Proof of Work: The tide is turning for state power

Bitcoin • June 15, 2019, 11:00AM EDT
Benjamin Friedrich | The Block

Quick Take

  • Cryptocurrencies are eroding the State’s ability to print money. Corporate and decentralized currencies like Bitcoin will compete with national fiat currencies

  • The ability of the state to wage war even on supposedly much weaker adversaries has become way more costly

  • The internet has allowed for information to be spread widely in a way that was previously only available to state actors
The following newsletter is republished with permission from Eric Meltzer of Primitive Ventures, a global venture investment firm with a focus on blockchain and related technologies. You can follow Eric on Twitter at @wheatpond and subscribe here to Proof of Work.

Normally I try to avoid speculating on the medium-term or far future—my job is to speculate on the relatively near future (5 years or so), and I know first hand how hard that is to do well. But if you’ll indulge me in a bit of long-term speculation for the length of this email, I’d like to think out loud a bit about what’s happening to state power as a direct result of technology. I also won’t bother to hide my glee about these developments—as a Jew I have a deep-seated distrust of nation states, and I’ve been dismayed by the increasing power that surveillance and weapons technologies have granted to state actors. That the tide is changing now is a source of deep joy for me, and a strong motivator to keep me investing in this space (as if the moongainz weren’t enough, haha)

The first and most obvious trend is that of cryptocurrencies eroding the State’s ability to print money. This started with Bitcoin, and was clearly part of Satoshi’s intent in releasing the Bitcoin software. Unsurprisingly, this is becoming most apparent in countries with extremely weak fiat currencies like Venezuela—and also, it happens slowly (then fast) because the fiat financial system resists outflows pretty well. But at the end of the day it’s a leaky bucket, and the cat is not going back into the bag on this one. The money landscape in Dec 2008 was entirely national fiat currencies—in January 2009 it suddenly included a decentralized digital currency. In January 2019, Bitcoin and a plethora of altcoins exist. In January 2029, I suspect that FacebookCoin style corporate currencies, decentralized currencies like Bitcoin, and national fiat currencies will all be competing, with the former two categories making up a very large chunk of world commerce.

The second ongoing trend is the inability of state defense agencies to deal with what William Gibson termed “an increase in individual lethal agency.” Put simply, the number of people one determined individual can kill if they want to is increasing and shows no signs of slowing down. From a State power perspective, this means that waging war even on supposedly much weaker adversaries is way more costly, because they can respond asymmetrically e.g. through terror attacks.

The final trend that seems to be reducing state power is the existence of the Internet as an information dissemination tool. This one is a bit of a mixed bag—the internet permits surveillance that increases state power, but it also permits people to share information widely in a way that was previously only available to state actors. I think on balance this will end up decreasing state power; surveillance will become more and more difficult as financial transactions move onto things like Mobilecoin, Zcash etc and as communications increasingly are over end-to-end encrypted open source tools like Signal; at the same time, the tools of mass influence will be wielded increasingly by non-state actors (corporations, small interest groups, etc).

One of the main differences between people who have been in the crypto space for a long time and people who are relatively new is the degree to which they understand that cryptocurrencies are inherently an anti-state technology, and need to be built from the ground up to withstand multi-state attacks. At the moment, very few if any cryptocurrencies meet this bar (although Bitcoin is by far the closest). Naval Ravikant referred to the State as the “final boss” for crypto; I agree with that assessment and think that the boss fight may be coming sooner than people think.

More next week. Especially interesting updates this week from Sia and Maker!

Satoshi’s Treasure Hunter’s Journal

  • Released the Clan Key which required users to start a chain by shooting videos of themselves outside making a clan gesture, and posting the video on twitter. To extend the chain, the next person should have someone shoot a video of them holding a phone playing the previous video in the chain, and making the same secret gesture, and then quote-tweet the previous “block” in the chain. Every tweet of this game includes a hashtag #clanchain

  • All tweets can be seen here

  • This clue will end on June 15th, and the team with the longest chain wins. So far, some of the longest chains include: #CipherToshi #steemclan #clarksonclan among which #CipherToshi is so far the longest with 51 tweets

Bitcoin & Friends

Jimmy on Bitcoin

Optech on Bitcoin [ed: sign up for their newsletter too! it’s great!]

  • A new paper by Gleb Naumenko, Pieter Wuille, Gregory Maxwell, Sasha Fedorova, and Ivan Beschastnikh describes an alternative transaction relay protocol, Erlay. 

  • Bitrefill CEO Sergej Kotliar gave a presentation about LN for the Optech executive briefing last month. The video is now available.

  • The author of the COSHV proposal we described last week has replaced it with a similar proposal under a different name.

Aviv from Spacemesh

Spacemesh is a programmable cryptocurrency powered by a novel proof-of-space-time consensus protocol.

JZ from Decred

Decred is an autonomous digital currency with a hybrid consensus system. It is built to be a self-ruling currency where everyone can vote on the rules and project-level decision making proportionately to their stake.

  • The May edition of the Decred Journal has dropped, covering the latest hard fork that activated DCP4 and paved the way for Lightning Network, which is now mainnet ready. It also brings word of the iOS wallet for Decred which just put out a release candidate this week in preparation for the imminent final release.

  • We also have a new issue of the Politeia Digest which summarizes the four proposals that were up for vote, all of which passed with support between 76% and 99%. The Decred treasury balance hit 617k DCR (approx +15k DCR/month) — $16.5 million (+$408k/month) based on $26.70 DCR price.

Johnny from Stellar

Stellar is an open network for sending and exchanging value of any kind. Its global network enables digitization of assets - from carbon credits to currencies - and enables movement around the internet with ease.

Izaak from Coda

Coda is the first cryptocurrency protocol with a constant-sized blockchain. Coda compresses the entire blockchain into a tiny snapshot the size of a few tweets using recursive zk-SNARKs.

  • Deepthi rewrote the parallel-scan (one of Coda's two core data structures), and the new code is beautiful!

  • Paul removed all the warnings from our codebase.

  • Carey, Avery, and Pranay have been pushing the desktop wallet UI forward.

  • Jiawei refactored the flow of async communication between various components of the daemon to make it more explicit.

Privacy coins

Paige & Zooko from Zcash

Zcash is a digital currency utilizing zk-SNARKs to enable its privacy-protecting properties.

Beni from Beam

Beam is a confidential and scalable cryptocurrency based on Mimblewimble.

  • Focus on Privacy - Team Beam is attending the Blockchain Cruise - June 9th-13th 2019

  • Alex Romanov, Beam CTO, will lead our first Vietnamese AMA on Telegram on June 18th, 2019, 1:00 PM (GMT)

  • Swap: changed Beam Lock time

  •  Swap: process invalid credentials

  •  Swap:  Transaction statuses change #703

  •  Swap: Rename "--swap_coins" to "--swap_init" #698

  •  Swap: Don't show help list after errors with 0 (zero) amount #704

  •  Desktop: Address book - Add ability to edit comment for addresses #623

  •  CLI Wallet: Add a command to get full transaction details #613

  •  Wallet - Multi-language support #618

  •  Edit Address pop-over should allow user to select / copy the address #608

Arnaud from AZTEC Protocol

AZTEC Protocol is an efficient zero-knowledge protocol built on top of Ethereum, making plug-and-play value transmission and asset governance privacy tools for developers and companies. 

  • This week in addition to updates to our client side library and our MPC code, we added the multisig with timelock contract which will help us administer AZTEC

  • We also received the first ever pull request for our EVM scripting language Huff by an external developer

  • Next week, Oana and Tom Waite will be at the zkp coding workshop in London. If you're around, say hi!

  • In addition to the two cryptographer roles, we are now hiring for a Senior Solidity Engineer and a Senior Engineer. You can apply here, or by emailing [email protected] with the name of the role as the subject.

Smart contracting platforms

Evan from Ethereum

Ethereum is a decentralized platform for applications that aims to resist fraud, censorship or third-party interference.

Peter from NEAR

NEAR is a sharded proof-of-stake blockchain.

  • 29 PRs across 9 repos and 10 authors. Featured repos: nearcore, nearlib, near-shell and near-wallet 

  • We now support smart contracts written in Rust

  • You can attach tokens to any call and send tokens to accounts from the command line in near-shell

  • View account and command syntax improvements in near-shell

  • Feature fixes in wallet such as display username, send money, account recovery, login redirect and UI.

  • Add keys for account in nearlib

  • Switched to u128 to nearcore

Topper from Quorum Control

Quorum Control makes Tupelo, a permissionless proof of stake DLT platform purpose-built to model individual objects that enables flexible public or private data models.

Michael from Loom

Loom Network is a platform for building highly scalable DPoS sidechains to Ethereum, with a focus on large-scale games and social apps.

Myles from EOS

EOS is a new blockchain architecture designed to enable vertical and horizontal scaling of decentralized applications.

  • Ivan on Tech interviewed Dan Larimer about Voice, EOS VM, EOSIO 2, and more

  • Ashe Oro published an overview of the B1June event 

  • EOSIO Labs released a WebAuthn Example Web App for EOSIO YubiKey Support

  • The Block reported that B1 has a $150M budget for Voice, its social network project

  • Block.one