Welcome!

Welcome to the flarnchain newsletter! brought to your inbox each and every week... sometimes on Wednesdays and sometimes on Thursdays, but hopefully roughly once per week. I've received reports that the new platform I'm using (paragraph) is not super reliable in terms of the timing of delivery, but perhaps it's reliable enough in terms of the likelihood of delivery to your mailbox. Not quite an atomic clock, but atomic clock adjacent (on long enough time scales).

Anyway, this week was pretty interesting if you've been paying attention to crypto at all lately. Bitcoin broke above $30k for the first time since July 2023, and basically, the entire crypto market has experienced a huge surge. The entire market is up close to 15% since last week, hovering around $1.3 trillion. We haven't seen $1.3 trillion since I started tracking market cap on a weekly basis. If I take a look at the overall crypto market cap chart from coingecko.com, a quick glance suggests the last time the market was worth this much was May 2022. That's a long time ago!

The crazy thing about crypto is that it is an incredibly volatile market. The other crazy thing about crypto is that it seemingly repeats itself in 4-year cycles, which coincide with the Bitcoin halving event that occurs once every 4 years. Every four years, the new supply of Bitcoin mined gets cut in half, resulting in a sort of supply shock to the market. Speculators take advantage of this event and buy in advance to capitalize on this reality.

Anyways. Why is crypto pumping so hard right now, like, this week? Could have something to do with an imminent ruling on a Bitcoin ETF, but it could also just be due to the inevitability of a volatile crypto market. Either way, things are starting to get a bit more interesting again.

Thus, this week's market animal is a bull (🐂🐂) and that's 2 bulls in a row!

So, this week was a bigtime bull market. Only time will tell if next week will continue the momentum, or if the market will come to a screeching halt on some macro news or some other regulatory threat coming towards crypto.

Moving on... to this week's topic:

Blockchain stuff / on-chain governance

So I've been thinking a lot about account authentication and abstraction, and also about account recovery. Not just as it relates to crypto / web3 stuff, but also just general online accounts like on social media or other web2 applications. Basically, nobody has to worry about remembering their password, because they can always just do "forgot my password" and be about their merry way.

The reason why this works is because a centralized entity is in charge of the user database, and that centralized entity (like Facebook or Google or whatever) can just recover your password for you in the event that you forgot it. This can potentially be exploited by hackers, but the modern-day authentication setup has many ways to prevent such a thing.

With web3 / crypto applications, this is not the case. When you set up your wallet, you receive a 12 to 24-word security phrase, which is essentially your only key to accessing that wallet. If you lose that recovery phrase, and then forget your password or try to log in on a different device, you will forever lose access to the assets associated with that wallet. More and more frequently, crypto wallets are being used like web2 accounts where an online identity is tied to that wallet address.

There are even solutions such as the Ethereum Name Service (ENS), where you can attach a human-readable name to an address, which makes interactions between individuals on blockchains more natural and welcoming. For example, my primary Ethereum wallet has an ENS name attached to it: flarnrules.eth -> This acts as a sort of web3 digital identity that is more like a social media handle than a bank account number.

Despite the existence of ENS, crypto is still incredibly challenging for a normal person to interact with, because even if you have an ENS attached to your account, you could still lose your recovery phrase, and potentially lose access to the assets and the ENS attached to that wallet address, making things even worse! That's a nightmare user experience. The finality associated with blockchains, and the fact that you can make one mistake and lose access to your funds forever creates a massive barrier to entry for most normal people who might be interested in participating in a permissionless and parallel financial system.

Here's where "Governance Based Account Recovery" comes in to save the day! Think of a blockchain protocol as the central authority of a closed-loop system that is a blockchain ecosystem. The protocol is like the laws of nature, it says when a new block is created, how to create one, what types of transactions can be in that block, and so on. Transactions are like the... atomic units of a blockchain. They are like the matter. So you have matter (transactions) and laws that govern that matter (the protocol).

Well, many blockchains have what's called on-chain governance where changes to the laws of the blockchain are determined via transactions of the users of that blockchain. On-chain governance is basically where people get together to make decisions collectively. In most cases, the voting is democratic and permissionless, but "democratic" needs a bit of an asterisk, because the amount of governance tokens you have determines how many votes you get. Basically, more money = more power.

Now, a whole bunch of small token holders can band together through social consensus and use their tokens to vote against a single large token holder, but that is less common just due to the law of large numbers or power law or some other law about human behavior and emergent systems. There are ways to diminish the power of large token holders, by creating a system of one wallet, one vote which is more democratic, but then that system is subject to what's known as a sybil attack where someone could just spin up thousands upon thousands of wallets, effectively replicating themselves and making it so they get to cast multiple votes.

Then there's a third option one verified account one vote which is the most ideal, but the most challenging to get right in a permissionless decentralized system. Who gets to decide whether or not a wallet is an account? Who determines the rules to determine who gets to decide this? These are very big questions, and with the right features, a blockchain can implement such concepts directly into its protocol through governance.

Alright... I think I said a lot there, without really saying much. I'll try to end this with something tangible. I would like the Flarnchain blockchain to emphasize user interface and user experience as two pillars of its protocol. It needs to be something that is very easy to use and I think account recovery is one of the features that would dramatically improve the usability of blockchain technology. I think I'll write more on this in the future. There's a lot that has been written on this topic by some of the greatest thinkers in blockchain, and I've been thinking deeply about these concepts for over a year now.

Anyway... if you read my newsletter this week, hope you enjoyed it.

Cheers!

-Flarn

🤘🤘🤘🤘