With all of the recent speculative "feeding frenzy" surrounding DeFi opportunities linked to "wrapped" tokens, I have been my usual contrarian self. How?
By simply asking, "this is the future?!" 🤷♂ 🤔
Well, surprise, surprise, I am obviously not the only one asking that question. How many others are looking into it? I do not know, but as a LOKI token HODLer, this proposed solution recently appeared on my "radar screen."
In this post, given my background, I'd like to address my introductory question from a little different direction than most. Then, take a closer look at Blockswap ...
"Wrapped" Tokens as System "Bridges"
At the highest conceptual level, cryptocurrencies / digital assets / ?...? (your preferred global descriptor ...) are:
- Databases! Very specialized, no doubt, but still databases ...
- Decentralized! In the sense "the" database does not reside on a central server, under the control of a central enterprise, like most databases. Copies of "the" database reside on "nodes, which are linked together ...
- The global network supporting these all-important links is the Internet.
In a word, these marvels of creative brilliance are software. Which are not exempt from the challenges associated with any other software.
Like what? 🤔
Based on the incredible changes to business systems across the world, since PCs began to "roll out" in the early 80s, at the core of most enterprises today their business systems are databases. Like we see in the world all around us, their is a lot of information to manage. A task which a database is best suited to handle.
Depending upon the "core competence" of the enterprise, these databases will, of course, vary considerably as to their structure and content. Invariably, no matter how powerful a database / system you have invested in for your business, there are "boundaries" beyond which we find other databases / systems. Upon which your enterprise will be heavily dependent to conduct its day-to-day affairs.
How does the all-important information stored in your system or the other system get across the "gulf" between them? Data "bridges!" As a former Business Systems Analyst, I could expand on this simple statement, for post after post ...
It is beyond the scope of this post to do more than state the obvious:
- Unless explicitly designed otherwise, any given database / system "knows" absolutely nothing about any other database / system.
- Even where explicitly designed to meet "industry (varies by industry ...) standard" specs, the most mature industries have a long way to go to get these data "bridges" between systems right.
Source: MultiSpeak's webpage on "What Does MultiSpeak Cover?" Example: I spent the last 10 years of my career in the electric services industry. A more mature industry can hardly be named, given how absolutely essential electricity is to the standard of living of most of us. The MultiSpeak spec was the "standard" for "interoperability" in our industry. I was personally part of conference calls for years related to trying to get this spec anywhere close to where it needed to be ... - The "cryptosphere" is not even remotely close to a mature industry. 😏 Any questions? 😉
My point? A "wrapped" token represents a data "bridge" between two different blockchains which "know" absolutely nothing about the other.
Is a "wrapped" token an elegant,
mature solution for handling
the interoperability requirements
of a decentralized exchange of value
between two blockchains?
mature solution
No!
It is a
"band-aid"
solution!!
Any other questions? Okay, how about ...
- Does the "wrapped" token solution work?
- Does it work today?
Yes to both. Which is why we are writing about it at all, given the market potential unleashed by its use.
- Caveat from experience in my long professional life: Never underestimate the "life span" of a "band-aid" solution! Rather than dying a well-deserved "death," at the earliest possible opportunity, the same poor time and resource management decision leading to the creation of the first "band-aid" solution can easily result in another one being applied over the top of the first one.
Leading to a "band-aid" on top of "band-aid" on top of ... Which inevitably results in a nightmare of system maintenance & operations issues for those on the "front lines" having to deal with them! Typically costing more to finally fix than if it had simply been done right in the first place!
and @howo would say about what they have found "under the hood," when working on
SteemIt, Inc.'s blockchain code, in preparation for HF24?]
Very intentionally, I have "skipped across the surface," at a very high level, of an issue which is mind-numbingly complex. At least to most of us ...
In doing so, I haven't even touched on other aspects of the UniSwap (currently the "800 pound gorilla" in the DeFi space everyone else appears to be "gunning" for ...) approach which strike this investor as being uhhh ... "less than optimum" ...
- The transaction fees on the Ethereum blockchain are in "La La land." Only "whales" need "apply," as you need to invest significant sums to even begin to overcome / pretend to make sense of this ...
- To benefit from adding liquidity requires the participant to provide liquidity for both sides of the desired transaction. e.g. wLEO and ETH. Ever seen anything like this in the "real world?"
- Anyone with any experience at all with this new asset class knows how volatile cryptos are to begin with, so ... Adding all of the known risks associated with rehypothecation on top of that? In the (so far ...) unregulated "wild West" of the cryptosphere? Hmmm ...
Surely this has nothing to do
with what is roiling the markets,as this is being written...
Right?
"Nothing to see here! Move along ..."
So ... Doing just that ... Moving on ... If accepted that "wrapped" tokens are a somewhat "kludgy" solution to one aspect of building the highly prized decentralized exchanges of today and tomorrow, what is(are) the alternative(s)?
Certainly there are very capable people working, as this is being written, to answer that question. For example, Binance with their announcement yesterday (Sept. 3rd) about Binance Liquid Swap. Binance is, of course, a centralized exchange. This investor is looking for a decentralized solution.
Like, for example, the proposed Blockswap solution introduced at the beginning of this post.
Let's take a closer look ...
Is Blockswap the Future?
Okay, @roleerob ... As you are obviously not currently a "big fan" of "wrapped" tokens and the UniSwap DeFi model, what is your "brilliant idea?" I have already written that there are "many others are looking into it."
For example:
- Some blockchain solutions like the 0x protocol, with its ZRX token have been actively working on this problem for awhile ...
- Exchange services like Changelly Pro and CoinSwitch Pro are pretty easy to use, but you are simply paying them for use of their links to centralized exchanges, e.g. Binance, rather than rely upon your own account ...
- Balancer and Crypto.com, among others, represent well-known competitive alternative DeFi platforms / systems / models ...
My purpose, in writing this post, is simply to point out what to me are significant flaws in the way whatever potential is contained within the DeFi "value proposition" appears to be currently unfolding, i.e. with "wrapped" tokens and the UniSwap DeFi model ... And that I am not alone in that assessment ...
With that, I'll finish up focusing on one possible alternative - Blockswap!
Inherent in the original concept of the LOKI network is the idea of blockchain-staked, incentivised service nodes. Designed to do what? Create a foundation upon which Lokinet can support access to private, censorship-resistant websites and Session can support a private messaging service. Including voice messages, files, images, and other attachments ...
- Tip: If you have any interest in this whatsoever, you really should make sure to open the Lokinet link and take a couple of minutes to listen to the embedded (key question: where is the source?) video. What it illustrates should definitely catch your attention when considering what "can be!"
Blockswap, then, is based upon the idea of taking the lessons learned and applying them to decentralized finance, i.e. DeFi.
Not intending this post to be a "deep dive" into the technical details of the Blockswap approach to DeFi, I'll just hit some "high spots" which stood out to me, starting with their "executive summary" statement:
"Blockswap enables cross-chain
cryptocurrency swapping ...
... without using
centralised exchanges,
specialised wallets, or
wrapped tokens."
cryptocurrency swapping ...
...
without usingWhat is not to like, dear reader? With what part of that would anyone disagree?
Further, from their Abstract:
"Existing decentralised token swapping solutions suffer from a range of issues that severely limit usability, privacy, and practicality. Blockswap is a protocol for automated cross-chain token swaps that resolves these issues ...
... The network of vault nodes acts as the network’s decentralised authority, and achieves consensus over the state of the swaps, liquidity, and balances of the network using parameters outlined by a permissionless distributed database."
Taking a closer look "under the cover," these aspects of this network stood out to me:
- LOKI service nodes can be set up to provide specialized services, e.g. "vault" nodes to function as liquidity pool providers for Blockswap. It appears this is accomplished by a LOKI version of a "second layer" on top of the LOKI blockchain, with LOKI serving as the "base token."
Like Hive! - "Fast" swaps provide pseudonymity, but not complete privacy, as they are not necessarily executed through the LOKI network.
Source: Blockswap Home Page, # Privacy-Properties bookmark.
Private swaps are passed through the LOKI network to ensure privacy, by "obfuscating" both sides of the exchange!!
For this investor, there is a lot to like about what I have read so far about the Blockswap "value proposition" to the booming DeFi marketplace.
Having a vision of what "can be" is one thing. And communicating it clearly is essential. But, bringing it "to life?" This is where we "separate the men from the boys" ... Starting with one of the most basic "reality checks" any enterprise faces in becoming reality - are there sufficient $$s to fund it? 🤷♂
Given the LOKI team's current projection that they will have an MVP version of Blockswap available to try out sometime in Q1 2021, they apparently have sufficient funding to get that far. Then, they'll likely see what "the marketplace of ideas" has to say in "passing judgment" from there.
Full disclosure, repeating what I stated above, I am a LOKI token holder. On basic principles, I like the concept of systems designed to protect our freedom of expression, from tyranny in all the many forms it is taking in our "new normal," post-COVID world.
In addition, I have always enjoyed the rapport I've experienced with the few Australians with which I have ever had any contact. So ... The fact the LOKI team is based out of Australia stood out to me in my initial due diligence, before investing.
In summary, in my mind, this means the proposed Blockswap solution has a strong team behind it, to "bring it to life." If interested in learning more, here is a link to their Discord server. Where they host a #blockswap channel ...
Additional info and links can also be found on the LOKI website.
Closing
So, @roleerob ... Is Blockswap the future then? I make no claim to having any idea, dear reader. I am simply pointing out what is, at least to my mind, painfully obvious. All of the complexity surrounding "wrapped" tokens does not seem likely to be it.
There has to be a better way. And the Blockswap team are almost certainly not the only ones to agree. As always, in the marketplace of ideas, the "best and brightest" of them will ultimately emerge. And we'll all be the better / more prosperous for it.
Agree? Disagree? Either is fine with me, as I am a strong advocate for "vigorous exchanges," if conducted with civility and respect, in the "marketplace of ideas." There is an essential "sharpening" effect, which exchanges around competing ideas provide to any successful enterprise. They should, therefore, be encouraged, rather than "stuffed" ...
I’d love to hear any feedback you may be inspired to provide.
Until "next time," all the best to you for a better tomorrow, as we all work together to build up our Hive Communities and add increasing value to our Hive blockchain! 👍 😊
Respectfully,
Blogger @roleerob
Hive "Dolphin" 🐬, LeoFinance "Whale" 🐋, & Man Cave "Dragon" 🐉
🐝 🍯 🐝
P.S. I am not a financial adviser. Please consider this post as financial information and / or opinion only. Please perform your own due diligence, in whatever manner you seems best to you, if you have found it to be beneficial.
🌲 No trees were harmed in the publishing of this post! 🌲
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