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RelayNode NYC #37 - January 27

David Gogel

Welcome to RelayNode NYC Area edition! The NYC blockchain ecosystem is growing rapidly. Our goal is to harness its energy and innovation for the benefit of New Yorkers and provide a weekly curated list of interesting content, upcoming events, and local jobs.

新年快乐 / Happy New Year to my Chinese friends! 🐀🧧🇨🇳

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RelayNode NYC is curated by:

David Gogel Advisor & Finance Lead @ Paperchain fmr Associate @ Techstars' Blockchain Accelerator, Co-president @ Wharton FinTech, Corp dev @LinkedIn @AIG

Hsin-Ju Chuang Founder @Dystopia Labs. Former-Head of Growth @Stellar/Lightyear, Solana. Ex-Director at Tezos (TQ)

2020 The Opportunity For Entrepreneurs With Staking-As-A-Service (PoS Mining) 

My interest in staking-as-a-service (Proof-Of-Stake mining) was piqued when I sat in on a workshop on validator economics during CryptoSprings last September. I follow base-layer protocol development fairly closely & knew that a number of Proof-Of-Stake (POS) protocols were about to launch, that many projects were struggling to onboard a diverse and decentralized set of validators (which they need to do to ensure the security of their networks upon launch), and were in the process of setting up their incentivized testnet programs. As I started doing more research, I discovered a huge knowledge gap in the space: while there was plenty of documentation teaching people how to spin up validators on various networks (ie. the technical know-how), there was no educational content teaching people about how to build a viable staking-as-a-service startup (ie. startup 101: on validator architecture best practices, security / attacks, how to acquire stake, how to decide which protocols to mine, etc). 

I saw an opportunity, with so many PoS networks getting ready to launch, to help push the space forward by organizing a conference Trust-Less 2020: A Proof Of Stake Validator Summit
and using it as an on-boarding mechanism to: 
 

  1. Support open-source / early dapp funding: for early stage blockchain startups, funding is hard. My hypothesis is, all these projects should explore spinning up validators and doing a small staking-as-a-service operation to (potentially) earn some passive income. This can help these early stage companies survive long enough to qualify for ecosystem grants or get VC funding. 

  2. Get more developers to become active participants in the blockchain space (since staking-as-a-service is one of the few business models that is capable of earning money; the idea for dev onboarding is similar to how ppl got into Bitcoin originally - they mined - started earning BTC - and then dug into the tech & went down the crypto rabbit hole). Our conference curriculum is based around this edu methodology. 

  3. Push incentive-aligned education - The learning curve for blockchain is steep. Developers (who are not in blockchain already) are not incentivized to get deep into the space because it's too much work with too little reward. By changing the edu narrative, we propose getting developers to invest a few hours learning how to set up a validator, start earning (and losing) $$ rewards, and then have them dig into the tech. We believe that this would be a more effective mechanism than telling devs to spend months learning about BTC, ETH, etc etc. first. This not only gets fresh blood / new devs into the blockchain space but also incentivizes existing blockchains devs who are siloed within a specific ecosystem to explore other protocols (as the staking-as-a-service business model is inherently protocol agnostic). 

  4. Help these PoS blockchain networks become more decentralized upon launch

TLDR; join us for Trust-Less 2020: A PoS Validator Conf on Sat Feb 1st at 1:00pm EST to learn how to build your own staking-as-a-service startup. The conf is virtual so you can tune in from anywhere in the world to learn. Speakers include experts like Preston Van Loon (ETH 2.0 Developer; Co-Founder of Prysmatic Labs), Luke Youngblood (Exec at Coinbase Custody), Evan Shapiro (Co-Founder & CEO of O(1) Labs / Coda), Joe Petrowski (Research at Parity / Polkadot), Marek Olszewski (Co-Founder of Celo / C-Labs), Collin Myers (Global DeFi Product Strategy at Codefi Networks (ConsenSys), and more. 

-- Hsin-Ju

1 Big Thing: CBDC & the Central Bank Innovator’s Dilemma

The World Economic Forum, an international organization committed to improving the state of the world, has developed a framework for central bank digital currencies (CBDCs). The “CBDC Policy‑Maker Toolkit” provides information on retail, wholesale, cross-border and “hybrid” CBDCs, for all sizes of emerging and developed countries, and a guide for central banks to help them decide if CBDC is right for them.

The Big Picture: According to a Bank of International Settlements survey, 80% of the 66 central banks surveyed were engaged in some form of work surrounding CBDCs. Some 40% of central banks have progressed from conceptual research to experiments, or proofs-of-concept; and another 10% have developed pilot projects. 70% of central banks still deem it unlikely to issue any type of CBDC in the near future.

China: China's central bank appears to be ahead of other central banks in the CBDC race. The country’s central bank started researching digital currencies in 2014 and recently said that it has completed the “top-level” design of its digital yuan. Some experts say that a digital yuan could help China’s currency internationalize and challenge the reserve status of the U.S. dollar.

US: Chris Giancarlo, former Chairman of the CFTC, along with Charles Giancarlo and Daniel Gorfine, recently partnered with Accenture to create the Digital Dollar Project to advance exploration of a United States CBDC. “A digital dollar would help future-proof the greenback and allow individuals and global enterprises to make payments in dollars irrespective of space and time.” 

In memoriam: Clayton Christensen (1952-2020), a longtime professor at Harvard Business School who became famous worldwide after authoring the best-selling business book, “The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail,” recently passed away. In his seminal book, Christensen develops the concept of disruptive technology and explores why top companies fail to respond appropriately and profitably when a disruptive innovation emerges. The paradox at the heart of this issue: the logical, competent management decisions that are critical to a company’s success are also the very reasons that a company loses its position of market leadership. By staying too close to its current customers, a company develops processes and incentive systems that are geared only toward satisfying those customers. As a result, the company has excellent organizational difficulty recognizing and responding to the disruptive technology—whose potential, at least at first, is with new markets and customers. 

Central Banks Innovator’s Dilemma: When a new technology (insert: bitcoin, blockchain) emerges that has the potential to revolutionize the concept of money and payments, established central banks see it as unattractive. It’s not something mainstream customers want, and the expected utility and potential benefits aren’t sufficient to cover existing governance and cost structures. As a result, the  technology gets ignored in favor of what’s currently popular. 

But then another company (insert: Libra, the Digital Yuan, CBDCs) steps in to bring the innovation to a new market. Once the disruptive technology becomes established there, smaller scale innovations rapidly raise the technology’s performance on attributes that mainstream customers value. What happens next is akin to the rapid, final moves leading to checkmate. The new technology invades the established market (analog fiat money). By the time the established central bank wakes up and smells the coffee, its competitive disadvantage is insurmountable.

The bottom line: Central banks around the world are experimenting with CBDCs. Competition between permissionless / decentralized (Bitcoin), corporate (USDC) and state-run currencies (Digital Yuan) is heating up. For the United States to avoid succumbing to the innovator's dilemma and preserve the dollar’s status as the world’s reserve currency, it needs to spend more resources exploring a digital dollar.

Go Deeper:

Things to read

🌐 Why Bitcoin / Macro?

  • Parker Lewis, Head of BD at Unchained Capital, explains why Bitcoin obsoletes all other money. 

  • Max Bronstein (Institutional Sales at Coinbase, previously BD at Compound) shares views on why Bitcoin-backed lending has been, and will likely continue to be, a large driver of institutional participation in the crypto ecosystem. In a world starved for fairly price yield, Bitcoin-backed loans provide an enticing risk-reward structure.

  • Binance Research released research on annual crypto correlations. The median correlation between most large cryptoassets slightly declined over Q4 2019. This trend upholds the annual median correlation, which is lower than in Q3 or Q4. Nonetheless, cryptoassets remained highly correlated with each other in 2019.

💰 Funding, M&A, & Exits

  • Numbers, a startup creating an open, transparent and traceable data system allowing users to monetize their personal data, raised an undisclosed sum from Binance. Numbers has been working with Shoah Foundation, Stanford University, and IBM for the Starling project to establish the data traceability and verification systems to pre-load the applications on Exodus, the blockchain-powered HTC smartphone. 

🔓 DeFi / OpFi

  • Taylor Monahan, CEO of MyCrypto, shares her thoughts on DeFi risks. 

  • Kain Warwick, founder of Synthetix, reflects on last year’s breakout and the current state of the protocol.

  • Matej Galvanek, Investment Director of Sigil Fund, published research on fundamental analysis of new ZRX token model and its consequence on the valuation. 

  • Alkemi, an open finance prime brokerage platform, announced an integration with Chainlink to leverage its market-leading network of decentralized oracles. Chainlink’s protocol is facilitating trusted marketplaces for obtaining quality oracles, which is quickly becoming the de-facto standard in the Oracle-as-a-Service category.

💸 STOs / Stablecoins / Tokens / DAOs

  • DigixDAO, a DAO governed by the DGD token, raised 466,648 ETH worth ($7M at the time) in an ICO in 2016. Project Ragnarok, a measure to return 380,000 ETH ($64M) of ETH held in the treasury to ICO investors from Digix’s treasury, passed with 95% support (though this represents only 52 votes.) The vote comes after the project’s developers decided to create a “mechanism for dissatisfied DGD token holders to make a clean break from DigixDAO.”

  • Binance announced, as part of its Q4 2019 Burn, it burned 2.2M BNB (1.1% of total supply, worth ~$38M). Larry Cermak from the Block explains Binance changed their whitepaper last summer and no longer burns BNB based on 20% of profits. It now burns an amount "based on overall trading volume" in a 3-month period.

  • According to Ripple's XRP Markets Report, XRP sales were $13M, down 80% from the $66.24M sold in Q3 driven at least in part to a total suspension in programmatic sales, which accounted for $16.1M in Q3. OTC trades also dropped 74% QoQ. Ripple’s On-Demand Liquidity services, which facilitate cross-border settlements, saw noticeable growth. These services handled 550% more value in Q4 of 2019 than they did in Q3.

🏦 Institutionalization

  • Huobi Group, the parent company of cryptocurrency exchange Huobi, is launching a brokerage platform. Connected with several exchanges, OTC desks for best trade execution, the new platform targets institutional investors and high net worth individuals

  • Amun AG, a crypto fund manager, launched the 21Shares Short Bitcoin ETP (SBTC) on Switzerland’s stock exchange SIX. Amun’s 10 other ETPs are long products, while SBTC is the first short product. The product captures bitcoin’s price movement inversely in one stock purchase akin to a synthetic ETN comprised of short positions. SBTC charges an annual management fee of 2.5%.

🌉 Infrastructure

  • Deribit Insights published research on exchange market structure and maker/ taker fee structures. Maker-taker fee structures are a natural evolution and inscribe cost of liquidity into the fee protocol.

🍰 Layer 1 

  • Josh Stark & Evan Van Ness released their seminal “The Year in Ethereum 2019” report.

  • Are blockchain hostile takeovers on the horizon? Jiang Zhuoer, CEO of mining pool BTC.TOP, explained that a group of Bitcoin Cash mining pools (BTC.TOP, Antpool, BTC.com, ViaBTC, and Bitcoin.com, which collectively make up ~⅓ of hash rate) were preparing to soft fork the network to implement a "short-term donation plan" that would cut block rewards by 12.5% in order to support Bitcoin Cash infrastructure. The proposal is controversial since it highlights the potential pitfalls of miner centralization. To ensure participation and include subsidization from the whole pool of SHA-256 mining, miners will orphan BCH blocks that do not follow the plan. Hasu explains the tradeoffs here. 

  • The Tezos Foundation completed the third cohort of its Ecosystem Grants Program, issuing 21 new grants to 16 different projects. This program intends to offer financial support to projects building applications or developer tools for the Tezos protocol, as well as increasing awareness of the Tezos ecosystem through education or marketing efforts. 

  • Coda, a zk-snark protocol, releases its economic whitepaper to showcase its monetary policy, including incentives designed to maximize network scalability and security and launches Genesis, a token program that prepares participants to become the network's first block producers upon mainnet launch; grants will be distributed to members engaged in testnet challenges designed to contribute to greater network resilience.  

🍰🍰 Layer 2

  • Square Crypto announced the "Lightning Development Kit" for wallet and app developers, which includes an API, language tools, demo apps and other features to help developers integrate support for Lightning payments into their own wallets. UX for crypto payments is gradually becoming more seamless.

⚖️ Legal

  • The Chamber of Digital Commerce has filed an amicus brief in the ongoing court case between encrypted messenger service Telegram and the United States Securities Exchange Commission (SEC). Filed on Jan. 21, the document was authored by Lilya Tessler, a partner and the New York head of Sidley Austin LLP, counsel to the Chamber. 

🎥 Video of the Week

  • On the heels of Davos, Nisa Amoils, on the latest FinTech.TV, interviews Ken Kragen, Neil Morgan and Jonas Hudson on their ambitious Hands Around the World project.

Highlighted Industry Jobs (non-exhaustive list for NYC / remote):

If you would like to highlight jobs or internships in future editions, please email links here.

Events this week

CryptoMondays NYC Fireside Chat with Ryan Selkis, Co-Founder & CEO at Messari (Free)

When: Monday, January 27, 2020, 6:30 PM to 9:00 PM

Where: The Ainsworth, 64 3rd Ave · New York, NY

This CryptoMondays NYC features a Fireside Chat with Ryan Selkis, Co-Founder and CEO of Messari, a leading information provider (i.e. curated daily insights, market data, and research) for crypto professionals.

For three years prior to launching Messari, Ryan was with DCG (Digital Currency Group), where his last role was Managing Director of CoinDesk where he led the acquisition and turnaround of the crypto industry's leading news, research and events business.

NYC/XRP IV - Seeing 20/20! (Free)

When: Tuesday, January 28, 2020, 6:00 PM to 9:00 PM

Where: Location, TBD

The last year has been a very exciting time for both the NYC/XRP meetup and the larger global #XRPCommunity. Ripple Labs engineers and directors will be invited to share their stories and journeys as part of a fireside chat. 

[Whitepaper Wednesday] Helium - A Decentralized Wireless Network (Free)

When: Wednesday, January 29, 2020, 12:00 PM to 1:00 PM

Where: Rent24, 25W 39th Street 14 Fl · New York, ny

This week, we'll be reviewing Helium, a decentralized wireless network. http://whitepaper.helium.com/

This is a fairly technical paper, so if you're looking for the tldr, check out this summary from our friends at Messari. https://messari.io/asset/helium/profile

State of the Blockchain dApps - WANTED: 1/2 Million Female Engineers ($6)

When: Wednesday, January 29, 2020, 6:30 PM to 8:30 PM

Where: Lair East, 424 Broadway #602 · New York, NY

This session is particularly interesting for developers and those who want to learn about the latest in decentralized applications. What a perfect time to review the blockchain ecosystem of decentralized applications aka ‘dApps’. Fauve Altman who leads community at State of the dApps, the eldest Dapp registry out there will speak about how the ecosystem developed over the span of the last 5 years. You will learn about Dapp trends, success stories and the most popular industries.

And the Blockchain Engineers, Kelly Simer Abdelmagid from Blockapps, and Alice Henshaw from Fluidity will share their insights from the forefront of the field. What it takes to be a successful Dapp developer to realize solutions with smart contracts, tokenization and other blockchain related expertise in service of innovative solutions or to integrate blockchain technology with existing platforms and business structures. You will learn about the growing opportunities for blockchain developers i.e. in initiatives such as https://onemilliondevs.com/

Join defining the future and ensure that 1/2 of those million engineers are female!!!

TRUST-LESS 2020: Proof of Stake (PoS) Validator Summit

When: Sat Feb 1st - Sun Feb 2nd 2020

Where: Virtual

This is one of those pivotal moments in blockchain history. With ETH 2.0 & multiple PoS layer-1 blockchain protocols slated to launch early 2020, it's an opportunity for developers & students to enter the blockchain space & learn how to build one of the few viable business models that can earn money: staking-as-a-service. Attendees Will Learn:

  • How Proof-Of-Stake (PoS) Blockchains Work (An Introduction)

  • Costs / Rewards Calculator: The Basics (Terminology & Walkthrough Of Tools)

  • Approaches To Validator Architecture & Security: Trust Model & Slashing Basics

  • Decentralization: Metrics & Methodology For Determining The Health (And Viability) Of A Blockchain Network with Reseachers from ConsenSys

  • A Deep Dive Into Proof Of Stake (PoS) Validator Security & Attack Vectors 

  • How To Identify Which Proof-Of-Stake Networks Are Worth Mining (Being A Validator For)

  • How To Acquire Stake: The Different Profiles Of Stakers (Community, Funds, & Service Providers) 

  • What Makes A Good Network Custodian: A Candid Discussion On Incentive Alignment

  • Validator Tooling: Innovations On UX

  • Heroku For Staking: Democratizing Staking So That Anyone (Not Just Institutions) Can Participate

  • Should Your VC Fund Stake Or Run A Validator? 

  • A Candid Discussion On The Future Of Staking-As-A-Service: Exchanges, 0% Fees, and Centralization 

  • Incentivized Testnets: Learnings From Past Competition Winners (Case Studies)

Upcoming events

CryptoMondays NYC Fireside Chat W/ Nodar Janashian Co-Founder of DeFiZap (Free)

When: Monday, February 3, 2020, 6:30 PM to 9:00 PM

Where: The Ainsworth, 64 3rd Ave · New York, NY

This CryptoMondays NYC features a Fireside Chat with Nodar Janashia, the Co-Founder of DeFiZap, a rapidly growing app that enables users to allocate assets across multiple DeFi protocols in one transaction, saving time and gas. Zap is a smart contract that auto-spreads incoming deposits across Compound, Fulcrum, TokenSets and others, based on pre-set allocations.

BitDevs: Socratic Seminar 101 (Free)

When: Wednesday, February 12, 2020, 6:40 PM to 8:40 PM

Where: Jeffrey S. Gould Welcome Center, 50 West 4th Street · New York, NY

Thanks to our friends at Chaincode Labs and NYU Digital Asset Forum for food, refreshments and event space. If you can't make it to the main event please join us at The Malt House around 9:30PM.

Please see our zotero link aggregator for a list of potential discussion topics. Topics will be added as the weeks progress. Feel free to suggest topics in the comment section below.

https://www.zotero.org/groups/691739/devsny/items/collectionKey/TZLDWGYG

Notable Conferences

Nothing written in RelayNode NYC is legal or investment advice and should not be taken as such. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence.