Tag: blockchain

Metaphorical Apes & Gorillas

~ cafebedouin

Apes & Gorillas is another little gem from Joe Armeanio. It closely mirrors the idea two computing revolutions talked about in this post that talks about:

  1. Apps with easy to use interfaces designed for casual users
  2. Application layers, that provide tools that allow new ways of using a computer that were previously impossible

There’s a huge difference in needs between traders doing swaps and solo miners using a node wallet. The general principle is applicable to most areas of life where technology touches.

First Article, On-Spec: Ergo’s Hybrid Method for Counting Costs

~ cafebedouin

I wanted to note that I wrote an on-spec piece for the Ergo cryptocurrency that was published yesterday. It started with watching this developer update, where Joe Armeanio, the business manager for the Ergo Foundation, mentioned that they were looking to translate a technical topic for a general audience. I volunteered to do it. The editorial team sent me the link to the developer’s paper (morphic). I did a summary. morphic reviewed what I had written, twice, and we got it to the point where he thought it was correct. An editor from the group reviewed the article, and he made a significant number of changes. The community read it, and someone made a title change suggestion. It went from idea to finished piece in just over 24 hours.

It’s the first time I’ve been paid to write. The funny part, I had so much help, it hardly feels like I wrote it at all. Recommended experience.

Why Ergo?

~ cafebedouin ~ 2 Comments

Ergo is different from other blockchains. It is focused on providing a decentralized, open, permissionless, and secure platform for contractual money that is usable by ordinary people to pursue their common good over the long term. It is designed to be resilient in the face of different economic environments and competing interests, allows individuals to choose how much privacy is right for them, and offers economic opportunity to the people using the blockchain.

Ergo has the technical capability to provide a wide variety of services to the decentralized financial cryptocurrency ecosystem and to enjoy comparative advantages, whether that comes from oracle pools, logarithmic mining, profit sharing protocols or other innovations. However, while Ergo offers a lot of technical capability not available on other chains, the real value of Ergo is its focus on providing the tools for the financial success of ordinary people, like you and me.

Introduction

“The real problem of humanity is the following: we have Paleolithic emotions, medieval institutions and god-like technology.”

–E.O. Wilson

We are witnessing the birth of a new era, one where well-established elements of computer science, such as cryptography and distributed systems, are combining with fields of finance and game theory to bring a new economic and social order. Who will reap the benefits of this new era?

Shifts of this kind tend to create new social classes. For example, the Industrial Revolution and the emergence of capitalism made being royalty and a feudal landlord less important.

With change, there is opportunity. But, frequently, the opportunity is limited.

What is new is that blockchains make it possible to facilitate transactions between businesses of any size, between people in any geographic location and that can work in any economic, social or political environment. Blockchains can unlock synergies and new ways of exchange and interacting.

Blockchains are a new method of accounting. Just as double entry accounting introduced a formal and methodological rigor to bookkeeping that transformed medieval businesses into capitalist enterprises, blockchains have the potential to upgrade our medieval institutions into something that serves the common interest more than elite interests by providing mechanisms for financial exchange, decision-making, arbitration, and so forth that were not possible before.

The Challenge

People don’t like change. Medieval institutions who serve entrenched corporate, state and other interests will want to limit the opportunities of blockchains to enrich themselves. Even with the best of intentions, it is a challenge to broaden access to opportunity. Everyone wants to help the hungry, but few people want to give up their lunch in order to do it.

So, the question is how do you grow the pie? Do you grow the pie by focusing on large economic actors, such as governments or businesses in the Fortune 500, who then, presumably, pass along portions of the pie in the form of more goods and services at less expensive prices? Or, do you grow the pie by focusing on the needs of ordinary people and creating new opportunities with this technology that didn’t exist before?

And while it is necessary for a blockchain to have multiple constituencies with different interests, such as miners, liquidity providers, developers, entrepreneurs, users and so forth, some groups are in opposition. If you are focused on cross-border payments for large businesses, it’s not the same as being focused on cross-border remittances of people without access to traditional financial services. The software for these two use cases will be very different. While it is possible the same blockchain can serve both groups, it’s going to serve one of them better.

When using, or investing, in a blockchain, one of the key questions is: Whose interests does the blockchain serve? Who is threatened by it? And how can it be attacked?

The Power of Ergo’s Proof of Work

Ergo’s proof of work provides a powerful example of seriously considering the problems that come from various attacks, whether they be 51% attacks via centralized pools or regulatory attacks on infrastructure, such as China’s displacement of blockchain miners.

Ergo addresses this issue by implementing an algorithm designed to be mined on commodity hardware by users of the blockchain. Right now, there are smart contract pools that allow people with a single GPU graphics card to mine Ergo and verify the blockchain in return for some cryptocurrency. And with Moore’s Law, this commodity hardware becomes more accessible over time, as graphic cards with the same capability become less expensive.

It provides more opportunity, for more people and results in a more secure blockchain. What’s not to like?

Capabilities & Environments

Almost every blockchain claims to value decentralization. But, if you need people with specialized hardware to maintain your consensus, then you are beholden to people with that specialized hardware, or to the governments that can ban them.

People talk about the number of transactions per second, the market capitalization, the price, the size and productivity of the applications on the chain. But, there is much that is not discussed.

For example, people rarely think about longer term issues, such as the fact that blockchains have lifecycles. Blockchains will have to operate during times when a significant portion of the local, regional and global environment is experiencing a pandemic, a war, or some other factor that threaten their ability to function. How prepared are they to meet that challenge?

It is not hard to imagine that various blockchain ecosystems becomes important to our daily lives, such as when there is a digital national currency, and a failure could lead to catastrophic outcomes, such as famine. How many people in the cryptocurrency space have given that possibility consideration? Your lambo is useless in an environment where you don’t have enough food to eat.

At this time, most blockchains are building their infrastructure. They aim to increase their market share and capability of their dApps. But, if you don’t have your eye on the potential problems that will manifest over time, you’ll make design decisions that will be difficult to fix later, e.g., Ethereum’s move toward Proof of Stake in an effort to resolve their problems with fees. And every design decision has positives and negatives.

Ergo’s Positives & Negatives

  • Financial capital: A fair launch means you don’t have a lot of money sitting around to fund development. There are ways this problem can be solved, such as establishing funds that people that are interested in certain kinds of development or a particular dApp could contribute to that would help make them a reality. This also has the advantage that it establishes that there is interest and perhaps even a market for the software being developed.
  • Human capital: There are many excellent developers already working on Ergo. With financial constraints, it isn’t possible to bring on as many developers as some other blockchains, but this fact also leaves more room for organic growth. If adoption were only about market share, then Ergo is at a disadvantage. However, there are many niches that Ergo’s technology can fill. Some niches may not have many options and developers will be enticed to the platform because it can solve problems other blockchains cannot.
  • Infrastructure: You need wallets, dApps, APIs and so forth. The software that faces the user of the chain needs a lot of work. However, the underlying chain technology is great, or has great potential, and the dApps and consumer facing technology will only improve from this point.
  • Open source: It’s important to recognize that open source does have drawbacks. Many open source projects are a labor of love that don’t have good incentives, which can negatively impact projects by making it difficult to keep developers, create schisms that undermine the project or lead to other problems . But, there is also real value in not having to reinvent the wheel when building an application. It’s easier to leverage an existing code base, modify, and iterate than it is to write code from scratch. However, open source requires evolution, which takes time and implies some tolerance for error.
  • Synergy: The ecosystem is young. But, there is evidence of clustering of services, such as the development of a profit sharing contract that can be used by any dApp, the building of cross-chain functionality, the launch of a variety of stablecoins, etc. These kind of interactions implies both competition and an attempt to accommodate a variety of use cases.

Conclusion

Who is using the blockchain? Without many dApps, it is primarily people investing in the chain and transferring Ergo to and from exchanges and wallets. So, Ergo is a promise. It’s an idea that blockchains can be a vehicle for the economic good of ordinary people. But, there needs to be a lot of development before Ergo can fully deliver on that promise. Investing in that promise before it is fulfilled will both help make it reality, and it has the potential, if the promise is fulfilled, to benefit those willing to make that investment.

Acknowledgements: Many of the ideas in this essay came from Joe Armeanio’s response to a reddit post outlining Tascha’s A Checklist for Layer 1 Blockchain Investment.

How NFTs Create Value

~ cafebedouin

“[Non-fungible Tokens (NFTs)] enable new markets by allowing people to create and build upon new forms of ownership. These projects succeed by leveraging a core dynamic of crypto: A token’s worth comes from users’ shared agreement — and this means that the community one builds around NFTs quite literally creates those NFTs’ underlying value. And the more these communities increase engagement and become part of people’s personal identities, the more that value is reinforced.

Newer applications will take greater advantage of online-offline connections, and introduce increasingly complex token designs. But even today, it’s less surprising than you might think that people are making money selling pictures on the internet.”

–Steve Kaczynski and Scott Duke Kominers, “How NFTs Create Value.” Harvard Business Review. November 10, 2021

I was of the mindset that NFTs are a scam. But, then again, people think the same thing about cryptocurrencies, which I think is a new computing paradigm. This overview and explainer convinced me that perhaps there is more going on in this space than I realized. If you want to go deeper down this hole, you could do worse than Rolling Stone’s coverage of the Bored Ape Yacht Club.

The Internet of Grift (Non-Fungible Tokens Edition)

~ cafebedouin ~ 5 Comments

“The moment that something has bubbled up to the surface long enough for it to establish real value is the exact moment at which those engineering the system for their profit are planning to exit or have already left. All of the flashy press has likely died down due to the market cap crashing from $1.1 billion to today’s cap of $726 million and $1 million in volume – with a few days this week below $350,000. For context, the top cryptocurrencies have daily volume in the billions or hundreds of millions of dollars. Now the market is flooded with cheaper cards that people can’t recoup value from, with no real market to sell them into. But the guys who got in early got rich, as they always do…

…When you remove the idea that an NFT could forseeably be sold for more money than you paid, what value does it have? What beauty? What does it symbolize? What meaning does it have? And what’s the point of it being unique? It’s not a Rolex, that actually has a quality and heft and look to it, nor is it something you can admire outside of the computer, and even if you don’t care about that, it’s a status symbol of wealth and taste (if you feel that way about expensive watches).”

-Ed Zitron, “The Internet of Grift.” ez.substack.com. October 1, 2021.

It’s interesting because there are people that make this same argument about cryptocurrencies, “They are a solution looking for a problem.” I’d argue that programmable money does have obvious utility in ways that a non-fungible token of art doesn’t. But, it’s a point where reasonable people can disagree.

Metaiye Knights

~ cafebedouin

“Metaiye Knights is a graphic novel and gaming saga on the rise of a decentralized freedom movement across digital and physical realms. Think the Matrix, meets Tron meets Mr Robot in comic, gaming and film formats for the mixed reality, crypto generation…

…Metaiye Knights teaches users how and why to utilize blockchain in a compelling manner, in a saga based on the evolution of the decentralized web. Starting as a graphic novel, our story evolves into an open gaming platform that will ultimately culminate as a TV or film series — it tells the story of the rise of a decentralized society and is published using decentralized money and collectibles. Users will be able to create assets that persist like personal avatars and digital collectibles, which they will be able to keep and use in other environments regardless of what happens with the platform, which will make them more valuable and collectible with time. It will use VR and AR to create new reading and gaming experiences and use blockchain to pioneer new distribution, payment and rewards models.”

–Metaiye Knights

So, this is a project like Kickstarter, but instead of getting a product, you are buying shares of the creative product produced. I’ve never seen anything like this before. My guess is that it is a bad investment, but if it helps get something made that you’d like to see, such as a comic book and gaming platform that helps promote blockchain technologies, perhaps it is worth it to people with a lot of discretionary income?

The State of Cryptocurrency, Mid-2017 Edition

~ cafebedouin

Main takeaways:

  1. It’s not that hard to get up to speed.
  2. Overall, the cryptocurrency ecosystem feels younger than I thought.
  3. Blockchain is the technology that will let lifestyle businesses cross the chasm from fringe to mainstream.
  4. Micropayments still aren’t going to work.
  5. Money leads to Power which leads to Centralization.

Cryptocurrencies and their technologies can seem overwhelming, but it’s easy to get up to speed.

“I really only started reading up in depth on cryptocurrency and the related technology like blockchain three months ago, and felt like I could at least follow all the talks.

If you want to get up to speed, you’re only a couple Saturdays of reading away…”

—Pearson, Taylor. “The State of Cryptocurrency, Mid-2017 Edition.” Hackernoon.com. August 16, 2017.