Goldman Sachs Investment Banker Matt Levine: What are the core innovations of the next generation of cryptocurrencies?

The only cryptocurrency I own is ExcelCoin. ExcelCoin is the next generation cryptocurrency, and its core innovation is that its ledger is not maintained by proof-of-work (which creates environmental problems) or proof-of-stake (which has its own problems), but by me. I maintain books in Microsoft Excel. Here is a copy of the ledger as of 9am today:

Goldman Sachs Investment Banker Matt Levine: What are the core innovations of the next generation of cryptocurrencies?

Email me if you want to buy ExcelCoins; I will make a market with a bid of $0.99 / offer of $1.01, although this will of course change with market conditions.

Of course, ExcelCoin started out as a currency, a form of “digital cash”, but the power of the concept is that in principle you can track any type of asset using the same underlying technology (which I type in Excel). For example, you can extend ExcelCoin technology to track not only fungible tokens like coins, but also non-fungible tokens, where each entry in the ledger represents a unique asset. For example:

Goldman Sachs Investment Banker Matt Levine: What are the core innovations of the next generation of cryptocurrencies?

Why do you want me to write “a picture of a cat” next to your name on the list? This is just a toy example, but with a little imagination you’ll see how powerful it can be. For example, we can track real estate in this way. I can write down a list of all the houses in my town and who owns them, and we can update the entries in my list, transfer ownership. As of now, my listing in Excel does not have any legal title and it will not be synced or superseded with the legal property registry. But I think you’ll agree that it’s much more efficient and technologically advanced than the old paper property registration legal system, so I think it’s likely to win out in the long run.

This is stupid, why do you say that? Simply put, it’s technically stupid. Actual cryptocurrencies (and blockchain systems for NFTs, proposed real estate blockchains, etc.) have distributed consensus mechanisms for updating their shared ledger, proof-of-stake or proof-of-work, or some other mechanism that lets participants in the system Validation and collective control of the ledger. And I can enter whatever I want in Excel. If you buy some ExcelCoins from me and I delete your entry in my Excel ledger, then you also have no ExcelCoins, what type of system is that?

A better answer is a better answer is that it’s socially stupid because it’s me who maintains the ExcelCoin ledger, and I’m obviously joking. You have a better answer that it’s socially stupid because it’s me who maintains the ExcelCoin ledger, and I’m obviously joking. You won’t believe that I maintain the ExcelCoin ledger because I invented ExcelCoin to make a joke about the ledger. On the other hand, millions of people own dollars, which just means that some bank has a list and an entry on that list. It may not be in Excel, but the basic idea is the same: the bank has a list of dollars in its account, the list is not kept by any kind of consensus mechanism or blockchain or otherwise, the bank just uses Cobol to keep the list of lists. But you (largely) trust the bank to maintain that list because, among other things (1) it has a good track record in maintaining this list, (2) it has a business incentive to maintain this list, (3) it has a Strong regulatory and legal motives for the list, and more. The list of banks doesn’t have any big shakes technically, 100 years ago, banks kept very similar lists with pen and paper. This list system is not perfect, and sometimes banks make a mess of the list! But it’s not terribly stupid. This is very normal and standard, and millions of people rely on it without thinking. I don’t save ExcelCoin in Excel because it’s stupid, but because I save it in Excel, it looks stupid.

Last Friday, Moxie Marlinspike wrote a blog post about “My first impressions of web3.” Marlinspike is a renowned cryptographer and computer security expert, inventor of the Signal application, and more. This article has gotten a lot of attention in the Web3 (and Web3 skeptics) world; it’s good, I highly recommend it, and I’m just scratching the surface here. A related point is that distributed ledgers are not necessarily a complete technical solution to asset ownership.

Most people think of images and digital art when they think of NFTs, but NFTs typically do not store this data on-chain. This is too costly for most images to be NFTs.

Instead of storing data on-chain, NFTs contain a URL that points to the data. What amazes me with these standards is that there is no hash promise for the data located at the URL. Looking at the many NFTs on popular marketplaces being sold for tens, hundreds or millions of dollars, the URL often just points to a certain VPS running Apache. Anyone who has access to the machine, anyone who buys the domain name in the future, or anyone who breaks the machine can always change the NFT’s image, title, description, etc. to whatever they want (whether or not they don’t “own” it) ”). There is nothing in the NFT specification that tells you what an image “should” be, or even allows you to confirm whether something is a “correct” image.

So as an experiment, I made an NFT that changes based on who is looking at it, because the webserver serving the image can choose to serve a different image based on the requester’s IP or user-agent. For example, it looks one way on OpenSea and another way on Rarible, but when you buy it and view it from your crypto wallet it will always show up as a big [poo] emoji symbol. What you bid for is not what you get. There’s nothing unusual about this NFT, that’s how the NFT specification is built. Many of the highest priced NFTs could turn into a [poop] emoji at any time, I just made it more explicit.

Is technology also fully centralized? Malin Spike continued:

NFTs by themselves do not convey ownership of the related thing in a legal or practical sense. It conveys ownership in a more metaphysical sense: if you buy a Bored Ape Yacht Club NFT, those who are part of the BAYC NFT community will see you as the owner of the ape. This is essentially a social fact, and it could be true even if the immutable code of the blockchain says you don’t own this one because you were hacked or whatever. Technology is the scaffolding that hangs social systems, but social systems are things that convey or do not convey “ownership” in a meaningful sense.

Is technology also fully centralized? Marlinspike continued:

A few days later, without any warning or explanation, the NFT I made was removed from OpenSea (an NFT marketplace).

What I found most interesting, though, was that after OpenSea deleted my NFT, it also no longer appeared in any crypto wallets on my device. This is web3, but, how is this possible?

Crypto wallets like MetaMask, Rainbow, etc. are “non-custodial” (the keys are kept on the client side), but it has the same problem as my dApp above: the wallet has to run in a mobile device or browser. At the same time, Ethereum and other blockchains are designed with the idea that it’s a peer-to-peer network, but it’s not designed in such a way that your mobile device or browser really has the potential to be one of those peers.

Wallets like MetaMask need to do basic things like display your balance, recent transactions and your NFTs, as well as more complex things like construct transactions, interact with smart contracts, etc. In short, MetaMask needs to interact with the blockchain, but the blockchain is built so that clients like MetaMask cannot interact with it. So, like my DApp, MetaMask does this by calling an API to three companies that are merging in this space.

For example, MetaMask…displays your NFTs by calling OpenSea’s API…

All this means, if your NFT is deleted from OpenSea, it will also disappear from your wallet. Functionally, it doesn’t matter that my NFT is indelible somewhere on the blockchain, since the wallet (and more and more other things in the ecosystem) just use the OpenSea API to display the NFT, which starts to provide my address Query of owned NFT returns 304 No Content!

“OpenSea keeps a list in Excel of who owns which NFTs.” The underlying list is kept on the blockchain, it’s just that OpenSea can modify its version of the list as it wishes, and its modifications are actually very binding. In fact, there are often stories of: (1) some gullible crypto guy handing out private keys to anyone who asks for his, (2) his NFTs were stolen, (3) he complained on Twitter , (4) he had a major NFT marketplace lock up the transactions of his stolen NFTs, (5) everyone wrote articles like “Hahaha, don’t you like decentralization now?”

That’s fine, Web3 proponents argue, because OpenSea’s ability to act arbitrarily is limited by community standards. Open immutable blockchains are still around, so you can compare what OpenSea says to what blockchain says. (Maybe MetaMask doesn’t, but the possibility exists.) If OpenSea’s listing doesn’t meet the expectations of its customers, e.g. it arbitrarily ignores blockchain, it lets people claim it’s not their NFT, etc. then everyone will put Take their apes to other places. But it’s also the basic reason why people trust banks! The basic protections are social, not technical.

Marlinspike:

When you think about it, OpenSea would actually be much “better” in a direct sense if all the web3 parts were gone. It will be faster, cheaper for everyone, and easier to use. For example, to accept a bid for my NFT, I would have to pay over $80 to over $150 in Ethereum transaction fees. This sets an artificial floor for all bids, or you’ll lose money by accepting bids that are lower than gas costs. Compared to credit cards, credit card payment fees often feel extortionate, but look cheap. OpenSea can even publish a simple transparency log if people want a public record of transactions, quotes, bids, etc. to verify their accounts.

But if they build a platform to buy and sell images that are not nominally based on crypto, I don’t think it will get off the ground. Not because it’s not distributed, because as we’ve seen, a lot of what is needed to make it work is not distributed anymore. I’m not bullish because it’s a gold rush. People make money from cryptocurrency speculation, and these people are interested in spending those cryptocurrencies in a way that supports their investments while providing additional returns, so this defines the setting of the wealth transfer market.

NFT hype people at the end don’t fundamentally care about distributed trust models or payment mechanisms, but they care about where the money goes. So money attracts people to OpenSea, they improve the experience by building a platform that iterates the underlying web3 protocol in the web2 space, they finally provide the ability to “mint” NFTs through OpenSea itself rather than through your own smart contracts, and ultimately this Everything opens the door for Coinbase to provide access to the verified NFT marketplace with their own platform via your debit card. This opens the door for Coinbase to self-manage the tokens themselves through dark pools held by Coinbase, which helps eliminate transaction fees and makes it possible to avoid interacting with smart contracts entirely. Eventually all the web3 parts are gone and you have a website that buys and sells JPEGs with your debit card. Due to market dynamics, the project cannot start as a web2 platform, but the same fundamental forces of market dynamics and centralization are likely to drive it to that end.

Also, technically, ExcelCoin is in some ways superior to other forms of encryption that rely on distributed consensus mechanisms. But it’s a lot worse in society, not only because I’m kidding and not doing anything to build trust in ExcelCoin, but also because there’s a huge speculative bubble in cryptocurrencies that doesn’t work for transparent non-crypto things like me The stupid Excel joke. The power of distributed consensus and immutable blockchains isn’t that they’re better technologies than some large trusted website you know to keep lists, that’s how Web3 works. The power of distributed consensus and immutable blockchains is that they can attract capital, which is exactly how Web3 works.

ChampionCoin

Last year, a group of people liked to hype memorabilia stocks like GameStop Corp. Many of them use Robinhood Markets Inc.’s brokerage app to do this. At one point, Robinhood briefly restricted GameStop and a few other purchases due to a clearinghouse issue, which angered a lot of people and sparked a bunch of conspiracy theories. Some meme-stock investors wanted to sue Robinhood over it, and in fact, there was a class action lawsuit that was dismissed in November.

You can probably see this dynamic and understand that people who bought GameStop in a speculative frenzy want to sue Robinhood. They want to sue Robinhood because they are angry, and in the US suing people is a form of catharsis and emotional satisfaction. They want to sue Robinhood because they believe they have a valid claim and want monetary damages for their inability to buy GameStop stock at $300 per share. But beyond emotional satisfaction and financial compensation, they may have a third wish: They may want to have another speculative frenzy. They may want to turn their dissatisfaction with Robinhood into a speculative asset and then trade to get rich.

You might think so because:

1. This is what everyone has been wanting these days. The lesson of GameStop, AMC, NFTs, Dogecoin, Web3, and ConstitutionDAO has always been “people will seize any excuse for a good speculative trading frenzy”. So if you can turn anything into a speculative trading frenzy, you should.

2. Those who participate in the meme-stock speculative trading frenzy may be particularly interested in the speculative trading frenzy.

It’s a story about a company that wants to do litigation financing and let regular people trade litigation financing claims, but on a blockchain, blah, blah, that’s a pretty common thing you’d expect. I tend to think that there is a long list of asset classes that the average person doesn’t trade very often, and people keep saying “what if we built the technology for the average person to trade this asset class” and my answer tends to be “they won’t trade it because Nobody wants this.” People have been trying to get the average person to trade a small fraction of individual office buildings for no apparent reason. I don’t think there’s a huge number of people who want to research and bet on individual lawsuits, or a huge number of plaintiffs who want to finance litigation by doing registered securities offerings, but that’s just one person’s opinion, yes, it may be crazy, or it may not be This madness:

On its website, however, Ryval focuses all of its attention on potential returns for investors. “Buy and sell tokens representing litigation stakes and gain access to a multi-billion dollar investment class previously unavailable to the public,” the company said . Ryval also promised “annual returns of 50%+,” though when Motherboard asked him about it , Roche admitted that the number “may be a bit high”.

But what follows is this:

But it wasn’t until the initial Apothio ILO launch that Roche realized the platform’s potential. This happened last January when online trading platform Robinhood temporarily suspended trading in GameStop stock after a surge in meme-related interest. The decision has led some to accuse the exchange of illegal manipulation. “When can we ILO Robinhood? We’re going to hold Robinhood accountable,” Roche said.

“ILO” is “Initial Litigation Release”. How Worth is the Lawsuit Against Robinhood by GameStop? Well, the actual value is about $0, which is what I personally predicted last year. But can you sell it for more than its long-term fundamental value? For GameStop investors? In January 2021?

Congressional Stock Exchange

Sometimes I get to know couples, one works in a bank and the other works in a hedge fund, and I think “Ah, what a regulatory nightmare.” Many regulated financial firms (and law firms, consulting firms, etc. company) has very strict rules on personal dealings to prevent the improper use of inside information by its employees. They require pre-approval of transactions, prohibit transactions in the name that the employee is working, and sometimes prohibit all trading of individual stocks. And to avoid overtly toying with the rules, they tend to extend to the employee’s family. This is fine if you work in a bank and your spouse is a teacher, although if your spouse is also an amateur stock trader you may have to make some tough choices, but if you work in a bank and Your spouse works for a hedging firm and it seems harder. You can’t expect hedge funds to be pre-approved by banks. I think people will fix this, but conceptually it seems like a challenge.

anyway

Georgia Senator Jon Ossoff is seeking to introduce a bill that would bar members of Congress from trading individual stocks — a move that House Speaker Nancy Pelosi did when her husband made millions from trading tech stock, the Washington Post has learned. defense of this practice.

Ossoff’s ethics bill would crack down on conflicts of interest and make it illegal for lawmakers and their families to trade stocks while in office, a source close to Washington, D.C., said the Democratic freshman senator plans to find a Republican co-sponsor after he finds a Republican co-sponsor. introduce the bill.

The bill could also require lawmakers to place their assets in confidential trusts, a step Ossoff, 34, did on his own just months after being elected in January 2021.

It may not seem easy if you’re a congressman married to a hedge fund manager, but maybe it’s a classic, not a mistake. What I’m trying to say is that, as far as I know, most of the useful inside information MPs get is on broad industry topics, not individual stocks. If you only own index funds and get an in-depth, secret briefing on Covid, you can sell those index funds for profit without trading individual stocks. I guess the confidential trust solves this problem.

Take a quick look at Bloomberg and you might not notice that AeroCentury Corp’s stock closed Friday at $47.99. It completed a 5-for-1 stock split over the weekend, so Bloomberg’s historical price page adjusted retrospectively to show Friday’s closing price of $9.598. And then people woke up this morning to do premarket trades and… uh…

NYSE Arca Equities, along with other UTP exchanges, ruled to cancel all erroneous ACY – AeroCentury Corp trades executed between 4:00:00-4:04:00 ET today at prices or high at $11.52. The ruling is not eligible for appeal.

Basically what seems to be happening here is that you have a computer program that buys and sells AeroCentury stock, the program is running and closes on Friday, and Friday closes thinking that AeroCentury is trading at $47.99, and then based on that price and how the weekend develops , it thinks “I’m going to buy AeroCentury at $47 or sell at $49” or whatever (actual numbers don’t matter), then before Monday morning you either do or don’t update the program like “don’t forget to put everything Divide by 5.” Some people did, some didn’t. People who don’t have their program waking up at 4AM and the market price of AeroCentury is $47.00/$49.00, and people who do, have their program waking up at 4AM on Monday and the market price of AeroCentury is $47.00/$49.00 $9.40/$9.80, and those who thought a little more woke up AeroCentury was on the market at $9.40/$45.00 and sold some stock at a ridiculously high price to those who forgot. And then the stock exchange would disrupt those transactions because it’s more of a cryptocurrency.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/goldman-sachs-investment-banker-matt-levine-what-are-the-core-innovations-of-the-next-generation-of-cryptocurrencies/
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