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August 9, 2022
DAOs, Modular Blockchain, Triple Halvening… let’s unpack
Where are we at with DAOs…
Tuned into a lunch sesh on Upstream with some insights on DAOs and future use cases. Highlighting some points in bullet form below.
But first…
What is a DAO? It stands for Decentralized Autonomous Organization, an organization with computer programed rules that is controlled completely by community members. It’s basically programmable money, programmed to do different things.
Back to the bullet points…
-DAOs could one day replace companies
-Still waiting for DAOs to have their moment, waiting for one that will actually make people money and obtain enough staying power. Teams with strong marketing, influential members will win
-With over 380 DAO tools, there are very few tools that enable DAOs to do what traditional companies can’t do already… one exception Coordinape, which helps to incentivize and reward contributors through community feedback. Overtime this feedback provides valuable insights as for what kind of work to prioritize and what the community finds most valuable. Essentially it would be like a company rewarding its top performer every quarter with a spot bonus based on other employee feedback.
-DAOs tools have the potential to help DAOs outperform traditional companies by removing the excess and unneeded systems but also provide a net new functionality that would enable DAOs to do new things that traditional companies can’t do
Pallet Board good rec for people looking for jobs from web2 to web3 Check it out here… https://awesomepeople.pallet.com/talent/welcome
Onto Modular Blockchains…
Think… scalability… blockchain infrastructure. How we are going to do it?
But first…
What is a blockchain? There are two components to a block, a block header and it’s transaction data.
“Full nodes” parse through the block’s data to make sure transactions are valid. There are different layers with different functionalities on the blockchain. These include:
Execution: users interacting with transactions deploying smart contracts and transferring assets
Settlement: the execution of rollups that are verified and disputes that are resolved
Consensus: the ordering and finality through a network of full nodes
Data Availability: data that is required to verify that a validated state transition is published and stored on a layer
Now…
What are its limitations? Many refer to Blockchain Trilemma to answer this question
Essentially, blockchain can only provide two of the three benefits of decentralization, security, and scalability at a time. Because security is the main tenet of blockchain, typically its either scalability or decentralization that takes the hit.
Through modular architecture (both execution and data available), however, it is becoming possible for blockchain to solve the scalability portion of the Trilemma.
Vitalik believes that both the pools of block production and verification need to remain decentralized which can be achieved by splitting blockchain nodes into full nodes (verify transactions) and light clients (download block headers). This splitting of blockchain can apply to block validation and block availability. Light clients can use the fault proofs generated by full nodes for their transaction validation. This allows the light clients to operate nearly identical to full nodes. Essentially centralizing computation while keeping validation decentralized.
Though erasure coding, the data availability problem might be solved. Since light clients don’t download the entire block, just the header, data availability sampling can be performed to allow light clients to probabilistically determine whether the entirety of a block has been published through randomly sampling small portions of the block.
Since data availability remains the more limiting factor, Celestia, the first modular blockchain network, focuses solely on providing a data availability layer for transaction ordering and data availability guarantees through data availability sampling. In terms of blockchain stack fuellabs is working on parallelized VM on the execution layer and Optimisim PBC is working on sharding, incentivized verification and decentralized sequencer.
Post the merge, ETH roadmap includes plans for a unified settlement and data availability layer. Danksharding transforms L1 data shares into data availability engine allowing L2 rollups to implement low-cost, high- throughput transactions. Additionally increased usage and prevalence of layer 2 solutions unlocks layer 3: fractal scaling, which allows application-specific rollups to be deployed on layer 2s unlocking customizability and interoperability for developers.
Web infrastructure evolved from on premise servers to cloud servers. In a similar way, decentralized web is evolving from monolithic blockchains and siloed consensus layers to modular, application specific chains with shared consensus layers ultimately benefiting the users.
https://volt.capital/blog/modular-blockchains
WTF is Triple Halvening?
Halvening refers to the bitcoin algorithm that automatically reduces the amount of bitcoin rewarded to miners by half. It reduces the issuance rate of BTC over time and creates deflationary pressure. It also reduces the BTC sell pressure from miners selling their BTC rewards. Historically Bitcoin halving events have correlated directly with the start of the crypto bull cycles.
ETH issued under PoW works different because instead of algorithmically reducing the miner ETH read, its done thru software updates agreed by the community. About 6.5K blocks are mined per day, 13K eth issued, increasing about 4.3% per year. The issuance rate is high to incentivize miners… with more miners, the network is more secure because its more expensive to try the 51% attack.
PoS switches from a miner to validator. It is more secure and it reduces energy consumption by 99.5%. Instead of using special hardware and energy, validators use game theory involving capital and punishment.
Part 1: Exponential reduction in issuance, since validators consume less energy to run, network can pay smaller block rewards to incentivize people to run them -ETH will drop from 4.3% to .4% post merge -10x reduction in daily sell pressure on ETH miners meaning sell pressure causing price to goes up -this change signals a transition from a mine and dump economy to a stake and re-stake economy
Part 2: EIP-1559, burn after sending, its a software update to ETH that burns a portion of each transaction’s fees
Part 3: Lock up period, Staking ETH with a validator and helping secure the network you will be given block rewards **right now 23,263,160,847 worth of ETH is being staked which is 10% of the entire market cap of ETH
ETH staking withdrawals will not be available right away which locks up a large supply of ETH that cannot be sold
Overall this means: Ether will be an exceptionally more scarce asset to hold post merge
https://twitter.com/Montana_Wong/status/1556706440726716416
Also Electric Capital just released this interesting report…
https://medium.com/electric-capital/electric-capital-developer-report-2021-f37874efea6d
Big take aways:
-more developers joined web3 in 2021 than any year in history (34K+)
-Polkadot, Solana, NEAR, BSC, Avalanche, and Terra are growing faster than ETH did at the same point in its history
-2.5K + developers on DeFi projects
-What are they working on… community (decentralized applications, documentation, tooling, wallets) + Protocols (core protocol only)
-ecosystems live in other ecosystems ie Terra lives inside cosmos (Terra community: anchor, mirror, terra swap, pylon/ Terra Protocol: core, terra.js (javascript), terra.py (python))
-eth has some of the best retention in Web3 (1 out of 5 coming into Web3 works on Eth)
** Study did not deep dive into NFTs DAOs and Gaming since metrics alone can be misleading
So putting wrapping this all together… the space is evolving and more people are involved than ever before.
Will leave you with this…
So you want to learn to code do you. Here are some resources from friends I’ve asked in the space….
Youtube is your friend, it will teach you things you didn’t even think about
Udemy
Code Academy
General Assembly
Topics: solidity, rust, SQL, Querying data, API/web scraping
Learn a language and build it into a smart contract!
Till next time, keep on keeping it real as always.
August 9, 2022
DAOs, Modular Blockchain, Triple Halvening… let’s unpack
Where are we at with DAOs…
Tuned into a lunch sesh on Upstream with some insights on DAOs and future use cases. Highlighting some points in bullet form below.
But first…
What is a DAO? It stands for Decentralized Autonomous Organization, an organization with computer programed rules that is controlled completely by community members. It’s basically programmable money, programmed to do different things.
Back to the bullet points…
-DAOs could one day replace companies
-Still waiting for DAOs to have their moment, waiting for one that will actually make people money and obtain enough staying power. Teams with strong marketing, influential members will win
-With over 380 DAO tools, there are very few tools that enable DAOs to do what traditional companies can’t do already… one exception Coordinape, which helps to incentivize and reward contributors through community feedback. Overtime this feedback provides valuable insights as for what kind of work to prioritize and what the community finds most valuable. Essentially it would be like a company rewarding its top performer every quarter with a spot bonus based on other employee feedback.
-DAOs tools have the potential to help DAOs outperform traditional companies by removing the excess and unneeded systems but also provide a net new functionality that would enable DAOs to do new things that traditional companies can’t do
Pallet Board good rec for people looking for jobs from web2 to web3 Check it out here… https://awesomepeople.pallet.com/talent/welcome
Onto Modular Blockchains…
Think… scalability… blockchain infrastructure. How we are going to do it?
But first…
What is a blockchain? There are two components to a block, a block header and it’s transaction data.
“Full nodes” parse through the block’s data to make sure transactions are valid. There are different layers with different functionalities on the blockchain. These include:
Execution: users interacting with transactions deploying smart contracts and transferring assets
Settlement: the execution of rollups that are verified and disputes that are resolved
Consensus: the ordering and finality through a network of full nodes
Data Availability: data that is required to verify that a validated state transition is published and stored on a layer
Now…
What are its limitations? Many refer to Blockchain Trilemma to answer this question
Essentially, blockchain can only provide two of the three benefits of decentralization, security, and scalability at a time. Because security is the main tenet of blockchain, typically its either scalability or decentralization that takes the hit.
Through modular architecture (both execution and data available), however, it is becoming possible for blockchain to solve the scalability portion of the Trilemma.
Vitalik believes that both the pools of block production and verification need to remain decentralized which can be achieved by splitting blockchain nodes into full nodes (verify transactions) and light clients (download block headers). This splitting of blockchain can apply to block validation and block availability. Light clients can use the fault proofs generated by full nodes for their transaction validation. This allows the light clients to operate nearly identical to full nodes. Essentially centralizing computation while keeping validation decentralized.
Though erasure coding, the data availability problem might be solved. Since light clients don’t download the entire block, just the header, data availability sampling can be performed to allow light clients to probabilistically determine whether the entirety of a block has been published through randomly sampling small portions of the block.
Since data availability remains the more limiting factor, Celestia, the first modular blockchain network, focuses solely on providing a data availability layer for transaction ordering and data availability guarantees through data availability sampling. In terms of blockchain stack fuellabs is working on parallelized VM on the execution layer and Optimisim PBC is working on sharding, incentivized verification and decentralized sequencer.
Post the merge, ETH roadmap includes plans for a unified settlement and data availability layer. Danksharding transforms L1 data shares into data availability engine allowing L2 rollups to implement low-cost, high- throughput transactions. Additionally increased usage and prevalence of layer 2 solutions unlocks layer 3: fractal scaling, which allows application-specific rollups to be deployed on layer 2s unlocking customizability and interoperability for developers.
Web infrastructure evolved from on premise servers to cloud servers. In a similar way, decentralized web is evolving from monolithic blockchains and siloed consensus layers to modular, application specific chains with shared consensus layers ultimately benefiting the users.
https://volt.capital/blog/modular-blockchains
WTF is Triple Halvening?
Halvening refers to the bitcoin algorithm that automatically reduces the amount of bitcoin rewarded to miners by half. It reduces the issuance rate of BTC over time and creates deflationary pressure. It also reduces the BTC sell pressure from miners selling their BTC rewards. Historically Bitcoin halving events have correlated directly with the start of the crypto bull cycles.
ETH issued under PoW works different because instead of algorithmically reducing the miner ETH read, its done thru software updates agreed by the community. About 6.5K blocks are mined per day, 13K eth issued, increasing about 4.3% per year. The issuance rate is high to incentivize miners… with more miners, the network is more secure because its more expensive to try the 51% attack.
PoS switches from a miner to validator. It is more secure and it reduces energy consumption by 99.5%. Instead of using special hardware and energy, validators use game theory involving capital and punishment.
Part 1: Exponential reduction in issuance, since validators consume less energy to run, network can pay smaller block rewards to incentivize people to run them -ETH will drop from 4.3% to .4% post merge -10x reduction in daily sell pressure on ETH miners meaning sell pressure causing price to goes up -this change signals a transition from a mine and dump economy to a stake and re-stake economy
Part 2: EIP-1559, burn after sending, its a software update to ETH that burns a portion of each transaction’s fees
Part 3: Lock up period, Staking ETH with a validator and helping secure the network you will be given block rewards **right now 23,263,160,847 worth of ETH is being staked which is 10% of the entire market cap of ETH
ETH staking withdrawals will not be available right away which locks up a large supply of ETH that cannot be sold
Overall this means: Ether will be an exceptionally more scarce asset to hold post merge
https://twitter.com/Montana_Wong/status/1556706440726716416
Also Electric Capital just released this interesting report…
https://medium.com/electric-capital/electric-capital-developer-report-2021-f37874efea6d
Big take aways:
-more developers joined web3 in 2021 than any year in history (34K+)
-Polkadot, Solana, NEAR, BSC, Avalanche, and Terra are growing faster than ETH did at the same point in its history
-2.5K + developers on DeFi projects
-What are they working on… community (decentralized applications, documentation, tooling, wallets) + Protocols (core protocol only)
-ecosystems live in other ecosystems ie Terra lives inside cosmos (Terra community: anchor, mirror, terra swap, pylon/ Terra Protocol: core, terra.js (javascript), terra.py (python))
-eth has some of the best retention in Web3 (1 out of 5 coming into Web3 works on Eth)
** Study did not deep dive into NFTs DAOs and Gaming since metrics alone can be misleading
So putting wrapping this all together… the space is evolving and more people are involved than ever before.
Will leave you with this…
So you want to learn to code do you. Here are some resources from friends I’ve asked in the space….
Youtube is your friend, it will teach you things you didn’t even think about
Udemy
Code Academy
General Assembly
Topics: solidity, rust, SQL, Querying data, API/web scraping
Learn a language and build it into a smart contract!
Till next time, keep on keeping it real as always.
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