And where they’re moving to.
This week, we’ve got two great podcasts. The first is on how a crypto project can manage that tricky transition from being centralized to decentralized — without compromising security or getting entangled with the SEC. On Unconfirmed, we hear from Steven McKie, an African-American crypto hedge fund manager on his experience and how he thinks the crypto community can address issues of systemic racism.
I just wanted to add one little personal note about everything that’s happened in the last couple weeks. First, Black Lives Matter. It’s sad we have to say it and that some people continue to quibble with it, but that just means we have to say it more. Second, I hope justice is served, not just in these recent cases that have gotten attention but for all the other ones that were not recorded on video and shared on social media. And finally, I truly believe that good things will come out of all these events — the pandemic, these racist, unjust incidents, the protests — all of it. I don’t know how long it will take, but I’m in it for the long haul, and I think all of you are too.
Some of you may remember I used to teach yoga, and a few people in crypto know I’m into meditation, and I’ve been thinking that, as we move forward, I hope people also turn inward, reflect on our common humanity, and remember that everyone around you started out a precious little baby. Even the perpetrators of violence and injustice are, in their own way, victims of a system that has racism built into its core. I’m not saying they should not be punished or that justice not be served, but just that we should ask ourselves, going forward, as we try to do a massive reset to all our systems, what do we want that to look like? Things need to be shaken up, they are being shaken up. And what kind of new systems do we want to put in their place? How do we prevent future generations from playing out these same roles? And I hope that, while we ponder those questions, people remember our common humanity.
This Week’s Crypto News…
And the drama continues. CoinDesk reports that Bitcoin mining equipment manufacturer Bitmain is in a civil war, with two cofounders, Jihan Wu and Micree Zhan Ketuan, battling over power. Zhan, who was ousted by Wu last fall, addressed Bitmain employees via WeChat saying he had returned to the company’s Beijing office and called for them to join him. He also claimed he would lead the company to an IPO. A video circulating online showed Zhan leading private guards and entering the Bitmain office on Wednesday. He even offered cash bonuses of 10,000 yuan ($1,500) to those who returned Wednesday and 5,000 yuan ($700) for those that came Thursday. Meanwhile, there are now two versions of the company’s official seal, which CoinDesk says, in China is “as important as the role of the legal representative in terms of signing a company’s decision into effect.” However, both Zhan and Wu appear to have different seals with different serial numbers, and Wu’s side of the firm said Zhan had no authority, while Zhan said that the seal with Wu’s side had been voided. Bitmain issued a statement on its WeChat accusing Zhan of forgery and said it has hired lawyers to take legal action against him. Whew! Sounds like there will be more where this came from.
On Wednesday, Bitcoin Core released a new software update that includes software that could help prevent attacks by nation-states. The feature, called Asmap, makes it possible to limit the number of nodes connecting to any specific “autonomous system,” such as Amazon Web Services or states. This helps prevent a so-called Erebus attack, in which an autonomous system could censor large swaths of the Bitcoin network.
For those of you wondering about Ethereum 2.0, Danny Ryan wrote up a monster post on what each phase entails, what the benefits of Ethereum 2.0 will be, and more. He says, “As a user, you can either get involved early with staking in Phase 0, or you can simply wait until Ethereum fully migrates into eth2 at Phase 1.5 (a transition which should be seamless from the point of view of both dapp developers and users).” We shall see just how seamless it all ends up being.
According to The Block, Coinbase is the largest holder of bitcoin, with 984,000 BTC in its wallets. The second-largest is Huobi at 413,000 BTC and then Binance at 318,000 BTC. Its report on exchanges shows that exchanges still hold 17% of all bitcoins, down from 19% in February.
Coin Metrics published what it calls a preview of a forthcoming research piece with ARK Invest that analyzes various metrics that institutions might look at when evaluating Bitcoin. It begins with a breakdown of the various markets, showing, interestingly, that the USD market is the smallest, at $500 million in daily volume. Next are all fiat markets, which is at $1.2 billion. Then all fiat and stablecoin markets, at $3.5 billion. Next, all fiat, stablecoin and crypto markets, at $4.1 billion. And finally, all fiat, stablecoin, crypto and derivatives markets are at $18 billion. Among stablecoins, Tether completely dominates, accounting for $2.2 billion in daily volume, whereas the next highest is Binance USD, which accounts for $65 million in daily volume. However, the analysis shows that Bitcoin’s volume is miniscule compared to other major asset classes, at $4 billion a day, vs. $46 billion a day for US equity spot markets and $2 trillion for global FX spot markets.
CoinDesk reports that the most popular off-chain use for Bitcoin is to, well, take it to Ethereum. Wrapped BTC and imBTC hold 70% more bitcoins than the Bitcoin-based Lightning or Liquid, although, to be fair, the amount of Bitcoin held off the Bitcoin blockchain is only 8,300 BTC, which is about $80 million. Blockstream engineer and researcher Christian Decker said the greater popularity of off-chain Bitcoin on Ethereum is “a strong signal that the interest in Bitcoin itself is increasing, and that other tokens are losing ground when it comes to bitcoins.”
Some users of the Ethereum mixer Tornado Cash are making it possible to de-anonymize their transactions. The mixer uses zero-knowledge proofs so users can anonymously withdraw — except of course, that doesn’t work when users do so in a traceable manner. A group of researchers were able to link 400 out of 3,000 withdrawals to specific deposits, with the most common error being that they used the same address for deposits and withdrawals. Also, many users are leaving their deposit in the mixer for less than a day. Another error: using the same manually set gas price.
SEC Commissioner Hester Peirce has been tapped for a second term, allowing her to serve through 2025. Without the reappointment, her term would have expired Friday. Back in February, she proposed a safe harbor for new token issuers.
Although it was six months in the making, a16z made a timely announcement of a new $2.2 million fund and program for entrepreneurs from atypical backgrounds. It plans to fund and train a small group in the first year, and then expand. Entrepreneurs will receive seed capital as well as undergo training programs. The announcement says, “We are looking for entrepreneurs who did not have access to the fast track in life but who have great potential. Their products can be non-tech or tech; they should be from underserved communities (all backgrounds welcome); and ideally, their business will have an interesting model, niche market, and/or a little traction to indicate the promise and potential.” Spread the word!