Crypto Research Notes
Last updated April 14, 2021
Table of Contents
Blockchain 101
- A Visual Demo
- Bitcoin white paper
- Assets are stored in digital “wallets” which are comprised of the following:
- A “Public Key”, or “Address” (similar to the notion of a username in Web 2.0 parlance), and a
- “Private Key”, sometimes called a “Seed Phrase” (similar to a password, albeit one that is not centrally managed and thus, unrecoverable)
- “Blocks” are comprised of transactions between wallets and can be viewed on a block “explorer”. Etherscan is an example of a block explorer for the Ethereum blockchain.
- What is Proof of Stake?
Smart Contracts
DEXs
DAOs
- Wikipedia
- A DAO's financial transactions and program rules are maintained on a blockchain.
- DAO’s are internet native and do not require authorization of a state or incorporation within a geographic jurisdiction.
- DAOs can be comprised of known, anonymous, or pseudonymous entities.
- “Although unclear, a DAO may functionally be a corporation without legal status as a corporation. This means potentially unlimited legal liability for participants, even if the smart contract code or the DAO's promoters say otherwise. Known participants, or those at the interface between a DAO and regulated financial systems, may be targets for regulatory enforcement or civil actions.”
- DAOs, DACs, DAs and More: An Incomplete Terminology Guide
- “a decentralized organization takes the same concept of an organization, and decentralizes it. Instead of a hierarchical structure managed by a set of humans interacting in person and controlling property via the legal system, a decentralized organization involves a set of humans interacting with each other according to a protocol specified in code, and enforced on the blockchain.”
- A DAO “is an entity that lives on the internet and exists autonomously, but also heavily relies on hiring individuals to perform certain tasks that the automaton itself cannot do”
- in “a DO the humans are the ones making the decisions, and a DAO is something that, in some fashion, makes decisions for itself”
- “a DAO still requires heavy involvement from humans specifically interacting according to a protocol defined by the DAO in order to operate”
- “The above definitions are still not close to complete; there will likely be gray areas and holes in them, and exactly what kind of automation a DO must have before it becomes a DAO is a very hard question to answer.”
- How to create a bankless DAO
- OpenLaw has created a protocol and open source library for creating, signing, and deploying contracts on the blockchain.
- OpenLaw Core
- The LAO “is a global group of Ethereum enthusiasts and experts supporting the work of Ethereum builders”
- Interestingly, though it's incorporated in Delaware as a limited liability company, it is “primarily administered via an online application (a ‘DApp’) and related smart contracts”. It seems like the LLC is a general legal container (shell?) and that most of the organization's decisions and activities occur on-chain in the form of Ethereum smart contracts. Docs.
- Flamingo DAO looks like it used the LAO’s template of a Delaware LLC., etc. and is the same thing except it’s focused on NFT-specific projects as opposed general Ethereum projects.
- “Membership in Flamingo is currently limited to accredited investors, as defined under U.S. law. The total number of members will be capped at a maximum of 100 members. Members have the opportunity to contribute Ether to Flamingo by purchasing between 100,000 and 900,000 units representing an ownership in Flamingo (‘Flamingo Units’). Units will be sold in blocks of 100,000. Each block of Flamingo Units will be sold for 60 ETH and provide a member with 1% of the voting rights in Flamingo, along with 1% pro rata rights to any proceeds from purchases. Each Member will be permitted to purchase 9% of the Flamingo Units. The LAO will be allocated 200,000 Units of Flamingo for its role in helping to formulate Flamingo. The members reserve the right to create a Flamingo Token to represent Flamingo Units via a Member vote.” Source.
- What’s the point of going to all the trouble setting up a DO/DAO/LAO/ETC. when it’s essentially just a DE LLC? Governance?
- Bootstrapping A Decentralized Autonomous Corporation: Part I
- Corporations are legally defined as people, and indeed are comprised of people. Contracts within a corporation constrain the behavior of its people.
- “When a corporation has limited liability, it means that specific people have been granted extra privileges to act with reduced fear of legal prosecution by the government – a group of people with more rights than ordinary people acting alone, but ultimately people nonetheless. In any case, it’s nothing more than people and contracts all the way down.”
- Automation has removed the need for low skilled workers at the bottom of an organization but has preserved those higher up such as managers and directors. DAOs approach the problem of human action from the other direction by asking the question, which parts of the management, decision-making, and governance processes can be automated with code?
- This article was written by Vitalik in 2013 before he created Ethereum. He works through some of the challenge of distributed decision-making using the Bitcoin network and clearly articulates it’s shortcomings for such a use case.
- Bootstrapping An Autonomous Decentralized Corporation, Part 2: Interacting With The World
- Rough, open-ended thoughts on decentralized organizations.
- Bootstrapping A Decentralized Autonomous Corporation, Part 3: Identity Corp
- Rough, open-ended thoughts on decentralized identity.
- The LAO – DAOs From a Legal Perspective with Aaron Wright
- Vermont has a concept of a “BB” (Blockchain-based) LLC.
- Wyoming recognizes a DAO by law (45:00 min)
- You create it just like you would an LLC via filing an “Articles of Organization” document with the state that identifies the underlying smart contracts managing the system. DAOs can be designated either “member managed” (wherein humans make the decisions) or “algorithmically managed” (wherein computers make the decisions).
- Wyoming is working to make the filing process available via an API.
- Traditional contracts can be used as containers for smart contracts (50:00) in that they can specify digital “courts” as the “jurisdictions” where disputes must be resolved. Aragon Court is an example of one such digital court.
- What’s interesting about Aragon Court is that it doesn’t attempt to remove humans from the decision making processes. It simply provides a digital intermediary layer between “judges”, plaintiffs and defendants.
- “Protocol Politicians”
are will be a thing...
- WY has a provision wherein they can “unregister” a DAO (?) if they go “completely haywire”.
- It’s unclear what would happen in such a scenario as the state can’t remove the DAO from the blockchain on which it’s operating. (52:40)
- One idea is to include an “update” feature in the source code wherein DAOs are required by law to be update-able, and in the event the state wants to shut a DAO down they “update” it with instructions to kill itself.
- Algorithmically managed DAOs require a charter in WY.
- DAOs can be comprised of other DAOs. 🤔
- “Coordination” DAOs like KeeperDAO are a thing.
- As the tools get better it becomes increasingly clear how they can be used for good and bad (assassination markets, etc.)
- Preston Byrne is not impressed
- https://www.coindesk.com/how-to-sue-a-decentralized-autonomous-organization
- https://badger.finance/
NFTs
- What is Cryptomedia?
- Zora is a startup proposing the notion of Cryptomedia: “the canonical instance of a piece of hypermedia”
- Cryptomedia is comprised of the following:
- Creator
- Media
- Owner
- Market
- Rather than proposing these ideas at the protocol level (in the form of an EIP, and waiting for the development community to reach consensus and then allocate engineering resources to implement) they are instead creating a platform that can move quickly and experiment.
- Do people care about “owning” digital media again though? That’s what NFTs offer but I wonder if that’s what people actually want? It feels very 20th century to me, the notion of owning something rather than just streaming it. No one buys CDs, DVDs, or mp3s anymore. We just pay a monthly fee for Spotify, Netflix, et. al. What would have to change in order for this shift to occur? 🤔
- One argument is that most people will continue streaming but it’ll be directly from the creators themselves (or, in the event creators sell their NFTs to someone else), who will in turn receive “royalties” directly, rather than through some intermediary. In this way, I don’t see much of a difference to the traditional media publishing world other than the fact that it’ll be smart contracts on a blockchain mediating the agreements as opposed to lawyers in a corporation. Which is not insignificant, but also doesn’t seem to change much for the end user experience.
- Another argument: “Cryptomedia's closest analogue is art in the public domain. Individually owned, but free to share and use by anyone. When it’s freely shared and used it’s not detracting value from the original, it’s adding value. The Mona Lisa is an exceptionally valuable artwork that lives in the public domain, it is individually ownable yet publicly available for reuse. Mona Lisa Instagram posts, poster prints, remixes, reuses all do not detract value from the original, they add value to it.” So perhaps, if a piece of digital media, say, the cover of Kanye’s new album, was minted as an NFT, then owning it would be highly desirable because though it would be free to use and enjoy by all, owning it would have some value. It’s easy to imagine a strong correlation between an NFT’s recognition and perceived value (price). In such a scenario it seems likely there would be a handful of highly recognizable, prized, and thus expensive NFTs, with a long tail of unrecognizable and thus not valuable, cheap NFTs. Kinda like the current media landscape.
- Building the Investable Layer of Music, by 3LAU
- “my long-term vision is that digital collectibles will evolve into true fractional ownership in a song’s master recording rights, allowing artists to disintermediate the music industry and fans to gain from their success”
- Crypto Art Data has a lot of interesting data on the top 6 NFT platforms.
- 3Lau makes the case for why songs should be an asset class. I would argue they actually already are, it’s just that the market is confined to a relatively small group of industry insiders, namely music publishers.
- One cool potential outcome of fractionalized ownership in NFT songs is that early fans who support an artist’s work prior to it spiking in demand would see their fraction of the ownership increase in price. Such a scenario aligns the incentives and outcomes of both artists and their fans.
- Another interesting idea is: an artist who retains 51% ownership of their (NFT) song, allocates 49% ownership into a DAO, and then sells shares in the DAO on the open market.
- A coat check ticket, a magic spell
- Well written blog post on one writer’s foray down the rabbit hole of tokenizing (“minting”) a piece of his own writing using the Zora protocol.
- The Rise of User-Generated Capital: Bridging the Creator Economy and Decentralized Finance
- Likes/Follows/Etc. are a form of social currency on the current web.
- But this currency is controlled by the platform owners and as such, leaves the community of producers and consumers out of the value capture loop.
- “Social Money” like $CHERRY (a token and community for a popular OnlyFans creator with a current (as of 2/12/21) market cap of $75M), $KARMA, and $WHALE will change this.
- Roll is currently building infrastructure and tools for social money.
- The last six months of 2020 saw over $300M in market value created from over 300 different creator communities on Roll.
- “If I speak the ‘language’ (gifs/memes) of a community and exhibit its ‘culture’ (user behavior), why wouldn’t I have a position in the economics of a digital community as well? We’re seeing the same people who have status in user-generated content, translate that status by accumulating user-generated capital (social money and NFTs). The main difference here is capital now becomes a form of expression with a community.”
- This space is rapidly evolving.
- “a significant portion of new Web3 opportunities will come from the infrastructure and applications that make use of this new category for end users.”
- $CHERRY’s approach of paywalling content behind the walled garden of a Discord server, that then uses Collab.Land to check a wallet’s balance to determine its level of access is very clever. Does such a strategy scale? If so, would there need to be Dapp equivalents of platforms like Substack, YouTube, Spotify, et. al. (or those platforms themselves) that do something similar? Outpost seems to already be moving in this direction.
- To what extent is market making required for the success of content creators?
- What incentives exist now, or could exist in the future, that ensure token issuers interests are aligned with those of their holders?
- Besides content creators, what other uses cases are gaining traction? Could social money be extended to other categories of society like education, entertainment, and sports? For example, instead of an ISA with Lambda School, could a student simply offer some personal token that paid out some agreed upon return to its holders once certain milestones were met? Or could a sports franchise purchase the token of an athlete, invest in them, and then share in a portion of their success?
- What are the barriers to opening up the minting process so that anyone can issue a token?
- What happens when $ becomes to money what # became to topics?
- Adaptor: The Rise of Social Money
- Roll is at the intersection of content creators and community
- What will it mean to be an “entrepreneur” (person) who “issues” (mints) a “security” (NFT) to “investors” (people) when millions of entities are doing this in a permissionless peer-to-peer fashion? The SEC isn’t suited to enforce securities regulation and accreditation requirements across hundreds of millions or billions of market participants. Especially when the trading activity is decentralized. There’s no centralized platform to shut down, no CEO to imprison.
- https://rally.io/
- https://brandtokens.io/
- https://fairmint.co/
- https://defipulse.com/blog/social-money/
- https://medium.com/swlh/why-were-excited-about-roll-the-protocol-for-social-money-beedd4ebb9ca
- https://darkstar.mirror.xyz/srmoGiN_1pg_toQGzCupkjWFOaf8xi0mM60zYpn_pwI
- https://messari.io/article/explain-it-like-i-am-5-nfts
- https://eulerbeats.com/
DeFi
Oracles
- Oracles are trusted data sources for smart contracts. They provide the input to a smart contract so it knows what output to generate. For example, two parties enter into a contract wherein:
- Adam agrees to pay Bob $50 if the value of $TSLA increases and,
- Bob agrees to pay Adam $50 if the value of $TSLA decreases.
- Adam and Bob each send their $50 to the smart contract.
- Written into the source code of the smart contract are instructions that say to use the NASDAQ closing price of $TSLA as the oracle to determine who to send the $100 to.
- Chainlink
- Leading oracle service provider. Offers price feeds only.
- Very curious to learn if there is anyone focused on providing oracles for events in the real world using input sources like audio, video, bar codes, GPS, and others. In addition to providing trustless chain of custody, valuable in its own right, such services could be used as the interfaces—arbiters of truth—between the physical and digital worlds.
- In theory, the hardware needed to provide such services could become sovereign economic agents in their own right. They could earn income from the services they provide, and then use that income for routine maintenance and upgrades.
- One could imagine these agents forming a DAO wherein some consensus and decision making mechanism was used to make changes across an entire fleet of devices.
Decentralized Web
Other Projects
Ideas
- Smart Contract branding/browser that facilitates discovery of interesting things happening on a blockchain.
- Escrow service that’s beautiful, fast, and easy to use.
- A service that makes it trivially easy to create and deploy DAOs.
- A service that makes it easy to issue NFTs, couple them to real world products or events (like the scanning of a QR code), and then “burn” the NFT once the product or event has been issued, or scanned. For example, I receive an NFT that’s redeemable for entrance to an event, I arrive, have the QR code in my NFT scanned, am admitted, and then the NFT is deleted from my wallet. The same flow would work when redeeming a physical good.
- A system that helps creators issue tokens whereby once certain milestones are met, those tokens pay out a dividend. For example: 1) I’m a creator on YouTube/Twitch/Substack/Spotify/OnlyFans/Zora/Whatever, 2) I mint a $JONNY token that specifies in its smart contract it will issue a 50% return once I reach 100k follows/likes/subscribers/whatever, a 25% return at 1M follows/likes/subscribers, a 10% return at 10M, and so on.
- Such a system would align the incentives of both producers and consumers and give early adopters and supporters exposure to the upside they help create. (Imagine buying some $JOEROGAN tokens in the first year he started podcasting. What would they be worth today?)
- The system would handle regulatory compliance, issuance, technical infrastructure, maintenance, and updates, etc. and in exchange charge a fee + get a percentage of the issued tokens. In this way, the success of the platform would itself be aligned with the producers and consumers who use it.
- One can imagine such a platform being used to fund not just content creators but startups as well, and in doing so becoming a kind of crowd funded venture capital firm.
History
Legend