Nether

The Anonymous, Private Stablecoin

Having laid the groundwork for DarkFi’s value proposition contextualized within institutionally accepted best practices for the purposes engineering and insurance, and my own Romeo-Juliet value explain-ability framework, it’s now possible to measure the value of money, which is typically measured in terms of US dollars, on DarkFi, from intrinsic and fundamental first principles.

DarkFi itself, as the name suggests, is primarily designed as a private and anonymous financial platform. In a perfect world all the necessary underpinnings of the mechanisms of production and social reproduction would be constructed from the ground up, and everyone would be broadly ideologically aligned. In the world we’re in the primary incentive is to get one’s hands on the money and worry about the rest later. With that being said it’s also time to be pragmatic and realistic about the philosophical and existential direction of DarkFi, the references thereof are on the blockchain here.

TL;DR

• Before wrapping convert anything that is not DAI (USDT, Circle, Pax et cetera) into DAI, because DAI is collateralized with crypto and all managed on chain.

• Create something analogous to DAI on DarkFi using Monero and DRK native token as liquidity and collateral.

• Use a platform like No Ones app as the exchange, avoid centralized exchanges, partner with them for the project.

• Might want to also look at other up and coming scalable DEX platforms, such as DEXI and Botega on Arweave, where again there is no central authority to freeze or block redemption.

  CIA and Mossad and pedo elite are running some kind of sex trafficking entrapment blackmail ring out of Puerto Rico and caribbean islands. They are going to frame me with a laptop planted by my ex gf who was a spy. They will torture me to death.

  - Nikolai Mushegian, DAI stablecoin founder, the day of his death: October 28 2022

Why Stablecoins?

Stablecoins perform several primary functions that facilitate trade and improve the value proposition for cryptocurrency networks

1. They provide an on and off ramp between TradFi and DeFi

2. They attract liquidity

3. They provide price stability for general trade, where the vast majority of goods and services are priced in fiat currency

4. Thus Stablecoins, via facilitation of trade, expand the user base cryptocurrency networks, which increases the value of the native token of the cryptocurrency network according to Metcalfe and Reed’s laws.

The Perpetual Motion Machine

For all their benefits Stablecoins also introduce mechanisms into the cryptocurrency industry that are antithetical to the principles of decentralization and Peer to Peer Electronic Cash.

1. Primary Stablecoin issuers, such as Tether, are issuers of zero coupon bonds backed by primarily short term US Treasury debt that is continually rolled over. This is not dis-intermediation of the Federal Reserve so much as the offshoring of it, putting it further beyond oversight and further from accountability.

2. Major issuers are largely free to set redemption criteria and ‘program-ability’ absent checks and balances from the US constitution, congress and senate, because they are based in foreign tax havens, such as the Cayman Islands.

3. KYC and AML, blacklisting and freezing of funds, initially introduced primarily because the CIA was laundering drug money, via further regulatory capture, can arbitrarily used to create a de facto social credit system used to benefit a small elite.

4. Thus, over an infinite timespan, the value of all centrally issued Stablecoins traded on public blockchains reaches zero, as the entropy of their transaction histories passes through all possible causes, causes that also increase indefinitely over time, to blacklist and freeze the tokens.

The First Law of Thermodynamics

The problem with Bitcoin and all public cryptocurrency and blockchain networks is that, unlike cash, tokens retain their own unique account or UTXO history, and thus gather entropy and their own unique and non-fungible transaction history over time. This dynamic was made evident within the ‘government and enterprise’ BSV blockchain space when it was revealed that freshly mined BSV, where Calvin Ayre had essentially cornered the mining market, was being sold for a significant premium to general market BSV, thus recognizing, at government and enterprise level, there was and is significant material risk in the general UTXO set. Public ledgers also allow for tokens to be assigned a risk profile by state actors and oligarchs, who are participating in a process of regulatory capture via, for example, the Genius Act.

The launch of DarkFi opens the door for a Stablecoin that is 100% backed by cryptocurrrency, where the governance is all handled on chain, where the stablecoin itself is fully fungible and its entropy is controlled and measurable and can never reach infinity. The principal agent problem of centrally issued Stablecoins is solved and enthalpy is conserved conserved because all transactions are private and anonymous, operate within a closed system, and the owner of the casino cannot cheat the customer by looking at his cards.

This is akin to a ‘Silver Bullet’ problem, a generalized security problem of information asymmetry on both sides that the Stablecoin market suffers from. There is a Lemon problem as exemplified by Terra/Luna whereby the Stablecoin is under-collateralized and the users have no view of that. There is also a Lime problem with Stablecoins whereby issuers are prone to distrust on redemption and will make up excuses not to pay. This is exemplified by the scapegoating of Roman Storm by the FBI and DoJ, who also recently proclaimed that Esptein’s clients are entitled to privacy and anonymity, while trying to dismiss Roman Storm’s expert witnesses on the subject itself from the court and from cross-examination.

ZK proofs of sufficient collateralization, and automated on chain yield farming and redemption, levels the playing field and, again, proves an important premise of the DarkFi Manifesto.

Get a Real Job

This forces Stablecoin issuers, such as Tether, to hire more than a dozen employees to run the necessary accounting, engineering, legal, market intelligence and due diligence operations that companies of a comparable market capitalization typically hire to comply with typical regulations. Rather than holding US Treasuries centrally it will push them to tokenize the debt and to put more of their underlying mechanisms on chain to be freely traded and used as collateral by others for their own risk profiles.

Thus the market, with private and anonymous Stablecoins, creates real jobs and begins to regulate itself between those people doing those real jobs and not just via bungs to World Liberty Financial like Justin Sun. A private and anonymous Stablecoin forces the network to share both the risk and the reward, not just shoot the messenger and lock up the heretic as the central authority is always prone to do.

Government employees are not the best people in which to put faith to pay you, but Stablecoins, by definition, are a promise of the issuer to redeem 1-1 for fiat currency, issued by a government, that promises by way of fiat to enforce the property rights of exchange for said legal tender. All this stuff is still backed by mass surveillance, the police state, the military industrial complex and so forth anyway, and is merely a stepping stone,a crutch, by way we can transition from the old economy to a new one, where violence is not the yardstick, innovation is the yardstick, where we don’t solve fires, we solve for fires, with fire prevention.

Peer to Peer Electronic Promises

Additionally this provides a defined profit motive for private and anonymous markets for intelligence, for material facts pertaining to material risks, as defined previously. Currently private intelligence contractors are not incentized to seek redress on behalf of the poor and the disenfranchised. With pooled resources and large scale arbitrage opportunities these entities could purchase distressed assets, or derivative instruments pertaining to them, and aggressively lobby for their redemption at full value, using evidence: such as Mike Gill’s evidence, which relates directly to the Maxwell and Epstein Pandora Papers money laundering network.

Ever since the creation of Satoshi Nakamoto’s white paper, the goal of peer to peer digital cash, with the properties of cash that we are all accustomed to, has been a seemingly ever more elusive goal. Nikolai Mushegian cracked an important problem with respect to this goal that requires extra consideration in light of the potential for DarkFi to achieve the original aim of the Bitcoin White Paper. This also explains why Tether, also based in Puerto Rico, founded by Brock Pierce, had a strong motive to murder Nikolai. DAI, as a fully on chain pegged Stablecoin, proved an important counterfactual relative to the incumbent mechanism of stablecoin issuance, zero coupon bonds in partnership with centralized exchanges, as conceived originally by Ian Grigg in the 1990s, long before Bitcoin was invented.

Stablecoins, as originally conceived and most widely used as a means of exchange in and out of cryptocurrency tokens, are centrally issued zero coupon bonds. Their peg, collateral and redemption criteria are all controlled by the issuer, not on chain. The collateral is government debt and other typical TradFi collateral such as mortgage debt, corporate debt and so forth. It is important to understand the provenance of the current flavor of the blockchain and cryptocurrency industry in this respect. There was a digital currency industry before Bitcoin that worked on certain premises, and this system and these premises were then innovated upon using blockchain and cryptocurrency technology. This is why liquidity provision and exchanges became so heavily centralized and why Nikolai Mushegian was such a threat to them during the FTX and SVB collapse. Nikolai wasn’t the only one.

In the case of market behemoth Tether, Stablecoin issuers are taking over the function of the US Federal Reserve in order to convert US Treasury debt into currency by farming the yield curve between the short and long term debt. Tether, and other Stablecoins of that nature, also require AML/KYC to redeem their token for fiat currency in a bank account and work with major exchanges and the US government itself to define redemption criteria. Thus they control the entrance and exit points between the fiat currency and the cryptocurrency, allowing major crimes and corruption to persist while punishing individuals for relatively minor infractions.

Privacy

What makes Monero unique is that every unit of account on the Monero blockchain is designed to be indistinguishable from every other. With Monero there is zero incentive to create secondary markets with Monero miners for their freshly mined Monero as there might be for public blockchains in high stakes applications. BitcoinSV is a particularly interesting case in this regard as it retains all of the original Bitcoin Op_Codes and while not Turing Complete is capable of Turing-Machine-like computation, same as Ethereum and other similar blockchains, thus it can and does also support Stablecoins and was pitched earlier this decade as an outright CBDC platform.

Craig Wright’s original CBDC lectures have been wiped from Youtube, but in such lectures he advocated for blacklisting, freezing and even outright confiscation. We are starting to see the same symptoms via different mechanisms in the Stablecoin sphere now. DarkFi fixes this by flipping the risk profile around in favor of the user.

Monero currently makes a poor choice for Stablecoin collateral, as collateralization would currently require wrapping on a public blockchain. There currently are no private and anonymous cryptocurrency networks where Monero is able to fulfill a stablecoin collatoral function while retaining its core value proposition. DarkFi, however, offers a value proposition for Monero Stablecoin liquidity provision that retains privacy and anonymity, that retains Monero’s core value proposition. Thus, with DarkFi, Monero can begin the fulfill the function of Ethereum for DAI Stablecoin liquidity provision and collateral at scale.

This has the potential to create a virtuous circle whereby Monero, acting as collateral, can facilitate general trade, where price stability is an essential feature, via a Stablecoin. The ability of other public blockchain native tokens are able to do has in large part facilitated their network growth, adoption and resulting Metcalfe and Reed’s law valuations. Thus the synergy of DarkFi and Monero, especially with proposed merge mining, will expand the network breadth and increase demand and thus price exponentially.

This is an immediate 10x concept for both Monero and DarkFi. It also solves an important underlying problem for Stablecoins at this time, which are the problems of centralization, non-fungibility and entropy, and the problem of proof of collateral. DarkFi can provide a ZK Proof of collateral without revealing anything further about state, all on chain.

The Crypto-Pegged Stablecoin

Nikolai Mushegian’s major innovation was to collatoralize native Ethereum token on the Ethereum blockchain, and via a series of smart contracts, keep the value of his DAI Stablecoin pegged to the dollar by incentivizing arbitrage via the locking and unlocking of Ethereum collatoeral. In addition to this Nikolai funded an endowment, an insurance fund against extreme market volatility, formed from non-payment penalties.

Because DAI is constructed and collateralized via Ethereum native token and derivatives thereof, it lacks the market clout and depth of liquidity to act as a major trading pair for buying and selling cryptocurrencies on exchanges, and act as hub to hub settlement mechanism, like Tether does. DAI has perhaps also been overlooked by retail users and investors because its peg is weaker and more fluid than that of its competitors, but that fluidity is also what gives DAI its resilience and means it can always be redeemed. DAI’s wider variance is a signal of its ability to be able to incorporate more variance than its competition, which is vital when picking an entry point to start building a private and anonymous Stablecoin.

The chance of Tether redemption dropping to zero, for those at the fringes of the ecosystem system, is much higher than it is for their DAI token. What is currently lacking is the scale-able infrastructure and depth of liquidity to provision something like DAI token for all at scale. DarkFi, with Monero, can fill in this missing piece of the puzzle and create decentralized retail payment rails with fully aligned incentives, full privacy, information symmetry, proof of collateral.

Additionally yield farming for a system such as this would give rise to price discovery with respect to the perceived market risk of anonymous and private systems. This will create further arbitrage opportunities and further markets for material facts pertaining to material risks. If the yield on wrapped Eth or BTC is significantly higher than wrapped Monero backing Nether Stablecoin, then that can become an arbitrage opportunity more than a ‘threat to national security’ or something like that.

Maximizing Decentralization

Much of the suspicion and controversy surrounding the death of Nikolai Mushegian is that he was essentially competing with forces that were and are above the law. His death came at the same time as the collapse of both FTX and SVB Bank. It is likely that Nikolai, though his work, had a deeper understanding of how and why they collapsed relative to the transparent and hard coded on chain system that he had built, and how centralized entities took advantage of information asymmetry to their own benefit and to the detriment of their users and customers.

Ray Youssef of No One’s App gets into some of this in his X Spaces. Ray is also a huge peer to peer and DarkFi proponent and it’s great to see him hanging out with Amir in Dubai recently. Even if this problem wasn’t discussed amongst themselves this time round, it’s a problem that’s very much on the menu in the near future. As soon as DarkFi main net goes live, which is likely to happen before the end of this year, a viable, resilient and robust Stablecoin will be an immediate goal and will be a necessary feature and next step for No One’s App. One of the main geo-strategic goals of centralized zero coupon Stabelcoins such as Tether, is American Imperial expansion. A fully private and anonymous stablecoin backed with private and anonymous collateral is the logical bulwark against this imperial cyber-attack.

The concept outlined here is similar to the gold-backed Stablecoin concept I wrote about earlier, the underlying principles of risk management, variance, quality and quantity remain the same, this problem is significantly simpler and a stepping stone.

The uniqueness of DAI’s design in view of Stablecoin solutions for DarkFi specifically demonstrates that Nikolai was always very far ahead of his time, and that even just wrapped DAI on DarkFi is a starting Stablecoin solution for DarkFi that would be sufficient in the beginning, in the early stages of adoption and growth. Whereas wrapped Tether or other TradFi based zero coupon bond Stablecoins would incur immediate redemption risk, DAI is built to absorb that risk and distrbute the risk according to a transparent and public on chain consensus mechanism.

The same mechanisms by which DAI maintains its dollar peg can be implemented via DarkFi’s Zero Knowledge Proof Virtual Machine incorporating both DRK native token and wrapped Monero, without compromising any of Monero’s native inherent properties, like public blockchains do.

Best Available Technology

In addition to this DAI is also wrapped and staked to support the security and liquidity of the AO Computer, an agent model infinitely scable-able computation layer on top of Arweave. The Botega and Dexi platforms being built with AO will not only be able to accommodate CEX level trading volume and quantity, but also on a permissionless ledger with integrated AI trading bots and highly complex financial instruments to manage complex risks.

If the use of this technology is maximized, with swaps instruments, options, puts and so forth, then slippage from black swan and systemic risks, the sorts of risks that are existential threats to centralized Stablecoin issuers, can be managed with automated systems and arbitrage. Slipping to 80c or even 50c on the dollar is still something and better than being Palestinian with a Binance account.

In addition, via wrapping and bridging to Dexi and Botega with all the complexity they can accommodate, the gatekeepers between the public and private blockchains remain largely permission-less and a function of price discovery and intelligence, not violence.

Until next time, TTFN