Metastablecoins

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Ever since the Global Financial Crisis (GFC) in late 2008, central banks have kept real interest rates close to, and for much of the time below, zero. Around the beginning of this year it started to become obvious that the end of the era of "free money" was approaching, and that interest rates were going to go up. That real interest rates haven't yet risen much above zero is because of the rampant monopolization of the US economy; companies with market power have seized on the supply chain crisis and the Russian invasion of Ukraine to raise prices and thus the inflation rate.

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Given this flood of "free money" since the GFC, investors bid up the price of assets such as the technology stocks in the NASDAQ index. In The tech sector teardown is more catharsis than crisis by John Thornhill writes:

There is certainly a strong argument that the extraordinary boom in tech stocks over the past decade was largely fueled by the unprecedented low-interest-rate policies in response to the global financial crisis of 2008. With capital becoming a commodity, it made sense for opportunistic companies such as Uber to grab as much cash as VC firms would give them to “blitzscale” their way to market domination.

This madcap expansion was accelerated by funding provided by a new class of non-traditional, or tourist, investors, including Masayoshi Son’s SoftBank and “crossover” hedge funds such as Tiger Global.

Below the fold, I look at how this is now all unwinding.

Storage Update: Part 3

This is part 3 of my storage update; see Part 1, on DNA storage, and Part 2, on SSD reliability. This is Part 3, on the 2022 Library of Congress "Designing Storage Architectures" meeting. The agenda with links to the presentations is here. Below the fold I have comments on some of them.

A "Blockchain Certificate of Deposit"

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Thanks to cryptocurrencies being decentralized they can eliminate the middleman, which leads to the fabulous offer from middleman Hex.com to revolutionize my finances that arrived unsolicited in my US mailbox last Wednesday.

How could I refuse to not just "earn up to 38% APY" but also receive "significant price appreciation" from the "fastest-appreciating digital asset in history"? It is a "blockchain Certificate of Deposit" and I know that Certificates of Deposit are issued by banks and are:

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a safer and more conservative investment than stocks and bonds, offering lower opportunity for growth, but with a non-volatile, guaranteed rate of return.

Middleman Hex.com says:

This common investment tool is used by hundreds of millions of people worldwide with a market value in the trillions.

HEX uses blockchain technology to offer the same concept without the middleman.

The top national guaranteed rate for a 5-year bank CD is currently 3.15%, so clearly eliminating the bank middleman who seems to be taking a 35% cut means a blockchain CD guaranteed by middleman Hex.com is a winner with no additional risk!

Below the fold I look this gift horse in the mouth.

Probabilistic Fault Tolerance

In our 2003 SOSP "Best Paper" Preserving Peer Replicas By Rate-Limited Sampled Voting (also here, expanded version here) we introduced a number of concepts. The most important was consensus based on sampling the electorate at random, in contrast to the traditional Byzantine Fault Tolerance (BFT), which at every step solicits votes from the entire electorate. The advantages of this mechanism are so significant that, a decade and a half later, it was re-discovered and improved upon in the context of a blockchain protocol. Below the fold I explain our original consensus system, and describe how the basic idea has been adopted and enhanced.

Fixed Supply, Variable Demand

BTC transaction fees

As I've been writing for a long time, because there is an auction for inclusion in the fixed supply of transactions, when no-one wants to transact they are cheap, but when everyone wants to transact they get very expensive. Vitalik Buterin is unhappy about this:

Buterin didn’t predict the rise of NFTs, and has watched the phenomenon with a mixture of interest and anxiety. ... their volume has overwhelmed the network, leading to a steep rise in congestion fees, in which, for instance, bidders trying to secure a rare NFT pay hundreds of dollars extra to make sure their transactions are expedited.

Last Saturday evening I looked at Molly White's invaluable timeline Web3 is going just great and saw that the top two entries summed up this problem to a tee. Below the fold, I explain

Grayscale Bitcoin Trust

Amy Castor's Welcome to Grayscale’s Hotel California is a fascinating account of one of the Alice-in-Wonderland market ecosystems that grew from cryptocurrencies:

Grayscale wants to convert its Grayscale Bitcoin Trust (GBTC) into a bitcoin ETF after flooding the market with shares. GBTC is trading 25% below its net asset value, and investors are rightfully pissed off. Grayscale wants them to be upset with the SEC, but the regulator isn’t really to blame. If anything, the SEC should have warned the public about GBTC years ago.

Below the fold, I provide some commentary:

Meta: Fifteen Years Of Pontification

Fifteen years ago today I posted Mass-market scholarly communication to start this blog. Five years ago today I posted A decade of blogging, and a couple of months later noticed it had exceeded one million page views. Now, the blog has accumulated:

• 812 posts, including my personal all-time favorite, 2014's Economies of Scale in Peer-to-Peer Networks.
• 4038 published comments.
• Over 3.4M page views, of which 367K (~11%) were of last February's short-notice EE380 Talk. Apart from that anomaly, it is an average of about 35K/month.