The Disrupt Weekend

Good crypto-economic systems optimize both cryptography and economics. The optimization of one without the other leaves an inefficient imbalance in the system and can lead to long-term wear on the system. This is the fundamental critique that crypto-economic researchers have of the bitcoin system: an optimized economic asset but powered by an inefficient economic engine.

Proof of Work is Inefficient. Bitcoin built the first viable crypto-economic engine, and has proven viability as a construction. A critique of the Bitcoin system is that it is using ‘stone-age economics’. Bitcoin has ongoing costs for maintaining economic security:

  • Perpetual energy consumption
  • Perpetual ASIC degradation and turnover

Under Proof-of-Work, this endless competition to mine Bitcoin blocks adds security to the Bitcoin system, at the cost of expending the energy inside the BTC monetary unit. Bitcoin is secured by long-term perpetual selling pressure on the economic unit.

BTC the asset leaks its value due to significant power-draw placed on it by the Bitcoin Proof-of-Work security engine. Bitcoin’s expenditure-based security is persistent, reliable long term sell pressure of BTC from PoW miners, because Bitcoin does not meter resource consumption by its security providers.

Just as economic systems before it, Bitcoin is secured by taxation on GDP produced by its economic engine. Bitcoin’s military, its PoW force-shield is running at an extremely high burn rate.

A second inefficiency in the Bitcoin economic engine is its inability to control its security budget. Bitcoin’s long-term security comes from the transaction fees paid to the network.

Bitcoin does not know how much fees it will receive at any given moment; it just collects the revenue it receives and sends all of it to the miners. Bitcoin has no capacity to give long-term assurances to its security providers about the future size of the security budget.

BTC fees paid to miners are volatile. Sometimes they are low, sometimes they are high. This is like injecting fuel into an engine by stomping on the gas and then immediately releasing it. Rather than finding the exact right spot to go the desired speed, Bitcoin just throws all of its received transactional revenue into the engine as soon as it receives it.

Not being able to meter the economic resources inputted into the Bitcoin security engine means two things:

  • Bitcoin miners have an unpredictable security budget
  • Bitcoin is overpaying for security

Giving up the power of issuance at the protocol level means that Bitcoin’s security acts as a sail, powered by the winds of its economic engine. It is not actually capable of generating its own power; its security is a function of its own economy. Bitcoin’s native economy may be enough to keep the sail filled with air, but long-term security assurances are absent.

From the perspective of a holistic, integrated system design of both an economic engine and monetary fuel, Bitcoin has sacrificed the efficiency of its engine to produce scarcity in the asset.

But crypto-economic systems are composed systems; the aggregate output of these things are the result of the interaction between the power of the money and the efficiency of the engine. Optimizing for one and not the other leaves you with an inefficient system that is a drag on the economy that it hosts.

As with all technological innovations that humans have ever come up with, there have been 12 years of crypto-economic research and development to leverage. Leveraging these advances in crypto-economics means that we can move away from the stone-age economics of ‘Gold 2.0’, and move into the full expression of sci-fi economics using optimizations in both cryptography and digital economies.”

“WellsFargo’s “Way2Save” Savings Account offers 0.01% APY. Like what in the actual f**k is that.

While rates across the board hit all time lows, inflation is hitting all time highs. In response to the global pandemic, the Fed expanded the money supply by roughly ~24% in the past year alone—an unprecedented level of issuance in that time span. This is a recipe for disaster.

There’s little chance that the average American individual will be able to preserve their purchasing power these days. They’re set up to have their wealth decimated. While traditional finance leaves investors dry, DeFi is offering the best yields in the world on USD. Full stop.

In DeFi, virtually every opportunity is offering over 5% APY on USD—even with the safest DeFi protocols today. So we took some time to research where anyone can put their money to work, and not only preserve their purchasing power, but even grow it. Here’s what we found.”

“The distinction between the token and the digital object to which it binds is quite crucial. In the crypto-native world, property rights and ownership are defined by “not your keys, not your crypto” – meaning that (absent certain circumstances) you control the private key that can send (assign) the token to someone else, you own the token (and all associated rights).

However, in case of a digital collectible, the ownership of a token may or may not mean you own the underlying computer file to which the token maps. Blockchains use a hash function to establish uniqueness but a JPEG file and its copy both produce the same hash.

Content addressable systems (systems that allow information to be retrieved based on its content rather than location) such as IPFS (a decentralized network) can solve this problem by allowing an NFT to bind with an IPFS URL such that you own the resource but the copy of the JPEG is a different resource.

In this scenario, the URL bound to the token becomes worth $69 million whereas the URL corresponding to the copy is basically worth $0. Essentially it’s the token minted by Beeple that “makes” the artwork worth $69 million more than a copy of the digital artwork.

However, purely from a technical point of view, an artist or another actor can double-spend a digital object on (a) the same blockchain (b) on a different NFT platform (c) on a different blockchain.

Further, multiple non-fungible tokens can be mapped to the same underlying digital file or IPFS URL or to different copies of the same digital file. Indeed, on-chain ownership is not sufficient for off-chain objects unless the legal framework governing the rights of an NFT owner respects and enforces these rights in the off-chain world. I might own a Beeple artwork on Ethereum but Justin Sun might mint the Beeple artwork on the Tron blockchain and thus claim ownership of the artwork anyway. A court in the U.S. might enforce MetaKovan’s rights, whereas a court in Macau might decide in favor of Sun.

NFT platforms are doing three critical things:

First, by creating a large, digitally native market for off-chain assets using on-chain tokens, these platforms are providing a proof of value for bringing other off-chain assets such as land titles, cars, houses and bonds – basically everything of any value on to Web 3.0.

Second, by building robust, scalable infrastructure for minting, trading and settling NFTs on-chain, NFT platforms are bringing ordinary, nontechnical people to crypto platforms in the way nothing else has so far. I’d not be surprised if 100 million new people become comfortable with using wallets like Metamask and DeFi products this year and next year because they want to trade digital collectibles.

Third, by sparking debates such as the one contained in this article, NFTs will force common and civil law frameworks to align off-chain rights with onchain rights.

Essentially, with NFTs we are looking at technical consensus evolving into a market which in turn forces the social consensus.”

We’ve just launched our V4 testnet which is our mainnet release candidate. We’ve hosted an open and permissionless testnet for five months now, and it’s been an incredible experience for testing our software in the wild. We’ll be giving the release candidate a bit of mileage on testnet before shipping it off to mainnet.

  • Typical transactions on Arbitrum use 2–3k Ethereum gas. With the introduction of BLS signatures in our release candidate, developers can now cut these costs down even further.
  • Arbitrum is EVM compatible on the bytecode level so no need to rewrite your code or use any custom compilers or new tools to download.
  • Your Solidity/Vyper code just works. Arbitrum breaks out of Ethereum’s contract size limit and transaction gas limit. Want to do a large contract deployment on Arbitrum? No problem! Have a transaction that uses more gas than is available in an Ethereum block? Go for it!”

See Also: Optimistically Cautious

“Ren is a cross-chain liquidity protocol. With Ren, anyone can port any crypto asset to any other blockchain in a trust-minimized fashion. Interoperability between chains may be a key factor to the growth in crypto.

The RenVM ultimately acts as an interoperable liquidity building block, allowing developers to integrate cross-chain capabilities into any application they build. This means that any DeFi application, like a DEX or lending protocol, could integrate RenVM’s capabilities and enable cross-chain liquidity into their application.

By achieving interoperability, we can bring significantly more liquidity (we sometimes call it economic bandwidth) to DeFi. Bitcoin is now a trillion dollar asset. All of that liquidity and economic bandwidth could be used as value in DeFi—as collateral to mint DAI, used to borrow USDC on Aave, provide liquidity on Uniswap, etc.”

“Let’s take a look at the projects that received funding in the final quarter of 2020.”

Sentinel Network allows anyone to be able to sell their bandwidth on its marketplace. Developers can utilize the Sentinel Protocol, built with Cosmos SDK, to build applications, both public and private, that use the Sentinel Network’s bandwidth marketplace for dVPN applications.

Sentinel is the first project that focuses on offering privacy at the network level to any blockchain or dApp. Once integrated, these blockchains or applications will be able to provide their users with both privacy and censorship resistance.

Simply, the purpose of the Sentinel ecosystem is to empower universal access to the internet in a trusted and provable manner.

As Freedom House notes in their latest annual Freedom of the Net report, the pandemic is ‘accelerating a dramatic decline in global internet freedom.’ For the tenth year in a row, users of the internet have ‘experienced an overall deterioration in their rights, and the phenomenon is contributing to a broader crisis for democracy worldwide.‘”

“Secure technologies, like blockchain and encryption, are woven throughout Excelsior Pass to help protect the data, making it verifiable and trusted. No private health data is stored or tracked within the apps.

Each participant will determine what information they want to share, with whom, when and for what purpose – without sharing the underlying personal data used to generate the credential.

It’s available for free of use by businesses, and the implementation will be voluntary. The major venues that will adopt the blockchain COVID-19 pass include the Madison Square Garden in New York City and the Times Union Center in the state’s capital, Albany.”