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What follows is a whirlwind tour through some more crypto projects. As with the previous chapter, I have included them because they are interesting, not because they are likely to be profitable. As with the preceding chapter, I will add more projects in the book’s next edition.
Privacy should be a human right, not something that is considered suspicious. Unfortunately, as we have seen, most cryptocurrencies are not private. In this section, we will look at some projects which aim to change the balance and give users the privacy they deserve.
Monero started as a project called bytecoin in 2014. While the founder is known, the developers are a mixed decentralized bunch of known and anonymous individuals. This gives Monero a similar level of decentralization, albeit without the same mining power as bitcoin. Monero’s token is XMR.
CryptoNote is the open-source software that Monero uses to implement private transactions. Monero has constantly been evolving, getting more secure. The complex cryptography systems underpinning Monero’s privacy will not be explained here because I am not qualified to do so. So instead, what follows is a simplified overview.
Monero uses proof of work mining that anyone can participate in with a regular PC. The way most pools work on Monero is that you would need to be very determined and probably unprofitable or have multiple PCs to participate realistically. Still, the point is that it is way easier to get involved compared to Bitcoin mining. Governments don’t like Monero because it works, so I do like Monero.
The FBI has offered a bounty to anyone who can hack it. This annoys me a little. After all, if I offered a reward to anyone who can hack the FBI, I would probably get a knock on the door, or the door knocked down completely. Furthermore, most exchanges don’t list XMR, but a few less-regulated exchanges do.
Monero uses a cryptographic technology called Ring signatures, which generates a new public-private key pair for every transaction while inserting fake transactions signed by decoy signatures to hide human transactions. As a result, all the transactions can be seen, but nobody knows who sent or received them, which public keys are connected, and, therefore, how much XMR anyone holds.
Monero coins are entirely fungible. I.e., they cannot be distinguished from each other. If you committed a crime and were rewarded in bitcoin, the UTXOs would forever hold the history of their origins. This is different from Monero, which in some ways makes it more private than cash which has the potential to keep forensic traces. Of course, Monero isn’t as accepted as cash, but you can buy a surprising amount with it. There is a list of where you can purchase and use Monero here: https://www.getmonero.org/community/merchants/
Monero is the original privacy coin still with a significant following today, but another reasonably early and arguably more advanced yet less fundamentally private is Zcash. Zcash, with ticker ZEC, has a multi-institutional setup where two organizations, The Electric Coin Company, and The Zcash Foundation, collaborate to develop and maintain the project with a decentralized development team. However, decentralized miners of the coin control the project’s governance. Zcash was started as a bitcoin fork in 2016 but has been highly modified and evolved on an ongoing basis ever since.
Zcash privacy is optional; users can choose whether to send a regular or shielded transaction. Zcash uses SNARKS just like the ZK rollup technologies used by some Ethereum scaling solutions when the user selects a shielded transaction. Transparent or T transactions work nearly identically to Bitcoin. Secret or Z transactions use zero-knowledge cryptography to verify that the user knows the required private key without revealing even the public key.
The idea of optional privacy is interesting because it allows users to demonstrate being transparent and auditable. This might encourage Zcash adoption, even from institutions. Unfortunately, Zcash is also subject to delisting from many exchanges, but at the time of writing, Zcash can be found on Binance and Kucoin.
Secret network and its SCRT token are perhaps surprisingly not for sending private peer-to-peer transactions. Instead, the Secret network is part of the Cosmos ecosystem and is built with the Cosmos SDK. So what’s so secret? Secret Network uses what is known as a trusted execution environment or TEE to run secret smart contracts. All the use cases of this are still unexplored. Still, examples are private token swaps, private NFTs with anonymous galleries, secret project governance, and voting. In addition, you can mint secret tokens that can be traded privately from peer to peer.
Even a validator who executes the smart contract code won’t know what is being executed. Remember, we discussed MEV and potential adverse effects like higher prices when swapping tokens. However, Secret Network’s TEE smart contracts negate this. This is achieved using a modified version of the Cosmos smart contract environment CosmWasm.
The gas token is SCRT; as alluded to earlier, it is not a privacy token. All its peer-to-peer transactions can be seen on the blockchain. However, you can bridge Ethereum, Bitcoin, and Monero to the Secret network and transact with them privately. Be sure to read about the risks of bridges before doing this.
While it is true that Secret network has illegal use cases and will likely get significant regulatory scrutiny, there are already many legitimate projects building on Secret network that aims to secure medical data, confidential real-world documents, cloud storage, and control access to it and anyway, most illicit transactions happen in cash. You can see what is built on the Secret network here: https://scrt.network/ecosystem/dapps.
As an aside, Litecoin’s Mimmblewimmble privacy upgrade added optional privacy for Litecoin transactions, but Zcash, Monero, and Secret network are the real deal.
Litecoin, launched in October 2011, has branded itself as the silver to Bitcoin’s gold. It is designed to be a lightweight version of Bitcoin. There is a maximum supply of 84 million Litecoin, which is four times that of Bitcoin’s 21 million, and Litecoin has a 2.5-minute block time and 4MB blocks. In addition, Litecoin can handle 56 transactions per second compared to Bitcoin’s 5 to 6.
Litecoin was also designed to be even more decentralized than Bitcoin. It secures the network using a proof-of-work algorithm called Scrypt, which differs from Bitcoin. Scrypt intended to achieve Litecoin’s superior decentralization by restricting mining to regular PCs, meaning regular users could join mining and create millions of individual miners worldwide. However, this extra decentralization didn’t happen, as ASICs were developed for Litecoin.
Litecoin mining also features a halving in mining rewards every four years, so inflation is controlled like in Bitcoin. So, is Litecoin better than Bitcoin, then? Not really, just different. Even its founder, Charlie Lee, advised people to invest in Bitcoin as a store of value and Litecoin for regular payments.
Fun fact. The meme coin crypto, Dogecoin, often promoted by Tesla and SpaceX billionaire, Elon Musk, is merge-mined with Litecoin. This means that by default, most Litecoin miners also mine Dogecoin. Dogecoin’s existence depends upon Litecoin.
Charlie Lee, a former Google and Coinbase developer, was motivated to create Litecoin when the US government shut down online gambling websites of which Charlie was a fan. Charlie wanted a way to separate money from government control. He saw Bitcoin as a value store rather than an efficient means of regular payment.
Charlie is a controversial figure, one of many in the crypto world, because he sold most of his own Litecoin holdings when the price was high, and this was viewed as abandoning the project. He did, however, continue to lead Litecoin’s development.
Like Bitcoin, the code for Litecoin is open source, and anyone can read it and suggest modifications. If a change gets the support of more than half the miners, it is then implemented. Over the years, several improvements were made to Litecoin, like SegWit for increased block size in 2017, Lightning network compatibility in 2017, and Mimblewimmble in 2022 for enhanced privacy. However, when Litecoin added Mimblewimmble privacy features, it drew negative attention from government regulators worldwide and was banned on some exchanges.
If SegWit and Lighting sound familiar, that is because they are the same upgrades given to Bitcoin that we discussed in Chapter 5. Litecoin upgraded in both instances before Bitcoin. Litecoin is often seen as a testbed for Bitcoin.
You can find out more about Litecoin at https://litecoin.org/. You can play a simple but compelling video game using Litecoin here: https://www.litebringer.com/ or earn free Dogecoin on your Android by playing the classic Pong game here: https://play.google.com/store/apps/details?id=com.mansoon.tiltgate&hl=en_GB&gl=US.
You might wonder how the smart contract “knows” the prices of tokens, what day it is, or how a smart contract can generate a verifiably random number. The answer to these problems is oracles. Oracles can be designed to share real-world data with smart contracts operating on the blockchain. Anything from sports data for betting, weather data for forecasting or insurance, shipping or flight data for stock control, transport management or travel apps, and citizen data for government control. I could go on with more examples, but how does it work?
Oracles are computer network data providers with feeds to real-world data motivated to provide verifiably accurate data with financial incentives and penalties. The biggest and most well-known oracle network is Chainlink.
Chainlink runs a network of decentralized PoS nodes. Stakers to the nodes make money in the LINK token for providing accurate data to Chainlink smart contracts that other smart contracts can access by paying in the LINK token.
Chainlink has the task of interacting with real-world data. It does this by interfacing with the feeds of real-world data providers. For example, a stock exchange will have an Application Programmers Interface or API which feeds stock price data to interested parties. Shopping sites like Amazon have APIs, Crypto exchanges all have APIs, and Google and others run sports results APIs. Sometimes custom, industry-specific APIs can be used/developed for special cases. There are thousands, if not more APIs that supply real-world data. For example, you have probably seen apps that show all the ships, all the planes in the world, or traffic congestion and speed camera location.
Connecting to an API is relatively easy, even for a mediocre programmer. What makes Chainlink special is how it verifies data from multiple sources, aggregates it often to find an average, rewards and punishes the decentralized nodes for keeping the feeds truthful, and then supplies all the results to smart contracts across multiple blockchains. Furthermore, once the data is in the smart contracts, other smart contracts can use it for a fee paid in LINK within their dApps.
Stablecoins are cryptocurrencies designed to maintain a stable value relative to a specific asset, such as the US dollar, gold, or a basket of currencies. They are often pegged 1:1 to the underlying asset, meaning each stablecoin represents ownership of the underlying asset. The goal is to reduce the price volatility commonly associated with cryptocurrencies, making them more useful for transactions and as a store of value. There are a few general types of stablecoin.
- Fully collateralized: backed by an equivalent value of the underlying asset, held in reserve.
- Partially collateralized: backed by a value of the underlying asset lower than the issued stablecoins, with the rest backed by other assets or algorithms to maintain stability.
- Algorithmic: not backed by any specific underlying asset but instead use algorithms to control the supply of the stablecoin and maintain its value relative to a specific asset or basket of assets.
Fully collateralized stablecoins include Tether (USDT): pegged to the US dollar, and PAX Gold (PAXG): pegged to gold.
Partially collateralized stablecoins include MakerDAO (DAI): backed by Ethereum as collateral, and Compound (cUSD): backed by a combination of Ethereum and other assets.
Algorithmic stablecoins include Terra Lunas UST: which used an algorithm linked to the LUNA coin on the Terra blockchain. I say used to because it spectacularly lost its peg and went to zero in 2022. Ampleforth (AMPL) is another algorithmic stable coin that adjusts its supply based on market demand to maintain its relative value.
Other stablecoins have lost their peg in the past, meaning their value deviated from the asset they were pegged to. This can occur due to various factors, such as changes in market demand, mismanagement of reserves, or technical issues.
Stablecoins are less volatile than other cryptos but are not “safe.” Centralized, fully collateralized stablecoins also have risks like censorship where your USDC can be confiscated because a centralized entity, in this case, Circle, controls the smart contracts, issuance, and the process to swap back to dollars.
Some more crypto projects
As well as DeFi, which will be covered in great detail, crypto projects are innovating in video streaming, games, metaverse, music, insurance, artificial intelligence, and more. Here are some examples:
The Theta blockchain is a decentralized platform for video delivery that uses blockchain and peer-to-peer (P2P) network technology to provide a decentralized alternative to traditional video streaming.
The Theta network allows users to share their unused bandwidth and resources to help encode and deliver video content. As a result, the Theta network provides a more decentralized video delivery solution than traditional centralized servers. It also allows users to earn THETA or TFUEL tokens as rewards for contributing their resources to the network.
The Theta network is designed to be highly scalable, secure, and decentralized, and it aims to provide a more efficient, accessible, and equitable video delivery infrastructure for the future. You can find out more about Theta here: https://www.thetatoken.org/.
GALA is the native cryptocurrency of the Gala Games network, a decentralized gaming platform. The GALA token is used to pay for transactions and access to games and dApps on the network, and it can also be used for in-game purchases and rewards. In addition, gala node operators can participate in governance and decision-making for the Gala network through its decentralized autonomous organization (DAO) model.
The Gala Games network aims to bring together gamers, developers, and the wider blockchain community to create a new, decentralized gaming ecosystem that puts players in control of their data and assets. In addition, Gala has recently branched out into decentralized music and movies. This will revolutionize everything – or be the biggest almighty flop since ET, the video game. You can find out more about Gala Games here: https://games.gala.com/. Also, you can find out about their decentralized music network here: https://music.gala.com/. Be warned; while the Gala projects are very exciting the team has been caught lying to investors about the terms of various investments. Do your own research!
The metaverse: Decentraland, Sandbox, and APE
The metaverse is a term used to describe a virtual world or a collective space created by the convergence of virtual reality, augmented reality, and social networks – not necessarily connected to crypto and blockchains. The metaverse concept is a virtual world where users can interact with each other and participate in gaming, social interaction, commerce, and more.
Cryptocurrency and blockchain technology can enhance the metaverse by enabling secure decentralized transactions and asset ownership. In addition, cryptocurrency can be used as a medium of exchange within the metaverse, allowing users to buy, sell, and trade virtual assets, land, goods, and services.
In addition, blockchain technology provides a secure and transparent ledger for recording ownership and transactions of virtual assets, making it possible for virtual assets to have real-world value and be traded on decentralized exchanges. This creates a new economy within the metaverse that operates independently of traditional financial systems.
The metaverse can potentially be a highly decentralized and equitable virtual world where users have complete control over their data and assets. As a result, it is expected to impact the future of the internet and online gaming significantly.
Examples of projects building a metaverse are Decentraland and the MANA token, the APE ecosystem called Otherside, the Minecraft-like Sandbox world with the SAND token, and many more.
Find out about these projects here:
- Decentraland: https://decentraland.org/.
- The Otherside: https://otherside.xyz/.
- The Sandbox: https://www.sandbox.game/en/.
Let’s look at another music project.
Audius is a decentralized music streaming platform that aims to provide a more equitable and accessible music streaming experience for artists and listeners by cutting out intermediaries like record labels and centralized streaming platforms.
On Audius, artists have complete control over their music and can upload and distribute their work directly to listeners. In addition, listeners can access a wide range of music from independent artists and stream their favorite tracks, all while supporting the artists.
Audius uses blockchain technology and cryptocurrency to create a decentralized and transparent royalty system. When a listener streams a song on Audius, the artist receives a portion of the revenue through the AUDIO token, ensuring that artists are fairly compensated for their work.
In addition to its decentralized nature, Audius provides additional features for artists and listeners, such as creating and joining communities, social networking, and fan engagement tools. You can find out about Audius here: https://audius.co/.
The Graph is a decentralized indexing and query protocol for data on multiple blockchains. It is designed to help developers create and run dApps, making accessing and utilizing the data stored on a blockchain easier.
The Graph achieves this by indexing data and making it searchable. This eliminates the need for developers to search through entire networks manually and allows them to retrieve the specific data they need more efficiently.
The Graph network is run by a decentralized network of node operators incentivized to participate through a token-based rewards system. This creates a more secure, scalable, and decentralized solution for data indexing and query than traditional centralized servers.
You are probably starting to think that there is nothing that can’t be leveraged with crypto blockchain and smart contracts. That’s what is so exciting; everything is open to change! I have barely scratched the surface in this short chapter. So let’s keep going and discuss ways to manage and secure all these tokens.
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