Co-authors
Peter Yoon (@whitebitcoin8)
Andrew Kang (@adr_sk_)
This article is Episode 1 of Why Gno?, a series featuring a deep dive into the background and breakthroughs of Gno.land, the most performant smart contract platform powered by Gnolang, and Gnoswap, an innovative CLMM DEX aspiring to become the liquidity hub of Gno.land.
[Why Gno?]
Episode 1: Tracing the History of Crypto
Episode 2: Hello World, Meet Gno.land
TL;DR
- The control of the monetary system around fiat is monopolized by a centralized authority with violence, and its inflationary design forces dilution of value over time.
- Satoshi enabled decentralized storage and transfer of value with Bitcoin, and Vitalik pioneered trustless, autonomous applications built with smart contracts with Ethereum.
- Jae has optimized consensus (Tendermint), development (Cosmos SDK), and communications (IBC) of blockchains with Cosmos, and is now building a new scalable Layer 1 that achieves scarcity, programmability, and performance called Gno.land.
A System Built on Violence
“Absolute power corrupts absolutely”
-Lord Acton
To fully understand the problems that crypto is trying to solve, it is important to first realize why the monetary system, in its current form, is bound to fail. Since the inception of fiat, the control over the monetary policy has been monopolized by those with power that assert supremacy with violence.
Attempting to create or deliberately use counterfeit money comes with punishment in a physical form, most commonly with a sentence. At a larger scale, the power of a fiat currency stems from the military power of its issuing nation, hence the dominance of the US Dollar as the de facto base currency of the world. As an “end user” of a fiat currency, you are trusting its issuing nation to warrant and protect the rights it entails.
It is clear that the current monetary system centered around fiat money is built on violence and trust toward a powerful centralized authority. The fundamental flaw around this system is that the authority has the power to print money out of thin air, not only having immense influence over the economy, but allowing it to manipulate interest rates and inflation, or even impact the value of currencies traded against it.
This creates a wealth disparity that favors the few at the expense of the many, by concentrating power to those who are already well-positioned to take advantage of these actions, such as large corporations and financial institutions. Without a doubt, the human race was in need of a new kind of money. Before we decide on what’s our best shot at overthrowing the status quo, let’s first agree on what properties “sound money” should have.
What Makes Money, Money
After thousands of years of bartering, a term of direct trade of products as services, such as a fisherman trading away a fish for some wood from a lumberjack, humans soon discovered the need for a new method for exchanging value. The method, later called money, needed to have the following properties to be useful.
- Fungibility: Money should be interchangeable and uniform for liquidity; it should be easy to break down into smaller or larger denominations to represent value and for liquidity.
- Durability: Money should be built to last. A perishable good quickly loses value and becomes obsolete for future transactions.
- Portability: Money should be easy to carry around for transportation and exchange.
- Recognizability: Money should be easy to authenticate. Something that is easy to replicate leaves its end users exposed to counterfeit fraud.
- Scarcity: Undoubtedly the most important property of all, money needs to be scarce. The value of money comes from the difficulty of obtaining it. Money should require legitimate work to obtain it.
Throughout history, many substances that have partially satisfied the above have been used as money: leather, metal coins, gold, and fiat. However, none of these were able to fully embody all of the properties — at least that was until a new kind of money was introduced to the world.
A New Kind of Money
In 2008, a pseudonymous developer under the alias Satoshi Nakamoto proposed a technology to set a standard for a new monetary system — the Bitcoin Protocol. Built as a distributed ledger that runs and relies on cryptographic hash functions (or math, for simplicity), Bitcoin was the first censorship-resistant and decentralized asset that enabled transfers and proof of ownership without an intermediary.
Bitcoin’s approach was simple yet powerful: the network achieved consensus based on Proof of Work, a mechanism where nodes were challenged to a race to solve a math problem that require pure computation (work), and the first one to find the answer was rewarded with the right to verify the legitimacy of transactions in the next block, along with a reward electronic coins — a maneuver we call mining. To prevent forgery of past transaction records, each new block is linked to its previous one by including its hash value to prevent forgery, forming a chain-like structure, hence the name blockchain.
The technical breakthroughs of Bitcoin placed it as the first of its kind to satisfy all five properties of sound money.
- Fungibility: 1 BTC = 1 BTC. Bitcoins can also be broken down into smaller units called SATs that can represent as little as 1/100,000,000 of a BTC.
- Durability: Bitcoins are simply chunks of data, meaning that they live forever as long as there’s electricity.
- Portability: Bitcoins can be transacted wherever there is internet. All you need is a phone or any online device to carry Bitcoin around.
- Recognizability: Distinguishing fake Bitcoins from real ones is a rather simple task. There are countless software including wallets and explorers that can verify the authenticity of the Bitcoin in question.
- Scarcity: Bitcoin has a fixed supply of 21,000,000 BTC, period. This is an immutable rule that is set in stone in Bitcoin Software.
Bitcoin has not only paved the way for mankind to explore a new asset class that is poised to be the most viable solution in replacing the existing monetary system, but has also given a glimpse of the infinite potential that decentralized technologies possess.
The Era of Decentralized Applications
Fast forward a few years, a young Russian Programmer, Vitalik Buterin, was inspired by Bitcoin’s dogma and saw the need to expand Bitcoin’s initiatives to not only decentralize money but the very financial system itself. What was built as a result was Ethereum, a blockchain for building decentralized applications based on Smart Contracts, a term for programs that are automatically executed as coded.
Cypherpunks, builders, and speculators rushed in to take part in Ethereum’s challenge of building a new financial infrastructure, ultimately giving birth to thousands of decentralized applications (dapps), most of which were powered by their unique currencies in the form of tokens, a term for cryptocurrencies that exist as smart contracts in a blockchain.
Soon, the Ethereum network was flourishing with approaches to financial activities that were never seen before — Initial Coin Offerings (ICOs), decentralized exchanges (DEXs), investment decentralized autonomous organizations (DAOs), and much more. This new sector was named decentralized finance (DeFi).
Ironically, the vibrant ecosystem of Ethereum uncovered its major weak point that has still yet to be addressed: scalability. Soon, users were fighting over the limited block space of Ethereum which could only handle 15 transactions per second (TPS). As a result, the gas fees, a term for transaction costs paid by the user, spiked up to hundreds of dollars, essentially making it inaccessible for retail, leaving them questioning if a financial infrastructure with unaffordable transaction costs is sustainable.
Many blockchains have jumped in to challenge Ethereum’s dominance with unique value propositions, but have failed for the following reasons.
- The incompleteness of the programming language.
- Network resource depletion due to bad memory management.
- Poor developer tooling & experience.
- Lack of liquidity or reliance on centralized entities due to lack of a communication method with other blockchains.
- Slow time to finality, meaning that it takes a long time for a transaction to reach an immutable state.
In 2014, a visionary developer named Jae Kwon launched Cosmos, a project set out to solve the most difficult problems that the blockchain industry was facing.
Enter the Internet of Blockchains
Jae quickly realized that three major components of blockchains needed to be solved for scalability and mass adoption: Consensus, Development, and Communication.
Tendermint marked the beginning of Cosmos as a consensus protocol that combined Delegated Proof of Stake (DPoS) and Practical Byzantine Fault Tolerance (PBFT), scaling the network it powers to support up to thousands of TPS and a guarantee of 1-block finality of all transactions. Tendermint’s powerful approach attracted many blockchains to build upon it, boasting a combined market cap of $45b+. Without a doubt, Tendermint has positioned itself as the gold standard in blockchain consensus.
The Cosmos-SDK gave developers the necessary tools and rich libraries to create blockchains with. Pre-Cosmos, developers had to either build all components of the blockchain from scratch or fork the Bitcoin code which was severely limited in terms of functionality it offered. The Cosmos-SDK has made spinning up a blockchain as simple as writing a smart contract, saving hundreds, if not thousands of hours and valuable resources for developers.
The final piece of the Cosmos stack was the Inter-Blockchain Communication Protocol (IBC), an interoperability protocol for connecting arbitrary blockchains. IBC allowed for blockchains built with Tendermint and the Cosmos-SDK to communicate with each other to transfer data, most commonly for sending and receiving tokens, which enabled cross-chain movements of liquidity, providing a way for nascent blockchains to bootstrap its ecosystem.
Thanks to the Cosmos stack, its ecosystem is thriving with performant blockchains seamlessly connected to each other. However, one final task, arguably the most challenging one yet, has remained to be addressed — building a sustainable and scalable layer 1 blockchain where developers can easily onboard and reliably build large-scale dapps.
A Flawlessly Built, Future-Proof Blockchain
Let’s take a step back and remind ourselves what makes the three largest blockchain ecosystems, Bitcoin, Ethereum, and Cosmos, valuable. Bitcoin’s value comes from its Scarcity, Ethereum’s from programmability, and Cosmos’ from performance and interoperability.
After years of rigorous research and development, Jae has designed the foundations for a new blockchain that fully incorporates each one of these values into a single system that we call Gno.land.
- Scarcity: Gno.land runs on a unique consensus mechanism called Proof of Contribution (PoC), a decentralized variant of Proof of Authority (PoA). Unlike tokens of Proof of Stake (PoS) blockchains that suffer from high inflation to keep a minimum staking ratio, GNOT tokens are designed to be deflationary, leaving them attractive to hold and use in DeFi.
- Programmability: Smart contracts on Gno.land are written in a new programming language called Gnolang, an interpreted version of the popular Golang. Gnolang is 99% identical to Golang, meaning that Web2 developers can seamlessly onboard, making Gno.land the go-to ecosystem for starting a career in Web3. The efficient, deterministic, and concurrent properties of Gnolang provide developers with a secure and friendly environment for writing succinct, scalable applications.
- Performance: Gno.land is powered by Tendermint2, a fork of Tendermint that emphasizes simplicity and performance rather than the scope of functionalities. Tendermint2’s approach is expected to enhance the scalability and security of Tendermint.
- Interoperability: Gno.land will port the IBC module of Cosmos-SDK to fully leverage the exposure to the interchain ecosystem. In the future, Gno.land plans to introduce IBC2, a new approach to scalable communication between blockchains (specs WIP).
What we’ve uncovered in this article is merely the tip of the iceberg. Gno.land is designed to be a blockchain that will suggest a viable solution to the most difficult problems that mankind is facing including freedom of speech, lack of transparency, sustainability of open-source projects, and much more.
We hope this article serves as a gentle push down the rabbit hole that we’ll be exploring over the next months.
We’ll see you in the next article. Stay tuned.
