As I progress in the in-depth study of the crypto-sphere, the more I realize two things: first, the enormous privilege it means for me to have discovered this world, since things like these occur only once per century (in the 19th century it was gold, in the 20th century it was oil, in the 21st century it was the crypto-sphere). There are very few of us who have understood or are understanding what this revolution means. According to Statista, in December 2020 there were 63 million blockchain wallets in the world. Many people may be using multiple wallets, so we could say that about 50 million people have approached the world of coins so far. That is less than 1% of the world's population. Really, it is to feel privileged and work hard for mass adoption, because the road ahead is huge.
And secondly, and sometimes this scares me a bit, when I realize all the profound changes that the "simple" emergence of blockchain technology and decentralization, in general, are going to bring to humanity, I really realize that we are in a period of interrupted equilibrium.
Let me give you a very simple example to explain interrupted equilibrium.
The armies of Julius Caesar and Napoleon operated with a difference of 2,000 years, but they were essentially the same: they both depended on carts and horses. Seventy years after Napoleon's death, steam trains reached speeds of more than 70 km per hour.
Typically a known species dominate the picture.
But sometimes something happens and the equilibrium is "disrupted." Suddenly, without warning, the environment changes dramatically, and dominant species quickly disappear and are quickly displaced by others. Evolution makes a quantum leap, and a new spontaneous order begins.
I dealt a little more in-depth with the issue of interrupted equilibrium in a previous post.
The subject is so vast that I will try to analyze different aspects throughout different posts, framing the analysis on this topic of tokenomics or new value society.
The first issue that I want to analyze is that of the disappearance of the concept of the Nation-State.
The vast majority of people relate the cryptocurrency to the price of Bitcoin and Ether (referred to as the dollar). Few are thinking about what will happen when the long-awaited mass adoption arrives.
The truth is that everything seems to indicate that there are not going to be more Nations as we know them, all being connected through a huge decentralized network. What is the point of having a nationality? The tradition? Well, that doesn't seem like an attractive concept these days, except for older generations. In any case, the new nationalities will be Bitcoiners, Ethers, or Cardanians. We will have to think about passports for them.
Let's see a bit of history.
The Nation-State is a concept of a homogeneous-population-political-organization that shares culture and language, and that has a government that serves the interests of this institution. In terms of culture and language, Bitcoiners make up a Nation. Of course, they do not have a government that "serves their interests", nor will they, I hope.
"Cryptocurrencies are an asset class that humanity did not know until now"
The concept that there must be a State that serves the Nations appeared in the 19th century.
In the “ancien regime”, the state did not serve nations or communities but served God. Society was divided into corporate groups, peasants, landowners, bourgeoisie, and aristocrats. Each one pursued their own interests and often spoke different languages even while living nearby.
Image of honeydrops in Pixabay
Decentralization and the concept of transfer of value known as P2P eliminate any possibility of social categorization. This is one of the most profound changes to come. There are no peasant Bitcoiners and bourgeois Bitcoiners: there are Bitcoiners with a common language and a common goal, which is surely not going to be, as it is today, the search for get-rich-quick speculating on the currency’s value in relation to a currency fiat.
In the crypto-sphere, there is no state that manages a central bank that prints promissory notes to pay for the public spending of its inefficient government. There is only 21 million Bitcoin and no one can print them.
Image of isuru prabath in Pixabay
The place of residence of the Bitcoiners or the Cardanians does not matter. They can be thousands of kilometers apart and still belong to the same "nation."
I know what many think. This is an idealistic dream. (10 years ago, when I discovered Bitcoin, I got used to people describing me with the euphemism of "idealist", when in fact they think I'm an asshole). What pessimists think will really happen in practice is that governments are going to “intervene” miners, exchanges, wallets, and DeFi mechanisms, and they are going to regulate them, invent new taxes, and all this dream of being your own bank is going to be destroyed forever. And if not, the whales are going to handle the price of cryptocurrencies at will and people are going to depend on the price that the whales come up with.
Okay. Let's go in parts, as Jack the Ripper said.
Image of Christian Dorn in Pixabay
The first argument is possible because the greengrocer still does not accept Bitcoin. When this happens, and it is going to happen much earlier than many think, I pay the greengrocer with crypto and I have no obligation to go through any "authority". What regulations, taxes and authoritarian interventions are you talking about? Don't you understand what P2P is?
The second argument, that of the whales, is a direct product of reasoning with the concepts of the "ancien regime." Of course, having a Central Bank, there is, by definition, currency inflation. Inflation is a tax designed by governments to favor their wealthy friends, basically the corporations that provide the money necessary for presidential campaigns and that in return receive handouts from governments. Inflation is synonymous with accumulation, but accumulation by the few. In a recent post, I talked about inflation, the Cantillon effect, and Hayek's honey metaphor.
Image of ArtTower in Pixabay
So without inflation (I remind you that there is only 21 million Bitcoin), there is no accumulation. If there were, it would work against the accumulator, like a poison pill. This was also the spirit of a dreamer like Satoshi Nakamoto. We are so used to inflation that we think it is a model that will never abandon us. Most still think this disrupted equilibrium is academic speculation.
Image of robtowne0 in Pixabay
How did the Nation-State come true?
All the institutions of the “ancien regime” were destroyed. The balance was disrupted. The distinctions based on corporate rights and privileges were eliminated and replaced by new concepts about social relations.
The new ideas were called "Rationalism." The new production techniques were called "Capitalism", and the new administrative techniques were called "Sovereign State".
The most important point of rationalism in studying human questions was not to start with a biblical interpretation. The proper theme of humanity was Man.
Capitalism supposed the satisfaction of needs through "money". Money is the main mode of exchange and, above all else, the "measure of value." This was a huge revolution from the previous feudal system, in which the basis of exchange was reciprocity that was defined by oath or promise.
For its part, the Sovereign State became the “sole source of authority”, the basis of the Nation-State concept. Its progress did not consist of a displacement of the old institutions, but rather their complete destruction, creating a new society and disrupting the balance.
Rationalism created the idea of ??"nationality", the individual who recognizes the State as his legal sphere. It created the idea that the state exists to serve citizens and give them identity. It created the idea of ??a larger social group called Patria.
Capitalism created the "mass", men and women without an owner and free to sell their labor power, and also the conditions of communication between them. And it tried to create the conditions for all these complex interdependencies to self-control.
The state created common languages, education systems, and the granting of professional titles. It created customs tariffs, debts, and central banks. It created bureaucratic bodies and armed forces to protect territorial borders and conquer other territories.
Image of OpenClipart-Vectors in Pixabay
What armed forces does a nation need that only exists on thousands of interconnected computers distributed all over the world, on a decentralized P2P network?
What customs tariffs do these virtual nations need? What central bank do they need? What is a central bank or retail bank good for in this context?
They tell me that there is still a long way to go before this equilibrium of fiat money is interrupted, and that central banks and international organizations are going to act very aggressively against the crypto-sphere, and that they are going to destroy it plagued by regulations. I honestly don't see what they can do. Are they going to cut the Internet or electricity? Are they going to charge huge taxes? Why do traditional offices that cease to exist need taxes?
If you think that the current balance is not being interrupted as with the birth of the Nation-State, I think you should study a little more what the blockchain, decentralization, and the transmission of P2P value consist of.
With that said, let's move on to today's two tokens.
FILECOIN
Rank CoinGecko #39
Filecoin with the symbol FIL is one of the projects that raised the most money in the ICO fever. It is a decentralized storage solution that uses the Interplanetary File System (IPFS) to protect and store data. Users get paid to donate their unused hard drive storage space. They can also buy space from other users with FIL tokens. Protocol Labs is behind IPFS and runs the Filecoin project. IPFS is a blockchain protocol for decentralized data storage and transmission. Many analysts think that it can be the successor to HTTP in a distributed and decentralized web.
The Filecoin network requires storage providers to secure storage space for customers. The storage provider generates the replication test and the space-time test. Testing helps miners, or rather storage providers, to be audited by the network.
In this way, Filecoin seeks to take advantage of the storage space that digital devices connected to its network have, using a blockchain, a FIL token, and a mining system that secures the entire platform. The devices connected to the Filecoin network give up their storage space for Filecoin to use and in return receive tokens from the platform that can be exchanged for other tokens or cryptocurrencies, even fiat money. With this, Filecoin builds a distributed data storage network, uncensored, secure, private, and financially self-sustaining.
Filecoin works under a novel test, called Proof-of-Spacetime or PoST, where the blocks are created by miners who are storing data. Customers pay to store and retrieve data. Miners earn tokens by offering storage. If a device has a lot of storage space that it does not use, its owner can allow Filecoin to store third-party data in that space, and for this, it receives a reward in FILs tokens.
Image of ds_30 in Pixabay
In 2014, Juan Benet from Protocol Labs devised the use of empty space in storage devices connected to the network, using blockchain technology for the administration and recording of activities. He created the Filecoin project based on a complementary project called the “Interplanetary File System” (IPFS), which is a huge database on distributed networks that decentralizes such storage. In August 2017, the Filecoin project is launched and manages to raise more than $ 200 million in 30 minutes.
Filecoin has an incentive system that rewards its miners for the storage space assigned and for the recovery of the data, under a work-proof scheme similar to that of Bitcoin, except that in the case of Filecoin, instead of hashes, storage space is mined, through proof of replication (PoRep), which guarantee the platform the availability of said space.
IPFS is a peer-to-peer distributed file system that seeks to connect all computing devices to the same file system. The system provides a high-performance, content-addressed block storage model, with hyperlinks directed to content. This is known as a directed acyclic graph or DAG. In a previous post, I referred to DAG.
The Filecoin ICO managed to raise $ 257 million, making it the most successful ICO up to that point (August 2017). This piqued the interest of many crypto investors. 30% of Filecoin tokens were issued at the launch of the network: 15% went to developers, 10% to investors, and 5% to the Filecoin Foundation. The remaining 70% is reserved for the incentive system.
The FIL token is traded on many exchanges and has been added to many wallets, which greatly facilitates the process of being able to exchange them for other cryptocurrencies and dollars.
The consensus algorithm that allows the network to function is called Proof of Space-Time (PoST), and it allows to provide the security and scalability users need for their operations.
Similar to the well-known PoS, the idea behind this algorithm is to require network participants to demonstrate a financial interest in the success of the network. To do this, each node within the network must allocate resources such as memory or storage space. As the nodes contribute more resources, the greater their participation in the consensus of the network.
Filecoin can be seen as a cold storage layer, perfect for safely storing large batches of data. IPFS would be the hot storage layer, designed for rapid retrieval and distribution of content.
Conclusion. The main advantage of Filecoin is that it contributes to the decentralization of data storage on the network, by establishing data storage and retrieval mechanisms in a distributed network while opening possibilities for users to share the space they do not use in their hard drives and make some profit in the process. In this sense, the project is truly a gamechanger and allows us to imagine a fabulous world in which no single corporation gets hold of the data we all need. However, at the moment, the processes of storing (sealing), verifying (testing), and opening (retrieving) are computationally expensive and take a long time. If you have space that is not being used on your computer equipment and a good internet connection, mining in Filecoin can be a good option to start storing FILs in your wallet as part of a diversified portfolio. In my opinion, any project related to data storage, be it hardware or software, should be a safe investment, taking into account of course that it is managed by the appropriate management team. Information is and will be for many years, the most important asset of our society.
MATIC
Rank CoinGecko #113
Vitalik Buterin himself considered that the scalability problem “is a big bottleneck for Ethereum”. Because of Criptokitties and DeFi, the network collapsed!
Matic Network is a blockchain network for decentralized transactions and applications that can scale through sidechains. The network is secure and computing takes place outside of the main blockchain. The network uses an adapted version of the Plasma Framework and implements the Proof-of-Stake (PoS) consensus algorithm.
Plasma has been created in order to help the Ethereum blockchain scalability. It is a solution to record transactions and smart contracts in one or more Ethereum sidechains, to alleviate the collapse of the network.
Plasma provides a framework for building off-mainstream applications that are secure, scalable, and fast to run. It is used to improve the operation of various applications for games, databases, and payment networks. Plasma can be applied to other blockchains in addition to Ethereum. It was officially introduced in 2017 by Vitalik and Joseph Poon, developer of the Lightning Network project.
Plasma allows the existence of crypto assets in a root chain and in a side chain to be secure. The fundamental principle of Plasma is that all crypto assets can fall back to the root chain in the event of a security breach in the side chain. Thus, this solution makes it possible to take advantage of some of the utilities of the side chain (such as low-cost transactions, for example) while keeping crypto assets safely.
Currently, Plasma research is focused on creating cheaper engagements; implement Zk-SNARKs in Plasma to improve privacy and improve transaction completion time, to reduce the 25 confirmations or approximate 6 minutes established by the root chain, Ethereum.
Matic is designed not only for transactions but also focuses on the development of decentralized dApps applications. The slowness of most blockchains and the high cost of gas makes them difficult to use, so Matic has focused on offering a better blockchain service.
In addition, Matic has a toolkit for developers that helps them create their own dApps, even allowing them to use their own tokens as a settlement fee to run the network. In fact, any developer on Ethereum can take 100% of their knowledge and start developing on MATIC. That is the advantage of this project, that you do not need to learn new programming languages if you have already worked with Ethereum. Therefore, it has the largest network of developers in the world, that of Ethereum.
MATIC is the native token of the platform, which allows access to all its functionalities. However, the platform will allow you to use other tokens to perform certain actions.
MATIC has a circulating supply of 2,758,503,686 MATIC out of a total of 10,000,000,000 MATIC.
The visible face of MATIC is Sandeep Naiwal, its founder, who has extensive experience in technology and supply chain.
Conclusion. The ecosystem that most blockchains currently have is not ready to take the next step required by current demand. One of the problems that arise today is that the confirmations of the transactions are usually slow, in addition to having very high fees for their transactions. This is where MATIC intends to provide solutions in order to provide a better experience to its users. Any solution that is focused on improving the scalability of a blockchain is welcome. If you also use proven tools and have a vibrant and dedicated team, the project begins to attract attention like MATIC is doing. We do not know if it is the solution that Ethereum needs at the moment, but we do know that it is a project that must be followed closely because it seems to be heading in the right direction. All this ultimately adds up to the fact that we will one day achieve mass adoption.
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.
Thank you for reading!
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