3 BITES OF THE CHERRY – A LEGACY

I’d like to talk about a few things that seem to have come up together…

I’ve noticed with many things in Web3 / Blockchain that I start talking about it months and in a few cases a year before its ‘a thing’

I tend to be critical of technologies if they are either unnecessary or not in the best interests or both. I’ve usually made fairly nuanced points with a technical undercurrent to support my view. I don’t tend to be declarative in posts.

My brain has a fairly low tolerance level for rhetoric, and my stomach even less.

When my narratives are not especially concerned about Nigeria specifically, or ‘The Global South’ generally, then they more broadly tend to have the interests of the global consumer or retail customer at heart.

So, when someone comes late to the party, talking about something I have copiously covered previously, but prostrate and in awe of it, to the detriment of the global consumer or retail customer, it may be unsurprising that this does not sit well with me.

Such things have happened to everything from EIP-4844/Dencun/Danksharding… to ERC 404 (a protocol which couldn’t be bothered to even follow its (low threshold) internal EIP processes …   (  ERC 721 came in to improve on the hopelessness of ERC 20 for NFA (Non Fungible Asset) tokenization, and then some loons decide to combine the two as one protocol… What could possibly go wrong??

I also came in on the madness of Solana trying to steal the Eth Ecosystems ‘cheap and cheerful’ hack prone clothes, for collectibles last year, and in November specifically joked about dogwifhat ($WIF), roll on a few months and everyone and their dog writes about it.

So, this is a ‘bites of the cherry’ series like no other, as unlike breaking news, we re-visit  a few things in collective context, that we have covered already.

We are revisiting:

Zimbabwe Gold Backed Currency

When previously commenting on the gold backing of the Zimbabwe currency, I said it was a bad idea. The global abandonment by ‘developed’ nations of gold backing began in 1971. It initially began because the UK government at the time required the US to pay dues in gold, and US precipitated a bandwagon that dropped it.

But the over-riding reason was that any fixed commodity would not scale as a bond with the improvement of fast-growing economies. Economies grow by their GDP, what they generate from goods and services. Gold, or any other commodity they own, is not about generation.

Otherwise, since there is far too little of a commodity available in the world to support gold standard processes globally, a nation will teeter to bankruptcy trying to acquire more gold, while beginning an inflationary cycle as GDP improves.

The right way, is to align note issue with a % of GDP value itself. This has only become a problem for some developed economies because they have taken political decisions raising note printing creating a poor, or even negative growth dynamic with GDP.

Several democratic countries have decided to make their central bank completely independent of governance, to avoid short term populist political decisions artificially printing extra money.

However, gold backing is a legacy policy, not a new idea, and one that has already been proven to take a nation backwards.

(Synthetic) Stablecoins.

A CBDC is effectively a type of programmable stablecoin owned by the government, rather than a corporate entity. This may start some ranting, but the reality is, corporate ethics in crypto-world is no cleaner than anywhere else. We only have to see the result of $hitcoin dramas to see this. I guess it just comes down to if you prefer to trust your government or Mr. Chevron or Mr. Pfizer. Rather than nit-pick between them, it makes more sense to dismiss them all as bad choices.

Block.io says: ‘USDe employs a unique mechanism that does not rely on direct fiat or asset backing. Instead, it includes derivative hedging against collateral positions and an arbitrage system for minting and redeeming designed to maintain its peg to the U.S. dollar.

It also leverages a cash-and-carry trade that generates a yield, which is then shared back with stablecoin holders. For example, it utilizes strategies like staking ETH holdings (collected from USDe stablecoin minters) with Ethereum validators and simultaneously shorting the same amount of ether futures.’

So, effectively, owning a ‘Synthetic’ Stablecoin is a variation on holding an extensible bet on the future of a stablecoin relationship with another instrument without holding the stablecoin itself – sort of.

If one does a parallel between a sovereign FIAT (like the Zimbabwe situation) and a blockchain ecosystem, use of a stablecoin makes the same mistake.

If we consider a blockchain ecosystem as a virtual ‘sovereign country’ then we need to use the ‘GDP’ of that ecosystem to determine coin/token levels instead of using stablecoins as a middleman or pegging it to something exotic (like the Venezuelans tried to use oil!).

If we can combine a ubiquitous relationship with many other instruments (as is the case with bitcoin) with a strong ‘virtual GDP’ , then we get something more capable of instrument dominance than the $USD is in the FIAT world.

Stablecoins are beside gold as obsolete reference standards. CBDC carries the extra threat of manipulation by government in ways that infringe human rights.

Layer 3 Networks (L3s)

I see a lot of new drama in crypto-journalism and content creation talking about Layer 3s as if they are something new.

For the most part, Layer 3s are just someone pretending they have a blockchain when they don’t. Businesses build a product or two off an L2/EVM Compatible, and to give VCs /Investors an exit, they create a token for it.

In order to make themselves sound bigger and more important than they are, they try to call the software collection that comprises the products and the tokenomics an ‘L3’ but the reality is the are nothing more than a client/consumer/user end network.

Other anomalies exist where folks hang a peer/node system off an an L2/EVM Compatible calling it a ‘DAO’. A bit of a stretch to call something built on top of a corporate centralized network a ‘DAO’ but what can we say?

Folks do make strange claims!