Nothing is Decentralized... and it Doesn't Matter Anyways

These slides were presented at the inaugural Crypto Springs conference on October 3, 2018.

Transcript

1. Nothing is Decentralized And It Doesn’t Matter Anyways Meltem Demirors
2. DISCLOSURE 0x | $0X Civic | $CVC Golem | $GNT Ocean Protocol* | $*** Stellar | $XLM Aelf | $ELF DeepBrainChain | $DBC Groestlcoin | $GRS Qtum | $QTUM TenX | $TENX Aeon | $AEON Digibyte | $GBD Litecoin | $LTC Reddcoin | $REDD Tezos | $XTZ Augur | $REP Dragonchain | $DRGN Lunyr | $LUN Request | $REQ Unikoin Gold | $UKG Basic Attention | $BAT Elastic | $XEL Maidsafe | $MAID Ripio Network | $RCN Verge| $XVG Bitcoin | $BTC Enjin | $ENJ MakerDAO | $MKR Ripple | $XRP Vertcoin | $VTC Bitcoin Cash | $BCC Ethereum | $ETH Mainframe | MFT RocketPool | $RPL Waves | $WAVES Cardano | $ADA Ethereum Classic | $ETC Metal | $MTL Salt Lending | $SALT ZCash | $ZEC Caspian | $*** Filecoin | $*** Monero | $XMR Stacks | $*** Handshake |$*** Cindicator | $CND Gas | $GAS Nimiq | $NET Status | $SNT Caspian|$*** I personally hold the below digital currencies and tokens in my portfolio (listed and updated on Medium): I am an investor in the below companies and funds, either via Athena or personally: 3.0 Capital* Chia Network Picks & Shovels Remy* Algorand Blockdaemon* Marble Messari Token Daily Vantage Point Casa Integral aka Summa Paycase / Shyft* TokenSoft Note: * indicates an I hold a compensated advisory role
3. MY VIEW OF THE WORLD
4. 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
5. GREED IS GOOD
6. 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%
7. THE NEXT BITCOIN, ETHEREUM, RIPPLE @Melt_Dem 7
8. WHAT INVESTORS AND ENTREPRENEURS WANT 8 @Melt_Dem
9. MATURITY IS A RELATIVE THING
10. 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
11. 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
12. 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
13. UNTANGLING DECENTRALIZATION
14. DECENTRALIZATION: WHAT DOES IT MEAN? @Melt_Dem 14
15. MAYBE THIS? @Melt_Dem 15
16. WHAT IT DOESN’T MEAN @Melt_Dem 16 • FAIRNESS • PRIVACY • SECURITY • SELF-SOVEREIGNTY • MORAL SUPERIORITY
17. 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
18. PAINFUL REALITIES
19. WE WORSHIP MONEY @Melt_Dem 19
20. MONEY TALKS, VALUES WALK @Melt_Dem 20 2013 2018 2014 2015 2016 2017 Source: Proprietary analysis using publicly available news sources.
21. 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.
22. INCENTIVES ARE EVERYTHING @Melt_Dem 22
23. AND… @Melt_Dem 23 SPECULATOR USER =
24. 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
25. THE STATE OF DECENTRALIZATION
26. Decentralization isn’t a myth... It just hasn’t been implemented properly yet
27. 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
28. 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
29. 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.
30. FINDING WAYS TO TEST “DECENTRALIZATION” @Melt_Dem 30
31. 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
32. Decentralize ALL THE THINGS @Melt_Dem