And how coronavirus is still impacting crypto.
I hope you’re all safe and healthy. This week, the effects of the coronavirus continued to ripple out to the crypto world, both impacting Bitcoin mining and getting crypto people talking about digital dollars. I also have two great episodes for you that look closely at why the events of Black Thursday were so bananas, why the crypto markets were so badly hit and how some of the unique aspects of the crypto markets affected price movements that day. Both of these episodes illustrate why crypto still has a long way to go, and how the craziness of this pandemic and its effects on crypto are not yet over.
This Week’s Crypto News…
CoinDesk reports Bitcoin’s mining difficulty declined by 16% on March 26, after the massive sell-off in Bitcoin on March 12. It is now at 13.91 trillion, a level not seen since December 20. This decline in difficulty comes at an especially bad time: three days before Black Thursday, Bitcoin mining difficulty reached an all-time high. Now with miners falling off and since the mining difficulty takes 2,016 blocks to adjust, it is projected mining difficulty will take 17 days to adjust rather than the typical two weeks. However, with the BTC price rising past $6,600 and current decreased difficulty, older mining equipment like Bitmain’s AntMiner S9 is now profitable again. Also, this news bit is only tangentially related, but interestingly, a nominee to CME’s board of directors has suggested that the derivatives trading behemoth start mining Bitcoin.
After all the discussion of Libra and central bank digital currencies last year, digital dollars did briefly appear in drafts of the coronavirus relief bill before the House this week, but did not survive the final cut. The bill initially envisioned a digital payment system in which the Fed and its member banks could directly send funds to those who need financial support. Catherine Coley, CEO of Binance US, argued in a CoinDesk op-ed last weekend that a blockchain-based stablecoin would be a good vehicle for providing direct stimulus because of the fact that digital dollars cannot accidentally expose people to the coronavirus, plus they can also be distributed to people without stable residences. However, in a CoinDesk article, Daniel Gorfine, the former chief innovation officer at the CFTC who has proposed a digital dollar with former CFTC chairman Christopher Giancarlo, argued that implementing a central bank digital currency should be done in a hurried fashion. He said, “I think it’s really important that this doesn’t cause any delays in getting emergency funding to needy businesses and individuals through existing channels.”
Speaking of that venture, the Digital Dollar Foundation founded by Giancarlo, aka Crypto Dad, named a couple dozen former government officials and industry experts to its board, including Sheila Warren, head of the World Economic Forum’s blockchain efforts and Don Wilson, founder and CEO of trading firm DRW.
A New York federal court issued a preliminary injunction against the distribution of Telegram’s GRAM token, saying it would violate US securities laws. Though a preliminary injunction is not final, it is likely that there will be a permanent injunction, and that even if Telegram appeals, it would likely be unsuccessful. The Block reports that at least 10 Telegram investors are inclined to take 72% of the invested funds back. In October, Telegram offered them an option to get 77% of their money back, but they instead agreed to postpone the launch of the TON network to April 30, 2020. The drop from 77% to 72% is due to some funds being spent on development since then. Yakov Barinsky, head of Russian crypto investment firm Hash CIB, said of the 72% deal, “Considering what is happening in the financial markets, this offer now looks like much better than in October.”
Interestingly, on a separate track, the TON Community Foundation, a group of developers and investors supporting TON are looking at ways to launch the Telegram Open Network, TON, without the company’s participation. After all, the code necessary for launch has already been published. CoinDesk reports, “The community would only need to generate the first batch of transactions, or genesis block, and provide at least 13 computers known as validators to run the network.”
Nathaniel Popper and Ana Vanessa Herrero of The New York Times wrote a great feature story on Gavriel Jiménez, a Venezuelan cryptocurrency entrepreneur who had protested president Nicolas Maduro, but when asked to help create a national digital currency, thought it was an opportunity to change his country from within. He told the Times, “The actual goal of the project was to change the economic model of the oppressive regime. This was my mission and my gamble, in a bet that ended costing everything I had in my life: my friends, my partners, my reputation, my love, my company and my country.” Definitely check this story out for a great long read this week.
For the Multicoin Capital blog, Tony Sheng wrote a monster piece on trust in crypto and how it is multi-dimensional, not binary. He breaks it down into five properties: custody, immutability, verifiable security, legal and regulatory protections and insurance. He then assesses a number of crypto companies and projects, including Bakkt, Coinbase, Tether, Compound, Maker and Uniswap, among others, along these spectrums.
Some of the more interesting spectrums are the immutability one, which shows almost all the companies and even some several DeFi projects huddled toward the mutable side, which I think is probably a reflection of how nascent the industry still is. In the years to come, we may see more in the most immutable column, where Uniswap currently sits alone. In contrast, the spectrum for custody is more spread out, probably reflecting the variety in consumer choice. The post also ends with an analysis of the recent bZx attacks and how the bZx protocol scores on these factors. Sheng writes, “This episode concluded with relatively minor losses (about $1 million total), but it’s not hard to imagine how greater damages could occur in larger systems with more malicious actors.”
If you listened to the interview with Antoine Le Calvez on Unconfirmed, you may have wondered how I neglected to mention that Coin Metrics just announced its Series A funding round! Well, the news didn’t break until after we wrapped recording, and he didn’t mention it, so I didn’t know! But now, I’ll take the opportunity to say congratulations to him and the team at Coin Metrics, and to let you all know that the round was led by Highland Capital Partners, with participation from Communitas Capital, Avon Ventures and Digital Currency Group, among others.