Mosaic’s Weekly Cryptoasset Roundup — May 28, 2018
Mosaic constantly monitors a wide range of sources for cryptoasset news and summarizes the most interesting items in a daily newsletter. This post will compile and analyze our favourite news and features of the week.
Decentralized exchange and debt
Decentralized exchange (DEX) protocols such as 0x saw a lot of development in the latter half of 2017, and the first half of 2018 has proven just as fruitful for the technology. It is clear that big players in the cryptocurrency space understand the promise of decentralized exchange and Coinbase’s recent acquisition of Paradex — a 0x relayer — only confirms this.
“After making some product enhancements, we’ll initially offer this experience to customers outside the U.S., and eventually to U.S. customers after we implement changes,” Coinbase said in a statement. It will be interesting to see how Coinbase implements Paradex alongside their centralized offerings. Coinbase has traditionally been wary over regulatory uncertainty over whether or not tokens should be considered as securities or not. One of DEX’s value propositions is their ability to allow censorship-resistant exchange between parties and it not yet clear how Coinbase will square this with their desire to remain on the right side of regulation.
A corollary of the interesting developments in decentralized exchange over the last year has been the emergence of decentralized protocols for debt, such as Dharma. Dharma is a “generic, permissionless protocol for issuing, underwriting, and administering debt instruments as cryptographic tokens”. Last week, the Dharma announced that version 1 of there protocol was now live on the Ethereum mainnet. Currently, the protocol allows users to “borrow and lend with trustless collateralization in over 50 different ERC-20 tokens using Plex — a free, open-source light client for interacting with [the] Dharma protocol.” In addition, the protocol opens up use cases such as debt agreements, derivatives, and applications that facilitate borrower-lender matching & the underwriting of the ‘creditworthiness’ of borrowers.
While the technology is currently in its nascent stages, Dharma is currently being used already for margin trading — allowing for the short-selling of ERC-20 tokens and decentralized leverage. Mosaic are excited for the future of decentralized exchange and debt as projects like 0x and Dharma continue to “BUIDL” and gain mainstream traction.
Ethereum blockchain size
StopAndDecrypt recently published an article about the growth of the Ethereum blockchain and its effect on the processing requirements of Ethereum nodes.
The argument of the article can be summarized as the following:
“ 1. Ethereum’s blocksize growth is bad because of node processing requirements, not how much they need to store on a hard-drive.
2. To prevent complete collapse of the network, Ethereum will need to implement a reasonable blocksize cap.
3. Implementing a blocksize cap will raise fees and in return prevent many Dapps from functioning, or severely slow down. Future Dapps won’t work.
4. If Dapps don’t work, Ethereum’s entire proposition for existing is moot.”
Gustav Simonsson, co-founder of Orchid Labs, posted a response where he outlined his disagreements.
For example, in response to:
“(…) the incentive structure of the base layer is completely broken because there is no cap on Ethereum’s blocksize (…)”
Gustav argues that Ethereum does have a blocksize cap in the form of its block gas limit decided by miners. Miners are incentivized to maximize the value of the tokens they receive in each mined block and therefore are unlikely to vote for blocksize increases they expect to break the network. The crux of Gustav’s rebuttal is his belief that miners generally in the short-term will be able to adjust gas limits in the best interest of the network as a whole. Moreover, if the Ethereum network does grow too quickly for full nodes to keep up, checkpoints can be used as a partial remedy. He argues that checkpoints can be used as a way to preserve decentralization and security on the network.
To quote Gustav on the topic of checkpoints, “Clients can be (backwards compatible) updated every month to point to a checkpoint block 30 days into the past. This allows clients to quickly do a full sync from the checkpoint and then continue to do full validation of the entire Ethereum state, with far less storage required compared to a full archive node.”
We only briefly touch on all the arguments made by the two authors in their articles so we recommend that you read both posts, as well as the comments on each.
Wall Street and Security Tokens
The blog post “Move Over Crypto-enthusiasts, Wall Street Will Take It From Here” by Jim Greco made the argument that blockchain technology’s ‘killer app’ is “regulated and centralized trading”. Jim argues that 2018 has and will be defined by firms like Goldman Sachs, JP Morgan, and DRW entering the cryptoasset trading space and that is where the biggest opportunities lie.
It remains to be seen whether trading will be the industry’s ‘killer app’ over applications such as dApps and ‘sound money’. However, no one can doubt that 2018 has been characterized by an increased interest from institutional players in cryptoassets and blockchain technology — the weekly roundup series has already covered notable cases.
Trading is only one side of the coin for institutional interest; there has also be a lot of talk about the promise of ‘security tokens’ — blockchain based representations of value that are subject to regulation under security laws. Stephen McKeon argues that blockchain technology can help improve security contracts by allowing things such as 24/7 markets, fractional ownership, rapid settlement, and automated compliance.
We recommend that you read Stephen’s article in order to get a clearer view of the potential possibilities enabled by security tokens.
End of weekly roundup
We hope you have enjoyed reading about some of our favourite features and news pieces for the week May 21–27. Subscribe to our daily newsletter to stay up-to-date with cryptoasset news. Click here to visit our website.
This article is intended for informational purposes only. The views expressed herein are not and should not be construed as legal or investment advice or recommendations. Recipients of this article should do their own due diligence, considering their specific financial circumstances, investment objectives, and risk tolerance before investing. The individuals contributing to this article have positions in some or all of the assets discussed. This article is neither an offer, nor the solicitation of an offer, to buy or sell any of the assets mentioned herein.
