💠 Crypto's Most Underrated In 2019 — Issue No. 78

📰News

As 2019 comes to a close, plenty of outlets will be recapping the biggest stories of the year. From DeFi to Libra, the most obvious stories have been thoroughly discussed. In this year's final edition of this newsletter, I'd like to do something different. What were the most underrated and under-covered stories in crypto this year, relative to their potential importance and impact? I'll give you my top five. Let's jump in!

#5 — MetaMask Goes Mobile And Extensible

MetaMask is one of the most important tools in the Ethereum world. It is emblematic of the significant lead that ecosystem has over would-be smart contract competitors. This year, there were two important developments by MetaMask that went almost unnoticed by the broader crypto community, but could have a huge longterm impact.

First, the release of a high quality, easy to use mobile wallet and DApp browser for both iOS and Android. Second, and more importantly, the announcement that MetaMask would be making itself extensible to third party developers through a secure plugin system.

Both the mobile wallet and the plugin system are still in beta for now, but both could be critically important in 2020. The latter, in particular, could unleash a wave of creativity and experimentation from developers. Link.

#4 — Binance Chain Decentralization Theater

Binance is one of the most important exchanges in the industry. This year, they launched a so-called decentralized exchange (DEX) on their own so-called decentralized blockchain, with their own token, BNB. There's just one problem: there is literally nothing decentralized about Binance Chain or the DEX that runs on top of it. While there was plenty of coverage— some of it quite glowing— around the network's launch, very few called Binance out on their glaring hypocrisy and decentralization theater. Let's review all the ways in which Binance Chain is laughably centralized:

• There are only 11 validators, all of whom are picked by Binance
• No one even knows who the validators are (they could literally all be Binance)
• Validators have nothing at stake and no protocol-level incentive not to cheat
• The code for Binance Chain isn't even open source

Yes, decentralization is a spectrum, and on that spectrum, Binance Chain is literally in the same position as running an exchange on a private server. Binance chain make's Facebook's Libra look extremely decentralized. It's a joke. Yet for the most part, the industry has let them get away with calling this a "blockchain." Yuck!

#3 — Bitcoin Utreexo Research

Let's be honest, this was a slow year for Bitcoin, at least from a technical perspective. Lightning network has stagnated. Literally no one cares about the Liquid or Rootstock sidechains. Many thought we'd see soft fork this year, to introduce Taproot smart contracts and Schnorr signatures, but it never materialized.

One interesting piece of scaling research that was published this year went relatively unnoticed outside those who follow Bitcoin closely. Utreexo is a project by Thaddeus Dryja, a researcher at MIT's Digital Currency Initiative, and one of the co-author's of the original Lighting whitepaper.

The idea behind Utreexo is to introduce a hash based accumulator of the full Bitcoin UTXO set. Spends leveraging Utreexo would need to send an inclusion proof along with their transaction, proving their unspent output was included in the global set. The result of this is that the size of the global UTXO set is decoupled from the storage space required by any full node. Doing so means many more addresses can hold Bitcoin without drastic increases to the hardware needed to operate a node. Link.

#2 — Rejection Of Ethereum Protocol-Level Funding

Funding of public goods is one of the biggest problems in crypto. In many ways, it suffers from all the same problems that have plagued Open Source Software for the last 20+ years. What makes the situation even stranger for crypto is that we're literally making money. As a result, there are bizarrely pathological situations: projects have multi billion dollar market caps and founders who've made generational wealth, yet talented researchers and developers can't scrape together market salaries to focus full time on their work. Link.

Given this situation, many have suggested creating in-protocol mechanisms for funding research and development. Of the major cryptonetworks, Zcash is the only one that actually does this, allotting 20% of their block rewards for funding purposes.

This year, some members of the Ethereum community put forth a proposal to adopt something similar. The proposal was extremely conservative. It set aside only a quarter of a percent of block rewards and was time bound for only 18 months.



The reaction within the Ethereum community was overwhelmingly negative, and the proposal was nerfed before it even got off the ground. Outside of Ethereum circles, the death of EIP-2025 didn't get much attention, but I think it's rather significant. Link.

Ethereum is the second biggest cryptonetwork, and the one where much of the industry's innovation is taking place. Had the Ethereum community successfully leveraged in-protocol funding to develop public goods, even at the level of a small scale experiment like the one proposed, it could have lead other projects to consider this path. Instead, the Ethereum community has all but closed the door on funding via protocol level rewards, for better or worse.

#1 — Zero-Knowledge Cryptography Breakthroughs

As you might know, zero-knowledge proofs are a perplexing and relatively new form of cryptography; they allow you to prove your knowledge of something without actually revealing the thing itself. ZK proofs have huge potential in cryptocurrencies and beyond.

This year saw lots of exciting progress by researchers in the field of zero knowledge cryptography. These were barely discussed even in the cryptocurrency world, and didn't register at all with the wider tech press.

First, in May of this year, researchers from Microsoft published a paper detailing a method for generating efficient ZK proofs without a trusted setup. Link.

Second, another group of researchers announced a ZK proof scheme, called PLONK, which makes trusted-setup ceremonies easier to run, and allows developers to easily adjust parameters between security and efficiency. Link.

Third, and probably most impressively, a Zcash researcher announced Halo proofs, a way to compress any amount of computation into a single, efficient proof via recursion, all without a trusted setup. Link.

If you're wondering exactly what each of those breakthroughs entails, check out the links. Here's the bottom line: ZK proofs have enormous potential to change the game for decentralized cryptonetworks. They show promise not just for enhanced privacy, but also for unlocking significant scaling gains, and for enabling the creation of trust minimized protocols for a whole host of uses. In short, ZK proofs are a powerful new cryptographic tool that we've only just started to understand how to wield. I'd go so far as to say they might be the most underrated technology in the whole technology industry right now.

🎄Happy Holidays

I wanted to take a minute to wish you and yours a happy holiday season and a blessed New Year. I hope you've enjoyed all 47 issues of Build Blockchain in 2019. I've had a ton of fun writing them.

This will be the last edition of the newsletter until the second week of 2020. Keep an eye out— I've got some improvements planned and some announcements to make next month.

I hope you get some time to spend with the people most important to you in the coming weeks. The 2020's are going to be a big decade for crypto. I'll see you on the other side!