Why price does not reflect fundamentals, Part 96

A bit more than two weeks ago, on March 12, 2020, the cryptocurrency markets — led by Bitcoin — experienced the most significant single-day price drop in seven years, as the price of Bitcoin fell below $4,000 for a brief amount of time.

This drop happened in two phases, the second being about 13 hours after the first. Kyle Samani of Multicoin Capital provided an insightful post laying out the steps that led to such a significant price reduction. I suggest you read the entire article (or listen to the interview he conducted with Laura Shin on the Unchained podcast), but here’s Kyle’s summary:

The quick summary: the Bitcoin and Ethereum networks—in their current forms—cannot operate at global scale. During times of crisis, they become so congested that arbitrageurs cannot keep prices in line across venues, causing massive dislocations on individual exchanges. Massive dislocations on a single exchange (BitMEX) caused Bitcoin to dip below $4,000 for 15-30 minutes; however, this would not have happened if the market operated correctly.

If you do not have time to read the entire piece, here is the jist of what happened:

  • An initial sell-off, potentially motivated by the overall decline in the global economy, triggered an initial drop in price. We’ve seen these types of drops before — Bitcoiner’s are used to 10-20% fluctuations on a regular basis. However, due to the significance of this drop, there were additional ripples in the market as a whole.

  • With this initial sell-off, many traders who were leveraged long — perhaps as much as 25x-50x — were forced to liquidate their collateral on exchanges, led primarily by BitMEX.

  • These mass liquidations led to an additional sell-off, since a large amount of Bitcoin was now being sold on the market.

  • With significant spreads between what people were willing to sell BTC for and what they were willing to buy it for, market makers were hesitant to provide liquidity (as they typically do), due to the overall uncertainty in the market. This lack of liquidity only worsened the situation.

Meanwhile, arbitrageurs — those who make money by buying BTC on one exchange and selling on another exchange at a higher price — also tried to capitalize on the situation, leading to a surge in the amount of BTC being transferred between exchanges. This increased traffic congested the network. In addition, miners — now seeing the price of BTC was less than their cost of mining — began to shut down their mining operation, which only further congested the network (since fewer block producers lead to slower network operations).

This congestion only made it more difficult to provide much-needed liquidity, exacerbating the problem.

While it’s difficult to necessarily prove that all these events definitively caused the price drop(s), this seems to be the most likely sequence of events.

Key takeaways

There are two important takeaways that blockchain participants should take away from this situation:

First, is that we are still in a very immature market. While Bitcoin has been around for more than a decade, and various exchanges have been around for nearly as long, we are still a long way away from a truly functioning cryptocurrency economy with the infrastructure built out in a manner that can generate full trust in the market. Serious investors look at the situation described above and likely laugh about the number of mechanisms that could have been put into place to avoid this outcome. (Kyle Samani wrote a follow-up to his original post, laying out ways we could fix what occurred).

While many cryptocurrency investors believe projects should be up and running in just a few months with mass adoption coming shortly afterward, this episode should serve as an example that we still have a long way to go. The fact that the critical infrastructure surrounding cryptocurrency is still not yet reliable, despite years of building, should serve as proof that we are still in the early innings.

The second takeaway is the fact that basically none of the events on March 12 had anything to do with the fundamentals of Bitcoin or any other cryptocurrency project (perhaps with the exception of MakerDAO, which had it’s own issues as a result of the price action). Other than the initial sell-off — which was motivated by outside events — the various steps that led to such a significant and immediate price crash were outside the scope of the question: “Is Bitcoin a good investment over the long-term?”

The fact that traders who were over-leveraged got eaten for lunch was essentially the contributing factor to such a price plummet; because a handful of people needed to make more money trading Bitcoin (by borrowing money via leveraged trading), there was a price crash far more significant than we have typically seen.

Fundamentally, nothing changed with Bitcoin, ICON, Ether, or dozens of other projects that continue to go about their business each day, building and growing.

While many can’t help but look at the price of a token and immediately conclude that it represents fundamentals (“the price is down, the project must be struggling!”), this episode should be a lesson against that sort of evaluation.


News from ICON World

ICON releases broof pitch deck


Reliant Node’s P-Rep projects site has launched

Reliant Node’s latest project allows ICONists to keep track of and learn what P-Reps are working on.

ReliantNode @ReliantNode
The best way to keep track of, & learn about what #ICON P-Reps are working on... is now LAUNCHED! 🎉 📣 Check it out at
ICONPreps.com If you have staked ICX, you can rate projects & leave your feedback. $ICX #ICONProjecDU

Feel free to leave a review for current/existing P-Rep projects you support!


Markus Jun sits down and chats on the latest episode episode of the RHIZOME Report

Former head of research for DeBlock, Markus Jun has returned to the ICON ecosystem and discussed his plans as a P-Rep.


A minor update to MetrICX has been released

A minor update for RHIZOME’s app - MetrICX has been recently pushed. For both versions (iOS and Android), MetrICX users can now see ICX/USD value within the app along with several bug fixes.


Espanicon shows how to contribute to Hylian - a decentralized price oracle built on ICON

Espanicon recently released a tutorial demonstrating how to set up Marvin - the price feed bot created by RHIZOME.


ICON in mainstream media, once again

ICON was recently featured in a Korean news network - X-Files News Broadcast. Accordingly, ICON DAO has translated the video interview to English.


ICX Comic #2 has been released


ICON community member Sazern has started a folding@home team for the ICON community

As we’ve seen the effects of COVID-19 run through our communities and the global economy - using one’s computer processing power, ICONists can help stimulate COVID-19 proteins to help find a cure.


ICX_Station releases ICON ecosystem map v1.0


An update from Balanced

Balanced, a new DAO on the ICON network recently released a publication providing insight into how Balanced can help hedge against events like we witnessed on “Black Thursday” - and help ICON in the process.


Blockchain Industry News

Craig Wright Challenges Court Order Criticizing His Evidence in $4B Case - CoinDesk

According to Wright, the latest order "improperly relied on prior conclusions about [the] defendant that were unrelated to the existence of an attorney-client relationship and, in so doing, ignored the fundamental and bedrock principle of our legal system."


Bitcoin Halving 2020, Explained - CoinDesk

While the immediate impact on the price of bitcoin was small, the market did tally a gradual increase over the year following the second halving. Some argue this increase was a delayed result of the halving. The theory is that when the supply of bitcoin declines, the demand for bitcoin will stay the same, pushing the price up. If that theory is correct, then we could observe similar price increases after future halvings, including the one scheduled for this year. 


Federal court judge grants temporary injunction against Telegram - Decrypt

The SEC argued in October that the token sale for the Telegram Open Network, or TON blockchain, was illegal, because grams constituted securities under US law, and sales of securities have to be registered with the agency. Telegram has disputed that claim but agreed to hold off launching the network until the case is resolved with the SEC.


Bitcoin exchange Mt. Gox’s latest update sets out plan ahead - Decrypt

The document mainly concerns how the Bitcoin will be repaid to creditors. It explains that the creditors will be able to choose if they want to receive fiat money or a mixture of fiat money and Bitcoin, including Bitcoin Cash—but no other cryptocurrencies. If the creditor does not indicate either way, then it will be paid in fiat.


Hive Continues Independence Push as Steem Stakeholders Migrate to New Chain - Cointelegraph

The hard fork successfully took place on March 20 at around 9:30 a.m. UTC. The network split was accompanied by a 1:1 airdrop, which notably blacklisted the purported owners of Steemit’s “ninja-mined” stake, currently worth around $9.25 million, and the alleged “Tron puppets” who proxied their vote to Steemit-affiliated witnesses during the infamous takeover. 

How does crypto react to an economic crisis?

Thoughts on the recent price decline and how things may play out in the short-intermediate term

Welcome to this week’s edition of RHIZOME WIRE!

What is going on?

As fears of COVID-19 (coronavirus disease 2019) continue to manifest and amplify - the global economy as a whole - and stock markets in particular have started to tumble drastically within the past few weeks.

For crypto, the same has been seen in recent weeks.

Notable cryptocurrency critics have stated “bitcoin is no longer a non-correlated asset,” while others have been seemingly scratching their heads in a state of confusion.

Last evening, I published an article doing a deep dive into why I think the price decline we’ve witnessed within crypto makes more sense than what many have been suggesting in the crypto-sphere.

The confusion stems, for many, in the viewpoint that when it comes to Bitcoin - it’s seen as a “safe haven” or “hedge” from the traditional financial system. However, after some consideration, the price decline we’ve witnessed within crypto makes sense, for a few reasons.

First, in times of economic panic, there is rush toward cash. This isn’t necessarily because people and companies have found a newfound intrinsic love for the long-term value of the dollar; rather, they’re in need of liquidity. For individuals, this may be because they aren’t sure if they’ll have enough money on hand to pay for expenses over the coming months, or it may just be because they see their 401k balance falling and decide to panic sell, or a combination of both.

The lack of certitude in where tomorrow’s dollar is going to come from will only propagate one thing - selling assets. One cannot pay for things such as rent, food, bills, etc with assets such as gold or stocks - they need cash.

The same can mentality can be applied to crypto.

In other words, if you’re not sure that you’re going to have an income next month, your desire to hold Bitcoin (or any other cryptocurrency) falls dramatically. While the philosophical belief in HODLing may still be there, it’s going to take a back seat to the need to put food on the table.

How might this play out?

Since Bitcoin has often been compared to gold - in the sense that one day it will become supplant to gold in being a “safe haven”, looking into gold’s performance in a past economic crisis may shed some potential repeating behavior for Bitcoin in the coming months.

The above chart was taken during the time of a previous economic crisis - the financial crisis of 2008. From January to October 2008, the price of gold fell from just under $1000 to a bit more than $700.

Despite the significant financial turmoil witnessed within the markets at the time, the price of gold, a proclaimed “safe haven” - fell drastically.

While Bitcoin was not existent until after the peak of the financial crisis, the above investor behavior in gold at the time, propels some interesting observations.

Could what we are witnessing now be similar?

The answer to that question is a difficult one as the aforementioned economic crisis witnessed in 2008 - was due to a truly broken system that was destined to correct itself. Nonetheless, the decline in gold’s price and what we are witnessing now with Bitcoin and the traditional financial markets paint an ode of similarity.

However, with events on the horizon such as the bitcoin halving, the next few months for Bitcoin and crypto in general - will be interesting to witness as they unfold.

I encourage you to read the entire article!


News from ICON World

P-Rep governance meeting #2 has concluded

The second P-Rep governance meeting hosted by the ICON Foundation has concluded. Unfortunately, for this months meeting, there was not a YouTube video uploaded.

Topics discussed during the meeting can be found on the icon.community forum, viewable here.


ICON has been fully integrated into Dapp Review!

After going through the ICON community grant program, Dapp Review has been approved for a grant and has recently integrated ICON into their platform.


Blockchain-based used car trading system

Loopchain, the Seoul Metropolitan government’s standard blockchain platform for all current and future applications is being utilized in a reliable used car trading system - Seoul Automotive Industry Integrated Information System.


Blockchain-based voting system

The Seoul Metropolitan government introduced its blockchain-based voting system utilizing it’s standard blockchain platform - loopchain.

Business as usual for ICON.


MetrICX v2.0 has been released for Android and iOS users!

RHIZOME has recently released a new version of MetrICX. The new version includes several new highly requested features from the ICON community including, but not limited to, dark-mode, multi-addresses, TAP dividend tracking, and more!

Be sure to download the app for iOS or Android if you haven’t already!


ICON in mainstream media, again!

Subtitles courtesy of ICON DAO.


Blockchain Industry News

Wipe out! Why many BTC miners just got liquidated in China - Decrypt

The thinking among the miners was that it made sense to effectively pawn their coins for cash now, wait for the price to go up as the halving approached, and then pay the loans back. In the meantime,  the miners would get operating cash in fiat, which could be used to pay for electricity, daily expenses, and invest in the latest, more powerful rigs.


MakerDAO Governance Approves USDC Stablecoin as Collateral - Cointelegraph

While the Maker Protocol has mechanisms in place for such events, the scale of the sell-off led to these not functioning as intended, and in at least one case, liquidated collateral was auctioned off for 0 Dai.


Craig Wright ordered to pay $165,000 in legal fees - Decrypt

The legal fees Wright was ordered to pay today were incurred during the litigation of two motions regarding the production of documents on Wright's alleged Bitcoin holdings. The Kleiman estate's lawyers originally asked for a total of $658,581.78, mostly for wages, with some expenses included. The judge found that the lawyers were charging excessive rates and had billed for hours without specifying what they were working on—striking these expenses.


Tezos Co-Founder Turns to Gaming With ‘Hearthstone’ Competitor - CoinDesk

The whole project is being built on Tezos, so all trades will be made in the blockchain's native cryptocurrency, XTZ, but the company is also working to hide this behind fiat rails for users who don't care about the crypto aspect.


BitMEX Explains Why Bitcoin Nearly Hit $0 Last Week, Pays Out $200K - Cointelegraph

Coming at a time of intense volatility across Bitcoin markets, a botnet managed to consume hardware resources, ultimately causing BitMEX to fail altogether and go offline for around half an hour. 

We're going to Consensus!

Welcome to this week’s edition of RHIZOME Wire!

A consensus around consensus

While discussions about an organized presence at Consensus — one of the largest and most significant blockchain conference in the world — had been occurring for a few weeks, it was officially announced recently that several P-Reps were collaborating on a way to make sure ICON had a presence at the event.

Here is a quote from RHIZOME’s post announcing the sponsorship:

On average, since the beginning of Consensus in 2015 - the event has attained roughly 3,600 attendees. This year’s consensus is expected to have 5,500 attendees across many different walks of life. With this in mind, it is clear that Consensus is the “big event” and obtaining sponsorship for ICON will accomplish several things.

First and foremost, we want the world and the entire blockchain space to know ICON is not “dead”. Attendance in events with the magnitude such as Consensus is expected for many leading projects in the blockchain space. Rumors or negative remarks may spark when industry leading projects don’t attend, as attendance in an event such as Consensus is almost universally expected - especially for a industry leading project such as ICON.

More than a dozen P-Reps are participating in one manner or another. Here is a breakdown of what each participating team will be contributing:

  • UBIK Capital: Has organized and spearheaded the Consensus 2020 sponsorship initiative. UBIK Capital will provide funding, leading the planning and setup of the booth, and will aid in running it during the conference.

  • ICONation: Has committed funding and will assist in creating static ads to be displayed in the main ballroom area as well as manning the booth. ICONation will also bring camera equipment and obtain footage/conduct interviews during the event.

  • RHIZOME: Has committed funding and will create brochures for people who come to ICON’s booth. RHIZOME will also be bringing high-end video/audio equipment and obtain coverage from the event and conduct interviews with other notable projects/attendees.

  • WeBloc: Will be assisting with running the booth, and demonstrating a DApp running on the ICON network. This will give attendees a chance to interact with a team who is actively building on ICON.

  • ICONVIET: Has committed funding, will be assisting in video production and manning the booth.

  • Mineable: Has committed funding and will create several videos to be played on a loop in the main ballroom area. Mineable will also assist in the creation of static ads to be played in the ballroom area in front of thousands of attendees.

  • Catalyst: Has committed funding, helped organize, and plan the Consensus 2020 sponsorship initiative.

  • SymmetrySLC: Has committed funding for sponsorship.

  • ICON Chicago: Has committed funding for sponsorship.

  • Parrot 9: Will be assisting in providing infographics to use at the booth for people passing by and/or stopping by to see. Parrot 9 will also help with other areas requiring graphics usage.

  • ICON DAO: Will be assisting in helping set up a broof demo at ICON’s booth. ICON DAO also plans to be present in the booth area and helping attendees who stop by ICON’s booth learn more about ICON.

  • Reliant Node: Will provide several hundred gift cards to give away at Consensus to people who stop by and complete a demo at ICON’s booth. These gift cards will be powered by their newly launched “Marvelous” ICON gift card service.

Sometimes, conferences can simply be excuses for people to socialize and party; sometimes, they can be immensely valuable. Most of the time, the value you obtain from participating in an event like this is proportional to the amount you put in.

Based on the above list, it’s clear that ICON will be walking away having made an impact, both on the convention-goers themselves, but on the project’s reputation as well. Beyond simply getting in front of more eyeballs from leaders in the blockchain industry, here are some other possible benefits for ICON:

  • An opportunity to make a positive impact in the eyes of leading voices in blockchain. It’s one thing to impress some random blockchain enthusiast, but it’s another to make a strong, positive impression on those who are viewed as leading voices in the blockchain community. This category also includes the media, who will almost certainly have a strong presence at Consensus.

  • The ability to interact with other projects within the blockchain community - either entire networks, or more specific applications — on possible collaborative efforts with ICON. By having a physical presence, these discussions and opportunities are more likely to present themselves.

  • There will likely be a number of developers attending Consensus, either as hobbyists or those looking more seriously for the leading blockchain opportunities. By making a strong case for the development possibilities on ICON, we can potentially work to recruit some of these interested developers.

Ultimately, attendance, participation, and sponsorship in a conference provides the opportunity for both retail marketing (although on a more limited level) and business-to-business marketing (which has been ICON’s primary focus since the inception of the project.

Is this initiative likely to spark any game changing news or partnerships? Not likely. But at this point, the success of ICON will be delivered through dozens of smaller accomplishments and victories. Participation at Consensus can certainly plant the seeds for a few of those.

However, with the rise of COVID-19 concerns, the event is being monitored carefully and a decision will be made accordingly regarding a continuance/rescheduling for next year prior. Accordingly, it has been announced just today Consensus 2020 will still take place amid COVID-19 concerns, except it will be hosted virtually.

Discussion is currently underway to host Consensus 2021 and/or utilize some of the options presented by CoinDesk for this year’s virtual conference.


News from ICON World

The third community P-Rep meeting has been uploaded!


weBloc hosts a trading competition following a recent exchange listing

Following the recent listing of WOK on Probit Global, weBloc has decided to begin a trading competition to incentivize users to trade WOK on the exchange and win up to 4.72M WOK total from the prize pool.


My-ID v. Competition

In this week’s ICON newsletter, a long awaited explainer on My-ID is provided in the form of two infographics shared within the newsletter.


Balanced has released a new roadmap

This week, Balanced released a high-level roadmap and also ascertained their increased scope for the project. Currently, the release is slated for Q1 of 2021. To learn more about Balanced and what exactly it is, be sure to read some of our past publications breaking down the ambitious project extensively.


ICON announces its new ICONLOOP employee participation program

Recently, ICON has announced that ICONLOOP employees will be mitigated from being restricted to limited to work they are allowed to conduct on the public chain. Accordingly, there will be two programs through which ICONLOOP employees will be able to be rewarded for their work and efforts done on the public chain.

This is a positive move for a few reasons, the biggest of which - having the public chain benefit from the extremely skilled and talented developers at ICONLOOP. Secondly, Min Kim shared some additional insight on twitter ascertaining why the decision was made.


ICONation has released ICONSwap


IISS 3.0 proposal has been released

Recently, ICON shared their new vision and details surrounding the newest revisions planned for IISS (ICON Incentives Scoring System) - IISS 3.0.


RHIZOME Report EP16 has been released!


Reliant Node teases a new project in development


Blockchain Industry News

Kraken Exchange Pledges India Expansion as Nation Reopens for Crypto Business - CoinDesk

In its post, Kraken said it was "thrilled" to see the Reserve Bank of India's ban overturned, and would "recommit resources to grow its service in the region through new features and offerings." Among those was a hint it may target the massive remittance market in India, with Kraken keen to help Indians save and "send value" to friends and family overseas.


Figure Technologies Securitizes $150M of Home Equity Loans on Blockchain - CoinDesk

Figure says it can approve a HELOC in five minutes and fund the loan in five days instead of the typical 30 to 60 days. The firm claims its technology could save $30 billion in costs for the $3 trillion annual securitization market if applied widely.  


US judge throws out Craig Wright’s latest excuse - Decrypt

Wright's latest argument is that a lawyer holds the documents, and therefore his “communications are privileged.” His wife had also dealt with the lawyer, so he claimed he had spousal privilege. And Wright claimed these documents were connected to 17 companies, another reason for not spilling the beans.


Trolls drive "CEO of XRP" to abandon Ripple - Decrypt

Previously one of the most popular proponents of XRP, Hayden could regularly be found discussing the benefits of the cryptocurrency over competitors, as well as sharing financial insights to her more than 76,000 Twitter followers. However, it appears that the negative backlash she received over some of her more controversial tweets and opinions made her a target for XRP trolls and passionate investors.


Watching ads with this web browser now pays for HBO, Hulu - Decrypt

The browser, which uses a “blockchain-based advertising model,” gives users 70 percent of revenue share through its BAT, according to Brave. Now users who earn BAT can redeem those tokens through the TAP Network for gift cards at various retailers—but only if those users have verified their wallets with crypto exchange Uphold.

An interview with Balanced

Welcome to this week’s edition of RHIZOME Wire!

Interview with Balanced

Recently, Scott Smiley, one of the individuals working to build the Balanced project, agreed to an interview with RHIZOME about the project. If you haven’t yet heard of Balanced, be sure to check out the website, and also give my prior writing on the project a read!


Can you provide some insight into what sparked the idea for this project, the process of getting it off-the-ground, and how the participants became involved?

Answer: This idea was sparked when I was at Devcon in Japan. I looked around at the Ethereum DeFi ecosystem and realized its importance. DeFi is not something that one blockchain will dominate or specialize in, I realized that DeFi is something that would benefit any public blockchain.

To get this off the ground, I first did some brainstorming with internal team members about how to design an ICON defi platform. I did meaningful research into MakerDAO and Synthetix. From there, I spoke to a couple P-Rep teams to gauge their interest, specifically looking to get all the skill sets needed to turn this product into a reality. iBriz had the ICON smart contract skills, Mousebelt knows smart contracts and backend development, and PARROT9’s UX design / frontend skills are amazing.

After talking to all the teams and gathering interest, I cranked out a whitepaper and shared it with the team. We’ve been having weekly calls ever since then, with clearly outlined to-do items after each meeting. So far it has been a pleasure working with everybody.

What’s the next phase in your development process, and has the team reached a general timeline for launch?

Answer: The next phase in our development process is putting together a technical roadmap. We are currently outlining all the technical components of Balanced. Our current plan is to have a finished roadmap shared with the community and to start actual development in March.

What do you foresee as the most significant technical obstacles you’ll have to overcome?

Answer: Without getting too deep into the details, there are some technical obstacles when designing the arbitrage process. We are working on thinking through a way to make the transactions less computationally heavy.

From a higher level, the most difficult part of development will be designing and building secure and efficient smart contracts.

Are there any less-than-obvious benefits that Balanced can provide that you’re particularly excited about?

Answer: I’m particularly excited about the longer-term vision of Balanced, where we have many different pegged tokens backed by ICX. The first iteration of Balanced is ICON Dollars (Dollar pegged token backed by ICX), but future enhancements could include everything from other fiat currencies to commodities, stocks, real estate, etc. Anything that has a fairly liquid market that can have accurate pricing data will be theoretically possible to launch on Balanced.

The ICON roadmap currently lists a Stable Coin as one of its future objectives. To the extent you’re aware and can discuss it, do you see Balanced fulfilling this objective, or do you think there may be a scenario where several stable coins exist on the ICON network? 

Answer: I think there should be a scenario with multiple stablecoins on the ICON Network. I’d like to see fiat-backed stablecoins as well.

Fast forward two years from now: what would you hope that the Balanced project looks like and how do you envision its role in the ICON ecosystem?

Answer: I hope to see at least 1.5% of total ICX supply deposited in Balanced and backing various different pegged tokens. I hope to see many different asset classes, such as equities (Amazon stock, apple stock, etc.), commodities (gold, silver, oil, etc.), and fiat (USD, EUR, KRW, etc.) all backed by ICX and traded on a DEX. To me, this really gives ICX meaningful utility in our digital economy as a form of collateral to back the value of other assets.


News from ICON World

Democracy Seoul platform aims to incorporate proposals from the public into city policy


February roadmap update

This week - the ICON Foundation released their February roadmap update. Notable updates include LFT 2.0, side chain, and IISS 3.0.


UBIK Capital has sponsored ICX Comics


Several P-Rep teams have funded sponsorship for ICON at Consensus 2020

Inarguably within the blockchain space - Consensus has been touted as the “big event” one of which nearly all reputable and industry leading projects attend/have attended stretching as far back as the event’s orgins, 2015. This year, thanks to combined efforts of several P-Rep teams, ICON will be a top sponsor for the event.

Accordingly, RHIZOME has released more details surrounding the sponsorship and how the combined efforts of numerous P-Rep teams epitomizes a truly ecosystem-wide initiative.


Blackjack has officially launched!


Brian Li of RHIZOME sits down and chats with Corey Costa in his latest podcast


ICONLOOP is one of four finalists in the Global Enterprise Blockchain Awards


The next community P-Rep meeting will take place this weekend

As a precursor, in case other are not aware - the weekly P-Rep meetings have been moved to a bi-weekly basis.


5 new partners have joined the MyID alliance!


South Korea has passed legislation that recognizes crypto as a legal entity


Blockchain Industry News

IOTA plans to spin its crypto back up next week - Decrypt

An attack on IOTA on February 12 resulted in the theft of several million dollars worth of IOTA tokens. The day after, the IOTA Foundation, which develops the tokens, announced that it had “paused” the Coordinator, the IOTA-run node that validates the network’s transactions. 


CoinDesk’s Statement on Coronavirus and Blockchain Week NYC - CoinDesk

As of today, CoinDesk is moving forward as planned with Consensus 2020 and Blockchain Week NYC, but we will be monitoring the situation on a daily basis between now and May 8. 


The Steem Takeover and the Coming Proof-of-Stake Crisis - Cointelegraph

The Steem blockchain reportedly experienced a troubling episode recently, whereby the blockchain’s entire governance system was disturbed. Tron founder Justin Sun, new owner of the Steemit social network based on the Steem token, appears to have successfully executed a takeover of Steem by leveraging not only tokens directly controlled, but also tokens held on several major exchanges, in order to vote out the previous delegates (Steem uses a delegated proof-of-stake system) and install new ones.


Ethereum’s ProgPoW Debate Is About Much More Than Mining - CoinDesk

ProgPoW could drive a split on Ethereum if it goes forward, potentially similar to what happened after the DAO hack in 2016, which led to the creation of ethereum classic (ETC). But ethereum (and its native currency, ETH) is worth vastly more now than it was then. Much more is at stake.

Is a bond requirement a good idea?

Welcome to this week’s edition of RHIZOME Wire!

The possibility of a bond requirement

About two weeks ago, Ben Lee - aka “Dr. ICON” posted a thread in the ICON Community forum dedicated to a discussion about possible changes to IISS. Listed first among possible ideas was the concept of a bond requirement:

Bond Requirement: Many voters are scared of being burned and we think this is an issue. We also think it is an issue that many P-Reps have nothing at stake themselves and voters are taking all the risk of holding ICX. We believe P-Reps should be accountable for their own actions and should also have “skin in the game”. We are still deciding on the size of the bond requirement, but it will be a percentage of total delegation received. This will also lower the advantage of vote buying because P-Reps will need to post a larger bond as they get more votes. If they can’t post the full bond they will not get full rewards. This will also incentivize P-Reps to not sell some of their ICX because they need to have it as a reserve to post bond as they get more votes.

This, as far as I can tell, is the first serious suggestion of moving toward this type of system. Accordingly, I’d like to examine what the possible pros and cons of this type of proposal could be.

Pros

As Ben Lee pointed out, by requiring P-Reps to hold a certain amount of ICX, it ensures they have more skin in the game. Here is a scenario that is currently the “worst case scenario:”

  • A P-Rep has been voted in entirely by the community, holding no ICX themselves.

  • Rather than utilizing the ICX they currently receive for the betterment of the project, they instead simply sell their P-Rep rewards each day for spot BTC, meaning that a declining ICX price over the long term has no impact on them.

  • Due to voter apathy, they continue to receive votes, despite their lack of contribution.

Is this currently happening? Not that I can tell. Are all three of these outcomes likely? Not really. Are some degree of them possible? Yes.

Accordingly, by requiring a bond, either this P-Rep would have to purchase ICX and hold it — thus making them true stakeholders — or, they’d have to dedicate a chunk of their rewards toward fulfilling their bond, rather than selling them on the market.

For P-Reps who aren’t acting maliciously (in the manner described immediately above), requiring a bond is, to a certain extent, almost like another layer of staking. By requiring X% of a vote to be bonded (ICON has stated that they don’t envision the requirement being higher than 10%), it’s essentially locking up more ICX, further reducing the true circulating supply.

I could envision a scenario in which the bond percentage required fluctuates based on the level of the network that’s staked overall. For instance, the closer we get to 100% staked, the less the bond requirement is. This would be a similar model to Tezos’ bond requirements.

Meanwhile, as teams received more votes, they’d be required to deposit more ICX into their bond. This will add another layer of disincentive to selling rewards — perhaps both their P-Rep rewards, as well as their staking rewards.

Finally, it could indeed serve as a disincentive to vote buying as well. If a P-Rep knows that they’ll have to not only give up a portion of the rewards (which costs resources), but they’d have to pony up more ICX as their votes as “bought,” the math starts to get a bit more complicated when it comes to whether or not it’s worth it to attempt vote buying (not including possible blowback from the community).

There may be other benefits to the bond idea, but these are what are the most obvious.

Cons

One of the most significant objections to the idea of a bond is that it would further enable self-staking whales while possibly penalizing (or at least disincentivizing) P-Reps who don’t hold enough ICX to self-stake.

A major factor in this possibility is what exactly the bond % will be. There is likely a formula where the bond requirement is low enough to where any growth in the bond requirement could be offset by simply retaining the increased P-Rep rewards that come with an increase in votes. That way, teams could grow their bond in direct correlation with the vote increase.

Meanwhile, there are also concerns that simply putting ICX aside where it does nothing except sit in a bond wallet will mean the ICX isn’t being put to use as a contribution to the system. This is more relevant as it relates to P-Rep rewards being bonded instead of spent on growth.

This is certainly a legitimate concern, and once again touches upon the ongoing debate about whether P-Rep rewards should be use to build on ICON or if they should be sold more sparingly to avoid pressure on the price. Like much of the bond proposal, the specific math would provide more clarity about whether or not a bond would lead to excessive “hoarding” of P-Rep rewards.

As mentioned in the section on benefits, there may be additional unintended consequences that are not explored here.

An idea for consideration…

While I have not seen this idea mentioned, the idea of creating a disincentive for voters to vote for P-Reps with insufficient bonds may be worth considering. Let’s assume a team has received 10m votes, and is atop the rankings. Let’s also pretend a 5% bonding requirement, equating to 500,000. Let’s say they are only able to provide 400,000. Not only will the P-Rep receive fewer rewards, but the voters will as well. The outcome would be that voters would be less inclined to vote for the team with “too many” votes, knowing they’d receive fewer rewards.

This would also require voters to remain “on their toes” and check their P-Reps bond balance frequently, in case they are leaving potential rewards on the table.

This would have the additional benefit of giving top P-Reps a bit more control over centralization concerns. For instance, it’s one thing for a top team to encourage vote movement vocally. It’s another for them to sacrifice some rewards by reducing their bond and thus generating a financial incentive for votes to shift to other teams.

Of course, the downside of this is that teams with sufficient ICX — let’s say, for example, the ICON Foundation — would still allow voters to receive 100% of the rewards, since they’d presumably be self-staked enough, meaning voters wouldn’t shift votes away from them. However, this is exactly how the system works now.

Could this have a negative effect on lower-ranked P-Rep teams? (Say, a team that has 2m votes, but doesn’t have 100,00 ICX) Possibly — but it’s a lot easier for a team to acquire 100,000 ICX than it is 500,000 ICX, so the impact would not be as significant.

Of course, there are more downsides I may not be considering, but this could be an idea worth considering.

Conclusion

As with most proposals, the details do matter; chief among them will be the bond requirement %, and whether or not it will fluctuate with either the percent of the total supply that is staked, the price of ICX, or a combination of both. I do hope the ICON team continues to explore this idea and put forth more specific numbers in the near future so the community can have a better assessment of the true impact of this type of proposal.


News from ICON World

Ricky Dodds gives a brief overview of real yields across top PoS based-blockchain networks


MyID services are slated for release in April


RHIZOME has postponed their visit to ICON HQ due to coronavirus concerns

Due to lingering concerns abound the coronavirus with South Korea becoming the most infected country outside of China, RHIZOME has postponed their plans to visit ICON HQ.


Second P-Rep weekly meeting has been uploaded

The second P-Rep weekly meeting has been uploaded. ICONation team member, Radiofriendly was kind enough to moderate discussion. Key topics discussed were taken from the icon.community forum, viewable here.

It’s important to note, the weekly P-Rep meetings have now been moved to a bi-weekly basis.


More MetrICX features are on the way!

Multi-addresses, dark mode, and several others features are on the way from RHIZOME for users of MetrICX.


Blockchain medical information app SeoulCare will use ICONLOOP’s smart insurance claims service


Metanyx has started development of ICONpay for Shopify integration


Ricky Dodds shares a prospective outlook for ICON

Recently, Ricky Dodds chimed in on twitter sharing a few of the things he expects to see by year end for the ICON project.


ICON will be a sponsor of Consensus 2020

Thanks to efforts from several P-Rep teams and involvement from the ICON Foundation, ICON will be a sponsor for this year’s Consensus event hosted by CoinDesk. Roughly 5,500 attendees are estimated to be present for the event.


JH Kim gets interviewed by CoinDesk Korea

Recently, ICONLOOP CEO, JH Kim was interviewed by CoinDesk Korea. Long time ICON enthusiast and former head of research at Deblock, Markus Jun shared a translation of a few of JH Kim’s statements.


ICX_Station has released part II of ICON, deconstructed


ZenSports has raised another $770k in startup funding

ZenSports, an mobile peer-to-peer sports betting platform that will utilize the ICON public chain has now raised roughly $2M in startup funding. The company will now begin aggressive marketing geared towards customer acquisition.


The ICONist provides a tour of ICON Lounge

Recently, ICONLOOP hosted an event at ICON Lounge. Accordingly, The ICONist provided an in-depth article breaking down the event and a virtual tour of ICON Lounge.


Blockchain Industry News

On EOS Blockchain, Vote Buying Is Business as Usual - CoinDesk

The heart of Buterin’s prediction about vote-buying comes down to cartels. He described how delegate candidates will inevitably start offering better and better terms to voters to win votes, until at some point a bloc forms to stabilize the instability. Worse, as Binance's report describes, there can even be single-entity cartels: organizations that take up more than one slot on the list of block producers, by pretending to be multiple entities.


Justin Sun Bought Steemit. Steem Moved to Limit His Power - CoinDesk

Steem is a delegated proof-of-stake blockchain (DPoS), much like EOS, which means a smaller number of decisionmakers are needed to coordinate in order to counter a major new stakeholder. The community deemed action necessary because Steemit owns a giant pile of tokens that could be used to take over the blockchain, though the pool has never previously voted. It is believed that Sun, a savvy marketer and controversial figure in the industry, now owns that giant pile.


Polkadot to Use Chainlink Oracles for Interoperability Network - CoinDesk

"The integration of Chainlink’s decentralized oracle network on a dedicated parachain can unlock multiple use cases on Polkadot," Polkadot wrote in a blog post announcing the deal. "For example, a parachain optimized for self-sovereign identity would be able to reliably query off-chain data such as identity-based digital signatures or verifiable claims using Chainlink’s oracles."


Steven Seagal fined $300,000 for shilling failed ICO startup - Decrypt

According to the SEC, Seagal didn’t tell prospective investors that failed “utility” coin Bitcoiin2Gen (B2G) promised to pay him $250,000 in cash and $750,000 worth of B2G tokens if he became its brand ambassador. 


Ethereum Community Comes out Against Controversial ProgPoW - Cointelegraph

ProgPoW is a version of the proof-of-work (PoW) algorithm, which is supposed to smooth the transition of the Ethereum network to proof-of-stake (PoS). It’s designed to eliminate the gap in efficiency between Ethereum ASIC miners and graphics processing units (GPU) to protect the Ethereum network against a monopoly of ASIC hardware manufacturers.

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