The Breakdown - Multi-Collateral DAI goes live / Not so privacy coins / Crypto fundraising & M&A

Episode Date: November 19, 2019

After a huge amount of work, MakerDAO's multi-collateral DAI is live. Only one new token (Brave's BAT) is in the ecosystem, but it heralds the beginning of a new era. In the world of privacy coins, the MimbleWimble protocol is pushing back against a theoretical attack that some say invalidate its privacy features. Finally, Gemini makes its first acquisition.  Watch: https://www.youtube.com/nathanielwhittemorecrypto

Welcome back to another Crypto Daily 3 at 3. What's going on, guys? It has been a minute behind the scenes. I'm working on some interesting stuff. I'm not quite ready to announce it, but it should be very exciting for those of you who enjoy this content. So keep an eye out for that. But for now, back to the regularly scheduled podcast and video content.

So we're going to dive right in. Today we're going to be talking about multi-collateral dye. Second, we're going to be talking about privacy coins and the potential vulnerability therein. And third, we're going to be talking about some financing in the space. So let's start with multi-collateral dye. Obviously, we've talked about this before on Long Read Sunday. We've talked about it on 3 at 3. Naker Dow and Dai are the most significant project in the DFI space.

It's hard to argue any differently. And one of the things that they've been working on for a while is moving from a single asset or single collateral die where Ethereum is the only colloquial. that's used in the system to a multi-collateral die where multiple different assets can be used to collateralize the die system. And so the idea is that if multi-collateral die goes live and it works, it means more resilience for the system, right? You're not subject to the price shock or demand shock or whatever around any one particular asset like Ethereum. Now, on the other hand, it potentially introduced a lot more complexity as well. And some folks have been worried that

it's too early to introduce that additional layer of complexity and what's more, relative to the other crypto assets that might be included in a multi-collateral die package, Ethereum is likely to be more stable anyway. So does this actually decrease stability? Now, the long-term vision is that many, many things could be used as collateral within the die ecosystem. It doesn't even just have to be digital assets or crypto assets. It could be tokenized real estate or something else, right? So there's a long-term vision here, and this is the first step. And it is here, right? So you see Rune Christensen, the founder of Maker, says after waiting for almost five years, it is surreal that the full vision of die we dreamed up so many years ago has now been realized

and is functioning right. Maker Dow says, Maker Multi-collateral Die is live. This is yesterday morning at 11. Read everything you need to know here. So a few different changes that are noticing on. So there's a lot going on behind the scenes. I won't necessarily get into everything because obviously on three at three, we're a little bit more focused on the implications of the system rather than all the technical specifics.

A couple things that are important, or the main things that are important are one, BAT Braves Digital Asset token, or Digital Advertising token, rather, is now available as collateral, right? So now BAT has been added to ETH as available collateral options within Maker. Second, they've introduced a new die savings rate so users can earn returns on their die holdings natively right from within the protocol, which is pretty interesting. There's a whole lot more. There's a ton around new terminology. There's a ton around kind of transitioning your old single asset die, which is or single collateral die, which is called psi to multi-collateral die, which is now just what die refers to. Collateralized debt positions, CDPs are now called vaults and so on and so forth. So obviously a ton of new stuff going on. But the main thing is the really big things for just the passive observer outside is this is the first step to using lots and lots of lots of different things for collateral, which theoretically can introduce or increase the stability of the system in the long term and make this a real serious player and an asset in the world

more broadly. So what happened since then? We have Mariano Conti who works at MakerDAO based in Argentina, says just over 12 hours in some numbers for MakerDAO. 2.4 million die, 88% ETH, 11% fat, a single asset. die, single collateral die. 689 volts, i.e. CDPs opened.

470,000 die in DSR. That's the digital savings rate. 534 die generated instability fees, six accolations already. He also, Mariano also put together this cool site, dye sat. So you can actually go and see at any given moment what the latest is. So I think if you refresh it, it'll be up to date. Yeah, one sec, fetching data from Ethereum mean that.

So super cool. cool stuff from the Maker Dow team. And also I wanted to point out that the community around this is doing some really great content as well. So you have Chris Black here who put together a, I don't want that on, put together a video on how to actually do this upgrade, right? So it seems complicated to migrate your side to your die. This video should help. To me, I think that shows the strength of the community. Now, like I said, the implications of this are big, right? And so, of course, you know, as the most prominent asset in Defi, as the most kind of focused on experiment in Defi, there's going to be critiques, right? There's going to be reasons that some people are nervous.

The biggest one that I've seen a lot of is this question of decentralization. So yesterday you had Lee from CoinDesk wrote a piece basically saying that questioning the decentralization of, of decentralized finance, right? And what she pointed to was just the kind of size and scope of the holdings of some prominent funds, right? So you can see here, despite the rapid growth of the sector and the diversification of assets involved, defy is still influenced

by a handful of central players, namely polychain capital A16Z, one confirmation and unknown maker whales. This gets into this question of governance and the difficulty of governance, right? So if you look over here, Andresen Horowitz wrote about their vote to bring multi-collateral die online. And if you remember a couple years ago, Andrews and Horowitz bought basically 5% of the available maker at the time.

So I think that there are, we do need to have questions in every crypto asset community about wealth concentration and concentration of holdings, but particularly in the context of these systems that are trying to introduce new types of governance, where, where that power or those holdings literally translate to power. I don't think that that's a reason to throw the baby out with the bathwater, but I do think that it's a worthy thing to note. So again, you know, DIA is going to always have a target on its back, and it should.

It is the most advanced defy asset. It is the most robust network. So it has to answer the most, you know, the biggest and harriest and thornyest questions. But still in nothing else, it is super interesting to see live, A ton of work went into it. And we are on to phase, I don't know if it's two, but at least 1.5 of both the MakerDAO and the DeFi experiment.

With that, let's move on to number two. So Lawson here says Monday was a rough day for privacy coins. I'm going to focus on this first part. Reports stating grin transactions are linkable by running archive known. This is a known issue and definitely not promoted or known by the broader public. So what he's referring to is this thread from Ivan Boghadi, who's at Dragonfly Capital with Hoseb Qureshi, and they were previously at Metastable Capital. So these are, you know, more technical VCs, right, among the set.

And he says, I just published a new attack that breaks Mimble Wimble's privacy model. The attack traces 96% of all sender and recipient addresses in real time. Here's a summary and what it means for the future of privacy coins. There's a bunch of technicals in here. He actually does a really great job of breaking down the anonymity models and the differences between Zcash, Monero, and Mimba Wimble. Mimble being the protocol underneath both Grin and Beam, with Grin certainly being the better known of the two. And effectively articulates an attack which goes after the transactions before they get joined to be anonymized. So this caused a huge stir.

you can see here 2.3,000 likes, 900 retweets, and this came out just yesterday morning. Of course, a lot of the folks who were involved in these projects were not as thrilled. So Yeast Plum, who's one of the developers at Grin, and a number of the other developers wrote a response, and they effectively argue that the article to them reads like it's out to get clicks and that there's fundamental. misunderstandings. You know, again, it's, I think that you should go read it and make your own judgments. I think what's definitely clear is that it's brought up a debate about to what extent this is, is kind of a clickbait thing, or is an actual kind of sincere look at a really difficult

challenge. So yeast bloom says, sorry do I've been so blunt, but the recent article describing an attack on Mimblewimblewimble's transaction graph is misleading at best, grossly exaggerated clickbait at worst. And Udi says, I know where you're coming from, but I think there's another angle to this. The fact is, while people deeply familiar with Mimble Wimble were obviously aware and very open about this fundamental issue, many in the community still weren't aware. This reflects a tweet that he had sent earlier, that he says, sure, people know Mimble Wimble intimately knew about it and mentioned a lot, but still no one executed it to empirically show how effective it is, this being it being the attack in this case, which means most people still didn't know about

it. And Yeas-Plum responds, he says, we very much want the community to be aware of all potential issues and imperfections on Grin's privacy. However, this article claims that Grin's Mimble Wimba Wimba privacy model is somehow broken via logical leaps that simply don't follow from the research. Beam did for their part as well. So Beam is kind of like a, it's a more Z-Cash version of deployment of Mimblewimble. They have a native token, whereas Grin doesn't, or excuse me, they basically they have a different sort of founders reward that's what I was saying I have not done this in too long anyways so basically the beam responded as well with a effectively saying that their decoy outputs and just their technical system makes it more

difficult for this attack to work but again I think that for me let's go back to why this is interesting. There are obviously technical specifics here. There's going to be continued to be debates around whether they're privacy or not, but I think that privacy coins kind of have a different burden on them. And what I mean by that is that the demand for privacy coins or the need for privacy coins is very, very distinct, right? Like you can, we can have sincere debates, I guess, about whether it's good or not that Bitcoin is anonymous or, and, or, you, or, you how traceable transactions are. That's something that's going on.

We've talked about it here in the context of, you know, debates with Joe Wisenthal and Nick Carter and a few others a couple weeks ago. But with privacy coins, they are explicitly designed to shield people's transactions, to allow people to transact in ways that are not traceable and trackable in the same way that other types of financial transactions are. And because of that, the technical burden on them and the challenges, they have to be kind of above and beyond these sorts of questions, right? It's really, really, I mean, it's essential.

It is the fundamental foundation upon which these protocols are based. So I think that the debate is important to have, and I don't think it's sufficient to kind of just, I worry a little bit about writing off these critiques as just kind of clickbait headlines. Now, of course, if you're invested in a protocol, it's your right to defend it as vociferously as you want. want. And I don't think that we should also be in the business of FUD, but I do think that the raise on debt for privacy coins requires an extremely high burden of proof. And so, you know, I think

like things like this, although they are unfun for core developers, they are important for the rest of the community to decide what what they are and aren't going to think about these types of coins. So anyways, I think it's a really interesting and important conversation because I think privacy coins or just the privacy features of other coins like Bitcoin is an incredibly important area, particularly given the world that we live in today. But with that, let's move on and finally wrap up with number three, which is some fundraising activity and crypto M&A. So I saw this tweet this morning from Bully Esquire. He says, 25-year-olds out here getting their 12-month-old crypto-Kibdi startup called Nifty Gateway bought out by Gemini, and you're spending your

days chasing shit coin pumps and fighting on Twitter. So the story here is that Gemini made their first acquisition. They bought Nifty Gateway from, ironically, the WinkleVos Twins bought another set of twin startups. And Nifty Gateway is effectively a way for people to buy NFTs with traditional payment methods like credit cards. So the goal here is it's an infrastructure play to try to make the acquisition of NFTs or, you know, digital collectibles much easier. I think that the thing that's interesting for me is one, I guess it's validation that people are interested in the NFT space. Digital collectibles continues to be a thing. Now, of course, the Winkle of I are pretty comprehensive in their coverage of the potentials of this space. So to some extent, I think that, you know, giving, it makes sense for them to have assets in this domain. But I do think, too, that one of the things that I've been watching for a while is that it feels like, it feels like MNA is as a natural next step for a lot of crypto platforms. Just as, you know, it's the natural process and evolution is that

when an industry starts, tons and tons of companies kind of get going. Many of them don't work entirely. Some of them work a little, but don't go all the way or just need a different home to thrive. And we actually haven't seen a huge amount of MNA activity. So it's interesting to see this maybe signaling that there's some movement that could happen. Now, it's one M&A. It's certainly not enough to call a trend, but it was something that coin shares flagged in their report as well, an expectation that perhaps there might be more M&A, especially as we start to see clarity around business models. So either way, exciting for the folks behind the Nifty Gateway and something to watch. And then finally, just a fundraising news, Bison Trails, which is basically infrastructure to

allow folks to run to allow infrastructure for multiple blockchains at once raise 25 million from kind of the key crypto investors. You've got blockchain capital, Coinbase, Kleiner Perkins, and accomplice. And yeah, so I think that the key thing here, why it's interesting, is just has to do with the state of the industry as well. One of the indicators that you can look at is to what extent there's actual capital activity going on in a market. If it's completely dead, that means that people aren't interesting. 25 million certainly suggests that some folks who are invested in this space think that it's worth continuing to double down on.

So anyways, guys, that is it for today. Thanks for hanging out. Let me know what you think about Grin and this Mimble Wimble Privacy issue. You know, I think it's been, the story of Grin is really fascinating, right? They kicked off the year with this much fanfared, you know, kind of virgin launch where there were no pre-mines and no founders rewards or anything like that. And a lot of the debates that we've had throughout the year in terms of developer funding and all sorts of things have come back to them. So anyways, interesting stuff, guys. Appreciate you listening.

If you're listening, appreciate you watching. If you're watching. And I will be back tomorrow with another Crypto Daily 3 at 3. Peace, guys.