Epicenter: What Bitcoin Was Meant to Be

Patrick Moynihan
Dec 3, 2020 · 10 min read
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The cryptocurrency revolution that began with Bitcoin has shown that the march into fiat currencies, centrally controlled by the financial elites, is not inexorable. Millions of people around the world have become reacquainted with the notion of sound money and are now captivated with the promise of secure, universal, low-cost transactions that don’t depend on banks or other intermediaries.

Unfortunately, the vision that Satoshi Nakamoto laid out in his white paper 12 years ago has never been fully realized, and actually seems to be receding as time moves on: rather than a spreading network of small, independent nodes, we see an increasing concentration of power in centralized exchanges and hardware-intensive server farms. Security concerns are steadily rising and so are the fees: almost no one today would consider using BTC for routine, day-to-day transactions.

The Epicenter economic ecosystem aims to address some basic cryptocurrency shortcomings in hopes of actually realizing Nakamoto’s original vision — in which large numbers of small transactions are processed efficiently, anonymously and securely on a decentralized network of lightweight nodes.

Bitcoin Genius

Bitcoin was a stroke of genius and we are all in debt to Nakamoto, whoever he, she or they might be. However, the Proof-of-Work function chosen for BTC made it clear pretty quickly that specialized hardware would provide a large (and steadily increasing) mining advantage over general purpose CPUs. So the increasing concentration of mining activity we see on the BTC network today was pretty much inevitable from the start.

Furthermore, the brave assertion in the white paper — that “storage should not be a problem” — does not appear to be particularly prescient. Storage has definitely become a problem and there is no easy solution in sight.

Most cryptocurrency enthusiasts are familiar with the characteristics of sound money, and were thrilled when Bitcoin first offered that prospect… but those same enthusiasts are not so thrilled now to find that, with the advent of “tainted coins,” BTC is no longer fungible. Tainted coins became possible — perhaps inevitable — because BTC’s transparent custody chain allows transaction participants to be identified as “questionable”, calling into question all the coins they touch. One must be continuously on guard against receiving tainted coins, to the extent that large parts of the network are no longer safe, herding the small holders into centralized exchanges where they do not have full control of their funds.

Rather than circulating as a currency, BTC has become digital gold, hoarded in vaults. It has richly rewarded hoarders and speculators of late… but as yet it has not done much for the common man. If Warren Buffett’s hypothetical visitor from another planet was bemused by gold, he would have to be equally mystified by Bitcoin, mined through computers at great cost and then locked away untouched, back on those same computers.

Epicenter: easing the transition to a post-fiat economy

The Epicenter ecosystem was designed to address the problems discussed above, and the bedrock of the system is the Epic Cash cryptocurrency (ticker symbol EPIC), launched on September 2, 2019. Epic Cash is modeled after Bitcoin, with a predetermined emission schedule and the same hard limit on the total coin supply… but with several major design improvements.

The Epicenter project was fortunate enough to inherit, not just from Bitcoin, but from several significant algorithm improvements that have occurred over the last 12 years. So to address the fungibility issue, Epic Cash leverages the Confidential Transactions (CT) and CoinJoin technologies developed by Back and Maxwell, to scramble the details — participants and amounts — of the transactions included in a block. All transactions are truly opaque, so the coins involved in those transactions cannot become tainted. While this mixing does not preclude the possibility of tracing transactions, it provides the same level of confidentiality expected in financial transactions today.

To address the size issue, the project makes use of the Mimblewimble protocol developed by Jedusor and Poelstra which drastically reduces the storage requirements, to about 1/10th of what is required for BTC or similar cryptocurrencies. Currently about 1.14 Gb in size, the Epic Cash chain rate-of-growth is designed and managed so that most home PCs will be able to accommodate it with ease, now and in the future. Epic is also one of only a handful of production blockchains that can run natively on low-end mobile devices.

And finally, to further encourage decentralized mining, Epic Cash employs a range of different Proof-of-Work schemes that can be hot-swapped on the fly:

  • RandomX is an algorithm that favors general purpose CPUs.
  • ProgPoW (Programmatic Proof-of-Work) runs most efficiently on GPUs.
  • CuckAToo31+ is a Proof-of-Work scheme that favors special purpose ASICs.
  • Further algorithms will target mobile phones, special-purpose TPU chips for AI, and embedded computing applications.

The mixture of these algorithms will evolve as the network grows to optimize inclusivity and balance that against cost efficiency. This design was also consciously chosen as a risk reduction mechanism for future-proofing against ASIC developments and the unpredictable impact of quantum computing on the horizon.

All of these technologies are described in greater detail in the Epic Cash white paper.

True P2P Transactions

The starting premise of the Epicenter project was that the original vision of Nakamoto’s white paper — for true peer-to-peer, frictionless transfers over a widely decentralized network of nodes — is still very much desirable and very much within our reach. In a decentralized network, stability increases as the network grows, so the scalable and lightweight Mimblewimble implementation in Epic Cash is designed to appeal to the widest possible network, based on its low storage requirements, Proof-of-Work flexibility and opaque, anonymous transactions.

BTC is an excellent store of value, possessing the longest and most resilient chain of any cryptocurrency. However, many have no desire to use BTC for everyday transactions and view it as a financial battery to hold long-term and monetize. Epic Cash has a hardcoded total supply of 21 million coins, an aggressive halving schedule, and will match the BTC emission rate in 2028. Epic Cash is a young crypto asset benefitting from advanced PoW technologies designed for affordable private transactions under the same economic principles that were proven by BTC.

Nonetheless, Epic Cash has one significant problem that it shares with BTC: its value, measured in fiat, fluctuates wildly. What causes this volatility — and many would point to the inflationary currents constantly at play in the fiat money supply — is immaterial. The fact that large-scale volatility exists at all makes the fluctuating cryptocurrency unsuitable for conducting business in the fiat world. Any dollar-denominated smart contract will obviously require reference to a dollar-denominated asset.

EUSD: essential infrastructure for today’s fiat reality

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To address this need, the EUSD stablecoin will launch under the Epicenter umbrella in Q1 2021. It is soft-pegged to the US dollar: one EUSD token is always instantly redeemable for $1 worth of Epic Cash. This will allow holders of Epic Cash to seamlessly convert it back and forth between EUSD for the sake of real world transactions, large or small.

The advantage of a stablecoin, anchored to fiat, was recognized a while ago and has led to a wide range of offerings. The largest of these, Tether, employs a straightforward protocol: users deposit dollars (or euros) to purchase Tether tokens, and Tether Limited acts as the custodian for the fiat funds. In theory, at least, there should always be 100% fiat backing for all Tether tokens, although several observers have questioned that claim and disputes are ongoing. According to recent findings, Tether is approximately 74% backed by actual cash, with the balance comprising “other assets” including related-party liabilities.¹ Even some proponents are uncomfortable with the fact that promised audits have not taken place. Holding billions of dollars in custodial accounts sounds like a great problem to have, but in fact it is a giant headache for those who are honest and a giant temptation for those who are not. While we presume the trustees of Tether Limited fall in with the former, we can expect that their custodial accounts will receive all sorts of unwanted attention, from thieves, governments, or some combination of the two.

The smart contracts supported by the Ethereum blockchain allowed stablecoins to slip the fiat tether and instead use digital assets as collateral in smart contracts that guarantee payment denominated in fiat. With smart contracts, the collateral is secured without the need for a trusted intermediary.

The danger of course is that, given the volatility that currently exists in the cryptocurrency world, the digital assets that serve as collateral could suddenly drop in value. If the drop is sharp enough, liquidation of the collateral as mandated in the smart contract could prove to be “too little too late,” causing the stablecoin to break its peg… and if confidence in the peg is lost, the stablecoin could quickly find itself unloved and unwanted.

The MakerDAO open-source project came up with an innovative solution to this problem by introducing a “governance token” (MKR) to guarantee the value of its stablecoin (DAI). Under the Maker Protocol, users can borrow Dai, soft-pegged to the dollar, and pledge Ether (or some other acceptable digital asset) as the collateral in a smart contract. If the value of the collateral falls below a threshold defined in the contract, an online auction is automatically triggered to liquidate the collateral… but if the collateral auction fails to raise enough to pay off the loan, an additional layer of protection kicks in through the MKR token. Holders of this token are effectively backing the value of the Dai. As long as the Dai remains stable, MKR holders profit from the interest generated by outstanding loans; but in the event of a failed collateral auction, MKR holders are diluted in order to pay off the outstanding balance.²

Epicenter Triumvirate: Blue Chip Digital Assets

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The Epicenter ecosystem has adopted and modified this “three-coin” approach in order to address the problems that have prevented most cryptocurrencies from operating as true currencies:

  • EPIC — Epic Cash is a blockchain-based cryptocurrency that can be mined at home — and is designed for self-custody; encourages a wide network of small nodes.
  • EUSD — a stablecoin that provides Epic Cash holders with easy access to fiat. Merchants are incentivized to accept it — to prefer it even — because fees are miniscule and the risk of chargebacks or fraud is zero (a smart contract cannot be broken since the collateral is under block and key).
  • ECR — “Every Citizen’s Reserve” — the governance token for the Epicenter community, used to ensure that the EUSD-to-USD soft peg is maintained and the system functions smoothly.

If a user’s Epic Cash account can be considered their savings — their digital gold — then EUSD could be considered a checking account for dollar-denominated expenses. In the same vein, ECR could be thought to fill the role of the Federal Reserve for this monetary universe — it stabilizes the currency (EUSD) and ECR holders get seigniorage and other compensation for the risk they assume. ECR is equivalent to an investment, with both risk and reward, but through their voting rights — selecting the parameters that govern the system — ECR holders can have a direct impact on their own success. They are strongly incentivized to maintain the stability of the system and are rewarded to the extent they succeed. Unlike purely passive investments, ECR user-owners play a pivotal role in increasing the value of their holdings through a variety of direct participation mechanisms, each of which offers incentives.

An initial circulating supply of 25 million ECR tokens will be generated, with a one-to-one matching to the ~11 million units of Epic Cash that will exist when a snapshot planned for Q1 2021 takes place: each owner of Epic Cash will have the opportunity to participate in this airdrop and will be automatically credited with a corresponding amount of ECR. The remaining ~14 million are allocated to provide incentives for ecosystem partners, alliances, advisors and others to create a vested interest with “skin in the game” and alignment toward success. Subsequent protocol inflation is carefully balanced to create a variety of feedback loops and incentive mechanisms to ensure sustainable operation of the system for all stakeholders over the long term.

A monetary tipping point is near

A monetary tipping point is near. The old world banking system, in cahoots with governments, rewarded insiders handsomely for many years, but ultimately got too greedy and is now collapsing under the weight of its own internal contradictions and long-festering problems compounded by generations of band-aids, can kicking, and unrequited moral hazard. We believe that the free market for money is about to reassert itself in a significant way and unleash a healthy dose of creative destruction.

Of course the bankers are trying to jump on the crypto bandwagon, in a way that will maintain their skim, but the truth is they are now largely unnecessary middlemen. We already have the technology to dispense with trusted intermediaries in any of our financial transactions, which means we are free to choose the money we find best — the most efficient, the most secure, the most useful, the most trustworthy.

Epicenter is entirely based on open-source code — nothing can be more transparent than that. It is implemented entirely through smart contracts on the Ethereum blockchain, which is as strong a guarantee as you can get in this world. No trust is required.

This is not banking reimagined. This is banking vaporized.

  1. Michael Lavere, Report: Tether USDT Only 74 Percent Backed by Fiat (April 30, 2019): https://ethereumworldnews.com/report-tether-usdt-only-74-percent-backed-by-fiat/
  2. This theory was put to an extreme stress test in 2018, when the price of Ether dropped from $1300 in January to $80 in December. MakerDAO proved that the theory could work under stress, even with the relatively primitive set of price-control tools their protocol has available.

Epic Cash

Epic Cash is designed to be a currency for everyone, and…

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