S3T Apr 17: Proof of Work, Energy Sink, Zero Knowledge Proofs, Biomimicry, Owls Wings, Mushroom talk...

S3T Apr 17: Proof of Work, Energy Sink, Zero Knowledge Proofs, Biomimicry, Owls Wings, Mushroom talk...
Proof - Digital Mixed Media Ralph Perrine 2022

A sentiment split may impact the crypto market as players learn to distinguish between proof of work vs. proof of stake amid healthy concerns about environmental impact. Its part of the diversifying evolution of web3 with opportunities to learn from nature's patterns.

Crypto Sentiment Shift?  

Wikipedia mulls whether to stop accepting crypto donations after the Mozilla foundation announced it is modifying its policy to accept "Proof of Stake" crypto but not "Proof of Work" crypto donations.  

Look for increasing buzz/confusion about crypto's energy consumption along with broader awareness of the difference between “Proof of Work” vs “Proof of Stake” confirmation methods used by blockchains.

Bitcoin uses an energy intensive Proof of Work mechanism to confirm transactions while many other emerging blockchains use a more efficient Proof of Stake confirmation method. Ethereum is shifting to Proof of Stake.

Proof of Work as a new ESG hot button

Companies investing in crypto in 2021 trumpeted their crypto holdings as a badge of modernity. In 2022, investment will continue (for example Kevin Leary's portfolio), but companies will likely begin to communicate more carefully.  

Companies who report crypto holdings should be prepared to educate themselves and their stakeholders and customers about the energy footprint of crypto and how this issue is evolving. This is an in-depth issue and our social media framed public discourse is not good with in-depth issues. So careful communication is required.

Four recommended reads for better understanding this issue:

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"Bitcoin does not waste energy, Bitcoin capitalizes on wasted energy." -Bitrawr

Together these articles bring important points to light and illustrate how there is more to this issue than most realize:  

  • Today's energy industry loses and wastes large amounts of energy. Bitcoin captures and uses this energy. Bitcoin can serve as an energy sink - a way to monetize energy for future value.
  • Bitcoin energy usage is a tiny portion of the world's energy usage.
  • Bitcoin uses "half as much as inactive home appliances in the U.S. consumed."
  • An astonishing amount of energy "lost in transmission" - 19x the total amount used by Bitcoin.
  • Bitcoin energy usage occurs when "summoned" by network activity. This is quite different from the rest of the world's energy consumption which tends to occur whether or not there is an actual need at the moment.

Summary

First, its wonderful to see concern over environmental impact. The negative press about bitcoin energy consumption (example) seems to have a disproportionate dependence on a few sources that highlight the usage of Bitcoin but don't put it into context.

The emergence of the more efficient Proof of Stake confirmation method is a good thing and most blockchains going forward will use it, or other emerging alternatives because of the advantages they offer. These chains will likewise compare themselves favorably against Bitcoin as Tezos does here.

But it is far from clear that any are capable of becoming a replacement for Bitcoin and the unique role it plays as a censorship resistant inflation hedge and store of value. We may be entering a phase where it is fashionable to boycott or bash Bitcoin. Over time though I think empathy wins out: empathy with the people for whom Bitcoin has been a lifeline, and this recognition puts Bitcoin's energy consumption in its proper value context.

Photo by Daniel Buhat / Unsplash

Biomimicry and DAOs


Fascinating Bankless podcast this week on DAOs and Nature, unpacking how Decentralized Autonomous Organizations (DAOs) can benefit from biomimicry. Biomimicry is the discipline that looks to nature for useful patterns and solutions that can be applied to design of human engineered processes and systems. For example, engineers are studying owls wings to learn how to create quieter airplanes and wind turbines.

Designing the New

Why might nature be able to serve as a guide when designing new kinds of organizational models?

Per the podcast above, creating organizational structures is innate to living things. Consider the different kinds of organizational structures that living things create:

  • Bees create hives
  • Ants create ant hills
  • Humans create organizations: states, companies and now DAOs

These structures provide security and sustenance for the members that belong to and maintain these structures.

As we evolve our ability to create better and better organizations, we can look to nature and its systems for guidance on how to create systems that are not just command and control but rather sense and respond.

Planning for Change

On a related note, the patterns of nature can not only help us understand how to innovate better things, but also help us understand challenges we face when innovating:

  • why organizational change can be so hard and
  • why resistance usually mounts as new ideas take shape.

It turns out that organizational units - the operational platforms and processes and the people who own and manage them - can best be understood as a living organisms:

  • They feed themselves and grow
  • As they do, they require more and more resources
  • They are very capable of defending themselves

Organizations tend to resist any change that threatens their ability to continue growing and consuming more resources. Teams with intimate knowledge of the systems they support can very effectively resist change - persisting against wave after wave of would be change leaders who lack the same level of intimate knowledge.

This has struck me as a good way to understand why so many companies struggle to change - they are literally attacking an organism that is enormously capable of defending itself. It is not easy to drive change unless you win over the hearts and minds of the individuals involved.

Zero Knowledge Proofs

Why Zero Knowledge Proofs matter: ZK proofs can open new ways for us to share and create value from data while better protecting privacy and human rights.

How ZK is starting to be applied:

  • This podcast describes Element's airdrop (at 18:45) which used Zero Knowledge (Zk) process to allows individuals to accept their portion of the airdrop without having to disclose their identity. A dashboard generates public and private key with randomness by having the user move their mouse around.
  • Mina - a lightweight blockchain - is rolling out a ZK approach that enables the creation of zkApps, smart contracts powered by zero knowledge. This in turn let's users control their privacy by validating and "sharing proofs of their data, rather than the data itself."

The ZK approach seems directly adaptable for use in healthcare - to enable anonymous enrollment and use of data. Recently some medical ethicists have become convinced NFTs could help to empower individuals with a more private more ethical model for protecting but using data to benefit the health and well being of individuals.  

Nature Notes

Micro X-ray of mushrooms with false colors.
Photo by Mathew Schwartz / Unsplash

Can Mushrooms Communicate?

Recent scientific analysis of small electrical signals sent between mushrooms reveals patterns that suggests the mushrooms are conversing. The apparent communication patterns bear "striking resemblance to human speech."

New Evidence about Ivory Billed Woodpeckers

This new paper Multiple lines of evidence indicate survival of the Ivory-billed Woodpecker in Louisiana is being peer reviewed along with a set of photo and video evidence presented to the Macaulay Library of Cornell University. The paper recounts the results of a large systematic search effort conducted in Louisana, using remote cameras and drones as well as other methods. The paper includes screenshots of photos and videos, as well as text accounts of finding what the authors believe to be a location with family of birds that might be Ivory Billed Woodpeckers.

A couple of the photos appear to have the right shape and coloration but the photos are extremely poor quality. They appear to have been shot with remote cameras in low lighting.

Levels of Certainty in Sightings of Rare Species

When attempting to determine whether a species is still in existence, it is helpful to understand the levels of certainty the scientific community would be able to confer on any potential sightings:

  • Level 1: Single Unconfirmed Claim. One or more persons claims to have seen an unexpected bird but has no photo  - and we can't confirm that they know enough about birds to distinguish between this bird and others that might appear similar.
  • Level 2: Multiple Unconfirmed Claims. One or more persons claims to have seen an unexpected bird but has no photo - but we know that at least 1 of them is an experienced birder. (Why is this not credible? even experienced birders sometimes seek verification of their own observations - "I think it was a ____ but I'm going to take a photo so others can review it and confirm...because I know that I may be subjectively biased....this may be a bird that I was really hoping to see, etc)
  • Level 3: Claims with Inconclusive Documentation. One or more persons claims to have seen an unexpected bird, at least 1 is an experienced birder, and there is a blurry photo, but other birders debate it. (Why is this not credible: same reason as above)
  • Level 4: Event Confirmation: Multiple people claim to have seen the bird, including 1 or more experienced birders, and there are clear non-debatable photos linked to a known location. This is good evidence that the bird was at this location at a specific time. It is not evidence that the bird breeds or lives there. Perhaps the bird was lost or just passing through, and the bird may never be seen there again. Not sufficient justification to fund a program to protect that bird. Note: I don't include sound recordings. Sound plus photo or video with sound is credible. Audio alone very easy to misidentify.
  • Level 5: Repeatable Observations: Multiple people have seen the bird, including 1 or more experienced birders, there are clear photos, and people who visit these locations consistently see the same bird (and get more clear photos or videos). The recent Snow Goose in Orange Co NC is a good example.
  • Level 6: Viable Breeding Population: Multiple people have seen the bird, including 1 or more experienced birders, there are clear photos, people who visit consistently see multiple birds, AND observe nesting activities (nest building, actively drilling out cavities, eggs, feeding young etc). Example: Red-Cockaded Woodpeckers can be notoriously hard to find, but during nesting season you can find them near their nest cavities feeding their young.

We have a lot of endangered species in the Level 6 category. We will loose them within a decade if we don't focus our funding and work on them. The Ivory Bill - I am sad to say - is at best Level 3 category.  There's no evidence that there is a viable population to be saved. Not yet anyway - the paper might change that if additional clearer photographic or video evidence can be obtained. Let’s keep looking.

Final Note

Thank you again for reading and sharing with friends! Join the conversation on the S3T Discord, Twitter or LinkedIn. Happy Easter!

Ralph

Opinions mine. Not financial advice. I may hold assets discussed.