Zap - decentralized bonding curve curation market
Nick Spanos from Zap.org sharing his thoughts on oracles, bonding curves, decentralized economic ecosystems, and the future of crypto and DeFi.
Hello! What’s your background, and what are you working on?
My name is Nick Spanos, and I am the co-founder of Zap.org. Before entering the blockchain space, I was active in political microtargeting, big data, and I also had a passion for other technology in addition to real estate.
When I worked for Ron Paul after the 2008 elections, we continued the liberty movement. I heard about bitcoin many times in the libertarian circles before reading the whitepaper. Presuppositions lead me to believe it was centralized. After I read it, that changed. I now knew this was a monetary revolution that offers humanity a censor-proof method for merging popular consensus with decentralization. I knew this can help us deal with all these untrustworthy institutions, from tyrants to large multinationals, that for too long went unchecked.
Soon after, I founded the Bitcoin Center NYC in 2013 - the world’s first-ever peer-to-peer cryptocurrency trading floor - initially directly across from the New York Stock Exchange (NYSE). I also am the CEO of Blockchain Technologies Corp., and the holder of a number of blockchain patents, such as the multi-branch blockchain. I was also featured in the 2016 Netflix, Amazon Prime, and Hulu documentary Banking on Bitcoin. This year, Zap.org had its mainnet launch.
Zap is a decentralized bonding curve curation market which provides access to data providers and other services through algorithmic token generation. Remember the first word in my explanation: decentralized. Decentralization is the key to the value of bitcoin and other digital assets. It is what ensures that you have meaningful algorithmic consensus verifying all data in a public blockchain. It is what ensures value. This is why bitcoin has become so popular because you can trust math and algorithmic consensus instead of trusting third-parties.
Now, how does that relate to Zap? Consider the next term I used: the bonding curve. What is this? A bonding curve is a smart contract that issues tokens as one stakes or “bonds” value, based on a floating price point signifying the intersection on a graph between how many tokens have been generated (x-axis) and the corresponding price (y-axis). The value bonded stays in the contract ready for two scenarios: The first is to spend the secondary token, which releases the value to the service provider. The second scenario is to sell the secondary token back to the contract at the price point reflected by a curve at any time. The graph below is a visual representation of this.
So why is a bonding curve important?
For one, it creates a decentralized exchange (DEX) since it uses an algorithmic marketmaker (the pre-set price curve) to eliminate order books and provide a fully liquidity environment for instantly trading tokenized assets. When you bond/unbond, you are trading with a smart contract rather directly with buyers and sellers. I believe this is the solution that will even further decentralization the cryptocurrency arena into the future.
This fosters and advances tokenization by providing a solution for exchanging tokens for a small business or individual, as well as larger entities. Why is this so important? Because before Zap’s protocol, any token or project was forced to play by an exchange’s rules - whether having to face exorbitant listing fees or face random delistings. Modern-day exchanges are centralized, and the current DEXs use order-books and can take a good amount of time for trades to go through. Bonding curves are the decentralized solution for instantly creating a market for a tokenized service or asset.
A significant hackathon was recently tokenized utilizing bonding curves. The competition templates that were created on Zap’s framework allowed attendees to stake the ZAP utility token on the teams they believed would have the best project. After staking, attendees received the secondary token specific to the project(s) they bonded to. Positions could be held or sold through the decentralized exchange, ForkDelta, up until the end of the hackathon. The staked ZAP for the losing teams were then paid out proportionally to the holders of the winning team’s token. All this was self-actuated through smart contracts. The additional appeal is after the hackathon ends, developers who would like to take their token beyond this competition, and even beyond the Zap platform in dapps of their choosing, can easily do so. As well, attendees who want to support a team/project can simply purchase their token and use the bonding curve to help support their efforts, such as spending their token, thus releasing capital to the project.
There are additional benefits to bonding curves. One is to validate tokenized service providers, such as oracles providing data that can trigger financial events on the blockchain. The frequency or quantity of tokens bonded to a provider’s curve can serve as a decentralized indication of how much the provider is, or should be, trusted. This also forms a speculative market where bonding early to high-quality providers yields a greater reward for those who would want to unbond or use this provider’s service later when the bonding ratio is at a substantially greater position than when the service was initially offered.
A few of the use-cases possible are curating trusted data feeds, a token launch platform, tradable futures markets, real estate, or crowdfunding/fundraising/bounty development competitions.
What’s Zap backstory?
Even before founding the Bitcoin Center NYC, our attention has been on decentralized products and solutions. One area that we realized was desperate for a decentralized solution, initially, was data.
We were first exploring a number of decentralized ways to approach the problem of building a trustless environment surrounding data for blockchain/smart contract use. In this search, we discovered the early work of Simon de la Rouviere, an engineer at consensus, who was exploring curation markets. In fact, he credited us with coining the term “bonding curves” after applying the concept of curation markets to our protocol.
As we said before, this initial focus on data was narrow in scope. Not only can our protocol be used for tokenizing data, but for tokenizing any service or asset. Additionally, these tokenized assets can then be utilized in various decentralized environments (such as in a decentralized competition or Distributed Autonomous Organization (DAO)) since the bonding curve can be used to create a fully liquid decentralized exchange with the “marketmaker” built into the pre-set price curve, thus eliminating order books and centralized exchanges.
What went into building the Zap?
It took a little over a year, with development beginning in November of 2017 and launching mainnet in January of 2019. We initially launched with seven provider endpoints, and now there are currently multitudes of provider endpoints available.
We launched at a time when everyone else was claiming to someday build revolutionary utility. But now the dust has settled, realizing that we are of the very few who actually built a product, that is also revolutionary.
Many of those on the outside didn’t seem to comprehend the gravity of what we have created and the amount of work its taken to get to this point. People want everything to happen overnight, and yet even bitcoin’s significance was not recognized overnight. This wasn’t just a simple ERC-20 token project; this is building a new decentralized world.
So now, as demand in the crypto-sphere shifts to usability, and beyond conception, I think we have entered the next phase where these truly decentralized projects will begin to intersect and grow with each other. The demand for the realization of these use-cases we have been talking about is high, and we are finally close to it becoming a daily reality. Part of that is eliminating centralized exchanges, human marketmakers, and centralized order books so that any item can be tokenized and instantly have a marketplace - with even more understanding by the masses, Zap’s protocol will have cemented itself as the foundation of this brave new decentralized world.
What’s your business model?
One of the great things about Zap.org and its protocol is that anyone in the world can access the platform and either provide, buy, or speculate on various tokenized services with no fees paid to us or restrictions in place. Developers can also use Zap as the back-end to a number of front-end services they want to provide (every tokenized service has a shortcode for a widget that allows you to easily provide the ability to bond to your service(s) directly on your website.)
The customers we are now drawing are those who wanted to try tokenizing their assets but found that the ability to do this was too complicated and costly. Now, those same people are actively ready to drive this new initiative as early adopters and pioneers of a new era in human innovation. For instance, we have real estate developers who are now ready to tokenize their properties as the groundwork has been built for seamless decentralized interactions using bonding curves to trade the tokenized real estate asset.
I have really hammered this point in, but I think for a good reason. Without having to deal with any centralized exchanges or human marketmakers and having full liquidity truly redefines the possibilities of peer-to-peer interactions. So many of these ideas we all have involving decentralized tokenized assets is about to come into fruition.
If you needed any more proof of the importance of bonding curves, Elon Musk and rLoop are discreetly jumping on this decentralized train by utilizing bonding curves for their project.
What’s your position on the regulatory landscape today?
Regulators will regulate. It’s what they do. It’s a fact of life that each country has regulations, some countries try to harmonize with their neighbors, and others try to gain an advantage. The one thing about something non-physical like a cryptographic, digital asset: it’s portable. Crypto is like knowledge. You can’t blockade it, and you can’t lock it down. No matter what some people have tried to do in the past, there will always be people competing to have new industries come to their jurisdiction.
What are your goals for the future?
As we develop even more of the foundation of the decentralized economic ecosystem, the value will soar.
With a new vision, we are working towards the imminent and inevitable future. Many of the goals we are going forward with our continued development, making the platform even more accessible, teaching developers how to quickly manifest their ideals and ideas using the Zap protocol, forcing even more use-cases into reality as the “killer app” makes its way to the surface.
Ultimately, I think seeing this technology in action is the best way for people to understand it. We have some things lined up, like the real estate example, which will put on display the power and place this protocol has in the future. At the same time, we are working to sharpen our documentation so as we continue to grab the attention of programmers, so they can seamlessly begin developing using our protocol.
What are your future thoughts for the DeFi market?
I think the future of cryptocurrencies and DeFi will be a fight between those who claim to be decentralized and are not and those which remain true to the decentralized ethos, which is taking the world by storm. As I said before, the essence of cryptos value is decentralization. Gone, hopefully, are the days when you could just mention the word “blockchain” and have people give you millions of dollars. Gradually people are realizing a “permissioned” blockchain solves none of the problems of an institution-centric, centralized economic system, and soon those permissioned setups will have to decentralize or prepare to be liquidated. Soon, people will insist on decentralization, auditors will check for this, and there will be no value without it.
The way we win is by creating an actual peer-to-peer environment that anybody can use. There, they will see the difference in a world where Facebook’s Libra owns one’s wealth versus an environment where impartial code manages and safeguards it. As we are all early to this space, the best thing we can do is ensure our terminology doesn’t get co-opted by centralized actors who want to remain in a third-party position. Make it clear what a decentralized environment is versus a centralized impersonator that adopts distributed ledger terminology. Keep developing and keep educating. We are almost there.