The Breakdown

Last Friday on Ethereum’s core developer call, the devs agreed to push forward a controversial anti-ASICs consensus algorithm switch known as ProgPoW.  The broader Ethereum community was not pleased, and has spent the last week debating both ProgPoW itself as well as the way decisions in the community get made.  In this 101-guide to the controversy, @nlw breaks down: What is ProgPoW The history of the debate Arguments for and against Who falls on what side and why  The implications of ProgPoW for DeFi

Bitcoin is having a terrible, horrible, no good very bad day. Many are using the dump - which from a timing perspective aligns with a broader market selloff among Coronavirus fears - as a way to diminish the “bitcoin as a safe haven” narrative.  In this episode, @nlw revisits that narrative and argues that it is uncomfortably bunched up with the uncorrelated asset narrative, or, as Chamath Palihapitiya calls it “schmuck insurance.” This episode also covers: Central bank digital currency (CBDC) news: Canada says it doesn’t see the need right now but that could change if private cryptos get more traction, while China’s work on a digital yuan is paused due to Coronavirus shutdowns.  The six year anniversary of Mt. Gox’s lost 750,000 BTC coming to light.

The spread of Coronavirus has dominated the news cycle across industries, but the discussion has been particularly fierce in both the finance and tech worlds, with crypto right in the lead.  For a month or more, prominent crypto voices have been discussing the event in terms of skepticism of reported government cases, questions of market impact, and plans for personal preparation.  I surveyed more than 1500 people on Crypto Twitter to ask why crypto was so interested in the Coronavirus.  These were their top answers.  This episode of The Breakdown also features an excerpt from Hidden Forces Ep 123: Market Nihilism: Price Discovery in a World Where Nothing Matters | Ben Hunt & Grant Williams 

An incredible amount of work has gone into convincing institutional investors that bitcoin and crypto should be on their radar. Now that many are convinced, however, they face some significant limitations in the infrastructure.  A new crypto bank out of Wyoming is designed to address those problems. Founded by Caitlin Long, Avanti is apply for a special purpose depository institution (SPDI) charter and already has 8 products in its pipeline not currently available to US investors.  In this interview, Caitlin and @nlw discuss: Why Avanti is needed Why Avanti will have 100% of assets in reserve at all times Why the right model for crypto custody is more akin to valeting a car than current financial market models  Why building a crypto bank is important in the context of macro market turmoil How Coronavirus is exposing pre-existing problems in the global economy

The full week's episode run in one long-run, long-chill, long-sleep episode: Monday | Off Tuesday | Is It Exploitation Season for DeFi? Wednesday | Chainlink's Sergey Nazarov on What DeFi Can Learn From Early Exchange Hacks Thursday | Why We Should Stop Thinking of ‘Crypto’ as a Single Industry Friday | Diagnosing the Dip: Why Today's Leading Exchanges Are Powerful, but Not Inevitable

After settling in to the $10,000 price level, BTC suddenly and rapidly dipped more than 5% in an hour on Wednesday. As the market discusses possible explanations, some floated the unexpected simultaneous downtime of Binance and Coinbase as a causal factor.  In this episode of The Breakdown, we discuss the power exchanges wield - both in terms of market liquidity as well as the ability to shape news cycles. The good news is that new funding for insurgent exchanges suggest that power today is not inevitable.  Lastly, we discuss the latest in central bank digital currencies, with Sweden launching an e-krona pilot; a former head of China’s national bank saying Coronavirus could accelerate efforts; and a new member of the Libra Association. 

The ‘crypto’ industry is having a hard time fitting everything that’s happening inside that one monolithic term. On this episode, @nlw looks at current news stories from across at least 5 different categories - DeFi, enterprise blockchain, central bank digital currencies, digital collectibles and bitcoin - to ask whether they really all belong lumped in in the same category.  The episode also looks at: Four reasons these increasingly different categories remain bunched together  Why turning other parts of the industry into an enemy is rewarded in the public sphere Why letting individual parts of the industry evolve individually is likely to bring more, not fewer resources into the space.

The DeFi world continues to dissect the recent attacks on bZx. To most, the amount lost in the attacks is far less relevant than what the attacks suggest about how DeFi applications need to be designed.  Within that, one key topic of conversation is the role of price oracles - the systems by which DeFi applications check the prices of assets that dictate what happens in a given smart contract. Since asset price manipulation was at the core of the recent attacks, this is a particularly pertinent area of inquiry.  Yesterday, Chainlink announced that it would be helping bZx upgrade their systems taking advantage of Chainlink’s recently-launched “meta oracle.” On this episode of The Breakdown, Chainlink founder Sergey Nazarov discusses: The role of price oracles in DeFi How price oracles were targeted in the recent attacks What the DeFi industry can learn from early crypto exchange hacks

Part of what makes DeFi interesting to people is how it takes advantage of open source protocols to enable types of transactions never before available. The problem, however, is that financial structures mean new financial vulnerabilities.  In the last few days, two attacks on bZx have used a similar strategy of manipulating the price of synthetic assets in the context of a new instrument called “flashloans.” On this episode of @nlw breaks down exactly  How the attacks were carried out  How the community is responding  What the larger ramifications for DeFi might be

The full week's shows as one long episode, featuring guests including Travis Kling (Ikigai), Muneeb Ali (Blockstack), Coinlist (Andy Bromberg)  Monday | On the Frontlines of the SEC Safe Harbor Proposal With CoinList President Andy Bromberg Tuesday | Muneeb Ali Explains Blockstack’s Big Bet on Bitcoin Wednesday | Why Crypto Sentiment and Prices Are Soaring: Puppets, Pundits, Partnerships Thursday | The US Government Sends Mixed Signals on Digital Currency Privacy Friday | The Top Narratives Driving Crypto Market Growth feat. Travis Kling