3 Giga-brained ideas from Consensus Day 2

One of the main selling points of crypto is that the industry is full of new ideas. For some reason, crypto tends to attract unorthodox thinkers or potential revolutionaries, much in the same way that a loose community formed around the internet in the 90s. Part of this stems from the nature of the technology itself, which offers radically new ways to build code-based systems. Another is Web3’s notorious barrier to entry, which means the people who end up here tend to be committed—and frankly, smart enough not to get blown out while taking care of valuable assets.

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At the same time, after covering the industry for nearly four years, I often feel like I’m hearing the same ideas over and over again. Crypto markets, perhaps more than any other, hang on what insiders call “narratives”. These are the stories people tell themselves and others about what blockchain technology is good for (or can be good for).

Still, every once in a while a person or theory comes along that can really shake things up (or at least be fun to entertain). Here are some of the giga-brained ideas I heard while roaming Consensus today.

Ethan Buchman, the founder of Informal Systems, wants to bring about a revolution. Central banks have mishandled the economies they are supposed to support, the “petro-dollar” has caused untold suffering and there are layers of corruption at all levels of the monetary system. Of course, blockchain presents a solution. But before he explains how, Buchman wants us to consider the past.

Imagine yourself as a Genoese banker in the 16th century, shortly after double-entry bookkeeping was discovered. At the time, Buchman said, the banking industry was composed of a few family-run institutions that sprouted to supply a modernizing and globalizing economy with credit (perhaps for the first time in history). There were no central banks, no depository institutions and few, if any, banknotes.

Instead, what bankers offered at the time were “trade credit,” entries in a ledger that enabled someone in Antwerp to trade with someone in Medina. Occasionally, because the environment was highly trusting, the banking families met to balance their books. To do this they used an old term-of-art called “payment graph.”

It’s hard to visualize, but if Cosimo owes money to Catalina, and Catalina owes Albrecht and Leonardo owes Cosimo, there’s often a way to map out those deficits so that everyone can settle their debts—without necessarily injecting extra liquidity into the system. This was done by finding “loops” and “debt cycles” that allowed the banks to zero out their books.

Buchman wants to revive this idea for the modern age. The game, which requires cooperation and communication, works because debts can be “cleared” (balanced on paper) without being settled (few funds actually transferred). To this end, Informal Systems, operating as a worker collective, is building Cosmos-based smart contracts and algorithms that allow communities to do this permissionless and automatically.

“You show up at a fair [the banking conferences of the time] with books that reflect debt and you mess around with your friends and you wipe out all your goddamn debt,” he explained. In fact, modern banks still do this on an almost daily level using clearinghouses and discount windows. “But why should they have all the fun,” he said.

What is informally called “co-financing”, or CoFi for short, may not work at all. The company has yet to even release a full white paper. But at a time when my peers are saddled with student loans and where international trade imbalances reflect the “power and production structure of the economy” after centuries of exploitation, it might be worth considering an alternative.

For now, you can read more about the idea here. Or you can read the newspaper that inspired Buchman here.

I’ll spare you the rundown of how ChatGPT unlocked a wave of venture capital funding and Silicon Valley-based startups, and the history of failed Web3 experiments with artificial intelligence, to say that many people in crypto are now thinking seriously about AI. Some of the uses are prosaic: like building chatbots to help people better understand a jargon-filled industry. Others seem inhuman: using code to replace coders, to run Web3 startups with a leaner team. And there is probably no worse idea than outsourcing smart contract auditing to “hallucination” prone systems.

Still, Tarun Chitra, the founder of Gauntlet who is widely recognized as one of the sharpest minds in crypto, believes blockchains can be useful for AI. The long and short of it is: As more information is produced by machines, it becomes more important to know where all the data comes from.

Zero knowledge proof, an area of ​​cryptography research proposed in the 80s and thrown into hyperdrive by cryptocurrency funding, allows people to check the truth of someone else’s statement without the person having to show all their cards. (The standard description of a “ZK proof” is that a barfly can prove they’re over 21 without pulling out their ID, which also reveals their home address.)

ZK proofs can be distributed in a way that helps anyone prove whether some new data was produced by a human, by a machine, or by a machine with access to a particular data set (like an AI trained on proprietary information on the Q&A site Quora) . “This is quite important because one particular output … is going to be IP [intellectual property] of the future,” Chitra said on stage at Consensus.

As mentioned, ZK-based systems don’t necessarily need crypto to work, but blockchain can still play an important role by providing immutable records of data origin, he said. Verifiability is powerful in an increasingly distrustful age.

Finally, on Wednesday the NEAR Foundation announced a new project called Horizons, which is essentially a startup accelerator mixed with Uber. CoinDesk has a blueprint of the system here, which will allow anyone with an idea for a startup to essentially crowdfund funding and business advice from experts.

The system uses a two-way marketplace that takes an idea from Uber, which allows startups to rate the level of support they received from their advisers and advisors to rank the founding team, Horizon co-creator Laura Cunningham told The Node in an interview. It’s what she called a “reputation graph.”

Obviously, not every startup will make it, as some business ideas are just plain bad. But using smart contracts to inject some visibility into the process, perhaps everyone can learn. Because, as crypto has shown, sometimes an idea can be valuable even if it hasn’t been deployed.