📌 An opinionated recap of the most interesting news in crypto
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The discussion touches on a number of trends that we've seen and been thinking about, including fully-digital security tokens, dual token economies, "personal data monetization", DAOs and the end of capitalism ( 😱).
Going in more detail on the discussion, Stefano talks about a few areas of interest for him.
Fully-digital security tokens, for lack of a better definition, are tokens that are clearly securities but never have to interface with the "old-school" offline world. So, no real-company shares, or tokenized funds or real estate. Instead, what is fascinating is the creation of tokens representing shares, income, dividends, debt, transaction fees, staking nodes, other digital estates, and whatever else can be thought about a security but which exists only in the realm of the crypto world.
Tokenized offline equity and fund interests are a massive innovation, and probably the best application of blockchain technology in the short-term, but they still have some major drawbacks in the view of a crypto-utopist: mostly, they interface with the offline world in a single, weak-link point. This means you have to trust an issuer, a depositary or a trustee depending on what type of asset we're talking about. Additionally, and most importantly, the flow of funds will never be programmatic. There will always be someone that needs to take in actual old-bank wires in an account, go on an exchange, buy some ETH or other currency, and then distribute this to the rightful owners.
(As Yannick rightly points out, one mid-way solution could be interacting with offline securities but conducting the business through smart-contracts with stablecoins. This would still have the issues of "court-mandated" reversibility, but could be a great first step.)
This seems like both a very risky offering, as you just need one person or entity to unravel the whole system, as well as a terribly inefficient one.
The plus, obviously, is that you get access to the offline judicial system - and thus all the standard protections. This point may be more or less important depending on much you trust that system and think that those safeguards can actually hold.
But now, we have a completely new technology that opens a world of possibilities for programmable money, and most importantly programmable equities and securities.
This means that we can have shares in DAOs and crypto-corporations or crypto-funds, that could issue dividends, or even pay a percentage of revenues, or interest on loans automatically every month from their wallets. This flow of cash can now go straight to the ultimate beneficiary, in a completely trustless dynamic.
Examples of this are starting to show up, like Siafunds, which are the security tokens complement to Siacoins.
"Siafunds pay out a real-time transaction fee from all storage-related payments on the network. This means that, if you hold one of the 10,000 Siafunds in existence, you receive a piece of this transaction fee as users pay for storage space.
Because Siafunds only generate revenue when users pay for storage, holders are incentivized to take a long-term view and directly contribute to product development and growth."
The interesting part for us is that when you have a new type of infrastructure like this, the possibilities are usually larger than our current imagination, meaning that we'll see completely novel securities and cash-flow dynamics we can't quite grasp yet.
If you are working on something similar, we'd love to see it and help bring it to market.
Sia has also shown one interesting usecase of a dual-token economy, but there are dozens of similarly shaped token ecosystems popping up everywhere, which will probably warrant a post of its own, along thoughts around "personal data" monetization and how DAOs and crypto could usher a new type of economic system that complements or replaces capitalism. Will add to the Medium drafts queue!
In the meantime, you can listen to the episode here.
We'll start off with another excellent post by Tony Sheng (if you haven't already, do subscribe to his blog).
In this one he argues that designing token economies for value accrual is short-sighted and ultimately suboptimal for the efficiency of a decentralized network as it inevitably ends up attracting speculators.
Borrowing from Radical Markets, and using ZRX and LAND as examples, Tony thinks networks should optimize for:
1. allocative efficiency ie getting tokens in the hands of those who value them the most and contribute work; 2. investment efficiency ie ensuring holders have an incentive to add value; 3. diversity efficiency ie ensuring there is a broad enough distribution of tokens.
Like Tony, we also think we'll see tons on experimentation around how to maximize network efficiency going forward.
Tetras Capital have published an in-depth 42-page report outlining their bearish thesis for ETH that led them to initiate a short position in May 2018 (predominantly as a hedge to a long position on BTC).
At the core of Tetras views is that, despite the recent correction, the current valuation still prices in irrational expectations of ETH becoming a dominant SoV, as its currently struggling at the two use cases that would enable that thesis to play out:
1. a decentralized application platform suffering from technical and political issues, as well as competitive forces 2. a fundraising platform facing regulatory uncertainty and well capitalized alternative ecosystems.
Spencer Noon believes that building an exceptional community is paramount to becoming a winning cryptocurrency, and there is a playbook for doing so. #1— Maximize your initial token distribution #2—Codify your project’s mission and values #3—Cultivate productive online discussion #4—Provide support #5—Set up a grant program #6—Support community-run organizations #7—Spread the word #8—Have fun
0x gets a big Techcrunch feature mainly relating to the fact that it hired Chris Kalani, a former Facebook top designer.
He says that he hadn’t been this excited about a technology since discovering the internet as a kid.
The article is mainly centered around how to support building a network as a not-for-profit, which is a really interesting topic we come back to often (although in 0x's case, the $24M raised in the ICO and the tokens that appreciated should help).
Centrifuge shares their concept of Business Non Fungible Tokens, which to us is fascinating.
Crypto kitties and similar are fun and all, but this is a much more powerful use of the concept and technology.
The team at Centrifuge is working on turning invoices, purchase orders and other documents into NFTs that can then be easily tracked and shared, given that in today's paper-cum-pdf world the problems of duplication, verification of document authenticity, or tracking of “ownership” (e.g. who should receive the money when an invoice finally gets paid) are very real challenges.
We hope to see more real-world use cases like this one of all the amazing new decentralized tech and concepts.
(Disclaimer: we are early investors in Centrifuge).
David has put together a super slick and comprehensive 87-page state of the crypto nation deck. On the back of his MBA at Wharton he is currently taking part in ConsenSys online Summer Development Course and thinking about his next move. Say hi :)
PS: his deck rivals closely Autonomous Next latest Crypto Utopia, a 124 page thick report containing every possible chart and data point you can dream of. Hard to single out anything in particular, only perhaps a survey showing c. 10% of respondents own crypto currencies in UK, US and Japan and a chart showing institutional investors accounting for 16% of trading volumes only.
It's now clear why so many reports came out this week: H1 is over (that was fast!).
Greyscale released their first half of 2018 activity and performance report and as always it contains some interesting data points. Of particular note, given the sharp correction since January, is that they managed to raise $250M in fresh new capital, the strongest inflows of any six month periodsince inception, and that 56% of that came from institutional investors.
The performances are obviously a little less rosy, with the investment trusts recently launched (e.g. ZEC, ETH, BCH, XRP, LTC) all well under water.
IBM is going all-in and competing with Ripple. It has announced that they are experimenting with Stronghold's USD stablecoin on the Stellar network, with some last minute drama as Signature Bank that was supposed to custody the USD got cold feet.
To us this very similar to Ripple's model, with the addition of a (welcome?) stablecoin.
Interesting times in the banking and corporate world for sure.
In other news:
- Wall st #1: Perhaps no clearer sign that Wall st is coming than the CFA Institute adding crypto and blockchain topics to its programme.
- Wall st #2: from leading to lagging indicators, Blackrock CEO claims none of his clients "has sought out crypto exposure". The news that the asset manager has just established a crypto/blockchain working group was debunked (they had it since 2015).
- BTC-e saga. A Greek court ruled for Alexander Vinnik's extradition to France, which will likely lead to a further extradition to the US. Russia isn't happy.
- Deadpool. Remember the Kodak-branded miner for rent that was presented at CES in January? Not happening anymore, apparently the SEC blocked it.
Marble Protocol (not to be confused with Marble Chain), is a smart contract that atuomatically 'flash lends' Ether to execute and profit from arbitrage opportunities on decentralized exchanges.
The idea in very simple terms is that, if you (or a bot) identify an opportunity to profit from an arbitrage, you can encode the trade via exchange wrappers and submit it to a smart contract which will automatically borrow ETH and execute the trade, sending the profit to your own address.
It's a mobile native ERC20 wallet with 'super powers', at least compared to current alternatives, that abstracts a lot of the complex stuff away by giving users more sophisticated access control and recovery options, allowing things like:
- 2 or more factor authentication by splitting access across devices - setting different numbers of confirmations based on value - interacting with whitelisted adresses only - recovery mechanisms after "proof of paralysis" - paying for gas costs with a token - bundling multiple txs
Perlin is a new DAG-style blockchain, and to my knowledge the first using the new Avalanche consensus mechanism.
Their claims are - A bleeding-fast ledger at 1,300 tps with consistently low latency times of 4 seconds. - A leaderless consensus protocol that is robust, decentralized and resource efficient. - A privacy-preserving layer even in the presence of Byzantine adversaries. - Supports the development of DApps that are secure, stable and scalable.
It also might have the longest list of investors we've ever seen.
Just as one thought $4B would have been a sufficiently insane amount of capital, Block.one, the developer of the EOS software, announced the closing of even more funding from the likes of Peter Thiel, Bitmain and hedge fund manager Alan Howard.
To an outsider, this could look like an attempt to gain more institutional legitimacy by signing up 'trophy' investors, after a launch with a few speed bumps.
At the same time the new investors get access to what is now a very large asset manager and fund of funds.
Some thoughts from two lawyers at Jones Day on how the SEC should approach regulation of the crypto currency markets:
- encourage the formation of a self-regulatory body - convene an interagency working group - provide public notice of a proposed rule and take comments from the public - formalize views on 'sufficient decentralization' - create something similar to LabCFTC to directly engage with the industry
This was issued last month, but we only came across it now.
It's an absolute monster 125 page report by the Law Library of Congress covering legal and policy landscape surrounding cryptocurrencies across 130 countries. The authors should get a medal for dedication.