At the 2019 Devcon in Japan, the Ethereum community was optimistic about the launch of the network’s second iteration, seemingly untouched by the latest controversy surrounding claims made by Ethereum’s founders about its inability to scale and grow.
No controversy big enough for Ethereum fans
While much of the crypto industry seemed shaken by the comments made by Ethereum co-founder Joseph Lubin, the community surrounding the second-largest coin by market cap stood firm in their beliefs.
Earlier in September during the Ethereal Tel Aviv conference, Lubin said that Ethereum creators knew “from the beginning” that the network wouldn’t scale. To combat the flaws in the network’s original form, the second iteration of Ethereum has seemingly always been planned.
This led many Ethereum critics to accuse its creators of lying, with some even going as far as saying the entire project was a scam. However, the majority of the reactions seemed to be a bit more moderate, as people pointed out that such an ambitious project could have clouded the judgment of its creators.
But, none of this seemed to have affected the Ethereum community at the 2019 Devcon, the largest developer conference in the crypto industry. Most shrugged the criticism off as a smear campaign by avid Bitcoiners and were looking forward to Ethereum’s next iteration.
Ethereum 2.0 still a long way ahead
That iteration, however, is still a long way ahead. During the conference, Vitalik Buterin, the co-founder of Ethereum, said that Ethreum’s layer two solutions are proceeding “slower than expected.”
James Beck, communications lead at ConsenSys, said that there are currently nine teams working on the upcoming Ethereum 2.0 blockchain, including well-known companies such as Chainsafe and Protocol Labs.
However, Ethereum Foundation developer Jamie Pitts said that he was concerned about the project.
“I feel like there’s a lack of strategy,” Pitts said. “I think there’s a lot of teams working on their ideas, but there’s a lack of coordination.”
The lack of optimism from the people directly involved with the project didn’t go unnoticed by the community. Developers working on Ethereum clients said that the two versions of the network could easily exist at the same time and that they didn’t plan on halting their work on the original Ethereum blockchain.
All of the confusion and controversy seems to have originated from the pressure the Ethereum team got from their investors. Buterin admitted that “business people” discouraged him from talking about Ethereum’s limitations, which he said were “obvious from the start.”
Without a launch date in sight, serious scaling issues to overcome, and no clear roadmap for transitioning tokens and smart contracts, Ethereum 2.0 will have some tough times ahead.
Ethereum Forecast and Analysis February 24 — 28, 2020
Ethereum ETH/USD closes the trading week at 258.88 and continues to move as part of the growth. Moving averages indicate a bullish trend for ETH/USD. Prices have gone far up from the area between the signal lines up, which indicates pressure from cryptocurrency buyers. At the moment, we should expect an attempt to reduce and test the support level near the area of 210.05. Where again we should expect a rebound and continued growth of the Ethereum rate with a potential target above the level of 385.05.
Ethereum Forecast and Analysis February 24 — 28, 2020
An additional signal in favor of raising the ETH/USD quotes for the current trading week February 24 — 28, 2020 will be a test of the support line on the relative strength index (RSI). The second signal will be a rebound from the lower boundary of the ascending channel. Cancellation of the growth option will be a fall and a breakdown of the level of 170.05. This will indicate a breakdown of the support area and the continuation of the fall of ETH/USD with a potential target below the level of 105.05. A confirmation of the growth of the Ethereum cryptocurrency will be a breakdown of the resistance area and closing of quotations above the level of 305.05.
Ethereum Forecast and Analysis February 24 — 28, 2020 implies an attempt to test the support area near the level of 210.05. Where can we expect a rebound and continued growth of the cryptocurrency in the region below the level of 385.05. An additional signal in favor of the rise in the Ethereum course will be a test of the support line on the relative strength index (RSI). Cancellation of the growth option will be a fall and a breakdown of the area of 170.05. In this case, we should expect continued decline with a target below the area of 105.05.
How the Ethereum Foundation Got UNICEF to Embrace Blockchain
Donating to the United Nations Children’s Fund (UNICEF) may turn out to be the Ethereum Foundation’s shrewdest move yet.
“We are still discussing the details on what we can do together, but we have decided to continue support for the next couple of years,” said Ethereum Foundation Director Aya Miyaguchi. “I believe a partnership with a group like UNICEF can maximize our impact without shifting our focus from what we still need to do to improve Ethereum as a technology.”
The foundation donated roughly $150,000 worth of bitcoin and ether the UNICEF’s experimental crypto fund in October 2019. Since then, the UNICEF Kazakhstan office has developed an ethereum-based system for processing internal payments, such as sending funds from the UNICEF headquarters to people running a local education program.
“We can see now clearly it’s operational and it’s great for the organization. So we will continue to work on that,” said UNICEF partnership specialist Oleksandra Gaskevych. “We only have used ethereum so far, for smart contracts. We’re thinking maybe we could test bitcoin as well for digital currency transfers, so we’ll see.”
The Kazakhstan-based team is still putting a few finishing touches on the smart contract platform, because UNICEF budgets require multiple signatures from people with varying degrees of clearance. Today, a significant amount of office paperwork still involves people double-checking expenditures by hand. So this new digital process is much more efficient.
Gaskevych said they expect to be fully transitioned over to the ethereum-based system in 2021.
“We can easily adapt it to other Russian-speaking countries in the region,” she added.
Elsewhere, UNICEF is also partnering with SoftBank Investment Advisers (SBIA) to develop a structure for distributing cryptocurrency. Chris Fabian, co-lead of UNICEF Ventures, said so far the crypto fund is starting slow by funding several startups like Coinsence, a Tunisian token project experimenting with ERC-20 tokens for community currencies.
Coinsence founder Karim Chabrak said more than 200 people in the beach town of Hammamet, with roughly 100,000 residents, participated in a pilot program that is graduating to a fully operational phase this quarter.
“There are communities that have no money and a lot of unemployed youth,” Chabrak said. “Communities need to be able to address that without waiting for governments to act.”
Residents mainly use the token to pay youth for jobs at local restaurants and resorts, then offer them a discount at particular businesses. Chabrak said the goal is to reduce the unemployment rate and encourage productive spending habits. This year, Chabrak said he is establishing a national association with a legal framework to support any other community that wants to issue its own local token.
“We heard about bitcoin in 2010,” Chabrak said. “But we are trying to build currencies that aren’t speculative, that are part of the commons.”
All of these experiments were funded by the Ethereum Foundation, which also acts as a consulting resource but not an official partner like SBIA. For example, Coinsence received 50 ether, most of which was used for pilots and research in late 2019. Likewise, the Argentinian startup Atix Labs received a bitcoin from the Ethereum Foundation’s donation, and developed software tools that Fabian said may be useful for the program in Kazakhstan.
Fabian said last year’s donation from the Ethereum Foundation was “part of a larger agreement with them, that we had to test some of the piping with them first.”
The ethereum community is investing in global outreach through this agreement with UNICEF, even without directly implementing blockchain solutions.
“They’ve made the community available to us for a variety of things,” Fabian said.
This created a ripple effect beyond the donations themselves. For example, Gaskevych said basic materials related to blockchain technology and smart contracts were incorporated into the Kazakhstan office’s digital literacy program for youth, teaching 200 people about ethereum so far. As UNICEF looks to transition its internal system, and find external partners willing to accept ether, the team is focused on training local talent to develop customized solutions for specific needs.
Fabian clarified only a few of UNICEF’s external partners in Kazakhstan are willing to accept cryptocurrency for the services they already provide, like an internet service provider or a construction company.
“That’s fine, we’re not trying to push it,” he said. “It’s not that we are only paying them in crypto, we’re also paying them in fiat so there’s a little bit of hedge.”
Over the next two years, Fabian said UNICEF’s goal is to help schools without internet connections get online by supporting local tech ventures, some of which may choose to run their own cryptocurrency nodes and earn revenue from providing connectivity to people and businesses in the surrounding neighborhoods. That’s how UNICEF aims to make this project sustainable beyond one-off donations.
In addition to the global school initiative, called GIGA, Chabrak said he hopes community currencies in Tunisia will be designed to help nonprofits and universities promote the United Nations’ sustainability goals by incentivizing eco-friendly habits.
To be clear, there’s one main reason ethereum became the most widely used blockchain technology across UNICEF’s global development strategy, which seeks to deploy nearly $45 billion in diverse programs around the world. The reason is the Ethereum Foundation reached out and ponied up.
Even though the donation was a tiny fraction of UNICEF’s related budget, the “agreement” Fabian referenced motivated his fund to set up a compliant system for receiving and distributing cryptocurrency. The fund also accepts bitcoin, but there have been hardly any bitcoin donations so far, Fabian said.
Based on his research in Tunisia, Chabrak said the most challenging part of getting people to use cryptocurrency was inspiring a sense of personal ownership over an asset that isn’t associated with a familiar entity, like the government. That’s why foreign startup tokens, and to some extent bitcoin, have been a harder sell.
“Communities are not so motivated to build an ecosystem around the currency because they don’t identify with the currency and have full control,” he said. “People accept the coins when they know the people that are issuing the coins and they can implement their own governance.”
(The fact such communities don’t see bitcoin as something they can control and influence the governance of may be, in part, a misunderstanding.)
With that in mind, the Ethereum Foundation’s strategy of finding an indirect way to fund blockchain education and entrepreneurship in emerging markets, where other computer science resources are scarce, may eventually set it apart among blockchain projects competing for both market- and mind-share.
“Cryptocurrency is too often seen as a means for investment, but as you know, ethereum is capable of so much more than that,” Miyaguchi said. “Whether with UNICEF or other parties, we are always looking for ways to maximize our impact using the technology that we’re helping to build.”
Exploring the Decentralized Insurance Arena That’s Rising on Ethereum
The Ethereum “world computer” can do, and be extended into, many things, which is why the young but advancing smart contract platform has given rise to various sectors of projects across fields like finance, identity, logistics, collectibles, and games.
When it comes to Ethereum’s decentralized finance arena, or DeFi, insurance in particular is a growing area of note. This isn’t surprising, either: insurance was one of the earliest envisioned use cases for Ethereum, as demonstrated by Vitalik Buterin’s brief description of a crop insurance prototype in the platform’s whitepaper.
But moreso than that, the specter of decentralized insurance has spiked anew in the space as a bad actor has launched two DeFi attacks so far in February, and they apparently remain on the prowl for now.
With the stakes as they are then, let’s touch a little further on those attacks as a jump-off point to explore some of the top insurance projects in the Ethereum ecosystem, namely what they can offer users today and what we might expect going forward.
Flash Loan Predator on the Loose: Are You Covered?
This month, the DeFi lending protocol bZx faced sophisticated, back-to-back assaults against its system.
The first attack involved a dastardly market manipulation exploit that netted the blackhat responsible 1,193 ether (ETH), or some $300,000 USD. The second attack, seemingly by the same blackhat, seemed to be an oracle manipulation incident that saw around 2,388 ETH, or nearly $650,000, stolen.
Both transactions involved flash loans, a powerful new crypto primitive that allows users to take out a DeFi loan and pay it back within a single transaction. This new tool gives nefarious agents the ability to blitz unprepared DeFi platforms by borrowing, manipulating, and then profiting within the span of one Ethereum block.
And while there are defenses that can be taken going forward, the bZx system was unprepared for these novel assaults. The platform’s leadership has charted a course to absorb the blows, but the episode has served as a stark reminder that young DeFi platforms are still vulnerable and thus so are the users’ funds therein.
Notably, a few users actually had purchased bZx insurance policies in place before the attacks, but since the exploits didn’t occur from a hack per se but rather through market manipulation techniques, the question arose as to whether they would pay out. What came next will serve as an interesting early case study for DeFi.
Enter Nexus Mutual
Nexus Mutual is a “people-powered” insurance platform on Ethereum. Holders of the Nexus (NXM) token can decide whether claims should be approved for payout from their collectively-pooled fund.
The Nexus Mutual community ultimately responded to the first bZx attack with nuance. While a general consensus emerged early on that a hack hadn’t occurred and thus there wasn’t a direct obligation to honor claims, some key stakeholders highlighted that Nexus’s assessors had full discretion to consider the incident’s unique circumstances and vote accordingly. These folks made the case that even without direct obligations, the project could earn trust and more users from demonstrating that it’s flexible and can payout in borderline cases.
With that said, Nexus’s assesors approved two of the six claims that were received over the first bZx attack for a collective payout of around $31,000. It was the first time the project paid out to claimants.
“It’s never good that people are losing money because there’s a hack, but we are able to prove that the system works,” Hugh Karp, the founder of Nexus Mutual, commented in the aftermath.
Not Perfect, But It’s Something and Can Grow
An interesting wrinkle to consider with Nexus Mutual is that you can take out an insurance policy through it even if you don’t have any funds at stake in the smart contract you want a policy on.
Right now then, a user simply has to request insurance on a particular contract for a particular duration of time, to which Nexus then offers a quote.
This model has raised some concern, with skeptics saying its vulnerable to exploitation, too. For example, consider if a blackhat was about to launch an attack on a DeFi project. As Nexus currently works, the attacker could take out a policy with the project, launch the exploit, and then reap an insurance payout on top of their illicit profits.
That’s obviously not the most optimal opening to have, though Nexus does employ a basic Know Your Customer (KYC) process that means any abusers would leave some sort of trace. The advantage of this structure is it allows regular users to bet on the health of popular smart contracts, which is useful.
Opyn Insurance Hits the Scene
Another project to watch in Ethereum’s insurance sector is Opyn Insurance.
This month, the effort launched its first offering, which allows users to take out put options on stablecoin deposits on DeFi’s popular Compound Finance dApp. These options can be used to cover losses, or even just simply profit, if Compound was struck by catastrophe.
Similar to how Nexus Mutual works, Opyn users won’t have to demonstrate that they own any of the underlying stablecoin in order to take out an option. Where Opyn differs from Nexus, though, is that it doesn’t similarly require a KYC process.
“You don’t have to prove anything to anyone,” the project’s co-founder Zubin Koticha has commented previously.
Interestingly, Opyn’s oTokens — which are what are used to take out options on Compound’s cTokens — can work like oracles with regard to risk. If the price of an oToken starts to rise quickly, it could mean anticipation of a crisis is growing, which is an alarm in and of itself. They’ll certainly be a wrinkle to watch in the years ahead.
Bigger Picture: Etherisc
Etherisc is also a major insurance project of note, being one of Ethereum’s oldest. Simply put, it’s a decentralized insurance protocol that can be used to build different kinds of insurance products.
For example, the protocol’s builders have designed insured crypto wallet and hurricane protection products. Just this month, the Etherisc team and decentralized oracle play Chainlink unveiled a decentralized flight insurance prototype that can pay out in the event of delayed or missed flights.
“Insurance companies stand to save money on the backend by cutting their overheard for processing claims, as well as improved brand recognition thanks to moving policy arbitration to a neutral third party protocol,” Etherisc explained of the proof of concept.
We’ve only just begun to scratch the service with regard to the types of parametric insurance products — “if this parameter is crossed, pay out” — that can be actualized on Ethereum. Like Vitalik Buterin suggested in the Ethereum whitepaper, crop insurance is but one fertile avenue to explore here.
Another aspect to consider going forward is how decentralized solutions can bring superior transparency to the insurance industry. The on-chain auditing and KYC possibilites of such solutions can help clamp down on claims fraud, not to mention that these tools can be used to automate many related processes.
Accordingly, there’s plenty of room for more insurance projects on Ethereum, though from the examples above it’s clear that there’s already an early groundswell of interesting efforts that are pointing the way to an even more robust DeFi insurance sector in the future.