This Week in Blockchain

This Week in Blockchain on 22nd February 2021

February 22, 2021 Conor Svensson Season 1 Episode 2
This Week in Blockchain
This Week in Blockchain on 22nd February 2021
Chapters
This Week in Blockchain
This Week in Blockchain on 22nd February 2021
Feb 22, 2021 Season 1 Episode 2
Conor Svensson
Show Notes Transcript

Hi it's Conor Svensson here, founder and CEO of Web3 Labs and this is your Week in Blockchain on Monday the 22nd of February 2021. It's hard to ignore the gains that the crypto markets have seen during the past week with Bitcoin and Ethereum reaching all-time highs. Bitcoin broke the fifty thousand dollar USD barrier and the market cap has now exceeded one trillion dollars Ether exceeded two thousand dollars but also the other surprise was Binance's Coin becoming the third largest cryptocurrency after Bitcoin and Ethereum, which we'll be discussing a bit more later. This shows continued interest in the actual asset class from an institutional perspective. What's very interesting here too is how different companies are finding new ways to offer exposure to the asset class. One way is as Tesla did by adding reserves onto their balance sheet so there's a bit of exposure to the cryptocurrency there but we're also seeing it with other companies. MicroStrategy being one who are doing a lot of innovation here. They've become so focused on speculating on cryptocurrency to boost their profits that the nine billion dollar company has actually added to their corporate strategy the statement they are also acquiring and holding bitcoin. They have just completed their second bond issuance in order to buy more bitcoin. The fascinating thing here is that what it does is it opens up the market more to companies that actually are comfortable investing in bonds but not cryptocurrencies by investing in MicroStrategy's bond offering. They're getting exposure to cryptocurrency and how MicroStrategy have actually structured it in a way that the bond pays a zero percent coupon i.e they just pay back the principal, they don't pay additional interest to the lender on this but they have an option in there called convertible debt which allows them to buy more shares in MicroStrategy at a set price if the price goes above a certain point. So, it basically enables them to cash in if the price of Bitcoin goes up more which is fascinating. It'll be interesting to see how this pans out. One of the other big pieces of news this week was Coinbase with the valuation for their upcoming IPO estimated at $303 per share. This would make them a company worth $77 billion USD which would make them larger than the intercontinental exchange which is the owner of the New York stock exchange, which is a fascinating statement in itself. Coinbase have also opened up a waiting list for Eth2 staking. Eth2 staking enables you to take your current Ether cryptocurrency and stake it for the new Eth2 network which is Ethereum's new network which uses what is called proof-of-stake consensus instead of proof-of-work consensus. Right now one of the things that the Bitcoin and Ethereum networks come under a lot of fire for is the fact that they use a lot of power in order to run with this proof-of-stake mechanism. What happens is that people commit amounts of the cryptocurrency in order to create and mine new blocks on the network so there's no longer a dependence on this high amounts of electricity for the network to operate. The Eth2 network actually launched on the first of December last year. However, when people stake and put this Eth into the network in order to see a return they're not actually going to be able to transfer that out until the Eth2 network and some additional components become live, which isn't likely to happen for another year or two. But, what this does mean with Coinbase opening up the staking is that people can see a return of up to 7.5% APR on their Eth. Coinbase isn't the first exchange to do this, Kraken have been doing this for a while and they offer a more competitive rate which is that they take a 15% fee of whatever the rate is that stakers on the network get which right now is is 8.9%. It's certainly likely to see more money going in to actually invest in this Eth2 with Coinbase offering, given that they are the dominant exchange here. One other thing on the Eth2 network is that the creator of Ethereum, Vitalik Buterin, also published a new plan on Monday for the first hard fork of the Ethereum 2.0 network and so this is just going to be progress on that journey to making this new network a reality. On the enterprise side, we've also seen BNY Mellon launch their enterprise digital asset secure infrastructure for safekeeping and issuing digital assets. The whole thing here is about building bridges between traditional and digital spaces so that you have this standardized platform so enterprises which are well established in the financial industry can then offer the digital asset services as well which they're seeing increasing demand from their customers on. BNY Mellon is a key service provider in this respect and so it makes a lot of sense for them to actually offer this digital asset service to their customers. KPMG as well have created a product called Chain Fusion which provides a suite of analytic capabilities built on crypto assets and data and technology projects, bringing them all together but it's really focused on companies and fintechs that want to actually offer crypto asset services on an institutional scale. When you're offering these services on an institutional scale there's a lot of constraints around ensuring you have things like anti-money laundering and know your customer type checks in place and so by bringing together these things and from a very well trusted company in the space, KPMG, it provides quite a compelling offering for those companies that want to get into crypto because being able to audit that everything's being done properly is a key consideration. It's been a fascinating week as well within DeFi, with the decentralized exchange Uniswap, which was formerly the largest decentralized exchange, has now actually processed over $100 billion in volume. This is still far from Binance's daily trading activity over $20 billion but the thing of this $1 billion mark makes it the 20th largest digital asset exchange which in itself is a significant milestone. However, the other thing that's happened is that Binance created their own blockchain called Binance Smart Chain in September of last year which is based on Ethereum. As a result of what's happened on that network during this this past week the price of the Binance token has exploded, bringing it into the third largest crypto asset by market cap after Bitcoin and Ethereum. It probably won't stay at that point for a long time but the driver for this is the creation of a decentralized exchange on Binance's own smart chain blockchain platform which is called Pancake Swap. Now Pancake Swap is a fork of Uniswap and the volumes have just exploded this week so it actually overtook Uniswap in the last week with over $2 billion traded on it over the course of Friday and Saturday, with that volume now hovering around $1.7 billion and uni-swap around $1.3 so not only in the last week have we seen Uniswap hit this new milestone of one billion dollars being traded in a 24-hour period but we've also seen Pancake Swap come along on the Binance Smart Chain and actually overtake that and double that volume so it's been crazy what's happened there. Another space there's loads happening in is the non-fungible tokens. We saw last week about the NBA Top Shots that have been going crazy in terms of people paying a thousand dollars for these digital collectibles. There's been a report launched saying that transactions in NFTs actually tripled in 2020 reaching more than $250 million. However, in the last 30 days alone we've seen over $100 million in non-fungible token sales and with of course NBA Top Shots being at the top of the list. The other thing though as well and this is really fascinating and again another illustration of these NFT collectibles moving into the more mainstream worlds is that the auction house Christie's is going to be auctioning an NFT token by the artist Beeple later on this month. It really is an indicator of the old world embracing the new especially when you've got an institution as well established as Christie's getting in on the act doing what they do best there. In terms of the numbers of the actual markets, the crypto market capitalization is up over 15%, it just crossed $1.5 half trillion last week and now it's about $1.75 trillion and the crypto assets locked in DeFi is just shy of $43 billion which shows roughly a 5% increase. That's all we have for this week but if you like what you hear please subscribe to the podcast and the YouTube channel. Links to all items discussed are available on the show notes on our website weekinblockchain.com. We're also going to be hosting now a weekly clubhouse room every Monday at 12 p.m eastern 5 pm GMT, if you'd like to discuss any of the items we've covered here. See you next week!