📌 An opinionated recap of the most interesting news in crypto
Token Economy
🤣 April Fools?
Vitalik just released a new EIP proposing to cap total ether supply at ~120 million ETH.

"In order to ensure the economic sustainability of the platform under the widest possible variety of circumstances, and in light of the fact that issuing new coins to proof of work miners is no longer an effective way of promoting an egalitarian coin distribution or any other significant policy goal, I propose that we agree on a hard cap for the total quantity of ETH"

This one could actually be real, at least Coindesk seems to think so. Or it could be an April fools joke that turns into reality. Such is crypto...we'll wait for it to be confirmed our debunked!
Zeppelin audited the US dollar smart contracts and here's what they found out:

- Centralized issuance, requires trust in US government
- Not backed by any physical asset
- Heavily depreciating asset
- High energy usage and environmental impact
- Undetermined confirmation time for transactions
- Unappealing design
- Highly susceptible to theft
- Unsuited for global transfers

The funny thing here is that it's all dramatically true! 🤣
Advanced shit-the-bed tech, proof of poop, sewer channels, brown paper.
This shitcoin's got it all!

PS: it's actually for a good cause, all funds raised go to charity Giveth.

Now off to what *actually* happened this week...
📌 Token Economy
Quite a lot to digest on governance this week, see this and the next two posts!

Here Vitalik picks on EOS DPOS consensus model to illustrate how on-chain coin-holder voting mechanics are bound result in a plutocratic form of governance that is sub-optimal for base-layer protocols like Ethereum.

Vitalik's solution is governance via cryptoeconomics, ie "trying to reduce social trust assumptions by creating systems where we introduce explicit economic incentives for good behavior and economic penalties for bad behavior, and making mathematical proofs of the form “in order for guarantee X to be violated, at least these people need to misbehave in this way, which means the minimum amount of penalties or foregone revenue that the participants suffer is Y”."
Dan Larimer promptly responded to Vitalik's post highlighting the limits of a crypto-economic form of governance, namely its inability to make subjective judgment calls, determine right or wrong or even prove the total (internal and external) economic exposure of the participant and thus his or her truthfulness.

Dan concludes that:

"Vitalik and I are both attempting to solve some very challenging problems in human governance. I have chosen to recognize certain realities regarding the limits of objective proofs and accept reality that each community might have its own definition of “right and wrong” which can only be measured by a poll of the subjective opinions of community members."
Following on with decentralized governance models, a must-read on the 0x governance roadmap and the role the ZRX token will play in it.

Will's TL;DR
- 0x protocol’s pipeline of smart contracts can accommodate upgrades without downtime or disruption to markets.
- The ZRX token will drive a governance process that allows stakeholders to securely execute these protocol upgrades.
- ZRX as a fee token enhances governance by ensuring the token distribution converges on a representative sample of protocol stakeholders over time.
- 0x protocol’s transition to community governance will occur in phases that shift control to ZRX holders.

Don't miss out on the FAQ at the end of the post and the comments, where Will openly addresses some tough questions the investor community has raised recently on the ZRX token economics.

The value and role of governance tokens are not yet well understood, mostly because they haven't yet been battle tested in the field, so we're all navigating in uncharted waters. Some are dismissing them already though, which feels premature.

Disclaimer: we own some ZRX tokens.
A PoS skeptic does a side by side comparison of how PoW and PoS would fare under black-swan worst case scenarios, like the entire network going offline, portions of the network getting partitioned or private keys getting stolen.

He concludes on the superiority of PoW down to two benefits:

- PoW protects the future: When there’s a chain split, it gives us an objective mechanism, automatable way of resolving conflicts, without requiring manual human intervention or trusted third parties
- PoW protects the past: Getting control of majority hash rate still costs an attacker an enormous amount of time & money to rewrite history, so the balances are somewhat safe.
Simon describes a new general-purpose token model that, based off the ideas behind TCRs and bonding curves:
- utilises a continuous token model,
- requires less reliance on specific entities [eg, founding teams],
- allows tokenized projects to be started with very low barrier to entry,
- allows more natural accountability between the users & beneficiaries,
- allows more effective capital allocation
- allows projects to dissolve naturally. 
A rather long and intellectually stimulating piece on game theory and Nash equilibrium under complex multi-player games (read crypto networks?).

The piece also touches on "correlated equilibrium", a more general concept of game theoretical equilibrium that is also very relevant to the design of decentralized networks:

"Correlated equilibrium [...] posits a scenario in which game players each receive advice from a trusted mediator (or “correlating device”) about what strategy to play. The mediator’s advice forms a correlated equilibrium if no individual player has an incentive to deviate from the advice he has received, if he believes the other players are each following their own advice."

The conclusion is that there are still many unknowns in the design of complex economic networks.
Thoughtful post by Tony who runs product at Decentraland. He applies Ben Thompson's Aggregation Theory framework to the web 3.0 to hypothesise at what layer of the supply chain value may end up accruing.

Thoughts like this are very timely coming after the uproar caused by the Facebook/CA situation:

"Users will have to make a choice between the superior UX of today’s internet companies and the superior privacy and data sovereignty of decentralized internet companies. Long term, this gap will close as users can offer more data to discovery engines and UX handicaps are removed. But there’s still the probable possibility that decentralized apps will never provide the same kinds of magical (and sometimes creepy) experiences as today’s internet companies."
A feel-good post from Chris dedicated to all those who are losing sleep over the bearish price action since January, citing Buddha, Ben Graham and Warren Buffet.


"...you have a choice about how to handle and interpret this present that Mr. (Crypto) Market is bringing you. Maybe it even allows you to stop caring about the price, and focus on the ideas behind crypto more"
Pompliano illustrates how we are entering the third age of securities: analog, electronic and digital, the latter enabled by blockchain technology. 

Security tokens in his view are merely digital incarnation of shares, which will enable things like fractional ownership, automated regulatory compliance enforced by the protocols, cheaper transactions costs via instantaneous settlement on decentralized exchanges and generally broader access to the asset class. 
A gripping dive into Zhao Changpeng's story of building Binance into the largest crypto exchange in just over 9 months, a pace that has taken most regulators by surprise.

CZ claims the company still operates without banking and deliberately keeps location of its offices and servers secret, while he travels from place to place staying in hotels. And it seems like he may have found a new home in Malta now.

“We’re OK to do things very creatively to avoid unnecessary regulation”.
Positive news for the Ethereum ecosystem, and for those tormented souls that inadvertently sent ERC20 tokens to their Coinbase ETH address...

No timeline was given, and further regulatory clarity is required to inform which ERC20 assets will be supported.
After Google, Facebook and most recently Twitter banned crypto-related ads, now it's email service provider Mailchimp's turn to clamp down on the sector.

The broad-brush, clumsy move caused a bit on an uproar in the community, who called censorship on Mailchimp as legit and valuable endeavours like Evan's newsletter got flagged and given short notice.

In a Tweet follow-up they cared to add that "Cryptocurrency-related information isn’t necessarily prohibited. It can be sent as long as the sender isn’t involved in the production, sale, exchange, storage, or marketing of cryptocurrencies.", which is still rather obscure and prone to misinterpretation.

Inevitably some of these controversies will end up in court, as it's in fact happening already with a joint lawsuit filed by a coalition of blockchain businesses against Google, Facebook, Twitter and Yandex as a result of their recent bans.
A very simple yet effective way to understand how LN works, though some folks from the newer generations might be wondering what an abacus actually is...
For the Tether/Bitfinex conspiracy theorists out there, there is supposedly some new data that points to Noble Bank of Puerto Rico as Tether’s primary reserve bank.

In the meanwhile, Bitfinex announced they will enable deposits and withdrawals in Yen and GBP and well as related fiat (or USDT rather) to crypto trading pairs. 
A really interesting data-driven piece digging into how Maker-Dai handles a large CDP liquidation event. 

In the recent crypto downturn DAI has proven incredibly resilient, in spite of the critics. Make no mistake though, it's still very early days.
A good overview of the Monero/Bitmain situation.

The Monero dev team is setting up to combat ASIC-miners, and Bitmain in particular since the release of its Antminer X3 designed specifically to mine XMR, by updating its CryptoNight hashing algorithm every six months.
😎 Cool new projects
This made significantly less noise than it deserves, perhaps because, unlike Harbor's recently announced similar endeavour, it doesn't emanate from the Silicon Valley hype machine.

(Little detour, but here's why Argentina is developing as a world-class crypto hub 🇦🇷🤟).

Zepplin have released a whitepaper and proof of concept smart contract for the Transaction Permission Layer protocol, an open-source self-regulatory framework allowing token issuers to guarantee regulatory compliance in the secondary markets by enforcing it on-chain: KYC/AML and accreditation requirements are baked into the token smart contract code itself, while the protocol validates whether participants meet such requirements then automatically approves transactions if that's the case.  

It's awesome to see the regulatory infrastructure getting built by the community itself.
Aragon released their much awaited 0.5 release.

It is stunning, and massively impressive. You can use it today on Rinkeby to organize and manage open source projects, startups, non-profits, or whatever other type of organization that needs governance.


With it they also released a *stunning* video, showcasing a few people in the space, explaining why what they're doing is so important.

We have it on loop over here.

Disclaimer: we own some ANT tokens.
The Balance team released WalletConnect, an open, interoperable protocol to make dapps easier to use.

It works in the same way the Whatsapp for web auth flow works, by scanning a QR code presented on the web with your mobile device.

This seems to be a great alternative to Metamask for people that prefer having their funds on a mobile device.
Amazing Lightning Network apps are starting to emerge, like Blockstream's Paypercall, powered by Lightning Charge, that allows developers to charge for HTTP APIs on a pay-per-call basis with Bitcoin and Lightning.

This will enable programmatic micro-payments triggered by certain actions, like requiring a payment when a users sends an SMS. Here's their Github.
Great initiative by Rough Draft Ventures, General Catalyst’s student-focused programme aimed at funding entrepreneurs at the university level.

They are pledging up to $1 million and accepting application for blockchain projects emanating from universities and addressing some of the key industry challenges such as diversity, scalability, privacy, custody and interoperability.

Their underlying thesis resonates: "Students are the first generation native to the crypto world and they have access to world-class researchers." 

To our few hundreds student subscribers, you can apply here by April 15th.
🤡 ICO madness
We got the preliminary March ICO numbers from Tokendata overnight, and we are continuing to see a significant softening on the public raise front:

- $0.7 billion raised from 53 projects, down from $1.2 billion in February
- 60%
of the capital was raised in private rounds

* These numbers do not include the Telegram pre-sales as they have not been officially publicly announced yet. If you wanted to account for that, you'd need to top up with $850 million in both February and March, which would increase the % of private raise even further.

** The top 5 ICOs of the month include Celsius ($50M), Leadcoin ($50M), Endor ($45M), Yggdrash ($40M), TrakInvest ($33M). Literally never heard of a single one...
Speaking of which, Justine and Olivia (identical twins!) from Charles River Ventures shared their in depth take on the Telegram ICO.

Our conclusion? We aren’t convinced that Telegram will deliver significant upside beyond the ICO valuation.

The points are all valid, and we subscribe to them all, but we find it still pretty weird that no real thought is put into determining why the cryptoasset would hold any value in the long term, even if the network was successful.

It's also interesting to compare how a traditional venture investor would analyse an investment opportunity in something like Telegram, with the views of a "crypto native" like Chris Burniske. They both come to similar conclusions, but from very different angles.
👮 This week in regulation
Nothing particularly new here.

To "carry out rectification of various types of virtual currencies" while making steady progress on "the research and development of the central bank’s digital currency" (no more details given out) are firmly on PBOC's agenda for 2018, in an effort to protect the health of the national currency.
Russia's efforts to ‘outlaw’ cryptocurrency are in full swing: the Russian Ministry of Finance is drafting the ‘Money Surrogate Bill’ to criminialize the ‘turnover’ of ‘money surrogates’. If this became law it would prohibit the use of a crypto currency to purchase goods or services in Russia.

It's very clear which nation states are feeling more at threat by crypto.
Across Platforms, Sparkco, Pink Ribbon, Mattervest and 18 Moons were simultaneously issued formal Consent Orders by Massachusetts’ Secretary of the Commonwealth, outlining missteps and remedies required to avoid prosecution.
💰 New funds
It's not everyday that one hears of a venture firm getting acquired, and it's not always clear what it actually means / what assets are effectively part of the transaction.

In any case, Anthony Pompliano's Full Tilt Capital, who had recently announced their next fund would be entirely crypto focused, is being acquired by Mark Yusko's hedge fund Morgan Creek. Under Morgan Creek's umbrella, the Full Tilt team will have access to up to $500 million that will be raised from large institutional investors in the hedge fund's circles. Given how outspoken Pomp has been on Twitter about the topic, it isn't surprising that the strategy will be to pursue the security token opportunity across all asset classes.
💸 Funding rounds
Bram Cohen's still rather mysterious new crypto endeavour Chia announced a $3.4 million Seed round apparently led by Naval personally, with participation from A16Z, Greylock, True Ventures, Danhuacap, DCM and Metastable.

The announcement was also an opportunity to lay out their intention to gun for a Reg A+ offering in the summer, which would allow them to raise up to $50 million from both accredited and retail investors, structured as a dutch auction.
Congrats to Felix and the Set team for closing their funding round from a great group of investors and for announcing their consumer-facing dapp Tokensets

If you've lived under a rock, Set is building an open-source standard for a higher-order token fully collateralized by a basket of underlying ERC20 tokens, which will have many known and yet unknown applications.
Spring Labs, started by former executives from online lender unicorn Avant, is building what sounds like a permissioned 'Civic for financial institutions' and has just closed a large $15 million round from August Capital plus GreatPoint Ventures, Jump Capital, a PE firm Victory Park Capital and even Multicoin Capital. 

Obviously pre-product, and with a plan for a proprietary token. 
Big milestone for Everledger, the underhyped blockchain based provenance platform for diamonds and jewellery: it has raised a $10.4 million Series A round from Fidelity Investments and GMP Securities, with participation from Vickers Ventures Partners, Graphene Venture Capital, and previous investors Rakuten, FPV, Fenbushi, and Bloomberg Beta.
Boston-based algorithmic crypto asset manager has raised $3.4 million from True Ventures, The Chernin Group, Resolute Ventures, Boston Seed Capital, Converge, and Founder Collective.

Their market-beating secret sauce combines technical analysis and fundamental metrics such as developer activity and on-chain transactions.
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.
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Token Economy · The Dolomites · 38121 Trento TN · Italy
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