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.

Sluggish Crypto Q2 2024 Saved By Memecoins and Airdrops

Posted on by Werner

Introduction

Despite the much-anticipated fourth Bitcoin Halving in April, which traditionally marks the beginning of a new era in the crypto cycle, the cryptocurrency market’s response in Q2 2024 was surprisingly muted, according to the latest CoinGecko report.

Q1 was a period of exuberance, driven by the approval of the USA’s spot Bitcoin ETFs and the run-up to April’s Halving event. 

Q2 2024 was characterized by choppy trading conditions for Bitcoin and the broader crypto market, where major positive events like the Ethereum spot ETF approval didn’t trigger immediate price surges. The summer holidays – traditionally a bearish time – didn’t help. 

What is ahead in the second half of 2024? The crypto industry faces a mix of challenges and opportunities. The looming distribution of Mt. Gox’s Bitcoin holdings and several large token supply unlocks will impact the market in uncertain ways. 

However, positive developments such as the impending launch of spot Ethereum ETFs in the USA, an improving macroeconomic environment, and continued innovation from development teams offer reasons for optimism. 

Let’s explore the key developments that shaped the crypto landscape from April to June 2024.

Market Capitalization: Weathering the Storm

Despite a decline in total cryptocurrency market capitalization, closing at $2.43 trillion in June, the crypto market exhibited remarkable fortitude. Throughout Q2, the market fluctuated within a defined range, unable to surpass previous all-time highs but maintaining a strong foundation.

This performance contrasted with traditional markets such as the S&P 500’s steady climb during the same period. The divergence between crypto and traditional markets highlights the unique dynamics at play in the digital asset space, and caused some concern. However, Trump’s surprising championing of Bitcoin and Ethereum spot ETF approval have led to a late Q2 surge in crypto prices and market sentiment, as electioneering efforts to capture the important crypto vote began to ramp up. 

Bitcoin: Navigating Post-Halving Waters

Bitcoin, the flagship cryptocurrency, experienced a modest decline in Q2, ending the quarter at $62,734. The much-anticipated fourth Bitcoin halving occurred during this period. Historically, these halvings marked the beginning of new market cycles. However, the immediate market response to this halving was subdued.

The quarter concluded with some market uncertainty as news broke that significant Bitcoin sell pressure was to come: in the form of Mt. Gox repayments and the German government’s seized BTC sales. FUD levels were amplified as usual by the media and key influencers, causing a dump in all crypto prices before it rebounded with Trump’s endorsement. 

Credit: Tesfu Assefa

Mining Landscape: Adapting to New Realities

The Bitcoin mining sector faced some big challenges in Q2. Hash rate reached an all-time high in April in the runup to the Bitcoin Halving, followed by a foreseeable decline. Since the halving, a lot of smaller miners have been flushed out due to the increased difficulty and cost. Despite this setback, the mining industry saw notable developments, including:

1. Major players are expanding into AI applications

2. Significant investments in the mining sector

3. Advancements in mining chip technology

These developments suggest that mining companies are diversifying their operations and investing in technological advancements like artificial intelligence to maintain competitiveness in a post-halving environment.

Airdrop Farming Yields Too Little

One of the defining features of Q2 was the proliferation of token airdrops, as many projects sought to capitalize on the bullish sentiment from Q1. However, these airdrops became a source of controversy within the crypto community, who were vocally aggrieved by the paltry amounts given to them by the likes of Layer-Zero and ZkSync after supporting these projects for months and even years. 

Projects struggled to balance rewarding genuine users while filtering out opportunistic ‘airdrop farmers’. Meanwhile, many airdropped tokens experienced significant price drops post-launch, leading to complaints that the financial benefits were primarily accruing to project insiders and private investors who were looking to establish high-FDV low-float tokenomics. Creating fair and sustainable token distribution models in the crypto ecosystem remains an ongoing challenge, and retail investors are becoming increasingly jaded.

Memecoin Mania Peaks

As airdrop season flamed out, memecoins earned their new status as a dominant force in Q2 2024, capturing a significant portion of market attention and billions in trading volume. Alongside Real World Assets (RWA) and Artificial Intelligence (AI) projects, these categories accounted for a substantial share of market interest. 

2024 Q2 Crypto Industry Report (Credit: CoinGecko)

While new bluechip projects lined the pockets of venture capital funds, memecoin launches were considered fair and transparent by retail investors, who understood for the most part that they were devoid of any real utility other than being a fun lottery ticket. New memecoin launch platform Pump.fun enabled nearly 450,000 new Solana memes to be issued in May alone.

The return of GameStop legend RoaringKitty created pandemonium, resulting in a plethora of low-quality memecoins getting churned out, inevitably draining the wallets of their buyers when they went to zero.

As minor celebrities like Iggy Azalea, Caitlyn Jenner and Andrew Tate piled in, so did some memecoin fatigue, and the market began to dip at the end of Q2 as pump and dump scams and rugpulls became the norm.

Blockchain ecosystems also played a significant role, with platforms like Solana and Base leading in popularity. New Telegram-backed entrant Toncoin ended the quarter strongly, attracting millions of new users through TapFi games like Notcoin and Hamster Kombat.

Ethereum: Supply Dynamics Shift
Ethereum experienced an inflationary quarter, adding to its circulating supply, despite the deflationary EIP-1559 mechanism. This shift resulted from changes in the balance between burned and emitted ETH. The burn rate fell compared to Q1, indicating reduced network activity and lower gas fees. A worrying 120,000 ETH was added to its supply in Q2.

Credit: Ultra Sound

Centralized vs. Decentralized Exchanges: A Tale of Two Trends

Centralized exchanges (CEXs) saw a further decline in trading volume of 15% during Q2 for a total of $3.4 trillion, with Binance maintaining its position as the market leader despite the overall downturn. However, some exchanges bucked this trend, with platforms like Gate.io, Bitget, and HTX seeing increases in trading volume as they ramped up marketing efforts.

In contrast, decentralized exchanges (DEXs) experienced growth of 15%, with a total trading volume of $370 billion driven by a surge in meme coin trading and new layer-1 and layer-2 chains offering supposedly lucrative DeFi airdrops which grabbed the bulk of crypto’s mindshare and capital. 

Uniswap maintained 48% dominance in the DEX space, and Top Ten newcomers like Thruster and Aerodrome made significant gains, due to Blast airdrop farming and Base trading respectively.

Conclusion

The crypto industry’s performance in Q2 2024 paints a picture of a market poised for further growth, but also nervous about macroeconomic issues.

As we move into the second half of 2024, investors and enthusiasts should keep a close eye on emerging narratives and regulatory changes ushered in by events such as the US Presidential Election, the mainstream adoption of crypto spot ETFs, a long-awaited reduction in Fed interest rates as well as the inevitable effects of Bitcoin’s post-halving supply shock coming into play. 

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DeFi Summer: Will We See a 2024 Revival?

Posted on by Werner

The decentralized finance (DeFi) landscape finds itself at a critical juncture: will the second half of 2024 be like the first? In the summer of 2020, Compound kickstarted DeFi Summer. But the TradFi challenger has since experienced a long period of underperformance. Enthusiasm for DeFi has waned, accelerated by the dramatic 2022 collapse of Luna and the loss of value from most governance tokens. Users moved from DeFi to more sustainable ‘real yield’ solutions.

However, beneath the surface, fundamental shifts are occurring that could herald a revival of this revolutionary financial paradigm. Let’s take a look at the current state of DeFi, its historical performance, challenges, and the potential catalysts that could drive its resurgence.

Current State and Historical Performance

Credit: DefiLlama

The DeFi sector has struggled to regain the glory of 2020-2021. The DeFi Pulse Index (DPI), which includes major tokens like UNI, MKR, LDO, AAVE, and SNX, has been on a three-year decline against Ethereum, while Ethereum has underperformed Bitcoin in the current cycle. This long-lived low performance has many people questioning has DeFi’s moment passed.

However, it’s crucial to note that DeFi’s total value locked (TVL) has been resilient. As of July 2024, the total stablecoin market cap is $160 billion and TVL stands at around $85 billion, representing a significant recovery from the lows of late 2022, and about 70% of the all-time high of late 2021. This suggests that while token prices have struggled, the underlying infrastructure of DeFi protocols remain robust. Of the total TVL, 60% is attributed to Ethereum.

Credit: DefiLlama

Daily DeFi trading volumes have also shown signs of recovery, averaging $6.9 billion since March 2024. This is about 70% of the peak volumes seen in November 2021, indicating that user engagement remains strong despite the price declines. Furthermore, the stablecoin market cap has rebounded to $168 billion, over 90% of its 2022 highs, suggesting ongoing demand for decentralized dollar-pegged assets.

Pain Points and Obstacles

Several factors have contributed to DeFi’s recent struggles. 

Many DeFi tokens, particularly from the first generation of protocols, have struggled to show clear utility beyond governance and staking rewards. This has made them less attractive to investors seeking tangible value. Additionally, some protocols issue tokens continually, diluting existing holdings.

The unclear regulatory landscape has hampered institutional adoption – and it’s made retail investors hesitant. The threat of potential regulatory crackdowns looms, limiting growth potential. DeFi interfaces and processes remain complex for the average user, limiting mainstream adoption. New users have to learn to understand concepts like gas fees, slippage, and impermanent loss – and this can be a barrier to entry.

The hype wave has rolled on to memecoins, Layer 2 solutions, and airdrop farming, leaving established DeFi protocols high and dry. These newer, often more speculative opportunities have captured the imagination of retail investors, leaving DeFi seeming boring in comparison. The proliferation of new DeFi protocols has led to a fragmentation of liquidity and user attention, making it harder for any single protocol to achieve significant network effects.

High-profile hacks and exploits have eroded trust in the DeFi ecosystem, creating additional barriers to widespread adoption. The DeFi summer of 2020, and subsequent bull run, set unrealistic expectations for token price performance, leading to disappointment and disillusionment among many investors.

DeFi’s Keys to Success and Potential Catalysts

Despite these challenges, several signs hint at a DeFi revival. As regulators get their frameworks in place, institutional capital can flow more freely into DeFi, potentially triggering a new growth phase. The recent approval of Bitcoin ETFs and the potential for Ethereum ETFs could pave the way for this regulatory acceptance of DeFi.

Protocols like Uniswap are exploring fee-sharing mechanisms, which could set a precedent for other DeFi tokens to offer more tangible value to holders. This shift towards revenue sharing could transform DeFi tokens from purely speculative assets to productive financial instruments, attracting a new class of investors.

Traditional assets like real estate and bonds are getting tokenized: a move that could bring trillions of dollars of liquidity into DeFi protocols. This DeFi plus real-world assets (RWAs) combo could have new use cases, and attract institutional capital. Major players like BlackRock have already begun tokenizing traditional funds, signaling growing interest from mainstream finance.

Recent improvements like Ethereum’s Dencun upgrade have significantly reduced gas fees on Layer 2 networks, making DeFi more accessible. This scalability enhancement could drive increased adoption and enable more complex DeFi applications. Unlike newer narratives, DeFi has proven its resilience through multiple market cycles and has a robust, battle-tested infrastructure.

As the market matures, we may see increased mergers and acquisitions, leading to stronger, more efficient protocols. This consolidation could help address the issue of fragmented liquidity and create more sustainable business models. New ways to sustainably generate yield – such as real yield and productive assets – could reignite interest in DeFi yield farming, attracting both retail and institutional investors. 

Credit: Tesfu Assefa

The Case for a DeFi Renaissance

The factors above suggest that DeFi might be poised for a significant comeback. As the hype around memecoins and airdrop farming inevitably fades, capital may rotate back into established DeFi protocols with proven business models. This return to fundamentals could benefit DeFi protocols that have continued to innovate and improve during the downturn.

Many DeFi tokens are trading at massive discounts relative to their total value locked and revenue generation potential, presenting attractive investment opportunities. Investors could notice they’re undervalued now, and begin an upward price-correction acrossDeFi assets.

Major financial institutions are increasingly exploring DeFi, with some already launching tokenized funds on Ethereum. This institutional interest could bring legitimacy and significant capital inflows to the sector. The potential for DeFi to disintermediate traditional financial services remains a powerful long-term driver of growth and innovation.

Innovations like restaking and improvements in Layer 2 scaling are opening up new possibilities for DeFi applications, enhancing both scalability and functionality. These technological advancements could enable new use cases, and improve the overall user experience, addressing one of DeFi’s key pain points.

Traditional finance is beleaguered by problems such as inflation and low yields – and DeFi’s promise of open, permissionless finance starts to look better and better. Global economic factors could drive more users and investors towards DeFi solutions, particularly in regions with unstable currencies or limited access to traditional financial services.

Conclusion

DeFi has undoubtedly faced headwinds in recent years, yet the underlying technology and value proposition is stronger than ever. The sector has shown remarkable resilience, continuing to innovate and grow despite market pressures. As we look ahead, the convergence of regulatory clarity, technological advancements, and potential market rotations could set the stage for a DeFi renaissance.

The integration of real-world assets, improvements in user experience, and the growing ecosystem may finally bridge the gap between DeFi’s potential and its real-world impact. However, challenges remain. DeFi protocols must continue to innovate, focusing on security, scalability, and user experience. They must also find ways to offer compelling value propositions for token holders, beyond mere speculation.

Ultimately, the future of DeFi will depend on one question: can it actually deliver a more open, efficient, and inclusive financial system? If it can overcome its current challenges and capitalize on emerging opportunities, DeFi may not only revive but eclipse its former glory, reshaping the future of finance in the process.

As with all things in the crypto world, the only certainty is change. For investors and enthusiasts alike, keeping a close eye on DeFi’s evolution in the coming months will be crucial. The seeds of the next major crypto narrative may already be germinating in the fertile soil of decentralized finance.

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$570 Million Stolen: Crypto Hacks Surge in Q2 2024

Posted on by Werner

Introduction

The cryptocurrency industry faced significant security challenges in Q2 2024 – and it failed some. Let’s look at the latest reports from the two leading crypto security firms: Immunefi and Hacken. The analyses paint a concerning picture of the current landscape, highlighting both familiar vulnerabilities and emerging trends. Data reveals a substantial increase in successful attacks which raises alarm bells about the need for improved security measures across the crypto ecosystem.

Overview of Q2 2024 Losses

Credit: TradingView

According to Immunefi, Q2 2024 saw a staggering $572.7 million lost to hacks and frauds across 72 incidents, representing a dramatic 112% increase compared to Q2 2023. Hacks continued to be the predominant cause of losses in the crypto space, with the vast majority of funds stolen through direct exploits rather than frauds or scams. This can be attributed to less awareness when markets trend upwards, which make it easier for bad actors to exploit newer users and stretched protocols.

Major Incidents

Two major incidents stood out in Q2, accounting for over 60% of total losses. The largest hack targeted DMM Bitcoin, a Japanese crypto exchange, resulting in a massive $305 million theft. This was followed by an attack on BtcTurk, Turkey’s largest cryptocurrency exchange, which suffered a $55 million loss in a cyberattack. These high-profile incidents highlight the potential vulnerabilities in even well-established exchanges and the devastating impact of successful attacks.

Shift in Attack Focus: CeFi vs. DeFi

Q2 2024 saw a significant shift in attacker focus, with Centralized Finance (CeFi) platforms bearing the brunt of attacks. CeFi losses totaled $401.4 million, accounting for 71% of all funds lost. This marks a massive 984% increase compared to Q2 2023. In contrast, Decentralized Finance (DeFi) platforms saw a 25% decrease in losses compared to the same period last year. This shift suggests that attackers may be finding centralized platforms to be more lucrative targets, possibly due to larger pools of concentrated funds.

Most Targeted Chains

Ethereum and BNB Chain remained the primary targets for attackers, with Ethereum suffering 34 incidents and BNB Chain experiencing 18.

Arbitrum, a layer-2 scaling solution for Ethereum, came in third with four incidents. 

Ethereum’s dominance as the most targeted chain highlights the ongoing need for heightened security measures in its ecosystem, especially as its total value locked (TVL) has grown significantly over the past year.

CeFi Accountable for the Biggest Losses (Credit: Hacken)

The types of attacks employed by malicious actors varied, but access control issues caused the highest losses at $397.2 million. Price oracle issues and flash loan attacks also contributed significantly to the overall losses. This breakdown helps identify areas where security measures need to be strengthened across the industry, providing valuable insights for both developers and security professionals.

Comparison to Previous Periods

The big increase in losses from Q2 2023 to Q2 2024 is worrying, especially considering the growth in total value locked across the crypto ecosystem. While the overall DeFi TVL tripled from about $50 billion to $150 billion by June 1, losses grew even faster. 

It’s worth noting that despite fewer individual hacks compared to Q1 2024, the severity and financial impact of Q2’s attacks were significantly higher, indicating a trend towards more sophisticated and damaging exploits.

Implications for the Industry

The major hacks targeting CeFi platforms highlight the need for enhanced security measures in centralized systems. As the crypto ecosystem grows, maintaining security becomes increasingly challenging, and it will get worse if and when the 2024/2025 bull market returns. Projects must balance the desire for rapid growth with the need for robust security measures. 

The industry may need to develop more comprehensive insurance solutions and standardized recovery protocols to soften the blows dealt by large-scale hacks. Additionally, these high-profile incidents may lead to increased regulatory scrutiny, potentially resulting in stricter oversight of crypto platforms, especially centralized exchanges.

Security Measures and Best Practices

Given the persistent threat of hacks and exploits, individual users and investors should take proactive steps to secure their assets. Some essential measures include:

  • Using hardware wallets for long-term storage
  • diversifying holdings across multiple platforms, 
  • enabling two-factor authentication
  • staying informed about the latest security best practices

By adopting these proactive steps, users can significantly reduce their risk exposure in the face of evolving security threats.

Positive Developments

Despite the concerning trends, there’s some good news in crypto security. The industry is showing an improved ability to recover stolen funds, with about 5% of the total losses in Q2 2024 being recovered. 

This represents a slight improvement from previous quarters and demonstrates the growing capability of the ecosystem to respond to and mitigate the impact of attacks. Additionally, despite Ethereum’s TVL growing by nearly 400% year-on-year, it only suffered $8 million in losses this quarter, indicating some improvement in DeFi defenses. This resilience in the face of rapid growth is an encouraging sign for the industry.

Credit: Tesfu Assefa

The Importance of Audits

The reports reveal a critical gap in security practices among many projects. Out of 41 hacked projects analyzed, only seven had undergone the relevant audits. This alarming statistic underscores the vital importance of thorough security measures in preventing large-scale exploits, including regular audits and robust bug bounty programs. 

History has shown that projects that prioritize these security measures are less likely to fall victim to attacks, signposting a clear path to better security.

Conclusion

As we move forward, a collaborative effort between developers, security researchers, and users will be crucial in building a more resilient and secure crypto ecosystem. The industry must prioritize security measures to protect users and maintain trust. By learning from these incidents, implementing stronger security protocols, and fostering a culture of vigilance, the crypto ecosystem can work towards a more secure future for all participants.

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Top Ten Crypto Cash Cows Analyzed

Posted on by Werner

It’s standard procedure that cryptocurrency projects come and go at a dizzying rate, as they often serve no real immediate purpose. However, some protocols have managed to establish themselves as revenue-generating powerhouses, demonstrating real-world utility, user adoption, and sustainable profits. 

Traditional Finance firms are chomping at the bits for the newly-approved Ethereum spot ETF to start trading. The Bitcoin ETF serves as a safe haven asset hedge, ETH is an asset class that Wall Street can engage with. TradFi firms can use metrics like new users, fees, revenue and total value locked (TVL) to measure network effect. With Ethereum clearing the way, other chains and protocols can eventually follow in its wake. 

We’ve used a recent study by Onchain Times and Token Terminal data to do a deep analysis of the top ten money spinners in crypto in mid-2024, comparing their business models, revenue streams, and key performance metrics.

1. Ethereum: The Undisputed Leader

Ethereum remains the giant of the crypto industry, generating an impressive $1.42 billion in revenue year-to-date (YTD). As the foundation for much of the decentralized finance (DeFi) ecosystem, Ethereum’s success stems from its widespread adoption and the high demand for block space on its network, as well as recent upgrades like the Merge and Proto Danksharding upgrade, which has moved it to proof-of-stake and slashed layer-2 chain costs.

 Key points

  • Highest revenue generator in the crypto space
  • Revenue primarily comes from transaction fees paid by users
  • Profitability fluctuates due to issuance rewards to validators
  • Q1 2024 was profitable, while Q2 saw a decline due to activity moving to layer-2 solutions

2. Tron: The Stablecoin Highway

Surprising many, Tron takes the second spot with approximately $852 million in revenue YTD (year to date). Tron’s success is largely attributed to its role as a major conduit for stablecoin transfers, particularly USDT in developing economies. It’s cheap, fast, and reliable. 

Key points

  • Second-largest stablecoin ecosystem after Ethereum
  • Popular in countries like Argentina, Turkey, and various African nations
  • Competes with Ethereum and Solana for highest stablecoin transfer volumes

3. Maker: The OG Stablecoin Protocol

Maker, the protocol behind the DAI stablecoin, comes in third with $176 million in revenue YTD. Its business model revolves around issuing DAI against crypto collateral and charging interest on these loans.

Key points

  • Total DAI supply is currently 5.2 billion, down from its all-time high of around 10 billion
  • It has diversified revenue streams, including holding real-world assets (RWA) at 25.6% of total revenue
  • Estimated earnings of $73 million annually after accounting for DAI Savings Rate and operating costs

4. Solana: The Phoenix Rising (Again)

Once written off as dead, Solana has made an impressive comeback since its 2023 Breakpoint conference, ranking fourth with $135 million in annualized revenues YTD. Its resurgence is attributed to increased activity in memecoins, NFTs, and DePIN (Decentralized Physical Infrastructure Networks) projects.

Key points

  • Revenue comes from transaction fees paid to validators
  • High token issuance costs make it challenging to assess profitability
  • Success driven by technological improvements and community-driven events like the JTO airdrop

5. Ethena: The New Stablecoin Contender

Launched in January 2024, Ethena has quickly become the fifth-largest revenue-generating protocol, with $93 million in annualized revenues. It’s backed by big names like Arthur Hayes, and while it’s conjured up some early Luna 2.0 fears due to its algorithmic stablecoin design, so far it’s doing well. Its USDe token, a synthetic dollar, has achieved a market cap of $3.6 billion in just a few months.

Key points

  • Innovative delta hedging strategy to maintain USDe peg
  • Currently the most profitable decentralized app (dAPP) YTD with $41 million in earnings
  • Business model designed to excel in bull markets, raising questions about long-term sustainability

6. Aerodrome: The Base Layer AMM

Aerodrome, an automated market maker (AMM) on the Base layer-2 network, has generated $85 million in revenue YTD. Launched in August 2023, it has quickly established itself as the top decentralized exchange (DEX) on Base.

Key points

  • Implements successful mechanisms from various DEX protocols
  • Uses vote-escrowed tokenomics to attract liquidity
  • Incorporates concentrated liquidity features to compete with Uniswap

7. Lido: The Liquid Staking Giant

Lido, a prominent liquid staking protocol, has generated $59 million in revenue year-to-date across Ethereum and Polygon proof-of-stake chains. Its popularity stems from making Ethereum staking more accessible to average users. 

Key points

  • Revenue comes from a 10% fee on users’ staking rewards
  • Profits of $22.5 million YTD after accounting for node operator payments and token incentives
  • Operates as a double-sided market, connecting ETH holders with professional node operators

8. Base: The Coinbase L2 Solution

Base, a fast-growing Ethereum layer-2 solution launched by Coinbase in Q3 2023, clocks in at $52 million in revenues YTD. As a relatively new entrant, its rapid growth is noteworthy, and its backing by Coinbase could see it reach the top of the food chain very quickly.

Key points

  • Revenue comes from user transaction fees
  • Impressive profitability with $35 million in earnings YTD
  • Benefited significantly from the implementation of EIP-4844 that reduced data availability costs

9. Uniswap Labs: The DEX Pioneer

Uniswap Labs, the company behind the popular decentralized exchange Uniswap, has generated $39.3 million in revenue YTD. Uniswap was the earliest DEX to gain real traction, and continues to play a crucial role in the DeFi ecosystem.

Key points

  • Revenue primarily comes from trading fees
  • Pioneered the automated market maker (AMM) model in DeFi
  • Continues to innovate, with features like concentrated liquidity in Uniswap V3

10. PancakeSwap: The BSC DeFi Leader

PancakeSwap, a leading DEX on the Binance Smart Chain (BSC), rounds out the top ten revenue-generators, with $36.3 million in revenue YTD. Its success highlights the growing importance of alternative blockchain ecosystems.

Key points

  • Largest DEX on Binance Smart Chain
  • Offers a wide range of DeFi services – including trading, yield farming, and NFTs
  • Lower transaction costs compared to Ethereum-based DEXs

Credit: Tesfu Assefa

Comparing the Ten Chains:

Revenue Generation (year-to-date)

  1. Ethereum: $1.42 billion
  2. Tron: $852 million
  3. Maker: $176 million
  4. Solana: $135 million
  5. Ethena: $93 million
  6. Aerodrome: $85 million
  7. Lido: $59 million
  8. Base: $52 million
  9. Uniswap Labs: $39 million
  10. PancakeSwap: $36 million

Ethereum’s revenue still dwarfs that of its competitors, emphasizing its dominant position. However, the presence of new entrants like Ethena, Base, and established DEXs like Uniswap and PancakeSwap shows that revenue is chain-agnostic and that investors will find it wherever they can. 

Remember the importance of understanding tokenomics; Lido, for example, still trades at under $2, the same price it had two years ago, despite its market cap growing 50x. When assessing a cryptocurrency, look at its fully diluted value (FDV) instead of current market cap. 

Profitability

Profitability varies significantly among these protocols due to differences in their business models and their running cost:

  • Ethena: leads in profitability with $41 million in earnings YTD.
  • Base: shows strong profitability with $35 million in earnings.
  • Maker: estimates $73 million in annualized earnings after costs.
  • Lido: reports $22.5 million in profits YTD.
  • Ethereum and Solana’s profitability is more complex due to token-issuance costs.
  • Profitability data for Uniswap Labs and PancakeSwap is not readily available.

Business Model Diversity

The top cash cows in crypto have diverse business models:

  • Infrastructure providers: Ethereum, Tron, Solana, Base
  • Stablecoin issuers: Maker, Ethena
  • DeFi protocols: Aerodrome, Lido, Uniswap, PancakeSwap

There is more than one way to skin a cat. Protocols in the crypto ecosystem can generate revenue in entirely different ways – from providing foundational infrastructure to offering specific financial services.

Market Position and Competition

  • Ethereum maintains its leadership position, but faces growing competition from layer-2 solutions and alternative layer-1 blockchains.
  • Tron has carved out a niche in stablecoin transfers, particularly in developing markets.
  • Maker continues to be a major player in the stablecoin space, but faces new competition from innovative protocols like Ethena.
  • Solana has shown resilience and adaptability, rebounding from near-collapse to generate healthy revenue.
  • Base and Aerodrome demonstrate the potential for new entrants to quickly gain market share with innovative features and strong backing.
  • Uniswap and PancakeSwap showcase the ongoing importance of decentralized exchanges, with each dominating their respective blockchains.

Sustainability and Future Outlook

When assessing these protocols, it’s crucial to consider the sustainability of their revenue models:

  • Ethereum’s shift to proof-of-stake and the growth of layer-2 solutions may impact its long-term revenue structure.
  • Tron’s reliance on stablecoin transfers could be vulnerable to regulatory changes or shifts in market dynamics.
  • Maker’s diversification into real-world assets may provide more stable revenue streams.
  • Ethena’s success in bull markets raises questions about its performance during market downturns.
  • Base and Aerodrome will need to maintain their innovative edge to continue attracting users and liquidity.
  • Uniswap and PancakeSwap face increasing competition from other DEXs, and may need to continue innovating to maintain their position in a competitive market.

Conclusion

The top ten cash cows in crypto are a mix of established giants, innovative newcomers, and specialized DeFi protocols. While Ethereum continues to dominate in terms of raw revenue, the success of newer protocols like Ethena and Base, as well as the continued relevance of DEXs like Uniswap and PancakeSwap, demonstrates the ongoing evolution and diversification of the crypto landscape.

The presence of both infrastructure providers and application-layer protocols in this list highlights the importance of a robust and diverse ecosystem. Investors and users should closely monitor these protocols, as their performance often serves as a barometer for broader trends in crypto. 

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Nada! How Cardano’s Community Thwarted DDoS Attack

Posted on by Werner

Introduction

The cryptocurrency sector recently witnessed an intriguing security event in the Cardano ecosystem – a distributed denial-of-service (DDoS) attack that was swiftly mitigated, showing the robustness of the blockchain and the ingenuity of its developer community, marking a victory for the collaborative spirit that defines the crypto space. 

Let’s delve into the details of this attack, its resolution, and the implications for Cardano’s future.

What is a DDoS attack?

DDoS (distributed denial of service) and DoS (denial of service) attacks have been a thorn in the side of Web2 businesses since 1996, causing billions of dollars of losses in the process. In the crypto world, there haven’t been many, although Electrum Wallet’s 2019 incident is a notable one: created a botnet of 152,000 hijacked wallets, and in 2020, two exchanges were shut down by DDoS attacks.

In short, DDoS (Distributed Denial of Service) attacks are malicious attempts to disrupt the normal operation of a cryptocurrency network, exchange, or service. Attackers flood the target with a massive amount of internet traffic from multiple sources, overwhelming its infrastructure and causing it to become unavailable to legitimate users. These attacks can have serious consequences: they can halt trading, block transactions, and cause financial assets to be lost.

Cardano DDoS Attack: Play-by-Play

On 24 June, 2024, the Cardano network experienced an unusual surge in activity. Fluid Token’s CTO reported that the attack commenced at block 10,487,530. 

The attacker’s strategy was to flood the network with transactions, each executing 194 smart contracts. At a cost of 0.9 ADA ($0.36) per transaction, the malicious actor attempted to congest the network by filling blocks with these spam transactions.

The intent behind this DDoS attack was twofold:

  • Primarily, it aimed to disrupt the network’s normal operations by overwhelming it with traffic. 
  • There was speculation that the attacker might have also been attempting to manipulate the fee structure to enable cheaper high-value transactions, or maybe to steal staked ADA tokens.

The attack resulted in a significant increase in network load, with chain utilization reaching peaks of 72% on average and up to 93% on an hourly basis. This heightened activity raised concerns among community members and developers who noticed the network’s sluggish performance.

Community Response and Investigation

As news of the attack spread, the Cardano community quickly mobilized. Developers, led by figures such as Philip Disarro from Anastasia Labs, began investigating the attack and formulating countermeasures.

Through on-chain analysis, community members traced the origin of the attack to addresses linked to the Kraken exchange. This discovery raised questions about the attacker’s identity and the potential for legal action. The transparency of blockchain technology was invaluable in this investigation, allowing for real-time tracking of the malicious transactions.

Interestingly, despite the attacker’s efforts to congest the network, their actions inadvertently contributed over 1,000 ADA in transaction fees to the Cardano treasury and stake pool operators. This unintended consequence showed how the Cardano network’s economic model can help keep it safe.

Technical Analysis and Vulnerability Discovery

As the community rallied to understand and counter the attack, developers like Mel from Harmonic Labs began dissecting the malicious transactions. By deserializing the UPLC (Untyped Plutus Core) of the attacking scripts, they discovered a critical flaw in the attacker’s strategy.

The scripts used in the attack were designed to always return ‘true’, no matter what input they were fed. This oversight meant that the scripts could be easily manipulated, providing an opportunity for the defenders to turn the tables on the attacker.

The Counterattack: A Brilliant Solution

Philip Disarro of Anastasia Labs identified a clever way to not only stop the attack but also claim the attacker’s funds. The solution involved deregistering the stake credentials used by the attacker. This action would force the attacker to re-register their credentials at a cost of 400 ADA each time they wanted to continue the attack, significantly increasing the financial burden of their malicious activities.

Moreover, this countermeasure allowed defenders to claim the attacker’s ADA, effectively turning the attack into a donation to the Cardano ecosystem. 

As Disarro put it:

Thanks for the free money, moron.

The community quickly implemented this solution, deregistering approximately 200 stake contracts from the attacker, which did the trick. 

Credit: Tesfu Assefa

Lessons Learned and Network Resilience

The failed DDoS attack provided several valuable insights into Cardano’s capabilities:

1. Network Capacity: Despite the high transaction volume, Cardano’s network continued to function, processing legitimate transactions alongside the spam. This demonstrated the blockchain’s ability to handle significantly increased loads, suggesting room for future scaling.

2. Community Strength: The rapid response and clever solution showcased the strength of Cardano’s developer community. Their ability to quickly analyze, respond, and implement countermeasures highlights the importance of a robust and engaged team.

3. Economic Model: The attack inadvertently proved the effectiveness of Cardano’s economic model. The attacker’s funds were not only used to pay transaction fees, but were also claimed by the defenders, turning a potential threat into a net positive for Cardano.

4. Transparency: The ability to track and analyze the attack in real-time demonstrated the value of blockchain transparency in security and incident response.

Future Implications and Upgrades

In the aftermath of the attack, the Cardano development team, including organizations like Intersect, began working on node upgrades to bolster the network’s resilience against these attacks. The upgrades aim to address potential vulnerabilities without compromising the network’s performance or decentralization.

The incident also sparked discussions about potential parameter adjustments, such as increasing block sizes or reducing block times, to further improve the network’s capacity and resilience.

Comparison with Other Networks

This event provided an interesting contrast to how other blockchain networks handle similar attacks. As noted in the community discussions, when Solana faces attacks, it often results in network shutdowns. Ethereum, on the other hand, typically sees transaction fees skyrocket during periods of network congestion.

Cardano’s ability to withstand the attack with only mild degradation in performance, coupled with the community’s innovative response, proves it is a robust and resilient blockchain platform.

Conclusion

The recent DDoS attack on Cardano, while potentially disruptive, ultimately served to demonstrate the strength and resilience of the network and its community. The swift and clever response thwarted the attack – and even turned it into an opportunity for growth and improvement. While Cardano has had its share of criticism – including some undeserved ridicule – for its slow development, its security has now been battle-tested and is hard to criticize. 

As Cardano continues to evolve, incidents like these provide valuable lessons and drive innovation. They underscore the importance of ongoing development, community engagement, and the power of decentralized systems in facing security threats.

The crypto world will undoubtedly be watching Cardano’s continued development with interest, as it sets new standards for blockchain resilience and community-driven problem-solving.

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How The Trump Shooting Sparked Crypto Revival

Posted on by Werner

On Saturday, July 13, 2024, former U.S. President Donald Trump was the target of a shocking assassination attempt during a campaign rally in Pennsylvania. The incident, which saw Trump narrowly escape death, has sent shockwaves through the political landscape and financial markets, including the cryptocurrency sector, with Bitcoin and friends immediately surging in price in its wake. 

This article examines the events surrounding the assassination attempt and its subsequent immediate and long term impact on the crypto markets.

The Trump Assassination Attempt

During a campaign event in Butler, Pennsylvania, a gunman attempted to assassinate Donald Trump, the Republican nominee for the 2024 U.S. presidential election as he was addressing supporters. Trump was shot in the ear but survived the attack and was ushered off the stage waving a defiant fist in the air, which was captured by a photographer for an iconic image. His campaign reported that he was doing well following the incident. 

Public sentiment has shifted dramatically in favor of Trump since the incident. He is now the 60% favorite according to betting markets in the presidential election in November.  

Immediate Market Reaction

In the aftermath of the assassination attempt, cryptocurrency markets experienced a significant surge, after weeks of decline due several factors, including summer holidays, bearish market pressure caused by Germany selling seized Bitcoin, as well the announcement that Mt Gox would begin returning stolen BTC to victims of the 2014 hack. 

After dropping as low as $53k during early July, Bitcoin (BTC), the world’s leading cryptocurrency and the one that dictates the overall market confidence in digital assets, saw a sharp increase in value, rising by more than 25% to reach $66.4k by Friday, July 19. This marked its highest level in four weeks and represented a year-to-date gain of approximately 54%. Other cryptocurrencies also benefited from the market movement, with Ethereum (ETH) rising 12.1% to $3,488.

The surge in crypto prices was not isolated to major currencies. Meme tokens associated with Trump also experienced substantial gains. For instance, MAGA leapt from around $6.35 to a brief peak over $9.50, the satirical TREMP token is up 15$ this week. Conversely, BODEN, a joke asset named after President Joe Biden, has declined by about 18%. 

Hundreds of pro-Trump memecoins were launched in the days after the shooting, most pumping and dumping within hours. 

5 Reasons For The Trump Shooting Crypto Rally

Several factors contributed to the cryptocurrency market’s positive reaction to the assassination attempt:

1. Increased Trump Victory Odds

The incident appears to have bolstered Trump’s chances of winning the presidency. Betting markets and political analysts suggest that the attack may garner sympathy votes and mobilize his base to vote. On the Polymarket prediction platform, the probability of Trump winning the presidency jumped to an all-time high of 70% following the incident.

2. Trump’s Pro-Crypto Stance

After slamming crypto during his first term, Trump has made a remarkable recent U-turn on crypto after it became clear that the tens of millions of Americans owning crypto could ultimately decide the next president. As a result, Joe Biden flip flopped soon after to also embrace crypto and the SEC stunningly approved a spot Ethereum ETF. 

Throughout his campaign so far, Trump has positioned himself as a champion of cryptocurrency. He has hosted cryptocurrency industry executives at Mar-a-Lago, and expressed enthusiasm for Bitcoin mining in the USA. Trump’s campaign is also the first from a major U.S. political party to accept cryptocurrency payments, signaling a potential shift in the regulatory landscape if he were to win the election.

3. Anticipated Regulatory Changes

Investors speculate that a Trump presidency could lead to a more favorable regulatory environment for cryptocurrencies. Trump has criticized Democratic attempts to regulate the crypto sector through the SEC and the controversial Operation Chokepoint 2.0 which has seen an exodus of Web3 firms from the USA, leading many to believe his administration would adopt a lighter touch approach to oversight.

4. Economic Policy Expectations

Trump’s previous tenure was marked by tax cuts and deregulation. Investors anticipate similar policies in a potential second term, which could drive up deficits and inflation. Such economic conditions often lead investors to seek alternative assets like cryptocurrencies as a hedge.

5. Trump’s VP pick is pro-crypto

The crypto market rally gained further momentum on Monday, July 15, when Trump announced 39 year-old Senator J.D. Vance of Ohio as his running mate. Vance, known for his tech-savvy background and pro-crypto stance, has further energized the digital asset community. He previously declared $250k in Bitcoin holdings and is an outspoken critic of crypto’s arch-enemy, SEC chairman Gary Gensler.

Vance’s selection is seen as a strategic move to appeal to both traditional conservatives and the tech-oriented younger demographic. 

The Trump-Vance Ticket and What It Means for Crypto

Vance’s pro-crypto credentials include:

  • Personal investment in Bitcoin through Coinbase, valued between $100,001 and $250,000
  • Support for bills promoting cryptocurrency innovation in the Senate
  • Opposing increased regulatory scrutiny of the crypto industry
  • Drafting legislation to overhaul digital asset regulation

The Trump-Vance ticket is viewed favorably by many in the crypto and tech industries. Notable figures – such as Peter Thiel (a mentor of Vance), Marc Andreessen (who has now also endorsed Trump publicly), Ben Horowitz, and the Winklevoss twins – have expressed support for the candidates. This backing from influential tech personalities adds credibility to the ticket’s pro-crypto stance.

Credit: Tesfu Assefa

USA and Crypto: Potential Trump Policy Shifts

Experts anticipate several policy changes under a potential Trump-Vance administration that could benefit the cryptocurrency market:

1. Deregulation: A return to Trump’s previous deregulatory approach could create a more favorable environment for crypto entrepreneurs and investors.

2. Currency Devaluation: Vance has advocated for a weaker dollar, which could indirectly boost Bitcoin’s value proposition as a hedge against currency devaluation.

3. Crypto-Friendly Banking Reforms: Policies making it easier for traditional institutions to hold their clients crypto in custody could lead to broader adoption.

4. Redefining Crypto Assets: A potential shift in how cryptocurrencies are classified could impact their regulatory treatment. At present only Bitcoin and now Ethereum have been greenlit as non-securities.

5. Antitrust Actions Against Big Tech: Vance supports antitrust measures against major tech companies, and this could create opportunities for blockchain-based Web3 alternatives, which hold huge potential to disrupt the monopoly of Web2 giants.

Market Outlook and Expert Opinions

While the crypto market has responded positively to these political developments, opinions vary on the long-term implications:

Matthew Sigel, head of digital assets research at VanEck, believes the Trump-Vance ticket represents a significant shift toward a more crypto-friendly regulatory environment. He suggests their pro-business stance could pave the way for a more favorable environment for crypto entrepreneurs and investors.

Mark Cuban, billionaire entrepreneur and investor, posited on social media in a long post that the support from Silicon Valley for the Trump-Vance ticket might be motivated by potential benefits to Bitcoin. He argues that lower tax rates and tariffs, combined with global uncertainty about the USA’s geopolitical role, could accelerate Bitcoin’s price and potentially establish Bitcoin as a global ’safe haven’ currency.

Conclusion

The assassination attempt on Donald Trump and the subsequent selection of J.D. Vance as his running mate have provided an unlikely shot-in-the-arm for the cryptocurrency markets. The rally in Bitcoin and other digital assets reflects renewed investor optimism about the future of the space, which may soon be under more crypto-friendly regulations. 

There is a near-consensus opinion that the Fed will reduce interest rates by a quarter of a percentage point, or 25 basis points, for the first time since the end of 2021, so the stars seem to be aligning for Bitcoin and its children.

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ASI Merger Is Here: SingularityNET, Fetch.AI and Ocean Protocol’s Crypto AI Super Alliance Fights Back!

Posted on by Werner

The Decentralized Resistance joins forces and fights back. Our bid to keep artificial intelligence development democratic and open is about to get supercharged thanks to the merger of three of the biggest crypto AI projects: SingularityNET (AGIX), Fetch.ai (FET), and Ocean Protocol (OCEAN). 

It’s the hottest thing in crypto AI this year and it’s called the Artificial Superintelligence Alliance (ASI). Like its name suggests, it’s big and ready to fight. 

Fetch.ai, Ocean Protocol Foundation, and SingularityNET Foundation will continue operating independently but will collaborate closely within the ASI tokenomic ecosystem. The merger brings together the expertise of renowned AI pioneers, ensuring ethical and innovative AI development.

Together, the three ASI partners make up a market cap of nearly 3 billion dollar and represent some of the smartest and innovative minds in the space. It’s super-ambitious and is aiming for a 7.5 billion dollar market cap post-launch.

If this flew under your radar, fret not, but keep reading this article. Let’s take a look at the entities behind it, why it’s been created, what each party brings to the table, and what essential information that AGIX investors and supporters should know. 

Artificial General (AGI) vs Super Intelligence (ASI)

Artificial General Intelligence (AGI) and Artificial Superintelligence (ASI) are both advanced forms of artificial intelligence, but they differ in their capabilities and scope: the term ‘AGI’ emphasizes matching human intelligence in flexibility and generality, while the term ‘ASI’ emphasizes capabilities beyond the greatest human geniuses: a machine-mind that can whip up new theoretical physics in an hour,

  • AGI is a hypothetical AI system that can match human-level cognitive abilities, including self-teaching and problem-solving across various domains. It is considered strong AI, as it can perform any intellectual task that a human can. 
  • ASI however is a hypothetical AI system that surpasses human intelligence. A mind of superhuman genius. It would have thinking skills never before seen in the known universe: able to ingest millions of scientific data in seconds, and understand them with the nuance and common sense of a real intelligence. 

While AGI is focused on matching human intelligence, ASI aims to exceed it. 

What is the Artificial Superintelligence (ASI) Alliance?

ASI is a unified network aimed at accelerating the development of decentralized artificial superintelligence (ASI). The new partners had to put the merger proposal to a vote with their respective communities, and have now received the community greenlight to join forces. 

ASI wants to reshape the landscape of AI research and development, challenging the dominance of centralized tech giants and promoting an open, democratic, and ethical AI ecosystem.

The alliance is not a merger of the three technology platforms. It is a merger of their three tokens.

Overview of SingularityNET, Fetch.ai, and Ocean Protocol

SingularityNET

Founded by Dr. Ben Goertzel, SingularityNET is a decentralized marketplace for AI services. Its mission is to create inclusive, democratic, and beneficial Artificial General Intelligence (AGI), a concept coined or popularized by Dr. Goertzel. The platform allows companies and developers to trade algorithms at scale without a central controller, reducing costs and barriers to entry. SingularityNET is developing its own AGI system, the OpenCog Hyperon AGI framework, and using OpenCog Hyperon and the AI marketplace, SingularityNET aims to leverage its decentralized tools for emergent superintelligence.

Fetch.ai

Fetch.ai is building a decentralized machine learning network that enables users to access secure datasets and execute tasks using autonomous AI agents. This empowers consumers to create and deploy versatile AI for various tasks. The Fetch.ai tech stack includes a Cosmos-based Layer 1 network and a multi-agent framework, facilitating rapid deployment of commercial AI applications.

Ocean Protocol

Ocean Protocol provides a secure, privacy-preserving platform for trading tokenized data assets, giving a way to financially support AI models through their development lifecycle. One of its flagship tools is ‘Predictoor’ for crowdfunded predictions, which has gained traction in the crypto-finance community. Ocean Protocol aims to  manage data requirements for both small-scale and large-scale AI systems ethically and securely.

Credit: Tesfu Assefa

Why Is ASI Needed? 

In the race towards AGI and ASI, the choice is stark in 2024: a choice between either centralized control by Big Tech and the military, or else a decentralized, open network. As most new entrants have found, AI’s barriers to entry are now incredibly high, and a few Web2 behemoths like Microsoft, Alphabet and Amazon are very far ahead thanks to financial power. 

As a result, the leaders of SingularityNET, Ocean and Fetch had to make a necessary choice: adapt or die.

The mission of the ASI Alliance is to ensure that decentralized ASI is in the race, benefiting humanity as a whole. 

This alliance aims to make a real-world impact with decentralized AI, to guide the public and the industry towards decentralized AGI and ASI with continuously improving AI applications. By uniting their strengths, Fetch.ai, SingularityNET, and Ocean Protocol are poised to create synergies that exceed their individual capabilities.

This begins with the merger of AGIX, FET, and OCEAN tokens into the new ASI token. The total supply of ASI will be 2,630,547,141 dollar tokens, distributed among AGIX, FET, and OCEAN holders.

Leadership and Governance

A governing council will guide the Superintelligence Alliance, with Dr. Ben Goertzel as CEO and Humayun Sheikh as Chairman. Bruce Pon and Trent McConaghy will represent Ocean Protocol. 

Key Benefits of the Partnership

Here are five good reasons why the ASI alliance is a great idea:

  • The merger creates the largest open-source, decentralized player in AI research and development.
  • It provides an unprecedented opportunity to challenge Big Tech’s control over AI. 
  • It leaves the technology platforms and development operations of the three partners largely intact and independent, while merging their tokens on the market.
  • By combining their research, brands, technologies, and products, Fetch.ai, SingularityNET, and Ocean Protocol lay the foundation for a scalable decentralized AI infrastructure.
  • The merger facilitates the commercialization of each company’s technology, offering universal access to cutting-edge AI platforms and large databases.

Essential Q&A for AGIX Holders

1. Why are these tokens merging?

The merger aims to consolidate resources and accelerate the development of decentralized ASI. Rather than try to merge the technologies of the three platforms, it aims to merge their economic muscle.

2. How does this benefit token holders?

Tokenholders will benefit from a streamlined ecosystem, greater interoperability, and accelerated progress towards decentralized AGI and ASI.

3. How will this transaction work?

Existing AGIX, FET, and OCEAN tokens will be converted into ASI tokens at specified conversion rates.

4. What are the token conversion rates?

AGIX holders will receive 0.433350 ASI per AGIX token, FET holders will receive 1 ASI per FET token, and OCEAN holders will receive 0.433226 ASI per OCEAN token. This aligns pro-rata with their respective crypto asset prices at the time the announcement was made.

5. Do I need to do anything?

No immediate action is required. Conversion tools will be provided if necessary.

6. What does this mean for my AGIX tokens?

Your AGIX tokens will become ASI tokens, integrating into a larger new asset.

7. How do I exchange my AGIX token for a merged ASI token?

Conversion tools will be provided. Follow the instructions from official channels like the SingularityNET blog and Telegram.

8. My AGIX tokens are staked and I won’t have access to them to participate in the merger. What should I do?

A migration tool will be available. Tokens can be converted once they are unstaked.

9. What happens to my tokens on centralized exchanges?

Tokens on centralized exchanges will be automatically converted to ASI. Holders do not need to take any action.

Conclusion

The ASI merger certainly marks an exciting but challenging new chapter in the AI landscape and the battle for little guys to shape the development of Artificial Superintelligence. By merging Fetch.ai, SingularityNET, and Ocean Protocol, a multi-billion dollar alliance is created. This has the strength to drive progress towards decentralized AGI and ASI, ensuring ethical and trustworthy practices. 

ASI’s formation accelerates AI development but also democratizes access to AI technologies, challenging the dominance of centralized tech giants. As the world watches, the ASI Alliance stands ready to lead the next wave of innovation in decentralized AI.

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BlackRock’s RWA Vision: Pioneering the Future of Tokenized Assets and Securities

Posted on by Werner

BlackRock, the world’s largest asset manager with over $10 trillion in assets under management, first stirred the crypto pot in August 2022 when it announced that it would use Coinbase to service its Aladdin clients. In late 2023, it came to the rescue when the SEC besieged the crypto industry by announcing its iShares spot Bitcoin ETF application. That sent BTC on a rocket ride from $25,000 to nearly $75,000 this year, as I predicted last year.

The ETF approvals in January 2024 finally made the world’s biggest cryptocurrency an accessible mainstream investment that anyone and their grandmother could own without fear of security or regulatory risks. 

Almost immediately after the SEC greenlit Bitcoin spot ETFs, BlackRock execs began to endorse Ethereum and unveiled plans for an ETH spot ETF, which has now also come to fruition and will start trading imminently (2 July) if analysts are to be believed. 

The ETFs are all roads however that legitimize blockchain and smart contract technology to lead to BlackRock’s Grand Plan: 

Tokenizing the world’s assets, or real world assets (RWA). Why trade Monday to Friday in US office hours only, if you could allow the whole globe to trade the US stock market and treasuries anywhere, anytime? 

BlackRock goes all out on RWAs

To that effect, BlackRock already announced in April 2024 that it would be launching a new RWA fund called the BlackRock USD Institutional Digital Liquidity Fund (BUIDL) that will invest in tokenized treasuries and repos. Coinbase, yet again, will play an important role as a key infrastructure provider. 

The TradFi behemoth doubled down on RWAs by investing $47 million into Securitize, an RWA tokenization firm. With a significant portion of its portfolio dedicated to real estate assets, approximately $39 billion, the potential impact of tokenizing property investment is immense. 

Larry Fink, CEO of BlackRock (and of Bitcoin as well? just kidding maxis, put down the pitchforks) sees the big picture very clearly:

I believe the next generation for markets, the next generation for securities will be tokenization of securities, and if we could have a distributed ledger that we know every beneficial owner, every beneficial seller, we all have our code of who’s buying, who’s selling – instantaneous settlement – think about it! It changes the whole ecosystem!

What exactly are Real World Assets (RWAs), and why is this significant for BlackRock?

Credit: Tesfu Assefa

What are RWAs?

As we discussed in a previous article, Real World Assets (RWAs) is a very hot new crypto narrative about converting ownership rights of various tangible and intangible assets into digital tokens using blockchain technology. These assets can be bonds, equity, and real estate, or even cultural assets like art and collectibles. 

Tokenizing RWAs offers several compelling benefits:

  1. Enhanced liquidity: Traditional assets, particularly real estate and fine art, are often illiquid. Tokenization allows these assets to be broken down into smaller, tradable units, increasing their liquidity.
  2. Transparency: Blockchain technology provides a transparent and immutable ledger, ensuring that ownership and transaction histories are easily verifiable.
  3. Access to investment opportunities: By lowering the barriers to entry, tokenization makes it possible for a broader range of investors to participate in markets that were previously inaccessible.

BlackRock USD Institutional Digital Liquidity Fund (BUIDL Fund)

The launch of the BUIDL fund in March 2024 on the Ethereum blockchain represents BlackRock’s first tokenized offering, and is a crucial component of its broader strategy. The BUIDL fund attracted $245 million in its first week of operations, showing massive investor interest and confidence in tokenized assets.

The fund is represented by the BUIDL token, which is fully backed by cash, U.S. Treasury bills, and repurchase agreements to ensure its stability and confidence among investors.

Token holders receive daily yield payouts via blockchain rails, providing a seamless and efficient way to distribute earnings. 

BlackRock’s partnership with Coinbase is notable because it represents a collaboration between a traditional financial institution and a cryptocurrency exchange. Cross-industry collaboration between crypto and TradFi is crucial for growing and developing the RWA market, bringing together the traditional financial world and the emerging world of digital assets.

Secondly, BlackRock’s involvement is likely to get RWAs adopted into the mainstream quicker. With its vast network of institutional clients and its reputation as a trusted asset manager, BlackRock has the potential to bring significant capital and credibility to the RWA market, helping to drive growth and attract new investors.

BlackRock’s Partnerships and Ecosystem

BlackRock’s strategy is to create a robust ecosystem through strategic partnerships, ensuring the seamless operation and security of its tokenized assets. Partners include:

  • Securitize: As the transfer agent and tokenization platform for the BUIDL fund, Securitize plays a pivotal role in managing the token issuance and lifecycle. BlackRock’s investment in Securitize, coupled with Joseph Chalom’s appointment to Securitize’s board, underscores its commitment to this partnership.
  • BNY Mellon: Serving as the custodian of the BUIDL fund’s assets, BNY Mellon ensures the safekeeping and proper management of the underlying assets.
  • Other Key Participants: The fund’s ecosystem includes prominent names like Anchorage Digital Bank, BitGo, and Fireblocks, each contributing to the security and functionality of the tokenized assets.
  • Circle’s Smart Contract Feature: This feature enables BUIDL holders to exchange shares for the USDC stablecoin, adding another layer of flexibility and liquidity.
  • Ondo Finance’s OUSG Token: By moving $95 million of assets to BlackRock’s BUIDL fund, Ondo Finance’s OUSG token achieves instant settlement, showcasing the efficiency of tokenized assets.

Future of Tokenized MMFs and RWAs

The future of tokenized Money Market Funds (MMFs) and other securities is not confined to centralized platforms. BlackRock envisions a broader distribution across various trading platforms and decentralized finance (DeFi) protocols. 

This decentralized approach can unlock numerous opportunities:

  • Collateral for lending: Tokenized MMFs can serve as collateral in smart contract loans, providing additional security for borrowers and lenders.
  • Liquidity pool deposits: These tokens can be deposited into the liquidity pools of automated market makers, enhancing market efficiency and liquidity.

What is the ERC-3643 Token Standard?

Compliance with existing regulations is key to the success of tokenized assets. The ERC-3643 token standard is designed to address this requirement by embedding compliance at the token level.

ERC-3643 ensures that tokens adhere to regulatory requirements, providing a level of assurance that is crucial for institutional investors.The standard is being spearheaded by a non-profit community, and has been presented to regulators worldwide. It’s steadily gaining recognition for its ability to uphold security laws while facilitating innovation.

Cogito Moves Into RWA Space

Cogito, Mindplex’s partner in the SingularityNET ecosystem, is making waves in the RWA market with its innovative approach. The platform recently obtained a tokenized fund license from CIMA, allowing it to offer fully regulated RWA investment products. 

Cogito’s unique offerings include TFUND (tokenized treasury bonds), GFUND (tokenized green bonds), and XFUND (an AI-managed basket of tech stocks), catering to various investor preferences. 

By leveraging AI to manage investments and providing crypto and fiat on-ramps, Cogito is making RWAs accessible to a wide range of investors, driving adoption and growth in the market.

Conclusion

No matter what you think about their powerful financial and political influence in our world, BlackRock’s involvement in crypto has so far helped to champion the sector to new regulatory and market highs. Its vision for the RWA market is a forward-thinking strategy that promises to revolutionize the investment landscape and bring crypto and TradFi closer together than ever before. 

By tokenizing a significant portion of its assets, BlackRock is enhancing liquidity and transparency, and also opening access to traditionally exclusive investment opportunities. The successful launch of the BUIDL fund and the strong assembly of partners will give it a precedence that other traditional firms will find irresistible. 

BlackRock, as usual, can never be counted out.

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Real World Assets (RWAs) Primer: Crypto’s Ultimate Use Case?

Posted on by Werner

Introduction

With the Bitcoin Halving and Bitcoin and Ethereum spot ETF approval in the rear view mirror in mid 2024, crypto investors’ are now asking what’s next for the world of Decentralized Finance (DeFi).

The recent regulatory approval of Ethereum can help spread one of the biggest crypto narratives for 2024, known as Real World Assets, or RWAs in short. These hybrid financial assets are offering investors a unique opportunity to diversify their portfolios and tap into the potential of tokenizing traditional financial assets. 

The RWA market is expected to experience significant growth in the coming years; some predict a 5-10 trillion USD market cap by 2030. As more investors seek to bridge the gap between traditional finance and the digital realm, RWAs are emerging as an attractive option for those looking to invest in tangible assets while enjoying the benefits of blockchain technology. It’s easier to understand, less volatile and can unlock all the benefits that come with decentralized networks. 

Let’s dive in with a primer on RWAs. 

What are RWAs?

RWAs are physical or non-physical assets from the real world that are tokenized and represented on a blockchain. This can include a wide range of assets, such as

  • real estate, 
  • precious metals, 
  • stocks, 
  • bonds, 
  • commodities, 
  • art, and 
  • collectibles

When these assets become tokens, they become more accessible, tradable, and divisible within the crypto ecosystem, opening up new opportunities for investors who may have previously been excluded from certain markets by high barriers to entry, or by lack of liquidity. They can be traded 24/7 from anywhere in the world, without geographical or technological barriers. 

How are Real World Assets tokenized?

The process of tokenizing real-world assets can get very complex, but these are the broad strokes:

  • First, the asset must be appraised to determine its value. 
  • Next, a legal framework is established to define the rights and responsibilities of token holders. 
  • The token is then issued on a blockchain platform, making it available for trading. 

Platforms like Cogito, a SingularityNET ecosystem partner, are simplifying this process for investors, providing user-friendly interfaces and streamlined workflows for creating and managing RWA tokens.

Why are RWAs Gaining Popularity?

While they’re not as sexy as other crypto trends such as AI cryptocurrencies, GameFi and memecoins (and even DePIN), there are several reasons why RWAs are touted as the ultimate use case for blockchain technology.  

  1. They’re stable

RWAs introduce real, tangible value into the often volatile crypto market, providing a level of stability that pure cryptocurrencies may lack.

  1. They bridge the gap with TradFi 

The involvement of major players like BlackRock is bringing massive growing institutional interest in RWAs, potentially leading to mainstream adoption.

  1. They bring liquidity to assets

Tokenization allows previously illiquid assets to be traded 24/7 on crypto exchanges, giving investors greater flexibility and liquidity.

  1. They make TradFi assets more accessible

RWAs lower the barriers to entry for high-value investments by enabling fractional ownership, making these assets more accessible to a wider range of investors.

BlackRock’s RWA Plans

Earlier this year, BlackRock, the world’s largest asset manager, doubled down on its long-term plans for crypto by announcing it was entering the RWA market. Through a partnership with Coinbase, BlackRock launched BUIDL (BlackRock’s USD Institutional Digital Liquidity Fund) a fund investing in tokenized treasuries and repos.

This move validates RWAs as a viable investment opportunity, and could potentially accelerate mainstream adoption. In previous years US regulators like the SEC have come down hard on previous attempts to tokenize securities, such as securitized token offerings (STOs), and prosecuted exchanges like Binance and Kraken.

With BlackRock’s vast network and massive influence on Capitol Hill, the company could bring significant capital and credibility to the space, driving growth and attracting new investors. The collaboration between a traditional financial giant and a crypto exchange is crucial to bridging the gap between the two worlds.

In fact, with the Ethereum spot ETF now approved, many crypto experts believe that BlackRock’s real ambitions for crypto stretch far beyond just ETFs – that they ultimately aim to tokenize all real world assets! Just listen to how their CEO Larry Fink waxes lyrical on tokenization here.

Credit: Tesfu Assefa

Top RWA Projects in 2024

Several notable projects and platforms are leading the way in the RWA space, each offering unique features and benefits for investors.

Ondo Finance: Tokenizing Traditional Assets

Ondo Finance is currently the biggest player in the RWA space with a market cap of $1.7 billion. It leads the pack thanks to its ability to bridge TradFi and DeFi. Ondo’s partner with established financial institutions to help ensure the security and stability of tokenized assets. 

Ondo focuses on tokenizing traditional assets like corporate bonds and treasuries, and works with BlackRock, moving nearly $100 million over to the BUIDL network. The platform aims to provide investors with access to these assets through a user-friendly interface, making it easier for them to diversify their portfolios. 

Mantle: Bringing Real Estate to the Blockchain

Mantle is a platform that focuses on tokenizing real estate assets, allowing investors to gain exposure to this traditionally illiquid market through fractional ownership. The platform uses blockchain technology to ensure the security and transparency of these investments, providing investors with a new way to participate in the real estate market without the large upfront capital or extensive paperwork that would be required to buy houses or commercial buildings.

RealT

RealT is another platform that tokenizes real estate, turning ownership of properties into digital tokens, allowing people to invest in fractional ownership, and trade with less friction. Like Mantle, RealT is making it easier for investors to access the real estate market without the need for large upfront investments or lengthy paperwork processes.

Pendle: Unlocking Yield Opportunities

Pendle is a platform that is focused on unlocking yield opportunities in the RWA market. The platform achieves this by tokenizing future yield, allowing investors to buy and sell the rights to future cash flows from various assets. 

This innovative approach provides investors with a new way to generate passive income and potentially earn higher returns than traditional fixed-income investments. Pendle’s platform is designed to be user-friendly and accessible, making it easier for investors to participate in the RWA market and take advantage of the unique yield opportunities it offers.

MakerDAO

Stablecoins are a core component of a resilient RWA market. As such, MakerDAO is playing an important role by using RWAs as collateral to stabilize the value of its DAI stablecoin. 

By accepting real-world assets as collateral, MakerDAO is able to create a more stable and reliable stablecoin that is backed by tangible value. This innovative approach has helped to establish MakerDAO as a leader in both the RWA and stablecoin spaces, paving the way for other projects to follow suit. MakerDAO has restored much-needed trust in algorithmic stablecoins following the brutal 2022 demise of Terra Luna that wiped tens of billions from investor accounts. 

Centrifuge

Centrifuge is another notable player in the RWA market, offering a platform for tokenizing and financing real-world assets like invoices and loans. It unlocks liquidity and provides new financing options for businesses and investors alike.

SingularityNET’s Cogito Gets RWA License

Cogito, a SingularityNET ecosystem partner, is another sleeping giant in the RWA market that is starting to wake up, making huge strides in tokenizing real-world assets in 2024. Recently, Cogito obtained a tokenized fund license from the Cayman Islands Monetary Authority (CIMA), becoming one of the first companies to offer fully regulated RWA investment products.

Cogito is committed to making RWAs accessible to a wide range of investors, including both institutional and retail investors. The platform offers both crypto and fiat on-ramps, making it easy for investors to purchase RWA tokens using their preferred currency. This accessibility is key to driving adoption and growing the overall market for RWAs.

Cogito’s approach to RWAs is unique in several ways:

  • The platform offers a range of innovative investment products, including the TFUND (tokenized treasury bonds), GFUND (tokenized green bonds), and XFUND (an AI-managed basket of tech stocks). 
  • These products are designed to cater to different investor preferences and risk profiles, providing a diverse range of options for those looking to invest in RWAs.
  • Importantly, Cogito is leveraging the power of artificial intelligence to help manage and optimize its RWA investments. By using AI algorithms to analyze market data and identify investment opportunities, Cogito is able to make more informed decisions and potentially generate higher returns for its investors.

Conclusion

There’s no room left for doubt: Real World Assets are here to stay. In fact, they might dominate the crypto sector by the end of the decade. With the potential to introduce real, tangible value into the digital asset ecosystem, RWAs offer investors a compelling opportunity to diversify their portfolios and gain exposure to a wide range of assets.

As more institutional behemoths like BlackRock enter the market and innovative platforms like Cogito continue to develop new investment products and services, the future looks bright for RWAs. While there are certainly challenges and risks to be aware of, such as regulatory uncertainty and the need for robust security measures, the potential benefits of RWAs are simply too great to ignore.

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Ten Key Crypto Technical Indicators for Beginners To Know in 2024

Posted on by Werner

Note from the editor: This is not financial advice. The claim that technical indicators predict future price movements better than chance has not been validated by Mindplex.

The Bitcoin halving has come and gone, and crypto markets are in the doldrums of summer. Explosive growth has settled into a cruise, presenting the perfect opportunity to master an important component of crypto investment success: technical indicators, which are tools used to perform technical analysis (TA).

Are you new to the world of cryptocurrency trading and feeling overwhelmed by the sheer number of technical indicators available? Or you’re an inexperienced investor that just can’t figure out what’s going to happen next? That’s because the crypto market is dominated by short-term trading, mostly with bot trading tools, that look at specific indicators to devise an optimal strategy. Therefore, while you don’t have to be a pro trader, you should at least know the rules of the trading game before you invest in shorter time frames. 

In this article, I’ll cover ten important crypto trading indicators that any crypto trader can try and master in 2024 to manage their Bitcoin and Ethereum. These indicators (which I’ll explain in descending order of importance) will help you make more informed trading decisions in the dynamic crypto market.

It’s important to note that no single indicator should be viewed in isolation. Instead, traders should use a combination of indicators to confirm signals and make more informed decisions. By using multiple indicators together, you can gain a more comprehensive understanding of market trends, potential entry and exit points, and overall market sentiment. 

Credit: Tesfu Assefa

1. Moving Averages

What is a Moving Average?

A moving average is a technical analysis tool that smooths out price data by creating a constantly updated average price over a specific period.

Moving Average Indicator (Credit: Werner Vermaak’s image from TradingView)

What does it do?

Moving averages help identify trends and potential support and resistance levels. They can also serve as a foundation for other technical indicators.

How it works

The two most common moving averages are the simple moving average (SMA) and the exponential moving average (EMA). An SMA is calculated by taking the average price over a set number of periods – while an EMA gives more weight to recent prices.

2. Relative Strength Index (RSI)

What is a RSI?

The Relative Strength Index (RSI) is an unmissable momentum indicator that measures the speed and magnitude of price changes. Its stochastic RSI variant is said to provide an easy visual way to see whether prices are bottoming or topping. 

RSI Indicator. (Credit: Werner Vermaak’s image from TradingView)

What does it do?

RSI helps identify overbought and oversold conditions, which can signal potential reversals or trend confirmations.

How it works

RSI oscillates between 0 and 100. Readings above 70 suggest an overbought condition, while readings below 30 indicate an oversold condition.

3. Bollinger Bands

What are Bollinger Bands?

Bollinger Bands are volatility indicators that consist of a middle band (typically a 20-day SMA), plus two outer bands set two Standard Deviations above and below that middle band.

What does it do?

Bollinger Bands help identify potential overbought and oversold conditions, as well as potential breakouts when the price moves outside the bands.

How it works

When the price touches the upper band, it’s considered overbought, and when it touches the lower band, it’s considered oversold. A squeeze in the bands often precedes a breakout.

4. Fibonacci Retracement

What is a Fibonacci Retracement?

Degen traders’ favorite tool of choice, Fibonacci retracement levels are based on the controversial Fibonacci sequence and are used to identify potential support and resistance levels.

What does it do?

Fibonacci retracement levels allegedly help traders set price targets and determine entry and exit points.

How it works

Credit: Werner Vermaak

The most commonly used Fibonacci retracement levels are 23.6%, 38.2%, 50%, 61.8%, and 78.6%. These levels are plotted on a chart by drawing a line from a swing high to a swing low (or vice versa) and then dividing the vertical distance by the key Fibonacci ratios.

5. On-Balance-Volume (OBV)

What is an OBV?

On-Balance-Volume (OBV) is a volume-based indicator that helps confirm price trends and predict potential reversals.

What does it do?

OBV can help identify divergences between price and volume, which can signal a potential trend reversal.

How it works

Credit: Werner Vermaak

OBV adds or subtracts volume based on whether the price closes higher or lower than the previous day. If OBV is rising while the price is flat or declining, technical analysts claim that suggests a potential price increase, and vice versa.

6. Moving Average Convergence Divergence (MACD)

What is a MACD?

    The Moving Average Convergence Divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages.

    What does it do?

    MACD helps identify trend changes, momentum, and potential buy and sell signals.

    How it works

    Credit: Werner Vermaak

    MACD consists of a MACD line (the 12-day EMA minus the 26-day EMA) and a signal line (a 9-day EMA of the MACD line). When the MACD line crosses above the signal line, it’s a bullish signal, and when it crosses below, it’s a bearish signal.

    7. Stochastic Oscillator

    What is a Stochastic Oscillator?

    The Stochastic Oscillator is a momentum indicator that compares the closing price of an asset to its price range over a specific period.

    What does it do?

    The Stochastic Oscillator helps identify overbought and oversold conditions and potential reversals.

    How it works

    Credit: Werner Vermaak

    The indicator consists of two lines: %K and %D. When %K crosses above %D, it’s a bullish signal, and when it crosses below, it’s a bearish signal. Readings above 80 suggest an overbought condition, while readings below 20 indicate an oversold condition.

    8. Ichimoku Cloud

    What is an Ichimoku Cloud?

    The Ichimoku Cloud is a comprehensive indicator that provides a quick overview of an asset’s price action, trend direction, and potential support and resistance levels.

    What does it do?

    The Ichimoku Cloud helps traders identify the prevailing trend, gauge momentum, and spot potential buy and sell signals.

    How it works

    Credit: Werner Vermaak

    The Ichimoku Cloud consists of five lines: the Tenkan-sen, Kijun-sen, Senkou Span A, Senkou Span B, and the Chikou Span. When the price is above the cloud, it’s considered bullish, and when it’s below the cloud, it’s considered bearish.

    9. Aroon Indicator

    What is the Aroon Indicator?

    The Aroon Indicator is designed to identify trend changes and measure the strength of a trend.

    What does it do?

    The Aroon Indicator can help traders spot trend changes and potential entry and exit points.

    How it works

    Credit: Werner Vermaak

    The indicator consists of two lines: the Aroon Up and the Aroon Down. When the Aroon Up is above the Aroon Down, it indicates an uptrend, and when the Aroon Down is above the Aroon Up, it indicates a downtrend.

    10. On-Chain Metrics

    What are On-Chain Metrics?

    On-chain metrics provide valuable insights into the fundamental health and activity of a cryptocurrency network. Looking at data such as total market cap, circulating supply, fully diluted value, total value locked, dApp activity, transaction count, user activity and more can help you see through all the smoke and mirrors in a bull market. 

    What do they do?

    By monitoring on-chain metrics, traders can gauge the overall sentiment and growth potential of a particular cryptocurrency.

    How it works

    Credit: Werner Vermaak

    Some important on-chain metrics include transaction volume, active addresses, network value to transaction ratio (NVT), and realized cap. These metrics can be tracked using various blockchain explorers and analytics platforms.

    Conclusion

    In conclusion, these ten essential crypto technical indicators provide a powerful foundation for beginner traders in 2024, but it’s good to keep in mind that it barely scratches the surface of what’s possible in technical analysis. 

    You can test out applying these indicators for yourself, and see if they help you make more informed trading decisions or improve your chances of success in the dynamic crypto market.

    However, it’s crucial to remember that no single indicator is perfect, and relying on just one can lead to suboptimal results. Maybe using a combination of indicators to confirm signals will help you gain a more comprehensive understanding of market trends and sentiment.

    As you continue your trading journey, stay committed to continuous learning and adapting to the ever-changing crypto landscape. With dedication and practice, you’ll be well on your way to becoming a proficient trader in the exciting world of cryptocurrencies.

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