The Network Glue: The Role of the Application Layer in Decentralization and Participation

Transcript

okay awesome so thanks everyone for coming I know it's been 370 long days so appreciate that you guys are around so let's kick it off what are we gonna be talking about today so I think the main objective of this talk is going to be kind of dissecting where we stand with regards to decentralize networks the use and participation in them so specifically what we're gonna be doing is dissecting recent trends and then taking a specific look at what the role of the application layer is in fostering participation and utilization so before we dive in let's do a quick show of hands who here owns tokens themselves good who in here has actually been using

them for Network native functions that could be staking delegation voting all right so we already see in this room that there's a bit of a discrepancy here we have kind of active token holders and something that could be classified as more passive token holding so one of the things that we kind of want to dissect is why is that what is kind of the separation that we see and and how can we encourage better adoption and utilization across decentralized networks so before we kick off let's do a really quick recap of kind of what's been going on so for that let's let's dissect kind of the first area that we've observed and kind of all been part of right we kind of dub it the Wild West why the Wild West we've seen a lot of interesting trends a lot of innovation

but also a lot of you know skepticism that has kind of induced somewhat of a stigma around token distributions how they should be carried out utilization and the regulatory environment so let's kick it off with kind of 2012 to 2018 so what was kind of trends that we observed during these timelines it was the phase of the ICO craze the total absence of regulation in that context and a lot of innovation but also no regulation on how this should be done in a compliant and accountable way how we can induce and create transparency standards for token networks and and when they launched to mean that one of the other things that would have observed and those early times of innovation was a lot of the networks

that were launching token distributions weren't really at a stage of technical maturity that allowed these tokens to actually be used right so let's kind of dissect some of the trends that we saw during this era what is a token this thing is new let me figure out what it is where can I go and buy it right and then what is its use and oftentimes the answer to that was kind of you know I don't really know where to use it because there's no may not ready for me to do so so next up where can I go and trade it or where can I go and sell it so where do we stand today and I think that's kind of dissecting what we've kind of dubbed the age of use right why

the age of use we've seen the maturation in the design of decentralized networks and a lot more sound and senta the mechanism design that is encouraging participation in these networks we've also seen the response of I guess the first phase from a regulatory perspective that initially was fully absent to something that has evolved into a lot more scrutiny without necessarily providing the necessary guidance or formal standards of how they should be conducted so we're seeing a lot less in terms of you know tokens being distributed across the markets but we are seeing the rise of interesting trends in the ecosystem predominantly the rise of proof of stake and the evolution of delegate work entities to facilitate and enable ecosystem so this

is kind of the trends that come with this error right it's predominantly okay these tokens now have use that's great what can I use them for and then where can I go and actually use them and I think the last point here is something that we want to dive in especially as it relates to the application layers role in enabling it so during during this time period or this I guess evolutionary of chapters there's been a couple different things there's been a few different things that have grown that are new that up all been kind of working in unison to get to where we're at today we'll dissect those different pieces so talk about the the road approve mistake and kind of how how we got here and how long it took 2012 we can consider to be

essentially the genesis which is peercoin was represented and put forth in the community which was one of the first proof of stake ideations 2014 we can consider to be iteration which was the release of the tenement white paper and also delegated proof of stake through bitshares these were all I guess the most important thing to talk about at the beginning of this is most things that are innovative they were done individually and not collectively 2017 this was more of when a collective effort around this really began to bubble and take place more people were participating in the effort doing research and the two primary efforts taking place during that time period were Caspar F F G and C BC which is now

f2 and Aurora bourse which will eventually be Cardno not sure win but sometime in the near future 2019 we can think of as implementation this was wind proof of stake networks for the first time actually began to go live people were actively staking inside of these systems and may nuts were their most notable cosmos tezo's from a layer one perspective and then layer two solutions built on top of aetherium being lumen Matic other ones but those are probably the best way to divide up the first implementation of proof of stake is existing in competing layer ones to aetherium and then additionally aetherium helpers you could say 2020 is now where we are today there are more

proof of stake networks that are set to launch this year most notably eath to the scale network and then polka dot again scale being elastic side chains and aetherium helper eath to helping itself but still needs plenty of help from others and then polka dot essentially as being a competing layer one so it's it's taken you know us eight years to get to full implementation and now proof of stake is considered to be the standard and if you do anything in the proof-of-work realm it it's not quite strange but but it's you have to take different approaches to proof of work and research efforts on that end have lessened and pretty much all the brightest minds are looking at previous take today

so let's talk about some numbers because everyone in the d 5 space loves to talk about value locked or associated market cap or or different things not in my opinion the best way to look at it but it's a relative growth metric and we're humans so it makes sense so as of today these are all updated as of today right before the chat the total crypto marco cat globally is two hundred and sixty billion of that thus taking market cap is fifteen point nine billion which is about five point seven percent now if we dissected those numbers further and said what is what is the market cap of proof of stake compared to the top ten or the top 100 these these numbers would be you know much higher from that perspective the more interesting thing to look at is

of of all the live staking networks that exist how much is actually locked in staking which right now is about sixty seven percent which is which is quite interesting so that means that the the ones that have gone in launched we are seeing a lot of participation in them but a more interesting metric which we are spending time digging into is exactly how many individuals are participating inside of that high stake rate how centralized is it is it how is the distribution evolved from its initial distribution and are all the people staking inside of these networks just early purchasers who are basically restricting the liquidity of the token and to some degree restricting

participation upon others the bottom chart here is is just kind of just a visual representation of just all the the most prominent staking tokens and and how much they're they're locked in and as you can see we kind of we started from zero and you know not now we're at sixteen billion which is quite interesting so now that we've kind of dissected the rise I guess of a market cap that is currently sitting in proof of stake based protocols one of the main things that we've observed with this is a trend and the emergence of delicate work entities so what our delegate work entities they're basically providers infrastructure runners those that enable

the staking by providing infrastructure either directly or by accepting delegation or providing these for other participants so as you can see that I really love this chart but it's a it's a stakeholder group that is really diapers it's a web 3 business model that has evolved native to some of these as a core business function and then we've kind of seen the evolution and hybridization for other parts of this ecosystem if you look at custodians and exchanges they're kind of the new kids on the staking block that have kind of evolved into providing staking infrastructure and staking services as kind of in tandem to their existing business models another interesting function is that of I guess

like what is the role of the VC in web 3 context and how has their model evolved one of the interesting things that we're seeing is that capital providers are now increasingly becoming work providing entities right running their own infrastructure or delegating to infrastructure providers so in that sense we're seeing capital provider work entities evolve which is kind of a hybridization of a web 3 approach of what the C's are kind of evolving into the main thing that kind of to point out here is as we see different parts of this stack I guess evolved and something that we'll dive in a bit deeper each of these have their own customer acquisition channels right and and their own incentives and ensuring

participation with different sizes and different economies of scale so lastly I guess wrapping up the first two topics that we've kind of talked about the rise of proof of stake tightening of the regulatory environment and lastly I guess the the way that different kinds of stakeholders play a critical role in enabling use for these decentralized networks let's talk a little bit about token distribution models so I guess everyone he is familiar with the ICO and pretty much everyone should also be familiar with the kind of passive airdrop we've seen in the early days right you know airdrop tokens see if they stake see people actually want them you know mostly they didn't but that's fun so kind of let's let's dissect what what

some of the trends are that we're observing and I guess the first chart is a pretty good overview of that so if you look at the little green bar there we've seen a proportional increase in the rise over the last two years and interactive air drops interactive air drops are kind of targeted at encouraging self-selected user groups that may have a higher potential and and are better I guess equipped to support networks with active participation which is critical number one in the face of bootstrapping but number two also from a regulatory analysis perspective we've seen really interesting proposals come out of this so life peer as an example of you know an interactive ear job new cipher has a really interesting model called the work

lock which is basically incentivizing collateralization by building in a use element into the token distribution why because of deter speculation because it supports an initial distribution that goes out to representatives that are active participants in the network and encouraging that use in bootstrapping in the beginning proof of use is one of the bigger elements of what we push in consensus and what we've kind of come out of multiple years of researching the best way of doing an initial token distribution should look like you can think of proof of use as a programmable mechanism anyone who purchases tokens in the sale was basically required to use their tokens before they're able to use them outside of the network or for

trading purposes why is that important again the regulatory environment kind of setting the standards and ensuring that everyone who purchases tokens is actually using them so that's something that we've we've pioneered before with projects such as foam and something that we're doing with our partners at scale which is going to be rolling out in q2 of this year so let's take a look at what the next chapter looks like I personally think that I would love to know if people agree but we're approaching adoption territory right now there's probably only a million global users of crypto they're maybe 10 to 12 million people who have interacted with it but the core community is probably

only like a million people so how do we get to where we need to be and what are some of the important steps to get there so as we talked about chapter 1 chapter 2 20 who knows win hopefully soon is the point that hopefully you're purchasing your coffee with Krypto or you're interacting on a daily basis with the blockchain in some format and hopefully it's invisible to you because if it's not then we won't ever actually reach to where we want to get so let's talk about the bridge some of the biggest we spent loads of time doing user research on all different types of users crypto bubble users outside users different countries different age brackets pretty much everything and it's it's been quite interesting to see where things sit and

what people are having trouble with I think everyone knows that a general education barrier in blockchain is extremely difficult to get over this is essentially from an innovation perspective basically everything that humans have ever created packed into one technology so explaining this to someone when it's supposed to be abstracted away when it's not is is quite difficult so education has always been a big issue in blockchain and I think it's getting better but it's still one of the major points that we've come across in our research when it comes to specifically the topic of launching tokens and participating in networks regulations a problem there is just no guidance whatsoever and hopefully that improves itself but we personally think that that

is one of the major things blocking innovation in this category is is that if you do this process wrong like the risk is that like you potentially end up in jail and like who wants to innovate if that's like the actual worst case scenario it's it's an issue the other one being which is what will dig into next is the most recent problem which is fragmentation essentially when it comes to the application layer what we've seen is everyone's building their own front ends and as a user I'm so overwhelmed with where to go to use my thing that I actually may end up not ever using it or I've used my thing on six different platforms and I have no idea where my things are or what they're worth today or how to track them and how to find

them fragmentation is a huge problem and just honestly general UX and UI which is something that like the guys a deep work are actually doing an amazing job with and that's how do you design applications to interact with the blockchain from a web to perspective and how do you bridge the design gap there's loads of work being done on interactive design and also like human coordination at that level and how to get these things done UX UI will be a big big category in 2020 it'll in my opinion be kind of one of those sleepers that most people won't notice where's the party out I guess this kind

of wraps up the discussion forth on Collin just mentioned which is where do I go and we kind of dissected how the ecosystem of stakeholders work there currently support infrastructure we kind of touched on them earlier thanks changes on custodians are kind of moving into the people of state

providing speaking services in general I mean I think it does create participants for already but one of the things that we're kind of I guess finance is a common example these providers have

economies of scale that a lot of other smaller so going 4-0 pisanka missionary could be great for user adoption but really not so great for decentralisation and preventing the crowding out of smaller players were really important to facilitating the centralization in these networks what's next so Network portals we've kind of seen networks build their own application layers to access and encourage participation with them that kind of provide an interface that allows all providers and supporters in the network to post their service Lesley so we've seen that with life here we've seen that with loom you have kind of a native network dashboard that you can

kind of operate from and it's great because in one way it makes it easy for you to select providers based on parameters that are important to you whether that's performance risk assessment and and it provides transparency and a better competition in the market one of the drawbacks is that all of these Network native portals are being built by all of these networks what am I going to use a different like portal for each of the networks that I'm a part of doesn't really seem conducive access points and the engagement points defined like a multi token okay so that's kind of one thing the other thing that we've kind of seen them especially with some of the partners that we're working with is there is this kind of

impending question around centralization / what is the effort of protocol teams in building and maintaining access portals to participate in these networks and how does that kind of play in a way against the classification of whether or not that is a centralized effort from a regulatory perspective last but not least this is kind of the biggest category where we see a lot of innovation and a lot of diversity it's the staking providers the ones to room providing infrastructure for saving services is made up to their to their business model and one of the things that we've seen as you know as all of these taken providers for at multiple networks there's for building multiple

interfaces and applications to access and participate in all of these networks right to me as a user going across this to try and roam out and find out who I should be staking with can be quite tedious and it's encouraging the fragmentation that we're generally seeing in the market so it's not necessarily conducive to the end-user to make it easy for them to understand the opportunities to aggregate them and execute on them right for the protocol teams and infrastructure providers themselves building and spending time and resources on building out these front-end applications carries a significant customer acquisition cost right in a way a lot of those resources are diverged from spending time on

building infrastructure critical things that are kind of the core functions of what these providers are are in the ecosystem for on the precipice so I guess what's the point that we're trying to make its we're seeing kind of early trends of fragmentation as everyone is kind of going into the realms of identifying the best application layers to interact with different protocols for the end-user with you know a multi token portfolio it's really not that easy anymore for me to understand where to go where to use what to do and at this point you know using multiple interfaces and applications to interact with the underlying protocols and become an active participant that net that may

actually not be that conducive to the adoption that we're all kind of driving towards so just kind of recap and we'll bring all this together you can think about debate as as a unified platform that brings across the sphere of users it's

as a validator as more explained its you shouldn't feel the need to build your own this is more as a helper and ultimately the last player here

who's trapping your network from the very beginning is very difficult to do it's an orchestration event he builds and it's mission-critical that you see large so these are the three users that we're here to bring together and bootstrap and launch networks for the future this is kind of what what the UI and UX will look like and this is kind of a high participation portal you can think of it activate supports networks on the token holder of that network I can come in and I'm given user level data and given network level data and then I'm given Network native functions that I can do

to interact with that network and support it from this taking sense I can earn rewards from the voting sense also governance is heading in that direction as well but this is this is the look in the feel of a repeatable platform for multi networks that allows the user so thanks everyone I know it's been a super long week and I'm sure everyone's heard a million to talk so thanks for sticking around you can get at us on telegram or you can check it out on activate as Maura said our first partner is scale we will be supporting them and doing things

we'll be releasing more specific information and suing the launcher is gonna happen in what the details of it are so please jump on the website you want to learn more about scale stands up to guys and the scale shirts are yours I doubt we have time for questions yeah