Catching up with Olaf Carlson-Wee
We had a chance to talk to Olaf Carlson-Wee on what he has been up to and how he feels about the Tezos Ecosystem
Catching up with Olaf Carlson-Wee of Polychain Capital
Olaf Carlson-Wee, former board member of Tezos Foundation and founder of Polychain Capital was kind enough to share a few of his thoughts on Tezos and what particular trends/innovations in the blockchain space excite him the most for 2020 and beyond.
Polychain was one of the first major crypto funds to come around in late 2016. A lot has changed since then. What innovations in the blockchain space excite Polychain the most for 2020 and beyond?
One area that I’m very excited about is the automation of the corporate structure through smart contracts. So, this for example, looks like systems like MakerDAO and StakerDAO where you have a thing that looks a little bit like a company but the product is a smart contract.
Instead of shares of the company, there’s a token that accrues revenue from the successful operations of those underlying smart contracts.
So, that’s one area. Another area that we’ve been excited about for many years is the proliferation of Proof-of-Stake as a consensus mechanism and additionally — novel incentive mechanisms to drive behavior with cryptocurrencies.
If you look at for example, bitcoin mining, and you think of the function you’re trying to optimize for as being hashrate — bitcoin mining as an incentive mechansim has been quite successful at generating substantial hashrate.
One thing we think about is what other types of human coordination problems could be addressesed using a similar cryptoeconomic incentive mechansim. So, we’re looking at if you could bootstrap other types of human behaviors or other types of network effects other than say — hashrate in bitcoin mining. We very much expect the answer is yes.
Polychain is one of the largest Tezos bakers. Apart from this, you have spoken about Tezos on several occasions, Olaf. Compared to other PoS protocols, how do you feel Tezos differentiates?
Tezos is the only cryptocurrency, in my mind, with a scalable and formal upgrade mechanism. In fact, it is the only P2P system in the world — outside of crpytocurrency with a formal upgrade mechanism.
The reason that it is uniquely possible with Tezos relative to other types of P2P systems, is because there is a voting mechanism that is resistant to sybil attacks. In this case, it’s coin-weighted voting where you have a larger vote if you hold more coins.
This upgradeability is a critical feature. No other P2P system or cryptocurrency, really has a formally defined mechanism for upgrading — that can scale substantially. It doesn’t require rough community consensus. This idea of a rough community consensus is, I think — a naive way to scale a platform that I think could be worth trillions of dollars and host many billions of dollars worth of financial transactions.
I don’t think that you can scale those types of systems with rough community consensus — the only other alternative is to have the system never upgrade. This is sort of the way that bitcoin works and I think that is the other highly legitimate approach to upgrading a P2P system. Obviously, it comes with benefits but also — problems.
So, Tezos to me, is the only system that has a scalable and formal upgrade mechansim and that differentiates it very much from any other system in the crypto space or in the entire P2P ecosystem.
I feel it’s worthwhile to revisit some of Tezos’ core features and look at current key areas of focus within the Tezos ecosystem. For, as of late, there have been several developments within the Tezos ecosystem. Hopefully, this post can serve as a useful resource for the Tezos community.
What Makes Tezos “Different”?
In comparison to other blockchain-based networks, Tezos encompasses several features that separate it from any other blockchain-based network. Tezos’ consensus is based on the Proof-of-Stake (PoS) consensus mechanism, uniquely referred to as Liquid Proof-of-Stake (LPoS).
Liquid Proof-of-Stake offers the ability to delegate and bake (stake) your XTZ simultaneously. This ability is non-existent in Delegated Proof-of-Stake (DPoS) based-blockchain networks where there lies a fixed number of block producers comprising the governing body of the protocol. In Tezos, the stake holders have the option to choose whether they wish to bake on their own — contingent upon owning a roll of XTZ (8,000 XTZ/roll) or simply delegate to a baker.
An excerpt from a previous publication conveys the nature of Tezos’ governance structure more clearly.
It is in this sense, that Tezos has accomplished a remarkable feat. It is able to flow between a representative democracy type governance structure (DPoS), in the form of choosing a baker and move on a sliding scale to pure liquid democracy, where a baker with a single roll can exercise their views forthright while having to remain diligent and educated on each amendment proposal.
Subsequently, the cardinal attributes that differentiate Tezos are three key points — upgradeability, institutional-grade smart contracts, and secure custody.
The ability to evolve over time through a scalable, formal means and adapt to changes in technology is one of the core features within Tezos and is a feature that is not native to any other blockchain-based network — or P2P system in the world. Essentially, network constituents can amend the protocol and effectively port new features onto the protocol through a formal means decided upon by token holder voting.
Additionally, funding for core protocol development can also be derived and financed directly on-chain. Through invoicing, a dev team can submit a network proposal and have it go through 4 phases of token holder voting. This process takes roughly 3 months, but if quorum is obtained within all 4 phases and results in successful activation — the protocol will mint new tez distributed directly to the dev team’s wallet.
This unique feature to Tezos, also known as inflation funding, is detailed more within a previous publication.
Key Areas of Focus
Since the launch of the Tezos network, we’ve seen several key areas of focus arise — one in particular has garnered an ever increasing amount of traction and adoption. For the sake of brevity, we will encompass three key areas of focus within the Tezos ecosystem.
- Security Token Market (STO’s)
- Gaming
- Privacy
Security Token Market
The security token issuance space is one that is at an even earlier level of adoption than cryptocurrency. However, we have seen significant strides and traction being made with Tezos as being one of the primary choices for institutions, companies, and security token issuance platforms to conduct their STO’s on.
This momentum has been driven from the value proposition that Tezos offers which is a high-value and high-complexity chain. As of this date, over $3B worth of STO’s are planned to be conducted on the Tezos blockchain.
- Elevated Returns and Securitize — Are seeking to conduct and deploy up to $1 billion worth of real-estate STO’s on the Tezos protocol. Expected launch of the first deal of $77M real-estate backed security tokens is slated for April.
- BTG Pactual and Dalma Capital — Are seeking to use the Tezos blockchain for conducting up to $1 billion worth of STO’s.
- tZERO and Alliance Investments — Have announced their plans to tokenize the first of their total $643 million worth of STO’s on Tezos with the River Plaza located in the UK.
- Fundament Group — Has announced a strategic partnership with the Tezos Foundation to develop digital securities infrastructure.
- Equisafe — Has developed the NyX Standard, “a set of smart contracts on Tezos blockhain, audited by institutions and open sourced on an MIT license”. Recently, the Music Pavillion of Versailles, a classical piece of real-estate was tokenized on the Tezos blockchain using the NyX Standard.
- Vertalo — A security token management and issuance platform has transitioned from Ethereum to Tezos.
- Andra Capital and TokenSoft — Utilizing TokenSoft’s security token issuance platform, Andra Capital is seeking to raise up to $1 billion in it’s Silicon Valley Coin STO which represents interest in the Andra Capital Open-Ended Fund. The fund is currently valued at $500 million.
Security tokens pose several benefits per their utility token counterparts, those of which created a robust and significant uptick in transactions within the Ethereum network during late 2017 to early 2018. With this in mind, it will be interesting to monitor how Tezos continues to develop and perform in the STO space in the coming weeks/months.
Gaming
Recently, we have learned more about Coase’s digital collectible card game — Emergents. Previously, the name for the game was not provided, and an alpha release date has been given — slated for April.
The new title, whose alpha version opens up to a select few in early April, comes as the market for online card games nears $2 billion in size and coronavirus-related shutdowns drive gamers indoors.
As written in a previous publication, Coase seeks to tackle the inhibition of popular games such as Hearthstone and Magic: The Gathering to adapt to the digital era. Taken from the concept paper, Coase’s new game — Emergents is seeking to tackle four key areas.
- Reduction of non-economic barriers to entry.
- Becoming more watchable.
- Implementing increased player interaction.
- Becoming playable on a mobile device.
If it were not immediately apparent, Emergents will be built entirely on the Tezos blockchain — which means one thing, transaction fees in XTZ.
The whole project is being built on Tezos, so all trades will be made in the blockchain’s native cryptocurrency, XTZ, but the company is also working to hide this behind fiat rails for users who don’t care about the crypto aspect.
However, I don’t see Emergents merely as a transaction generator. The expertise and background behind the founders and team is second to none. If a game such as Emergents achieves a significant level of adoption, it will mean significantly more for Tezos in bringing real world adoption and attention to the protocol.
Privacy
Another key area of focus within the Tezos ecosystem has been centered on privacy. Arguably one of the best use cases for blockchain technology — sapling integration within Tezos is expected to come in the near future.
An AMA with Nomadic Labs on sapling integration in Tezos has recently concluded and can be viewable here.
Q. u/ clarus — What would be the first features provided by the sapling integration?
A. u/ paracetamolo —
The main feature is the ability to process privacy-preserving transactions in a smart contract. It’s a simple building block that allows to write a privacy-preserving version of a FA1.2 like contract. You can mint, burn and transfer tokens managed by the contract but the amount, source and destination of the transactions is unknown.
Conclusion
Navigating through the noise can be difficult especially in turbulent and timultous times. For new members to the Tezos ecosystem, and older ones, the information presented herein can help glean a deeper understanding of the Tezos project and current areas of focus within the Tezos ecosystem. For, it’s been business as usual within the Tezos ecosystem.