Decentralization is a Myth

Transcript

1. Nothing is Decentralized
   And It Doesn’t Matter Anyways
   Meltem Demirors
   

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2. MY VIEW OF THE WORLD
   

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3. THE BLOCKCHAIN APPLICATION STACK
   We are still in the early stages of defining, building, and implementing protocols, but this time,
   billions of dollars of value are at stake at the protocol layer instead of the application layer
   THE INTERNET
   Innovation in Information Transfer
   Network:
   ISPs
   Killer App: Email
   Application Universe:
   Streaming video and music, data sharing, cloud
   computing
   Protocols:
   TCP/IP, HTTP, DNS, FTP
   THE BLOCKCHAIN
   Innovation in Value Transfer
   Network:
   Miners, Full Nodes, Staking Pools
   Killer App: Bitcoin
   Application Universe:
   Smart contracts, distributed computing,
   tokenization
   Protocols:
   Bitcoin, Ethereum, IPFS, RSK, Blockstack
   @Melt_Dem 4
   

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4. GREED IS GOOD
   

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5. BLOCKCHAIN, MAKE ME MONEY!
   @Melt_Dem 6
   Source: CoinMetrics.io
   BITCOIN
   $0
   $11
   $22
   Jan-15 Jan-16 Jan-17 Jan-18
   Thousands
   ETHEREUM
   $0
   $600
   $1,200
   Aug-15 Aug-16 Aug-17
   RIPPLE
   $0
   $2
   $4
   Jan-15 Jan-16 Jan-17 Jan-18
   As of 8/2018
   Up 874%
   As of 8/2018
   Up 14,408%
   As of 8/2018
   Up 2,854%
   

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6. THE NEXT BITCOIN, ETHEREUM, RIPPLE
   @Melt_Dem 7
   

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7. WHAT INVESTORS AND ENTREPRENEURS WANT
   8
   @Melt_Dem
   

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8. MATURITY IS A RELATIVE THING
   

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9. SPECULATIVE FRENZIES ARE NATURAL
   @Melt_Dem 10
   EMERGENCE
   FRENZY
   SYNERGY
   MATURITY
   Big bang Crash Institutional
   Adjustment
   Next big bang
   Time
   Degree of Diffusion of the
   Technological Revolution
   INSTALLATION PERIOD DEPLOYMENT PERIOD
   Intense funding
   Decoupling of paper
   value and real value
   Rampant speculation
   Focus on production
   Recoupling of paper
   value and real value
   Decreasing growth
   opportunities
   Source: Carlota Perez, Technological Revolutions and Financial Capital
   

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10. WHERE WE ARE IN THE ADOPTION LIFECYCLE
    @Melt_Dem 11
    - 2!
    ARDENT
    - 1! 1! 2!
    "
    EARLY
    ADOPTERS
    INNOVATORS
    EARLY
    MAJORITY
    LATE
    MAJORITY
    NO-COINERS
    LAGGARDS
    Each successive wave of new applications changes the adoption curve and addressable market
    Source: Geoffrey Moore, Crossing the Chasm
    

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11. WHERE WE ARE IN THE CRYPTO LIFECYCLE
    CREATE DISTRIBUTE RETIRE
    OR REPLACE
    MANAGE
    t = 0 t = 1 t = 2 t = 3
    Speculation Utilization Specification
    A BRIEF ANALYSIS OF POPULAR CRYPTOASSETS (ASSET | LIFESPAN)
    BITCOIN | 9.7 YEARS | $111B
    ETHEREUM | 3.1 YEARS | $21B
    LITECOIN | 4.6 YEARS | $3B
    RIPPLE | 5.1 YEARS | $11B
    ZCASH | 1.9 YEARS | $590M
    TRON | 1.0 YEARS | $1.3B
    EOS | 1.2 YEARS | $4.6B
    Source: Market data retrieved Sept 7 2018 from OnChainFX, personal assessment of lifecycle state
    @Melt_Dem 12
    

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12. UNTANGLING DECENTRALIZATION
    

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13. DECENTRALIZATION: WHAT DOES IT MEAN?
    @Melt_Dem 14
    

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14. MAYBE THIS?
    @Melt_Dem 15
    

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15. WHAT IT DOESN’T MEAN
    @Melt_Dem 16
    • FAIRNESS
    • PRIVACY
    • SECURITY
    • SELF-SOVEREIGNTY
    • MORAL SUPERIORITY
    

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16. BUT PROBABLY THIS
    @Melt_Dem 17
    • CENSORSHIP RESISTANCE!!!
    ü Must make censorship economically difficult / impossible
    • CONTROL
    ü Inability of a single entity to change the system
    • EFFICIENCY
    ü Consensus can be achieved efficiently
    

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17. PAINFUL REALITIES
    

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18. WE WORSHIP MONEY
    @Melt_Dem 19
    

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19. MONEY TALKS, VALUES WALK
    @Melt_Dem 20
    2013 2018
    2014 2015 2016 2017
    Source: Proprietary analysis using publicly available news sources.
    

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20. INVESTORS ARE NOT SOCIAL ACTIVISTS
    @Melt_Dem 21
    Fiduciary Responsibility -
    A legal obligation of one party to act in the
    best interest of another. The obligated party
    is typically a fiduciary, that is, someone
    entrusted with the care of money.
    

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21. INCENTIVES ARE EVERYTHING
    @Melt_Dem 22
    

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22. AND…
    @Melt_Dem 23
    SPECULATOR USER
    =
    

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23. WHEN INVESTORS OWN ALL THE TOKENS…
    @Melt_Dem 24
    Early crypto
    funds and
    industry insiders
    1x
    10x
    50x
    Larger, later
    stage funds,
    family office,
    VC, and angels
    Final FOMO lap
    on the fundraise
    trail
    Exchange listing
    hype and FOMO,
    retail buying
    Early investors
    start dumping to
    recoup principal
    Puke up 75%+
    of value in first
    30 days Bag holders
    waiting for the
    moon that
    never comes
    time
    a race to the bottom
    

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24. THE STATE OF DECENTRALIZATION
    

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25. Decentralization isn’t a myth...
    It just hasn’t been implemented properly
    yet
    

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26. DECENTRALIZATION IS AN ESOTERIC GOAL
    APPLICATION
    NETWORK
    PROTOCOL
    Applications User adoption of
    various applications
    1000s 100S ? ?
    ”Ecosystem”
    Amount of capital
    dedicated to
    ecosystem?
    $B $B $M $M
    Network Cost
    Annual ”mining”
    reward or cost to
    maintain network
    ~$6B ~$1B $0 $0
    Nodes in Network # public nodes in
    network
    100K+
    various types
    10K ? 156
    Node Concentration
    # entities with
    >50% of network
    power in consensus
    4 3 2 1
    Distribution of Tokens % supply held by
    top 100 accounts
    19% 34% 81% 62%
    Development
    # client codebases
    that account for
    >90% of nodes
    1 2 1 1
    MEASURE METRIC
    Source: arewedecentralizedyet.com, OnChainFX, BitInfoCharts.com, Blockdaemon research, my back of the envelope math
    @Melt_Dem 27
    

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27. IMPLEMENTING DECENTRALIZATION
    Network:
    Miners, Full Nodes, Staking Pools
    Application Universe:
    Smart contracts, distributed computing,
    tokenization
    Protocols:
    Bitcoin, Ethereum, IPFS, RSK, Blockstack
    @Melt_Dem 28
    Governance Layer
    Voting, polling, community updates, forums, foundations
    • Not enough to implement
    decentralization at the
    technology layer
    • Have to add in a governance
    layer which links to the protocol,
    network, and application
    

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28. WE NEED GOVERNANCE LAYER TOOLS
    CREATE DISTRIBUTE RETIRE
    OR REPLACE
    MANAGE
    t = 0 t = 1 t = 2 t = 3
    Speculation Utilization Specification
    The market needs more robust
    infrastructure to enable assets
    that create true utility to be
    functional in a market economy
    @Melt_Dem 29
    Source:Proprietary analysis using publicly available news sources.
    

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29. FINDING WAYS TO TEST “DECENTRALIZATION”
    @Melt_Dem 30
    

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30. FINDING WAYS TO TEST “DECENTRALIZATION”
    @Melt_Dem 31
    • ATTACK PROTOCOLS - STRESS TEST TECHNOLOGY
    • ATTACK NETWORKS - STRESS TEST CONSENSUS / COMPUTE
    TOPOLOGY
    • ATTACK GOVERNANCE - STRESS TEST POLITICAL
    STRUCTURES
    

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31. Decentralize ALL THE THINGS
    @Melt_Dem
    

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