EPISODE 9: WAVES and ZEC

EPISODE 9: WAVES and ZEC

By SirGerardThe1st | Tokenomics | 4 Dec 2020


We are used to thinking of a "coin" as a flat cylindrical metal object, because that is what the ancestral code of thousands of human beings passed down for generations.

For several years I have been trying to make entrepreneurs understand, the new code that the crypto-sphere, the cryptocurrencies and the tokenization of the economy gave us. I think everyone who reads posts on Publish0x knows about the difficulties of evangelizing about the crypto-sphere. The biggest problem that I find is that of making it possible to understand that a coin or a bill is not what it used to be, that is, a promissory note. A currency is now a transaction history, as defined by Satoshi Nakamoto in his White Paper.

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Still many people believe that a coin or banknote is backed by a quantity of gold in a bank vault, and that the government, in its capacity as administrator, holds the quantity of gold in direct proportion to the quantity of money in circulation.

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Image of Richard Duijnstee in Pixabay

In Episode 8 of this blog I referred to the traditional financial system, with the intention of showing, roughly, the way in which the establishment wove a death trap for consumers to spend their lives in debt, paying with their salaries (their work) the parties that politicians and bankers put together to keep the global consumer machine running.

Before talking about today's tokens, I want to close the concept of the previous Episode, briefly discussing the gold standard and the ill-fated Modern Monetary Theory (MMT).

The gold standard is a monetary system that fixes the value of the monetary unit in terms of a certain amount of gold. The issuer of the currency guarantees that it can give the holder of its notes the amount of gold consigned in them. It began during the 19th century as the basis of the international financial system. It ended during World War I, as belligerent governments had to print a lot of fiat money to pay for war expenses and they had no gold to back up those papers. In the Bretton Woods Agreements, it was decided to adopt the US dollar as the international currency, under the condition that the Federal Reserve uphold the gold standard. From 1971 on, everything fell for good and the dollar became a de facto fiat currency, backed by an international hallucination, with no intrinsic value.

We all participate in a huge shared hallucination that tells us that tomorrow that promisory note called bill will continue to have value, and that, if we go to the supermarket and present it, someone will give us a dozen eggs in exchange.

During the history of mankind, various things were used as currency, gold, cattle, salt, seashells, pepper, large stones. All were chosen for their “intrinsic qualities”, that is: difficult to be lost or stolen, rare, difficult to be falsified, easily measurable, divisible.

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Image of Liselle VD in Pixabay

The so-called Modern Monetary Theory (MMT) imposed on the world after the abandonment of the gold standard, directly contradicts the fundamental notion that money has value for its desired intrinsic qualities.

According to the MMT, money is "a creation of law" and derives its value from the state. MMT maintains that we "have evolved" from snail shells, to gold coins and finally to "fiat" as a result of “seeking more efficient ways to manage debt”. The notion of an asset-backed currency is a nightmare for a government, because it takes away the ability to control the issuance of money. With MMT, a government has no need to balance its budget, and then, the expense can be much higher than the income from tax collection, since the difference can be covered by issuing more money, that is, more debt (bills, that is, promissory notes).

On the contrary, Bitcoin has built a robust social contract with its users based precisely on their intrinsic qualities, and not on the law or some other government hoax.

This social contract has the following clauses:

  • Only the owner of a coin can generate the signature to spend it (Resistance to confiscation)
  • Anyone can exchange and save value in bitcoins without asking anyone's permission (Resistance to censorship)
  • Only 21 million bitcoins will be issued, with an established schedule (Resistance to inflation)
  • All users can review and verify the rules of Bitcoin (Resistance to counterfeiting)

There is nothing in the Bitcoin contract that has to do with the "acceptance of a system by a State", much less with the search for an effective means of managing debts. These are political declamations that are of no use in the 21st century.

On the other hand, the notion of “fiat” money (money that exists by government decree) is a relatively new concept. And not only has it not yet stood the test of time, but it has also demonstrated an enormous propensity for mismanagement and corruption. After Germany left the gold standard at the end of World War I, for example, it only took less than a decade for hyperinflation and the total collapse of its economy. Zimbabwe and Argentina are examples of spectacular “fiat” money failures.

The fiat system is extremely wicked.

If you do not have money, but there is money available and they offer it to you (banks, cards, mortgages, loans) you can consider taking it, to buy goods that you know will cost more tomorrow. Those who create money create inflation. Inflation generates more spending, less savings and eternal indebtedness. And this is an absolutely "legal" system!

MMT is a cancer. The "fiat" money is the result of accepting to pay governments. The market IS NOT a place where goods and services are exchanged, but rather a vulgar “clearing house” to match debits with credits. Proponents of MMT believe that governments can create as much debt as they want, as long as there is sufficient demand for money to attend the obligations imposed from the State. In theory, governments can finance themselves strictly by issuing money, until inflation rises to a point where more taxes need to be levied to increase the demand side for money and thus match it with supply.

The fundamentals of the MMT are not new, but there has been a great resurgence recently on both sides of the political spectrum. It is a pleasure to be a politician and to be able to control the herd through the creation of money. The current belief is that the government can live with a perpetual deficit to wage wars, roads and hospitals, because if something goes wrong and they are in danger of default, they can simply print more money!

It is because of these things that I believe that some tokenization projects with strong fundamentals, can really change the paradigm. If the fundamental premise on which an argument is built is challenged, then the argument is destroyed. MMT says that money is worthless because of its intrinsic desirable characteristics, and bitcoin has shown that it is capable of creating value from them alone. If people start to value money for its intrinsic desirable characteristics, in the medium term, money that can be printed according to the whims of a handful of politicians will lose value.

Governments perpetrate two types of theft against citizens:

  • Forcing them to pay taxes
  • Stealing silently through inflation

Bitcoin allows the separation of money and state in a way that has never been seen before.

The state has committed acts of robbery with ordinary people for centuries. In most countries of the world, everyone who has a job is required to contribute to the government with a portion of their income. Governments created a monetary system to enrich congressmen and representatives, and also their close friends. Using a currency like bitcoin, people are not obligated to contribute to anyone.

Cryptocurrencies are very portable, and offer great protection against the collecting agent who wants to keep the fruit of our work. With a currency like bitcoin, you can send funds immediately to any part of the world without having to ask permission from any bank, or any government, or fill out the countless forms that sick control entities ask for, and then wait weeks of approvals and parasitic and useless procedures to credit the money.

Cryptocurrencies empower the people while MMT empowers a group of oligarchs sitting on top of the hill. It is not a battle between businessmen and government. It is a battle between the centralized empires of the planet and a decentralized rebel alliance of ordinary people. It is an eternal battle.

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Image of Erika Wittlieb in Pixabay

It is a battle that is being fought since prehistoric man came out of the swamps. It is the battle of freedom versus control. Power to the people versus power to a select group of elite controllers. Each generation must face it with new tools and our generation had the crypto-sphere as a tool. When the pendulum swings very far to one extreme, it must necessarily return to the other. And it seems that the controllers of money and power have pushed the pendulum to an extreme that demands a return.

 

The philosophical concept of decentralization is the change of our relationship with power.

 

With that said, let's move on to today's two tokens.

 

 

WAVES

The name of the game today is "interconnectivity". There are several interesting projects trying to bring the game to the blockchain 4.0 realm of decentralized interconnectivity.

The "blockchain cobweb" consists of several isolated mini-ecosystems, all serving a particular purpose. WAVES tries to solve this fragmentation and be able to interconnect the accumulated functionalities of the current tangle of blockchains. Instead of trying to bring everything together in a "unifying blockchain" (which could even represent a centralizing solution to decentralization), the solution that WAVES presents rests on an "inter-chain interaction", truly blockchain-agnostic, without the need for a native token, but based on the use of the tokenomics of each participating blockchain.

It is also interesting to see how new projects are sometimes more concerned with making life easier for developers than for users. This seems very healthy to me. The protocols must be friendly for developers and have them build their dApps on them, and then attract many users to them. This is high strategy.

WAVES is precisely an open source platform for Web 3.0 applications, aimed at facilitating the dAps development process. The company was founded in 2016 and is based in Berlin, DE. WAVES is ranked # 38 on CoinGecko.

The WAVES blockchain is designed to allow users to create and launch custom crypto tokens, without having to know the intricacies of smart contract programming. The company's vision is “blockchain for everyone”. The underlying idea is that developing new tokens, and the applications that host them, shouldn't be much different than launching a traditional web application.

Designed assets can be traded in the WAVES ecosystem, as a built-in decentralized exchange is included.

In 2018, WAVES added smart contract functionalities to its MainNet, allowing external developers to build new dApps. The WAVES protocol is practical and powerful for developers, providing a friendly infrastructure and allowing an infinite range of innovation. WAVES is being built with the concept of mass adoption of tokenomics on the planet.

Blockchain has more than proven itself to be a very effective technology to efficiently manage community-based projects, but due to its conceptual infrastructure, it cannot support applications that require speed and high frequency. In this way, some centralized solutions are still preferable for high volumes of transactions with milliseconds of execution times. But for applications that do not require speed, blockchain has great advantages such as decentralization, security, permissionless and resistance to confiscation. In this sense, centralized solutions have little or nothing to contribute.

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With the WAVES Integrated Development Environment, developers can create dApps in WAVES, using a battery of smart contracts. WAVES created RIDE, a multipurpose functional language of smart contracts, with a unique approach to developing decentralized environments. Interaction with other applications is seamless and safe. The LPoS consensus protocol, Leased Proof of Stake, is a PoS enhancement that allows any token to be leased to a WAVES node, earning a percentage of the node's payment as a reward.

In addition, developers can design oracles with Gravity, a protocol of the WAVES ecosystem, consisting of a decentralized cross-chain, designed to transmit data from the outside world and from other blockchains.

The WAVES ecosystem is composed of and has solutions for developers, traders, investors, node holders, and leasers (tokens to mining pools).

For its part, Neutrino, another WAVES protocol, is a crypto-collateralized multi-assetization protocol, which acts as an interchain toolbox for developing solutions for DeFi. Neutrino allows the tokenization of national currencies and commodities, maintaining the stability of the synthetic asset through algorithms.

The Neutrino protocol uses a native token (NSBT token) as a reserve of locked currency in the smart contract, without the need to resort to centralized entities of dubious transparency. With Neutrino you can generate a synthetic with a currency, for example, the dollar, for example, the euro, for example, the BTC.

Suppose a dollar Neutrino, USDN, is generated. The process to create a USDN is like this. USDN is backed by WAVES. If the price of WAVES goes up, then the dollar value of the collateral in the contract also goes up, and all of the USDN is well collateralized. When the price of WAVES falls, and the reserve fund is not large enough to compensate for the fall, the smart contract issues NSBT, which, in addition, can be bought on exchanges. It is the typical system to cover the shortage and encourage the public to buy this shortage and cover the debt of the ecosystem in exchange for rewards.

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The WAVES roadmap conceives for the short term a DeFi interchain through Gravity, something like an asset space for all blockchain ecosystems in which it is very easy to swap between assets that belong to different systems.

In 2019, the WAVES team began marketing WAVES ENTERPRISE, a version of the network designed for businesses.

WAVES ENTERPRISE has a native token called WEST, which allows access to MainNet operations and services. WEST is the fuel needed to secure the LPoS network and pay transaction fees. MainNet miners must hodle WEST to generate blocks. Token holders in general can lease WEST to miners and receive additional tokens as a reward. Additionally, WEST can be used to purchase or rent WAVES ENTERPRISE licensed software.

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The WAVES platform was founded by Sasha Ivanov in 2016. Sasha is a technology entrepreneur graduated from Moscow State University and Leipzig University. He has long experience in trading and in the use of artificial neural networks.

Other visible people on the team are Aleksei Pupyshev, co-founder of the Neutrino and Gravity protocols, and Sten Laureyssens, Waves Association’s strategic Advisor.

 

Conclusion. WAVES is growing consistently. It has incorporated major partners such as Tron, Ontology, 1inch, and Band protocol. Although there are several projects that are being built with the same concept, WAVES has from my point of view the advantage of providing easy-to-use tools so that anyone can launch their own token, which is one of my most enchanting dreams: a world in which every person prints his/her own money to buy the things he/she needs, save and invest. Companies can use Gravity and Neutrino to build a completely different paradigm for marketing their products on Web 3.0. The network is highly secure and fast. The WAVES token and also the WEST token may explode in the medium term as these tools become known and the long-awaited mass adoption arrives. In that sense, WAVES is developing a massive training program for developers called Coursera, and they announced a much larger educational program for the general public to learn how to handle the concepts of the decentralized web. The latter in particular, makes the project extremely attractive in the medium term.

 

 

 

ZEC

Suppose you are a member of an Exclusive Club where you dine once a week with your also exclusive friends. The Club is so, so, but so exclusive that, in order to enter, you have to know a secret phrase. Let's call this secret phrase "w". You do not want to tell anyone the secret phrase, although you would have no problem sharing with others the "hash" of this phrase, which we are going to call "x". So we can write:

 

        X = hash (w)

 

You arrive one night at your Exclusive Club and the doorman awaits you at the entrance. You never trusted the doorman, because since you were a child you were taught to distrust. That is why you are one of the members who voted that the doorman should not know the secret phrase "w", although he can know "x". So we need to create a method "m" that helps us convince that a person can know the secret phrase "w" if it is given the public value "x".

 

           public bool m (x, w) {

                      return (hash (w) == x);

                     }

 

If the correct passphrase "w" is entered, the above code returns "true".

 

If you want it easier, we can also use the example of the telephone: I can prove to my friends that I know my cell phone password, without having to reveal that password to them.

 

The keyword in these examples is zk-SNARK.

 

Zk-SNARK comes from zero-knowledge succint non-interactive arguments of knowledge.

It is a method that can test the truth of an argument without revealing anything else about what that argument is trying to prove.

This is what Zcash and its ZEC token are based on.

The zk-SNARKs are built based on the operation of a Zero Knowledge Protocol (ZKP). The main characteristic of zk-SNARKs is that their computational cost is very low. This means that its generation and verification is very efficient, which helps scalability.

Succinct means that the hashes are very small compared to the duration of the actual process required to create them. Non-interactive means that, in this type of system, there is normally no interaction between the parties to a transaction. Argument means that the verifier is only protected against computationally limited testers. Providers with sufficient computing power can create evidence / arguments for incorrect assertions. Although this is highly unlikely due to the computational power required to achieve this. Zero knowledge means that no one in the system knows the secret, they are only sure that it exists. In this case, nobody has information about the transaction, but they are sure that it has been carried out correctly.

Zcash (ZEC) is an open source decentralized cryptocurrency that guarantees privacy and selective transparency of transactions. Zcash coin payments are posted on a public blockchain, but the sender, recipient, and transfer amount details are confidential.

ZEC is intended to be private and completely anonymous. This is possible thanks to the zk-SNARK protocols. Thanks to this method, it is possible to confirm transactions without revealing additional information, making the use of this currency completely anonymous. ZEC is ranked # 36 on CoinGecko.

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The project was born with the purpose of improving the privacy and anonymity of Bitcoin, in 2014, with the work of Matthew D. Green, and the students Ian Miers and Christina Garman, all of them belonging to Johns Hopkins University, and at the beginning, it began as a fork of Bitcoin. Finally, its launch was officially announced, on January 20, 2016, on a totally independent blockchain.

Zcash has two types of addresses: private (z-addresses) or transparent (t-addresses). Private addresses start with a "z", and transparent addresses start with a "t".

A transaction from z to z appears in the block explorer, so it is known that it occurred and that the fees were paid. But the addresses, the transaction amount and the memo field are encrypted and not publicly visible. This is possible thanks to the use of zk-SNARKs. Despite having different addresses, both types of addresses are interoperable. Funds can be transferred between z addresses and t addresses.

Zcash originally kept the SHA-256 algorithm inherited from Bitcoin. However, this was changed in 2014 in favor of Equihash, which is based on a cryptographic concept called the Generalized Birthday Problem. This problem defines that, in a group of 23 people, there is a 50% probability that at least two of them will have a birthday on the same day. The reason for your choice is that Equihash provides very efficient verification. This situation proved to be important in the future for thin clients on underpowered devices or for implementing a Zcash client within Ethereum.

Vitalik Buterin, founder of Ethereum, spoke recently while bearing the stress of the imminent launch of ETH 2.0, that the form of crypto presented by Zcash can be a great solution for scaling to Ethereum.

 

Conclusion. I think that as the massive adoption of cryptocurrencies grows, the regulatory and collection anxiety of the organizations that will be left out of the party will grow in the same way. In many cases, currencies like ZEC are going to be highly sought after, especially as an exchange mechanism between privacy-zealous operators. In addition, I think there is going to be a lot of computer science development around methods like zk-SNARKs, and that new algorithms are going to appear that will give total operational privacy to individuals who do not want to be snooped on while transferring value. ZEC, as a pioneer, and as a fork of Bitcoin, can have great advantages over a market that claims to be large. Another currency that is in the same direction is Monero (XMR), for which I recommend reading this excellent post from SamBTC here at Publish0x. Monero has carried out several hard forks to increase privacy and make it practically impossible to decode who has transferred or received value, using highly advanced cryptography techniques, but always based on zero-knowledge protocols.

 

As usual, none of the things written in this post are financial advisoring and are not intended to replace personal research.

I am interested in showing in this blog the fundamentals of cryptocurrency projects that may mean a paradigm shift in the near and not so near future. This approach may be different and complementary to the posts of other talented colleagues at Publish0x that show shorter-term variables and which I follow with great interest, since I, of course, am also interested in the short term and in putting together a solid portfolio.

 

Thank you for reading!

 

 

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SirGerardThe1st
SirGerardThe1st

Franchise veteran, Dapps developer, DeFi evangelizer, Bitcoin and Ether since a long time


Tokenomics
Tokenomics

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