Relaynode SoCal: December 9, 2019 – Relaynode SoCal
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Paul Graham released another great essay this week titled the Lesson to Unlearn. This is a must read for any current college students, recent graduates, and startup founders (including crypto founders).
The premise is that the biggest problem with the way we are taught to learn is that we conflate learning with getting good grades. Because grades are the scoreboard we use to measure our “success” in learning, instead of optimizing for a mastery of the subject matter, we optimize for the grade itself. This leads to habits like hacking exams.
How many of us have zoned out during lectures, only to cram a few days before the final exam? If you’re good at cramming, you’re able to hone in on the material that is most “testable,” or practice tactics like predicting test questions from old exams.
You can’t blame students for behaving this way, because the system rewards them for this sort of behavior. However, when it comes to solving real world problems, life is not always so easily hacked.
I was drawn to this paragraph as it applies to crypto companies:
“Getting a good grade in a class on x is so different from learning a lot about x that you have to choose one or the other, and you can’t blame students if they choose grades. Everyone judges them by their grades — graduate programs, employers, scholarships, even their own parents.”
Change the variables and it becomes more clear:
“Getting a [high token price] is so different from [creating a useful product] that you have to choose one or the other, and you can’t blame founders if they choose a [high token price]. Everyone judges them by the [token’s performance] — [investors, twitter pundits, the media, exchanges, even their own employees].
This applies to non-crypto startups as well. We remain in a “peak startup” world, where founders hack growth in order to achieve the next round of funding — unit economics be damned! Founders are congratulated for securing their latest investment round more often than they are lauded for their companies real traction.
The ICO craze of 2017 was simply a Frankenstein version of this broader startup trend — teams were able to raise tens or hundreds of millions or even billions. As a result of the large funding rounds, expectations were high. But money alone can’t solve the hard technical problems crypto is after. So we ended up with a decemated retail market, a bad industry reputation, and a lot of frustration at the lack of progress relative to the money raised.
I wonder if the latest trend of companies experimenting with new token models to optimize for value capture / price appreciation is another version of this problem rearing its head.
Yes, we should experiment with new ways to bootstrap network growth, but when tokens like Kyber pump 40–80% on a tweet that they may adjust their token model, we have to ask if this is the right variable to optimize. (More on Kyber from Roy below).
As Graham states, “you might like to win by hacking bad tests…” but it is generally detrimental to society and probably our industry.
The Block launched a new framework for measuring traction in the DeFi ecosystem, their Open Finance Index. The core idea is that the common metric used to measure DeFi success — total value locked in DeFi or TVL- is insufficient in that it only measures collateral value, but fails to differentiate use cases and excludes measuring payments and DEX volume.
There has been a significant uptick in Bitcoin mining activity in North America. The reasons argued: more political clarity on the legality of $BTC mining in the US/Canada vs. China + abundant cheap sources of energy.
Vitalik Buterin, founder of the Ethereum Foundation released a great intro to quadratic voting, payments, and funding. The continued experimentation with governance including DAOs, prediction markets, and new voting mechanisms is an exciting area of the industry that I hope will usher in a new age for the allocation of public resources.
Meanwhile, it’s common to hear newcomers, who view cryptocurrencies purely through a technological lens, ask if Bitcoin is just the MySpace of crypto? Although Bitcoin continues to win based on “moneyness” alone, there is still a great deal of technological innovation on the network. Layer 2 solutions focused on bringing smart contracts, scalability, privacy, and self-sovereign identity to Bitcoin are all in the works.
Jason Choi kicked off a thoughtful discussion to redefine value accrual for cryptoassets. Great thread highlighting intrinsic value, the velocity problem, monetary premia, This response from Maple Leaf capital highlighted one or two challenges with Jason’s framework. Valuing cryptoassets (and defining taxonomy) is still a nascent and evolving field actively shaped by participants.
Probably the biggest post of the week came from Haseeb from Dragonfly and Tarun from Gauntlet evaluating how DeFi will impact the security of a PoS base chain. The key takeaways:
- Don’t use deflationary monetary policy in PoS as it will almost always end in the majority of assets being lent rather than staked.
- 2. Monetary policy in PoS must always be adaptive and able to respond to evolving market dynamics — otherwise security can be jeopardized.
Of course, claim #2, gets the $BTC maxis salivating as dynamic monetary policy feels a lot like existing central bank coins (aka fiat). The authors also note that Eth 2.0 is currently on the right track, and even include an allocation for “altruism” in their analysis (those who stake based on belief v. economic rationality).
Celo launched Baklava, its incentivized testnet.
Crypto twitter continues to pontificate on the moves that the CCP will make and how they will affect the status quo — in this case, the dominance of Chinese exchanges is questioned.
Written by Roy Learner Wave Financial, former Enterprise Ethereum Alliance
Kyber recently indicated that they are reconsidering their token model, with the market reacting favorably to potential changes. Currently, the KNC token has varying forms of utility:
- Reserve managers are required to pay 0.25% of a trade’s value (denominated in KNC)
- Fee sharing program, whereby aggregators receive 30% of the reserve fee on trades facilitated through them. When taking into account the fee sharing program, effectively only 0.175% of a trade’s value is burned (0.25% less 30% fee sharing)
- KNC will also eventually be used for governance when the protocol transitions into KyberDAO (TBD on timing). However, during the first on-chain vote in March 2019 only 60 voters participated (roughly 0.76% of the circulating supply)
- In July 2019, Kyber Swap introduced trading discounts for KNC holders (min. stake of 2000 KNC) ranging from 20–38% of the trading fees, similar to a discount token like BNB
The primary utility driver for KNC comes from reserve managers paying 0.25% of the value on each trade back to the Kyber Network, which is then burned, ultimately reducing total supply. As reserve managers earn revenue by taking a spread on each trade, the added cost of 0.25% for the reserve fee either eats into their profits or is passed on to the Taker (latter being more likely IMO).
There is a direct trade-off between increasing KNC’s reserve fee and providing best-execution against competing DEXs (and emerging aggregators like Totle, DEX and 1inch). Therefore, with the current token model, Kyber Network may not offer the best execution price on most trades, despite aggregating multiple sources of liquidity.
As Kyber gains traction (integrations and rising volume), it becomes easier to revisit token assumptions vs. bootstrapping liquidity, with the market clearly signalling that any changes to KNC will benefit token holders. We’ll have a better idea of specifics soon — will be keeping a close eye to see what Loi & team come up with.
New section this week, because I often spend more time listening to crypto podcasts than reading Medium posts (call me lazy). My top 2 this week:
- Castle Island Ventures partners, Nic Carter & Matthew Walsh interviewed former Head of OTC Trading at Circle, Dan Matuszewski, who took the gloves off and gave an unfiltered look into the history of crypto
- Relaynode’s very own, Jason Choi, discussed value capture in cryptonetworks with Jack Platt from Web3 Foundation on Jason’s podcast Blockcrunch.
If you’re company is hiring in LA, please submit new roles directly to marc@relaynode.io
Outside of LA, companies are hiring as well. If you’re non-technical, here are some great available roles for you.
Spring Labs — Senior Blockchain Engineer (Full Time)
Wave Financial — Consulting Associate (Full Time)
Ikigai — Analyst (Part Time)
WAX — Senior UX Designer (Full Time)
ARCA — Data Scientist / Quantitative Analyst (Full Time)
Blockchain Research Analyst (Full Time)
CryptoMondays LA(Free)
When: Monday, December 9th, 6–9P
Where: Upstairs Space 1212 Restaurant on 3rd Street Promenade in Santa Monica
GiveBitcoin Holiday Party(Free)
When: Tuesday, December 10th, 6–8P
Where: Eureka Building 1621 Alton Pkwy · Irvine, CA
Join us to celebrate the holidays, Bitcoin-style! We’ll have food, drinks, merriment, and a great info on giving the gift of sound money thanks to GiveBitcoin.io!
Crypto Traders Dinner Party(Free)
When: Tuesday, December 10th, 7–9P
Where: Panini Cafe Santa Monica, 312 Wilshire Blvd Santa Monica, CA 90401 United States
Network with other crypto traders of all levels
San Diego Blockchain Forum($25–80)
When: Thursday, December 12th, 5:30–9:30P
Where: UCSD Rady School of Management 9500 Gilman Drive San Diego, CA 92093
The SD Blockchain Forum joins legal leaders, academics, students, and technologists for discussions on blockchain and its global impact. Including presentations from leading legal experts from local universities.
What Can Blockchain Do for My Business?(Free)
When: Friday, December 13th, 6:45–8:45P
Where: EvoNexus 5151 California Ave., Suite 150 · Irvine, ca
We will discuss the opportunities and challenges involved in bringing your business to the blockchain.
Bitcoin Socratic Seminar(Free)
When: Tuesday, December 17th, 6–8P
Where: WeWork Fine Arts 811 W 7th St Los Angeles, CA 990017
Discussion topics from a variety of sources are collated by meetup members in the weeks preceding the events. To complete the meeting, members present open source projects, companies, research and other relevant materials.
January 15–17 — Crypto Finance Conference (Switzerland)
February 1–2 — Trust-less 2020 — Proof of Stake Validator Summit (Virtual)
February 7–10 — Satoshi Roundtable (TBD, North America)
February 10 — DAS: London (London)
February 19–21 — Stanford Blockchain Conference (Stanford University)
March 27–28 — Bitcoin2020 (San Francisco)
Nothing written in RelayNode SoCal is legal or investment advice and should not be taken as such. RelayNode SoCal does not make any guarantee or other promise as to any results that may be obtained from using our content. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence.
Published at Tue, 10 Dec 2019 00:45:33 +0000
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