Decentralization is good, even if it looks bad

https://medium.com/coinmonks/decentralization-is-good-even-if-it-looks-bad-fdd32fd49929?source=rss----721b17443fd5---4

A blockchain sleuthing story

Divi is a cryptocurrency project dedicated to lowering every barrier to entry that people have, not just for their own coin, but for the entire market. This goal is in the lifeblood of the project, in every action is takes, every single development they do. While other projects are creating chains to address utility for blockchain, Divi is creating tools to make other chains more assessable, making crypto’s benefits, incomes, and features available to everyone possible.

They were the first to create multi-tier masternodes, the same masternodes that anyone can launch with a single click of a button. They were the first to bring all the income-producing benefits to people who couldn’t run a node, but had a phone and could earn income over SMS and Whatsapp by storing Divi there. They are creating more utility by integrating Divi into games in development such as Siege Worlds. And in doing this they created the best damn crypto community in existence. People from this project now sell coffee, syrup, books, using shopify and wordpress tools created by Divi to make using the coin easier. And they are just getting started. Their novel wallet is coming out in November.

The development and community support of all this lead to a tremendous price rise over the last year from about 0.3 cents to 3.5 cents now.

Who am I?

Quick note about me. I don’t work for the Divi Project, or any of their subsidiaries, in any way. I love the project and it’s amazing community. I learned about blockchain there and have even learned to make some blockchain related stuff with Divi, using their amazing volunteers and community members to teach me. I do volunteer admin some of their telegram communities, but that’s about it. I’m not a trader and none of this is trading advice. You do what you want, you are on your own, even if I think it’s dumb and will say so in this article.

A 10x rise for a post-ICO era coin is pretty good, so there isn’t much to complain about. However, this coin recently saw 8 cents, so after a meteoric rise, there has been quite a drop. But why? None of the fundamentals changed.

Some possibilities

Obviously, sell pressure outweighs buy pressure, but why?

Inflation: Divi has very high inflation compared to other legitimate projects, it’s currently about 30%. Maybe, like most projects with high inflation, it’s simply time to pay the piper. In fact it’s one of the most common complaints leveled by newcomers to Divi. This idea is demonstrably false. I have a whole article dedicated to the top three complaints about Divi, and high inflation is one of them. Needless to say, Divi inflation isn’t much different than Bitcoin inflation, and masternodes and staking keep Divi off the markets. Divi has also written two articles about this topic.

Development Delays: It’s possible that development delays have lead to a mass exodus, just when price was doing well. COVID has had an impact on the development schedule, like it has on every other aspect of the economy. So maybe, people got tired of waiting, and went on to greener pastures. If so, we would see selling by a lot of people. This article will demonstrsate that this is not the case.

Whale Exit: This is another distinct possibility, but perhaps the most benign. If the inflation was a fundamental problem we would be seeing lots of people fleeing, including whales. Same for fear about development delays or any other fundamentals. But if a whale exits, that means a large concentration of funds is being dispersed amongst the community. Not only does this bring down the price to make it easier to more people to gather more, more people hold those funds. Maybe a whale died, and many fish were born or got bigger.

Bad Actor: Another possiblity is a bad actor. Maybe someone engaged in a pump and dump. Divi is getting on a new exchange soon, maybe they had to give coin to the exchange and then the exchange dumped the price before trading starts. There are a lot of ways a bad actor could affect the price negatively. This article will show that this can’t be the case unless an exchange has held Divi for almost 2 years.

The first step is really hard, tedious and tempermental. While a community member has put together a decent block explorer and Divi has been listed on Chainz for over a year, these aren’t enough alone to work this out.

Chainz provides a lot of extra tools other than just following transactions (also they have recently borked their vanilla explorer to some degree). They have an experimental feature that tries to group together addresses that are in the same wallet. I have tried to verify this feature a number of times, and while it is not right some of the time, it’s surprisingly accurate most of the time. I do not know their algorithm for doing this, but it is pretty cool.

Chainz does a half decent job of grouping addresses in a wallet together

I entered my bitrue deposit address and go thte page above. So you click on the “7008 addresses” and it takes you to what must be Bitrue’s wallet, at least the public facing one. At the time of this writing, here is what you see.

Does Bitrue only have 9454 Divi on their exchange? No.

It looks weird because if this is all there is, that seems awful. It looks like there are no funds on Bitrue. But fear not! Remember, centralized exchanges like Coinbase, Binance and Bitrue don’t record trades on a blockchain. When you trade some crypto, that crypto is not sent from one address to another.

No, when you send funds into an exchange’s public facing wallet, they take the funds and send it to a second (or third or fourth) wallet, and the amount gets credited to your account. Then, as you trade, the values just get added and subtracted from the balances of the relevant accounts, no blockchain used. Thus the funds do not stay in the public facing wallet for very long.

Schematic of how incoming funds are handled on a centralized exchange

I had been watching the price drop from almost 900 sats to 700, and then down to 600. If it was a general consensus that something was wrong with Divi, I would be expecting to see many smaller transfers of Divi from lots of wallets. Perhaps I might see, lots of transfers of 10,000 Divi to 1M Divi frequently over time. But I did not see this. I saw the Bitrue wallet page change very little from time to time. Furthermore, on Bitrue itself I saw, well let’s call them green traders, putting a ceiling on the price by placing a really large sell order (no one but other whales or groups of determines holders, can break those) that tend to push down the price. Then the owner of those orders would lose patience and dump the order into the buy side order book, dropping the price even further. See what I mean by ‘green’ traders? More on this later.

I had a suspicion that a large holder was exiting. So I waited and kept on watching the Bitrue wallet. Lo and behold, I saw a 7 million Divi transfer into a bitrue address. Holy crap, someone was about to dump the price again.

I grabbed that 7 million Divi transfer and followed it back. I ended up at a Diamond level masternode (10,000,000 Divi) with the address. I know it is a masternode because the 540 rewards are coming in and there is that balance there. Then, I used the wallet guestimator again at Chainz… and

This person had 30 million Divi and throughout August got rid of all of it. There is another way to verify this wallet. Simply go to the address from where I caught the 7M transfer and see where the rest of the funds come from. When you add up all the transfers from addresses into the Bitrue address, you also end up with about 30M Divi. This dumping is one person.

Blue represents a diamond masternode, dark grey a platinum.

He disassembled diamonds, made platinums, then eventually got rid of all of it.

We can see the influence this one person had on the price at Coin Gecko. Adding the daily volume over the month of August, we find that a total of 206 million Divi were traded over August on Bitrue, 30M of which were his.

Volume rose significantly with this person’s individual Divi exit

So while volume was about 5 million Divi per day in July (this would be about 150 million Divi baseline volume for the month), being 54% of the additional volume creates pretty intense sell pressure for a low liquidity coin considering the price vaulted to 900 sats the month before. Then, as normal in the greed cycles of crypto, this person’s exit caused panic for speculating traders and people who got into the project at higher numbers.

What do we know about this person?

This article is not out to dox anyone, and frankly, I have no idea who that actual person is in real life. It’s easy enough to check Divi telegram channels to see if anyone mentioned any of these addresses, but it’s pointless. What would that accomplish?

However, we do know that the person has been with Divi since the start of the blockchain. We know that he has held many masternodes over time. So it’s safe to say, that this isn’t an attack. It is not tons of people fleeing the project. It’s not even a bunch of whales leaving or an exit scam. It’s simply ONE whale who wanted or needed out.

One lesson from all this that is important to glean, is that your activities on blockchain are NOT private. I am no expert in following transactions, but this was pretty simple. If I wanted to go further, I would try to find mentions of these addresses and connect them to a real person somewhere. It is very hard to maintain privacy by using blockchain in ways that we normally use cash or cash based apps like venmo.

So, why did he leave?

Who knows? There are a lot of reasons people may leave a project. If they were an investor group, maybe they did a cost/benefit analysis and decided its better to [waste their money] buy into the new hotness, DeFi. Maybe it was someone fleecing people who had invested with him by dumping their investment and taking off. Perhaps he just needs to buy a house right now and needed the money. Maybe hospital bills. Maybe putting three kids into college. Can’t know.

But since he was with us for so long, it’s hard to believe there was malice. I think the destruction of the price was due to being green at trading, at worst being inconsiderate.

How to exit a project you care about

In general, the goal is “Win-Win”. By “in general”, I mean this is how you can go through life with the greatest expectations of positive returns, not just financial ones, but social ones also. Just thinking about every action this way, you can strengthen your bonds with other people, keep communities afloat, keep projects alive. Thinking win-win, is better for you, almost always. This is a great example.

When exiting a project, you want to exit with the most profits (or least amount of loss depending on the situation), don’t you? If you care about the project at all, you will also want to leave with the least negative impact. The price of a coin, is important to the project to some degree. There are market cap thresholds that spur investment, and create opportunities that may not have existed before. Single handedly dragging down the price, not only reducing overall income from the sales, it also harms the ability of the project to develop. That is lose-lose, and why would you go for lose-lose? So win-win here is: you get to maximize your money, while the project gets to capitalize on their current gains in market cap. How?

  1. OTC trades. The easiest way to achieve this is to communicate with the team. Crypto projects leadership are inundated with requests of Over The Counter trades. Some projects actually have people that handle this, especially if they are low liquidity coins (and let’s be honest, other than a top 20 coin, I might even say top 10, they are ALL low liquidity). So it’s likely that a large trade or set of trades could be made, with escrow for safety, by contacting the team. They get to facilitate a large buyer with a large seller without tanking the price, and you get to have all the coins at the same price, usually the current price, instead of killing the price for everyone.
  2. Using an exchange like an adult. Ok, maybe that’s a little mean. But the goal is to maximize your income from sales, while not tanking the price. If you are going to move all your funds to an exchange, why not take your time and do it right. You aren’t day trading. You are trying to actually exchange, not lose the value of your funds.

I am not a trader and this is not trading advice, but here are my observations of how the owner of these funds demonstrated naivete about how to unload them. The first mistake is creating huge sell walls. When you put up a sell wall, you deter everyone from chipping at it. Why? Because most traders in a low liquidity asset will just look at it and say “Nahhh” because no one person has the funds to over come it. So the wall just sits there, while the price drops.

In fact, smart buyers will attempt to annoy you by nibbling at your large sell order in miniscule chunks until you get annoyed, drop the wall, and dump into the order book. Worse, people put sell orders below your wall, so YOU think the price is getting away from you, so you put the wall even lower. Putting up a sell wall is the tool of someone who wants to buy at a lower price. It is not for someone who wants to maximize income when selling. See what I mean about how naive this person is in regards to selling assets effectively?

This is a terrible way to sell a low liquidity coin, and this isn’t even as bad as it was.

Patience, entice people to your price. Sell on multiple exchanges using the volume each has. Smaller chunks more often. Hide your walls with multiple, smaller trigger orders. There are many things you can do to avoid shackling the price to the ground. In the end, you would receive far more money, and the project can continue to excel. Win-Win.

After following the money for some time, I see that this person still has some money on Bitrue for sale (probably those walls I posted above). There are a couple of wallets and all the masternodes are down. I think at the time of this writing there is still 1.4M Divi he needs to sell.

So the good news is two fold. First, he is almost done, and we can get back to people who don’t buy and sell in such a juvenile way. Maybe. At least not people with this much Divi to unload. So that is a relief.

The fundamentals of the coin are not changed. The community is still strong, the wallet is imminent, the fintech integration still happening, the various use cases all going strong. Even while this sell off was going on, the masternode count rose. I expect we can see some of our previous levels soon enough.

The second bit of good news is that Divi is even more decentralized than it was before. 30 million Divi was dispersed to other holders, put into staking wallets and made into more masternodes. All projects have whales, and the whales of Divi have been holding since Day 1, and continue to hold (except this guy). Divi remains more decentralized than most other important coins.

Divi is as decentralized as other coins, and often more.

Divi is the chart on the right, it is already less centralized than PIVX, DASH, even Litecoin (I must say, as for coin holders, Bitcoin isn’t looking so bad). There simply aren’t many whales that hold 30+ million. But those that are, are fiercely loyal to the project. They advise, they participate in the social media channels and volunteer their time for various aspects of the project. The fact that one dropped out (and not one of the people I just mentioned as I talk to them, and know who they are), greatly decreases the likelihood that this will happen again.

I have to stress, I am happy that a whale who hasn’t personally engaged in the project, has basically given away his coins to many other people at better than half price. Other than this one guy, and those who followed his path downwards, sell pressure is minimal.

All in all, this guy who is exiting is almost done, the project is still looking great, the community (and its whales) are mostly holding firm, and the growth and opportunities coming along with this project are looking great.

Author’s Note: While I used the term ‘I’ to describe the activities here, the truth is that other people helped tremendously. While no inside information was used (or even needed) to produce this article, I did get a lot of help from people in the Divi community, especially OriZ, Giff, John Seastar and Voice, so my thanks go to them.

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Liquid Governance

https://doseofdefi.substack.com/p/liquid-governance

The rise of DeFi and the billions of dollars worth of assets flowing through smart contracts on Ethereum has produced a growing crop of technical auditors, who scour code for any parameter or permission that can be exploited for financial gain. They’ve been busy lately, although many are just yolo’ing into a mainnet launch.

Ask any auditor what opens up the largest attack vector, and inevitably, the answer will be “governance”. Smart contract risks and exploits can be limited to the existing permissions of the contract, but governance – by definition – sets rules for the rest of the system, so co-opting it is akin to a 51% attack on a base layer chain.

Liquid Governance

Maker was the first project to fear a governance attack from rogue token accumulation. In the migration to multi-collateral Dai, it lowered its governance delay to 0, which meant that an attacker with $41m in MKR could coopt governance and drain all the collateral, according to security researcher Micah Zoltu. Maker later increased the Governance Security Module (GSM) to a 24 hour delay, so there would be time to insulate the system from the attack.

The source of the vulnerability to this attack is obvious: MKR is a freely traded token that also contains governance rights. An attacker does not have to infiltrate the system, just accumulate MKR and acquire the governance power it entails.

Liquid governance means that control of the system can be transferred, and inevitably, traded on the open market. Time locks help protect against flashloan attacks and locking up tokens for governance keeps short-term speculators out, but optimizing an ideal governance system is like nailing jello to the wall.

CRV & YFI

Curve.Finance (CRV) and yEarn.Finance (YFI) are two of the hottest DeFi projects, both of whom launched liquidity mining incentives and on-chain governance systems within the last 6 weeks.

They were both crucial to each other’s success. Curve has $1.1bn in deposits and $734m of those are from yEarn’s Y pool, which offers efficient trading between yEarn’s interest-optimized version of Dai, USDT, USDC and TUSD. Meanwhile, the YFI token was distributed through the same Curve pool.

But the relationship is changing as the protocols move to on-chain governance. Cooper Turley in The Defiant today:

Curve Finance proposed that CRV holders who lock up their tokens in a voting escrow can multiply their rewards by up to 2.5x, starting Aug. 28.

Token holders of yEarn Finance, which holds roughly $2.5M worth of CRV from its early liquidity provider rewards, decided to take advantage of the new incentive, locking the entirety of their CRV treasury for 4 years (the max duration). 

But Curve’s core team locked up their own tokens too, overpowering yEarn’s and every other token holder in the voting escrow. They’re effectively holding ~71% of the DAO’s governance power at the time of writing.

Curve Finance is now encouraging others to lock tokens in order to dilute their super-majority power, but it’s clear that the Curve team intends to remain in control of protocol governance. Governance “moves” like this will increase and while the dust settles, a couple thoughts:

  • You can’t distribute a token while you’re establishing an on-chain governance system. Compound achieved this, but they actually started on-chain governance first. One of its first proposals was to launch the COMP rewards program.

  • YFI could wield tremendous power over DeFi protocols that launch liquidity mining programs.

More:

  • Thread on the game theory around CRV locking mechanism [Spreek]

  • Steem vs Tron: The rebellion against a cryptocurrency empire [Decrypt]

Chart of the Week: Traders prefer low gas

Great chart from the Formal Verification newsletter, which shows that higher gas prices pushed traders from Kyber to Uniswap. Gas fees can be 3-4 times as expensive on Kyber for a simple swap as compared to Uniswap.

Tweet of the Week: DeFi Legal Team awakens

Two separate threads on some of the evolving regulatory issues in the space. The rise of yield farming has led to a proliferation of token launches and potentially more scams that catch the eyes of regulators. The distribution events themselves will be looked into, but there’s also the DeFi products and services themselves that could come under closer scrutiny.

Odds and Ends

  • Aave awarded an Electronic Money license by UK’s FCA Link

  • Synthetix futures primer Link

  • How to conduct your IDO on Mesa Link

  • dYdX partners with Starkware to offer Layer 2 trading Link

  • 1inch announces token and liquidity mining initiative Link

  • Compound proposal to alter COMP distribution mechanics Link

  • Opyn launches options for YFI and WETH Link

Thoughts and Prognostications

That’s it! Feedback appreciated. Just hit reply. Written in Brooklyn, which is as lively as ever.

Dose of DeFi is written by Chris Powers. Opinions expressed are my own. All content is for informational purposes and is not intended as investment advice.

Inspecting Tezos decentralization: 200+ public nodes, 1000+ in total

https://medium.com/coinmonks/inspecting-tezos-decentralization-200-public-nodes-1000-in-total-6ef0761caac9?source=rss----721b17443fd5---4

When it comes to arguing Tezos decentralization they usually put roll distribution on the first place saying: “look, top 5 entities own more than half of the stake”. More advanced also highlight attacks on the voting mechanism: how many entities can block or force a proposal (which is actually a changing value).

However it’s not that straightforward, because once you are in a Proof-of-Stake network it’s not just rewards but also Value at Risk. At the end of the day it’s risk/reward ratio that matters when it comes to economic incentives and it’s only if we assume all agents are rational!

Ideally, for each attack vector (and strictly speaking every proposal introduces a new vector) one should estimate reward/VaR considering all risks for each attacker class (there are more than one profile).
We leave that for a separate study, but in this article, let us focus on another aspect of decentralization namely P2P layer.

Collecting peers and connections

In order to conduct a comprehensive analysis, we needed a high-quality data set.
Basically we could just set max_connections in the node config to a relatively large value and use /network/points RPC endpoint. However, as we found out, this output is rather polluted with nodes having different chain_id or nodes that are not operating.

Moreover, we also wanted to try to build the network graph so we needed not only vertices (nodes) but also edges (connections). We didn’t get to do it precisely in the end, but we learned a lot about how P2P works in Tezos.

Tezos Handshaker

Anyways, we went deeper and wrote a simple P2P scanner that connects to bootstrap nodes and queries known peers, then tries to connect to those peers and query their connections, etc. It worked great, however we faced several limitations:

  • Obviously, we couldn’t query known peers from nodes that are not exposed to the internet ( hidden nodes). Basically that’s fine, since we are mostly interested in public nodes;
  • Some nodes were probably rejecting our connections because they have reached the maximum connections count or for other reasons. As a workaround we do the scanning in a repeatable manner, however that does not give us 100% guarantee we’re not missing something;
  • The main problem is related to the way nodes respond to the request: they return no more than 50 results, of which 30 are best (active connections sorted by the time of establishment), and the remaining 20 are random (could be both active or not).

P2P LIKE A PRO

If you are interested in how P2P layer works in Tezos, check out the SimpleStaking blog.

Another problem relates to determining whether a node belongs to a particular network, in our case mainnet. We can confidently distinguish between public nodes, as they return version string during the handshake, however we cannot be 100% sure about hidden nodes. All we can say is that if a particular hidden node is known by several public mainnet nodes, it is likely to be mainnet node as well.

We are not sure about the reasons why carthagenet/zeronet/other nodes occur in the list of known peers of mainnet nodes. Probably this is due misconfiguration, or one’s running several nodes on the same machine, or else.

Goals and objectives

Given the above problems and limitations, we had to decide what we could calculate and how. We have formulated several goals:

  1. Identify all public nodes as they are in essence the “center” of the network and have the greatest importance;
  2. Try to detect active hidden nodes using heuristics;
  3. Make geographical analysis of these two groups;
  4. Draw an approximation of the network topology.

In order to do that we used the following algorithm:

  1. Do iterative peer scanning in order to handle max-connections issue and enumerate all random points;
  2. Finish the scan when the number of nodes stop growing for a sufficiently long period of time;
  3. Filter out nodes that do not belong to the mainnet
  4. Assign a score to each hidden node calculated as the number of public nodes that know that particular node;
  5. Filter out hidden nodes that have score less than the average.

Terms and conditions

In this article we will operate with the terms Public node and Hidden node. In both modes nodes are connecting to others, but only public ones accept incoming connections.
Bootstrap nodes are the default ones specified in the node config. This is actually a single hostname hiding a load balancer that routes requests to 27 nodes spreaded across the globe.

DISCLAIMER

In this article:

We analyse only Mainnet nodes;

The scanning method is time-stretched and it’s not possible to make a snapshot at a particular time;

We only rely on the geographical location of the nodes as well as the connections between them;

We recognize that we may not have scanned the entire network or may included inactive nodes in the dataset.

Thus, it’s important to understand that our results DON’T fully characterize the system.

We will look at the criteria for decentralization which determine how well the network can oppose a breakdown or an attack.

Tezos mainnet results

NUMBERS

During the scan we have discovered:

6298 addresses in total

1679 presumably operating nodes

203 public nodes

As you may notice, there are far more nodes in Tezos mainnet than the number of bakers. It is clear why the bakers should be decentralized (in all senses), but what about the other nodes? What are they?

Roughly speaking, while baker nodes ensures the valid state of the blockchain and actually “write” the data, the rest of the network provides decentralized access to that data (i.e. “reading”) and makes sure broadcasted “write requests” reach the baker.
This is just as important as block validation, because what’s the point in a decentralized network if you cannot access it in a decentralized way.

In the next chapters we will analyze all (presumably) running nodes and public nodes in isolation. Note, that while we are pretty confident about public nodes, there are certainly some deviations when we operate with the whole network. Still, we think it could give some interesting insights.

Geographical distribution

This is an intuitive criterion: the more continents, countries, jurisdictions, segments of the global network are covered by Tezos the better.
Connectivity and network topology are also important, especially their dependence on transcontinental communications and tier-1/2 operators, but we will examine that a bit later.

The heat map looks good, and although there are obviously countries with high concentrations of nodes, we will see later that these are mostly cloud provider data centers.

NUMBERS

Tezos nodes are distributed across 56 countries and 193 regions.

Let’s take a look at each of the sub-criteria in detail.

Hosting providers

Before we move on to detailed statistics by country and region, let’s look at the distribution of nodes by hosting providers.

Not surprisingly, we see the prevalence of popular cloud hosts, but if you take into account the country where the hosts are located, the numbers are not that big. For example, top 3 cloud providers with data centers in US (AWS, Google, Digital Ocean) host 300 Tezos nodes. The actual question is how important are those nodes for the network in general, and although we cannot answer that from the staking perspective, we can analyze the network topology based on our dataset.

Countries

Europe and the U.S. dominate, taking on about 2/3 of all nodes.

Interactive map

Note the (decimal) logarithmic scale.

Regions

As for the regions of individual countries, we can see that there is a correlation with the location of data centers of the largest hosting providers.

Interactive map

It’s more interesting, we think, to see how Tezos is scattered around the planet. Use the zoom to see the names of settlements.

Tezos network topology

We will only investigate the logical network topology. Unlike the physical topology, we will not consider the physical distance between nodes, latency and speed of packet propagation in the underlying network (Internet).

NOTE

As was pointed out, the numbers can differ in reality, but the topology will likely remain the same.

Using nodes as graph vertices and known peers connections as edges we built a network graph and calculated its basic properties.

MAINNET GRAPH

Radius: 2
Diameter:
3
Average path length:
1.9
Center size:
1082
Clustering coefficient:
0.82
Density: 
0.008

Here is a simplified interpretation of the results:

  • , , and are small which is good for network synchronization and fast propagation, and also says that presumably every node can reach the network center directly or via a trusted peer, or is part of the center itself;
  • is more than half of all presumably running nodes, supposedly it’s a more robust estimation of the network size that we used;
  • is high, the network is divided into three clusters, varying in the degree of connectivity. This is most likely a side effect of the way the scan is done, so let’s not give it much importance;
  • is low which indicates that Tezos graph is sparse;

Public nodes

Let’s take a closer look at the public nodes, we are particularly interested in how they are distributed across hosting providers and countries.

In theory, you can optimize the latency and improve connectivity using this information, e.g. in order to deal with endorsement misses or resolve other network issues.

Top countries and hostings

While the world’s largest cloud providers provide a highly reliable service, diversification will never hurt.

Interesting observation: half of Tezos’ public nodes are spinning on Amazon, including all the bootstrap nodes.

Bootstrap nodes alternatives

There is a predefined set of peers (set in the default configuration) a new node initially connects to. These peers called bootstrap peers and there are currently 27 of them, hidden behind load balancers. It is logical to assume that they are part of the center, and we will mainly care what proportion they make up and how far they are geographically dispersed.

The question that worries many people is what happens if the bootstrap nodes suddenly stop working?

As the graph shows, nothing terrible.

Further work

Using results of this work we will enrich our products with two features:

Stay tuned!

Originally published at https://baking-bad.org on July 30, 2020.


Inspecting Tezos decentralization: 200+ public nodes, 1000+ in total was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.

Decentralized Identity, IPFS and ION

https://blog.ipfs.io/2020-06-11-identity-ipfs-ion/

Identity is a key part of how we all interact with each other on the internet every day—sometimes every moment of every day. And sometimes each raging moment as we do the “forgot your password?” dance yet again. Regardless, forging a path forward for user-controlled online identity is a table-stakes requirement for the dweb to succeed.

But, identity is hard. There are no easy solutions for interoperable decentralized digital assertions of self. Privacy, security, validity, access control, surveillance, GDPR, KYC, anonymity. It’s like Inception but each nested dream level is the same minefield, and those minefields are littered with projects that’ve tilted at the identity windmill, leaving naught behind but vinyl stickers slowly being covered up on our laptops.

Hope has not forsaken this land. The Decentralized Identity Foundation has been plugging away at this challenge for many years, as have groups like Rebooting the Web of Trust. And there’ve been efforts to build decentralized identity systems on top of IPFS, such as IPID, Nomios.io, the IPFS IDM, and most recently the Ceramic Network.

However, today we’re celebrating the launch of a decentralized identity protocol and service from an unlikely place: Microsoft.

Microsoft has been increasingly present in open-source tools and services in the past few years, and has now launched a standards-based decentralized identity service called ION.

ION has been under development for over a year, and is an instance implementation of Sidetree (a blockchain-agnostic distributed PKI protocol) that runs on the Bitcoin blockchain.

And it stores transaction data on IPFS.

Ion architecture diagram

Like HTTP, IPFS does not have user identity built into the protocol. However, IPFS provides resiliency, validation, and future-proofing features that HTTP cannot:

  • The content addressability of IPFS means that ION nodes who are pulling the CIDs off a blockchain or other underlying public network don’t need to care where the transaction data resides. This means they can switch servers or datacenters, or new storage nodes can come online without requiring any code or infrastructure changes and without the addresses needing to change.
  • ION nodes also don’t need to worry about the data being manipulated or tampered with, because hash-based addressing means the cryptographic verification of the data is built into the network request itself.

IPFS in ION

The ION implementation is in JavaScript (specifically, TypeScript) so it made sense for them to use js-ipfs as a Node.js service. ION rolls up batches of identity transactions, publishes it through their IPFS node, and then writes the address (CID) of that batch to the Bitcoin blockchain.

In order to meet Microsoft’s needs for using js-ipfs as a long-running process we added cancelable requests to all APIs, ensuring that as requests were being made and handled, the underlying objects, memory, file handles, and other resources created up and down the stack are cleaned up properly. Huge thanks goes to Alex Potsides (@achingbrain) for implementing this long-needed feature, which shipped in js-ipfs 0.44.0.

What this looks like for developers is the ability to set timeouts on requests:

const cid = new CID('QmWillNeverResolve')

try {
  await ipfs.get(cid, {
    timeout: 1000 // abort after 1000ms
  })
} catch (err) {
  console.err(err) // err is a TimeoutError
}

Try ION Now!

This is the public beta of ION, and it is now running live on the Bitcoin blockchain.

In the launch post, Microsoft’s ION project lead Daniel Buchner explains how to run a node and use decentralized identities in your apps and services today.

The project is open source, built on open standards, and you can run your own node—so try it out or contribute to the project today!

Ethereum DeFi’s poster child, MakerDAO, is up 120% in the past month: why this is important

https://cryptoslate.com/ethereum-defis-poster-child-makerdao-is-up-120-in-the-past-month-why-this-is-important/

Aside from Bitcoin gaining a perfect storm of macro factors, one of the biggest narratives in the crypto market over the past few months has been decentralized finance (DeFi). The DeFi industry has seen vast amounts of investment while the number of users in blockchain-based finance products has shot up rapidly.

Coins representing the industry have respectively exploded higher in value, strongly outperforming Bitcoin, Ethereum, and even Cardano (in some cases).

Ethereum-based DeFi coins explode in value

In the past 30 days, the second native asset of the MakerDAO ecosystem, Maker (MKR) has exploded higher by 120 percent, according to data from CoinMarketCap. Over that same time frame, Bitcoin gained 13 percent while Ethereum saw a 30 percent increase in value.

MKR’s outperformance comes on the back of three fundamental trends:

  • A listing on Coinbase’s professional platform, which is one of the first times the asset can be traded by a retail audience in the U.S.
  • An increase in MakerDAO demand spurred by the addition of alternative assets to the collateral pool.
  • An increase in usage of DeFi applications, which all involve MakerDAO’s DAI token.

Other coins representing DeFi have also outperformed. Ethereum investor “Arthur_0x” noted that certain altcoins in this industry — such as Kyber Network’s KNC, Loopring’s LRC, Aave’s LEND, Bancor’s BNT, Gnosis’ GNO, and Airswap’s AST — have strongly outperformed Bitcoin since the start of the year.

According to Kelvin “Spartan Black” Koh, partner at The Spartan Group and formerly of Goldman Sachs, the strength in MKR (and presumably other DeFi tokens) affirms “strong interest and momentum” in the DeFi space.

DeFi is tapering out… for now

While DeFi has seen growth — both in terms of its native assets and user base — over recent months, some fear that it is a trend whose growth is tapering out for the time being.

Multicoin Capital managing partner Kyle Samani released an extensive blog post on Jun. 4 outlining why Ethereum’s budding finance space is “facing some real challenges,” and thus, is staring down a “plateau” in growth for the time being.

Samani explained that there exist clear “latency” issues with Ethereum which are preventing the mainstream adoption of DeFi products:

“You just can’t build global scale trading systems for lots of users on POW chains. It just doesn’t work. High latency –> all kinds of negative second order effects. So I think for now we are near a plateau for DeFi – measured in ETH terms (not USD) – until the core latency problems are solved.”

Ethereum’s 13-14 second block time seems to be his main gripe: high-frequency trading, where every millisecond may amount to more or less profit, and other financial functions are made difficult when you don’t have the speed of the internet on your side.

Samani also identified a lack of fiat on-ramps, a lack of trading functionality in decentralized applications, and a lack of abilities to obtain leverage in the DeFi space as issues for this budding part of the Ethereum economy.

Multicoin Capital has investments in the DeFi space, making these comments more constructive criticism rather than an attack on this segment of the Ethereum market.

Bitcoin could get a boost with altcoins booming

Although DeFi coins are getting a massive boost, some of those gains could soon be siphoned into Bitcoin as investors begin to realize that they need to preserve the gains they made.

Koh explained in response to Su Zhu’s comment on CME options that the growth in DeFi coins over the past few weeks while Bitcoin has been stuck in a range is a clear sign that “risk appetite is returning” in the crypto market:

“We have seen a major re-rating in many of the smaller altcoins (esp DeFi ones) in the past 4-5 weeks while BTC has been range-bound.”

To him, this means that altcoins will soon reach a point where their valuations are “frothy,” forcing capital to flow back into Bitcoin, boosting prices.

This is somewhat similar to what happened near the end of 2017, when certain altcoins saw exponential explosions in value, which then forced smart investors and whales to sell their altcoins for Bitcoin, boosting BTC.

The post Ethereum DeFi’s poster child, MakerDAO, is up 120% in the past month: why this is important appeared first on CryptoSlate.

Introducing $WAM, my Social Money Experiment

http://startupmanagement.org/2020/06/10/introducing-wam-my-social-money-experiment/

It’s no secret I’m a fan of creative usages of crypto-tokens, and the resulting mini-economies they create. As a refresher, please refer to 2 seminal blog posts I wrote 4 years ago:

The Theory of a Blockchain Circular Economy and the Future of Work and

The Relationship Between Cryptocurrency Tokens, Value and Work.

Since then, I’ve had direct experience and involvement in the first social currency that showed a decent adoption, Steemit, as well as with Kin, another large-scale cryptocurrency for socially-minded mobile apps. 

[disclaimer, I was an early advisor to/holder of STEEM, and am currently on the Kin Foundation board, and hold KIN]

While both Steemit and Kin reward the end-user for their activity, the user is required to use their common currency, STEEM or KIN. There is nothing wrong with that model, as it fits a wide range of use cases. Kin, for example has been adopted by 57 mobile apps, and garnered more than 4 million monthly active users in that ecosystem who participate in a variety of earn/spend social actions.

This brings us to wondering: How about a personal token for a brand or individual that is tied to their unique online presence, and one they directly own, control and use to coordinate how value is created across their community’s touch points? 

That’s where Roll comes in. Roll is social (crypto) money that a personal brand can use to incentivize a variety of earn/spend activity for their community. Think of it like a personal loyalty points program, with the difference being:

  1. you receive and manage your points as crypto-tokens in a special wallet, which means that you have custody of these tokens, and no one can take them away from you or arbitrarily force an expiry date.
  2. you can spend them inside the community where you earned them, or across other services in the crypto universe- that’s the equivalent of using your United MilagePlus at a hotel or restaurant seamlessly.
  3. you can exchange them for another cryptocurrency like ETH or BTC without asking anyone for authorization, so the equivalent would be to redeem your mileage points for their actual face value in dollars/euro/etc, with the additional twist that these points might appreciate in value based on a various demand/supply factors related to the economic strength of that specific currency. 

To get this started, Roll has minted 10 million $WAM tokens, and that supply is fixed. It will never be increased nor change. Roll holds 12% of that supply, and I was given 2 million initial $WAM that I plan on distributing across the community I touch via this blog, social media or events I produce, such as the Token Summit. Every month, for the next 3 years, I will be issued a new number of $WAM that I can continue deploying. 

How do you start? 

You can earn $WAM via an action you take, or via a redeem code I share with you. 

Specifically, here are some options to consider:

  1. Redeem code: Just click on this link, and if you complete the steps which include signing-up for Roll (or downloading the App), you will find 100 $WAM auto-magically appear in your wallet. Note this is available only to the first 30 that respond within 3 days. So, it’s a one-time offer (and I will receive your email from Roll).
  2. Subscribe to any one of the 5 blockchain-related news content portals that I’m personally curating. Each new email subscription between June 10-15 that doesn’t un-subscribe for at least 1 week will receive 50 $WAM into their wallets. 

OnCoins – General blockchain market news

OnEthereum – Ethereum ecosystem news

OnDeFi – Decentralized Finance news

OnStablecoins – Stablecoins and Digital Currency news

OnDGov – Decentralized Governance and Decentralization news

3. Leave a comment on my blog with an idea on how to “spend” $WAM, and I will send you 200 $WAM. One idea could be to redeem them as a discount for a future Token Summit ticket, or potentially for early access to my next book, or something exclusively available to token holders, but I’m looking for creative/interesting/valuable ideas. 

As a sidepoint, last week, during a virtual presentation on Decentralized Autonomous Associations, I pre-announced $WAM and offered 100 $WAM to the first 50 users that subscribe to the Decentralized Governance news portal, and they will be receiving their $WAM shortly.

$WAM is an ERC-20 token. This means that the Roll wallet allows you to send your $WAM to another ERC-20 compatible wallet you may already own, and in the future, you will be able to trade it on the Roll Exchange (similar to Uniswap).

How do you spend $WAM? 

Currently, the “Spend” options for $WAM are limited, which is why I’m asking for feedback in point #3 above. Another spend idea  is that $WAM could be used as a currency to purchase a digital asset on the OpenSea marketplace.

Recap:

Sign-up to one of the curated news portals. Start here: OnCoins.org

Redeem the special code to earn $WAM if you sign-up and download a Roll wallet

Learn more about Roll. Here’s a great podcast the 2 founders, Bradley Miles and Sid Kalla. (Some of you may remember Sid as a speaker at the first Token Summit in 2017 when he was an analyst at Smith+Crown)

Or, download Roll for iOS on the Apple App store and Roll for Android on the Google Play store, and get familiar with it. 

Finally, here’s a handy FAQ on Roll.

Let the good times Roll with $WAM. I had to say it 😀.