Three Things #29: August 7, 2022
A few things that haven't changed
We’re getting closer to launching Spacemesh a short 18 weeks from now. As I mentioned a few weeks ago, now that we’re in the final gauntlet and I shift focus more and more to achieving this important milestone, I’m going to use this space to explore the ideas and motivations behind the project. I’ll try to tell the story of the journey these past few years, to talk about what the future might look like, to discuss some of the technical and social differences behind the project, etc. If you’re unaware of Spacemesh, you can start by reading about my motivations for joining the project. If you’re interested in the project, great! I have plenty to share and I can’t wait to hear your thoughts. If you’re disinterested, that’s fine too—check back here in a few months :) (I doubt I’ll write exclusively about Spacemesh for months, but then again, I just might!)
To kick things off, I’d like to lay the groundwork by talking about what has and has not changed since the Spacemesh project kicked off in 2017-2018, and since I joined in 2019. Here are some things that have not changed.
Thing #1: This Stuff Matters
I try to be as honest as possible with other people, and with myself as well. I’ve been very open about my frustrations with Bitcoin, Ethereum, and with the cryptocurrency/blockchain/Web3 space more generally. And I’ve tried to periodically take a step back and ask myself, what’s it all for? Life is short, and we only really get to do a small handful of impactful things in one lifetime, so I ask myself: Why pursue this one? Is this really what I want to spend my life doing?
Every time I’ve asked myself this question—and, to be honest, sometimes when I did it took a vision quest, some time off, and some deep conversations to find faith and confidence in the answer—every time I come back to basics, and recommit to this work, because I know that it really matters.
There isn’t enough space here to list all the reasons why, but the single most important one has to do with social fabric. We humans are social creatures by nature. We don’t do very well on our own; we survive, thrive, scale, and succeed (or fail) in groups. We require tools and technologies to do that well, to scale beyond the size of a single tribe (a group where everyone is on a first name basis with everyone else). Over the course of the development of human civilization we’ve developed better and better tools for social scalability to scale this social fabric, from language and money to agriculture, warfare, governance, religion, books, empires, boats and airplanes, nation states, democracy, parliaments, law, private property, corporations, factories, automobiles, telegraph and telephone and computers and mobile phones and modern internet, and of course a lot else in between.
Every one of these social structures has been built upon one of two foundations, atoms and institutions. Human civilization started with atoms: building physical things, like huts and castles and walls and armor, to protect ourselves, and building sharp, powerful weapons to defeat those defenses. For money, we started with physical artifacts such as shells and beads. But none of these things scaled very far because the physical world has limits. You cannot simply mint more rare shells in order to stimulate the local island economy, and there are limits to how big you can build your castle walls.
So humans upgraded to a new social structure: the institution. Institutions are almost infinitely flexible and can be configured in a myriad of ways, and they’re vastly more scalable than atoms. Institutions, especially the most successful, most scalable ones of all—the nation state, the corporation, and religion—got us pretty far, but they’ve recently begun to show their age. They’re the product of a previous age that are increasingly unable to keep up with the pace of change, and with the impacts of modern technology in particular.
Enter the blockchain. It’s the first fundamental breakthrough in tools of social scalability in hundreds of years, one that is neither bound by atoms nor by existing institutions, and is thus inherently more scalable than anything that came before. It’s an entirely new sort of institution, one which allows human promises to be backed up by code and by serious economic constraints, and where code and math can keep otherwise fallible humans honest.
Blockchain and the things built on it—money, governance, digital scarcity—represent the best hope humanity has to continue to scale and develop in this age and beyond. For a variety of reasons, existing blockchains aren’t perfect—just as the first companies, nation states, and religions weren’t perfect, either. It’s essential that we keep innovating. Spacemesh is about innovation along some important dimensions (more on this soon).
For more: Consider what sorts of institutions blockchain and smart contracts will enable us to build in the not-too-distant future (other than the obvious ones like money, banks, courts, property registry, voting, etc.).
Thing #2: Bitcoin and Ethereum
Another thing which has not changed in the past few years is the dominance of Bitcoin and Ethereum. In retrospect, this is actually somewhat surprising. So many new chains have appeared over the last few years with diverse designs, built by different teams in different places, using different tools, taking entirely different philosophies and approaches. And that’s just layer one, to say nothing of the innovation that’s taking place at layer two and beyond, and in “crypto-adjacent” projects like Urbit. It’s sort of surprising that nothing has dethroned either of these chains yet—especially considering that there isn’t really such a thing as a first-mover advantage.
Other chains, networks, and ecosystems like Solana have begun to give Ethereum a run for its money with respect to attracting talent and developer interest. Anecdotally, I’ve seen more and more talented friends migrate away from working on Ethereum layer one to working on sidechains or in other ecosystems. But Ethereum is still lightyears ahead of the competition and gaining ground going into the upcoming Merge. The Ethereum ecosystem continues to grow larger and more diverse every day. A year or two ago, commentators called it Ethereum’s race to lose; so far, Ethereum isn’t losing. Nevertheless, it’s super interesting to see which other approaches are working with respect to technology (especially VM and programming languages), culture, governance, etc. (More on this later when I get to what has changed!)
Based on my experiences in Ethereum a few years ago, good and bad, I wrote a very long article series on how to build a successful blockchain platform and community. 80% of it was praise for the things Ethereum got right. And I still see projects making the same mistakes today, things such as raising too much money from the wrong people, putting marketing before product and community, not investing in good tech, and aiming for technical perfection rather than adopting existing standards. Of course hindsight is 20/20 but, for all of my criticism of Ethereum and for all of its flaws, I am impressed by how the momentum of the project and the ecosystem haven’t slowed down at all over the years.
Bitcoin and Ethereum themselves have continued to change, though obviously not at the same pace. Ethereum continues to rapidly evolve. It has made some major changes recently, such as the launch of the Eth2 Beacon Chain, EIP-1559, and an enormous amount of prep work for the upcoming Merge.
Bitcoin is another story. While the Bitcoin blockchain honeybadgers on and continues to produce one sovereign block after another every ten minutes, making Bitcoin an ever-reliable store of value, the momentum with respect to both community and ongoing development work feels like it’s slowed considerably. Ethereum and other, more agile projects have continued to attract the lion’s share of developer attention, both at the base layer and at the application layer, because it’s simply much easier to innovate on other platforms and because other platforms promote a culture of innovation. Ethereum has vastly outpaced Bitcoin in terms not only of developers, applications, and use cases—a long and growing list that recently has expanded to things like DAOs, stablecoins, NFTs, and identity management—but also in concrete metrics such as total fees collected and total transaction throughput. Many longterm, hardcore Bitcoin advocates seem more interested in perpetual navel-gazing and manufacturing internal crises, such as apostatizing those who aren’t faithful enough, rather than in being constructive and forward-looking. If these trends continue, I wouldn’t be at all surprised if Ethereum actually flippened Bitcoin.
For the record, I’m bullish on Bitcoin, Ethereum, and Spacemesh, each for different reasons. Over the long run this is definitely not a zero sum game, and each chain brings something different to the table. There is room for more than one winner, and in spite of what maximalists say, the future is clearly multi-chain.
For more: As a thought experiment, consider what it would take for another blockchain/cryptocurrency to unseat Bitcoin, Ethereum, or both.
Thing #3: Mining from Home
In the earliest days of Bitcoin and Ethereum, it was possible to mine coins profitably from home without requiring specialized hardware, but that quickly became impossible for both networks as word spread, incentives grew, economies of scale developed and more and more professional miners appeared. This trend has only continued over the past few years. Other networks have tried to enable mining from home, most notably Chia (which, like Spacemesh, uses hard drive space for mining), but no one has yet figured out the right mix of incentives and economics to make this possible. It’s still possible to mine Chia from home, but only as part of a mining pool, and the rewards for mining with commodity-grade hardware work out to literally pennies per day.
Meanwhile the rest of the crypto space has migrated towards proof of stake, which is even less friendly to mining from home. In most PoS networks, there are a tiny number of professional, enshrined validators, the minimum required stake is enormous and the best everyone else can hope for is to delegate coins to these privileged validators in exchange for a pittance of a reward. Ethereum has bucked this trend by making it permissionless to run a validator and thus allowing orders of magnitude more validators, but the minimum stake required to operate a validator is still far too expensive for most people, and running a validator also requires a lot of technical knowhow. As with proof of work mining using a pool is an option, but pools increase centralization, are trusted intermediaries, and result in relatively lower rewards for home miners.
Due to the near-impossibility of mining from home, participants in the vast majority of crypto projects, communities, and ecosystems have only three options to attain coins: 1. Buying them on an exchange (which requires ID and a bank account and/or credit card), 2. Being gifted them (which requires luck and generous friends), or 3. Doing work in exchange for them (honorable but tricky). Options 2 and 3 are severely limited for many people in many legal jurisdictions, which leaves only option 1 for the majority of people. Option 1 is a pain in the ass because of ID requirements and an often lengthy KYC process, and because many users aren’t familiar with exchanges and don’t feel comfortable using them. The option is completely off the table for teenagers and others without a bank account or a credit card. The difficulty of obtaining your first coins, and the fact that none of these options is permissionless, are antithetical to the original concept of cryptocurrency (which was all about permissionlessness and the removal of gatekeepers).
Many luminaries and active, passionate contributors in the cryptocurrency space got their start mining bitcoin or ether from home—I know dozens who did. And while I wasn’t one of them, I can tell you that I feel very differently about networks that have enabled me to mine my own coins. I feel much more enfranchised by those networks and communities, and much more excited about them. I feel more of a sense of ownership and a desire to contribute.
The blockchain space has collectively given up on the idea of decentralized block production—because it’s hard, and difficult to scale—a thesis that Vitalik wrote about in Endgame. I don’t want to understate the difficulty of this problem or suggest that the solution is trivial, but we have a novel approach to the problem at Spacemesh and we’re going to try as hard as we can to make it easy and profitable for anyone, anywhere to mine from home using whatever hardware they’ve already got. (Expect more on this important topic later, too.)
For more: Try using an app like NiceHash to earn a few bucks with your existing hardware and internet connection.