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More ethereum work

I haven’t been keeping up with habits lately, and haven’t written in three days. I also haven’t been working out much, instead drinking and staying up too late. I could make excuses about how work, home and the kids have been stressing me out, but that’s not it. I’ve just got to find other things to do.

I have been getting a lot done on the Ether Auction smart contracts. I’ve been using Hardhat, which is probably a bit too new and buggy for me, given my experience level with Solidity development, but I’m slowly moving forward with TDD. There are a couple bugs that are preventing me from putting the tests together like I would want. Chai methods for ensuring wallet balances change between bid and withdrawal calls seems to be broken, and I can’t seem to retrieve the getters from a public mapping in the contract.

I’ve been reading up on Solidity best practices, fussing over the withdraw function on the app to make sure I don’t have any hacks on the withdrawals. I want a really solid testing suite before I worry about deploying this thing. I’ve got a lot to figure out in the meantime. Just getting the testing suite has been difficult enough, but I’ve still got to finish building the auction instance contracts, the deployer contract, then figure out how to deploy, and get the web3 UI up and running. I have no idea what I’m doing, and will have to learn it all on the fly.

Thankfully the Hardhat community Discord has several helpful people, although the team seems like they have quite the backlog on the Github issues page.

I’m trying to just take it slow break when I get frustrated. I’ve been working through the Javascript ES tutorials on FreeCodeCamp to try and fill the gaps in knowledge, since I’m going to need it more and more.

I’m not happy with the pace of progress that I’m making, but as long as I make some progress every day I should be happy.

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Continued optimism

Nose to the grindstone.

So I actually got a quite a bit done yesterday since I wasn’t obsessing over $BTC price action yesterday. I spent most of my time working in Hardhat, trying to figure out how to make tests work using the Waffle/Chai suite. I’m having a hard time wrapping my head around all the different dependencies so that I can do things. It’s a lot to take in, even for me, so I just had to turn in early last night and give my brain a rest.

I’ve been reading Kurt Vonnegut’s Player Piano for the past week. I finished Slaughterhouse Five earlier last month — it’s a short read — Player Piano is much more like a regular novel. I only gotten through the first fifth of it, but it’s quite amazing from a futurist standpoint. The novel deals with the economic and class consequences of automation and computerization, and even touches on things like standardized test scores determining one’s algorithmic destiny. It’s really making me think about the kids’ education.

Elder is really spending a lot of her day working on schoolwork. I know it’s really not a lot compared to how much time she would be spending in class if they were in person, but it just seems like a lot of work for a third-grader. I find she’s often not paying attention to what the teacher is doing, and is doodling or reading something else she’s not supposed to, and I feel like a hardass constantly telling her to pay attention. She gets frustrated by the homework, having to type everything up; I’ve been trying to reinforce her touch typing, but she often falls back to two-fingers when she’s working.

And I’m pushing Younger with her reading. We’ve been doing IXL every day for the most part, and I’m working with her on language arts as much as I can. It’s stressful, cause she gets frustrated easy, so we have to take it in short increments, a few questions, a TV show, a few questions, another show.

And trying to fit all this in while “working”…

Zombie, LLC’s home franchise was having their virtual convention yesterday, and I spent half of my workday yesterday trying unsuccessfully to get sound working in the Windows 10 VM that I use for work. I don’t know if it’s a problem with QEMU, or the Pulse Audio subsystem, but I tried to convert my QEMU image over to a VirtualBox image and ran out of space. I tried watching the Zoom meeting on my host, but I’m stuck on wifi (another problem with the ethernet card), and the meeting was pretty much unwatchable. I also tried using the Azure VM that I use for the meeting, but the throughput on that was pretty horrible.

I really don’t know what to do about the networking issue other than just put my head to the grindstone and figure out what the hell is going on. I’m not sure if it’s a driver issue with the card itself or some sort of Network Manager / NetPlan issue that I messed up. I’m just not getting an IP address unless I run dhclient directly, and that only works for a few minutes. I really wasn’t looking forward to debugging the entire Ubuntu network stack.

I did have some small wins over the past few days. Lambo1, my six-GPU mining rig, had been acting up, so I wound up disconnecting the rig and pulling out every card one-by-one and spraying then off with air. It looks like one of the power cables stopped working, but it took an hour of swapping and restarting to figure it out. The riser support was slipping down as well, which may have contributed. I also managed to finally figure out how ssh-agent and ssh-add work together with ssh to allow automatic login. It had always been one of those things that I managed to clobber together once in a blue moon, but I had to redo my Gitlab and Github keys on both my development workstations, and now I’ve got it figured out. It’s so nice to be able to clone my repos and push without having to lookup passwords.

I think my BTC bullishness may have caught on with the Missus. She’s sitting on a lot of cash right now and just opened a Vangard account, per her FIRE peeps. I bought a small amount for her during the 2017 run up, and it’s now worth three times what she paid for it. We were comparing notes on portfolio performance she said, “OK, I’ll buy some more”. I’ve been trying to get her to setup a BlockFi account, but she’s had other things on her mind. I’ll probably just have her set the account up with some cash, and we’ll feed the interest into BTC. Maybe I’ll add some dollar cost averaging into the mix if she want to fund it further.

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Ether auction development

So I actually started programming the (Evil) Ether Auction that I’ve been thinking about for several weeks. I put the repo up on GitLab while I work through it, so that I can get some feedback on it before deploy it.

I’m still working on the actual auction portion of it. There are several auction Solidity auctions tutorials out there, so used those as a start point while I refine the requirements for the app. The auction contract is deployed with a bid time parameter, and the the pot is seeded via a separate transaction. The first bid will set the endtime of the auction.

We keep track of the winner and first loser, once the auction is complete all other bidders will be able to withdrawal their funds from the contract. When the winner claims the pot, both the winner and first loser’s balance become property of the owner.

That’s the gist, anyways. I’m working out the details on a deployer contract that will keep the game running indefinitely, or until a set limit. I actually want the next round to be triggered by the winner claiming funds, some sort of callback to the deployer that takes the winnings from the previous auction and uses it to create a new one. I’ll probably add some sort of dev fee, and checks to make sure that the proceeds from the previous auction are more than the starting pot. I don’t think there’s any reason that this can’t be done, I’ll have to do some gas tests to make sure claiming the pot doesn’t cost too much for a first round.

I’m planning on seeding the first round with one Eth, and letting the contract run until the last round is greater than 32ETH. It’s actually pretty small change for some Ethereum whales, and there’s no reason that I couldn’t make this work for specific ERC20 tokens.

I’m using the Hardhat library to code this up right now, instead of Truffle and Ganache, and I’m not sure if I’m going to stick with Solidity for this contract or change over to Vyper. I’ve got the framework up and running and have started writing tests, but I’m unfamiliar with Chai and having problems wrapping my head around how to structure the tests.

The last piece I want in place is some sort of web interface setup, something simple that will list the auction details and allow users to place bids or reclaim bids from previous auctions.

That’s what I’m envisioning, so we’ll see how things go as development continues.

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DeFi notes

This weekend was a bit rough.

The kids were on my nerves the whole time and my temper kept flaring up. The girls seem to think they can just do whatever they want and ignore what I ask them to do. It’s infuriating. Missus is stressed out from work, and has been sleeping a lot. I’m stressed out cause she’s sleeping a lot and it feels like I’m doing most of the work around here.

We did manage to have some fun around here. I had promised Younger an ice cream party if she learned her letters. She did that several weeks ago and has been waiting patiently through Halloween and her friend’s birthdays, and Saturday I took her to Cold Stone and let her pick out three different flavors. She was really distraught when I told her that her friends wouldn’t be able to come over till Sunday, and on Sunday she must have asked five or six times if it was time.

So they came over yesterday afternoon and had their ice cream in the backyard. And these kids are exhausting, man, I tell you.

We also watched Biden’s victory speech Saturday night, although I had a hard time getting Elder to pay attention to it. I told her it was important to watch cause she’s so young that she probably doesn’t remember anything about the Obama presidency, and I want her to remember this moment. Younger probably won’t remember it. Missus was more interested in Harris’s speech and making Elder watch it. She didn’t see any point in making her pay attention to another old, white dude. Still I think moving on from the Trump presidency as soon as possible is very important.

Most of my time this weekend was spent reconciling my DeFi transactions, trying to figure out how to reconcile the ycrvBUSD that I have. I owed the girls some, so I got those numbers recorded in my Notion database and moved a bunch more fiat into them. I was tempted to buy more BTC, but decided to stick with my stablecoin strategy for the time being.

I also spend some time on the Yearn Discord and reading over the smart contracts to try and figure out just what the heck is going on. I pulled my ETH out of the vault since it was inactive, and considered doing so with LINK save for the fact that I don’t know what else to do with it. I talked to someone about using it as collateral on Aave for something else, but I don’t want to risk it.

Also, it seems that there is a new test USDC vault, which there seems to be some excitement around. I was tempted to move some funds there but I’m playing with savings here. I’m already nervous enough after hearing of some US-based crypto lending firm filed for bankruptcy this week. I don’t know enough about their business model to know whether BlockFi is at risk as well, but much of CT seemed to think so.

After I deal with day job stuff I need to take a look at my altcoin lending portfolio. Several positions should have stopped out during the pre-election run up, but I’m not entirely sure I had my stops set properly. Cosmos, PolkaDot, and Serum are all well below my stops, only ChainLink has managed to hold its position. I need to calculate my losses and figured out if I’m allowed to make any November trades. I found a new degen yield farming site and am tempted to try and take a position on one or two. If I was smart I would just wrap my BTC and put it in a vault. Alternatively, I don’t have any CRV or YFI tokens, and as much as I’m relying on the vaults I should probably allocate some funds there.

But the best strategy might just be to hold my BTC for now. It seems on the verge of a breakout this morning, and I have no idea what equities will do this morning now that Biden has won. We’ll see.

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Evening update

BTC was mainly quiet today, resting while alts seem to be pumping. Bitcoin has held steady mostly today while the election results come it. Several outlets are calling it for Biden, but several states are going to recounts. It seems that Dems may be able to squeeze out a Senate majority as well, pending results in Alaska (!) and two runoff elections in Georgia early next year.

I spent some time this morning thinking about how to design the Evil Ether Auction app, and exactly how I want to make it work. Nothing solid yet, but I’m trying to figure out how I want the mechanics to work. I’m thinking that it’ll will have a series of rounds, starting at one ETH, and that the proceeds from the first auction will be used as a starting amount for round two, and so forth. I’m thinking the last round would be for 32 Eth, enough to fund a masternode. I’ll either keep the proceeds of the last round, or possibly put a bid tax at some nominal amount as a developer fee. We’ll see how that goes.

My most recent fiat funds cleared ACH on my onramp, so spent more time today thinking about strategy. The GUSD Curve pool is basically garbage, so I’m probably going to stake the bUSD pool. There are a couple degen opportunities out there, Harvest seems to be going strong, recent hack withstanding, and someone pointed me to SnowSwap, but I’m not playing around with these funds. I trust BlockFi and Yearn, but I’m not willing to take chances on any other platforms with significant sums.

I also spent a lot of time thinking about tax ramifications of lending platforms and all this DeFi activity. It’s going to be absolute nightmare. I don’t think CoinTracking has done much work in this area, so I’m probably going to have to take a look at TokenTax when the time comes. Considering that it integrates with Turbotax, I probably should.

The rest of the afternoon was spent going over CSV exports of my Ethereum transactions, trying to line up all my activities over the past few weeks, trying to match fiat to various pools. I haven’t been doing a good job with my earmarked funds, and I’ve got some cleanup to do before I make any more conversions. Trying to keep track of funds earmarked for my family members in one wallet is proving tedious, but keeping them in a separate wallet is out of the question, given gas fees for vault deposits and withdrawals.

I have to be very disciplined if I’m going to keep things straight, and I’m still not sure the best way to keep track of it. Hopefully I can keep things straight in a spreadsheet or Notion table and not have to go as far as putting together a custom database or ledger. I’m going to go back to it here shortly and shore up my calculations and see what I come up with.

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Bitcoin election pump

I have been completely useless for the past two days. I wrote Tuesday’s two thousand word post as a way to distract myself from anxiety around the election, and that was probably the last productive thing I’ve done. It seems that Biden has won, while Trump is contesting the results as we knew he would. Meanwhile, bitcoin has gone on an epic run that has put me in a state of ecstatic shock.

BTC waited until the polls closed on Tuesday to breach an eighteen month high. Betting markets swung wildly to Trump after he won Florida and it became apparent that this would be the Blue Wave that Dems were hoping for. I actually managed to go to bed at a decent hour, to my credit, instead of staying up for hours past my bedtime, obsessing over Twitter and results. I think I was mainly tired of Trump trolls in my TL.

By next morning the odds had swung back in Bidens favor, and bitcoin began it’s nonstop climb from $13,500, up two grand as I write this. It’s been completely insane. My high exposure to crypto funds in my IRA paid off handsomely today, as I was up over seven percent today, over five figures, before dropping by the close.

Of course CryptoTwitter has lost their minds. There have been arguments over which candidate would be better for crypto (answer: either), but my theory is that the markets have been pricing in a Biden victory since the run we say from $11,600 mid-October. More specifically, I think that they’ve been anticipating a peaceful transition.

Trump still refuses to go quietly, he just held a presser that the national networks had to cut off lest he undermine democracy any more than he’s already done. He’s even lost Fox News, and now it’s just down to his rabid fan base. I’m actually much more hopeful than I thought I would be, I just hope that we can have some resolution out of these last remaining states in the next day or two and that the Supreme Court doesn’t have to get involved. God help us.

This quick run near $16,000 has really put me in a pickle, and is really putting the pressure on my decision making. I’ve revised my moving average targets to match the 200-day MA that the Mayer Multiple tracks (I’d been using 100-day,) and have revised my sell target, keeping it in line with the 3.6x 2017 peak. Current target: $36,000. Of course this is a moving target, the longer we take to get there, the higher it will be. Or we may never hit it, who knows. Maybe this time is different.

My whole philosophy behind this sell plan is to try and time the market top, then buy back in after we see another pullback. The goal is more BTC. That said, I will be looking at a huge long-term capital gains tax bill if I sell. My average entry price is around $6,000. So, as an alternative, I’ve been throwing numbers around to see what I price I need BTC to be at in order to maintain my current income using only interest generated via lending platforms.

That number ranges from $250,000 for something conservative like BlockFi to a more reasonable $75,000 if I’m willing to try some of the riskier platforms using wrapped BTC. I’m still not convinced either way.

And to show just how degenerate my mind has been, I’ll tell you something. I got a credit card offer in the mail today, offering balance transfers and zero percent APY on purchases for the next twenty months. My brain immediately started scheming on how to take advantage of this. Step one, find a fiat on-ramp that allows zero-fee credit card crypto purchases, and max out cards. Step two, deposit stable coins with BlockFi at 8%. Step three, earn compound interest for twenty months, then convert to USD via ACH to bank and pay off card.

No one has gone broke faster than by playing with borrowed money, as it is known, but this is also basically how the big banks have made money off of the fed for years. Borrow funds at zero percent, then buy bonds or make government backed loans at prime plus. It’s still risky, and Missus would likely divorce me if I tried to pull something off. She got mad at me when I told her I was delaying my mortgage contributions cause we had too much cash in our shared accounts.

Well, it’s probably for the best. I’m well positioned as it is, there’s no need to get greedy and so something completely stupid. It’s not like BlockFi is zero risk. Who knows what will happen. I am trying to spread my funds around different platforms: BlockFi, Yearn, and I think I may take a dip with Fulcrum to see what it’s all about. One of the problems with these platform is the variability in profitability. It may be better to just stick with BlockFi for a stable rate, at least with wrapped BTC. Stablecoins seem much more lucrative on DeFi, but I’m seeing less and less incentive to hold fiat right now.

Right now I’m not sure how much more we can sustain, we’re almost at $16k, so either the price pulls back or otherwise just plows through it to the stratosphere. I’m just holding on to my hat at this point and watching the green candles come.

It’s already been a hell of a ride.

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Crypto exposure in equities markets

Introduction to cryptoassets for traditional investors

Sometime in the past few weeks, after Microstrategy and Square announced that they were holding $BTC as a treasury asset, someone put together BitcoinTreasuries.com as a way to track other public and private companies that have exposure.

Earlier today I checked the list and noticed a new name on the list, Bit Digital ($BTBT), which lead to a conversation on Twitter which I felt needed explanation beyond the two hundred and eighty character limit. So this post is squarely aimed at traditional equities investors who are trying to understand crypto and the industries around it.

Getting started

First off, if you want to understand Bitcoin, I recommend The Bitcoin Standard (affilliate link). I’m not the biggest fan of the author, but the book does a good job of explaining things despite the tone. The Nakamoto Institute has a crash-course as well that is probably handy, although I haven’t read the entire collection.

Other resources that I’ve found helpful in the past includes: Cryptoassets: The Innovative Investor’s Guide to Bitcoin and Beyond and the HashPower series by Invest Like The Best’s Patrick Oshaughnessy. Laura Shin’s Unchained podcast is a great source of current news about what’s going on in the space. And one of the best minds in the space is Andreas Anotonopolis, who has written numerous books on Bitcoin and Ethereum.

The current recommendation that I would give to investors coming into the space is to convert between one and five percent of your current net worth directly in BTC. Dollar cost averaging is perhaps the best strategy to use instead of a lump purchase, due to bitcoin’s volatility. Coinbase and Gemini are two fiat on-ramps that I recommend, but there are more springing up all over the place, RobinHood, Square, and now Paypal. If you plan on investing more than a couple hundred dollars, however, you’ll want to invest in a hardware wallet and use an on-ramp that will let you withdraw your coins to your own wallet. There’s a lot to cover here, more than I have time for today in this post.

In general, most OG crypto people follow the maxim “not your keys, not your coins”. The entire premise around bitcoin is that of self-sovereignty, and entrusting your funds to a custodial entity, such as onramps or exchanges, goes against this ethos. That said, there are places where it can’t be avoided.

Crypto exposure in equity markets

While I have been building up my crypto positions over the past few years, I also have a larger IRA that I’ve carried over from 401Ks accumulated over two decades in traditional corporate jobs. (I cashed out my traditional brokerage account for BTC last cycle.) So I’ve spent the last couple months trying to find exposure to crypto markets, where I can take advantage of tax deductible deposits and tax-free capital gains.

Grayscale

The most direct exposure to crypto in the equities space for US investors is via Grayscale Investment’s Digital Trusts, mainly the Bitcoin ($GBTC) and Ethereum ($ETHE), and to a lesser extent, the Digital Large Cap fund ($GDLC), which is a basket of BTC, ETHE, and a couple other alts. I do not recommend the Ethereum Classic trust ($ETCG), and the other single-asset funds are not available through standard broker accounts yet.

Until there is a straight bitcoin-derived ETF, which may be a long way off, Grayscale is probably the best bet for exposure to Bitcoin. There are a few things to keep in mind though. Grayscale operates with a two percent annual fee, and the bitcoin per share of GBTC is currently at 0.00095320, according to their website. However, the Grayscale vehicles trade at a premium to the underlying value of the BTC in the trust. The GBTC premium is currently at twenty percent, and the ETHE one is at fifty, although this is near an all time low.

Other equities

Let’s take at the companies listed on the BitcoinTreasuries page. I’ll mention the ones that I have positions in: RIOT, HIVE Blockchain (HIVE/HVBTF), MGTI, and Voyager (VYGR/VYGVF). I also have two other positions not on the treasuries list, Marathon ($MARA) and DPW Holdings ($DPW), that have exposure to BTC as well.

A number of them are involved in mining activities, so let’s break that down.

Bitcoin is the world’s first truly scarce asset. The mining process, as it’s called, is actually a competition to see who can win a mathematical contest to mine a new block, and win the block subsidy, (currently 6.25 BTC) as well as the transaction fees. There are a couple analogies that one can use to describe this, but I like to use coin flips.

Imagine that you and I are in a contest to see who can flip ten coins in a row and have them all come up heads. It may take the two of us a while to do that, but as more people join our game, the amount of time before someone ‘wins’ will decrease. This is essentially what happens with bitcoin, but in this case the game is a contest to perform a cryptographic hash function using the last block and a random nonce as inputs. In this case the winner is the one that can generate a hash with a sufficient number of zeros in the front. This process is known as proof of work (PoW).

Another critical component of the bitcoin algorithm that makes it work is the difficulty adjustment. This adjustment, built into the bitcoin PoW protocol, is triggered every 2016 blocks, or about every two weeks. It changes up or down to keep bitcoin’s blocks coming every ten minutes on average. As more miners enter the blockchain network, this adjustment ramps up. As you can imagine, this leads to a race for hashpower, as manufacturers put out faster, more power-efficient hardware to mine faster.

So when someone asks what the “intrinsic value” of bitcoin is, I usually point them to the capital cost of the hardware securing the network, as well as the cost of electricity used to run those machines. There’s a lot more detail to go into about the mining process, especially with regard to the stock to flow model and halvening process, for example, but that will have to wait for another post. What I will mention is that we just had the second largest difficulty adjustment in history, as a number of Chinese mining companies shut down their equipment. Most of them were taking advantage of low-cost hydroelectric power during the recent rainy season, and are relocating due to higher prices. The takeaway here is that it will mean better returns for others who are still mining on the network.

One last note about mining companies. There are number of cryptocurrencies beyond Bitcoin that can be mined. There are forks of bitcoin that can be mined using the same specialized ASICs, although I recommend staying away from them, and there are other currencies that use traditional graphics cards like those used for video games, called GPUs. I mention this because there have been ASIC mining operations that focused on non-bitcoin during the last bear cycle that weren’t able to stay afloat.

Generally speaking, I don’t recommend exposure to any of these mining companies unless you’re very familiar with the space, and/or as is my case, looking to take a gamble that one could see an outside return during a BTC bull run. Caveat emptor.

Other cryptocurrencies

As I alluded to a moment ago, anyone can take the Bitcoin source code, modify it, and create a new bitcoin fork. There have been many attempts over the years, and I won’t name them. I generally stay away, and agree with most bitcoin maximalists that the original BTC is the best store of value out there. That said, there are other blockchain projects out there that have different aims and use cases. The only one that I’ll mention is Ethereum, which is a smart contract platform, and allows one to program applications on the blockchain and have them run in a decentralized, autonomous way. It’s been around for several years, and is the king of the Decentralized Finance (DeFi) space, which is generating huge interest amongst developers and finance types. It’s the main focus of my activities right now.

There is a lot going on with Ethereum right now, so I recommend caution before taking a position in it, at least until you understand the landscape. I advise even greater caution with other cryptocurrencies, or altcoins. I’ve been in the space since 2014, and have spent hundreds of hours researching various projects, reading white papers, and the number of scams, hacks, contract failures and rug pulls that I’ve seen in this short time is staggering.

Fiat onramps like Coinbase, Gemini, and others have been adding other cryptoassets to their platforms over recent years, mainly cause the demand is there, but anyone who thinks that any of these tokens will see price appreciation anything like bitcoin over the last four years are probably going to be in for a rude awakening. Are double digit gains possible? Sure, but I am not betting anything other than a small stake, especially if we’re on the cusp of a BTC moon run.

A note about trading pairs: a few years ago, your owly onramp into cryptoassets from fiat was into bitcoin, which was then traded for other altcoins. As a result, most traders tracked their performance by the BTC price. The rationale here being that if you lost value in BTC terms you would have been better off not trading. As fiat on-ramp have made it possible to go directly from USD to other tokens, some have stopped this practice, although I still stick to it. More recent trading and market making platforms have introduced swap mechanisms which make it possible to go from one token to virtually any other, performing whatever third or nth level conversions necessary in the background. Since my long term goal is to accumulate BTC, not USD, I still track all trades via the BTC pair.

Stablecoins and Tokenization

Another trend that I think is worth mentioning is that of stablecoins and tokenization of hard assets. Basically, fintech companies have figured out that they can use a type of Ethereum asset called an ERC20 token as a digital dollar, and transmit these tokens over Ethereum as an alternative to the traditional fiat settlement system in traditional finance. Ethereum transactions settle in as little as twelve seconds, compared to ten minutes for bitcoin, and days for banks. These tokens go by the name Tether, USDC, DAI, or GUSD, and are supposedly backed by physical reserves of the various issuers. There is a lot going on in this space, I recommend you checkout The Crypto-Dollar Surge and the American Opportunity if you are interested in more.

Lastly, I wanted to mention asset tokenization, cause it will likely be huge in the coming years. Stablecoins are basically tokenized dollars, and we’re already seeing companies tokenize traditional equities on blockchains, and real estate is right around the corner. I bring this up cause I was asked directly about Vemanti Group’s plan to offer a gold-backed crypto. I’ll only speak in general terms, since I’m not familiar with Vemanti. I have seen a host of gold-backed crypto projects in my day, and I’ve got a general unease about the concept.

While there’s generally nothing wrong with gold-backed crypto per se, the whole idea as bitcoin as an alternative to gold makes me question the motivation behind such aims. The whole point of bitcoin as an alternative to gold as a store of value has to deal with gold’s difficulty to transport, as well as seizure risk. It seems like a step backward to me.

The main risk here that I see is one of custodial risk. Bitcoin, Ethereum and blockchain technology as a whole are decentralized projects, and one’s which allow trustless interactions between adversaries. When you start talking about asset tokenization, you’re putting trust in a third party. Tether for example, has been highly controversial because of accusations that they print more Tether than they actually have reserves for.

Color me skeptical about gold-backed crypto projects. Again, there’s nothing wrong with it in general, but for the most part, I think that the more people understand how bitcoin works, the less interest they’ll have in gold in general. Again, I do think there is a huge opportunity in tokenization of assets, and I’m looking forward to see how this plays out in the future.

TL;DR:

To sum up, I hope this serves to answer some questions traditional asset investors have about the crypto space. I truly think it’s the greatest opportunity of my lifetime, and that we’re on the cusp of widespread adoption by retail, institutional and sovereign investors that will be unlike we’ve seen. The tech is moving super fast, and truly understanding Bitcoin requires a fundamental shift in thinking about money and economics, especially scarcity.

Again, the best exposure is direct exposure to BTC, preferably in self-custody, but getting started with an institutional custodian while you figure that out is ok. It’s how most people start. There are a number of new instruments popping up for retirement or institutional accounts that we didn’t cover, Grayscale is probably the best option out there for those getting started.

Once you understand the technology, good luck to you, cause I don’t know anyone that has invested the time to make it that far that has ever gone back. It’s a whole new world. Please do your own research before you make any significant investments.

Hopefully this helps! If you have any questions, feel free to hit me up on Twitter or leave a comment.

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DeFi update

PRIA Burns Frontrunning Bots

Yesterday while I was puttering about on Telegram, I noticed a couple of large PRIA orders come through via a bot channel that I have pulled up. What immediatley struck me was that two of the three transactions were by the same address, a purchase and a sale, right before an after a larger order. It was apparent that this was a bot order trying to front run a transaction on the Uniswap pool, likely because of high slippage on the order.

What the bot owner didn’t account for was PRIA’s transaction burn. Between four and six percent of the purchased tokens were burned on during the attempt, resulting in about half an eth’s worth of loss for the bot. Oops.

This is part of a bigger problem in the Ethereum ecosystem, and why it’s considered an adversarial system. All transactions get sent to the mempool before they are mined in a block, which gives bots the opportunity to watch the mempool for transactions and try to front run it by submitting another transaction with slightly more gas.

Some have called this aspect of Ethereum’s architecture “the Dark Forest”. There’s a fascinating write up about it here that everyone should read if you haven’t already: Escaping The Dark Forest.

Another dev on the PRIA project has been trying to do KEEPR jobs the past few days and said that it is nearly impossible because everything keeps getting fronted as well. I’m not sure what the solution is to fix this problem, other than having private mem pools available via large mining pools, as mentioned in the article above.

At some point I need to dive into what solutions are being proposed by the Ethereum community, and compare how it’s handled in other L1 solutions like PolkaDot or Cosmos.

Value DeFi exit

A few months ago I tried staking some USDC in the Value DeFi seed pool v2, which was supposed to be earning 23% APY. The pool is closing, which I happened upon just by chance, and I just withdrew my funds for some underwhelming results.

I got my stake out, minus a bunch of gas fees, and got a couple bucks worth of $YFV back, which I then had to swap for $VALUE. Ok, I guess. I’ll just sit on this forever and see if it ever turns into anything.

The lesson here is that DeFi does not reward the timid. If you have less than a thousand dollars, you’re probably better off just keeping your money in BlockFi. Unless you’re a complete degen and want to ape into something with insane APY and risk getting rug pulled.

Currently, my main vault holdings are in the Yearn sBTC Curve vault. After that, it’s the Yearn BUSD vault. I’ve also got some Link in their yaLINK vault, which isn’t doing too well at the moment, but I can’t be bothered to move it right now.

My main strategy at the moment is to move funds that are locked into the Lending Club accounts I have earmarked for my kids, into stablecoins into various vaults. (This is on top of the BTC that I DCA for them into their BlockFi accounts.) I’m also trying to figure out the best way to maintain my cash flow between my expenses and lending platform. Moving in and out of vaults is expensive, so I’m trying to figure out the best way to do that. Quarterly, maybe? Keeping funds that need to be converted to cash in BlockFi for easy ACH back to fiat.

Keeping track of everything is proving to be quite the chore. I’m using a Notion database, but keeping track of where funds go, where they originated from (in the case of kids and other family members), and fees associated with the various conversions is a bit of a mess right now.

And tracking the value of the shares of these vaults outside of something like Zapper or DeBank is difficult. Right now I have no idea whether keeping cash in BlockFi at a stable eight percent with no fees is a better idea than trying to chase twenty percent plus with all the variability, contract risk, and fees.

I’ll keep working on a solution though. If you have one, please leave suggestions in the comments.

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Uniswap limit orders

Most people who are used to trading on centralized exchanges are familiar with using limit orders, where one is able to set orders that are off from the market price. Automated market makers such as Uniswap don’t have these features, which makes trading Uniswap-only pairs a bit of a problem, especially when one is trying to take advantage of volatile tokens such as $PRIA.

I’ve been looking for ways to set limit orders with Uniswap, and after several dead ends I’ve found two that may work. One is an on-chain protocol, the other is a bot.

On-chain method

Pine.Finance calls itself an AMM order engine. They only support limit orders on Uniswap v1 and v2, but they say they plan on adding stop loss and market functionality across the DEX space, like Aave, Balancer, and others. In order to use it, you have to submit the input token along with your order details through an on-chain transaction, then wait. When the price hits the target, Pine’s network relayer’s should execute the transaction.

There’s a lot more detail in the link above. What is important to note is that each order gets its own order vault, meaning that your order input funds will be stored in a discrete Ethereum address. You can see them on chain.

The project is in beta, and hasn’t been audited, so this one is use at your own risk. I did go ahead and put in a very small order that I’m still waiting on to execute. The gas cost was nominal, about as much as a standard transfer, but I’ll also have to pay gas if I want to cancel the order. This is similar to the way that on-chain DEX like iDEX or Metamask have worked in the past, although Pine is a custodial solution, probably a requirement of the fact that the relayer pays the gas when they execute the trade (and arbitrages the difference).

[Update: Pine replied wanted to clarify the custodial claims:

I’ll need some more time to delve into the process used here. What I am sure of is that during the order process, a deterministic funds vault is created, and tokens are transferred to this vault. Even trusting that these funds are self-custodial, they are removed from the user’s wallet. This may be similar to how 0x works, as mentioned below, and I promise to do more research and follow up on this. ]

Bot method

LimitSwap is a Uniswap limit order bot that is available on Github. After downloading, you’ll need to export your private keys and configure several settings to get things up and running. Set the tokens you want to trade, set your prices, and then let it go. You’ll also need to hold LimitSwap’s $LIMIT token in your wallet in order for the bot to function.

That’s the promise, anyways. I wasn’t willing to actually give it a shot. The project’s sole developer, who goes by the handle Crypt0Gnome, seem legit, but has taken steps to obfuscate his code. I understand his motives is to fund his development efforts via the $LIMIT token and prevent people from easily modifying his code to circumvent this requirement, but I’m not willing to trust my private keys with something like that.

I won’t go too far into the technical details but to say that he’s written the bot in Python using a Flask front-end and packaged all the dependencies in the zip file. This may make it easy for Windows users to get up and running, but shocked me a bit when I went to download the source code and found an empty repo.

I’m not trying to be unjustly harsh here, Crypt0Gnome seems to be sincere and to be community focused. However, in addition to the closed source nature of the project, I did find the Flask interface buggy and less than polished, and it was hard to justify digging into it when all I wanted to do was set a single limit order for a small amount. I do hope Crypt0Gnome can find a way to fund his project and open it up so that others might contribute to it as well. We’ll see.

The search continues

So while I’ve decided to do a small test transaction with Pine for now, I’m still looking for other solutions, preferably non custodial ones. The 0x protocol may offer a solution if one can find relayers supporting the tokens one wishes to trade, but I’ll need to do more research on that front to say more.

The bot approach would also be preferred over a custodial, on-chain solution if one is willing to maintain the bot, but a closed source solution with a single dev is a bit to risky for me to use, let alone recommend to others.

Google is a graveyard of dead links and others looking for solutions to this problem, so there is a need for it, but for now it seems that there is no good solution. I’ll keep searching and will probably do more research into both of these solutions for a future update.