This Week in Blockchain on 24th May 2021

Hi, I'm Conor Svensson, founder and CEO of Web3 Labs and this is your Week in Blockchain on Monday the 24th of May 2021. The leaders this week include the huge crypto sell-off that's happened in the last week, Coinbase launching a new in-browser wallet, EY's big commitment to blockchain research, scaling activity picking up on Ethereum layer 2, Polkadot and Cardano on the cusp of launching significant new milestones, genuine Andy Warhol NFTs to be issued and what Rick and Morty have to do with NFTs. Leaders this week, we've got to start by talking about the big market sell-off that's happened. The cryptocurrency market has shrunk by almost 40% and there was a number of different items that came together to cause this to happen. First of all Elon Musk raised concerns about Bitcoin's environmental impact, China renewed its regulatory crackdown on digital assets which sent loads of crypto tokens tail spinning down, Tether we mentioned last week, also released a pie chart breakdown of their reserves since 2014 and what it showed wasn't very reassuring for its critics. It showed that the majority of its reserves were in commercial paper and various loans, not the sort of assets that a company providing a stable coin for the dollar should have in place. This combination plus some other potential items caused the crypto markets really to fall into a tail spin. At the time we're doing this recording, the price of Bitcoin has dropped in the past day to just over thirty three thousand five hundred and thirty eight dollars and Ether one thousand nine hundred and twenty two. They're now up trading a little bit from that but again these are very different numbers to the highs we saw of over almost sixty five thousand for Bitcoin and over four thousand three hundred for Ether. During the frenzied activities as well we saw leading crypto exchanges have outages including Binance and Coinbase where they had to restrict trading and selling. Interestingly in the decentralized exchanges the marketplaces were still available but the the transaction fees went very high due to all of the activity. It's fascinating to contrast the difference between the two, with centralized they end up having to go down, decentralized the fees go up massively which can make it inaccessible to a lot of people but it's still possible to trade on them. During the time just before all of this activity happened we saw Ethereum hit a new milestone where the inflows actually outpaced those of Bitcoin. The digital asset manager Coin Shares said that inflows into its Ethereum products vastly outpaced inflows into Bitcoin for the first time ever but this was just before the crypto prices plummeted and no doubt would have seen a lot of outflows since then. During this last week as well Microstrategy, after one of the dips, decided to increase their Bitcoin holdings and bought another 10 million dollars worth of Bitcoin. Again to also fend off some of the criticism that's been happening especially after what Elon Musk said from the Tesla perspective, Galaxy Digital put out research talking about how the Bitcoin market consumes less energy than gold and the banking industries. In the Ethereum world, the Ethereum Foundation also put out a piece about how their transition to proof of stake will actually drop their power consumption to roughly 99.95% of where it is right now. They painted some interesting pictures in the article as well, so if you say that your power consumption to transact with Ethereum it's roughly 20 minutes of tv whereas right now Ethereum uses the equivalent of powering the entire house for 2.8 days per transaction and Bitcoin 38 house days worth of electricity. So, there's some good metrics there to show quite how much the transition to proof of stake will save in terms of energy efficiency in the Ethereum network. Coinbase also announced the new browser extension for the Coinbase wallet. This was a very significant piece of news because for a lot of DeFi and what's been happening with making blockchain more accessible, the default has been for a lot of people to work with Metamask, which is the browser wallet extension created by ConsenSys. We mentioned previously how the revenue had shot through the roof when they added the ability to swap tokens via decentralized exchanges using the wallet exactly where Coinbase are going with this it's no doubt to try and eat into the Metamask wallet's market share. But it shows that they're very serious on making an impact there. It's not obviously ideal news for Metamask but at the same time for DeFi more generally it is a good thing because it's going to provide more options for individuals to engage with the technology because right now the usability is a significant challenge. Ernst and Young have committed a hundred million dollars to funding blockchain research. They announced this in the last week. They haven't said exactly over what time frame they plan to do it but again it shows that they're very committed to the technology. They've launched private and public blockchain solutions, they're involved with the Baseline Protocol along with ConsenSys and Microsoft which helps enterprises adopt public blockchain technology, they also have EY blockchain analyzer suite of tools which includes a smart contract testing tool, block explorer and tax calculator. Wells Fargo the US bank have said announced that they're going to often offer cryptocurrency exposure to investors. They're in the final stages right now selecting a manager to for a solution that they can offer to qualified investors. Within the documents discussing this they also cited a couple of reasons for the 2020 boom. One being the pandemic and the other being increased regulatory clarity. I think it's interesting to see just what the views are from an established institution in that regard but of course I think many people agree that the pandemic certainly did accelerate the adoption significantly during the past year. Greenpeace US branch have announced they're going to stop accepting Bitcoin donations due to the environmental concerns. This whole thing about how much energy it requires to run the network they just don't feel it's tenable anymore to accept the cryptocurrency. Sony have filed for a new patent that will support Bitcoin wagering on Playstation and other consoles. Nvidia, the graphics card manufacturer, are reducing the ability of newly manufactured graphics cards to mine cryptocurrencies to ensure that they have more inventory available for gamers. Whether or not this is because of their the concerns around the climate impact associated with cryptocurrencies wasn't spoken about but at the same time it shows that they're trying to stay closer to their roots with supporting gamers first and foremost. The beer Birra Peroni in Italy they've announced that they're creating NFTs for beer traceability now using EY's ops chain. The idea here is it provides supply chain traceability in the creation of these beers so that they have NFTs associated with each batch that's brewed. Not only are they wanting to provide that value-add through the NFTs but they also believe a lot in the traceability capabilities of the technology which is the primary motivator for this. Holoride, the Audi spin-off that's created in-vehicle cross-reality passenger entertainment experience are deploying blockchain technology and NFTs in preparation for a 2022 market launch using the Elrond blockchain. In protocol news, there's been a lot happening in the world of scaling with the Optimism network, previously known as Plasma, has announced the collaboration with the blockchain analytics platform Etherscan. So, if you go to Etherscan you can see details of Optimism transactions that are happening. The reason why this is significant is because Etherscan is really the golden source for a lot of people for seeing details of transactions. When you trade the different cryptocurrencies on exchanges you'll typically get taken to a block explorer for this. Etherscan is by far the most widely used one for the Ethereum network and so supporting Optimism there is going to make it a lot easier for people to validate the activity that's happening on that layer 2 scaling technology. Whether or not other protocols are going to be supported remains to be seen but it's certainly advantageous for the Optimism network. The Cardano code maintainer IOHK have announced their new product to bring ERC tokens onto their proof of stake blockchain. We mentioned about this some time ago but now they're very close to launching their ERC20 converter which will allow organizations to easily migrate their ERC20 tokens onto the Cardano network. The intent here is of course so that people can not be privy to the transaction fees and also the proof of work consensus mechanism that's used on the Ethereum network which supports the majority of tokens. What Cardano are doing here is really finding a way to provide a layer of interoperability with Ethereum so that people can easily bring their tokens across to their ecosystem. We're certainly seeing this a lot in many different companies because they recognize the traction that the Ethereum network has so they're finding ways to plug into it whether it's the transfer of tokens or perhaps the support for the Ethereum Virtual Machine, these are the sorts of ways in which we're seeing the industry going. A company called Revuto has raised $1.7 million in a private round as Cardano's first dApp. They're a subscription management service for tech savvy individuals. Cardano's main public blockchain, although it's been around for a while, the capabilities to develop smart contracts haven't been launched yet so we know that we'll start to see a lot more decentralized apps bubbling up to the surface over the coming weeks and months. Also Polkadot's long-awaited parachains are launching on their Kusama network. The Kusama network is more of a research and development network that's supported by Polkadot where some of the innovations are released to before they make it to the main Polkadot network. This support for these parachains is a significant milestone for Polkadot and is something that is one of the final steps of achieving their original vision that they set out with launching the network. Also the banking app Current has picked Polkadot for its DeFi debut. They're gearing up for a crypto crossover on Polkadot. What they're planning to do is integrate Acala which is a Polkadot based decentralized finance platform into its core banking platform. The key thing here is that Current's got three million users so again there's the potential here to expose a wide number of people to DeFi with this this partnership. Back to the scaling news, Polygon, their active user base has grown by 75 000. They've attracted this number of people in the past week alone showing the growing demand for layer two decentralized applications which are no doubt significantly cheaper to run right now given what's happened with the wider crypto markets. Also, DiversiFi, an Ethereum based layer 2 decentralized finance platform, they've secured $5 million in strategic investments from some of the crypto world's biggest VC firms. They intend to make DeFi trading more accessible allowing users to invest trade and send tokens without having to pay gas fees and they're using Starkware kSTARK layer 2 technology. MakerDAO, one of the leading stablecoin platforms on Ethereum, their annual revenue has gone above 200 million dollars. They've hit this milestone in the last week. PancakeBunny, the popular Binance Smart Chain based decentralized finance platform, has suffered a major exploit which allowed a hacker to make off with more than 200 million dollars worth of crypto assets. Apparently this was caused by a flash loan attack from an external actor. Also we saw millions of dollars of Bitcoin being incorrectly credited to BlockFi's customers. So the the crypto lending platform BlockFi they accidentally deposited large amounts of Bitcoin to user accounts. They had an ongoing promotional campaign that started in March where eligible participants received bonus payments delivered in a dollar-backed stablecoin called GUSD created by Gemini. However, some of the users instead of being paid the amount in GUSD were paid the amount in Bitcoin where apparently one person was credited with over 700 Bitcoin which would have been more than $25 million at that time. Apparently there's fewer than 100 clients but the the irony here of course is that because the transactions are immutable they don't have any way to reverse them but they have said that they're contacting these users and working with them to recover the funds. Again it just shows the perils of what can go wrong with this technology if you're not careful. Uniswap V3 , which we spoke about the launch that happened earlier this month, they've now overtaken Sushiswap which is the number two DeFi exchange on Ethereum by volume. They're actually on track to surpass the number one exchange which is Uniswap V2 so it's all working out well for them there. In the world of NFTs, Sotheby's is hosting a dedicated group auction for NFTs next month. They're going to be having NFTs from PAK and the Crypto Punks collection being auctioned off and this is the first time they've done a dedicated group sale for crypto art. Instagram have also announced that they're hosting an event for NFT creators as part of this inaugural creator week. The idea here is that they're going to have a series of events to solicit feedback from creators on how Instagram and Facebook can better support their content. That's going to be happening in early June. The luxury fashion brand Angelo Galasso is releasing its first collection of NFTs which are designed to be sold alongside and reinforce the exclusivity of its handmade items bridging their physical and digital worlds together. Their Genesis collection is going to be released on the centralized marketplace called the OpenSea where they're going to have a total of 24 NFT items. Each will represent a unique piece of digital art which will be sold alongside a physical item that's been designed by Angelo Galasso for the collection. Christie's they're going to be auctioning Andy Warhol work as NFTs. They've got five digital artworks that were created by Andy Warhol in the mid-1980s and so it's amazing to see that they found a way to do this. Basically these pieces of art were recovered in 2014 and they were created on Andy Warhol's Commodore Omega personal computer and so the ability to take these old pieces of artwork that he created and permanently put them on a blockchain as NFTs is fascinating to hear about. Also, we've heard Red Bull's F1 team they're going to be launching a new NFT offering using the Tezos blockchain. We've not heard a lot of news from Tezos on their NFT offerings but this is certainly no doubt a big deal for them. Then also the first blockchain based pet app with NFT capabilities is going to be launching on Apple's App store and Google Play called Pawtocol. It's basically a pet community where people can register their pets and have NFTs associated with them and then people can invest really with the NFTs to help the pets as well so for those pets that are being re-homed and things like this there's a way of supporting them. It's an interesting innovation to see. Then Unic.ly floats its first fractionalized NFT tokens. They're creating a marketplace for fractionalized collections making it easy for people to take NFTs and then fractionalize the ownership of them. Then also, Dan Harmon, the guy behind the tv shows Rick and Morty and Community is going to be launching a show called Crackopolis that promises to be the first ever animated series created entirely on the blockchain according to a Fox press release. Details are very vague right now but it'll be fun to see what happens there. Looking at our metrics, the markets as we discussed have absolutely tanked this week, so the crypto market cap is down to $1.42 trillion, that's down by almost 38%. The assets locked in DeFi are down almost 37% to $51.2 billion, the seven-day NFT sales price is down almost 70% to $ 777 dollars across 18 000 sales, so the actual number of sales are up but again it's not good for the sale price. That's all we have for this week, if you like what you hear please subscribe to our podcast and our YouTube channel and also like and comment on the episodes. Links to all items discussed are available in our show notes and on our website weekinblockchain.com. We're also hosting a weekly Clubhouse room every Monday at midday eastern 5 pm UK time if you'd like to discuss any of the items we've covered here. Thanks and i'll see you next week.