BlockchainGandalf: Recent Episodes
Keir Finlow-Bates
This channel features regular updates devoted to explaining issues surrounding blockchain, from the technical through to economics and philosophy. I also look at tech startup issues, innovation, and the patenting process.
You can get a copy of my book at http://mybook.to/moveover or read more about it at http://www.thinklair.com/
When you have to perform the same stupid tedious complicated task every day, eventually you don't even notice how stupid, tedious, or complicated it really is.
Online #security is seriously hampered by the fact that a lot of the requirements put on users seem stupid, tedious, and initially also complicated.
In this article, Luis Lubeck and I look at ways in which security for users can be made more bearable, or even ... fun, dare I say.
☢️ 🦴 🎯 You should seriously consider if you want to be a successful #startup #founder!
Going into business is not for the faint of heart, and being prepared is important.
So is critically analyzing any and all advice you read or are given.
Reminder: just because someone has tens of thousands of followers and lots of positive comments doesn't mean they are automatically right or an expert.
And yes, that applies to me too.
Think before you act.
Well, that didn't take long.
A day after my previous video there was a Sybil attack on the XEN cryptocurrency. Except, the attack was really on an exchange - FTX, which offers free crypto withdrawals, and didn't check the maximum gas it allocates to this.
As a result someone found an arbitrage opportunity. Use smart contracts to spawn off lots of Ethereum addresses, deposit small amounts of ETH in the exchange, then withdraw and in the same transaction claim XEN crypto, with FTX paying for it. A day later, mint the XEN and immediately sell on a DEX.
More on that in this episode.
The last week has seen the XEN ERC20 token taking up the largest share of Ethereum transactions.
So why should a humble token with no defined utility or extra whistles and bells be achieving that?
The answer is that:
🆓 the token is free to mint (except for gas)
💰 there's no pre-mint,
📉 for an added dash of FOMO, the first people claiming it get the most,
🏦 it has staking (🚩),
with a lot of provisos and some untested tokenomics behind it.
In this video, I go through what XEN is, why it's different most of of the tokens out there, who is behind it, and how it implements a novel distribution mechanism.
I only spent a morning investigating the contract, looking into the main founder, and playing with some of the tests to see if I could engineer any attacks on the contract (I couldn't).
It's not a thorough audit, but it's more than most of the reporters out there commenting on this token will have done.
In summary, I'm cautiously optimistic about the safety of this token (but use a new address if you interact with it, just to be sure).
And as for whether it has legs?
No idea. I only give technical and sometimes sociological explanations, not financial advice.
Investors bring in money for P2E projects, but they expect to take out more in the long run. That includes most players, who typically expect to invest time to extract money.
So how is a P2E game supposed to build a proper revenue stream and become sustainable?
The P2E angle may be great initially for raising capital and attracting a particular type of user base, but in the long run you need more.
The obvious answer is to look at traditional game revenue strategies, of which there are three main ones:
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charge per copy (or subscription)
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in-game items
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advertising or brand promotions
More on that in the episode.
What's the most important rule for play to earn games?
In the previous episode I talked about what could be called "the first law of P2E games", or perhaps "The fundamental theorem of P2E economics", but Mark Skinner pointed out to me that there is a more important one: The zeroth law of P2E games. And it doesn't just apply to P2E. What that is, is revealed in the episode.
It's so obvious a lot of people forget about it.
The problem with most P2E games is that they are not sustainable. Why would that be?
It turns out that the answer is very simple: the amount of value being put in by players over time is less than the amount the players want to take out.
More on that in the episode.
There are a number of myths about blockchains that keep getting repeated. For example, that proof-of-work is a "cryptographic puzzle", that blockchains "build trust", and the most insidious of all: that blockchains "are immutable".
In this episode, I explain why blockchains are not immutable. With the aid of not one, not two, but three examples.
Staking cryptocurrency assets can serve a purpose for projects - for example, raising liquidity for a decentralized exchange. And I approve of that kind of use, because it serves a purpose.
Unfortunately the use of staking in many projects amounts to nothing more than a complicated Ponzi scheme (and I don't use that phrase lightly).
I suspect that it is a decision that is often just not thought through - the project founders are enthusiastically deciding, "Hey, let's implement a DAO! And let's provide staking!" without considering the ramifications.
More on this in the episode.
This is the sound track to a video in which I define what a metaverse is through the use of a banana.
The banana is not a simile or a metaphor, it is an actually metaverse.
It won't make much sense in just audio, just as the metaverse is apparently going to be about more than sound. If you are fortunate enough to have vision, you can watch the video at https://youtu.be/PE5uE-gfxRQ
It's midsummer (or Juhannus as they call it) here in Finland at the moment, and although I enjoy the importance and the traditions of this time to the Finnish people, I am an outsider. I don't fully connect in the way they do.
And so I also find myself dispassionately analyzing it every year. It makes me think about how significant culture is to all the societies out there.
But the great thing about traditions and culture is that they can be changed for the better, because they're arbitrary.
The bad thing about them is that they can be abused to manipulate people.
And the amusing thing about them is ... well: 🧄
In this episode, I explain what the "ERC" in ERC-20 and ERC721 means, and then delve into the history of the term, all the way back to a couple of years after the summer of love, namely 1969.
Handling intellectual property rights continues to cause headaches in the NFT world - we've seen problems with the BAYC terms and conditions, Tiffany & Co.'s lawyer removing clauses from their NFTiff agreement on the fly as the community pointed out over-reaching license terms, and now upset in the Moonbirds community as the pixelated owl images are licensed under the CC0 license.
In this episode, I talk about the latter, and discuss why I think we're having problems.
It really boils down to two things:
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lack of understanding of intellectual property law by ordinary buyers of NFTs, and
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lawyers and the legal framework failing to catch up with a shift in the intellectual property landscape
The latter is more important, in my opinion.
Edited boiler-plate license agreements don't cut it in the NFT world, but that's what we're seeing.
When you start reading about self-sovereign identity and decentralization of credentials, and stuff like that, it starts to sound very complicated very quickly.
And yet, when I got my hands dirty and implemented decentralized identity and access management in the Orthoverse, it took less than a screenful of code to get the basics working.
In this episode, I talk about how IAM works in the centralized, the federated (i.e. outsourced centralized) and decentralized worlds, and as an added bonus, I talk about how NFTs could tie into this.
Which they already do in the Orthoverse.
If you want to join me in this metaverse/NFT experiment, get your Orthoverse land token at https://orthoverse.io for a few US dollars worth of ETH.
A few weeks ago the authorities in the US started clamping down on Tornado.Cash, a dApp for "mixing" cryptocurrency to hide its origins. Sometimes mixers are used for criminal reasons, and sometimes for personal privacy reasons, but that aside:
The incident clearly reveals a well-known flaw the the whole decentralized applications stack, namely the user interface in the form of websites.
In this episode I talk about how the underlying smart contract still works, but inexperience users (i.e. most of them) can't use it without that interface, and how decentralized websites may emerge to prevent interface censorship.
Ethereum has a royalty standard for NFTs, namely ERC-2981.
It's disappointingly simple.
The reason for that is because at the moment, smart contracts can't enforce royalties, they can only suggest them.
In this episode, I explain how ERC2981 works. Prepare to be underwhelmed.
If you're more into software development than anything else then, like me, your first reaction to the word "marketing" is probably going to be "yuck".
And your second to fourth words will be "Not for me."
Unfortunately, you're wrong.
Whether you're in a tech company, pushing an open source project out there, or presenting the world with your latest hobby activity, if you actually want people to pay attention, you're going to have to do some marketing.
In this episode, I explain why, and point out that it's not that hard to go from "rubbish marketing" to "kind of acceptable marketing". Because it takes very little to make the transition.
I continue to see a lot of confusion over the meaning of the term "decentralized" in the blockchain space.
In this episode, I talk about where I think that confusion comes from, and present a simple linguistic tool that you can use to actually ask meaningful questions and get sensible answers when it comes to the underlying issues.
Issues that are being badly addressed due to the inadequacies of language and a failure to dig deeper and actually understand what it is that you are asking when you say, "Is this blockchain project decentralized?"
I was asked last week, "what is the difference between a CBDC and USDC?"
I can see why some people might be confused - in the case of the United States' central bank, the Federal Reserve: their CBDC would be a "digital dollar", and USDC is a kind of "digital dollar" too.
In this episode, I explain the different in terms of the entities involved, their aims, and the potential impact on our lives.
I find the best way to understand what is going on in a given technology is to actually get my hands dirty and install, configure, and run the underlying software.
Last weekend I configured an Ethereum testnet node - the Göerli testnet to be precise - to examine what is involved in running all the client software and staking some ether (göETH in this case - I don't have $64000 dollars spare to try the mainnet).
In this episode, I talk about the various components required, and a bit about how they work and what they do: - the execution node, - the beacon chain node, and - the validator
In this episode, I talk about the key mechanism whereby the move from proof-of-work to proof-of-stake is managed - the staking of ETH. Not from a technical point of view, but from a marketplace one.
Releasing a staking smart contract is a popular trick in token projects to artificially decrease the supply of the token, hence increasing its price.
In Ethereum, the staking requirement can be fully justified by the fact that proof of stake requires ... well, staking of course. And the move to proof of stake can be justified by efficiency and environmental arguments.
It is convenient though, that the move to proof of stake probably has increased the market value of ETH, and has moved "mining" profits from the Ethereum miners with their batteries of mining hardware to the owners of spare ETH that was previously just sitting there doing nothing.
The fact that these owners of spare ETH happen to be the initial project architects and early project supporters is by-the-by.
Anyone want to buy a spare graphics card? Barely used...
So many people have asked me my opinion on the use of #nfts to serve notice of #legal proceedings that I thought it was time to record an piece on it.
What the hell is #tokenomics?
The answer to that question, and a lot lot more, can be found in this episode.
What's more, the explanation doesn't rely on complicated mathematics applied to esoteric #defi protocols. Instead, I provide illustrative examples using #nfts.
Which are a lot easier to understand.
If you want your company intranet checked for security, if you can afford to and if you can find them, you get a hacker to try to break in. Not a sysadmin.
If you want to determine that a psychic is a fake, you get a magician to test them, not a scientist.
But in DeFi we still hand auditing over to developers. And although a large number of problems with DeFi protocols are down to bugs, in some of the most expensive cases, there's actually a design flaw in the financial architecture.
So who should you call in to determine whether your protocol is vulnerable to arbitrage attacks, insider trading, front running, or short squeezes?
How about traders?
You would not believe how much fun I have had trawling through #NFT copyright licenses and US copyright case law this weekend!
I felt compelled to do this, because the current situation in the NFT world when it comes to ownership of the underlying art for NFTs is diabolical, and I wanted to understand what is going on, and what could be possible in a better, brighter world.
The summary of my findings is in this article.
A common technique used to overcome front-running and other malicious subversions of systems is the commit-reveal sequence.
In this episode, I explain how this works through the use of an analogy with the game "rock, paper, scissors", and then talk a bit about how it is used in the Ethereum Beacon chain and in front-running prevention systems.
In this episode, I explain what a Bitcoin node does, and what a Bitcoin miner does, and why a miner doesn't have to be a node (and why a node does not need to contain a miner).
I recently discovered a horrifying "innovation" in the computer world.
The database.
In this episode, I break down the arguments against databases, and there are many.
If the humble reliable filing cabinet can be compared to a wholesome filling cabbage (and I think it can), then the database is a tulip. Inedible, and clearly the cause of a mania.
Let's do something about these things. Whether relational, noSQL, hierarchical, or object-oriented - they have to go.
Blockchain may be fact, but Web3 is only presentation.
A while back I made a series of videos talking about the levels and layers in blockchain when it comes to web3. The point I was trying to make is that although (roughly speaking), blockchains store facts, web3 sites are presentations of those facts, and can therefore easily be subverted.
Not a lot of people seem to be aware of the distinction, or its ramifications.
But recently, an NFT token owner was scammed out of half a million dollars worth of tokens due to a lack of awareness of this distinction (and to be fair, a pretty clever if simple scam).
Listen to the episode to find out more.
What is it like to help novices in the blockchain world?
The following video is an analogy in which I try to describe what it can be like to help someone who has enough knowledge to start messing about with web3, blockchain wallets, and smart contracts, but not enough to actually understand what is going on.
A little knowledge is a dangerous thing, but never more so than in the blockchain world.
If you want to improve your blockchain knowledge, why not pick up a copy of my book: "Move Over Brokers Here Comes The Blockchain" at https://mybook.to/moveover
Sometimes in software innovation we end up with concepts that can't be summarized succinctly in the way that a simple targeted app can (think, "it's it's a fitness app for orthodontists", or "it's a dating app for pet cats", as opposed to "it's the cloud" ten years ago).
Blockchain used to be like that too, but we're all starting to settle on a fairly common view as to what it is and how it can be used, even if the concept is still expanding and changing on a yearly basis.
The concept of the Metaverse, on the other hand, is still a shambles. As is this video.
But the former is definitely entertaining, and hopefully the latter is too.
We are starting to see more NFT projects losing significant sums of money - this used to be the preserve of DeFi protocols.
A few days ago a project called "Akutars" managed to inadvertently lock up over 11,000 ETH, worth about $34 million in fiat prices.
There are plenty of analyses as to exactly what went wrong in the code to cause this, so in this video I take a one-level-up view and look at the red flags visible in the code that should have suggested there might be a problem.
This is more useful to future smart contract developers than a line-by-line level analysis which would only apply specifically to the Akutar contract.
The above title is total and utter clickbait.
But it does describe what I talk about in the episode, so perhaps I'll get away with it. Go on, listen to it.
You know you want to know what I think is the most surprising thing about social media marketing, don't you?
In the meantime:
My book: https://mybook.to/moveover
T-shirts: https://www.etsy.com/shop/Thinklair
The Orthoverse: https://orthoverse.io/
On Thursday 24 March someone going by the name of HashArt on OpenSea found an exploit in the Orthoverse NFT contract, allowing the crafting of transactions that allow any NFT in the contract to be moved to any address.
Obviously this is not a good state of affairs. As a result, Richard and I fixed the contract, finally wrote a test suite, corrected other niggling but only cosmetic bugs we'd found, and added artificial scarcity to the contract.
And then we migrated all the existing tokens into the new contract, which turned out to be incredibly painful, and quite expensive ($5000 in gas).
The scarcity thing may sound like an oxymoron for a contract that involves 1.5*10⁴⁸ tokens, but we managed it.
Listen to the episode for a full explanation and other fun Orthoverse stuff.
The Orthoverse is doomed! But not quite yet.
In a recent interview in Time Magazine Vitalik Buterin expressed disappointment in the fascination and speculation around Bored Apes and other similar projects.
I understand why he feels that way, but this progression is not unexpected. In fact, if there wasn't such speculation, it would indicate that Ethereum and other blockchain projects were rather limited in their relevance to society as a whole.
Listen to the episode to find out more.
In this epsode, I explain in less than a quarter of an hour what Ethereum is, what gas fees are, what value transfers are, how ether was converted from an inflationary to a deflationary cryptocurrency, and a bunch of other stuff.
It wasn't easy. But then again, nothing in blockchain ever is.
Let me know how I did.
I like collectible and art NFTs as much as the next collectible and art NFT aficionado, but it pays to remember that these tokens have a lot more possibilities than being able to flex to your buddies about the value of your PFP portfolio. In this episode, I look at an analogy between an object described in William Golding's Lord of the Flies, and the potential that NFTs offer in providing societal utility. And it's nice and short, so there's no reason not to listen to it.
This is a bit of an odd episode, because I start off with a proof as to why measuring the "energy expenditure per transaction" does not make sense for Bitcoin, and end up talking about the tragedy of the commons, and the psychology behind deciding what it is worth spending energy on. Nevertheless, I'm going to break the habit of a decade, and talk about blockchain and environmentalism, even if it's in a somewhat oblique manner.
Whenever there is a lot of competition in a given marketplace you have three obvious choices - race to the bottom on prices, differentiate on features, or convert your brand and hence your product into something aspirational.
Price wars result in products with very low margins, and who voluntarily wants to become a potato farmer?
Competing on features is tough in blockchain, because people are having enough trouble understanding vanilla NFT tokens, let alone more esoteric smart contracts.
And creating an aspirational brand involves an equal measure of luck and supreme marketing skills.
In the NFT world there are an awful lot of projects, and more arrive every day. Most of them are effectively copies of previous ones, right down to the marketing and business development strategy that is used. This puts those projects squarely in the domain of relying on luck.
Is there another way? Listen to the episode for a quick primer on marketing and NFT projects to find out.
Social media existed well before the web2 sites of Facebook, Twitter, and their ilk. Not only that, but it was decentralized.
In fact, it started in 1979, and was called USENET. But it was missing the one "secret spice" that modern day social media sites use to turbo-charge user engagement (and subsequently profit from data harvesting and advertising).
Want to know what that secret spice is? Listen to the episode.
I think there's a lesson to be learned from this when we look at what web3 might be, and what its "hidden herb" is going to turn out to be. I have some suspicions and hunches, but I'm not completely sure.
What I am certain about is that in hindsight it's going to seem so obvious most people won't even really notice or appreciate it. They'll just accept it as the new reality without realizing.
One of the upshots of the tendency of human beings to gravitate towards centralization for its efficiency and perceived security is the handing over of control to a popular leader.
In this episode, I talk about how some of the decentralized projects out there have coped (inadvertently or otherwise) with the centralization risks inherent in highly visible leadership and personality cults.
About a year ago I made a video explaining the differences and similarities between ERC20, ERC721 and ERC1155 from a layperson's perspective (https://www.youtube.com/watch?v=Gt5C-j2b62U).
I thought it might interesting to remake the video and release the audio as a podcast, but this time explaining the differences in the standards through the differences in the data structures within each contract that act as ledgers for the tokens.
I found it interesting that ERC721 is at its core a flipped ERC20 data structure, and that ERC1155 is an ERC721 that encapsulates ERC20s. Plus there's a trick discussed which allows you to use ERC20 to mint a single NFT. So that's all great fun, isn't it?
Most traditional companies are based on a hierarchical command an control structure, and as a result most people are used to functioning in such a structure.
These companies are structured that way partially due to the laws that enshrine what corporations are as legal entities, partially due to conditions imposed by venture capitalists or investors, and mostly because people in companies don't know any better.
This has a serious impact on how blockchain projects develop as they become commercialized. And so we start with founders espousing a decentralized philosophy, and end up with a centralized company controlling the end result.
If you push a round peg through a strong square hole for long enough, the peg becomes square too. Even a conical hat won't protect you from that.
Centralization around the edges can take the teeth out of decentralization in the center.
Well, if that isn't a confusing sentence then I don't know what is. In this video I dig a bit deeper into two opposing tendencies within the human psyche - moving towards centralization, and moving towards decentralization. There are advantages and disadvantages to both.
Furthermore, localized decentralization can give the illusion of control in what ultimately remains a centralized system.
What, for example, is the use of "being in control of your data" (whatever that may mean) if you have no community in which to control it? Similarly, what is the point of owning digital assets if there is no wider system where those assets have practical value?
A week ago about 100 NFTs worth an estimated $1.4 million dollars were grabbed by someone for $0 million dollars.
How did they manage to do this? There was an error in a smart contract which did not consider the result of multiplying a number by zero.
The case is not just interesting from a smart contract testing perspective, but is also a clear-cut example of "code is law" diverging from the "spirit or meaning of the contract".
More on that in this episode.
In hindsight, the 2017 craze of handing over the digital equivalent of a suitcase of cash to a small group of project coordinators in the hope of making a financial killing was a bit stupid.
The next evolution in this is to hand the suitcase of cash to a smart contract, a DAO, instead. The idea being that the investors maintain some control over the finances of the enterprise in the same way that traditional VC investors control the startups they invest in with seats on the board of the company.
Will it work? Time will tell.
One thing is for sure - there will be bugs, and they will be interesting to study.
Human beings are contradictory: they're remarkably good at adapting to both change, and things staying the same.
In this episode, I talk about the impact this has on web design, and why you need to fix problems with your site sooner rather than later.
Because within a matter of days:
🤢 the awful experience you had the first time you used the site will be forgotten,
🥴 you'll start to take it for granted that your site makes sense,
☹️ your early user base won't want it to change because they're used to it, and
😵💫 many of your later users will be put off, and will leave.
So fix it now!
Smart contract testing currently faces a problem:
👨💻 developers are in short supply, so
🧪 smart contract testers get asked to write code, and
🔎 code writers are too close to the code to spot the wider problems, and
📄 smart contract quality suffers, thus
💵 funds are lost
I use a chess analogy to explain why developers usually only test one aspect of code.
Would you hire some random person in a different country that you found on Fiverr to look after your money? And the money of other people that trust you?
Yet that's exactly what over 30 NFT projects did. And the backdoor to their contracts consisted of a few lines of code that are shorter than the average fortune cookie message.
There's a lot more in this episode, so go listen to it.
What is the difference between on-chain and off-chain signing?
Less than you'd think. Mainly because everything is signed off-chain.
Lazy minting is not minting an NFT until you have a buyer.
So now you don't even need to listen to the episode.
Except, it contains a cake analogy, and is only a minute long, so perhaps you want to anyway.
In the last few days about $1.7 million in NFTs were stolen from OpenSea users, and there is quite a bit of confusion about how it was done.
In this episode I talk about a number of "design decisions" in the Ethereum space, and their security issues. These include: token approvals, off-chain signing, how NFT decentralized exchanges work, and there is a bit about phishing emails thrown in for good measure.
In summary, it doesn't look like OpenSea was to blame in this case, but just as we've been trying to hammer home the "don't share your seed phrase with anyone" security mantra, it appears that "take extra care when signing requests" needs to be emphasized too.
Decentralization maximalists dream of a world in which everything is decentralized, and single players no longer dominate in particular sectors. I think their dreams will never come to pass for two main reasons, which are discussed in this episode.
The audio for this episode comes from a video where I am wearing a hat. Because I can't be bothered to clip the last 20 seconds I talk about a hat I am wearing, which of course is going to be a non-sequitur to listeners, so feel free to ignore that bit.
Oh the wonderful things that a DAO can do!
It can moo like a cow, moo moo. No, hang on, that's a Dr. Seuss book.
The thing is, a lot of DAO use cases are probably better served by a multi-signature wallet than a DAO. But there are some where providing the ability for a diverse and unconnected group of people to vote on a regular or semi-regular basis as to how assets should be dispersed, is of value.
Furthermore, DAO's can be given extra powers by connecting or chaining them to other smart contracts.
In this episode I present the example of a DEX being controlled by a DAO, but I'm sure there are plenty more. In fact, I've thought of a couple just while writing this. But the key is, you have to think about that diverse and unconnected group being provided with the means to coordinate in a meaningful manner.
Which is kind of what corporations do, when looked at from the administrative and legal angle.
Anyway, it's only a short episode, so go listen to it.
Fundamentally, a DAO is about automating voting processes in the context of a deterministic collective with assets.
Or in less stupid language - it's a computer program thingy that controls some money and does what its owners tell it to when enough of them agree on what should be done.
As it happens, voting is a complicated and subtle science, with plenty of empirical data for us to examine from the real-world of democratic (or not so democratic) voting systems.
In this episode I talk briefly about two voting systems that have been implemented in DAOs, and the advantages and disadvantages they have.
Even though I didn't study PPS (Politics, Psychology and Sociology) at Cambridge. And who would have thought that degree would actually have a practical use in blockchain?
Certainly not me.
Decentralized Autonomous Organizations (DAOs) are automated voting systems, which (sometimes) happen to have large sums of cryptocurrency assets at their disposal for their members to vote on.
And by "vote on", I mean that the members (the people who have voting tokens for the DAO) get to decide where that money goes through a voting procedure.
Unless the DAO contains bugs. In which case, a malicious hacker gets to decide where that money goes. Which is usually into the hacker's pockets.
More on that in this episode.
PS: A test engineer mantra is that all code contains bugs, and we just haven't found them yet.
PPS: Limited liability companies have bugs too. They've been fixing them since 1811.
If you're having difficulties understanding DAOs, it may be that it's because you're thinking about companies from the perspective of an employee (which is what most of us are), rather than as an active shareholder or board member (which most of us are not).
More on that in this episode.
Did you know that the first NFT was minted way back in 2014? Neither did I, but Anthony Day helpfully pointed me at an article about the problems currently surrounding it - https://www.ledgerinsights.com/sothebys-sued-over-quantum-nft-auction
The artwork the NFT (or NFTs, as you will understand if you watch the video) points (or point) to is called Quantum, and looks like a British 20 pence piece that went to too many raves in the late eighties.
An NFT (not _the_ NFT, as you will understand if you watch the video) that points to the artwork and that was auctioned for 1.5 million is now being called into question by someone who claims to own the original NFT.
It is a fascinating case, because strangely enough, the first NFT actually contained a contract assigning copyright for the artwork to the owner of the NFT. Which is unusual for art NFTs. But all the other NFTs that now exist have tenuous connections to that first NFT.
So ... who owns the original NFT?
If you are wondering why I have used the three letters N, F and T so much in this description, it is because this case involves a surprising number of them. Or not. Just watch the video, and you'll understand. Or not.
I know I don't.
Causality - a wonderfully complicated word for a wonderfully complicated concept. Now with NFTs.
"This item's metadata was permanently locked and stored in decentralized file storage."
Those word can be found in the details presented for many of the NFTs listed on OpenSea.io.
They make you think that your NFT can never change - the traits and the image are locked down forever, right?
Wrong.
In this episode I explain - using the Bored Apes Yacht Club NFTs and NFT contract as an example - how misleading those words are.
And I have a little rant at the end, which may be partially due to the fact that I'm a bit ill today (hence the croaky voice).
How should a well-managed efficient NFT project be run in order to maximize the chances of success?
There is a well-structured format to NFT projects these days (a road-map if you will) that every project now seems to follow.
In this episode, I explain how Richard Piacentini and myself decided to throw the rule-book out of the window, and do the opposite pretty much every single step of the way.
If you want to see what the project is about - it is to be found at https://orthoverse.io
If you want to see what the outcome so far has been by doing everything contrary to conventional wisdom - well, just watch the video.
A few days ago hackers made off with about a hundred thousand ETH due to a security flaw in a cross-chain bridge protocol called Wormhole.
The protocol bridges assets between a number of chains, including Ethereum and Solana.
In this episode, I explain how the heist was pulled off, using an analogy.
I've now talked to and heard enough reports from other smart contract developers who have encountered the same thing: web3 developers who don't understand one simple fact about the blockchain world.
And if you don't understand that fact, even if you know how to write ethers.js or web3.js code in your React website, you're not really a web3 developer.
Listen to this episode to find out what it is, and why it's concerning.
No, this is not me advertising an open position.
These are the kinds of job adverts I'm seeing in my inbox these days.
The salary ranges may be more realistic than they were three months ago, but the job descriptions have expanded to the point where they are longer than my resume. And there are probably only ten people on the planet who could both do the job, and who would want to.
You can listen to the episode, or read this summary:
Offering half a million dollars for a job that requires the applicant to a) have spent a decade researching and hacking away at blockchain programming, so they can b) help you recruit a team of blockchain developers, and then manage them, is going to be hard to fill. Because people who have done the former, are probably not going to want to do the latter.
Welcome to the NFT metadata persistence problem.
Art NFTs and Collectible NFTs usually follow the same data pattern: the NFT points to a metadata file, which points to an image file.
The problem is that if the metadata and image file are hosted on a third-party server, and that server disappears, then the NFT points to nothing, and its perceived value will drop.
If the metadata and image file are on the IPFS, persistence is also not guaranteed. There still has to be someone out there with a copy of the files on their IPFS server.
In this epsode I talk about a simple insurance policy for data persistence, to make sure your NFT metadata and image can be found.
(This all assumes that the blockchain will last, but that's a different issue)
In which our intrepid hero talks about why, despite having no use and conferring no real ownership of the artwork, NFTs are still booming.
OpenSea hasn't just offered the world a rather average looking NFT trading platform. It's also provided us with an excellent set of lessons concerning the risks posed by smart contracts and bad design.
In this episode, I look at the recent problems they have faced, in which people's tokens are being bought at below-market prices and then instantly flipped for huge profits, due to a series of smart contract, web interface, and user experience design mistakes made by OpenSea.
As such, it offers a lesson in:
👍 what "approving transfers of tokens" is (and how it differs from actually transferring a token),
💵 how users will take the cheapest option when it comes to gas fees, even if it carries long-term risks,
🤔 why you need to think before you send instructions out to your users, and
🏃 what front-running is.
It's said that mistakes are the best teachers. But I prefer to learn from other people's mistakes whenever possible.
(Note: in the episode I imply that OpenSea had been running on a shoe-string budget until recently, which is wrong: their most recent funding round is their fourth, with 2.1M$ in 2018, 23M$ and then another 100M$ in 2021, and 300M$ in 2022.)
Collecting NFTs that point to artwork you like, and are part of a community you enjoy belonging to is lovely.
But there is so much more that NFTs can do. We're already seeing NFTs gain utility features, such as giving you access to members-only Discord channels.
In the future, I predict that NFTs will gain all sorts of other super-powers. But - problems arise when those super-powers are provided on centralized platforms.
More on that in this epiaode.
Today I gave a lecture on Blockchain for the Emerging Technologies group at Tampere University.
The focus is less on how blockchain technology works, and more on the problems it aims to solve, and why it is significant, and so I talked more about the history, psychology and sociology of blockchain, rather than going into computer science, cryptography, or consensus algorithms.
I place a copy here for anybody who would like a gentle introduction to the topic (and for anyone who meant to be at the lecture, but overslept or forgot).
You've got your project sorted - tokenomics, value proposition. community building, marketing, and smart contract development are all in place. But you need a company or person to build the front end for you.
How do you determine whether they're competent or not when it comes to web3 work?
In this episode I provide a simple practical checklist that you can use to make your decision, which is summarized here:
📃 - do they have samples of previous work
✉️ - does the sample page handle the following well:
* switches chain if your wallet is on the wrong one
* shows the address you're connecting with
* offers an "import this token" button if it's for an ERC20 project
* actually works
💻 - will they give you access to the source code
🧪 - do they use the test deployment of the smart contract to check their pages before going live
If the answer to any of these is a no, you may want to consider using a different contractor.
We all know that proof-of-work is energy intensive, which means that cryptocurrencies such as Bitcoin and Ethereum currently have to defend themselves against charges that the environmental damage they are causing is not outweighed by the current or future benefits they offer.
This means that if someone sees no value in a decentralized currency/store of value/whatever the cryptocurrency is ... then you can't win the argument.
Ethereum has taken the approach that side-stepping to proof-of-stake, thereby removing the attack, is the best approach.
But how good is proof-of-stake as a replacement for proof-of-work?
Listen to this episode to see what I think.
What is the user experience for web3 identity going to be like?
Initially, very much like the web2 experience is for users who are wise enough to use a password manager.
Provided the web3 sites get their own ux designs in order.
More on that in this expisode.
Okay, so Web3 uses asymmetric key cryptography as the basis for identity and authentication.
Why do we need the rest of blockchain then?
Answered in this episode. Well, it's an answer. Of course, given blockchain, it's not _the_ answer.
The three authentication mechanisms are:
1️⃣ Something you know
2️⃣ Something you have
3️⃣ Something you are
But what about a fourth one: something only you can do?
In this video, I look at the fundamental different between identifying yourself to a Web3 website using a blockchain wallet, and Web2 using a username and password.
It has to do with asymmetric key cryptography.
In part 2, I will talk more about why blockchain is an important piece of the puzzle for a number of different reasons (because what I talk about in this video could be used in Web2, but generally speaking isn't.)
In this video I talk about how I airdropped 100 DETS tokens to every single one of the 1.5 quindecillion Ethereum addresses.
In the process I examine different layers of meaning in blockchain systems, from the raw ones and zeroes on hard disks around the network, through data structures, smart contracts, and right up to the presentation layer in the form of web3 that actually shows users what they own.
The key word in the previous sentence is "meaning". Because ones and zeros don't have meaning in and of themselves. We construct that meaning as a society and as individuals, and sometimes that can lead to some very odd results.
I regularly read news reports in which it is plain that the reporter writing the report hasn't really understood what is going on the blockchain, DeFi or crypto world.
And it's not their fault - they're trained writers, not blockchain experts.
The problem is exacerbated by the number of analogies that have taken hold in the space.
In this video I talk about this, using some of the bad analogies as examples of the problem.
The solution? Presumably, better analogies.
And journalists who will listen.
The masters of the current financial institutions would have us think so, and have been mounting a campaign with increasing frenzy over the last year to push forward this opinion.
The same tropes are trotted out again and again.
One of those tropes contains a logical contradiction.
But who ever expected propaganda to be logical and consistent?
By looking further into the structure of the $SOS token contract, I am fairly convinced that it doesn't allow the deployers to drain your wallet of funds.
However, there are always more concerns surrounding smart contracts than just the code that is there on the blockchain.
I mentioned in the previous video on this topic that I was not entirely sure about the digital signing function for claiming $SOS, based on your activity on OpenSea.
And indeed, some people have determined that the OpenDAO project devs can arbitrarily sign fund allocation transactions, meaning that they can airdrop as many tokens to whatever address they choose, up to the maximum supply of the token.
Furthermore, half the tokens are under the control of three wallets, which means that those whales can dump their holdings whenever they like - and if you don't know what the risks associated with that are, well, imagine what would happen to the price of Tesla stock if Elon Musk suddenly and without warning sold every single share he owns.
And so we are stuck with a problem - how much do we trust the anonymous parties behind the OpenDAO and $SOS token project?
Airdrops are giveaways, where a project hands out tokens for free in order to drum up interest in the project, hopefully increasing the user base and/or the price of the token given away.
There are risks associated with airdrops though - they offer a great opportunity to scam artists. For example, you may think you're getting a token, but be tricked into signing a transaction that allows a smart contract to siphen off your NFTs and crypto.
Here follows the obligatory disclaimer - what follows is not financial advice, so do your own research.
In this episode, I look at the recently popular OpenDAO project and it's $SOS token give-away.
I spent an hour or so looking through the $SOS contract, and can't see any obvious flaws or malicious code in the contract, but of course the problem with audits or reviews is that they either:
a) find a problem which means the contract is not to be trusted, or
b) do not find a problem, which means the contract might be fine, or it might contain subtle bugs or scam-enabling code
I also talk about the red flags to look for in airdrops, and the risks involved in caving to FOMO.
Personally, I'm waiting a couple of months before (or even if) I claim my "free tokens". The deadline is June next year, so what's the hurry?
I might as well let other people conduct a more thorough audit.
I was asked over the weekend if I could think of any way to bring down Bitcoin. Of course, "impossible is nothing", so there may well be a way. But I can't see what it would be.
Technically, it seems very unlikely to me that one wealthy actor could destroy Bitcoin, and I cover 51% attacks, quantum crypto cracking, and ordinary key/hash function cracking in the video and explain why they won't work.
Legally - well, the evidence from Russia and India is that it's ineffective. It's like trying to ban particular thoughts. In any case, it only applies to one country.
Socially - this would seem to be the most effective approach to me, except that the evidence is that rubbishing Bitcoin in the media just makes the spokesperson look stupid or ill-informed.
Economically? How about cornering the Bitcoin market? Just look at what happened to the Bunker brothers when they tried this with the silver market in 1980. And the "market cap" of Bitcoin and silver are about the same.
It may be possible, but I can't see how Bitcoin can be brought down intentionally. It would be easier to herd a million cats.
Here's the link to the video of Andreas Antonopolous that I mentioned: https://www.youtube.com/watch?v=ncPyMUfNyVM
Why do Ethereum addresses work on Polygon and Binance Smart Chain?
If you create an Ethereum address in your wallet (for example MetaMask), the same address can be used on other EVM compatible layer 2 chains, such as Polygon Matic and Binance Smart Chain.
The reason is because these sidechains use the same digital signing algorithm and blockchain address derivation function. It's like creating a bank account number at one bank, and finding that the same account number now exists and can be used in other banks in other countries.
Perhaps the catchphrase "be your own bank" should be changed to "be your own banks"...
We all know that social media platforms use complicated algorithms to determine who gets shown what.
But are they really that complicated? And if they are, do they need to be?
In today's newsletter, which I have read out to create this podcast, I put forward a very simple formula to determine when your LinkedIn post has peaked.
Who knows, perhaps it even works. Why don't you try it and let me know?
What exactly is a seed phrase? Or an HD wallet?
In this video, I explain how a seed phrase is converted to a "master key" for your crypto-wallet, and why as long as you have your seed phrase (and no one else does) you can use it to set up and use a wallet on any device.
This is what non-custodial wallets are all about - your seed phrase is the key to accessing and controlling your blockchain addresses, and hence your digital assets (crypto, NFTs, or other) and ultimately your identity on the blockchain.
Anywhere, without any one else being able to block you.
Provided you're careful with that seed phrase.
I don't stand by the smart contract principle that is espoused by some, that is summed up in three words: code is law.
As a former test engineer, it's all to clear to me that there will always be bugs in any computer program that does something complicated or contains more than ten lines of code. Or in the platform, interpreter, or operating system running underneath it.
Behind all computer programs there is an intent, and the code is an attempt to capture that intent.
In specific cases where DeFi protocols move large amounts of digital assets to a particular wallet following some contract interaction, of course there are grey areas, and there is room for arguing whether or not the interaction was "reasonable" or not.
But if the conclusion is that it's not reasonable, and that this was understood prior to the interaction, then I don't see "code as law" as a defense.
What do you think?
Most important to me?
The potential for web3 and a digital wallet (browser or otherwise, but probably browser to begin with) to be used as a replacement for OAuth or other identification systems. No more "log in with Google/Facebook/Twitter". Instead, I can have accounts on many platforms and servers where IAM is handled using my decentralized controlled-only-by-me (if I'm careful with my keys) identity.
Some people may take a very reductionist view would be to consider your identity as "data", thereby considering data ownership to be the most important thing. But identity is more than that. It is about control. Because it is how that data is interpreted that is important. Just as "code" can be viewed as merely data - but there's more to it than that.
It's data, plus an infrastructure that interprets and takes action on the basis of what's in the data. And in a ledger or platform-based world, without identity, you can't own things.
There need to be a specified owner.
Smart contract projects that want to use the Ethereum system have a well-known problem.
Ethereum has all the brand recognition, but it costs a fortune to use.
Layer 2 solutions such as Polygon or Binance Smart Chain are a lot cheaper, have the same functionality, but involve awkward contortions to move people from the main network onto them.
And the clunky bridges that exist between Ethereum and the other chains aren't getting any easier to use.
What's a DeFi or NFT project to do?
Trust. Such a short simple word.
Well, it's short. Not so simple.
The problem with the word trust is that it has different meaning in different contexts. And no more so than in security, cryptography, and by association, blockchain.
In this episode, I talk a bit about what people mean when they describe blockchain as "building or engendering trust", and at the same time describe it as moving towards a "trust-less system".
I trust that at the end of the episode you will have a better understanding of all of this.
And why two of them are a waste of time.
Three years ago I recorded a video where I talked about the gaming token projects built on blockchain that I've looked at over the last few weeks.
In the end, there was even enough material there for an article (to be found here: https://lnkd.in/eScHejs ), but if you prefer a guy talking in the freezing cold about it instead of reading, then all the key stuff can be heard here.
Summary: these days a blockchain token needs to offer more than just decentralized transferable unforgeable digital assets because they're just too easy to spin up. You either need a new innovative associated business model or a worthwhile technological advance.
That's token 2.0 in a nutshell. Amazing that the need for it has arrived so quickly.
Have you ever lost 31 million dollars because you didn't think someone would do something both stupid and brilliant?
That's what happened to the DeFi protocol MonoX a couple of days ago.
In this video I explain, through the use of an analogy (that anyone who has ever bought a bag of potatoes can understand, or indeed Samson Williams) how an eight figure sum was lost to a hacker who thought like a test engineer rather than a software developer.
DeFi - it's the gift that keeps on giving.
Unfortunately, not to the people you want it to be giving to.
If you've invented something and are looking to get a patent, one of the costs you'll be looking at is the "prior art search".
That's patent speak for "find if something has been made public that describes your invention".
Professional patent searches cost money.
And if you're a pro se inventor (an inventor prosecuting your own patent application), then it's a cost I think you can avoid.
In this episode I explain why.
I am told that storytelling is often a better way to get your point across than explaining, especially when the story is authentic and comes from personal experience.
So here is such a story.
Sometimes it's best to explain things backwards. Perhaps this is one of those times.
In this episode, I work backwards from the artwork through the metadata to what an NFT actually is, in order to help "content creators" (shudder - why can't we call them artists, composers, writers, and so on).
And in particular, why the NFT is not the art, but rather a pointer to a pointer to the art.
Samson - you need to watch this one: https://youtu.be/kqtfPSP-f0k
In this episode, I talk about the metaverse.
Oh, the metaverse. It's a hot topic, yet no one seems to really know what it is.
Perhaps it's a hot topic because no one knows what it is?
The problem I have with the definitions I see flying about is that they focus on "immersiveness".
But imersiveness isn't new. A good book is immersive. A story well-told is immersive.
Neither is the concept of a "collective online virtual experience" novel. These things have been around for over three decades - people were getting immersed in collective virtual experiences called MUDs (or multi-user dungeons) back in the late eighties.
So is there anything that could be different this time, other than better resolution and faster response and rendering times?
Yes - true decentralized ownership.
For the first time Neal Stephenson's alternate reality can posses this one key property that wasn't previously possible, thanks to blockchain. (And it's a property that the tech giants of today are going to have a problem fully embracing, because it goes against the very fibre of their world view).
And so now we have to ask ourselves the question - do we really want this to be implemented by a bunch of Silicon Valley tech-bros who don't seem to have realized that Snow Crash is a dystopia?
In this episode, I present an analogy for NFTs, which explains how they work and what the significance of various steps in the production and sale of NFTs actually is.
It will also help you to understand why an NFT isn't a piece of art (just a pointer), and how easy it is to make an NFT look like it was produced by someone else if the website used to display it lies (or if we're being charitable, presents information in a slap-dash manner).
You read that correctly - CryptoPhunks with a PH, not CryptoPunks, the iconic NFTs selling for hundreds of thousands of dollars.
In the last day, OpenSea has had another public relations nightmare. Due to an oversight on their part, forty NFTs were sold at well-below market prices.
In this video I go through the timeline, covering the history of CryptoPunks and CryptoPhunks, copyright scuffles using DMCA takedowns, and the mistake made by OpenSea, which I explain in a non-technical manner.
Blockchain-based projects, eh? Never a dull moment.
If a tree falls in the forest and there's no one around to hear it, does it make a sound? Yes, but the sound has no meaning.
These days you'll find articles and reports that alarmingly imply that NFTs are disappearing. I give some examples at the end of this text.
The thing is, the NFTs aren't disappearing. The files they point to are, and that is very different.
NFTs are immutable (if the contract has been set up correctly) and persistent (as long as the blockchain they are on continues to exist).
The things they point to? Not so much.
Furthermore, websites that display them can come and go. Again, the NFTs still exist, even if your "window of choice" for viewing them doesn't.
And so I wish that journalists would choose their words more carefully. But ... they're journalists, not blockchain experts.
https://interestingengineering.com/nfts-are-mysteriously-disappearing-heres-how
https://cryptobriefing.com/tezos-nft-marketplace-hic-et-nunc-offline/
Are you confused by NFTs?
Have an idea for an NFT project, only to have it dismissed by the software developer you talk to?
In this episode, I present a short talk that explains the mechanics of NFTs in a manner that can be understood by anyone who has used a spreadsheet, or kept a list on a piece of paper for that matter. This video will help you:
🤑 Understand what you are buying when you purchase an NFT
👍 Determine where they might be useful
🚫 Filter out pointless projects.
The talk references a presentation, and you can download a copy from https://souls.fi/NFTs-primer.pdf to look at as you listen.
Don't forget to get a copy of my book on blockchain at https://mybook.to/moveover
Why would someone want to rent an NFT?
And if they did, how could such a borrowing and lending service be provided?
In this episode, I discuss these questions, and look at how one protocol, reNFT, has solved this problem, and what weaknesses their solution contains.
If this video title isn't the antithesis of clickbait, then I don't know what is. But the point of this video is wider than just to comment on some quirky behaviour on a geeky chat channel in the unfashionable end of the western spiral arm of the Internet.
There's a platform called Gitter, which designed as a place for software developers to go to chat.
And there's a channel on that platform for the Ropsten Ethereum test network.
Except the people on that platform don't chat. They post their wallet addresses. Endlessly. Even though this achieves nothing, and even though there are a couple of us there who point out regularly that it achieves nothing.
In this video I discuss where this bizarre behaviour might be coming from, and at the end I talk about how similar things happen in other areas of life.
The IPFS has a lot in common with traditional file systems.
But the few distinct differences that it has, do not only mean that it is decentralized, they also occasionally pose problems for developers that are not easy to solve.
Yet.
In this episode I talk about one of those problems, namely "revealing" files over time. Reveals are important in the NFT world in order to prevent people "sniping" sales of particularly rare colletables. It turns out to be a lot trickier than you would think at first, whereas with a traditional file system it's trivial.
What is the connection between the InterPlanetary File System and Non-Fungible Tokens (especially art tokens)?
Given the amount of money that has poured into art NFTs, getting those images that the NFT metadata points to up on a server that is unlikely to ever go away has become more and more important.
It's probably given more impetus to the adoption of the IPFS than anything else in its history.
Today I have a brief introduction to the InterPlanetary File System for you, from a browser user's perspective.
People are now familiar with typing HTTPS:// into the address bar of a browser (even though most don't know what it means), and the idea of domains (you know, things like www.thinklair.com), and that web pages are tacked on to the end of domains.
But we're now seing the IPFS making an appearance in some browsers, for example in Brave, where you can type IPFS://
In this episode I talk a bit about what that means, and why it might be significant in the future.
Bryan Sanya Mondoh pointed me at yet another nine-figure loss in the cryptocurrency and DeFi space - trading platform BXH lost $130 million.
And an accompanying offer from the exploited exchange to the hackers offering a bonus and wiping the slate clean if they returned the funds. There's a $1 million bounty on offer.
This is seriously broken. The message that is being sent out goes against all that has been achieved in providing bug bounties and recognized systems for people who find weaknesses in software to be rewarded for their discovery.
It also highlights how pathetic bug bounties have been. Uniswap offers half a million tops, Aave a quarter, and Compound's maximum reward is 150k. Most bug bounties are a few thousand at best.
And you have to prove that the bug you've found is severe and certain to be exploited, disclose it discretely within a short period of time, with lots of supporting documentation, and the team in question has to actually agree with you.
Which I imagine is similar to getting an insurance company to pay out a significant claim.
More on that in this episode.
There are three problems with artwork NFTs at the moment:
- the buyer isn't getting much more than a row in a database,
- sales are linear and infrequent, so there is no liquidity, and hence price discovery is speculative rather than investment or trade-driven, and
- ongoing royalties are difficult to implement
Through the use of capped Automated Market Makers and an interesting token-to-license path, Vitomir Jevremovic is aiming to solve all of those problems in one go.
In this video, I talk about the mechanism he is proposing.
(Full disclosure: I hold no tokens or equity in the NFT-PRO project.)
I'm not the only inventor on the block.
I've had quite a few conversations with Vitomir Jevremovic recently about a new concept he's come up with - the capped AMM.
It's an interesting DeFi concept that he's built a prototype for, which places an upper limit on how much of one of the tokens in the token pair the contract can hold.
In this video, I briefly explain how AMMs work, and then cover what different properties the cap adds to the AMM. They relate to price-discovery, and an alternate way of releasing a token into a finance ecosystem.
As it's a very new idea, it may have all sorts of other unexpected applications and properties that will become apparent over time.
See Vitomir's write-up at https://docs.all.art/protocol/camm for more details.
Vitomir is using it to provide increased liquidity in the NFT licensing market, and how he plans to do this is the topic of my next video.
Milly Perry asked me, "I wonder if you could go beyond the 'usual suspects' (digital assets) to the physical assets or into the future?"
And so in this episode, I start from basic building blocks, talk about the meaning of ownership, what a cryptocurrency represents, what a fungible token could, and then with that foundation I move on to non-fungible tokens.
Physical assets are reached about a third of the way in, and the future is two-thirds of the way through the episode.
And yet I've only just scratched the surface.
In the late eighties the World Wide Web was invented, and has since proved to be one of the most transformative recent technologies.
One of the reasons for this is that it has developed to become ubiquitous and highly useable. With Web 2.0, interactiveness was introduced, allowing anyone with a mobile phone or desktop to create and disseminate content.
In this episode, as part of the Unit Masters Program, I talk about the up-and-coming Web 3.0 - which promises to remove many of the walled gardens and central authorities that have arisen to profit form Web 2.0, and change the way we transaction and engage in commerce.
(Visit http://unitmasters.org for more.)
I was watching a video by John Oliver, in which he quotes a shocking statistic.
85% of hospitals do not have an onsite computer security professional.
We all understand why physical guards are needed at hospitals, airports, and places like that.
Why don't we have the same attitude towards protecting the virtual world in which all our essential data lives?
In fifty years (or if we're lucky, perhaps just five), people are going to look back at this era and wonder why we were so cavalier and foolish.
You've planned your DeFi or smart contract project, advertised it, and there's interest in it. What do you do next?
Issue a token, of course!
But is that always the right thing to do? Are the better (and possibly more ethical) choices?
More about that in this episode.
Today I am talking about standards - which are good things to have, but as is always the case with good things, they also have their downside.
In the episode, I look at the ERC20, ERC721 and ERC1155 standards in the world of smart contracts, and discuss why the latter isn't winning out over the other two yet.
Capitalism is all about turning a profit from the wealth that you have, without having to do any work. And crypto assets are capital, but how can you use those assets to your advantage without lifting a finger? After all, that's what "passive income" is all about.
In this episode, I talk about some of the DeFi protocols out there that allow you to deposit your virtual wealth and then see it increase.
If you're lucky.
Blockchain projects devoted to charity have a problem, in that the underlying mechanism that drives blockchains is 'financial' incentivization. Mind you, a lot of conventionally funded charity projects suffer from similar problems.
Don't get me wrong - my preference would be for us to interact and transact as human beings and social beings, rather than as market actors using the price system, but I'm not seeing much of that in the crypto space.
Though to be fair, most of us only return empty bottles and shopping trolleys with that little extra incentive of getting some money back.
Blockchain charity projects also suffer due to the number of ineffective or even dishonest projects using the "charity" badge to try to attract more users.
More on these issues in the episode.
In simple terms, blockchain governance is the method by which a blockchain is maintained, managed, and improved.
For example, deciding to change a protocol is an act of governance. So is rolling back the chain after a hack.
Different blockchains have different governance systems, and many of them have grown and evolved in an ad-hoc manner. Some of the parties that have an influence over how the blockchain runs are: the developers, the miners, whales (people with lots of tokens), and the users.
But there is one group that I had never thought about before, and they only came to my attention following the recent Ropsten Ethereum blockchain split, where after the London upgrade there were two chains.
And the shorter chain with less mining effort was actually the "correct" chain (if the London update is considered correct).
This episode is about how I realised that there is another significant group in the blockchain governance space, one that I haven't seen identified before.
Frontrunning is a stock market term whereby you use insider knowledge about upcoming trades to get in on the action before the rest of the market can. So it's a form of insider trading.
It's been a concern in DeFi for a while. Now it turns out that there's a version potentially happening in the NFT market space - namely on OpenSea.io.
Find out how by listening to the episode.
(At the point I read the tweet, which is here - https://twitter.com/RiceFarmerNFT/status/1437956078130585611 , it was speculation, but https://www.theblockcrypto.com/post/117751/opensea-confirms-executive-used-insider-knowledge-when-buying-nfts confirms it was actually happening)
I was asked if it was possible to move an NFT off one chain, and onto another.
The answer is, "yes ... sort of", but this question reveals to me that most people don't really understand what blockchains are doing.
In the meantime, in this episode I discuss the question and then get sidetracked into talking about the different values of different blockchains.
With more and more small start-up projects outsourcing software development work to contractors, especially in the blockchain space, I am sometimes asked, "How can you trust the developer you hire?"
This is especially pertinent in DeFi or cryptocurrency projects, because the software may eventually be moving around or locking up millions or even billions of dollars in crypto-assets.
Watch the video to discover the number one criterion for determining the trustworthiness of your remote developer.
In this video, I talk about the relatively new discipline of "tokenomics", and the emergence of a new job, namely tokenomics specialist.
In conventional business, we have people who decide how much a company is going to charge for their product, how many units will be released into the market and at what rate, and so on. With the aim being to maximize company profits.
The same kind of thing is (or should be) going on in blockchain organizations, but there it's called tokenomics rather than pricing and positioning strategy.
In this episode, I talk about OAuth, or open authentication, which is the protocol and process sequence whereby you can log in to one website using your account on another website.
You know, the "Log on using Facebook" button that crops up here and there.
But the fact is, you aren't logging in. Something subtly different is actually happening.
More on that in the episode.
Incidentally, SOULS is live at https://souls.fi
The DeFi protocol Compound accidentally paid out 90 million dollars today to people who had deposited crypto-assets in their smart contract.
But what exactly went wrong under the hood?
That's the discussion in today's episode, in which I present an analogy to explain what the bug was, why it wasn't detected earlier, and why it allowed investors to withdraw astronomical sums.
I also cannot resist the temptation to comment on Compound's initial response, which was a nervous knee-jerk reaction and completely counter-productive.
Twitter has been working on integrating NFTs with their social media platform, as have I with my SOULS contract.
But it turns out we're working in different directions.
Twitter is looking to authenticate ownership of an NFT so you can use the image linked to in the NFT metadata as your avatar on Twitter, with a special check-mark to show you actually own it, rather than just making copies of the image from any NFT you fancy, and uploading it yourself.
I'm producing a token that allows you to mint an NFT from your social media profile (currently Twitter, LinkedIn, Facebook and Github are on the list).
And, of course, SOULS does a lot more.
https://twitter.com/af_mada/status/1443243702156206089
One of the issues that still hasn't managed to be resolved in the mainstream NFT markets is what you are actually buying other than a record of ownership in a distributed ledger of a row that contains a link to a file.
Many people still think they are "buying" the art pointed to by an NFT, but that's generally not the case.
For example, the Larva Labs CryptoPunks does have a contract of sorts, but it does things like put an upper cap of 100,000$ that can be earned using the punk that the NFT you own points to, so it's a bit unclear on reproduction and monetization rights.
People who have blatantly copied CryptoPunks, or platforms that display such copies, have received DMCA take-down notices.
And so in this episode, I talk a bit about the issue of copyright and digital art, especially when the artwork is very very small.
A couple of years ago I released a short episode on how to get into blockchain programming, covering a few general points that needed to be considered.
In this post, I talk more specifically about how to get into Ethereum programming, which splits into two categories - writing and deploying (and testing!) smart contracts, and producing websites that interface with such contracts (also known as web3 programming).
Jamie Dimon asked the question the other day, "How do you know it ends at 21 million?" followed with a few questions that had a scornful tone about the reading of code. It's understandable that he doesn't read code - most people don't know where to begin. I don't know if viruses, DNA, or black holes actually exist. So I rely on biologists or physicists to confirm or deny their existence. I thought I would do Jamie Dimon a favour, look up the relevant code, and then explain it. He's a banker, so he should understand the numbers I talk about. The rest of you will have to trust me - I'm a mathematician. I then go on to talk about the one scenario in which there isn't a 21 million cap, and explain why it is highly unlikely that it would come to pass.
The reason for web 3.0 is so obvious to people working in the space that they often forget to draw attention to it when explaining it to other people. I failed to mention it explicitly in my video series on the topic of Web 3.0. And it's the number one user error that I encountered after launching my SOULS.fi NFT token website. Fortunately, Thomas Lukasik pointed out to me that I really should make a video about it. And so I have.
In trading, a blow-up describes the "complete and abject failure" of an individual, company, or hedge fund. When an individual trader "blows up", it's game over for them, and they move on to being an Uber driver or something like that. But banks are bailed out when they manage to work around the regulations designed to protect them and then trigger a financial crisis. This is because they provide the infrastructure and mechanisms for trade, investment, and ... just everyday living. Our society runs on the rails that they provide. You've got to wonder why we've built a financial system where, apparently, the only way to prevent our major players from blowing themselves up is to regulate their behaviour and then bail them out if they find a way around the regulation. But what if we could build automated "rails" for finance, that continued to function even if individual participants mismanaged themselves and went bankrupt? I wonder what such a system could be based on...
Saying you're looking to recruit a blockchain developer is like saying you're looking for a lawyer.
Specifics matter - just as you don't want a patent attorney defending you against criminal charges, you don't want a web3 interface designer writing smart contract implementations of financial instruments. You need to be specific. Mind you, traditional software developer recruiting agencies are often clueless about the underlying skill requirements for the roles they are looking to fill. It's just that in blockchain it's ten times worse, because it's a relatively new field. More on that in this episode.
Did Van Gogh die in vain?
Wouldn't it be nice if non-fungible token art carried with it an automatic royalty, so that every time the artwork was sold, the artist would receive a percentage of the sale price? Kind of like what happens in some jurisdictions when artworks are sold through auction houses? In this video, I explain why this isn't going to work, and why NFTs aren't magic bullets that can ensure artists who become successful get a guaranteed share of the profits from the subsequent increase in their artwork.
As for my question about Van Gogh - no, he didn't die in vain. Tragic though his suicide was, it has become part of the whole narrative behind his life and art. But that doesn't change the fact that he did die in poverty.
It's a known problem in the hiring world that assessing the competence and skill of a potential candidate for a role is difficult. It's even worse if you're hiring in a space that you're unfamiliar with, because it's easier for the candidate to pretend they know more than they do, or are less experienced than they present themselves. And blockchain is an unfamiliar space for most recruiters and hiring companies. In this video I discuss the problem, and some of the solutions.
The best, most experienced blockchain developers with years of experience usually have a different background to your average applicant for a software development role. They're likely to fall into several of the categories below:
📀 they get obsessed with technology early on and like to work on new things
😠 they have strong opinions about traditional finance, and those opinions may transfer over into other areas
😵💫 they're risk takers - after all they sank hours of their time into a technology well before its worth became globally apparent
🤑 they've got a bit more spare capital sitting around than the usual candidate, so they're not (as) desperate for a job.
🤐 they're concerned about security and privacy
And there are plenty of wacky or unusual projects out there to catch their attention. So if you put them through the usual corporate bullsh*t of grueling condescending interviews and pointless "do this at home" tasks, or ask them to copy/paste the resume they sent you (if they even bothered with that) into yet another recruitment portal, they'll walk away. In other words, it's a seller's market, you're the buyer, and you're going to have to rethink your strategy.
The blockchain space has sure hotted up since the cryptowinter of 2018. As a result, blockchain engineers and smart contract developers are in more demand than ever. Entrepreneurs and companies are seeing vast sums of money pouring into DeFi and payment remittance project, and want in on the action. What they don't want to do is pay for the back-end work that needs to be done to design, build, and run such project. if you want to hire someone suitable, you're going to have to compromise. At the bare minimum you'll need to offer:
✅ Rates well above the software development average,
✅ Remote working as standard,
✅ Part-time as an option,
✅ An efficient non-toxic, non-bureaucratic work community.
Don't like it? Sorry - that's how free markets work in a capitalist society.
If ever there was a misused word, it's the word "intrinsic". Even some of the dictionary definitions are suspect.
Attach it to the word "value" and you enter a philosophical minefield. Now we have an incompletely understood word modifying another incompletely understood word.
And this is all very well if we are just engaged in philosophical word games, but the problem is that the term "intrinsic value" is often used by people in authority to dismiss things that go against their agenda.
And then other people parrot the words without understanding the meaning, or knowing what the original agenda stands for, often to their own detriment.
And then I get annoyed and make videos like this one.
The final level to discuss is the presentation layer, which consists of the use of a website and web3 libraries in order to retrieve data from the blockchain to put on a web page, and in order to write data back to the blockchain in the form of transactions, usually using an integrated web browser blockchain wallet such as MetaMask. The thing to realize here, is that the web site developer has complete control over how they present the data they retrieve from the blockchain to the user. They can present it as is, or they can alter some or all of it. There is nothing about a blockchain that forces the web developer to be honest in this presentation, and I give an example in this video of how I did just that to Anthony Day in the SOULS website ( visit https://souls.fi/ for more ).
This is a digression into why the layers that I am talking about in this video series are not related to "layer 2 solutions" like Polygon and Binance Smart Chain. Instead I'm talking about layers in the same manner as the upper layers of the OSI seven layer model. I find it odd that "layer 2" solutions use the word "layer", because they don't really sit on top of the base blockchain that they use for anchoring (i.e. the Ethereum blockchain). Instead they kind of sit beside it, with bridges in order to transfer assets from Ethereum onto these sidechains. You see, there already was a word that worked - sidechains. I guess it didn't pass muster with the marketing people. Or perhaps you can explain to me why we need to use the term "layer 2" instead of sidechain for things like xDai or Polygon, because it's not obvious to me.
As a developer, you have a choice as to what blockchain you use, but very little if any control over the mechanisms that power it. It's a bit like choosing a country and a language to write your book in. If it's a smart contract blockchain, move up a level, and you can start to exert more control - for example, you can release a centralized token on a decentralized blockchain, if you so choose. But there are still some fundamental things that you will be tied to, if you want your contract to have traction. Similarly, as a writer you can bend the rules of grammar or coin new words, but go overboard and your audience will think you're speaking gibberish. Then there's a third level, namely web3, which acts as a presentation layer. On this layer you can really go to town. There will be more on this in the final video in the series.
In this video, part three of the series, I talk about how smart contract blockchains such as Ethereum allow developers to play with levels of decentralization in the smart contracts they deploy. For example, although Ethereum is "censorship resistant" due to it's blockchain consensus system, it is perfectly possible to release smart contracts that are highly centralized, under the control of one entity, and therefore vulnerable to censorship. For example, it was revealed during the Compound bug that Tether can "freeze" transfers on certain balances in the way that traditional banks can freeze accounts. I also talk about levels of "arbitrariness" found at the different levels in the blockchain.
Having looked at what a ledger is, and why the concept of a ledger is significant within blockchain, it's time to move up a layer and consider "ledgers within ledgers". When a smart contract instantiates a fungible or non-fungible token, what it is doing is implementing another ledger in order to keep track of the balance or ownership of the token. So - tokens are created by building legders within ledgers. This video goes into what that means at greater depth.
In this video, I start with a recap of what a ledger is, in order to set the groundwork for later videos on the different levels that exist in blockchain. This will help you to understand what is going on in cryptocurrencies and NFTs, and what parts are arbitrary, and which are fixed. (Well, ultimately all of blockchain is arbitrary, because we invented it, but some parts are now fixed, and other parts can be "played with". But more on that later in the series...)