Blocktrak

Decentralized Finance

Decentralized Finance has been taking shape for years. The goal is to decentralize finance into a peer to peer financial ecosystem consisting of digital assets, smart contracts, protocols and various dApps (decentralized applications) that would allow a user to build financial ecosystems and tools, as well as participate. Most of these are currently being built on the Ethereum Blockchain. This all goes back to the original vision of “Peer to Peer” finance, and it while most of the users are Crypto centric, it could one day be adopted by more traditional institutions and the mainstream. Currently, there is nearly $1 Billion USD value participating or “locked” in the DeFi ecosystem. In late 2017, there was less than $1,000 USD. The current value locked only demonstrates the popularity of these networks.

One may wonder what the incentives are to use such a system. The most evident reason is access to traditional financial institutions are limited to those able to open a bank account for the most part. This means a large user base in developing countries could participate in a DeFi ecosystem through the use of their phone. Many of these users are located in places that do not have the same access as those in modern more developed countries. There are also obvious incentives such as being able to lend currency, and collect interest, as well as “Stake” to earn interest. Decentralized exchanges also known as a “DEX” will enable a user to trade these various digital currencies or Tokens. They emulate traditional finance, however they are enabling Peer to Peer networks in a decentralized way, and cut out the middle man (banks). This always reminds me of the late 1990’s and the emergence of e-commerce. While traditional financial institutions may not be enthusiastic about this, the technology is inevitable just like the dawn of computers as described by Apple pioneer Steve Jobs in a 1981 Nightline interview:

While this illustrates the emergence of computers, it can be correlated to how DeFi/Blockchain/Crypto have been emerging over the past decade. What matters is the network effect and as the users grow, traditional institutions will begin adopting this new way of conducting financial operations. Currently, most of the users are Crypto enthusiasts mixed with some modern Wall Street pioneers who are trying to embrace these new systems. Many young entrepreneurs coming from traditional finance backgrounds have attempted to launch their own funds focused strictly digital assets. They believe the future is in DeFi.

MakerDAO

Maker (MKR)

Maker is one of the early pioneers in DeFi and one of the most popular. It includes a Stable Coin called the “DAI” which has a multitude of uses and describes itself as being “soft pegged to the US Dollar”. Through its “Oasis” feature a user can trade on their marketplace, borrow by locking Tokens and earn interest by saving which is also described as “Non Custodial” furthering the aim of decentralization of finance. The platform currently works in conjunction with 10 Tokens: DAI, Ethereum, BAT, USDC, WBTC, Augur, ZRX, LINK, PAX and TUSD. The popular exchange Coinbase described MakerDAOs long term ambition to become a sort decentralized reserve bank.

Maker also has a built a governance system which allows a user to vote on changes in its network. These votes are issued through the use of their own token called the MKR. What is also interesting is the fact that DAI works on dozens of blockchain applications such as wallets, exchanges and games. Some of the notable ones are Coinbase, MyEtherWallet, Origin Protocol, Wirex, Ledger, MyCrypto, Trezor, MetaMask, OpenSea, KickBack, Compound, DYDX, Uniswap, and many others.

Compound

Compound enables a user to lend out and borrow Cryptocurrency such as Ethereum (currently over $66M worth) and earn interest. Not limited to just Ethereum it also allows for DAI (Maker DAOs stablecoin), USDC, Augur, Wrapped Bitcoin, Basic Attention Token, ZRX, Tether, and SAI. To set the interest rates on these loans, Compound enables an algorithmic system which analyzes the supply and demand on the token being used. Unlike Maker DAO, the project had not originally issued a Token or participated in the Initial Coin Offering craze of 2017, they had raised capital through more traditional Silicon Valley venture funds. Fast forward to 2020, Compound currently has its own governance token called the “COMP” which is to be used for voting on changes to the protocol. According to their own data, Polychain Capital has issued the most votes, next an anonymous address and Third one of its original co founders. While that does certainly seem quite centralized a far as voting goes, there is no doubt that Compound has gained much popularity with DeFi enthusiasts.

It has been said by many in the Cryptocurrency world that ultimately to gain mass adoption everything will have to become centralized. For example, if a random country adopted Bitcoin as a national currency and it became highly regulated, then the price would probably sky rocket over $1M in value per coin. Many of the participants in the Crypto ecosystem, if not most of the participants care about one thing – the price going up.

DYDX & Uniswap

Many of the DeFi projects act as a location to park your digital assets and earn interest through mechanisms like loaning and staking. Exchanges serve as a critical component in the decentralized ecosystem. DYDX currently has nearly $30M in volume. It allows a user to open short or leveraged trading positions up to 10x. Just like MakerDAO and compound, users can also borrow any supported asset as well as lend out tokens. DYDX has an advanced clean user interface and operates on the Ethereum protocol in a trustless way. Similar to Compound, DYDX was funded by venture firms in Silicon Valley.

With over $30M in volume, Uniswap is another token exchange powered by smart contracts on the Ethereum network. They have their own method of automatically settling trades near the market price. While DYDX and Uniswap are not the only players in this game, they have higher liquidity and remain popular. The difference is some of the mechanisms and UI.

Synthetix

A slightly different exchange than DYDX and Uniswap, Synthetix focuses on Synthetic assets which provide exposure to an asset without holding the underlying resource. As they describe: Synths are synthetic assets that track the price of the underlying asset. They allow holders to gain exposure on Ethereum to various asset classes without holding the underlying assets themselves or trusting a custodian. If a custodian was needed, it would certainly be centralized mechanism defying what DeFi is supposed to be.

The platform has 3 main features: an exchange with infinite liquidity, peer to peer contract lending, and a distributed collateral pool. Second it has “Mintr” which is a dApp enabling their own token called the “Synth” and offers the ability to collect fees on the network and mint new tokens. Lastly it has a clean user friendly dashboard for viewing data based on volume and other details relevant to the participant.

DeFi is definitely still the buzzword in the Crypto world in 2020, and will continue to be proliferate. These projects described above are just a few of hundreds of attempts globally at building competing applications.

NFT.NYC Expands

It has been 1 year since the first NFT.NYC conference took place in New York City. For those of you who do not know what NFT means, it stands for “Non Fungible Token” which is an Ethereum Request for Comment describing a unique one-of-a-kind Non Fungible Token. Unlike the Fungible ERC-20 which was used to distribute for Utilities on new Blockchain protocols and crowd funding capabilities, the ERC-721 was published as an Ethereum Improvement Proposal describing a unique, one of a kind digital item. Many of you reading this will have some recollection of the famed “Crypto Kitties” which gained popularity in 2018 and enjoyed a moment of fame, so much fame that “Normies” had heard of Crypto Kitties. Traders went wild speculating the price of Crypto Kitties and at one point, a single Crypto Kitty sold for Six Figures.

Since early 2019, much of the NFT arena has expanded beyond collectibles. Many independent game studios popped up, and because of the limitations of Blockchain transaction speed, produced very simple strategy games that do not require high throughput. Some of these games are: “My Crypto Heroes” a Japanese based strategy game with cool retro graphics, “Axie Infinity”, which has minted over 140,000 unique characters for sale on the marketplace. The most expensive Axie sold was for 110 Ethereum! Other gaming environments have also gained traction like Decentraland – a virtual world that allows you to buy land and construct your own Blockchain properties. Interestingly, some large companies have decided to purchase virtual land in Decentraland for advertising purposes, and I expect to see more heavy hitters coming into the space and continuing to do this. However, at the heart of any project is its community, and how it spreads and grows.

According to NFT site nonfungible.com weekly volume can be tracked on these projects. The data clearly shows it is a small yet growing niche within the Blockchain universe. The largest medium of exchange for NFT items is known as OpenSea, and had reached nearly $2M in trading volume. OpenSea is a sort of Amazon marketplace for NFT items, whether they be in the gaming arena or random digital art collectibles. Most of Blockchain based gaming and digital art pieces have listed on OpenSea. Other NFT initiatives include KnownOrigin, SuperRare, MakersPlace, CryptoVoxels, Crypto Punks (one of the oldest NFT projects), Neon District (Blockade Games), Gods Unchained which raised $15M in a limited edition card sale in 2019 has done quite well in trading volume. Some of these cards have sold for Five Figures since release.

Value Is Subjective

An exemplar for high value virtual items is the notorious “Club Neverdie” in Entropia Universe – a non Blockchain game. Jon Jacob paid a whopping $635,000 USD for this virtual nightclub. Second to that was the Crystal Palace Space Station, which sold for $330,000! While these are centralized gaming creations, you can only imagine what Blockchain based virtual items could be sold for in the future. They represent more than just virtual items for gamers. More and more, humans are connecting with virtual worlds, they represent an alternative reality as well as emerging new economies.

Furthermore, NFTs have the potential to be quite transformative for several industries outside of the gaming and collectible space. I have met the founders of several initiatives who intend to deploy them in the real estate industry as well as financial sectors. NFTs will play an increasingly important role in the newly emerging blockchain economy.

This years NFT.NYC conference will be taking place in the famed Edison Hotel, which was named after inventor Thomas Edison himself. He turned on the lights upon its opening in 1931. Famous films like “The Godfather“, “Bullets over Broadway” and “Birdman” were filmed here. It also represents in many ways the pioneering of new technology in the center of the world – Times Square. A place where the world meets large scale imagery and technological magic. Attendees will be able to watch the pioneers of this new space speak, and express their views on how NFTs have the ability to be truly disruptive technology. It is not to be missed! Tickets can be purchased on www.nft.nyc

2020 has arrived. As we progress into a new digital age, we see transformative technologies rapidly emerging like never before. People often do not comprehend how fast technologies evolve and how they affect our lives as a whole. Although this blog focuses more on blockchain, there are many emerging trends taking precedent alongside blockchain. As important as Distributed Ledger Technology can be, these other technologies should be observed and noted. These includes Machine Learning and automation tools. Companies like DuoLingo, SparkCognition, Augury, Signal AI, Chorus, Cobalt, and over 230 cities globally with Machine Learning startups in operation.

Multi-sensory projects are shifting peoples perceptions of the world. In the early 1990’s Virtual Reality experiences tried to gain adoption in shopping malls. If you recall the thriller movies “Lawnmower Man” or “Total Recall” this kind of environment can be visualized. Now, companies like Oculus, HTC, Hewlett Packard, Magic Leap, and of course Google are all rapidly deploying new experiences for mass adoption. Many of these experiences are geared towards gaming, but other uses include recruitment and training, pain management, creating and forecasting trends, training medical students, treatment of PTSD, and social cognition.

The democratization of of information continues to gain momentum. Data & Analytics tools, like MongoDB, Apache Hadoop, Lumify, RapidMiner, and others will allow for scalability and rapid deployment of data. Custom application through the use of AI, low-code and no code platforms will enable non developers to deploy solutions to the masses. Non IT professional will be enabled with tools allowing them to apply specialized skills above and beyond their training.

Human augmentation. Traditionally, we have referred to the science fiction name of “Cyborg” when thinking of man merged with machine. In 2020, companies are continuing research into solutions for prosthetics, sight, implants, and “Bio-printing” which essentially is 3-D printed organic tissues. This in particular could be quite revolutionary for human evolvement as many are in need of replacement parts which can be damaged from bone loss. When we think of Cyborgs, we think of action and entertainment movies of the future, however they are becoming very real with the merging of humans and machines. The movie “Blade Runner” illustrates a dystopia of this environment.

Smart Cities and Smart Spaces will continue to evolve. Some cities are rapidly deploying this model in Asia, Particularly Sejong and Busan in Korea. In China dozens of cities are deploying automation, facial recognition, automated transportation and endless IoT solutions. The advanced urbanization of our planet will only see massive and rapid increases of these practices in the years to come.

Distribution of the Cloud. Cloud computing will become more distributed and less centralized as more options open. Cloud initiatives will account for 70% of all technology spending going into 2020. 80% of all organizations globally will be involved in cloud computing by 2025. As remote working will continue to expand, workers will greatly benefit from Cloud advancements and its capabilities.

Automation is King. In simple language, robots could advance over human capabilities. Robots will rule the world – but not yet. Autonomous vehicles continue to be tested and have yet to hit mainstream due to safety reasons. There are parallel effects from this which will cut costs, but also remove low skilled labor and increase a demand in high tech skills for all humans. You may have experienced autonomous transportation by taking your local airport terminal commuter trains. Drones and other AuT (Autonomous Things) will expand.

Last but not least, Blockchain. Since the inception and notoriety of digital currency (Bitcoin), the general public has had a fascination with the capabilities of the various distributed ledgers. Most of this focus has been on the price of digital assets, and enterprise level firms have been deploying their own in house blockchains. The international banking giant HSBC recently announced that it will transfer $20 Billion in assets on a blockchain based custody platform. World governments are also starting to seriously explore the capabilities of their own national digital currencies. The wild west atmosphere of Cryptocurrency is becoming increasingly institutional but still piques the interest of more grass roots enthusiast communities, developers, and retail investors who still “Hodl”. One of the trending buzzwords of late 2019 was “DeFi” which is short for “Decentralized Finance”. Projects like MakerDao have gained prominence, loaning and staking platforms, as well as Stable Coins. Regardless of the price of Bitcoin, it will be an interesting year for all of these emerging technologies.

Malta is leading the pack in the emerging technology sector, entering a new era of digital innovation! Next month, 8,500 people from all over the world will gather here in the Blockchain Island to have the opportunity to discuss and invest in projects that are changing our future. Join us on the 7th and 8th November. www.aibcsummit.com

Many delegates will likely be attending the various conferences and workshops at AIBC Summit, which have always been extremely popular. Headline topics will include the Future of Fintech, Business and Emerging Tech, Innovation, and of course, Regulation. Leading the discussions will be Joseph Muscat (Malta Prime Minister), Silvio Schembri (Malta Financial Services, Digital Economy and Innovation), Anthony Pompliano, AKON, Ian Balina, Matt Greenspan, Yorick Wilks, David Orban, Miko Matsumura, Grace Rachman, Tim Draper, Virgil Griffith, and Alfio Bardolla.

The AIBC Awards on 7th November will be a glittering celebration of the best of the best in the worlds of AI, blockchain, tokenisation, robotics, IoT, and more. A charity event will wrap up the evening, with the intention of raising a 5 figure sum for the SiGMA Foundation’s global activities to help those in need.

Finally, this year’s show also adds glitz and glamour to the proceedings, courtesy of Grammy Awards-winning artist Akon, who will be delivering a keynote on the main stage about his West African AKOIN project, as well as performing at the extravagant closing night on Friday 8th November.

Eman Pulis, CEO & founder of SiGMA Group and AIBC Summit, said, “We’re so excited to bring this third edition of AIBC Summit to fruition in November. Alongside the latest government initiatives to further establish Malta as Europe’s leading hub for technology, our wider Malta Week activity will develop the synergy between the blockchain and medical cannabis sectors, offering a profitable new direction for smart DLT investors. It’s set to be a busy but successful week for everyone!”

Malta AI & Blockchain Summit is a bi-annual expo covering topics relating to the global sectors for blockchain, AI, Big Data, IoT, and Quantum technologies. The event includes conferences hosted by globally renowned speakers, workshops for industry learning and discussion, an exhibition space accommodating more than 400 brands and a number of networking events.

One of the topics often discussed in Blockchain communities is how mass adoption can be achieved. This revolves around decentralized applications, and scaling Blockchains which currently do not scale enough for widespread users globally. At a recent Keynote at Stanford University in California, founder Vlad Zamfir described what exactly Casper Labs does. But it is best described in reference to their GitHub:

“CBC Casper is a family of “correct-by-construction” consensus protocols that share the same proof of asynchronous, Byzantine fault tolerant consensus safety. We describe this family of protocols by defining their protocol states and protocol state transitions, and then we provide a proof of Byzantine fault tolerant consensus safety for the entire Minimal CBC Casper family of protocols. We give examples of members of this family of protocols, including a binary consensus protocol. “Casper the Friendly Ghost”, a blockchain consensus protocol, and a sharded blockchain consensus protocol. Each of these examples is “correct-by-construction” because the way they are defined guarantees that they are part of this family of protocols, and therefore satisfy the consensus safety theorem.”

Computation for networks like Bitcoin require a high amount of energy to operate, this is why multi million dollar mining facilities are constructed to operate this network. In the old days, Bitcoin could be mined at home on regular desktop computers. Since that time, networks like Ethereum came into existence from computer engineers like Vitalik Buterin, who was an early Bitcoin enthusiast. The main problem developers at Ethereum are working on is scalability, and reducing compute power. This can be done through what is referred to as “Sharding” which is what it sounds like, broken up pieces of information – think glass, organizing it a certain way and sending it to specific locations. It can also be achieved with the “Proof of Stake” consensus mechanism which means that the creator of a new Block is chosen from a pool of users that have staked a certain amount of Cryptocurrency, so there is no puzzle to complete like Proof of Work mining, and no reward for doing so. Many developers have been in favor of this model and it continues to gain attention in the Blockchain world.

Another added benefit to this project is being open to all programming languages. Ethereum requires knowledge of Solidity, which is a Javascript like based language. Languages like C, C++, Rust and others can be utilized with Web Assembly or WASM which is an open standard put forward by the W3C or World Wide Web Consortium. This organization was formed in 1994 and is designed for the purpose of developing standards for the world wide web. It currently has 444 members. Casper Labs also wants to allow for the development of “Side Chains” which is a separate blockchain that is attached to its parent blockchain using a two-way peg. The original chain is usually referred to as the ‘mainchain’ and all additional blockchains are referred to as ‘Sidechains’.

Casper Labs is also aiming to become fully decentralized which means the operation of the Blockchain will be open to anyone. Master Nodes will not exist on the network. For those who have never heard of a Master Node, a Master node is full node (a computer) that incentivizes node operators to perform the core consensus functions of running a blockchain. They want the project to be open source and run by the community and stakeholders. They are preparing governance models that would prevent any sort of centralization of this network. Currently, the governance model consist of validators, core devs, node operators, app owners, end users, token holders, and software licensees and will utilize a voting structure between these entities.

The team for Casper Labs is comprised of Blockchain veterans such as Vlad Zamfir and developer Michael Birch. Based on research done here at Blocktrak, this is one of dozens of initiatives in the Blockchain ecosystem with the goal of scalability. It is worth noting.