Recently I was interviewed by Peter Oluka of Techeconomy NG, for an article for 9ja Cosmos’ launch of the first ever Web 3 (blockchain) Top Level Domain in the world.
This was .9jacom (for Nigeria) on 13th September. As part of his research process, Peter also looked around for other information about me, and content that I had created here and there.
One of the things he decided to include in his piece, was an extraction from an off-the-cuff point I had made about Ethereum going PoS (Proof of Stake) or otherwise called ‘The Merge’ because it involved a fusion with another blockchain system, Beacon.
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While it wasn’t wrong to include them, the comments were nuanced among quirky retorts between blockchain enthusiasts.
This meant things implied, which the contributors ‘in the moment’, may fully ‘get’, may be somewhat lost on a wider audience later.
There is a separate story here that is worth telling.
In the piece, I am quoted as saying: “We’ve all seen the SEC decision in US ‘deciding’ the Ethereum Chain falls under Federal US jurisdiction. There would be no point in just ‘declaring’ such if acting upon it wasn’t feasible…. “Moreover, Ethereum has now become a potential political tool.”
“The Chinese ‘Binance’ has a dependency on the eth-chain. So, welcome to Huawei part 2.’
Let’s unpack this a bit. What was Huawei Part 1?
Deng Xiaoping when leader, brought an end to the ‘leader for a lifetime’ concept. China enjoyed remarkable growth, illustrated with its crowning glory to the world – the incredible ‘Bird’s Nest’ stadium and amazing opening ceremony of the 2008 Olympics under the leadership of Hu Jintao.
Since Xi Jinping came to power in 2012, we have seen the wonder-boy, Jack Ma under house arrest, and towards the middle of last year, a purge of the entertainment industry under the guise of a ‘return to traditional values’.
2018 saw the reversal of Deng Xiaoping’s ‘Leadership for Life’ ban, meaning that notionally, Xi Jinping might not be leaving office any time soon.
Over the last few years, the complexion of the relationship between China and the rest of the world changed drastically.
In no particular order, we have seen big earners for China like Huawei and ZTE being banned from several international markets, and we have seen the Africa Union HQ spying scandal.
Huawei Chief Financial Officer (and daughter of founder, Ren Zhengfei) Meng Wanzhou was arrested in Canada in 2019 at the request of US who wanted to extradite her on fraud charges.
Then came COVID, which some may recall Donald Trump labelling it as ‘The China Virus’.
Following, we had the Russian invasion of Ukraine, with China conspicuous in its failure to condemn.
More recently we’ve had a Chinese manoeuvre by sea and air around Taiwan big enough to be their own Global Warming Footprint.. as a reaction to a visit there from a rather frail US Elder Stateswoman…
What did they expect? A launch of tactical nukes from her handbag???
Huawei in particular, had been accused of assisting in the mass-detention of Uyghurs in internment camps and using them as forced labour.
It specifically faced allegations from US and NATO countries, that its wireless networking equipment could contain backdoors enabling surveillance by Politburo CCP.
Huawei products were outlawed in many lucrative markets.
On Sunday, May 19, 2019, Google publicly declared that it would be complying with Trump’s Huawei ban. Gmail, YouTube, Google Drive, and even the Google Play Store were now no longer available for Huawei smartphones.
Not long after Google made its announcement, other US-based companies followed suit. This included Qualcomm, Intel, Arm, Microsoft, and many more.
The US approach to China and its companies overseas remains one of the few examples where the policies of the Trump and Biden Presidencies in the US, remained on the same page.
Binance now has the biggest crypto exchange in the world. It was founded by Changpeng Zhao, and started its life in China. It later moved its registered HQ to Cayman Islands following Politburo CCP’s ban on cryptocurrency.
Binance open development framework was first issued as ‘Binance Smart Chain’ and later renamed ‘BNB Chain’.
‘Binance Smart Chain (BSC) and Ethereum look similar at first glance. Even your public wallet addresses are same on both blockchains. Moreover, DApps and tokens built on Binance Smart Chain are compatible with (EVM) Ethereum Virtual Machine.’ – said Gourav Khanna, CEO of APPWRK
Gnosis Chain founder Martin Köppelman said: ‘Proof-of-work favours those with access to cheap electricity and rewards them with capital. Not perfectly egalitarian but not a feedback loop. Proof-of-stake favors those with access to cheap capital and it rewards them with more capital, creating a feedback loop. The rich get richer and the richer they get the easier it is to get rich.
Centralization is not just a proof-of-stake problem. Köppelman followed up his original tweet by noting that Bitcoin, which continues to use proof-of-work, also has issues with centralization: “No, dear Bitcoin fans, it is not better in Bitcoin. In fact you need only 4 entities to come to >72%”
But the key difference in terms of control potential, is that those 4 entities don’t have control over the actual process of adding blocks on the blockchain. Unlike PoS, on PoW, this is done by a myriad of anonymous miners.
Ethereum Merge has converted Stake Holders to Controllers, and the SEC decision in the US has put that power under Federal US control.
Even before this, US authorities have shown no hesitation in wading into operations on the Ethereum ecosystem – example – Tornado Cash.
And now, there is the spectre of something that could make their intrusion a lot easier. New token specifications – ERC 20 R and ERC 721 R.
That ‘R’ by the way, denotes ‘REVERSIBLE’.
“One misunderstanding, which surprised us, is that people thought the proposal is to make all transactions reversible on [a layer 1 blockchain], or to replace the regular ERC-20/721 standards,” they wrote. “This is not the case. The paper is simply a proposal for a token standard that people can use or not, just like any other token standard.”
“If there is no way to architect a judicial system, then this proposal will not work,” they said. “Designing a fair judicial system (or proving that one does not exist) is an open question for the community to think about.” – Sam Kessler of Coindesk interviewing Stanford researchers.
All very fine and reassuring… J. Robert Oppenheimer once had a huge body of research work, which were just papers for a funding proposal. It resulted in the Atomic Bomb!
Building on Ethereum may face a major existential threat. The blockchain, post ‘The Merge’ is now manipulatable by US state actors.
It is double jeopardy for building on Binance, or any system emanating from or connected to a country which Uncle Sam isn’t particularly happy with and there are some global economic and political dynamics that are unlikely to change any time soon.
Politicians and Civil Service Agencies tend to be obsessed with various Armageddon and Doomsday global economic and political scenarios. They are also capable of dreaming about different kinds of domestic threats, real or perceived.
They frequently ego-centrify themselves as some kind of anti-hero beating their chests like mountain gorillas while backslapping between themselves as having to be those ‘brave’ enough to make the hard decision on least bad selection from thoroughly toxic choices.
There may be paranoia about shell companies owned by Iran aimed at corporate ownership of .eth stake, ‘Russians’, MAGA extremists, or even domestic ‘Black Opps’ systems … but it is a fact that over 70% of stake ownership of Ethereum are known entities, and that means its easily targetable.
While that vulnerability is real, it needs to be considered commiserate with risk. The problem is that politicians and high-ranking civil servants are often their own paranoid echo chamber, incapable of keeping perspective, and therefore pose a real risk to bringing the whole Ethereum ecosystem crashing down.
9ja Cosmos has its technical investments based on Handshake. Handshake was conceived by Joseph Poon (co-creator of Bitcoin’s Lightning Network and Plasma payment channels), Andrew Lee (CEO of Bitcoin payments gateway Purse), Christopher Jeffery (CTO of Purse and creator of Bitcoin node software Bcoin), Boyma Fahnbulleh (Bcoin developer), and Andrew Lee (Founder of VPN provider Private Internet Access).
9jacom and 9javerse are minted to the Handshake blockchain.
Summary:
- The combination of the easy accessibility of over 70% of known stake owners since the Ethereum ‘Merge’ with the US SEC decisions means it is vulnerable to arbitrary and subjective decisions of US political or civil systems.
- The advent of new protocols ERC 20 R and ERC 721 R (R means REVERSIBLE) may make such actions easier and therefore raise risk.
- There is potential for Ethereum to become an international political tool, so systems perceived to be connected with entities not friendly to US may be at particular risk, such as Binance/BNB
- The investment/infrastructural ‘ecosystem’ on the headline cartoon illustration are tools that are potentially deployable against individual entities dependant on the Ethereum Chain without necessarily going after the whole chain itself.
- People in many African countries have problems raising pre-seed capital. The notion of taking ‘positives’ from failures often holds no solace for some African entrepreneurs as compared to some other locations globally. Many will only get to accrue the trickle capital needed to overcome inertia once in a lifetime. They should consider avoiding Ethereum or different solutions/L2s built on them such as BNB (Binance) or Polygon or consider gradual ‘architectural unwinding’ and migration of working systems as a gradual process.
- 9ja Cosmos recognises a conflict of interest, but isn’t holding up Handshake as the ‘holy grail’ for averting risk exposure to building off Ethereum. There are many more options to explore for building on such as Bitcoin’s ‘Lightning Chain’ Cardano’s ‘Vasil Hard Fork’, Solana and DeSo.
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All references were accessed between 30-09 and 03-10 inclusive 2022:
www.cnbc.com/2022/03/15/consensys-doubles-valuation-to-7-billion-with-microsoft-backing.html
www.businessinsider.in/investment/article/microsofts-web3-plans-now-includes-ethereum-co-founders-startup-consensys/articleshow/90271753.cms
consensys.net/blog/press-release/consensys-announces-unified-portfolio/
consensys.net/blog/press-release/infura-and-truffle-now-support-polygon/
coingape.com/sec-did-7-meeting-on-ethereum-before-giving-infamous-security-speech/
medium.com/@BobMcElrath/whats-wrong-with-proof-of-stake-77d4f370be15
messari.io/asset/handshake/profile
www.reuters.com/article/us-usa-huawei-tech-meng/huawei-cfo-house-arrest-contrasts-with-canadians-detained-in-china-idUSKCN1SQ0C3
en.wikipedia.org/wiki/Politburo_of_the_Chinese_Communist_Party
en.wikipedia.org/wiki/Criticism_of_Huawei
www.androidauthority.com/huawei-google-android-ban-988382/
appwrk.com/binance-smart-chain-vs-ethereum-who-is-the-winner-of-the-blockchain-world
www.coindesk.com/tech/2022/09/28/stanford-proposal-for-reversible-ethereum-transactions-divides-crypto-community/
www.bbc.com/news/world-asia-china-43361276www.republicworld.com/world-news/global-event-news/is-xi-jinping-president-for-life-why-2022-is-make-or-break-for-chinas-leader.html
www.hollywoodreporter.com/news/general-news/china-ban-boy-bands-reality-talent-shows-1235008064/
www.business-standard.com/article/international/joe-biden-signs-law-to-ban-huawei-zte-from-doing-business-in-us-121111200372_1.html
qz.com/africa/1192493/china-spied-on-african-union-headquarters-for-five-years/
bitcoinist.com/binance-chain-launch-sees-developers-and-entrepreneurs-reconsidering-ethereum/
www.bnbchain.org/en
www.benzinga.com/markets/cryptocurrency/22/09/29080036/whats-going-on-with-cardano-all-you-need-to-know