2 posts tagged with "defi"

• What does that mean?
• Impact on cryptocurrencies
• What can be done
• What xx Network has to offer
• Take-away

The Coin Telegraph reports:

Uniswap Labs founder Hayden Adams said its “ready to fight” after disclosing it received a notice of possible enforcement action from the SEC.

What does that mean?​

Let's soak in the wisdom of X for a minute.

(Presumed) teenage shitcoiner 1 on X:

No one that uses Uniswap cares about the SEC

The SEC doesn't care that no one who uses Uniswap doesn't care about the SEC.

All they need to do is to persuade Mr. Adams and fellow developers to pick another hobby (after they beat them in a Biden kangaroo court).

(Presumed) teenage shitcoiner 2 on X:

With Dexes like uniswap, SEC can bring down the domain but easily anyone can setup a Dex exchange like Uniswap.

Like anyone can setup and run a coin mixer - they can't, not for long anyway.

These SEC activities aren't unexpected.

It's happened before to ShapeShift which - curiously enough (see the link) - just settled with the SEC some five weeks ago.

The federal regulator instituted a cease-and-desist against ShapeShift, which dissolved its U.S. crypto exchange in 2021.

Very encouraging (for the SEC) - it took years, but now it's done!

One down, few more to go! Centralized or decentralized doesn't matter - as long as there's a person that can be sued, they're good to go after them. (In the case of the US government they don't even care if you're a US citizen or resident.)

Maybe some used to think - apparently, some on X still do to this day - that one can just ignore the delistings of their coins from CEX or the draconian anti-privacy and anti-liberty laws taking effect in EU and elsewhere.

Unfortunately, that's not possible as long as we have these quasi-capitalist and socialist governments unite in their fascist and globalist mission to eliminate freedom.

It's not hard to imagine what comes next - it's not unlike what I said in the post EU puts EU-based privacy coin users in untenable position. In fact, it's the same thing, in my opinion.

Here's how I see this will play out for DEXes:

• Prominent US-based DEX developers, non-profits, community members, server operators are silenced
• Many users drop off as well
• The same thing happens worldwide
• "Anonymous" (in their opinion) community members continue development and operations (decentralized Git, hidden services on Tor, etc.), but volumes are small and liquidity sucks
• Because anonymity and reputation don't mix well, scams increase (malicious commits, for example), fundraising becomes hard, and their user base a tiny fraction of what it used to be

Decentralized Exchanges won't disappear, but they're in for a very difficult period.

Another possibility - not immediate, but 3-5 years from now - is that the West sets up some version of the commie firewall that detects and blocks IP addresses of known DEX nodes. I know that's very difficult to do well, but so is today's blocking of general Internet in certain hellholes around world which does work very well. All it takes is a bit of disruption and a globally disruptive legal action which all major governments and globalist organizations seem to be eager to team up on.

Impact on cryptocurrencies​

It's easy to think this could mainly impact "illegal" (privacy) coins. That was my first thought, at least.

But that is not the case. It will impact all DEX users, all DEX exchanges and therefore all coins.

In the case of major crypto-currencies, any coin that other coins are denominated in - primarily stablecoins, but also BTC, ETH and others.

Who knows, maybe - in I'm right - privacy coins could regain some of the lost popularity among the leftover DeFi hardliners, but if you lose 90% of users and gain 20%, that's still not a great result and you're not growing or "changing the world" (sorry, that's as naive as I am willing to go - I won't say "democratizing finance").

I've just looked at the past 12 months of Ethereum vs. Monero on Google Trends. I assume the Google globalists aren't feeding us fake trends, although we can't exclude that possibility.

If you remove Ethereum from the chart and look at Monero alone, you'll see it went up a lot in late 2023 and then dropped off. I think it will drop even further (see that post on EU above).

But when Ethereum is added to the chart, Monero looks flat and barely registers.

It's not an apples-to-apples comparison, I know, but it shows two things:

• The average user cares about flipping coins, not about privacy (not something I like to see, but let's admit it)
• Despite the ongoing attack on privacy (and other) crypto-currencies in the EU, Monero is attracting just a small fraction of crypto-currency users, which I think confirms my expectation that most crypto-exchange users will give up or trade "legal and regulated coins" (completely useless circle-jerk as far as I'm concerned - it's no different from flipping FANGs all day long)

What can be done​

Maybe some "benevolent dictator" like that Bukele guy (not benevolent in my opinion, but I'm trying to think like the average teenage Bitcoin fan on X) permits DEX in their country and some prominent developers give up citizenship and relocate there, but this can't do anything for the users in countries where the use of decentralized exchanges is illegal.

Would economic and political gains from such policies be net-positive? Probably not. Maybe that'd earn sanctions, cut them off from the IMF/WB, etc. I'm not suggesting utilitarianism, but merely the fact that politicians have to consider it as there would be a price to pay.

Assuming some jurisdictions decide to harbor such activities, the next problem to consider is DEX users' privacy.

I wouldn't even attempt to suggest xx Network mixnet (cMixx) could be used to circumvent the problem. This solution already exists and works (see Proxxy) and we'll probably see it as an extension or "Web 3 app" in browsers like Carbon one day.

How many users will dare to violate laws this way? I'd say a small minority - primarily those from countries with governments "who haven't gotten their shit together" (yet).

Tor Browser may be another option, although it's not as good a solution as cMixx. It's harder to use correctly, and setting up malicious Tor nodes costs next to nothing. In fact it does cost nothing if you're a government and fund that activity with freshly printed money or new public debt.

What xx Network has to offer​

xx Network's Proxxy approach acts as a mixing proxy gateway between your client (for example, Carbon browser) and the server (for example, DEX server nodes). This is useful because it breaks the link between DEX activity (observable by all) and user's IP and location.

It also hides the connection between a wallet (addresses) and the owner. For non-private coins, a DEX observer would see there's a wallet with 123 XYZ coins, and monitor ins and outs, but they couldn't see who owns it. If one were to trade on a DEX via Proxxy, they could do that in privacy and exit to a privacy coin (so that the last leg is also anonymized on-chain).

But let's not forget that a DEX could route all its messages over xx Network's cMix protocol. xx Network dashboard currently shows 3000 messages per second. That could be enough for a DEX that doesn't attempt to provide near real-time settlement.

3000 messages per second is plenty, and can scale as soon as more nodes are added to the network (which is a function of network economics, but ultimately driven by demand which is currently a community decision and later may become a function of postage fees - more users, more nodes chasing their share of xx Network cMixx postage).

Take-away​

I'm not optimistic about this development now and the prospects for crypto-currencies in coming years.

Bitcoin is already a joke (see the recent news on how almost 50% of mined coins are routed to a single address - presumably almost 50% of "virgin coins" are bought by Wall Street custodians) and Ethereum isn't far behind (just wait until the first ETFs appear - it's going to be worse, because of staking which lets Wall Street farm virgin coins directly).

Crypto-enthusiasts think they (or "someone") can ignore what governments do "because decentralized". That works only until they knock on your door.

xx Network (Proxxy, etc.) can help and will help to some extent, but in a NWO environment it still can be stopped.

The only way this can be solved in the long term is by fighting centralization and that means civic engagement against globalists, dictators and autocrats - from the UN over governments of large political unions down to small countries.

Code is law, but not the law.

• Why it's good
• Why it's important
• What's not so good
• Scavengers welcome
• More to come
• Wrap-up

PatCrypt created a great post about the Wrapped XX coin aka WXX with the contract address 0x171120219d3223e008558654ec3254a0f206edb2 (view it on Etherscan).

Why it's good​

The main benefits are already called out by Pat:

• Compatibility with the major Decentralised Exchanges (DEXs)
• A shorter route to being listed by Centralised Exchanges (CEXs)

There's a lot to like about that, obviously, especially since:

• At least one CEX recently rejected xx coin because "it's a privacy coin" (except that it's not - I wrote about that here)
• The globalists have been making progress with their plan to "allow but disable" private cryptocurrencies
• Because of the KYC/AML regulations, listing a coin on a CEX has been expensive for years and now it's even worse - it's more expensive and more scrutinized

Because of that and because xx coin is not a pump-and-dump/meme coin (although anything that's tradeable has people who pump it, and xx coin is no exception), xx coin used to have a hard time getting listed. It's been listed on MEXC for some time, but that was about it.

I know some vocal MEXC users complain about MEXC (not in the context of xx coin, but in general), but considering it's located in a low-hassle country, I think it's a great exchange and all things considered, less likely to rat on its users than 90% of other CEX (all the EU-based CEX will have to rat on their users once they codify the latest EU regulations.)

In any case, WXX fixes "all of the above" (challenges): people will be able to get xx coin on centralized and decentralized markets (and anything in between - more on that later).

Of course, just being available on one popular DEX would be enough, but on-chain DEX are not known for great liquidity and they're (in my opinion anyway) less user-friendly and less liquid, although this last bit may change as more trading moves to DEX due to the fascist laws passed in communist and capitalist jurisdictions alike. We still want and need CEX exchanges, especially in crypto-friendly jurisdictions (go MEXC!).

Why it's important​

I haven't traded xx coin, or any coin for that matter, for many years. I haven't (yet) sold any xx coins either. When I have enough for my needs (which I now do), I prefer to do things that interest me - if I have free time I'd rather do something interesting and hopefully useful to the community than trade.

Why do I care, then?

Because WXX is good for things I care about, such as privacy and decentralization.

It is very important that xx coin be easy to trade because - see the post on new EU legislation linked above - xx Network plans to introduce postage (fees for prioritized and/or high volume users of its mixing network layer).

If you can't buy xx coin, you can't pay for postage (once the feature becomes available). That doesn't mean you wouldn't be able to use xx Network - its mixnet is now completely free to use and I have no reason to think it won't retain a generous free tier even when/if postage kicks in.

But I want xx Network to attract large users who pay postage, because that creates a virtuous circle: demand for xx coin to pay for mixnet postage creates a demand for coins earned (and sold) by mixnet runners ("validators"), which makes xx Network sustainable for both paid and free users.

This may seem trivial now (hey, it's free and it's working just fine as-is!), but remember this next time you use Signal and get that donation prompt upon starting the app.

What's not so good​

There isn't much not to like.

PatCrypt's posts mentions some admin to-do's and the fact that WXX is currently semi-centralized (which is what I mentioned "something in between" a CEX and DEX - even when traded on a DEX, it's still semi-centralized until EVM bridge comes about, which should be shortly).

A wrapped xx Coin was recently listed on the XRP Ledger (XRPL) where liquidity is thin and it appears there aren't many users. One may be reasonably skeptical about WXX as well, but I am optimistic because ERC20 tokens are everywhere. Anyone who owns more than two coins probably has an ERC20-compatible wallet or a CEX account and can easily access any DEX by simply installing an app. XRPL is accessible as well, but I feel its main user base are Ripple-focused users, which is fine but not as large as these new markets.

Scavengers welcome​

I won't put this under good or bad, it's something that simply is, and can't be judged.

An immediate effect of WXX is that its existence increases opportunities for trading, because the more markets which also means more opportunities for arbitrage.

With xx coin available on MEXC, XRPL, WXX (including DEX-es, each of which may be "out of sync" with others) and the fact that only MEXC has its own API while integrations for others already exist (for different ERC20 tokens, but it just takes a search-and-replace), it's no longer prohibitively expensive to build a bot that trades xx coins among several markets. It takes just one MEXC integration and a xx-focused repurposing of ERC20-compatible code for other markets.

It's kind of silly, but necessary. Scavengers exist because they need to exist. The main benefit for the regular buyer (or seller) is they get close to best price and liquidity regardless of where they buy (or sell) their coin.

Remember that, initially at least - until an Ethereum bridge is built and WXX decentralized - it may be inconvenient to easily move coins between MEXC, XRPL wrapped coin and WXX coin, but this will get easy for WXX once those to-do's are completed. For people who engage in arbitrage and move a lot of coins around this means arbitrage will remain inconvenient until that EVM bridge becomes available.

More to come​

Three things I'd like to mention here:

Firstly, Pat's article does mention Snowbridge, a trustless Polkadot bridge technology which - once completed - will bridge Substrate (Polkadot, initially) and Ethereum - something I've been looking forward to since last year.

Snowbridge is now getting attention in the xx community, but I think there still isn't enough appreciation for what had to happen in order to get here: the fact that xx Network picked a Substrate-based chain, which is the only reason why Snowbridge is now relevant to xx Network in the first place.

They could have picked some cooler "next gen" blockchain design with even faster finality and whatnot, but they decided to build on Substrate where all chains and parachains benefit from network effect.

Perhaps this isn't the best comparison, but Substrate can be compared to the Linux kernel. Once an improvement is implemented - due to permissive licensing - it becomes a new feature that every Linux application can use - all Substrate-based blockchains ("Linux applications") can easily benefit from it. That's why it will be relatively easy for xx chain to benefit from Snowbridge without spending many months on developing novel code just for your own project.

(This reminds me - even the development effort for a xx Network EVM bridge (that xx Foundation has awarded a grant for) probably significantly benefits from the ability to reference 3rd party EVM bridge implementations for Substrate chains. That's why that doesn't take quarters, but only months.)

So again, kudos to David Chaum and the team for making a good choice here. Maybe it wasn't a hard choice - naturally a decentralized mixnet project would pick a well-maintained and popular chain with governance features built-in, rather than a niche or new chain that requires a lot of in-house chain development - but it was still a choice and they chose wisely.

Secondly, due to network effects of the Substrate chain ecosystem, I think it won't take long for Polkadot to take advantage of Supra's HyperNova. Punchline:

In short, Supra verifies Ethereum’s L1 consensus cryptographically.

In other words (please visit that link to find out more), Supra's HyperNova does not need staked bridges that create multi-signature transactions.

The quoted part mentions Ethereum, obviously because that is likely to be the first target for Supra, but the same design applies to other L1 chains.

HyperNova is a new design and quarters may pass before it becomes available. But once it does, if Polkadot gets integrated, it becomes easy for xx Chain to get integrated as well. That means a Supra-wrapped xx coin could become instantly available on Supra in a decentralized, management-free and derisked (considering it's bridgeless) manner.

Thirdly, the benefits of Substrate flow in both directions. It is easy for other Substrate projects to connect with xx chain (not just for trading, but for on-chain identity, native assets held, balances, voting history, and other information xx chain holds). You can take a look at the Crust Network (based on a Substrate chain) documentation to see how they have a separate section for integration with Substrate-based chains, for example.

They recently released Ethereum integrations, but even in that case, it's nice to have a choice and be able to easily integrate semi-natively using the familiar Polkadot SDK. Ethereum bridges have many advantages (see WXX), but also adds a bit of complexity, risk, round-trip-time and cost. It's not the only answer.

xx Wallet was able to showcase native Crust Network integration by making their application code to load in one's xx wallet. I haven't looked if there are multi-coin wallets for Substrate and how they work, but they could make it easy to do buy xx coin for postage and use the purchased "message tokens" to pay for (xx) mixnet (proxied API) traffic created by Web 3 apps that work on other Substrate chains. It may take a year or two, but it's doable.

These are just three examples - there must be more - where Substrate (Polkadot SDK) can take care of 80% of the plumbing. It is much appreciated, but still widely underappreciated!

Wrap-up​

WXX makes xx coin available to all ERC20-capable wallets and markets.

This is a product of hard and smart work by xx Network developers (including the wise choice to use Polkadot SDK) and the wider Substrate and crypto community.

Also because of Substrate, the best is yet to come.

• an integration with Snowbridge could give xx coin a native and trustless xx-chain-to-Ethereum bridging
• Supra HyperNova - this would also require an xx chain-specific, but not unique, integration and would enable a direct, trustless and bridgeless xx-to-Supra cross-chain interoperability. I plan to keep an eye on HyperNova, especially if Substrate or Polkadot are mentioned
• DEX for native Substrate coins - useful for multi-currency Substrate wallets and shapeshift-like purchases of xx mixnet credits (to pay for postage)