Crypto is full of new ideas. This is one of its major selling points. Crypto tends to attract heterodox or revolutionaries for one reason or another. It’s similar to how a loose community grew around the internet during the 1990s. This is partly due to the technology itself, as it offers new ways of building code-based systems. Web3 is also known for its high barrier to entry. This means that people who end up in this industry are usually committed and smart enough to not get blown away while they self-custodian valuable assets.

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After covering the industry in the past four years, it often feels like I hear the same ideas. The crypto markets are largely based on what is called “narratives” by insiders. These are stories that people tell about blockchain technology and what it can do.

Even so, every now and then, someone or a new theory will come along that can really shake things up. (Or at least, are entertaining to watch). Here are some of the most outrageous ideas I encountered while wandering around Consensus.

The future of banking has passed

Ethan Buchman is the founder of Informal Systems and he wants to start a revolution. The central banks have mismanaged the economies that they are supposed to support. The “petrodollar” has led to untold suffering, and there is corruption on every level of our monetary system. Blockchain is a solution, of course. Buchman wants to look at the past before he tells us how.

Imagine you are a Genoese Banker in the 16th Century, just after double entry bookkeeping was invented. Buchman stated that at the time the banking industry consisted of a handful of family-run institutions which sprouted in order to provide credit to a globalizing and modernizing economy (perhaps for first time ever). The banking industry was composed of a few family-run institutions that sprouted to supply credit (perhaps for the first time in history) to a modernizing and globalizing economy.

Bankers instead offered “trade credit,” which was entries in a ledger allowing someone in Antwerp transact with someone else in Medina. The banking families would sometimes meet to balance their books because of the high level of trust. They used an old term of art called the “payments graph” to do this.

There are ways to calculate the deficits that exist when Cosimo owes Catalina money, Catalina owes Albrecht, and Leonardo owes Cosimo. This can be done without adding extra liquidity to the system. The banks were able to eliminate their debts by finding “loops”, “cycles” of debt.

Buchman is reviving this idea in the modern era. The game requires communication and collaboration. It works because the debt can be “cleared”, (balanced) on paper, without having funds transferred. Informal Systems is a worker collective that builds smart contracts and algorithms based on Cosmos. This allows communities to perform this automatically and without permission.

He explained: “You go to a banking conference with your books showing debt and then you play with your friends, and voila! You wipe out your entire debt.” Modern banks do this almost daily using discount and clearing-house windows. “But why should the banks get all the fun?” he asked.

Informal’s “collaborative financing,” or CoFi, might not even work. The company hasn’t even released a complete white paper. In an age when my peers have student loans, and international trade imbalances are a reflection of the “structure and production of the economy”, after centuries of exploitation it might be worth considering an alternative.

You can find out more about this idea by clicking here. You can also read the original paper that Buchman was inspired by here.

Crypto and AI

I won’t go into the details of how ChatGPT sparked a wave in venture capital funding, Silicon Valley startup creation, and failed Web3 artificial intelligence experiments. Suffice it to say, many people are seriously considering AI. Some uses are simple, such as building chatbots that help people understand a jargon filled industry. Some of the uses seem cruel, such as replacing coders with code in order to run Web3 startups using a smaller team. There’s no better idea than to outsource smart contract auditing systems that are prone to “hallucination.”

Tarun Chitra is the founder of Gauntlet and widely recognized as one of the brightest minds in the crypto world. He believes that blockchains are useful for AI. It’s important to understand where data comes from as more and more information will be produced by machines.

Zero-knowledge-proofs is a research area in cryptography that was proposed in the 80s and has been accelerated by cryptocurrency funding. It allows you to verify if someone else’s claim is true, without them having to reveal all of their cards. The standard definition of a ZK proof is when a barfly proves they are over 21 without having to pull out their ID card, which also shows their address.

ZK proofs are a powerful tool that can help everyone verify whether a new piece of data was created by a person, a machine, or a machine who has access to a particular set of data (such as an AI programmed on the proprietary information found on Quora’s Q&A website). Chitra, speaking on stage at Consensus, said: “This is important because one particular output… will be the IP [intellectual properties] of the future.”

He said that ZK-based system do not require cryptography to function, but the blockchain still plays an important role in providing unalterable records of provenance. In an age of distrust, verifiability has become increasingly important.

Tech support

The Near Foundation finally announced on Wednesday a new project titled Horizons, which is basically a startup accelerator combined with Uber. CoinDesk’s writeup on the system is available here. It allows anyone with a business idea to crowdfund and get advice from experts.

Laura Cunningham, Horizon’s co-creator, told The Node that the system is based on a two-way marketplace, an idea taken from Uber. It allows startups to rate their advisors, and for advisers to evaluate the founding team. She called it a “reputation chart.”

Some business ideas will fail, and it is obvious that not all startups will succeed. Smart contracts can be used to bring a bit of transparency into the process, so that everyone can benefit. Crypto has shown that an idea is valuable even if not deployed.

James Rubin is the editor.