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Don’t Trust, Verify

Look at any cryptocurrency today, and there’s a high probability that it’s at or near two-year lows.

Cardano ($ADA.X) – 689-day low, Bitcoin ($BTC.X) – 737-day low, and Polkadot ($DOT.X) – 693-day low.

It’s red all over the place as sentiment and capitulation begin to set in. To make matters worse, it’s the Thanksgiving holiday this week. Extended holidays are often very ugly for crypto – so keep your eyes open. 

The leader today, if you want to call it that, was Tron ($TRX.X), with Cardano the biggest loser out of the top ten. We’ll talk a little about Tron in today’s Litepaper. 

We’ll also look at the kind of pressure Bitcoin miners are facing – which is simple math: cost to produce > amount to sell = no profit. Additionally, we’ve updated the FTX Update Megathread.

And if you’re wondering what Proof-Of-Reserves means, check out our Crypto 101 article on that topic. 

Here’s how the market looked at the end of the trading day:

Tron (TRX)
$0.05
-0.82%
Litecoin (LTC) $60.38 -2.63%
Monero (XMR) $126.87 -3.98%
Bitcoin (BTC)
$15,565
-5.41%
Polkadot (DOT)
$5.12
-5.92%
XRP (XRP) $0.35 -6.48%
Polygon (MATIC) $0.78 -6.48%
Stellar (XLM) $0.08 -6.57%
Cardano (ADA) $0.29 -6.63%
Binance Coin (BNB)
$251.26
-6.64%
Altcoin Market Cap
$438 Billion
-2.91%
Total Market Cap $740 Billion -3.07%

Tron (TRON) Flips Solana (SOL) Featured Image

Solana ($SOL.X) is no longer a Top 10 market cap cryptocurrency – let that soak in for a minute. Instead, the once-touted Ethereum-killer Solana struggles to hold onto the $12 value area. At its peak, Solana was trading near $265. 

Solana’s position in the Top 10 was taken by Tron ($TRX.X). This is not surprising, considering how Solana and Tron have traded this year.

The image below is Tron’s weekly chart. Believe it or not, Tron is one of the best-performing cryptocurrencies out there for 2022. Most of the cryptocurrency market is down over 60%, but Tron has kept its losses (so far) to -34.6%. 

TRX/USD Weekly Chart

But if we look at Solana’s chart, we get a wholly different story. 

SOL/USD Weekly Chart

Solana has lost over -93% since January 2022 and over -95% since its all-time high in November 2021.

Why is Solana bleeding off like crazy? Long story short, tied to the now-bankrupt FTX. You can read last Friday’s article for more details. 🩴


BTC Miners Between A Rock And A Rock Featured Image

Bitcoin ($BTC.X) miners are in a tough spot.

Bitcoin requires a metric crap ton of energy to mine. So if power is cheap and demand for Bitcoin remains stable, miners can turn a profit. 

But the situation for miners today is ugly. Miners are dealing with a steep drop in demand and rising energy costs. As the difficulty of mining increases, so do the energy costs. 

On Sunday, Bitcoin moved to a new all-time for its difficulty rating. The result is an unattractive average cost to mine Bitcoin: $19,662. 

With Bitcoin barely holding onto the $16,000 value area, miners are expected to stop or pull back their activity and be forced to sell their Bitcoin instead of hodling. 

2022 has seen a good amount of consolidation in the Bitcoin mining space and some expansions in operations for others. 

For example, in September 2022, CleanSpark purchased roughly 10,000 new miners. In addition, in October 2022, crypto miner Crusoe Energy bought Great American Mining

The problems facing Bitcoin miners are almost all directly related to pessimism in the broader crypto market caused by failed entities like Celsius and FTX. ⚒️


Crypto 101: Proof-Of-Reserves Featured Image

Ever heard of the phrase: Trust, but verify? Proof-Of-Reserve’s saying is: Don’t Trust, Verify.

When writing this Crypto 101 content, it’s November 2022. Unfortunately, 2022 has been one of the worst – if not the worst – years for cryptocurrencies from any fundamental or technical measurement. 

FTX’s bankruptcy in late 2022 added to an already big list of entities in the cryptocurrency space that collapsed: hedge fun Three Arrows Capital (3AC), crypto lending platform Celsius ($CEL.X), and crypto exchange Voyager ($VGX.X)are just some of the entities that fell in 2022. 

To summarize, FTX, Celsius, and other entities lent out customers’ crypto assets to other firms. But, when those firms collapsed, many customers who believed their safe assets were gone – possibly forever. 

Trust in cryptocurrency exchanges, wallets, and other custody forms dropped to levels beyond the loss of trust during Mt. Gox. 

Proof of Reserves + Proof of Liability = Verified Solvency

Proof-Of-Reserves is a claim (attestation) from an exchange that says they have your crypto; it’s still there and hasn’t been used or sent elsewhere. 

Ok, but how do you prove that? Taking an exchange’s word that your funds are ‘safu’ hasn’t worked – so how can someone know an exchange is being honest?

The first method is the old-fashioned way: use an accounting firm to perform an audit. For example, the Crypto lending platform Nexo ($NEXO.X) uses the accounting firm Aramino

But then we ask, “but how do we trust the accounting firm?” Good question – Aramino is in the Top 25 accounting firms in the U.S. and has been around since the 1950s; the rest of the determination of their honesty is up to you. 

Another method of showing Proof-Of-Reserves is using a trusted on-chain analytics service like Nansen

Merkle trees are also used, but there’s no great way to properly summarize a Merkle tree in this article – look for that in a future Crypto 101 article. But in a nutshell, a Merkle tree on a blockchain ensures that blocks (data) sent and received are unaltered and original. It also acts as a way to prevent any fake data and manipulated data.

Who Has Completed Proof-Of-Reserves?

The entities listed below include but are not limited to the listed entities. 

So far, Kraken, BitMex, Nexo, Gate.io, and HBTC have completed a full Proof-Of-Reserve release.

Binance, Bitfinex, Crypto.com, KuCoin, OKEx, and Huobi have committed to providing a full Proof-Of-Reserve release very soon. 👨‍⚖️


The FTX News Update Megathread (Updated – December 2, 2022) Featured Image

All The Big News – December 2, 2022

Accusation That FTX Misused Customer Funds Presents a ‘Prison’ Problem, Says Crypto Legal Expert Jeremy Hogan From The Daily Hodl

U.S. Trustee asks bankruptcy court to appoint FTX trustee From The Block

FTX Japan drafts plan to return client funds From Cointelegraph

Sam Bankman-Fried’s still sorry, but now he says his memory isn’t great From The Block

Continue Reading


Bullets From The Day:

🐶 Trying to understand what goes through the heads of memecoin hodlers will just give you a headache. Crypto is already the riskiest of the risk asset classes, and memecoins are some of the riskiest in crypto. Has the bear market deterred the memecoin traders and investors? Nope. Case in point: Shiba Inu ($SHIB.X) added whopping 50,000 new wallet addresses between October 20, 2022, and November 20, 2022 – or roughly 1,644 new wallets a day. Full story from Finbold

🕵️‍♀️ Cardano ($ADA.X) is stepping into the privacy coin space. Cardano’s founder, Charles ‘The Hosk’ Hoskinson, confirms that Input Out Global (IOG)is set to launch a new altcoin with privacy as its focus. The Hosk explained why Cardano is developing a new privacy coin: “One of the reasons why a lot of people sign up for cryptocurrencies is they mistakenly believe that cryptocurrencies have this capability. They mistakenly believe that cryptocurrencies will give them privacy, freedom of expression, association, and commerce.” Midnight will be a sidechain of Cardano, which allows stake pools to get Midnight’s token, called Dust, as a reward. Get the full scoop from The Daily Hodl

🤖 Just like Tron ($TRX.X) flipped Solana ($SOL.X), Binance just flipped Coinbase ($COIN) as the largest reserve holder of Bitcoin ($BTC.X) for the first time – ever. Exchange reserve is a title given to the amount of a cryptocurrency held by an exchange’s wallets (hot and cold). What is the cause of the flip? It’s hard to identify a single cause. Still, Binance continues to gain significant market share from Coinbase and has aggressively targeted Coinbase’s expensive fees by offering free and discounted trading. Read more from Bitcoinist


Credits & Feedback

Today’s Litepaper was written by Jon Morgan. Let him know how he did: