The rise of the protocol politicians (Market Monday)
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Dear Crypto Natives,
A dozen bankers meet every 6 weeks to set the interest rates for the world. A committee of unelected officials charged with achieving maximum unemployment and price stability—keeping the U.S. economy on track.
Federal Open Market Committee - January 2014
This institution of technocrats—do they have skin-in-the-game? Are they apolitical? Are they accountable to anyone? Are they captured by special interests?
And you think this system is flawed—ok, what would you suggest instead?
Maker has a suggestion. A new protocol with a sole mandate of currency stability governed by MKR holders who each have skin-in-the-skin. Successful management increases MKR price. Flawed risk management dilutes it.
If successful, the stablecoin they govern—DAI—becomes a major world currency.
Today MKR holders vote on changes to DAI interest rates. With the launch of multi-collateral DAI, they’ll also determine which collateral assets back DAI and the risk parameters of those assets—the decisions get more complicated.
Since each MKR holder votes directly governance requires time and effort. A voter must be knowledgeable on the issues and vote often. This means the interests of passive MKR holders aren’t represented. And smaller voters become too apathetic to participate—their vote doesn’t matter when the larger holder swing the outcomes.
But what if the passive holders could delegate their votes to representatives?
Does voting become more scalable? Does the system start to resemble some new form of shareholder governance—one with with instant election and removal?
Will we see new politics emerge as prospective delegates campaign for voters?
And maybe someone like me will create a platform to Keep DAI bankless!
While political rivals rise up promising the highest MKR rewards:
David Hoffman and I had fun defining our MKR political platforms this weekend:
- “Ryan’s plan leaves fees on the table” - Hoffman
- “The constraint for DAI isn’t supply!” - RSA
- “Ryan is an ETH-agent in the MKR system!” - Hoffman
- “False! Don’t let the bankers take over!” - RSA
- “Both of these plans are terrible” - Third-party candidate enters the ring
You can see how quickly rhetoric emerges and sides are chosen. Ahh…politics.
To be clear, while Hoffman and I probably have positions resembling our hyperbolic tweets, MKR delegation does not yet exist and our twitter vitriol was more illustration than serious. But a delegation system can be created with just a bit of code. And isn’t this an inevitable glimpse into the future?
Imagine a monetary protocol with the power to affect global economies—a private, protocol-based central bank for open finance. How could such an institution exist without accruing political cruft at every open surface area of decision-making?
- Political parties
- Forks based on disputes
- Vote-buying markets
- Lobbyists & interest groups
The rise of the protocol politicians?
Let’s shore up our governance systems and enter these next chapters with eyes wide open. The protocol politicians are coming.
We’re maybe 6 months away from having a completely bankless version of Venmo but the crypto markets don’t care yet—put some syrup on em—they’re flat as a pancake
Scan this section and dig into anything interesting
- ETH down slightly at $176 from $182 last Monday
- BTC about even at $8,240 from $8,243 last Monday
- Maker stability fee down to 9.5%—back to double digits!
- (Lend) Argent releases Compound on Android (jump the queue 🔥)
- (Lend/Borrow) ETH/DAI margin trading with new DDEX feature (zero fees!)
- (Lend/Borrow) See rates across crypto banks & protocols at CoinMarketCap
- (Lend) DAI on DyDx at 10.13% (free arbitrage if you borrow DAI at 9.5%)
- (Trade) DAI on Bittrex US for the first time
- (Bet) Will Justin Trudeau be re-elected Prime Minister of Canada?
- (Invest) Get 2% rebate on PAX Gold tokens (stay tuned for my gold token review)
- (Lend) BlockFi still 6.2% BTC / 4.1% ETH
- (Trade) Nexo token on Binance chain to earn rewards (geofenced of course)
- ENS support in more chains & wallets (might make your ENS more valuable)
- A Maker-type “DeFi chain” on Cosmos being sold on Binance (many thoughts!)
- Crypto.com offering PAX Gold Lending (i’m doing reviews on both soon!)
- Zerion added Set to its dashboards | Multis too!
- From 0 to 35k users—money protocol look like hockey stick growth to me 🔥
- USDT on Ethereum will probably flip USDT on Bitcoin anytime now
- Uniswap doing more volume than Bakkt 🌶️
- GodsUnchained is a 2 weeks from release & already blowing up! (this is why)
- Over $400m now exchanged on Synthetix exchange! (SNX is a “bank bet”)
- How kids will Bank (i tend to agree!) - Vishva Dave
- Buying stuff in China (feels like dystopia imo) - Tony Sheng
- QE4 is here (about $300B worth between now and Q2 2020) - Zero Hedge
- Ethereum’s DeFi Competitors (good but missed SoV) - Mohamed Fouda
New release—🔥Bankless exclusive AMA with one of the most promising privacy tech protocols in open finance today. Does it make DAI private? Find out!
WHAT I’M DOING
Check out a few opportunities I’m capturing right now with my crypto money
Explored a crypto card. Update: investigated crypto.com crypto card this week and I ordered one. It’s a custodied solution using BitPay, mobile app is slick, though I still have some analysis to do on their MCO token. I plan to use the card and do a full write-up for us. Stay tuned!
Used new Wyre on-ramp. This was the easiest fiat onramp experience I’ve ever had in crypto (still jurisdiction restricted though). A mainstream user can get crypto without extensions or downloads directly from a browser link—all they need is an Apple or Google Pay wallet—no account setup, no KYC, no prerequisites. Costs 2.9% + 0.30 fee. This is Stripe for money protocols. (In Europe? Hearing good things about Ramp)
I bid on a few premium ENS names. In last week’s assignment you picked up and registered an ENS name—did you know auctions are going on right now for premium ENS names? I’ve bid on a couple so far. DeFi.eth (10 ETH), Gold.eth (5 ETH), and BTC.eth (4.6 ETH) will all be auctioned off in the next week—and sorry folks money.eth is gone—because guess what? ETH is money.
- Secured ENS names
- Figured out Synthetix
- Bought assets on Uniswap—no bank
- Tezos protocol upgrade
- Lent on Compound via Argent wallet
Make time to complete this assignment before next week
What is it? Think of your ETH address as a bank account. But unlike a traditional bank account, you own it. So you can plug it into any user interface you want. MyDeFi is one such interface—really simple, mobile optimized, ETH account tracking.
Here’s what you do:
- Download and install MyDeFi app (iOS and Android)
- Add an active ETH address
- See your account activity
This is a view-only interface meaning no ability to access your private keys.
Note on privacy: according to the developer the ETH address is stored locally—no addresses stored in server—do further due diligence on privacy if paranoid.
Now view your account assets, money protocol activity, and balances. Also, check out Best Lending Rates under Tools to see opportunities. This app will be useful for future weekly assignments—e.g. check out Pool Together assignment in MyDeFi!
Cool right? Open finance is already creating its Mint.com. And I expect ETH account wrapper tools like this to get a lot better in the coming months.
Extra Credit Learning
- (Beginner): VIDEO: How to enter Pool Together Lottery (Chris Blec)
- (Beginner): Rika’s DeFi reading list
- (Beginner): 5 Things your should know about DeFi
- (Beginner): What is Tokenization?
- (Intermediate): Upgrade guide to the new Maker CDP system (another one here)
- (Intermediate): VIDEO: DeFi Lending pools | DeFi P2P Lending
- (Intermediate): How to use DeFi Safely
- (Intermediate): AMA with Connext on ETHFinance (happening today)
- (Advanced): All about TBTC—BTC on ETH (requires 1.5x ETH for every 1 BTC)
Read my takes but draw your own conclusions
- This G7 report on stablecoins claims Bitcoin and crypto has “…so far failed to provide a reliable and attractive means of payment or store of value.” Governments seem far less threatened by Bitcoin as a highly volatile store-of-value than they did when Bitcoin’s narrative was a P2P electronic payment system. This explains both their aggressive posture toward Libra and relative dismissal of crypto monies like BTC and ETH. This may be working in crypto’s favor at the moment—crypto monies can grow unstraggled in their crib while governments chase Facebook
- Coinbase commerce adding a way to pay in crypto directly from a Coinbase wallet—looking more and more like crypto Paypal everyday
- Grayscale offering a new trust product that’s 80% BTC, 10% ETH, and the rest XRP, BCH, and LTC—expect to pay crazy high premiums and fees—way better to break out of your brokerage account and buy them yourself
- Can’t help but notice BTC and ETH are the two assets Fidelity is talking about to institutional investors—the two crypto monies
- Binance made over $1b in profits and while I admire the execution keep in mind this is the casino model of crypto banks—yes, every bank exists on that spectrum, but Binance is especially happy to help you take as much risk as you like—buyer beware
- 109k ETH wallets ready to stake—for self-staking Ethereum will require a minimum of 32 ETH to stake—over 109k wallets have more than 32 ETH today
Tweet me your question—I reply to one per week
Question from Inner Circle:
If Argent the company goes away can you lose access to your Argent wallet funds?
This is an important question for any smart-contract wallet. I don’t think Argent’s had a good answer to this previously, aside from setting a hardware wallet as a recovery guardian.
More recently however they released details. There’s good news—you can fully recover your funds by following a few steps here.
And this is a useful level-up even if you don’t use Argent.
Because really, any time you trust a substantial amount of funds to a smart-contract you need to make sure there’s a recovery processes. Have funds in Set? They recently released their recovery instructions too.
Remember: the functions of a truly bankless money protocol are completely accessible on the public ledger. The app you use? That’s just the wrapper.
Some recent tweets…
- Execute any good market opportunities you saw
- Complete the weekly assignment: Setup MyDeFi app with an active ETH address
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Post. Tweet. Tell. That’s how we take back our money system.
Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.
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