Happy Birthday Tgrade!
Tgrade was launched on 27th June 2022 and was bought online by 65 validators around the world.
The number of validators has grown to 77 active validators, there have been 86,111 transactions, a large proportion of the tokens remain held by the validators and the foundation with a smaller pool being traded through the Osmosis DEX.
Proof of Engagement was a new consensus mechanism that Tgrade has pioneered as an evolution of the established Proof of Stake. The theory was well developed in a paper published in 2020 and was put into practice with the launch of Tgrade. It has worked as intended with a level of engagement as expected, a well established Oversight Community, and a half-life event which reduced the engagement points by 50% as expected.
The only cloud is that the price of the token has fallen in line with the majority of other similar projects reflecting the impact of wider decline in the crypto markets following the collapses of Luna, and FTX.
In short the basics are right, the network is running and is supported by a community. The process over the last 12 months of progressive decentralisation has been effective. At the launch there was leadership and centralised decision making from a small number of individuals, this has changed as was envisaged to a more community led, and decentralised, blockchain.
Tgrade a blockchain for business
Tgrade is a blockchain built for business and at launch there were a number of businesses considering building on Tgrade and over the past twelve months seen a steady growth of followers on LinkedIn, and the Tgrade medium page as well as direct enquiries to Stichting Ocean Blue.
Project Figaro was the first off the blocks building a prototype around the last mile delivery. The prototype was a success and since then Figaro have been refining their whitepaper, developing the economic models and speaking with prospective investors.
Stelarator have spent the last twelve months developing their plans to bring transparency to the business of films and Tgrade is part of their ambitious plans.
There have been no businesses launch on Tgrade in the last twelve months, partly to do with the investment climate in the crypto/blockchain markets and the ongoing regulatory uncertainty which makes it harder for real world businesses to embrace blockchain. This will change in the next 12 months with MiCA in Europe and further clarity in US markets.
A big change in the last twelve months from the rise and fall of DeFi has been the emergence of projects looking to bring Real World Assets (RWA) to blockchain and this narrative is a positive step for Tgrade as it begins to show what is possible and how Web3 might work for business.
There has been a lot of talk of Central Bank Digital Currencies in the last twelve months. Discussions have taken place on what a wholesale CBDC platform might look like and how Tgrade might be set up to provide a solution.
Legislation and the business climate
When Tgrade was first being thought of and designed there was no talk about regulations and a decentralised, outside of the rules, system was rapidly evolving in the spirit of P2P and anonymity.
The regulators did the right thing in waiting and observing rather than stepping in too early. The mistake that some of the crypto/blockchain players made was the assumptions that regulations were not applicable and too difficult to implement if they were not domiciled anywhere or run by anyone. There was even a cynical move by some to play fast with the rules to grow market size and then from a position of power take up conversations with regulators.
In designing Tgrade, the initial assumptions were that regulators care about fair and orderly markets, consumer protection and stemming the flow of funds from the proceeds of crime. It was also important to consider that real world businesses are registered in countries they operate in and are subject to the laws and the customers they serve are protected by regulations.
The balance achieved of maintaining a decentralised, resilient, public blockchain with the ability for businesses to be able to organise themselves using built in governance tooling was the key achievement of Trusted Circles.
A lot has happened since 2020 when we first worked on the design of Tgrade and Trusted Circles.
The EU have passed the MiCA legislation that will apply across the member states from 2024 and bring more clarity to the sector. It is not all rosy in EU, however, with additional proposed legislation for Smart Contracts in the proposed Data Act and more worryingly the publication from ECON proposes ditching MiCA and classify all tokens as securities subject to MiFID II by default. Clearly the regulatory certainty that businesses craved is not as solid as once thought, especially as MiCA applied the same rules through the member countries whereas securities law is applied by member countries thus harmonised rules would not apply. It should be noted that ECON is an academic paper and not official EU policy nor was it commissioned but it is influential and stokes further debate where there certainty.
In the US the SEC has been active with actions and enforcement measures against companies and pronouncing tokens as securities. This is a long process to bring clarity of how tokens are classified and what legislation they fall under.
The regulatory uncertainty will put a brake on business adoption of blockchain technology especially where it involves tokens both in Europe and US.
There are some regulations in various jurisdictions that are more friendly such as South America, and in Asia but often there are “bans” on crypto with differing levels of enforcement.
The big change in the business climate is the perception of the space following the very public collapses of Luna and FTX which triggered further collapses. The focus has shifted from blockchain to AI following the launch of ChatGPT and the ensuing publicity meaning that securing funding for blockchain startups is much harder.
Businesses still grapple with the opportunity of blockchain and how to fully embrace it.
There are those who pick up a piece of the business and drop it “on blockchain” and this generally does not end well.
More difficult is to re-think existing processes and what opportunities an open, immutable ledger brings to tie multiple parties together. Figaro is a good example of looking at what a immutable ledger, combined with smart contracts can do to disrupt the last mile delivery mechanisms. Finance is a sector that is active in exploring the potential and 2023 has seen issuance of structured notes by UBS in Hong Kong for BOCI, a Chinese Investment Bank.
We are yet to see wholesale adoption by businesses.
What of the next year? How will the future look?
The value proposition of blockchain is clear. The “solution looking for a problem” label, while hard to shift, is looking a lot less credible than a few years ago when there was little adoption outside of trading tokens.
The future is clear, blockchains will be the backbone for connecting multiple parties and having a shared source of truth stored on a public, immutable ledger. We will see cases where product lifecycles or services are maintained and connected to complimentary services such as insurance or have built in escrows for managing flows and trust between parties.
The big question is when will this happen? In the next six months? Twelve months? Five years?
I wrote a blog post last year reviewing Green Finance and the opportunities I had seen in deploying smart contracts to bring much needed transparency. The conclusions were that the technology is in place and it is possible to deploy new and innovative ways to finance green projects, it is the regulatory uncertainty that weighs as well as a powerful incumbents who do not have compelling needs to change, and an element of political expediency.
What is the path for Tgrade in the next year? The driver will be business led, and this in turn will be influenced by the regulatory situation, the economy, and the opportunities that businesses see.
The regulatory landscape is becoming clearer, the economic situation improving and the businesses exploring opportunities continues.
With a few pioneering businesses on Tgrade in 2023/24 we then can start thinking about what the network effect might look like.
