ErgoPad is an innovative cryptocurrency project built on Ergo, a smart contract platform (ERG). On its website, ErgoPad says it is not an investing platform but a project incubator that aims to build human solutions for the global financial future. They do this by offering token IDOs (initial dex offerings), which provide funding for new projects within the Ergo ecosystem. ErgoPad’s goal is to enable ordinary people to engage in commerce privately and without centralized limitations. In this interview, we chat with Marty about the crypto space, privacy, and cybersecurity, what makes the Ergo project unique, the future of digital assets, and much more.
What’s Happening in the Crypto Space?
How do you view crypto today?
Marty: There’s a lot going on in the crypto space right now. For instance, a Tornado Cash developer was arrested for writing code. Tornado Cash is a mixer that concerns the government because it can be used to launder money, but it was not necessarily designed for that. People think crypto should be fungible, just like money, so they use mixers to regain their privacy and hide previous transactions. You don’t share all the transactions of your bank account with the public, so why would you want to share your crypto transactions? That’s where a mixer comes in; it mixes your coins with others to hide previous transactions. Without mixers, because most crypto is a public ledger, if your wallet gets doxxed, your transactions are public. However, since some people can use mixers to launder money, regulators want to ban them completely. There is a battle between regulators and users who need a fully private way to transfer money. As such, there’s a big push for KYC (know-your-customer) and AML (anti-money laundering) regulation, which means we are moving to a regulatory environment where all VASPs (Virtual Asset Service Providers) must do KYC for all transactions. This is even being pushed to the DeFi (decentralized finance) space. So, my view is: if everything is public and regulated, and all users must KYC with all platforms, why not just use centralized platforms again? What’s the point of using crypto, which comes with some drawbacks over legacy systems, such as speed and scaling, if we still have all the same problems we had with legacy systems?
What are your thoughts on blockchain technology?
Marty: I think it’s important for people not to lose sight of why we use blockchain. Blockchain is designed to provide full freedom to use our money and access financial technology throughout the globe. If we’re not careful, it can turn into the legacy systems we are trying to get away from, a.k.a, the centralized bank system. These systems limit people from using them. How do we globalize the planet if we’re picking and choosing who gets to use the tech that is available to us? The most marginalized people of the world are hit hardest by sanctions and, beyond that, limited access even to basic banking systems. For instance, I have read that over one billion people on the planet do not have a bank account. Crypto can help solve this. Anyone can make a crypto wallet in seconds and use it to pay anyone on the globe for goods or services. People in America laugh when you say crypto is a hedge against inflation and point out that Bitcoin has lost a lot of value over the past year. But, in countries where the government inflates the currency drastically, such as Turkey, Argentina, and others, crypto can protect those citizens’ wealth by allowing them a safer place to store it. Even if Bitcoin drops 75 percent (and note that many blue-chip stocks dropped the same amount over the same period), it’s still better for people in countries with hyperinflation to stay out of their native currency. I think governments in first-world countries are afraid people use crypto to launder money and avoid paying taxes, but I think taxes are fair in a lot of ways. I don’t think crypto is meant to help people avoid paying taxes or to launder money. This is a misconception. We’re not here to launder money, just here to have fair access. A country can’t run without taxes. After all, a community of people has shared needs, and we need to pool resources to build infrastructure. Taxes are a good thing, and crypto can facilitate financial privacy without preventing governments from collecting taxes.
Online Privacy
Where does online privacy fit in?
Marty: I think it’s important people develop good self-custody practices. A lot of people have lost money on centralized exchanges. So, learning how to use cold storage is important. Ergo has a very cool way to do cold storage, which only requires an old cellphone! How many people have an old cell phone in their drawer? You can factory reset it, download Ergo’s mobile wallet, put it in airplane mode, and create a cold wallet simply accessible with a simple QR code. You go to a dApp (decentralized app) with any internet-connected device, generate a QR Code for your cold wallet, and the signed transaction can then be submitted by your main device with your wallet never being exposed to the internet. It’s important to be air-gapped this way for larger sums of money, but very easy for anyone to do.
What are dApps?
Marty: dApps are like traditional apps, but the bulk of what happens is meant to be on-chain in a decentralized way. This allows anyone in the world can access that software without limitation. Like Tornado Cash, which we mentioned before, despite being sanctioned, the smart contracts still live on-chain, and anybody can use them. Typically, this is how a dApp should be set up, not to circumvent fair laws but to allow people to take control of what they do with their money. For instance, if you’re using Tornado Cash to make your on-chain activity private, but you aren’t laundering money, why shouldn’t you be allowed privacy? This is an example of where unfair laws harm the general public more than they do to protect them and a great example of where DeFi and dApps come in handy. What this means is that individuals get to make their own choices about what they do with digital assets, and if an individual breaks the law, that individual is responsible for the repercussions. A dApp does not have a political leaning, and when designed correctly, anybody can use it at any time, regardless of a third party wishing to stop them. What if you are a farmer in a rural area of a country with limited banking services, and you don’t have an ID, but you want to start exporting your goods to buyers who can only pay digitally? If you cannot get a bank account, and the buyer won’t travel to your country to pay cash, you cannot access that market. Crypto can solve this problem because you don’t need an ID to make an account or access DeFi. On Ergo, a company called Zengate Global is building crypto-based commodities markets that allow people to access global markets exactly this way. The Sri Lankan Tea traders have already signed on to have their commodities put on-chain into a DeFi marketplace. This will give unbanked Sri Lankan farmers access to a fair global market and cut out most middlemen who extract value between the buyer and seller.
We’ve heard about the DAO revolution recently. What are DAOs?
Marty: DAOs (Decentralized Autonomous Organizations) allow you to put governance on-chain and make collective decisions in a trustless way. It will enable people to vote on how pooled funds are spent. We’d like to start experimenting with DAOs and on-chain governance, and we are building a platform called Paideia on Ergo to do just that. The goal of a DAO is to remove corruption from collective decisions regarding money and how it’s spent, as well as to give full transparency to all stakeholders. Smart contracts ensure all votes are incorruptible, and funds are always sent to the correct place when a vote takes place.
Cybersecurity
What should the average person know about crypto-wallets?
Marty: Common self-custody wallets for the EVM (Ethereum Virtual Machine) include Metamask and Trust wallet, along with many others. Metamask has done geolocation blocking, so it’s not great, in my mind. Where transactions are concerned, you can start to think about whether you like the Bitcoin model, UTXO (unspent transaction output), or the Ethereum accounting model. Some newer technologies being tested are extended UTXO, which takes the Bitcoin model and adds smart contracts. The DeFi coming out of that model is much safer than EVM, meaning there are fewer ways to exploit dApps, and eUTXO does not have gas fees which makes interacting with dApps much cheaper. Examples of eUTXO chains are Cardano and Ergo.
What does zero knowledge mean?
Marty: Zero Knowledge Proofs or ZK Proofs allow you to batch transactions off the chain to scale better. Blockchain can only scale so much before the network gets congested. If you use ETH (Ethereum), you pay “gas” fees which can be very costly, so ZK Proofs allow you to build a second layer on top of the main chain, where users can make secure transactions but not pay gas individually. Think of it like this: if 100 people send money around in one block, a ZK Rollup can combine all those transactions in the fewest actual on-chain transactions possible and split the gas fees amongst them. Other blockchains that don’t use EVM don’t have gas fees, but they will still use Layer 2 protocols and ZK proofs to add speed or scaling on top of the base layer.
Smart Contracts
Could you tell us about smart contracts or financial contracts?
Marty: Smart contracts are the backbone of DeFi. Using smart contracts, decentralized exchanges can allow fully trustless transactions and decentralized marketplaces for any on-chain asset. People in the U.S. and other wealthy countries can easily invest in the U.S. stock market through their banks or another trading platform. However, people in some countries can’t do that because they don’t have those services. Some platforms create synthetic stocks, giving anyone access to stock markets, lending protocols, and other DeFi tools. This allows anyone around the globe to level the playing field against citizens of wealthier nations, giving them investment vehicles to build their wealth.
Stablecoins
What are these collateralized stablecoins that we keep hearing about?
Marty: There are two ways to create collateral to maintain a stablecoin peg: you can have an on-chain algorithm that handles that, or a centralized third party can take care of it. With USDT and USDC, people send them BTC or USD, and they generate on-chain tokens to represent that value. You have to trust them to hold those assets and maintain the peg. Terra Luna claimed to be an algorithmic version of the same thing, meaning it didn’t require trusting a third party, but it turned out to be more of a Ponzi scheme than an effective algorithmic peg. Because of Luna’s failure, people think all algorithmic stablecoins are bad. However, not all are created equal. SigUSD on Ergo has never lost its peg because the algorithm was written in a sensible way, and the design has worked even from a bull market through a prolonged bear market. SigUSD is based on the AgeUSD protocol, and an updated version will be launched on Cardano, called Djed.
How are coins like Monero taking on privacy concerns? What about Cardano’s Midnight?
Marty: Monero does not have a public ledger, so people’s transactions are obfuscated. On public blockchains like Ethereum, you can view the blockchain and see the full transaction history of every wallet. Due to this, governments have sanctioned specific wallets, and any wallet that receives money from them is also met with sanctions. Money is supposed to be fungible. Every dollar should be indistinguishable from every other dollar. What if somebody did an illegal transaction like a drug deal, and the government knew which bills they used? Then, that money moved through the system, and somebody used that money to buy a car from you (a completely legal transaction, obviously), but because those bills are now marked as proceeds of crime, your bank seizes the money when you try to deposit it. You’re out of money but did nothing wrong. This is what’s happening with crypto now. Because it’s so easy to identify where certain crypto comes from, governments and regulators are forcing centralized exchanges to block transfers of assets from specific wallets, even if those wallets didn’t engage in any illegal activity, just because somebody before them did! Monero doesn’t suffer from this issue because all transactions are private all the time. Monero does not have smart contracts, though. At the moment, no privacy coin has smart contracts. There is a new side-chain coming to Cardano called Midnight, a privacy-focused layer two that should provide privacy functions alongside DeFi. Hopefully, others will follow suit.
Regulation and the Future of Digital Assets
Who are these regulators?
Marty: Think about FATF (Financial Action Task Force) guidelines. These concern AML and terrorist tracking. FATF provides guidance to countries, each with its own regulating body. The way AML is enforced now with crypto prevents regular people from investing in crypto projects. Often average citizens are blocked from investments just because of where they live. The FATF claims they want projects to collect this data to prevent money laundering and terrorist financing. The ultimate goal of this organization is to have a record of all transactions by all wallets in crypto connected to personal info. Is this meant to protect people, or does this just limit commerce and freedom? I’ll leave that up to you to decide.
Do you believe in digital assets?
Marty: There’s an opportunity for digital assets and digital money to be used in a good way or a scary, surveillance type of way. We need to decide how much power we want to give to it. CBDCs (Central Bank Digital Currencies) are basically digital surveillance currencies that track everything you do at all times. A government in control of a CBDC could seize your money at any time. If you are a journalist, for example, and they don’t like something you said, they could take away everything you own in an instant. I believe crypto could be a powerful tool for financial freedom, but if people aren’t careful, it could also be a powerful tool for surveillance and corruption. We are at an impasse, and I hope the general population can get over the crypto-bro stigma and image NFTs and see the potential crypto brings.
Closing Comments
Marty, thank you very much for your time, and we wish you the best of luck with your endeavors. Please keep us posted! Marty: I appreciate your time, and I’m glad there are people like VPNOverview that help people behave in a privacy-oriented way online. Keep up the good work, and keep helping people protect themselves. [The content in this interview represents Marty’s personal views]
