1/ What are the experiments from crypto in 2015 to 2018? What are the underlying beliefs and thesis that were validated or invalidated? Feel free to add your own.
2/ The beginning was the ultimate OG Bitcoin with Nakamoto Consensus. The underlying assumptions were private key = value (bearer shares), security at all cost, domain specific validation (UTXO validation), single player mode (store of value), and a community around collectible.
3/ The problem was how do you distribute this as a global currency. There are two economies: the services & goods economy and the financial economy. People took the currency and tried to add merchants to bootstrap the demand. Coinbase started with this, and instead pivoted.
4/ The underlying assumption with this strategy was that if enough merchants adopt it, then you simply airdrop to consumers. The problem was that 'sound money' was competing with credit, and effectively credit cards.
5/ As people pondered what to do there were a couple of different approaches: colored coins (asset validation on top of bitcoin), distributed ledger (ripple and stellar) issuing IOU/Promissory notes with banks, and smart contract (account/balance with generalized state ledger).
6/ The approach that ended up working (causing the bull market of 2017) Ethereum coincided with the big bull stock market 2017 and ended almost simultaneously when the central bank (U.S.) started raising interest rates and reducing quantitative easing.
7/ With every bull market in the normal economy, you'll have a "shadow banking" economy where people go into risky assets in search of returns. This ended up being the utility token market. This was the subprime market in 2001 to 2008, which spectacularly crashed in end of 2008.
8/ In most cases, the shadow banking is propped up by returns and solvency. I invest my money into this "productive asset" and then I get this money back, I use this money to leverage up and invest in another "productive asset" and so forth.
9/ The issue with investing in tokens is that unlike the 2001 to 2008 bubble, this isn't even real estate, the utility tokens were non productive assets that returned no associated cash flow, so as soon as there were no more new buyers then things started crashing.
10/ The trend of increasing your BTC/ETH wealth through the cycle of ETH -> token -> more ETH ended up not working, people over leveraged, and caused personal solvency issues that kept on cascading downward.
11/ Famously in the financial crisis of 2008 Bears and Lehman welt bankrupt through the deleveraging process and this is causing the increasing sell off of Eth and Btc. Yes, I said it: btc was used to buy tokens too and this cascading sell off.
12/ In this process we had a couple of hypothesis tested: "community vs technology", "minority vs majority rule", "belief vs demand of currency", "financial economy not services and goods", "bloated state vs UTXO", "general composability/validation vs domain specific validation"
13/ One of the underlying beliefs is that because money is a shared delusion, one can simply belief a money into existence if enough people belief. People regularly cited Yuval Noah Harari. The assumption is the majority rules and as long as the majority votes, it's fine.
14/ The problem is that this was tested in two main cases: NEO, IOTA. One was the Chinese Ethereum and the other was a new crypto chain based on no fees. Both ostensibly was loved by the community for its promises: regional SC and fast and no fees.
15/ The both had good reddit/discord/telegram group but did it matter? Neo famously failed when one of its server failed, indicating that their consensus a round robin system didn't work.
16/ In one moment the faith was shattered on the technical team, and it dropped further than most coins. At one point it was valued almost at $20B. The same thing with IOTA with its tangle system, hand rolled cryptography, and toxic founders. It's not clear whether it'll survive.
17/ One can argue that technology is necessary but not sufficient, and community is sufficient but not necessary. Simply put, belief and having other speculators with you in telegram and reddit is not enough to prevent a currency from going down.
18/ There is a common perception that blockchain teams are a commodity and everyone is coming out with scalable blockchains. The refrain is "community matters." Yes it does but if technology team fail more often than not it causes the collapse of the community.
19/ This is also seen with "belief." Many people believed in Eth as an Ethos and Btc as an Ethos. Btc maximalist laughed with glee as the ICO boom crashed not realizing that the key use case for Btc during this boom was speculating with non productive financial assets.
20/ This caused confusion, many teams like ConsenSys, Status.IM, and others thought Vitalik was very smart and awaited the flippening. Correspondingly, lots of teams held their treasuries in Eth and just relied on "belief" because "belief" is what provides bids.
21/ People just realized in late 2018 that the "build it and they will come" may not work with Status.im laying people off, ConsenSys laying people off, ETCDev shutting down. This is the unwinding of a leveraged bubble that's unwinding right now.
22/ It's true that Eth has maximum composability but that leads to: bloated chain 1TB+, lack of full node decentralization, unscalable TPS, lack of data chain synched with main chain, and all of this will be solved in 2020 with Serenity.
23/ The good things is that we see the value of domain specific validation and general composability. VCs think that generalized validation will subsume the "calculator" Bitcoin. This is only true in areas where people don't highly value security and decentralization.
24/ The progression of computation has been subsuming previous eras, whereas it's very likely that once a protocol is good enough for its area it can maintain its lead: bitcoin, handshake dns, and monero.
25/ On the other hand, generalized computation seems to have a key use case around decentralized finance, but the problem is the layer 2 projects of Eth still use non productive assets, and by continually locking up CDPs with non productive assets increases the leverage of Eth.
26/ We still have the Stellar/Ripple experiment running. The distributed ledger architecture seems to be a proof of authority architecture. I know the crypto communities perspective on them but the jury is still out.
27/ We also see with Bitcoin Cash ABC/SV that they forked the code but couldn't fork the social consensus. With Btc after surviving the tumult of 2017. This is social consensus about the properties of a technology, not generalized "community."
28/ The points about Btc are endlessly debated and if anything else medium, twitter, and others will increase the network effects of Btc. medium.com/s/story/bitcoi…
29/ Some people have pointed out that Btc failed in its goals, I would argue that it's simply on its way. In network effects, "single player mode" comes before multiplayer mode. Single player mode of being a collectible and simply surviving is sufficient:
30/ The final issue is that may of the applications on Eth competed directly with technology giants. The funding, team, distribution, and UX were all insufficient.
31/ If Google+ can't take down Facebook, why should Status.IM? The bigger question is that if your dapp is hoppled by metamask wallet requirement, low responsiveness (due to synching with eth), and don't have a distribution strategy, how will it succeed?
32/ While there were many things that didn't go right the bright points came out: Eth as securities platform (yes I said it), domain specific validation and the supremacy of focus (btc/monero), maker dao as a stable token (although with non productive erc20 tokens).
33/ Stellar and its approach of issuing IOU promissory notes with the counter party being real entities is decent as well, but the vision is more quickly being done by Revolut and the Neo banking revolution.
34/ The question of the dot com boom was how does this medium inherently enable the use case. There was the same attempts: private internets (like private blockchains), big companies trying internet (Eth enterprise), company vs company internets (blockchain consortiums)
35/ There were inherent aspects that came out: private property for digital assets (NFTs), securities platform (maker dao, harbor), enabling counter party risk offchain (WBTC, Harbor). You see the early signs of native systems. What else in your opinion has worked?
36/ In conclusion, non productive assets (ERC20) in a quantitative easing environment is causing a deleveraging on Eth/Btc, there are no governments to bail these currencies out, how will this go? No idea.
37/ What other experiments do you see running that you find fascinating?
The final point is that because eth has never hit its deadlines it’s safe to say serenity will likely be in 2021 if not 2022, not 2020 as they claim.
