Dispatch #53: Everything Is Buggy at First
In this patch of your weekly Dispatch:
- Solana and Arbitrum outages
- NFT insider trading
- Vitalik goes mainstream
The Big Idea
A Bad Day for the Blockchains, a Good Day for Blockchain?
Tuesday started just like any other day – crypto tribes at war on Twitter and new memes flying around. But then people started to notice that Solana hadn’t produced a new block for a while.
Time passed, and still nothing. Solana founder Anatoly Yakovenko explained that it was an outage caused by “resource exhaustion.” Bots chasing an initial token offering cascaded the system with 300,000 transactions per second, causing the queues that send transactions on to block producers that overwhelmed the system of validators.
While adherents of Layer 1 competitors piled on in comments, much-hyped ETH L2 scaling solution Arbitrum also went down, due to a bug. Arbitrum would be back up about an hour later.
A few days later, the outages serve as an interesting reminder that everything is buggy at first. Bitcoin experienced critical bugs and accidental hard forks for at least four or five years so we would like to remind you that multiple projects you set your hopes on remain extremely new and susceptible to unforeseen technical challenges.
This episode highlights some meaningful questions and observations:
- Could the fact that SOL’s price did not crash mean that investors have matured and become more patient? That more people can stomach the risk because they see the potential?
- Many Ethereum community members decried Solana’s ability to get a quorum of validators in a single discord, but in doing so, Solana was able to come together to solve the problem.
- The trade-offs of decentralization and questions of how decentralized is enough have to do with what one wants from their blockchain.
As more smart contract platforms compete for Layer 1, those questions are going to become more and more acute and important. In the meantime, remember that crypto is antifragile – it gains strength from the disorder so don’t be quick to judge any mishap along the way.
The Latest In…
Time has released its annual 100 “Most Influential People” list and, would you look at that, Ethereum creator Vitalik Buterin is on it. The publication had Reddit co-founder-turned-VC Alexis Ohanian write the brief, who called Vitalik a “builder’s builder.” He concludes the piece by saying “I’ve never been more excited about the potential of the Internet, and that’s largely thanks to Vitalik Buterin.” It’s a great tribute and a nice moment to recognize just how far this industry has come.
The Latest In…
Meet the Nexo Team
Our Co-founder Kalin and Head of Corporate Finance Tatiana absolutely killed it in New York where they attended Blockworks’ Digital Asset Summit. In case you haven’t had enough of Nexo, a few members of our team – including George whom you know from the Nexo Brainer – are going to Amsterdam next week for the European edition of one of the world’s largest fintech events – Money 20/20. Say hi if you’re in town.
The Latest In…
The US Govt and Crypto
US Securities and Exchange Commission Chair Gary Gensler testified before the Senate Banking Committee this week. It was something of a mixed bag.
- On the one hand, some of the allies from the Infrastructure Bill battle such as Pat Toomey came out firmly for crypto.
- On the other hand, Gensler’s tone in his prepared statements is seemingly getting more hostile.
Additionally, it seems nothing can stop the US Government from accessing crypto exchange data. In the case of crypto trader James Harper versus the IRS, taxes win.
The Latest In…
A couple of months ago, Laos’ central bank came out and warned businesses and consumers about cryptocurrencies. Seems they’ve done a big about-face, however, and are now beginning to authorize mining and trading. The reverse is an opportunistic move to take advantage of 1) the country’s excess hydropower from dams along the Mekong as well as 2) a potential influx of Chinese miners looking to set up shop in a more hospitable territory.
While some are rightfully worried given that Laos is home to the notorious Golden Triangle, we think that any government exploring crypto is worth paying attention to.
The Latest In…
A bit of a sad one this week in NFT land. It appears one of the employees of uber-fast growing NFT marketplace OpenSea has been leveraging their privileged information about which collections are going to be featured on the front page to front-run the market. The violation of trust or, as some put it – insider trading – isn’t the type of behavior that we should endeavor for in a brave new financial world that’s meant to beat back the problems of the past.
The Week’s Most Interesting Data Story
How Is That Hash Rate Migrating?
Above, we discussed how Laos is trying to take advantage of the great migration of hash rate out of China by offering up its abundant hydroelectric power. What’s the status of that migration, though? Well, in China, they’re still very focused on policing the ban. Inner Mongolia just hired a private firm to help them root out any holdouts. In the rest of the world, the hash rate is recovering impressively. When the ban went into place, about half of the world’s hash power went offline. A few months later, we’ve recovered 54% from the lows. Hard not to be impressed with the resilience of the Bitcoin network.
What the Community Is Discussing
This Nexo user paid for his mom’s surgery using our credit lines. It’s not nearly just about Lambos, folks.
As we like to say, crypto is finally big enough to invest in itself.
Does Bitcoin have a fee issue?
What to Watch for Next Week:
- Will Avalanche steal Solana’s momentum?
- What government will get into Bitcoin next?
- Will you win $NEXO with #WrongAnswersOnly?