About ECC
The third Ethereum Community Conference (ECC) is held from 3rd March to 5th March in Paris in 2020. There are over 250 speakers and over 2000 audience expected to attend the conference. Most speakers are from the Ethereum community and the conference is followed by Eth Paris, which is held on 7th March with open topics. One highlight for venture capital especially is that an organized pitch event took place during the conference and 30 early-stage startups with funding requests participated.
The conference is hosted in Maison de la Mutualité and there are 6 other rooms besides the main theatre hosting talks. The conference is crowded despite the threat of coronavirus.
Overview of Ethereum
Ethereum’s vision is the world’s computer. It allows decentralized applications to be built upon and provides services to users worldwide. As the earliest underlying infrastructure, the network effect shows up. Cryptokitties became the most popular Dapp after launched in 2017 and caused huge congestion. Topics towards scalability became the main direction where projects worked on especially in 2018.
Ethereum 2.0 was initiated therefore with two main goals: Introduce a proof-of-stake consensus mechanism and sharding. The former will eliminate the need for expensive proof-of-work mining and the latter improve the speed and throughput of ETH transactions. Besides sharding, ZK rollup and optimistic rollup are also important research directions for scalability.
Regarding the enterprise solution, ConsenSys together with EY has recently announced the formation of Baseline Protocol Initiative to make ethereum mainnet safe and effective for Enterprises. The protocol will enable confidential and complex collaboration between enterprises without leaving any sensitive data on-chain.
Eth 2.0 Roadmap
Phase 0: Launch Beacon chain. It will be kept simple and remains the foundation of the entire system. It does not support smart contracts and asset transfer.
Phase 1: Shard chains will be launched and there will be 64 of them to be deployed. The Eth1 and Eth2 chains will still operate in parallel after Phase 1.
Phase 2: Shard chains transition from simple data containers to a structured chain state and smart contracts will be reintroduced. Each shard will manage a virtual machine based on eWASM.
DeFi
Obviously DeFi is a hot topic during the conference. Joe Lubin believed that the ethereum community will be getting stronger. DeFi will become the first killer app and we are expected to experience soon user-friendly, mobile-accessible Dapp.
There are a few points we would like to highlight:
1, Standardized interface: Zerion believes that one of the obstacles in DeFi is the independence of their interfaces and the lack of a standard. DeFi needs to be accessible easily among a wider range of population as it providers open financial infrastructure, not only within the crypto enthusiasts.
2, Flashloan: Flashloan has to be the most recent hot topic as the event took place in Feb. We have explained our opinions in a former article. In 2018, Marble protocol has explained its mechanism and introduced a similar concept. You can also get inspired by the Bridge contract from InstaDapp. Flashloan allows you to get uncollateralized loans when your operations guarantee it will be repaid in 13–15 seconds (almost free if you pay it back in the same one transaction). Stani from AAVE saw its positive side, that although at the moment users of Flashloan are mainly developers, we would see more opportunities like interest rate swap, self-liquidation pool besides arbitrage bots when more to C products are built. Also, DeFi products were suggested to strengthen their resilience and keep excess liquidity in mind.
While the event showed the composability of DeFi protocols including lending, DEX, decentralized insurance, stablecoin, we also saw the inspired opportunities:
· A costless decentralized futures exchange. Fees for margin trading can be much lower and a low-risk premium is possible. Centralized futures exchanges may face more competition when safer and costless decentralized derivatives exchange finally appear.
· To C financial product. Flashloan is not designed for everyone but for people who understand solidity. However, it is not impossible to make it available to the end-users. For example, aggregation platforms and user-friendly tools such as Zerion may deploy flashloan and allow users to do a one-click collateral swap and refinancing. Furthermore, high-frequency arbitrage trading strategies could be developed by professionals and create a market to trade the strategies.
· Insurance. Nexus Mutual paid out two claims worth~$31k after the attacks, which proved the system works. Compared with various insurance products in the traditional finance (e.g. CDS, CLN, TRS) and DeFi is still in an early stage, we believe asset protection in the form of cryptocurrency insurance is creating a huge demand.
The attack ended when an admin key was used by bZx. Users of the Curve have lost USD 140,000 because of liquidity and Iearn was close enough to get attacked. We saw the protocols face severe security and governance problems. There is a need for stress testing and comprehensively design the product.
3, DEX: A fair, efficient, permission-less DEX has been always desired. According to Dune Analytics, trading volume in Feb 2020 on DEX reached USD 0.37 billion, a 62% increase compared to it in Jan. The peak volume was USD 0.35 billion in Jul 2019. Kyber and Uniswap are the top DEX, while Oasis and Toeknlon (0x) start to catch up. 0x (V3) and IDEX (V2) is launching with new features and new aggregation exchange like 1inch.exchange is developing fast. Gnosis team has launched DutchX deploying Dutch auction mechanism to avoid front running. However, the process was designed as long as 6 hours and sellers were not able to have any clue about the end price. The team believes the future of exchange gonna be a fragmented multi-coin market and therefore they are launching dƒusion, which uses multidimensional order books with batch auctions, that provide uniform clearing prices in every batch.
4, DAO: Flashloan has as well raised discussions around DAO. How to make a DeFi really decentralized? We believe decentralized custody, price oracles, rewards incentive, and permission-less access are essential for DAO. Centrifuge spoke in the conference of the importance to incorporate DAO into DeFi and a complete DAO should satisfy the following points:
· broad governance member and not limited to a specific group
· voting rights cannot be blocked or changed by a centralized organization
· governance member receive rewards directly or indirectly to ensure alignment
One of the most famous DAO on Ethereum is MetaCartel. It was founded by Peter Pan and James Young in 2019 and aims at building and connecting the application layer community of ethereum. It provides a small amount of capital, but the community is helping to polish the prototype. It has invested in a few pre-seed Dapps like Mintbase, DeFiZap, Gelato Finance, RocketNFT, Kickback.
Though the ticket size cannot be compared with that from a regular VC, we tend to share a similar view with MetaCartel that besides capital, community support is crucial. We will build a more effective communication channel for our portfolios as well.
Gaming & NFT
Most games write rules and functionalities of items into smart contracts and define every meaningful action, such as an attack, as a transaction. The most common token used in games is ERC20, ERC721, and ERC1155.
We see the motive in incorporating blockchain into gaming industry:
· One side economy: players are only observers or payers. They cannot influence how the game is nor benefiting from the profit. Blockchain-based games are more engaging.
· Ownership of items: players do not own the items despite they paid for it. Blockchain enables true ownership and players are free to trade them later.
· Lost of trust: gaming companies might randomly or on purpose change game parameters. Blockchain guarantees transparency.
Old games have focused a lot on the trading of NFT but ignore the fundamental reason why people want to play the game. The value of NFT is highly correlated with the depth of games. If the games are not fun enough, it won’t be able to attract players and trading of NFT won’t be attractive either. Also, scalability restricts a certain amount of interactions in games (mainly due to transaction /gas fees).
Ethernal.world has made an accordingly adjustment towards gas payment. The customer will do a once payment into an escrow for gas payment use. A reminder will pop up when there is not enough fee left(similar to Burner Wallet). EOS Knights believe that the early introduction of the crypto-related product (e.g. when register for a new game, a wallet and cryptocurrencies will need to be ready) prohibits users entering blockchain-based games. Therefore, they are introducing registration or login methods like SNS (e.g. through Google or Facebook).
Decentralized crypto-collectibles market, OpenSea, enables trading NFT. They are supporting over 4,000,000 collectibles and have a trading volume of over 55,000 ETH. NonFunible.com believes art, TCG and RPG will be the trend in 2020.
Decentraland has launched as well last month. Its concept is a combination of “blockchain + VR +Second Life”. The core NFT collectible in Decentraland is the limited, 3D virtual “Land”. The holder of NFT can control its content and environment built on the “Land”. It can further be developed towards various theme community.
There are a number of gaming projects showing demos and obviously they have put the effort in UI /UX and the games themselves seem more diversified. Gaming and NFT become hot again and we started to see more teams in the space. Cryptovoxels is a virtual world where one can buy land and build stores and art galleries. At the same time, editing tools, avatars, text chat and voice chat are built-in.
A few projects from EthVC
For us, an organized pitch event is very time efficient. We enjoyed it and will share a few projects and our thoughts.
Alice is a decentralized platform for the social finance sector. They aim to help impact investors, governments, and nonprofits to cut transaction costs and share verified impact data.
Stasis has launched EURS, first euro-pegged digital asset. Each token is backed 1:1 by euros held in their reserve accounts. It might be attractive for European institutional investors.
Autark is an Aragon network organization and builds tools that empower agency and large-scale coordination. There have been lots of competitors in this field like gitcoin and the colony. We think it is important to find a clear market fit and competitive advantage.
It enables users to instantly create and share analysis of ethereum data among the community. We believe the need is there and the project has already great traction among free users. However, how to attract paid users and the business model design will remain a difficulty.
The team is building commons-based microeconomies to sustain public goods through incentive alignment, continuous funding and community governance. Blockchain for goods has always been interesting among the open-source community and the team aims to create a world where public goods are valued fairly for the benefits they deliver.
Reward employees with crypto to replace perks. With more people into blockchain and crypto, we see it is a new trend. But how to deal with taxes both for corporates and individuals remains a question mark.
Blockchain-based game with already paid customers and profit-sharing model token.
Decentralized dispute resolution platform. The team aims at dealing with different types of the dispute through a cheap, fast and transparency method. Instead of one single court, there are sub-courts designed and each may modify fees, time and different parameters. The risk might be how to reduce bribe, encourage juries and the opportunity cost because of staking.
DEX aggregator. The project providers faster transaction for DEX users by aggregating information.
Some highlights
Developers focus more on user experience, growth hacking, positive impact and find that minimize blockchain-related concept might be helpful. Pepo, a product built by OST team, is a decentralized social network application (similar to Tiktok). Users can upload 30-second videos and get rewarded when receiving a “Like”. It has been used as official network software during other ethereum conferences like EthLondon and EthDenver.
We also saw more attempts in the mobile entry, which will be a highlight in 2020. Argent (just announced the round with Paradigm) is claimed to be the most simple crypto wallet. Assets are held in a smart contract on the blockchain. You control access to those assets via your phone, which holds your private key. If you lose your phone you can quickly recover your wallet on a new phone through its “Guardians” system.
Killer App for ethereum — Community
Though since the start of March, coronavirus became a threat, it was still very crowded at the conference. We have seen the unfortunate news of a few attendees have been infected and we hope everyone will stay safe!
The contents in the conference have been similar: Web3.0, Eth2.0, DeFi, Gaming, Enterprise solution, DEX, privacy, UI /UX scalability, and security, however, we see more discussions over how to build a product for end-user, what will be go-to-market strategy and what lessons have been learned over past years. The conference is more like a mega catch-up, where projects share, learn and have fun.
People always wondering what would be the killer app for ethereum in the end? Will it be DeFi? After all, we have seen tremendous development in DeFi this year in terms of numbers of DeFi protocols and users. Though Flashloan showed us of the extreme vision of composability, the lessons learned and reflections of the community make us continue believing in the platform. We saw many projects build ecosystem fund to attract developers for the past few years, however, it doesn’t yield in many promising projects. To build a community might not be hard, but it seems that only ethereum can maintain a sustainable, lively, and interactive community, where it can be self-upgraded and keep providing energy to the whole ecosystem. In this regard, there might not be much time left for other public chains.
Max Planck once said, a new scientific truth does not triumph by convincing its opponents and making them see the light, but rather because its opponents eventually die.
We believe ethereum can bring a positive vibe, while we are looking forward to a diversified ecosystem that can ultimately drive social progress.