Decentralized Finance Emerges as Banner Topic at Ethereum Denver Conference

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Decentralized Finance Emerges as Banner Topic at Ethereum Denver Conference

“We always needs to ask, ‘Who are we building for?’”

Kicking off the annual ethereum hackathon ETHDenver, Aave CEO Stani Kulechov shared an opening address on on “leaping decentralized finance [into the] mainstream.”

Aave is a Swiss-based blockchain technology company that officially launched in September of last year. Acting as the parent company to ETHLend – a decentralized financial marketplace for asset-backed loans – Kulechov explained that cross-application coordination and cooperation is key to seeing mainstream adoption.

“We need to approach adoption from an ecosystem perspective,” said Kulechov. “You might be building a project that relates to decentralized finance. Each has a use case but if you can connect all these defi [decentralized finance] applications … we form an ecosystem where we are bringing together more users.”

However, highlighting that mainstream adoption isn’t the be all and end all of application development, Kulechov added that “decentralization is a choice” and that to some developers “it might be a good idea to focus on the segment of decentralized users that are privacy-concerned.”

As highlighted by Josh Stark – head of operations at blockchain consulting firm Ledger Labs – in a blog post, a new wave of decentralized applications (dapps) are growing in both number and popularity on the ethereum blockchain.

Called “decentralized finance” or “defi” applications, these dapps on ethereum give users new tools to manage and use ethereum-based money or assets, Stark explains in his post.

As such, today’s talk by Kulechov is actually one of several centered around the topic of finance.

Defi-related talks expected to be held later today at ETHDenver include an address by CTO Alex Bazhanau from cryptocurrency lending platform Bloqboard, as well as an address by Tom Beam, a co-founder of decentralized lending protocol bZx.

Tomorrow, the defi narrative continues with a panel discussion on the roadmap for many of these finance-focused application on ethereum with a panel discussion between several defi startups including bZx, Set Protocol, Zerion and Wyre.

Stani Kulechov image taken by Christine Kim.

Ethereum’s Blockchain Is Once Again Feeling the ‘Difficulty Bomb’ Effect

Ethereum is being affected by what is popularly known as the “difficulty bomb” embedded in the code – and this month’s upcoming hard fork is expected to once again push its effects further into the future.

The piece of code was originally created in an effort to create an incentive – a negative one at that – for miners and developers to manage the transition from proof-of-work consensus to proof-of-stake. In effect, the difficulty bomb as referenced back in 2015 by former ethereum CCO Stephan Tual raises the difficulty level of mining a block on the ethereum blockchain exponentially over time.

The bomb began to “go off” so to speak last December after being delayed once in June 2017 and again in October 2017. The initial impacts of the code – though minor to start off with – are slowly but surely starting to become noticeable on the network, as the data shows.

As reported by blockchain analytics site Etherscan, the ethereum blockchain saw its lowest level of daily block reward issuance Monday with a recorded 13,131 ETH. By comparison, as late as mid-November, new issuance was regularly seen above 20,000 ETH.

What’s more, Etherscan reports a clear decline since December in the number of blocks produced on ethereum per day, which sits at present below 4,500 blocks.

Afri Schoedon – release manager for ethereum client Parity – estimates if left unaddressed, it would take two to three months from now for the difficulty bomb to stall the ethereum blockchain to new record-lows.

Yet before that happens, the bomb is actually expected to be delayed again for a period of 12 months as part of a system-wide upgrade known as Constantinople.

Constantinople – which is scheduled to launch later this month at block number 7,280,000 – will, among other changes to the network, stabilize average block count to 5,700 blocks daily and reduce block time creation to roughly 15 seconds, according to Schoedon.

And this not being the first time ethereum core developers have had to include such tweaks to the difficulty bomb code. Schoedon expressed exasperation at the need to deal with the reoccurring effects of the bomb at all.

“The bomb is an annoyance that no longer serves a purpose,” Schoedon told CoinDesk.

Time’s up

Schoedan elaborated on that point by highlighting that the transition to PoS – also commonly dubbed ethereum 2.0 or Serenity – likely won’t occur within this year or next.

He went on to say:

“I personally don’t want to deal with [the difficulty bomb] anymore. Serenity is not happening this year and most likely not next year. So why bother?”

To this point, Eric Conner – founder of ,ethereum information site ETHHub – agreed telling CoinDesk that, in his view, the motivationary effect of the difficulty bomb isn’t the same as it was.

“Early on it was true but I think now that the entire community and developer set is clearly focused on ethereum 2.0 – and therefore PoS,” said Conner to CoinDesk. “At this point it’s more a motivator to always revisit upgrades and be forced to do something.”

Some developers, on the other hand, continue to see the difficulty bomb as playing an important role in the network’s evolution.

In a response to an Ethereum Improvement Proposal (EIP) by Schoedon that would delay the bomb indefinitely, Marcus Ligi – creator of ethereum android wallet Walleth – wrote:

“My fear is that without the difficulty bomb we might end up in a situation where rolling out [system-wide upgrades] gets difficult because people just do not update their software as there is no real need to do so.”

Blast to the past

As with the previous delay to the difficulty bomb included in system-wide upgrade Byzantium, users faced record low block counts in the fall of 2017.

Ethereum block count and rewards chart. Source: Etherscan

Mining difficulty levels increase by a factor of two as a result of the bomb every 100,000 blocks, Connor noted. As a result of this, he also highlighted that during the months shortly preceding Byzantium in October 2017 average block times on the ethereum network reached record highs of up to 30 seconds.

Average block time of the ethereum network. Source: Etherchain

This time around, Connor doesn’t imagine any further impacts of the difficulty bomb on the ethereum network, given that Constantinople – with its kicking-of-the-can built-in – will occur before the next expected uptick in mining difficulty at block 7,300,000.

What’s more, after Constantinople is activated, ethereum will face an added reduction of block reward issuance from 3 to 2 ETH. The reduction “thirdening” was put in place in order to mitigate the impacts of inflation on the network without a timed difficulty bomb.

The following graph on ETHHub illustrates a continued downward trend for ETH issuance in the years ahead.

Ethereum’s historical and projected block reward issuance rate. Source: ETHHub

Of course, the projected trend for issuance illustrated above in orange is highly dependent on both activation of Constantinople and Serenity over the next two to three years. A testnet launch for the initial phases of Serenity is expected sometime in March.

Nevertheless, as with most things in cryptocurrency development, only time will have the final word.

Fake bomb image via Shutterstock

Nasdaq to Add Bitcoin and Ethereum Indices to Global Data Service

Stock exchange operator Nasdaq is adding indices for bitcoin and ethereum to its global data service later this month.

The company announced Monday that it has partnered with New Zealand-based blockchain data and research firm Brave New Coin to offer information on the two new indices starting Feb. 25.

The Bitcoin Liquid Index (BLX) and the Ethereum Liquid Index (ELX) will offer “real-time” information on the Nasdaq Global Index Data ServiceSM (GIDS), its consolidated data feed, Nasdaq said.

Specifically, the BLX and ELX indices will offer a “real-time spot or reference rate” for the price of 1 bitcoin (BTC) and 1 ethereum (ETH) respectively,  quoted in USD, and “based on the most liquid ends of their markets.” The data will be refreshed at a frequency of thirty seconds.

Nasdaq said both the indices are calculated using a methodology that has been “independently audited” against the International Organisation of Securities Commissions (IOSCO) principles.

“The BLX is one of the most widely-referenced BTC indices among crypto traders and has been calculated back to 2010. Likewise, the ELX has been calculated back to 2014,” the exchange operator added.

Nasdaq has been very active in the crypto and blockchain space, including investors in industry startups. Last month, the firm led a $20 million Series-B funding round of enterprise blockchain startup Symbiont.

Back in November, it was revealed that Nasdaq has partnered with investment management firm VanEck to “bring a regulated crypto 2.0 futures-type contract” to the market in 2019, though no additional details have been revealed since then.

Nasdaq image via Shutterstock