Geeq Review: Proof of Honesty, Infinitely Scalable, High TPS

GEEQ is a platform of independent, interoperable blockchains. It uses a unique consensus mechanism called Proof of Honesty (POH). POH allows users to determine whether a node follows certain rules, and is behaving honestly. It requires less validators, but still maintains a high level of security. POH is 99% Byzantine Fault Tolerant, and is invulnerable to 51% attacks!

The Geeq platform consists of multiple independent blockchains. This architecture allows for unlimited scalability, high tps, high security, and real decentralization.

Other important features:

  • Transaction costs of around 1/100th of a cent!
  • Each chain can run on a different ruleset. A chain can even run Solidity!
  • Upgradeability
  • Separation of validation and application layers.
  • An innovative token design allows the $GEEQ token price to steadily grow with adoption, instead of wildly fluctuating.

Here are some important links:

What is Proof of Honesty (POH)?

Proof of Honesty is a unique consensus protocol. It provides high security, with low computational resources. POH requires that a node proves its honesty, before a transfer is made. A POH network only requires one honest node to function. This is what is meant by 99% Byzantine Fault Tolerance.

How Can a Node Verify its Honesty?

A node shows it is truthful, by creating records to show it follows certain rules. If a ledger follows these rules, it is considered honest. A user can verify this within the client software, before a transfer is made.

Geeq Separates Validation and Application Layers for Better Security

Geeqchains runs validation and application layers on separate chains.

The validation layer does not contain smart contracts. Its simplicity minimizes the attack surface. The validation layer only does token transfers, and fee payments.

The application layer allows business logic, smart contracts, native tokens, dapps, and specialized data. Each chain can run a different ruleset. A Geeqchain can even run Solidity and Ethereum smart contracts!

How Nodes Police Each Other

Nodes can police and audit each other. They do this using a system called the Catastrophic Dissent Mechanism (CDM). Nodes can earn the Good Behavior Bond (GBB), if they are catch another node being dishonest.

Standout Features of GEEQ

Upgradability without Hardforks – Hardforks are disruptive. Geeq allows for a more elegant way to upgrade. A new chain can be created to replace, or fix the old chain. Users have the option to migrate to the new chain, or stay with the old one.

Very High Security – Geeq’s central focus is security. The network has 99% BFT. This makes it resistant to 51% attacks, and takeover from state or high resource actors.

Other security features:

  • Separate validation and application layers.
  • Nodes can audit each other to win the node’s collateral, or Good Behavior Bond.
  • A final layer of security called Edge Security, verifies a node’s honesty via user client software. High security is one of the main focuses of the GEEQ blockchain.

Interoperability – the separation of the validation and application layers, allows GEEQ tokens to move across chains with different rulesets. Geeqchains can even be configured to run Solidity and Etherum smart contracts.

MicroPayments – Micropayments are possible on Geeqchains, as transfer costs are reduced to around 1/100th of a cent. This opens up new use cases like streaming payments, and IOT.

Multi-Chain Architecture – Geeq’s architecture consists of interoperable chains. This allows higher throughput, parallel processing, and improved scaling.

High Transaction Per Second (TPS) – Each Geeqchain can do 40 – 200 TPS. Transactions can also be done in parallel. So, the maximum TPS depends on the number of chains in the network (200 x N). Tests have done around 1000 transactions per second.

Stabilized Token – Geeq has a stabilized token. This is NOT the same as a stablecoin. It means that the token was designed to gain value, as the network increases in usage. $GEEQ’s price fluctuations are less dramatic.

Hub and Spoke Node Structure – Geeq uses a “hub and spoke” structure, instead of a gossip node structure. This is more efficient and cost effective for notifying nodes of transactions.

Geeq’s Highly Skilled Team

Geeq has a strong team, with a proven business history. The team is skilled in business, finance, and machine learning. Their goal is to make connections in the banking sector.

Tokenomics of GEEQ

GEEQ is a utility token. It is used to pay validators and for virtual machine services on the network. The value of the token is stabilized. As network usage grows, the value of the GEEQ token will grow with it.

$GEEQ’s total supply is 100,000,000. Its market-cap is around 3 million. It is held in just over 1300 wallets. Below is its token allocation.

Conclusion of GEEQ

GEEQ is unique. It addresses many problems facing blockchain. Its multi-chain architecture and POH consensus tackle scaling, upgradability, fees, security, and interoperability problems.

Geeq has a strong focus on security. The team wasn’t satisfied with the security of POW or POS. This is why they created POH consensus. They also separated the validation, and application layers for extra security. This separation also allows chains to have different rulesets for applications, but still accept transfers through the validation layer.

Geeq has high TPS and low costs. The multi-chain environment allows transactions to run in parallel. TPS will scale as the network grows. The low cost per transaction opens up new use cases like: streaming video payments and IOT.

GEEQ is an excellent project, but it hasn’t yet received much attention. Only 1300 wallet addresses hold the token. I think that once GEEQ has some applications running on-chain, it will gain more notice. GEEQ token holders will be rewarded as the network becomes utilized. The token price was designed to increase in value, as the network grows.

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Cartesi Review: Layer 2 Scaling, Linux Bridge, Decentralized Games

Cartesi is a layer two scaling and development platform. It serves as a bridge between Linux and blockchain. Blockchain software, in comparison to Linux, is very rudimentary. It doesn’t even have the concept of a file! Cartesi allows devs to take advantage of 50+ years of Linux software tools. It can help developers build and scale the next generation of blockchain killer apps.

Cartesi allows apps to run “heavy computation”, inside a Cartesi node. This isn’t possible to do on-chain. The computation done in a Cartesi node, is also verifiable and reproducible. This provides decentralization, with the security guarantees of the blockchain. Local consensus can be achieved inside a node, with any dispute being settled on the main-chain.

To demonstrate this tech, Cartesi has created a tower defense game called Creepts. The game uses fully decentralized logic. This makes the outcome of the game, provably fair. The team is experimenting with gaming, but Cartesi has many use-cases. This includes: defi, logistics, and A.I. marketplaces.

  • The Cartesi project has been in development, since 2018. Notable investors include Sergei Popov, who is a co-founder of IOTA. It’s goal is to enable development of scalable, cost-efficient dapps, with high levels of computation and security. It is also interoperable with other blockchains.

Here are some important links:

Creating Off-Chain Local Consensus in a Cartesi Node

Blockchains are very slow, because multiple machines must reach consensus. Global consensus is both time consuming and expensive. It makes scaling difficult. BUT, a decentralized app only needs to achieve local consensus, in most instances. Cartesi splits up the vital on-chain processes, from the less vital processes, which are run in the Cartesi VM. Local consensus can be used for the majority of computation. This increases speed, and reduces the costs.

Does Cartesi work with other Layer 2 Scaling Types?

Cartesi is complimentary to both ETH 2.0, and other L2 scaling types. Other compatible scaling projects include: Plasma (OmiseGo), State Channels (Celer Network), ZK-Proofs (Loopring), and Side-Chains (xDai). The other layer 2 projects can “specify full Cartesi computations within their transactions.”

Decentralized, Fair Gaming with Cartesi

Decentralized gaming has two approaches. The first uses blockchain to interact with NFTs. The second has fully decentralized gaming logic, which offers a provably fair game. This type is good for tournaments, ensuring no one can cheat. Games with decentralized logic can verify scores, with no central authority. This type of game is also open-source. This allows them to be forked, and governed like a DAO.

Cartesi’s first game, Creepts is built on decentralized Linux. This allows for complex, fair games, with high on-chain security. Creepts uses heavy computation, which wouldn’t be capable of running on-chain. The game is fast and inexpensive, because it runs on layer 2.

The Cartesi CORe: Cartesi Nodes, Cartesi Machines, and the Data Ledger

Cartesi uses a hybrid on/off-chain approach. Most computation is done off-chain, with vital aspects like payments being done on-chain. Below, i’ll explain the components of the system…

What is a Cartesi Node?

A Cartesi node holds the off-chain components of an app. The node is composed of both hardware and software. Users must interact with these nodes to run an app. Each node contains a Cartesi Machine, which is a VM running distributed Linux. The decentralized logic is run and replicated in the VM.

What is a Cartesi Machine?

A Cartesi Machine, is the virtual machine (VM) inside of a node. It hosts a decentralized version of Linux. All computation that is done inside the Cartesi VM, is verifiable and reproducible. The core splits computation into that which needs to be reproducible, and that which doesn’t. Dividing the computation, brings the performance in line with traditional speed and storage capacity of modern systems.

How the Data Ledger solves the Data Availability Problem

Layer 2 projects have a data availability problem. This occurs if one of the parties goes off-line during a transaction. This is fixed with a POS side-chain, called the Data Ledger. The data ledger is also used for “short term storage, garbage collection, sharding, off-chain emulated computations, and localized consensus.”

What are Possible Use Cases of Cartesi?

Cartesi is capable of building scaleable apps, running Linux, and using high amounts of computation. Cartesi’s uses extend beyond gaming. It has utilities in: defi, marketplaces, outsourcing, logistics, and even scientific research. It can improve the performance of any type of app.

The Tokenomics of $CTSI

$CTSI is Cartesi’s native token. It is used to reward node operators and to pay to store data on the data ledger. It’s staked as collateral, in the proof-of-stake side chain. Block producers receive CTSI rewards, and fees from the data ledger. Staked CTSI collateral is slashed, if a node operator behaves dishonestly.

Here’s a full explanation of the token’s utility, when i asked in the Telegram group:

CTSI has a total supply of 1 billion tokens. 250 million tokens are reserved for miners of the POS algorithm. There are a series of time-locked accounts, which will release coins over time.

This article discusses the CTSI macro-economy and staking. CTSI mining is coming in Q4 of 2020.

My Conclusion on Cartesi

Layer two scaling projects are in demand. Ethereum 2.0 will take 2 more years. The Cartesi project can provide a fix for Ethereum’s scalability issue. On top of scaling, the project allows developers to build with Linux. They can use higher amounts of computation, while maintaining high security. This will drive the creation of next generation killer blockchain dapps.

There is a demand for CTSI tokens within the ecosystem. I do have some concerns about the high token supply. But, as you can see in the graphic above, the majority is for mining rewards, to support the foundation, and to fund future growth of the project.

The team and founder Erick DeMoura is capable and experienced. He has an association with IOTA, which will help gain connections with other major blockchain projects.

I think Cartesi’s tech is a critical puzzle piece in our decentralized economy. It will produce better apps, which will help speed growth of the entire ecosystem.

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Akropolis Review: For Profit Daos, Capital Pools, and Under-collateralized Lending

AkropolisOS is a framework to create financial DAOs, dapps, and protocols. It’s a smart contract toolkit to build community driven financial services, with no central counter-party. It helps users work together to earn, save, invest, and lend. It can even provide under-collateralized loans! This is very unique in defi, which tends to focus on over-collateralized loans.

This project allows users to create and control pools of capital, under DAO governance. These pools of money can be configured into: pension funds, savings accounts, insurance accounts, group investments, or community lending pools. DAO members receive incentives for providing pool liquidity, for staking to fund loans, and voting. Groups of DAOs can even organize into Guilds.

Originally Akropolis was started to create a distributed savings/pension fund, but it has morphed far beyond that. Its overall goal is to replace many banking services, using the model of “coops or mutuals”. This creates a more fair type of banking system, and removes predatory middlemen. Users are always in full control of their funds. They can “rage quit” the DAO at any time.

  • Akropolis lunched its mainnet in June, 2020. There are major updates coming, including: liquidity mining, a rebalancing module, and Opyn support. The roadmap can be seen here.

Important Akropolis links:

A Tale of Two Capital Pools: Sparta and Delphi

The Akropolis team has seeded the first two defi products into the AkropolisOS ecosystem: The Sparta and Delphi pools.

1) The Sparta Pool: This is a community owned capital pool. It is used to issue under-collateralized loans, save money, or farm yield for a co-op. It can be thought of as a community bank, run by DAO governance.

2) The Delphi Pool: This pool helps members dollar cost average (DCA) into BTC and ETH. It lets them earn interest via defi protocols (Compound, Aave, dYdX, etc.) and participate in liquidity mining. Members can also farm governance tokens like COMP, BAL, and MTA. Here is a prototype of the Delphi pool.

$ADEL is a recently launched governance token for the Delphi pools. It is earned by contributing liquidity, and by actively governing the pool. In addition to being a a part of governance, “ADEL will also have a shared claim on any future fees of Delphi.” 

Below is the Delphi UI Alpha.

Pool Growth and Liquidity Incentivization

Both pools are designed to offer incentives for: early pool membership, capital growth, participation in lending, and voting. Users can buy into a pool, by purchasing pool tokens (pTokens). pTokens are priced according to a bonding curve. The bonding curve allows early adopters to cash out at a higher price, if the liquidity increases.

Undercollateralized Loans via Staking

I think a stand out feature of Akropolis, is its ability to give under-collateralized loans. This sets it apart in the defi landscape.

Members can get an undercollateralized loan, by requesting it from the pool. The borrower must provide 50% of the collateral themselves. The remaining 50%, must be staked by other DAO members. Members use on-chain social reputation, along with identity metrics, and 3rd party credit scoring to assess risk of the borrower.

Staking on a loan application creates a credit scoring system, used to evaluate the loan’s risk.

(The image below shows how loans work in the DAO)

Pensify: The On-Chain Pension Fund

Pensify was created in an Akropolis hackathon. Its a pension dapp, that allows its members to farm yield. It offers flash loan arbitrage, yield rebalancing, and increases its token’s value, with the bonding curve.

When a member retires, they can withdrawal their pension funds based on the plan they chose. (Below is a screenshot from the UI.)

Tokenomics

There are 4 tokens used in the Akropolis economy: AKRO (governance token/liquidity incentive), pTokens (pool token), ADEL (governance of Delphi pools/ liquidity incentive), and DAI (to fund loans).

The total supply of AKRO is 4,000,000,000. AKRO is used for network governance, and liquidity incentivization. AKRO holders can vote on pool parameters like: the bonding curve, and the loan collateralization rate.

AKRO tokens are deflationary. AKRO is bought and burned, when there is a gain between pToken entry and exit on the bonding curve.

AKRO’s allocation is shown below:

ADEL is a newly added governance token for Delphi pools. A fixed supply of 60,000,000 will be minted and distributed over 6 months. It can be mined by adding liquidity to these pools.

pTokens represent a user’s share in a capital pool. Its price is based on the bonding curve, which rises as more tokens are minted. The pToken’s value is tied to the amount of capital in a pool.

DAI is used to fund loans.

Whats Coming Soon for Akropolis?

Akropolis has many new features coming like: gasless transactions (using GSN), insurance options via Nexus Mutual and Opyn, automatic rebalancing (RAY, Curve), and liquidity mining. Governance improvements and new tokenomics, are also being tested.

The team is addressing interoperability with Polkadot, by launching their own parachain.

My Conclusion on Akropolis

I think DAO governance can fix the problems created by the centralized control of our banking system. Akropolis’ DAO controlled capital pools, can build a more fair system. It removes middlemen, and gives the voice back to consumers.

Akropolis gives multiple incentives to users, for contributing to the network. Members can earn two governance tokens (AKRO and ADEL) for providing liquidity. Early pool members can also profit off the bonding curve, if liquidity grows. They can also stake on a loan, to earn interest.

It’s exciting to consider the possibilities of these DAO managed pools. I can see them being utilized in: group investments of non-crypto assets, DAO betting (harnessing the wisdom of the group), and as a way for non-savvy traders to pool with more experienced traders. I think community banking and savings just scratches the surface.

The Akropolis team seems to be smart, capable, and experienced. They have backgrounds in fund management, insurance, pensions, and previous blockchain startups.

Akropolis is early in its development, but its community is already growing. Members have built dapps including: Pensify and Cash Flow Financing. AkropolisOS seems like a financial swiss army knife. It’s a springboard to launch hundreds of user-controlled banking products.

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Dxdao Review: A Defi Eco-System Governed By its Token Holders

DxDAO was constructed in May of 2019, by the Gnosis and DaoStack teams. Initially, it was built to manage, upgrade, and govern the DutchX decentralized exchange protocol. It has since morphed into a leaderless collective, with the goal of building/growing defi’s infrastructure. DxDAO aims to keep defi free of corruption by centralized powers. It also aims to put the ecosystem’s revenue in the hands of DXD token holders.

DXD is the DAO’s native token. Revenues from the ecosystem are the right of all DXD holders. Payment is distributed, via its token buyback program. Additional utility may be added to the DXD token, such as product suite rights, and discounts.

DxDAO is made up of capable members including developers from: Loopring, Gnosis, and Ethereum. The project is still in its infancy, but it could grow to play a major role in decentralized finance.

  • Here is what Consensys has to say about DxDao.
  • Here is DxDao’s FAQ.
  • Here is the Governance Guidebook for DxDao stakeholders.
  • Dxdao whitepaper

What is a DAO? How do users govern the DxDAO?

A DAO is a transparent organization, with automated management, that is coded directly into software. DAOs can coordinate groups, provide feedback, and give financial incentives to members that work on the project. It is a governance system that prevents malicious groups from swaying decisions.

DxDAO is built on the DaoStack framework. It is managed here. Users are paid for development and marketing work, via a system of proposals and voting. Proposals are filtered, via staking with Daostack’s GEN token. Staking prevents members from being bogged down by bad proposals.

DxDAO’s Voting, Staking, and Holographic Consensus

DxDAO employs a system of holographic consensus. This type of consensus addresses scaling issues, and allows the DAO to make decisions quickly.

Any DxDao member can create a proposal. Members then vote to approve/deny the proposals. Votes are amplified by a user’s Reputation (or REP). Members can earn REP by providing work to the DAO. They can also earn REP by creating and passing proposals. REP is given to a wallet address, and is non-transferable.

Staking acts as a filtering mechanism for proposals. Users can stake for or against a particular proposal, using GEN tokens. GEN is DaoStack’s native token. Staking allows proposals to pass or fail with a lower voting threshold. “GEN is used in a prediction layer that allows DAOs to scale their decision-making frequency without sacrificing representativity.”

Below you can see a proposal for DxDAO development work. The proposal system can be viewed here.

DxDao’s Growing Ecosystem of Dapps

DxDAO members are currently developing, building, and managing a growing suite of defi applications. Its eco-system includes: The DutchX Trading Protocol, Mix.eth, Omen.eth, Mesa.eth, DxSwap, and DxPay.

DxDao was recently gifted the layer 2 payment solution, Loopring Pay UI (below).

The DxDAO Dapp Suite

1) DutchX Trading Protocol

DutchX is a decentralized trading protocol. It conducts an auction in a more fair manner for all parties. DutchX is a permissionless, censorship-resistant protocol, to trade ERC-20 coins. Users can add any token pair.

2) OMEN prediction market

Omen is a decentralized prediction market, built on Gnosis conditional token contracts. Omen markets use liquidity pools, similar to Uniswap. Anyone can earn 4% fees on a prediction market, by providing liquidity to it. A liquidity pool allows more markets to be openly traded. This addresses a problem faced with other types of prediction markets, like Augur.

Omen markets are divided into binary (Yes or No), and categories (multiple choice). The more category outcomes, the more expensive the transaction is for liquidity providers in gas fees. This is a problem that the developers are working to solve.

Omen’s developer believes it could kill Augur’s marketshare. With Omen, any market has the chance to provide betting, which is one of Augur’s main problems. Omen almost always lets a user buy and sell outcomes, compared to Augur, which often has empty orders.

Here is a deep-dive into the Omen platform.

3) MESA

Mesa is an Open Source trading interface for the Gnosis Protocol.

4) MIX

Mix is a portfolio tracker for Ethereum tokens, and defi services. It even allows users to anonymize tokens, with services like Tornado.cash. Users can earn interest, via services like Maker and Compound.

DxSwap

The team is working on a fork of Uniswap, called DxSwap. The difference is that the DAO will have control over the trading and provider fees.

LoopRing Pay UI

Loopring Pay is a working second layer scaling project, utilizing zk-rollups. It was recently gifted to the DxDao community. It is an excellent addition to the eco-system, bringing low gas fees, and faster TPS.

DXD Token Supply and Allocation

The DxD supply currently consists of 124,507 tokens. 100,000 tokens are held by the treasury. The 24,507 tokens, are minted from the issuance curve. “The amount issued is infinite, BUT the price goes up with each token (+1 ETH/DXD every 50k minted iirc), so eventually the tokens minted will be miniscule. “

DXD tokens represent a claim on revenue from the ecosystem. Revenue currently goes toward a buy-back program, supporting the bonding curve on DXTrust. There has been a discussion to revamp the DXD tokenomics. The addition of utility, distribution of revenues, and rights to use the product suite may change in the future.

DXD token ecosystem

5 tokens are utilized in the DxDAO economy. They include: DXD, REP, GEN, GNO, and OWL.

  1. DXD is a token which entitles holders to a percentage of the revenue of the ecosystem.
  2. REP is used to provide reputation and voting power on proposals.
  3. GEN is Daostack’s native token. It is used for boosting proposals and staking for or against them. (This filters out bad proposals.)
  4. GNO is a reward on proposals.
  5. OWL is a bounty reward token.

This vid explains what DxD is used for:

My Conclusion on DxDAO

DxDAO aims to keep the crypto economy decentralized, using DAO governance. Our current financial system is corrupted, by centralized powers. We need to carefully design our new system, in a way that isn’t susceptible to the same problems.

The DxDao project is in its infancy. BUT, it already has an active community, a suite of products, and revenue. I think its tokenomics and revenue distribution model could be improved. I think the community acknowledges this. It is a work in progress. The group seems to have good ethics, smart community members, and big goals. If they succeed in their mission, it will be a boon to the entire crypto community, and its token holders.

The DXD token supply of 100k, and diluted marketcap of 10 million is very LOW. Tokens are minted on an issuance curve, where the price goes up 1 ETH for every 50,000 tokens. Eventually the issuance will come to a halt, as the price becomes too high to mint. This gives it a high growth potential. I think this project may take a while to hit its strides, but could become essential infrastructure for the defi community.

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Thorechain RUNE Review: Staking, Swapping, and Connecting all Chains.

Thorchain is a permissionless, decentralized marketplace of liquidity, with the goal of connecting all blockchains. It is a proof-of-stake network, allowing its users to supply and swap assets in continuous liquidity pools (CPLs). It’s similar to Uniswap, but for ALL digital assets. Stakers provide liquidity to pools, so they can receive rewards on swap fees. The swap fees are based on the slippage. It’s not a flat fee, like with Uniswap. Thorchain’s tech allows users profit from their unproductive assets.

Thorchain’s RUNE token

RUNE serves four purposes: Security, Liquidity, Governance, and Rewards.

  1. The token is staked by validators to secure the network – Nodes must bond RUNE, in order to be given the chance to be churned in as a validator. Bonding creates Sybil resistance, preventing a malicious user from harming the network. 1,000,000 RUNE is the minimum bond to run a validator node.
  2. It is used for liquidity to perform swaps – In the liquidity pools, all tokens are bonded to RUNE. Swaps are done over two pools (Asset1–> RUNE –> Asset2). Bonding assets to RUNE lowers the amount of connections needed between tokens.
  3. It is used for governance – It is a signal for new assets to be listed. New asset pools with the highest amount of RUNE allocated by users are added first.
  4. It provides rewards for liquidity providers and validators – Liquidity providers earn swap fees as a reward. Rewards are also given to validators that secure the network.

Supply and Allocation

RUNE’s total supply started at 1 billion tokens. 500 million were burned by the team, bringing the new total supply to 500 million. 44% of its supply will be emitted over 6 years. All transaction fees on the protocol are burned, making RUNE a deflationary token.

Below, is the RUNE’s token allocation:

Thorchain Team and Project Info

The Thorchain project started in 2018. It operates as a semi-anonymous team, for better decentralization. Here is the whitepaper, the Economic Paper, and their medium blog.

The project is built on an eco-system of 5 protocols: BiFrost, Yggdrasil, Aesir, Asgardex, and the Flash Network.

Its BiFrost Protocol builds cross-chain bridges to bring interoperability that is secure. It’s Yggdrasil Protocol addresses scalability, using a vertical sharding technique. Its Aesir protocol is for governance, and its Asgardex protocol is the liquidity interface. Soon, it will add a layer 2 payment network called the Flash Network.

What is BEPswap?

BepSwap is a non-custodial DEX for Binancechain tokens. It’s built on Thorchain’s tech. It’s in alpha now. It operates using continuous liquidity pools (CLPs) supplied by stakers. Stakers give the liquidity, in exchange for rewards.

Bepswap has no oracle supplying its price feeds. Prices are created via user arbitrage. The price is determined by the “ratio of the depths of both assets”.

RUNE Staking: How much can stakers earn?

Stakers earn RUNE tokens by providing liquidity, or as block rewards. Stakers can currently earn between 20 – 30% APY. Pools with low liquidity and high demand, earn the most for liquidity providers.

Can Stakers Lose Money in Liquidity Pools?

There is a risk of impermanent loss in liquidity pools. This occurs due to volatility in the market, when one asset in a pool gains against its paired asset.

Here is a website and video below showing the profitability of liquidity pools on different protocols.

Thorchain’s Layer 2 “Flash Network”

Thorchain plans on creating its own 2nd layer scaling solution. It is called the “Flash Network”. The team is planning to work on this in 2021.

With the Flash Network, the team is trying to fix a problem with lightning to lightning swaps. With this type of swap, there is no way to prove that a recipient has received the funds. Recipient’s might not redeem an invoice, in certain situations. Thorchain will use the price feeds from its liquidity pools, to power their layer 2 Flash Network.

Governance

Thorchain has minimal governance. The devs want to create tools to allow validators to create their own cross-chain bridges. New chains can also be added through community and node participation. A higher amount of staked capital, leads new assets to be added.

Users create new pools on their own. They can list new assets by “making staking transactions with the asset in the transaction memo”. The new pool is then bootstrapped, with swapping disabled. Every few days, the new assets with the deepest liquidity are enabled. The highest amount of liquidity is what triggers the protocol to list the new assets.

Goals for Thorchain in 2020 and Beyond

Thor’s mainnet was launched in June 2020. The goals for this year are to add more BEP tokens, create a bridge to Binance Chain, then add 5-6 more chains. The team wants to build developer tools, so validators can build bridges to other chains, if the community demands them.

Goals for 2021 and beyond include: adding a layer 2 scaling network, called the Flash Network. After it’s built, they will connect it to other lightning networks.

My Conclusion on Thorchain (RUNE)

Thorchain is an excellent project, with big potential to gain marketshare. Uniswap is its model, so it is built on proven fundamentals. Its goal of adding assets from ALL chains, gives RUNE potential to grow to a large marketcap.

RUNE has excellent tokenomics. Demand and value of the RUNE token will increase, as the protocol grows. RUNE tokens are needed to stake in liquidity pools, as well as to bond to validators. Transaction fees are burned, so the token is deflationary! Stakers of RUNE are currently earning around 20 – 30%! I love seeing teams learn from the token models of their peers. Good tokenomics are important to help a project gain traction, fund the team’s development, and bring in new investors.

The marketcap of Thorchain is already 81 million. This is significant, but leaves some room to grow. The project is blockchain agnostic, so it has potential to expand further, as more chains are added.

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Celer Network Review: 2nd Layer Scaling, the cEconomy, and Staking

Celer Network is an off-chain layer 2 scaling platform, that is blockchain agnostic. It can be thought of as a programmable, smart contract, lightning network. Celer can theoretically achieve an infinite level of scalability on the second layer. The Celer team describes the project as, the most advanced state channel, with a full stack solution.

Celer has an innovative token model and crypto-economic system, called the cEconomy. The cEconomy solves the liquidity and availability problems that occur, when bringing transactions to the second layer. The team focused on building out layer 2, because they felt on-chain scaling had limitations, and not every transaction needed to be broadcast to the main chain. The team believes they can enable blockchain to match the speed of the internet, bringing mass adoption, and enabling vast new use cases.

Celer will allow low latency applications to run, with a high level of value transfer. This has implications for: micro-payments, decentralized exchanges, prediction markets, and gaming. Recently, Celer Network launched the first e-sports gaming platform. Their mainnet 1.0 will be launched towards the end of 2020, and will allow staking of the CELR token.

Celer is based in San Fransisco, and has top financial backers including: Pantera Capital, Arrington XRP Capital, FBG Capital.

Why Scale on Layer 2?

The Celer Network works to empower layer one, NOT to compete with it! Co-founder Mo Dong, states that layer one will always have scaling problems, due to the consensus required between multiple machines. Layer one performance, will always be restricted by the slowest performing node. For this reason, the team decided to move to the second layer to circumvent the cost, speed, and overhead of consensus on layer one. The cost for a Celer layer 2 transaction is about 100x smaller, than a layer one transaction!

BUT, there are always trade-offs. Layer 2 solutions like Celer Network improve speed, at the consequence of liquidity and availability. Moving off-chain causes liquidity problems, as state channels “require deposits to be locked on-chain as network liquidity.” To deal with the liquidity issues, the Celer team developed an innovative economic system called the cEconomy. With the cEconomy, CELR stakers can earn rewards by providing the needed liquidity to open state channels.

Off-chain scaling also sacrifices availability. This is why the State Guardian Network was developed. The SGN stores the state, so it can be accessed when a user is off-line, or unavailable. The state guardian network (SGN) is a specialized side-chain that backs-up data states, resolves disputes, receives off-chain transactions, and records player moves.

Other risks with off-chain transactions include: data loss, malicious disputes between peers on side-chain, peers must always be online. The team mitigates these problems with the state guardian network.

Three Components of the cEconomy

cEconomy – The cEconomy was developed to help dapp providers open state channels, without providing the necessary capital themselves. In order for a provider to open a state channel, they must lock up deposits. In the cEconomy, token holders can contribute some of this liquidity, in exchange for CELR rewards. Celer Network has created an innovative token model and the cEconomy, to lower the liquidity barrier to entry for dapps, and incentivize good behavior. There are three aspects to the cEconomy: Proof of Liquidity Mining, Liquidity Backing Auctions, and the State Guardian Network.

Proof of Liquidity Commitment Mining – This allows service providers to borrow funds from stakers, so they can open a state channel. In exchange for providing liquidity, stakers are rewarded with CELR tokens.

Liquidity Backing Auctions – Service providers can borrow liquidity from stakers, via an auction. A liquidity backer can submit a bid, which is ranked by a reliability score, and amount of CELR tokens staked. A higher reliability score, gives the staker a better chance to win the lending opportunity. These auctions help dapp creators provide services, without having to provide the upfront capital on their own. This solution was created, so whales don’t have to provide liquidity, which would be centralized.

State Guardian Network – The SGN is a special kind of side-chain, which helps guard a state for a user, in case one of them goes off-line. It brings the most recent state on-chain, when needed. The user pays a fee to the guardian for the service. Guardians are randomly accepted due to state hash, and responsibility score. The more a potential guardian stakes, the more likely they will be chosen. The guardian ensures that the data will be available when needed, as on-chain state storage is expensive. The SGN serves as cheap, off-chain state storage. It is a “connectivity oracle that is a compact side-chain, with plasma semantics”.

Reasons for the cEconomy – The cEconomy ensures an abundant liquidity pool, it lowers the barrier to becoming an off-chain service provider, it reduces centralization, improves network adoption, and takes transactions off-chain in a scalable incentivized manner.

The Celer Network Full-Stack

The Celer Network includes a full stack solution, which is called the cStack. It is composed of the cChannel, cRoute, cOS, and cEconomy. They created separate layers, so they can independently evolve. These layers serve as the raw material to build scalable applications. The cChannel is the combination of a generalized state channel and a side-chain suite. It enables payments, as well as smart contract transactions. It is the most basic component to build scalable apps. cRoute routes payments through the network. cOS is run-time system. The cEconomy provides the needed liquidity to open state channels. This layered architecture, allows Celer to tap into different blockchains and pursue different use cases, with scalability.

Celer Network Partnerships

Celer has partnerships with multiple blockchains, like NEO and Bytom. They are also working to speed-up blockchain gaming dapps with partners like: Cocos Blockchain Expedition and Mix Marvel.

They have a partnership with another 2nd layer scaling project called Matic, which is a developer focused on sharding. Sharding and state channel scaling solutions are complimentary to each other. Also, if Ethereum implements sharding, Celer will add additional improvements, not be replaced.

Celer has also created a partnership in the defi space with TROY. TROY trade is a decentralized exchange and asset manager.

CELR Supply, Token Allocation, and Token Release Schedule

CELR has a total supply of 10 billion, with 3.7 billion tokens currently released. The entire supply will be released by Aug. 2022 in the ratios below.

My Conclusions on Celer Network and Layer 2 Scaling

The CELER project is well thought-out, and developed by a smart, capable team. The cEconomy was planned so that the CELR token will have utility in the eco-system. Its demand and value will grow, as the network grows. CELR is needed to provide liquidity, and scale the network. Users can stake the CELR token to earn rewards for providing liquidity to off-chain service providers.

The total supply of 10 billion tokens, will be released over the next two years. If the project is successful, the CELR tokens should gain value and demand as the network is utilized. I do have some concerns about about the CELR token value in the short term, as billions of tokens will be released in the next two years. BUT, if the technology gains adoption, many tokens will be locked up for staking, as they will be needed to provide liquidity for the state channels. Also, this project is blockchain agnostic, so it can scale many blockchain projects, even beyond the ETH network.

Second layer scaling technologies will be essential to the crypto economy in the near future, as ETH 2.0 won’t be fully implemented for another 2 years. These projects will bring improved speed and lower transaction costs to the eco-system. Layer 2 scaling projects are a category to watch, as blockchain becomes utilized. As mainstream adoption begins, projects like Loopring, Celer Network, Matic, OMG, and xDai will become essential to scale blockchain for world-wide usage.

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Defi Money Market Review: Bringing Physical Assets into Defi

Defi Money Market allows physical goods to be turned into interest generating assets. Users of the DMM platform can tap into the equity of cars, real estate, or planes, to earn a stable interest rate of 6.25%.

DMM is a two token economy. mTokens provide a stable 6.25% rate on ETH, DAI, or USDC deposits. DMG is a governance token, which entitles holders to about 5.5% of the earnings from ALL the assets on the ENTIRE platform! DMG holders can vote to receive the 5.5% income on mAssets, use it to grow the platform, or to purchase more income producing assets.

The DMG governance token is available for purchase here. (DMG was recently backed by investor Tim Draper.)

So, How does the DMM platform work?

DMM users start by depositing ETH, DAI, or USDC into the platform here. They receive interest generating mTokens (mETH, mDAI, mUSDC) in return. mTokens pay a stable interest rate of 6.25% APY. The mTokens represent a stake in $8.5 million dollars worth of income producing car liens (or other liens on real estate, airplanes, etc.). When the mTokens are returned, a user’s funds are paid back, along with any interest that is accrued. Cars are just the tip of the iceberg. Tokenizing assets like real estate, homes, and boats will suck trillions into defi. This is why I think a defi project will be the next 100x coin.

Tokenizing Trilllions in Real World Assets

The more i learn about the DMM protocol, the more I am excited about defi as a whole. Physical value is now being pulled directly into the digital world! 100s of asset types, in addition to cars, can and will be tokenized.

Transitioning to the DAO, the DMG Governance Token

The first stages of DMM, will launch under authority of the DMM Foundation. Later, it will transition to the DAO. The foundation includes members like Mathew Finestone, whom I respect highly, due to his work on Loopring. Once control is transitioned to the DAO, voting rights will be given to holders of the DMG governance token. Excess revenue of around 5.5% is generated by the system. This extra revenue will be paid to DMG token holders, used to buy more assets, or used to grow the protocol.

The DMM DAO is unique in that it is one of the few DAOs that is already producing revenue and has a straightforward revenue model that grows as mAssets grow.

How the DMG Token Generates 5.5% interest on ALL mAssets

DMM is a two token eco-system. mTokens pay a stable 6.25% interest rate, while DMG gives governance rights and a claim to excess revenue. So, how does DMM produce extra revenue?

The income producing liens generate 8% – 12% APR on assets, while mTokens pay 6.25% interest, SO there are excess funds. 5.5% APY is being earned from the mAssets right now, and is the right of DMG token holders.

DMG holders can even earn a 5% origination fee by introducing new assets into the DMME. This will grow revenues for all DMG holders.

  • Here is a more detailed outline of DMG token governance.
  • You can purchase DMG here.

Do I Consider Defi Money Market to be Decentralized?

Decentralization exists on a wide spectrum. Uniswap is at one extreme end. DMM is more on the centralized end, because it is dealing with the legacy financial system. It will work its way to the middle, when it implements its DAO. Some trust is needed, but will be lessened with on-chain transparency, regular audits, and DAO governance.

DMM’s car ownership data is currently on-chain. It can be viewed on the explorer here. We can see the ownership records now, but, I had concerns about the car appraisals. I think the cars values need to be verified by an independent auditor, in a scheduled manner. Users should to be able to verify that the car is worth as much as we are told it is.

Zachary addresses my concerns about the verification system below:

DMM’s goal is to create an automated system, which demonstrates ownership, accurate value appraisal, and verifies it all on-chain. I think adding automatic quarterly audit, would help as well.

Another issue I see, is the treasury management. It isn’t yet transparent. It is currently under the control of the DMM foundation, but isn’t yet on-chain. I assume it will be on-chain, when the DAO is implemented.

How to View Collateralization Levels on DMM

The DMM project is over-collateralized. This means the value in equity, is greater than the amount of mTokens paid out by the platform.

Currently, it is collateralized at 2037%. View collateralization levels on the explorer here.

Conclusion on DefiMoneyMarket

I believe that the tokenization of physical assets will provide huge growth for defi and the entire crypto eco-system. This influx of capital will power the success of many defi protocols.

Since the project is dealing with the legacy financial system, it is very difficult to make it fully decentralized. Trust can be brought to the project by providing transparency and data on-chain. One way that i feel the system could be abused, is by falsely valuating the cars. But, this can be addressed with independent audits to reassure users that the cars are actually as valuable as they are purported to be.

Overall, i really like this project. The governance and revenue provided by the DMG token, encourages holders to bring in new assets and further grow the system. I feel like DMM could reach a very high valuation, as there is alot of equity in physical assets that can be incorporated into the protocol. Tokenizing physical assets will lead to explosive growth in the entire defi and crypto markets.

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Other Useful links:

DMM telegram group

DMG Governance Token Whitepaper

DefiMoneyMarket Whitepaper

Tim Draper Invests in DMG

xDai Chain Review: MultiChain Staking, a Dual Token Model, and 15% APR

xDai Chain is the world’s first USD stable-blockchain. It is meant for fast, private, fixed fee payments. It uses a dual token model, with the stable-coin xDai for payments, and the STAKE token supporting POSDAO consensus. Constructed by POAnetwork, the POSDAO consensus mechanism is proof-of-stake consensus, implemented by a DAO. This project has 5 second block times. It can transact and execute smart contracts quickly, cheaply, for a price which can be pre-determined because the asset is stable. It can do 70 transactions per second, for just a fraction of a cent, per transaction. This makes it a very suitable mechanism for payments.

Dual Token Model with Multi-Chain Staking

XDai chain uses a dual token model. xDai is the stablecoin, and STAKE‘s value is set by the market. xDai‘s stability allows for cheap, pre-determined transaction fees. A stable-chain creates benefits like: stable balances and stable gas fees (making it more scalable). It also brings the massive liquidity provided by Dai’s $120 million dollar marketcap.

The STAKE token is volatile. It is used to secure the network, and to provide rewards to validators. xDai Chain offers 4 types of staking rewards.

The 4 different types of staking rewards include: transaction fees in xDai, STAKE rewards for validating blocks, bridge fees, and Chai interest fees from locked Dai.

Rewards are paid based on staking ratios. Rewards are given to validators, in STAKE tokens, and in xDai based off of transaction fees. STAKE tokens which are locked in the protocol, can currently earn a 15% (or more) Annual Percentage Rate making it very attractive to investors.

Currently, there is a 34% APR pre-staking period until August taking place on Bitmax.

  • Multi-chain staking means the STAKE token can be used to secure and earn rewards for ANY side-chain under POSDAO. It can also be staked on other blockchains. STAKE’s value could grow, if many stable-chains were built under the DAO. Validators of these side-chains would need to secure them with STAKE.

The POSDAO Consensus Mechanism

xDai Chain has just transitioned from Proof-of-Authority to the POSDAO consensus mechanism, which stands for Proof of Stake Decentralized Autonomous Organization. POSDAO can be used to generate and govern an unlimited amount of side-chains, for horizontal scaling. The DAO can be used to configure variables like: the number of validators, transaction fees, block rewards, bridge fees and even a dual token. This gives it on-chain upgradability. The consensus mechanism makes it cheap, scaleable, fast, and efficient.

Each side-chain running under POSDAO could potentially run a coin fixed to a different currency, like the EURO. It can run side-chains fixed to other fiat currencies, or cryptocurrencies. Different side-chains can be designed for different use cases.

How the Token Bridge Earns the Dai Savings Rate (DSR)

Dai tokens are swapped into xDai, via the token bridge. This creates interoperability between the Ethereum Network, and xDai Chain. When Dai is locked in the bridge, it is converted into Chai. Chai receives the Dai Savings Rate (DSR). The fees earned from the DSR are distributed to stakers. This is one of the ways this project provides healthy incentives to validators of the bridge, as well as block producers.

Stable Side-Chains Offer Scalability/Predictable Fees

2nd layer stable-chains have advantages. They include speed, predictable transaction costs, and network scalability, as the gas prices can be pre-determined. This is perfect for payments, as well as dApp usage. POSDAO consensus can manage unlimited stable-chains. Anyone running their own side-chain on the same protocol, will have their own group of DPOS validators. The validator set is managed by its own DAO, even allowing it to upgrade independently.

Who is POANetwork?

POANetwork is an autonomous network built on the Ethereum protocol, using Proof of Authority consensus. This means that validators have a public identity, with a vetting process to ensure good behavior. The POA network uses a limited number of independent, pre-selected validators. In addition to running a network, POA has created projects like: TokenBridge, Nifty Wallet, and a blockchain explorer called Blockscout.

The Burner Wallet and xDAI

Burner wallet is a simple wallet to use with xDai. It can be directly accessed within the browser, NO downloading of an application is needed. Its private keys are stored in local storage. It is a quick, easy method to spend and receive xDai.

Here’s a medium article showing you how to host a burner wallet.

My Conclusion on xDai Chain

xDai Chain‘s POSDAO side-chains are a needed solution for scaling, privacy, and payments. It is usable now! Stable-chains can offer benefits like: predetermined gas prices, speed, and massive liquidity from Dai’s 180 million dollar marketcap. I like the idea of many stable side-chains fixed to individual fiat currencies like the Euro, Yuan, etc.

I also like the dual token eco-system, which rewards stakers with 4 separate reward mechanisms. Interest rewards from Chai, are icing on the cake 😉

But, it will be interesting see how Ethereum 2.0 will affect the project, as it will implement higher TPS and low gas fees on layer 1. In spite of this, I think stablechains serve a needed purpose. Many users might not be comfortable using volatile cryptos like ETH, and want a better payment solution than DAI. I often wonder how a massive ETH price spike would affect its fees and usability. Stable-chains will allow better scalability, providing options which users will appreciate.

xDai chain’s main value propositions include: privacy, lower gas fees, higher TPS, 15% APR staking, horizontal scaling to other stablecoins fixed to fiat currencies. It brings multiple benefits, with TPS being only one.

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Aztec Protocol Review: Plonks, and Privacy on Ethereum

The Aztec Protocol is a privacy technology for Ethereum. It uses zero-knowledge proofs, to enable private transactions, private smart contracts, and the minting of private assets. With Aztec, users can make ANY ERC-20 token, as well as other digital assets, private! On-chain privacy is needed protect proprietary business data, income levels, political affiliations, and to block third party data mining. While blockchain privacy does exist, it is currently only native to a specific cryptocurrency, like Monero or Z-Cash. Aztec works now, try it at zk.money. You can shield, transfer, and un-shield zkDAI and zkWETH, yourself!

BUT, Aztec offers MORE than privacy. It is a scaling solution that improves speed, reduces gas costs, and enables publicly verifiable private computation. Additional use cases include: confidential voting/governance, private decentralized exchanges, and anonymous group identities. This is all enabled using zero-knowledge proofs.

What is a Zero-Knowledge Proof?

Zero-knowledge proofs can prove a secret, without revealing the secret. They enable deep interactivity with private data, without exposing the data. For example, they can prove that (A+B) = (C+D) to a verifier, without the verifier even knowing what A,B,C, or D is! This could be used to show a user is over 21, without disclosing their birth year. Aztec’s proof construction is very fast. Execution time is in the range of 10 ms, which is very useable compared to other privacy solutions.

ZK proofs can also help ETH scale. The team has a goal of “Visa level” transaction capacity of around 2k TPS, using this technique.

Aztec’s Pre-built Toolset of ZK Proofs

Aztec’s ZK proofs are modular. They can be stacked like legos, to build privacy for complex functions. The functions include: minting, joining, swaping, dividends, and ranges. For example, multiple ZK proofs can create a private loan, with streamable interest. The Aztec team will first focus on privatizing trades, then work on more complicated transactions like CDPs, which are significantly harder.

What is PLONK? Other Types of ZK proofs.

PLONK is a new type of fast, universal SNARK construction allowing executed computation with complex business logic, and multi-party computation. It was created by Aztec’s founders Zac Williamson and Ariel Gabizon. Plonks add programability to the Aztec protocol. Soon Aztec will implement the new Plonk architecture, which will bring more complicated functionality to its privacy toolset. Other benefits of Plonk include prover and verifier efficiency, and very small proof sizes. Plonks will be a key element for Aztec’s scaling and privacy, moving forward.

Other projects like Dusk Network and Matter labs have recently switched to the cutting edge PLONK mathematics.

What are ZK rollups and ZK ZK rollups?

ZK rollups are a “zero-knowledge” scaling technology. They aggregate MANY transactions into one small proof. This proof, is then stored privately on-chain. This benefits privacy, scaling, and reduces gas costs. Utilizing ZK rollups will allow up to 2000 transaction per second (TPS), which is on-par with the transaction speed of Visa.

ZK² Rollups are different. They require verifiers to prove SNARKs inside of SNARKs. This is called recursion. This is difficult because “special mathematic conditions” must exist, or it will require a significant amount of computation. Aztec has made some R and D breakthroughs, which make recursion an option. ZK² Rollups further improve scaling and reduce gas costs on the Aztec protocol.

Why is Aztec Better than OTHER Privacy technologies, like Monero?

Monero can hide financial transactions, and balances, but ONLY for Monero. Aztec, on the other hand, can privatize ANY ERC-20 asset! Aztec makes the use-case for Monero invalid. Also, Monero doesn’t offer private smart contracts, reducing its functionality. Aztec takes a highly active blockchain (Ethereum), then privatizes it. In addition to privacy, Aztec also offers benefits to scaling, speed, and gas costs.

If a privacy layer is implemented, it opens up a variety of additional functionality. Exposed transactions could disclose political donations, income levels, and allow 3rd party data harvesting, which prevents mainstream use.

What is the Revenue Model of Aztec?

The revenue models being discussed for Aztec include: charging for the use of the SDK, or payment for rolling up transactions to reduce gas costs. Aztec could save money for blockchain businesses like exchanges, as it consolidates the gas costs of 100s of transactions, into just 1 transaction.

My Conclusion on Aztec

I think Aztec is very important tech for Ethereum. Its ability to privatize ALL ERC-20 tokens, is mindblowing! It allows advanced smart contract functionality, while shielding prying eyes from the data. Ethereum is already very active, so, privatizing existing assets makes more sense than creating a specific blockchain just for privacy, like Z-Cash or Monero.

Marketplaces could spring up around privacy, allowing users to buy/sell items, where secrecy is important. Spying and data collection will be stilted. A privacy layer will drive growth for Ethereum.

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Numerai Review, Erasure Bay, and the Trustless Data Market.

Data is the oil of the 21st century. It flows through the veins of the internet like black crude. But, anonymous internet data, is impossible to trust. Information, without a reputation to judge it on, cannot be believed. Also, information can only be judged on its quality, after it has been provided. The Erasure protocol can trustlessly, tap into the messy crowdsourced data flowing through the web.

Richard Craib and team have built two projects using the Erasure protocol, Numerai and Erasure Bay. Numer.ai is a crowdsourced AI, designed to control a hedgefund. It’s predictions are based on machine learning models, compiled by data scientists across the world. Erasure Bay is a data marketplace. Its users can buy/sell ANY type of data! …NOT just market data.

The Erasure protocol consists of financial incentives, penalties, and staking. It can refine quality data, from untrusted anonymous sources. Good data is rewarded. Bad data is penalized. Data is obfuscated, so users don’t even know what they are predicting. Users must stake funds, for the chance to sell data. The financial risk of staking, improves the data quality massively. This system of rewards, punishments, and staking, creates a trustless marketplace for users to buy and sell high quality anonymous information.

In the article below, i’ll discuss Numerai, Erasure Bay, and how they can enable trustless, data brokering on the blockchain.

What is Numer.ai? How Does it Work?

Numerai is a crowdsourced AI, designed to control financial capital. The AI is constructed from crowdsourced machine learning models, uploaded by data scientists from across the world. The AI predicts financial markets, then allocates capitol based on these predictions. Numerai provides its users with obfuscated stock market data, which is used to build machine learning models. The best models are then aggregated, into a superior meta-model. The “meta-model” has a higher statistical rate of accuracy, with a sharpe ratio is as high as 2.09. (image below)

How Does Numerai Turn Anonymous Internet Data, into Trusted Data?

Numerai is able to build a statistically superior stock market meta-model, with crowdsourced data. This meta-model is comprised of 100’s of user uploaded data models. Users compete with their models in Numerai’s weekly data science tournament. The top models are awarded in accuracy and originality. In the tournament, contestants are given blind stock market data, to build their own machine learning models. The data is obfuscated, so users don’t know what they are predicting. They just predict what will happen next. The best models are aggregated into a superior,”meta-model”, which is used to control the hedgefund.

How Does Numerai Reward its Users for Creating Data Models?

Users with the lowest logarithmic loss error on their predictions, get the most money, paid out in Bitcoin. Users provide predictions on live market data, as well as test data. The test data is used to validate the accuracy of their models. Users are paid for accurate predictions on live data. Models are rewarded on consistency, originality, and concordance. As the money being managed by the platform increases, the users will earn larger percentage of the profits.

How Does the Numerai Platform use Staking?

The team found that staking produces higher quality data! When money is at risk, better data is generated. On the Numerai platform, staking can even be automated, with payouts compounding over time. As more tokens are staked, the potential reward increases. Positive and negative economic incentives, weed out low-quality data providers. Auto-staking lets users just focus on just the data science. Profit is generated as a result.

NMR tokenomics

The supply of Numeriere (NMR) tokens is capped at 11,000,000. NMR tokens have value and utility due to the fact that it is needed for staking on the Numerai and Erasure Bay platforms. Higher levels of staked NMR tokens, will generate a higher return for the data scientists. This creates demand for the token. As the platform grows, this should cause the NMR tokens to gain value.

Erasure Bay – the non-financial data marketplace

Erasure Bay is a trustless data marketplace, built on the Erasure protocol, similarly to Numerai. This marketplace grew out of the knowledge that staking increases the quality of crowdsourced data. Erasure Bay users can buy and sell ANY type of data, NOT just market data! This includes: current news, sports, and science. Data sellers must stake NMR tokens. The receiver of the information can destroy the seller’s NMR stake, if the quality is poor. This gives sellers the incentive to provide good data. The data must be accurate, because data providers have their own money at risk! Erasure Bay, if successful, can provide the world with a source of verifiable, true information.

Conclusion

In a world where lies and propaganda rule our tv screens, true information is more valuable than gold. The implication of a trustless data marketplace, extends far beyond just predicting stocks. Richard Craib and team have found a way to extract value, from the raw brainpower of untrusted internet users. The protocol of incentives, penalties, and staking creates a system, that FORCES a user to play by the rules. If they provide bad data, they lose money!

Numerai has an edge in the stock market. Its crowdsourced predictions have a superior rate of accuracy, compared to machine learning models. As the platform grows, and more data models are generated, this edge will increase. Numerai is mum on the exact profitability of its system, but it makes logical sense that more accurate predictions will produce profits.

Blockchain enables many types of anonymous trusted marketplaces. Stock market data is just the start! I’m most interested in the data it can obtain concerning politics, and current events. Maybe we could use this platform to find the truth about the world around us. Numerai and Erasure Bay are interesting projects, with great potential. Tapping the brainpower of the internet, trustlessly, allows us to access true information, and insights we’ve never been able to previously. I think this is a project to watch.

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