  Exploring the transformation of value in the digital age By Michael J. Casey, Chief Content Officer July 16, 2021 If you were forwarded this newsletter and would like to receive it, sign up here.
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A quick programming note…
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A Postmortem for OpenBazaar  Illustration: Rachel Sun/CoinDesk Earlier this week I wrote a long-overdue postmortem on OpenBazaar, the cryptocurrency-powered e-commerce marketplace that folded in January. What follows is a eulogy of sorts.
Skeptics might wonder why I suggested, in my interview with OpenBazaar co-founder Brian Hoffman, that someone might want to dust off the open-source code and have another go at building a peer-to-peer version of eBay. Or at least, why would anyone other than a criminal want to build a marketplace where anyone can take part and no product or service can be banned?
I’ll give two examples that illustrate the need for such a service. Those who scoff at the first may be convinced by the second, and vice versa.
In March, Dr. Seuss Enterprises, the organization that owns the rights to the late Theodor Geisel’s works, announced it would cease publishing six of his 60 books because they contained illustrations depicting racial stereotypes. To be clear: This was absolutely the organization’s prerogative, and the claims in some corners that a beloved children’s author had been “canceled” were overblown.
Far more concerning was the decision by eBay to stop used-book sellers from listing the half-dozen books in question on its platform.
Because these discontinued books, published from the 1930s to the 1970s, were now collector’s items, they were more likely to end up sitting in Mylar bags or behind museum glass than corrupting impressionable minds. eBay nevertheless decided that protecting its brand from any association with offensive drawings was a higher priority than letting a few small-business owners make a buck or two during the coronavirus-induced recession.
Again: eBay’s house, eBay’s rules. I am not a lawyer, but to the best of my understanding, the First Amendment to the U.S. Constitution doesn’t guarantee vendors the right to use an internet platform, however dominant it may be in its market. (As of May 2020, eBay ranked third in U.S. e-commerce sales, behind Amazon and Walmart, with a 4.5% market share.)
Yet, had OpenBazaar still been around then, the booksellers might have had another way to monetize the musty old volumes collecting dust on their shelves at a time when the coronavirus pandemic was likely discouraging garage sales.
No one would have been hurt.
Sexless in Texas
Perhaps you think eBay took the high road by refusing to facilitate resales of out-of-print books that reflect the prejudices of their day, and that there’s no good reason to help anyone circumvent such enlightened corporate censorship.
If so, consider another, older example.
In 2016, when Sen. Ted Cruz was vying for the Republican presidential nomination, the Texas Republican was mocked for having once defended a Texas law that criminalized the sale of, er, marital aids.
Nine years earlier, as the state’s solicitor general, Cruz had responded to a lawsuit challenging the law’s constitutionality by arguing, among other things, that “there is no substantive-due-process right to stimulate one’s genitals for non-medical purposes unrelated to procreation or outside of an interpersonal relationship.” Unconvinced by his brief, an appeals court struck down the law in 2008 (the year Satoshi Nakamoto published the Bitcoin white paper).
But what if the ban, which most readers would probably consider archaic and intrusive, had stood?
Neither bricks-and-mortar nor online retailers would have been able to sell these products to Texans without risk of prosecution. Yet, OpenBazaar would have given randy residents of the Lone Star State another way to obtain their sex toys. Granted, this would have fallen under the "illicit uses" category.
But, again, no one would have been hurt.
The P2P frontier
Both of these examples may be outliers, but they speak to a broader principle.
In the old world of physical stores and face-to-face business dealings, trade is almost always censorship-resistant by default. You hand banknotes to the baker or the butcher or the barber, she gives you a brioche or a brisket or a buzzcut. No third party gets to second-guess or overrule your choices. As commerce moves online, more and more transactions are funneled through ever-more-powerful intermediaries.
“Electronic P2P markets at scale are still unexplored lands,” said Tim Pastoor, an independent researcher on peer-to-peer identity and reputation systems. “Sure, people have been transacting P2P since the dawn of time, but digitally and at scale is another one of those magical nuts that hasn't fully been cracked yet.”
Pastoor sees a practical economic benefit to cracking that nut.
“It would be cheaper for both buyer and seller if the middleman is eliminated from the process,” he said. “Think eBay, Amazon or even Netflix or Spotify, or ordering a pizza from your local shop, but without the centralized infrastructure between the buyer and seller, that always comes with some sort of fee for the upkeep of the infra[structure] and for the business building and maintaining it to operate.”
Costs aside, the Dr. Seuss example shows the veto power of intermediaries becomes a problem when they block innocuous transactions. Those incredulous that I question eBay’s offensive-materials policy should consider how they would react if the company’s executives instead enforced Ted Cruz’s views on morality.
–Marc Hochstein
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Off the Charts DeFi Grows, So Does Front-Running  Shuai Hao/Dune Analytics/Flashbots Miner/Maximal Extractable Value (MEV) has been a hot topic in the Ethereum community over the past few months due to the increasingly disruptive strategies Ethereum miners are using to capture it. According to data from Dune Analytics and Flashbots, a cumulative $765 million dollars in additional miner revenue has been generated from different MEV tactics since January 1, 2020.
Ethereum miners extract MEV by ordering transactions within blocks. The ability to order transactions enables miners to front-run trades on decentralized exchanges (DEXs), take advantage of price arbitrage across DEXs and liquidate positions at the most optimal times on decentralized lending apps. Bots are commonly programmed to identify these profit opportunities within the decentralized finance (DeFi) ecosystem of Ethereum and exploit them by paying off miners to manipulate transaction order.
As seen in the chart, MEV tends to follow trade volume on decentralized exchanges. This is because growing liquidity and trade sizes on DEXs lead to more profitable arbitrage and front running opportunities.
Critics of MEV tactics believe the process of extracting additional value through transaction ordering threatens the integrity of the Ethereum network. While price arbitrage and liquidation are beneficial for the usability of DeFi, MEV is controversial because of the negative effects it simultaneously has on the Ethereum ecosystem. Front-running consists of stealing basis points from other transactions, by buying before the pending transaction and then selling the asset for a profit after the other transaction confirms. Furthermore, front-running bots are associated with creating a slower and more costly Ethereum network. MEV can also cause transactions to fail for gas fee and slippage errors.
While daily MEV revenue has cooled considerably from its peak of $5 million reached in May during the height of the crypto bull market, MEV remains a source of contention and debate on Ethereum that is only expected to become more heated as the DeFi ecosystem continues to mature.
–Teddy Oosterbaan
The Conversation Is Bitcoin Right Wing?  Illustration: Rachel Sun/CoinDesk For a co-founder of one of the most popular cryptocurrencies, Jackson Palmer doesn’t like crypto much. This week, Palmer – who invented the parody Dogecoin before disowning it – launch a scathing attack on the industry:  He went on to say that crypto's supporting ecosystem (including its media) is perpetuating “a cult-like ‘get rich quick’ funnel.” (I hope he didn’t mean CoinDesk.) Then Palmer said that “good-faith debate is near impossible” about crypto because its proponents don’t want to discuss downsides. Given the seriousness of Palmer’s remarks, his status and that he speaks in public only rarely, his diatribe elicited many responses. Nic Carter said Palmer would have been happier if he had done well with more Dogecoin:  Ryan Selkis questioned Palmer’s place to criticize:  But some came to Palmer’s defense. The programmer Stephen Diehl said he was brave:  And Willamette University’s Rohan Grey took on the idea that Bitcoin can be neutral technology:  Of course, there was no winning this debate. But Palmer certainly touched a nerve.
–Ben Schiller
A message from Coindesk  The CoinDesk Quarterly Review 2021 Q2 After two consecutive quarters of strong price gains for most of the top crypto assets, Q2 2021 finally brought an end to market euphoria with a resounding crash.
Most CoinDesk 20 assets, which constitute 99% of the crypto market by verifiable volume, ended the quarter with negative returns. Meanwhile, protocol development for the world's largest cryptocurrencies by market capitalization, Bitcoin and Ethereum, reached new milestones.
CoinDesk Research's latest Quarterly Review dives into the trends, developments and technological progress that shaped the crypto markets from April to June 2021.
The full report is now available from the CoinDesk Research Hub.
Relevant Reads The DAO of ShapeShift  One of the biggest stories this week concerned ShapeShift, a crypto exchange founded in 2014. Founder Erik Voorhees announced he was closing the company down (partly for regulatory reasons) and forming a decentralized autonomous organization (DAO) for what remains. “Currently employing 65 people, ShapeShift will have no employees, no bank accounts and no CEO in somewhere between four and 12 months’ time,” wrote Brady Dale, explaining the switch.
Voorhees, who has long-time cred in the crypto space, cast the move as aligning with crypto’s decentralization ethos and a point of differentiation to competitors that are centralized. It could also reduce the stress that comes with being regulated as a conventional corporate entity. “As the founder of his company, Voorhees was not especially wistful about the end of this era. He said he looked forward to getting rid of all the bureaucracy he’s been burdened with,” Dale said.
A message from CoinDesk  The Investor’s Perspective on the Bitcoin Taproot Upgrade Taproot is a bundle of three upgrades to Bitcoin aimed at improving network security, privacy and scalability. At the same time, it poses some potential drawbacks to Bitcoin including risks of low adoption, unintended privacy shortcomings and Bitcoin community disappointment and fracturing. CoinDesk Research's newest report dives into the economic impact and investment implications of the Taproot upgrade.
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