A library of snippets
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What Axie Infinity brings is a new gaming model called play-to-earn where users can now “transfer their sweat equity into actual equity” and sell their equity for real money.
From How to Cash in on Crypto Game Axie Infinity’s 230% Surge Last Month:
It’s not clear to me what is new about this business model. One of the first blog posts I ever wrote was about play-to-earn farms in China, where virtual gold miners were earning more money than actual gold miners.
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If you don’t feel comfortable taking your credit or debit card into the festival ground then perhaps Google Pay or Apply Pay is the right solution for you. However, there are a few factors that could cause this plan to come a-cropper.
Firstly, the phone service. As with any music festival, the precious phone signal is likely to be pushed to breaking point. Keep this in mind when ditching your card for the more modern alternative.
From Reading Festival won’t accept cash this year – here’s everything you need to know – Berkshire Live:
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Her name is Ling, and she’s a social media influencer with more than 130,000 followers on Weibo, China’s version of Twitter. She is also not real, but that hasn’t stopped her from netting ad deals with Tesla and Nayuki, one of China’s biggest bubble tea chains.
Ling guarantees a trouble-free experience for advertisers and marketers in an age of celebrity scandals and influencer controversies. Unlike the David Dobriks and Jake Pauls of the world, an AI presence like Ling is engineered to perfection down to the last wisp of hair on her head. Her ultimate selling point is that she brings absolute peace of mind to the brands she works for — something that unpredictable human celebrities and influencers could not possibly ensure.
From China’s Flawless AI Influencers Are the Hot New Queens of Advertising.
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A California federal judge has ruled South Korean crypto project ICON (ICX, a blockchain-powered network that supports smart contracts and was historically considered South Korea’s answer to Ethereum) may have acted improperly when it instructed Kraken and Binance to freeze 14 million tokens minted by a crypto “hacker”. The word hacker is in quotes here, because it’s a matter of some dispute what constitutes a hack when it comes to smart contracts on a blockchain.
In this case, the alleged hacker, Mark Shin, countered that he had never hacked any part of ICON’s system, he simply used the code as it had been programmed. Mr. Shin’s lawyer quoted as that “if the blockchain says you have certain tokens, and you didn’t take those tokens from another individual, the rules of blockchains are that that property belongs to you”. In other words, this has nothing to do with hacking and everything to do with redistributing value to, as my friend David Gerard would put it, cryptographically more deserving causes.
1101010.
NFT available direct from the artist at TheOfficeMuse (CC-BY-ND 4.0)
These smart contract errors are not exactly rare, by the way. An investigation conducted by CyberNews found that nearly 3,800 Ethereum smart contracts had vulnerabilities in them and called them a “time bomb”. It is hard to disagree. A detailed paper IEEE paper on “Smart Contract: Attacks and Protections” analysed a number of security tools to detect vulnerabilities in order to assess their effectiveness and found that not all vulnerabilities were detected, providing a dangerous false sense of security that attackers can abuse, and concluded that developing secure smart contracts “remains a challenge”.
Many of these problems with the smart contracts are often caused by programming errors. Earlier in the year, I remember looking into another smart contract failure. If you are interested, the detailed analysis is on Medium, but the essence of it is that there was an error in a smart contract where the programmer had set a condition “greater than zero” rather than as it should have been “greater than or equal to zero”, result in a couple hundred million dollars vanishing. The developers, rather wonderfully, reported on Telegram that because of a condition “which we have unthought of”, the money won’t be coming back.
There is an important point here about persistence. Smart contracts are not like other apps. People are lousy at writing software but when there’s a bug in Word then Microsoft can just download a patch and fix it. But blockchains are immutable: that’s sort of the point of them. You cannot patch a bug in a smart contract, all you can do is fork the blockchain back to a time before the smart contract was executed.
As I was sitting down to write this piece, I noticed that Poly Network had reported that a person or persons unknown used smart contracts on their network to redistribute some $600m worth of Ether, Binance Coin and USDC to cryptographically more deserving wallet addresses. This was made possible because of bugs in two important smart contracts on the network (you can read about the details here). Poly Network responded by abandoning the “code is law” ethos of smart contracts and threatening legal action and lynch mobs saying “law enforcement in any country will regard this as a major economic crime and you will be pursued” and the perpetrator eventually returned the funds. I can’t decide whether this is a real story, a marketing stunt or performance art. My best guess is that the attacker slipped up in such a way that they could be identified by vigilantes, since their IP address and email were discovered soon after the heist.
(In my opinion, “smart contracts” is one of the worst marketing labels in history. Bill Maurer and DuPont nailed this in their superb King’s Review article on Ledgers and Law in the Blockchain back in 2015, when they pointed out that smart contracts are not contracts at all but computer programs and so strictly speaking just an “automaticity” on the ledger. In my book “Before Babylon, Beyond Bitcoin” I made that point and further mentioned Ethereum inventor Vitalik Buterin’s comment that he wished that with hindsight he had used the word “persistent script” instead.)
Some apps are not like other apps, in short. But what is the point of these persistent scripts? Gartner’s Avivah Litan summarised the situation well by saying “the benefits and logic of smart contracts are not understood by all parties” (or indeed, I might add, any of the parties in some of the use cases I have seen). They are not smart, and they are not contracts. But they are useful. They enable users to form decentralized digital agreements without the need for a third party., which has attracted interest around services including banking, health and insurance. There is the potential here for an entirely new financial infrastructure: that of decentralised finance, or “defi”.
The St. Louis fed wrote that defi may increase the “efficiency, transparency, and accessibility” of the financial infrastructure and I think that they are right. Moreover, the system’s composability allows anyone to combine multiple applications and protocols, thereby creating new and exciting services: this is the world of the “Money Legos” that advocates describe so enthusiastically. The opportunity to build complex, structured products through defi implies the use of smart contracts rather than financial institutions and markets. Such contracts can source liquidity from various on-chain derivatives protocols and pull them together to achieve some specific risk objective, all the while staying 100% transparent.
In a detailed and fascinating paper on the topic Dirk Zetsche, Douglas Arner and Ross Buckley summarise the defi opportunity very accurately by noting that defi potentially offers an opportunity for the development of an entirely new way to design regulation, specifically with the concepts of “embedded supervision” and “embedded regulation” (or as Richard Brown, Salome Parulava and I called it “ambient accountability”) potentially decentralising both finance and its regulation in the ultimate expression of not fintech but regtech.
This approach opens up an entirely new field of finance with significantly more complex instruments and significantly lower costs. However, it has to be noted that smart contracts’ key selling points of flexibility and efficiency could be, at the same time, their biggest challenge to institutional adoption. In the same way that defi offers multiple avenues for users to take advantage of their yields and value propositions, hackers also rely on that flexibility to conduct attacks and simple exploits mean the infrastructure is a gamble.
The more the use of smart contracts expands, the more it catches the attention of potential attackers, both for technical exploits and what you might term market exploits (eg, front running). Many observers think that what we have now (the Ethereum Virtual Machine, or EVM, basically) is just not suitable, and I can see where comments such as “EVM was the first engine of smart contract blockchains. Like with the early automobiles, we do not drive T-Fords today” and “EVM and its programming language @soliditylang are very use case focused and narrow. They can do little computing, slowly, similar to a dumb phone from 1999” are coming from.
(Security is not the only barrier, of course. A recent webinar from The Block that looked at the issuing around scaling discussed other issues ranging from the user experience to discoverability and are to “general agreement” on the need for a central app store-like destination to discover and interact with persistent scripts. I wonder if the SEC could run an “Dapp Store” of certified scripts?).
Ultimately, if we are to realise the benefits of this new infrastructure we may well need both a different kind of “blockchain” and a different kind of “smart contract”. I’m not smart enough to know whether defi will be built on Ethereum 2.0 or Solano or Liqudity, but I am smart enough to know that a market of competing smart contract platforms is growing, that defi will be built on them and it makes sense for financial services organisations to start working on their strategies for exploitation.
(An edited version of this article first appeared on Forbes, 27th August 2021.)
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There were $11 billion USDC stablecoins in March 2021, up an incredible 16x from $600 million in 2020. But USDC’s quarterly interest income didn’t jump by 16x. It went from $1.3m to $3.2m, a measly double.
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X1X5TXHX AXUXXGXUXSXT 20X21X
SUNDAY
BRIEFING
MINERVA RESEARCH EXCELUXSCILVUESITVOEXTXOXXXXXX
China may provide the tech for other countries’ currencies
Long before it was on the Fed’s radar, we predicted that
China’s digital currency would soon have the Western central
banks rushing to produce one of their own. That’s now
happening.
But in our view most commentators miss the crucial
aspect of how digital currency is likely to spread beyond
China. Contrary to the general idea that China’s e-RMB
will increasingly be used in other countries – although
that may well happen – the likely mechanism is that other countries create digital currencies of their own using China’s technology stack.
Some 81 countries, accounting for 90% of global GDP, are
now exploring official digital currencies. A handful of small
PRINT ONCE – DO NOT FORWARD – DO NOT COPY
15TH AUGUST 2021
8 OF 8 EXCLUSIVE TO XXX
QUOTED
“Intelligence is really a
kind of taste: taste in
ideas”
American literary
critic Susan Sontag
countries have actually launched one already, such as the
Bahamian Sand Dollar. A number of significant economies
have launched pilot projects, such as South Korea, Thailand
and Saudi Arabia. More, such as Brazil, South Africa, Russia
and Japan, have digital currencies in development.
If these are built on Chinese tech – with its inbuilt
emphasis on surveillance and control – that has the
potential to transform the global financial system
regardless of whether or not China’s own currency is widely
internationalised.
Chinese ambitions
As part of broader ambitions to promote Chinese tech
standards in other countries, China’s five year plan makes
clear the aim to “participate in formulating international
digital currency regulations, and digital technology
standards”. Officials from China’s central bank have been
working to that end. For example, the PBoC has joined with
the Central Bank of the UAE, the Hong Kong Monetary
Authority and the Bank of Thailand to test real-time foreign
exchange.
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Major banks are concerned the new open banking regime has created an unlevel playing field that will allow global technology companies like Amazon or Facebook to use bank customer data without having to provide anything in return.
From CBA calls for consumer data right extension to global tech players.
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Circle, which is in the process of listing via a SPAC, expects to make $40 million of income this year from the roughly $28 billion of assets currently backing its USDC coin, plus further growth.
From Crypto’s Tether Sheds Light, but Not Enough, on Its $63 Billion Reserves – WSJ:
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Switzerland’s embassy in Beijing has called out Chinese state media for inventing a fake Swiss scientist to bolster the government’s dispute about the origin of Covid-19.
In recent days, an alleged biologist from Switzerland named Wilson Edwards had been widely quoted as criticising the US for politicising the World Health Organization’s investigation into the beginning of the coronavirus.
However, the Swiss embassy has said no registry of any citizen by that name exists, nor any academic articles in the field of biology by a scholar under that name.
Additionally, the Facebook account linked to the alleged Mr Edwards was only opened on July 24, had only one story and three friends, the embassy noted.
From Chinese state media called out for inventing fake Swiss scientist to bolster Covid origin dispute:
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The BOK’s 10-month pilot is an initial step in testing the viability of a CBDC on a distributed ledger, or blockchain and will utilize a Klaytn ledger built by Kakao’s Ground X blockchain division… The benefits for South Korean consumers of a CBDC may initially be unclear.
From South Korea’s forward-thinking digital currency pilot program | East Asia Forum:
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