Thoughts, stories and ideas.

How many developers work on crypto?

How many developers work on crypto?

Developer count is a very relevant metric when evaluating the health of the crypto ecosystem. While the general discourse will revolve around pricing, especially Bitcoin’s, there are many indicators of the temperature of the cryptographic industry, and the pace at which it attracts top-notch talent is one of them.

Crypto research firm Electric Capital recently published a report that extrapolates headcount and activity based on the analysis of open-source code commits.

Some top conclusions were:

  • 18,000+ monthly active developers commit code in open source crypto and Web3 projects
  • 34,000+ new developers committed code in 2021 — the highest in history
  • 4,000+ monthly active open-source developers work on Ethereum, 680+ open-source developers work on Bitcoin
  • 20%+ of new Web3 developers join the Ethereum ecosystem
  • 65% of active developers in Web3 joined in 2021; 45% of full-time developers in Web3 joined in 2021
700 new developers join Ethereum monthly

Politics | Which side does crypto lean towards?

For most of its life, the ecosystem has been either too small or too confusing for a single political ideology to get a hold of it. There are some libertarian and anarchist traces in its past. But in the current times, the estimated 300 million people holding crypto worldwide only have that in common: they hold crypto.

Things might change, though. The political weaponization of crypto is a likely side effect of regulation. Once politicians of one side start holding a strong opinion about the industry, the opposing party will take the opposite stance.

Crypto does not fit well in any box, and that’s probably our best vaccine. It’s just too complex for the accustomed shallow, binary political speech. Here’s a list of the main issues that could make it to the political debate. There’s ammo for both sides and in a very confusing mixture.

  • The debate between investor protection VS freedom and individual responsibility.
  • The challenge crypto poses to big corporations, like big tech and big banks.
  • Environmental protection through the energy consumption concerns.
  • Taxation and general government intervention.
  • Nationalism: is our country going to lead or lag? Or worse: will the bad guys beat us?
  • Business and entrepreneurship promotion, high-quality job creation.
  • Fairer economies and generalized access to financial services

ETH2 & the application-infrastructure cycle

ETH2 & the application-infrastructure cycle

There’s this TV series called Snowpiercer, based on a movie with the same name, which is itself based on a French comic book from the 80s: one of those post-apocalyptic stories where the Earth is engulfed in a neverending winter. The only survivors are those on board the Snowpiercer, a 1,001 cars long train that circles the planet constantly, waiting for better weather. The train serves as a metaphor for humanity: the humans that inhabit it are divided into first, second, and third class, their values, beliefs, and struggles, portraying a miniature version of a world divided into castes. The drama unfolds in a straight line.

In the series, the people who govern the train are the engineers: they are the ones who can operate the locomotive, they fix what’s wrong, and they’re the ones the passengers look to when there’s trouble. I don’t know about the novel or the movie: the series was a simple, crude metaphor, but the engineer thing stuck. Because for the last 30 years, engineers are indeed in control.

FAANG -the acronym that represents Facebook, Amazon, Apple, Netflix, and Google- and whatever the equivalent Asian acronym is, has done more to shape the world how we see it today than most governments. These corporations have designed the way we work, socialize, or inform ourselves, and their most important resource is engineers.

If anything, crypto is even more like this than its Web 1 and 2 predecessors. That is why one of the most important developments of 2022 looks like this.

This is the Ethereum roadmap. A chronological (left to right) representation of the technical progress in store. Ethereum is the second most important project of the cryptographic ecosystem, after Bitcoin. But as this roadmap unfolds, it will become more and more apparent that we are talking about two very different technologies.

Bitcoin excels as a store of value. Ethereum strives to become a global, decentralized computing system. The infrastructure layer for the development of decentralized applications. This is easier to understand when you portray its opposite. When you shop online with PayPal, you are using a centralized application (PayPal) running on a centralized infrastructure (Google Cloud). When you get a loan from Uniswap, you are using a decentralized app built on a decentralized network.

Decentralization matters.

  • Decentralization avoids single points of failure. This avoids technical trouble (no center, no downtime) and manipulation (remember PayPal cutting off Wikileaks for political pressure).
  • Centralized organizations tend to be extractive, while decentralized organizations, by design, distribute benefits. Like when Facebook, now Meta, built an empire with the collaboration of thousands of developers creating an ecosystem or interconnections and millions of users providing the actual content and interactions without having any say in anything whatsoever.

So far, the main applications built over Ethereum have been financial. It’s in crypto’s DNA. But 2021 was the year of NFTs. And other less financial use cases, like DAOs, are starting to poke their heads out. And the success of these applications has come at a price: transaction fees skyrocketed. With such transaction costs, Ethereum`’s dream of being the base layer for a future financial ecosystem seems unattainable.

We seem to be in the middle of the apps-infrastructure cycle—the tennis match between innovative use cases and the conditions that allow them to happen.

Planes (the app) were invented before there were airports (the infrastructure). You don’t need airports to have planes. But to have the broad consumer adoption of planes, you do need airports, so the breakout app that is an airplane came first in 1903, and inspired a phase where people built airlines in 1919, airports in 1928 and air traffic control in 1930 only after there were planes. The Myth of The Infrastructure Phase

Applications have clogged Ethereum. And this is how Ethereum plans to unclog itself.

  • The Merge changes the consensus mechanism from Proof of Work to Proof of Stake, reducing energy consumption.
  • The Purge adds scalability through rollup sharding. As a result, transactions get cheaper, but they inherit the L1’s security.
  • The Verge. It simplifies validation and facilitates becoming a node, which helps security improve as scalability does.
  • The Purge. Eliminates blockchain deadweight.
  • The Splurge. It is a scrap bucket of innovations, but they needed a miscellaneous chapter that rhymed with the rest.

This year we will be witnessing a new step in the infrastructure stairway -an event that is likely to kick off an avalanche of innovation. We know some of it already: DeFi, NFTs, DAOs, etc. Only bigger and faster. Other applications are yet to be imagined. Crypto works. It’s now time to make it work for everybody.

Decentralization wars

Decentralization wars

Last week’s crypto-Twitter felt a little bit like wlaking through Tokio in a Godzilla movie. We are all used to our share of screen conflict, but this time it was starred by some of the biggest names in the space.

Jack Dorsey, Elon Musk, Balaji Srinivasan, Chris Dixon, Marc Andreessen, Erik Voorhees, Tyler Winklevoss jumped into it. We could even include Cardi B as part of the brawl because a brief exchange between her and Jack preceded the start of the fight. Coincidence?

Drama aside, the discussion revolves around the most relevant concept in crypto: decentralization. So let's break things down a little bit and use this anecdote as a gateway into this crucial principle.

The rant

It all started when Jack Dorsey criticized the direction Web 3 is taking. According to Dorsey, the whole concept of Web 3 is a gimmick to fool people into believing they have power over the design of the new Internet.

What seemed like an abstract take against VC’s insatiable appetite for Web 3 startups became personal in a reply to Elon Musk with a not-so-veiled reference to Andreessen Horowitz (aka’d A16Z). Andreessen Horowitz launched a $2.2B fund in June, has invested in over 50 companies so far and has hired virtually everyone in the crypto startup space.

A while later, he RTd this self-explanatory cartoon

Image

Then, in case someone still didn't know what he meant.

Finally, he summarised all his views in this last tweet

The concept

What exactly are we fighting about?

Web 3 is still an ambiguous concept that refers to a new iteration of internet technology based on decentralized ownership and transfer of value. The term references Web 2.0, the title given to the technologies that changed the role of end-users on the Internet in the early  2000s. And where there's a 2.0, there must be a 1.0.

Web 1.0 refers to the initial iterations of the Internet, where the protocols allowed for the transmission of information, like through email or basic web navigation - an era characterized by open-source tech that many entrepreneurs used as the building blocks for new products and services.

Web 2.0 encompasses the technologies that allowed the end user to become a content producer, which created new ways in which content was generated, distributed and consumed. It was eventually dominated by proprietary platforms turned into monumental corporations that became great at extracting value from the community: the end user produces the content and interactions, developers builds a whole industry around these platforms, dependant on these platforms, but it's these big corporations who reap most of the benefits.

Web 3.0 evolves over the foundations of web 2.0:

  • It expands what can be generated and transmitted: from information to value. In Web 3, what users can create and share, goes beyond messages and enters the realm of digital property.
  • It decentralizes value and rewards. While 2.0 was the era of the Internet of platforms, where companies like Google or Facebook provided the platform and extracted the value, web 3.0 platforms are decentrally owned and governed, and value is distributed between stakeholders.

At least that's the theory. Jack disagrees.

The meat of the story

Decentralization is a key component of crypto. It is the great conceptual leap that will take internet to the next level, because it dramatically changes the incentive structure.

Even Chris Dixon himself, a GP in Andreessen Horowitz, has written one of the most accurate explanations on how this structure works. Web 2.0 platforms initially behave as neutral protocols that the community can use and build on. This is how Dixon describes the timeline between attraction and extraction of value from users and cooperation and competition against other ecosystem builders.

Jack's point is that when Dixon says "web 2.0", he should say "VC backed companies" instead. He claims that Web 3 will be following the same path as long as the economic incentives of investors are so central to the development of the trend.

Crypto is currently experimenting with new ways of distributing value and cooperating in an agile, profitable, and fair manner. Play-to-earn, DAOs, DeFi, are all different routes into this hypothesis. And even though the debate is complex and full of nuance, and no one should take a position based only on a set of tweets, Jack is correct in pointing out the importance of decentralization as a transformative force. So let's just let that sink in and not lose sight of it.

Crypto CEOs Congressional hearing. Who's who?

Crypto CEOs Congressional hearing. Who's who?

Six CEOs from major crypto companies were summoned to the U.S. House Committee on Financial Services to testify about the present and future of the industry...and things went surprisingly smooth. Jake Chervinsky, one of the most prominent crypto lobbyists, said this:

Crypto-CEOs had the opportunity to warn regulators about the risk of ill-regulating the space and pushing these companies off-shore. Regulators had the chance to express their interest in understanding and acting sensibly.

Let's see who were these six CEOs and what they represent.

  • Sam Bankman-Fried. SBF is the world's youngest billionaire, a charismatic leader for crypto, and the founder and face of FTX. FTX is a centralized exchange specialized in derivatives that has become a force of nature in the industry and is fighting to become a household name in the USA through grandiose partnerships that have sent them to No. 10 on Ad Age's 2021 Marketers of the Year list. FTX's footprint in crypto is vast, thanks to its business activity, including many investments in the space.
  • Jeremy Allaire is the CEO of Circle, a company created by Center. This consortium includes members from the cryptocurrency exchange Coinbase and Bitcoin mining company Bitmain to help businesses embrace the innovations in the payments space. Circle is behind USDC, #2 stablecoin by market value.
  • Brian Brooks is the CEO of Bitfury Group. Bitfury's story sounds like a western movie: miners turned into tycoons. Bitfury started with mining hardware and software production but has evolved into software, venture capital, and analytics for public administrations.
  • Charles Cascarilla is CEO of Paxos Trust Company. Formerly ItBit, one of the first Bitcoin exchanges, Paxos has become an infrastructure provider and is behind some of the most promising examples of big corporation immersion in crypto, helping firms like PayPal or Meta go crypto.
  • Denelle Dixon is CEO and Executive Director of Stellar Development, an open-source, decentralized protocol for digital currency to fiat money low-cost transfers.
  • Alesia Jeanne Haas is the CFO of Coinbase Global. Coinbase was the first crypto native company to go public. It has become a de facto representative of crypto in Wall Street and is one of the strongest lobbyists for crypto.

Stablecoin regulation is getting closer and closer

Stablecoin regulation is getting closer and closer

In Elizabeth Warren's words, "stablecoins provide the lifeblood of the DeFi ecosystem." She does not mean it as a compliment. Her follow-up sentences defined Defi as the shadiest part of crypto.

Warren is one of the many political figures urging regulatory action on stablecoins. Stablecoins are probably one of the most urgent matters on the table of regulators and traditional financial institutions looking at crypto either as a threat or an opportunity.

Why is this?

A stablecoin is a digital asset whose value is pegged to another asset like a commodity or another currency and therefore has a stable price. As a result, they benefit from the transaction speed and low prices of cryptocurrencies while avoiding the problem of volatility. They have two primary use cases that have the potential of eating off of the big brother's cake:

  • They are used to investing in digital assets without resorting to fiat currencies. Money can move around crypto without touching a bank because stablecoins provide a home currency to go back to and often a bridge between protocols, platforms, and blockchains. They are the lifeblood of DeFi; Warren's not wrong.
  • They also have great potential as cross-border fast and cheap payment methods.

Regulators have some legitimate concerns, while others may not be so legitimate. There are questions about the stability among the fair points, as most protocols haven't been tested under large-scale stress conditions. Plus, some stablecoins (USDT, we’re looking at you) have behaved suspiciously in the past and have led to a bad reputation as possible market manipulators. But also, stablecoins erode government and corporate power, something regulators don't like…but some people in crypto quite like it.

Legislators worldwide have been increasingly vocal about regulating the space in recent times. We could say the last chapter in this series kicked off at the beginning of November when the President's Working Group on Financial Markets (PWG) in the USA released a report on stablecoins. The PWG urged lawmakers to subject stablecoin issuers to the same strict federal oversight as banks. In recent days, Japan announced a similar possible approach to legislation that might happen in early 2022. The country's 70 most important financial institutions are working in a CBDC project that might have also triggered the need for more control.

Other international organizations, like the World Economic Forum or the European Council, are lagging a little bit behind, still going through the phase of producing recommendations. But in these cases, too, proposals are pushing for regulation.

When it comes to taking action, things get more complicated and nuanced. The US Senate recently launched consultations and hearings to dig deeper into the industry. Their energy was less combative in general than that of other politicians (yes, Mrs. Warren, we're talking about you. We know you read this newsletter), and Senators have often stated that regulation needs to be careful not to stifle innovation.

Corporations and big finance also have heterogeneous positions on stablecoins. There's a general sense of interest, but it can manifest through copycat projects that try to embrace the virtues of digital assets virtues without the decentralization and subsequent loss of power. But other institutions, like Bank of America, have openly urged regulators to act because they want to come out and play properly once and for all.

If we zoom out and see the forest, we probably witness the baby steps of the first significant regulatory intervention in crypto. The first generation of regulatory efforts aimed to close the most urgent loopholes of crypto: lack of AML or KYC in substantial businesses, essential investor protection from fraud, etc. Stablecoins are the first opportunity for regulators, traditional finance, and crypto native corporations to build a framework that pushes adoption while respecting innovation.

Gaming guilds

Play-to-earn. If you haven't heard of it, let Grimes break it down for you.

Play-to-earn is more than a teenager's dream or a streamer's privilege. It is becoming a reality, as crypto allows gaming projects to redistribute the wealth they generate across the community. In play-to-earn gaming platforms, players earn tokens for their participation, therefore turning them into fiat to use at a grocery store. If you want to understand it quickly, albeit superficially, you can think of play-to-earn as a company like Fortnite distributing its marketing budget across the players, who in exchange are incentivized to build an extended community.

Guilds are a type of business born from this concept—players organized in company fashion to professionalize playing in play-to-earn platforms. Andreessen Horowitz invested $4.6M in Yield Guild Games in August, and now another two guilds have some announcements to make: Avocado Guild has announced an $18M round, and Loot Squad announced a $5M raise too.

The $BOTTO token

Botto is about to turn two months old. For those who haven't been following, Botto is the decentralized art project Carbono, along with the Eleven Yellow team, has been involved in for more than a year, and that officially launched on October 8th.

This is how we introduced Botto to Carbono insights readers, and this is the 1-month recap we did. Botto has been on tour recently, with team members, like Mario Klingemann, our own Raúl Marcos, and more visiting Madrid and Miami. You can therefore find some good explanations in the press about Botto (this is one of my favorite explainer articles so far).

Long story short, Botto is a project with two main faces: it is an algorithmic, generative artist, that produces 350 fine art pieces weekly. But it also is a community of thousands of people, gathered around the $BOTTO token, who participate in governance mechanisms over the artist.

Today, we'd like to briefly overview the $BOTTO token, how we distributed it initially, and why.

The existence of the token was a necessary condition for Botto to happen. They create an incentive structure around a project that requires human implication. to put it bluntly, Botto the AI needs human labor for curation and training purposes. The community also does a job of awareness-raising, visibility, and education. That labor needs to be rewarded, and without crypto, this would have been next to impossible. At the launch, 100M units of the Botto token were created. Botto is an ERC-20 token built on Ethereum. Token holders were given voting rights and would participate in the proceeds of auctions. But how was Botto distributed, and why?

The team defined a distribution meant to serve several purposes:

Team. The team was allocated 20M BOTTO, with a vesting period recently extended to two years. This means the team cannot sell their tokens as proof of engagement and implication. We want Botto to thrive in the long term and not be a source for quick revenue, and this is the way to hard code this commitment.

Airdrop. First of all, the project needed visibility. So 20M tokens were airdropped to people who had interacted or owned some relevant related NFT projects, such as ArtBlocks or Bored Apes Yacht Club. This was meant to provide awareness across tight-knit communities that would inform their members about the initiative.

Liquidity mining program. Once you've launched a token, you want people to be able to purchase it. DeFi is the way to do this for a project with no access to centralized exchanges. We created a liquidity pool in Uniswap, ETH-BOTTO, where token owners from all categories (team, treasury, airdropped users) could lock their BOTTO for others to come and buy. Those who participated in the pool were eligible for the liquidity mining program rewards, which had 20M Bottos allocated. (The project recently modified its incentive structure and has partnered with OlympusDAO, but that's a pretty long and complex story)

Treasury keeps 30% of the $BOTTO issued. That money will be used for everyday purposes such as marketing and will become the community's budget once the project is fully decentralized.

We hope this peek into Botto helps you get closer to the workings of a project. Botto has DAO, DeFi, and NFT ingredients, and working on it is a mind-blowing adventure we are eager to share.

Metaverse: a $1 trillion opportunity

Metaverse: a $1 trillion opportunity

The metaverse: the interconnected, experiential, 3D virtual worlds where people located anywhere can socialize in real-time to form a persistent, user-owned internet economy spanning the digital and physical worlds.

The above is Grayscale's definition of the concept. Probably accurate, but a little convoluted, if you ask me. I'm finding that "virtual worlds" is often enough to explain what most people think of when they say metaverse. However, I usually follow it by explaining that, in many senses, the metaverse is already here insofar as we already play, socialize and, more and more, conduct our finances in the digital realms. Bulky glasses are optional.

Grayscale recently published a report claiming that the metaverse may represent an over $1 trillion annual revenue market opportunity, with $400B of it coming from gaming. Grayscale bases their prediction on current tangible trends, like the ongoing flow of venture capital into metaverse related ventures, including the $10B committed by Meta, the company formerly known as Facebook. Also, in just the past weeks, virtual real estate sales have broken records with purchases of a $2.43M plot in Decentraland and $2,48 in Axie Infinity.

Pepe.wtf, a site for the old cars in NFTs

Pepe.wtf, a site for the old cars in NFTs

NFT is the word of the year 2021, according to Collins dictionary. You don't get much bigger than this :)

2021 has been the year for NFTs. There's probably not one single reason for this, but a perfect storm of trends maturing simultaneously. Financial bonanza in crypto, Layers 1 and 2 providing the highways, artists finding an escape from more traditional forms of expression and marketing, an ecosystem of companies streamlining access... But how long would you say it took NFTs to get to this point?

At Carbono, we started playing NFT archaeologists recently and ended up falling down a rabbit hole. We discovered a whole new world of NFT ancestors and went a little obsessed about it.

Meet the culprit.

Pepe, the frog, was a character in an indie comic book from a 2005 series called Boy's Club by Matt Furie. For some reason, 4chan ended up adopting this frog as their favorite resource for meme-making, and it became an internet sensation.

This silly-looking frog might ring a bell to you. At some point in its strange little life, the American alt-right Pepe and its image was used to deliver right-wing propaganda. But Pepe survived the misuse and moved on. So let's forget this happened and instead let THIS define Pepe: Pepe was the leitmotif of the first real NFT collection.

In 2014, some developers built Counterparty: a sort of Layer 2 built on top of the Bitcoin blockchain that allowed for some very basic initial DeFi and NFT functionalities. It allowed its users to mint and trade with unique assets, sometimes decentralized.

Counterparty feels a little bit like steampunk. For those who don't know, steampunk is that genre of science fiction where writers create worlds where technology has advanced dramatically but where science hasn't moved beyond steam-powered technology and learned about electricity.

In steampunk fiction, machines do their job, but it all looks noisy and clunky. If you browse through XChain, the most popular Counterparty block explorer, you'll probably see what I mean.

Thanks to the new features Counterparty added to Bitcoin, users could create the first authentic NFT collections. Spells of Genesis and Force of Will were the two first experiments: card games translated into crypto. But in 2016, Pepe the frog made its appearance, and it became the first NFT sensation.

Born from Telegram groups, Rare Pepes became a collection on Counterparty starting in late 2016. They began by mocking the ICO fever and honoring Satoshi Nakamoto but went on to become a collection of pop and underground culture, political satire, and plain weirdness in general.

There are 300 units of this Nakamoto card, the first official RarePepe. Each one sells for at least $400k

The last accepted submission of a Pepe happened in 2018. By that time, 1774 different cards had been issued along 36 series. Some of them are 1/1 supplies (like ONLYONEPEPE) or in the millions (like GIVEKUDOS, with 100 million). There are references to art (Picasso, Kandinsky, Dalí...), politics (there are at least 6 Putin-themed cards), popular culture (PEPEKACHU currently sells for $35k), and then randomness galore.

Pepes have become the equivalent of classic cars in the NFTs space. They are feats of olden day engineering, you wouldn't want to drive them for your daily commute because the UX is painful, and they look weird by modern-day standards. But, boy, are they cool. They are a piece of crypto history. Born from indie memes, sometimes beautiful, often tasteless, many of them inspired by shady references, full of crypto's F-U ethos, and loved by a faithful and cohesive community.

We fell in love with the frog and decided to do something about it. So we built a site: pepe.wtf

Pepe.wtf is the brainchild of @pepe himself and Carbono. Our humble contribution to the exciting universe of Rare Pepes. With this platform, we have tried to gather all the primary sources of information about this fantastic collection under the same roof and digest it to provide clarity in the exploration process. Users can now find all the relevant information on any card in one place before buying one for their collection. We have built some sort of Coingecko for RarePepes.

Our goal was to provide collectors with a new, streamlined browsing experience for their favorite collection. But we also wanted to onboard new people who might want to approach this collection but were deterred by the complex user experience.

What does all this say about the general crypto space?

Rare Pepes are a crucial part of the general NFT space. A primordial manifestation of the digital version of the human impulse toward collecting. You're probably astounded by the looks of the cards and their price but bear in mind that we are talking about culture here and a community celebrating it. If (or when) NFTs become art's new home, Pepes will be its cave paintings.