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Goldman Crypto Report Shows Exchange Tokens, Proof-of-Stake Assets Outperforming

5 years 2 months ago

Exchange tokens and digital assets associated with proof-of-stake blockchain networks have outperformed the broader cryptocurrency market since the end of 2019, while privacy-focused digital tokens have underperformed, Goldman Sachs wrote in a new report.

“As the market matures, monitoring crypto’s market segments may help determine which network features investors are rewarding, as well as the prospect for practical applications of the technologies,” Zach Pandl, Goldman’s co-head of foreign-exchange strategy, and analyst Isabella Rosenberg wrote Wednesday in the report. 

The publication of the report represents the latest iteration of the Wall Street firm’s on-again, off-again flirtation with cryptocurrencies. As recently as June, one Goldman division panned digital assets as not “viable” for client portfolios, but the company’s analysts continue to cater to institutional investors with in-depth examinations.

Related: Inversores institucionales regresan a bitcoin a pesar de posibles impuestos para las criptomonedas en Estados Unidos

Exchange tokens are digital tokens issued by crypto exchanges, such as binance coin, while currency-like assets are represented by bitcoin (BTC). The report categorized chainlink (LINK) as a token used in other applications, and monero (XMR) as a privacy coin. 

Remittance tokens such as xrp (XRP) outperformed the crypto market last November, while decentralized finance-related assets such as uniswap (UNI) gained momentum in January and early February, the report noted. 

Meanwhile, tokens associated with proof-of-stake networks have outperformed proof-of-work tokens since the end of 2019, according to the report. 

Cryptocurrencies are a “top-heavy market” compared with other asset classes, the report noted. Bitcoin accounts for 46% of the cryptocurrency market and ether accounts for 20%, according to the Wall Street firm. In comparison, the two largest stocks in the S&P 500 index account for roughly 12% of the market capitalization, the report shows. 

Related: Crypto News Roundup for Aug. 11, 2021

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How Does Ethereum Staking Work?

5 years 2 months ago

The launch of the Beacon Chain network in December introduced the first iteration of protocol-level staking for Ethereum investors.

Put simply, Ethereum staking is the process of locking up an amount of ETH – the native cryptocurrency of the Ethereum blockchain – for a specified period of time in order to contribute to the security of the blockchain and earn network rewards.

People who do this are known as “validators” or “stakers,” and are tasked with processing transactions, storing information and adding blocks to the Beacon Chain – the new consensus model of Ethereum. As a reward for their active involvement in the network, validators receive interest on their staked coins, denominated in ether.

Related: A Crypto Guide to the Metaverse

This method of staking not only serves as a passive income opportunity for contributors, but it also helps to secure the next iteration of the Ethereum network, dubbed Ethereum 2.0. Ethereum 2.0 is the next phase of Ethereum that runs on the Beacon Chain, Ethereum’s proof-of-stake (PoS) consensus model.

What is proof-of-stake?

As part of plans to enable a faster and environmentally friendly transaction validation process, Ethereum protocol developers are expected to execute a switch from a consensus model known as proof-of-work (PoW) to PoS.

Proof-of-stake is the name of the consensus mechanism that requires users to stake an amount of cryptocurrency to become validators, as described above, as opposed to something like proof-of-work that requires users to purchase and run mining equipment or proof-of-authority where users have to provide evidence of their identities.

Oftentimes, a validator in a PoS system will increase their chances of earning rewards on the network by staking more coins. Depending on the PoS system, users may also be able to delegate their stake to another user who can perform the responsibilities of being a validator on their behalf. 

Why is Ethereum switching to PoS?

Related: What Is Cryptography?

One of the main reasons for the consensus switch is to dramatically reduce the energy requirements for validating transactions and issuing new ETH.  According to an Ethereum Foundation blog post, the team expects the new PoS system will reduce the amount of energy consumed during the validation process by 99.95%.

One reason for that is that the minimum hardware requirements to run a PoS validator node are significantly cheaper and easier to access for the average user than the advanced computer hardware needed to be a crypto miner. Staking, unlike mining, can be done on everyday computers or laptops, and so it removes the need for electricity-guzzling mining equipment. And, because it’s more accessible, it also means there’s a strong possibility the new 2.0 system will attract more node operators. That in turn will help boost the new network’s decentralization.

PoS on Ethereum is also intended to lay the groundwork for “sharding” – a partitioning technique that allows multiple parallel chains to share data and transaction load efficiently.  These shard chains, when combined with a secondary scaling product known as “rollups,” could allow Ethereum to process upward of 100,000 transactions per second. That’s a huge leap compared with the 10-15 transactions per second it currently processes.

Rollups involve batching dozens of transactions together off the main chain, creating a cryptographic proof for them (evidence of their validity) and then submitting that to the main chain.

How does ethereum staking work?

Unlike the PoW-based blockchain, the PoS-powered blockchain bundles 32 blocks of transactions during each round of validation, lasting 6.4 minutes on average. These bundles of blocks are what’s known as “epochs.” An epoch is considered finalized – that is, the transactions contained are irreversible – when the blockchain adds two more epochs after it. 

During the validating process (also known as the “attesting process”), the Beacon Chain randomly groups stakers into “committees” of 128 and assigns them to a particular shard block. 

Each committee has a set time for proposing a new block and validating the transactions inside of it, called a “slot.” There are 32 slots in each epoch, meaning 32 sets of committees are required to complete the validation process in each epoch.

Once a committee is assigned to a block, one random member of the group is granted the exclusive right to propose a new block of transactions while the remaining 127 members vote on the proposal and attest to the transactions.

Once a majority of the committee has attested the new block, it’s added to the blockchain and a “cross-link” is created to confirm its insertion. Only then does the staker who was chosen to propose the new block receive their reward. 

  • Cross-linking is the process of reconciling individual shard states with the main chain, which is also called the Beacon Chain. The final state of each shard must reflect on the Beacon Chain through cross-linking.

Note that block proposers and attesters have varying reward models. The block proposer receives ⅛ of the base reward, known as “B,” while the attester receives the remaining ⅞ B, which is adjusted based on how long it takes for the block proposer to submit their attestation. The attester has to submit it as fast as possible to earn the entirety of the ⅞ B reward. For each slot that passes without the attester including the attestation to the block, the reward reduces. If two slots pass before the attestation is included, the reward reduces by 7/16B, 7/32 B for three slots and so on. 

A base reward is the fundamental primary determiner of the issuance rate of Ethereum 2.0. The more validators are connected to Ethereum 2.0, the lower the base reward per validator. That is because the base reward is inversely proportional to the square root of the total balance of all Eth 2.0 validators.

How to get involved

Those interested in staking on the new Ethereum network would have to set up a staking node by running Ethereum 1.0 and Ethereum 2.0 clients. Ethereum clients are just software that enables nodes to interact with the Ethereum network.

Compatible software clients for staking nodes include:

  • Prysm: It is a Go language variant of the Ethereum software.
  • Nimbus: This is an Eth1 and Eth2 lightweight version written in the Nim programming language.
  • Teku: This is an enterprise-focused Eth2 software client written in Java.
  • Lighthouse: This software client uses Rust programming language.
  • Lodestar: This software client was created by Chaincode Labs and uses JavaScript/ Typescript.

As a minimum requirement, you’ll need to use a computer with enough memory space to download both Ethereum blockchains – the old and the new. Already, Ethereum 1.0 contains around 900 gigabytes of data, and it expands at a rate of about 1GB per day.

Validators are also expected to keep their nodes connected to the blockchain 24/7. Therefore, a quality internet connection is a core criterion. After you install your validator software on your computer, the next step is to lock away a minimum of 32 ETH to the appropriate Ethereum staking contract address:

0x00000000219ab540356cbb839cbe05303d7705fa.

To do that, you will have to generate two keys – one for signing and validating blocks of transactions and the other for withdrawing your funds. However, you won’t be able to create your withdrawal key for now until Eth1.0 merges with Eth2.0 in 2022.

Note that you have to first visit the ETH 2.0 launchpad and follow the instructions contained before you make payment into the staking contract address.

This payment validates your claim to become a validator. It also provides the network a way to punish rogue validators undermining the validity of the Ethereum blockchain intentionally or accidentally. Whenever the blockchain notices discrepancies in the activities of validators, it will “slash” the staked funds of the culprits. 

Slashing is the term used for when an Ethereum 2.0 validator purposefully breaks network rules and is forcefully removed. An amount of their staked ETH is also removed as a penalty, and in some cases, the full staked amount of 32 ETH can be taken. 

Likewise, offline validator nodes get issued minor penalties too to encourage staying connected to the network. The protocol issues both penalties and rewards approximately every six and a half minutes or epoch. 

How profitable is ethereum staking?

The reward distributed to stakers depends on the total number of ETH staked and the number of validators on the network. When the pool of staked ETH dips, the annual interest rate increases. 

For example, when there were only around 500,000 ETH staked last year, the annual percentage rate of interest (APR) was a little over 20%. Today, there are more than 6,800,000 ETH locked on the blockchain, meaning the APR has dropped to about 6.0%. 

As soon as the pool of stakers is large enough to promote a decentralized ecosystem, the interest rate drops. For now, it is impossible for stakers to withdraw staked funds and accrued rewards, at least not until the Ethereum 2.0 and Ethereum 1.0 merge. 

What is a staking pool?

Understanding that not all interested stakers can afford 32 ETH to participate in the network – which at present costs about $103,000 – some platforms have begun to provide staking products that allow investors to combine their financial resources to meet the minimum requirements for becoming a validator. That is also an ideal option for individuals who don’t want to undertake the technical requirements that come with staking. In essence, users need only to deposit and lock their capital on a third-party platform and start earning returns. It’s staking without the hassle.

Staking unlocks opportunities for the Ethereum ecosystem. It will make Ethereum a more environmentally friendly blockchain. And it also puts a lot more participants in the position to become validators and earn ETH. 

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Riot Blockchain Forecasts 7.7 EH/s by Q4 2022 as Texas Facility Starts Production

5 years 2 months ago

Nasdaq-listed bitcoin mining company Riot Blockchain forecasts that its new facility at Rockdale, Texas will lift its hash rate capacity to 7.7 EH/s by the fourth quarter of next year.

  • Riot acquired the 190,000 square-foot site in Texas with the acquisition of Whinstone US’s data center in Texas in April.
  • By early September, the company said it expects to have a total of 25,946 Antminers in operation, providing an estimated hash rate capacity of 2.6 EH/s, according an announcement Tuesday.
  • With full deployment of a fleet of more than 80,000 Antminers, 95% of which will be the latest generation S19 model, the company forecast total hash capacity of 7.7 EH/s by Q4 next year.
  • Riot expects to consume 257 MW of energy, of which 206 MW will be deployed at the new facility.

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Lending Startup Upgrade Closes $105M Series E Round

5 years 2 months ago

Upgrade, the lending startup co-founded by the former CEO of Lending Club, Renaud Laplanche, has raised $105 million in a Series E funding round that takes the firm’s valuation to $3.325 billion.

  • The funding round was led by Koch Disruptive Technologies with contributions from new and existing investors, including BRV and Ventura Capital advised by Julius Baer.
  • In July, Upgrade launched its Bitcoin Rewards Card, a credit card that pays rewards in bitcoin rather than cash. “We created the Upgrade Bitcoin Rewards Credit Card for those consumers who are either crypto enthusiasts or are just getting started, and wanted a low-risk way to participate in the crypto economy,” Laplanche, the CEO of Upgrade, said in a statement to CoinDesk.
  • The Upgrade card is the company’s flagship product and pays rewards to cardholders as they pay down their balance. 
  • “We have experienced unprecedented growth and profitability this year, and the additional capital will enable us to further establish Upgrade Card as a mainstream credit card and continue designing innovative products that benefit consumers,” said Laplanche.

UPDATE (August 11, 16:16 UTC): Added quote from Laplanche in second bullet point.

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Fintech App Titan Adds Actively Managed Crypto Basket

5 years 2 months ago

Mobile investment platform Titan is getting into the crypto game.

The company, which describes itself as a “Fidelity for millennials and Gen Z,” currently offers three “strategies” – Titan’s version of an index fund – for investors to gain exposure to the stock market. It manages approximately $500 million for over 30,000 clients. 

But with its new product, Titan Crypto, the investing app is expanding its offerings into the crypto realm with a basket of leading coins. Titan’s actively managed crypto offering will feature a collection of five to 10 cryptocurrencies that, according to Titan co-CEO Clay Gardner, will include bitcoin and ether as well as altcoins like Cardano’s ADA and Stellar’s XLM.

Related: Prime Trust Raises $64M to Scale Fintech Infrastructure Biz

As cryptocurrencies become more mainstream, retail investors are clamoring to get involved. But for some, the process of setting up a wallet and navigating the crypto ecosystem can be overwhelming. User-friendly investing platforms like Robinhood, PayPal and now Titan have sprung up offering various levels of crypto exposure to crypto-curious retail investors.

Titan Crypto’s investment team, led by analyst Gritt Trakulhoon, will make monthly adjustments to the allocations and coins contained in the crypto portfolio based on performance. 

Titan did not tell CoinDesk where the actual crypto would be custodied. (For example, PayPal uses Paxos to power its crypto services.)

Gardner told CoinDesk that over time, Titan hopes to expand its crypto offerings to include decentralized finance (DeFi) tokens as well as add more features for users including staking and lending. 

Related: Crypto-Friendly Investment Search Engine Vincent Raises $6M

In July, Titan raised $58 million in a Series B funding round led by Andreessen Horowitz (a16z), a venture capital firm known for its crypto investments. Anish Acharya, a general partner at a16z, joined Titan’s board of directors. 

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Neuberger Berman Greenlights Indirect Crypto Investments for Commodities Fund

5 years 2 months ago

Asset management firm Neuberger Berman has given its $164 million commodities-focused mutual fund the go-ahead to invest indirectly in bitcoin and ether for the first time.

“Neuberger Berman Commodity Strategy Fund” added crypto derivatives, bitcoin trusts and exchange-traded funds (ETFs) to list of permissible investment strategies, the $400 billion manager said in Wednesday regulatory filings.

The fund, which as a mutual fund would be widely available to investors, has been on a tear this year as commodity prices surged, according to a fact sheet. Its top holdings were gold, corn, heating oil and Brent crude at the end of June.

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Fitch Says Germany’s ‘Spezialfonds’ Investing in Crypto Face Liquidity Risk

5 years 2 months ago

A German law that allows Spezialfonds (special funds) to allocate as much as 20% of their assets to cryptocurrencies could pose a liquidity risk, Fitch Ratings said. 

  • Spezialfonds are open only to institutional investors and had an estimated €2 trillion ($1.17 trillion) of assets under management at end-March 2021.
  • By bringing cryptocurrencies into the traditional, regulated financial system, the law passed earlier this year could also result in increased exposure to crypto assets for retail investors, whose insurance policies and retirement savings are managed by those institutions.
  • “If price volatility triggers trading breaks for exchange-traded cryptocurrency assets, this could make it more difficult for managers of cryptocurrency-exposed Spezialfonds to meet investors’ redemption requests or other obligations,” Fitch said.
  • The ratings company said it does not believe that allocations to crypto assets will reach close to the 20% allowed because Spezialfonds institutions are “traditionally risk-averse” in their approach to asset allocation.
  • If the funds were to invest the full amount allowed, Fitch calculates maximum crypto-asset investments of up to €360 billion ($422 billion) – which compares with bitcoin’s current market capitalization of around $860 billion.

Read more: CBDCs May Be Disruptive for Financial Systems, Fitch Ratings Says

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Coinbase Stock Up More Than 8% After Record Quarter

5 years 2 months ago

Coinbase (COIN) stock is up more than 8% on the day, following the release of impressive second quarter earnings on Tuesday after the stock market’s close. 

  • The U.S.’s largest cryptocurrency exchange posted $1.9 billion in transaction revenue, outpacing the expected $1.57 billion. Its take rate – or retail trading revenue divided by retail trading volumes – was 1.24%, up from 1.21% and the first increase in the metric in the past four quarters. 
  • But the company noted in its guidance that monthly transacting users (MTUs) in July had declined significantly to 6.3 million, and trading volume was only $57 billion in the month. While August’s numbers were slightly higher than this, Coinbase warned that MTUs and trading volume would be lower in Q3 compared to Q2.
  • COIN was volatile after results were released yesterday after the close, as investors parsed the earnings report.
  • “When people saw the earnings hit, the stock was up and when they looked at the future guidance for monthly transacting users and trading volume, the stock turned back,” said Oppenheimer analyst Owen Lau.
  • But Lau added that “when people digested the earnings report and call, they realized there were way more positives than negatives. If you don’t transact in 28 days, they don’t count you as an MTU. Because bitcoin’s price was boring in July, traders didn’t engage. … For me, I do see multiple catalysts for driving up MTUs in the second half of the year.”
  • Coinbase shares are now up about 17% from their reference price of $250, but down around 28% from their opening trading price of $381 in mid-April.
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Commercium Financial Becomes Fourth Wyoming-Chartered Crypto Bank

5 years 2 months ago

Cheyenne-based Commercium Financial has been granted a special purpose depository institution (SPDI) bank charter in Wyoming to handle digital assets. 

  • The bank joins Kraken, Avanti Financial, and Wyoming Deposit and Transfer in receiving  charter application approval, but so far none of the applicants have received a certificate of authority to operate, meaning that they are not yet open for business.
  • Commercium Financial is not related to the proof-of-work cryptocurrency Commercium (CMM), the Wyoming Division of Banking confirmed in an email. 
  • When the Wyoming-chartered crypto banks open, they’ll offer a variety of digital asset services that are novel for the institutions in the banking industry. SPDIs, however, are not allowed to lend, and each bank has to hold 100% of its customer deposits in reserve.
  • “This Charter allows us to deploy a unique set of technology solutions that connect traditional banking systems to tokenized assets and securities,” Jonathan Dever, Chief Executive Officer of Commercium Financial, said in a press release. “Commercium’s mission is to create a fully digital and automated financial institution that offers a blend of traditional banking and new to the market digitization and asset tokenization products. Regulatory compliance is at the heart of what we do.”
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Cake Wallet Brings Readable Usernames to Its Crypto Wallets

5 years 2 months ago

Unstoppable Domains, a blockchain domain provider, now allows Cake Wallet users to create custom usernames for their wallet addresses.

Launched in 2018 as the first free and open-source wallet for the privacy coin monero on IOS, Cake Wallet has expanded to include android applications and support for bitcoin, litecoin, ether and Cardano’s ADA. The wallet maintains some of the fundamental features of traditional wallets such as a built-in exchange and support for “fiat view.”

Rather than use a 32-bit ambiguous string (on the visible layer at least), Cake Wallet’s 150,000 users will be able to create usernames under the [NAME].crypto format.

Related: Congress’s Misstep on Crypto Reporting Shows the Dangerous Allure of Surveillance

The domains are minted by the popular blockchain domain provider Unstoppable Domains. Their process involves creating a non-fungible token (NFT) on the Ethereum blockchain that is attached to the actual domain. This way, each domain is unique and unreplicable. 

Retaining privacy

Initially launched as Bitmonero, a fork of Bytecoin, Monero has grown to a $4.8 billion market cap. Unlike Bitcoin, Monero has built-in privacy features that protect new users’ privacy by default.

According to Unstoppable Domains, while using these domain usernames in Cake Wallet, the privacy of Monero is still retained. The domain is connected to the main Monero address (Bitcoin/Litecoin/Ethereum address) that is used when sending and receiving funds.

However, in Monero, unique stealth addresses are published on the blockchain, not the main/sub addresses.

Related: Riccardo ‘Fluffypony’ Spagni Hires Top Attorney to Battle Extradition to South Africa on Fraud Charges

“There’s no way to go from a stealth address to a main/sub address without the private view key,” explained Justin Ehrenhofer, creator of the Breaking Monero series.

Brad Kam, co-founder of Unstoppable Domains, said, “You can attach a static Monero address to your domain and receive money to it without having your balances exposed. Transactions associated with a particular wallet address remain 100% private. It’s the best of both worlds: public usernames, private transactions.”

He also mentioned that the system is completely opt-in and that users don’t need to create a username for their wallets.

“Cake Wallet and Unstoppable Domains share a similar goal to make it easier for people to send and receive their crypto safely and seamlessly,” said Vik Sharma, CEO of Cake Wallet. “Through this integration our users benefit from being able to transfer crypto between 50+ wallets and exchanges, all with one blockchain-based username.”

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US July Consumer Price Index Rose Slightly Faster Than Expected

5 years 2 months ago

The U.S. Consumer Price Index jumped by 5.4% in the 12 months through July, the same pace as June but slightly exceeding the 5.3% increase expected by economists, the Labor Department reported Wednesday.

Core CPI, which excludes food and energy prices, rose 4.3% year-over-year, lower than economists’ expectation of 4.4%.  

Prices rising while interest rates remain low could lead more investors to pour into bitcoin over bonds as a reward for paying those higher prices. Bitcoin traders closely track headline inflation numbers in the event that the premiere digital asset becomes a hedge against inflation because of its limited supply cap.

Related: Inversores institucionales regresan a bitcoin a pesar de posibles impuestos para las criptomonedas en Estados Unidos

The Labor Department’s Bureau of Labor Statistics reported the increase, which compares July 2021 prices to those from July 2020 and shows an economy that’s working through supply constraints while trying to meet increasing demand. On a month-to-month basis, which takes out how much prices dipped in 2020, consumer prices rose 0.5% 

The July CPI report may not influence tapering discussions at the Federal Reserve. In last month’s Federal Market Open Committee (FOMC) press conference, Fed Chair Jerome Powell noted that the central bank is aiming to make gains in its goal to reach maximum employment before tapering. (The Fed’s quantitative easing program brings more liquidity to the markets through quantitative easing that gives investors the liquidity to invest more in riskier assets like bitcoin.)

The rest of the report was illustrative of easing bottlenecks in the global supply chain. On a month-over-month basis: 

  • Used vehicle prices rose by 0.2%, slowing June’s trend of high demand for used automobiles in lieu of new ones, when prices for used autos increased by 10.5%.
  • Airline fares fell slightly by 0.1%, compared to June’s 2.7%.
  • The food index increased by 0.7%, compared to June’s 0.8%.
  • The energy index increased by 1.6% with the gasoline index rising by 2.4%.
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Ghana to Test CBDC With German Banknote Printer Giesecke+Devrient

5 years 2 months ago

The Bank of Ghana plans to test a central bank digital currency (CBDC) in partnership with German banknote printer Giesecke & Devrient. 

  • The central bank said Wednesday that Giesecke & Devrient will be providing the technology for the currency, the digital cedi.
  • Munich-based Giesecke & Devrient provides banknote and securities printing services as well as cash-handling systems.
  • The CBDC will be tested with banks, payment service providers, merchants, consumers and other relevant stakeholders.
  • In July, Bank of Ghana First Deputy Gov. Maxwell Opoku-Afari said the last phase before implementation of a digital cedi is “expected to start by September.”
  • No definitive timeline for the potential launch of a digital cedi has been given.

Read more: Ghana’s Central Bank to Pilot CBDC in September, Calls It ‘Cash on Its Own’: Report

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EIP 1559 Hasn’t Affected Ethereum Miner Revenue

5 years 2 months ago

Ethereum Improvement Proposal (EIP) 1559 is live on Ethereum. I never thought I’d see the day. Just kidding … Or am I?

In all seriousness, this code change has been more than two years in the making. So far, it appears to be effective at doing two things, including burning ether and curbing block sizes to an ideal target. It hasn’t been so effective in helping users predict what transaction fees will look like over a few minutes or hours, but it has removed the uncertainty for users trying to price their transactions in the heat of the moment.

In today’s New Frontiers, I do a deep dive on how EIP 1559 is affecting miners on the Ethereum blockchain and the main factors contributing to why the effect on their revenue has been minor so far. (Ha, no pun intended.)

Related: Ether Held on Centralized Exchanges Hits 3-Year Low

This article originally appeared in Valid Points, CoinDesk’s weekly newsletter breaking down Ethereum 2.0 and its sweeping impact on crypto markets. Subscribe to Valid Points here.

Pulse check

The following is an overview of network activity on the Ethereum 2.0 Beacon Chain over the past week. 

Disclaimer: All profits made from CoinDesk’s Eth 2.0 staking venture will be donated to a charity of the company’s choosing once transfers are enabled on the network.

New frontiers: Ethereum miner revenues hold up

Bullish ether (ETH) prices and surges in non-fungible token (NFT) trading activity have made up for miner revenue lost as a result of Ethereum Improvement Proposal (EIP) 1559. 

Bullish ether prices

Related: NFTs Over DeFi: OpenSea Just Overtook Uniswap on Ethereum Usage

EIP 1559 was activated alongside four other EIPs bundled into the London upgrade last Thursday. As a result of its activation, the bulk of transaction fees normally awarded to miners are instead being burned and removed from circulation. 

A total of 22,708 ETH worth roughly $71.6 million has been burnt since the London upgrade, representing roughly 33% of new coin supply growth. 

Reduced revenue from transaction fees does not appear to have significantly affected total miner revenue on Ethereum. Data from Coin Metrics shows that in the days following EIP 1559 activation, daily miner revenue in USD has increased 7.1% and remains at two-month highs. 

Part of the reason for persistently high miner revenue levels is the bullish price breakout for ETH, which took off in earnest a day prior to London. Anand Gomes, co-founder of crypto trading platform Paradigm, told CoinDesk in a Telegram chat, “London … is driving this activity [and] it’s mostly institutional.”

To Gomes’ point, the ETH options market has seen ultra-bullish flows as of late, with Paradigm seeing a bull call spread at $40,000 and $50,000 strike prices expiring in March 2022. 

Despite their lower earnings in native ETH units from transaction fees, miners are recouping lost rewards from higher ETH prices. 

Surges in NFT trading activity on Ethereum

Beyond price activity, the number of on-chain transactions transferring NFTs have increased 75% over the last seven days, which has also boosted miner revenue. The biggest NFT release in recent days has been the CovidPunks series, which was dropped on the same day as London and sold out within minutes. 

Over the past seven days, CovidPunks has reached a total sales volume of over $200,000. Several users reported failed transactions because of insufficient transaction fees, which noticeably spiked from under 100 gwei – gwei is one billionth of an ETH – to over 400 gwei the first hour these NFTs started trading.  

Under EIP 1559, miners can still be rewarded for including transactions into a block through an optional tip known as the “priority fee.” Users have paid a total of 7,141 ETH, worth roughly $22.4 million at time of writing, in priority fees since the activation of the London upgrade. 

Because miners still get rewarded for a portion of transaction fees on Ethereum, a spike in on-chain activity due to an NFT drop or a popular decentralized finance (DeFi) application will boost total miner revenue through increased priority fees. 

Most transactions are not formatted for EIP 1559

As reported on Friday, the vast majority of transactions aren’t formatted for EIP 1559, meaning users aren’t specifying a minimum base fee or priority fee. In these instances, the fee attached to legacy transactions on Ethereum is automatically split to cover the cost for the base fee, which is burnt, and then the priority fee, which is awarded to miners. 

The benefit for users and network service providers who do optimize for EIP 1559 is that any portion of their transaction fee that is not used to cover the base fee or the amount they have specified for the priority fee will be refunded back to the sender’s account. 
Given that EIP 1559-formatted transactions are generally cheaper for users than legacy Ethereum transactions are, it is likely only a matter of time before more applications and service providers adopt the new format. The delay in adoption, however, is a sign of wariness from users and businesses that are giving EIP 1559 time to stabilize and prove its effectiveness on the network.

Validated takes
  • The first backward-incompatible upgrade, or hard fork, for the Ethereum 2.0 Beacon Chain has been scheduled for activation on a test network later this month. BACKGROUND: Dubbed “Altair,” the upgrade will be released on the Prymont testnet at epoch 6150, expected to hit on Aug. 19. All users who connect to Prymont will need to upgrade their computers, or nodes, in time for Altair activation. However, popular Eth 2.0 software clients such as Prysmatic Labs and Lighthouse have yet to release a software version compatible with the Prymont Altair upgrade.
  • For the first time ever, NFT marketplace OpenSea has topped the leaderboard in gas consumption on Ethereum, overtaking decentralized exchange Uniswap, which had previously ranked number one since December. BACKGROUND: The resurgence of NFT trading activity from highs earlier this year is evidence of the persisting interest and growth in this sector. Data site Glassnode projects that OpenSea will reach $1 billion in volume by the end of the month and have 300,000 active users. 
  • The U.S. Senate did not adopt a bipartisan compromise on a crypto tax provision in its $1 trillion infrastructure bill after a vote on Monday. BACKGROUND: The proposed amendment announced by U.S. Sens. Cynthia Lummis (R-Wyo.) and Pat Toomey (R-Pa.) and supported by Democrats, Republicans and the Treasury Department would have exempted protocol developers and transaction validators from the purview of this bill. The amendment, which needed unanimous consent, was objected to by Sen. Richard Shelby (R-Ala.).
  • In the first case of its kind, the U.S. Securities and Exchange Commission (SEC) charged a decentralized finance (DeFi) lending platform for selling unregistered securities. BACKGROUND: The founders of the platform called “DeFi Money Market” were charged for unregistered sales of more than $30 million of securities in the form of governance tokens that allegedly had no role in the core business of the platform. Without admitting to or denying the findings in the SEC’s order, the founders consented to a cease-and-desist order that includes disgorgement totaling $12.8 million and penalties of $250,000.
  • Ether’s trading volume totaled $1.4 trillion in the first six months of 2021, growing three times faster than bitcoin’s trading volume. BACKGROUND: According to crypto exchange Coinbase’s biannual review, ether outshone bitcoin, the S&P 500 and gold in terms of price performance, rallying 210% from January to the end of June. The report cited the growth of Ethereum’s decentralized finance (DeFI) ecosystem, upcoming transition to proof-of-stake (PoS) and the EIP 1559 upgrade as reasons for ether’s impressive market performance so far this year.
  • Blockchain interoperability protocol Wormhole launched its 2.0 release on mainnet this week. BACKGROUND: Wormhole enables transfers of non-native assets between several blockchains including Solana, Ethereum, Terra and Binance Smart Chain. Said to be the “trustless bridge” for easy transfers of tokens to Solana from other decentralized networks, Wormhole is secured by 19 validators. 

Teddy Oosterbaan

Factoid of the week Open comms

Valid Points incorporates information and data about CoinDesk’s own Eth 2.0 validator in weekly analysis. All profits made from this staking venture will be donated to a charity of our choosing once transfers are enabled on the network. For a full overview of the project, check out our announcement post. 

You can verify the activity of the CoinDesk Eth 2.0 validator in real time through our public validator key, which is: 

0xad7fef3b2350d220de3ae360c70d7f488926b6117e5f785a8995487c46d323ddad0f574fdcc50eeefec34ed9d2039ecb. 

Search for it on any Eth 2.0 block explorer site.

New episodes of “Mapping Out Eth 2.0.” with Christine Kim and Consensys’ Ben Edgington air every Thursday. Listen and subscribe through the CoinDesk podcast feed on Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, IHeartRadio or RSS.

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Alipay Adds Cooldown Feature on NFTs to Curb Speculation

5 years 2 months ago

Chinese payments app Alipay is now requiring users to hold onto non-fungible tokens (NFTs) for at least 180 days before they can transfer them, Chinese media reported.

  • Alipay updated the terms for use of its NFT marketplace “mini-program,” an app within the super-app, AI Caijing reported today.
  • Alipay, which is China’s second-most popular payments app, says the mini-program shouldn’t be used for speculation.
  • Users can send NFTs only to accounts that have passed real-name verification, the terms said.
  • The terms also state that the copyright of digital works belongs to the creator or issuer and that buyers can’t use them for commercial purposes without consent.
  • The mini-program caters primarily to fans who want to buy NFTs of celebrity memorabilia.
  • The NFT market globally has been picking up, with marketplaces hitting all-time records in transaction volumes.
  • Chinese financial regulators are vehemently opposed to market speculation, a stance they have often reiterated with regards to the highly volatile crypto markets.
  • Ant Group, Alipay’s parent company, has been trying to “rectify” its standing with regulators for almost a year, after its initial public offering was abruptly halted last year.

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US Senate Passes $3.5T Budget Plan

5 years 2 months ago

Senators voted 50-49 along party lines to support a $3.5 trillion blueprint for President Joe Biden’s agenda.

  • The bill paves the way of expansion of federal involvement in reducing poverty, protecting the environment and improving care for the elderly, Bloomberg reported.
  • Bitcoin barely reacted to the vote, holding above $46,000.
  • The bill follows the more fractious $1 trillion infrastructure bill that passed Tuesday and included contentious tax-reporting provisions on the crypto community.
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Bitcoin Price Rests Above Key Indicator Amid ‘Return of Retail Investors’

5 years 2 months ago

Despite pulling back from recent highs, the world’s largest crypto by market cap remains above a key long-term indicator, reflective of bullish market conditions.

Prices are currently changing hands for around $46,350 after topping out $46,453 in the last 24-hours, CoinDesk data shows. The crypto is still up 57% year-to-date and is making headway toward its all-time high of $64,829, witnessed April 14.

“After a quiet July, we’re seeing a return of retail investors,” said Caroline Bowler, CEO of Australian crypto exchange BTC Markets. “Market wisdom draws a line between the retreat of Chinese bitcoin miners and the recentering of trading activity in the U.S. and Europe.”

Related: Bitcoin Avoids Bear Market; Long-term Uptrend Intact

Indeed, Tuesday’s on-chain analysis by blockchain data firm Kaiko suggests trading activity is continuing to shift from China to the U.S. and EU amid the crackdown against crypto mining in the Communist state, CoinDesk reported.

The 200-day moving average now appears to be holding prices above $45,117, according to Bitstamp exchange data. As CoinDesk reported, price action is considered bullish above (red line) and bearish below, per technical market theory.

“Despite July being a quieter month, we experienced a significantly larger number of accounts trading over $1 million per month,” Bowler said.

Data from provider Glassnode shows the total supply of bitcoin held by entities with a balance of 0.1-1 BTC has continued to increase alongside bitcoin’s price suggesting retail is buying up alongside institutional investors.

Related: Changing Crypto Trading Patterns Reveal the Market’s Power Shift to the West

Bitcoin isn’t the only crypto whose experiencing an uptick in trading activity for the month of August.

“Ether and other assets are representing the majority in trading volume and not bitcoin,” said Daniel Kim, head of capital markets at Maple Finance. “This shows that individuals and institutions are feeling a lot more comfortable holding other cryptos and are no longer “diversifying” their portfolios by just holding bitcoin.”

Other notable altcoins in the top 20 by market capitalization are also riding high over a 24-hour period with the cardano, XRP, binance coin, polygon and stellar having posted the highest gains.

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Poly Network Prepares for Hacker to Return Millions in Stolen Crypto

5 years 2 months ago

Cross-chain protocol Poly Network has set up three wallet addresses hoping that the hacker who drained about $600 million in crypto on Tuesday will keep their word and return at least some of the stolen funds.

  • About 4:00 UTC on Wednesday, the hacker said in a message embedded in an Ethereum transaction with themselves that they were ready to return the funds. In another message, they said they had failed to contact Poly Network and asked for a multisignature wallet to return the loot.
  • The hacker’s Polygon address sent $10,000 in USDC to one of the wallets Poly Network set up at 8:46 UTC.
  • The hacker said they were already a “legend” after pulling off what some, including China-based Poly Network, have described as the largest DeFi hack in history.
  • Poly Network announced the heist on Tuesday evening on Twitter and posted three addresses on Binance Smart Chain, Ethereum, and Polygon where the funds were funneled. At the time, the accounts held more than $600 million in tokens including USDC, shiba inu, wrapped ether, and wrapped bitcoin.
  • At the time of writing, the three addresses hold just under $400 million after sending money to other addresses, including DeFi liquidity pool Ellipsis Finance.
  • Poly Network has endorsed the analysis of security company SlowMist, which analyst Kelvin Ficther agrees to, which blames the exploit on a bug related to the protocol’s cross-chain functions. Chinese company BlockSec has stated it’s possible the hack resulted from a leaked private key.

UPDATE (9:15 UTC): Adds that hacker returned $10,000 USDC.

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Top South Korean Money Transfer Firm Joins RippleNet to Further Remittances to Thailand

5 years 2 months ago

One of South Korea’s largest remittance service firms has joined Ripple’s network of institutional payment providers in a bid to hasten payments between the country and Thailand.

Global Money Express Co. Ltd (GME Remittance) has linked with Thailand’s largest bank by market capital, Siam Commercial Bank, through the use of RippleNet, according to a blog post on Tuesday.

Ripple is focusing on Asia, which the company has said is its fastest growing region with transactions growing 130% year-over-year.

Related: EU-Thailand Remittance Corridor Opened on Stellar Blockchain

The partnership, a joint venture between SBI Holdings and Ripple, known as SBI Ripple Asia, seeks to “accelerate and scale” payments in a bid to facilitate the remittance needs of some 184,000 Thai nationals residing in South Korea.

GME Remittance is also seeking to hook up with existing RippleNet customers to expand into additional remittance corridors across Asia and globally, including Europe and the U.S., per the release.

Ripple argues the current global payments systems established by financial institutions and large banks are “outdated, irregular and fragmented.” Their network, they say, attempts to fix this by offering turn-key solutions built around blockchain technology.

“We chose Ripple as our partner because with RippleNet we can launch into new countries with new partners within 1-2 weeks,” said Subash Chandra Poudel, director at GME Remittance. “This has drastically reduced the time to market and provides us with an edge compared to our  competitors.”

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Investment Research Firm Says Coinbase Revenue to Decline Despite Beating Estimates

5 years 2 months ago

Despite Coinbase beating analysts’ estimates on transaction revenue on Tuesday, a U.S. investment research firm still thinks the biggest U.S. crypto exchange is overvalued.

The exchange, the largest in the U.S. by trading volume, posted $1.9 billion in transaction revenue for Q2, exceeding expectations of around $1.57 billion, CoinDesk reported.

Though according to Nashville-based firm New Constructs’ CEO David Trainer, the results, while impressive, are not good enough to justify the company’s “very expensive” valuation of around $56 billion.

Related: PNC Bank Is Planning a Crypto Offering With Coinbase

“Coinbase will likely not be able to sustain blowout earnings going forward thanks to rising competition in the cryptocurrency trading space,” said Trainer. As such, New Constructs expects the exchange’s margins and future revenue growth rates to fall as competition from the likes of Binance, Gemini, and Kraken “eat into its business.”

It isn’t the first time the research firm has criticized Coinbase’s value. The company In May the predicted that exchange’s share price would fall to $100. Coinbase’s share price did fall to an all-time low of $208 on May 19, but has managed to claw back losses and is currently trading around $269 per share.

Still, amid the backdrop of regulatory developments and U.S. politicians wanting their slice of the “crypto trading pie” in the form of taxes, Trainer argues Coinbase investors should be wary.

“At current levels, Coinbase’s stock remains terribly overvalued,” said Trainer, who points to a need for Coinbase to attain higher revenue than established rivals like Nasdaq (NDAQ) and Intercontinental Exchange (ICE).

Related: Coinbase Rakes In $1.9B in Transaction Revenue in Q2, Beating Estimates

The CEO also points to Coinbase’s dependency on the spot price of bitcoin for its transaction revenue growth, noting that as bitcoin prices move up or down, so too does the exchange’s share price.

Indeed, as a result of bitcoin’s shaky performance during the second half of the year, the exchange has warned that monthly transacting users and trading volume would be lower in Q3 compared to Q2.

“Hints of lower volumes in Q3 coupled with July’s crypto market volatility has led to a mild retracement to the US$270 level,” Toby Chapple, head of trading at digital asset firm Zerocap, told CoinDesk via Telegram.

Yet despite lower expectations for Q3, the digital asset firm said Coinbase’s revenue is diversifying into other cryptos, which is helping to capture thematic decentralized finance flows.

“Ultimately we expect a buoyant share price into the rest of this month given the supply shifts in Ethereum, and expected sentiment growth from traders and investors,” said Chapple.

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