But at least we have more privacy?
The Fat Protocols thesis from 2016 was one of the seminal essays in crypto, and may have helped spur the ICO craze. This week, Joel Monegro, the author, published an obvious follow-on, fittingly titled Thin Protocols. Plus, research shows more bitcoin transactions are likely being denominated in dollars.
On this week’s shows, we’ve got Chainalsys’s deep dive into crime in crypto in 2019 — and for those of you interested in more legitimate work in the space, Frank Chaparro of The Block talks about job trends in crypto.
This Week’s Crypto News…
Joel Monegro of Placeholder Ventures has an update to his 2016 Fat Protocols Thesis, which I would say was in part some of the fuel behind the initial coin offering craze that took off the following year. In that thesis, he talks about how, at least until then, most of the value in Bitcoin had been accrued at the protocol level, not the application layer, unlike previous tech history. In a new post called, you guessed it, Thin Applications, he contrasts the way crypto networks function against the way Big Web companies, do. As he puts it, “Web users are locked-in by force through the centralization of data. Crypto applications, even if they’re built more traditionally, don’t have that same ability to lock you in. But user-staking creates a kind of ‘opt-in’ economic lock-in that benefits the user by turning them into stakeholders in the success of the service. It creates defensibility through user-ownership instead of user lock-in.” He goes into some detail with various examples and talks about how in this new model, the user brings his or her own data. It’s probably a piece worth reading a few times to absorb his ideas, but they’re pretty compelling and give some idea at the kinds of disruption we could see once this technology matures.
BitMEX research analyzed almost 1.3 billion Bitcoin outputs with non-zero values since the launch of the network, and what they observed is that more than 70% of transactions have a degree of precision of 1 Satoshi. A fraction of a cent! And this percentage has increased over time from about 50% four years ago.
BitMEX concludes that the increased precision spending of Bitcoin likely has to do with more payments being fiat-denominated, indicating that Bitcoin is nowhere near becoming a unit of account. However, on the plus side, it does say that in Bitcoin-denominated transactions, which has two outputs — one to the recipient and the other the resulting change — the output with higher precision or more decimal points could more easily be identified as change. Thus, they say that both outputs having high-degrees of precision would increase financial privacy.
The Block reports that popular lending protocol Compound is accusing Chinese DeFi lending protocol dForce of taking the code for its Money Market contract from version 1 of Compound’s money market protocol. DForce has almost $8 million locked in it, which would make it the fifth-largest lending platform on DeFi Pulse (although it’s not currently listed). While this raises questions about the meaning of the term open source, The Block writes, “Though Compound’s website describes its protocol as open-source, that doesn’t mean that the company can’t exert ownership claims over the work it produces.” Compound CEO Robert Leshner told The Block “All Compound code is available for review, inspection, and auditing, but that does not mean you can freely steal or republish it – in fact, all of our code is copyrighted, e.g ‘rights reserved.’” Primavera De Filippi, a legal scholar and permanent researcher at the National Center of Scientific Research (CNRS), says, “Compound probably advertised their code as ‘open source’ in the sense that the code is available for anyone to see (but not for anyone to freely reproduce or modify). This might be slightly deceiving, but since they didn’t mention any specific license, dForce should have known better and go check the actual terms of the license before forking the code.”
Bitcoin Roundup: Lightning and Taproot
- Jack Mallers announced the launch of Strike, which enables you to make Lightning payments with your debit card or bank account. It’s currently in beta.
- And Peter Wuille, a Bitcoin Core contributor, submitted code for Taproot as a pull request, a sign that the code is closer to being ready. Taproot would enable smart contract capabilities to Bitcoin that help make transactions more private.
Brief Crime Roundup: Quadriga and BTC-e
- The lawyers representing the former users of QuadrigaCX asked the Royal Canadian Mounted Police about the status of their request last month to have founder Gerald Cotten’s body exhumed.
- After his extradition from Greece to France last week, Alexander Vinnik, the alleged operator of BTC-e, was charged with extortion, aggravated money laundering, conspiracy and harming automatic data-processing systems. Vinnik says he is innocent of all charges.
For the data nerds out there, The Block published a monster list of all the crypto resources it uses.
For those of you who like fiction, Emily Parker wrote a really fun sci-fi piece on what life would be like if everything were on blockchains. It stars a journalist who makes end-of-hype predictions, mostly about teenagers or animals, and makes money from them in the form of, you guessed it, tokens. (Btw, this made me wonder if this was going to be my dystopian future.) Banks no longer exist and all records are instead kept on VeriChain. But then she meets a strange man in a cafe and well, I won’t give any spoiler alerts, but let’s just say, she eventually realizes not everything makes it onto the blockchain.