Notes of Mamoto Satoshi: Ten Disasters in History That Couldn’t Kill Ethereum
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Top 10 Disasters in History That Couldn’t Kill Ethereum
One of Hercules' most famous battles was with the great Hydra. According to Greek mythology, the Hydra is unique because when it is attacked and its head is severed, two more grow back. The more pain and problems the Hydra encounters, the more resilient it becomes. This regeneration feature is a feature called "antifragility".
The Ethereum public chain is the modern Hydra. Ethereum has only been around for about 5 years, but has seen many battles and severed heads in the short time it has existed. From a technical point of view, it is designed to be anti-fragile. Ethereum will be its own self-sustaining and head-regenerating organism, both technically and socially. The following are the ten "beheaded" regenerations of Ethereum:
Ethereum Foundation's 'Co-Founder' Leaves, But Network Development Still Grows
In June 2014, before Ethereum launched, Charles Hoskinson and Vitalik Buterin disagreed on the direction of the Ethereum Foundation. Charles Hoskinson hopes to accept venture capital funding and establish a formal governance structure. Vitalik wants to stay away from venture capital and instead run the Ethereum Foundation as a non-profit entity. One of the first civil unrest faced by Ethereum resulted in Charles leaving the Ethereum Foundation. An entrenched community gradually replaced Charles Hoskinson, and the Ethereum Foundation has since become an incredible supporter of the Ethereum ecosystem.
Ethereum Foundation Has Centralization Risks, But Consensys' Sprouts Grow
The Ethereum Foundation has been critical to Ethereum's success, even helping to spearhead the project, but it was a centralized force in its early days. Centralization is essentially the antithesis of Ethereum, and this centralization has led to numerous attacks from the Bitcoin community claiming that Ethereum is a “centralization hoax.” In October 2014, Ethereum co-founder Joseph Lubin gave birth to Consensys. The organization currently operates in more than 30 countries around the world, helping everyone from developers to NGOs to Global 2000 companies launch real-world blockchain solutions based on Ethereum technology.
Ethereum (ETH) Unstable But MakerDAO Emerges
While Bitcoin's original vision was to serve as person-to-person electronic cash, Ethereum's vision goes far beyond that and it still hopes to fulfill that role. The problem with the likes of Bitcoin (BTC) and Ethereum (ETH) is that they are highly volatile assets. This volatility makes it difficult to use for payments as people need stable currencies to buy or sell goods and services. In 2015, MakerDAO promised to "build a better currency". They created the stablecoin Dai. Maker, one of the first decentralized autonomous organizations (DAOs) built on Ethereum, is currently forming the backbone of the new open financial system.
The DAO is destroyed, but the evolving DAO emerges
In May 2016, some members of the Ethereum community announced the creation of The DAO. After the fundraising period, the DAO was valued at more than $250 million. It's a novel idea, essentially the world's first decentralized venture capital firm. In June 2016, The DAO (without proper auditing) was hacked and all funds were drained. This was a critical wound for Ethereum, but the community came together to weather the pain, and the anti-fragile Ethereum now runs many successful DAOs, each learning from the mistakes of The DAO Hack . These include but are not limited to MakerDAO, DigixDAO, MolochDAO, MetaCartel, KyberDAO, and the soon to be revived DAO (called LAO)
Parity is killed, but Gnosis is built
Parity was one of the first organizations to build infrastructure on Ethereum. They created Parity Wallet and Parity Ethereum Client. In July 2017, a vulnerability was discovered on the Parity Multisig Wallet, an attacker could steal more than 150,000 ETH (approx. Losses, including 300,000 ETH from the Web3 Foundation (Parity) team. Fortunately, there are many other good options for securing value on Ethereum. Most notable is the Gnosis team, who not only have one of the best Ethereum multi-signature wallets, but are leading the future wave of smart wallets.
EtherDelta Fails, But DEX Protocol Thrives
The first meaningful use stands for EtherDelta During the frenzy of 2017, EtherDelta served many investors. In 2018, the U.S. Securities and Exchange Commission (SEC) forced founder Zachary Coburn to shut down the exchange, charging him with violating U.S. securities laws. But Hydra did not back down and gave birth to Uniswap, a fully decentralized exchange that is not affected by the problems faced by EtherDelta. In addition to Uniswap, there are more than 20 DEXs built on Ethereum, including With complete protocols like Network and 0x Protocol, the DEX ecosystem will continue to develop and mature.
CryptoKitties (MysteryKitties) Blocks But Scalability Blooms
The first decentralized application (DAPP) to gain widespread public attention was CryptoKitties. These cats are provably rare digital collectibles that can be bred and have unique characteristics. During a brief peak, someone paid more than $170,000 for a cat. By December 4, 2017, CryptoKitties mania peaked and clogged Ethereum due to transaction volume. The Ethereum community was already working on scalability solutions, but this pushed many teams to hyperdrive. Ethereum now has many second-layer solutions through implementations such as Rollups, SKALE Architecture, Connext Network, Counterfactual, Raiden Network, Funfair, Offchain Labs, and multiple Plasms. This does not include the gas limit of the first layer, sharding, etc.
ICO boom and bust but open finance takes shape
ICOs were a revolutionary way of raising capital and, like many revolutionary advances, caused a huge speculative bubble. The ICO boom of 2017 brought many people into the cryptocurrency space and then crashed out. This is the first time Ethereum has proven itself to be a decentralized and censorship-resistant platform, but there are more revolutionary events to come. Open Finance has been brewing in the context of Ethereum, but this is certainly the next wave in the Ethereum ecosystem.
Synthetix under attack, but oracles mature
Synthetix is a decentralized synthetic asset system. It allows users to stake value and in return, generate a synthetic asset that tracks the price of real-world assets such as Bitcoin, gold, cryptoassets, indices, and more. In June 2019, the Synthetix oracle was attacked, resulting in a loss of 37 million Synthetix Ether. After evaluating most of the oracles in the market, Synthetix decided to partner with Chainlink. Chainlink is also famous for various partnerships, most importantly their collaboration with Google to connect BigQuery to Ethereum.
Parity fades away, but Ethereum 2.0 will become popular
Ethereum, the antifragile Hydra will undoubtedly face more battles in the coming years, but it will continue to regenerate its wounds, each time stronger.
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Network Effects in the World of Decentralized Finance
A very good Defi ecological map may not necessarily introduce the network effect of Defi very convincingly, but the ecological explanation is very good.
Ethereum is currently innovating at scale around open financial applications, well beyond the overhyped and flawed promises of ICOs. In this article, we explore and map out this exciting ecosystem and how each built application adds to the rest of the ecosystem.
Where does it start — DAI
The value of Ethereum itself is highly volatile, while DAI provides stability to the ecosystem.
Financial operations through DAI
Spend/Take Profit - (send transaction)
Borrow/Lend - (Compound, MakerDao)
Exchanges - (Uniswap, Kyber)
Interest - (Compound, PoolTogether)
Collateral - (MakerDao)
Savings - (Compound, Dharma)
Transactions - (Kyber, OasisDex, IDEX)
Leveraged Trading - (dy/dx, Synthetix)
As the cryptocurrency user experience improves, we're starting to see applications called "smart contract wallets" that offer incredible power to your funds while remaining the same or better than standard wallets security. For example, InstaDapp lets you manage MakerDao loans, Compound loans/borrows, and Uniswap pools all in the same layout, often compressed into 1 step, not multiple.
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Economic Applications of Ethereum and Bitcoin
This is an article that belittles Bitcoin and exalts Ethereum. You can still take a look at some of the shortcomings of Bitcoin. Although it may be a bit subjective, you have to accept some opinions.
It has also become more of a cult than a revolutionary movement, with Bitcoiners expecting the world to change its business processes and switch to a new cryptocurrency, while blatantly ignoring some important facts.
Bitcoin can only be used as a medium of exchange. A unit of currency used for transactions of services and goods between people.
Due to Bitcoin's structural design and the limitations of its second-layer scaling solutions, it will actually fail as a currency.
It cannot run any automated programs that can perform some kind of business/financial logic.
Thought leaders keep changing the story they tell, and the grand concept of Bitcoin as a store of value or "digital gold 2.0" ends in catastrophic failure.
A store of value is a dead end because it cannot really help the world economically nor bring about any significant changes due to the aforementioned limitations.
It's a great cypherpunk tool, but is it worth a $240 billion market cap? of course not.
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Atomex - a decentralized exchange based on atomic swap technology
Atomex co-founder Igor Matsak explained how atomic swaps can help resolve interoperability between blockchains. They are from the Baking Bad team in the Tezos community, and they are launching a DEX based on atomic swap technology.
Atomex is a hybrid DEX based on atomic swap technology and a multi-currency wallet. It allows funds to be stored locally while maintaining liquidity. Thus, users can exchange their funds for another cryptocurrency just like a normal blockchain transaction. It is done in a trustless, decentralized manner without sending the cryptocurrency to any third party.
Background of Atomex:
In the Tezos community we are also known as Baking Bad. Last year we released the "bake-bad.org" browser for bakers and delegates in Tezos, a better call.dev smart contract browser, and Python (Pytezos) and C# (Netezos) packages for Tezos nodes .
We start from scratch. Atomic swaps seem simple and powerful, but there are still very few implementations. Why? Making easy-to-use applications based on atomic swaps is tricky. Assuming market volatility, the specifics of various blockchains, exchange fees, etc., setting up an exchange that operates 24 hours is quite challenging. This construction process requires all of our experience, from the basics of cryptography to trading principles, covering all parts from head to toe.
For us, we decided to build a completely trustless service. Perhaps, there must be a place where mobility is met. Our solution is to make a hybrid model with two basic takeaways:
All on-chain exchange work is done independently on the client side;
Collect and match liquidity on Atomex servers.
When the two parties to the transaction meet on the server, their applications run themselves with the blockchain to execute the transaction. This model can not only bring sufficient liquidity to the market, but also provide a trustless and independent on-chain exchange process. As mentioned earlier, the swap is done through an atomic swap scheme.
Among today's competitors, AtomicDEX from Komodo is the most well-known project among them. Atomex is considered a high-quality implementation of the useful atomic swap technology, the distinguishing feature of which is usability. We don't care about similar competitors. In fact, we are likely to collaborate with other DeFi. I think this is the best strategy to compete with the centralized entities in the industry.
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How DeFi Can Eat PoS Security
Dragonfly Capital's new work tells the story of attackers using higher interest rates than Defi loans to attract funds, so as to achieve the effect of acquiring a large amount of network chips at a lower cost.
Now imagine that you are an attacker trying to compromise a PoS system. what will you do?
At a higher level, there are two avenues of attack: you can acquire all unstaked chips to reach 1/3 network chips, but this is difficult and expensive. The second way, you can convince the current stakers to stop staking and take over the network at a lower cost. The second approach sounds attractive in principle, but how do you get current network participants to stop staking? One easy way is to offer them more attractive benefits elsewhere.
In a PoS network, PoS only works when incentives are generated, and they will only be incentivized if the rewards are large enough. But if they can get better returns elsewhere, they'll put it where they get higher returns. Literally, on-chain lending markets compete directly with PoS staking, which means they compete directly with security protocols!
Tarun used simulations in his article https://docsend.com/view/697feid to conclude that PoS chains cannot safely use deflationary monetary policies. If PoS block rewards decrease over time, its long-term balance will be that almost all assets are used as loans, not staking.
If an attacker subsidizes the on-chain lending market and pays better long-term rates, that will shift stakeholders from staking to lending. Then, use this to acquire more equity shares at low cost.
As long as a PoS network is in an open ecosystem, any on-chain lending market can undermine its security by offering higher yields.
How to defend the PoS system?
There are two options to combat this: either force the on-chain lending market to cap its interest rates, or compete with the lending market by offering better returns to stakeholders.
The first strategy would be similar to implementing capital controls. While this is obviously not possible on the blockchain, even then, borrowers and lenders can establish transactions off-chain.
The only realistic way to defend against this is to use a flexible monetary policy to provide a competitive exchange rate if necessary. Any fixed inflationary regime is vulnerable to this attack because the attacker always knows exactly how much they need to subsidize the lending market and can swallow stakeholder chips.
