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.

W’ETH Done It! Ethereum Spot ETF Approval Opens World to Web3

Posted on by Werner

Introduction

While the traditional crypto wisdom is to sell in May and go away, Ethereum had other plans. On 23 May 2024, the U.S. Securities and Exchange Commission (SEC) surprisingly greenlit spot Ethereum (ETH) exchange-traded funds (ETFs) in principle. This has sent its price skyrocketing and turned its future very bright. Most crypto investors thought this would never come, due to the United States’ onslaught on cryptocurrency technology, or would require a multi-year political struggle.

It marked a pivotal and triumphant moment for the cryptocurrency market that will boost its development even further and bolster a beleaguered US crypto sector dragged down by heavy-handed regulation the last few years. It also again showed that politics and finance always intertwine, coming soon after Donald Trump’s embrace of crypto in the US essentially forced that country’s Democrat party to make a dramatic U-turn on the sector in what will be a tough election year to keep Joe Biden in power.

In this article, we’ll explore the implications of this approval, the impact its had on Ethereum and the broader crypto market, and the potential benefits for retail investors.

What is an Ethereum ETF?

An Ethereum ETF is a financial product that allows investors to buy shares representing a stake in Ethereum, without needing to directly purchase or manage the cryptocurrency itself. ETFs are traded on traditional stock exchanges, making them accessible to a wider range of investors. The approval of these ETFs means institutional and retail investors can now gain exposure to Ethereum through regulated financial products.

The Road to Approval

The journey to the approval of Ethereum ETFs has been long and difficult, and fraught with regulatory hurdles since Vitalik Buterin – with co-founders including Cardano’s Charles Hoskinson and Polkadot’s Gavin Wood – launched Ethereum in 2015 as a novel application of blockchain technology. 

The SEC’s approval of Bitcoin ETFs earlier in the year laid a path down for Ethereum ETFs to follow. This path was studded with rigorous analysis and a public comment period, during which stakeholders provided feedback on various aspects of the proposed ETFs, including custodianship, sponsor fees, and creation and redemption models.

Market Reactions and Expectations

Impact on Ethereum’s Price

A tweet from influential analysts Eric Balchunas and James Seyffart increased the estimated odds of an Ethereum ETF to 75%. The result: the price of ETH spiked within hours to nearly $4,000, before retracing. 

Following the announcement, the price of Ethereum remained largely unchanged, soon dropping to as low as $3,500 in typical “sell the news” behavior. A number of other factors also impacted the ETH price blowoff. Notably, additional hurdles must be cleared first before an actual Ethereum ETF is approved, such as the final filing of amended S1 applications for each issuer (BlackRock is pushing for a July 4th launch) as well as another round of Mt Gox FUD. And of course, there’s also the question of whether we’ll see another huge sell-off from Grayscale holders. 

Onchain deposits & withdrawals of addresses identified as custodians of Grayscale’s ETHE Ethereum Trust (Credit: Dune)

This price movement is reminiscent of the initial reactions seen with Bitcoin ETFs, suggesting a pattern of bullish sentiment following regulatory endorsements. However, investors had more time to ladder into their BTC buys, knowing that it was almost certainly coming, whereas Ethereum went into the ETF battle as an underdog. 

What does an Ethereum ETF mean longterm for crypto? 

Regulatory Greenlight

The SEC’s decision brings Ethereum closer to being classified as a commodity, like Bitcoin. The devastation of being labeled a security has been hanging like a sword over its head for years, despite earlier statements by both the SEC’s William Hinson in 2018 and the CFTC in 2022 that it was not a security. Classification as a commodity will simplify regulation for Ethereum, providing clearer guidelines for future developments and investments in the ecosystem. Additionally, the recent crypto-friendly legislative movements in Congress have created a more supportive environment for digital assets.

This regulatory clarity helps to clear the way for the network to scale and become the world’s computer. Ethereum’s ongoing technological upgrades – such as the implementation of zero knowledge roll-up technology and sharding – are poised to increase the network’s transaction capacity and efficiency which will help maintain Ethereum’s competitiveness against rivals such as Solana, Sui and Cardano and support its growing ecosystem of layer-2 networks such as Arbitrum, Optimism, Base, Linea, Stark and ZkSync. On all these networks in turn reside hundreds of thousands of decentralized applications (dApps). 

Web3 Stays Free

Classifying Ethereum as a security would significantly impact the Web3 industry, affecting dApps, DeFi, and NFTs that rely on Ethereum’s layer-2 solutions. With Ethereum leading the DeFi space, holding over 60% market share and $100 billion in total value locked, regulatory challenges could arise that could kill any other crypto layer-1 and layer-2 network, especially proof-of-stake ones. 

Benefits for Retail Investors

One of the primary benefits of Ethereum ETFs for retail investors is the ease of access. Investing in ETFs does not require the digital know-how or cybersecurity measures needed for direct cryptocurrency investments. There’s no private key management, no hacking and scam risks, which cost crypto investors billions each year. This accessibility can encourage more widespread participation in the crypto market.

ETFs offer a diversified investment option: they can include a range of assets within a single product. For retail investors, this means a more balanced exposure to Ethereum, potentially reducing the volatility risks of individual cryptocurrency investments, and also means insured investments. 

On the downside though, ETF investors will not earn any ETH staking rewards yield (at least not initially). This reward is around 5%. Ethereum’s Shanghai upgrade last year kicked off a liquid staking (LST) and Eigenlayer restaking frenzy that has rejuvenated its struggling DeFi sector. 

Credit: Tesfu Assefa

Trading Strategies Around Ethereum ETFs

With the approval of several Ethereum ETFs now just over the horizon, traders can adopt various strategies to navigate the evolving market landscape. We won’t speculate on the future price of Ethereum, as there are too many variables at play, both on an industry and macro-economic level. However, market sentiment is quite bullish for the next year, especially if the bull market resumes and ETH can turn deflationary again thanks to its EIP-1559 upgrade.

Conclusion

The approval of Ethereum ETFs is a transformative event for the cryptocurrency market that could unlock a new era of mainstream crypto adoption. This regulatory milestone validates Ethereum’s role in the financial ecosystem, and opens the door for increased institutional investment and greater market liquidity. It also boosts the development of Web3 technology and infrastructure, particularly in the USA. 

For retail investors, Ethereum ETFs offer a convenient and regulated way to participate in the growth of the crypto market, providing opportunities for diversification and risk management. As Ethereum continues to innovate and evolve, ETFs will shape its future trajectory and solidify its position as a leading digital asset.

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Bittensor (TAO): The Crypto Neural Network for AI and ML Model Development

Posted on by Werner

As we never tire of saying at Mindplex and SingularityNET, progress in developing advanced AI and ML models is tainted by the chances of centralized institutions gaining undue control over one of the most important technological evolutions in human history. 

The race is afoot: key players in AI are under the thumb of institutions, even if they started off as non-profit and open-source projects. Decentralized AI proposes free-roaming AIs to combat fortress-style AI solutions; it uses protocols and facilities built on the blockchain to promote multi-point control systems for AI infrastructures. 

Bittensor, a decentralized AI project with a native cryptocurrency called TAO, has recorded exponential growth in 2024, growing an ecosystem of applications on its network, and gathering a community of contributors advancing the AI revolution.

Let’s discuss the key elements of Bittensor, and how they work in synergy to create a distributed network for the development of AI and ML models and algorithms.

What is Bittensor?

Bittensor is a decentralized network designed for peer-based commodity development and provisioning of computing resources. 

Bittensor is basically a marketplace for compute resources (storage space etc.), with a collaborative network for developing AI and Machine Learning models. Bittensor embraces competition as a strategy to ensure that commodities, resources, and models developed on its network are top-notch. It is a mesh consisting of computers performing different roles and collectively controlling a distributed network.

The Bittensor network has a more pronounced role in AI and ML model development. However, it is capable of doing even more. It is a modular network, built for flexibility. Key concepts of the network can be applied to many sectors. Other digital commodities that can be built using the Bittensor network include financial market prediction tools, marketplaces for computing power, and algorithms for protein folding experiments. Bittensor is a multi-purpose decentralized network. Requests are posted to a ‘request and solution’ network with advanced data intelligence for the development of AI tools. The Bittensor network is an enterprise-grade tool, opening doors to industry-level adoption for getting. It is also stable for micro implementations by individuals and small organizations.

Operational schema for Bittensor network (Credit: Bittensor)

The Bittensor network consists of harmonized subnets designed to share data on AI and ML models and provide digital resources. The key role players on the Bittensor network are –

  • The Bittensor Subnets
  • The Bittensor API
  • Bittensor blockchain (Known as a subtensor) and 
  • The Yuma Consensus.

Understanding Bittensor subnets

Bittensor subnets are neural networks of advanced knowledge and data-sharing nodes. Nodes on the network are called ‘Neurons’, and can be Miner or Validator nodes. Validators are the input layer of the network: they create a communication portal between the external environment and the rest of the network. 

First, Validators communicate with the hidden layer (miners) via the Synapse module, feeding them information on the task(s) to be done. Next, Miners compete on who provides the best answer or results for the task. Then, Validators assess the results provided by the Miners and feed the rest of the network with their evaluations. Miners are only in communication with the validators, hence, isolated from the rest of the network. There are about 36 subnets on the Bittensor network at the time of writing.

The Bittensor API connects the Subnets to the subtensor. Validators’ evaluations are processed as separate inputs and transported through the API to the Subtensor for consensus. 

Understanding Bittensor subtensors

The subtensor is the final validation layer for results from the subnets. The Subtensor is a blockchain operating the Yuma Consensus. The Yuma consensus uses a weighted algorithm to compute validator evaluations and decide which model (developed by subnet miners) is best. The network rewards miners with TAO tokens as specified by the subnet’s incentive mechanism. Validators are also rewarded for their input. 

Bittensor operates two subtensors, the Nakamoto and the Kusanagi blockchain. Each of these subtensors can perform final validations.

The Bittensor network is a supernet, housing several subnets created to solve different tasks. Subnets operate a network of validators who feed miners with information on the tasks to be done and assess their results for quality. Validators mediate between subnets, the external environment, and the subtensor to ensure a steady flow of information on the network. This way, Bittensor creates a network where participants can trustlessly share intelligence.

Making a case for the Bittensor network

The Bittensor is, first, an attempt to lower the barrier to developing AI Models. Bittensor caters for resource-intensive digital ventures. Through a collaborative network, it splits the financial burden across various participants, making it cheaper to develop digital facilities.

The network uses input from several network contributors and a decentralized assessment system to promote more efficient models and solutions. Unlike the siloed systems used by centralized organizations, the collaborative environment makes for more efficient products.

But even more important is trying to promote decentralization in developing and managing these tools. Blockchain technology gives Bittensor a multiple-point-of-control system that easily resists censorship attempts and taps the power of the community.

Credit: Tesfu Assefa

Bittensor (TAO) tokenomics

TAO is the Bittensor Network utility token. With TAO, Bittensor is creating an economy to keep the network in operation, promote adoption, and oversee its security.

TAO use cases

Incentivization: TAO is used to reward miners and validators on the network for their contributions to providing computing resources and developing AI and ML models. Subnet owners define the reward system for their subnets. Miners whose solution emerges the best are rewarded with TAO according to the subnet’s incentive mechanism. Validators also receive TAO rewards.

Network consensus: To create a value layer for the network’s security facility, validators stake TAO to their hotkeys to run a node on the network. Other TAO holders can also delegate their assets to their desired validator. The Validator stake is a commitment to the network.

Governance: TAO holders decide on project improvement through community voting. Proposed additions to the projects must be approved by a majority of the community before they are implemented.

TAO distribution

  • Total TAO supply is 21 million coins, just like with Bitcoin. 
  • TAO block rewards also halve every four years
  • New TAO tokens are generated through mining and validating
  • One TAO is generated per block.
  • The circulating TAO supply is about 6.8 million. 
  • TAO can be traded on centralized exchanges like Binance and Kucoin.

Who uses Bittensor?

Anyone can use the Bittensor network as a client or a participant in the network. Enterprises and individuals who wish to create a task on the network can set up their own subnet and define their incentive mechanism based on the TAO economy. Anyone can also plug their facility into the network as a Miner to help problem-solving, or as a Validator to contribute to assessing solutions. The incentive system ensures participants always have a point of attraction, keeping the network operational.

Conclusion

Bittensor’s neural network builds a base for developing decentralized intelligence systems, and a marketplace of AI solutions. The economy built on the TAO token ensures that this network stays in charge of the finance that fuels it. Advanced AI facilities are delicate and almost unlimited in ability.

A centralized administration is a bottleneck for developing and using AI. As a network that supports the development of AI models, Bittensor promotes the development of battle-tested models powered by a censorship-resistant system.

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Will the Crypto Vote Decide The 2024 Presidential Race?

Posted on by Werner

Introduction

As the 2024 US presidential election approaches, a surprising issue has emerged: cryptocurrency. While once considered a fringe topic, the growing size and influence of the crypto voting bloc has forced candidates to take notice. As the Biden administration faces backlash over its regulatory crackdown, presidential rivals like Donald Trump and Robert F. Kennedy are seizing the opportunity to court disaffected digital asset enthusiasts.

The Rise of the Crypto Constituency

Let’s talk numbers. According to recent Paradigm and DCG Harris polls, a whopping 20% of Americans now own some form of cryptocurrency. That’s about 60 million people! And in key swing states, 1 in 5 voters say crypto is a big deal for them when it comes to picking a candidate. Over 11 million voters hold over $1000 in crypto assets.

If in the region of 10 million of voters say they care about crypto, and elections often swing on a hundred thousand votes or so, that’s a big deal. Crypto isn’t just popular with the tech bros anymore. It’s gaining serious traction with younger voters, college students, and ethnic minorities. 

The Generational and Demographic Divide

Crypto’s political clout is particularly pronounced among younger and minority voters. 

  • 33% of African Americans and Hispanics own, trade, or use crypto (Paradigm)
  • 2 in 5 men aged 18-54 and 1 in 4 college students own crypto (Paradigm)
  • 70% of those polled are dissatisfied with the current financial system (DCG Harris)

These demographics, which have traditionally leaned Democratic, are now up for grabs. If the Biden administration takes a hard line on crypto regulation, it risks alienating this critical bloc.

Biden’s Crypto Crackdown Backfires

So, what’s the current administration’s take on all this? Well, let’s just say President Biden and his crew haven’t exactly been rolling out the red carpet for the crypto community. 

The SEC, led by Gary Gensler (who ironically used to teach about blockchain at MIT), has been slapping lawsuits on major players like Binance and Coinbase left and right. Then there was Operation Choke Point 2.0, which basically cut off a bunch of crypto businesses from the banking system. And don’t even get me started on the proposed 30% tax on crypto mining. It’s enough to make any Bitcoin owner’s blood boil.

Now, some folks argue that Biden is just trying to protect consumers and keep the US dollar on top. But the majority of crypto enthusiasts see it as a massive overreach that’s stifling innovation and financial freedom. It’s a breach of crypto’s most sacred values. 

Trump Enters the Crypto Chat

Enter Donald Trump. Now, if you’ve been following along, you know that Trump used to trash talk Bitcoin like it was his job. He once called it a “scam” and said it was based on “thin air.” But the tables have turned.

After making bank on his NFT collection last year, Trump is suddenly crypto’s biggest cheerleader. He’s got an estimated $6 million in digital assets (the most of any major politician) and he’s brought on pro-Bitcoin advisors like Vivek Ramaswamy. On the campaign trail, he’s been roasting Biden’s SEC and painting himself as the savior of financial freedom.

Is it a genuine change of heart or just political opportunism? You be the judge. But one thing’s for sure: the crypto crowd is eating it up. While some question the sincerity of this pivot, Trump’s overtures have resonated with a community that feels besieged by the current administration.

Will Biden get REKT by RFK?

But wait, there’s more! Outspoken conspiracy theorist Robert F. Kennedy, who’s running as an independent, has also been making waves with the crypto community. He’s been all over TikTok, touting his pro-crypto stance and taking jabs at Biden. And it’s working. He’s gaining serious steam with younger voters who are disillusioned with the current administration’s approach.

In a tight race, even a small defection of crypto-aligned voters could prove decisive.

The Political Calculus

Recent polling suggests that the crypto community is leaning Republican in 2024:

  • 48% of crypto owners support Trump, versus 39% for Biden (13% undecided) (Paradigm)
  • Crypto voters skew younger, more diverse, and more liberal – traditionally Democratic demographics (DCG Harris)

If Democrats hope to prevent a mass exodus, they may need to recalibrate their regulatory approach. The upcoming Senate vote on the SAB21 crypto custody bill offers an opportunity for a strategic pivot.

Will the Crypto Vote Decide The 2024 Presidential Race? (Credit: Tesfu Assefa)

Crypto as a Permanent Political Force

So, what does all this mean for the future of American politics? Well, one thing’s for sure: crypto isn’t going anywhere. As more and more people start investing in digital assets, candidates are going to have to start taking clear stances on regulation and policy.

The crypto community is passionate, vocal, and ready to put their money where their mouth is. They could become a major fundraising force in future elections, not just in the USA but around the world. 

And with Bitcoin potentially gearing up for a huge post-halving bull run, its influence is only going to grow. Politicians who try to ignore or dismiss this movement do so at their own peril.

The Bottom Line

The 2024 presidential race is shaping up to be a watershed moment for crypto politics. The Biden administration’s regulatory attack is pushing away a voting bloc – a growing and increasingly influential one – and rivals like Trump and RFK are circling. 

But beyond the immediate electoral calculus, the rise of the crypto constituency heralds a more fundamental shift. As blockchain technology reshapes our financial and social landscape, it is also rewriting the rules of political engagement. Candidates who fail to grapple with this new reality risk being left behind.

At the end of the day, crypto probably isn’t going to be THE deciding factor in 2024. But it has definitely earned a place at the political table. How the parties and their candidates adapt to this new reality could have big implications down the line.

We’re living in a brave new world of digital finance and decentralized power. In digital democracy, the crypto voter is king. So this election just became a whole new game.

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The Four Seasons of Crypto: Where Are We Post-Halving?

Posted on by Werner

We’re in the fifth month of 2024 and meme–infected crypto bros are crying out to sell in May and go away. Yes, it’s clear that the crypto market is in a bit of limbo following the thrilling rally that started with the announcement of BlackRock’s spot Bitcoin ETF application last year and peaked during the recent fourth Bitcoin halving event in April. 

This has led many experts and influencers to dust off the old ‘Crypto Seasons’ theory to explain why a drop in market prices right now is to be expected and all part of the plan. 

The theory is based on historical data that shows crypto price cycles moving in a specific pattern that resembles four periods or seasons. These seasons are not tied to specific months and days, but rather to the sentiments of crypto investors. Will it be the case again this year? 

Understanding the four Seasons of Crypto

If you’ve been in crypto long enough, you’ll know that all things start and end with Bitcoin, and even more so its cyclical halving updates, which reduce mining rewards by 50% every four years to rein in coin emissions. Based on previous data, it’s fair to consider each Bitcoin Halving to fall in the first season, Crypto Spring. 

Conversely, Bitcoin has been notorious for the disastrous crashes it’s had in its 15 year history, such as the 2018 and 2022 bear market lows and this Crypto Winter period normally indicates the end of a cycle. 

Spring

Crypto spring is a period of stability and gradual growth, characterized by a recovery from the previous winter’s lows and a rebuilding of investor confidence. In the past, crypto springs have seen varying degrees of growth, with the spring of 2013 maintaining a stable market capitalization around $2.5 billion USD, while the spring of 2020 grew from $180 billion USD to over $500 billion USD.

Now in the crypto spring of 2024, the market is likely to experience a similar period of stability and gradual growth, driven by the recent Bitcoin halving and the anticipation of a potential bull run in the coming months.

Summer

Crypto summer is marked by a significant surge in market capitalization, accompanied by bullish sentiment and rising prices. Historical examples include the summer of 2017, where the market capitalization skyrocketed from $90 billion USD to over $650 billion USD, fueled by new projects and ICOs.

Looking ahead to the potential crypto summer of 2024, the market may experience a similar surge, driven by increased institutional adoption, the development of new blockchain technologies, and the growing mainstream acceptance of cryptocurrencies.

Autumn

Crypto autumn is characterized by a peak in market capitalization followed by initial signs of weakness, as investors start to take profits and volatility increases. In the fall of 2013, the market capitalization reached its peak of $15 billion USD, while in the fall of 2021, it reached an all-time high of over $2.5 trillion USD before its downturn.

As the crypto market progresses through the spring and summer of 2024, investors should remain vigilant for signs of a potential peak and the onset of crypto fall.

Winter

Winter is the harshest season, marked by a sharp decline in market capitalization, bear attacks, and falling prices. Past crypto winters, such as 2014-2015, 2018, and 2022 have been brutal as market faith quickly erodes after market capitalization crashes down, with the latter witnessing a drop from over $800 billion USD to approximately $100 billion USD.

While the severity and duration of the next crypto winter remain uncertain, investors should be prepared for the possibility of a market downturn following the potential peaks of the 2024-2025 crypto summer and autumn.

Credit: Tesfu Assefa

Previous Crypto Cycles

First Cycle (2010-2012)

  • Spring: Early adoption and gradual growth
  • Summer: First major bull run, driven by early adopters and Bitcoin gaining traction
  • Autumn: Peak in prices, followed by the first significant correction
  • Winter: Extended bear market, with prices stabilizing at a lower level

Second Cycle (2012-2014)

  • Spring: Recovery from the previous winter, with the first Bitcoin halving in November 2012
  • Summer: Gradual increase in prices and mainstream media attention
  • Autumn: Peak in prices, followed by the collapse of Mt Gox exchange
  • Winter: Prolonged bear market, with prices declining throughout 2014

Third Cycle (2014-2016)

  • Spring: Slow recovery from the previous winter, with the second Bitcoin halving in July 2016
  • Summer: Gradual increase in prices and growing interest in Ethereum and ICOs
  • Autumn: Ethereum-driven bull run, with Bitcoin prices reaching new highs
  • Winter: Short-lived correction, with prices remaining relatively stable

Fourth Cycle (2016-2018)

  • Spring: Continued growth and mainstream adoption, with Bitcoin prices surging
  • Summer: Exponential growth, driven by the ICO boom and retail investor FOMO
  • Autumn: Peak in prices, followed by a significant correction and the bursting of the ICO bubble
  • Winter: Prolonged bear market, with prices declining throughout 2018

Fifth Cycle (2018-2021)

  • Spring: Recovery from the previous winter, with the third Bitcoin halving in May 2020
  • Summer: Rapid growth, driven by institutional adoption and the emergence of DeFi and NFTs
  • Autumn: Peak in prices, with Bitcoin reaching an all-time high of $69,000 in November 2021
  • Winter: Correction and consolidation, with prices stabilizing at a higher level compared to the previous cycle

Sixth Cycle (2021-2024)

  • Spring : Gradual recovery and increased mainstream acceptance, with the fourth Bitcoin halving in April 2024
  • Summer: (Projected) Potential bull run driven by institutional adoption and technological advancements
  • Autumn: (Projected) Possible peak in prices, followed by a correction
  • Winter: (Projected) Potential bear market, with prices consolidating before the next cycle begins

Key Factors Influencing Crypto Seasons

Several factors influence the progression of crypto seasons, including:

  1. Bitcoin halving cycles: Reduce the supply of new Bitcoin, potentially driving up prices and marking the beginning of new market cycles.
  2. Global economic conditions: Inflation, interest rates, and market sentiment can impact the demand for cryptocurrencies as alternative investments.
  3. Regulatory developments: governments and financial institutions accept or reject crypto-related products and services; this can affect market stability and growth.
  4. Adoption and innovation: Emergence of new technologies like DeFi , AI cryptocurrencies, memecoins, DePin and NFTs can contribute to market excitement and attract new investors.

2024 Bitcoin Halving and the Current Crypto Cycle

The recent Bitcoin halving in April 2024 has set the stage for the beginning of a new crypto market cycle, coinciding with the spring season. The halving event, which reduces the amount of new Bitcoin entering circulation by 50%, has historically led to supply shocks and driven up prices.

Post-halving, the market usually goes sideways for a few months as investors lose interest, the US tax season rolls into town, and companies take their summer holidays till as late as September. This gives enough time for a real supply shock to set in, as mining rewards now yield only 450 Bitcoin a day instead of the previous 900. 

We are likely to experience a surge in interest and investment later this year, as the reduced supply of new Bitcoin and increased demand contribute to a bullish sentiment and rising prices. Add US elections and interest rate cuts, and the stage is set for a hot crypto summer, driven by significant growth and mainstream adoption.

However, investors should remain cautious and prepared for potential volatility. The crypto market continues to mature and face new challenges, such as regulatory threats (especially from the SEC), high interest rates and fears of a recession. 

How long will this crypto season last? 

At present, retail investment is still very low compared to previous seasons. Some experts like Raoul Pal believe that the Bitcoin Spot ETF has caused us to front-run the bull run for the first time before the halving (historically Bitcoin had never previously seen a new all-time high price prior to a halving) and therefore all cards are off the table. Others believe we’re about to see a “supercycle” bull season again, and Arthur Hayes, a mega bull, thinks we’ll see a $750,000 Bitcoin in 2026 and then enter a crazy recession. In short, nobody knows. 

Let’s look at crypto indicators such as the Crypto Fear and Greed Index and Stochastic RSI, which reflects buying and selling levels. Anything under 20 could represent a good time to accumulate assets, while a score of over 80 should start to send alarm bells off in your head that we’re nearing a top. Some traders try to ‘ladder’ in and out by dollar cost averaging (DCA), selling periodically. 

Stochastic RSI combines the Stochastic and RSI indicators to forecast trade’s entry and exit points (Credit: Kucoin Learn)
The fear and greed index for crypto is scored from 0 – 100. 0 indicates extreme fear and 100 indicates extreme greed. (Credit: Look into Bitcoin)

How to Navigate The Current Crypto Season

Based on our Crypto Seasons theory, we’re now likely in the spring phase and on the cusp of summer. Crypto investors are being advised to:

  1. Stay informed about market trends and adapt strategies accordingly
  2. Consider accumulating assets during the spring season, while exercising caution and managing risk
  3. Be prepared to take profits and rebalance portfolios during summer and autumn
  4. Conduct thorough research and due diligence on new projects and emerging technologies
  5. Employ risk management techniques, such as diversification and stop-losses, to navigate potential market volatility

Conclusion

It’s important to note that while crypto history never repeats, it rhymes in a big way every time and this year will likely not be different. 

Understanding how crypto cycles work and how to identify unique characteristics of each crypto season and the factors that influence them will help investors make more informed decisions

Let us know your thoughts! Sign up for a Mindplex account now, join our Telegram, or follow us on Twitter. 

Crypto Market Makers: Liquidity Saviors or Sinners?

Posted on by Werner

In cryptocurrency trading few things matter more than speed and information. Maybe one thing does: market liquidity. Ever traded a shitcoin with a small market cap, and seen its price crater (or moon) in a matter of minutes? In most cases, that is the result of some whale executing a big order, driving the price up or down by supply or demand. 

This is where so-called market makers come in. They play a vital role in ensuring exchanges run smoothly by lubricating them with liquidity. But what exactly does liquidity mean, and why are market makers so crucial to crypto markets? Let’s dive in and explore the essential role they play.

What is a Crypto Market Maker?

A crypto market maker can be defined this way: it’s a person or financial entity who stands by to buy and sell a particular cryptocurrency on a continuous basis at publicly quoted prices. These are the prices found on the order books of centralized and decentralized exchange. Market makers place orders on exchanges to buy and sell cryptocurrencies like Bitcoin, Ethereum, or smaller coins. When they do this, they ensure there is sufficient liquidity – meaning other traders can easily enter or exit positions without causing drastic price movements. 

Market makers profit by capitalizing (some say exploiting) the difference between the bidding price and the asking price. This difference is known as the bid-ask spread.

For instance, a market maker might quote a bid-ask spread of $99/$100 for Bitcoin. This means he is willing to buy Bitcoin at $99 and sell it at $100. If a buyer and seller transact with the market maker as a counterparty, the market maker earns $1, minus their transaction fee. Multiply such small profits by thousands or even millions of transactions, and it becomes a very lucrative business model.

To manage their risk, market makers run (and fine-tune) advanced algorithms and technology to continuously adjust prices based on factors like trading volume, price fluctuations, and market volatility. This high-frequency trading allows them to capitalize on fleeting price discrepancies across different exchanges and currency pairs.

Why are Crypto Market Makers Important?

In the crypto space, market makers serve several important functions. 
First and foremost, by providing continuous liquidity, they make it much easier for buyers and sellers to trade without causing sudden, drastic price movements. Imagine if you had to wait for another trader who wants to take the exact opposite position to yours every time you wanted to buy or sell a coin. The market would move extremely slowly.

Additionally, market makers help to stabilize prices and reduce volatility by stepping in to buy when prices fall, and to sell when prices rise. Without them, crypto price charts would resemble seismographs, with prices jumping all over. By tightening spreads and balancing order flow, market makers ‘smooth out’ price action.

Several types of entities engage in crypto market making. Some are individual traders looking for profits from bid-ask spreads. Others are professional market making firms hired by exchanges or projects themselves to ensure sufficient liquidity. 

Many exchanges also act as market makers, either openly or behind the scenes. High-frequency trading (HFT) firms and arbitrageurs also contribute to liquidity through their rapid, algorithm-driven strategies. Finally, some token issuers and crypto projects provide their own liquidity to facilitate trading of their coin or token.

In employing market-making strategies, firms typically rely on a combination of advanced statistical models and formulas, ultrafast computers, and automated trading systems. 

Popular strategies include:

How Market Makers Make Their Money

So how exactly do market makers profit? The most obvious way is through the bid-ask spread. Every time they complete a round-trip transaction (i.e. buying and selling an equal quantity), they earn the spread between their buy and sell prices. 

Many market makers also receive commissions or rebates from exchanges for the liquidity they provide. Finally, some market makers generate profits by opening their own directional trading positions based on anticipated market movements. 

Example: DWFLabs and $Floki

One of the most well-known crypto market makers are DWF Labs, who usually drive up the price of their client’s assets significantly. Follow their portfolio here on CoinMarketCap. Their most recent success is the $GUMMY token, which peaked at a $250 million market cap. 

By accumulating $FLOKI tokens quietly over several months, DWFLabs was able to establish a strong position. They then orchestrated a massive 772% price pump in just three weeks, showcasing their ability to generate substantial returns quickly.

Credit: Werner V. via CoinMarketCap

However, market makers like DWFLabs often employ controversial tactics to manipulate prices. By artificially creating new lows, they can starve out retail investors and accumulate tokens at discounted prices. This cycle of pumps and dumps creates a challenging environment for average token holders, who may struggle to navigate the volatility created by market maker activity.

Therefore, when analyzing a crypto asset, make sure to take a look at both the price and the market cap. The higher the market cap, the more liquid the coin will be, and the less volatile in price.

Credit: Tesfu Assefa

The Good and Bad of Market Makers

An important question arises – are market makers good or bad for the average crypto investor? As with most things, there are two sides to this debate.

On the positive side, the liquidity market makers provide is undeniably valuable. Without it, crypto markets would be highly illiquid, slow-moving, and volatile. Their activity makes it much easier for investors to enter and exit trades seamlessly. Furthermore, competition between market makers keeps spreads tight, allowing investors to trade at fair prices close to the market price. 

However, some argue that market makers – particularly large, sophisticated firms – can take advantage of their role for manipulative purposes. 

Market makers have a range of ways they can potentially manipulate asset prices. With their large capital reserves and advanced algorithms, they can engage in practices like front-running, where they exploit advance knowledge of pending orders to make trades ahead of other investors. They might also employ quote-stuffing, placing large numbers of buy or sell orders they don’t intend to execute in order to create a false impression of demand or supply.

Another tactic is wash-trading, simultaneously buying and selling the same asset to generate fake trading volume and momentum. Market makers’ ability to set bid-ask spreads also gives them some control over short-term price movements. 

The opacity of some market makers’ operations, and their access to information not available to regular traders raises concerns about asymmetric advantages. While not all market makers act maliciously, they all follow the profit motive. This comes with an inherent potential for price manipulation that necessitates robust oversight and regulation.

Conclusion

Crypto market makers are essential actors in the cryptocurrency ecosystem. While not without controversy, these entities – through their combination of advanced technology and trading expertise – help form the circulatory system of the crypto markets we know today.

While they can manipulate markets with their tactics (especially small illiquid markets), most would agree that the benefits of liquidity and more efficient markets outweigh the potential drawbacks. And in most jurisdictions, there are rules and regulations in place to prevent market abuse. While imperfect, market makers are arguably a necessary presence to ensure crypto markets run smoothly.

By providing continuous liquidity, tightening spreads, and balancing order flow, they serve the crucial role of facilitating efficient trading and more stable prices. For any investor to be profitable long-term, understanding how they operate will help them unlock access to the inner workings of crypto trading.

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Runes Protocol: Did It Ruin Bitcoin or Save It?

Posted on by Werner

The future of Bitcoin was at stake last week in two ways: with both the Halving upgrade and the launch of the Runes protocol, a new token standard for issuing fungible tokens directly on the Bitcoin blockchain. The Runes Protocol laid a foundation that will determine the fate of the chain in the decades to come. Activated on 19 or 20 April 2024 on block 840,000, coinciding with the next Bitcoin halving, Runes aims to provide a more efficient and responsible way of creating fungible tokens compared to existing options. Let’s dive into what Runes is all about, who created it, how it works, and what impact it could have on the Bitcoin ecosystem.

What is the Runes Protocol?

The Runes protocol is a new token standard that allows issuers to create fungible tokens on the Bitcoin blockchain in a more efficient way. It can offer users a streamlined method for creating tokens that represent various assets, from stablecoins to governance tokens. Runes positions itself as a robust platform for token creation and management with all the security and immutability of Bitcoin. At least, that’s the official line. For Bitcoin maximalists, Runes and its predecessors Ordinals and BRC-20 are cynical money-grabs that clutter and congest the world’s most important blockchain with its flood of transactions. 

Rodarmor: The Mastermind Behind Runes

Bitcoin developer Casey Rodarmor, well-known as the creator of the Ordinals protocol, proposed Runes in September 2023. Building upon his experience with Ordinals, which opened the door to NFTs on Bitcoin, Rodarmor envisioned Runes as an improved token standard that addresses the limitations of existing solutions like the BRC-20 standard, which he felt required too many steps to complete and wasn’t built in accordance with Bitcoin’s ethos.

Rodarmor designed Runes to be a simple protocol with minimal on-chain footprint and responsible UTXO management. UTXOs, or Unspent Transaction Outputs, represent individual units of Bitcoin value that have not yet been spent. Unlike the BRC-20 standard, which is complex and produces junk UTXOs that congest the Bitcoin network, Runes aims to be more efficient and user-friendly.

Other fungible token protocols on Bitcoin, such as RGB and Taproot Assets, rely on off-chain data storage. Runes distinguishes itself by keeping all token information on-chain using OP_RETURN, a Bitcoin script opcode for storing data. In this way, Runes ensures that asset metadata remains tightly integrated with the base layer.

Under the Hood: How Runes Works

Runes adopts a UTXO-based model that aligns seamlessly with Bitcoin’s design. When a Rune token is created (‘etched’), minted, or transferred, a protocol message called a runestone is generated. Runestones contain all the necessary information, including the token ID, output index, and amount, encoded in an OP_RETURN output.

The token supply of a Rune is stored within a single UTXO, with a maximum supply of approximately 340 undecillion (340 followed by 36 zeros). Each Rune has a divisibility parameter that determines the number of decimal places it can have, up to a maximum of 38.

New Runes are created in a process called etching, where the token’s properties, such as its name, divisibility, symbol, pre-mine amount, and minting terms, are defined. Once etched, the Rune can be minted according to the established terms, with the minter specifying the Rune ID and the desired quantity.

Transferring Runes is accomplished through ‘edicts’ – instructions that define how tokens move from inputs to outputs within a transaction. Edicts support batch transfers, airdrops, and a transfer of all remaining units of a specific Rune ID in a single transaction.

Runes vs. BRC-20 and Ordinals

Runes vs BRC-20

While both Runes and BRC-20 are token-standards built on the Bitcoin blockchain, there are several key differences between the two.

BRC-20 is a meta-protocol that relies on the Ordinals protocol. This means that BRC-20 inherits the complexity of Ordinals, and requires multiple transactions for minting and transferring tokens. In contrast, Runes is a standalone protocol that operates independently of Ordinals, allowing it to create and manage tokens more efficiently.

Another significant advantage of Runes over BRC-20 is its simplified transaction structure. With Runes, minting and transferring tokens can be done in a single transaction, reducing the overall on-chain footprint and minimizing the creation of unnecessary UTXOs. This streamlined approach leads to improved scalability and a more user-friendly experience for token issuers and holders.

Runes vs Ordinals

Although both Runes and Ordinals are protocols built on top of the Bitcoin blockchain, they serve different purposes. Ordinals is primarily focused on creating and managing non-fungible tokens (NFTs) by inscribing data onto individual satoshis. These inscriptions are unique and can represent various types of digital assets, such as artworks, collectibles, or even text.

On the other hand, Runes is designed specifically for fungible tokens, which are interchangeable and divisible. 

The Potential Impact of Runes on Bitcoin

The Runes protocol could have far-reaching implications for the Bitcoin ecosystem, both good and bad. Developers can use Runes to create various types of fungible tokens, potentially attracting a wider user base and expanding Bitcoin’s utility beyond its primary function as a digital currency.

As more projects build on top of Runes, the increased transaction volume could generate additional revenue for miners in the form of transaction fees. This is particularly relevant in light of the halving of the Bitcoin block reward: the added revenue from fees would compensate for one incentive for miners being reduced.

Moreover, Runes could spur innovation within the Bitcoin developer community. Projects like RSIC, a metaprotocol that combines Ordinals with yield-farming, have already emerged in anticipation of Runes’ launch. As developers explore new use-cases and build novel applications on top of Runes, the Bitcoin ecosystem could witness a surge in creativity and experimentation.

However, Runes has also in its short history attracted an avalanche of scam or low-quality projects that offer little to no chances of a return on investment. 

Credit: Tesfu Assefa

The Road Ahead for Runes

Casey Rodarmor’s next plan is to introduce direct trading between users, potentially reducing reliance on centralized exchanges and mitigating issues like Replace-By-Fee (RBF). Additionally, the approval of the OP_CAT Bitcoin Improvement Proposal (BIP) could pave the way for bridging Runes tokens to Layer-2 networks, enhancing scalability and interoperability.

As the Bitcoin community prepares for the launch of Runes, excitement is building around the potential for a new era of token innovation on the world’s most secure and decentralized blockchain. With its focus on simplicity, efficiency, and responsible UTXO management, Runes aims to address the limitations of existing token-standards, and to provide a solid foundation for growth of the Bitcoin ecosystem.

Only time will tell how developers and users will receive and adopt Runes. However, one thing is certain: when Runes is activated at block 840,000, it marks a significant milestone in Bitcoin’s ongoing evolution, opening up new possibilities for token-creation, management, and exchange on the original and most secure blockchain.

The Runes protocol has the potential to bring numerous benefits to the Bitcoin ecosystem –

  • Firstly, Runes can attract a wider user-base by enabling various types of tokens, such as utility tokens, governance tokens, or even stablecoins. This increased diversity of use-cases can draw new users to the Bitcoin network, driving adoption and fostering a more vibrant and inclusive ecosystem.
  • Secondly, the increased activity generated by Runes can make the entire Bitcoin network more sustainable. As more users engage with Runes-based tokens, the demand for block space will increase, leading to higher transaction fees. These fees will draw in more miners to continue securing the network, especially as the block rewards diminish.
  • Lastly, Runes can serve as a catalyst for innovation and experimentation within the Bitcoin ecosystem. By providing a standardized and efficient platform for issuing tokens, Runes can lower the barriers to entry for developers and entrepreneurs who want to build new applications and services on top of Bitcoin. This can lead to a proliferation of novel use-cases, and a more dynamic, resilient, and interesting ecosystem.

Runes provides a platform for token-related activities directly on the Bitcoin blockchain, and can help drive transaction fees, nourishing a sustainable mining ecosystem. Even if some of the tokens created through Runes are shitcoins or memecoins, Rodarmor argues that the fees generated from these activities are still valuable for the network’s security.

Moreover, Rodarmor sees Runes as a way to bring more users and activity to the Bitcoin ecosystem. This increased adoption and engagement can further strengthen the Bitcoin network and its position as the world’s leading cryptocurrency.

How Runes Works

  • Etching is the process of creating a new Rune token and defining its properties. This is done through a special transaction that includes an OP_RETURN output containing the token’s metadata, such as its name, symbol, and any additional attributes.
  • Minting refers to the act of creating new units of a Rune token. The minting process involves specifying the token ID, which is derived from the etching transaction’s block height and transaction index. Minting can be done through an open process, allowing anyone to participate, or it can be restricted based on predefined terms set during the etching process.
  • Transferring Runes involves moving tokens from one UTXO to another. This is accomplished through a transaction that consumes the input UTXOs containing the tokens and creates new output UTXOs with the updated token balances. The transfer process is governed by a set of instructions called ‘edicts’. These edicts specify the token ID, amount, and destination UTXO.
  • In the event of an error during the etching, minting, or transferring process, a ‘cenotaph’ is created. Cenotaphs are runestones with invalid or unrecognized data, and they cause the associated tokens to be burnt. This mechanism encourages responsible UTXO management and helps maintain the integrity of the Runes protocol.

Conclusion

Existing token standards, such as BRC-20, have certain limitations. Every time they are minted or transferred, multiple transactions have to pass through the Bitcoin blockchain, and this leads to increased complexity and network congestion.

In contrast, Runes offers a streamlined approach, allowing you to create and transfer tokens with minimal on-chain footprint and responsible UTXO management. Fewer transactions are needed and Bitcoin’s limited block space is used more optimally. It is a more efficient and scalable solution for issuing tokens.

Conversely though, the protocol is still young and has had to deal with some adversity. Proponents of BRC-20 feel that Runes projects are too centralized, while others feel Rodarmor’s design was nothing more than a cynical money grab. Only time will tell if they will survive and even thrive. As Samson Mow told me in an interview last year at Bitcoin Miami, “it’s just noise”. 

It pays to zoom out and see where other chains like Ethereum and Cardano are heading, and what’s possible with new protocols and even Layer-2 chains for Bitcoin. When mining rewards become negligible in the next 10 or 20 years, the network will have to rely on transaction fees to keep the miners from revolting and shutting down their machines. Innovations like Runes are asking the right questions in order to get them to stay. 

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Guide to Solana’s AI Cryptocurrencies 2024

Posted on by Werner

Introduction

Solana is a rebellious, young and cutting-edge blockchain. It has weathered frequent outages, a price collapse, and industry disdain due to being backed early on by FTX and Sam Bankman-Fried. Its technical quality has helped it bounce from its nadir in 2022, seeing the SOL asset price jump from $8 to over $200 as users poured in, partly due to some lucrative airdrops. 

All this adversity has battle-tested Anatoly Yakovenko’s Proof-of-History network, drawing so much traffic that it had to roll out a patch this week in order to combat severe network congestion the last few weeks. 

It boasts an exploding Web3 ecosystem of DeFi, NFT and memecoin projects that take advantage of its high-speed, low-cost transactions and minimal energy impact. However, it also provides fertile ground for the intersection of artificial intelligence (AI) and blockchain technology.

Solana’s unique architecture utilizes a parallelized environment, and makes an ideal platform for AI projects that require fast and efficient transaction processing. The blockchain’s ability to handle a high volume of transactions quickly has drawn the attention of projects like io.net, a decentralized network that provides global GPU resources for AI and machine learning purposes. 

With io.net’s upcoming launch and impressive $1 billion valuation, it’s clear that Solana is poised to become a major player in the AI cryptocurrency space, which is currently dominated by big players like SingularityNET, which has close ties with Cardano, the most proof-reviewed blockchain which takes a more academic and stable but slower approach to development.

In this article, we’ll dissect this in more detail and also briefly go over some of the hottest Solana AI crypto projects out there right now. 

Warning: Solana’s low-cost fees and gung-ho ‘degen’ culture have drawn in not only some hottest Web3 projects, but also many crypto scams and vaporware projects that claim to use AI but don’t. Users should exercise extreme caution when investing and always conduct thorough research, including on the content in this article. None of it should be considered financial advice. 

Why is Solana a Promising Platform for Crypto AI?

Solana’s unique architecture offers several key advantages that make it an ideal platform for AI applications in the crypto space:

  1. Scalability: Solana’s combination of Proof-of-History (PoH) and Proof-of-Stake (PoS) consensus mechanism enables it to process thousands of transactions per second, making it highly suitable for AI-related computations.
  2. Low Transaction Costs: Solana’s low fees make it an attractive choice for AI applications, allowing developers to execute complex algorithms and models without the high costs associated with traditional cloud computing services.
  3. Fast Confirmation Times: Solana’s high-speed network ensures fast confirmation times for transactions, which is essential for real-time data processing required by AI algorithms.
  4. Open and Transparent: Solana’s open-source technology eliminates potential biases and ensures that AI algorithms deployed on the network are fair and accountable.
  5. Developer-Friendly Tools: Solana provides a comprehensive set of tools, libraries, and APIs, simplifying the development process and enabling seamless integration of AI algorithms with the blockchain.
  6. Robust Community: A thriving and supportive community of developers and enthusiasts are actively collaborating to build innovative AI solutions and foster a vibrant ecosystem.

Real-world Applications of Solana Crypto AI

The potential applications of AI within the Solana ecosystem are vast and varied:

  1. Decentralized AI Marketplaces: Solana’s scalability and low transaction costs make it an excellent platform for building decentralized AI marketplaces, where individuals and organizations can buy and sell AI algorithms, datasets, and models.
  2. AI-powered Financial Services: Solana can be used to create AI-powered financial services, such as automated trading systems, risk assessment models, and fraud detection algorithms, enabling more accurate decision-making and enhanced efficiency.
  3. Smart Contracts and AI Integration: Solana’s smart contract capabilities allow developers to integrate AI algorithms directly into blockchain applications, and build self-executing AI contracts and decentralized autonomous organizations (DAOs).
  4. AI-driven Supply Chain Management: By combining real-time data from various stakeholders with AI analytics, businesses can optimize inventory levels, predict demand, and identify potential disruptions, improving overall supply chain management.

Credit: Tesfu Assefa

Top Crypto AI Projects on Solana

  1. io.net (GPU resources)

Crypto AI platform io.net is a highly anticipated project in the Solana ecosystem. It aims to provide a decentralized network for AI and machine learning purposes. The platform is designed to offer global GPU resources, enabling developers and researchers to access powerful computing capabilities for training and executing AI models.

With its launch and airdrop planned for this month, io.net has garnered significant attention within the crypto community. The project has already secured an impressive $1 billion valuation and has raised $30 million in funding, speaking to strong interest and support from investors. The airdrop is likely to generate substantial buzz and excitement, as it presents an opportunity for individuals to gain exposure to a promising project at an early stage

  1. Grass (Solana Layer2)

Grass is a unique project that uses a decentralized network to gather users’ public web data for training AI models. By developing a zero-knowledge (ZK) Solana Layer-2 solution, Grass allows users to participate in the network by installing a browser extension, effectively turning their browsers into nodes. This innovative approach enables the network to harness spare internet bandwidth from users and collect data from public websites.

  1. gmAI (AI Dapp builder)

Developed by the creator of the points-trading exchange Whales Market, gmAI is an advanced AI platform designed to improve the functionality and user experience of dApps on Solana. gmAI is an operating layer of AI capable of analyzing on-chain data, identifying smart contract risks, prompting on-chain swaps, and automating yield farming without custody issues. While its functions are mostly related to DeFi, gmAI intends to support various use cases, including on-chain gaming, DAO automation, and SoFi.

  1. Nosana (GPU marketplace)

Nosana, a project that has seen a staggering 24,000% appreciation in the past year, is creating a decentralized network specifically designed for AI inference workloads. By establishing a marketplace for GPU power, Nosana enables individuals and companies to contribute or access computational resources, making AI model training and execution more cost-effective and scalable.

  1. Synesis One (AI model trainer)

Synesis One is building a decentralized solution for training AI models on the Solana blockchain. The platform allows users to earn cryptocurrency by completing small tasks, such as providing data for models, or labeling data. Synesis One aims to democratize AI development by making it easy for ordinary people to get involved.

  1. DatorAI (GPU marketplace)

DatorAI strives for inclusivity and accessibility in the AI and GPU sharing landscape. DatorAI is a way for people to use AI technologies through a decentralized platform. With features like revenue-sharing, GPU node rental and lending, and on-demand nodes, DatorAI empowers users and fosters innovation across various sectors.

  1. Dither (AI trading bot)

Dither, often mistaken for a simple Telegram trading bot, has larger ambitions. It aims to be an AI tool that utilizes open-source historical data to create tools for trading applications within and outside the crypto space. With upcoming applications like a ‘semantic sniper’ for evaluating soon-to-launch tokens and a Fantasy Football Draft Player Analysis, Dither showcases the versatility of AI in the Solana ecosystem.

  1. Solana Trading Bot

Bitsgap’s Solana Trading Bot harnesses AI to automate trading and optimize strategies. It monitors markets 24/7, identifying profitable opportunities and making autonomous decisions based on predefined strategies. 

The bot offers customizable modifications, such as the GRID bot for sideways markets and the DCA bot for volatile conditions. These bots can be tailored to individual preferences and risk tolerances. The Solana Trading Bot manages risk with AI and automates away constant manual monitoring to help users maximize profits while minimizing loss in the dynamic cryptocurrency market.

  1. Render (GPU media rendering)

The most popular Solana AI cryptocurrency Render is a decentralized GPU rendering platform that harnesses the power of distributed computing. It utilizes AI algorithms to allocate rendering tasks across a distributed network of GPUs, ensuring efficient and cost-effective rendering for artists and studios.

Conclusion

As Solana continues to mature and attract more innovative projects, it has the potential to become a major hub for AI-focused cryptocurrencies which play to its strengths. However, as with any emerging technology, it’s essential for users to exercise caution and thoroughly research projects before investing, as scams are not uncommon in the crypto space. By conducting proper due diligence, users can make informed decisions and participate in the exciting growth of Solana’s AI blockchain ecosystem.

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Layer-3 (L3) Networks: Climbing Crypto’s Next Frontier

Posted on by Werner

Intermediate Level Introduction

Web3 and DeFi continue to grow and mature, and any established smart contract platform blockchain requires scaling and speed to keep up with user demands, causing a new frontier to emerge: Layer-3 chains. 

These cutting-edge solutions are designed to build upon the foundation of Layer-1 and Layer-2 technologies, bringing forth a new era of scalability, interoperability, and specialized functionality.

Understanding the Blockchain Layers

Credit: Werner V.

To understand why Layer-3 networks are being touted as integral to the future success of crypto, it’s essential to understand the role of each layer in the blockchain ecosystem.

Layer-1: The Foundation

Also called the base blockchain, Layer-1 networks, such as Bitcoin, Ethereum, Solana and Cardano form the bedrock of the blockchain world. They provide stability and battle-tested security to the projects that build on them, and rely on them to keep their assets safe. 

Bitcoin and Ethereum are the two biggest L1 blockchains in the world. L1 blockchains are the basic infrastructure and security layer that Layer 2 (L2) blockchains build on. These networks provide the core functionalities, consensus mechanisms, and security protocols that decentralized transactions and applications require.

Layer-2: Scaling Solutions

Layer-1 networks face scalability challenges; Ethereum can process only 14 transactions per second maximum. So Layer-2 solutions have emerged in the last two years to address these limitations. 

A Layer-2 chain is a secondary protocol that is built on top of an existing Layer-1 blockchain. 

The primary purpose of Layer-2 chains is to improve the scalability and efficiency of the whole blockchain by handling transactions off the main ledger. This approach helps alleviate the network congestion. It also reduces the transaction costs – which are often high on Layer-1 blockchains due to their limited throughput. 

Popular examples of Layer-2 solutions include the Lightning Network for Bitcoin and Optimism and Arbitrum for Ethereum. Layer-2 solutions employ various techniques like state channels, sidechains, rollups, and plasma, each with distinct mechanisms for moving transactions off the main blockchain.

As such, Layer-2 chains are critical in blockchain architecture, offering a balance between decentralized security and high scalability.

Optimistic vs ZK Proof Rollups

Rollups execute transactions outside the main chain, but post transaction data back to it. This setup enables higher transaction throughput while coming back to the robust security of the Layer-1 blockchain. 

Ethereum rollups can broadly be divided into two camps, namely optimistic rollups (OR) and zero-knowledge proof (ZK) rollups. 

Optimistic rollups like Optimism (Coinbase’s Base Network used its OP stack to build its chain) and Arbitrum assume transactions are valid by default, and only run computations in the event of a dispute, which significantly reduces the burden on the main blockchain but entails a waiting period of up to seven days for withdrawals to ensure security. 

In contrast, ZK rollups like ZkSync and Stark use zero-knowledge proofs to validate all transactions off-chain before bundling them back to the main chain, providing immediate finality and reducing wait times but requiring more complex computation upfront. Vitalik Buterin, Ethereum creator, is a big fan of ZK rollups as they enable you to validate data without the need to share your private information. 

Layer-3: The use case-specific layer

However, if the world wants to all transact and send data on one chain like Ethereum or Solana, we need to go bigger and faster. This is where Layer-3 chains come in. 

Layer-3 networks focus on enabling seamless interoperability between different blockchains while providing specialized functionality tailored to specific use cases. Think of them as specialized, custom-built chains created for specific use cases, such as Web3 gaming or DeFi trading. 

Key Features of Layer-3 Networks

Layer-3 networks offer distinct advantages that set them apart from their predecessors:

Enhanced Scalability and Efficiency

By optimizing consensus mechanisms and data structures, Layer-3 networks achieve higher transaction throughput and processing capabilities. This allows decentralized applications (dApps) to perform with extreme efficiency, minimizing network congestion and computational bottlenecks.

Improved Interoperability and Accessibility

One of the key benefits of Layer-3 networks is their ability to seamlessly communicate and transfer assets between different blockchains. This interoperability means the crypto ecosystem becomes more connected and more accessible, enabling users to navigate and bridge across various networks with ease and far less risk.

Customization and Security

Layer-3 networks usually host only one dApp per network. This allows developers to customize their chains to their satisfaction, and implement security features tailored specifically to their dApp’s requirements. By providing a dedicated environment for each application, Layer-3 networks ensure optimal performance and enhanced security.

Notable Layer-3 Projects

Several promising Layer-3 projects have emerged, each bringing its own set of innovative features and use cases to the table.

Orbs

Orbs positions itself as a Layer-3 infrastructure project, bridging the gap between Layer-1, Layer-2, and the application layer. By providing an intermediary execution layer, Orbs enhances smart contract capabilities and introduces groundbreaking DeFi protocols such as dLIMIT, dTWAP, and Liquidity Hub.

Degen Chain

Built on the Base blockchain, Degen Chain is a Layer-3 platform designed to efficiently handle payment and gaming transactions. With its thriving ecosystem of tokens and rapid growth, Degen Chain aims to tackle scalability issues while maintaining low transaction costs.

Social media influencers have relentlessly shilled the chain in recent weeks for potential airdrops, and attracted a lot of investment as a result. 

Arbitrum Orbit

Arbitrum Orbit enables developers to create customizable Layer-2 or Layer-3 chains within the Arbitrum ecosystem. These chains can settle transactions on Arbitrum One, providing developers with the flexibility to tailor their application’s features and governance to their specific needs.

Other notable Layer-3 projects include Cosmos IBC, Polkadot, Chainlink, Superchain, and zkHyperchains, each contributing to the evolution of the blockchain landscape in their own unique ways.

Credit: Tesfu Assefa

Potential Impact and Use Cases

Layer-3 networks hold immense potential for the future of blockchain technology. Here are a few of the biggest plusses.

Decongesting the Main Chain

By processing transactions off-chain, Layer-3 solutions help alleviate congestion on the main blockchain. This leads to reduced network congestion and lower transaction fees, improving the overall user experience.

Enabling Complex dApps

The specialized functionality offered by Layer-3 networks opens up new possibilities to develop sophisticated and user-friendly dApps across sectors like DeFi, gaming, and social media. By providing a tailored environment for each application, Layer-3 networks enable developers to create highly optimized and efficient dApps.

Driving Mainstream Adoption

The ability to create customized, high-performance applications lowers the entry barrier for businesses and individuals, fostering a more inclusive and diverse crypto ecosystem.

Challenges and Considerations

While Layer-3 networks present exciting opportunities, they also face certain challenges that need to be addressed.

Centralization Concerns

Some critics argue that Layer-3 networks, being built on top of potentially centralized Layer-2 solutions, may further compromise the decentralization principles that is the soul of blockchain technology. Striking the right balance between scalability and decentralization remains a crucial consideration for Layer-3 networks.

Competition and Fragmentation

As more Layer-3 networks enter the fray, competition for users and developers is likely to intensify. This could lead to fragmentation within the crypto ecosystem, with liquidity and resources being spread across multiple platforms. Ensuring a cohesive and interconnected ecosystem will be a key challenge for Layer-3 networks.

Conclusion

Layer-3 networks can make blockchain technology. By building upon the foundations laid by more scalable, interoperable, and specialized than ever before. As the crypto landscape continues to mature, Layer-3 networks are poised to play a crucial role in shaping its future.

For beginners navigating the complex world of cryptocurrencies, understanding the significance of Layer-3 networks is essential. By staying informed about these cutting-edge developments, individuals can position themselves to capitalize on the opportunities presented by this next-generation technology.

As the blockchain ecosystem continues to evolve, Layer-3 networks will undoubtedly face challenges and obstacles. However, the potential benefits they offer in terms of scalability, interoperability, and specialized functionality are too significant to ignore. As more projects emerge and mature, the true impact of Layer-3 networks will become increasingly apparent. 

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Bitcoin Halving 2024: Final Countdown To 19 April

Posted on by Werner

Please note: This article is for educational purposes only and doesn’t constitute financial advice of any kind. Please invest responsibly. 

Intro

Tick-tock, tick-tock, get closer one more block. Despite this weekend’s crypto jitters after Middle East tensions, everyone and their cat is now tuned in for this week’s 4th Bitcoin Halving, scheduled for 19 April, 2024 around 6pm UTC, and anticipation, nerves and speculation levels are off the charts. 

This momentous event, which occurs roughly every four years, will reduce the mining rewards from 6.25 BTC to 3.125 BTC per block, cutting the daily issuance of new Bitcoins in half. 

Bitcoin supporters are gunning for that $100,000 price tag milestone with laser-eyed focus, and the 2024 halving is Bitcoin’s big event after the year following the Spot ETF approvals, and a defining moment for the entire crypto industry, providing high hopes that the ensuing supply pinch will kick off another crazy bull run.

What is the Bitcoin Halving?

The Bitcoin Halving is a pre-programmed event that is hardcoded into the Bitcoin protocol. It is designed to control the supply of new Bitcoins entering circulation, ensuring that the total supply will never exceed 21 million BTC. By reducing the block reward for miners every 210,000 blocks (approximately four years), the Halving helps maintain Bitcoin’s scarcity and deflationary pressure.

Historical Behavior of 2012, 2016, and 2020 Halvings

Credit: Werner V.

To better understand the reason for optimism surrounding the upcoming 2024 Halving, let’s take a closer look at the previous three Halving events and how they affected Bitcoin’s price, narratives, and overall market sentiment.

The 2012 Halving

The first Bitcoin Halving took place on 28 November, 2012, when the price of BTC was just $12.35. In the year leading up to the event, Bitcoin’s price had recovered from the fallout of the first Mt. Gox hack, rising from $2.55 to $12.35. Post-Halving, Bitcoin’s price surged by an astonishing 2000%, reaching $260 in April 2013. This period was characterized by growing interest from tech-savvy individuals and online communities, laying the groundwork for Bitcoin’s future growth.

The 2016 Halving: Leaving behind Mt. Gox 

By the time of the second Halving on July 9, 2016, Bitcoin had faced several challenges, including the devastating Mt. Gox hack in 2014 and a tarnished reputation due to Dark Web-related criminal activity and prosecutions such as Ross Ulbricht of Silk Road. Despite these setbacks, Bitcoin’s price rose from $430 to $650 in the months leading up to the Halving. 

In the post-Halving period, Bitcoin entered a phase of runaway growth, reaching nearly $20,000 by December 2017 – a staggering 2984% increase from the Halving day price.

The 2020 Halving: Institutions arrive

The 2020 Halving occurred on 11 May, 2020, amidst the global turmoil caused by the COVID-19 pandemic. Governments worldwide pumped trillions of dollars into their economies, leading to increased interest in Bitcoin as a hedge against inflation.

In the months preceding the Halving, Bitcoin’s price recovered from a significant drop, rising from $5,000 to $8,600. Post-Halving, Bitcoin’s price rallied to an all-time high of approximately $64,000 in April 2021, driven by a surge in institutional adoption and growing interest in decentralized finance (DeFi Summer), and those silly crypto jpegs known as NFTs.

Bitcoin Halving: A Three-Act Play (Hype, Disillusion and Accumulation)

According to Galaxy Research, Bitcoin’s halving events have historically unfolded in three distinct phases, each characterized by unique market dynamics and investor sentiment. 

  • Hype: The first act, dubbed the ‘Hype Phase’, sets the stage with a surge in prices leading up to the halving. Excitement and anticipation build as market participants speculate on the potential impact of the reduced supply.
  • Disillusionment: As the curtain rises on the second act, known as the ‘Disillusionment Phase’, the market wakes up to a post-halving hangover. Prices dip or go sideways, leaving some investors questioning the immediate effects of the event. However, this act is merely an intermission, setting the stage for the grand finale.
  • Accumulation: The third and final act, the ‘Accumulation Phase’, is where the magic happens. Prices recover and embark on a sustained upward trajectory, rewarding patient investors who held through the previous two phases and market participants who recognize the long-term implications of the halving and the growing maturity of the ecosystem.

Opinions on prices after the 2024 Halving

Uber-bullish Bitcoin predictions are a satoshi a dozen right now. 

Michael Novogratz, CEO of Galaxy Digital, Morgan Creek CEO Mask Yusko, and analyst Tom Lee have all predicted that Bitcoin’s price will hit $150,000, while Skybridge founder Anthony Scaramucci thinks Bitcoin will hit at least $170,000 in the 18 months after the Halving. Additionally, billionaire investor Tim Draper has predicted that Bitcoin will reach $250,000 in 2024, and Cathie Wood’s ARK Invest has projected that Bitcoin could surpass $1 million in the long-term.

Other notable predictions include Plan B, a prominent Bitcoin analyst, who regularly shares price analyses and predictions on Twitter, ranging from $100,000 to $1 million. Fred Thiel, Chairman and CEO of Marathon Digital Holdings, also forecasts Bitcoin reaching $120,000 post-Halving.

Credit: Tesfu Assefa

What to Expect After the 2024 Bitcoin Halving

As Bitcoin’s daily emissions get slashed from 900 BTC to 450 BTC, the price of mining will go up exponentially over the coming years. Several factors are expected to contribute to Bitcoin’s potential price appreciation, including increased institutional adoption, growing interest from younger generations, and the reduced supply of new Bitcoins entering circulation. Additionally, the launch of Bitcoin ETFs and the continued development of Bitcoin’s core infrastructure, such as the Lightning Network and Taproot upgrade, are expected to further bolster Bitcoin’s growth.

All these will help other crypto networks such as Ethereum, Cardano and Solana and their AI cryptocurrencies, memecoins and DePIN, as Bitcoin’s rising tide has shown to raise all ships. 

The Impact of Bitcoin Spot ETFs

One of the most significant developments in the lead-up to the 2024 Halving has been the introduction of Bitcoin Spot ETFs. These investment vehicles hold actual Bitcoins rather than futures contracts, and provide institutional investors with a way to enter the crypto market. With major players like BlackRock and Fidelity now holding hundreds of thousands of Bitcoins in their ETFs, the institutional demand for Bitcoin is stronger than ever.

The Cost of Bitcoin Mining After the Halving

While the 2024 Halving is expected to have a positive impact on Bitcoin’s price, it will also present challenges for miners. As the block reward is reduced, the cost of mining new Bitcoins will effectively double. Some analysts, such as CryptoQuant CEO Ki Young Ju, predict that mining costs could rise from $40,000 to $80,000 per BTC for miners using the popular Antminer S19 XP.

This increase in mining costs will likely lead to a consolidation of the mining industry, with smaller, less efficient miners being forced out of the market. However, as the difficulty of mining adjusts to the reduced hash rate, the remaining miners will become more profitable, potentially leading to a more stable and secure network.

Conclusion

As the crypto world counts down the days to the 2024 Bitcoin Halving, it’s clear that this event has the potential to be a watershed moment for the world’s first cryptocurrency. With institutional adoption at an all-time high, a dramatically reduced supply of new Bitcoins, and a range of technical upgrades in the works, Bitcoin is poised for significant growth in the post-Halving period.

While it’s impossible to predict the exact price of Bitcoin in the coming years, the historical precedent set by previous Halvings suggests that we could be on the cusp of another bull run. As always, it’s essential for investors to conduct their own research, manage risk appropriately, and stay informed about the latest developments in the ever-evolving world of cryptocurrencies.

In the meantime, sit back and count down with the entire crypto space here:

https://www.nicehash.com/countdown/btc-halving-2024-05-10-12-00

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Why is Data Availability (DA) in Crypto and Blockchain Important? 

Posted on by Werner

Introduction

The digital world’s driven by data, whether in Web2 or Web3. It’s no different in the cryptocurrency and blockchain sector. Gigantic new decentralized networks are spinning up and getting new layers of chain – and data availability is crucial to their integrity, security, and functionality. 

With the technology evolving at a breakneck pace, understanding data availability and its implications is key to understanding the future of cryptocurrency applications. New innovations, like data sharding and sampling, are making it cheaper and more effective to ensure reliable DA and data storage than ever before. And the DA space is only going to get more competitive from here on, with ‘modular’ chains like Celestia, which are divided into specific layers dedicated to specific tasks.

In this blog post, we will explore the concept of data availability, its challenges, and the innovative solutions being developed to address them.

What is Data Availability (DA)?

Data availability can be defined as the state when all transaction-related data is accessible to nodes on the blockchain network. For a trustless network to function, it is essential that nodes can verify transactions and compute the blockchain’s state independently. When block producers propose new blocks, they must make all data within the block, including transaction data, available for others to see and verify. 

It can get quite complicated. Let’s look at the top two chains in the world and how they handle DA. 
First up is Bitcoin:

Credit: Global X ETFs

Now, let’s take a look at Ethereum, and how its shard chains distribute data:

Credit: Shardeum

The Importance of Data Availability

Data availability is crucial for several reasons:

1. It maintains the integrity of the ledger: once data is recorded by all nodes, it is challenging to alter, ensuring the ledger’s immutability.

2. Decentralization: with multiple nodes storing copies of the ledger, data availability ensures that all nodes have access to the same data, maintaining consensus and preventing central points of failure.

3. Transparency and auditability: data availability means all participants can verify data and transactions stored on the blockchain, fostering trust among users.

4. Resilience: by distributing data across multiple nodes, the blockchain becomes more resilient to attacks or failures.

Challenges of Data Availability

While data availability is essential for the proper functioning of blockchains, it also presents some challenges:

1. Reduced throughput: requiring nodes to download and verify data reduces the overall throughput of the blockchain.

2. Increased storage requirements: as the blockchain grows, the amount of data that needs to be stored by nodes increases, leading to higher hardware requirements.

3. Centralization risk: as hardware requirements increase, fewer individuals may be willing to run nodes, potentially pushing out small operations and leaving only large orgs running nodes.

Data Availability in Blockchain Scaling Solutions

To address the challenges of scaling while maintaining data availability, various solutions have been proposed:

Rollups and Data Availability

Rollups are a layer-2 scaling solution that executes transactions off-chain before compressing and posting them in batches to the base layer. There are two main types of rollups:

1. Optimistic rollups: These use economic incentives to guarantee data availability, relying on fraud-proofs to prevent invalid state transitions.

2. Zero-knowledge rollups (ZKR): ZKRs guarantee data availability using cryptographic proofs to check transactions are valid without revealing sensitive information.

Sharding and Data Availability

Sharding involves splitting the blockchain network into multiple sub-chains (shards) that operate in parallel. Ethereum’s future scalability plans include data sharding, where nodes only store data posted in their assigned shard. This reduces the storage requirements for individual nodes while maintaining data availability across the network.

Monolithic vs. Modular Blockchains for Data Availability

Monolithics vs Modular (Credit: Fuelet, C. (2024, January 4). Monolithic VS modular. Medium.)

As networks scale, the architecture of your network is becoming increasingly important, and the arrival of modular chains like Celestia is making even Vitalik Buterin nervous.

Monolithic blockchains handle all aspects of the blockchain in one layer – including execution, consensus, and data availability. While this approach ensures high data availability, it can limit scalability and decentralization due to the increased storage and computational requirements for nodes.

In contrast, modular blockchains separate the blockchain’s functions into distinct layers, allowing for specialization and optimization. In this architecture, a dedicated data availability layer focuses on storing and providing access to data, enabling other layers to scale more efficiently.

Innovations in Data Availability

Several innovations have been proposed to improve data availability and overcome its challenges:

Data Availability Sampling (DAS)

DAS involves randomly selecting nodes to store a subset of the data on the blockchain. This reduces the resources required to store data while maintaining its availability. DAS is often used in conjunction with erasure coding, where data is encoded with redundant data pieces, and stored across different nodes, to ensure recoverability even if some data is lost.

Data Availability Layers

In modular blockchain architectures, data availability layers are dedicated to the task of ensuring data availability. These layers can be on-chain or off-chain and focus solely on storing and providing access to data, leaving other layers free to specialize in tasks like execution or consensus.

Danksharding and Proto-Danksharding

Danksharding is a sharding architecture that utilizes binary large objects (BLOBs) for efficient data storage. It aims to increase decentralization, provide additional security, and mitigate the risks of MEV (Maximal Extractable Value). Proto-danksharding was added to Ethereum when the recent Dencun upgrade implemented EIP4884. Proto-danksharding is a step on Ethereum’s roadmap towards complete sharding, introducing a new transaction format called BLOB-carrying transactions.

Credit: Tesfu Assefa

Five Projects Utilizing Data Availability Solutions

Ethereum is actively implementing sharding as part of the Ethereum 2.0 roadmap. This sharding will split the Ethereum network into 64 shard chains for processing transactions and storing data, reducing storage requirements for nodes while prioritizing and ensuring data availability. However, it’s getting competition from others. Here are a few leading  projects that incorporate data availability solutions in their architectures.

  1. Celestia:
  • Modular blockchain architecture separating consensus, execution, and data availability layers
  • Focuses on providing a decentralized data availability layer for other blockchains to build on top of it
  • Enables scalable and interoperable blockchain solutions without compromising security or decentralization.
  1. Filecoin:
  • Decentralized storage network using blockchain for secure and efficient data storage
  • Utilizes ‘Proof-of-Spacetime’ consensus mechanism to incentivize storage providers
  • Ensures data availability with cryptographic proofs and a decentralized network of storage providers, allowing users to retrieve data on-demand
  1. NEAR Protocol:
    • Scalable blockchain platform using sharding to increase throughput and decrease latency
    • Ensures data availability through erasure coding and the Doomslug consensus mechanism
    • Enables parallel processing of transactions while maintaining data availability
    • Introduces ‘chunks’ for better load balancing and adaptability
  1. EigenDA:
    • Data availability service for high-throughput decentralized operation on Ethereum rollups
    • Uses EigenLayer restaking primitives for secure and scalable infrastructure
    • Employs erasure coding and KZG commitments to efficiently store and retrieve data
    • Aims to reduce costs through a shared security model and minimized storage requirements
  1. Avail:
    • Avail is a data availability layer to improve scaling and interoperability in Web3
    • Serves as base layer for trust-minimized applications and sovereign rollups
    • Utilizes validity proofs, erasure coding, and KZG Polynomial commitments
    • Ensures immediate and reliable data availability for efficient rollup operation

Conclusion

Data availability is a fundamental aspect of blockchain technology. Without it, we can’t trust in the integrity, security, and functionality of decentralized systems. As the demand for scalability and efficiency grows, innovative solutions such as rollups, sharding, data availability sampling, and dedicated data availability layers are being developed to address the unique challenges associated with data availability. It is likely that the best blockchains for DA will thrive in the coming years. 

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