🚨Warning: this is a ponzi/scammy game, play at your own peril.
We'll never cease to be amazed by this industry: every single week there is something mind-bending that pops up and makes us feel like we are in the next Black Mirror episode.
This time it is a self-proclaimed pyramid scheme or ponzi game or exit scam (or something along those lines), with the main difference that it's totally autonomous, open-source and unstoppable, built by an anonymous team that calls itself “Team Just” (they themselves don't know each others identities, or so they claim). It's most likely breaking a few laws too, but good luck trying to ban this one. The concept is relatively simple and expands on the mechanics of a similar game called “Powh3d” released by the same team not long ago (which handled something like 350k ETH already): it's a smart contract powered lottery game where contributors can buy 'keys' for ETH, with proceeds from each purchase part going into a common jackpot, part being paid out to previous buyers in the form of dividends and part going to a 'bank fund' to reward the creators. Each new buyer adds time to a count-down and when the timer runs out, the last key buyer can drain the jackpot, at which point a new round begins in a never ending cycle. But in theory round #1 could go on forever, as one would think there will always be someone willing to buy the last key in the hope of being the last man standing. Here's a good post on the dangerous game theory behind it. There are other clever game mechanics and viral tricks that you can dissect in their Wiki, for example the price of the keys goes up linearly over time, so perhaps at some point it'll become too expensive for someone to buy, leading to an ultimate winner? It's incredibly well thought-through.
At time of writing we are still in Round #1 with the timer staying close to the 24hrs mark (the hard cap) and 21.7k ETH locked up in the jackpot, a total of 96k ETH invested and >74k ETH paid out in dividends. 🤯
In the words of its makers this is first and foremost a “psychological social experiment in greed”, built to effectively tax the wealth of greedy ETH holders and potentially lock it up forever. Thought provoking and, when put in that light, possibly a work of genius: one that uses the power of the technology itself to symbolically free it from its inner evil, or at the very least one that elegantly shows to the masses both ends of its power spectrum.
It will be absolutely fascinating to see how this one ends, if at all. As the pot gets larger, it will no doubt attract more hackers (some already tried with some success) and attention, creating a vicious circle. Some even speculate that it may at some point incentivise miners to collude. 🍿
It will be even more interesting to witness the proliferation of similar autonomous schemes that leverage game theory and crypto economic incentives to fund greater causes (as Denis hinted to) or to create fully digital yielding assets (as we discussed last week), like the autonomous art bot that we covered in #54.
Brendan picks up on some comments Naval made a couple of weeks back on developer incentives and investors free-riding. It's great to see a well reasoned argument as a response, as opposed to the unproductive personal attacks that we all saw flooding our feeds.
It's a pretty long read, but the gist of it is that holders play a critical role in crypto currencies in that they signal to the market, and thus to developers, which one is more likely to be (or rather become) 'money'.
"Developer activity, buzz, dapp launches and ICOs are not leading indicators. Don’t follow the developers. Follow the money, and the developers will join."
A contentious conclusion for many no doubts, but one that we feel is worth highlighting.
PS: in the meantime, Ether shorts are making the headlines on Forbes.
It's great to see Jeremy Liew writing about crypto.
In this post he contends that investing in this space is becoming less about betting on a 'fat' layer capturing most of the value and more about picking the winners in each layer, as the risk profile has shifted from being 'systemic'.
We're kind of forced to publish any article with such a disclaimer: "This article absolutely expects you to know how modular arithmetic and prime fields work, and be comfortable with the concepts of polynomials, interpolation and evaluation. If you don’t, go back to Part 2, and also this earlier post on quadratic arithmetic programs"
Jokes aside, this is a super-technical article, but very useful for people that are exploring implementation of STARKs, from Vitalik himself.
An interesting take on what this blockchain revolution can enable.
The author argues that it is what will usher us into the age of Autonomization, which is different from automation.
"Automation focuses on making systems and processes automatic without the need for continuous intervention or input from an operator (a human). Autonomization focuses on making an agent or system self-governing."
This is enabled by three core innovations: - a new digital model for the global generation, transference and store of value. - the ability of smart contracts that allow for rules-based transference of value, programmatically. - decentralization, which allows us to cross organizational borders and break the constraints of a centralized organization or a central authority.
More tech-cycle analysis and future predictions in the post.
An useful post for people thinking of running token sales and how to align incentives. We've written about this a lot, but still find it hard to have all things really match perfectly, especially when you factor in greed and the abundance of capital available.
A useful primer on hashing algorithms and how they have evolved over time. According to the author, protocols that will stand the test of time need to run hashing algorithms with the following properties:
- Changing one bit in an input should create an avalanche effect and result in an entirely different hash altogether - Should have very low probability of collisions - Some degree of efficiency that does not sacrifice collision resistance
Speaking of hashing, Ric Burton cleverly coined the word "hasflows" as the equivalent of equity cashflows but for economic protocols, i.e. a measure of the flow of value around open networks. Successful projects, he argues, need to generate positive hashflows through the system.
He also picks up on some of the ideas we touched on last week on fully digital security tokens:
"On-chain share tokens will crypto-economically enforceable claims to future hashflows."
Long read, but a truly fascinating historical perspective and take on decentralization by looking back at how mp3 files distribution evolved from the late 90ies to recent years.
"Decentralized technologies don’t take the legally impossible and make it unstoppable. Decentralization is a tactic for diffusing risk for many and lowering the risk for the activists that operate the most sensitive parts of the system. [...]. Without activism, we would have beautifully designed decentralized technologies which are impossible to use in practice."
Meltem Demirors is interested in Tezos, and gives us an overview of some of the network's most distinctive aspects such as fiduciary responsibility, token holder activism, and the balance of power in self-amending protocols.
While seeing this, it's really fascinating to see a whole industry of "delegators" come to life.
A short post to get you started on your thought journey about programmable token regulations.
Security tokens are interesting for a number of reasons, but what not many people are thinking about is that they could be especially interesting for regulators who could force regulations right at the code level.
In other news:
- M&A #1. It's now official, BitTorrent has been acquired by TRON (for $126M in cash) and its team will operate out of TRON’s new San Francisco office.
- M&A #2. Messari has announced the acquisition of Onchainfx, launched a new version of its website that integrates it and revealed its masterplan to build the open data layer for crypto (disclosure: we are investors in Messari)
- M&A #3? Nexo have publicly shared an LOI to propose the acquisition of Salt Lending assets, following the sudden departure of its CEO Shawn Owen. Probably a marketing stunt or just next level trolling, but one can never be too sure.
- Hacked. Etherscan suffered a minor and fortunately inconsequential hack this week, with Disqus as the attack vector.
- SPOF. The Metamask Chrome extension was removed from the Chrome Web Store by mistake apparently, causing unnecessary but inevitable drama for a few hours. Here's a retrospective from the Metamask team.
- Digital fiat. Iran is "preparing ground" for a national cryptocurrency to circumvent US sanctions, while Venezuela will soon be using a new Bolivar anchored to the Petro. What a time.
- BTC ETF. The SEC rejected the Winklevoss twins Bitcoin Trust proposal for the 2nd time in a 92 page report, citing scepticism about markets being "uniquely resistant to manipulation". Not everyone at the Commission seems happy with the decision though, with Commissioner Hester Pierce voicing her dissent on the SEC website itself with some powerful words:
"By withholding approval of a bitcoin-based ETP because the underlying market insufficiently resembles the markets for other commodities, we set ourselves up as the gatekeepers of innovation. Securities regulators are ill-equipped to fill this particular role."
- Transparency. Bitmain makes a public commitment to being more transparent ahead of its rumoured IPO later this year.
- Investigations. Coinbase concluded its internal investigation (done by two law firms), and found no wrongdoing. The company was ridiculed a lot on Twitter for its self exculpation. The CTFC is still investigating the matter apparently.
- Security. Ledger has released two new apps (Hodl and RecoveryCheck), two enhance the security of its users and reduce potential errors.
A new startup called Voyager, started by former E*Trade executive and funded by an Uber co-founder, is going after Robinhood with a zero-fee crypto trading mobile app due to be released later this year. It claims to have developed a dynamic smart order router that connects to liquidity pools from a dozen exchanges and market makers, which would allow them to service institutional investors as well with execution services.
With crypto adoption rates in the single digit percentages, the battle for the mass market is still wide open.
We are genuinely excited for Julien, who has closed a pre-seed round for Unlock led by General Catalyst and our Berlin friends at Cherry Ventures, while also open sourcing its code base. Congrats!
In over a year of writing on Medium, we've been experiencing the first hand the challenges of relying on a centralized platform for publishing content, so we strongly relate to what Unlock is trying to build and look forward to seeing it come to fruition.
Tony Pompliano's Morgan Creek has led the Seed round for CityBlock Capital, a new type of venture fund "for the digital age".
It's a sort of franchise platform that tokenizes LP interests in early-stage funds raised in a number of cities, investing locally and leveraging investors with feet on the ground to generate quality dealflow. They are raising the first fund targeting NYC.
SatoshiPay is going for an old fashioned IPO on the London AIM market, executed via a reverse takeover offer from one of its listed shareholders. It's also announcing a pre-IPO investment of €566K from Daniel Masters, Executive Chairman at CoinShares.
Novogratz's fund Galaxy Digital Ventures has led a $52.5M investment into a crypto lender called BlockFi. $50M will be reserved to lend capital on the platform to customers against their crypto collaterals, while the remaining $2.5M is an equity investment into the operating company alongside Consensys Ventures and others.
The report on crypto assets that the G20 Ministers of Finance and Central Bank Governors requested back in March in Buenos Aires has been released last week, making an initial set of recommendations as to what data from the crypto industry should be monitored going forward.