0xResearch - Runes: BRC-20s Replacement or Just More Hype?

In this episode of 0xResearch which took place on April 25, 2024, Boccaccio, Dan Smith, Ryan Connor, and EffortCapital join to discuss BRC-20s, insights on investments, blockchain innovations, the role of AI agents in transactional activities, and more! Read our notes below to learn more.

Background

Boccaccio (Host) – Research at Blockworks

Dan Smith (Host) – Contributor/Host at Blockworks

Ryan Connor (Host) – Research at Blockworks

EffortCapital (Host) – Sr. Analyst at Blockworks

Market Skepticism and Bitcoin Optimism

Dan criticizes the user experience (UX) of Runes and Bitcoin Layer-2 technologies, describing them as a regression in the development of DeFi on Bitcoin and suggesting a better approach might be to integrate Bitcoin with more advanced smart contract platforms.
Boccaccio speculates on the potential advantages of using Bitcoin for transactions due to its trustless nature and discusses the cultural significance of NFTs on prominent blockchains, reflecting on a perspective shared by Suzu about NFTs as a flex and a store of value.
Dan notes that Unisat is currently a leading marketplace for trading, but he is unable to access their website, suggesting it might be down, which could be bullish. He mentions Magic Eden is launching a trading platform soon for Runes and discusses the role of meme coin trading as a significant aspect of Solana’s appeal, likening it to gambling.
Dan expresses skepticism about the ultimate utility of certain technologies, comparing the user experience and the impact of inscriptions on Avalanche to that of meme coins. He describes the process and costs associated with minting and flipping these assets for significant profit.
Dan critiques the logic behind buying Runes, emphasizing the speculative nature of their value and the challenges with user experience in the crypto market. He highlights the minimal utility beyond speculative trading.
Boccaccio equates the discussed assets with meme coins, noting their similar dynamics and the evolving market landscape that now includes Solana.
EffortCapital points out the potential bullish scenario for Bitcoin miners due to the high demand for transaction processing, driven by the minting of certain crypto assets. He mentions specific data about mining outputs, indicating a surge in activity.
Dan supports the assertion of high demand on Bitcoin, citing transaction fee revenues as evidence. He acknowledges that while certain innovations like Runes might not revolutionize financial infrastructure, they maintain relevance by appealing to those wanting to engage with Bitcoin.
Ryan updates on the partnership between io.net and Aethir, highlighting their contributions to distributed computing and the significance of their collaboration. He details the technical capabilities and the benefits of the partnership, including mutual token airdrops.
Ryan discusses the broader implications of recent developments in decentralized computing networks, emphasizing their growing importance and potential. He highlights how these advances are creating opportunities for developers and startups to access powerful computing resources and innovative models like Llama 3.

GPU Supply Battle: Decentralized Platforms & Strategic Partnerships

EffortCapital says that io.net’s new partnership is impressive because it brings 3000 high-quality GPUs to their platform, putting pressure on competitors to improve their distribution of high-quality GPUs.
Dan asks who is winning the supply battle for GPUs among decentralized compute platforms, suggesting that securing supply could lead to winning demand. Ryan responds that io.net appears to be leading, benefiting from contributions of over a thousand GPUs from Filecoin miners.
Dan mentions that Filecoin nodes, having idle GPU power, are contributing to networks like io.net.
Ryan describes io.net as primarily an orchestration UI that simplifies the use of excess computing power, making it easy for providers like Filecoin to integrate and distribute their GPU resources.
Boccaccio notes that there was an issue with virtual GPUs flooding the market, leading to io.net addressing token farming by malicious actors. Ryan adds that io.net had to adjust its reported numbers of chips due to spoofing, yet confirms real activity and demand on the network.

Blockchain Deployment, Challenges, and Strategic Considerations

Dan states that setting up a blockchain is now a simple one or two-click process, though he acknowledges challenges such as interoperability issues between chains and the fragmentation of applications and users.
EffortCapital says that the likelihood of a new chain being more effective is highly doubtful, implying that new entrants are unlikely to surpass established platforms.
Dan mentions that the first Points program to launch was effective but diminishing returns are evident with subsequent points program announcements from projects in the same sector.
Boccaccio believes that building a trading-focused L2 immediately may not be the best approach, citing DYDX’s success on an established chain before launching its own L1 as a better strategy.
Boccaccio later mentions ZKasino, a gambling platform accused of misappropriating $32 million from users, leading to significant backlash and security concerns.
Dan categorizes various blockchain ecosystems by their distinct characteristics and expresses skepticism toward the trend of launching new L2s as a solution to enhance project valuation.
Boccaccio comments on the substantial funding some platforms have raised despite questionable operations, comparing them to successful counterparts that have not launched their own chains.
Dan reflects on the complexities of launching and operating a new chain effectively, mentioning the necessity of various technical and business developments to ensure functionality and integration within the broader ecosystem.

Exploring AI Agents in Crypto Transactions: Partnerships, UX Benefits, and Trust Issues

Boccaccio introduces Wayfinder AI, mentioning its recent teaser that demonstrates transaction facilitation on blockchain. He recalls previous discussions of skepticism about AI agents but suggests these technologies are advancing rapidly.
EffortCapital shares his view after watching the Wayfinder AI video, feeling that for basic swaps, the traditional UIs are already efficient and doubts the impact of an LLM-type interface. He acknowledges a potential improvement in abstracting away more complex DeFi activities.
Dan highlights the UX benefits of Wayfinder AI, especially in chaining transactions without requiring user interaction for each step, and discusses the potential ease of use for less knowledgeable users.
EffortCapital questions the trust people would place in an AI agent handling their funds, emphasizing the challenges in ensuring reliable and accurate transaction execution by AI.
Boccaccio points out the risk of errors, such as hallucinations by AI, which could lead to significant financial losses, and expresses concerns about the AI’s ability to accurately handle transactions in a landscape with poorly documented and similarly named tokens.
Ryan predicts that AI agents will likely dominate crypto transactions over time due to efficiency, especially in environments like Solana that encourage bot activity. He remains cautious about the current effectiveness and timing of AI agents.
EffortCapital discusses his reservations about the current rush to adopt AI agents in Web3, suggesting that it might be more about narrative and funding than about ready-to-use technology. He supports the long-term potential of AI agents but stresses the prematurity of expecting significant real-world adoption soon.
Dan discusses the potential of building an AI agent that operates on crypto rails, acknowledging the advancements in AI technology demonstrated by Wayfinder. He highlights the complexity of developing foundational AI models and the relative ease of fine-tuning them for specific applications, despite the high intelligence requirement.
Ryan elaborates on the security challenges inherent in deploying AI agents, such as prompt injection and data poisoning attacks, which could lead to agents performing unintended actions. He emphasizes the ongoing need to address privacy and security vulnerabilities in AI technology.
Dan talks about the advantages of blockchain for AI agents, mentioning a conversation with a payment processor expert who stressed the trust and security issues in conventional payment systems compared to blockchain’s instantaneous settlement feature.
Boccaccio expresses a preference for human-only activities on blockchains, showing skepticism about integrating AI agents into blockchain transactions.
Dan suggests the potential for applications specifically designed for AI agents, contrasting them with current applications intended for human users. He points out the different usage patterns of bots and humans in transactional activities on networks.
Ryan supports the utility of bots in networks, stating they act on behalf of humans to add value and reduce friction.

Avalanche: Innovating App Chains for High Performance and Customization

EffortCapital provides an update on the Avalanche blockchain, detailing technological advancements that enhance transaction processing speeds and the potential for launching application-specific chains with high transaction throughput. He also mentions forthcoming developments that could simplify the creation of subnets on Avalanche, highlighting the platform’s promising capabilities for developers.
Dan mentions that Avalanche aims to be a hub where developers can create customized, high-throughput chains. He refers to them as app chains, optimized for specific use cases, inspired by the Cosmos SDK, which is known for flexibility and ease of use.
Dan discusses Avalanche as a strong competitor in the appchain market, especially with their HyperSDK that allows for high customization in building blockchain VMs tailored to specific needs.
Dan notes the advances in Avalanche’s transaction processing capabilities, aiming for 100K transactions per second with their new system, which could challenge existing models by decentralizing the approach to chain operations.
EffortCapital agrees that Avalanche has all the necessary components, including interoperability, performance, and a versatile EVM, making it a formidable ecosystem for developers.
Dan highlights Avalanche’s potential in performance optimization, particularly through their Firewood database system and the Snowman consensus mechanism, which supports a scalable network of validators.
EffortCapital highlights Avalanche’s full-stack capabilities and the ease of deploying subnets, suggesting that Avalanche is undervalued in the crypto community despite its technical advancements.
Boccaccio contrasts Avalanche’s potential with other chains, noting that while Monad has strong business development, Avalanche has struggled to maintain a compelling narrative, particularly in leveraging real-world assets.
EffortCapital expresses optimism about Avalanche’s future, pointing out that the platform’s comprehensive tech stack should attract serious developers, which could shift attention and capital toward Avalanche.

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Show Information

Medium: YouTube (Video)

Show: 0xResearch

Show Title: Runes: BRC-20s Replacement or Just More Hype?

Show Date: April 25, 2024