Smart Contract Platforms Thread -- Web3 Wars

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Smart Contracts are the bricks using which the internet of tomorrow, Web3 will be built. A decentralized internet owned by the users and builders, running solely on the collaboration of communities that power it. The idea of Smart Contracts was pioneered by American Cryptographer Nick Szabo in his 1996 paper and popularized as Ethereum gained traction.

Ethereum was launched by Vitalik Buterin in 2015 and became the dominant SCP. Its rise began with the 2017 ICO boom and it continued to shine brighter as it served as the cradle of DeFi (Decentralized Finance) and NFT mania. All SCPs are bound by Blockchain Trilemma and cannot be decentralized, massively scalable and secure at the same time.

Ethereum has prioritized Decentralization and Security over Scalibility and has been a playground for whales and institutions as small investors cannot afford to use the platform due to high transaction costs (Gas Fees). This created opportunities for other players to step in and fill the void. Soon EVM clones started to emerge promising faster transaction execution with low gas fees and started gaining prominance as they delivered on it. Ethereum killers were becoming a phenonmenon as innovative chains started developing their protocols such that they are EVM compatible making it easier to deploy DApps and attract developers to build in their ecosystems.

DeFi became huge on Binance Smart Chain as Total Value Locked was surging exponentially. The BNB token, went to the moon as it did a 20x after Pancakeswap and other Dapps were launched in it.

Ethereum was still growing but the newer chains were more attractive for investors as their growth rates were stellar, starting from a low base.

The biggest winners of 2021 turned out to be Solana, Luna and Avalanche (trio called Sol-Lun-Avax) as their TVL exploded and they made their foray into the top 10 cryptocurrencies by marketcap.

Ethereum co-founders Gavin Wood and Charles Hoskinson built their own blockchains each comprising of their own visions for a decentralized future. Polkadot plans to be the interoperable base layer of Web3 while Cardano wants to fulfil its vision of becoming an Ethereum killer.

Ethereum Virtual Machine (EVM) continues to dominate Web3, however that’s not everything. Cosmos happens to be another powerful ecosystem that acts as the internet of Blockchains and threats to disrupt Monolihtic EVM architecture with its Modular architecture

Algorand, Near, Tezos, Fantom are also among major Layer 1 blockchains that have made respectable strides in pushing DeFi adoption.

By Q3 of 2022, Ethereum will become a Proof of Stake Blockchain which will improve its scaling by a large margin. The future is multichain, can Ethereum continue to dominate or will it be pushed to the sidelines as Web3 wars heat up.

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Starting this thread because DeFi and Web3 are too big to confine them to general Cryptocurrencies thread. There’s too much instituational and VC money in this sector which presents lots of investment opportunities. I’ve covered very little here in my summary. Lets use this thread for discussion on the tech, adoption, innovations, regulations, tokenomics and markets as Web3 evolves.

Discl: I have small tracking positions on ETH, AVAX, ALGO and NEAR. More than the money, I’m it for the tech and Decentralization.

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How are you investing in these? Any guidance?

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You can earn yields on crypto deposits at Binance, KuCoin and OKX

Yield farming on Algorand’s Tinyman DEX

They offer 20% yields as their Aeneas Liquidity Mining programme is live till the end of May.

You need ALGO tokens to get started.

If you are just getting started with crypto, I would suggest you to try Staking. Learn about the L1 Protocol of your choice and if it has a sound ecosystem, buy some tokens and stake them on the Mainnet. Its a relatively low risk investment and you will get cashflows in the form of staking rewards.

Discl: There is always a smart contract risk in DeFi. Do your own research.

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Tornado cash advertised itself as a privacy solution on Ethereum for anonymous transactions. Turns out its not.

Algorand founder Silvio Micali said in a FIFA statement his company could help “transform the way we all experience the world’s game.” The deal also covers the 2023 Women’s World Cup being hosted by Australia and New Zealand.

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Interesting thesis on the unsustainable economics of algorithmic stablecoin UST.

https://hjalmarpeters.medium.com/why-i-am-betting-against-terrausd-2bc0f5668997

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Never expected it would happen so soon. Never expected the contagion would impact other smart contract platforms so much. Yes, I am talking about LUNA and its death spiral as UST was under a bank run triggered by the cataclysmic depegging event. A BLACK SWAN wiping out Hundreds of Billions in value in hours and decimating the entire Terra Ecosystem. Who would have thought? It did prove that a Bitcoin backed currency/stablecoin is not sustainable.

A cocky and charismatic founder, Do Kwon led thousands on investors to a bitter end, dismissing all criticism of his protocol and disparaging the critics.

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Its almost like many of these media houses want Web3 to fail. Silent when the markets were roaring and making noise when its crumbling down.

Crypto winter will wash way lot of froth in the space. Decentralization, Disintermediation are real trends that will eventually pave the way for web3 startups to shine. Finance and Music are some sectors I am bullish on where the days are numbered for middlemen.

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“The only time I’ve ever said “This is like the internet” ’ is now" - Marc Andreessen.

Marc is the creator of Netscape (the first web browser) and a billionare tech investor (a16z)

People spend millions of dollars over the internet every day, but it wasn’t always like that.

Prior to 1993, it was illegal to do any business on the internet at all. Aka no e-commerce, no online payments, no online transfers, nada.

When Marc was building his first company, Netscape, he was essentially looking to encrypt data over the internet. At the time, Congress believed encryption would help the black market, terrorists and bad actors do illegal stuff. (Sound familiar? crypto is kinda going through a similar phase)

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Crypto Investors are getting gutted as Centralised Lending Platforms like Celsius are reeling on the brink of Bankruptucy force selling coins to raise capital, as they scramble for liquidity amid a wave of liquidations (deleveraging) due to the ensuing contagion.

Celsius still holds at least about 409,000 stETH, worth about $413 million at current prices. The stETH-ETH Curve pool only has about 110,000 ether, meaning there’s simply not enough tokens to swap stETH into. Centralized exchanges don’t have enough market depth for the stETH-ETH trading pair for those who want to sell

Staking derivatives are not stablecoins, or even ‘algo-stables’. Some people are describing them as more similar to Greyscale’s GBTC, or to a futures market with an unknown future delivery date. Fundamentally, it is tokenised ownership of locked collateral.

You can instantly create 1 stETH with 1 ETH by staking it with Lido.

Because of this, stETH should never trade above 1 ETH. If stETH ever traded at 1.10 ETH, traders could simply mint 1 stETH with 1 ETH and sell it for 1.10 ETH — they could repeat this for easy profit until parity was restored. This instant arbitrage opportunity does not currently exist in the other direction.

Three Arrows Capital was a darling among crypto investment firms for years. 3AC appears to be at real risk of insolvency and crypto companies have taken steps to insulate themselves from the distressed firm.

Finblox, a staking and yield earning platform that promised “up to 90% APY” on customer deposits, has “paused all reward distributions, updating withdrawal limits and disabled the creation of new crypto addresses until further notice,” according to a statement on its website.

Babel Finance has responded to a market downturn by temporarily freezing withdrawals and redemptions.

Its chaos everywhere in the cryptoverse

Marc Andressen goofs up while explaining Web3 to Tyler Cown

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Hey man, thanks for creating this thread. I did not see anyone else here talk about Web3 and related tech. I got into this space through NFTs (after experimenting a bit with some altcoins), I minted a couple Clones from RTFKT’s drop in October, which did really well for me. I did lose out on some of the profits because I put them in a few other coins and NFT projects, but I am still in the green with my Web3 investments, which gives me some relief.

How are you navigating through this fall? are you putting your eth to use or are you mostly in stables? I do have some spare crypto in stables and my jaw drops every time I look at the price of etc or any of the others. This looks like an amazing opportunity but the problem is that I do not know if any one has figured out how to properly value these tokens. I am looking to find people to work with and understand tokenomics. I have learnt it to an extent, but I find most present resources quite useless. There is some helpful content from a16z but definitely not enough.

I do believe in the talent that is shifting towards web3. I think this can be a big play, but I want to move with caution and honestly learn the tools to value these properly like we do with stocks. I know it might be very difficult currently without ample clarity into the elements and levers that go into token valuations, but that just leaves more space for thought leadership and a first mover advantage. Again, thanks for creating this.

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Well played :clap: :clap:

I had mostly stablecoins till ETH dropped below 2k when I started buying back, turned out to be a bad idea, moved to other L1 alts in the midway, and now yield farming on DEXes with those L1 tokens. I opted to move out of ETH because its highly leveraged with futures contracts and can have heavy falls in extreme market conditions. Will rotate my L1 alts back to ETH once everything stabilizes before the Merge.

Its challeging to estimate value in crypto. I personally rely on on-chain value locked in different DApps for Smart Contract Platforms, how developer friendly the platform is, and how many Devs are working on the platform. There are a bunch of metrics, most important is user adoption. Consider L1 chains as shopping mall. The crowded ones will attract more creators/builders which in turn creates a virtuous feedback loop.
There’s another mental model which considers L1 blockchains as nation-state economies and the sectors (NFTs, AMMs, Synthetic Assets, DAOs, GameFi…) where the ecosystem is focusing on drive its economic outputs proportionally depending on whatever is trending. Diversified DApp ecosystems are preferred. We had Terra Luna which blew up because its economic output was heavily concentrated on UST adoption.

I do not have a complete picture and I am investing only based on guesstimates of how these decentralized crypto protocols could empower the internet. Feel free to message me if you are interested in brainstorming ideas on DeFi.

Meanwhile another funny incident on Solana Ecosystem which indicates that decentralized systems are still in experimental phase

https://cointelegraph.com/news/what-decentralization-solend-approves-whale-wallet-takeover-to-avoid-defi-implosion

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And just like that Crypto markets have started rallying again as Crude Oil prices have moderated and Ethereum’s transition to Proof of Stake is getting closer.

At the Ethereum Community Conference in France Thursday, Vitalik shared his vision for future developments well beyond the network’s move to proof of stake. After the merge, which is very close “the only thing left to do is do a merge on Ropsten [test network],” Ethereum will then undergo further upgrades which he calls the “surge,” “verge,” “purge,” and “splurge,”

The surge refers to the addition of Ethereum sharding, which will help scale the base layer.

The verge will implement “Verkle trees” (a type of mathematical proof) and “stateless clients.” These technical upgrades will allow users to become network validators without having to store extensive amounts of data on their machines.

The purge: trying to actually cut down the amount of space you have to have on your hard drive, trying to simplify the Ethereum protocol over time and not requiring nodes to store history.

The splurge will include all the other fun stuff.

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Logan and Zach give you a number of reasons why Web3 startups are doomed to fail. Even Pomp, one of the biggest Bitcoin advocates was careful to not turn into a debate and moderated the conversation.

Here’s the count down for Ethereum Merge, 11 more days left for Ethereum to transition to Proof of Stake.

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Metaverse hype has deflated, asset valuation corrections are yet to follow.

In the year since, Meta has spent billions of dollars and assigned thousands of employees to make Mr. Zuckerberg’s dream feasible. But Meta’s metaverse efforts have had a rocky start.

The company’s flagship virtual-reality game, Horizon Worlds, remains buggy and unpopular, leading Meta to put in place a “quality lockdown” for the rest of the year while it retools the app.

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Code is Law, until it’s not. This credo of smart Contract messiahs has gotten thrown under the bus many a times, but the recent incident at Mango Markets is worth pondering over.

Mango Markets (a decentralized crypto exchange on Solana) was exploited for $100m+ back in October. The dude who drained the tokens on the platform, Avraham Eisenberg, confessed on Twitter about how everything he did was completely legal & by the books. He blamed it on Mango Markets being poorly designed and leaving the bank vault wide open and went on to negotiate a White Hat bug bounty. His tweets cut the work short for cops.

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The U.S. Justice Department arrested Eisenberg on Dec. 27, however, and charged him with one count of commodities fraud and one count of commodities manipulation.

DeFi never fails to entertain.