Author: Werner

Freelance crypto content editor, strategist and writer since the very top of 2017's bull run.  Based in Cape Town, SA and previously lived in Asia for a decade. I'm a big believer in the good that decentralized network technology and ethical AI can bring to make the world a more fair and transparent place.

2024 US Election: The Crypto Divide Between Trump and Harris

Posted on by Werner

As the 2024 United States presidential election approaches, an unexpected issue has emerged as a potential game-changer: cryptocurrency policy. The contrasting approaches of the two leading candidates, Donald Trump and Kamala Harris, highlight the growing importance of digital assets in American politics, an issue that could have far-reaching implications for the future of finance and technology in the country.

At the moment, Trump is promoting himself as Crypto Jesus, using all its tools from DeFi to NFTs to boost his campaign coffers, while Harris has recently made overtures to the space and announced she’d be accepting donations via Coinbase. What is happening? 

The Crypto Conversion of Donald Trump

Donald Trump’s journey from crypto skeptic to champion is a complete turnaround. In 2021, the former president dismissed Bitcoin as a “scam against the dollar”, a threat to the supremacy of the U.S. dollar. However, by 2024, Trump had done a 180° turn, positioning himself as a prominent cryptocurrency advocate in American politics.

Trump’s crypto embrace began with the launch of his NFT collection in December 2022, featuring digital trading cards commemorating key moments from his presidency. The initial release of 10,000 NFTs at $50 each sold out quickly, though subsequent releases have seen slower uptake.

The former president’s crypto strategy intensified in 2024:

  1. In May, Trump announced that his campaign would accept donations in various cryptocurrencies, including Bitcoin, Ethereum, and Dogecoin.
  2. In June, he met with the USA’s Bitcoin mining industry at his Mar-a-Lago resort, declaring that crypto users should vote for him because he would “stand up to Biden’s hatred of Bitcoin”.
  3. In July, Trump made history as the first American president to address a Bitcoin event, speaking at the Bitcoin 2024 conference in Nashville.

During his Nashville appearance, Trump emphasized American leadership in the crypto space, stating he wants Bitcoin “mined, minted, and made in the USA.” This rhetoric cleverly ties crypto to his “Make America Great Again” platform, appealing to both tech enthusiasts and his nationalistic base.

Trump’s involvement with crypto isn’t limited to rhetoric. In late August 2024, he announced ‘The DeFiant Ones’, later rebranded as World Liberty Financial, a new cryptocurrency project promising “high yield” investment opportunities. While details remain scarce, this initiative, along with Trump’s sons Donald Jr. and Eric’s involvement, signals that the Trump family has big plans for crypto, particularly in decentralized finance (DeFi).

Kamala Harris: A Cautious Approach

In contrast to Trump’s enthusiastic embrace of crypto, Vice President Kamala Harris has taken a silent approach. As the Democratic nominee, Harris’s exact position on digital assets remains largely undefined.

Harris’s crypto history is closely tied to her role in the Biden administration, which has been characterized by:

  1. Operation Choke Point 2.0: Alleged efforts to discourage banks from serving crypto companies.
  2. Aggressive SEC enforcement actions against leading crypto companies like Coinbase, Binance, and Ripple.
  3. President Biden’s veto of a bipartisan bill that would have made it easier for financial institutions to offer crypto custody services.

However, there are signs that Harris may be open to a more conciliatory approach:

  1. A senior Harris campaign advisor made a brief statement indicating that Harris would “support policies that ensure emerging technologies and that sort of industry can continue to grow.”
  2. Reports indicate that Harris’s campaign has been reaching out to crypto industry executives, showing a willingness to listen to their concerns.
  3. Harris’s Silicon Valley background and support from tech companies suggest she may be more open to innovation than the current administration.

The Crypto Vote: A Potential Kingmaker

Recent polls suggest that crypto owners could be a significant voting bloc in the upcoming election. A Fairleigh Dickinson University poll found that Trump leads Harris by 12 points among crypto holders, while trailing by the same margin among non-crypto owners. The poll also revealed that crypto owners tend to be young men and members of racial minority groups, demographics that could be crucial in swing states.

According to another earlier survey, crypto is considered a key election issue for 20% of voters in six swing states, many of them ethnic minorities like African-American and Hispanic voters. This data underscores the potential impact of crypto policy on the election outcome.

Party Positions and Platform Shifts

The contrasting approaches of Trump and Harris reflect broader shifts within their respective parties:

Republican Party:

  • The Republican Party platform now includes language defending Bitcoin mining and opposing a Central Bank Digital Currency (CBDC). Trump is especially vocal about the latter, saying on many occasions that it won’t happen on his watch. 
  • There’s increasing activity within the party to create a Bitcoin strategic reserve, led by Donald Trump and senators like Cynthia Lummis who presented a draft bill in Nashville.
  • Trump has promised to fire SEC chairman Gary Gensler, the leading antagonist of crypto, on his first day in office.

Democratic Party:

  • The 2024 Democratic Party Platform  does not mention cryptocurrency, suggesting it’s not a high priority for the party as a whole.
  • Senator Elizabeth Warren, who has significant influence over the Democratic Party’s financial policy, remains one of crypto’s most vocal critics.
  • There are unsubstantiated rumors that Harris will promote Gensler to head of Treasury.

Expert Opinions and Industry Reactions

Crypto industry leaders and experts have mixed reactions to the candidates’ positions:

  1. Jake Chervinsky, Chief Policy Officer at the Blockchain Association, comments: “While Trump’s embrace of crypto is encouraging, we need to see more concrete policy proposals. On the other hand, Harris’s cautious approach leaves room for dialogue and potential compromise.”
  2. Perianne Boring, founder and CEO of the Chamber of Digital Commerce, notes: “The crypto industry needs regulatory clarity, not just friendly rhetoric. We’re looking for candidates who can provide a clear, innovation-friendly regulatory framework.”
  3. Caitlin Long, CEO of Custodia Bank, warns: “Whoever wins, the crypto industry needs to be prepared for continued regulatory challenges. The next administration will need to balance innovation with consumer protection and financial stability concerns.”

Credit: Tesfu Assefa

Challenges and Criticisms

Despite the potential benefits, both candidates’ approaches to crypto face challenges:

Trump:

  • Critics point out the contradiction between his current stance and his previous skepticism.
  • There are concerns about how Trump would navigate the complex regulatory landscape surrounding cryptocurrency if elected.
  • The ‘World Liberty Financial’ project’s promise of high yields raises concerns about potential risks, given past crypto market crashes.

Harris:

Looking Ahead: The Future of Crypto Policy

As the 2024 election approaches, cryptocurrency is poised to play a significant role in shaping the political landscape. The candidate who can effectively balance innovation, regulation, and economic concerns may gain a crucial advantage.

Key areas to watch include:

  1. Regulatory Framework: How will the candidates propose to provide regulatory clarity without stifling innovation?
  2. International Competitiveness: With countries like El Salvador and the Central African Republic adopting Bitcoin as legal tender, how will the USA position itself in the global crypto landscape?
  3. Central Bank Digital Currency (CBDC): Will the USA pursue a CBDC, and how will that impact existing cryptocurrencies?
  4. Tax Policy: How will crypto transactions and investments be taxed under each administration?
  5. Environmental Concerns: How will the candidates address the energy consumption associated with crypto mining?

In the recent debate between Trump and Harris on September 10th, both candidates steered clear of the subject, indicating they may be unable to articulate their vision for the future of crypto in the United States. As the campaign progresses, cryptocurrency stakeholders and political observers will be watching closely to see how the conclusion of the love triangle between finance, technology, and politics.

Regardless of the election outcome, one thing is clear: cryptocurrency has moved from the fringes to the center of political discourse, and it’s here to stay. The policies shaped by the next administration will have lasting implications for the future of financial innovation and regulation in the United States and beyond.

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Vini Nvidia Vici: How the AI Giant’s Earnings Impacts Crypto AI Tokens

Posted on by Werner

Intro

Most crypto AI tokens are now on sale, trading at a huge discount on their 12-months highs, yet many crypto investors remain hopeful and bullish on the sector, in no small part due to its correlation to the TradFi juggernaut that is Nvidia Corporation. That is of course before this week’s alleged DoJ subpoena, which sent all markets down and which we will address in another article. 

The Nvidia stock has come to be a key indicator to the general health of both the traditional stock market and the cryptoverse. They are both barometers of the high-tech sector. Although the crypto market had a slight resurgence during August, this was short-lived; bearish news for Nvidia and the general market has almost completely wiped out recent gains – with AI cryptos such as Near, FET and Render having seen significant downward pressure since August 26. 

These downturns show an intricate relationship between traditional stocks of tech giants and these new classes of assets, offering insights into market sentiment and the many factors driving crypto price valuations in the AI era.

Understanding the Nvidia-AI Crypto Connection

Nvidia’s hardware – specifically their graphics chips – are the computational engine that trains advanced AI models. As such, Nvidia’s performance is often seen as a barometer for the overall health and growth of the AI industry. Although there is a lot of competition in the GPU space, no other company has yet been able to keep up effectively with the speed at which Nvidia has innovated and consistently produces newer and faster tech. 

In the crypto sphere, a new class of tokens has emerged over the past year, focusing on AI applications within blockchain technology. In essence, these tokens finance projects in the AI space, such as AI-powered portfolio management, image-generation, pathfinding, and more. These AI crypto tokens include projects like Artificial Superintelligence Alliance (FET), Bittensor (TAO), and Render (RNDR). 

As the markets become increasingly tied together, many are watching Nvidia with keen eyes for any news that might signal up or downturns in the market. 

Nvidia Pre-Earnings Expectations and Market Behavior

Waiting for Nvidia to release their earnings results at the end of August, analysts were hopeful. The company was doing consistently well and new chips were being released. Prices climbed, fueled by optimistic projections for Nvidia’s performance, with analysts expecting significant year-over-year growth in both revenue and earnings-per-share.

The crypto space experienced a considerable upturn leading up to the earnings call, especially in AI-related tokens. The market cap of many AI and big data cryptocurrencies increased by as much as 80% in the weeks preceding the Nvidia earnings announcement, reaching around $32 billion. This growth reflected not just excitement about Nvidia’s potential earnings beat, but also a broader recovery in the general market following a big dip earlier in August 2024.

Credit: Tesfu Assefa

The Earnings Release: Numbers vs. Expectations

Nvidia’s Q2 2024 earnings report did not disappoint. It was, by most measures, exceptional. The company had seen considerable year-on-year growth in virtually every metric:

  • Revenue: $30 billion (up 122% year-over-year)
  • Earnings-per-share: $0.68 (up 168% year-over-year)

These figures surpassed Wall Street’s predictions of $28.72 billion in revenue and $0.64 per share in earnings. The company’s performance was driven primarily by robust demand for its AI products and services. Its other branches also grew: its gaming revenue climbed 16% from a year ago to $2.9 billion, and Nvidia’s self-driving automotive division climbed 37% from a year ago. Good news all around, but as market participants have come to know, good news isn’t always good news for stock prices. 

Post-Earnings Market Reaction: A Significant Downturn

Despite Nvidia’s strong results, the market reaction in both its stock price and subsequently the price of most AI crypto projects was remarkably negative. Below are some noteworthy metrics on valuations in the hours and days since the August 29 release. 

  • $292 billion wiped off the Nvidia stock price, with the stock having fallen 18% since its August highs and downward pressure appearing to hold strong. 
  • Artificial Superintelligence Alliance (FET) dropped 20% to $1.142
  • Bittensor (TAO) fell 27% to $262
  • Render (RNDR) declined 26% to $4.65

This negative response to very positive news about Nvidia illustrates the counterintuitive nature of market dynamics. Expectations often matter more than absolute performance. As market commentator Lisa Abramowicz noted, “Better-than-expected doesn’t cut it for Nvidia. Evidently, investors expect this company to blow away expectations.”

Credit: Tesfu Assefa

Factors Influencing the Post-Earnings Dip

When broader market conditions are taken into account, negative market reactions become a little more understandable. The market in general has seen a substantial downturn recently, with the S&P500 and the Nasdaq having seen notable losses in the past week. Some other notable factors to consider for Nvidia include:

1. Priced-in Expectations: The gains that both the Nvidia stock and in AI crypto tokens made in August before the earnings report meant that much of Nvidia’s success was already factored into prices. Markets are forward-looking, and the higher pricing in mid-August implies the good news had already had its effect before it broke.   

2. Impossibly High Standards: Some analysts had predicted Nvidia would beat estimates by 10% or more. While the company exceeded expectations, it didn’t do so by the margins some had hoped for. The revenue exceeded projections by 4.5%, and the earnings-per-share by 6.25%. Nvidia’s second-quarter earnings were solid but not spectacular—and these days, that isn’t good enough for Wall Street.

3. Delays and Issues with New Chips: There was recent bad news about the new generation of Nvidia’s Blackwell GeForce graphics cards, specifically the RTX 5090: production is delayed and power consumption is higher than expected, possibly reaching 600W. This may have contributed to the downturn in the AI space

4. Forward-Looking Concerns: Investors may have been looking for stronger indications of future growth that weren’t present in the earnings report. Nvidia is however expected to ramp up production of its next-generation chips in the fourth quarter of this year, which could send the stock higher.

5. Broader Market Sentiment: The reaction to Nvidia’s earnings doesn’t exist in a vacuum. Overall market conditions – including concerns about interest rates and economic stability – play a role in how investors have interpreted and reacted to earnings reports.

6. Profit-Taking: The post-earnings dip could partly be attributed to investors cashing in on the pre-earnings rally, the “buy the rumor, sell the news” phenomenon common in financial markets. 

The Interest Rate Factor

The upcoming Fed meeting on 18 Sept 2024 has many investors and market participants sitting at the edge of their seats. The final decision on whether to lower interest rates or keep them stable will play a significant role in shaping market dynamics in the near-to-medium term, and that definitely includes the valuations of AI crypto tokens. Lower interest rates could encourage bullish movement in the market, with some traders expecting a cut of 25 to 50 basis points at the next meeting. 

 Chairman Jerome Powell testifies before the House Committee on Financial Services (Credit: The Conversation)

Long-Term Outlook: Beyond the Earnings Volatility

While the immediate reaction to Nvidia’s Q2 2024 earnings was negative for AI crypto tokens, it’s essential to consider the longer-term picture. Despite the post-earnings dip, many AI tokens have shown impressive year-to-date gains. For instance, FET has surged 75% since the start of 2024, while RENDER and TAO have posted gains of 18% and 10%, respectively.

These gains align with Nvidia’s own excellent performance, with its stock up 160% year-to-date. This broader trend suggests that the AI narrative remains strong, even if short-term fluctuations occur.

Conclusion: Navigating the AI Crypto Landscape

Recent price action in the AI space might be concerning. The technology is not immune to the larger market influences at play. The recent downturn and the uncertainty about the Fed’s interest rate cut puts the entire sector in a precarious spot, but the long-term trajectory of AI development and overall AI adoption appears as robust and promising as ever. 

Many of the projects in the AI crypto space, like SingularityNET and its partners, are working on truly remarkable projects. New startups are promising to help drive the next generation of tech in AI, DeFi and traditional finance. For investors and market enthusiasts in the AI crypto space, the recent market volatility underscores the importance of looking beyond short-term data and focusing on the bigger picture. 

The AI revolution is here to stay, and no measure of short-or-medium term bearishness, or the outcome of any one single company or federal agency interaction will stop what is coming.

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Black Monday 2024: Why Did TradFi and Crypto Markets Crash?

Posted on by Werner

Introduction

The cryptocurrency sector had its usual sluggish performance during the summer, exacerbated with a catastrophic one-day collapse which swept across the entire global economy. Let’s analyze that crash and what has happened since.

The crash in August drew comparisons with 1987’s brutal Black Monday Wall Street crash, and took an especially heavy toll on tech stocks and crypto assets, often seen as high-risk high-reward investments. Markets have recovered in the month since, but talk of a recession still roams out there. 

Let’s take a look at what happened on the day, what happened since, and why it was so heavy. 

The Crash in Broad Strokes

On August 5, 2024, financial markets worldwide experienced significant turmoil. The Bank of Japan was the primary trigger for this abrupt downturn, announcing unexpected economic developments including a rate hike at the same time worrisome economic indicators emerged from the United States of America. The crash had widespread implications, affecting major indices, cryptocurrencies, and investor sentiment globally. (Credit: TradingView)

TradFi Markets 

S&P 500

The S&P 500 saw a sharp decline, dropping 3% on August 5: its worst single-day performance in two years. This drop extended a losing run that began weeks prior, influenced by fears of a weakening U.S. economy and overvalued tech stocks. Key factors included disappointing earnings reports from major corporations and broader economic concerns​.

Nasdaq Composite

The tech-heavy Nasdaq Composite was hit particularly hard, falling more than 6% in early trading before recovering slightly to close down around 3%. This decline was driven by significant losses in major tech stocks, including Nvidia, Apple, and Microsoft. The combined market capitalization of the leading tech companies, often referred to as ‘The Magnificent Seven’, saw a massive dip, losing nearly $1 trillion intraday.

Crypto Markets

This turmoil spilled over into the crypto market, with Bitcoin plunging about 20% in just three days, from $67,000 to just above $49,000.  On August 5, the total crypto market capitalization plummeted by $314 billion: one of the most severe sell-offs in recent history. ETH fell 18% and other cryptocurrencies, such as Solana, were even harder hit, with Solana’s price falling over 30% since late July​. 

Aftermath: The Bounce

The immediate aftermath of the crash saw heightened volatility across all markets. The Cboe Volatility Index (VIX), which measures market volatility, spiked dramatically, peaking above 65 before settling at 38.6 by the end of the trading day, its highest closing level since 2020​. 

Since the crash we have seen a significant recovery, indicative of a resilient market with real interest. Bitcoin rebounded by over 20%, returning to around $60,000 where it sits now, as investors bought the dip and market confidence slowly returned. The broader crypto market also showed signs of recovery, as recession fears subsided when Japan vowed to not increase interest rates for the remainder of the year. 

Investor sentiment was heavily impacted, with the Crypto Fear & Greed Index dropping to “fear” territory.

Credit: CoinMarketCap

What Caused The Black Monday 2024 Crash?

Rate Hike in Japan causes Stock Drop Contagion

The Bank of Japan’s unexpected decision to raise interest rates was definitely a big catalyst. This move caused a surge in the yen’s value, causing yen carry trade to unwind – where investors borrow in yen to invest in higher-yielding assets elsewhere. The rate hike also heightened concerns about global economic stability, contributing to widespread market anxiety​. 

Japanese stocks declined and it spread to other markets, creating a domino effect as investors reacted to global market turmoil.

US Economy Concerns

In the USA, a few factors combined to bring market growth to an abrupt halt:

  • a disappointing jobs report exacerbated fears of an impending recession
  • The Sahm Rule recession indicator (which its creator later said was open to interpretation) was triggered and amplified fears. 
  • Weak economic data and the Federal Reserve’s anticipated rate cuts in September created a risk-off sentiment among investors: they sold off riskier assets, including stocks and cryptocurrencies​.
  • The Federal Reserve kept upping interest rates in an effort to combat inflation. This, coupled with signs of an economic slowdown, heightened investor concerns about a potential recession.

Global geopolitical tensions

Israel’s assassination of a senior Hamas leader in Iran was just the latest potential spark that could set off a broad regional war in the Middle East. Coupled with other conflicts such as in the Ukraine, markets are extremely jittery about geopolitics driving prices down even further. 

Concerns over AI market bubbles

Investors in AI leaders like Nvidia have been on the ride of their lives the last couple years, as they saw absolutely mouthwatering returns on investment. There were growing fears that certain sectors, particularly those related to artificial intelligence, had become overvalued and were due for a correction. This played out as expected. 

Crypto sell-offs spook markets

Jump Crypto’s significant selloff of Ethereum (ETH) played a crucial role in the market crash on August 5, 2024. This selloff was part of a broader liquidation strategy by the firm, which involved offloading hundreds of millions of dollars in assets. This large-scale liquidation exacerbated the already fragile market conditions, contributing to the sharp declines in cryptocurrency prices.

The firm, which is behind big crypto plays like Solana’s Firedancer consensus mechanism, Wormhole and Pyth Network, was slated on social media for apparently selling over the weekend prior to the crash. Speculation is that it is preparing a war chest for its legal battles with the SEC over its investment in the collapsed Terra Luna project. 

The liquidation of Bitcoin holdings by Mt. Gox creditors and rumors of the U.S. government moving its Bitcoin holdings​.

Portfolio insurance hedging strategies

Similar to the 1987 crash, the use of computer-based models to automatically buy or sell index futures based on market conditions may have accelerated the sell-off.

Credit: Tesfu Assefa

Conclusion

Crypto was invented at the end of the major 2008 recession, and since then it’s faced off against a pretty smooth TradFi market. This changed at the Covid-19 pandemic, which battered it at first, then made it soar to all time highs when stimulus money flooded into the space. 

Since then, crypto has struggled to deal with any sustained bearish macro-economic conditions, as we’ve seen with its reaction to the Fed’s interest rate hikes. You could argue that the most important dates each month are the CPI number reports and Fed FOMC meetings, where interest rate changes are announced. 

Analysts believe we’re not out of the woods, so keep a close eye on markets and de-risk where you can. We have seen the effects of uncertainty on the market when investors respond to economic data and to policy responses from central banks. The potential for further rate cuts by the Federal Reserve will keep affecting market stability in the immediate future, as will ongoing geopolitical tensions. 

The dramatic 5 August market crash once again drove home the interconnectedness of global financial systems and the sensitivity of markets to policy changes and economic indicators. 

The immediate losses were substantial, but recovery was quick and longer-term impacts depend on subsequent economic developments and policy responses. Investors remain cautious, with many seeking safer assets amid the heightened volatility and uncertainty. 

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Bitcoin Nashville 2024: Trump and Others Go All In On BTC

Posted on by Werner

Introduction

Bitcoin Nashville 2024, the annual flagship event for the world’s most important digital asset a month back. Organized by Bitcoin Magazine, it again provided a stellar showcase for BTC, loaded with big personalities, bold predictions, and the kind of energy you only get when money and politics collide in the USA.

This year’s conference, held from July 25-27, was one for the ages, and likely the most anticipated edition to date, with good reason. With over 35,000 attendees packed into Music City, it felt like a political rally crossed with a rock concert – all centered around that digital gold we call Bitcoin.

I attended Bitcoin 2023 in Miami last year as a journalist for a well-known crypto publication, which gave me unfettered backstage access to the event. At that time, around mid-May, Bitcoin was gasping for air at around $27k, getting throttled by mean-spirited US regulators. Still, people were optimistic about the year ahead. I listened to Michael Saylor wax lyrical about BTC for four hours in the press room, and was fortunate enough to ask new Bitcoin convert Vivek Rahmasamy a question or two. Also at the conference were Robert F Kennedy JR (RFK), Tulsi Gabbard, and a few lesser-known politicians. 

A month after the event, BlackRock announced their Bitcoin spot ETF application – and we were off to the races. Now 12 months later, at this year’s edition in Nashville, ex-president Donald Trump has become an unlikely crypto evangelist and is speaking on the Nakamoto main stage. Coming on the back of his shocking recent foiled assassination attempt, this was impossible to fathom a year ago, especially if you dig up anti-crypto statements Trump made during his term in office. 

But there he was, the former (and possible future) president, standing on stage at Bitcoin 2024 in Nashville, promising to create a ‘strategic BTC reserve’ if he wins in November. If you ever had doubts about Bitcoin going mainstream, retire them. 

Trump Steals the Show

Trump’s keynote appearance was always going to be the headline act. Love him or hate him, he has fame and knows how to work a crowd. As he took the stage, the energy in the room was electric. Bitcoiners who’d waited over an hour to hear him speak were practically buzzing with anticipation. You can watch his full keynote speech here.

And he delivered, despite some uneven moments. He came out swinging, vowing to fire SEC Chair Gary Gensler “on day one” and end what he called the Biden administration’s “anti-crypto crusade”. It was music to the ears of many in attendance who’ve felt stifled by recent regulatory crackdowns. He promised to free Silk Road martyr Ross Ulbricht: pitch perfect to his libertarian-leaning audience. 

But between the familiar self-praising soundbites and vitriol aimed at his opposers, Trump showed that he did his homework, or had the right crypto people give him the lay of the land. He wasn’t just there to bash the current administration, but ticked all the right boxes that Bitcoin maxis care about. 

Trump’s pro-Bitcoin promises

The Donald laid out a surprisingly detailed pro-Bitcoin agenda:

  1. Establish a “strategic Bitcoin reserve” for the USA.
  2. Prevent the USA from selling its existing Bitcoin holdings.
  3. Create a “Bitcoin and crypto presidential advisory council” with members who support the industry.
  4. Fire SEC Chair Gary Gensler on his first day in office.
  5. End what he called the Biden administration’s “anti-crypto crusade”.
  6. Keep 100% of the Bitcoin the U.S. government currently holds or acquires in the future.
  7. Appoint a new SEC chairman who is more favorable to crypto.
  8. Shut down the controversial Biden administration-led “Operation Chokepoint 2.0,” which he claimed was aimed at choking crypto businesses out of existence.
  9. Work to keep Bitcoin jobs and businesses in the United States rather than seeing them flee to other countries.
  10. Aim to make the United States the lowest-cost energy and electricity provider of any nation on Earth, to support Bitcoin mining.
  11. Transform the U.S. into the “crypto capital of the world” and the “Bitcoin superpower of the world.”
  12. Commute the sentence of Ross Ulbricht, the founder of Silk Road.
  13. Create rules for the crypto industry written by “people who love your industry, not hate your industry.”
  14. Oppose Central Bank Digital Currencies (CBDCs).

It was surreal hearing a prominent politician shout “Never Sell Your Bitcoin” and compare it to the steel industry of the last century. Whether you’re a Trump fan or not, whether it’s mere political theater or not, it marks a shift in how politicians are approaching crypto.

Credit: Tesfu Assefa

Not Just a Trump Show

While Trump might have stolen the spotlight, he wasn’t the only political heavy-hitter at the conference. Robert F. Kennedy Jr., then running as a third-party candidate, proposed a reserve of a whopping 4 million Bitcoin. Senator Cynthia Lummis pitched her plan for a 1 million BTC federal stockpile. Even Senator Tim Scott got in on the action, floating the idea of Bitcoin “opportunity zones” for underserved communities.

Bitcoin was the belle of the ball, and every politician there was a-courting. What a time to be alive!

Big Money Takes Notice

It wasn’t all politics, though. The suits showed up in force too. Robert Mitchnick from BlackRock, and Chris Kulper from Fidelity talked about Bitcoin’s investment potential – a reminder of how far we’ve come from the days when crypto was just for rebels and cypherpunks.

And then there was Michael Saylor. The MicroStrategy CEO and Bitcoin über-bull didn’t disappoint, predicting Bitcoin could hit $13 million per coin by 2045. 

Market Madness

All this bullish talk had an impact. Bitcoin’s price surged close to $70,000 during the conference, reaching levels not seen in weeks. It was a reminder of how much influence these high-profile endorsements can have on the market.

Regulation Fears Take A Backseat

Of course, it wasn’t all moonshots and lambos. The specter of regulation loomed over the proceedings, but less darkly than in previous years. Trump’s promise to fire Gary Gensler got some of the biggest cheers of the conference, reflecting the frustration many feel with the current regulatory environment.

There was also plenty of discussion about Central Bank Digital Currencies (CBDCs), with most speakers (including Trump) coming out strongly against them. The battle lines are being drawn between centralized and decentralized visions of digital money.

Looking Ahead

The Bitcoin Nashville conference could well be a turning point for crypto, thanks to such a high-profile endorsement by someone who is currently the slight favorite to be the next US president. Factor in that Kamala Harris, his Democrat opponent, apparently wanted to attend too, and is making overtures to the crypto community, and it becomes clear that the crypto vote is now strongly coveted by both US parties. Crypto is especially popular with minorities like African Americans and Latinos, meaning politicians can no longer ignore it. 

In 2023 I asked several speakers whether Bitcoin and crypto would be a major political issue in the 2024 election. The overwhelming consensus was that it was still years too early for that. Things have moved faster than expected, with the approved ETFs and patronage from the world’s biggest finance firms. It’s not even a question anymore. Bitcoin adoption is accelerating in all arenas, and the intertwined worlds of finance and politics are no exception. 

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Pavel Durov’s Arrest: Shockwaves Through Crypto, TON, and Data Privacy

Posted on by Werner

The authorities have struck another blow against crypto. Pavel Durov, the mysterious 39-year-old Russian-born billionaire and founder of the popular messaging app Telegram, was arrested in Paris on 26 August, 2024. 

This high-profile collaring sent ripples through the tech industry, particularly affecting the cryptocurrency markets due to Durov’s relationship with The Open Network (TON) and raising significant concerns about data privacy in the age of Web3. Let’s delve into the details of this incident and its far-reaching consequences.

The Arrest: Charges and Aftermath

French authorities, specifically the Office for the Protection of Minors on the Internet (OFMIN), issued an arrest warrant for Durov over a range of serious accusations. The charges arise from activities on Telegram including:

  • Organized crime
  • Drug trafficking
  • Fraud
  • Cyberbullying
  • Promotion of terrorism on Telegram

The prosecutors will need to show that Telegram failed to adequately moderate its content and curb illegal activities by users and groups on the platform.

Durov was held in police and judicial custody for two days before being released on bail. The incident immediately impacted the crypto markets, with Toncoin (TON), a cryptocurrency closely associated with Telegram, experiencing a 20% drop in value within 24 hours of the news. This wiped out approximately $2.7 billion in market value.

Credit: Tesfu Assefa

Telegram and TON’s Symbiosis

To understand the full implications of Durov’s arrest, it’s crucial to examine the relationship between Telegram and the TON blockchain.

The TON Blockchain

The Open Network (TON) is a blockchain project initially developed by Telegram in 2018. It was abandoned when US regulators came after them them for promoting a security asset and forced them to return $1.2 billion raised in their Initial Coin Offering (ICO).

However, the project was soon revived by the crypto community in 2021 (crypto folks love to use the word CTO or ‘community take over’) and has maintained close ties with Telegram ever since. It has become one of the hottest layer-1 chains in 2024 and has seen various Tap-to-Play games like NotCoin and Hamster Kombat attract hundreds of millions of users thanks to the ability to earn crypto from airdrops and points rewards. 

Alex Thorn, Galaxy Digital’s head of research, emphasized in a report that the value of the TON blockchain and its native token, toncoin (TON), are “substantially dependent” on its ties to Telegram. The downside of being close with Telegram? When their founder Pavel Druov gets arrested, Toncoin immediately takes a tumble on the market.

Market Impact

The arrest triggered significant market activity:

  • Toncoin lost $2.7 billion in market value, dropping 20% within 24 hours.
  • In the 24 hours following the news, $8.2 million in liquidations occurred across the crypto market – $3.82 million from long positions and $4.20 million from short positions.
  • Traders bet almost $70 million, causing TON’s open interest in future markets to jump 32%.
  • As of 30 August, 2024, Toncoin’s price stood at $5.35, showing signs of resistance.

Interestingly, not all TON-related tokens suffered. The DOGS token, a memecoin launched on the TON blockchain with much fanfare and a big airdrop, saw a 23% surge, reaching a market cap of $789 million. This demonstrates the complex and sometimes counterintuitive nature of crypto markets in response to major events. It was also the perfect vehicle for crypto natives to show solidarity with the #FreePavel campaign. 

Credit: CoinMarketCap

Web3 and Telegram’s Data Privacy Concerns

Durov’s arrest shines a light on the struggle between privacy-focused platforms and government efforts to combat illegal activities online. This tension is particularly relevant in the context of Web3, where data privacy is a basic principle. 

Telegram’s Privacy Features

Telegram, with its estimated 800 million users, has long been criticized for its perceived lack of moderation. However, its end-to-end encryption and commitment to user privacy have made it a popular choice for those seeking to avoid surveillance, including both legitimate users and malicious actors. Durov is a fierce advocate for censorship resistance, all the way back to his VKontakte days, and has appeared to be willing to die on his shield several times, even after Russian authorities put pressure on him during the 2012 Russian protests.

Credit: Werner Vermaak

The Balancing Act

Privacy-focused platforms must strike a balance between protecting user privacy and complying with local laws in 2024, especially if they’re non-US. Pavel’s arrest shows what happens when you mis-judge this delicate legal balancing act.

It’s increasingly challenging to operate a global service under varying national regulations, particularly in light of the European Union’s Digital Services Act (DSA) and similar legislation worldwide.

Potential Shift to Decentralized Alternatives?

With Telegram’s network distribution and TON’s blockchain capabilities, can we expect to see more interest in truly decentralized alternatives after Durov’s arrest? Very likely. These alternatives can better withstand legal and regulatory pressures. 

The crypto community, which relies heavily on privacy-preserving technologies and resistant communication channels, view this encroachment on freedom of speech and freedom of finances as very dystopian. They may turn to blockchain-based messaging solutions that are inherently more resistant to censorship and surveillance.

The TON Blockchain Outage

In a case of bad timing, the TON blockchain went down for nearly six hours on 29 August, 2024. This disruption was caused by a surge in network traffic, possibly linked to the recent airdrop of the DOGS memecoin.

The TON blockchain team explained on Twitter: “Several validators are unable to clean the database of old transactions, which has led to losing the consensus.” They assured users that “no cryptocurrency assets will be lost due to the issue”.

This outage, coming on the heels of Durov’s arrest, raises questions about the resilience of blockchain networks closely associated with centralized entities like Telegram. Maybe they’re not decentralized enough? On the other hand, outages are almost a rite of passage for most blockchains as they scale, and top chains like Solana are notorious for it.

The Future of Privacy Tech and Crypto

The outcome of Durov’s case could set important precedents for how aggressively authorities pursue tech leaders over content moderation issues, and the responsibilities of platforms under regulatory frameworks like the European Union’s Digital Services Act (DSA). It may also influence debates about encryption, backdoors, and the role of technology companies in moderating content.

Potential Outcomes

  1. Increased scrutiny on how cryptocurrency and related technologies are discussed and promoted on messaging platforms.
  2. New compliance challenges for crypto projects and crypto exchanges.
  3. Innovation in decentralized communication tools built on blockchain technology.
  4. A shift in how encrypted communication platforms are understood and regulated.

Conclusion: A Web3 Watershed?

Pavel Durov’s arrest is an important beat in the ongoing story between privacy-preserving technologies, blockchain ecosystems, and regulators. As the case unfolds, it will spark intense debates about the proper balance between law enforcement, user privacy, and the role of technology companies in moderating content.

Durov’s release on bail provides some comfort, but he’s still a regulatory target. And if the 120th richest person in the world can get in trouble for going too far with speech that offends the powers that be, anyone can. 

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Sui: Crypto’s New Object of Affection

Posted on by Werner

Introduction

In bearish market conditions, one blockchain has stood out for its recent upward price action and news, which is finally beginning to match its promise as a very unique and powerful decentralized network which can compete with older chains like Ethereum, Solana and Cardano.

Sui is a next-generation layer-1 blockchain platform that’s turning Web3 heads with its object-based design that enables a promise of more speed, scalability, and user-friendliness. 

Headquartered in San Francisco and developed by the bright minds at Mysten Labs, former employees of Facebook and its doomed Diem project, Sui aims to make Web3 technology more accessible and user-friendly.

What is Sui?

In essence, Sui is a layer-1 blockchain with a novel approach to transaction processing. Launched in May 2023, it’s aiming to be a blockchain that’s as easy to use as your favorite social media app – that’s Sui’s ultimate goal.

Its name is derived from the Chinese word for ‘water’, symbolizing its adaptability and ease of use in the Web3 space.

Key Challenges Sui Aims to Solve

Sui is addressing several critical issues in blockchain:

  1. Scalability: Sui’s architecture is designed to scale horizontally, maintaining performance as network demand grows.
  2. Transaction fees: Sui’s efficient processing aims to keep fees low and predictable, even during peak usage.
  3. User experience: Sui focuses on simplifying the user interface to make blockchain technology more accessible.
  4. Programmability: Through the Move language, Sui offers enhanced flexibility for developers.
  5. Efficiency of data handling: Sui’s object-centric model allows unrelated transactions to be processed in parallel, significantly improving efficiency.

Key Features

Sui boasts several innovative features:

  • Horizontal scalability: Network capacity can expand by adding more nodes.
  • Low-latency transactions: Processes transactions with minimal delay.
  • Object-centric data model: Enables parallel processing of independent transactions.
  • Move programming language: Enhances security and simplifies digital asset management.
  • Byzantine fault-tolerant proof-of-stake consensus: Ensures network security and efficiency.

The Move Programming Language

Move, Sui’s programming language is specifically designed for secure and flexible smart contract development in blockchain environments (and it’s also used by Aptos). It focuses on securely managing resources and building flexible smart contracts.

Key features of Move include:

  • Resource-oriented programming
  • Static type system
  • Formal verification capabilities
  • Efficient module system

By treating assets as first-class citizens, Move allows developers to implement complex payment logic with a high degree of safety and efficiency. This approach significantly reduces the risk of common vulnerabilities found in other blockchain systems.

The combination of these features makes Move particularly well-suited for blockchain environments:

  1. Security: The resource-oriented approach, and the static typing, help prevent common vulnerabilities like reëntrancy attacks or double-spending.
  2. Efficiency: Move’s design allows for efficient execution, crucial for blockchain systems where computational resources are limited.
  3. Flexibility: Despite its focus on safety, Move remains flexible enough to implement complex smart contract logic.

In the context of Sui, developers can create complex, interrelated objects that mirror real-world assets and relationships, all while benefiting from Move’s strong safety guarantees.

Developers building a decentralized finance (DeFi) application on Sui could define custom tokens using Move, create complex financial instruments, and implement sophisticated trading logic, all with a high degree of safety and efficiency. The ability to mathematically verify the correctness of critical functions provides extra peace of mind.

Credit: Tesfu Assefa

How SUI Works

Sui’s key innovation is its object-centric model. Instead of the usual account-based system, Sui treats everything as objects. Your coins, NFTs, and even the programs running on Sui are all objects.

 In Sui’s object model, there are three types of object ownership:

  1. Owned by an address: Objects like coins or NFTs owned by a specific user address.
  2. Owned by another object: For example, an NFT that is part of a larger collection.
  3. Shared: Objects that can be accessed and modified by multiple users.

This model enables Sui to process independent transactions concurrently, increasing throughput and reducing latency. By executing unrelated transactions in parallel, Sui achieves higher transaction processing speeds than traditional blockchain architectures.

The object-centric model also simplifies the development of complex applications, particularly those involving digital assets. Developers can create and manage assets as distinct objects with their own properties and behaviors, leading to more intuitive and efficient smart contract design.

SUI Tokenomics

The native token of the Sui network, SUI, serves several key functions:

  • Gas fees: Used to pay for transaction fees on the network.
  • Staking: Validators and delegators can stake SUI to participate in network security and earn rewards.
  • Governance: SUI token holders can participate in on-chain governance decisions.

The total supply of SUI tokens is capped at 10 billion. This fixed supply model is designed to create scarcity and potentially drive value as network usage increases. SUI tokens have a distribution and vesting schedule designed to incentivize long-term participation in the network and align the interests of developers, users, and investors.

What Drove the Recent SUI Price Surge?

Credit: CoinMarketCap

After suffering with all other coins during Black Monday’s market crash, Sui recently experienced significant growth, driven by two key events:

  1. Mysticeti Upgrade: On August 6, Sui’s mainnet was upgraded to Mysticeti, increasing its theoretical transaction processing capacity to 297,000 TPS. This upgrade demonstrated Sui’s commitment to continuous improvement and its potential to handle large-scale adoption.
  2. Grayscale Trust: On August 7, Grayscale introduced its SUI Trust for accredited investors, potentially increasing institutional interest in the token. This development signaled growing recognition of Sui in the traditional finance sector.

Bridging the Web2 to Web3 Gap

Sui is on a mission to make blockchain technology more accessible to the average person. Here’s how:

  • Easy wallet creation: Use your Gmail or Face ID – no need to remember another password.
  • No more seed phrases: This addresses a pain point for crypto users.
  • QR code transactions: As easy as scanning your boarding pass.
  • User-friendly interface: If you can use Facebook, you can use Sui.

SUI Ecosystem Overview

Despite its relative novelty, Sui is building a diverse ecosystem. Notable projects include:

  • Ocean DEX: A hybrid central limit order book and automated market maker decentralized exchange.
  • Ethos Wallet: A web3 wallet for Sui with simple email registration.
  • SuiNS: The Sui Name Service, providing human-readable addresses for Sui wallets.
  • Navi Protocol: A money market protocol contributing to Sui’s recent increase in TVL (total value locked)
  • Artificial intelligence-focused protocols like Atoma and Walrus

Cross-chain bridges like Axelar Network and Wormhole interoperate with other major blockchains. Users can transfer assets across these bridges that link Sui to other blockchain networks. This brings more liquidity Sui-based tokens, and expands the set of use-cases and market size for Sui-based applications.

The growth of Sui’s ecosystem is crucial for its long-term success. It currently has a total value locked (TVL) of just under $600 million according to DeFiLlama with the top tokens commanding comparatively small market caps, the biggest at $70 million and the 20th with a fully diluted cap of under $1 million if CoinMarketCap Sui Ecosystem data is accurate.

A diverse range of applications and services built on Sui is therefore crucial if it wants to grow and attract the best developers and investors.

Sui vs Solana: A Concise Comparison

Sui and Solana are both high-performance blockchain platforms, but they differ significantly in their approach:

Sui uses an object-centric model with the Move language, enabling parallel processing of independent transactions and native sharding.Solana uses an account-based model with the Rust language, utilizing a global state and Proof of History consensus.

While Sui’s architecture potentially allows for greater scalability through horizontal expansion, Solana focuses on optimizing single-node performance. Sui offers sub-second finality for single-owner transactions, whereas Solana provides this for all transactions.

Is Sui a ‘Solana killer’?

It’s premature to make such a claim. While Sui’s innovative approach shows promise, Solana has an established ecosystem, massive user numbers (thanks in no small part to memecoins) and a proven track record. Rather than displacing Solana, Sui may carve out its own niche, particularly in use-cases that benefit from its object-centric model and Move language capabilities. The blockchain space is vast, with room for multiple successful platforms serving different needs.

Conclusion

Sui is working hard to solve massive challenges in the blockchain industry. Its innovative features, growing ecosystem, and focus on user experience position it as a noteworthy player in the layer-1 blockchain space. 

As Sui continues to develop and attract projects, it has the potential to significantly impact the future of decentralized applications and Web3 technologies.

However, like any new technology, Sui faces challenges and competition. Its success will depend on its ability to deliver on its promises of high performance and scalability, attract and retain developers, and build a robust and diverse ecosystem of applications. This is a big task, but it’s one that all major blockchain networks have had to undertake.

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Web3 Wars: GameFi Dapps Overtaken By Crypto AI Growth, What’s Next?

Posted on by Werner

TL;DR

  • AI Dapps now have 28% of blockchain activity, surpassing GameFi Dapps at 26%
  • GameFi is still growing: 4 million daily active wallets, up 79% month-over-month.
  • Q2 2024 saw $1.1 billion investment in blockchain gaming; July dropped significantly.

Introduction

Blockchain’s decentralized application (Dapp) industry has witnessed a significant shift in recent months, with artificial intelligence (AI) Dapps surpassing crypto gaming (GameFi) Dapps as the leading category for the very first time. 

This development, highlighted in the July 2024 DappRadar Games Report, means that gaming remains a robust and growing sector, but that AI-powered Dapps are the hotter current tech trends, and hold a bit more mindshare in the space right now. 

AI Dapps Take the Lead

Credit: DappRadar

  • In July 2024, the Dapp industry maintained its impressive milestone of over 15 million daily unique active wallets (dUAW) interacting with blockchain applications. 
  • However, the most striking development was the rise of DappRadar’s ‘Other’ category, which primarily consists of AI-based Dapps, to the top position with a 28% share of user activity. 
  • Gaming Dapps still demonstrated significant growth.The sector now represents 26% of DApp activity, engaging 4 million dUAW – a remarkable 79% increase from the previous month. 

The rise of AI Dapps reflects a broader trend in the tech industry, where artificial intelligence and machine learning are being integrated into sectors from finance to entertainment. In the blockchain space, AI applications are leveraging decentralized networks that provide services from decentralized AI computations by projects like Render to AI-driven data analysis and prediction markets.

Gaming Sector Plays On

Despite being overtaken by AI Dapps, the blockchain gaming sector continues to show strength and innovation. The report highlights several key developments and trends:

1. Blockchain Diversity: Ronin remains the leading blockchain for gaming activity, driven by popular titles like Pixels and Lumiterra. Other networks like opBNB, Oasys, NEAR, and Immutable zkEVM are also seeing significant engagement, showcasing the diverse ecosystem of blockchain gaming platforms.

Credit: DappRadar

2. Emerging Titles: New games like SERAPH: In the Darkness, which launched in mid-July, have quickly gained traction, indicating ongoing innovation and user interest in fresh gaming experiences.

3. NFT Trading: Despite a general decline in metaverse-based NFT collections, gaming NFTs continue to see active trading. Gods Unchained and Axie Infinity remain the most traded gaming NFT collections, while newer entries like Guild of Guardians are gaining popularity.

4. Cross-Platform Integration: The success of games published on major platforms like the App Store and Epic Games Store shows the growing acceptance of blockchain and NFT elements in mainstream gaming channels.

Investment Landscape

The investment climate for blockchain gaming and metaverse projects is a mixed picture. July 2024 saw the lowest investment level since Q3 2020 – just $23 million across three deals – but the preceding quarter (Q2 2024) was notably strong. 

Q2 marked the best quarter for blockchain gaming investments since Q3 2022, with $1.1 billion raised – a 314% increase from the previous quarter.

Key investments in Q2 included:

1. a16z Gaming Fund: Raised $600 million for game studios, infrastructure, and the Games x Consumer ecosystem.

2. Bitkraft Venture Fund: Secured $275 million for early-stage investments in gaming and interactive media companies.

3. Metaverse Projects: Significant investments in Baby Shark Universe ($34 million) and The Sandbox ($20 million) demonstrate ongoing interest in metaverse development.

These investments, focused on infrastructure and foundational development, suggest a strategic approach to enriching the Web3 gaming ecosystem. The contrast between the robust Q2 and the subdued July may indicate a temporary summer lull rather than a long-term trend.

Credit: Tesfu Assefa

GameFi Q2 Industry Snapshot and Analysis

1. User Engagement: Blockchain games remain strong in the Web3 industry, accounting for 26% of all Dapp activity and attracting 2.8 million active wallets daily. This persistent engagement suggests that gaming remains a key driver for Web3 adoption.

2. Blockchain Performance: Ronin has reclaimed the top spot among gaming blockchains, with a 100% increase to 1.9 million dUAW. This indicates the Ronin platform has strong user appeal. Newer platforms like Immutable zkEVM and opBNB grow rapidly.

3. Game Performance: Pixels leads the gaming landscape with 48 million unique wallets this quarter, demonstrating the enduring appeal of well-established titles. The success of newer entries like Guild of Guardians, especially following their mobile launch, shows the potential for growth through strategic platform expansions.

4. Metaverse Developments: Metaverse-based NFT collections saw a 29% decline in trading volume and a 21% drop in sales. Projects like Animoca Brands’ Mocaverse continue to dominate, capturing half of the trading volume. This suggests that while the metaverse concept may be experiencing reduced hype, established projects are maintaining their market positions.

5. Technological Advancements: The industry continues to focus on seamless gameplay experiences, investing in infrastructure and cross-chain compatibility. This focus on user experience is crucial to acquire and retain users.

6. Friend or Foe? The rise of AI Dapps presents both a challenge and an opportunity to GameFi. Gaming developers may need to integrate AI elements to stay competitive, potentially leading to more sophisticated and engaging gameplay experiences.

Looking Ahead

Despite the challenges, the blockchain gaming industry shows promising signs for future growth, especially if the 2024/2025 crypto bull run gets back on track.

New game launches are succeeding, and lots of blockchain platforms are getting traction. These trends show continuing innovation in tech, in gameplay, tokenomics, and user engagement strategies. There is potential crossover with traditional gaming platforms (as we’ve seen with Gunzilla and PS5), and interest from established tech companies. Broader industry collaborations will help the GameFi industry scale beyond what we’ve seen.

Significant investments in gaming funds and infrastructure projects continue to lay the groundwork for more sophisticated and scalable blockchain gaming experiences. Also, the rise of AI Dapps may lead to innovative hybrid models, combining elements of AI and gaming to create new, engaging experiences for users.

The rise of AI Dapps presents both a challenge and an opportunity for the GameFi sector to evolve and integrate new technologies. The capital is there. Substantial investments in Web3 gaming, infrastructure, emerging platforms, and cross-industry collaborations are laying the foundations for an exciting next phase of blockchain gaming evolution.

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Bitcoin: These Governments Hold Billions of Dollars in BTC

Posted on by Werner

New crypto poster boy Donald Trump made waves at the recent Bitcoin Nashville 2024 conference where he and other politicians unveiled plans to create a governmental ‘Bitcoin reserve’ of sorts. This bullish news came in the wake of a tough July for BTC where Germany sold off $3 billion of dollars in seized Bitcoin, pushing its price down significantly to the low $50,000s.

While Bitcoin started as a libertarian ideal which was supposed to help free Joe Public from the financial control of evil governments and their central banks, 15 years later it is clear that idealism doesn’t survive reality unharmed. 

The US government now holds a staggering 200,000, and it’s not the only country to have a big bag of Bitcoin for a rainy day. Other governments around the world have found themselves in possession of significant amounts of Bitcoin (BTC) and other cryptocurrencies, which they are HODLing for whatever reason they deem fit. 

These holdings are often the result of seizures from criminal activities rather than intentional investments, but that makes no difference in the end. The growing stockpile of digital assets under state control has consequences that must be considered. 

Let’s look at Bitcoin holdings of several major governments, how they acquired these assets, and the potential implications for the crypto market.

United States: The Largest Government Holder of Bitcoin

According to data from blockchain analytics firm Arkham, the US government holds over 213,000 BTC, along with various other cryptocurrencies, bringing its total crypto holdings to approximately $4 billion. This makes it the largest holder of bitcoin among governments globally, accounting for about 1% of the total bitcoin supply of 21 million.

Interestingly, the US government has never directly purchased Bitcoin. Instead, its holdings are the result of seizures from illegal activities, particularly from the Silk Road marketplace, which was shut down by the FBI in 2013. The U.S. government has auctioned off a significant portion of its seized bitcoins, having sold around 195,000 bitcoins, generating approximately $366 million from these sales.

Some other notable cases include:

  1. The ‘Individual X’ case: An anonymous hacker stole over 69,000 BTC from the Silk Road darknet marketplace between 2012 and 2013. The hacker was apprehended in 2015 and forced to forfeit the stolen funds, going straight to the vaults of Uncle Sam.
  2. James Zhong’s Silk Road exploit: Zhong managed to steal more than 51,000 BTC from Silk Road using a technical exploit, which many don’t consider to be really criminal. He was caught in November 2021 after a decade on the run, which was covered in this fascinating documentary episode.
  3. The Bitfinex hack: In February 2022, authorities arrested Ilya Lichtenstein and his wife, Heather ‘RazzleKhan’ Morgan, for allegedly laundering almost 120,000 BTC stolen in the 2016 Bitfinex hack.

The US government typically keeps seized crypto assets in cold storage during ongoing investigations. Once cases are resolved, these assets are often converted to fiat currency through exchanges or OTC auctions. Between 2014 and 2023, the US government sold over $360 million worth of BTC across 11 different auctions.

However, if Trump gets elected, he has promised that the US government will, “Never sell your Bitcoin”.

China Plays Both Sides

Despite its bipolar attitude and well-known crackdown on cryptocurrency trading and mining, the Chinese government has also found itself in possession of a substantial amount of Bitcoin. In 2020, Chinese authorities seized over 190,000 BTC, along with other cryptocurrencies, from the Plus Token scam project. This massive haul was valued at billions of dollars at the time.

While it’s unclear if China still holds all of these assets, the government stated its intention to process the seized digital currencies “pursuant to laws” and forfeit the proceeds to the national treasury. This suggests that much of the confiscated crypto may have already been exchanged for fiat currency.

Interestingly, despite the ban on crypto mining in China, there have been speculations about state-owned mining operations. In October 2023, reports emerged of a Bitcoin mining operation called Bit Origin, which could be traced back to the Chinese government, raising questions about China’s true stance on cryptocurrency.

United Kingdom Nabs 61,000 BTC from Criminal Activities

The United Kingdom has also amassed a significant Bitcoin holding through law enforcement actions. In one high-profile case, London’s Metropolitan Police seized over 61,000 BTC from a female UK citizen named Jian Wen, who was found guilty of laundering funds from an investment fraud operation in China.

The UK government has been actively seizing cryptocurrencies used in criminal activities. In June and July 2021, the Metropolitan Police confiscated around £180 million worth of crypto assets as part of a money laundering investigation, setting new records for the largest crypto seizures in the country.

A new law that came into effect in April 2024 has given UK law enforcement agencies more power to seize, freeze, and destroy cryptocurrency used by criminals. This legislation is likely to cause even more crypto assets to come under government control in the future.

Ukraine Mixes Government and Official Holdings

Ukraine presents an interesting case in the realm of government Bitcoin holdings. The country has received significant crypto donations to support its war effort, with estimates suggesting over $225 million raised by July 2023. But it’s the holdings of government officials that truly stand out.

In April 2021, a Ukrainian government data report revealed that public officials owned over 46,000 BTC, worth $2.67 billion at the time. Out of 700,000 officials who made property declarations, 652 declared Bitcoin ownership, with an average holding of 71 BTC each. Some officials reported owning over 5,000 BTC, with one claiming ownership of 18,000 BTC – worth over $1.1 billion at current prices.

El Salvador Continues to Accumulate

And of course, this article would be remiss to not mention El Salvador. Under its leader Nayib Bukele, the country became the first to adopt bitcoin as legal tender in September 2021 to much fanfare at the Bitcoin Miami conference. El Salvador was mocked at first for its meager holdings and took even more flak during the 2022 bear market, but with Bitcoin’s dramatic reversal of fortune in 2023, its investment has come up roses ever since.

El Salvador currently holds approximately 5,770 bitcoins, valued at around $340 million as of August 2024. This makes it one of the largest government holders of bitcoin globally.

Credit: Tesfu Assefa

Potential Market Impact and Future Outlook

These big Bitcoin holdings by governments raise a question: what impact can this have on the crypto market? Some come from seizures, some from intentional investments, but either represent a substantial amount of Bitcoin that could potentially enter the market.

Government sales of Bitcoin, such as the recent German government sell-off, give Supply a shot-in-the-arm in its neverending armwrestle against Demand, pushing prices downwards. Such sales also have an indirect effect: generating uncertainty among investors who are worried about the downward pressure of a sudden big sell-off.

Looking ahead, there are several factors that could further influence government attitudes towards Bitcoin:

  1. Regulatory developments: As crypto regulations get more cohesive worldwide, governments may gain more clarity on how to handle their holdings.
  2. Reserve currency potential: Some crypto pundits love to speculate that governments could eventually view Bitcoin as a potential reserve currency, especially given recent recommendations of allowing central banks to hold up to 2% of their reserves in crypto starting January 1, 2025.
  3. Political shifts: Changes in government leadership, such as the potential return of a crypto-friendly administration in the United States under Trump, could lead to more positive policies towards the crypto industry. 
  4. Mining operations: Governments might opt to mine Bitcoin rather than buy it, potentially following China’s alleged model of state-owned mining operations. This will require extensive resources though, and with the recent Halving making it more expensive to mine the currency, it could be tough to get approved. 

Conclusion

The world’s governments becoming significant Bitcoin holders still isn’t standard practice. But government Bitcoin holdings – even if primarily through seizures – is a growing trend, and an intriguing development in the cryptocurrency landscape. 

Add to this the slow but steady accumulation of BTC through a number of spot ETFs led by TradFi giants like BlackRock, and it’s clear that Bitcoin is really starting to reach its ‘digital gold’ end-state. What these governments and Wall Street giants do with their holdings, and the power this gives them over the world’s premier digital asset, remains to be seen. 

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Top Ten Crypto Games for Q3 2024

Posted on by Werner

Introduction

The crypto gaming industry reached a brief but explosive peak in late 2021, hitting its GAME OVER screen as all the metaverse mania quickly fizzled out. Since then, the generally vastly overvalued leading GameFi projects have dropped the bulk of their market cap, as reality met fantasy and we find out that most crypto games were just… well, turn-based gaming crap better suited to the 1990s. 

Fast forward to 2024, the Web3 games sector is still here, and everyone continues to hunt for the next Axie Infinity breakout star of this new bull cycle. 

As a result, the sector has seen substantial growth, even while prices continue to plummet in most cases, with a variety of games that blend immersive experiences with blockchain technology. 

Here are the top ten crypto games to explore in Q3 2024.

1. Heroes of Mavia

Overview 

Heroes of Mavia is a strategy-based MMO where players build bases, manage resources, and engage in battles involving whimsical characters and vehicles. It operates on a play-to-earn model, allowing players to earn MAVIA tokens (on Ethereum and Base).

Why It’s Popular 

The game’s strategic depth and vibrant community make it appealing to both casual and hardcore gamers. Its unique combination of resource management and tactical combat provides a challenging and rewarding experience.

Key Features

  • Base-building and Resource Management: Players construct and upgrade their bases, manage resources, and develop strategies to defend against enemy attacks.
  • PvP and PvE Battles: Engage in intense battles against other players or AI-controlled enemies to earn rewards and climb the leaderboards.
  • Robust In-game Economy: Players can trade resources and items within the game, enhancing their gameplay experience.

2. Shrapnel

Overview 

Shrapnel is a gritty, realistic first-person shooter (FPS) that integrates NFTs and blockchain technology. Players can own, trade, and upgrade in-game items.

Why It’s Popular 

The high-quality graphics and intense gameplay of Shrapnel, combined with the ownership of digital assets, create a compelling experience. The game also features a dynamic environment where players’ actions can significantly impact the game world. It feels and looks like a AAA title. 

Key Features

  • High-Octane FPS Gameplay: Fast-paced and strategic, requiring quick reflexes and tactical thinking.
  • Customizable Weapons and Gear: Players can modify and upgrade their weapons and gear using NFTs.
  • NFT-Based In-Game Items: True ownership of items allows players to trade or sell them on the marketplace.

3. Pixels

Overview 

Pixels is a cozy farming simulation game with pixelated graphics. Players cultivate crops, raise animals, and trade produce. The game utilizes blockchain technology to enable true ownership of in-game assets and had a massive launch earlier in 2024. According to Dappradar, there are 720,000 unique address wallets created for the game thus far. 

Why It’s Popular

Its relaxing gameplay and vibrant visuals appeal to a wide audience, while the blockchain aspect adds an extra layer of engagement. The community-driven economy allows players to collaborate and trade, enhancing the social aspect of the game.

Key Features

  • Farming and Crafting: Grow crops, raise animals, and craft items to develop your farm.
  • NFT-Based Land and Items: Own and trade land and other assets on the blockchain.
  • Social Trading and Interaction: Collaborate with other players to trade goods and resources.

4. Guild of Guardians

Overview 

Guild of Guardians is a fantasy RPG for mobile. Players assemble a team of heroes to battle through dungeons and earn rewards. The game emphasizes cooperative gameplay and NFT ownership.

Why It’s Popular 

The game’s focus on team-building and cooperative play, along with its mobile-first approach, makes it accessible and engaging. The ability to own and trade heroes and items as NFTs adds significant value for players.

Key Features

  • Hero Collection and Team-Building: Collect and upgrade a diverse roster of heroes.
  • Dungeon Crawling and PvE Challenges: Engage in exciting battles and complete challenging quests.
  • NFT-Based Hero and Item Ownership: True ownership of in-game assets allows for trading and selling.

5. Aurory: Seekers of Tokane

Overview

Aurory is a JRPG-inspired Solana game set in a vibrant fantasy world. Players explore, battle, and collect creatures called Tokane, which can be used in various in-game activities.

Why It’s Popular 

Its rich lore and engaging gameplay mechanics, combined with the ability to own and trade Tokane NFTs, make it a standout title. The game’s cutesy visuals and intricate storyline captivate players and keep them coming back for more.

Key Features

  • Exploration and Combat: Traverse a beautifully designed world and engage in strategic battles.
  • Tokane Collection and Trading: Collect and trade various Tokane creatures, each with unique abilities and attributes.
  • Story-Driven Quests and Adventures: Immerse yourself in a deep and engaging narrative.

Credit: Tesfu Assefa

6. Hamster Kombat

Overview 

Following in the footsteps of ‘TapFi’ game Notcoin, Hamster Kombat has recently emerged on the surging Telegram platform, reportedly attracting a massive 250 million user base since its mid-2024 debut. This innovative game blends elements of cryptocurrency management with casual gameplay, allowing users to take on the role of hamster executives running virtual crypto exchanges.

Why It’s Popular 

The game’s core mechanic revolves around a tap-to-earn system, where players can accumulate in-game currency through simple screen interactions and task completion. By leveraging Telegram’s mini-app capabilities, Hamster Kombat offers an accessible gaming experience directly within the messaging app. The developers behind Hamster Kombat will  airdrop a large portion of its coin supply to its players based on their points. 

Key Features

  • Integration with The Open Network (TON) enables secure digital transactions. 
  • Players will be able to transform their in-game achievements into actual cryptocurrency tokens during a planned token distribution event.

7. Parallel

Overview

Parallel is a sci-fi card game where players collect, trade, and battle with NFT cards. The game’s lore and strategic depth make it a favorite among card game enthusiasts.

Why It’s Popular 

The intricate card mechanics, and the ability to own and trade cards as NFTs, appeal to both casual and competitive players. The game’s deep strategic elements and immersive storyline keep players engaged.

Key Features

  • Collectible Card Battles: Build and customize your deck to compete against others.
  • Deep Strategic Gameplay: Utilize a wide range of strategies to outsmart your opponents.
  • Rich Sci-Fi Lore: Immerse yourself in a detailed and captivating sci-fi universe.

8. Hytopia

Overview 

Hytopia is a Minecraft-type game where players can build, explore, and interact with others. The game uses blockchain technology to allow for true ownership of in-game assets.

Why It’s Popular 

Its expansive world and creative freedom attract players who enjoy sandbox games and the added value of NFT ownership. The game’s robust creation tools and active community foster a collaborative environment.

Key Features

  • Open-World Exploration: Discover and explore a vast, dynamic world.
  • Building and Crafting: Create and customize your own structures and items.
  • NFT-Based Assets and Items: Own and trade unique assets on the blockchain.

9. Legends of Elumia

Overview

Legends of Elumia is a fantasy MMORPG with high-end graphics. It features epic quests, PvP battles, and a player-driven economy. The game’s integration of blockchain technology allows players to own and trade in-game items.

Why It’s Popular 

The game’s rich world and extensive gameplay, combined with blockchain integration, provide a deep and engaging experience. The ability to own and trade items as NFTs adds a layer of depth to the gameplay.

Key Features

  • MMORPG Gameplay: Embark on epic quests and engage in intense PvP battles.
  • Experience thrilling adventures and compete against other players.
  • Player-Driven Economy with NFT Items: Own and trade unique items within the game’s economy.

10. Axie Homeland

Overview 

Axie Homeland is a continuation of the popular Axie Infinity franchise, focusing on building and managing a homeland for cute little critters called Axies. The game incorporates NFT-based land and Axie ownership.

Why It’s Popular 

The established fanbase of Axie Infinity and the new features in Axie Homeland make it a must-try for fans and newcomers alike. The game’s focus on community and collaboration enhances its appeal.

Key Features

  • Land Management and Building: Develop and manage your own Axie homeland.
  • Axie Breeding and Battling: Breed and battle Axies to earn rewards.
  • NFT-Based Assets and Land: Own and trade land and Axies on the blockchain.

The games covered here really showcase the diverse and innovative landscape of crypto gaming in Q3 2024. Whether you’re interested in strategic MMOs, relaxing farming sims, or intense FPS action, there’s something for everyone in blockchain gaming​. With a prediction of an industry size totaling $614 billion by 2030, it’s a smart move to keep playing. 

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What are Layer-2 Blockchains and Why Does Ethereum Need Them?

Posted on by Werner

Introduction

Ethereum still reigns supreme in 2024 as crypto’s leading smart contract platform. There is growing competition from other layer-1 chains like Solana, Cardano, Avalanche, BNB Chain and the surging Tonchain, but no one’s quite ready to come for the king.

Ethereum was the first chain to enable decentralized applications (dApps), decentralized finance (DeFi), NFTs, and more, and it rightly deserves its reputation of excellence – a reputation that earned it spot ETF approval in 2024.

Ethereum always prioritized decentralization over scalability, never compromising. This led to major network congestion at times over the years, especially when its popularity surged. At periods of high demand, ETH transactions become slow and gas fees skyrocket. This remained true after the move from proof-of-work consensus to proof-of-stake in 2021 during ‘the Merge’. Ethereum’s failure to evolve in its early years saw co-founders like Charles Hoskinson and Gavin Wood leave the project (to found rival projects Cardano and Polkadot respectively). 

Evolve it did. Finally. The early 2020s saw a slew of so-called Layer-2 (L2) scaling solutions come in, battling for crypto dollars and the ETH of DeFi investors in an ultra-competitive frontier. At present, the total Ethereum layer-2 ecosystem has captured a total value locked of over $40 billion in crypto, according to L2Beat.

Credit: L2BEAT

With new entrants like ZkSync recently joining the fray, it’s the perfect time to take stock of the Ethereum layer-2 landscape to figure out what’s nice to know and what you actually NEED to know. 

What are Layer-2 Chains? 

Layer-2 blockchains are secondary networks built on top of Ethereum to offload transaction processing from the main Ethereum chain (Layer-1). By handling transactions on a separate chain, Layer-2s provide a faster and cheaper way to use Ethereum without compromising on the security of the base layer. You can think of Layer-2 chains as an efficient assistant that processes the bulk of Ethereum’s transactions separately, then sends the processed data back to Ethereum for final approval and addition to the Ethereum ledger.

The need for Layer-2 solutions stems from the blockchain trilemma: the tradeoff between decentralization, security, and scalability faced by all blockchains. By design, Ethereum prioritizes decentralization and security at the expense of scalability. With Ethereum currently processing only 15-30 transactions per second on its main network (compare traditional payment networks like Visa which handle 1700 TPS), L2 chains are crucial for Ethereum to scale and support mainstream adoption.

EIP-4844 drops Layer-2 transaction fees 

A huge boost for layer-2s came in March 2024 when the network implemented EIP4884 during its Dencun upgrade.
EIP-4844, also known as ‘proto-danksharding’, is an Ethereum improvement proposal that aims to help Layer-2 solutions by introducing a new transaction format called ‘shard blob transactions’. These transactions allow Layer-2s to store large amounts of data on Ethereum at a dramatically lower cost, helping them to offer cheaper transactions and onboard more users to compete with ultra-cheap chains like Solana, thereby further improving Ethereum’s scalability and accessibility, as we can see in this Dune chart below.

Credit: Dune Analytics

Types of Layer-2 Solutions: Sidechains vs. Rollups

The two main categories of Ethereum L2 scaling are sidechains and rollups. 

Sidechains

Sidechains are independent blockchains with their own consensus mechanisms and native tokens. They connect to Ethereum through a two-way bridge, allowing users to move assets between the chains. 

Sidechains don’t actually transfer assets to Ethereum – instead they ‘lock’ the original tokens in an Ethereum smart contract and ‘mint’ pegged versions of those assets on the sidechain. Polygon is a prominent example of an Ethereum sidechain focused on scalability. Sidechains are no longer very popular, and the top ten layer-2 chains are all rollups. 

Rollups

Rollups, on the other hand, keep transaction data on Ethereum. Rollups “roll up” or bundle hundreds of transactions together off-chain, then post a cryptographic proof of those transactions to ETH. By compressing transaction data in this way, rollups reduce the data footprint on Ethereum, resulting in lower fees.

There are two types of rollups:

  1. Optimistic rollups assume transactions are valid by default, only running a fraud proof if a transaction is challenged. 
  2. Zero-knowledge (zk) rollups generate a validity proof for each rollup block, verifying the accuracy of the off-chain transactions.

Leading optimistic rollups include Arbitrum and Optimism, while examples of ZK rollups are Immutable X and zkSync. An advantage of optimistic rollups is EVM-compatibility: compatibility with the Ethereum virtual Machine that makes it easier for Ethereum developers to port their dApps to the rollup. However, ZK rollups can offer faster transaction finality and higher throughput.

Benefits and Use Cases of Layer-2 Networks

The core benefit of Ethereum L2s is massively improved scalability. Rollups like Arbitrum have achieved 40,000 TPS compared to Ethereum’s 15-30 TPS. This allows for near-instant transactions at a fraction of the cost of Ethereum base layer.

Major brands are turning to Ethereum L2s to make their Web3 initiatives viable. Starbucks chose Polygon for its Odyssey loyalty program to provide a seamless, low-cost user experience. Blockchain gaming, which requires high volume, low-latency transactions, is another growing use-case. ImmutableX is a ZK rollup purpose-built for NFT gaming with features like gas-free minting.

DeFi protocols are also expanding to L2s to offer users lower fees and faster settlement. Uniswap v3, Aave, and other top Ethereum dApps are now deployed on optimistic rollups. Even blockchain-powered social media platforms like Reddit’s Community Points and decentralized Eternal platform have launched on Arbitrum for cheaper costs and better scale.

And as layer-2 chains continue to blossom, we see task-specific layer-3 chains built on top of them in turn. 

Top Ethereum Layer-2 chains in 2024

Tools like L2Beat and CoinMarketCap provide a wealth of excellent on-chain data about all the best layer-2s, which are worth mastering before you make any investments. Core metrics to grasp include total value locked (TVL), which means how much funds are contained within the project ecosystem, total active users and wallet addresses, and of course fully diluted value (FDV), which is total market cap of the layer-2 asset if all the coins to be issued were already in circulation. 

Here’s a quick rundown of some of the best layer-2s right now. We’ll do a deeper dive in a follow-up article:

Dominant Ethereum’s L2 (Credit: L2BEAT)
  • Arbitrum One: Is a leading Layer-2 rollup that processes transactions off-chain. It achieves 40,000 TPS, reduces transaction costs, and has $17 billion TVL and 40% market share.
  • Optimism: Uses optimistic rollups (ones that assume valid transactions), creating faster processing and lower costs. It is compatible with Ethereum tools and contracts.
  • Base: Incubated by Coinbase, Base uses Optimism’s tech. Their stated aim is to create a ‘super-chain’. They have achieved an impressive $7.4 billion TVL since Nov 2023.
  • Polygon: Migrated from sidechain to zkEVM. Currently clocks 7,200 transactions per second at $0.01 average cost. Its accessibility for everyday use-cases is shown by the fact that Starbucks chose it to host their loyalty program.
  • Linea: EVM-compatible ZK rollup by Consensys, with higher throughput, and lower fees. Uses an innovative lattice-powered prover, zkSNARK tech, and no trusted setup.
  • Immutable: Designed for NFTs and gaming, Immutable uses zero-knowledge proofs, for fast, gas-free, carbon-neutral minting and trading, and offers a streamlined experience.
  • Ronin: Created by Axie Infinity team, Ronin achieves near-instant and low-cost transactions for gaming and NFTs, using proof-of-authority consensus.
  • zkSync Era: Uses zero-knowledge proofs for scalable, low-cost payments and smart contracts. It is accessible and user-friendly for various applications.
  • Starknet: Starknet is a ZK rollup that supports general-purpose smart contracts. It uses the Cairo language, is efficient and easy to use, and attractive for complex dApps.
  • Mantle: Built on BitDAO, BitDAO improves user experience for dApps, DeFi, and decentralized governance. It enables faster transactions and lower fees to drive adoption.

Credit: Tesfu Assefa

Is The Future Still Ethereum and Layer-2?

Ethereum L2s are not a replacement for the Ethereum base chain, but rather a complement to make Ethereum more accessible for users and developers. In return, they benefit from Ethereum’s battle-tested technology. Even with future Ethereum upgrades like sharding, L2 chains provide a powerful scaling solution that preserve’s Ethereum’s decentralization and security.

With benefits like sub-second settlement times, negligible fees, and improved capacity, layer-2 chains are key to bringing Ethereum to the masses and to drive the next wave of Web3 adoption.

However, layer-2s are not always that easy to use, and it can be burdensome moving funds across Ethereum layers and chains in order to transact and invest.

Disruptive and ultra-cheap chains like Solana, TON and SUI continue to offer growing competition for the Ethereum ecosystem in blossoming new fields such as memecoins, DePin, Real World Assets (RWA) and artificial intelligence. Therefore these developments – in particular, the arrival of the Base Network and Linea – should really help Ethereum retain its lead, thanks to the influence of Coinbase and the ease of use of its Base Wallet. 

Add to that the innovation brought by ZK rollups like ZkSync, and it’s safe to say that Ethereum’s bull case and its stable of layer-2 chains remain intact. Read this year’s Van Eck report to see their crazy price predictions for 2030. 

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