Yet another airdrop tracker

Disclaimer: the stories shared on this blog are mine, they aren’t financial advice, endorsement, counseling of any kind. Do your own research, never EVER take loans to acquire crypto, and never invest what you can’t afford to loose.

In a market freely driven by supply and demand, volatility is to be expected. But when it comes to a highly speculative deflationary asset such as Bitcoin and plenty other cryptocurrencies, the volatility is extra high. Too high for comfort for most stock/Forex traders.

With the appearance of smart contracts however, it became possible to dynamically control the issuance of a cryptoasset, and thus making “stablecoins” possible.

There are many “stablecoins” available, most of them pegged to a fiat currency, some others to the gold market or other natural resources, or even stock markets. Or cryptocurrencies in other blockchains. But this not what this story is about.

Because not all “stablecoins” are created equal.

Centralised 1:1 pegged deposit-backed

This first category is certainly the easiest to understand: for each unit of an asset frozen in an account, a token is issued on the blockchain. In effect, the token holds a 1:1 value compared to the asset it represents, and is akin a contract.

Simple example: an $50 Amazon gift certificate. It has been “minted” by giving Amazon 50 USD. In turn, Amazon guarantees the user the certificate can be used to buy $50 worth of goods in it’s store.

Transposed in the cryptocurrency world, one can easily find examples of such stablecoins:

• Tether USD: issued by Tether Limited, stating that each token is 1:1 backed by US Dollars deposits in bank accounts
• USDC: issued by Coinbase, same principle
• TrueUSD
• Binance USD (Paxos)
• eEUR (e-Money)
• PAX Gold: issued by PAX, 1:1 backed by gold ingot deposits

To be able to receive and hold deposits, all those companies must be registered and follow strict regulations and audits, including (and especially) audit of the deposits. Should any company run on a fractional reserve, and not be in fact able to cover the value of every token issued, then the token can implode. This is why Tether in particular is under close scrutiny by the SEC lately, as they got recently fined for misrepresenting the deposits held.

The fact that these tokens are issued by an authority (a company), a de-facto central bank, is one major source of criticism against such tokens from the crypto community.

And in any case, these stablecoins are ever only as “stable” as the deposits they represent: fiat currencies are inflationary, sometimes hyperinflationary, and the deposits could be worth nothing, turning the tokens worthless or even break-peg if the company looses money holding deposits in banks (negative interest rate). Worse: the funds in the bank accounts can be frozen, making the tokens inconvertible and worthless.

Using a stablecoin can however be a rather safe hedge when holders from country A prefer to hold a token pegged to a stabler currency of country B.

Decentralised ~1:1 pegged arbitrage-backed
In this category, you’ll find lesser known tokens such as Basis or Carbon.

To reach and maintain a loose peg to an asset (say, US Dollar), an algorithm controls supply and demand, acting like a central bank influencing inflation rate by issuing more or less tokens.

• if demand is higher, the price increases, the algorithm then issues more tokens to create sell pressure and lower the price
• if supply is higher, the price decreases, the algorithm then issues less tokens to create buy pressure and raise the price

If the algorithm is “sensitive” enough to pick up variations quickly (but not too quickly to evade false signals), the peg can be maintained. Of course this goes as long as the token remains desired: if it’s not being traded, then the relative value stales and desyncs from the represented asset.

Decentralised ~1:1 pegged collateral-backed

For this last type, the stablecoin is issued from a collateral asset, and maintains it’s peg by arbitrage.

Most notable stablecoins in this category are:

• DAI (MakerDAO): collateralised by multiple ERC-20 assets (typically Ethereum)
• USDX (Kava Labs): collateralised by Kava tokens (KAVA, Hard, BNB, BTCB, BUSD, XRPB)
• UST (Terraform): collateralised by LUNA

While the value of the stablecoin is guaranteed by the collateral, the peg is algorithmically maintained by offering an arbitrage opportunity:

• if the token value is lower, then arbitreurs convert some collateral into the token to reduce it’s supply and thus raise it’s price
• if the token value is higher, then arbitreurs convert some tokens into collateral to increase it’s supply and thus lower it’s price

So the peg is maintained by a balancing between two assets, one of them deflationary and thus desirable, all while rewarding arbitrage.

Sidenote on decentralised stablecoins: being by principle on-chain, they are publicly auditable, and their optional collateral too. In this, they follow Nakamoto’s view of zero-trust and sovereignty of code, as opposed to trusting a company’s fiat bank account holdings.

Reminder: money is a social construct, and nothing is stable and absolute in the universe. While “stablecoins” provide a virtual stability compared to their represented asset (and the convenience of fast decentralised cheap transactions), they CANNOT fix the risks and shortcomings of neither the asset nor the blockchain ecosystem they reside in. Handle carefully!

Disclaimer: the stories shared on this blog are mine, they aren’t financial advice, endorsement, counseling of any kind. Cryptocurrencies are highly volatile and speculative assets plagued by gambling addiction and fraud. Do your own research, never EVER take loans to acquire crypto, never communicate your private keys or mnemonic seed words to anyone, and never invest what you can’t afford to loose.

Note: this post dives into technical considerations of mine after reading the Sentinel whitepaper and testing out the available software to date, the project itself is still in it's infancy, many aspects of the project might evolve over time or I might be totally mistaken on key principles. Please feel free to correct me and contribute in comments or Twitter!

What is it?

One of the most exciting cryptocurrency ecosystems out there is the CosmosHub, the internet of blockchains, which keeps gaining much deserved attention. And one of those blockchains (which is already IBC-active allowing it's token to be swapped on AMMs like Osmosis and Emeris), is Sentinel.
It's mere presence in the ecosystem caught my attention, and it's purpose caught my further investigation. The DVPN token serves as governance and utility token on the Sentinel blockchain. And this blockchain serves as intermediary for transactions between users and nodes of a decentralized communication network for data transfer in a Virtual Private Network context. In short: the dVPN.

VPN for privacy: the principles

One often sees ads and sponsors for VPN services, promising privacy protection in internet communications. It works like this:

• A client software or the system's included tool encapsulates ALL internet connections inside an encrypted channel
• This channel is linked to a server, the "bridge"
• The server forwards the connections to public internet under it's own IP address
  Traditionally (and quite often during a pandemic), VPN services are put in place by companies to allow external connections (say, a sales representative on a Starbuck's WiFi) to securely access internal resources (say, the network printer in the secretary office, or the file server handling the work documents).
  But a VPN can work the other way around: instead of forwarding to a local network, a VPN server can forward to the global network (internet). This property makes it useful to circumvent a geoblocking for example: your computer could be located in India connected on a landline, establishing a VPN channel to a server located in USA, and from Netflix' point of view you'd be accessing the streaming service from USA (thus opening you access to a much wider content selection than what's normally available for India).
  From a privacy point of view, this is only a risk shift tho: with a VPN channel your connection would be (more) secure against your ISP (public WiFi or other), but the VPN server still sees all connections flowing through it. As long you visit websites using TLS (https://) and the presented certificate is the genuine one, then the VPN server can't decrypt the content of the connection (nor manipulate the content). But it could still tell which websites you visit (domain name by sniffing at DNS requests, or IP addresses your computer wants to reach).
  Also: some VPN service providers claim that they keep no logs. This is fundamentally wrong: they at least keep account records (login + password), and payment info. Users need authenticate and pay for the service, right? With this comes authenticated session identifier, and the assigned port(s) by the server (yes, the server needs that to know to which user to route that Netflix stream). That's plenty enough for authorities, lawful or not, to identify which VPN user accessed a certain website at a certain date and time. Again: VPN providers can claim they don't keep logs, but in truth you don't know and you can't know whether this is true.

How the dVPN differs

The technical approach of Sentinel has some common principles with TOR: instead of a direct connection between the client computer and the VPN server, dVPN routes connections through several dVPN nodes (or relays). Those nodes ensure that the exit node does not know which computer initially established the connection. All it knows is which node to forward public internet packets to. And if dVPN takes the same levels than TOR, then the intermediary node (or "shield node") and the first node (or "entry node") ensure it's impossible to tell which computer used which exit node.
This architecture makes connection logging not impossible, but useless. One would need to seize potential logs from many / all dVPN nodes to hope reconstructing how a connection was established from a computer to an internet service.
With dVPN, like with TOR, people can operate relay nodes. Or even exit nodes. But while on TOR it's a free-for-all, on dVPN it's possible to set a price on the bandwidth provided. And how do trustless, immutable pseudo-anonymous transactions happen? Yes correctly: through the Sentinel blockchain!
The opened possibilities:

• people with lots of unused bandwidth can provide it to the Sentinel dVPN network (as relay nodes or exit nodes) and earn DVPN tokens in return
• people who want faster dVPN connectivity (or any connectivity?) can spend some DVPN tokens on the network, who redistributes it to the participating nodes
  (note: it's unclear to me if a per-use redistribution happens, and if yes this could be a security weakness: it could make it easier to reconstruct which dVPN nodes were implicated in a specific connection; but maybe the entry node would serve as payment proxy, or pre-crediting bandwidth from other nodes, shielding the user from payment-retracement)

Challenge: client software

Sentinel dVPN is just an infrastructure protocol. To use it, users will need client software. (think: to use the World Wide Web, users need a web browser like Chrome or Firefox)
At time of writing, there are two Sentinel-certified client software available for download, built by Exidio: an app for Android, and an app for iOS. More tech-savvy people might look on Sentinel's Github for a CLI client but that's probably just for tests.
So yes right now there aren't any client for Windows. But that might come soon: after all a centralized VPN provider can reuse their existing software but instead make it connect to the dVPN network. But if a client needs to be developed from scratch, utmost fine-tuning of the UI is necessary so the user understands the basic principles of paying with DVPN tokens, and why it's beneficial.
In the whitepaper, Sentinel mentions that, for wide public adoption, client software should make fiat-onboarding possible (say: use a debit card to buy DVPN tokens to spend for dVPN bandwidth). But that's bringing back a core issue of centralized VPN providers: fiat payment means accounting, thus traceability, and KYC+AML requirements. The company managing the client software could handle this on it's side, but there would be a transaction traceability when the DVPN tokens get credited, and thus, at very least, the possibility to link a personal identity to an usage pattern of those DVPN tokens. So, ideally, people should acquire DVPN tokens by other means.
And ummm, one more thing: the ability to have dVPN-compatible client apps on GooglePlay and App Store is totally up to Google and Apple. If they think this might attract negative scrutiny even by authoritarian regimes, they would pull the plug.

Challenge: relay nodes

Bringing more relay nodes to the dVPN network is basically as easy as the node software installation is. Good news: the technical requirements are reasonable and Docker makes it quick. Heck: aside from the storage space, this seems like a possible job for Akash deployments.
Easier yet: several router vendors announced partnering up with Sentinel to build all-in-one dVPN nodes for home users. Plug it to your internet line, enable dVPN node functions, set your DVPN wallet address, and get paid for the bandwidth your router relays!

Challenge: exit nodes

While providing a relay node for dVPN shouldn't be a headache, it gets significantly trickier if your intention is to operate an exit node (and that's why I expect such exit nodes to get better paid in DVPN tokens than simple relay nodes).
See: if you provide an exit node, then dVPN connections will use your public IP address when reaching the global internet.
It's something TOR exit node operators also face: their public IP address is what is visible to outside parties. So for example, operators might receive DMCA takedown notices, litigation threats for copyright infringement downloads, blacklisting by mail servers for spam distribution, and uncomfortable times in police offices if the exit node happens to have been abused to intrude sensitive infrastructures, posting threatening messages on social media, command botnets, or even send child abuse material.
That's why I'd advise AGAINST providing exit nodes from a home internet access. Instead, exit node operators should have a dedicated internet access, under a NGO or company, and ideally using one IPv6 address dedicated to the dVPN exit node only, no IPv4, to absolutely ensure abusive behavior came from the dVPN network and not, say, an employee of the operator company. Also: transparency is key. Operators should ensure it's very easy to find out that such IP address is a dVPN exit node, and thus prone to potential abuse outside the will and knowledge of the operator. This might be enough to grant operators Safe Harbor protection of liability for wrongdoings under "their" public IP address.

Challenge: competing with centralized VPN services

To reap the attention of the general public Sentinel and dVPN-compatible client software will go a long way: their marketing capacities would need to be immense to hope existing in an already crowded marketplace of VPN services. Instead, the focus should be on education, the risks of centralized VPN services, and maybe a few scandals of VPN services forced to hand over logs despite their claims of "not storing any logs".
But a strong catalyst could be the costs: paying for VPN service on dVPN could be much much cheaper than on centralized VPN (since dVPN is fueled by already-existing unused bandwidth on plenty internet lines, no need to build additional internet lines and operate dedicated VPN servers in datacenters, and even then it can sit on the very cost-effective Akash Network).
Better yet: the Sentinel blockchain uses delegated Proof of Stake, people can stake DVPN tokens to earn rewards (basically get "free VPN service" by contributing to blockchain security). And DVPN staking is quite juicy currently, with a 61% APY.

Challenge: competing with more advanced anonymization networks

dVPN doesn't seem like a direct competitor to TOR, since it has a slightly lesser privacy principle: the DVPN payment is traceable on the blockchain, and might be linked back to a personal identity in some cases (KYC+AML with debit card)..
But even TOR falls short for extreme privacy needs. Instead, dVPN is relevant for legitimate use of higher bandwidth, for example geo-restricted streaming services. And since bandwidth gets paid for per-use, this has as effect:

• for relay and exit nodes to allocate more bandwidth to get more DVPN token fees
• for users to select optimal nodes for their needs
• deters spammers and other bandwidth abusers
  dVPN sits at the crossroads between centralized proprietary VPN services, and anonymization networks.

Challenge: scaling of the blockchain
The Sentinel blockchain is built with the Cosmos-SDK, using Tendermint-BFT consensus, IBC-enabled. It can handle tens/hundreds of transactions per block without much issue, and there's a new block every 7 seconds. Not bad, but is it enough if millions of people rely on the blockchain for their dVPN use? Remains to be seen.
But then again, it's CosmosHub: interconnecting more Sentinel blockchains is doable if the need arises.
We'll see how it goes!

Disclaimer: the stories shared on this blog are mine, they aren’t financial advice, endorsement, counseling of any kind. Cryptocurrencies are highly volatile and speculative assets plagued by gambling addiction and fraud. Do your own research, never EVER take loans to acquire crypto, never communicate your private keys or mnemonic seed words to anyone, and never invest what you can’t afford to loose.

Websites, mobile apps, backup storage, content distribution, neural network training, gaming servers, .. even blockchain validators and masternodes. All those are very often found relying on cloud computing platforms.

Cloud computing brought a paradigm shift in IT fields, with data processing delegated to containerized virtual machines, spawn up on-demand, and deleted once the task is complete or when bigger resources are needed (for example a service becoming viral and requiring a resource processing closer to customers with greater load balancing).

The three biggest cloud computing providers are Amazon’s AWS, Google’s GCP, and Microsoft’s Azure.

For companies operating hugely popular services, the running costs of their cloud computing infrastructure can be significant. And you know there’s a problem when CloudFlare, the biggest CDN service, goes explicitly dissecting AWS’ horribly high egress costs.

However, there are many companies, hosting providers, just having cloud hypervisors running idle for long periods of time, cloud computing they could sell for significantly cheaper if their customers had a framework to deploy their instances within seconds, with tailored resource profiles, hypervisor-agnostic. And there’s a smart solution: the Akash blockchain, and it’s Akash utility token.

Described as an “AirBnB for cloud computing”, the Akash Network brings that required framework to standardize the process between providing cloud computing resources, and buying such resources to deploy Docker apps and services, all fully automatized and in the blink of an eye.

While still in it’s infancy, this project can already show operational use, and the website Akashlytics keeps track of deployment counts, active deployments, and loaned resources. And a price comparison page, showing just how affordable Akash deployments can be in comparison of centralized providers:

Speaking of infancy: just a couple days ago the Akash Network crossed the 200 active deployments line, showing a steady and slightly accelerating adoption rate.

While I’m personally not an expert in Docker deployment and management, I however do know the huge and increasing needs for cloud computing resources, scalable, quickly started and affordable. Plus, as pointed out by respective project developers, combining technologies of several blockchains make it possible to run a complete, affordable, fast and censorship-resistant cloud infrastructure relying on:

– Akash for processing power
– Sia / SkyNet for storage
– Handshake for domain name service

I played around a bit with Akash and really following instructions to get a “Hello World” web page up and running was quite easy and satisfying. I needed that hands-on approach to evaluate the potential of this project, and I must say I’m convinced. And I really really appreciate the bustling activity of the developers and contributors of that project, making it progress very fast.

Now, to the cryptocurrency side: as said the Akash Network uses the Akash (AKT) coin as utility cryptocurrency. The blockchain relies on the Tendermint consensus protocol, Delegated Proof-of-Stake, with a rather nice 46% APY currently, and the token can be found on several exchanges and DEX Osmosis. Management wallet can be Keplr, Cosmostation.

Delegated staking gives a reward output every 7 seconds (each block), and staked tokens have a 21 days unbound waiting period. There’s a max supply of 388,539,008 AKT. At time of writing, the Akash token is valued $2.46.

Long story short: it’s a project I have my eyes on 😉

Disclaimer: the stories shared on this blog are mine, they aren’t financial advice, endorsement, counseling of any kind. Cryptocurrencies are highly volatile and speculative assets plagued by gambling addiction and fraud. Do your own research, never EVER take loans to acquire crypto, never communicate your private keys or mnemonic seed words to anyone, and never invest what you can’t afford to loose.

In my previous story, I covered the specificity, advantages and issues with Proof-of-Work secured cryptocurrency blockchains.
In the near future, if things proceed smoothly, the currently second biggest cryptocurrency by marketcap, Ethereum, should make a switch from Proof-of-Work model to Proof-of-Stake. Therefore, getting to know more about PoS (and Delegated Proof-of-Stake) and and looking at blockchains already relying on such model is particularly relevant.

What is “Proof-of-Stake”?

On blockchains, transactions are broadcasted to the whole network in a peer-to-peer communication between nodes, simple computers. Those nodes must fulfill those tasks:

• validate the integrity of the previous block
• collect the transactions
• compose the next block with the transactions
• (and if the node is “lucky”:) sign and broadcast the new block, and earn a reward
  Those principles are the same on PoW and PoS blockchains, but the conditions differ:
• in PoW, to be able to “sign” out a new block, the node has to provide a mathematical solution to the previous block, thus proving having done the required calculations (the work, typically referred to as “mining”)
• in PoS, to be able to “sign” out a new block, the node gets a random selection based on amount of bonded tokens, it’s “stake” in the network

The more tokens a node has staked (bonded, dedicated to the network securing), the more likely it “wins the lottery” against other nodes and gets to sign out a new block, generating rewards for itself (a percentage of their bonded tokens, plus transaction fees paid in transactions in the newly signed block).

But what happens if a node “cheats” and tries to send out a block without having been selected, or “double-signing” a block? Well: the blockchain algorithm punishes such behavior with “slashing”: the misbehaving node sees a certain amount of it’s bonded tokens burned away. The losses being usually huge, node operators are highly discouraged to attempt disrupting the blockchain integrity.

On principle, such model has no limitation on amounts of nodes securing the blockchain, but unless the protocol has a built-in bias to “boost” chances for minority nodes to sign blocks, only the nodes with the biggest stakes ever get rewards (that’s particularly true if the blockchain didn’t had a “ramp-up period” in which many nodes could enter the network with zero or low stake, and with the first blocks generating zero or very low rewards, so all nodes get a chance to increase stake gradually and proportionally from the start). Some blockchains use that model in a centralized way, such as Stellar.
And there’s an improvement on that model:

Nominated Proof of Stake

NPoS, as seen notably on Polkadot ecosystem, sees a selection of validators by nominators make it into the active pool. It differs from DPoS as seen below as there’s a “rotation” of which validators secure the blockchain, based on the amounts of nominations they receive BEFORE era start. Otherwise, the general principles are the same ↓

Delegated Proof of Stake

More and more blockchains use a DPoS model, and indeed this component introduces very interesting functions.
In DPoS we must consider two participants in the blockchain:

• validators, who are the nodes as described before
• delegators, who are token holders
  A DPoS blockchain usually sets a fundamental parameter: the amount of validators (nodes) is limited, only the validators with the most bonded tokens are eligible to signing blocks on the blockchain and thus generating rewards.

But while node operators can bond tokens to their own validator, validators derive the most bonded tokens from delegators.
Delegators are, simply, token holders who choose which validator(s) they want to delegate their tokens to. In return, they receive a portion of the rewards generated by that validator, minus a commission kept by the validator (in this, it’s somewhat similar to pooled mining on PoW blockchains).

But there’s a catch: since the total number of validators on the network is limited, the network needs the validators to be faithful AND highly available.
If a validator is offline, itself AND the delegators suffer a slashing penalty. Not too hefty, but hard enough to really ensure the node operators do their best keeping their validator online, and the delegators do proper research about the validator and it’s operator before delegating their tokens to it.

And of course, in case of more grave infringements against the blockchain such as double-signing, the penalty is very hefty.
Also, to prevent validator-hopping and chain-split events, most blockchains set a minimum amount of time for undelegating tokens: usually between 7 and 28 days, during which those tokens can’t be redelegated or spent, and don’t make a portion of rewards the delegator might get.

The tasks of the delegators

To avoid seeing their bonded tokens slashed and suffering losses, it is highly recommended to delegators to carefully pick which validator(s) they delegate their tokens to. They may pick a single validator if they trust it’s operator will run it faithfully and with proper measures to ensure it will remain online 24/7 available for the network, or they may pick multiple validators to compensate the failure of one.
Delegators can delegate tokens any time and in any amount directly from their compatible wallet, can reinvest rewards to the same validator, can undelegate the tokens back to their wallet, or redelegate their tokens to a different validator (this operation, like undelegating, usually coming with a 7–28 days minimum time).

It is also quite recommended for delegators to keep in touch with the validator operators, may it be by following them on their website, Twitter, Telegram, Discord or any other communication channel where the operator might publish announcements regarding the validator node (for example: scheduled maintenance during which the node would be offline and potentially leading to slashes, or changes in the commission rates). Or even explicitly ask what measures the operator puts in place to ensure the good function of the node, hardware used, human supervision,…

Additionally: delegators get to vote for governance proposals on the network, their vote weighting according to the amount of tokens delegated. Such proposals can cover a variety of subjects such as changing the limit number of validators, creating a compensation fund in case of bugs, changing the inflation parameters, introducing upgrades to the blockchain…
Sidenote: on ownership of delegated tokens
In this post, I assume people who delegate their tokens do so by themselves using a proper non-custodial wallet, being in control of the private keys. That’s on-chain self-staking, people remain in ownership of their tokens, even of tokens that have been delegated. But there are other situations.

As per the motto “not your keys, not your coins”, people should be extra careful when they delegate their tokens through an exchange or staking service: they effectively loose control over their tokens.
On-chain custodial staking usually refers to exchanges or staking services taking control of the tokens, and actively using them to validate on the blockchain. This is for example the case of Kraken, Binance or Huobi, validating on the KAVA blockchain with their user’s tokens bonded. While users of their services might enjoy a few benefits like zero-wait unstaking or autoreinvest, they tend to get significantly less rewards than if they delegated themselves through a wallet. And: they become ineligible to possible airdrops or governance voting.
Off-chain custodial staking is basically just a proprietary interest rate on deposits on an exchange or other service, regardless if the token’s blockchain actually uses PoS.

The tasks of the validator operators

Validator operators have the responsibility to maintain a network node and do due process to ensure their delegators don’t get penalized by slashing, may it be by insuring them with a reimbursement (either paid out directly, or integrated as “slashing compensation fund” fed by a portion of the reward commissions.
Operating a validator node is maintaining a server or cluster of servers but on steroids: only people with solid expertise in system administration and high-availability protocols should operate a validator node.
Maintaining an online presence and providing transparency to delegators is always appreciated.
Validator nodes consume way less electricity than Bitcoin miners, and they are a limited quantity of them, but it’s always good if infrastructure can be reused, for example operating validator nodes for several blockchains on the same hardware, or using optimized cloud computing instances.

The staking rewards

Blockchains differ in their parameters, but usually there are a few principles:

• the amount of delegated tokens should be high, so no “rich adversary” can disrupt the blockchain by delegating to (or operating) a mischievous validator
• to reach high proportions of delegated tokens, token holders should be incentivized with high reward rates
• to be able to get tokens to stake, users should benefit from airdrops, sales, event rewards, faucets, or exchanging other tokens or fiat
  It is not uncommon for early blockchains to provide quite high reward rates to delegators, the rates gradually decreasing as more and more tokens get delegated and secure the blockchain. One common figure for PoS is > 80% of tokens staked. Additionally, reward rates are also affected by inflation rate.

The aristocracy issue of PoS

Proof-of-Stake introduces some level of trust in a blockchain ecosystem, with delegators having to trust validators will do their job properly to avoid slashing. It’s a sidestep from Nakamoto’s ideal of zero-trust digital money.
Delegators, by risk management, might pick only the most reliable and insuring validators, therefore concentrating the “validation power” in the hands of a reduced amount of validators. While PoS don’t exactly suffer a risk of 51% attacks like with PoW, the concentration shifts commissions resources away from smaller or newer validators. A big validator can easily cover their costs or buy the best hardware with just a 1% commission, while a smaller validator would struggle to meet ends with a 10% commission. It comes down to the community to ensure a monopole/duopole/tripole of validators don’t prove detrimental to small validator health, and that failure of one big validator doesn’t start a ripple effect on blockchain stability and security.

Further read
For a more technical dive into Practical Byzantine Fault Tolerance in a Proof of Stake context, here's an excellent blog post on Cosmos.

Disclaimer: the stories shared on this blog are mine, they aren’t financial advice, endorsement, counseling of any kind. Cryptocurrencies are highly volatile and speculative assets plagued by gambling addiction and fraud. Do your own research, never EVER take loans to acquire crypto, never communicate your private keys or mnemonic seed words to anyone, and never invest what you can’t afford to loose.

Many cryptocurrencies rely on a Proof-of-Work principle to secure their blockchain and reward participants.

In a nutshell: each block on the blockchain poses a cryptographic problem, in technical terms a reverse-hash bruteforcing. While generating a hash from input data is extremely fast for a computer (like multiplying two large numbers), finding the input data from the hash is extremely hard (like dividing two very large numbers). Whichever computer finds the solution broadcasts it to the network as proof, along with a new block containing transactions conducted meanwhile, and a new hash to “crack” for all participating computers. Should the proof be valid, the computer receives a reward for the effort.

This process takes a huge portion of calculation power from a Central Processing Unit, Graphics Processing Unit, or Application-Specific Integrated Circuits. Whichever works better for a specific algorithm depends.

One big advantage of Proof-of-Work blockchain security is that it can scale formidably, the network adjusting the calculation difficulty in realtime to stabilize the required duration for a solution to a block being found. And it’s zero-trust: all participating computers of the network validate the proposed solution by running the hashing function and comparing the digest. Any wrong solution is immediately spotted and discarded.

But also: the hashing algorithm is often very common and well documented in the computer industry, such as SHA256 or Scrypt. Which means general public hardware is able to perform the calculations (the “mining”), preferably with graphics card since they contain a great quantity of processing units (individually much slower than CPU cores, but it’s commonplace for a graphics card to contain 256 or 512 of them or even more, great for parallelized work!). This was by design from Satoshi Nakamoto, who envisioned everyone being able to “mine” Bitcoin at home and participate in the securing of the network, making it effectively robust against takeover attempts by adverse governments or companies.

No wonder many “old” cryptocurrencies rely on Proof-of-Work models:

• Bitcoin
• Litecoin
• Dogecoin
• Ethereum (at time of writing)
• Bitcoin Cash
• Monero
• Bitcoin Satoshi Vision
• Dash
• ZCash
• Verge
• Bitcoin Diamond
• …..

But.

Cryptocurrencies in general and Bitcoin in particular soon reached a popularity Satoshi Nakamoto probably didn’t anticipate. Many participants started pouring processing power into the network, and before long the probability for a solo miner to validate one single block got pushed to weeks, then months, and further. So, people gathered in “pools”, putting processing power in common and then sharing the rewards proportionally to participation. Sure one single miner didn’t receive the 50 Bitcoin reward, but instead got a steady ~0.1 Bitcoin reward per day (at the time I started GPU mining in a pool too).

This worked for a while, although rocked by the arrival of Application-Specific Integrated Circuits (ASIC). Machines custom-built to dedicate the maximum amount of power to the mining process (needless to say their operating system wasn’t Windows). But computer chips evolving very fast, and ASICs being so incredibly expensive, the mining shifted back to GPU and scaled up dramatically. Farm scale.

So much so operating a mining facility requires a significant initial investment, access to warehouse-buildings and cheap electricity. But it’s doable, and makes gamers absolutely furious by buying off all available graphics cards they’d need to upgrade their gaming rig.

That’s the four major issues about Proof-of-Work mining now:

• industrial facility, thus only the richest companies get to contribute to the blockchain security, instead of basic people with home computers
• graphics card shortages for gamers, modellers, graph artists, neural network engineers, scientists..
• concentration where electricity is cheap and political regime not democratic (until recently China, now shifting to Kazakhstan)
• gargantuan electricity consumption and heat dissipation, during a time where all efforts should be on solutions to limit global climate change

Sadly, due to the deflationary nature of many cryptocurrencies (especially Bitcoin and Ethereum), their exchange prices might continue to rise, further incentivizing the opening of mining farms. Sure, cryptocurrency mining still represents a droplet in the bucket of energy loss, heat emissions and fossil fuel burning. But it’s a serious thorn in the foot and very valid argument for cryptocurrency-banning legislation.

Also, technologically wise, the two behemoths Bitcoin and Ethereum lack practical foundations for use as transaction networks (40–80 minutes to validate a transaction on Bitcoin network? Hefty ~5 USD fee to hope getting a transaction go through on Ethereum chain? Neither are practical to pay for a loaf of bread at your local bakery).

I actually hope that Bitcoin and Ethereum end up giving way to better cryptocurrencies in the marketcap ranking. Cardano and Ripple show strength, good old Stellar is running fast, and I have some interest for Polkadot, Solana and Polygon. Tezos gets some institutional support, and Cosmos enjoys a flourishing ecosystem. Oh btw: all those have either a specific validator node infrastructure, or rely on Proof-of-Stake validation. That’s for the next post 😉

Disclaimer: the stories shared on this blog are mine, they aren’t financial advice, endorsement, counseling of any kind. Cryptocurrencies are highly volatile and speculative assets plagued by gambling addiction and fraud. Do your own research, never EVER take loans to acquire crypto, never communicate your private keys or mnemonic seed words to anyone, and never invest what you can’t afford to loose.

In the very early days of Bitcoin, the few alpha-tester holders transitioned from “funny technological toy proof-of-concept” to actual transaction currency use. And so comes a rather fundamental question: what is the value of one Bitcoin?

Some may say “whatever people agree it’s valued”, but the early days had little hints on what value to peg a Bitcoin to. Since minting (mining) Bitcoin requires an effort (CPU computation time and electricity consumption), there was a ballpark. But of course not everyone pays the same electricity bill, nor has the same CPUs. Still: at that scale, direct negotiation was still doable, and manual exchange forums.

And so, most famously, Laszlo Hanyecz proposed to pay 10,000 Bitcoins (about $41 at the time) for two delivered Papa John’s pizzas, and a British man accepted the trade. May 22, 2010 became known as “ Bitcoin Pizza Day”. And just at the begin of the next year, Bitcoin hit parity with the US Dollar.

Whether it was to earn a profit or to have a head-start in a neat decentralized digital means of payment, more and more people wanted to get Bitcoins without the hassle of mining. And miners wanted to get even on their mining equipment. This supply and demand field demands for an already very well known system: an automated exchange market, such as MtGox famously. Users buy, sell, or both. Sometimes the supply is greater than the demand, and the market price falls. Sometimes it’s the contrary.

Those price swings open a playground for certain users, some already experienced in the field, or just greenhorns: traders.

For who can correctly predict an incoming decrease in price can sell earlier, wait out the move, and re-buy at a lower price (for less collateral, or for more Bitcoin). Or predict an incoming increase in price and buy earlier, wait out the move, and sell for a profit.

Traders often think: “ah if only I had foreseen the market movement, I could have made a profitable order”. In fact, Bitcoin trading, as with other stock markets, is not random. There are indeed signals that can give a clue about the most likely move, and in which timeframe. Signals usually fit in two categories:

• fundamental: an outside event that could impact the market (Elon Musk mentioning a crypto in a tweet, Chinese authorities banning Bitcoin mining, Cyprus capping weekly withdrawals from bank accounts…)
• technical: the parameters of the market trend hits certain thresholds (the Relative Strength Index crossing the 70 line, the ticker piercing the Ichimoku cloud, the trading bars tracing a “cup and handle” pattern..)

For who can react very fast to such signals, there is a potential to make a profit. For who misjudges or gets caught off-guard with poorly placed stoplosses, well, the consequences can hurt.

Unlike more traditional stock markets, the Bitcoin trading doesn’t “close”. It runs 24/7, so for who wants to catch the most profitable waves this requires precise monitoring. Or they’re left off with daily/weekly/monthly time frame trading, with lower yield. Or.. they use trading bots.

At begin when there was only Bitcoin and “stable” fiat collateral, things were simple enough. But: imagine you want to weight the price movement of Ripple compared to Monero while considering a position on Dogecoin and selling off Polkadot. And rather exchange against Bitcoin, Ethereum, US Dollar, Euro… who each have their own “stability” rate against each other? Good luck with that Gordian knot if you don’t have bots doing the calculations and margin estimates for you!

Overall I think Bitcoin trading (or any commodity) requires a significant set of tools to monitor many many aspects of your markets, and then again not everyone is trading on equal footing. It’s high risk low yield for non-professionals (and even them aren’t safe playing on the S&P, may it be economic crises or jokers accumulating GameStop stocks to ruin futures trading).

Remain responsible, stay safe!

Disclaimer: the stories shared on this blog are mine, they aren’t financial advice, endorsement, counseling of any kind. Cryptocurrencies are highly volatile and speculative assets plagued by gambling addiction and fraud. Do your own research, never EVER take loans to acquire crypto, never communicate your private keys or mnemonic seed words to anyone, and never invest what you can’t afford to loose.

By the design of Satoshi Nakamoto and fiercely defended by developers since, Bitcoin is of deflationary nature: the total amount of bitcoins that will ever exist is 21 million. The issuance of Bitcoin is algorithmic and decreases over time (during so-called “halving” events), the final new bitcoins being minted around 2140. From there on, the sole rewards received by miners for securing the blockchain will be transaction fees alone.

Medically speaking, it is still rather safe to assume few current Bitcoin holders will live to see the turning point. Only one thing is certain: Bitcoin’s code.

Due to the deflationary nature of Bitcoin, holders are incentivized to hold onto them instead of spending them, in the hope their bigger share of the available supply will increase the scarcity of bitcoins, and thus their relative value.

Bitcoin was already known by many IT specialists and self-described “crypto-anarchists” before the general public, and the latter often times in the media with news headlines like MtGox hacks, busting of drug traffickers, warning financial regulators, or more recently cryptolocker attacks on companies and institutions. Nevertheless, more and more people, companies and institutional investors started investing in Bitcoin, logically driving up it’s price, further creating headlines and boosting interest in a positive exponential feedback loop. Up until a point an event, sometimes as small as a tweet by Elon Musk, causes a halt and pullback with investors taking profit quickly before the price decreases further, and by this intensifying the “crash”.

The resulting huge price swings are of course in the interest of traders, who usually resort to technical analysis and/or fundamental analysis to “buy low & sell high”.

But trading activities come with the risk of misjudging the market, leading to potential (huge) losses. That’s why many people rather resort to “hodling”: holding onto their bitcoins and waiting out for the price to reach a certain threshold (or none), perhaps to use their holdings for a big purchase (like real estate).

Bitcoin has often been described as “anonymous”: fundamentally nothing could be more wrong, as the transaction ledger is public, every move is traceable, and the possession of the private key of a wallet is an cryptographic indisputable proof of knowledge and control over holdings and transfers. Taking this into account, it’s actually amazing criminals used Bitcoin for their mischief instead of cash, much for the benefit of police criminal investigators. This fact makes me believe even the current cryptolocker trend will eventually pass, with individuals identified and brought to justice.

Some investors might hold onto their bitcoins for more political reasons: Bitcoin serves as reserve of value and global transaction network, which can be important for people living in under-banked countries experiencing high inflation rates or dependence on the US Dollar. Bitcoin has been historically sensitive to events such as Cyprus crisis in 2012–2013, Venezuela’s hyper-inflation, Salvador’s dependence on abroad money inflow…

Yet, Bitcoin remains unsuitable for direct purchases: Bitcoin’s ~10 minute block time makes transactions definitively confirmed by the blockchain only after ~60 minutes or more, and small sum transactions require hefty fees to find a spot in a busy block. As such, Bitcoin won’t replace fiat money. However, it can replace savings and “sock stash”.

While generally safe with a properly secured and backuped software wallet or hardware wallet such as Ledger, and highly likely to yield a significant increase in capital over time, Bitcoin holding nowadays comes with cons:

• nothing guarantees the price of Bitcoin, only supply/demand balance
• practical challenges of safe wealth redistribution means (events such as divorce, inheritance, debt liquidation..)
• “cashing out” often depends on centralized exchanges managed by companies, who don’t operate in all countries of the world
• Bitcoin mining’s impact on electricity supply and carbon gas emissions is a serious concern, which can motivate regulators to outright ban all “proof-of-work” cryptocurrency transactions (even if right now the impact of Bitcoin mining on climate change is far minor than transportation and industry)

All in all, Bitcoin “hodling” can be a relevant strategy for who enjoys a stable situation (a job income to cover housing and living expenses, plus an excess for rainy days without having to tap into the stashed Bitcoin, being rather immune to huge market swings, not having to monitor the market trends on the daily…)

The final word: as with all digital files, it is absolutely crucial to make backups (including off-site backups) of Bitcoin wallets, especially for significant Bitcoin holdings.

The current proposal 13 on Juno seeking to adjust the blocks per year param for it to more closely fit the projected issuance rate will very slightly alter the time per block. This brings me back to some thoughts about the realtime performances of Tendermint chains. Let's take a few examples:

Osmosis

Osmosis is a good case study because the chain usually doesn't require a fee to accept transactions, and every day at epoch (staking and LP rewards attribution) lots of transactions get into the blockchain in a very short period, which is a good indicator of how much a "real life" chain can handle at traffic spikes. There's how it breaks down:

average blocktime: 6.5 seconds per block
average transactions per block: ~50
spike transactions per block: over 300

All in all it handles it pretty well, from what I know it sits in a good equilibrium for it's use case. The same goes for Cosmos, with roughly 7 seconds per block, accommodating a steady 5-20 transactions per block. It could revamp the minimum gas fee structure to zero and still handle fine currently.

Binance chain

The Binance chain has some odd parameters in the field:

average blocktime: 0.5 seconds
average transactions per block: ~12
spike transactions per block: I rarely saw more than 30 transactions in a block

Choosing such a low block time might give a marginally "faster" feeling to transaction execution to the users (often funds movements), but the downside is that leaves very little margin for node sync for rounds. It's not unheard of for an internet link between datacenters of Netherlands and Australia to rarely reach a sub-second TCP response time, let alone a blockchain consensus round. There's little room for improvement possible there, which leads to the side effect to concentrating many validators in limited geographic locations (namely the IX hotspots New York, London, and Amsterdam). This for a very marginal user experience benefit (the block time could be 2 seconds with barely noticeable difference to the user, and each block would be more than enough to comfortably handle the same amount of transactions).

e-Money

The case of e-Money is interesting because that chain adapts block time "dynamically" to it's activity.

average blocktime: ~20 seconds
minimum blocktime: ~1 second
maximum blocktime: ~1 minute
average chain activity: about 1 transaction per minute

This chain has a payment use case, with it's NGM staking token and various fiat-backed stablecoins, so it needs to finalize transactions fast when they happen, while not wasting resources when nothing's happening. If you compare to a VISA/MasterCard payment, with the terminal recording the transaction, "calling home" to initiate a debit, it's not unusual for a transaction to require 2-3 seconds to complete. That's the amount of time a customer might expect to wait at the cashier. And accounting for mobile network delays, e-Money achieves transaction finality in about the same time.
VISA claims to handle about 1700 transactions per second, and from the peak performance per block of Osmosis above it really looks like a single chain like e-Money can handle almost as much.
And let's not forget e-Money chain is IBC-connected, if each country or region had a dedicated "e-Money zone" with local validators a user could automatically IBC-transfer their tokens to during travel for then use as main payment chain locally, this potentially scales up hundredfold (to say nothing of future performance improvements of transactions-per-block handling by validators).

Looking for something to deploy on Akash? Take a look there!

Deploying a Minecraft server on the Akash network (deploy.yml + guide)

Dedicated subreddit to Cosmos airdrops

Yet another page listing airdrops for Cosmos stakers

This tool allows to quickly check eligibility and amount of airdrops for ATOM stakers

Plenty people buying fiat currencies right now, despite the 6% loss in value year to year and unbacked supply.. are they hoping for an airdrop or something when hodling fiat? 😏 /s
Either cryptocurrencies taught me everything about money, or broke my understanding of it

• no top5 voting power
• no 0% commission validators (unless new chain / recently IBC-connected)
• no AWS/GCP/Azure hosting
• $AKT, $DVPN, $ATOM, $OSMO: website on @akashnet_ or ban
• contrib to #Cosmos ecosystem (code/governance/dApp/IBC node/...)

Since Osmosis is open source, it's possible to track the upcoming addition of tokens by monitoring the changes in this file.
Helps to know what to hold onto before feeding a future pool.

The swedish finance authority calls for regulators to ban Proof-of-Work mining:

If we were to allow extensive mining of crypto-assets in Sweden, there is a risk that the renewable energy available to us will be insufficient to cover the required climate transition that we need to make.
Furthermore, the publication reads:
There are other methods for mining crypto-assets, that could also be used for Bitcoin and Ethereum, that are estimated to reduce energy consumption by 99.95% with maintained functionality
I guess they're referring here to Proof-of-Stake mining.

Nym, built on the Cosmos-SDK, aims to create a mixnet infrastructure to render communications unobservable.
Currently in testnet phase.

The blockchain upgrade of Bitsong encountered some critical issues.
But it has been fixed and the Bitsong-2b chain runs smoothly since. Governance proposal to activate the IBC module is coming soon, paving the way of Bitsong's inclusion in the interconnected Cosmos Hub (and possibly listing on Emeris & Osmosis DEX?)