Past issues

Feb 11 2018

#35: The failure of the old-world corporation

📌 An opinionated recap of the most interesting news in crypto
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🔊Public Service Announcements
🎡 London Token Economy meetup - February 20th 5.30-7:30 PM

Token Economy comes to London! We'll be in town in a week or so and thought we would arrange an informal get-together in a cool venue. We'll be at Bar Elba in Waterloo with our friends from Decusis starting from 5:30 PM, would be great to catch-up with many of you.

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We're looking to deploy a small portion of the ETH some generous supporters staked on StakeTree into a brand new logo.

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🎭The MEW Drama and the failure of the old-world corporation
As if Ethereum users had any need of more uncertainty, this week the big story was the drama going on at MyEtherWallet, the best known and most-used Ethereum wallet.

Taylor, the de-facto public leader of MyEtherWallet, and Kosala, the original founder of MEW, must have had a big fallout recently, of which we don't know much.

Fact is, on Friday Taylor announced that she was taking basically the whole team, forking the project, and moving all of their future efforts to a new company called MyCrypto.

This would have been all cool and all, but Taylor also took the liberty of moving all of the ~80k followers that MEW had on Twitter to its new account. And most worryingly, it also moved the verified badge.

Now I'm left following MyCrypto on Twitter, and not MyEtherWallet.

But most importantly, I'm not sure which one to use next time I need to move some funds..

The situation is quite tricky and it's hard to take sides, but it's clearly not been handled in the best way.

This is the official statement from MEW / Kosala.

I think there are a few takeaways from this situation.

1) Security for Ethereum users

MEW had been plagued with phishing scams for a while, so this news is not going to help and will open up the door to many more attacks on users that don't really keep track.

While all previous attacks all tried to pass off as MyEtherWallet itself, I wouldn't be surprised if someone forked off MyCrypto or MEW again, with a new name, claiming to be an original developer, keeping the UI and just saying that have a new name but that they are legit.

We had absolutely no visibility in the MEW team, and always trusted the "public" brand of the website and their activity on twitter.

So now that the team has substantially changed, can we still trust that MEW will be safe? The site probably facilitates $M of movements on its site hourly, so ethics must be strong to not change a few LOC to take a peek at some private keys.

On the other hand, can we trust MyCrypto? If they took away one of the most valuable assets of MEW without any notice and clearly not in accordance, then can we be sure they won't "take" anything else?

Not great for the community.

2) Traditional corporate structures are absolutely medieval and it's embarrassing for humanity that we're still relying on them.

The situation between Taylor and Kosala is clearly pretty bad, and there have been multiple legal proceedings going on.

There is a lawsuit filed by Kosala in which we learn from a few emails sent by his law firm, that Kosala offered to buy out Taylor for $1M.

And on Reddit, /u/shanecorry uncovered some more info:
MyEtherWallet LLC was dissolved (or requested dissolution?) on the 29th of December 2017 (signed off by Taylor).

A 2nd dissolution document states the dissolution is being requested by members (shareholders?) who own more than 50% of the company combined but that not all members (of which there is 3, see below) are in agreement to dissolve the company.

Aside from whoever is right and will win, which is not of particular interest to the writer, what is fascinating about reading the lawsuits and other documents is the realization of the state of our governance infrastructure. Which is basically NIL.

Kosala had to request a date and time to go somewhere to review books and other documents of the company. How medieval is this?

I am indirectly a shareholder in more than 100 companies all over the world, so I might be feeling the pain more than others, but the opacity and lack of recourse is really stunning.

Oftentimes small shareholders in companies don't really have a say, and whatever documents everyone signed are completely disregarded by the company which ends up doing whatever it wants knowing that no-one has the time money and energy for a legal battle.

This is what really made me the most excited about crypto-land. I got in love with Bitcoin early on, but when I discovered the possibilities for decentralized governance, I fell even more in love with Ethereum.

My guess is that in 20 years, we will not have to deal with this paper crap anymore. Won't been soon enough.

3) Front-end forks vs chain forks

We've obviously seen a lot of chains being forked, but this is one of the first examples of the front-end, final customer UI being forked.

I'm not even sure we can classify MEW as a proper dapp, but I imagine this happening more and more.

It's a fascinating albeit scary thing to think about for investors as it makes it even harder to answer the question: where does the value reside?
📌 Token Economy
The Lightning network really is the first layer that has been built on top of Bitcoin (or many colored coin a while back, whatever happened to them actually?).

In any case, it's a great thing to think about, even if the article is a bit too repetitive and long.

I think we've seen this already with Ethereum, 0x, IPFS and other protocols for more practical computing stuff, where layering comes more naturally.

But thinking about BTC in these terms should make us all even more bullish about it becoming the de-facto standard for value.

If BTC doesn't need to please everyone with all the features, then it can just be BTC. And people and companies can just build the features they want on top.

I very much subscribe to this line of thinking, and I'd LOVE to talk to companies building similar layers on top of BTC.
A16Z's crypto team compiled a monster list of resources.

Bookmark and CMD+F when you need something.

(Thanks for mentioning us! 👋🙏)
We're officially moving to two shitshows per week apparently.

This time it's BitGrail / Nano (formerly RaiBlocks, someone help them with naming).

The situation is fairly simple, BitGrail lost 17 million Nano, worth ~$170M. They claim that there have been some unauthorized withdrawals.

The founder apparently asked for a hard-fork to invalidate the lost funds, but that's obviously out of the question.

The thing is fairly weird tho, because BitGrail hasn't been "hacked" in the proper sense, and they've lost only nanos. Might have been a bug in their implementation of the full-node, who knows.

Anyways, no-one is happy (other than the hackers).

Binance and other exchanges are already invalidating the funds out of the hack (which is a topic that deserves its own post, as it's effectively censorship).

The conversation makes for some interesting reading.
An amazing post from our Unplug.vc special guest Nadia Eghbal. 

Her insight is that developers have just recently switched to charging for their time as employees. They previously mostly charged for their code output.

And the big question is, what will they be charging for in the future? Her answer is reputation and access.

Fascinating area to think about.
Bitcoin and cryptocurrencies are all the rage in American universities.

Classes are being started mostly everywhere, and they all get oversubscribed fast (reminds me of something else..).

I don't know when the MBAs all started to flock to startups and VCs in the dotcom bust, but we should probably take a close look at the trends here.

In any case, it's great to see more people learn about the fundamentals rather than the token prices. We are happy to have a couple hundred students ourselves amongst TE readers 👋 
Coinbase put up a Coinbase Commerce landing page for what looks like a crypto-checkout plug-in for online merchants.

A random site selling t-shirts is testing the integration. The site is hosted on Shopify, suggesting this could soon roll-out to all Shopify stores.
Extremely solid article about continuous Bancor-like token issuance models, specifically used by curation markets projects.

We've highlighted this area of development quite often on TE, and continue to be interested in the innovation around these mechanics.

If you're looking to implement one of these models, this is a solid tech primer and also includes some Solidity code!
And so it begins, Forbes has started their list of Crypto Billionaires.

The names are the usual, but the two most interesting stories we recommend reading are about Binance's CEO CZ, and Brock Pierce.

From Zero To Crypto Billionaire In Under A Year: Meet The Founder Of Binance

Former Child Actor Brock Pierce Vows To Give Away $1B From His Crypto Fortune
Maker has published a post with interviews about some of its users and how they are using MKR CDPs and DAI coins.

Recap: DAI is a stablecoin pegged to USD which are created by locking ETH in decentralized Collateralized Debt Position (CDP).

So most people are locking ETH in these positions, and then withdrawing DAI, which they sell for USD to do whatever they want (pay mortgages, buy cars, etc.).

This is a straight up competitor usecase to the centralized and decentralized lending platforms like Unchained and Salt.

Fascinating.
Decentralized Exchanges Nerd Alert!

Superb post by 0x's Will on some mechanisms to prevents attacks in decentralized exchanges while maintaining networked liquidity.

"The 0x protocol is designed in a modular way such that we can create novel solutions that sit one layer above 0x’s system of smart contracts. This will ultimately require us to set the 0x order schema’s taker parameter to a smart contract address."

Fascinating.
If for whatever reason you're interested in Ripple, this is a nice recap of their troubled history.

PS: Bitmex research is super high quality 👌
A nice data dive on Tether's publicly available data.

Unfortunately, it obviously doesn't tell us if they have the monies.
Wences Casares, Xapo's Founder and CEO, has converted many a newbie to crypto.

Hi saw his family lose all their money three times due to actions by the government and is the so-called "patient zero" of Bitcoin in Silicon Valley.

Solid listen. Good job Laura!
And back in full force developing core protocol features in Bitcoin.

Specifically, he's developing Taproot and Grafroot.

Merklized Abstract Syntax Trees (MAST) are a proposed addition to Bitcoin that allows for smaller transaction sizes, more privacy, and larger smart contracts.

Good primer here.

They basically improve on the multi-sig transaction capability enabling the addition of different conditions to a transaction, like time based-conditions.

Maxwell wants to improve even more over MAST, making it possible to have MAST transactions look like normal Bitcoin transactions when on-chain.
A great post on the history of social order from made to more spontaneous forms, phased by its literature.

Really helpful in framing the crypto phenomenon and what led to it from a social perspective.

PS: If it isn't already, Hayek's work should be on everyone's reading list. 
Colony announced that the source code for the Colony Network contracts has been open-sourced.

Unlike other projects who rush towards network launch, trading off some elements of initial centralization for speed to market, Colony is taking all the time in the world to ensure there will be no centralized legacy when the time comes to go live.
BTC nerd alert.

A couple of guys have devised a way to fulfill multiple payments on different Lightning channels at the same time.

They call it AMP Atomic Multi-Path Payments, and you can use them today on Lightning.

"Conclusion

The existence of such a construct allows a sender to atomically split a payment flow amongst several individual payment flows.
As a result, larger channels aren't as important as it's possible to utilize one total outbound payment bandwidth to send several channels.
Additionally, in order to support the increased load, internal routing nodes are incensed have more active channels. The existence of AMP-like payments may also increase the longevity of channels as there'll be smaller, more numerous payment flows, making it unlikely that a single payment comes across unbalances a channel entirely. "
CoinDesk 2018 "State of Blockchain" report updated for Q4 '17 is out. Turns out the biggest story of 2017 was not ICOs as most media headlines have focused on, but rather forks & airdrops.

160 slides filled with data and charts for everyone's peruse (except obviously all out of date after January's roller-coaster).
If you need a dose of bullishness, this might be the article for you.

It's about the people that attended the 4th Satoshi Roundtable.

"After three days at the Satoshi Roundtable, I can tell you this: You’re not going to beat them."

There's also a good recap about the actual topics covered from Lopp here.
😎 Cool new projects
Aethia is Tamagotchi on the Ethereum blockchain.

In the wave of Cryptokitties success we're seeing many different efforts in the gaming space, all interesting.

Aethia gets the basic Tamagotchi dynamics and brings them to Ethereum. You can get eggs, hatch them, train them and then play with them.

BTCgeek has a good overview of the model and features.

We were lucky to be able to get one of the Alpha eggs in the giveaway the past week, as they've run out in minutes with every new issuance.

Now you can earn eggs by referring users until the 16th here.

The game is fairly complex with different egg phases, qualities, stars alignments, breeding, re-incarnation and in-game currency.
You need to keep your Ethergotchi alive obviously, and I am expecting I will get poor from gas fees.

We're very much looking forward to seeing this one live.

_____
Bonus I: even Baidu has launched a crypto-kitty style game, but for virtual doggies and built on the Achain blockchain.

Bonus II: Spankchain launched CryptoTitties. Expected no less.
Harbor is the first project incubated by David Sack's new fund Craft Ventures and it's awesome.

They are building a decentralized compliance protocol for the issuance and secondary trading of tokenized securities and the first project under their belt is a new open-source token standard called R-token (whitepaper here). It will be an additional layer built on top of ERC20 that bakes compliance into the token itself, meaning that custom business logic will be coded in to ensure specified requirements (e.g. KYC, AML, accreditation, caps, holding periods) are met before a trade is approved. R-tokens will be therefore natively compliant securities that can freely circulate between exchanges and wallets without enforcements from the gatekeepers.

Harbour also announced a $10 million Series A round led by Vy Capital, Fifth Wall Ventures and Valor Equity Partners.

David Sacks was interviewed about it on CNBC and the transcript is available here, it's worth a read as he also touches on Craft's investment thesis.
An interesting case of a city developing its own financial system outside of the US federal government. Threatened by Trump's tax reform, Berkeley is planning to tokenize and issue municipal bonds on the blockchain in an attempt to attract funding directly from residents who care about affordable housing.

The idea is that these tokens, backed by actual bonds, can become accepted as a medium of exchange in the local community.
The Aragon team have launched a R&D effort with a handful of other projects. The idea is to collaboratively explore governance use cases and implementation that ultimately will benefit all projects involved and beyond.

It is operated as a shared Github repository under the Aragon Github where anyone in the community can submit ideas and contribute code for working groups. The first two working groups are on Token Curated Registries and Liquid Democracy.

This will be a good place to get a sense for what's going to be hot tomorrow.
This looks very cool.

It's a decentralized front-end to a smart contract that allows users to buy or sell tokens from 0x relayers by sourcing the best prices.

This is going up against the centralized versions, specifically ShapeShift and Changelly. Will be super interesting to see how that plays out.

EasyTrade charges 0.5% on each trade.

h/t Myles Snider
A take on the million-dollar homepage model, in Blocklord you can buy any block of the world on map for 0.01ETH.

You can then earn rewards if people buy a block next to yours, you can sell your block, but you could also get “bought out”, and in that case you’d get back your original price paid plus 80% of the rest.
🤡 ICO Madness
For whoever thought the big-and-fast ICOs were over, here you go: there are so many of these that most of the time we've never heard of them.

And we're not even talking about the same sized private rounds going on all over the world.
👮 This week in regulation
Crypto has a new hero.

His name is Christopher Giancarlo, the Chairman of the US CFTC who won the hearts of many in the industry at this week's Senate Banking Committee heard testimony.

“We owe it to this new generation to respect their enthusiasm for virtual currencies, with a thoughtful and balance response, and not a dismissive one”.

He went as far as describing the meaning of 'hodl' (his version goes “Hold On for Dear Life”, but we still love it), calling his niece a 'hodler'. Let's let that sink in for a minute.

As way of background, the US Congress called this testimony from Giancarlo and SEC Chairman Clayton to better understand how digital currencies can fit into the existing financial regulatory landscape.

The outcome of the hearing was undoubtedly bullish for the industry, with the known alarm bells (Clayton mentioned “ICO” 132 times): regulators have the situation firmly under control and they understand the “enormous potential” of distributed ledger technology, encouraging people to “pursue it vigorously”. Giancarlo even stated that, had blockchain public ledger technology existed in 2008, we may have have been in a stronger position to measure counter-party risk and respond to the financial crisis.

“As we saw with the development of the Internet, we cannot put the technology genie back in the bottle. Virtual currencies mark a paradigm shift in how we think about payments, traditional financial processes, and engaging in economic activity. Ignoring these developments will not make them go away, nor is it a responsible regulatory response.”

For a comprehensive tweet-sized summary of Clayton's testimony we suggest reading Peter Van Valkenburgh's thread, while here you find the transcript of Clayton's testimony and here Giarcarlo's.
Marco Santori, aka Mr SAFT, is leaving Cooley to become president and chief legal officer of Blockchain, where he'll also be responsible for corporate development / M&A.

The timing is certainly interesting, as his move follows the SEC crackdown on ICOs and recent comments addressed to lawyers advising them.

We wish the best of luck to Marco in his new role at rocketship Blockchain!
No week goes by without another event in the Tezos drama.

The SEC has denied access to information pertaining to Tezos to an attonery who's representing plaintiffs in a class action lawsuit. This could indeed suggest that the SEC is working on enforcement activities related to Tezos.

Things cold get ugly quickly from here.
European Central Bank president Mario Draghi opens up the possibility of European banks holding reserves of Bitcoin.

"...the credit institutions established in the European Union are showing a limited appetite for digital currencies like Bitcoin, notwithstanding the high level of public interest. However, recent developments, such as the listing of Bitcoin futures contracts by US exchanges, could lead European banks too to hold positions in Bitcoin, and therefore we will certainly look at that."
💰 New funds
Crypto funds ain't cool anymore, crypto merchant banking is where it's at.

In the last stage of his come-back, Novogratz has apparently raised $250 million in a private placement to build what sounds like the Goldman Sachs of crypto, a mixture of prop trading, principal investing, managing third party capital and advisory work. 

The process is structured in a rather complex way, including the acquisition of a Canadian startup and the reserve take-over of a listed shell company, involving investors like the CEO of China's Foxconn.
Coinbase is setting aside $2,500 a month to support open source projects, or approximately 0.000003% of their 2017 revenues.

While undoubtedly being a negligible sum for an insanely profitable company, this is a welcome first step from a centralized organization like Coinbase that relies on some open-source software. It also acts as a painful reminder of the open-source development funding issue: it's very arduous for the long tail of open source developers to continue developing in absence of more scalable funding mechanisms (that do not involve an ICO).

Projects like Gitcoin, Fundrequest, Oscoin and others have emerged to address this gap.
Behind paywall (archive link here).

We continue to witness some of the most successful entrepreneurs, investors and developers gravitating towards decentralized technologies.

We're hearing rumours of Uber co-founder Travis Kalanick making moves into the space, as well as Linkedin co-founder, and now Reddit co-founder Alexis Ohanian announced that he will step down from the company to devote his attention to Initialized Capital, the early stage venture capital firm that he co-founded. He will focus on emerging technologies such as blockchain.
ℹ️ About us
Token Economy is written and curated by Stefano Bernardi and Yannick Roux.

If you're building a new fundamental piece of technology for the future, please reach out 🤙

If you're feeling generous, you can stake some ETH on our StakeTree page 🙏
Feel free to send links to include in the next issue, or any comments you might have on this one!
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