Please note: As we roll out new features, we are sending Members a Notice of Proper Registration. We simply can’t keep prices low if analysts, bloggers, or others who represent themselves on social media as stock pickers are subscribing to us and foregoing copyright laws to repurpose what we publish. (e.g. if you read our analysis and then tweet or blog about the tickers to grow a following, that’s a copyright violation). If you work for a competing service and use our analysis in any form, that’s a copyright violation. This does not apply to individual investors who are simply discussing their portfolios.Notice of Proper RegistrationNotice of Proper Registration. We simply can’t keep prices low if analysts, bloggers, or others who represent themselves on social media as stock pickers are subscribing to us and foregoing copyright laws to repurpose what we publish. (e.g. if you read our analysis and then tweet or blog about the tickers to grow a following, that’s a copyright violation). If you work for a competing service and use our analysis in any form, that’s a copyright violation. This does not apply to individual investors who are simply discussing their portfolios.

The notice you were sent outlines what I/O Fund’s attorney has prepared in terms of copyright violations. It also means if you improperly registered as an individual rather than a blogger/analyst, it means you must pay for a commercial publication license. This helps us keep pricing structures low for individuals and institutions/funds. If you are improperly registered, you will need to re-register appropriately – please visit this page here.If you are improperly registered, you will need to re-register appropriately – please visit this page here.

Introducing YO/LO Fund: The Blockchain is Going to Eat the Internet

In this analysis, we will discuss why blockchain and crypto is a movement and the ideology behind the technology.

We’ve stated why we are crypto enthusiasts across various research papers over the past 2-3 years, however, I want to take the opportunity to connect these dots on why blockchain may be the technology that our generation is remembered for in the centuries to come. I call this section a Quick Oscar Speech so you’re prepped for a more sentimental appeal. Context is key as to the importance of this shift and I want to get you fired up about the big picture. Considering we’ve had select cryptos as part of our LTBH since the beginning, we are clearly not seeing this as a swing trade or a way to get rich quick. Without the big picture, crypto could look silly. It’s not; rather it could be the most influential technology in history and this goes beyond decentralized finance.

We also discuss Ethereum, primarily why the window is open for competitors and what those competitors are doing to entice developer adoption on their networks. We do a brief overview of the tokens we plan to enter. Due to crypto breaking out, we will likely move quickly on this. However, our analysis is one in a series of reports that we will space out with our ongoing earnings coverage. As we go along, we will also do deep dives on individual crypto names but want to be sensitive with the upcoming earnings season and take good care of the other names in our LTBH and Momo portfolio. As you know, we are a small team with big ambitions and we juggle many balls at once. So, expect to see entries as soon as today and expect to see ongoing coverage of this space as time allows.

What is YO/LO Fund? On the forum, I discussed an upcoming launch of a new, explorative Fund where we maximize crypto exposure while having funwhile having fun. We will start small with each position and add to the tokens on breakouts. I can’t imagine a better team considering Knox’s performance record on Bitcoin in terms of risk management along with our ability to sift through trends to find winners via in-depth analysis. The reason Bitcoin and Link have done well as LTBH positions is that Knox adds and trims accordingly. You’ll also know why we are owning each coin plus full diversification within the trend. I want you to be able to go to dinner and tell your friends what a token does and why it’s important. 

My Oscar Speech on why Blockchain is Important:

The blockchain is proposing a complete overhaul to how we are conditioned to believe the world must work. On one hand, opponents call crypto a tulip craze. On the other hand, the top 1% in America now has more wealth than the entire middle class at 60%. This strikes at the core of why blockchain and crypto has become a movement. To challenge the effects of society, we must look at the cause: how has centralized finance and also the centralized internet created what Silicon Valley technologists are now calling an “oligarchy.”

The Federal Reserve was created in 1913, however, many claim Richard Nixon’s altering of the Bretton Wood system and the untethering of the US dollar from gold set in motion the accumulation of wealth for the 1% as wages stagnated despite an increase in productivity.

Source: Seeking Alpha, Jan Nieuwenhuijs

As a technologist, I would also point to the advent of the internet but most importantly mobile and how this contributed to the “oligarchy” of Big Tech. If you want to listen to a great podcast about this oligarchy, I recommend Naval Ravikant’s interview here from 2018 or here on Spotify. It’s well worth the hour and he connects the dots on the overwhelming importance of the blockchain. I’ll expand on my unique perspective of what I think contributed to the oligarchy he speaks of, and why centralization is one of the biggest issues that society faces. Finally, we will discuss how blockchain will dissolve the concentration of power.

The Centralized Internet and “the Walled Castles”

The internet was intended to become a democratization of information, yet the concentration of who controls the information became greatly concentrated once the mobile device began to leak data through various sensors. For example, there have been many independent reports such as here and also here of Facebook using the microphone to transcribe conversations and to later target keywords for ads. This would be very easy for Facebook to accomplish with a taxonomy, such as “Hawaii” or “golfing.” This started in 2014 and was caught by security professionals. It was debated and denied for years, buried by Facebook’s corporate communications team. Finally, in 2019, it was reported by Bloomberg that Facebook does transcribe messages — for your protection, of course — and Amazon does it too with Alexa. According to independent security professionals, you are not imagining it when you say something in a private conversation and later see an advertisement later on a browser or inside of an application. They pinpoint this beginning in 2014.

What I call “the surveillance era” began in 2008 yet really took off around 2012. The drawbridge to what Greylock calls “the walled castles” (i.e., not a quaint walled garden) were firmly closed by 2014. The drawbridge snapped shut when the more powerful tech companies became capable of collecting exponentially more data than the competitors through software installed on the device. Or, in Google’s case, the Android operating system. Wall Street will tell you it’s all about revenue, the ads, and the number of users. That’s wrong, of course, as the walled castles were created from an advanced use of data and gobbling up many online properties that produced more data. Why would Facebook buy Whatsapp for $19 billion? The phone numbers enriched their datasets.

The mobile device era created reckless abandon in terms of collecting data. The far majority will shrug and say “how does collecting data affect me? I’m okay with ads.” For starters, if you’re okay with it (I’m not) then every tech company should be able to run surveillance software, track your browser and native app activity and transcribe your conversations to run them through a taxonomy. Why do you only allow Google, Facebook and Amazon? What’s special about them. If you’re okay with it, then all companies should be able to track what you do on the mobile device. For those that are privacy complacent, that would be thousands of them.

That seems absurd yet we’ve allowed three key companies to do this without consent. Teams of engineers and data scientists built algorithms using private data to determine what you see and what you don’t see. Freedom of the press is at the core of a free society (i.e., ask China why they tightly control the media). Section 230 has been debated for nearly a decade, yet it’s raising a question that has become increasingly more important – where do the lines blur between publishers and tech? Big Tech has enough money to make sure Section 230 turns out in their favor, and thus, we are in a vicious cycle.

The enormous amounts of data that the top 3 companies have collected has led to a concentration of who controls the information that is consumed, seen and absorbed. In an attempt to have as much data as possible, the gatekeeper for media and communications leads back to these three companies. The definition of an oligarchy is “government by a few.” Algorithms are built to determine what information is seen rather than by meritocracy and these algorithms are centralized and built by a handful of companies. Freedom of the press is not possible in a society where media must pay to be at the top of a feedmedia must pay to be at the top of a feed. Technically, press has the right to publish but it’s not seen as we no longer pay 10 cents for a newspaper to support the press. Instead, you must pay thousands (and probably millions) for content to be seen.

My very first analysis for the public markets was on Facebook’s privacy issues and I followed this up later with details on the surveillance-network in HackerNoon. Although ethics and stocks don’t tend to go together, Facebook is not one I could look past knowing the amount of data they were collecting without consent. Twitter has always been easy for me to pass up as an investment because the platform is infiltrated by bots. Social media users are not necessarily aware of this but paying advertisers certainly are as click fraud and click bots are the ad industry’s biggest issue. Basically, it’s not the best platform to run ads because advertisers have to pay for bot clicks.

On Twitter, 66% of shared news links are from bots. That’s enough to control what’s trending. What else would be the purpose of the bots? The exact answer for that is above my paygrade. However, this leads back to the issues with centralization. In a decentralized network, social media users will be validated and bot activity will be penalized, often by removing the tokens. More independent reporting will be surfaced, and we can go back to some sense of normality around how information is accessed rather than viewing content that is paid by the highest bidder (or the most active botnet).

So, how does this relate to the blockchain? First off, the centralization of the internet has far and wide-reaching effects when those with the most money are able to determine what information is seen and whose articles surface. Of course, what you see with your eyes all day/everyday affects you. It doesn’t matter if this is done through bots on Twitter, Google’s algorithms and advertising pay structures, or Facebook’s dopamine-inducing newsfeed that is largely driven by your personal data which required tens of billions of dollars to collect.

The solution is blockchain as it results in a meritocracy for content creators and a democratic, verifiable process to what is surfaced and viewed.

The benefits of democratizing the internet goes beyond social media, traditional media and journalists. There is now a Spotify competitor called Audius that distributes the profits to artists. Normally, artists make 12% of revenues in the traditional structure. With Audius blockchain, artists make 90% of the revenues. This is because there are no middlemen or agencies and the music is freely distributed. We don’t need gatekeepers that decide the music we listen to and then takes the majority of the revenue.

Although I won’t go into decentralized finance here as I already have a few times in the past, you can imagine something along the lines as music artists where there is a redistribution away from centralized banks and into the pockets of the 99%. Primarily, the credit card fees, transfer fees for wires, recording fees for documents, costs for redundant paperwork (think taxes and the IRS), the amount we pay to prevent fraud — and even on a larger scale, the ability to lend and borrow in a peer-to-peer fashion.

I want to take a moment to revisit what our original Bitcoin analysisour original Bitcoin analysis had said in August of 2019:

My prediction is that once the Lightning Network is built out, bitcoin will surpass the market cap of Apple, Google, Microsoft and Amazon to reach a minimum of $50,000 per token. This is because the protocol solves critical needs for global populations, including the reduction of financial fees for 7 billion people, and offers a need to store money during times of inflation.This is because the protocol solves critical needs for global populations, including the reduction of financial fees for 7 billion people, and offers a need to store money during times of inflation.

Bitcoin is based on the most secure network in the world, and this solves a very real need for the financial system – which cannot be automated without a decentralized blockchain solution. Technically speaking, bitcoin is also the world’s most secure financial network. The transfers eliminate 3% in processing fees and hedges against inflation. This can, and should be, worth as much as a search engine, enterprise software, a social media network, warehouse fulfillment (AMZN) or iPhone hardware.Technically speaking, bitcoin is also the world’s most secure financial network. The transfers eliminate 3% in processing fees and hedges against inflation. This can, and should be, worth as much as a search engine, enterprise software, a social media network, warehouse fulfillment (AMZN) or iPhone hardware.

Apple, Google, Microsoft and Amazon reached market caps of $1 trillion because their products scale to global populations and are required on a daily basis. Bitcoin not only scales to the global population but it also protects their livelihood – a necessity rather than a convenience. In fact, we see populations who are not necessarily tech savvy most enthusiastic about bitcoin, and this is a strong signal that it will scale beyond the reach of $1 trillion market cap. “Bitcoin not only scales to the global population but it also protects their livelihood – a necessity rather than a convenience. In fact, we see populations who are not necessarily tech savvy most enthusiastic about bitcoin, and this is a strong signal that it will scale beyond the reach of $1 trillion market cap. “

Fast forward two years, and we see that more citizens of El Salvador have crypto wallets than bank accounts (that quickly!). While the top 1% like Jamie Dimon is saying “it can’t, it won’t,” the 99% are saying “we can and we will.”

How could you not get behind that?

[Insert Oscar Music telling me to exit the stage as I’ve gone over my time][Insert Oscar Music telling me to exit the stage as I’ve gone over my time]

I want to get you fired up on this for a few reasons:

1. My job is to bring you important trends in technology and to silence the noise. I want to make sure I/O Fund Members do not turn away from crypto and keep an open mind.
2. You didn’t miss the boat; Web 3.0 starts now. But be prepared to trim/exit at the top and re-enter. We plan to do this for YO/LO.
3. Many of the centralized applications and websites you use today are going to come under pressure long-term. We need to lower the barrier for blockchain adoption for dapps like Audius but it’ll happen.
4. Because the world needs a decentralized system, global populations will be willing to pay nominal amounts for this (hence, the importance of tokens). It’ll be like paying for the newspaper again. Pocket change well spent.
5. This nominal amount being paid will actually save people money in the long run as the blockchain will reduce costs, reduce fraud, and increase wealth for the middle class through decentralized consensus mechanisms that don’t require a middleman. (yes! It’s that big of a deal).
6. In terms of contributions to society, blockchain may be the one technology that future generations remember us for as the majority of the world lives beneath the poverty line. (To compare, AI would be more of a contribution to productivity.) Those beneath the poverty line in El Salvador are showing record adoption rates for Bitcoin wallets.
7. Media is bought and paid for, and I believe the headlines have retail believing crypto is still a high-risk and an undesirable asset, yet institutional buying is telling us a different story. Consider that Algorand (see below), has received a $700 million round.
8. However, the crypto world is confusing and high risk because there are so many products to consider – this is why many investors throw up their hands and walk away or they’ll buy one of the many ETFs that are launching. We think the bigger gains come from learning to fish and so we are inviting you to fish alongside us.
9. Most importantly, this site offers risk management (Knox) for entries and exits. Without this, crypto can be a blood bath. The reason investors keep a separate crypto fund is they aren’t able to handle risk management whereas I/O Fund specializes in this for all tech growth stocks and assets. We did not hesitate to add BTC and LINK to our long-term buy and holdto our long-term buy and hold due to Knox’s confidence in managing risk.
10. We can’t guarantee there won’t be losses as crypto is extremely volatile. Only invest what you can afford to lose.
11. We may need to be aggressive with entering and exiting. Don’t be surprised if we exit an entire position in YO/LO Fund to buy again later at a lower price. This isn’t about convictions or fundamentals. Risk management comes first with crypto and convictions are second to this.

Ethereum’s Scaling Issue: An Opportunity for Competitors

The blockchain and decentralized networks offer three key benefits over centralized networks. These three benefits are: decentralization, security and scalability. The issue is that most decentralized networks cannot offer all three without some compromise.

This was first discussed with decentralized data in what is known as the CAP Theorem as distributed databases cannot deliver Consistency, Availability and Partition Tolerance (CAP) without some compromise. This is because if a node goes down, either the system has decided to replicate the data (make a copy) on the other node or to partition the data (split the data) between two nodes. If partitioning the data is chosen, then consistency is sacrificed. If replication is chosen, then partitioning has been sacrificed.

MongoDB is a distributed database that elects a secondary node by whichever one received the most recent update. Therefore, MongoDB offers consistency and partition tolerance all of the time and availability most of the time except when a new node is synchronizing to become a primary node.

In addition to the proof of stake mechanism helping Ethereum to scale transactions, our report also discussed the importance of shards for scalability. Rather than every node downloading every transaction, calculating it and replicating it, shards create a subset of the network where nodes are dispersed for more efficient processing. We also discussed Rollups, which allows for hundreds of transactions to be rolled into a single transaction. This replaces Plasma, the current option where only a single transfer is made per transaction.

Here is what we had said about rollups. I’m copying this so it’s understood where the delay is as the merging to Proof of Stake is happening in the next few months while sharding and rollups are delayed:

“In the ZK-Rollup scheme, a transactor and relayer are needed. The transactors create a transfer and broadcast it to the network. In this case, a shortened 3 or 4 byte indexed version of the address helps to reduce resource needs. The relayers collect hundreds of transfers and roll them up, essentially, to generate a hash that compares a snapshot of the blockchain before the transfers and a snapshot of the blockchain after the transfers. In most cases, the transfers will be recorded by a change in the wallet values. The hash that represents the wallet values or the delta to the blockchain is called SNARK proof. The changes to the hash are reported to the blockchain.4 byte indexed version of the address helps to reduce resource needs. The relayers collect hundreds of transfers and roll them up, essentially, to generate a hash that compares a snapshot of the blockchain before the transfers and a snapshot of the blockchain after the transfers. In most cases, the transfers will be recorded by a change in the wallet values. The hash that represents the wallet values or the delta to the blockchain is called SNARK proof. The changes to the hash are reported to the blockchain.

Relayers are established by staking a required bond, or token amount, in the smart contract. The result will be fewer transaction fees that are processed faster than the previous Plasma framework. In the ZK-Rollup framework, blocks are computed in a parallel computing model that lends itself to decentralization. There will be less data than the previous framework which increases throughput and scalability.”

The Ethereum network has more security risks than Bitcoin as ZK-Rollups assume a trusted state and relies on a small group of developers to establish this initial trusted state and one of the developers could manipulate the code. Quantum computing could crack ZK-Rollups if the correct hash is guessed. This is more likely than guessing an encrypted protocol.”

Ethereum’s High Gas Prices

The term “gas” refers to the computational effort required to execute specific operations on the Ethereum network. Each transaction requires that a fee be paid called “gas” to offset the costs of computational resources. The market price for gas is determined by demand. If you want your transaction executed quickly or if you have a larger contract, you’ll pay more gas. As of August, the London Upgrade has changed how transactions are charged with every block having a base fee and a minimum price per unit of gas that is calculated based on demand for the block. Users also tip to compensate miners for executing the transaction.

The goal of the London Upgrade is to allow for variable-sized blocks. Previously, blocks would hit total capacity and users would have to wait for the demand to subside. You can see in the chart below that Ethereum’s gas prices are inching upward with a notable spike in September even after the London upgrade went into effect. The average gas price of 58 GWEI is about 10X higher than the Binance smart chain at 6.1 GWEI.

In September, TIME Magazine recently sold NFTs called TIMEPieces and minted 4676 tokens for the digital art. It sold out within minutes with 4,000 transactions occurring within a short period of time. The price for 10 NFTs was around 1 ETH or $2500 to $2800, yet due to gas fees, one buyer paid as much as $70,000. In addition, the wait time to transact ranges from 30 seconds to 16 minutes.

We had estimated in March that Ethereum 2.0 will need “another year minimum or about three years maximum” to reduce energy use and increase throughput for transactions per second (TPS). Recently, Buterin stated that what he thought would take one year has actually taken six years. The current roadmap for the Proof of Stake merge is for late this year in 2021 while sharding and rollups are expected by late 2022 or early 2023.

However, the delay in terms of scalability with sharding and rollups leaves an open window for competitors for about eighteen months if we assume early 2023, which is a substantial amount of time considering the activity we are seeing in NFTs and decentralized finance. The other issue facing Ethereum is that even though the network certainly has a defensible position in terms of the ecosystem and sheer number of dapps built on the network, there are competitors who are arguably stronger as scalability was solved for at time of launch. Some of this may be that the latecomers had the advantage of hindsight and could observe and improve upon the gas issues that Ethereum faced from being a first mover.

Quick Glimpse at Mid Cap:

Avalanche (AVAX):

Ethereum competitor that has a maximum supply of tokens and technically a decreasing supply due to burning. The network is unique in that Avalanche utilizes three interoperable blockchains. The X-Chain is for creating and exchanging assets including NFTs, the P-Chain validates and creates subnets, and the C-Chain is for executing Ethereum Virtual Machine (EVM) contracts. The C-Chain is critical for AVAX’s growth as developers can build applications that have easy interoperability with Ethereum while improving the base layer.

The layer one blockchain hosts smart contracts like Ethereum and has a low Nakamoto coefficient, which is a quantitative method of measuring decentralization. Although transactions per second (TPS) is lower than Solana at 4,500 TPS, Avalanche has a faster time to finality of less than a second compared to Solana’s 12.5 seconds. Avalanche is also compatible with Ethereum dapps and wallets. The company recently introduced a $180 million mining incentive program to add dapps to its decentralized ecosystem. The program is called Avalanche Rush and will help popular protocols to expand from Ethereum to Avalanche.

Emin Gun Sirer, the founder of Avalanche, predates even Satoshi’s Bitcoin whitepaper. He and a research team are credited with the first cryptocurrency developed in 2003 called the Karma system, which was based on proof-of-work.

Aave (AAVE):

On the Chainlink webinar, we discussed that one major issue with centralized finance is that a regular person (such as you or myself) cannot lend money to another person in order to get the interest rates that Chase Bank gets on credit cards or a mortgage lender gets on home loans. As artificial intelligence and the blockchain remove barriers to understanding creditworthiness, there should be no reason to not pool money together to achieve these returns. We don’t need a centralized bank to do this as it’s preventing regular people from earning income (and on the flip side, it also prevents regular people from getting the credit lines they need at an affordable rate).

Aave is the leading borrowing and lending protocol. Not only can you earn interest on your deposits but you can also borrow assets. The platform also issues flash loans, which means that the lender is repaid the money upfront through a smart contract rather than providing collateral. In the event something falls through or a condition is not met, then the transfer is automatically reversed. This is one illustration as to why smart contracts promise to revolutionize the way things are currently done as they are automatic, decentralized and secure.

The company launched as ETHLend in 2017 but has expanded to other networks. Within 6 months of launch, Aave was issuing more than $100 million in flash loans per day. One year later in June of 2021, the platform had issued over $4 billion in loans (total).

Curve (CRV) & Yearn.Finance (YFI):

When we think of the issues surrounding crypto, one that comes to mind is liquidity and stability. Not only do exchanges and trades take a long time due to lack of liquidity, but the price fluctuates to such an extent that common day uses are prohibitive. The TIME NFTs are a great example.

Curve is a popular DeFi platform and automated market maker (AMM) that reduces slippage between the expected price of a trade and the price at which it’s executed. Curve allows digital assets to be traded by using a liquidity pool, or a shared consortium of tokens. These pools are optimized to stabilize pricing and those who place their tokens into the pool are rewarded. Because Curve focuses on stable coins, volatility is greatly minimized. Originally, Curve launched to assist with lower fees for trades and to also offer the additional benefit of rewards in fiat currency. The decentralized exchange (DEX) is also integrated with Yearn Finance and Synthetix for users to participate in both the fees from the Curve pool, and also the yields from yield-bearing tokens. Curve also offers interoperability with other networks to maximize access to the DEX and increase its availability, which is called composability where you can earn across the DeFi ecosystem. We are especially keen on Layer 2 solutions that remain with Ethereum yet expands to new networks during Ethereum’s 2.0 transition. Curve recently expanded to Avalanche and the composability also is a key feature as the DeFi ecosystem grows.

There are 39 pools for swapping stablecoins. Curve competes with companies like Uniswap, which provides for swapping of tokens but with high fees. From my perspective, it makes sense that the best market maker and exchange would be a stable coin pool. A typical pool will include DAI, USDT and USDC, which are pegged to the US dollar. The automated market maker uses an algorithm rather than buyers and sellers to trade from liquidity pools, with a rebalancing that occurs partly from arbitrage traders buying any excess. The goal is stability from stable coins and also high-interest rewards from lending protocols. The automated money maker algorithm allows for high volume trading. We like this company because it solves for stability and having exposure to this is a good idea, in my opinion.

Algorand (ALGO):

Algorand is an East Coast company founded from an award-winning professor from MIT. Silvio Micali has won numerous awards including the Turing Award, Godel Prize and RSA Prize. He has been working with cryptography for decades and is known as the co-inventor of probabilistic encryption, Zero-Knowledge proofs and Verifiable Random Functions. As of now, more than 700 global organizations have partnered with Algorand including Koibanx, a LatAm asset tokenization, and the El Salvadorian government to build the blockchain infrastructure for the country.

Algorand handles 1,000 TPS and has a five-second finality. The blockchain network launched with Proof of Stake (PoS) in 2019 that awards all ALGO coin holders rather than rewarding only validators that stake a large number of tokens. The company calls this Pure Proof of Stake (PPoS) with on 1 ALGO coin required for staking whereas Ethereum requires 32 ETH or roughly $100,000 USD to stake tokens. Due to rewards being split across all tokens rather than only validators, the ALGO coin earns a 7.5% annual yield.

There is also a bifurcation between two layers that helps the network achieve a high throughput. Layer 1 executes smart contracts as ASC1s and Layer 2 executes more complex smart contracts and dapps as ASC2s, or off-chain.

Right now, it’s speculated that the Algorand network could become popular for government-backed stable coins.

Quick Glimpse at Small Caps:

Ocean:

Ocean is built to facilitate data exchanges. OCEAN tokens are used to access datasets and run AI and ML models through marketplaces. In turn, data providers earn OCEAN tokens for supplying data. The Ocean Market is an automated market maker (AMM) that facilitates the minting and exchange of data tokens. Compute-to-Data allows data sharing while preserving privacy. This allows AI and ML applications to utilize data while adhering to privacy standards. Considering that my Oscar speech was in regards to privacy as a primary pain point for centralization, I’d like to own a token that specifically addresses this ☺

The Graph:

The Graph indexes servers and powers data queries for many popular decentralized finance apps, such as Uniswap and Synthetix. Tokens are spent to perform the queries. By opening up data across the ecosystem, more dapps can be built utilizing blockchain data and APIs. By decentralizing the data layer, The Graph leverages a network of indexers to reduce the amount of overhead cost required to index servers.

API3:

You’re probably seeing a pattern here as to the trend I am preferring for small cap coins (the data layer). API3 has been called the “Chainlink killer.” Although I’m not convinced it will kill Chainlink, I’m always open to having more diversification on how to securely onload off-chain data. Rather than having a node sit between the API provider and the smart contract like Chainlink, API3 enables the API provider to run their own nodes. API3 argues that adding a middleman (Chainlink) creates a new attack surface and adds more costs.

Quick Glimpse at the Heavyweights:

Cardano:

Cardano launched with Proof of Stake (PoS) in 2017 and has been in a constant state of development since. For instance, IOHK is an engineering company that updates Cardano’s codebase with verifiable, high-liability code using the same approach as spacecrafts and high-frequency trading software. Cardano has two structures, a settlement layer and a computational layer. The consensus protocol enables ADA coin holders to delegate a stake pool, or a node, with the opportunity of becoming a slot leader as the stake increases. The rewards are distributed to ADA token holders. The blocks change every five days and the slots change every twenty seconds.

Cardano’s consensus mechanism is also very energy efficient as the PoS algorithm pushes energy back to the edge. The company is also working towards true decentralization by handing over access of Cardano’s open-source infrastructure to the community, which in turn, will allow more enterprises to leverage Cardano. The Cardano Foundation is a non-profit from Switzerland.

Polkadot:

Polkadot’s goal is for interoperability for a decentralized internet for applications to seamlessly communicate across networks. Its role is to connect networks for cross-blockchain transfers with a cross-chain system. Network validators can also be leveraged for security and consensus across multiple blockchains. Polkadot also updates without the need for a fork, which allows it to be compatible with new networks and blockchain features as they are developed. Polkadot was founded by Ethereum’s former CTO, Gavin Wood. It is backed by the Web3 Foundation, a non-profit research foundation in Switzerland that specializes in cryptography and provides grants to startups.

Solana:

Solana is an Ethereum competitor that has a very high throughput of 65,000 transactions per second on GPUs although Avalanche has a higher time to finality. Solana accomplishes this without second layers or side chains by using the Proof of History (PoH) consensus mechanism. PoH creates a historical record that proves an event has occurred at a specific moment in time. Rather than validators agreeing on a time, Solana validators maintain their own clock by encoding the time with a cryptographic hash function (SHA-256). This circumvents the need to wait for confirmation, thereby resulting in a higher throughput. The founder is from Qualcomm and Dropbox and he recruited engineers from Qualcomm to create Solana labs.

YO/LO Positions – Subject to Change:

(Friendly reminder: all of our positions are subject to change – more so in YO/LO and Momentum but LTBH can change at times too!)