One of the major selling points of crypto is that the industry is brimming with new ideas. For one reason or another, crypto tends to attract heterodox thinkers or would-be revolutionaries, much in the same way a loose-hanging community formed around the internet in the 1990s. Part of this stems from the nature of the tech itself, which offers radically new ways to build code-based systems. Another is Web3’s infamous barrier to entry, meaning the people that end up here tend to be committed – and, frankly, smart enough not to get blown out while self-custodying valuable assets.
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At the same time, after covering the industry for nearly four years, I often feel as if I’m repeatedly hearing the same ideas. Crypto markets, perhaps more than any other, hang on what insider’s call “narratives.” These are the stories people tell themselves and others about what blockchain technology is good for (or could be good for).
Still, once in a while, a person or a theory comes along that could truly shake things up (or at the very least are fun to entertain). Here are a few of the giga-brained ideas I heard while roaming around Consensus today.
The future of banking is in the past
Ethan Buchman, the founder of Informal Systems, wants to wage a revolution. Central banks have mishandled the economies they’re meant to support, the “petro-dollar” has caused untold suffering and there are layers of corruption at every level of the monetary system. Of course, blockchain presents a solution. But before he explains how, Buchman wants us to consider the past.
Imagine yourself as a Genoese banker in the 16th century, shortly after double-entry bookkeeping was discovered. At the time, Buchman said the banking industry was composed of a few family-run institutions that sprouted to supply a modernizing and globalizing economy with credit (perhaps for the first time in history). There were no central banks, no depository institutions and few, if any, bank notes.
Instead, what bankers offered at the time was “trade credit,” entries in a ledger that allowed for someone in Antwerp to transact with someone in Medina. Occasionally, because the environment was high-trust, the banking families would meet up to balance their books. To do this, they used an old term-of-art called the “payments graph.”
It’s hard to visualize, but if Cosimo owes money to Catalina, and Catalina owes Albrecht and Leonardo owes Cosimo, there is often a way to map out these deficits to allow everyone to settle their debts – without necessarily injecting extra liquidity into the system. This was done by finding “loops” and “cycles of debt” that allowed banks to zero out their books.
Buchman wants to resurrect this idea for the modern age. The game, which requires collaboration and communication, works because debt can be “cleared” (balanced on paper) without being settled (having funds actually transferred). To this end, Informal Systems, which operates as a workers collective, is building Cosmos-based smart contracts and algorithms that allow communities to do this permissionlessly and automatically.
“You show up at a trade fair [the banking conferences of the time] with books reflecting debt, and you mess around with your friends and you wipe out all your f**king debt,” he explained. Indeed, modern banks still do this on a near-daily level using clearing-house and discount windows. “But why should they get to have all the fun,” he said.
What Informal called “collaborative finance,” or CoFi for short, may not work at all. The company has not yet even released a full white paper. But in an age where my peers are saddled with student loans and where international trade imbalances reflect the “structure of power and production in the economy” after centuries of exploitation, maybe it’s worth thinking of an alternative.
Crypto and AI
I’ll spare you the rundown of how ChatGPT unlocked a wave of venture capital funding and Silicon Valley-based startup founding, and the history of failed Web3 experiments with artificial intelligence, to say that a lot of people in crypto are now thinking seriously about AI. Some of the uses are prosaic, like building chatbots to help people better understand a jargon-filled industry. Others seem inhumane such as using code to replace coders, to operate Web3 startups with a leaner team. And there’s probably no worse idea than outsourcing smart contract auditing to systems prone to “hallucination.”
Still, Tarun Chitra, the founder of Gauntlet, who is widely acknowledged to be one of the sharpest minds in crypto , thinks blockchains can be useful for AI. The long and short of it is: As more information is produced by machines it’ll become more important to know where all data is sourced from.
Zero-knowledge proofs, a cryptography research area proposed in the 1980s and thrown into hyper-drive by cryptocurrency funding, allows people to check whether someone else’s statement is true without that person having to show all their cards. (The standard description of a “ZK proof” is that a barfly can prove they’re over 21 without pulling out their ID, which also reveals their home address.)
ZK proofs can be deployed in a way that helps everyone prove whether some new data was produced by a human, by a machine or by a machine with access to some particular data set (like an AI trained on proprietary information on Q&A site Quora). “This is quite important because a particular output … is going to be the IP [intellectual property] of the future,” Chitra said on stage at Consensus.
As mentioned, ZK-based systems do not necessarily need crypto to operate, but blockchain can still play an important role by providing immutable records of data provenance, he said. Verifiability is powerful in an increasingly trustless age.
Finally, on Wednesday the Near Foundation announced a new project called Horizons that is essentially a startup accelerator mixed with Uber. CoinDesk has a writeup of the system here, which will allow anyone with the idea for a startup to essentially crowdfund funding and business advice from experts.
The system uses a two-way marketplace that takes an idea from Uber, which allows startups to rate the level of support they received from their advisers and advisers to rate the founding team, Horizon co-creator Laura Cunningham told The Node in an interview. It’s what she called a “reputation graph.”
Obviously, not every startup will make it, as some business ideas are just plain bad. But using smart contracts to inject a little visibility into the process perhaps everyone can learn. Because, as crypto has shown, sometimes an idea can be valuable even if it hasn’t been deployed.