Brewed From Within

Mechanized Money

Banks track the story of money to prevent double spending, but money management is a power that can be abused by regulations, greed, and outright fraud.

Blockchain technology was first introduced in a 2008 white paper for Bitcoin, with Bitcoin then going live in 2009. By recording transactions with transparent logs on dynamic ledgers, public and private blockchains solve the double-spend problem with fewer third parties taking a cut, and instead, redirecting resources to cover the raw costs of computing, electricity, and network verification. The unspent transaction output (UTXO) model for tracking transactions and balances fractures this digital asset from the initial whole. These fractions are used as currency, which makes accounting inclusive, verifiable, and very transparent.

EXTRA SHOT

This contribution is by scottrepreneur, a UX designer and blockchain developer building at the forefronts of technology.

Blockchain technologies have reached mainstream adoption, but cryptography has been studied since the 1980s. Bitcoin was first to crack the code, and now different blockchains and more onchain layers are being combined in powerful ways. Today, there are four main types of blockchain networks: public blockchains, private blockchains, consortium blockchains, and hybrid blockchains. It’s impossible to count private blockchains, consortium blockchains, and hybrid blockchains, but there are hundreds of public blockchain that are permissionless. This means they are fully decentralized and anyone with an internet connection can equitably access the blockchain as an authorized node. Bitcoin and Ethereum are the two largest blockchains, with 10% of the global population owning some form of countless cryptocurrencies.

Within each blockchain, layers provide separating infrastructure for developers. Hardware, data, network, consensus, and application layers make blockchain technologies more usable, with each layer offering unique functionality. The last ingredient in a blockchain recipe is hashing, which delivers verifiability by assembling a historical ledger where any tampering of previous transactions will disrupt current calculations. With verifiable ledgers storing only valid transactions, we can automate value.

Smart Contracts

Smart contracts allow us to program, exchange, and intermediate value using the storage mechanisms first introduced by Bitcoin. Programming languages allow smart contracts to store data on specific blockchains, with small amounts of cryptocurrency used for gas fees, which is the cost to cover computational intensity and network interactivity. These primitives help coordinate mechanized value, with tokenomics and technical testing leading to effective governance on and off blockchains.

Tokens & Standards

As smart contracts began conforming to implementation criteria, token standards led to initial coin offerings (ICOs) that were sourcing funds for a wide variety of projects. Many overly ambitious projects damaged trust with unfulfilled promises and led to ICO bubbles, but the speed and effectiveness of such aligned collaboration hints at the power of this mechanism. The adoption of standards across an ecosystem allows for tight composability and interoperability across protocols. Tokens and standards are the building blocks for decentralized finance (DeFi), with stabilizing support from stablecoins.

Stablecoins

Stablecoins are a type of cryptocurrency that pegs steady value off another asset.

Fiat-backed stablecoins are backed by fiat money in an auditable account and have structural similarities to money market funds. Fiat money is a government-issued currency, such as the US dollar, that is not backed by a commodity such as gold. While fiat stablecoins are easy to scale, they are less decentralized yet remain popular because they are backed by existing currency and established regulations.

Collateral-backed stablecoins are backed by assets that are locked onchain and transparently auditable. When done right, these types of stablecoins have great decentralization properties, but they are hard to scale and can have liquidity issues from a market squeeze.

Algorithmic stablecoins are balanced with a system known as seigniorage shares, which uses mathematical algorithms and smart contracts to maintain a stable value relative to a target asset. Implementation of algo-stablecoins has been unsuccessful to date, so avoid these types of stablecoins until technology can unequivocally support the ideology. Alright, with tokens and places to store value onchain, let’s look at innovating within traditional financial exchanges.

Lending & Exchanges

Organizations committed to a BUIDL market have delivered on over-collateralized lending and borrowing onchain. Lenders can lock collateral to earn from borrowers, but borrowers need to be lenders of another token and ensure their loans remain sufficiently over-collateralized. Lending and borrowing both rely on asset prices to determine liquidation thresholds, but if these can be manipulated, the system remains vulnerable. Oracles provide an example of systems that can support blockchains with real-world data to keep decentralized mechanisms in tune as the value and frequency of cyber attacks increase.

Early experiments around what order books looked like onchain were clunky. Each bid, update, acceptance, or cancellation required another transaction and small but constant gas fees. This changed in 2018, when Uniswap used the Ethereum blockchain to provide a simple interface to swap tokens. Instead of creating offers to buy or sell, a market maker provides two tokens in a pool. These pools are called automated market makers, with pilot protocols that leverage a constant product market maker equation (k=x*y) to hold the ratio of pooled tokens equal. This supports non-custodial token swaps with fewer steps. If parameters for a transaction are not met, the smart contract will not execute, which keeps the exchange stable.

Pioneering Frontiers

Crypto has fast-moving frontiers. This makes for a continuous experiment, with good discoveries along the way. While gold awaits any gold rush, progress does not come without struggles, sacrifice, and reparations.

Let’s use the technology life cycle of crypto as a case study. Concepts like liquidity incentives tested financial yields from onchain assets. This model was well-received (2022), but token inflation without enough value loops became unsustainable. Initial coin offerings (2023) were also a wild way to rope in financial capital, but fake projects took over as fraud became easy. Bad actors affect the public’s sense of trust early in any technology’s life cycle. This adds hesitation and slows adoption, but failed experiments are required.

Years of rapid experimentation keeps innovation curves rolling on any frontier. As the volume gets louder around other technologies, less good noise is often perceived as a stall, or more drastically, the beginning to an end. Less noise may lead to fewer people actively building into a shared direction, but a trendy talent shift does not mean a misunderstood technology has had its day.

Within the short timeline of this brief case study, Narrow AI had been conversationalized and Agentic AI was signaling toward General AI. This turned attention (deservingly so) away from web3 concepts, blockchain technology, and mechanized money, but the decentralized progress lies in wait and the concepts of crypto are not going anywhere.

The technologies and economies that digital depth supports provide balance. Even in quieter BUIDL cycles, cross-chain interoperability, token standards, layered development, and global regulations will continue to push DeFi forward.

DeFi’s Destiny

Any dark forest can be treacherous, but system-level engineering takes time, and it’s liberating to build with intrepids who are learning together. As we complete this download, here are more interesting use cases to keep us thinking about what’s possible beyond traditional finance.

  • Instead of getting paid every 2 weeks or each month, smart contracts can create payment streams. Instant access to financial capital furnishes more financial freedom. Along with incoming compensation and outgoing subscription fees, self-repaying loans can further automate and optimize financial command.
  • Prize-linked savings accounts, also known as no-loss lotteries, are not uncommon in traditional finance. Local municipalities and credit unions have generally handled them, but smart contracts enable little to no overhead. Pooling capital and lending it to others is also used in smaller communities to help with small, low-cost loans.
  • Flash loans allow for borrowing a near-infinite amount of a token, provided the loan is paid back within the same transaction. These trusted transactions require significant capital, but can be facilitated within one block, then democratized to anyone with access to the blockchain, a scripting language, and a relaying node.

      DeFi provides composable tools for traditional and innovative finance primitives. Being able to mechanize money and the value it delivers within a network is power that’s less fragile and more translucent. As web3 concepts hook into the financial primitives of crypto, the global economy can leverage faster, more equitable, and safer peer-to-peer commerce.

      Brewed From Within
      #77 📖 Technology

      By Ben McDougal, ago

      Small Business Owners

      Words matter. When “small business” and “small business owner” are overused, it becomes belittling. Breakthroughs await those with expanded vocabulary.

      First, let’s get an elephant in the room. There is a need for categorization between different types of businesses, and size is an obvious differentiator. This determines how government policies, regulated programs, and other environmental resources are distributed.

      Unfortunately, broad categorization leads to business owners not thinking of themselves as entrepreneurs.

      Whether it’s the size of a company, revenue, or other quantifiable metrics, using “small business” may be required for economic structuring, but it limits how many leaders think about their own potential.

      The opportunity to shift this narrative exists within events where the assemblage is comprised of small business owners. In these settings, use small business terms to target the promotional messaging, then find ways to release those technical terms at the event. Emcees, speakers, panelists, and staff can embolden the audience by using “small business owners” when necessary but then intentionally using more alternative titles that add depth to the attendee’s mindset. Instead of everything being focused on small, use synonyms that describe greatness, importance, appreciation, and yes, small business owners:

      • Entrepreneur
      • Founder
      • Leader
      • Student
      • Innovator
      • Heretic
      • Dreamer
      • Creator

        By using these synonyms, we can quietly inspire more inclusivity through fresh assimilation at events. Even if public policies remain rigid, more people will learn to celebrate and identify with more codifications.

        Over time, more people who may have kept themselves in a box will start to feel enlisted in all that is an entrepreneurial lifestyle. As more small business owners hear, use, and relate to enlivened vocabulary, the expanding taxonomy exposes new ideas, untapped resources, and unexpected realms to confidently explore within the local communities we love.

        Brewed From Within
        #36 📖 Leadership

        By Ben McDougal, ago

        Jargon vs. Understanding

        Humans seek to define emotions and articulate thoughts, yet a lack of understanding leads to fancy words and long-winded rhetoric. Sounding smart may protect our perceived knowledge, but as Albert Einstein said, “If you can’t explain it simply, you don’t understand it well enough.”

        To gauge levels of understanding, there are two questions to ask. First, can we deconstruct, expand, or compress what was said? Second, can we then describe the exact same idea in five different ways? If not, seek further insight to go beyond memorized jargon.

        Genuine understanding leads to more transformative conversations. As you seek to translate emotions into thoughts and thoughts into words, here are quick constructs that signal a state of comprehension:

        • Actively listening with genuine interest
        • Using fewer but more effective vocabulary
        • Feeling untroubled by uncomfortable silence
        • Ongoing execution and creative adaptation

        Brewed From Within
        #35 📖 Leadership

        By Ben McDougal, ago

        Gimmies

        Golf is a walk in the park with a small objective. If gimmies are illegal, why are conceded putts common?

        What’s the harm in an unquestioned finish? Does picking up that “unmissable” putt really save much time? There are unspoken social factors at play, but so few people are great at golf. Why not relish a satisfying sound of that golf ball dropping into the tiny cup?

        Extra Shot

        May your feet stay in the fairway.

        There’s no harm in keeping things casual to share time however you want, but tacit assumptions do leave room for misunderstandings. The truth is we all give gimmies to be given a break on putts we might miss ourselves.

        When we keep score, see how it feels to play without gimmies. Appreciate the missed putts and count those extra strokes. The unequivocal finish feels good and builds confidence for when gifts aren’t up for grabs.

        Brewed From Within
        #110 📖 Life & Happiness

        By Ben McDougal, ago

        Permeability

        Forever careers seem to be a thing of the past. Gone are the days of people working at one company their entire career. With rotating talent in high demand, scarcity can overshadow abundance. We fall back to reporting meaningless metrics, counting the keystrokes, and paying people just enough not to leave. Even the term talent retention feels desperate.

        What if, instead of trying to trick talent, we create remarkable roles in an inclusive environment that gives agency to team members eager to keep a promise?

        Seth Godin argues that enrollment can last when we invite people to leave. Instead of fighting to keep people in place, what if we optimize onboarding and welcome turnover while creating conditions to make this the best job someone has ever had? When people are invited to be indispensable, they feel significant, and the team will be led by those who aren’t just collecting rent for their time.

        Extra Shot

        “When you dance on the edge of infinity, there’s always enough… because you aren’t taking opportunity from anyone else, you’re creating it.” –Seth Godin

        When we create a gratifying but more porous environment, more gyrations within the team means leaders must be intentional with how they guide a business, relationships, and the environment overall. Having the best people in the right role takes extra attention, while ongoing commitment helps leaders stay in-tune with team dynamics.

        When departures occur, don’t blame the individual. Life happens, and talented people will always have new opportunities emerging. Responsive exits instill appreciation long after someone has left. This supports future hires, as modern leaders evaluate conditions, remain accountable, and nurture a performance-based culture made to stay… until it’s time to go.

        Brewed From Within
        #40 📖 Leadership

        By Ben McDougal, ago