As expected, in times of corrections the comments come out, ?oh coincidence! from retail banks and financial corporations alerting the population about scams with cryptocurrencies, saying that it is a whole bubble, which is the same as what happened to dotcoms in 1999 and that investors can lose all the money they put in.
And of course, they say it “to take care of the investor”
It is logical, the traditional banking and financial business is mortally wounded with the decentralization that the crypto-sphere proposes and, somehow, they have to do something for those who still trust in fiat money and deposit a fixed term in a bank.
Some even say that the value of bitcoin and cryptocurrencies in general "will depend on what the regulatory authorities do."
What authorities?
What are they going to do? Cut the Internet? Cut off the power supply?
“In case someone didn't understand, this is P2P. The future is P2P. Why do we need banks and authorities? The transactions are going to be done between you and me. Nobody else in the middle. Which of the 3 letters of P2P you don't understand? "
I am not talking about Bitcoin, nor any particular currency. I'm talking about the decentralization that characterizes the crypto-sphere. Bitcoin may be in the hands of a few whales that swing the price in their favor. But Bitcoin is not the crypto-sphere. It is the seed that started everything. But speculating with Bitcoin is not the only thing that we, decentralized freedom lovers, can do. I am not a maximalist of anything. I am convinced that crypto-sphere is a new asset class that humanity had not known and that it can free us from the oppression of banks, central banks, and governments in general.
Bitcoin paved the highway. Then came the automobile, motorcycles, and trucks manufacturers, those who drive cars, motorcycles, and trucks, the freeway’s lighting manufacturers, those who make signs for the routes, and many others that makeup today's most vibrant ecosystem. Blockchain is not Bitcoin. Blockchain is much more than the transfer of value. And this is known by banks, central banks, and governments.
Before speaking, they should understand that today there are already many people who understand how decentralization works and what the new technology called blockchain is all about. Speaking without understanding is a serious problem. But I repeat, I don't think they don't understand. What they are doing is calling on the population desperately to trust again the centralized and reassuring authorities.
It is logical if the business they have is based on fiat, then they have to say that the crypto-sphere is a scam. It is the more than famous "JPMorgan style" in the early days, do you remember its CEO?
What should we do, we the ones convinced that decentralization is the only future possible for human development?
It is necessary to prevent the common man from the two cruelest strategies that traditional finance invented: credit cards and the so-called “cashless society”.
Let's first look at the credit card. Everything seems to indicate that the credit card was born due to a fortuitous situation in which one of the diners at a business dinner, who had to pay for the dinner, forgot his wallet at home. They were at the Major’s Cabin Grill in New York, and the three diners were Frank McNamara, Ralph Sneider, and Alfred Bloomingdale, grandson of the famous chain of stores founder. Thus, they began to devise a personal and secure method with which to pay on credit in various establishments. In this way, the Diners' Club was born, in honor of the three diners.
At the beginning of 1950, only 200 people had their Diners ’Club, and only 14 restaurants in New York joined this new system. But by the end of the same year, it was already used by more than 22,000 people and about 500 restaurants accepted it.
Around 1958, the Bank of America put into circulation the first bank card or Bankamericard (which later changed its name to how we know it today: VISA card), whose massive adoption made this way of paying as accepted as money.
The modern credit card was born.
Image of jan mesaros in Pixabay
From that moment on, people began to speak of “plastic money”, money that was soon to replace traditional money in restaurants, shops, airports, stations, hotels.
In 1958, American Express launched its first credit card. Now citizens could buy a new coat, buy furniture, or go on vacation: it was enough to charge it onto the magical plastic card that did not ask questions. It was like a magician who made available, at least in the imagination of the cardholders, all the goods at his beck and call. A turning point within economic systems.
American banks became keenly interested in the new credit product in the 1950s. At the end of the 1960s, more than 1,000 banks operated with their own credit cards.
In 1967, the First American National Bank of Nashville made a new credit card called MasterCharge available to citizens. In 1979 the Interbank Card Association renamed it MasterCard.
Business transactions became much easier and faster with the card by eliminating factors of mistrust or lack of funds. In America, there was talk of a society without checks or accounts: only with cards. A real feast for Retail Banks.
Image of Capri23auto in Pixabay
The dream of the magic wand had come true in the form of a small plastic card. There was no need to carry cash, not even to make a phone call, not for the expenses of the kiosk or to buy the newspaper.
Image of lordpeppers in Pixabay
Let's see. When someone uses a credit card, there is a bank or a financial institution that is lending the money. We will have to return that money the following month or in several installments paying interest for it. In this case, the financial institution advances the money regardless of the balance in the account. For this reason, before granting a credit card, the bank studies the viability of the client, making sure that it is solvent.
That is, we can say that in reality a credit card is characterized by being:
- A status symbol
- A 30-day Check
- An instrument of monetary illusion, the idea that we can buy everything, in the same way that a supermarket shows us the “totality” of the products and gives us the idea of a “rich” society
- Almost like the incitement to gambling caused by casinos
Ordinary people have no idea how a credit card works and the retail bank misinforms them with supposed "savings" that the user achieves when using it, until one day he/she can no longer pay the summary every month, and then he/she has to finance, playing the game that the retail bank wants, applying rates that even the most pernicious usurer would think are immoral.
"It is very easy to steal from status-oriented people."
What do retailers say about the credit card?
Did you know that banks also charge retailers when they receive credit card payments?
There is no better way to control and hold on to the common man/woman than to urge him/her to use credit cards, making him/her believe that he/she "earns" points and "free" miles and discounts on fuel charges.
“However, addictive gambling is considered a disease, while the compulsive impulse to purchase with credit cards is considered a "proactive marketing strategy"”
But much worse than credit cards is the narrative of the “cashless society”.
They tell us that in this way we avoid carrying money with us and we are not liable for theft. (Sure, banks don't want competition).
But the concrete truth is that it is easier to control anyone through an expense control mechanism, while, in a cashless society, tax evasion is eliminated.
So who are the most favored beneficiaries of the cashless society?
By substituting cash for centralized electronic money, governments will have full knowledge of all transactions of all individuals and companies, and, therefore, this information will be used for financial supervision, political repression and discrimination
Many of the developments in the so-called “Fintech industry” are Orwellian control mechanisms. New applications, processes, products, business models, and other apps for the usury industry to modernize electronically. Now the common man/woman can be accessed by banks and governments through the internet to see how he/she uses his/her money, eliminating the cash and taking it to digital wallets and digital payment accounts.
Image of succo in Pixabay
Fintech includes tools for:
- Operation and means of payment
- In-depth investigation of each customer's movements (which will then be sold to commercial “call now” TV companies that will use this data to sell them automatic carrot cutters and other “progress” artifacts)
- security and identification of people (?!)
- and of course, the so-called by them "electronic money"
In short, the cashless society is the most sinister experiment in centralization, and it is sold as the most accomplished technological evolution of Fintech.
Even a 10-year-old realizes that the traditional financial system favors a few and parasitizes all others.
Fiat money is unfair and has proven to be an inexhaustible source of corruption and favoritism to corporations to the detriment of entrepreneurs and small businesses, which do not have access to the privileges created by this system called fiat money, consisting of the issuance of promissory notes through a central bank that determines the value of money. Common people end up paying the cost of this corrupt money through the tax called inflation. We no longer want this type of scourge, neither for ourselves nor for future generations.
Just in case, let's remember that Bitcoin cannot inflate. And that is what hurts governments, corporations, and banks the most. Taking out that sinister possibility of enriching themselves at their sole discretion is what hurts the most to lose. So it is logical that they want to make decentralization and the crypto-sphere appear like a huge scam and a bubble that will irretrievably burst. Retail banks lose the ability to "invent" money through loans without backing, corporations lose the hefty commissions for issuing debt papers and negotiable obligations, and governments lose two things, the discretionary issuance of promissory notes to pay their discretionary debts, and the taxes that they cannot collect through a decentralized network.
And what can we say about the alien monstrosity that central bank cryptocurrencies CBDCs make up?
Central bank digital currencies are destined to fail. It is a tremendous naivety to think that governments and central banks are going to take care of your wealth more than you. CBDCs cannot change anything, it is an anguished attempt to continue to control your wealth and your money. What they want to do is join the decentralization without giving you the possibility of your privacy and your freedom. CBDCs are fiat money in digital form. This is what I told you above about the “cashless society”. What they seek is to maintain control over the general financial system and penalize those who do not comply with the norms established by governments and central banks. You cannot be fat and skinny at the same time. There is no centralized decentralization. Central banks may lead people to believe for quite some time that they are joining the cryptocurrency revolution, but this is like having a child fooled into saying that it is the Three Kings who bring them gifts in January. The child grows up and understands the tricks of his parents.
Of course, it's not that central banks "don't understand" what decentralization and the P2P concept are all about. It is precise because they understand it so well that they react in this way.
By the way, who of you will buy or hold CBDCs?
The issuance of money at discretion is a violation of private property. It is deteriorating the heritage of people. Bitcoin clearly shows us that the money belongs to the person who has it and that no authority can or has the right to claim anything from him/her with threats or through violence. Bitcoin is a guarantee that any abuse by a monetary authority is impossible. Bitcoin is a declaration of freedom in itself.
With that said, let's move on to today's two tokens.
UMA
A vast majority of DeFi use cases require trust in so-called oracles. These contracts are those that provide external information to the systems enclosed in a blockchain.
Can we have confidence in oracles? What is the cost of corrupting an oracle?
Image of Mira Cosic in Pixabay
Austrian economists say that the most perfect information system mankind has is the price system. It seems that UMA can alter the model known as the pricing system.
What?
Do not prices rise "spontaneously" from the balance between supply and demand?
Well, sometimes we know not. In many cases, I would say. Price manipulation is nothing new.
Could it be that UMA is inventing a system that does not need oracles and in which the "price" is given by the incentivized action of some agents of the ecosystem?
Wow! This is really new.
Basically, UMA (Universal Market Access) is an open infrastructure that allows the development of “priceless” smart contracts on the Ethereum network. It does this through two models, a series of “priceless” smart contract templates that can be used to create synthetic tokens, and a very interesting method called DVM, Data Verification Mechanism, which acts as an oracle service. Working together, these two methods allow the creation of synthetic derivatives quickly and efficiently.
The fundamental idea is that interested parties can find adequate collateralization without the need to take prices from elsewhere. This is accomplished very creatively, awarding rewards to parties or third parties so that they can identify an inappropriate collateral position. To confirm this, the contracts rely on the DVM mechanism.
The DVM is an "optimistic" oracle service that responds to the price requests made by the financial contracts registered in it. The price requirements ask UMA hodlers to vote on the value of a price identifier in a historical timestamp. UMA hodlers commit and reveal their votes on-chain in a process that can last between 2 and 4 days. Once the votes are revealed, the mode of these votes as the value determined by UMA voters about the asking price is returned to the financial contracts. The contracts then distribute the collateral to all parties involved, based on the value returned by the DVM.
A genius. Compare it with what we talk about a cashless society. Prices are determined by a vote that has rewards, rather than the known supply and demand mechanisms, or a bonding curve. As the DVM requires 2 to 4 days to respond to a price request, it is not intended to be used as an on-chain price feed that puts pressure on the prices of financial contracts that need them. It is actually complementary to priceless financial contracts.
The DVM includes an economic guarantee that works with the cost of corruption and the profit of corruption. The cost of corrupting the DVM, measured as the cost of 51% of the voting UMA tokens, should be greater than the gain of corrupting the DVM, measured by the collateral held in the financial contracts recorded therein. To ensure that this difference exists, the DVM must charge fees to the financial contracts used to raise the price of the UMA voting tokens.
External oracles are used only in disputed situations that cannot be resolved by this mechanism.
The UMA model avoids many of the security and scalability problems that abound in decentralized finance, by minimizing the connection to the outside.
The UMA token enables the hodler to participate in community governance and resolve contract disputes through the DVM.
UMA was born on Wall Street. Hart Lambur, a professional with consolidated experience and a strong belief in the potential of cryptocurrencies, decided to create a cryptocurrency different from the others.
Lambur sold a private business to bet on cryptocurrencies and in 2017 he founded Risk Labs. He managed to raise 4 million dollars from recognized companies such as Bain Capital and Dragonfly Capital. In addition to capital, he enlisted 7 highly skilled professionals such as Allison Lu (former Goldman Sachs VP) and Regina Cai (Princeton-educated financial analyst and financial engineer) to join and become part of the team.
In December 2018 they published the first draft of the UMA technical document, days later it was formally announced on Medium.
Conclusion. The crypto-sphere wakes us up every morning with a new project. We thought we understood everything and suddenly a new ICBM appears. With UMA I felt the same sensation as with Ampleforth. The idea of ??a strong disruption started a new culture of money. UMA's mission aims to allow anyone to have access to financial risk and makes it possible for two counterparties to design and create their own “priceless” financial contracts secured with economic incentives. The derivatives market is the largest financial market in the world and with traditional finance, it is only accessible to accredited investors. With UMA it can be accessible to everyone. UMA's Ethereum-based protocol allows creating custom collateralized synthetic cryptocurrency tokens that are capable of tracking the price of virtually anything. This is just starting. Anyone can create a synthetic and start a new life.
ELROND
Blockchain technology is in its infancy and so it still has several problems to solve in this development that can last for many years. The best known of these problems is the famous trilemma: security, decentralization, and scalability at the same time. We call this the scalability trilemma.
Let's go through a brief description of each feature:
Scalable: Speed and adaptability when handling the increase in demand.
Secure: That is, invulnerable, resistant to external attacks, and immune to being corrupted.
Decentralized: Completely indispensable for any blockchain, this characteristic is usually the one that affects the others. It ensures, among other benefits, that no individual party or group can hijack the chain, censor it, or make changes to it.
Satisfying all three at the same time is difficult, it's actually strenuous work. In fact, many objects that it is impossible. To this day there is no proven solution to the problem of scalability that does not compromise decentralization.
Elrond proposes a very innovative architecture that takes a very important step towards solving the scalability trilemma, presenting a genuine sharding scheme for scalability, eliminating energy and computing costs while ensuring fairness distributed through a protocol consensus called SPoS, Secure Proof of Stake. Elrond's focus is heavily on security, ensuring resistance to known security issues such as Sybil Attack, Nothing at Stake attack, and others.
In an ecosystem that cries out for interconnectivity, Elrond's smart contracts solution offers an EVM-compliant engine that ensures interoperability by design. Preliminary simulations and testnet results showed that Elrond outperformed Visa's average throughput and achieved three orders of magnitude or 1000x improvement when compared to recognized viable proposals while reducing bootstrapping and storage costs to ensure long-term sustainability.
Elrond founder Beniamin Mincu is a skilled blockchain entrepreneur. According to him, “we have understood that no matter how powerful the technology is unless we solve the user experience problem, we will not be able to achieve anything. We are building a blockchain that my mom and grandmother can understand. Elrond intends a version of money that can be transferred globally, in an instant, and at negligible cost. "
Beniamin Mincu started with Elrond at the end of 2017 and had two co-founders from the beginning, his brother Lucian Mincu and Lucian Todea, both entrepreneurs with a technical professional profile. Beniamin was enrolled in the blockchain industry for more than 5 years. Also, the team is made up of really brilliant people who brought technical knowledge in design, space exploration, and artificial intelligence, acquired in some of the most important technology companies in the world such as Google, Microsoft, and IBM.
Initially, Elrond started with a native token called ERD, launched on the BINANCE Launchpad. As of September 3, 2020, the swap from ERD to EGLD officially began. EGLD is the new native currency of the Elrond economy, and all ERD tokens were gradually exchanged for EGLD tokens. The EGLD ticker is an abbreviation for EGold. From then on, EGold and EGLD are used interchangeably, to refer to the native Elrond currency.
The exchange was done in a ratio of 1000: 1, 1000 ERD (old) = 1 EGLD (new) through Binance and the official Elrond swap bridge.
Conclusion. For years we have dreamed of a “killer application” that solves the problem of the blockchain trilemma, and thus definitely opens the doors of mass adoption. Great talents gathered in developer teams have long been working on the problem. Elrond found a way that, even though it's still testing itself, seems to multiply the throughput in a disruptive way. The crypto-sphere appears to have staked a lot of chips on its method, as ELGD today boasts an honorable # 56 ranking on CoinGecko. I do not dare to say that we have solved the problem, but yes, surely, that we are very close to this new and creative proposal.
As usual, none of the things written in this post are financial advice and are not intended to replace personal research.
I am interested in showing in this blog the fundamentals of crypto-sphere projects that may mean a paradigm shift in the near and not so near future. This approach may be different and complementary to the posts of other talented colleagues at PUBLISH0X that show shorter-term variables and which I follow with great interest, since I, of course, am also interested in the short term and in putting together a solid portfolio.
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