Coleman McCormick

Archive of posts with tag 'Ethereum'

Taking Back Our User Accounts

July 28, 2021 • #

Identity management on the internet has been broken for years. We all have 800 distinct logins to different services, registered to different emails with different passwords. Plus your personal data exists in a morass of data silos, each housing a different slice of your personal information, each under a different ToS, subject to differing privacy regulations, and ultimately not owned by you. You sign up for a user account on a service in order for it to identify you uniquely, providing functionality tailored to you. Service providers getting custody of your personal data is a side-effect that’s become an accepted social norm.

Ethereum chain

In this piece, Jon Stokes references core power indicators in public finance like capital ratios or assets under management that help tell us when an institution is getting too big:

As a society, we realized a long time ago that if we let banking go entirely unregulated, then we end up with these mammoth, rickety entities that lurch from crisis to crisis and drag us all down with them. So when we set about putting regulatory limits on banks, we used a few simple, difficult-to-game numbers that we could use as proxies for size and systemic risk.

The “users table” works as an analogous metric in tech: the larger the users table gets (the more users a product has), the more centralized and aggregated their control and influence. Network effects, user lock-in, and power over privacy policies expand quadratically with the scope of the user base.

As Stokes points out, web3 tech built on Ethereum will gradually wrest back control of the users table with a global, decentralized replacement controlled by no-one-in-particular, wherein users retain ownership of their own identity:

Here’s what’s coming: the public blockchain amounts to a single, massive users table for the entire Internet, and the next wave of distributed applications will be built on top of it.

Dapps on Ethereum are so satisfying to use. The flow to get started is so smooth — a couple of clicks and you’re in. There’s no sign up page, no way for services to contact you (presumably unless they build something to do so and you opt-in to giving your information). Most of my dapp usage has been in DeFi, where you visit a new site, connect your wallet, and seconds later you can make financial transactions. It’s wild.

The global users table decentralizes the authentication and identity layers. You control your identity and your credentials, and grant access to applications if you choose.

Take the example of a defi application like Convex. When I visit the app, I first grant the service access to interact with my wallet. Once I’m signed in, I can stake tokens I own, or claim rewards from staking pools I’ve participated in proportional to my share of the pool. All of the data that represents my balances, staking positions, and earned rewards lives in the smart contracts on the Ethereum blockchain, not in Convex’s own databases. Services like this will always need to maintain their own application databases for aspects of their products. But the critical change with the global users table is that the user interaction layer exists on-chain and not in a silo’d database, with custody completely in the hands of the person with the keys to the wallet.

If more services use the dapp model and build on the public, on-chain global users table, what will the norms become around extending that table with additional metadata? With some systems like ENS (the Ethereum Name Service, decentralized DNS), subdomains and other addresses associated with an ENS address are properties written on the blockchain directly. This makes sense for something like name services, where they’re public by design. But other use cases will still require app developers to keep their own attributes associated with your account that don’t make sense on the public, immutable blockchain. I may want GitHub to know my email address for receiving notifications from the app, but I may not want that address publicly attributed to my ETH address.

Web3 is so new that we haven’t figured out yet how all this shakes out. The most exciting aspect is how it overturns the custody dynamics of user data. Even though this new world moves the users table out of the hands of individual companies, everyone will benefit (users and companies) over the long-term. Here’s Stokes again:

If you want to build a set of network effects that benefit your company specifically, it won’t be enough to simply cultivate a large users table or email list — no, you’ll have to offer something on-chain that others are also incentivized to use, so that the thing you’re uniquely offering spreads and becomes a kind of currency.

Incentives for app developers will realign in a way that produces more compelling products and a better experience for users.

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Infinity Possibilities →

July 22, 2021 • #

Packy McCormick is onto something with his recent pieces on web3 and the emergence of the “metaverse” being enabled by Ethereum.

This week he writes about Axie Infinity, a NFT-powered Pokémon-like PvP game built on the blockchain. The resemblances to Pokémon are many in terms of the gameplay, but that’s about the end of the similarities.

If they pull it off, Axie will be like Roblox on steroids, with better margins and better incentive alignment. Axie might become an even more important corner of the Metaverse, and a beacon for people building decentralized worlds online that blur work and play.

Axie’s mini monsters you collect are generated through breeding monsters together, which requires the ecosystem’s tokens to do (SLP), and mints new monsters that can be auctioned to others, for real money. There’s an expanding community of people worldwide, particularly in southeast Asia today, that are using Axie’s “play-to-earn” strategy to make real money playing the game. Gaming as a job isn’t a new thing, since people have been farming resources and selling accounts and add-ons on the gray market for years. But those economies were explicitly disallowed by centralized developer platforms like Blizzard’s World of Warcraft universe.

With Axie, play-to-earn is the entire point of the game.

I started to get my wallet set up to give this a try. Super interesting to see gaming converging with the internet and decentralized economic forces.

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Weekend Reading: DeFi Yields, Cloudflare's Internet, and Standards in Logistics

July 2, 2021 • #

📈 How Are DeFi Yields So High?

This is a great primer on yield farming in DeFi from Nat Eliason. Seeing the insane 1000% APYs on some DeFi products, you have to wonder if it’s a Ponzi scheme (hint: sometimes it probably is). But there are plenty of legitimate and relatively reliable projects growing right now that look fascinating for the movement.

☁️ Cloudflare’s Intelligent Design

Cloudflare has such an interesting approach to building the “pipes and wires” of the internet, a business most people wouldn’t think of as glamorous (even though it’s technically extremely complex). The only other companies out there building and shipping products as quickly are Stripe and Amazon, one that Byrne Hobart calls out the reference to:

Their “workers” product lets customers write code and then deploy it to the edge around the world; they can be location-agnostic, both in the technical sense that packets won’t take a needlessly roundabout path to users and in the legal sense that if they run something in a country that requires data to be stored locally, it will be stored locally. They originally built this as an internal tool for deploying their own code, then started letting customers use it. And then they turned that decision into an abstraction: “And so we implemented what we internally and somewhat cheekily called the Bezos Rule. And what the Bezos Rule is, is the exact same rule that Amazon put in place when they were developing AWS, which is, any API or any development tool that we build for ourselves and for our own team, we also are then going to make available to our customers.” Cloudflare built an uptime factory, then workers became an uptime factory factory, and with the Bezos rule they’ve codified the production of such things: an uptime factory factory factory. They are no doubt adding new layers of recursion even now.

🚢 Ever Given, Supply Chains, and the Physical World

A great overview of the state of logistics from Flexport founder Ryan Peterson.

With demand for goods rising around the world, our shipping infrastructure is hitting scaling limits and bottlenecks that will be hard problems in the coming years. Petersen considers inconsistent standards and fragmentation to be major challenges to surmount:

Our computers, laptops, tablets, phones, and more can all connect quickly to the information we seek thanks to standardization. And while today’s global trade network is kind of like an internet of physical goods, it’s missing a standard like HTTP. The same way data passes between devices via the internet, goods pass between ocean ports, airports, warehouses, and other entities to reach their final destination. Without a logistics standard to act as a request-response protocol, all the players — suppliers, drayage, ports, warehouses, buyers — have to stitch their networks together manually.

Information gets lost; layers of redundancy, designed as backups given low visibility, slow the exchange: connections end up being very brittle. Let’s say there’s a shipment scheduled to arrive in Long Beach on Tuesday. But which terminal exactly and what pier number? What time is pickup? How long before late charges are incurred? Finding these answers is labor-intensive and imprecise. Logistics managers end up consulting different sources on websites, via email, or in person.

The dirty secret of the industry is that no one really knows where their stuff is. But if global trade were like the network of information as it is on the internet, we could simply type or speak into a search bar to ask and answer these questions, precisely.

This is not about the desired features of such a system, but rather about the need for standardization, the need for a universal language for global trade. Once this exists, the physical world, like software, becomes searchable, programmable, accessible — connecting a patchwork of country-specific regulations and more.

Interface points between ships, terminals, carriers, and suppliers should follow standars, like APIs for the physical world. But standards are one of the hardest coordination problems to solve. The most powerful and versatile standards are adopted organically. How can you get thousands of freight forwarders speaking the same language?

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Ethereum Name Service

July 1, 2021 • #

I’ve bought a couple of domains on ENS recently, which is an a decentralized, on-chain version of DNS running on Ethereum.

Go to ens.domains and connect your ETH wallet, then you can search for available names just like you would on a normal domain registrar. With ENS, your domain name is essentially an NFT, with addresses and TXT records nested underneath.

I have no immediate need for this, other than the convenient reverse lookup to your eth address, which is neat. But if you believe in the future of web3 and Ethereum, it’s a good time to invest in the internet real estate of the next generation.

If it continues to be successful, ENS will disintermediate registrars from domain name purchases. Auctions to buy names from existing holders don’t need to be black box offers and escrowed negotiations; we could have auctions on OpenSea for popular addresses.

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ETH's First Quarter, 2021 →

June 16, 2021 • #

James Wang looks at the state of Ethereum as if it was a software company. If it was a business hosting an earnings call each quarter, what would we think of its financial and performance metrics?

2020 was a banner year so far for the platform. Some choice stats, emphasis mine:

  • Transaction volume
    • Decentralized exchange (DEX) volume increased 76x to $177 billion in Q1 2021, compared with $2.3 billion in Q1 2020.
    • Decentralized Finance (DeFi) total value locked increased 64x to 52 billion in Q1 2021, compared with $0.8 billion in Q1 2020.
  • Ecosystem
    • Metamask — the popular Ethereum wallet for desktop and mobile—reached 4 million monthly active users (MAUs) in Q1 and crossed 5 million MAUs in April. Metamask mobile saw strong global growth, especially in India, Indonesia, Vietnam, and Nigeria. Metamask’s MAUs is now comparable to mainstream consumer applications such as Robinhood and Clubhouse.
    • Visa announced that it now settles payments in the USDC stablecoin on the Ethereum blockchain. This makes Visa the first major payments network to use stablecoin as a settlement currency.

Before “ETH-pilling” myself a couple months ago, I had been boxing Ethereum simplistically in with Bitcoin as “another cryptocurrency”. But once down the rabbit hole, you realize that the only similarity between ETH and BTC is blockchain. What’s built on top of each’s blockchain is wildly different. Bitcoin has largely found its home as “digital gold”, solving the store-of-value problem in a hardened, digital way.

Ethereum is different. It helped me to think of it as a distributed and decentralized “global computer” — a secure hive-mind on top of which you can build entire applications using its native programming language. More than Bitcoin, it’s a store-of-value, smart contract platform, and financial infrastructure for the internet age. Ether, it’s currency, is the coin of the realm to do stuff on the Ethereum network.

The more I read and invest, the more exciting it gets. Ethereum creates a network for trustless interaction between people and organizations, buyers and sellers, creators and consumers, native to the internet.

Until now we’ve had to make do with meatspace-based infrastructure for most of our interactions with one another via the internet. Now we have a burgeoning ecosystem for a true web3.

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