Section 3: Crypto Natives & Enlightening Outsiders
Looking back, the year of 2018 plus at least the first half of 2019 were rather bearish for the crypto market. End-2017 and early-2018 saw the Bitcoin price surged from about $7,000 to over $19,000 within a month and swiftly plunged back to a little of $7,000 within almost the same time, if not shorter. ICO mania in 2017 inarguably contributed to the dramatic up and down. However, while the secondary market got hit, innovations in the blockchain universe didn’t tumble. In contrast, several seeds that in near future grow into towering trees were sowed in 2018 and 2019. In this section, we’d like to walk you through the milestones of a little bit bumpy but wide road paved in 2018.
2017: Crypto Kitties and Opensea
On November 28, 2017, the world witnessed the birth of CryptoKitties. For the first time, the world experienced a decentralized application built on blockchains but targeted a mainstream audience. Each CryptoKitty is a non-fungible-token (NFT), it’s unique and owned by the user.
Back then when CryptoKitties was launched, without a smart contract standard that was later proposed and applied, creating NFTs was not a snap-of-a-finger, neither in terms of coding capability, nor a choice of the underlying blockchain network. It’s a different story as of today though. Anyone who wants to mint their own NFTs can do so as the marketplace offers huge support by accepting over 150 different payment tokens, though Ethereum (ETH) remains the main one.
Wiping out most of its competitors, OpenSea has a massive market advantage for its sheer trading volume and collection. Founded on December 20, 2017, it alone recorded mammoth trading of USD 10 billion since its launch in 2017. With huge fundings, celebrity clientele and numerous NFTs to choose from, a collector might feel like a child lost in a candy store.
The official OpenSea website reads, “A core part of our vision is that open protocols like Ethereum and interoperable standards like ERC-721 and ERC-1155 will enable vibrant new economies. We’re building tools that allow consumers to trade their items freely, creators to launch new digital works, and developers to build rich, integrated marketplaces for their digital items.”
CryptoKitties and OpenSea’s establishments to a large extent marked the opening of an era, but the term “NFT” only achieved wider usage with the ERC-721 standard. The ERC-721 (Ethereum Request for Comments 721), proposed by William Entriken, Dieter Shirley, Jacob Evans, Nastassia Sachs in January 2018, is a Non-Fungible Token Standard that implements an API for tokens within Smart Contracts.
It provides functionalities like transferring tokens from one account to another, getting the current token balance of an account, getting the owner of a specific token and also the total supply of the token available on the network. Besides these, it also has some other functionalities like to approve that an amount of token from an account can be moved by a third party account.
If a Smart Contract implements the following methods and events it can be called an ERC-721 Non-Fungible Token Contract and, once deployed, it will be responsible for keeping track of the created tokens on Ethereum.
Additional reading: the original proposal here EIP-721: Non-Fungible Token Standard
DeFi was coined in 2018 by a group of entrepreneurs and Ethereum developers who wanted to open up finance applications from traditional systems. The abbreviation sounds like defy, which is intentional. Although today’s DeFi is an $200bn+ vertical (in terms of total value locked), DeFi was far from prosperity in 2018. But the idea was not only sparked up, it also was very well carried on, and eventually a great fire flamed in the hot summer of 2020. We will get to it in the next section of our Random Walk series.
2018: Flash loan
Flash loans were first introduced in 2018 by a forerunner to DeFi, open-source bank Marble.
They arrived on the Ethereum network in January 2020, courtesy of the pioneering decentralized lending platform Aave. By July of the same year, Aave was regularly issuing more than $100 million in flash loans each day. In June 2021, the platform had issued almost $4 billion in flash loans.
Being designed as a tool that allows capital to be borrowed and repaid in one transaction, most importantly without collateral, flash loan is unquestionably an extremely innovative tool. However, it also presents an opportunity for unscrupulous actors to siphon off millions by exploiting poorly protected protocols.
The first flash loan attack occurred in 2020, where a borrower took an ETH flash loan using the DeFi lending protocol dYdX. They then split the loan in two and sent the funds to the lending platforms Compound and Fulcrum, and took advantage of the latter’s poor oracle mechanism that led to a significant slippage, which ultimately gave the attacker the chance to make an arbitrage.
2018: Uniswap 1.0
On the 2nd Nov 2018, the initial version of Uniswap was published to the Ethereum mainnet. This was the culmination of over a year’s worth of work by its creator Hayden Adams.
Uniswap is clearly one of the most important projects in the DeFi space. In contrast to EtherDelta, Uniswap was built on the concept of liquidity pools and automated market makers, leveraging again the previously discussed user-to-contract model.
The first version of Uniswap was entirely funded by a grant from the Ethereum Foundation.
In July 2019, another important event happened. Synthetix launched the first liquidity incentive program — a mechanism that later became one of the key catalysts for the DeFi Summer of 2020.
Also, multiple other DeFi projects launched their protocols on the Ethereum mainnet between 2018 and 2019. These included Compound, REN, Kyber and 0x.
GameFi got its start in China at the Wuzhen World Blockchain Conference in November 2019, when the founders of MixMarvel, a blockchain game publishing platform, talked about how cryptocurrencies could revolutionize the video gaming industry.
Yet perhaps more famously — at least for western readers — the term was first used by Yearn co-founder Andre Cronje in a September 2020 tweet. Over the years, the term “GameFi” has become more frequent when describing games with financial elements enabled by blockchain technology.
However, the GameFi industry developed rather slowly until it became a breakthrough in 2021, when DeFi had seen a hot summer in 2020 and NFT had gained great traction. The approach of play-to-earn was widely adopted and brought to even outside the crypto world by projects such as Axie Infinity.
But, some might argue that blockchain games shouldn’t be limited by the term GameFi, as most of the games down this road are quite far from being as playable as the games that the gaming industry acknowledges. Very true, but nevertheless, GameFi’s ideation in 2019 and its blooming later in 2021 was very meaningful to the blockchain and the gaming industries.
2019: Facebook’s Libra
Libra was formally announced by Facebook on June 18, 2019 with the plan to be launched in 2020. Facebook revealed its plans to issue Libra as a cryptocurrency, a stable coin, backed by financial assets and enabling unbanked people all over the world to execute payments in a convenient way. Facebook established the Libra Association to oversee the new currency. The Association was founded in Geneva, Switzerland and included many big names from different industries like Lyft, Spotify, Uber, PayU, Vodafone, Bison Trails, Coinbase, Xapo, Andreessen Horowitz, Union Square Venture and so on.
But the following participants left the Libra Association already in October: PayPal, eBay, Mastercard, Stripe, Visa, Mercado Pago, and Bookings Holdings. The most obvious reason was the pretty negative reaction not only from the US government and US banks but also from banks, politicians and regulators in EU and other countries. All of them warned of huge risks for public monetary sovereignty with Facebook potentially becoming a “shadow bank”, and even of threats to society and democracy stability. And also from the side of decentralization fans, Facebook earned criticism for being a centralized, permissioned blockchain with the Libra Association as a de facto central bank.
Last but not least, some people who examined the code of Libra implementation released on Github were also disappointed about the code quality and the development state. For example, the blockchain engineer and Bloomberg columnist Elaine Ou wrote that “Make it up as we go along” is reasonable for a seed-stage startup, but not something one would expect from a half-trillion-dollar tech company — especially not one that’s collecting $10 million checks from prospective members.”
ARPA is a blockchain-based solution for privacy-preserving computation, enabled by Multi-Party Computation (“MPC”). Founded in April 2018, the goal of ARPA is to separate data utility from ownership and enable data renting. ARPA’s MPC protocol creates ways for multiple entities to collaboratively analyze data and extract data synergies while keeping each party’s data input private and secure. ARPA allows secret sharing of private data, and the correctness of computation is verifiable using the information-theoretic Message Authentication Code (MAC).
Developers can build privacy-preserving dApps on blockchains compatible with ARPA. Some immediate use cases include: credit anti-fraud, secure data wallet, precision marketing, joint AI model training, key management systems, etc. For example, banks using the ARPA network can share their credit blacklist for risk management purposes without exposing their customer data or privacy.
Team members have worked at leading institutions such as Google, Amazon, Huawei, Fosun, Tsinghua University, Fidelity Investments. ARPA is currently assisting the China Academy of Information and Communications Technology in setting the national standard for secure multi-party computation. ARPA is a corporate member of MPC Alliance and IEEE and is in partnership with fortune 500 companies to implement proofs-of-concept and MPC products. In 2019, ARPA was named the Top 10 most innovative blockchain companies in China by China Enterprise News and China Software Industry Association.
For more information about ARPA or to join our team, please contact us at firstname.lastname@example.org.
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