TCV August 2019 Issue

August 2019
Issue
Contents
The Crypto Vigilante Portfolio

Monthly Snapshot
2
Cryptocurrency Fundamental Metrics Charts

3
Evaluating Consensus Algorithms: Why Proof of Work is Better than Proof of Stake
Rafael LaVerde & Mr. X
5
AEON Outlook & Technical Analysis

Mr. X
19
www.cryptovigilante.io 1
Bitcoin (BTC) Number of Transactions on Blockchain Per Day - Historical Chart (Logarithmic)
ttps://bitinfocharts.com/comparison/bitcoin-transactions.html#log
Source: h
Monero (XMR) Number of Transactions on Blockchain Per Day - Historical Chart

(Logarithmic)
ttps://bitinfocharts.com/comparison/monero-transactions.html#log
Source: h
Bitcoin (BTC) Average Transaction Fee (USD) - Historical Chart (Logarithmic)
ttps://bitinfocharts.com/comparison/bitcoin-transactionfees.html#log
Source: h
Monero (XMR) Average Transaction Fee (USD) - Historical Chart (Logarithmic)
ttps://bitinfocharts.com/comparison/monero-transactionfees.html#log
Source: h
Bitcoin (BTC) Google Search Trends - Historical Chart (Logarithmic)
ttps://bitinfocharts.com/comparison/google_trends-btc.html#log
Source: h
Monero (XMR) Google Search Trends - Historical Chart (Logarithmic)
ttps://bitinfocharts.com/comparison/google_trends-xmr.html#log
Source: h
Evaluating Consensus Algorithms: Why
Proof of Work is Better than Proof of Stake
For the first time in history we can collectively assess the best means of spending energy towards what is most
beneficial for all. Crypto is profitable and valuable because networks of investors have decided to spend energy
and work in maintaining their preferred blockchain system. Every blockchain network strives not just to
remain alive, but also to thrive in the present and future global economic crypto market.
This premise is of utmost importance when taking into account the intrinsic value that comes forth from the
crypto consensus model of each given blockchain.
Not all blockchains are created equal. Blockchains are different in value because of their differences. The
differences range from the technology itself to the group of investors and businesses within a given
cryptocurrency’s ecosystem.
What distinguishes the value of a blockchain is found not just in its technology, but also in the effects that the
resulting game theory provides to investors. Every cryptocurrency’s unique game theory comes from the
structure of each cryptocurrency's unique technological and economic contingencies.
All of the contingent factors that make up the developmental history of a cryptocurrency directly affect a given
cryptocurrency's market value. Here we can look at a myriad of factors. We will focus on the cryptocurrency
investor’s incentive when driven by the market structure of a given cryptocurrency.
When we look at all of the contingencies of a cryptocurrency’s developmental history, we take into account all
factors, including the intricacies of its technology and its economic incentive framework. Some of these factors
can be evaluated from the time when the cryptocurrency was launched, and even beforehand in some cases -
such as whether or not it was launched with a public announcement ahead of time, premined, or launched as
an ICO or token. Above all, these factors comprise the quality of investor that a given cryptocurrency attracts,
preserves, and empowers.
It’s important to keep in mind that investors within a given cryptocurrency network not only include monetary
investors who purchase units of cryptocurrency, but also developers and volunteers who invest in the network
itself by performing the work of developing the protocol and ecosystem.
The quality of a cryptocurrency is directly proportional to the quality of investors who represent it. The goal
here is not necessarily to analyze the personal profile of these investors, but rather to focus on the ways by
which the most intelligent of investors are attracted to one another within cryptocurrencies.
All of the foundational factors that make up a cryptocurrency attract and reward the investors of a given
cryptocurrency. Thus we can conclude that the value of a cryptocurrency is proportional to the quality of its
investors.
As we analyze the future of cryptocurrencies, it is important to analyze how the contingent factors of each
cryptocurrency affect the associations and incentives that their investors have with one another.
These blockchain networks are not just environments for communication by means of exchanging units
amongst peers. First and foremost, blockchains are environments where investors aim to better the investment
of their peers.
All blockchains essentially compete to be the best environment in which investors can increase
the value of one anothers’ investment. Some would argue that the best cryptocurrency is
essentially the one where all of the given cryptocurrency’s investors’ interests are best aligned.
Others would argue that the best cryptocurrency network is the one that is most secure to
withstand any attack. That is, the best cryptocurrency is one where all actors within the
network - even malicious ones that seek to attack one another - can do so, but without causing
harm to the network’s trustworthiness, functionality, and accuracy of data.
Cryptocurrency networks must be naturally resilient to malicious actors, no matter who they may be - miners,
hackers, thieves, and governments who may wear any of these actors’ hats. This is why there are appropriate
checks and balances on each actor within the decentralized network - to ensure that any single entity does not
have too much power to maliciously steal funds or damage the trustworthiness of the network’s data.
By virtue of correspondence, the incentive structure of each cryptocurrency infrastructure corresponds directly
to how the investors within a given blockchain network associate with one another. Therefore, we can analyze
the game theory that results from the development of a given cryptocurrency’s technology.
This game theory that comes forth from a cryptocurrency’s contingent factors is what creates the dynamic of
investor association within every single cryptocurrency. Investor association is the term we will use to signify
the investment that investors of a cryptocurrency have in one another.
The type and quality of investor association varies from cryptocurrency to cryptocurrency.
Each cryptocurrency and its underlying network offers unique properties and features. Investors choose the
cryptocurrency network that best fits their idea of what will eventually be the most secure, profitable, and
productive.
Here at TCV we take into account the holistic makeup of all cryptocurrencies. We take into account intrinsic
factors pertinent to the intricacies of the coin itself, as well as the external contingencies that all coins have in
regards to the overall global economy.
The investment rationale that leads an investor to become part of a given cryptocurrency network of investors
is important to understand. The actions of a given cryptocurrency’s network of investors serve as a synthesis of
all of the factors that constitute a given cryptocurrency’s unique market offerings, and this provides us with
valuable insights.
As an investor, you should strive to join the most intelligent blockchain network. You do not want to be part of
a network of cryptocurrency investors that is ambivalent, careless, reckless, or even “passive.”
It is our goal at TCV to constantly move closer to the center of the most intelligent
cryptocurrency investor networks.
Remember that blockchains are byzantine fault tolerant systems that connect the incentives of everyone,
including rivals to one another.
This is the nature of the blockchain’s system of coopetition; this is the beautiful blockchain phenomena where
cooperation and competition work hand-in-hand. The better structured a blockchain is, the better its solution
will be in solving the byzantine generals problem, which elevates the quality of coopetition.
Cooperative competition is what fortifies the investment of blockchain investors within a given cryptocurrency.
Intelligent investors flock together. You need to figure out to the best of your ability which
network of blockchain investors is the most intelligent, while also factoring in the security of
the network, as well as its economic and monetary soundness. You will then want to consider
how you can contribute your skills and/or capital to that cryptocurrency ecosystem for the
maximum economic benefit where all parties will profit from each one’s voluntary actions.
Once you are an investor in a cryptocurrency network, you will not want to be just a passive speculator.
Although it may be tempting to hedge your bets, you will soon realize that the quality of your investment will
depend deeply on your involvement in making that cryptocurrency better.
What is best for you as a blockchain investor is to increase the profitability and value of your
favorite cryptocurrency network(s).
As stated earlier, not all blockchains are created equal. The means by which you associate with your fellow
investors changes drastically from cryptocurrency to cryptocurrency. That is, the inner intricacies by which a
network achieves consensus i s different amongst all cryptocurrencies. In other words, there are different
rulesets by which peers organize with one another. These rulesets are known as crypto consensus models.
In order to understand and break this down effectively, we will examine the top two crypto consensus models:
Proof of Work (PoW) and Proof of Stake (PoS).
Degrees of Miner Autonomy in PoW
PoW varies from within a spectrum of being a pure market driven meritocracy, to meritocracies that are
confined to voluntary rulesets.
A pure market driven meritocracy is what we refer to as pure PoW. Various cryptocurrencies claim this status
based on various arguments. Pure PoW is where the market of investors are given free reign to develop and
safeguard the network in accordance to their personal compass of profit seeking.
There are various arguments as to what class of investors is the most important determinant class of investor.
Objectively, we can acknowledge that the least liquid investment class within a PoW system is that of mining
equipment, making miners the class of investors with most to lose. Given a market crash a HODLer of the coin
could sell their coin, a business could pivot to another aspect of FinTech, but a miner who mines on
cryptocurrency networks that are ASIC-friendly invests in specialized ASIC equipment used for the sole
purpose of mining.
Another argument is that proof of literal work (cryptocurrency research & development) is also an important
factor, since the researchers & developers invest something what they cannot get back (their expertise and hard
work over the course of time). This is especially important when the cryptocurrency’s researchers & developers
(in some cases who are unpaid) make a costly signal to the market by investing their time and energy to
develop and build a cryptocurrency that seeks to manifest the qualities of sound money (the implied example in
this paragraph is referring to Monero).
Some would argue that the Bitcoin sibling chains are the PoW chains that best represent this class of investor,
for the miners of the Bitcoin protocol have utilized SHA256 ASICs created for the sole purpose of mining the
Bitcoin protocol - and nothing else.
Some would argue that there are PoW cryptocurrencies where miners are not allowed to implement the mining
computers they would find most profitable. These are PoW cryptocurrencies that some would not call pure
PoW. These are PoW cryptocurrencies where there are strong community arguments for not allowing miners
to have complete autonomy over their work; hence, not pure proof of “work. ”
Some would argue that pure PoW cryptocurrencies are allowed to run an incentive structure where the
meritocracy is completely open to market competition. The incentive structure set up by Satoshi Nakamoto
revolves around the most determinant players amongst all investors - the miners; those whose incentive is
supposed to be to protect the network.
In cryptocurrencies where the PoW is guided away from the complete autonomy of the miners, we find a
meritocracy that can only evolve in accordance to the confines by which miners are limited. If this is done
against the wishes of the majority of network participants and miners, then it could be argued that this is
controlled PoW. The more that the development and the security is taken away from the hand of the free
market, the greater the degree of controlled PoW.
If there is control over the kind of work performed by miners, then miners would find
themselves in the position of having limited autonomy to choose what they deem to be best for
themselves and the network.
Some would argue that any control imposed on the miners ought to be analyzed and scrutinized as much as
possible. For example, prominent influencers in the Monero community have argued that the very niche
market and specialization of mining with ASICs could lead to ASICs miners becoming a centralized monopoly
or cartel, which would introduce the risk of centralization - a serious risk for any cryptocurrency, especially one
which seeks to be disruptive to TPTSB. The argument follows that ASICs ought to be curved by the community
until the time that there is a low probability of any type of ASIC mining centralization.
Furthermore, the ethos of Monero is completely cypherpunk; its ideology champions free and open-source
software (FOSS). It is everyone’s desire within the Monero community that development continues with the
FOSS ethos. Hence, the avoidance of any possible mining centralization is so important. A secretly developed
ASIC by malicious miners could become the weapon used by TPTSB to attack Monero.
We will again ask the key Libertarian rhetorical question in regards to crypto-governance:
What is more libertarian? To have a cryptocurrency that invites the whole world to compete in a radical free
market, or a cryptocurrency that is designed as a Libertarian project guided by Libertarians? Some would
argue that the Libertarians “guiding” the Libertarian oriented project are a centralized entity of sorts.
It is for this reason that we must always be vigilant of all projects - even Libertarian/cypherpunk guided ones.
We need to make sure we do not fall for a new type of “central planning.” On the other hand, we must also
remain vigilant to protect our network from attacks, and sometimes this requires allowing researchers &
developers to do their job to protect the network from any security bugs which could be exploited by malicious
attackers. Furthermore, if you were to choose to invest in a cryptocurrency that invites all in the world to
compete, you must also be vigilant to ensure that it truly remains a competitive free market.
The Cypherpunk/Anarchist Argument for Why Monero is Pure PoW
The Monero community cares not for the choice of statists outside its cypherpunk market drivers. From this
cypherpunk perspective, there is no benefit in caring for what the statists in the traditional financial system,
and TPTSB, care about.
For Monero, what the market desires i s best understood as what is best for the security and robust
functionality of the Monero network. The Monero community sees itself as the Monero market of community
participants, and as such, it desires to protect and optimize itself at all costs.. There are many in the Monero
community who deal with the traditional financial world because they have to - not necessarily because they
want to do so. The cypherpunk/anarchist ideals within the Monero network are held at the highest esteem
above all else.
There are however plenty of exceptions, such as Globee.com which functions as a crypto payment service
provider and acts as a bridge between fiat and Monero, whilst encouraging businesses around the world to
accept Monero as payment and encourage Monero’s adoption.
Many in the Monero community see it as the most pure PoW network because it strives to keep its PoW mining
egalitarian in order to prevent ASIC mining centralization, which they consider to be dangerous to the security
of the network. The egalitarian nature of this endeavor revolves around staying true to Satoshi’s vision of
1-CPU, 1-Vote.
Monero has achieved this amidst some contention, even from formerly within its own base of support. Some
would criticize these egalitarian motivations for appearing socialist. They would argue that “nobody is equal,
and only competition matters” as the contentious counter argument. This resulted in hard forks that have
occurred, where Chinese ASICs farms tried to pump the price of dying forks running old versions of Monero’s
CryptoNight PoW algorithm.
Even in the face of this adversity, Monero - with its cypherpunk/Anarchist mission - has not only survived, but
even flourished. Monero’s cypherpunk ethos is the market driver that decides the future of Monero, while
championing privacy, fungibility, and sound money, with more and more former Bitcoiners joining the fold.
Monero was created to be ASIC resistant, and the Monero market has decided for Monero to remain ASIC
resistant, showing that the market remains committed to its original values. Over the course of several tweaks
to the PoW algorithms implemented during the regularly scheduled network upgrades/hard forks, ASICs have
been competed out of the Monero market by miners who are agile in updating their GPU and CPU mining
equipment. As discussed in previous reports, the latest iteration in this cycle is the new RandomX PoW
algorithm which is planned for this fall’s network upgrade.
Some of the most well-known examples of the Monero market choosing to remain ASIC resistant are the hard
forks that created the MoneroClassic and MoneroOriginal chains. This was a significant event in Monero’s
history where the market gave a resounding “NO!” to the Chinese ASIC miners.
The Monero community - the Monero market - will decide if/when ASIC resistance changes. At this moment
Monero is going to be adopting RandomX in October, as one of the last stages of ASIC resistance before the
Monero market considers embracing ASICs.
Arguably, the vast majority of the Monero market (which includes miners) agreed to remain true to Monero’s
values and update the PoW algorithm to stay ASIC resistant - but the Chinese ASIC miners disagreed, so they
split off and continued using the old code which lacked numerous additional bug fixes, improvements, and
security features. However, they failed to have the expertise or community support to update the code with
innovative security features or gain any traction, and their coin essentially died.
The Monero community expects for RandomX to more than likely become obsolete in the future due to the
competitive nature of mining. If/when that happens, the Monero community tentatively plans to embrace
ASICs via the SHA3 algorithm.
The evolution of Monero PoW is stated to be pure PoW because it is pure competition happening within the
Monero community itself. That is, just because Monero wants to uphold decentralization and keep their
network secure and not appease the ASIC miner special interests, it does not make its market competition for
securing the network less open to market forces. Anyone is free to compete and mine within the rules of the
Monero network with the understanding that the network seeks to be ASIC resistant. The market forces that
matter here are those guided by anarchist and cypherpunk principles.
Many within crypto criticize Monero for having a perspective of the market that is limited to their cypherpunk
ethos, but Monero does these things because the market participants and developers are committed to
Monero’s security and success. The Monero community sees itself as the determinant market driver of
Monero’s future.
How investors are associated in PoW
Every PoW block is the process of converting electricity into work that becomes stored in the blockchain
forever. The energy of the work agreed upon by the network ruleset is put into an immutable ledger. Every
block of time accounts for the best choice that the p2p distributed network’s rules agreed upon as being the
most valuable and profitable use of their energy - their work.
Within a PoW system, the energy spent in securing the network is competed for in order to make the network
more valuable and secure. PoW investors are brought together by means of coopetive & competitive
capitalism. Every investor’s best self interest is taken into account when choosing the securing of the network.
There are those amongst us that warn of the dangers of miner disincentives. Miners are also disincentivized
from doing what is best for the network via the temptation of malicious hacks and thefts. These miners are
suicidal in their approach to capitalize - for they only think in terms of present personal gains rather than
future value. This would be a miner that has given into pressure to choose a personal short term exit gain over
a long term profit, usually by dishonest or unethical means via malicious mining attacks or thefts.
Some would argue that a miner or peer within a PoW network that attacks the network for personal immediate
gains is suicidal; they will never be trusted as a node again, as long as they can be identified uniquely.
However, since Monero is private, and since many in the network seek to remain anonymous and retain their
privacy, its network arguably has a much greater need for sufficient checks and balances in order to remain
resilient against such attacks.
Some would argue that as peers move away from trustless nodes, trustworthy nodes gravitate towards one
another. Nodes/peers/investors of high trust become more interconnected. Some would argue that this
interconnectedness of trustworthy nodes is what secures the future of PoW blockchains.
However others would argue that trustlessness via decentralization is the best virtue of all - it is best for all
nodes to not have to trust or identify one another, but rather to verify the accurate state of the network via
cryptography. “Don’t trust, verify” is the original ethos of Satoshi’s vision in the Bitcoin (BTC) whitepaper and
that of Monero as well.
When we speak of nodes in this technical context, we are not necessarily referring to miners, but rather full
nodes which store the blockchain and verify its integrity. From a broader and more general context however,
nodes in a social network can involve any actor or investor within a given PoW blockchain. Mining is not the
only discipline that moves funds through a PoW network. Literally any marketable knowledge or discipline
wherein which you have differential knowledge is enough to make you a market driver in this leaderless
revolution. By providing a desired good or service in exchange for cryptocurrency, you can encourage flows of
funds on the blockchain and earn profit while fulfilling the market needs of your peers.
It is of utmost importance to participate in the development and security of your favorite PoW chain. There
will always be dishonest peers within the network that would want to exploit the network for personal short
term gains. Even if this were not the case, you as an intelligent investor should assume that there are malicious
nodes attempting to attack the network at all times, and be cautious to protect your assets from thieves seeking
to steal your crypto.
As much as there is the probability of constant malicious investors within a PoW blockchain, there are an even
greater number of investor peers that seek to secure and do what is best for PoW networks.
These are your peers! Guess what? The vast majority of these peers are libertarians, anarchists, and
cypherpunks who are amongst the first and most important of PoW cryptocurrency investors in blockchain
history! You need to constantly strive to protect the interest of these peers as they are currently constantly
striving to protect and better your investment by improving the network.
Think about this, all of your most beloved libertarian friends are those who are protecting your investment and
working tirelessly to make your investment more profitable and valuable. Now you (we) must return the favor
and participate by competing with them by constantly figuring out how to make your favorite PoW blockchain
more profitable and valuable.
What unites us investors within PoW blockchains is nothing else than raw capitalism. It is the
meritocracy that comes forth from our competitive cooperation that constantly secures and
improves our mutual investments.
As we know, within capitalism there is no equality. Everyone is seeking to figure out how to best profit. It is in
this race towards profits and value that we accumulate success for ourselves and for our peers. PoW was
designed for the purpose of aligning the self interest of every individual in the world. This constant seeking of
what is most valuable for all is what secures the confidence of the PoW investor.
“Profit-Seeking is Bitcoin’s Motor” - Daniel Krawisz
How interests are aligned in PoW
A PoW blockchain is a meritocracy that never ends. All of its investors are constantly competing to be at the
center of the network. The center of the network refers to the most intelligent and profitable of investors that
other investors follow within a PoW system. These most profitable intelligent investors automatically become
the most well connected nodes on the network. As the most well connected nodes of the network, these
investors become the heart of the network connecting all investors to one another.
For example, we can say that Satoshi Nakamoto and those closest to him were the first to be at the center of the
Bitcoin network in its early days. Within this meritocracy, we are invited to compete with Satoshi in making
PoW blockchains even better!
There will always be new innovations that make PoW blockchains more profitable. Entrepreneurs constantly
race to better the network, and some even create competing networks to fight for first place as the market
leader. This is what is referred to as a Stackleberg competition. Within this Stackleberg competition the
leadership position constantly offsets in accordance with whoever is making the entire network most profitable.
PoW is a meritocratic coopetition. You collaborate and compete with your peers at the same time in making
your mutual investment more valuable. Your rivals are your greatest strength within this byzantine fault
tolerant system.
Incentives constantly seek to align more efficiently within PoW frameworks. From an investment perspective,
we can predict that in the future the most intelligent of entrepreneurs will gravitate towards the same PoW
blockchains. Entrepreneurs and investors that seek profit will aim to leverage off the coopetition being offered
by the most intelligent of networks.
The most intelligent investors will flock together as they seek to be the most well connected
nodes at the center of the best PoW networks.
Look for example at how the likes of Ben Bernanke and Bill Clinton flocked completely away from meritocratic
cryptocurrencies. They cannot compete in the meritocratic realm of PoW blockchains. This is why they
preferred centralized entities like Ripple.
At TDV and TCV we love Proof of Work!
In our opinion, Proof of Work is what will eventually destroy politics. We believe it will eventually supplant all
governments. This is the future we strive for - a future of complete capitalist incentive structures aligned in
constantly aiming to make the world a better place.
PoW is like a pre-programmed missile guidance system that further fortifies the value of our favorite PoW
blockchains by aligning the self interests of the most intelligent amongst us.
Also note that we as anarchists for the first time have a record of our work that will live on for the rest of
history, stored on the blockchain forever. The value of work will be proven and uncensored. No tyrant will
ever be able to erase what us Agorists create. Our work will be proven as effective and profitable on the
roof of work will shine forth as the market testament of constantly realizing what is most
blockchain forever. P
valuable for all, without censorship!
PoW is revolutionary!
PoW is so involved and intricate and perfect in its magnification of human action, that the more we come to
understand PoW, the more we marvel at the genius of market economics and market anarchy. There will
always be more layers to understand about PoW. We are just barely starting to comprehend its application.
PoW is the means by which we allow the market to dictate what is most valuable for all! It is up to you - the
entrepreneur - to capitalize by exposing these capacities to the world!
How investors interests are aligned in Proof of Stake (PoS)
The association amongst PoS investors is different and stands in stark contrast to PoW. PoS takes away the
meritocratic incentives found in PoW and creates an environment where nodes cannot self organize based on
the same praxeological contingencies.
For example, if there was a global outage, once cross-region communication is re-established, nodes on a PoS
blockchain would not know which chain is the most “correct.” That is, there is no objective standard by which
PoS blockchains can determine which one is the “correct” one between two rivaling chains.
PoW blockchains calibrate according to market forces. They will automatically seek to self-organize in order
for nodes to gravitate towards one single chain. PoS blockchains need constant guidance from the community
due to the fact that a PoS system does not provide immediate alignment of incentives.
The constant guidance necessitated within PoS blockchains comes forth from a different setup of incentive
structures. The PoS incentive structure is not market driven. You do not become the leader of the block
producer, or validator, network based on immediate market feedback.
Within a PoW blockchain the market gives the miner an immediate correction by means of lost profit.
Furthermore, if you are a bad actor within PoW, other peers profit from your mistakes in securing the chain. A
miner not only profits from securing the blockchain, but a miner (assuming it is also a full node) also
constantly scans to profit off any mistakes made by its miner peers.
In PoS there are no immediate market corrections to guide the actions of nodes. Hence, PoS blockchains are
forced to strive so hard to come up with schemes in which bad actors are punished. Since there is no
immediate market feedback towards the actions of stakers, the crypto governance of each PoS blockchain sets
up non-market driven parameters to discourage bad behavior.
In Ethereum (ETH) we find a proposed system of slashing to punish validators who would go against
pre-established Ethereum ordinances. This system of slashing does not have a counterpart component of
favoring the possible good actions of ETH validators. Even if such a system were to be created, it would not be
as effective as the one that comes forth from the results of immediate market action.
From a technical perspective, Ethereum’s Casper has been found trite in its attempt to mimic PoW market
incentives. It turns out that the proposed Casper PoS implementation punishes Ethereum validators for the
“mistake” of simply going offline:
Casper introduces the problematic concept of “inactivity leak”, where nodes get penalized for the mere crime
of going offline. Whether you’re intentionally going offline to cause harm or not, it doesn’t matter. This is a
super perverse rule because a) it introduces a new vulnerability where an attacker can DDOS honest
validators into going offline & cause them to lose money and b) it potentially discourages nodes from staking
for fear of losing money. This has a negative impact on overall security, since staking participation is
extremely critical to PoS.
In EOS we see a community driven attempt to rival the market meritocracy of PoW. EOS’s DPoS sets up a
system where community ownership of the EOS token is proportional to the perpetual voting mechanism of
punishing bad Block Producers and rewarding good ones.
The EOS system of DPoS is essentially a political paradigm where those with the most EOS trump the vote of
those with less EOS. The possibility of voting cartels is always a threat to the EOS crypto governance model.
As much as EOS may strive in the future to mimic the incentive structure of PoW via an electoral mechanism,
the incentive structure of block producers are not at all dependent on actual market forces, but rather on
political maneuvering.
As much as PoS blockchains attempt to create disincentives for bad actors, there is no oracle set up to reward
better or more profitable conduct. PoS blockchains may strive to figure this out in the future, but nothing will
compare to the immediate market feedback that PoW miners experience.
PoS blockchains are not meritocracies. They may mimic capitalist meritocracies, but they are not
meritocratically driven at the core. In PoW, the continual expenditure of energy by miners signals to the
market their constant present and future investment commitment. Furthermore, the PoW miner constantly
seeks to do what is most profitable for himself (present value), as he secures the network for all (future value).
Unforgeable Costliness: The Main Difference Between PoW & PoS
The design of PoS blockchains have attempted to mimic the market incentives found within PoW. However, no
competing design has been able to replicate an incentive structure as direct and costly as that of the
unforgeable costliness of PoW.
In his renowned blog entry Shelling Out, Nick Szabo provides us with the economic arguments of what
constitutes the unforgeable costliness of a medium of exchange. Within his analysis of what makes precious
metals unforgeably costly, he notes the importance of a system of accounting - one where the costliness
incorporates receipts for transferability.
In terms of accountability in crypto assets, we have triple entry accounting at our disposal within the
blockchain. Not only do both parties have a receipt of the goods transferred as pertinent to dual entry
accounting, but we now have the immutable ledger of the blockchain that provides us with a final third entry.
The third entry of the blockchain makes our digital assets less forgeable than within a classic dual entry
accounting system.
The energy spent in attesting transactions into the blockchain, while securing the network, is not something
that occurs arbitrarily. PoW miners constantly race to ensure an increasingly efficient use of energy in securing
the blockchain.
This expenditure of energy is future oriented and is a sign of committed investment in the future of the market.
This constant expenditure of investment capital and energy forces miners to constantly calibrate their
investment thesis.
The author Hugo Nguyen has adamantly exposed the flaws of PoS, and contrasted them with the virtues of
PoW. He agrees with Nick Szabo’s thesis of unforgeable costliness. Nguyen also magnifies the quality of
randomness along with that which we have explained regarding the incentive structures of PoW.
Nguyen points out that the randomness of PoW mining is also set up in a way that aligns with market
incentives. He shows us how market incentives make the randomness of PoW mining an effective oracle of
what is best for the market at a given moment. The unforgeable costliness of the network comes forth from this
spontaneous order that organically emerges from the PoW incentive structure.
PoW cannot be faked because the cost of faking the commitment of investors would not be worth it. The
energy spent and the work proven on-chain cannot be forged or falsified due to its cryptographic properties.
Another aspect that the PoS blockchains have sought to mimic from PoW is the randomness found in the
technology of mining. The randomness in mining is pure spontaneous order, and it takes costly effective work
to monetize within it.
It is the erroneous belief of PoS engineers to think that they can mimic, let alone supplant, the inherent nature
of the market drivers pertinent to capitalist incentives. PoW abides by these economic incentive structures; it
does not attempt to engineer these incentive structures, but rather simply allows the market actors to perform
in accordance to these praxeological principles.
From this perspective we could argue that PoW is the authentic and organic manifestation of the free market,
whereas PoS is artificially manufactured, and is nothing but an inadequate, shadowy imitation of the free
market.
The Incentive Structure of PoW & PoS Investors
The value of a given PoW cryptocurrency is not found solely in the present value of its market capitalization (as
measured by multiplying its outstanding coins multiplied by the market price, as seen on CoinMarketCap).
First and foremost, it is found in the future productivity of its economy. This refers to the would be future
goods and services available for trade within that given cryptocurrency’s network. As investors, we can
speculate on what kinds of goods or services might be available for trade in the future of a given
cryptocurrency’s network and invest accordingly.
PoW cryptocurrency is a form of money wherein which a group of investors are invested in one another. The
people who believe in the long term value of the money are also the ones who are most motivated to improve
the economy. In order for these groups of investors to use their preferred PoW cryptocurrency as their means
of savings, they must all depend on the future productivity of one another.
Investors verify one anothers’ productivity by measuring other investors’ capacity for profit seeking.
This is the connection between investor association as their interests further align, and their knowledge of
value. Profit seeking refers to the activities aimed at accumulating greater quantities of one’s favorite unit of
account, be it PoW cryptocurrency, gold, and/or silver.
Intelligent investors in crypto must profit seek as they assess the profit seeking of other investors.
What is successful profit seeking?

Profit seeking is the application of your personal differential knowledge to a calculated risk.
A calculated risk may look risky to other people, but in reality it is less risky for yourself. Differential
knowledge is that which you know better than other people. You must assess where it is in the economy that
you as an investor have an edge over others!
Upon realizing where it is that you have this differential edge, execute! Once the rest of the masses realize this
advantage, it will no longer be profitable.
PoW cryptocurrencies will reward you as an investor for your differential knowledge. PoS cryptocurrencies
have a harder time rewarding the differential knowledge of its participants because PoS blockchains depend on
factors that are not in line with market incentives based solely on immediate market feedback, such as politics
and/or central planning.
Your differential knowledge will provide you an edge in accordance to the level of freedom you have within a
given economy. For example, your differential knowledge would have been of little or no use for you in the
tyrannical economy of Soviet Russia.
Your differential knowledge, as an entrepreneur and investor, will serve you best depending on the economic
system in which you are a participant. We believe that meritocracies are the freest of environments for market
anarchists. As the crypto space stands right now, PoW blockchain networks are more meritocratic in nature
where PoS blockchain networks are not.
Invest and trade wisely,
AEON Outlook & Technical Analysis
Mr. X
Over the past month, AEON has once again for the most part remained under bearish pressure until recently.
As seen in the daily chart below, the AEON/BTC price failed to yield any significant bounce since last month,
but recently has crept above the latest downtrend line.
Bittrex AEON/BTC daily log chart with price breaking above downtrend line
As seen above, AEON/BTC has remained under the downtrend line up until the past three days or so. The
price hasn’t broken out on an extremely rapid rise or very high volume, but the fact that it broke above the
trendline is still encouraging nonetheless.
Price has begun approaching the still bearish Ichimoku Cloud, but has not pierced it yet, the
accumulation/distribution line is still low showing that bulls haven’t taken control yet, MACD has just made a
bullish cross but is still below the zero line, the Willy is trying to bounce up from the oversold region, and the
Fisher Transform Indicator recently formed a double bottom and a bullish cross.
In regards to the fundamentals, Aeon recently turned five years old, and continues to make positive progress in
programming the K12 PoW algorithm updates in addition to other developments, according to this month’s
“The State of Aeon” AEON Community update.
I think prices will likely continue to remain undervalued for a while, but I am still long term bullish on AEON.
As stated previously, I have not sold my position in AEON and continue to HODL for the long term. I am
steadfast in my belief that when Monero (XMR) begins to rise and becomes valued more accurately by the
market, AEON will eventually gain more positive attention, if not sooner.
As mentioned in previous reports, traders will typically buy near support levels and sell near resistance levels. I
have listed some key support and resistance levels for AEON/BTC below:
Support levels Resistance levels (see also Fib levels above)
0.00006 0.000077
0.00005 0.0001 (psychological round number)
0.0000425 (2016 support level) 0.00012 (2017 support area)
0.00002 (2016 support level) 0.000137 (2018 resistance area)
0.00000618 (all-time low/ATL) 0.000168 (2017 support area)
Invest wisely,
Mr. X
Technical Crypto Analyst
Disclaimer: The Crypto Vigilante needs no disclaimer. Everything we say here is what we believe. Furthermore we need no disclaimer because we believe
that all nation states, governments, securities agencies or other legislative bodies are illegitimate and we do not recognize them nor believe we need their
permission to say what we feel about any topic and frankly think it is hilarious that people think a government body should be there to protect them.
However, because we know that all manner of Government agencies will come after us just for showing such disdain for them we are going to include a
standard, cookie-cutter disclaimer below just to keep them off our backs.
Enjoy reading it, bureaucrats at the SEC. Information contained in The Crypto Vigilante Emails or on The Crypto Vigilante website
(www.cryptovigilante.io) is obtained from sources believed to be reliable, but its accuracy cannot be guaranteed. The information contained in such
publications is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions
expressed in such publications are those of the publisher and are subject to change without notice. The information in such publications may become
outdated and there is no obligation to update any such information, such as cryptographic advice. Jeff Berwick, Ed Bugos, Rafael LaVerde, Mr. X, and
other analysts or employees of The Crypto Vigilante may from time to time have positions in the crypto assets, securities or commodities covered in these
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therein, are owned by The Crypto Vigilante (TCV). No portion of any TCV publication or web site may be extracted or reproduced without permission of
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TCV August 2019 Issue

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August 2019

The Crypto Vigilante Portfolio

Cryptocurrency Fundamental Metrics Charts

AEON Outlook & Technical Analysis

Monero (XMR) Number of Transactions on Blockchain Per Day - Historical Chart

Bitcoin (BTC) Average Transaction Fee (USD) - Historical Chart (Logarithmic)

Bitcoin (BTC) Google Search Trends - Historical Chart (Logarithmic)

Monero (XMR) Google Search Trends - Historical Chart (Logarithmic)

Rafael LaVerde & Mr. X

Degrees of Miner Autonomy in PoW

The Cypherpunk/Anarchist Argument for Why Monero is Pure PoW

How investors are associated in PoW

“Profit-Seeking is Bitcoin’s Motor” - Daniel Krawisz

At TDV and TCV we love Proof of Work!

How investors interests are aligned in Proof of Stake (PoS)

Unforgeable Costliness​: The Main Difference Between PoW & PoS

The Incentive Structure of PoW & PoS Investors

What is successful profit seeking?

Invest and trade wisely,

Rafael LaVerde & Mr. X

Support levels Resistance levels (see also Fib levels above)

0.00005 0.0001 (psychological round number)

0.0000425 (2016 support level) 0.00012 (2017 support area)

0.00002 (2016 support level) 0.000137 (2018 resistance area)

0.00000618 (all-time low/ATL) 0.000168 (2017 support area)

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Unforgeable Costliness: The Main Difference Between PoW & PoS