«Blockchain helps to solve the issue of trust»: Ukrainians and the Radical Future of Cryptocurrency

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Miroslaw Shpak, an Odesa-based engineer-entrepreneur and creator of the World of DeFish game, tells us what blockchain offers, how cryptocurrencies function, and how Ukrainians are among the most energetic adopters, even if the government is at an impasse on the matter.
Photo: Miroslaw Shpak

Photo: Miroslaw Shpak

By Vitalii Holich

With Joe Lindsley

Although much of October’s IT Arena tech fest was virtual, an afterparty at the new Mad Bars House, five floors of sleek bars and dining rooms in a centuries-old building, provided the chance to connect in person with tech entrepreneurs and engineers from Ukraine and abroad. 

Among them: Miroslaw Shpak, a web engineer, cryptocurrency enthusiast, and entrepreneur from Odesa. To his surprise, until our conversation he had spoken with no one at the event about blockchain, the technology that serves as the basis for cryptocurrencies, even though, as Bloomberg reported this year, Ukraine ranks among the top four countries for individual cryptocurrency adoption. 

Miroslaw, a co-founder of the outstaffing platform B2D, is pursuing two innovative blockchain ideas: the computer game World of DeFish, «a metafish universe where [everything] is profit-generating,» and the copyright protector, OnlYourz.

«Computer games can bring many folks to blockchain, making them realise that if they are playing well, it can be turned into profit,» Miroslaw told me.

Just a symbol

We spoke about the logistics and possibilities of cryptocurrency and blockchain–and how Ukraine is playing a major role in the development and deployment of these technologies.

What’s the difference between blockchain and cryptocurrency?

Cryptocurrencies like Bitcoin and Ethereum are digital assets that derive their value from the trust of people who invest in them; they aren’t backed by any commodity, like gold or silver. The cryptocurrency can be purchased or obtained through a process called mining in which computers compete to solve complex algorithmic tasks in return for cryptocurrency as a reward, which is stored in the digital wallet of its owner. 

These currencies rely on the blockchain, a decentralized system, like Wikipedia in a way, that has many more uses beyond cryptocurrencies; its network can be used for storing different types of data, and every user can track any transaction within it. He’s part of two ventures to expand these possibilities:

«One of the main advantages of blockchain is that it’s quite hard to destroy if the blockchain is big enough, not in the sense of size, but regarding the amount of servers it occupies,» Mryoslaw said. «Bitcoin is an ideal example, it’s absolutely impossible to break it down, as well as Ethereum. Because to do this, you’ll have to destroy the servers that contain it in every country in the world.» 

«Blockchain brings a lot of trouble in case of performance and size, but it helps to solve the issue of trust,» Miroslaw says.

What does a volcano in El Salvador have to do with cryptocurrency?

Popular among those who want decentralized economies, cryptocurrency is becoming more mainstream, but some countries seek to regulate it while others such as China ban it. In September the Ukrainian Rada (parliament) voted to legalize cryptocurrencies and tried to create a regulatory structure, but in October President Volodymyr Zelensky, wishing to dispense with the regulator, vetoed the bill. 

Photo by Oswaldo Martinez on Unsplash

In June, the Central American nation of El Salvador, population around 7 million, was bolder, declaring bitcoin to be a legal tender, at the behest of President Nayib Bukelew. Bukelew, a head of state who often wears a backwards ballcap, intends to build a «bitcoin city,» where geothermal power from a volcano will power the high-energy computers to mine new bitcoin. 

Discovering profitable uses of blockchain beyond cryptocurrency: A game and a tool

Miroslaw Shpak is particularly interested in exploring new possibilities for blockchain. 

OnlYourz, where Miroslaw is chief technological officer, helps secure the copyright for works of art with the help of blockchain. An artist can take a photo of his painting or a scan of his sculpture and put it into a decentralised database, where the upload will be marked with a timestamp: It thus becomes an NFT, a non-fungible token registered and protected in the transparent blockchain. 

Later, it can be even used as evidence before a judge to safeguard intellectual property while avoiding long bureaucratic procedures in the state institutions.

World of Defish

Miroslaw and his team are also creating a computer game, World of Defish, based on blockchain. World of Defish will enable users to sell their NFTs, in this case precious elements discovered in the course of playing the game, directly to other players, bypassing the game’s servers. This simplifies the process of making money through gaming. 

Also, blockchain games allow the reuse of data. For instance, if a developer creates a character, he can sell it so that it can be used in other games. Miroslaw and I wondered whether, just as reusing materials is a way to mitigate ecological problems, the same can be done with data to make its replication more controlled in the global digital environment.

(The Collins Dictionary named «NFT» the word of the year for 2021 given the rapid spread of decentralised database technologies.)

Starting a blockchain project can be easy

Even though these processes seem to be quite complicated, developing blockchain projects is usually quick and effortless in the start, according to Miroslaw

«This is how it works in the sphere of blockchain now: prepare quickly some project and look at people’s reaction. If it catches someone’s attention, and attracts money – you continue doing it. That is, preparing a lot of small things without carrying much, and then choosing the most promising and developing them».

Though Bitcoin is the most used cryptocurrency, there are also Ethereum, Dogecoin, Algorand, and thousands of smaller ones. One of their specificities is that exchange rates change rapidly, so they must be constantly monitored on the cryptocurrency exchange platforms. Ethereum, which is roughly a 1/14 of the Bitcoin’s price, is Miroslaw’s favourite. It uses the «proof of work» method to ensure the trustworthiness of new transactions, but is working to transition to «proof of stake.»

Proof of Work versus Proof of Stake

«There are consensus methods – mechanisms with which different servers agree between themselves on the state of the database, which is fully replicated in each of them,» he says. «They all are decentralised, so there must be some common protocol.»

Not this type of mining … though bitcoin mining does require significant energy | Photo by Dominik Vanyi on Unsplash

Bitcoin, Myroslaw explains, uses the method called proof of work. Using individual miners, the computers, to solve the complex algorithms, it ensures all the transactions are approved by the common consent of the network users. Another method is proof of stake, which doesn’t use mining [and requires less energy]: a validator contributes a stake, some crypto, in return for the chance to validate a new transaction and earn more crypto as a result. 

«At the moment, Ethereum uses proof of work, and it’s quite a complicated method which eats a lot of electricity.» (Think of the volcano plan to power computers in El Salvador.) 

«There were ecological claims against Bitcoin, but it doesn’t plan to change it, as far as I know. Ethereum, on the other hand, has long been preparing to transfer to something more ecological and faster. Moreover, proof of work is pretty slow, because the complexity of tasks is gradually increasing, and at some moment it will become unsolved.» 

Miroslaw Shpak predicts that as soon as Ethereum transfers to proof of stake, it will become fully usable, and its «price of gas» (the cost of using the network to perform a transaction) will become minimal. Consequently, the price of Ethereum may grow at least in the next year or two, because its usefulness will increase.

Cryptocurrency and geo-political struggle for control

The engineer points to global politics speaking about the factors that can influence the cryptocurrency growth.

«China bans crypto every three-four years [as new forms arise], it usually happens in October. In that period, its prices fall, sometimes fall hard, but nevertheless, they continue to grow. Sooner or later, it will drop, and then go on a plateau».

Therefore, he says, it would be too naïve to idealise the future of cryptocurrencies without predicting different scenarios.

«There is one variant, by the way. I think that Ethereum won’t be used for long. If states will transfer to cryptocurrencies, each of them would probably create their own one, because none would want to be dependent on something which they cannot influence. Probably, Ukraine will create karbovanets, its own digital coupon. China has already created its own one [despite its ban]. It’s quite utopic to think that there will be one cryptocurrency for the entire world.»

Taking this into account, it’s possible to predict the risk of crypto devaluation, Miroslaw says.

«Probably, at the moment when all countries will create their cryptocurrencies, the prices for all of them will drop, because people will see that there is no sense in investing if they will be forced to buy a local one. Maybe, in this case, Ethereum will become something like SWIFT [the global financial messaging service], so that the cryptocurrency of one country can be converted into another country’s one» – Miroslaw assumes. 

Nevertheless, putting blockchain under the control of one stakeholder leads to a risk for transparency. For instance, Miroslaw points to the Binance smart chain, which is an equivalent to Ethereum and gradually attracting more users from other blockchains.

The main difference is that all its servers are controlled by one company and other machines are not allowed in this network, which means that they use the proof of stake. This allows them to set a much lower «price of gas.» The disadvantage is its dependence from one stakeholder (the company Binance), and though it promises its users it will not cheat them, such a risk still remains.

«They can tell all the servers, for instance, to remove some transaction, though it mustn’t happen in blockchain. In Ethereum, it’s impossible to do so, because there are millions of stakeholders there, and you should negotiate with each of them to do this.»

Nevertheless, Ethereum will transfer to proof of stake, perhaps by the middle of 2022. 

How resilient is blockchain?

Miroslaw Shpak is optimistic about the resilience of the blockchain’s software. For example, he suggests a situation when an earthquake destroys most of the servers which contain this technology. The system will survive even if just one remains, as it’s fully replicated on each of them. 

Photo by Roman Mager on Unsplash

«If, supposedly, there would be some local blockchain in Kyiv, it would be possible to destroy it somehow if you cut the city off the internet,» he says. «However, if only one server with this blockchain remains, all other machines, after they are repaired, will replicate the info from it.»

Regarding the type of server which hosts the blockchain, Miroslaw Shpak says it can be cheaper to use cloud services in case of low capacity (which demand less electrical power), while performing high capacity operations would have less cost when using own servers. These schemes are often preferable in the case of Ukraine.

«The capacities are high, and we have cheap electricity. Therefore, creating a server by yourself and hiring one sysadmin who would take control of it would be much cheaper than using, for instance, Amazon Web Services, which are one of the most expensive.»

How do people get involved?

If someone would like to start investing in cryptocurrencies, Miroslaw suggests the scheme he uses himself: downloading Binance, a crypto-exchange, investing first $50, and then – forgetting about it and accessing the account in a year. With the current tendencies, the profit is annually two – or threefold, according to him. 

Another blockchain sphere to try is DeFi – decentralised finances, or banks created on top of cryptocurrencies. For instance, developers can create other cryptocurrencies using the smart-contracts within Ethereum, which remains the basis, but they have enough space for actions, such as creating a kind of digital deposit. For instance, on the PuncakeSwap platform if a user buys a cryptocurrency from them and puts it on their deposit, he will get regular dividends, and this platform is decentralised and not controlled totally by any stakeholder. 

The future of blockchain and Ukraine

Speaking about popularisation of blockchain among developers, Miroslaw points out its value in the eyes of investors.

«It’s quite easy to attract engineers, you can just show them salaries. They are now so highly demanded that companies don’t hesitate to offer $10-12,000/month, even for not very complicated knowledge. You should know how blockchain and smart-contracts work – and that’s all. And also, the desire to work with web3, which is a library for the communication with blockchain.»

Kyiv’s Maidan, or Independence Square. Photo by Maksym Diachenko on Unsplash

The engineer says Ukraine is a popular country among European and American clients who massively start blockchain projects and seek to hire developers for this purpose. 

«Therefore, if they see that in Ukraine, they can pay people $2,000/month, it’s quite pleasant for them, and they are ready to cooperate. At the same time, our developers are glad to make this money.»

These salaries can be seen on the new Ukrainian analytical service Djinni, where the average salaries in the IT sphere is presented.

«This mine is so big, that everyone is in the rush to dig deeper, so that it’s hardly possible to predict what will happen in two months», -Miroslaw says.

On 28 November 2021, one Bitcoin was valued at $54,836; down from 68,925 on 10 November. At the start of 2020, it was $7,200. There was a time, say in 2013, when the value was only in the double digits. 

Vietnam, India, and Pakistan are the other three top countries for individual cryptocurrency adoption, according to Bloomberg. 

Lviv today and IT Arena: speaker’s impressions

Lviv with its current appearance also created a highly positive impression on the Odesa dweller, who often has visited the city. Now, the atmosphere of the city centre, as well as the recently renovated railway station, are the things he notes the most.

Despite the fact that there was little chance to meet in-person with other participants of the IT Arena, Miroslaw appreciates this experience, especially the two afterparties that obviously were held offline. There, he had a chance to meet Yura Fedorenko, a leading journalist of Ukrainian IT engineers media Dou.ua; Vitalii Diatlenko, technical director of a Kyiv-based ride-share company Uklon; and Dmytro Voloshyn – CTO of Ukrainian company Preply which provides a language learning app and e-learning platform on a global scale. The two favourite meetups for Miroslaw Shpak were on the topics of Fintech and machine learning.

Find more stories about the 2021 IT Arena here on Lviv Now: The best tech wisdom from Lviv’s annual IT Arena festival.

Myroslaw Shpak is also co-founder of the outstaffing platform B2D. Previously, he owned the company Shuttle Software, worked as a head software architect at Coelix, and was a technical lead in a London-based software development company Yellow Brick Technologies. You can see more at his LinkedIn profile. He expects World of DeFish to be ready for play by year’s end. 

By Vitalii Holich, with Joe Lindsley

To receive our weekly email digest of stories, please follow us on Substack. Follow Lviv Now on Facebook and Instagram, @justthebestcityintheworld.

Lviv Now is an English-language website for Lviv, Ukraine’s «tech-friendly cultural hub.» It is produced by Tvoe Misto («Your City») media-hub, which also hosts regular problem-solving public forums to benefit the city and its people.

 



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