Feature: Prof Gün Sirer's "Who has your Back in Crypto?" - Cryptoeconomics Asia
In this review, Cryptoeconomics.Asia goes through Professor Gün Sirer's "Who has your Back in Crypto?", he shares that developers might not be the defenders that you think they are!
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Feature: Prof Gün Sirer’s “Who has your Back in Crypto?”

Scholar Feature: Professor Emin Gün Sirer at Cornell

 

 

HFeature: Prof Emin Gün Sirer (Twitter @el33th4xor)

There are very few academics that are heavily involved in the study and critical evaluation of blockchain. One important influencer is Professor Emin Gün Sirer of Cornell. He is heavily involved in Dist Sys, different Oses, Blockchain, NoSQL, and is an avid commenter on the current state of affairs of bitcoin. He shares his thoughts on blockchain economics very often through his website www.hackingdistributed.com.

I found Prof Sirer’s latest article very interesting. In “Who Has Your Back in Crypto?” published on 26 August 2017, he discussed a misconception that users of a blockchain have on the degree of friendliness that they have on users of the ecosystem. In his words “the entities that have their back.”

 

Prof Sirer named 3 main roles:
1) Developers
2) Businesses
3) Miners

 

He revealed that a simple poll through social media showed that users hold these beliefs:
1) 60% of respondents feel that DEVELOPERS have USERS’ interests at heart
2) 23% of respondents feel that BUSINESSES have USERS’ interests at heart
3) Only 15% of respondents feel that MINERS have USERS’ interests at heart

Readers should note that we are referring to cryptocurrencies in general, and specifically Bitcoin.

Before we continue there’s a need to explain the roles of the players. The four players within a blockchain ecosystem / cryptoeconomic framework:

1) Users – Users of the blockchain that are active participants of the network. They transact using the blockchain framework and hold value in that cryptocurrency.

2) Developers – Are those that contribute to the code of a cryptocurrency. In the case of Bitcoin, it is the Bitcoin Core developers. For Ethereum it would be the Ethereum Foundation development team that examines zero-knowledge proofs and Casper.

3) Businesses – Includes exchanges such as Bitfinex, Coinbase, CEX.IO and user-facing blockchain services such as CoinDesk, CoinTelegraph, Brave NewCoin. It also includes businesses that sell hardware wallets such as Ledger, Trezor, Keepkey. It might not be 100% true but many universities and academia fall into this category too.

4) Miners – are those that run full nodes or framework that allows for pool mining to occur. Earliest versions of miners are i.e. Slush pool. Individual mining has been made impossible since the increase of computing power on several blockchains such as Bitcoin. The result is a combination of computing power in the form of a “pool,” solving rewards if obtained are then split between the participants that have contributed to the computing power [hash rate] of the pool.


We are assuming that economic intelligence such as AI are agents within the specific player groups and do not serve as independent players within the ecosystem [as of 2017].

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The Catch

 

Here’s the catch. Prof Emin pointed out that most developers that are contributing to blockchain projects all over different cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Dash and even ZCash. Are in fact there simply for their own self-interest. He shared that most of the developers who are currently contributing were not around since the genesis of each project (Sirer, 2017). He referred to them as second generation developers in contrast to first generation developers.

He went explained that second-generation developers than to want to leave a mark for themselves in the project, and would at times leave etchings in their contributions in order to display to others that they contributed. This can be in the form of hard to understand coding components or vanity projects within the code which do not benefit the average user. Developers too have an incentive for the cryptocurrencies to do well.

I speculate that there exists a high degree of a principal-agent problem (See Agency Problem) between the user and developers of a cryptocurrency. It is my desire to examine this relationship through what the professors over at RMIT call “Institutional Cryptoeconomics” or what we traditionally call Industrial Organization/Economics [See Tirole].

 

Developers too tend to be the ones that are closest to users, take Buterin of Ethereum for example which constantly updates and communicate with users of the Ethereum Network. As developers are the ones that explain and advocate roadmaps and development plans for a cryptocurrency they tend to have a certain degree of “Mandate.”

In contrast to developers, businesses. Users regard businesses as profit-taking organizations which will want to benefit at the expense of users themselves. Scenarios that have played out, in reality, crafts expectations of consumers and thus indirectly affect the perception of users within all blockchain frameworks. Bias cannot be easily removed.

 

It would not be wrong to say that users tend to dislike miners by a ton. It is a fact that miners contribute a huge chunk of a blockchain’s hashing power, and are rewarded through solving and processing transactions. The high computing power of individual miners/pool miners has led to the inability of retail users [average joe] from ever being able to mine a single Bitcoin given today’s difficulty and network hash rate.

Readers should check out more on http://hackingdistributed.com/2017/08/26/whos-your-crypto-buddy/

 

 

 

References
Gün Sirer, Emin (2017). Who has your back in crypto? Retrieved from http://hackingdistributed.com/2017/08/26/whos-your-crypto-buddy/

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