Your OS is libre.
So is your web-browser.
This website is libre.
But you continue to use proprietary payment networks like VISA, PayPal, and even banks.
The powers that be want to eliminate hard cash and will probably get their wish. But the future of money is bifurcated.
On one hand - proprietary payment networks. Financial censorship and hardship await your arrival.
On the other - cryptocurrency, decentralized finance and an open programmable ecosystem of money. It is not just Bitcoin. A lot has been happening but the information is confined - certainly available but you won't see it covered on the news. There is an underlying trend. If you dismiss any mention of crypto you won't see it.
I will be writing a series of posts examining various projects.
I will begin with Maker.
>what is the objective of Maker?
To build a currency with 3 ideal properties: freedom, stability and transparency. Let me elaborate:
1. The currency must be free to use like Bitcoin.
2. The currency must have stable value.
3. The currency must be transparent. The traditional stablecoin is backed by assets in a a bank. This is a liability because it is dependent on the legacy financial system.
The Maker stablecoin is called Dai. It is backed by Ether and created as debt. Anyone can take out a loan in Dai by providing at least 1.5X the amount in Ether to a smart contract. You cannot be turned down for this loan. It is not processed by a human being. The smart contract will authorize the creation of new Dai for each loan just like how a bank creates money. You may not immediately understand the utility of putting up more than you get back. This service is very useful for speculators who wish to enter leveraged long positions. You do not have to take out a loan to own Dai. There is currently about $300,000,000 of Ether backing about $80,000,000 dollars of Dai.
The Maker system regulates interest rates like a central bank to influence the supply of Dai on the market and by relation the price. There are other mechanisms built in to help achieve this goal such as raising or lowering a debt ceiling. The system is about one year old.
I chose to give a primer on Maker and Dai first. The Dai stablecoin is relevant to other projects that I will explain next. If you have a question about Maker I will try to answer you.
Next is Augur.
>what is the objective of Augur?
To build a ideal prediction market without a central authority.
In the United States prediction markets are considered a form of gambling. Online gambling is illegal in most states. Some states allow it but only if the businesses "partner" with traditional casinos. The law is outright designed to protect traditional casinos from real competition. People who wish to participate in a prediction market resort to shady offshore websites that are often "rigged" against their users. In these markets the house bets against the users. The house decides which markets are available to bet and at favorable odds to themselves. Users who win too much are restricted from betting or just banned. In addition, these websites may steal user funds or deliberately report events incorrectly.
On Augur anyone may create a market by posting a bond. They must specify a reporting date. If they fail to report on the event they forfeit the bond to whoever is first to report in their name.
Anyone may buy and sell shares in an event. The price of those shares should correlate with the likelihood of an outcome. It is possible to profit trading shares without waiting around for the market to resolve.
The tentative outcome of the market is determined by the reporter who must stake money on the validity of the outcome. Any user or group of users can challenge a tentative outcome by paying a dispute bond. In turn anyone may challenge them. If a dispute gets too large the network forks into two parallel "universes". This forking event is written into the code but has never been triggered.
Anyone can create a market about anything. When Augur launched journalists wrote hit pieces warning about users creating "assassination markets". It is unlikely such a market could deliver enough money to overcome the tremendous cost and risk associated with attempting an assassination.
In practice Augur is subject to curation. Augur is like a protocol. Several betting markets are built on top of Augur and will curate markets they deem unethical.
Bets on Augur are denominated in Ether. Bonds are payed in the Augur Token (REP). The existence of the token is necessitated by the forking mechanism explained above.
Because Ether is unstable in value future versions of Augur will use the Dai stablecoin.
For questions about Augur you may ask me although I do not have a perfect knowledge of the protocol.
Next I wish to talk about a personal favorite - automated market makers (AMM) protocols. For this idea there is no analogue. The word "exchange" would not do justice for the topic I am about to explain.
There are really only two protocols that belong here. The older Bancor deserves credit for the idea but I prefer UniSwap.
UniSwap has no order-book and there is no order matching. Buyers and sellers exchange with a smart contract that will always buy and sell. The smart contracts controls two pools of funds. The exchange rate is the ratio between the two. If there are 100X and 50Y then the exchange rate is 1-2 X for Y.
>where does the smart contract get the money from?
Anyone can give the smart contract money. As people trade using the smart contract the liquidity providers earn fees. They can withdraw their funds or sell their ownership in the form of "liquidity tokens".
This is sometimes described as an x*y=k market where x and y represent funds in the two pools. This could use a visual and I have attached one. The exchange rate will always be a point on this curve.
>pop quiz
Q. If you provide liquidity to a smart contract in the form of tokens A and B and then all of B is sold off for A then how much A can you withdraw?
A. An infinite amount of A. Remember x*y=k! If y is zero then x must be infinite to meet the invariant! The situation where y = 0 won't actually happen so the question was nonsense from the beginning!
As either x or y approaches zero the other approaches infinity. In practice that means it is impossible for the smart contract to run out of money. That is why it is always liquid.
Prices change "continuously". This makes it impossible to pump and dump a market. No matter what you do there is no getting off that curve.
Prices are also completely predictable. That doesn't anyone may know what the price will be tomorrow or in a year. It means each known order will affect the price in a deterministic way. Slippage can be easily calculated before an order is placed.
Do you understand anons? Do you see the potential!
Up Next! How can we eliminate front running in this market? Get ready for virtual prices!
At a glance they are both crap. What problem are they even solving? Do we need decentralized cloud computing? Now with these things it is important to have an active mind (note: not an "open mind"). If you want to make the case for these projects then you can do so in this thread.
>>4336 was meant in reply to >>4334 Now back to front-running. A miner has discretion about the order of transactions in a block. This causes the seemingly unpreventable problem of front running. A miner can insert his own transactions in such a way as to guarantee profit. For instance, he can sandwich orders between his own buy and sell orders. The sell order recoups the cost of the buy order and then some. This is all at the expense at the unfortunate sucker(s) in the middle. This is not a hypothetical statement. It actually happens and the problem is bad.
A few months ago Vitalik Buterin wrote about a method to prevent this problem. Expect to see this in future versions of UniSwap. Here's the idea - buy orders and sell orders are executed at separate "virtual" prices. Beginning with each block the real price is the ratio between A and B. The virtual buy side increases and the virtual sell side decreases relative to the real price. If a miner tried to sandwich an order his sell order would fail to recoup his initial buy order. In fact it would lose money. The buy side may have increased the price but only for buy orders. The virtual sell price is unchanged by buying. The virtual prices are reset to the real price with each block.
Your OS is libre.
So is your web-browser.
This website is libre.
But you continue to use proprietary payment networks like VISA, PayPal, and even banks.
The powers that be want to eliminate hard cash and will probably get their wish. But the future of money is bifurcated.
On one hand - proprietary payment networks. Financial censorship and hardship await your arrival.
On the other - cryptocurrency, decentralized finance and an open programmable ecosystem of money. It is not just Bitcoin. A lot has been happening but the information is confined - certainly available but you won't see it covered on the news. There is an underlying trend. If you dismiss any mention of crypto you won't see it.