TLDR Crypto Daily Update 2022-05-16

OpenSea copy detection 🌊, staked ETH depegs πŸ“‰, navigating bear markets 🐻

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Innovation & Launches

How Metaplex Is Solving Solana’s Network-Crashing NFT Botting Problem (8 minute read)

Solana and NFT protocol maker Metaplex have implemented a bot tax into the Solana network to prevent another network crash. The Solana network crashed on April 30 due to botting programs spamming the network to mint NFTs. The network will charge 0.01 SOL for invalid transactions identified as coming from an automated program trying to mint blindly. The tax has already generated more than 1,620 SOL in penalties. Funds generated by the tax go to the creators of each respective NFT mint affected by bots.

OpenSea is adding NFT copy detection and verification features (2 minute read)

OpenSea is adding a new system to detect and remove copycat NFTs. It will use image recognition tech to scan NFTs and compare them with authentic collections. Human reviewers will check removal recommendations. OpenSea is also launching an invite-only verification process for accounts with at least 100 ETH trading volume. Verified accounts will receive a blue badge.
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Guides & Resources

Smart Contract Upgradeability (5 minute read)

Smart contract bytecode is immutable once deployed, but there is a complex system that exists for developers to write upgradeable apps. Mutability can be built on top of an immutable base layer. While it is a wholly different paradigm from hosting code that can be changed on a whim, it creates a stronger foundation on which to build financial primitives. This article discusses how smart contracts work and how storage parameters, contract pointers, and proxies can be used to upgrade them.

Staking issuance is not net neutral (8 minute read)

Almost all proof-of-stake layer 1s are fundamentally designed around the assumption that staking issuance is net neutral. However, all layer 1s are doomed in the long term unless their base assets have low inflation, high monetary premium, and high value accrual through usage. Low inflation can help the asset gain monetary premium. High inflation can lead to low value accrual, which can lead to an insecure network in the long term as people lose confidence in the asset. This could change if a better consensus protocol is invented that is non-plutocratic.

Staking issuance is not net neutral (8 minute read)

Almost all proof-of-stake layer 1s are fundamentally designed around the assumption that staking issuance is net neutral. However, all layer 1s are doomed in the long term unless their base assets have low inflation, high monetary premium, and high value accrual through usage. Low inflation can help the asset gain monetary premium. High inflation can lead to low value accrual, which can lead to an insecure network in the long term as people lose confidence in the asset. This could change if a better consensus protocol is invented that is non-plutocratic.

The Sustainability Checklist (3 minute read)

Crypto is dominated by short-term solutions with unsustainable designs. This article contains a checklist that can be used to analyze blockchains in terms of their social, economic, and technical sustainability. There is currently no single settlement layer that is anywhere close to satisfying the checklist and only a very small number of projects are even attempting to.

The Sustainability Checklist (3 minute read)

Crypto is dominated by short-term solutions with unsustainable designs. This article contains a checklist that can be used to analyze blockchains in terms of their social, economic, and technical sustainability. There is currently no single settlement layer that is anywhere close to satisfying the checklist and only a very small number of projects are even attempting to.

This is what happened (and is happening)

Terra effectively acted as a bank that offered a 20% per year interest rate. However, unlike other banks, it didn't keep cash on hand in case customers wanted to withdraw deposits. Its minting system worked during the bull market because of rising prices, but the opposite is true in a bear market. The Luna Foundation Group (LFG) tried to create a reserve of Bitcoin, but it raised money by burning LUNA into UST, causing them to increase their leverage. Listing UST on major exchanges resulted in the LFG losing capital control. Migrating capital from the 3pool to the 4pool on Curve opened up the network to attack.

On Bear Markets (4 minute read)

The key to making it through a bear market is to survive. It is best to plan for a reasonable life path for the potential scenario that crypto fails, even if you are pro-crypto. Most people should keep their fiat cash flows going for as long as possible as it helps keep things more balanced during market swings. It is fine to strive for money, but keep a part of yourself permanently separate from it. High-yield tokens are always a bit fishy, and there is no such thing as free money.
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Miscellaneous

Lido Warns Leveraged Traders at Risk of Liquidation as 'Staked Ethereum' Loses Peg (4 minute read)

stETH's peg to Ethereum has slipped. Lido, a pooled staking protocol, has warned that leveraged holders are at risk of having their collateral liquidated. It dropped by as much as 5% as people who had staked it on the Anchor lending protocol rushed to withdraw it on Friday. Those who use stETH for loans risk facing a cascade of liquidations, as well as penalties and gas fees for each of the transactions. This can be prevented by adding extra collateral.

Do Kwon’s Proposed Terra β€˜Revival’ Puts UST, LUNA Holders in Charge (1 minute read)

Do Kwon, founder of Terraform Labs has proposed a revival plan for the Terra ecosystem. The plan involves restarting the entire Terra blockchain and distributing network ownership entirely to UST and LUNA holders through 1 billion new tokens. Kwon has conceded that the Terra ecosystem has experienced total collapse. Even if the UST peg were to be restored, it lacks the ecosystem required to rebuild.

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