Curiosity

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

      Listen

      Listening is louder than it sounds.

      The more obsessed, the more vociferous we get. Idea machines must be willing to share compelling stories, but listening is part of any transmission. This is obvious, but with precious airtime up for grabs and knowing so much about our own interests, listening can devolve into feeling like a required distraction.

      Extra Shot

      Hearing is passive.
      Listening is active.

      As we guide people through the layers of understanding, active listening forms a bond much faster than forcing ourselves to be heard. The fear of not having time to deliver our message will linger, but when we truly tune into what another person is saying, it shows we care. Active listening also helps us better harmonize our thoughts within the moment and counters the common mistake of overloading others with too much numbing details all at once. Knowing each conversation is part of a broader relationship journey, good listeners are almost always given a chance to make a bigger impact.

      Ready for an experiment? The next time you meet someone new, embrace your inner scientist. Set your introverted/extroverted mindset aside and focus your attention on asking as many thoughtful questions as you can. The less you talk, the better. This will feel awkward if you just fire question after question, so be concise with each response, then return to thoughtful questions for a more natural interaction. Consider expanding this social experiment by purposely doing this throughout an entire networking event. Remember who you talked with and track how the listening-focused conversations evolve. Over time, how do these relationships compare with others where you’ve been less intent on listening?

      Here are tactics to support your listening practice:

      • Center your internal attention.
      • Stay engaged with eye contact.
      • Use jarring questions to dodge small talk.
      • Don’t interrupt or jump to conclusions.
      • Occasionally paraphrase what was said.
      • Avoid the urge to make it about you.
      • Ask curious questions to go deeper.
      • Use non-verbal cues to express attention.
      • Record and share a few key takeaways.
      • Exit gracefully, without a sense of rush.
      • Follow up with one more question.
      • Ask about progress next time you meet.

      This type of active listening will not only extend your ability to hear. It will also make your responses more in-tune with what others are thinking versus always trying to prove your point. Selflessness may keep a conversation from landing exactly where we want in that moment, but as we move from one topic to the next, we learn how others work.

      Extra Shot

      Listening within a support network ignites optimism, connection, and motivation. A healthy balance involves listening to challenge networks, which keeps us intellectually humble and rooted in reality.

      When done well, an unspoken bond is formed. This synchronization curates future conversations that are enforced by shared enthusiasm.

      Brewed From Within
      #34 📖 Leadership

      By Ben McDougal, ago

      Head Start

      The entrepreneurial lifestyle resists definition.

      Business owners paint with strokes of curiosity, determination, and innovation. When people build with creative ambition, experience is valuable, but the symphony of desire and attitude plays an equally important role. It takes heart to start and resilience to execute early moves, manage focus, build teams, maintain sales, and provide lasting customer service to maintain momentum.

      The best part about an entrepreneurial lifestyle is that it’s accessible to everyone. This can be seen as students explore projects that transcend the classroom. It’s intrapreneurs fueling positive change in existing companies. It’s startup founders achieving product-market fit with new ideas and others who acquire an established business.

      EXTRA SHOT

      This contribution was written by Sheldon Ohringer. Along with helping us buy a business, Sheldon is an investor and board member who led large sales teams, developed acquisition programs, and as CEO took a technology company public.

      Starting a brand new business is one way to explore the entrepreneurial lifestyle, but buying an existing business is also an interesting way to write your own story.

      While there may be a higher cost for the head start, acquiring an existing business presents an interesting side door to the entrepreneurial lifestyle.

      Organic growth is important, but there are added benefits in augmenting internal development with external acquisitions as well. As you consider a business to buy, avoid future headaches by understanding industry requirements, such as licenses, permits, zoning, and environmental requirements. As you work with existing ownership to determine a purchase price, a valuation based on capitalized earnings, excess earnings, cash flow, and tangible assets are all methods to guide fair negotiations. In the end, the right price is one that delights the seller and excites the buyer.

      As details come together, partner with legal and accounting experts who focus on mergers and acquisitions (M&A) to document the transaction. A letter of intent, confidentiality agreement, contracts, leasing documents, financial statements, tax returns, and sales agreements are all important documents to talk with your M&A team about. Many transactions include a vesting schedule as well, so stay in tune with these details to avoid unwanted surprises.

      There are a variety of strategic ways to acquire a business, but once the transition takes place, new owners are given keys to a kingdom that hails an established team, customer base, and operating procedures. As we see in the Exit section of the Results chapter in YDNTB, there will be challenges during these transitory times, but in the end, virtuous leaders listen to keep the culture balanced.

      All the good that comes with a business is important to maintain, but an audit of negative aspects is important too. This focus on areas that need improvement is stressful, and concerned employees may exaggerate issues to make their own contribution seem important. To stay proportionate, talk with everyone for context, invite resolutions that may solve issues, get hands-on, and stay optimistic to keep your assessment honest and weighted against the big picture.

      Searching and finding undervalued, cash-flow businesses may take time, but it serves as a viable alternative to growing a business from scratch. Intentional candor with areas to improve allows new owners to build on past success while charting a renewed vision for lasting prosperity.

      By Ben McDougal, ago

      Prismatic

      There are endless early moves to help avoid pushing your idea toward someday. For instance, creative wireframing requires only a pencil. With a little visualized clarity in place, a couple exploratory conversations can also help.

      First, meet with a mentor. This should feel like a supportive space but avoid rainbows and butterflies. Be realistic with exciting aspects of the idea, but also the challenges. As we learned in YDNTB, an early no is much better than a long, wrong yes. That said, playing it safe is easier than activating initiative, so don’t let early doubt slow you down. Instead, welcome it. Let curiosity uncover new understandings. Pivots are inevitable, and this exploration adds confidence as the original idea is tweaked toward product-market fit.

      After transparently talking with that trusted mentor, the next meeting is with a potential customer. This will feel too early, but it’s not. You’re actually protecting your personal bandwidth by not swinging at a bad pitch too many times.

      To optimize early innings, arrive prepared to ask good questions. Take notes and speak less so you can actively listen to how this potential early adopter is responding.

      Are you building a pain killer or vitamin? Remember, feedback is data, and this is only one data point, but let this conversation infuse reality into the idea. Show up, stand out, follow up, stay connected, find a thoughtful way to accelerate their work, and then keep building.

      The business model canvas is a tool to do so. While it’s impossible to predict the future, business model canvases help us continue to explore while curating a story that sells.

      Most early business ideas don’t have a clear story. This can make it hard to know where to start within the business model canvas. While you can use this tool in endless ways, consider an approach that is less about the entire business and more about one story at a time. Instead of trying to boil the ocean, organizing a complete story for each customer segment creates a combination of more actionable insights.

      To give it a try, use this special business model canvas. The areas are numbered to curate canvases that each highlight a customer story:

      1. Customer Segments – Start with the details of a particular type of customer. The goal isn’t to complete the Customer Segments box. It’s starting a story to follow through the rest of the canvas. Now lean into the pain as you move from box to box and watch as your solution transforms into a story.
      2. Value Propositions – What benefit(s) can you deliver?
      3. Channels – Where can you connect with this customer?
      4. Customer Relationships – Who are you working with and how will you make this customer feel?
      5. Revenue Streams – Will financial income flow? How?
      6. Key Activities – What actions make the customer care?
      7. Key Resources – What is needed to keep building, and how might needs change to maintain momentum?
      8. Key Partners – Who helps to make this sustainable?
      9. Cost Structure – What costs go into activating this customer segment? How is pricing organized to support realistic profit margins that align with a financial model?

                    By telling the story of created value for one customer segment, hypotheses can be connected with context. Next, using a separate business model canvas, visualize more stories based on different customer segments.

                    With separate business model canvases for each customer segment, merge everything into one business model canvas. To stay organized, select different colors to use for each customer segment. As everything blends together, the prismatic rainbow maps roads to reality.

                    By Ben McDougal, ago

                    Overtime

                    Meaningful moments form faster without an agenda.

                    When communication is graded by productivity, meetings, pre-planned talking points, goals, and recorded remains, there is mysterious value in extended conversations that have purpose but no end goal.

                    Extended discussions create space to pass interesting anecdotes, opportunities, and unforeseen knowledge grenades. While it’s uncommon, consider how bonus time connects friends who simply haven’t met yet.

                    Extra Shot

                    Many people are oversubscribed. When being busy makes us feel important, the illusion leaves less room to uncover peculiar variety.

                    Long-term leaders expand minds while tightening impact networks along the way. Respect the extra time required, but invite these verbal volleys and when asked to go into overtime, stay thirsty and see what happens.

                    Brewed From Within
                    #49 📖 Leadership

                    By Ben McDougal, ago