2018, The Year of Action

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2018 opened as the year of action. There has been plenty on that front. The Securities and Exchanges Commission (SEC) for example has been busy re-instating VC’s supremacy at the expense of entrepreneurs and ordinary investors who now can’t easily find a good start-up deal.

Venezuela’s president has likewise been very busy in talking up Petro, until it became very clear the thing kind of doesn’t exist and once it does it will be no different than the Bolivar due to zero transparency and due to complete centralized control over some “national blockchain.”

The Venezuelan people, on the other hand, have been very busy learning how to utilize cryptos amidst a monetary collapse.

We here at Trustnodes played our part in asking on January 16th “Can Bitcoin Cash Rescue Venezuelans?” That led to a chain of events which made aid agencies and undoubtedly governments turn their head for a very effective aid pipeline was organically established as people’s tips were used by entrepreneurial samaritans to mass feed women, children, and men.

Cryptos came to Venezuela’s aid when no one else did. Of that all cryptonians should be very proud for this space showed this year just why it exists.

“Bitcoin Matters for Freedom.” So said Alex Gladstein, Chief Strategy Officer at the Human Rights Foundation. A statement that means a lot from someone in that position.

In India too there has been much action as a power struggle developed this year over how the biggest democracy is to treat this space.

Their instant banning of crypto exchanges by India’s central bank made it self-evident just why this country remains still so poor even as it sees growth rates of 10% a year or more for now a decade or more.

Keeping the elected accountable is no easy task in even the most free nations. Thus a new idea has started gaining popularity. A people’s congress or a people’s parliament.

In Ancient Greece there were no elections as such, the rulers were randomly chosen. In Britain too there were no elections. The House of Lords, the hereditary aristocrats, consulted among themselves in a Queen’s Council style. The House of Commons, as in the commoners, then gained the upper hand with the commoners taking their seat through elections.

The commoners now are no longer very commoner. You need millions if not billions to run for a seat. A new house is perhaps needed where 500 people are randomly selected in a jury style to have the power to make, review, or veto law.

One can pressure a career MP with demotion or promotion, but one can’t pressure an ordinary mother or father who after a year or two of service has to go back to his or her ordinary job where they have to face the consequences of their own decisions.

Why this idea has seemingly never been proposed or tried, is not clear at all. With trust in our political system now however at or near all time low, there might be no harm whatever in trying what sounds like a common sense proposal that is gaining popularity especially after it was briefly tried in Ireland concerning a certain common decision on abortion.

It would be unfair to say that in Europe there hasn’t been much action. France of course has set up what appears to be a very reasonable regulatory framework for Initial Coin Offerings (ICO), with licensed ICOs guaranteed a bank account.

You’d think all would have been packing their bags singing Viva Le France. Their tax rate however perhaps made them sing instead: Leaver Le France.

Here too there’s an interesting proposition which no one appears to consider. While commoners have to pay at times as much as half their income in taxes, then the other half towards rent or the mortgage, with whatever left good enough for food and maybe a pair of shoes now and then, billionaires like Bezos pay almost nothing.

In Britain there was this idea of taxing more properties over £1 million, but of course poor grandma. Why the tax rate is flat for incomes over £40,000 however, or properties over £1 million, isn’t very clear. Surely a bank CEO who earns $16 million a year should pay a far higher % in taxes than a doctor who works 16 hours a day, or a high school semi-senior teacher earning $60,000.

Likewise Bezo’s billions should be taxed at perhaps 90% once he passes them on because his children don’t quite need all them billions. While he enjoys hopefully a long life it is perhaps justifiable for him to be worth more than some countries due to his achievements – he may well know better than others how to spend them.

His children however haven’t quite achieved anything so they should be happy with $1 or $10 billion, the $90 billion so going to the rest through lower taxes not least because much of this wealth is due to Amazon not paying proper wages.

Europe has also seen much action in Zug and Estonia as well as Latvia, with Austria making some positive noise too this year. Now at an EU intra-government level, they’re establishing strategies to effectively promote this space.

We continue to hear little from Germany. Primarily perhaps because we don’t quite speak German. There are German crypto media outlets and we’re sure they have covered this year’s local developments. Yet it is of course English the language of the globe.

We’d urge all governments, especially where it concerns this space, to translate their announcements into English due to the necessity of communicating in an understandable tongue. In addition or alternatively our emails are always open and all over these pages.

There was however something from Germany which we did not have the time to cover. If we did, the headline would have been: Blockchain Now So Cool Politicians Use it as a Tool. That’s after a candidate from Germany’s liberal democrats made this poster which says Blockchain and Brass.

German political candidate using blockchain for political gain, 2018.

In Russia there have been many statements of action, but the only real action is seemingly coming from some Siberian grannies who are now apparently mining crypto.

In China, the Schrödinger’s Cat continues. PBoC bragged this year of their crypto ban being successful, while news keeps coming from China of a thriving crypto culture. It is not a matter of if, but of when will they lift the ban in our view.

South Africa has gone bitcoin this year. As has to a lesser extent Brazil and Argentina. While price kept tumbling, the infrastructure and adoption kept growing.

Not very visibly, especially where the coding aspects are concerned. In bitcoin, the Lightning Network was out this year, but conceptual difficulties on how the crypto will scale in light of some of their ideological views, remain.

In Bitcoin Cash they’re experimenting with something else we didn’t have time to cover, but probably will at some point. Avalanche. That’s a new consensus mechanism probably by the Cornell Team, although they say it was just dropped on them by an unknown person or entity.

A reference to Nakamoto presumably. He too seemingly made an appearance this year, apparently making a comment in what seems to be in appreciation of immigrants.

We haven’t looked at Avalanche in detail, but it promises huge capacity at low resource requirements. Something worth trying perhaps.

The fundamental problem, however, isn’t so much to do with consensus as much as the simple fact that history continues to grow and has to be maintained by all nodes.

Ethereum has been trying to tackle head on that problem this year. The complexities are considerable. Certain trade-offs may need to be made too.

The main one is just what is good enough trustlessness when one considers this is money. Thus any abusable power point will be abused.

In the current state the system will eventually break even at 1MB to the point even one node won’t be able to run in a long enough time frame.

Obviously one can say in a long enough time frame the sun will run out, so the solution presumably is try everything to see what sticks.

Which is why different cryptos with their own teams and so on are quite important. All of this is still very new. We have to try different things and see what works.

One thing that has worked very well this year is the dollerization of eth deposits through Makerdao’s DAI.

That has now grown to almost $70 million, with the smart contract remaining unhacked for just a bit more than a year.

Dai’s success has given rise to a small but growing financial ecosystem that is building in effect natively digital bank services.

That includes things like loans, earning interest, margins and so on, with a new umbrella term rising: Decentralized Finance or Defi.

As a new term, how you pronounce that isn’t very clear. Perhaps to minimize room for arguments, we would say it is pronounced as defy, quite suitably too.

On that subject, we would say eth is pronounced as beth, rather than teeth. While Dai itself is dayi, d as door, a as apple, y as yellow, and i as english. So making it dayeeee. Not, you know…

The greater theme of 2018 has been a big hangover. For many it hasn’t been felt even as price kept falling. November changed that.

Price fell far too fast and far too much. What up until that point may have been a “comfortable” bear market, November turned it into an existential matter for many crypto businesses.

Hundreds if not thousands of blockchain/crypto employees are being fired across the world. Many businesses are on the verge of bankruptcy, if they are not bankrupt already.

We are going through a crypto recession of a scale and kind we have never seen. A comparison to 2011 now might not quite be far off.

Although one could see what was coming precisely a year ago, the speed and depth in November wasn’t easy to imagine.

The events starting on November 15th have sent many crypto businesses into a crisis mode. Quite a few good businesses that deserve to thrive might not quite make it. Tis the anus horebilis for many.

Violins near new years day are not quite appropriate, but there is here clearly a problem and a very big one. Proof of Work is simply flawed.

We looked at Bitmain’s crypto trades yesterday in some depth. As the biggest miner, we take them as a proxy for the rest.

They sell when the market is going down and they hold or increase their crypto savings when the market is going up.

This is compounded by the fact that when the market is going up they put no sell pressure whatever, not even the 12.5 btc block reward. Instead they save all crypto, presumably living on fiat reserves.

That creates an artificial balance between supply and demand because supply has vanished. There is now only demand.

Yet the supply hasn’t gone anywhere. When the market turns, thus, they insta-sell not only the new 12.5 blocks, but also the considerable crypto amounts they saved and were holding. So bringing in a far too high level of new supply. Effectively crashing the price.

You’d expect the opposite from someone who took the time to undertake some basic analysis or someone who has quite a big stake on the network. You’d expect supply to be withdrawn when price falls and slowly re-introduced while demand increases.

There is no reason to expect any intelligence from miners, however, and we say this without any intended or unintended offense. They are afterall mere buyers or producers of bricks.

The idea was of course that we all would be miners, one CPU, one vote. When someone suggested GPUs could be more efficient, Nakamoto begged everyone to have a gentlemen agreement and keep it CPU only.

Had it stayed so, then there wouldn’t have been effectively one massive actor who can introduce or withdraw massive new amounts of supply. We perhaps would have not seen vast amounts of stupendous volatility.

That one cpu, one vote, however, has turned – and very quickly – into one mega mainly Chinese industrial farm having effectively all or close to all votes.

That aspect in bitcoin will gradually be addressed through the halvening as in a decade or two new supply falls to irrelevance. However, if these mega-farm PoW extractors are maintained, there will be no real change if logic can have any peak through foreseeability.

That’s because the new supply is merely replaced with fees. The idea in bitcoin is to constrain capacity ostensibly due to resource requirements, but realistically because fees have to rise so as to replace the current block reward of 12.5 btc or so with fees.

If we now enter this fee running blockchain, 2 or 3 mega-farming miners, and some irrelevant smaller ones, are concentrating disparate supply into their own hands.

Meaning there is no difference. Instead of hoarding block rewards while price rises, they will hoard fees, thus artificially withdrawing supply. Then as soon as price turns or if they think it has risen enough, they introduce not just the new fee block rewards, but also whatever they have hoarded. In effect completely messing up the supply and demand equation.

That’s because miners are a cartel. They probably do collude too. To enter this market now you need tens of millions if not billions. Making it very flawed. So they have to go.

In bitcoin, development is concentrated in a for-profit company with its own interests. Blockstream even mines, so we probably have a complete merger there between coders and miners.

In eth, development is dispersed with the non-profit Ethereum Foundation providing some financial assistance. They plan to move to Proof of Stake (PoS), which returns the one cpu, one vote, principle or better said 32eth, one vote.

That has its own problems too for no system is perfect, but the main problem is when no PoW miners in eth?

The answer for this year appears to be: not for a very, very long time. That perhaps should be qualified with: unless Trustnodes shouts at us too loudly :).

As the ecosystem grows, so do we. To be generous, we take it as devs not wanting to over-promise anymore. They are dealing with very complex maths so we do give them as much leeway as we can. Within reason however. We have reflected general sentiment once or twice this year and that may have spurred them to put their house in order, not that we take credit for anything because obviously no one listens to a thing we say.

We have given the deadline of 2020. It’s not our job to do so perhaps and we’re sort of putting our neck on the line, but open source is sort of famous for its lack of accountability. If even the media doesn’t try to put some pressure, then how will anything get done?

And PoS has to be done and quickly. It can be refined later on, but this artificiality from mega-farms PoW can’t continue to maintain public support for much longer.

We’re told we’re going to have this Beacon Chain PoS and in parallel the PoW chain. What the block rewards for each will be hasn’t yet been stated. They hoped to finalize the Beacon Chain specs by the end of this year. They haven’t.

We wouldn’t call them lazy because we’re sure they’re working hard. Investors have punished them and quite severely this year. The Ethereum Foundation now has only about $60 million worth of eth left. That must hurt.

Yet there were also vibes that some of the core devs were having a lifestyle job. Taking it easy. No stress – as in no accountability. Partying at the eth woodstock with work more of an afterthought. The prime example being of course all of the December taken off for one of the most simple eth fork.

Harsh perhaps, but we’re independent. Not tied to any coin or interest. At least for now, we say what we want. Right or wrong, someone has to say what we think must be said.

We have however noticed changes in the organizational structure and their project management, but the Ethereum Foundation perhaps needs a better head than Aya Miyaguchi. We don’t know her, but she doesn’t appear to be an effective executive director where it comes to demanding accountability.

We can’t expect Vitalik Buterin to do everything by himself. The team around needs to stand up and take some responsibility. Quite a few did this year, so we hope to see a lot more of that.

Because in a way we’re all sort of growing and learning together. Criticism is never nice on the receiving end. Hence why we hope no criticism will be warranted.

For 2018 has been shambolic, to the very end. Any year that ends with Ripple in second position, has to be. Meaning sticks perhaps do have to come out for one gets too fat with just carrots.

Our 2020 deadline is not a joke. We’ll hold our tongue as much as we can and we’ll give as much leeway as possible for we’re in the business of knowing a little bit about everything and little in depth about anything. So we have a general understanding of the complexities and difficulties just as we have a general understanding of when it isn’t mere complexities or difficulties.

That makes the year of action quite packed with action. Perhaps of a different sort, but action still. A challenging year, but not really challenging. 2019 might be quite a spectacle.

The boy has grown to ten, the sweetest age that lasts until adolescence. Duly behaving, doing his homework, full of innocence, ambitious and proper.

Tis the pleasurable times, regardless of whatever goes around. Four years or five of it more to run, until arrogance it breads, an adult it becomes, listening naught, taking a life of its own.

Long may he live, as old as the mountains.

Copyrights Trustnodes.com

 

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Nice article.
I appreciate the great information and the swagger, but as a linguist I will say that your use of French and Latin wannabe-phrases just doesn’t cut it in terms of accuracy.
It was a great factual recap though! 🙂