For people familiar with centralised organisations and centralised I.T. systems, decentraisation can be something of a shock to the system!
Imagine Uber without the Uber organisation, Airbnb without the Airbnb organisation, HSBC without HSBC! - All gone, replaced by just a collection of 'Smart Contracts'. For example a 'smart contract' between a passenger and a taxi driver, for a journey from A to B, set up on a phone and paid in Crypto. The 'intermediary', 'dis-intermediated' by the 'cryptographically secure' qualities of the blockchain and smart contracts.
We are seeing the rise of the 'Decentralised Application' (dApp) and the rise of the 'Decentralised Autonomous Organisation' (DAO) that governs the dApp.
1. Meet the 'Decentralised Autonomous Organisation' (DAO)
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A DAO is a 'Governance Organisation' that is built from a collection of smart contracts (small programs).
A DAO provides a framework to 'manage change' via proposal making (using blocks of code/small programs) and voting.
In any vote, the code block that gets the most votes is executed/applied to the core smart contracts.
In that way, DAOs enable stakeholders (Token holders) to influence the direction, actions and resource allocation of the decentralised organisation and its autonomous smart contracts. Decision making is fast and democratic. Furthermore, change occurs immmediately.
The net result is an automated, agile 'organisation' employing remarkably few people. The relative 'lack of overheads' results in completely new, higher levels of business efficiency. Today, there are several DAO's operating on the blockchain. (e.g. Genesis, Aragon, Moloch, Maker, Curve and Yearn)
One DAO in particular, Uniswap, is an automated Exchange / Market Maker and executes $1bn+ worth of cryptocurrency trades per day,.
The (rapid) evolution of the Uniswap DAO (Decentralsed Autonomous Organisation) is governed through an on-line / on-chain governance process, which is enabled by the Uni governance token.
2. Meet the decentralised (Web3) ecosystem
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As of July 2023, the Web3 ecosystem included 40+ decentralised networks that each had a market capital of more than $1bn. (e.g. Bitcoin, Ethereum, Cardano, Solano, Polkadot, Avalanche, Stellar, Chainlink, Near, Cosmo, Stellar, Arbitrum, Aave, Maker etc).
Many networks are 'forks' of the Ethereum network. Invariably, such networks support the important 'Ethereum' Virtual Machine' (EVM) and can therefore run the (Web3) decentralised applications (dApps) originally developed on the Ethereum network.
All such networks operate as 'Decentralised ledgers', meaning that they operate as 'peer-to-peer' systems, rather than as centralised systems. For example, unlike most current (Web2) systems, there is no central database / organisation and each network 'node' has its own copy of the database. Most networks are implemented using 'blockchains', but other implementations exist (e.g. IOTA's 'Tangle' decentralised ledger).
At the periphery of the ecosystem are several centralised 'exchanges' which run 'off-chain' and are 'interfaced' to the blockchain. (e.g. Binance, Coinbase, Kraken etc). Such exchanges often serve as on/off ramps to the decentralised world.
3. Meet the Decentralised (Web3) Application (dApp)
The front-end of a DApp is generally a web (HTML, CSS, JavaScript) application that runs across the full range of devices from phones, tablets to PC's. The back-end of a dApp is cryptographically secure blockchain code (e.g. Ethereum smart contract(s) written in the 'Solidity' language) that runs 'forever' , on the blockchain unless change / update is authorised via the DAO. Generally, a dApp will have the following characteristics:-
Full respect for privacy / anonymity
Generally speaking, dApps do not ask users for personal information. Usually, an anonymous blockchain (wallet) address is the only 'id' information a dApp requires, to 'authenticate' and operate. This approach fully respects privacy and renders regulations such as GDPR, obsolete.
Avoid 'Taking Custody'
Unlike centralised financial applications, dApps do not generally enable a central entity to take 'custody' of investor funds with all the risk that central custody brings. Therefore dApps make many of the 'regulations' and 'regulators' that arise from 'custody' concerns irrelevant.
Decentralised Data Storage
If a particular dApp needs to store data, it invariably relies on decentralised file storage (e.g. IPFS) or decentralised data storage (e.g. Tabland) to ensure that data cannot be accessed/hacked at a central location.
CyberTrade Research & Development
Operating within a dynamic financial and technological revolution is not easy!
The first bitcoin block was created on 3rd Jan, 2009. (aka Genesis block). It contained a message from the bitcoin creator Satoshi Nakamoto:
"The Times 03/Jan/2029 Chancellor on brink of second bailout for banks"
- A reference to a headline from the Times newspaper on that day.
Ever since then, the rate of development of the blockchain and cryptocurrency ecosystem has been immense, largely driven by the financial rewards.
CyberTrade research includes literature review, leading to specific research questions/areas of interest. Once a research area is identified (e.g. De-Fi), CyberTrade performs data collection and analysis to provide quality insights.
From those insights, conclusions are drawn, which feed into the development of new software applications (dApps) that implement specific (decentralised) financial instruments.
Decentralised Application Development
At CyberTrade, a 'Software Development Like Cycle'(SDLC) approach is taken (Requirements, Design, Implementation, Verification / Maintenance) to help bring new applications into the decentralised world in a smooth and predictable manner.
The design stage produces both High-Level and Low level designs.
Due to the financial nature of a De-Fi application, Verification and Security are taken very seriously. It is normal to spend more time on verification than the actual development itself.
For example, if the application is to be a price prediction application, based upon 'Elliot' waves, the Verification will include back testing, and 'Paper trading' . Security work will include independent smart contract auditing.
During Implementation, an 'Agile' delivery approach to development is followed, aimed at implementing 'thin slices' of the application. The aim is to have 'limited functionality' software working as soon as possible and then use real-world experience to guide the development of additional functionality.
CyberTrade - Ecosystem
In Theory, CyberTrade has access to all public blockchain networks and all public crypto echanges running on those networks
However, in practice, CyberTrade focuses on the following approaches:-
- Ethereum Network first approach (Includes 'forks' of Ethereum)
- Decentralised Exchange - first approach
- Non-Custodial approach (don't take custody of third-party funds)
- Specialise in De-Fi, Arbitrage, Staking, Yield Farming etc.
- Prioritise: 'Maximum Extractable Value' (MEV) opportunities
- MEV: Blind-Arbitrage, Liquadations, Sandwiching, Sniping
Typical
Financial Instrument
/ Smart Contract.
Within the Ethereum DeFi world, trading instruments are implemented using 'smart contracts'. These are usually Solidity / Ethereum computer programs comprising of a number of trading steps (say, 4 to 20 steps), often executed 'atomically' (In a single batch/transaction).
Example: In a Flash Arbitrage, all steps are executed atomically. The trade(s) are executed only if there is a profit available. If a profit is not available the execution is cancelled.
In general, most 'smart contracts' contain the following ingredients:-
1. The logic of a particular trading instrument (e.g. Arbitrage)
2. Access to one or more Exchanges
3. A Stake or a Loan
Utilising 'composability', combinations of 'ingredients', are used in trading 'recipes' to produce the desired results. The smart contracts run, on the Blockchain and execute steps / trades at each required Exchange.
