Best TruStories of the Week - #6


#1

Please use the below format:

Claim:

Category: (see below)

Source:

Evidence/Argument:

Status: [Unconfirmed or Confirmed or Rejected]

For categories, select from one the following:

  • Crypto glossary
  • ELI5 for crypto
  • Projects (Bitcoin, Ethereum, EOS, Stellar, Brave, etc.)
  • Regulation
  • Mining
  • Scaling
  • Use cases
  • Scams
  • Stablecoins
  • Governance
  • Consensus protocols
  • Privacy & Security
  • Enterprise blockchains
  • Crypto funds & fundraising
  • Token Economics

If your claim doesn’t fit into any of these, you can request to add a category and we’ll consider it.


#2

Claim: Proof of Stake can be faked easily. The money only exists on-chain, so I can make a thousand chains with different histories and you can’t choose the canonical one between them. To make it unforgeable, you need to add a new mechanism that is separate from the actual stake (such as outside trust sources and/or a “finality” mechanism”).

Category: Consensus protocols

Source:

Evidence/Argument: The attack that James Prestwich describes is more formally known as the “nothing at stake” attack. Vitalik does a great job of explaining the “nothing at stake” attack in this post:

Proof of work has a nice property that makes it much simpler to design effective algorithms for it: participation in the economic set requires the consumption of a resource external to the system. This means that, when contributing one’s work to the blockchain, a miner must make the choice of which of all possible forks to contribute to (or whether to try to start a new fork), and the different options are mutually exclusive. Double-voting, including double-voting where the second vote is made many years after the first, is unprofitable since it requires you to split your mining power among the different votes; the dominant strategy is always to put your mining power exclusively on the fork that you think is most likely to win.

With proof of stake, however, the situation is different. Although inclusion into the economic set may be costly (although as we will see it not always is), voting is free. This means that “naive proof of stake” algorithms, which simply try to copy proof of work by making every coin a “simulated mining rig” with a certain chance per second of making the account that owns it usable for signing a block, have a fatal flaw: if there are multiple forks, the optimal strategy is to vote on all forks at once. This is the core of “nothing at stake”.

I agree with James Prestwich that to overcome this problem, you need to bolt on an additional mechanism. For example, one approach is to add a security deposit: A validator must put down a security deposit, and if he is caught voting on multiple forks, the reward and security deposit is slashed.

The issue with security deposits is that they are only useful for a short range of blocks. Why? Because…

Let’s say we require validators to put up a security deposit, and we lock that up for N blocks. As soon as the validators have the right withdraw the security deposit, there is no longer any incentive not to vote on a wrong/fraudulent fork starting far back in time using those coins. In other words, unless we have some way to deterministically know the “canonical chain” before the security deposit is returned, the validator could vote on a wrong/fraudulent fork at some block between the latest block (n) and after the security deposit was made (n - N).

Therefore, the claim is accurate in that 1) nothing-at-stake problem makes it easier for validators to vote for multiple forks 2) you need some additional mechanisms (e.g. security deposits + finality mechanism) to fix this problem.

Status: Confirmed


#3

Claim: Replicated state machine: A deterministic state machine that is replicated across many computers but functions as a single state machine. Any of these computers may be faulty, but the state machine will still function. If a transaction is valid, a set of inputs will cause the state of the system to transition to the next state. A transaction is an atomic operation on a database.

Category: Crypto glossary

Source: https://medium.com/s/story/lets-take-a-crack-at-understanding-distributed-consensus-dad23d0dc95

Evidence/Argument: https://en.wikipedia.org/wiki/State_machine_replication

Status: Confirmed


#4

Claim: FLP Impossibility: In a distributed system, even a single faulty process makes it impossible to reach consensus among deterministic asynchronous processes. This is because processes can fail at unpredictable times, and it’s possible for them to fail at the exact opportune time that prevents consensus from occurring.

Category: Crypto glossary

Source: https://medium.com/s/story/lets-take-a-crack-at-understanding-distributed-consensus-dad23d0dc95

Evidence/Argument: This result was proven in this foundational academic paper by Fischer, Lynch, and Paterson (aka FLP)

Status: Confirmed


#5

@preethi Does any of the solutions mentioned in this post - https://medium.com/@abhisharm/understanding-proof-of-stake-through-its-flaws-part-2-nothing-s-at-stake-8d12d826956c mitigate the “Nothing at Stake” problem in PoS. Most of these seem to be an internal solution within the chain itself

Ethereum Casper tries to solve this problem by introducing ”wrong-voting penalty” to the protocol, which allows users to submit evidence of voting on the wrong chain by miners in order to penalize that miner for wrong-voting.
PeerCoin - Peercoin clients use the chain with the”most coin-age consumed”, i.e., the one in which the sum of the total number of coins staked for each block multiplied by the amount of time those coins were staked is highest.
NXT chain - NXT client tackles this problem by not having any block-reward whatsoever, and simply let transaction-fees dictate the process.


#6

Claim: Jobs with the title “Blockchain Developer” are the fastest growing job category on LinkedIn in the United States.
Category: Scaling (?) Would it make sense for TruStory to have a category around industry growth and employment?

Source: https://economicgraph.linkedin.com/en-us/research/linkedin-2018-emerging-jobs-report

Evidence/Argument: According to the report published by LinkedIn which focuses on emerging jobs in the US over 2018, the position “Blockchain Developer” experienced 33x growth over the year. LinkedIn used data from its Economic Graph Team to analyze jobs which companies are looking to fill immediately, as well the skill sets required for these jobs.

Status: Confirmed


#7

nice find! I’d put this under Use Cases for now :slight_smile:


#8

@sijo0703 these could work. however, the claim still remains true because these are not inherently built into Proof-of-Stake. Whereas with Proof-of-Work, because it INHERENTLY requires the consumption of compute resource EXTERNAL to the system, we don’t need additional mechanisms layered INTERNAL to the system. Does that help clarify?


#9

yes that makes sense! Thank you!


#10

Claim : Mick Mulavey, the interim White House Chief of Staff, is pro-bitcoin.

Category : Regulation

Source : https://www.ccn.com/new-us-chief-of-staff-bitcoin-is-good-not-manipulable-by-any-government/amp/

Evidence/Argument :

  • In a speech to the John Birch Society, Mulvaney “blasted the Federal Reserve, saying its actions have “effectively devalued the dollar” and “choke[d] off economic growth.” He praised bitcoin as a currency that is ‘not manipulatable by any government.’”

  • He co-founded the Congressional Blockchain Caucus. Here’s a direct quote from the press release:

I’m excited to partner with Congressman Polis to found the Congressional Blockchain Caucus. Blockchain technology has the potential to revolutionize the financial services industry, the U.S. economy, and the delivery of government services, and I am proud to be involved with this initiative on the ground floor.

  • In a live Fox Business interview, he confirms the point about cryptocurrencies not needing approval from the government: “When you buy a cryptocurrency, you know you’re not buying something that bears the seal of approval from the government. I founded the Bitcoin…Blockchain caucus.”

Status : Confirmed.

Note: He’s not necessarily pro-Bitcoin over other blockchains like Ethereum. Based off his quotes, he conflates Bitcoin as Blockchain (as he did in the live Fox interview).


#11

Claim : ID-verified cryptocurrency users grew 4x in 2017 and then doubled again in 2018.

Category : Use cases

Source : https://www.cryptoglobe.com/latest/2018/12/number-of-crypto-users-doubles-to-over-35-million-cambridge-study/

Evidence/Argument :

  • The Cambridge Centre for Alternative Finance published a benchmarking report on cryptoassets this month. The specific metric they’re reporting on is the growth of ID-verified users (5m to 18m to 35m). From page 33:

They primarily used survey data to arrive at these numbers:

When available, absolute figures of ID-verified users supplied by survey participants were aggregated for each period. The ratio of ID-verified users as a share of total accounts, calculated using survey data for each period, was then applied to the remaining total account figures. The resulting figures were eventually added together to provide an estimate of the number of ID-verified users in the ecosystem.

They also suggest that they’re likely conservative with these figures:

The analysis does not capture all accounts at service providers since no data was available for some major platforms (e.g. in China) or individuals who do not use service providers. Together, these would contribute to an underestimation of total users. On the other hand, there are no easy means to identify users with accounts at multiple service providers – a practice that would contribute to an overestimation. Overall, there are reasons to believe that the underestimation factors outweigh the overestimation factors, which suggests that the current figure is a conservative lower-bound estimate.

Self-reported data isn’t the best possible source but many industry reports rely on that when they can’t access the proprietary information.

Status : Confirmed.

Note: the original claim did not include the “ID-verified” qualifier.


#12

I wish LinkedIn was more specific here. We don’t know the baseline number and we don’t know whether the job growth is happening in just a few isolated areas (SF & NYC) or everywhere in the US.

In fact, when I click through the provided link on Blockchain Developer Jobs and filter for the Atlanta area (which is the 3rd most popular city mentioned), a very small % of the jobs actually include any mention blockchain development in the job description.

I’ve been paying close attention to the growth here for my job and this report doesn’t really answer the question of whether there’s job growth for blockchain developer jobs outside of the two major tech hubs.


#13

Claim: JP Morgan says Pros are losing interest in Bitcoin

Category: Token Economics

Source: https://www.bloomberg.com/news/articles/2018-12-18/pros-are-ditching-bitcoin-market-as-interest-ebbs-jpmorgan-says?srnd=cryptocurrencies

Evidence/Argument: In this Bloomberg article, JP Morgan highlights different “Key Flow” metrics it used to prepare the research report, including open interest in Bitcoin futures, overall volume of Bitcoin trading, and daily median transaction size as indicators that the “slump” is scaring off institutional players.

Although the Bloomberg article also cites that other analysts may see institutional interest differently, as one of their own analysts points out that the number of combined contracts from CBOE and CME is ending the year at an all time high.

Also interesting to note is this article https://nulltx.com/institutional-investors-uninterested-bitcoin-jp-morgan/ which points out that institutional traders may have shifted to over-the-counter platforms with higher liquidity and off hours trading ability.

There’s also the possibility that participants have stepped away from trading and turned to learning more about the space, or are standing aside while the regulatory uncertainty plays out, as financial institutions often do.

JP Morgan also didn’t mention actually asking any institutional players about whether interest has waned.

There’s just not enough there to fully confirm their position.

Status: Rejected


#14

Claim: Bank statements reviewed by Bloomberg News suggest Tether has fiat funds to back stablecoin

Category: Stablecoins

Source: Bloomberg, further reported by CoinDesk

Evidence/Argument: The article provides no verifiable evidence to the reader aside from the assertion that Bloomberg did in fact review some bank statements for Tether.

The title used by CoinDesk is completely misleading. The bank statements that were supposedly reviewed were non-consecutive months, which would not pass any audit requirements I have ever heard of in my life (possibly why their auditor dissolved their relationship in January 2017 and they have not found a new one). Also, one of the statements mentioned was from 15 months ago (September 2017). According to the article Tether currently claims to have $1.8 billion in cash reserves for tokens in circulation. Nothing in the article suggests Bloomberg was able to verify their current cash reserves.

To quote Adi on our Slack channel: Adi [2 hours ago]

The Sep 2017 date is hilarious but it doesn’t really matter if the date was yesterday. Unless they have real time accountability over continuous time it doesn’t mean sh*t.

In conclusion, this article should be: Bank statements reviewed by Bloomberg News suggest Tether had fiat funds to back stablecoin in September 2017.

Status: Unconfirmed/Misleading


#15

That’s a very good point @bhaumik


#16

The analysis is interesting. Shouldn’t the claim, however, be moved to “unconfirmed” status. We have information arguing both for and against the claim.


#17

Well it’s a clam JP made that they can’t definitively prove and they took a narrow view to their supporting evidence.

The Bloomberg analyst pointed to where institutional investors may view interest differently.

Also there’s that possibility that traders could use the OTC markets, followed by my insight where I point out that the institutional investors sometimes wait it out and watch.

Honestly if you’d ask me for a gut feel, I’d say that maybe institutional investors may have indeed lost interest, for now at least. Or that it’s just an overall market pull downward and there’s just more sellers everywhere.

But for here at TruStory, JP would have to back their claim with evidence which excludes all doubt. This is why I rejected it. If you still think I should change it to unconfirmed we can go at some more evidence/analysis.


#18

Claim: IOHK Launches Secure Smart Contracts Technology

Category: Products

Source: https://www.the-blockchain.com/2018/12/11/iohk-launches-secure-smart-contracts-technology-for-cardano-blockchain/

Evidence/Argument:

IOHK, a blockchain research and development company, has launched the Plutus and Marlowe tools in test format for writing smart contracts on its Cardano blockchain. Plutus is a set of functional programming tools and libraries for developers based on the Haskell programming language. It also has a testing environment for Plutus contracts based on the Plutus Playground, a web-based blockchain emulator. Marlowe has been designed for those in the finance industry, with no programming background to generate code and automate transactions using the blockchain. It has its own web-based testnet called Meadow.

The reason why it is said as more secure smart contract technology is because Plutus is based on functional programming tools based on Haskell programming language. Functional programs are supposed to be a more secure approach to smart contract creation than Solidity or Vyper. This also aids in simpler Formal Verification which pretty much means that it is easier to mathematically prove what a program does and how it acts out. This gives Cardano its “High Assurance Code” property. Read below for a good comparison

Status: Confirmed


#19

While I do agree that JP Morgan would have to back their claim with evidence to prove the story is true, I feel a challenger needs to back their claims with evidence to prove the story is false beyond doubt (or to “reject” a claim - please do advise if I am interpreting “rejections” differently). I feel there is not sufficient evidence to reject the claim beyond doubt

In this instance, to support or reject a claim against this story, we need the following conditions to be true:

  1. We would need an objective indicator (or a set of indicators) that monitors investor sentiment and is followed universally
  2. demonstrate that all indicators are either supporting or rejecting the hypothesis

If we follow this framework:

  1. Generally, analysts use change in trading activity (e.g., volumes of sales/purchases), change in net investment inflows (e.g., amount of money moving in less money moving out) and changes in price to gauge investor sentiment for traditional assets. Given that investors can get exposure to bitcoins both directly (through direct purchases from OTC desks) or indirectly (through purchase of BTC futures), we would need indicators that monitor investor sentiment across both markets (unless we can prove that the size of one market compared to other is very small). Indicators across OTC markets can be observed less directly, so I feel we cannot monitor investor sentiment sufficiently across both markets. In addition, the relationship between markets are not well established, so it is difficult to agree on a set of universal indicators that monitor investor sentiment.
  2. Based on the evidence we have:
  • Prices of bitcoin, trading volumes of futures (both CBOE and CME), and GBTC and median transaction size have fallen, suggesting decline in investor sentiment (note total no. of contracts could be misleading, as it does not capture month on month changes)
  • Diar research suggests bitcoin trading volumes at Coinbase have grown, while that of GBTC (which provides indirect exposure) has decreased - these two metrics are not directly comparable as they are tracking different products, and potentially supporting different institutional client base. The net impact on demand from institutional investors demand is unknown.

Therefore, I think we need more information to reject this claim (in particular, establish the indicators that monitor OTC and exchanges, and evidence they all point in a similar direction), although majority of indicators (at this point) do suggest the claim is closer to being confirmed than rejected.


#20

I like your insight on this!

Although the challenger shouldn’t have to prove that the claim is wrong, only that there’s not enough to prove that it’s right.

Think of it as in the Hegelian Dialectic method of discourse where you have the:

Thesis: Claim

Antithesis: Challenge

Synthesis: Solution that brings these two argument/counter-arguments into an agreement grounded in reality, which is always possible.

You have actually provided the synthesis here, and the metrics you propose (objective set of indicators demonstrating full support or rejection of hypothesis) are what JP Morgan should have worked through before they even made the claim in the first place as a respected financial institution capable of swaying market sentiment.

But again, there’s nothing there until there’s a claim, and that claim, in order to be confirmed, must be exhaustive in that it negates any scenario where it could be falsifiable.

Or put another way, a claim is an actual thing, where the opposite of a claim might not be an actual thing, just a fact that the claim is wrong.

Like for example, someone tells me that the wall in a building is painted blue, but I can never get in to actually see it. I have to reject the claim for lack of evidence only. There will be times that lack of evidence is all we have to go against a claim.