Daily Bits – chickens, ether and bitcoin bills – June 26th, 2017

My article on CoinDesk this week –  Counting Chickens: Can Blockchain Restore Trust in China’s Food Supply?

These essays are taken from the weekly CoinDesk email, which I produce. If you don’t subscribe, you should, they’re kinda fun (even if I say so myself).

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As the price of ether retreats, this is a refreshing take on its outlook.

If you’re tired of the hype surrounding ethereum, you’ll like this article. Bitcoin miner and investor P4man takes a look at the fundamentals and makes some observations about the ether token’s outlook.

For instance:

  • Virtually no traction as a transactional currency (no merchant infrastructure, little evidence it’s used for remittances or similar)
  • Due to its complexity, it’s not a good store of value
  • It does not offer trust or predictability (vis hard fork)

And then there’s this:

“Despite hearing many claims to the contrary, ethereum with its vastly more complex blockchain, has a much bigger scaling problem than bitcoin, that is yet to be solved, even in theory. Concepts exist to address this problem (“sharding” etc), but those do not exist yet and may not even work.”

Plus, if we accept that a large part of the run-up in the price of ether was due to the demand for tokens with which to participate in ICOs, then for the ICO promoters to use the raised funds, they will have to sell those ether. Which could lead to downward pressure on prices.

Which may be what we’re seeing now. At time of writing, ether is ___% down from its recent high.

However, it looks like the ICO craze is not over yet, so ether could well rebound. I just don’t know when, or by how much (ie. this is not investment advice! – I do not hold ether.)

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A good thread on decentralization:

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Artist Matthias Dörfelt wrote a program which, for each bitcoin block input, outputs a design for a bitcoin bill. As in, a paper currency version of bitcoin.

by Matthias Dörfelt, via Co.Design
by Matthias Dörfelt, via Co.Design

To top it off, Matthias hand-signs each bill “Satoshi”. Because. And, notice the shadowy figure in the centre of each design.

by Matthias Dörfelt, via Co.Design
by Matthias Dörfelt, via Co.Design

I spent years teaching my daughter not to ask “why?” when it comes to art. I’m beginning to wonder if maybe she was onto something after all.

(Via Co.Design.)

 

Daily Bits – central bank currencies, blockchain ad servers and cookie dough – June 23rd

JP Koning brings up central bank digital currencies (CBDCs), and explains the difference between account-based money and bearer-based money. Most economic accounts of CBDCs, he says, only talk about the former. However, society needs the latter for “robustness”.

In account-based money, payments go through a central authority (say, the issuing central bank) that verifies we have enough in the account and that we are who we say we are. Then it authorises and executes the transaction. Bearer-based money is more like cash. Onus on the execution lies with the user, and the ledgers are adjusted off the central issuer’s books (if I give you €20, it’s understood that it’s now yours and not mine).

A CBDC that only works with account-based money will be vulnerable. Technological glitches happen. Servers go down, settlement platforms can break and mobile telecommunications can have outages. Cash, on the other hand, keeps on working throughout.

So, says Koning, to avoid a step backwards in a future move to CBDCs, in which society is left worse off than it is today, we need to develop a digital form of bearer-based money.

I know, at this stage you’re probably screaming “Bitcoin! Bitcoin!”. But we’re talking central banks here, so…

Koning posits that a solution could be “digital tokens”. A central bank could issue digital tokens onto a distributed ledger, and verification could be outsourced to nodes spread all around the world. This sounds bitcoin-ish, but the central bank retains control of the issuance. An intriguing compromise.

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Favourite tweet of the day:

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I might start a collection of blockchain “applications” that don’t really need blockchain. The fun part will be removing them from the list as I find out that, wait a minute, maybe the blockchain can help…

Anyway, here’s one that I don’t yet “get”: serving online ads. I understand that there’s a lot of fraud, and that the blockchain’s transparency can help with the trust. I also understand that a decentralized “marketplace” for ads could lower costs and spread the income.

But, given the sensitivity of certain messages and images, a totally decentralized ad serving platform will be a hard sell. Someone has to vet, and someone has to take responsibility if sensibilities are offended. If I were to host ads on this site (not going to do that), I would prefer the centralized, more expensive version to a decentralized one that might display pornography.

And, as this article in Digiday points out, there’s the transaction confirmation speed to worry about.

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Cookie dough!!! By the scoop!!!!! OMG!!! (Via The New York Times.)

via The New York TImes
via The New York TImes

IMAGE

Daily Bits – distributed storage, tweetstorms and cities – June 22nd, 2017

I’ve been pondering for a few days now the question of why decentralized file storage is better than centralized file storage with a trusted third party that can be held accountable if things go wrong.

And then this morning I come across this article published on Coin Center’s blog, written by Juan Benet, Jesse Clayburgh and Matt Zumwalt of the Protocol Labs team (a startup that focuses on data storage problems – so they know a thing or two).

These are the arguments against centralized cloud storage:

“This architecture makes the web brittle, undermines privacy, allows the price of storage to remain artificially high, and creates bottlenecks that prevent innovative new uses of data.”

Okay, I get that.

I’m also intrigued by the idea of locating files by what they are, not where they are. If a webpage calls a file now, it references it by where it’s stored. That, as the authors say, does make the web “brittle”. Move the file, and the call no longer works.

The authors helpfully compare this to pulling library books by their location, not their title.

Add to that the economies of scale of harnessing all that unused computing capacity (just on my laptop I probably have a fair chunk).

So, I’m liking the idea. But I still don’t see how this system will get enough of a network effect going to be practical. Website code will need to be re-written, and given the vast size of the ecosystem, the incentives will be tricky. If indeed possible.

But, just because something is “too big to change”, doesn’t mean we shouldn’t try, right? Look at the valiant cryptoeconomists working on imagining a new central banking system.

A daunting task, though. But one that I am now more interested in.

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An epic 37-tweet thread from Naval Ravikant that, although it’s long, showcases the discipline of having to work within 140-character limits:

It includes gems such as this:

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Diverging from blockchains for a second, I came across an illuminating article on the three different types of cities: suburban (built for cars), hypertrophic (built for transit) and traditional (built for walking).

This reminded me of something I read recently by urbanist and philosopher Jane Jacobs, who asked: “Are we  building cities for people or for cars?” I know which type I prefer (hint: I don’t even have a car.)

I do, however, recognize the impracticality of having a totally walkable city. Pity.

city traditional
Traditional city

 

Hypertrophic city
Hypertrophic city

 

Suburban city
Suburban city

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Finally, an article on digital identity that recognizes that the incumbents may have a say in how this turns out. But, they may be amenable to a business model mutation: “Hey, so you lose all this income from the identities you control, but just think about all the extra users you’re gonna get!”

Okay, it needs some work, but it’s a start.

Moral: the incumbents aren’t going to let go of their stronghold on our identities without a good reason.

 

 

Daily Bits – identity again, ICOs and thread – June 20th, 2017

My colleague Michael was at a presentation at the UN yesterday that focused on identity. Neil McCann of the UNDP (who was excellent on our “Global Issues” panel at Consensus, which you can see here) stressed cross-industry collaboration, urging the private sector to join the UN initiative to develop a platform for digital identities.

An especially intriguing part is this: the UNHCR representative speaking at the event insisted that the eventual identities need to be owned by the individuals.

While this may seem obvious on the surface, it isn’t when you think about how identities are granted today. Our identities are not owned by us – if our government decides to revoke our passport, it’s very hard for us to prove who we are.

Spinning out a sovereign identity platform for refugees (although they are not the only target “market” for this service) would have a huge impact – not only on how aid is delivered, but also on immigration, education, possibly even finance. The effect could be much wider than we dare to imagine.

To coin a phrase: “bring it”.

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Favourite tweet of the day:

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If you’re contemplating doing an ICO (really????), read Emin Gün Sirer’s take on Bancor first. It’ll provide strong guidelines on what not to do.

Bottom line, you should:

  • Address a real problem
  • …without mumbo-jumbo terminology

He doesn’t attack the code (well, a little bit) as much as the business model. Which, in this manic eurphoria, disconnected from fundamentals, is refreshing. And sensible. Hype cannot stay disconnected from reality for ever…

What’s more, whether you agree with Gün or not, the prose is sharp:

“‘Double coincidence of wants’ is a real problem in economics today in the sense that the ‘itsy bitsy spider’ problem is a real problem in zoology — that is, it’s something one might learn in grade school, and it’s completely irrelevant in the real world.”

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In no way am I into embroidery (I once tried a colouring book for adults… and realized that I’m just not that stressed.) But this is captivating:

3d embroidery

3d embroidery by Justyna Wołodkiewicz, an abstract mix of thread and clay. (Via Colossal.)

3d embroidery 2

Daily Bits – currency, tulips and tables – June 19th, 2017

A fascinating article from JP Koning on his blog Moneyness, on currency:

According to the monetary theorist Henry Dunning Macleod, currency used to be used an adjective, not a noun. Certain types of goods or instruments were considered to be “current” in the eyes of the law and common business practice. They were said to have “currency,” but were not themselves currency.

An item had “currency” if it could not be reclaimed if stolen. Coins, for example, belonged to the holder. (They still do.) But jewellery – at the time McLeod was writing, the 1800s – belonged to the original owner, and so was not “current”. The holder had to be able to prove that he/she had legally obtained the item.

Interestingly, McLeod did not consider bank deposits “currency” since they could not be transferred to someone else (back then). Stock certificates, however, were.

This illustrates that an item didn’t have to be money to have currency (e.g. bonds were considered to be current), nor did it have to be government-issued to be current (banknotes and bills of exchange were privately issued).

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This chart taken from a World Economic Forum post on the future of work is worrying, not for the overall message (because, like, we know), but for the detail offered.

via the World Economic Forum
via the World Economic Forum

I live in Spain (#3 in terms of most-to-lose), where unemployment is already the second highest in the European Union, at over 18% (not far behind Greece, in case you were wondering).

Add that to the almost 12% job loss that the chart shows, and you have an almost 28% unemployment rate. Yikes.

No doubt there will be many jobs created by automation. Someone has to take care of the machines and/or code, after all. But still, ouch.

And yet we hear nothing from the relevant ministries about plans to offset, compensate or handle this.

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Elaine Ou had some pithy observations about the ICO frenzy in her blog Elaine’s Idle Mind (a misnomer if ever I saw one):

“…the money is about as real as unexercised tulip options. Tokens aren’t sold for dollars; they’re sold for ether.”

“Today’s impressive half-billion dollar value is an impractical conversion — You can’t liquidate 1.6 million ETH without crashing the market.”

“The total amount of ether funneled into tokens is but a fraction of the 11.8M ETH dumped into the DAO.”

Worth a read. Unless you have a strong affection for striped tulips, in which case you might find it traumatic.

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A coffee table design based on Princess Leia’s buns??? Okay.

by Zaha Hadid Design, via Dezeen
by Zaha Hadid Design, via Dezeen

Daily Bits – facepalms, tokens and chess – June 15th, 2017

In the past couple of days I’ve read some staggeringly misinformed interpretations of the potential of digital currencies. It could just be the heat making me fractious, but c’mon, really…

First up: an article in Business Insider on crypto (and cryptic) comments made by the head of the Bundesbank, Jens Weidmann. I disagreed with something in almost every paragraph – I’m assuming that it’s because of poor reporting, Jens seems like a smart guy.

Perhaps the most egregious infraction is his alleged concern that central bank digital currencies will make the financial system more unstable by exacerbating bank runs. It’s so much easier to withdraw your deposits online than having to wait in line at the ATM. (Why would you even have deposits at shaky commercial banks with central bank digital currencies???)

Then came the normally quite good Investopedia, reporting on a proposed bill that hopes to force entrants into the US to declare their cryptocurrency holdings at the border. Um, how would they enforce this? Got that covered: “a global monitoring system could be put in place to watch over blockchain ledgers”. Of course. Yes. That should do it. And the crypto communities won’t mind at all.

One small thing: just who would do the monitoring? Ever heard of JURISDICTIONS?

Deep breath…

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Digital token fever seems to have hit a high this week, with the (perplexing) Bancor issue raising $125m ($150m using the ether price on Monday, the day of the sale) in under three hours.

And then Civic went and sold out of its IPO… before it even started. But, in what is probably an unprecedented move, investors will return one third of their tokens so that others may have a chance to bid for them. Extraordinary.

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Other particularly interesting articles on CoinDesk this week:

Kasakhstan’s central bank wants to use blockchain technology to sell debt directly to investors. Why, I’m not sure. Maybe it’s the rapid settlement? Although that would mean that investors would need blockchain-based currencies with which to pay. I need to look into this some more, it’s perplexing.

A step forward in smart contract deployment came from Thomson Reuters, who released in beta a “smart oracle” that will give smart contracts access to its financial data streams. The question is: how decentralized is this? Thomson Reuters’ data has a reputation for being reliable – but are we supposed to trust that? There’s a lot to unpack here on how we can avoid having to trust one source… and if that is worth the usability complications.

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Whether you like chess or not, this is beautiful: a chess set modeled after New York buildings (via MyModernMet).

Skyline Chess, via MyModernMet
Skyline Chess, via MyModernMet

Daily Bits – books, crashes and vodka – June 13th, 2017

MoneyConf was fun, and a very slick production (they have an impressive event app, with a smooth signup and easy chat function). It’s intriguing how enmeshed blockchain is becoming with fintech in general. One of the panels had CEOs from both blockchain and non-blockchain companies talking about technology in trading. And I got to interview fintech expert Brett King, not exclusively about blockchain, but obviously that was the focus.

Here are the articles I wrote for CoinDesk on the event:

The best part for me? The incredibly cool, smart and fun people I met. 🙂

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I may have mentioned that I’m a sucker for book lists. Love them. They motivate me to reorganize my life so that I have more time to read. They make me hopeful for a future in which I am smarter and better informed.

Today I came across a website that is NOTHING BUT BOOK LISTS!!

Fivebooks lists the top five books as recommended by a range of thinkers, writers and doers. Addictive, hypnotic and the black hole of time management.

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And speaking of books, check out these stunning libraries, via MyModernMet.

photo by Thibaud Porier, via MyModernMet
photo by Thibaud Porier, via MyModernMet

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A few days ago the International Business Times carried the best explanation of Quorum that I’ve seen:

“As to monetisation, J.P. Morgan insists they are committed to a long term view. If Quorum is Apple’s iOS, then smart contracts are apps like Angry Birds. Giving away the operating system means there’s a huge base to buy into new products later on, and therefore no plans to commercialise the existing platform. Possible interoperability with both public chain and other closed enterprise blockchains like those in development by IBM, Intel, Digital Asset Holdings, and a slew or others means Quorum can have their cake and eat it too.”

It also had a pretty good description of the Enterprise Ethereum Alliance:

“The Enterprise Ethereum Alliance (EEA) is a still-forming, non-profit trade organisation out to define standards so applications built on one Ethereum-derived platform run on another, and also ensure there is enterprise-grade tooling and support when corporates are ready to flip the switch.”

And it had an interesting observation about enterprise interest in blockchains in general:

“Any sufficiently adopted permissioned chain starts to look a lot like a public chain,” said [Amber] Baldet, “and even though it might not be open to the entire world, you are only as secure as your most malicious member.” The more robust the network, they suppose, the less risky it will be to do business in markets currently out of reach. It’s this potential opportunity for top line revenue that gets Fortune 500s excited even more so than simply cutting today’s paperwork load.”

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A lone voice crying “be careful!”. (Ok, not so alone, but with so many ICOs emerging, and ETH prices continuing to go up, it seems like it.)

Whalepanda on Medium – I was wrong about Ethereum.

“At one point it will crash, hard. What the trigger will be? Bug(s) in smart contracts, major hack, big ICO startup that fails/fucks up, network split, even something as silly as not having a decent ICO for a couple of weeks which creates sell pressure from miners and ICO projects can cause a big crash. It’s not a question of “if”, it’s a question of “when”. That being said: Markets can remain irrational for quite a long time.”

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Talk about viral advertising:

 

Daily Bits – healthy bubbles, an ad-free future and cool cakes – June 4, 2017

The Economist magazine published two articles about blockchain technology this past week. One focused on how it can help governments with all sorts of processes, and gave concrete examples from Sweden, Estonia, Georgia and Ukraine. I especially liked this quote from the deputy head of Ukraine’s e-government agency.

“Most officials don’t understand what we’re doing, so they don’t sense the threat.”

Another article asked whether bitcoin’s price rise was the result of speculative mania, or a realisation of value. It points out that, unlike tulips, bitcoins are actually useful.

“If there is such a thing as a healthy bubble, this is it.”

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This article on CoinDesk – A Counterargument to the Value Proposition of Ripple’s XRP Token – helped me understand Ripple better.

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So Google will release its own adblocker… and let publishers charge readers who use other adblockers. Maybe that’s monopolistic, but my takeaway is that the number 1 ad server, a company who’s revenue largely depends on ads, publicly acknowledges that ad-free experiences are the future.

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Apparently “brushstroke cakes” are a big thing now. I can see why – softly aggressive, stylishly informal, deliciously irreverent. And they look like they’d be so much fun to cut into…

via Bored Panda
via Bored Panda

 

via Bored Panda
via Bored Panda

(Via Bored Panda)

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I’m at the MoneyConf conference in Madrid for the next few days, talking and thinking about the increasing overlap of blockchain with fintech… Plus, I get to moderate a Q&A session with Brett King, host of the Breaking Banks podcast (and author of 5 books, and founder of fintech company Moven, and an excellent speaker). Yes, I get to interview one of the best interviewers in the sector. No pressure.

So, I probably won’t have time to post here until the end of the week. But, I imagine I’ll have a lot to say when I resurface… 😉

Daily Bits – basic income, ICOs and googly eyes – June 3rd, 2017

(Trying something new with the titles…)

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Venture capitalist Albert Wenger muses in his blog Continuations on the advantages and mechanics of universal basic income, and how cryptocurrency can help build such a system.

“This could happen at the existing nation state level and I was pleased to find out that some central banks are actually thinking along this direction. Even more tantalizing is the idea that with crypto currencies such as system could come into existence that lives outside the confines of nation states and helps bring about a global Universal Basic Income.”

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On the usefulness of Google Trends for spotting previously invisible correlations…

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And continuing the theme, this interesting post from Dominik Vacikar on Hacker Noon opens with a comparison of searches for “bitcoin” vs “blockchain”. I confess I didn’t realise the disconnect was so strong.

Dominik Vacikar, via Hacker Noon
Dominik Vacikar, via Hacker Noon

He goes on to explain the difference between hype and bubble – useful and interesting, and it leads me to the conclusion that the talk about bubbles could be pure hype (confusing, I know).

“Trading cryptocurrencies is very social driven — check Twitter, Reddit, Facebook, etc. There are many people trying to hype their own investments, but also many scammers (and I’m not even talking about all the click-bait articles). Given the extreme volatility of most of the coins, this is causing (and will continue to cause) many irrational market moves.”

Dominik throws in a good explanation of crypto trading, and his predictions for the rest of 2017.

“I’m expecting a lot of inexperienced investors will lose money on ICOs — which will further foster discussions about regulation”

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Etienne Brunet offers us a really useful list of companies operating in the ICO space – from protocols to lawyers, from hedge funds to venture capitalists… with a cool market map ‘n all.

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On Thursday I told you about eyebombing… It turns out that there’s a Googly Eyes Foundation!!! Which will send you some much-needed googly eyes! This just gets better and better.

googlyeyes

 

Daily Bits June 1st, 2017

For once I totally agree with Izzy Kaminska of the FT. While I usually enjoy her anti-crypto musings (and occasional rant), I often come away feeling like she’s missing the point. But in today’s article, I think she nails it:

“For the most part, the question that really needs asking is this: What sort of legitimate organisation really benefits from a decentralised or headless state? Also, what sort of company benefits from decentralised funding options or from providing decentralised services? The answer is almost none.”

Notice that she qualifies the answer with an “almost”, which is wise. It leaves open the possibility that there may be some cases in which it would work. But few.

“Decentralisation is, in almost all cases, not an efficiency. To the contrary, it’s a cost that adds complexity and creates an unnecessary burden for both users and operators unless centralised layers are added on top of it — defying the whole point.”

In fact, as Ronald Coase – the originator of “the theory of the firm” – would tell you, centralization emerged as an antidote to the high cost and low reliability of decentralization.

“Decentralisation also undermines professional and corporate accountability. If no-one is prepared to take credit for building an organisation which adds value to society, it implies there’s either an unheard scale of altruism at play or the organisation in question is probably not adding value to society because there’s no real credit to claim.”

Ouch. But, yes.

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Bloomberg published an article that, judging from its title – “This Blockchain Bubble Might Be a Good Thing” – promised to explain to us how the current froth in the digital token market was beneficial. It failed.

Apart from a list of recent initial coin offerings, and a tentative hint that maybe public projects could be financed this way (not sure what that has to do with ridiculously inflated prices), the article had very little to say about why bubbles could be productive.

It did, however, offer this gem:

“A recent token offering called PonzICO promises to apply the proceeds towards buying the founder a Tesla. Token holders get nothing more than the right to vote on the color of the car, and somehow even that project collected nearly $3,000.”

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This:

Absolutely.

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Try this one day – it is so much fun. Trust me.

Grab your kid (if you have one – if you don’t, skip this step), a bag of googly eyes, and your camera or smartphone. Head outside. Stick eyes on just about anything. Take a picture. Keep going until the giggles take over.

These are from Vanyu Krastev of Eyebombing Bulgaria. (I didn’t know there was a term for it! Eyebombing! That just made my day.)

by Vanyu Krastev, via Colossal
by Vanyu Krastev, via Colossal

 

by Vanyu Krastev, via Colossal
by Vanyu Krastev, via Colossal