XEN for bitcoin maxis and other sceptics

XEL Wallet Manager

Talking tokens is an insult to many Bitcoin maxis because Bitcoin is king and nothing else should exist. Their position is understandable. They make many valid points to support their dislike of anything born on Ethereum or any other chain, and they will likely discard XEN Crypto with equal disgust, so let them. The thing is, XEN doesn’t care because it comes from the same place as Bitcoin did and has the chance to become equally big. So here we talk about why this is possible and how we get there.

About shitcoins

The Bitcoin community coined the term “shitcoins” to describe any token or coin that is not bitcoin. The maxis see Ethereum as the butthole where shitcoins come from. Realistically, who can blame them? It’s been since the start of the chain that all kinds of ERC-20 tokens started popping out like pimples on a teenager’s skin, and, after a fast pump and dump or any other short-term scam scheme, they were disappearing from the face of Coinmarketcap if they even made it on the list. We’ve seen all kinds of ICOs and all kinds of fund-raising maneuvers aimed at launching different projects. If that wasn’t enough, players like Celsius, Luna, Voyager, or Coinbase try to convince unaware people that what they have to offer is better than the traditional banking industry. They are nothing more than centralized entities that act as intermediaries between a user and a blockchain, and they pose a security risk not only to the user but to the entire crypto space, as evidenced by the recent Luna crash or the Celsius and Voyager issues. There’s a lot to be talked about regarding the problems with the crypto space, but they stem from the same place: they’re not upholding the first principles of blockchain. Pre-minted tokens allocated in large part to a team, one team’s influence on the destiny of the protocol, no self-custody, no privacy: these are some of the main issues. Companies like Celsius, which prey on people to give up the keys to them in return for a yield, are preaching crypto but have nothing to do with the real principles of crypto. They behave like financial institutions but are not regulated like them.

"They received a lot of money from the users to give up their keys, and they sent them their economic energy in the form of cryptocurrency, and then they could do anything they wanted with them. So unfortunately, they lost a lot of money during the crypto downturn, and they became insolvent in the sense that they stopped people's ability to withdraw their cryptocurrency back to their wallet. So it's kind of like, you know, 'Hotel California’. "You can check in, but you cannot check out," says Jack Levine in a Twitter Space with Popcorn.

Coinbase is another example of a company preaching crypto and blockchain, but there’s no blockchain involvement, just an exchange.

"Except the only thing that they did really well is feedback, which means that if you have cash in your bank, they connect to your bank, and it's very easy for them to receive your dollars or euros in Coinbase. And then, technically, should they go bankrupt right at that moment, all the money that you sent to them will pretty much be frozen. So many companies out there that they're enticing people to participate in crypto, but in reality that's just marketing, and you're their product, and you may end up losing all of your money."

Back to Genesis

Bitcoin was created by Satoshi Nakamoto. It was a brilliant idea that was built on the ideas created by the Cypherpunks Timothy C. May, John Gilmore, and Eric Hughes, who published the Cypherpunk’s Manifesto, and by Hal Finney, Nick Szabo, Adam Back, and Wei Dai. Satoshi gave us Bitcoin to eliminate “the inherent weaknesses of the trust based model.” With the PoW consensus relying on the majority of hashrate (the network’s processing power) instead of the majority of nodes to reach consensus, it makes it expensive for a miner to tamper with the ledger. It also imposes a cost on the miner for going against the integrity of the blockchain because he needs to forego the bitcoin awarded to the miner who solves the puzzle correctly. Satoshi’s mechanism eliminates intermediaries through decentralization of the hashrate, trustless consensus, and self-custody of the keys.

XEN Genesis

XEN upholds the same principles as the blockchain. It starts from supply zero and is minted entirely by the users. There’s no hashrate to be used, but the user needs to pay a gas fee for the transaction, so there’s a cost to producing the tokens. This cost depends on the price of ETH, network usage, base fee, and miner tips. Essentially, the higher Ethereum’s network usage, the higher the gas. 

The Ethereum Daily Gas Used Chart shows the historical total daily gas used of the Ethereum network.

When Bitcoin came out, anyone could mine it on a computer, but as the difficulty increased, more sophisticated and expensive hardware was needed. The ordinary person was automatically ejected from the ability to create money. Due to price fluctuations, it has become something you hodl and never sell, reducing crypto adoption and the exchange of economic energy. XEN doesn’t require expensive hardware and sophisticated technical knowledge to mint it. People only need to download a wallet and connect it to a dapp. Everyone has the capability to create money and to use it without incurring excessive costs.

Bitcoin couldn’t gain adoption quickly enough because it was the first, and its design discouraged miners from bringing in new miners. On the other hand, XEN incentivizes users to bring in new users, which creates a fast network effect. The network effect may create value that is much higher than that of bitcoin. It all depends on the adoption.

Bitcoin has a hard cap of 21 million coins. XEN has no such hard cap. At Genesis, it’s highly inflationary like bitcoin, but with time it’s disinflationary because the minting difficulty increases every day until it reaches a stable value after 8.3 years. At that point, the token emission will be 2%. 

Decentralization

When Bitcoin was launched, it was so unknown that the OGs could mine it and become whales. Today, Bitcoin’s 41% of supply is concentrated in 2123 addresses. Only 0.0001% of addresses own 41% of the total circulating supply of BTC, so the distribution is not ideal. According to Glassnode, 2% control 71,5% while Bloomberg says it’s 2% of addresses controlling 95% of the supply. It all depends on what is taken into consideration, and the interpretation changes. XEN distribution should be completely different due to the fact that XEN doesn’t need specialized hardware and skills and because it’s possible to mint XEN by extending the time period. It’s expected that the distribution will be very broad among the population. When inflation reaches its minimum value, we’ll probably see more whales coming in and buying up the available supply.

bitcoin whale addresses
Bitcoin whales

It is very likely that over time, the accumulation law or the power law of the Pareto distribution will inevitably also hit XEN. The law is found in almost every kind of distribution in the world, and it says that, e.g. for networks, 80% of the degree of a complex network is held by 20% of its vertices, or that 80% of the effects come from 20% of the causes, proving an unequal relationship between inputs and outputs. So we see here that in bitcoin that is not 20% but 0.0001%, which is a lot.

Pareto Principle

Both XEN and bitcoin will see an unequal allocation of the increments or income, which means that different people will obtain different wealth. Typically, the rich get richer while the poor get poorer because the rich can get larger increments of their wealth. This is why the Pareto distribution is formed not only in wealth but also in internet traffic, social media usage, gene distribution, the frequency of certain words in a novel, and many others. This is just the state of nature, and there can be different methods applied to hinder it if this is what is desired, but sometimes it may not be possible. While it is hard to curb further wealth accumulation in bitcoin, it’s not too late for XEN. XEN ensures a fair launch, but it can’t go against the laws of nature within its scope. It will be up to DeFi applications built on XEN to decentralize in spite of Pareto.

The adoption curve in networks like the internet, Bitcoin, telecommunications, and Facebook is exponential because of the network effect of Metcalfe’s law, which states that the square root of the participants in the network is the value. In this regard, it is obvious that XEN will have a bigger network effect because of the incentives built into the function, while Bitcoin has no such thing.

XEN or Bitcoin

Bitcoin is definitely a store of value and hard, uncensorable money.

“Bitcoin is kind of like gold or diamonds. This is something that you hold and you save. Bitcoin acts as a buffer, as a layer of stored economic energy that you can potentially exchange into XEN back and forth, so we benefit Bitcoin by bringing more people in, and Bitcoin holders benefit us by providing liquidity, so it’s very complementary,” says the founder of XEN.

He doesn’t believe that bitcoin on the Lightning Network is the solution either. It’s because bitcoin has a concentrated supply. One scenario that sees bitcoin in the future is that the banks will end up lending bitcoin from the current whales, and this, in turn, will be lent to the people. It could well be that the whales will lend directly to the people themselves because they will want to earn a yield on their coins without selling them. This kind of rent-seeking and intermediation isn’t likely what Satoshi was looking for, but who knows?

XEN is free to mint and has a very low barrier to entry. Through its tokenomics, it’s designed to achieve maximum network effect, and it exists on multiple chains. While the most value will sit on Ethereum, it may achieve the most activity on other chains due to low gas fees. XEN Crypto is designed with the first principles of blockchain in mind, and that involves self-custody. Getting rid of intermediaries holding your keys is the main goal of XEN.

Self-custody and Transparency

Bitcoin was intended to be held in “self-custody,” but as previously stated, bitcoin supply centralization may make this difficult in the future. Right now, most of the “active bitcoin” is traded on centralized exchanges that hold your keys. There’s no proof that the price isn’t manipulated and that it reflects the true value of bitcoin. Tangent, in his interview with Jack Levin, said that if the price is manipulated on a big exchange then the price on every other exchange would equalize due to the arbitration bots, so price manipulation isn’t something that can be discounted nor confirmed.

XEN is a token that users need to claim and mint with the address they hold the keys to. It can then be traded on a decentralized exchange like Sushiswap or Uniswap, but the ownership of the asset is crucial in the game theory of XEN and it can’t be circumvented. Jack Levin believes that cryptocurrency traded on DEXes is what the crypto space should be all about because then you can see everything that’s happening on-chain, while when it’s traded on centralized exchanges it’s prone to liquidity issues and price manipulation.

Trustless consensus

The Bitcoin consensus is trustless, and the main point of attack that bitcoin maxis have against Ethereum is that it’s not trustless because the ETH supply is sitting mostly in the hands of a small number of addresses that can’t be disproven. The Pareto principle indicates that wealth accumulation over time is something natural, and checks and balances need to be put in place to avoid it happening too fast. Bitcoin decouples this to a degree by dissociating nodes and BTC from consensus. Ethereum does it with slashing. Reaching consensus on which transactions are valid and which are invalid can be done in a way that is trustless, or, to put it another way, trust is achieved through a consensus that we know is decentralized and transparent. XEN is an immutable, open source smart contract that has no admin keys and is built on Ethereum. You don’t have to trust XEN, the founder, or anyone else because with an immutable code, the security of the underlying blockchain, and a supply that is out of the control of any one individual or entity, trust is not needed.

Conclusion

Bitcoin and XEN complement each other. 60% of Bitcoin is held in cold storage for the long term. 20% haven’t been moved for over 5 years and are considered lost, but no one can be sure. A little less than 2 million bitcoins will be mined, with only a small portion being used for active trading. It is obvious that Bitcoin is considered a long-term store of value. XEN is here to be used as a currency and financial lubricant for DeFi applications.