July Overview of Decentralized Segments

I introduce you my pet project: Overview of Decentralized Segments. I do that 3 months in Russian already. But with help of @coinfox I have possibility to publish this 4th overview in English. This monthly overview is a part of monthly digest Blockchain Boom by @coinfox and #cyberfund. You can find really interesting analysis by @creator and @vitaly-lvov there. Enjoy!

It has been an interesting month. Ethereum split into Ethereum and Cethereum (for Classic Ethereum) due to political reasons. Steem has proved it is not a trembling creature but does have the right. We can observe the emerging demand for turnkey smart contract systems and, as a consequence, financial instruments denominated in national currencies.

Decentralized Computing

As a result of this month, the opinions concerning the philosophy of modern economic doctrines have divided. On one side are the technocrats who understand how to understand the code literally, on the other side are conservatives who think it is always possible to come to terms and rewrite the history. The market will tell who was right.

Ethereum:Ethereum Classic 5:1.

It is most interesting that the very fact of having two capitalised chains in this evolutionary struggle conveys a very interesting suggestion that it would be not easy to rewrite the history. It tends to bifurcate. And in such a way that it will be always possible to decide which of the two given histories is more profitable :-). Pure mind blow.

It will be interesting when prediction markets start working. For this, it is worth to invest in decentralised computing! This month, even with all this turbulence they have all the chances: the segment has added $150M, which means the growth by 14% in dollars and 18% in bitcoin. It is obvious that babies are growing and it is hard to predict what it will result in.

Decentralized Social Networks

This month, Steem made a climbing jump as it has grown nearly 5 times and bent over Synereo, which also grew 1.5 times. Indeed, how a thing that does not work can cost more than a thing that does? The market has effectively answered this question: it cannot.

Hot segment, no shit! 140% growth, while the segment capitalisation has grown from $181M to $434M. There they are, blockchain bubble megabucks! It will happen someday, right? If the dotcom had it, the blockchain will for sure. But not now. It's too early.

I like memes about that! I personally think that memes are an absolute indicator of virality. And without virality, a social network is just a pathetic excuse for a social network.

Here is a large list of them memes. The moral here is as follows:

"The Steem technology, on which we put our stake, has proved its resiliency in just three months from the moment of its launch"

Attracted a hell of demand even from the most notable more traditional venture capitalists. You may read what Fred Wilson thinks of Steem. Now it needs the time to meet the growth costs and pass the threshold of 100k registrations and 10k active daily users. I think, this is only the beginning and this creature has a very spectacular future. With particular interest, I am watching for something specific to come from Synereo. But it is fairly obvious that you need to be much better to show a faster growth. And for this project, I think, the current capitalisation of 140 mln dollars is too much. Even for Steem in its current state, 230 mln dollars of capitalisation means $5,000 for every user, which is too much. Let it be no secret and everybody knows where this money comes from – from the users. And this is really cool! A social network where the money comes from users and the users reallocate it among themselves must be and will be one of the first killer applications for the blockchain technology.

In just two months, I myself became a huge fan of the Steem blockchain and plan to dedicate a part of my life to it. Astonishing. No, really! Whoever heard that a project made from scratch in 6 months becomes serious enough to have a map like this.

Here, it shows your daily income compared to all other countries of the world. There's only one little problem. It sort of suggests that if you pull out only, it will last for about two years… I've worked for the system for about two months, invested some bitcoins, and with the content it generated it started to earn me that much, huh. More than in any country of the world! It's a kinda gorgeous demonstration of the potential of blockchain technologies for the people!

Smart Contracts Platforms for Organisations

Having comprehended the recent events around TheDAO, I became even more ascertain in my opinion that the segment of smart contract systems will flourish due to the demand for smart contracts that work in a guaranteed and predictable way for they are generic ones, despite the fact that this month, the segment lost 16% in bitcoins and 19% in dollars. Its capitalisation now hardly exceeds $100M, which is rather adequate.

To be honest with you, in the last half-year, I did not take a single look at NXT because I was convinced that everything it can do can be done with Ethereum. And it really is so.

But the value of NXT lies not in it having many dope smart contracts, but in the fact that (1) these contracts are familiar to a certain number of people (2) these contracts are well tested and has been working for years and (3) NXT smart contracts have a good balance between easiness and flexibility. The last drop in my world-view of this segment was the article by @dan where he represents any DAO as a set of smart contracts. Seen from this angle, bitcoin is a combination of two contracts. One makes the blockchain pay the miners for solution of abstract tasks, while the other makes the users pay the miners for verification and registration of transactions. That's it. Two contracts for all Bitcoin. No shit, it's too easy!

I decided to define the segment using one very simple criterion – the ability for individuals and organisations to issue and trade tokens. Obviously, without this, you can't build an organisation on a blockchain. Otherwise, there is no economic stimulus. It won't take off. The rest is optional.

So, who's in the family is under surveillance?

• NEM
• NXT
• BitShares
• Counterparty
• Omni Layer

Generally speaking, these are all decentralised organisations on the market doing a real job in the segment. We've sifted them through all over and can see all their advantages and disadvantages.

Of course, you can also use Colored Coins and Open Assets based on the bitcoin blockchain. But I don't consider them organisations because their protocol is either maintained by centralised organisations or by no one. There are no stimuli for apps ecosystem to be developed. There is, of course, a reason to analyse them from the point of view of the number of transactions, to understand how these protocols compete with their incentivised fellows. But I'm not going to look in that direction now.

There is also Ripple and Stellar based on the idea of issuing debts denominated in national currencies. I regard this as a separate segment because it is much narrower compared to full-blown platforms for organisation of organisation management by means of smart contracts.

I didn't include Waves here as well because this blockchain doesn't have anything of the specified functionality released yet. Lisk can jog on too, because with no blockchain apps neither clients for them it can't be used for our purposes. We pity Qora which seems worthless due to low capitalisation and poor community performance.

And here, just to complete the picture, I would certainly mention that there are at least 6 more projects in the field of Ethereum-based decentralized corporations that will issue tokens according to the standards of Standardized Contract API, each following their own philosophy, which will most likely join the segment when something starts at least to work:

• Wings
• Colony
• Backfeed
• BoardRoom
• AiraDAO
• Daobase.org

I can't say that this segment has endured any serious change over the month. As before, it only makes real sense to issue in BitShares. Among the disadvantages, it can be linked with bitcoin only through a debt asset OPEN.BTC. Otherwise, the platform shines. The logic of the market is hardly comprehensible here when it evaluates the completely non-working Counterparty at $6 mln and the brilliant BitShares at only $12 mln. NXT has grown after the news about Ardor. Personally, I am satisfied to see where the platform is moving and I am not going to write it off. Moreover, I will most likely return to my study of this platform because the design and the economy of sidechains as it is planned at Ardor looks meaningful and functional.

2 protocols: Counterparty and Omni look like a couple of freaks: slow, limited, expensive. If you issue tokens in these protocols for some particular tasks, moving them would be rather pain less. But trading on the bitcoin blockchain is bullshit. Try it. The guys need to think how to employ sidechains for this purpose. Listing on centralised exchanges is not a trivial task.

NEM has no proper interface yet for the creation of tokens in the client, as well as no ways to exchange them, but I like how it combines the concept of token naming. I think it will work perfectly, when it does!

A detailed review of these systems is a separate story. Someday I'll get around it.

Fiat Pegged Tokens

I've been watching this segment for quite a long time. The idea is too exciting to create a token with the price of the dollar but all the advantages of bitcoin. This was what Vitalik Buterin wrote about, and what has been concerning @dan from the very beginning of BitShares. What do we have in the end?

Nubits

The concept of NuShares has proven a failure recently. It's nice to see NuShares to be designed as a prototype of the real-world federal reserves put on a blockchain.

There is a central bank with NuShares stockholders who print NuBits according to their own obscure logic out of thin air. The NuShares stockholders guarantee that NuBits will be bought for a price no lower than 1$. To provide this, the system has a multilevel liquidity support system. After only a year, the NuShares to dollar pegging fell off because the stockholders failed to meet their obligations. This little cryptocurrency experiment clearly demonstrates that the existing federal reserve models are unstable and a similar event is always probable in the existing fiat ecosystem. For the experiment, we invested in this project a year ago, just to look into it. We looked and withdraw the money before the collapse :-)

BitUSD from BitShares

The pioneer of polymorphic cryptocurrencies :­) It works as a CFD with the 2x minimum required collateral in BitShares. The instrument works decently for a few years now but doesn't grow. With the capitalisation of about $100k, it just can't be taken seriously as an instrument for dollar operations on the blockchain. I reckon, the reason here is that such instruments may only exist and develop in the markets with a developed debt system. Whereas this part is only emerging on BitShares, while there are no specialised contracts provided there for developing a debt system. For the moment, we hold back from using this instrument for real.

TetherUSD

This is a simple debt of an ordinary US-registered legal entity, which operates on the Bitcoin blockchain in the Omni protocol. I.e. it is a token with default risk. At the moment there are 7 mln debts in circulation. And it works rather good. The token is traded on Poloniex very well at the price always close to US dollar. Which sort of implies, that, the legal entity most likely repays its obligations. This instrument still requires you to trust somebody you know nothing about. There are many similar instruments on BitShares. The debts from OpenLedger and BlockTrades are among them. I would isolate those assets by their nature into a separate class – creditor obligations.

SBD or steemdollar

This dollar is the debt of the Steem blockchain convertible into its shares. The Steem blockchain provides the guarantee that steembuck can be always converted into Steem shares at the market price. To guarantee the fulfilment of obligations, the blockchain is programmed to hold to 5% limit of the whole amount of SBD (about $1.5 at the moment) in Steem's capitalisation. The price pegging at the moment works badly. The price of SBD fluctuates between 75% and 140%. Nevertheless, I consider the steembuck the most promising instrument on the market and confidently ploughed into it all my pennies I would like to store dollar-pegged for short term expenses. We'll see what comes of this. Meanwhile, on the part of @satoshifund we cannot use this instrument yet because its liquidity does not comply with our needs.

I will be watching the progress of this segment with pleasure, because it is, in fact, the most relevant for the mass adoption of the blockchain. It is necessary to find the way for people to store a value equal to national currency by means of networks independent from the state, which currently controls non-cash money circulation. I am sure that this way of market competition will be beneficial for real national economies.

Miscellaneous

This month, I have nothing to say about decentralized storage (the growth by 11% in USD and 14% in bitcoin above the $100M mark) and the settlement system (fall by 9% in dollars and 6% in bitcoins below the $800M mark). If there is nothing to say, I think, I won't. I'd better say that for the next month we are preparing many marvelous announcements!