Somewhat flamboyantly dressed in a checkered suite of sorts, you wouldn’t expect Mathias Grønnebæk to be shy, but the former Operations Manager at the Ethereum Foundation spent most of the time looking at the floor during his presentation at the Ethereum London Meetup on September 13th.
The 27 year old tells us, while doing his best to avoid looking at the audience, that he was consumed with the bitcoin whitepaper after the banking collapse of 2008, so making his way to Milan, getting involved with Dark Wallet.
I wasn’t interested in the privacy aspects, he says, but Richard Stallman, a hero of his, came down, and that was “an interesting experience.”
What may have been more interesting for the millennial is the “very raw” ethereum paper shown to him by “one of the founders of ethereum.” He didn’t name him or her and we were too shy to shout in question whether it was Buterin.
In any event, he joined the project because bitcoin is limited in scripting, he says, so he went to Switzerland with the rest of the ethereum team, where he gradually developed into an operational manager, and then his role became somewhat unnecessary.
So he went off to build Braveno, which took years, he says, with his aim being to rebuild the financial system from ground up. Taking issue with intermediaries that exist solely because they have built strong network effects, intentionally themselves creating high barriers to entry.
He further complains centralized exchanges have no transparency, therefore you can not know whether they are solvent. Citing the case of Tether, connected to Bitfinex, which has issued $300 million while having only $50 million in deposits, Grønnebæk says.
But what exactly is Braveno? The exchange network starts with banks, which issue funds, turning fiat into ethereum based tokens. Those tokens can be returned to the bank for redemption, but in the period following banks’ issuing of tokens and its redemption, they can act as any digital currency.
Or can they? In the questions and answer session, under some interrogation, Grønnebæk says the bank can freeze the ECR20 fiat token they issue if they wish to.
That’s, of course, very different from bitcoin or eth, where a global coordination would be needed if any token was to be frozen and even then dissenters can continue in their own chain without the frozen tokens.
However, the project is undertaking a very first step towards somewhat intermingling, as well as transitioning, old fashioned finance with a very new world of digital and codable money.
Nor is it the only project trying to do so. There are far too many to name, with OmiseGo one of the more prominent. They aim, from our understanding, to connect e-wallets, by the e-wallet provider, say PayPal, tokenizing the fiat and so backing the token.
Then, once they are tokenized, they can be exchanged freely in a decentralized exchange, but such exchanges have trade-offs, Grønnebæk says.
High Frequency Trading (HFT), for example, wouldn’t be practical. That means considerable spread and potentially price premiums in either direction.
But the need for a decentralized exchange has become obvious since at least 2013 when a DDoS of MT Gox led to a considerable price fall, with the exchange then descending into bankruptcy some months later, leading to a two years long bear market in bitcoin.
Yet, cracking this holy grail is no trivial task at all. And whether Braveno, or indeed any of the other projects, can actually do so, only time will be able to tell.
UPDATE – Mathias Grønnebæk Had These Clarifications to Make:
“Firstly – I was not a dark wallet developer – I funded the project during their crowdfunding campaign, and attended the 2 week event arranged by Amir Taaki, and others in Milan.
Secondly – I didn’t say Bitfinex’s Tether only has 50M in deposits – I said that they could be running a fractional reserve – and so you just don’t know. The major downside is that they are doing so much jumping around between institutions that an audit is practically impossible you really need a proper treasury department as they have at a bank to be able to tell – when credits and debits equal out, and auditors say that everything is included, only then can you be reasonably sure.
With regards to the freezing of ERC20’s – this is a regulatory requirement that is true for any digital currency – and actually makes it incredibly difficult for institutions in the EU & US to interact with BTC, and ETH by default. In the US it is known as the “Travel Rule”, but something similar exists in all EU/EEA jurisdictions. It basically just refers to the fact that institutions need to know both who their clients are receiving money from, and who they are sending it to – and why.
What we are building is not a decentralized exchange – that would not be performant, what we are building is a trustless exchange – where you don’t have to trust that we have full reserves because you can see it with your own eyes, and you don’t have to trust us to hold private keys, because you are holding one yourself. (Last one being a feature that is also on the way for Exchange wallets, but is already supported by vault type wallets on our platform).”