The Cardano Vasil Upgrade

According to the Cardano project team, their much anticipated Vasil Upgrade hard fork will proceed on September 22, 2022. The upgrade will bring more scalability and also lower transaction costs on the Cardano blockchain. A smart contract platform, like its competitor Ethereum, Cardano represents a third generation blockchain design.

There have been previous delays to the upgrade due to flaws discovered while testing during the summer of 2022. The Cardano project developers have been criticized for moving too slow in meeting targets, but this was to make sure that the software is stable and secure. What many don’t realize is that this is part of the team’s strategy to deliver a product that is tested for quality, making it less prone to failure. Let us not forget that many cryptocurrency projects have ended in failure due to poor development, not to mention tokenomics.

Cardano’s founder Charles Hoskinson mentioned in a YouTube video (from Altcoin Daily):

“We built Cardano to be the financial operating system of the world …. we understood a roadmap to get there … we’ve maintained actually that level of security and quality that people have come to know …”

Charles Hoskinson

In essence, what Hoskinson is saying is that in order to have a working cryptocurrency token, it has to meet rigorous testing and quality assurance. Despite news of errors in the protocol, it was during testing that they occurred. Errors were discovered on the test network, so that means it can be corrected before deploying to production. Development takes plenty of time in order to guarantee an ecosystem that is reliable and safe to use. The team is now ready to deploy the upgrade to the main network, and this should improve the network significantly.

Cardano is at the Goguen phase (smart contracts) of the roadmap to the Basho phase (scaling). This is the release of the Cardano smart contract platform that uses Plutus, a functional programming language that uses Haskell. This also includes the release of Marlowe which is a high level programming language for financial applications that can also be used for building smart contracts. Plutus is more advanced for high-end developers, while Marlowe can be used by users with no previous background in software development.

What will be interesting is what happens in the Cardano ecosystem after the upgrade. For Cardano’s native token ADA, this could mean a big price boost provided there are no complications during and after the upgrade. Traders and investors are keeping an eye on the price of ADA, as the news has been received positively so far (ADA spot market price was at $0.49 as of writing). This has kept ADA among the top 10 in the cryptocurrency market so far (based on CMC 9/4/22).

Cardano sets itself apart from other tokens. It is not a ‘meme’ nor is it considered a purely speculative asset like many coins that have no utility (i.e. ‘shitcoins;). Instead it has its own unique philosophy that is in line with the fundamentals of cryptocurrency, but based on the foundations of sound engineering. It is building a community with its own ecosystem, much like Ethereum. If Cardano can deliver on the many features it hopes to provide users, we can expect it to remain one of the top (if not the top) cryptocurrency in the market.

Disclosure: This is not financial advice. This is for educational purposes only. Do your own research always to verify information.

We Were Warned About Terra LUNA

Prior to the great Terra LUNA meltdown of May 2022, there were warning signs to investors. This came from some notable crypto experts. The main problem was not about the team or developers. They actually have a solid project team with great ideas. It was more about the design of the stablecoin that worried critics. Terra developed an algorithmic stablecoin called UST (Terra USD) that has no actual commodity or asset backing its value. Instead it relies on minting tokens that peg its value to the US Dollar (USD).

In order to meet its peg to the USD, users must purchase Terra’s main coin called LUNA. UST is minted by burning LUNA, and users can hold UST in a DeFi protocol called Anchor to earn yields on interest up to ~20% (has fallen to 18% as of writing). It is a high earning interest rate that attracted investors to flock to UST. This includes many crypto influencers who also urged their followers to put their UST on the Anchor protocol and earn money.

The second problem with this system, is the sustainability of the Anchor protocol in being able to pay users the interest on their deposited UST. It turns out there were liquidity problems that exposed the protocol before. It was back in May 2021, during the cryptocurrency market crash that UST fell to as low as $0.96. That means a deposit of $1,000 would go down to $960 (a loss of $40) not including any yield on interest. This happened once again in May 2022, and this time the price of UST has gone well below the May 2021 mark. As of posting the value of UST was $0.1101 (Coinmarketcap). If you had deposited $1,000, the value will go down to $110.10 or about 90% of your money’s value was lost.

In order to return the peg back to $1, UST needs to be burned to mint more LUNA. During the meltdown that was what happened, but it hyper-inflated the supply of LUNA in the open market pumping into the trillions. This led to a drastic fall in LUNA prices as a “bank run” started with users dumping their UST. The Luna Foundation Guard (LFG) then stepped in by selling reserves in Bitcoin (and other assets supposedly) to try to mitigate the free fall of UST. It just was not enough because more users were selling off their UST than holding. On the Anchor protocol, the UST locked value fell from $14 Billion to under $5 Billion (and still falling as of writing).

Investment and crypto analyst Lyn Alden was one of the experts who warned about Terra’s UST. In a report from Daily HODL:

“Unlike a crypto-collateralized stablecoin, there is no specific threshold where UST breaks. However, if LUNA gets small relative to UST, the probability of an algorithmic bank run increases… Many of them would liquidate their BTC for cash since their positioning at the time was meant to be a stablecoin.” 

The fall of UST did affect Bitcoin prices, as the LFG had to sell off its reserves in BTC. The worst case scenario seems to have played out because it dragged several assets to the downside (UST, LUNA, ANC and Bitcoin). The LFG reserves would not be enough to cover restoring the peg to USD unfortunately.

She also cites some worries about the Anchor protocol:

“Then there’s the unsustainable Anchor yield timebomb. The time bomb is not about how well-managed the yield decline will be. It’s about what happens to UST demand structurally, when the primary demand driver (artificially high Anchor yields) no longer exists.”

In other words, Anchor did not appear to have the money to cover the interest payments. The payments would be coming from money borrowed using the protocol. However, there were more lenders than borrowers, so there was no balance. The yields were so high it could not be sustainable to pay in the long run.

Another warning about Terra LUNA came from Kevin Zhou of Galois Capital. He was one of the critics to sound the alarm and warned the public. Zhou told Coindesk:

“Even if it happened in slow motion, even if it was something like a bank walk, it was more about this thing not being solvent.”

Solvency was indeed an issue. To quote Zhou, “mechanism was flawed, and it didn’t play out as expected.”

There is also a crypto YouTube channel Coinsider that reported about the risk with Terra LUNA and UST. You can check the video which was made back in March 18, 2022 prior to the meltdown. The analysis was spot on and very informative. It may have also helped some people make the right decision of not investing in LUNA/UST or using the Anchor protocol.

What happened to Terra was catastrophic, and probably the worst if not one of the worst collapses in crypto history. Many people have lost money in the Anchor protocol with their UST deposits, while holders of LUNA now have a worthless (under $1) coin that once was valued at over $100 per coin. Regulators are aware of this problem and they could now begin to apply regulations that require money earning protocols to register or comply with financial rules for consumer protection.

The lesson from all this is to be careful when depositing your money into a DeFi protocol. Anchor was not the first protocol to fail like this. Iron Finance had their own meltdown that should have been another warning sign about high interest protocols. It was even endorsed by public personalities, making it more attractive to users which makes it even more problematic. The problem exposed in these systems is that during extreme market volatility, the algorithmic stablecoins were not able to keep the peg to USD. There was nothing the protocol can do when you have a bank run.

Sometimes when it sounds too good to be true (e.g. high interest on deposits), it probably is. It can be risky when big money is involved. Research the project thoroughly and listen to both sides to get a better understanding of the risks involved, and not just the benefits.

Disclaimer: This is opinion and not financial advice. The information provided is for reference and educational purposes only. Always DYOR to verify information.

Cross-Chain Swaps Using The Symbiosis Protocol

One of the main problems in DeFi (Decentralized Finance) is the seamless swapping of tokens. If a user wants to exchange one token for another, they can only do so if the wallet or exchange supports it with a token pairing. The issue here is that not all tokens are swappable with each other. You will need to find a token pair first, to make an intermediate exchange before you can swap for the token you need.

This is because there are many types of blockchains used by tokens and they are not all compatible with each other. The most liquid tokens are the easiest to pair because they have the most liquidity. When you want to swap from a lesser known token for another token, if it does not have a supported pair to swap, you will need to swap it first with a more liquid token. 

Swapping tokens can be frustrating with so many processes involved
(Photo Credit:Andrea Piacquadio)

For example, let’s say you have a token called X and you want to swap it for Z. You realize that you cannot swap them directly with each other. Token Z does not have a pairing with X, so you will have to swap it with another token first. You then decide to swap with token Y, which is paired with both X and Z. You will need to exchange X for Y, and then you can swap Y for Z. That is the best way to convert tokens, but it can also be more time consuming and cost more in terms of transaction fees.

It would be so much easier if things can take place on the backend. If a user can just send their order to swap X for Z, without having to perform any other intermediate step, it would save time and money. It would also be more convenient when it comes to user experience.

Symbiosis provides a solution to swapping tokens across different blockchains. It is a liquidity protocol that integrates the features of a multi-chain AMM (Automated Market Maker) and DEX (Decentralized Exchange). It is like a decentralized version of a digital exchange (e.g. Binance, Coinbase) that functions as an AMM (e.g. Uniswap). 

The Symbiosis app user interface.

With Symbiosis, users can swap any token across different blockchains with no additional software required. This provides interoperability between token swaps. As an AMM, it automates the order book system for unlimited token pairs with the best exchange rates offered. As a DEX, swapping of tokens is direct without requiring a trusted third-party like a payment processor or intermediary. 

Swapping allows the exchange of one token for another.

The process of swapping tokens from Symbiosis is called a cross-chain swap. This allows tokens to be traded across dissimilar blockchains without requiring the authorization from another exchange to process the transaction. Think of it as an open system that facilitates the flow of transactions. The tokens can also be on blockchains that are either EVM (Ethereum Virtual Machine) or non-EVM compatible. In order to get the best prices for swaps, Symbiosis routes transactions to other AMM DEXes like Uniswap or PancakeSwap. This allows for better price discovery by exploring the best options. Users also don’t have to pay different gas fees across blockchains since the protocol abstracts it into a single transaction fee.

An important benefit of Symbiosis is that it also addresses some issues that can occur during swaps. These are slippage and impermanent loss. A slippage occurs when there is a divergence in the price of the token from the time it was ordered and the fulfillment of an order. This can lead to what is called an impermanent loss. If the price recovers, then the loss is only temporary. However, if the price of a token does not recover right away and it is used for another transaction the loss becomes permanent. To address this, Symbiosis uses liquidity pools that includes stablecoins to offset market volatility with little to no slippage.

Swaps are just one of the many features of Symbiosis, which users will find very useful. It provides a much simpler solution for moving liquidity across multiple chains without experiencing fragmentation due to the many interfaces and processes involved. Current systems make swapping more difficult to the average user. What Symbiosis offers is a one-stop-shop solution for swapping different types of cryptocurrencies with less difficulty.

Disclosure: This article was written for #SymbiosisDeFined. This is not in any way financial advice, but for educational purposes only. DYOR always to verify the information.

First Published At Publish0x (3/23/22)

Ethereum Reaches A New Milestone As It Prepares For ETH 2.0

There have been plenty of great developments in the Ethereum blockchain. This has been good for its native currency ETH (Ether) and has restored confidence in holders toward the end of the first quarter of 2022. This has led to a rally in ETH price to above the $3K level, starting in March 22. Some analysts take this as an ominous sign that ETH has turned bullish once again, but what is really the motivation behind it?

Toward the end of 2021, Ethereum developers released the Kintsugi Merge test network. This is a more realistic approach to testing how the Ethereum network will be like post-merge (i.e. when the Beacon Chain merges with the mainnet). This allows developers to test the features of the network in an environment that supports PoS (Proof-of-Stake). This is where smart contracts can be tested without any additional costs to developers.

Ethereum developers have also released the Kiln public test network in March of 2022. This is the final test network before the transition to PoS. This is where developers can test their applications and tools before deploying on the mainnet. Node operators and stakers can also test on Kiln, to evaluate the performance on a simulated blockchain.

Toward the end of March 2022, the number of ETH 2.0 validators has reached 300,000+ with over $28 Billion TVL (Total Value Locked). That is based on the valuation of ETH (~$2900-$3,000 circa March 1, 2022). The total amount of ETH locked (requires 32 per validator) has reached 9.6 Million ETH. At the price of ETH in March 28, 2022 at $3,300.62 (10:46 PM EST), the total value locked would be $31.6 Billion. The value of ETH increases with the market, and any surge also brings up the TVL for the validators.

Ethereum is receiving not just retail support, but institutional as well. Macro guru Raoul Pal has become more bullish on his outlook of Ethereum. He believes it is on track to outperform Bitcoin based on its performance. Pal is looking at long term metrics that show that the market Ethereum is capturing covers a much larger base than Bitcoin. This includes the derivatives and money markets, where billions of dollars are sitting. Should even a small percentage of the money flow into the DeFi space, where ETH is a major currency, it can create network effects that can further drive ETH value higher.

Other reports are coming that banks are positive on Ethereum. It seems banks like JP Morgan had at one time been very critical of cryptocurrency. The sentiment has changed, and they now invest in projects that involve cryptocurrency like Ethereum. Perhaps the recent developments in how Ethereum will become more energy efficient and how it is a platform that facilitates a decentralized financial system opens opportunity for capital investments.

The transition to a new consensus mechanism can greatly impact Ethereum network performance. A faster and more energy efficient system gives it a positive outlook compared to Bitcoin and other energy intensive cryptocurrency that use PoW (Proof-of-Work). The more important matter that investors are keeping an eye on is how the move to ETH 2.0 will improve the network’s overall performance. This attempts to solve the problems of scaling, which Ethereum competitors (e.g. Solana, Harmony, Avalanche) have already been addressing. A more stable network with the capability to process more transactions will be huge for Ethereum, and can establish it as a dominant platform for years to come.

Spider-Man NFTs … From AMC

AMC Entertainment, the company that operates the AMC Theaters chain, has entered the NFT (Non-Fungible Token) market. In a collaboration with Sony Pictures, they will be giving away 86,000 NFTs for the December 16 release of the movie “Spider-Man: No Way Home.” This giveaway is open to members of AMC Stubs Premiere, AMC Stubs A-List and AMC Investor Connect with advance purchase of tickets.

According to AMC CEO Adam Aron (via Twitter):

This idea came from YOU! Partnering with @SonyPictures for #AMCFirstEverNFT. More than 100 unique Spider-Man NFTs, given FREE to the first 86,000 online buyers of U.S. AMC December 16 tickets for Spider-Man No Way Home. Only for Stubs Premiere, A-List & Investor Connect members.” 

— Adam Aron (@CEOAdam) November 28, 2021

This is not the first time AMC has ventured into cryptocurrency. They are already accepting payments in cryptocurrency like Bitcoin (BTC) for movie tickets. NFTs are like the next step in their journey to the blockchain and metaverse. Spider-Man is a popular Marvel Comics superhero, so an NFT would be a valuable digital collectible. This has future value for trading in the NFT marketplace among collectors. The NFT will be minted on the WAX blockchain.

This is probably part of AMCs strategy to catch up to the trends among millennials and Gen Zers. Crypto is popular among the younger generation and this is a better way to promote your brand. AMC needs to rebound after the pandemic lockdowns, so this is also a way to entice moviegoers to return to theaters with some added benefits to go along with the soda and pop-corn.

The Ethereum Altair Upgrade – Merging PoS With The Beacon Chain

The Ethereum Altair upgrade was completed on October 28, 2021. This is part of the transition to ETH 2.0, as PoS (Proof-of-Stake) consensus mechanism merges with the Beacon Chain.

The upgrade implements the following:

  • light-client support to the core consensus.
  • Setup of beacon state incentive accounting.
  • Fixes validator incentives issue.
  • Penalties for offline or inactive validator nodes per EIP 2982.

Over 95% of the network participated at the time of the upgrade’s first epoch. This is the first upgrade to the Beacon Chain since going online in December 2020 and could also be the last before the merge with PoS on the Ethereum mainnet.

According to IntoTheBlock researcher Lucas Outumuro:

Through the Altair upgrade, Ethereum sets the base for this vision, enabling the upcoming merge of the proof-of-work chain and the Beacon Chain. Finally, these are expected to benefit Ether holders and stakers by making it deflationary while offering higher returns to validators.”

The recent London Hard Fork had introduced a base fee as part of EIP 1559 with a coin burning mechanism that adds a deflationary feature to Ethereum. During the first 48 hours of that upgrade, $30 million in ETH were burned from the network’s circulation. As of 10/30/21, 681,030 ETH have been burned that is valued at $3,013,073,269. This puts pressure on supply as it decreases and drives the price of ETH higher due to market demand.

With ETH 2.0 set for deployment in 2022, Altair is part of the preparation. Altair is a hard fork, which means that the 250,000+ validator nodes who didn’t upgrade are now considered offline. Their ETH will then slowly diminish at about 10% per year. This was included in Altair as a sort of way to push for moving towards the upgrade. This not only benefits the validators, but the network as a whole as it comes to an agreement to pave the way for Ethereum’s next phase.

VISA Gets Into NFT With CryptoPunks

VISA has announced the purchase of a CryptoPunk NFT (Non-Fungible Token) worth approximately $165,000 (~50 ETH this August 18, 2021). Perhaps the most unlikely thing you would expect VISA (the financial credit company) to invest in. VISA is apparently bullish on NFTs, or could this just be another signal to show they are “in the know” or “part of the gang”? CryptoPunk NFTs are original digital artwork made by Larva Labs. These are unique collectible characters that have verified ownership on the Ethereum blockchain. They are not physical objects at all, but purely digital. They look just like icons or emojis, not at all like the works of art you would see in a gallery.

This shows that VISA is getting in on the DeFi (Decentralized Finance) market with NFTs. According to their recent tweet:

“Over the last 60 years, Visa has built a collection of historic commerce artefacts—from early paper credit cards to the zip-zap machine. Today, as we enter a new era of NFT-commerce, Visa welcomes CryptoPunk #7610 to our collection”

NFTs like CryptoPunks, despite looking like mediocre art, hold plenty of value. A typical CryptoPunk can bid over $20,000 while the more in demand will bid in the millions of dollars. That shows that there is a big market for these collectibles and the buyers have plenty of money to spend. This is not your basic retail market where items cost a few dollars. This is a big money market, and it has attracted VISA’s attention.

What makes CryptoPunks desirable as a collectible is their uniqueness. A CryptoPunk character (i.e. Punks) is algorithmically generated by computer, not manually created by a human artist. There are also different types like Apes, Zombies and Aliens. Each CryptoPunk character has their own set of attributes and their metadata are recorded on the Ethereum blockchain. That also includes the proof of ownership to the holder of the NFT.

It seems like VISA will hold this NFT for the collection purposes. It will hold the CryptoPunk for historical records, perhaps to document a time when NFTs first emerged. This will surely be valuable in the future, whether NFT continue to become successful or not. Just owning a piece of history is valuable in itself, so VISA is going to look back on this as having a memento to that timeline. Overall the NFT market continues to grow. According to Forbes, the NFT market grew 1,785% In 2021. It is now the fastest growing sector in DeFi that is also gaining pop culture adoption and VISA is jumping on board.

Moving forward, it looks like VISA is also on the horizon ready to enter new partnerships and projects related to NFTs. As a payment processor, VISA can help bridge the traditional finance market with the DeFi space. That opens a world of opportunities for buyers, sellers and developers.

Tokenizing Stocks Is The Next Financial Instrument

Binance is offering a new financial instrument on its digital exchange. They are offering a way to purchase fractions of a company’s shares using a tokenized stock trading service. This will provide stock traded equities in financial markets for investors. Binance will begin with Tesla stock on their exchange. The instrument is called a Binance Stock Token, and this allows users to buy a stock or a fraction of a share and earn dividends as well. The prices will be settled in Binance’s BUSD stablecoin token.

For users who have no access to financial markets, they now have an opportunity to own as little as 1/4 of share in an equity like Tesla (TSLA). There is no more need to purchase several stocks when you can have just a fraction and earn from it. This gives exposure to the non-traditional crypto investors who don’t have to wait for other platforms to offer the service.

S = Shares of A Stock
p = Price of the Stock
b = BUSD

b = S(p)

The user will purchase the stock in BUSD prices (b).

Binance claims that they are not creating synthetic assets to offer as stock. They have an asset that is backed by a depository portfolio of underlying securities, which is also managed by a German investment firm. In order to follow compliance, the service is not available to all jurisdictions and only where the exchange is allowed to offer such a service. Those interested will definitely be required to submit a KYC/AML document for legal purposes.

Two things that I can expect to see:

  1. Increase in BUSD trading as a result of the tokens use for investing in stocks. BUSD prices will not surge because it is pegged 1:1 with the USD.
  2. Open up the stock market to first time investors who have never had exposure to equities. This allows users who were either not allowed to trade because of lack of funds or not have access to stock investments to get their chance.

It is interesting to note if other DeFi products will follow that can interact with the Tesla stock. Binance also has its native Binance Smart Chain(BSC) which uses smart contracts that can lock tokenized stocks in a different protocol and earn from it. Some DeFi protocols may even accept tokenized stocks as collateral, depending on how valuable it is in the market.

This can also further boost Tesla stock prices as it has seen a phenomenal surge. Binance can gain more investors while helping bring Tesla stocks higher. While the trends look good for Tesla, investment always involves risk so users must do their due diligence and research always before investing.

Disclaimer: This is not financial advice. The information provided is for educational and reference purpose only, not for making investments. Do your own research always.

VISA Forges New Connection Between Fiat And Cryptocurrency

Payments giant and credit card company VISA, have announced they are providing support for cryptocurrency payments using the USDC stablecoin starting with partner Crypto.com. USDC is an ERC-20 token that runs on top of the Ethereum blockchain network. This makes use of a stablecoin to settle payments using VISA payment products through their partners. At the moment VISA will pilot the payment system with Crypto.com, a cryptocurrency platform and digital exchange, with plans to offer the service to other partners. VISA is going to make using cryptocurrency much more available for payments. This legitimizes cryptocurrency payments for goods and services, since VISA is a financially regulated entity.

This is a bridge between traditional finance with emerging fintechs involved with cryptocurrency and digital assets. VISA had tried to bridge cryptocurrency payments before, but plans fell through. Perhaps VISA is now ready to provide the service with more knowledge and understanding of cryptocurrency. This allows VISA to better understand the new space fintechs are operating from, which involves innovative products that implement digital currency and blockchain technology. Perhaps it is a sign that changes are coming to traditional financial systems. VISA has been warming up to cryptocurrency and other digital currency (non-crypto) as evident from their more recent postings.

Before VISA, payments processors like PayPal and Square have provided support for cryptocurrency. PayPal has paved the way for users to buy cryptocurrency like Bitcoin through their app. Square allows their customers to buy, hold and sell cryptocurrency through their platform, including the Cash app. Prior to that, there were not many mainstream apps other than those provided by digital exchanges like Coinbase that allow their users to purchase cryptocurrency. VISA is different in that it is providing a way for customers to make payments with the cryptocurrency they hold. This is a layer that has been missing and it could accelerate utility of cryptocurrency as a payment method. Using the blockchain may also provide faster settlements compared to the current system, but scaling remains to be seen on blockchain networks like that of Ethereum.

While the purpose of cryptocurrency is for open direct payments system (Peer to Peer), VISA is not exactly that type of platform. It still operates under the traditional financial system, which is highly centralized and permissioned. That means VISA is not exactly an open network, it requires a membership for its customers. That is why the product they offer is more of a bridge between the traditional fiat system and cryptocurrency. The decentralized aspect of a transaction still falls under the blockchain layer, but through a VISA payment gateway. In the case of USDC, the payment is from a user’s digital wallet on the Ethereum blockchain or even a custodial wallet that supports USDC. What VISA provides is a way to make that payment possible to retailers who will accept the transaction. VISA has so many partners in the retail space that they work with, this opens opportunities for cryptocurrency companies like Crypto.com to have access to more traditional financial markets.

VISA could also open another bridge, this time to the DeFI space of the blockchain. Most platforms in DeFi run over the Ethereum network, but other platforms like Binance, Polkadot and Cardano offer their own ecosystems that provide DeFi apps. If there is integration to support VISA, that can bring more users to the DeFi space who are using VISA credit cards or payment applications supported by the VISA network. At the moment, VISA and other credit card companies do allow customers to purchase cryptocurrency from digital exchanges. Opening up to support decentralized exchanges in the DeFi space are more challenging due to regulatory compliance. If this can be resolved, it opens up the space to allow interoperability of dissimilar payment networks to become possible.

This is overall good for the Ethereum network. VISA will not only need to have USDC, but also Ethereum’s native token ETH (ether). In order to process transactions using USDC, small denominations of ETH are used to pay for costs called “gas” which are part of the transaction fees paid to the network. This is for processing transactions that have to be verified and secured on the blockchain. It may also be likely that it will be VISA’s partners who hold the USDC and ETH, while VISA just helps bridge the retail merchants with the cryptocurrency payment as the settlement layer. The main issue with Ethereum has been scaling, but the development community is fast tracking efforts to scale the network.

With VISA’s announcement, other payment companies like Mastercard and American Express should take notice. This introduces a business model that brings cryptocurrency native platforms with the traditional retail space. The predominant form of payment in the VISA network is by credit and debit card. By integrating a cryptocurrency method into the network, it opens up new channels for making payments. The choice of using a stablecoin also makes plenty of sense given that cryptocurrency is very volatile. This changes the narrative that cryptocurrency is trying to replace traditional finance. Before that can happen, it must have greater utility. Perhaps VISA can help bring it to more mainstream adoption, to the point where we can buy toilet paper with cryptocurrency.

(Image Credit: Photo by Tom Fisk)

Live Peer – Moving Production Workflows To The Blockchain-based Cloud

When it comes to transcoding video or audio, it was normally done through equipment in an office environment utilizing expensive hardware for commercial quality production. You need to have your own equipment besides the computer in order to transcode. The complexities of the process have been simplified in the age of cloud computing. There are providers who offer transcoding as a service on their platform over the cloud. While this provides convenience to editors and producers, it comes at a cost. Another issue is that if the provider’s service is down, the transcoding service will not be available. Users would surely want reliability and quality for the service they are paying for.

LivePeer is a project that builds on the cloud provisioning service for transcoding, but is also blockchain-based. It provides a decentralized network of nodes that provide their GPU to help transcode data on the network. Decentralization aims to guarantee up time. A user who needs to transcode can then send the job to the Livepeer network and pay the fees in Livepeer’s own ERC-20 token called LPT. The LPT token is also the reward given to “video miners” who help transcode and secure the network.

The LPT Token is:

  • ERC-20 token built on the Ethereum blockchain
  • Originally distributed via a “Merkle Mine”, an algorithm for decentralized distribution of token during the genesis state
  • Inflationary according to algorithmically programmed issuance over time

LPT is available from digital exchanges, including DEXes like Uniswap. Token holders have the following capabilities when using LPT:

  • Earn the right to perform or delegate work on the Livepeer network and vote on protocol proposals
  • Routes work through the network in proportion to the amount of staked and delegated token, serving as a coordination mechanism
  • Secures the network against a number of attacks via slashing that occurs due to protocol violation

Why transcode over the cloud?

When streaming video online, as is with OTT, various formats need conversion. The original format is the highest quality, often uncompressed and very large when it comes to file size. That is a problem when delivering the content to viewers. The format needs to be changed or transcoded to a smaller sized format that preserves most of the quality of the original. The formats can be made available in different quality and bit rates, depending on the service level. Since it can also be adaptive, the bit rate (adaptive bit rate) can change depending on the Internet connection of a viewer. The cloud can streamline the process efficiently, allowing producers and content creators full transcoding service.

Why use a blockchain?

It has nothing to do with speed. It is more about setting up a system that makes use of a decentralized network that is market driven and incentive based. There are users who want to transcode video/audio so there will be providers willing to transcode for a fee. The LPT token is used to pay for transactions and the records (not the content of the transcoding) are stored on the blockchain as verification of the process. This proves that a transcoding was performed to assure service fulfillment to a customer. The network will make sure that there is more than 1 transcoding service available. The blockchain is there to record the transaction and act as platform to enable trust between two parties that do not need to know each other.

For example you do not need to personally know who is transcoding your video. How can you trust them? That is where the blockchain comes in. It makes sure that the service fulfills its duty to process your job request. Conditions written in smart contract can make sure that the job is fulfilled or else there will be no payment made to the provider (i.e. Livepeer). The blockchain also prevents any form of cheating, so that once content has been transcoded, the system prevents a user from trying to get their payment back or canceling the payment. Once completed, a transaction is final when both parties are satisfied.

Synopsis

How Livepeer will change the broadcasting and production world is through a decentralized architecture that uses a blockchain. As streaming OTT content continue to gain a larger market, the demand will be there for transcoding service over the cloud. Average Internet speeds are also increasing, and with the implementation of high bandwidth networks like 5G and Gigabit Internet, more demand for high quality streaming will be there. This will push the demand for transcoding services as well, and there are many players available, but if they are too centralized they may not be able to provide guaranteed up time.

Users who need to stream video, online gaming, coding, entertainment, education content and other types of content can use Livepeer applications. Broadcasters can also use Livepeer to decrease infrastructure costs when it comes to delivering content. The use of a token to provide service records it on a blockchain. It makes it secure, protecting the transaction’s integrity. This allows users to know that they are using a safe and reliable network when it comes to transcoding requirements.