“Researchers have been hard at work on the blockchain scalability problem. The key tenet to a decentralized, permissionless and trustless network is to have a culture of users verifying the chain. Some, like EOS, Solana or Polygon PoS aren’t interested in this, and go for a centralized network where users have to trust a smaller number of validators with high-spec machines. There’s nothing wrong with this – it’s simply a direct trade-off. Some, like Bitcoin, have given up on the problem, presumably deeming it unsolvable – instead relying on more centralized entities outside the chain.
The first obvious solution was to simply break the network up into multiple chains, with communication protocols between them. This will give you high scalability, as you can now can spread the load across multiple chains. You also maintain a higher degree of decentralization as each of these chains will still be accessible for verification or usage by the average user. However, you significantly give up on security, as your validator set is now split up into subnets between multiple chains. More naïve variants of this simply have different validator sets for the different chains (sidechains). More sophisticated variants have dynamic subnets. Either way, the point is – the split validator set is inherently less secure.
The next idea was to take the multiple chains approach, but enable shared security across all chains by posting fraud proofs from each shard chain to a central security chain. This is sharding, and each shard chain is backed by the full security of the network. You’ll remember the old Ethereum 2.0 roadmap followed this approach, with a central chain (beacon chain) connecting multiple shards. Polkadot started with this model, but made two changes – make the beacon chain much more centralized (and rename it relay chain) and open up the shards.
Rollups take this to the next level. Now, what were essentially shards or parachains are completely decoupled from the network, and protocol developers have a wide open space to develop the chain however they want. They can use L1’s security by simply communicating through arbitrary smart contracts developed in a way that is best optimized for their specific rollup, instead of in-protocol clients. Decoupling the rollup chains from the protocol has two further advantages over shards: if a rollup fails, it has no impact on L1; and most importantly, the L1 protocol doesn’t have any need to run a rollup full node. With sharding, there are still validators per shard which need to hold the full nodes for the shard (Polkadot calls them collators) in-protocol. If a shard fails, it can have ramifications for the shared consensus and other shards.
Rollups offer similar scalability to shards by themselves, but this is where the final piece of the puzzle comes in: data shards. One of the biggest challenges to executable shards was interoperability. While there are schemes for asynchronous communication, there’s never been a convincing proposal for composability. In a happy accident, shards can now be used as a data availability layer for rollups. A single rollup can now remain composable while leveraging data from multiple shards. Data shards can continue to expand, enabling faster and more rollups along with it. With innovative solutions like data availability sampling, extremely robust security is possible with data across upto a thousand shards.
The bazaar will take some time to standardize on solutions, but these solutions will certainly end up being more innovative than hardcoded in-protocol solutions. The end result here is: rollups + data shards are the best solution we have. The blockchain world finally has converged on a solution that will enable mass adoption.”
“The Curve, Yearn, Convex saga may be the highest stakes battle in crypto. Why? Over 15% of all value locked in DeFi is within these 3 protocols. And a majority of that relies on Curve’s yield as its foundation. Could this yield war make CRV one of the most important assets in DeFi??
The competitive landscape of DeFi is in a constant state of flux. The permissionless and composable nature of money legos has created a never-ending explosion of innovation and excitement. This is fully on display with the recent race between staple yield protocol Yearn Finance, and newcomer Convex Finance, to lock up Curve’s CRV token, in what has been dubbed as “The Curve Wars,” or “The Lockening.”
Convex’s meteoric rise, along with a 78% increase in the price of CRV, has sparked discussion as to if it is a “Yearn killer.” However, like with nearly everything in crypto, the answer is not so clear. Curve is one of DeFi’s largest decentralized exchanges, with over $10 billion in value locked and facilitating hundreds of millions in daily volume across their Ethereum and Polygon deployments.
Both protocols are trying to get their hands on as much CRV as possible to lock it for veCRV, so they can earn the largest possible boost, and therefore the highest yield, for their depositors. This has been the driving factor behind the sudden dramatic increase in the amount of CRV locked, with now over 63% of the supply taken out of circulation.
Yearn has a boost, and thus APY, advantage across a majority of the different pools. This creates an interesting situation in which Convex vaults are earning a higher overall APY due to CVX rewards, while Yearn is providing depositors with a better return on their CRV.
One interesting factor to consider are the two protocols’ governance power within Curve. As we know, veCRV holders can determine the allocation of CRV inflation across the different pools. As Convex now holds the greatest number of votes, they’ll be able to have considerable say in where newly issued CRV is directed. We could see a scenario in which Convex votes to allocate CRV to pools which would maximize their boosts rather than Yearn’s.
All these factors indicate that the protocols are both complementary and competitive. Yearn benefits from Convex locking CRV because it boosts their yields as depositors, while Yearn locking CRV is beneficial to Convex, as higher Yearn yields can lead to an increase in Yearn deposits, and therefore an increase in Convex TVL. As with much of DeFi, money legos blur the line between friend and foe.
Aside from users of both protocols, there is one obvious beneficiary from the whole situation: CRV holders. As more CRV continues to be locked, a potential supply shock is looming as the token becomes more and more scarce.”
“Stablecoins could encourage [international] use of the dollar by making cross-border payments faster and cheaper, and it potentially could be deployed much faster and with fewer downsides” than a central bank digital currency (CBDC).
That someone of [Fed Chairman] Quarles’ influence is thinking along these lines is significant. If the U.S. were to follow his advice, it could mean that, rather than the dollar losing its world reserve currency status as some scholars of monetary and geopolitical trends foresee, it could expand its influence.
In this scenario, the dollar would go beyond its current role as the unit of account for global trade and a key reserve asset for capital markets and become prevalent outside of the U.S. in everyday transactions. U.S. industry would derive great benefit from the ubiquity of dollar usage, but it might also ultimately diminish U.S. government control over the international monetary system – or at least radically change the nature of that control.
If so, that would be a good thing. Less hardline surveillance and less Wall Street gatekeeping of the world’s transactions is precisely what’s needed to boost monetary innovation and improve financial inclusion.”
“The “supercycle” thesis is the bold but vague idea that crypto is on the verge of mass adoption because of a series of technical and exogenous factors. Peter Thiel has said bitcoin is the new FANG because the digital asset will be macro driven (as are most things) in the next few years. I would extend the thesis to crypto as an asset class.
The bull market of 2016-2017 led to a mass of startups in crypto. The four years since has transformed nebulous white papers into products that we can deploy, test and use. There are users and products and product market fit is being formed.
In 2017, we had one product; a global permissionless fundraising mechanism (also known as initial coin offerings, or ICO). In 2021, there are many more including permissionless trading and lending, the ability to create derivatives and, more generally, an ability to deploy financial instruments and be a banker from one’s bedroom.
Both macro and micro factors play into crypto’s hands. Speculation is eating the world and the Gamestop vs. Wall Street saga shows us the new dimension of democratizing finance. People want capital and they’re finding new ways of accessing it.
The way forward is to innovate in the devices of economic decentralization so that more people can have more access to more markets in more ways.
For the Revoluts and Robinhoods of the world, tapping into decentralized finance is just a matter of integration. Their back ends will be upgraded from the old economy to the DeFi stack. This is how financial institutions will adjust to the new paradigm. This is the supercycle.
Crypto becoming the new FANG is a real option. The birth of a new asset class represents an opportunity to transition into a new economy. The conclusion to the supercycle is unpredictable, with either a dystopia or a utopia awaiting.”
“Using ZK-Optimistic Rollups, Nightfall 3 can achieve a cost of approximately 8,200 gas per transaction, while also maintaining privacy. This is almost one-eighth of the cost needed to make a conventional, public ERC20 token transfer. Nightfall 3 is also designed to reduce the learning curve required by developers to implement privacy by giving developers a standardized application programming interface (API) that appears similar to other token transfer tools.
Based on EY experience, ZK-Optimistic roll-ups are currently among the most effective in balancing security incentives and mathematical efficiency for running private transactions on the public Ethereum network. As we have in the past, we are again contributing this code into the public domain to speed up enterprise adoption of this technology.”
“Cronje announced the project, called Fixed Forex, in a Friday blog post. It lets users mint and exchange various fiat-pegged stablecoins, including the U.S. Dollar (USD), Euro (EUR), South African Rand (ZAR), Japanese Yen (JPY), Renminbi (CNY), and others.
If successful, Fixed Forex may be one of the first projects to overcome the challenges of implementing a large-scale decentralized forex exchange on Ethereum.
Contrary to decentralized stablecoin issuers, Fixed Forex has incorporated “gentle liquidations,” a mechanism that ensures a users’ collateral does not get fully liquidated during a market drawdown. The final release of the project will be deployed on top of Curve Finance.”
“Next Sunday at 6PM UTC, crypto’s Second Life sim will host TO THE MOON, a music and arts festival. The festival will be hosted at KnownOrigin’s virtual headquarters within Decentraland and will feature performances by electronic music acts including Ookay, SNBRN, Fred Thurst (aka Dr. Fresch), Autograf, and Win and Woo.
The organisers promise exclusive NFT goodies. Attendees receive a virtual POAP (Proof of Attendance Protocol) token to brandish on their Decentraland profile, and can buy exclusive (virtual) clothes, including a bomber jacket and hat.”
“The Bitcoin blockchain has undergone its biggest-ever drop in mining difficulty, as the network’s automatic stabilizing mechanism kicked in following a strict crackdown by China.
At 6:25 UTC Saturday, mining difficulty plunged by nearly 28% at block 689,471. The steep decline in difficulty led to corresponding plunge in transaction fees, which in turn may have contributed to a $1,000 surge in the price of the leading cryptocurrency on anticipation of a spurt in transactions.
The adjustment marks the third straight decline in mining difficulty, the first time such a trend has happened since December 2018. During this most recent difficulty period, the mean hashrate, a measure of total computational power contributed to the blockchain through mining, stood at 87.7 exahashes per second, the lowest since December 2019. That’s down from about a peak of about 180 exahashes per second in mid-May.
Though a decline in Bitcoin’s hashrate means it is slightly less resilient against attacks, the news bodes well for active miners.”