Happy Hump Day! After tumbling for days, the crypto market has finally pulled itself back on its feet – just as the Federal Reserve promised Congress it was taking steps to combat rising inflation. Maybe crypto is being treated as a risk asset again?
However, there’s still plenty of room for cryptocurrencies to rebound as their prices are still below the past week.
With a wish for a speedy recovery, we bring you today’s reads:
- Dorsey announces the Bitcoin Legal Defense Fund
- Clothing retailer Gap launches NFT collection on Tezos
- Crypto 101: What is Ethereum 2.0?
- Fed to release a report on crypto and CBDCs soon
- Coinbase acquires a CFTC-regulated derivatives exchange
Check how the major cryptocurrencies are looking:
|Binance Coin (BNB)||
To Combat ‘Satoshi Nakamoto’, Dorsey Plans the Bitcoin Legal Defense Fund
Jack Dorsey, the former CEO of Twitter, plans to create a “Bitcoin Legal Defense Fund” to provide legal support for Bitcoin developers. A major task for the fund is to assist developers who are being sued by Tulip Trading Limited, which is associated with Craig S. Wright, who claims to be the pseudonymous inventor of the leading cryptocurrency Satoshi Nakamoto.
Dorsey will create the fund to provide a legal defense for Bitcoin developers who are “currently the subject of multi-front litigation,” per announcement. The fund will be managed with Chaincode Labs co-founder Alex Morcos and Martin White, who appears to be a University of Sussex professor.
According to the announcement, the Bitcoin Legal Defense Fund is a “nonprofit entity that aims to minimize legal headaches that discourage software developers from actively developing Bitcoin and related projects.”
The fund’s first project will be to take over the existing defense of Ramona Ang’s “Tulip Trading Lawsuit” (the firm associated with Craig S. Wright) against developers for alleged misconduct over access to a Bitcoin (BTC) fortune.
It’s worth noting that Craig S. Wright, who alleges he is the creator of Bitcoin, has filed lawsuits against several prominent figures in the Bitcoin community. Wright filed a lawsuit against Blockstream CEO Adam Back, alleging that Back libeled him by calling him a “fraud.” The lawsuit was withdrawn in 2020.
Dorsey stepped down as CEO of Twitter at the end of November 2021. He is currently the head of Block (formerly Square), a financial payments company that has recently experimented with crypto-related services, including making a decentralized exchange for trading Bitcoin and launching a Bitcoin wallet. The current announcement moves him another step closer to achieving his ambitious cryptocurrency goals.
To Meet The Gap, Fashion Brand Rushes Into The NFTs
Fashion mammoth Gap is now diving into the hot market of NFTs. It is releasing its first collection of NFTs in collaboration with Brandon Sines, the artist behind Frank Ape. It will be built on the Tezos blockchain, which claims to be an “energy-efficient” and secure network for dapps (decentralized apps) and NFTs.
The clothing retailer said it is rolling out a gamified digital experience that allows customers to buy a physical Gap hoodie. Through this, the customers can also get the opportunity to buy digital art by Sines.
“Gap has always been at the intersection of music, art and culture, so we are excited about this growth opportunity in the digital space with artists like Brandon Sines,” said Chris Goble, chief product officer, and general manager of Gap North America.
The collection will feature editions of varying rareness – common, rare, epic, and one-of-a-kind. Customers can click on gap.com/nft for shopping, and the Common edition will start selling at 9 a.m. PT on January 13 for 2 Tezos ($XTZ.X) each until 8:59 a.m. PT on January 15. At the time of writing, 1 $XTZ.X is worth roughly $4.35.
Among the company’s goals with this new project is to gain insights into how people want to interact with a digital world. However, it’s somewhat late to the party. Last month, athletic apparel brand Adidas sold more than $23 million in NFTs from its debut “Into the Metaverse.” In the same vein, Nike bought a virtual apparel company that makes NFTs and sneakers for the metaverse.
Fashion companies rushing into NFTs and metaverses is not unexpected, as NFTs provide a platform for artists, creators, and fashionistas to sell their talent in digital form and earn money, which they can’t get otherwise.
What is Ethereum 2.0?
If New York City were a blockchain, it would be Ethereum: it’s an exciting, bustling place filled with thousands of NFT, DeFi, and web3 projects. However, just like real-life NYC, Ethereum is not cheap: there are “taxes to be paid,” so to speak. And if you have ambitions to get anything done on Ethereum, you might have to pay up (or wait.)
The reality is that the world’s second-most valuable blockchain is congested. And unlike NYC, Ethereum has no subway (in other words, no affordable and quick way to get around.) That’s one reason why Ethereum needs a big update.
For the last few years, Ethereum developers have been working on a massive overhaul to the network. It’s called Ethereum 2.0, or Eth2 for short, and it’s an update that its developers hope will solve its biggest headaches.
Over the last year, Ethereum developers have rolled out a number of updates in anticipation for Eth2. Among them are the launch of the new Eth2 Beacon Chain (Phase One) and the launch of EIP-1559 (sometimes referred to as Phase 1.5). However, 2022 might be the year that the masses finally get Eth2, which aims to reduce transaction fees, increase transaction speeds, and make the network less energy-intensive.
To do that, Ethereum will part ways with “proof-of-work” (PoW), a system that uses computing power to verify transactions. Even though it is the backbone of legacy blockchains such as Bitcoin, Litecoin, and Dogecoin, PoW is really slow. That’s why Ethereum devs are replacing it with “proof-of-stake” (PoS)
Comparatively, PoS is significantly faster. This system uses far less computing power and helps move transactions much quicker. You can read more here about the difference between PoW and PoS.
However, what you basically should take away from this is that proof-of-stake will replace proof-of-stake sometime this year, which will check the box on Phase 2 (which developers refer to as “The Merge.”)
This update will increase the chain’s efficiency and lead to further improvements, such as Shard Chains (Phase 3+), which will help to scale Ethereum over the years ahead.
The upgrade is important because…
Ethereum can only process about 30 transactions per second (TPS). That’s simply not enough, especially considering how popular Ethereum has gotten. In order for it to remain a leading blockchain, it needs to be fundamentally changed. Once Eth2 is fully launched, Ethereum will be able to process 100,000 transactions per second.
However, there’s a lot at stake (pardon the pun). Hundreds of billions of dollars ride on Ethereum as a network and as a cryptocurrency. This is one reason why developing Eth2 has taken so long: because one small mistake can cost developers, investors, and hobbyists a fortune.
Ethereum developers do not want a rehash of the DAO hack, an infamous event that almost destroyed Ethereum in its early days. So instead of rushing, Ethereum would rather tread lightly – and hope that their changes will be sufficient to put competitors (e.g., Solana, Cardano, Avalanche) to bed.
Crypto and Fed
Fed Will Release Crypto Report Within Weeks
The Federal Reserve’s much-anticipated report on cryptocurrencies and central bank digital currencies (CBDCs) will be released soon, according to Fed Chairman Jerome Powell, who conveyed as much to a U.S. Senate committee yesterday in response to a question about the report’s status from Senator Mike Crapo (R-ID.).
“We didn’t get it to quite where we needed to get it,” Powell said about the report’s delays. “But it’s effectively there now, it’s within weeks [that] we will be publishing it.”
The report, which was supposed to come last September, will focus on CBDCs, or central bank digital currencies. Powell first shared the possibilities of the report last year, when China was exploring its own digital currency.
Moreover, other sectors such as stablecoins might be considered in the report as well. As part of the hearing, Senator Pat Toomey (R-PA.) questioned Powell whether or not a CBDC could coexist with “well-regulated, privately issued stablecoins.” Powell replied, “No, not at all.” His comment seems to have changed from last year when he said central banks did not need cryptos if they issued their own CBDCs.
Due to the tone and temperament of the Fed Chair, crypto enthusiasts have a positive feeling and calling it a bullish mood would be an understatement. It will be interesting to see where this takes us once the highly-awaited report is released in the coming weeks.
Coinbase Acquires CFTC-Regulated Derivatives Exchange
Nasdaq-listed cryptocurrency exchange Coinbase ($COIN) continued its buying spree by acquiring FairX, a CFTC-regulated derivatives exchange. The U.S.’s largest crypto exchange hopes to bring regulated crypto derivatives to market, with hopes to offer them to its customers in the U.S.
“These products are in high demand from investors who seek to effectively manage risk, execute complex trading strategies, and gain exposure to crypto outside of existing spot markets. The development of a transparent derivatives market is a critical inflection point for any asset class and we believe it will unlock further participation in the cryptoeconomy for retail and institutional investors alike,” per announcement.
The FairX team is known for its deep expertise in product development and market structure. Since cryptocurrencies are in high demand, liquid derivative markets are imperative. With the acquisition, which is expected to close in Coinbase’s Q1, Coinbase wants to be the pioneer to offer crypto derivatives to its U.S. customers.
It seems Coinbase intends to be a crypto conglomerate by acquiring companies. Last year, it acquired crypto exchange data aggregator Zabo, an A.I. customer service startup Agara, and a crypto wallet firm BRD.