Let the staking season commence! Starting in early December, all chefs, bakers, and validators are invited to compete for the ultimate glory: honor, food, and Celo Gold.

Today we’re announcing The Great Celo Stake Off, a competition that will run on top of Baklava, Celo’s incentivized testnet

The Great Celo Stake Off is inspired by the many cooking shows and competitions. Why food? It’s one way Celo makes complex technology digestible — plus it’s delicious! Validator “chefs”, full node “servers”, coders of “recipes”, and technical friends are invited to collaborate and compete to earn as many Baklava Testnet Units (“BTUs”) as possible.

Subject to the Stake Off Terms and Conditions, the top 50 teams on the leaderboard will have the opportunity to receive substantial servings of Celo Gold at Mainnet launch. And because there are many ways to participate in the Stake Off kitchen, and to contribute to the success of Celo, there are additional ways to receive Mainnet Celo Gold for more bite-sized contributions.

Why Participate?

For those interested in running a validator on Celo’s Mainnet, participating in the Stake Off is a critical step for validator success. Specifically, you’ll:

• Build operational experience
• Establish security best practices
• Receive badges and certifications for your set up
• Improve Celo and influence its design
• Earn Celo Gold
• Enjoy good food

How to get involved

1. Help run the restaurant — Earn BTUs by running a validator or full node;
2. Become a Master Validator — Boost your BTUs by passing the C Labs operational security and infrastructure audit;
3. Help design, build, improve, and promote the restaurant — If accumulating BTUs isn’t your thing, and you prefer creating recipes and taste testing, you can participate in the Stake Off through community challenges, security bounties, ecosystem grants, writing documentation, creating educational content, finding security issues, building validator and governance tools, and much more.

The Timeline and Details

Starting in early December, the Stake Off will run in three phases over 2–3 months, with each phase focusing on testing a different part of the network.

All details on the Stake Off can be found on the Baklava Testnet forum here.

Join the The Great Celo Stake Off

Add your name to the list and wait for the doors to open. Invite your friends and don’t delay — we have some treats for those who sign-up first ✨.

Best of luck. As they say, the proof is in the pudding.

Stay updated on the latest news and opportunities via the Celo Newsletter

Announcing The Great Celo Stake Off was originally published in The Celo Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

Celo is an open, decentralized platform that enables a monetary system that creates conditions of prosperity for all. It’s an ambitious project aiming to make it straightforward for anyone with a smartphone anywhere in the world to maintain a current account, send money to friends, and pay merchants.

The Celo whitepaper summarizes the project’s approach to achieving these goals. The project embraces a full-stack approach, where many innovations at different layers combine to make the technology stack meet the needs of the community’s various stakeholders. There’s a lot of detail in there, and this blog post aims to unpack some that detail. We will take a tour of the key components: subsequent posts will dive into the technical aspects of the various elements presented here.

Motivation

Cryptocurrencies offer many benefits for transferring value compared to fiat currencies. They enable faster payments at lower costs with 24/7 global access. In addition, these new digital assets can be programmed allowing for new and more efficient forms of financial services. The challenge however, is crypto-assets are volatile and require long hexadecimal cryptographic addresses to transfer value — making them hard to use as a medium of exchange.

Therefore, for a cryptocurrency payments solution to prosper, it should offer stable-value assets and a frictionless user experience that makes exchanging value as simple as sending a text message. This is what Celo enables.

Celo, more specifically, is a mobile-first solution that’s composed of the following three elements:

1. Lightweight identity for a better user experience
2. Stability mechanism for stable-value currencies
3. Incentives and governance system for platform sustainability

The above components are part of a proof-of-stake smart contract platform that’s based off Ethereum. The Celo protocol is powered by a native digital asset called Celo Gold and all Celo assets (Celo Gold and Celo stablecoins) are ERC-20 compliant to facilitate token distribution via decentralized exchanges. Details about this underlying core layer will be shared in a separate whitepaper.

Lightweight Identity

To exchange cryptocurrencies today a receiver has to download a wallet, generate a public/private key pair, and then share the long hexadecimal address (derived from the public key) with the sender. Celo simplifies this by allowing people to send value to each other with only a phone number — bypassing the traditional approach of long complicated cryptographic addresses all together. In addition, if someone hasn’t yet registered on the Celo network (i.e. they haven’t yet proven that they own their phone number), the crypto-assets are held by the protocol until they verify themselves.

Address-based Encryption

Celo enables mobile phone payments using something called “address-based encryption” (which is a variant of “identity-based encryption”). Address-based encryption ties a phone number to a Celo address (similar to an Ethereum address) so that when a payment is initiated the phone number can be used instead of the address, which simplifies the user experience. To preserve privacy, a hash of the phone number is stored on the blockchain rather than the phone number itself.

Verification occurs when a phone number is attached to a Celo address. Broadly speaking, it works in the following way:

• A user sends a request to attach their phone number to a public Celo address;
• Once the request is received by the network, three secure messages in the form of a text messages are sent to their phone number;
• The user broadcasts the signed secure messages back out to the network, proving ownership of their phone number;
• Once all signed messages are received by the network, the verification is considered successful and the phone number is marked as verified on the blockchain.

We’ll go over the technicality of the above in a separate blog post.

Additionally, if someone changes their phone number they can re-verify themselves with the new phone number attaching it to their original address.Therefore, several phone numbers can be tied to a single public Celo address. A user may also revoke or change the address associated to their phone number at any time.

It’s worth noting that this scheme could work with any identifier that can receive secure messages, not just phone numbers. IP addresses or bank routing and account numbers could be additional methods.

Reputation

Finally, attaching phone numbers to Celo addresses enables capturing reputation (like a credit score). Celo uses EigenTrust for measuring this. It’s quite complicated to explain but in short EigenTrust is a decentralized algorithm where a phone number’s score is defined by the number of other phones who trust it weighted by their reputation scores (similar to how PageRank works).

Stabilizing Value

One of the biggest barriers to adoption of cryptocurrencies as a medium of exchange is volatility. Stable-value currencies address this barrier whilst also removing price risk from financial contracts denominated in those currencies. Furthermore, enabling a family of stable-value assets (as opposed to just one currency) would allow the creation of regional and utility assets that would foster local economies and enable people to hedge price-risk with respect to the local goods and services they regularly use.

Celo therefore allows for multiple stable-value currencies where each coin is pegged to a measurable value such as the Dollar, Euro, basket of goods in Greece, the price of a barrel of oil, and more . Each Celo stablecoin maintains its peg by adjusting its supply to match demand. The family of stablecoins is collateralized via a basket of crypto-assets that acts as a reserve and that acts to absorb volatility risk.

How Stability is Achieved

The protocol has a fixed supply of Celo Gold (cGLD). Part of the cGLD will be activated at launch and the rest minted by the network over time. The majority of cGLD launch supply will be used to fund the reserve where it’s anticipated that 50% of cGLD will go to the reserve and 50% of cGLD will be used to buy crypto-assets (e.g. Bitcoin and Ether) to also be placed in the reserve. In the future, the reserve could also include natural-capital-backed assets such as tokenized forests.

Let’s look at what happens when there’s only one stablecoin. The first one will be Celo USD (cUSD) pegged to the US Dollar.

When the price of cUSD is above the peg it means there’s more demand for it than supply available. In such instances, the protocol expands the supply of cUSD by minting new cUSD and selling it for cGLD via a Uniswap-like decentralized exchange called CP-DOTO.

Similarly, when the price of cUSD is below the peg it means there’s less demand for it than supply available. In such instances, the protocol contracts supply by buying cUSD off the market in exchange cGLD from the reserve, again via a Uniswap-like decentralized exchange called CP-DOTO. The acquired cUSD is then destroyed by the protocol.

To encourage long-term holding of Celo Gold and to ensure that the reserve remains healthy, there’s a variable fee on Celo Gold transactions that goes to bolstering the reserve. The rate is based on the reserve ratio, which is defined as the value of the reserve with respect of the value (e.g. cUSD) to be stabilized — the lower the reserve ratio, the higher the transfer fee. In addition, if the reserve ratio is below target level, a substantial part of the block reward minted by the network gets allocated to the reserve.

A description of how the price stability protocol works in detail can be found in this blog post and an analysis of the stability characteristics can be found in the Stability white paper. In addition, a detailed description of how the expansion and contraction mechanism works (i.e. CP-DOTO) can be found in this blog post.

Family of Stablecoins

In the case where there are several stablecoins, the protocol is designed to adjust supply by trading between these before going through the reserve, which makes the process more efficient. For example, if Celo USD (cUSD) demand increases and Celo EUR (cEUR) demand decreases then the protocol will create cUSD and sell them at market rate in exchange for cEUR that will then be destroyed by the protocol. With such a mechanism Celo stakeholders are incentivized to grow usage of the entire Celo ecosystem rather than focus on individual stable-assets. For example, introducing cEUR could decrease demand of cUSD but as long as the total demand for cEUR and cUSD increases, the total ecosystem grows.

New stablecoins are introduced via a governance process to ensure platform sustainability. To avoid a new asset having a negative impact on the stability of the other tokens (e.g. if it has high volatility) Celo uses a proof-of-bonded-stake model to vote on new introductions. It’s expected that Celo Gold holders will only vote favorably if they think the new stablecoin will grow and/or stabilize the Celo ecosystem.

Lastly, it’s worth noting that not all stablecoins need to use the same shared reserve. One could create a new stable token and initiate a separate reserve for that asset. That reserve would have its own local reserve currency. This would support the creation of local and functional currencies backed by collateral specifically tailored to each environment. For example, one such possibility is that some of the local reserve currency could get distributed to local inhabitants, which would allow them to benefit from the adoption of the local stablecoin, acting like a social dividend in the process. The decentralized nature of Celo means that different communities can use it as a foundation for many different projects.

Incentives and Governance

Celo’s governance structure is designed to incentivize behavior that aligns with long-term protocol stability. This is achieved through a proof-of-bonded-stake model, which encourages long-term holding of Celo Gold by weighting rewards according to the amount of Celo Gold bonded and length of time remaining in the bond.

Governance is managed on-chain. For a small submission fee anyone can propose protocol improvements along with an implementation fee. These are voted on by Celo Gold holders weighted by their bonded-stake. Proposals for introducing new stablecoins or new crypto-assets to the reserve follow a similar process. The only difference is that instead of paying a submission fee proposers have to stake Celo Gold. New stable assets that are not backed by the shared reserve (and instead have their own reserve and local reserve currency) do not need to go through the governance process to avoid existing Celo Gold holders vetoing that initiative.

Conclusion

In conclusion, the Celo protocol introduces a mobile-first protocol designed to be user friendly by addressing barriers to cryptocurrency adoption whilst remaining as inclusive as possible. In addition, the protocol supports a new type of monetary ecology that includes local and regional currencies, social dividends, demurrage, and natural-capital backed currencies.

Thanks to Anca Bogdana Rusu, Asa Oines, Brynly Llyr, Laurence Delisle, Tim Moreton, and Vanessa Slavich for helping write this post and a special thanks to Taylor Lahey for all the illustrations.

Stay updated on the latest news and opportunities via the Celo Newsletter

A Look at the Celo Whitepaper was originally published in The Celo Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

Choosing a consensus algorithm is more than a technical design choice: it’s about determining who to involve, how to involve them, and where to delegate power.

Celo’s mission is to build a monetary system that creates the conditions for prosperity for all. We are working to create technology that can deliver significant improvements to financial inclusion, the opportunity for everyone to access suitable, affordable, and easy to use financial products and services.

We see a significant part of this opportunity arising from the increasing ubiquity of mobile phones and rapidly improving internet penetration. However for a financial system to deliver equity (i.e. be fair and impartial), we believe it has to be a public good, developed and operated by the community it serves. For us, this is where blockchain technology comes in. Blockchains resemble databases that secure system-wide agreement (consensus) using compute resources provided by individuals and organizations without a prior trust relationship, who often are rewarded for doing so, and who often also participate in their governance. But how do you design the technology itself to be inclusive?

As we have begun the development of the Celo platform, we’ve gathered some insights and thoughts on the two main approaches to consensus, proof-of-work (POW) and proof-of-stake (POS), and how the incentive structures implied by these algorithms affect participation in the protocols themselves and the services built on top of them.

We think about this in three main ways:

1. Access — Give the ability to benefit from participating to as many as possible;
2. Distribution — Equally (re)distribute tokens without favoritism or discrimination;
3. Power — Divide governance power such that no single entity or small group have control over the platform.

1. Access

Who has access to the network and its native assets?

Running and securing the Celo platform and getting rewarded for doing so, should be accessible to as many as possible.

Three types of network participants

Throughout our research we identified three types of network participants:

The Grassroots: They’re hobbyists motivated by access to passive income (with potential financial upside) and/or by a desire to learn and support projects they believe in (e.g. ideological alignment, strong team, interesting technology, etc.).

The Professionals: They represent a new type of company or fund designed specifically to extract value from these new cryptographic networks. They’re driven by financial returns and choose what to mine based on profitability or what to stake based on yield.

The Disenfranchised Citizens: They’re individuals who don’t have access to sound currency and are motivated by access to a trustworthy censorship-resistant store of wealth. They’re based in countries that have a poor monetary policy (e.g. high inflation) and in the case of mining, where electricity is affordable. They choose a token based on its brand/reputation and its liquidity.

The higher the market cap, the more professionalized a network is

No surprises, that’s how Satoshi Nakamoto designed Bitcoin: the more participants, the harder it is to participate. However, the subtlety here is not about participation difficulty but about the consequences of it.

As a network increases in value, it’ll attract more players, which increases the barrier to entry causing that ecosystem to become professionalized. The reverse also applies: as a network loses value it’ll attract fewer participants, which will lower the barrier to entry and attract hobbyists. This is true to a certain extent since networks with mature consensus algorithms will have a barrier to entry capped by the cost of specialized hardware (i.e. ASICs).

For example, Ethereum (POW) started with a low market cap and as its value and hashing power increased, the network professionalized, squeezing out the grassroot miners. Tezos (POS) on the other hand, launched with high market cap requiring self-stakers to invest at least ~$24,000 (price for 10,000 XTZ) and requiring anyone with less than that to delegate their stakes to professional services. However, as the network lost value the minimum required to self-stake fell to ~$3,500 opening up opportunities for grassroot stakers.

2. Distribution

How are the network’s native assets distributed?

The minted assets and transaction fees should be equally distributed without favoritism or discrimination.

The “permissionless” debate

A fair consensus mechanism should allow anyone to join and participate in a network. When Bitcoin launched crypto-exchanges and other blockchain-based networks didn’t exist, which meant POW was the only way to distribute the cryptocurrency. Anyone could turn the cost of a computer and some electricity into Bitcoin. POS on the other hand, requires finding a way to distribute the staking tokens prior to or at network launch. Some argue that this represents a permissioned form of distribution since “gatekeepers” decide who can purchase pre-sale assets, receive airdrops, or get listed on exchanges, whilst others argue that the industry is now mature enough to consider exchange listings sufficient to be permissionless.

Fair distribution boils down to resource availability

POW requires access to cheap (or free) electricity and specialized hardware whilst POS requires access to token sales, exchanges (which in general also requires identity papers), or agents. In the case of POW, there are few places in the world where electricity is subsidized or cheap, which limits where people can mine from. In addition, with the increase of specialized mining hardware, few have access to the most competitive machines.

On the other hand, POS token sales are regulated to accredited investors, exchanges are still poorly represented in frontier markets, and agents only surface when there’s demand. Token distribution therefore depends on the types of resources a user has access too and determining what’s “fair” is, to a certain extent, subjective.

Confirmation bias is prevalent

It’s also interesting to observe that when asking people which is “better” POW or POS? They tend to support the consensus mechanism that’s most beneficial for them personally and that’s generally correlated with the resources they have access to. People’s perception of “fair,” if not driven by ideology, is biased by their experience and environment.

3. Power

Who governs and has decision power over the network?

Celo governance should be decentralized such that no single entity or set of entities can control the network.

In the end, it’s all about power

The POW vs POS debate is ultimately about who gets controlling power. Some argue that separating power between POW miners and token purchasers creates a healthy tension. No one can move forward without the support of the other, which generates constructive debates and well thought through changes. Others contend that this leads to misaligned incentives and unnecessary debates, which cripples a network and stifles innovation. Better align incentives via a POS model where token purchasers are also those running the network. The risk, however, is that the POS incentive model hasn’t yet been proven. For example, these networks may be subject to insufficient checks and balances, collusion, and bribery. In addition, many argue POS enables “the rich to get richer”, closing out others and accentuating inequality.

Conclusion

In conclusion, staking is more accessible than mining for the majority of users because it doesn’t (yet) require access to specialized hardware or cheap electricity. POS however, faces token distribution challenges. Unlike POW, where asset distribution is automated, decentralized, and permissionless, POS token distribution involves at some point human decisions and is therefore permissioned. As for controlling power, the debate is more nuanced than painted here, having a variety of stakeholders (POW) seems more inclusive than aligning them into one role (POS) but with the caveat that in such situations stakeholder power may be unbalanced. In addition, it could be that, compared to POS, existing POW networks are missing a governance process skewing perceptions and assessments. Ultimately there’s no perfect solution. Choosing a consensus algorithm is more than a technical design choice, it’s about determining who to involve, how to involve them, and where to delegate power.

We’re still working through these questions ourselves. What’s your take on it? Which do you think is more inclusive? We’d love to hear your thoughts.

A special thanks to Tim Moreton and Vanessa Slavich for their help researching, writing, and editing this post.

Stay updated on the latest news and opportunities via the Celo Newsletter

Which is More Inclusive: Proof-of-Work or Proof-of-Stake? was originally published in The Celo Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

Crypto Insights in the form of a weekly newsletter is stopping, however, I’ll continue to publish more in-depth posts from time to time as well as share interesting posts on Twitter (@clairebelmont).

For those who’d like to continue receiving a regular dose of crypto news, here are a few recommendations.

Newsletters

• Token Economy — The most comprehensive newsletter out there. Good if you only want one weekly update.
• Build Blockchain — Deep dives on a topic of the week. Covers news under a more technical angle. Enjoy it for the well thought through analysis’.
• Proof of Work — Short analysis followed by dev updates from many crypto projects.
• Staking Economy — Focuses on all things “staking.” Good to complement the above.
• NFTY News — Focuses on Non Fungible Tokens. Good complement to the above.
• Long Reads Sunday (by Nathaniel Whittemore) — “Bitcoin & crypto’s most interesting Twitter threads and long-form essays.”
• Circle Research — Comprehensive research reports. Newsletter also covers top stories.
• Massari’s Unqualified Opinions (free version)— Similar to Token Economy but less comprehensive though sometimes points to additional resources. Comes out Friday whilst Token Economy comes out Sunday/Monday so good for weekend reads.
• The Block — Quality content and they are sometimes some of the first to announce news.
• Chain Letter (from MIT) — Newsy stuff. Sometimes covers international organizations and foreign government news, reports, and initiatives.
• Breaker Magazine — For profile interviews and for some fun reads.

Blogs

• AVC (Fred Wilson) — A classic.
• Nadia Eghbal — Research focussed on open source communities. Original insights.
• Snippets from Social Capital — Multi-week deep dives on a topic, covers crypto from time-to-time. Original perspectives.
• Tony Sheng — “Essays on the business and strategy of crypto.”
• Multicoin Capital — Well thought through analysis’.

Think that’s it. Sure I’ve missed something but this is already a good start.

Happy reading!

The Best Crypto Newsletters and Blogs was originally published in Crypto Insights on Medium, where people are continuing the conversation by highlighting and responding to this story.

I recall reading 95 Crypto Theses for 2018 when it was published and thinking “looking forward to reading this at the end of the year.” No surprises. 2018 turned out quite different than most post predictions. That’s why I don’t like forecasts and prefer retrospectives.

Looking back at 2018 here are my three takeaways:

• Bitcoin is cool 😎 again: After the 2014 bitcoin bubble the narrative changed from “bitcoin” to “blockchain” and with the launch of Ethereum dapps were supposed to be the new hot topic until ICOs turned out to be the killer use case. People are realizing that blockchains alone aren’t of much value and bitcoin, after all, is in fact an ingenious, proven, and elegant solution to digital money. The launch of Lightning has also revamped bitcoin’s image.
• Regulation is surfacing use cases that need decentralization: With regulation kicking in and some big projects shutting down (e.g Basis stablecoin), applications that require censorship resistance are starting to appear, weeding out the rest. These use cases are looking increasingly financial, which explains the growing interest in “decentralized finance.”
• Patience: Many were expecting projects such as DFINITY, Cosmos, and more to ship in 2018 but it takes time to build a security product and curate a community. In addition, regulatory headwinds are slowing down innovation as teams become more cautious. The good news is that everyone is focussed on building and with funding drying up and projects scaling back, there’s an opportunity for gems to surface.

What are your takeaways?

From around the web

Betting on Dystopia (Project Syndicate) — Cryptocurrencies are like lottery tickets that “pay off in a dystopian future where they’re used in rogue and failed states … that means that cryptocurrencies are not entirely worthless.”

4 eras of blockchain computing: degrees of composability (Jesse Walden) — Compares the four computing eras (calculator, mainframe, server, and cloud) to crypto eras.

Reject Nocoiner Orthodoxy (Elaine’s Idle Mind) — A somewhat extreme view debunking bitcoin fuds.

The State of Bitcoin (Delphi Digital) — Comprehensive report on Bitcoin assessing “store of value,” “ medium of exchange,” and “key risks.” Long read. Use as reference.

2nd Global Cryptoasset Benchmarking Study (Cambridge University) — Another comprehensive report. Some takeaways: millions of users are entering the space but remain passive, multi-coin support is expanding, majority of mining facilities are using some share of renewable energy, mining is less concentrated than commonly perceived, and self-regulation reflects maturing industry.

All Teens Want for Christmas is Bitcoin (Breakermag) — Title says it all.

Smiley corner 😄

This is the last Crypto Insights newsletter following a weekly format. More on what’s to come next year.

If you enjoyed this post follow me on Twitter @clairebelmont.

The views expressed are my own and do not necessarily represent the views of my employer.

2018 Reflections was originally published in Crypto Insights on Medium, where people are continuing the conversation by highlighting and responding to this story.

In a fireside chat between Sam Harris and Yuval Noah Harari (author of Sapiens), Yuval states that the reason we need democracy (or other forms of governance) is to agree on problems and goals. Once we know these, governance is no longer needed; all that’s required are experts to address the defined problems and goals. For example, landing an airplane is a concrete goal that requires an expert pilot.

Full Waking up podcast here: The Edge of Humanity (with Yuval Noah Harari)

This got me thinking about goals, blockchains, and governance…

Starting with bitcoin. Governance isn’t needed because the goal is clear, which is to create a digital asset of value (e.g. e-cash or digital gold) without relying on a trusted third party so that the cryptocurrency can’t be censored. Although there are debates within the community, these do not question bitcoin’s fundamental goal and they’re essentially centered around executional details such as block size.

On the other hand, more generalized projects such as Ethereum, EOS, or Tezos aren’t solving any particular problem and thus have no clear goal, which would explain why governance of these platforms has become such a hot topic.

Today many of these projects resemble each other, all aiming to create a scalable Turing complete platforms. The key to differentiation and success for these will therefore depend on: (a) how well they’ll integrate and manage governance to address contentious problems, and (b) building an engaged community that’ll want to be involved in defining the platform’s goals. Until then, the question remains: “will these cryptonetworks ever have a killer application and thus goal?” Time will tell.

From around the web

The Four Horsemen of Centralization (outlast.me) — Nothing new but a good introduction to “decentralization.”

Unpacking Bitcoin’s Social Contract (Medium) by Hsu — Looks at bitcoin’s social contract and uses it to explain bitcoin’s unique historical position, its resilience to bugs and forks, and more.

A CBC Casper Tutorial (Vitalik.ca) — CBC Casper explained using a concrete example. Post is written to help more people understand the “other version of Casper,” which is different from the one Vitalik is working on.

Peer Review: CBC Casper (Medium) by Muneeb Ali — Related to the above, Blockstack team highlights the shortfalls of the CBC Casper paper.

22 Ideas to explore with 0x (0x blog) — some interesting, original, and creative ideas.

Uniswap — A Unique Exchange (Medium) — compelling “protocol for trading tokens that has some nifty advantages over traditional DEXes.”

Four Days Trapped at Sea With Crypto’s Nouveau Riche (Breakermag) — Long entertaining (and disheartening) article written by award winning feminist journalist Laurie Penny.

Chart of the week 📈

Weekly newsletter published internally at Google. The views expressed are my own and do not necessarily represent the views of my employer.

Governance is Needed When Goals Aren’t Defined was originally published in Crypto Insights on Medium, where people are continuing the conversation by highlighting and responding to this story.

Particularly liked Anthony Pompliano’s “Off The Chain” podcast interview with Murad Mahmudov “one of the highest conviction Bitcoin Maximalists in the world.” They discuss “what bitcoin is, how it works, the importance of its deflationary monetary system, why all fiat currencies are doomed to fail, and how central banks and institutions should be thinking about bitcoin.” Hope you’ll enjoy it too!

Listen here: Murad Mahmudov: The Ultimate Bitcoin Argument

From around the web

Centralization vs. Decentralization (avc.com) — Interesting take from Fred Wilson and partner Albert Wenger (from USV) on historical centralization/decentralization trends and what this could look like for the Web 3.0.

How Cryptography Redefines Private Property (Medium) — Excellent post explaining the history of property and cryptography and explains why “for the first time in history, a form of private property exists that is completely independent of jurisdiction or the law.”

A Skeptic’s Guide to Bitcoin (The Startup) — Compelling explanation of why bitcoin is unique and the role it could play in “exploring how we can evolve money for a better society.”

The future of organizations (Aragon blog) — Covers the history of corporations, their governance, and how DAOs can enable new types of governance experiments more adapted to today’s fast ever changing environment.

Behind MimbleWimble (Medium) — Introductory explanation of MimbleWimble, how it differs from other cryptocurrencies, and compares first two implementations: Grin and Beam.

A visual guide to the Howey Test (Nick Grossman blog) — Post to help navigate the regulatory landscape of what defines a “security.”

Tweet of the week

Weekly newsletter published internally at Google. The views expressed are my own and do not necessarily represent the views of my employer.

Bitcoin Maximalism was originally published in Crypto Insights on Medium, where people are continuing the conversation by highlighting and responding to this story.

Enjoyed “The End of the Beginning” talk by Benedict Evans, partner at 16z, on the evolution of software and why we’re just getting started. Although the presentation looks at tech overall, found it interesting because it provides a framework for placing crypto within the broader context of technological opportunities.

Watch “The End of the Beginning” here.

From around the web

Visions of Ether (Medium) — Recap of how the narratives of Ethereum have evolved over time and tells the history of the network.

Vitalik Buterin On the Hard Lessons of Ethereum’s First Five Years (Breaker magazine) — Vitalik shares items on his mind 5 years into building Ethereum and lessons learnt along the way.

The Search for a Stable Cryptocurrency (Ethereum blog) by Vitalik Buterin — Tackles the question of whether fully decentralized stable currencies are feasible and whether they’re necessary.

Blockchain Ownership & Crypto Anticommons (Medium) — Explores the notion of property rights for blockchains. “What’s behind any digital token, asset, or contract is a package of rights — how we assign and interpret these rights is at the heart of blockchain governance.”

Introduction to the Melon Governance System (Medium) — Melon is a protocol for on-chain asset management. Contrarily to other projects where token holders play a role in governance, Melon is proposing an alternative model with a dedicated council responsible for protocol upgrades, resource allocation, and setting network parameters. Details in post.

Let’s take a crack at understanding distributed “consensus” (Medium) — Excellent overview and explanation of consensus mechanisms, one of the best to date.

Prediction markets (Circle blog) — Comprehensive summary of why prediction markets are worthwhile, challenges to date, and crypto projects in the space.

Grincon0 videos (YouTube) — Video recording of Grin’s (MimbleWimble) first developer conference held in Berlin.

Smiley corner 😄

Note: There will be no newsletter next week due to Thanksgiving.

Weekly newsletter published internally at Google. The views expressed are my own and do not necessarily represent the views of my employer.

The End of The Beginning was originally published in Crypto Insights on Medium, where people are continuing the conversation by highlighting and responding to this story.

I’ve been thinking about how to design fair cryptonetworks. Ones that are open and that have diverse stakeholder groups where power is equally divided.

Fairness is important because history shows that ecosystems managed by a handful of gatekeepers, such as the telephone and TV networks and the Web 2.0, hinder innovation and fatten incumbent profit margins at the expense of end users. The rich get richer whilst everyone else gets locked out.

So, how do we build fair networks?

There are essentially three components. A network should:

1. Be permissionless: Anyone can join and participate by earning tokens, improving the core code, or building on-top of the platform. Proof of work (POW) networks like Bitcoin and Ethereum are a good example of this; anyone with access to the right hardware can mine. Proof of stake networks (POS) are more contentious since earning tokens requires pre-owning tokens.
2. Have fair token distribution: Tokens are held by a diverse group of stakeholders preventing power to accrue in the hands of a few. A New Model For Token Distribution blog post by Multicoin Capital explains why this is important and explores how to get there.
3. Divide decision-making power: Power is split such that no one group of stakeholders can make changes to the protocol without the others’ buy-in. This can be managed informally (e.g. Bitcoin and Ethereum) or enabled with tokens and formal frameworks (e.g. Tezos, EOS, and DFINITY). The blog post Blockchains are not startups by Jakob Arluck from Tezos suggests an approach decentralized governance.

Achieving these three properties is challenging. Proof of work networks may be fairer when it comes to openness and token distribution but are criticized for excessive power consumption and miner “centralization.” Proof of stake networks are more environmentally friendly and better align token holder incentives but lack of objective permissionless token distribution mechanisms. There is no perfect model but it’s encouraging to see a group of innovators dedicated to building a more equitable system than what’s existed to date.

From around the web

A New Model For Token Distribution (Multicoin Capital blog) — See point 2 above.

The problem bitcoin solves (The Spectator) — Nothing new but well argued.

Transaction count is an inferior measure (Medium) by Nic Carter — Explains why using “transaction per second” is the wrong metric when comparing (crypto)currencies. Instead we should be comparing the “value flowing through the system per unit of time.”

Gavin Wood: Substrate, Polkadot and the Case for On-Chain Governance (Epicenter) — Interview of Gavin Wood, one of the Ethereum founders and creator of Polkadot. Enjoyed the part on the history of Ethereum.

A Few Thoughts on Devcon4 (Medium) — Succinct summary of Ethereum’s annual developer conference.

The Unintended Consequences of Product Design (Medium) — Lessons learnt on designing good user experiences by the founder of MyEtherWallet and MyCrypto. Post looks at tradeoffs between ease of use vs. adding security-related steps so that users don’t shoot themselves in the foot.

Generalized Mining, An Introduction & Primer (YouTube) — Presentation that looks at the role of network participants in the evolving technological landscape.

Grin Privacy Primer (Github) — Overview of privacy solutions for Grin. Grin is the first implementation of the MimbleWimble whitepaper.

Intro to Public Blockchain Scalability (Medium) by Casey Caruso — High level overview of scalability solutions.

Game of the week

Explore kingdoms with your Hedgie and dig to earn tokens along the way. Tokens can be used to shop at local and online businesses. Launching summer of 2019

Weekly newsletter published internally at Google. The views expressed are my own and do not necessarily represent the views of my employer.

The Challenges of Building a “Fair” Network was originally published in Crypto Insights on Medium, where people are continuing the conversation by highlighting and responding to this story.

At Devcon 4, Ethereum’s annual developer conference, Vitalik Buterin presented plans for the future of the platform (called Ethereum 2.0 or Serenity). Many of the proposed upgrades such as proof of stake have been in the pipeline for years, some as early as 2014 when the project was just getting started.

In his presentation, Vitalik walks us through the challenges faced, why it’s taken so long to bring scaling solutions to life, and the rationale behind the decisions taken. Some solutions were entirely developed and then scrapped. The talk is 30 minutes long and quite technical but worth a watch for those interested in Ethereum’s story.

Watch here: Vitalik Buterin “The road to scaling Ethereum”

Going from concept to execution takes more time and and more resources than generally expected. Things that appear logical on paper can present a whole new set of unexpected challenges at execution. Ethereum’s case is amplified by the global decentralized open source environment it’s operating in. In addition, there are no formal process for rolling out upgrades making it tough to take decisions and coordinate stakeholders. It’ll be interesting to see how the third wave of projects started by academics such as Algorand, Coda, or Oasis, will fare when it comes to executing in this competitive and fragmented environment.

From around the web

On Cryptocurrency Communities (Medium) by Nick Tomaino — “The goal of this piece is to examine the key characteristics that have led to strong cryptocurrency communities.”

What is it like to be a Bitcoin? (Medium) by Nic Carter — Explores what identity means, how it gets created, and what makes Bitcoin’s identity special.

On the Instability of Bitcoin Without Block Reward (Princeton CS) — Academic paper that looks at security implications of paying miners in block rewards vs. transaction fees. “Our key insight is that with only transaction fees, the variance of the block reward is very high due to the exponentially distributed block arrival time, and it becomes attractive to fork a “wealthy” block to “steal” the rewards therein.”

Planting Bitcoin (cont.) (Medium) by Dan Held — The full 4 posts on Bitcoin’s story are now available: Part 1 — Species, Part 2 — Season, Part 3 — Soil (new), and Part 4 — Gardening (new).

Tweet of the week

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The views expressed are my own and do not necessarily represent the views of my employer.

Ethereum 2.0 Serenity was originally published in Crypto Insights on Medium, where people are continuing the conversation by highlighting and responding to this story.