#53 The Infrastructure Conundrum
Infrastructure is trendy again. Devs and investors have set their eyes on the different solutions: L1s, L2s, appchains, modular chains.. Although nobody seems to know what vision will prevail.
Infrastructure is trendy again. Crypto's attention traditionally swings from the apps that provide decentralized services (Uniswap, Maker, Opensea, etc.) to the rails those apps need to operate. These days eyes are on the rails.
The design of the infrastructure layer for blockchain technology is still undefined. The challenge of scalability is big and unsolved, and many competing visions of the future exist. The following is a walk through four of these possible visions. These are not cleanly different boxes. The whole infrastructure ecosystem is a map of gray areas, making predicting new trends virtually impossible.
There's the competition between Layer 1s. In this category, Ethereum is about to reach the Shanghai milestone that will close the circle of staking. At the same time, surprisingly, Bitcoin has gained momentum after the Ordinals revolution has awakened the community (even hinting at a possible DeFi layer). L2s are also hot, with Arbitrum and Optimism leading the momentum with massive moves (like Arbitrum flipping Ethereum in daily transactions or Optimism befriending Coinbase).
But so are appchains: the vision led by Cosmos of an app-first, infrastructure-second approach. Appchains are blockchains designed to fit one single use case.
Then there's another narrative. Modular blockchains offer a broader perspective of the rollup-centric model: the main tasks performed by a blockchain (Consensus, Data availability, Execution, and Settlement) can be broken up and delivered by interoperable solutions. So, for example, L2s have externalized Execution blockchains, but all four tasks can become their independent solution.
It's impossible to predict which infrastructure vision will ultimately win out. The crypto space is too intertwined, and technical advances in one area can majorly impact another.
We wrote a meatier description for our Medium. Check it out here.
We asked Dall-E to paint the most complex highway interchange for this week’s INTERPOLATION of Carbono Insights. Remember, you can follow our step-by-step tutorial on purchasing your first NFT if you want a friendly onboarding experience to crypto.
In today’s issue of Carbono Insights:
The victims of the oldest hack in crypto are starting to see their reparations come
Did you know you can go on-chain whale watching?
A little less tech and finance, a little more people
Uniswap wants to launch an IOS app, but Apple doesn’t.
Check out Botto’s financials with our Dune Dashboard.
⬡ Six Angles
We select six topics to illustrate the different angles from which we can approach crypto. We could choose dozens, but six is the atomic number of carbon… and otherwise, we’d be writing for ages.
1. Banking | Crypto’s BFF bank is agonizing
A combination of crypto-native sins and regulatory pressure might kill Silvergate, crypto’s BFF bank.
Silvergate was the capital on/off-ramp for most first-tier crypto projects. Unfortunately, the admission last Wednesday that they would be unable to deliver its annual report on time to the SEC, citing regulatory and financial uncertainty, seems to be the last-but-one nail in the coffin (the last one will be if/when they announce full insolvency).
Silvergate took a hit with the FTX/Alameda fall. Besides the financial damage, the collapse severely harmed its reputation. Silvergate was accused of being an accomplice in the commingling of funds between the two entities (how did they miss the mess?). Some weeks later, they suffered a massive bank run of over $8B. These days, amid insolvency concerns, some of its major customers are fleeing: first, it was Ledger X, then Coinbase, Paxos, and Crypto.com.
Some services are going to the other leading crypto-friendly bank, Signature. But Signature has recently been subject to pressure from regulators and has announced that they were not interested in an oversized exposure to crypto.
After gracefully surviving a succession of not-so-good macro news, the fear of Operation Choke Point finally scared crypto.
2. Hacks | Mt. Gox victims will start to see repayments
The Mt. Gox story is about to take another step towards closure, with the first repayments happening in March.
Mt. Gox was the first major bitcoin exchange and one of the most prominent cases of crypto hacking history, an honor that it shares with Ethereum’s “The DAO.” In 2014, Mt.Gox halted withdrawals.
The company said it had lost almost 750,000 of its customers' bitcoins and around 100,000 of its own bitcoins, totaling around 7% of all bitcoins, and worth around $473 million near the time of the filing (Wikipedia)
Today, those 750,000 BTC would be worth +$16B.
The hack victims will soon start receiving payments. Many of them probably never expected to see a penny back, so I’m guessing this feels like finding a banknote in last winter’s coat if that banknote was worth millions.
3. On-chain metrics | Whale watching
Things that feel illegal but are fair game? Sneaking a peek into the wallets of big names in crypto to see how they invest and spend their crypto.
This thread is a friendly reminder that, for better or worse, everything in crypto can be made public (and can be held against you). Crypto is still deciding whether this is a feature or a bug. It’s probably neither, and it stands somewhere in the gray area in the middle.
Crypto’s radical transparency certainly threatens privacy and can hamper business. But it is also the reason why we can safely say that crypto is in many ways safer and fairer than TradFi (even though regulators aren’t listening)
4. UX | Crypto is about people.
It’s always interesting to read what Vitalik writes, but it’s not always easy. He’s a luminary in the technical field whose blog post musings become the intellectual base layer on which the rest build. For example, Hayden Adams created Uniswap after reading a blog post by Vitalik about AMMs. If you’re into DAOs, you’re probably aware that “Centralization is convex, decentralization is concave,”; and zk-rollup developers reportedly use his 4 type classification of zero-knowledge rollups to illustrate their progress.
He recently delivered a serving of commons sense, with a recollection of anecdotes where his experience of crypto was faulty. Failed transactions, wallet malfunctions, inconsistencies, and incompatibilities…
We’re all generally too immersed in the technical and financial fine print and forget that this is for and about people.
5. Mobile | They won’t let us have nice things
The team at Uniswap Labs has created a self-custodial wallet to send and swap tokens, check your NFTs, or browse Web 3. But they haven’t been able to launch it properly because Apple.
Uniswap wallet will be available only to the first 10,000 users and on TestFlight, Apple’s environment for apps in beta.
We all probably know why Apple won’t greenlight the app. They’re not fond of enabling services that can’t incorporate Apple’s 30% cut of in-app transactions.
6. Analytics | Botto’s Dune Dashboard
Dune Analytics is an Ethereum-based analytics platform that makes on-chain data available and consumable. Any user can create and share dashboards based on on-chain metrics to communicate the insides of a project. So we decided Botto deserved one to show the world how this is a project with a real distributed economic model. Botto shows what crypto is excellent for.
Botto’s art engine generates art autonomously. AI doesn’t have a purpose, a creative vision, or a business perspective, so it needs humans to complete it. Crypto provides tools to gather people around a common purpose and incentivize them to contribute through free-flowing tokens and governance mechanisms.
Our Dune Dashboard illustrates Botto’s economic incentives: how it generates revenue and distributes it to the community in exchange for their contribution to the curation of art and training of the AI.
In this article, we explained what the process of building a dashboard is like and what were the main learnings we extracted.