Focus on Fundamentals

Normally I don’t share these kind of “mainstream” overview articles, but this one is an exception. As the feature on this month’s cover of Fortune, this article does a truly excellent job of summarizing Bitcoin and Ethereum, as well as applications thereof. Great to read and great to share with friends who have been wanting to learn more!

A deeply thorough and truly excellent overview of the most important challenge facing blockchains today: scaling. Bitcoin, Ethereum, and every other blockchain project is working on increasing the capacity of these systems to accommodate many uses at humanity-scale. Scaling is the most important element to consider in evaluating any blockchain architecture. 

SegWit, the controversial upgrade to Bitcoin, went live on August 24th. Looking at the years of political fighting behind this change to the Bitcoin protocol highlights the main pitfall of distributed systems: achieving consensus. Miners are biased one way, developers another. This history contrasted against the upgrade process of other blockchain projects such as Ethereum also shows how important the alignment of community behind a project is to its success.

60% + of the hashing power that secures Bitcoin resides in China, primarily due to cheap electricity. In recent years, the Chinese government has forced these mining firms to register with the government. This centralization and vulnerability to a single government represents a big risk to Bitcoin.

As China’s large-scale bitcoin mines partner up with the government, experts are beginning to question how secure the Bitcoin network is. 

An excellent overview of the Proof of Stake consensus mechanism on the Ethereum wiki. Please note, Proof of Stake isn’t proprietary to Ethereum; other projects such as Tezos use this consensus mechanism as well. As many blockchain technologies will trust PoS to secure $ billions (or potentially $ trillions), its security is absolutely paramount. 

Tokenization of traditional assets in the coming years will have an impact on liquidity across multiple asset classes. Near-perfect liquidity for traditional assets on a global scale is a revolution in its own right; add in near-infinite divisibility and no need for regulatory frameworks in developing markets (or conversely, the ability to circumvent onerous regulations in developed markets) and the way traditional assets are traded is totally upended. Even further, the exciting stuff will come from non-traditional tokens that are built and evolve on the blockchain from day one!

In response to excitement about tokenizing traditional assets, Preston Byrne articulates a contrarian argument that tokens fail when applied to traditional assets because those assets are governed by legal structures, not code. It remains to be seen how courts and regulators will respond to tokens that are said to represent assets that have a basis in law. 

An overview of one of the most exciting dApp (decentralized application) projects currently being built. KyberNetwork is a decentralized exchange which will provide excellent liquidity for millions of tokens and allow individuals to exchange with each other in a fast and trustless manner. As tokens continue to proliferate, exchanges like this one will become increasingly important to the blockchain ecosystem.

A deep-dive into one of the most disruptive aspects of crypto: the fact that it takes power away from the state and gives it to the people. This decentralizing property of cryptos follows a broader arc of technology that oscillates between centralization and decentralization over time (e.g. church monopoly on knowledge -> printing press, mainframes -> PCs).

Cryptoeconomics is so important because it is about constructing systems that are actually much harder to destroy than they are to build, which could ultimately be much better for society.