Autor Cointelegraph By Anirudh Tiwari

Looking to take out a crypto loan? Here’s what you need to know

Looking to take out a crypto loan? Here’s what you need to know

Uverejnil používateľ | apr 24, 2022 |

Loans based on cryptocurrencies have become a mainstay of the decentralized finance (DeFi) universe ever since the smart contract-based lending/borrowing platforms began offering the service to crypto users. The Ethereum network, the first blockchain that scaled the smart contract functionality, sees most of the total value locked (TVL) on DeFi protocols dominated by cryptocurrency lending platforms.According to data from DeFi Pulse, the top 4 of 10 DeFi protocols are lending protocols that account for $37.04 billion in TVL, just 49% of TVL of the entire DeFi market on the Ethereum blockchain. Ethereum leads in terms of being the most utilized blockchain for the DeFi market and the TVL on the network. Maker and Aave are the biggest players here, with a TVL of $14.52 billion and $11.19 billion, respectively.Even on other blockchain networks like Terra, Avalanche, Solana and BNB Chain, the adoption of cryptocurrency-based loans has been one of the main use cases of smart contracts in the world of DeFi. There are about 138 protocols that provide crypto loan-based services to users, amounting to a total TVL of $50.66 billion, according to DefiLlama. Apart from Aave and Maker, the other prominent players in this protocol category across blockchain networks are Compound, Anchor Protocol, Venus, JustLend, BENQI and Solend.Johnny Lyu, the CEO of crypto exchange KuCoin, talked to Cointelegraph about the choice of blockchain networks for crypto lending. He said: “I would say the ideal blockchain for loans and DeFi does not exist, as each has its own advantages. At the same time, the leadership of Ethereum is undeniable due to many factors.”However, he didn’t negate the possibility of the emergence of a truly ideal blockchain for DeFi. Kiril Nikolov, DeFi strategist at Nexo — a cryptocurrency lending platform — seconded this view. He told Cointelegraph:“The short answer is ‘no.’ Most blockchains are crypto lending-friendly. However, among the primary properties to watch for are liquidity and reliability, while a secondary determining factor might be network fees.”Considering that the liquidity and reliability of the Ethereum platform are the highest right now due to it being the most utilized blockchain within DeFi, one could consider taking advantage of the same and making it the blockchain of choice.Prominent players To start with, a borrower needs to choose between the major lending protocols on the network such as Maker, Aave and Compound. While there are a plethora of crypto lending platforms, in this piece, the most prominent ones are considered for the sake of ease of explaining and relatability. Cryptocurrency lending essentially enables users to borrow and lend digital assets in return for a fee or an interest. Borrowers need to deposit collateral that will instantly allow them to take a loan and use it for the objectives of their portfolio. You can take loans without any collateral, known as flash loans, on platforms like Aave. These loans need to be paid back within the same block transaction and are mainly a feature meant for developers due to the technical expertise required to execute them. Additionally, if the loaned amount is not returned plus the interest, the transaction is canceled even before it is validated.Since crypto-based loans are completely automated and simple for the average retail investor and market participants, in general, they provide an easy way to earn annual percentage yields on the digital assets they are hodling or even accessing cheap credit lines. One important aspect of collateralized loans is the loan to value (LTV) ratio. LTV ratio is the measurement of the loan balance in relation to the value of the collateral asset. Since cryptocurrencies are considered to be highly volatile assets, the ratio is usually on the lower end of the spectrum. Considering Aave’s current LTV for Maker (MKR) is 50%, it essentially means that you can borrow only 50% of the value as a loan in relation to the collateral deposited.This concept exists to provide moving room for the value of your collateral in case it decreases. This results in a margin call where the user is asked to replenish the collateral. If you fail to do so and the value of the collateral falls below the value of your loan or another predefined value, your funds will be sold or transferred to the lender.The extent of the impact of cryptocurrency-based loans reaches out of the DeFi market since it enables access to capital for individuals or entities without a credit check. This brings a mass population of people across the world that have a bad credit history or no credit history at all. Since lending and borrowing are all driven through smart contracts, there is no real age limit for the younger generation to get involved, which is traditionally not possible through a bank due to the lack of credit history.Related: What is crypto lending, and how does it work?Considerations and risksSince the adoption of DeFi-based loans has now risen to such an extent that even countries like Nigeria are taking advantage of this service and El Salvador is exploring low-interest crypto loans, there are several considerations and risks that are noteworthy for investors looking to dabble in this space. The primary risk involved with crypto lending is smart contract risk since there is a smart contract in play managing the capital and collateral within each DeFi protocol. One way this risk can be mitigated is by robust testing processes implemented by the DeFi protocols deploying these assets.The next risk you need to consider is the liquidity/liquidation risk. The liquidity threshold is a key factor here because it is defined as the percentage at which a loan is considered to be under-collateralized and thus leads to a margin call. The difference between LTV and liquidity threshold is the safety cushion for borrowers on these platforms.For lenders, there is another additional risk related to impermanent loss. This risk is inherent to the automated market maker (AMM) protocol. This is the loss that you incur when you provide liquidity to a lending pool, and the underlying price of the deposited assets falls below the price at which they were deposited into the pool. However, this only occurs when the fees earned from the pool don’t compensate for this drop in price.Nikolov pointed out another risk with DeFi lending platforms. He said that “Another one is bad collateral listing which could lead to disturbances of the entire platform. So, if you’re not willing to take these risks, we recommend borrowing from a platform like ours that guarantees you certain protections such as insured custody and over-collateralization.”There have been several instances of hacks since the increasing popularity of DeFi including Cream Finance, Badger DAO, Compound, EasyFi, Agave and Hundred Finance.Additionally, cryptocurrency lending and borrowing platforms and users both are subject to regulatory risk. Lyu mentioned that the regulatory framework on this issue has not been fully formed in any major jurisdiction, and everything is changing right before our eyes. It is necessary to separate borrowers from each other — private borrowers and companies of borrowers.Essentially, the risks highlighted makes it critical for you to exercise extreme caution when deploying your capital in crypto-based loans, either as a borrower or as a lender. Paolo Ardonio, the chief technology officer of crypto exchange Bitfinex, told Cointelegraph:“It is important that those participating in crypto lending on DeFi platforms be mindful of the risks in what is still a nascent field in the digital token economy. We’ve seen a number of high-profile security breaches that have put the funds of both borrowers and lenders at risk. Unless funds are secured in cold storage, there will inevitably be vulnerabilities for hackers to exploit.”Recent: Beyond collectibles: How NFTs are revamping the ticketing industryFuture of DeFi lendingDespite the risks mentioned, cryptocurrency-based lending is one of the most evolved spaces in DeFi markets and is still witnessing constant innovation and growth in technology. It is evident that the adoption of this DeFi category is the highest among the numerous others growing in the blockchain industry. The use of decentralized identity protocols could be integrated into these platforms for the verification of users to avoid the entry of scrupulous players.Ardonio spoke further on the innovation expected in DeFi loans this year, stating, “I expect to see more innovation in crypto lending, particularly in terms of the use of digital tokens and assets as collateral in loans. We are even seeing nonfungible tokens being used as collateral in loans. This will be an emerging trend this year.”

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Wormhole hack illustrates danger of DeFi cross-chain bridges

Wormhole hack illustrates danger of DeFi cross-chain bridges

Uverejnil používateľ | feb 16, 2022 |

Solana has become one of the fastest-growing smart contract blockchain networks since it was first officially launched in March 2020. The total value locked (TVL) on decentralized finance (DeFi) protocols on the network grew from nearly $152 million in March 2021 to $8.08 billion at the time of writing, as per data from DefiLlama.Simultaneously, the network has also been subject to several network issues and outages. Most recently, the Wormhole token bridge was hit by a security exploit on Feb. 3 that culminated in the loss of 120,000 wrapped Ether (wETH) tokens, worth over $375 million at the current price of Ether (ETH). This exploit was the biggest so far in 2022 and the second largest DeFi hack ever, following the Poly Network hack where over $600 million was stolen from three different blockchain networks when an Ethereum bridge was compromised.Wormhole is a token bridge protocol that connects multiple blockchain networks like Ethereum, Solana, Terra, BNB Smart Chain, Polygon, Avalanche and Oasis. It enables users to send and receive tokens between these networks without the need for a centralized exchange or tedious conversion processes. While wrapped Ether was the only asset impacted by this exploit, Certik, a smart contract auditing firm, mentioned that Wormhole’s bridge to the Terra blockchain network could be impacted by the same vulnerability as the Solana bridge. The token bridging protocol has released a detailed incident report that tracks the chronology of the hack and all the associated aspects of it including security audits, bug bounties and the security roadmap. Cointelegraph discussed this hack with Max Galka, the CEO of blockchain data analytics firm Elementus. He said:“About three hours before the Ether was taken from Wormhole, the wallet that is currently holding the stolen funds had a smaller transaction deposited from Tornado Cash — a mixer that anonymizes transactions. There was a transfer from a mixer on Ethereum to this wallet now holding the stolen funds.”Galka further mentioned that while it is evident as to why the hacker would have experimented with Tornado Cash in the first place, it is less clear as to why they would use the mixer to deposit funds exactly into the same wallet before executing a major exploit.Soon after, Wormhole launched a bug bounty program with Immunefi on Feb.12 with a $10 million reward that covers smart contracts, web user interface (UI), guardian nodes and Wormhole integrations. This makes it the largest bug bounty program in the cryptoverse, on par with Maker DAO’s bug bounty program.  Jump Crypto, the crypto investment arm of trading firm Jump Trading and one of the lead investors backing Wormhole, has stepped in to “make the community members whole.” The venture capital firm has replaced the 120,000 ETH and stated via a Twitter post on the same day of the hack that the firm believes in a multichain future and that Wormhole is essential infrastructure for this future.Security concerns with cross-chain activityVitalik Buterin, a co-founder of Ethereum, wrote on a Reddit AMA session along with the Ethereum Foundation’s Research Team where he said that the future of blockchain technology is multichain and not cross-chain. Buterin has reasoned this with security concerns of bridges and non-native token assets with a focus on the probability of 51% attacks. He said, “It’s always safer to hold Ethereum-native assets on Ethereum or Solana-native assets on Solana than it is to hold Ethereum-native assets on Solana or Solana-native assets on Ethereum.”My argument for why the future will be *multi-chain*, but it will not be *cross-chain*: there are fundamental limits to the security of bridges that hop across multiple “zones of sovereignty”. From https://t.co/3g1GUvuA3A: pic.twitter.com/tEYz8vb59b— vitalik.eth (@VitalikButerin) January 7, 2022Jagdeep Sidhu, the chief technology officer of Syscoin, a proof-of-work (PoW) blockchain network that is “merged-mined” with Bitcoin, spoke to Cointelegraph further on this narrative. He said, “He simply means that where there is a blockchain, there is a zone-of-sovereignty within that chain which has free will on the security of that blockchain. Any time blocks roll back, for example, all systems depending on the security of that chain also roll back. Because of this, when creating cross-chain bridges, you have to either assume a new consensus system that will watch and act on rollbacks or cautiously wait around the possibilities of a rollback, depending on the value of the transaction.”Sidhu further said that the Wormhole hack revealed the complexities of creating cross-chain exchanging and bridging, as the attack was only enabled due to an externality by the Solana team which rendered a certain operation in the consensus code legacy. This operation opened a loophole in the logic of Wormhole that was taken advantage of by the hacker.Even though this particular hack impacted a cross-chain bridge, it is noteworthy that, technically, this was a smart contract exploit, which has been around as long as the concept of smart contracts has existed. Galka stated:“The history of smart contracts has involved a pretty consistent stream of vulnerabilities and hacks dating back to the very early days of Ethereum when The DAO was attacked in 2016. In general, cross-chain bridge contracts have large balances making them prime targets. Historically, there have always been hacks on smart contracts. I would expect that to continue.”Cointelegraph also discussed this aspect of the hack with Anton Bukov, co-founder of the 1inch Network, a DEX aggregator, who mentioned that the cause that led to this hack was a low-level smart contract bug. It was related to the mechanism that Solana used for precompiled smart contract calls. He noted that the bug fix was publicly available on the interoperability protocol’s GitHub repository for more than two weeks before the hack. The fix being publicly available could’ve been the cue for the exploiter to identify the hack. Bukov also agreed with Buterin’s concerns with cross-chain operations and stated that “Cross-chain operations are much more dangerous and vulnerable than any other blockchain operations.”At least 5 bridges were hacked since mid-2021, attackers were able to steal more than $1B. Never underestimate security audits importance. Three hacks ago @VitalikButerin warned us about cross-chain dangers: https://t.co/jvmLOIEQlE pic.twitter.com/bQoht0FNve— Anton Bukov ⚖️ (@k06a) February 3, 2022

Zero-knowledge rollups Despite Solana’s rapid growth in the short time since its launch, the network has become increasingly susceptible to issues as more users begin to come onboard. The network had a bad start to the year when it faced six network outages in January that caused a lot of frustration to its community.Related: Scalability or stability? Solana network outages show work still neededSidhu pointed out that Solana, like all other alternative smart contract networks, uses a monolithic architecture that does not provide for economies of scale. Due to this, as more users come onto the network, the fees and the resources to keep the network stable, secure and decentralized will increase. Suggesting an alternative to this incoming issue, he said, “The best way we know to scale is through a modular architecture. This is what Ethereum and some other blockchains such as Syscoin are transitioning toward due to the creation of great scaling solutions such as optimistic and zero-knowledge proof based rollups.”Proving a detailed solution for this issue, Sidhu mentioned that the best solution for cross-chaining assets is to use zero-knowledge (ZK) proofs as a better alternative to having the pool of money sitting on an external consensus such as a multi-party protocol which requires an honest majority assumption of external validators. This use of ZK-proofs would replace the external consensus with mathematical validity proofs. Nonetheless, he also added that none of the solutions are as secure as using a reliable layer 1. He added, “A ZK bridge is a promising improvement to cross-chain bridging, but I do not think it should be used as a generic cross-chain DeFi ecosystem, as, by definition, it cannot provide as much security as simply using a secure layer 1.”Bukov noted the possibilities of this hack being replicated with bridges on other blockchain networks as well:“Historically speaking, there have been cases of one party exploiting code and then copycats seizing on this initial exploit. In 2017, a series of multisignature Ethereum wallets had their underlying code hacked. In this instance, several follow-up hacks occurred by other actors seizing on the same vulnerability.”This hack could be a sign for core developers of interoperable bridging protocols and other smart contract blockchain networks to proceed with caution for cross-chain smart contracts and assets and work on regular updates, audits, bug bounties, etc., to plug costly loopholes like these in their operations.

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‘Wave of litigation’ to hit NFT space as copyright issues abound

‘Wave of litigation’ to hit NFT space as copyright issues abound

Uverejnil používateľ | feb 7, 2022 |

Ownership is one of the most critical aspects of nonfungible tokens (NFT). They are a representation of the evolution of execution and ownership of art, content, music, in-game assets, etc., since they are digital assets with distinctive identities that are verifiable on a blockchain network. However, they have also created a new dimension of discussion about the interaction and grey area around copyright, intellectual property (IP) and trademark laws.In a recent highly publicized fiasco in the cryptoverse, crypto decentralized autonomous organization (DAO) Spice DAO was mocked for believing that the ownership of a copy of the unpublished manuscript of the film Dune granted them its copyrights as well. The DAO intended to produce an “original animated series” inspired by the book to be sold to a streaming service for which it would require copyrights. The book was won at a Christie’s auction in November last year for over $3 million.In this case, copyright laws dictate that the copyright is valid throughout the lifetime of the creators and even 70 years after their death which entails that the DAO cannot make the animated series without the permission of the living co-creator, Alejandro Jodorowsky. Cointelegraph discussed this incident with Andrew Rossow, a technology attorney and Ohio law professor, who said:“The Spice DAO and Dune fiasco was a landmark in its own right that sends a very powerful message to everyone involved in the NFT space — creator or owner. The $3-million mistake that was made proved that intellectual property’s dominion in digital fine art is essential to its success and longevity.”While it might not be a secret that the ownership of an NFT doesn’t necessarily mean that the underlying copyright of the work has been transferred to the owner, it doesn’t seem evident to all market participants. Rossow explained that copyright law affords six “bundles of rights” or exclusive rights to a creator, which collectively establish their copyright. The first four rights are crucial to NFTs right now — the right to reproduce the work, the right to create derivative works, the distribution right, and the public performance rights.Marie Tatibouet, chief marketing officer of cryptocurrency exchange Gate.io, spoke with Cointelegraph about the Dune fiasco, noting that anyone who did the proper research and due diligence would’ve known that the sale of a book’s copy had no copyrights attached to it. She said, “There still seems to be a wider misconception around what exactly NFTs are and what’s included when one purchases or trades an NFT in the space. As the industry develops, so will educational resources and a wider understanding of the market.”Lawsuits begin to pour inAs things now stand, brands and companies have begun to crack down against NFT projects that violate copyright, IPs and trademarks. On Feb. 4, Nike filed a lawsuit against StockX for trademark infringement on Nike sneaker NFTs. The sneaker company has lodged a 50-page long complaint that claims the reseller has sold nearly 500 Nike brand sneaker NFTs impacting Nike’s reputation and legitimacy. Additionally, the shoemaker has accused StockX of selling the NFT sneakers at inflated prices amid “murky terms of purchase and ownership.”Even French luxury fashion house Hermes has recently had a legal confrontation with Mason Rothschild, creator of Hermes Birkin bag-inspired NFTs MetaBirkins. Hermes mentioned in its complaint, the “defendant’s MetaBirkins brand simply rips off Hermès’ famous Birkin trademark by adding the generic prefix ‘meta’ to the famous trademark Birkin.” In response, the creator compared himself to Andy Warhol painting Campbell soup cans in that he is making art from a well-known commercial image.Jeff Gluck, CEO of CXIP Labs — an NFT minting platform — discussed the incoming lawsuits with Cointelegraph. Gluck is also an IP and copyrights lawyer with over 14 years of experience in the legislative domain. He stated:“There are dozens of artists preparing lawsuits against OpenSea for selling infringing NFTs. These examples are a sneak preview of a wave of litigation heading towards the space. It’s both good and bad in that it discourages creativity and growth in some ways, but it’s beneficial because it will ultimately help provide some guidelines in terms of clear legal parameters and guidelines for the space.”Gluck further pointed out that one of the biggest problems NFT marketplaces are facing right now is that if they mint NFTs for their users and/or provide any level of curation, they are not shielded by the Digital Millennium Copyright Act (DMCA) and thus can be sued directly for copyright infringement by creators. The DMCA was passed in 1998 to implement the 1996 World Intellectual Property Organization’s Copyright Treaty and Performances and Phonograms Treaty. In part, it creates limitations on the liability of online service providers for copyright infringement.Rossow believes that is an essential requirement for any NFT creator to highlight the copyright, trademark and IP implications of the NFTs they launch. He said, “The smart contract behind an NFT is what governs the rights on how it can be used. It would also make sense that the creator(s) behind any NFT project are crystal clear to their audience before minting on what rights they will have with the NFT once they mint and purchase it.”Blockchain and copyright lawsThe NFT industry has grown faster than even its participants could have imagined. The market sales surpassed $40 billion in 2021 just on the Ethereum blockchain. A recent NFT market report from Chainalysis found that the weekly total cryptocurrency value and average value per transaction have grown hand-in-hand from January to October in 2021. The prime reason for this growth is the hype that has surrounded these assets for the last two years from minting platforms, games, marketplaces, exchanges and others.Related: From art to gaming: The biggest NFT trends of 2021As a by-product of this high supply and demand, there are a lot of scams, hacks and other intentional property law violations that have been become more frequent. Tatibouet elaborated on this phenomenon, stating, “Considering many platforms have made minting NFTs quick and easy, it’s also made it possible for those with malicious intent to produce and sell NFTs of copyrighted items. Platforms are slowly starting to adapt to this; however, it may remain to be an issue for the foreseeable future.”She also noted that platforms will need to adapt quickly and introduce barriers to those looking to abuse the system since they are liable to face legal repercussions, being the direct link between consumers and creators. As multinational companies that have large intellectual property libraries that are being abused, the NFT industry can expect legal issues down the road.However, NFTs are also a relatively new innovation compared to the existing prevalent copyright, IP and trademark laws, which could be an opportunity to amend the law to account for this new technology. Varun Sethi, founder of blockchain legal services firm Blockchain Lawyer, told Cointelegraph that copyright laws need to recognize the tokenization of digital assets as a revolutionary and evolving legal option and accept the NFTs owner as the copyright owner.However, Sethi noted the obstacles involved, saying, “There are challenges pertaining to updating of the registered owner as per copyright record plus fragmentation of ownership of a single digital art into multiple NFT owners plus payment of filing fees for becoming actual owner and not just an ostensible owner.”Sethi foresees even more ownership issues when NFTs change hands unless the law is amended so that all NFT sales are recorded as ownership swapping as per the copyright office’s records.Even though NFTs as a whole fall under copyright and IP laws of the countries in which they are issued, there are NFT projects that are now aiming to solve the grey area around this legal concern and offer copyrights for NFTs as well. CXIP Labs is such an example wherein copyright registrations are included in the minting process itself.A platform called GuardianLink is using its proprietary artificial intelligence technology to monitor the web for any duplicate, rip-offs and copy-cat NFTs of the creators using their platform. This enables both creators and collections to protect their NFT assets.The cryptocurrency community is known to adapt to changes fairly quickly due to the nascent nature of the industry and the technology. Thus, as the legal issues around NFTs develop and reveal more about what modifications need to be made to the prevalent structure, there will also be protocols that adapt.

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Bitcoin miners’ resilience to geopolitics — A healthy sign for the network

Bitcoin miners’ resilience to geopolitics — A healthy sign for the network

Uverejnil používateľ | jan 18, 2022 |

Considering that Bitcoin (BTC) is a blockchain network that uses a proof-of-work (PoW) consensus mechanism, miners are a highly significant part of the market dynamics of the network and the community itself. On Jan. 5, it was revealed that Kazakhstan shut down its internet services due to unprecedented political unrest sparked by rising fuel prices in the country.The protests in Kazakhstan began on Jan. 2 in the town of Zhanaozen to fight against the government doubling the price of liquefied petroleum gas (LPG), which is widely used as car fuel in the country. This change in pricing came as a result of the gradual transition to the use of electronic trading of LPG in order to abolish the existing state subsidies for fuel and allow the market to discover the price of the asset.However, protests in the region soon snowballed, gaining more momentum and continued despite the country’s government announcing that the prices of LPG would be brought down to a level lower than before the increase. Soon, this led to the country’s presiding cabinet resigning and the state-owned telecom company, Kazakhtelecom, shutting off the country’s internet services. Network data provider Netblocks reported that the normalized network connectivity fell down to 2%, with the government attempting to limit coverage on the escalating anti-government protests.As a result, the Bitcoin network’s mining hash rate declined over 13% in the hours after the shutdown in the country from 205,000 petahash per second (PH/s) to 177,330 PH/s. Over the past year, the country grew to account for 18% of Bitcoin’s mining activity. A report from the Data Center Industry & Blockchain Association of Kazakhstan estimated that cryptocurrency mining would bring in $1.5 billion in revenue for the country in the next five years.This is not the first time that Bitcoin mining in the region has received the spotlight. Despite being an energy-rich country, the Kazakh government announced last year that it planned to crack down on unregistered miners that were straining the country’s energy supply after the mining migration from China.Kazakhstan’s mining market shareThe Central Asian country became a hub for Bitcoin mining after the Chinese government banned mining operations and cryptocurrency services in 2021. This led to the migration of mining companies like BIT Mining to relocate their operations from China to Kazakhstan. BIT Mining is one of the largest BTC mining companies in the world. The mining company has indicated that it is unlikely to flee Kazakhstan to relocate to North America amid the political upheaval. The firm is closely monitoring and evaluating the situation in order to decide its next move with respect to mining. However, countries like Spain have had their eyes on Kazakhstan’s mining market share. The Deputy for the Spanish Ciudadanos political party, María Muñoz, proposed to make the country a mining hotspot amid the current situation, stating in a tweet, “The protests in Kazakhstan have repercussions all around the world but also for Bitcoin. We propose that Spain positions itself as a safe destination for investments in cryptocurrencies to develop a flexible, efficient, and safe sector.”Rob Chang, the CEO and director of Gryphon Digital Mining, a digital assets mining company, told Cointelegraph:“Bitcoin mining will continue to grow and the need for viable locations will always be necessary. Countries with the foresight to make themselves Bitcoin-friendly will stand to do quite well as Bitcoin continues to establish itself as a legitimate alternative to fiat.”As a result of China’s mining ban, the mining dynamics have shifted globally, with the United States leading the charge with over a third of the mining rate. Chang said that one benefit of this migration includes rehomed miners’ shift to a larger mix of carbon-free energy sources.Additionally, some of the hash rates has gone to more transparent entities operating the mining machines, leading to increased security for the network and a higher level of public trust in Bitcoin miners.Illia Polosukhin, the co-founder of the NEAR Protocol, a decentralized development platform, told Cointelegraph that in addition to China’s ban leading to a loss of investment, the loss of talent is another major factor:“Chinese citizens living on the mainland and abroad are banned from working in the crypto sector, and that’s a big loss for the blockchain industry as a whole. It will stifle innovation and, eventually, leave Chinese citizens behind as more users begin to adopt Open Web technologies. It’s possible that more mining operations shifting to the United States could push the issue of blockchain and sustainability more fully into the public eye.”Thriving amid geopolitical risks is rare for financial assetsThe mining hash rate for the Bitcoin network recovered quickly from the drop to 168 million TH/s, according to data from YCharts. In fact, the network has taken a step forward with the hash rate hitting a new all-time high of 215 million TH/s on Jan. 13.We’re officially building an open bitcoin mining system ✨ https://t.co/PaNc7gXS48— jack⚡️ (@jack) January 13, 2022This new all-time high was driven by the statement from ex-Twitter CEO Jack Dorsey, announcing the creation of an open Bitcoin mining system. Thomas Templeton, the general manager of hardware at Square, said, “We want to make mining more distributed and efficient in every way, from buying, to set up, to maintenance, to mining. We’re interested because mining goes far beyond creating new bitcoin. We see it as a long-term need for a future that is fully decentralized and permissionless.”This new all-time high is evidence of how resilient the Bitcoin network and its community are to ensure that the network thrives at all costs. However, it’s important to remember that such risks are not exclusive to Bitcoin. Chang said, “Geopolitical risk is a common issue for many industries, and Bitcoin mining is not immune. While there will be some that will take the risk and operate in these countries for the sake of lower costs, they do run the risk, such as those experienced in Kazakhstan or others such as the government deciding one day to take all of your machines. Operators will need to understand the risk/reward tradeoff.”Related: A new intro to Bitcoin: The 9-minute read that could change your lifePolosukhin explained that no matter how distributed or decentralized a blockchain network is — Bitcoin or any other — it’s still intertwined with many legacy systems: energy grids, energy prices, regulation and the laws of nations. Bitcoin mining has either been banned or is facing uncertainty in many countries including Iran, Lebanon, Iceland and Sweden.Being an energy-intensive PoW network, the Bitcoin network is expected to continue to thrive as long as miners are incentivized economically to continue to remain miners. A report from Fidelity Digital Assets, the crypto wing of Fidelity Investments, indicated that the Bitcoin cycle is far from over, and with the high financial incentives for miners, they are in it for the long haul. While Bitcoin is in a price slump, currently trading around the $42,000 range with a market capitalization of $791 billion, the fact that miners — the core aspect of the network — have shown resilience to adverse situations over the 13-year history of the network reinforces the belief and trust the community puts on the flagship blockchain network.

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NFTs find true utility with the advent of the Metaverse in 2021

NFTs find true utility with the advent of the Metaverse in 2021

Uverejnil používateľ | dec 31, 2021 |

The growth of NFTs has shot to the next level in terms of popularity and finding acceptance from the crypto community and the mainstream alike. Nonfungible tokens (NFTs) that were initially thought to be a bubble are now expanding their coverage across the cryptoverse.According to a report by DappRadar, the NFT market has had its best year, generating over $23 billion with the floor market capitalization of the top 100 NFT collections standing at $16.7 billion, as of Dec. 17, even before the year closed out. The biggest move for NFTs and the metaverse space has been Facebook’s announcement of being rebranded to Meta on Oct. 28 in a bid to expand its reach beyond social media and into the Metaverse. In fact, in the last week of October, it was revealed that over $106 million worth of Metaverse land was sold in 7 days.Within the cryptoverse, the NFT collectibles frenzy first began in 2017 with the launch of the CryptoKitties game and the subsequent demand for these digital cats. At its peak, the blockchain game recorded a maximum of 140,000 daily users and 180,000 daily transactions in Nov. 2017, but this traction was quickly lost over a few months. Since then, the collectibles domain has gone on to have renowned collections like CryptoPunks, Bored Apes Yacht Club and NBA Top Shots.The initial interest around NFTs in the mainstream came from the digitization and tokenization of artworks by renowned artists like Beeple through auction sales hosted by traditional art galleries like Christie’s and Sotheby’s. Since then, the scope of NFTs has expanded to include art, music, games, sports and Tweets — just about any digital or real-world asset — that can be tokenized while still holding their value and providing unique ownership.GameFi is the game-changerThe prime watershed moment for NFTs that followed the Metaverse narrative is through GameFi protocols. GameFi is defined as the combination of gaming and decentralized finance (DeFi) within a single ecosystem. According to Huobi Research, the research arm of the cryptocurrency exchange, GameFi has revived the interest in blockchain gaming.The leading protocol in this regard in 2021 has been Axie Infinity, a game universe where gamers can collect Axies as pets in order to battle, breed, raise and build kingdoms for their pets. The game ecosystem is powered by AXS and SLP, the native tokens of the ecosystem.The Ethereum-based game was released back in March 2018 and has been developed by Vietnamese game developer Sky Mavis. Due to the hype that surrounded the game this year, the Axie Infinity collection has quickly risen to become the most traded NFT collection ever in the short history of NFTs. The collection has clocked nearly $4 billion in all-time sales. Axie Infinity has surpassed other blockchain games by a mile with the current in-game trading volume.The daily active users of the game grew from 20,000 users in March of this year to 2.5 million users in December of this year, marking a 125x increase in less than nine months — a remarkable feat for a game that gained hype only this year. The game has recorded $9.72 million in a single day in June, surpassing a record Tencent held at the time. In the third quarter of 2021, the game accounted for 19.5% of the total NFT trading volume in the same period and $2.08 billion of trading volumes.While this game is based on Ethereum, blockchain-based games have spread across blockchain networks like Solana and the Binance Smart Chain. There have been several games that have gained popularity across blockchain networks like Splinterlands on Hive and Wax, Alien Worlds on Wax, Upland on EOS, and MOBOX based on the Binance Smart Chain.The investment raised with the blockchain gaming domain has well surpassed over a billion dollars in 2021, led by the $930 million raised by the gaming company Forte Labs.Pushback from traditional gaming and regulationsEven though GameFi has been disrupting gaming with the introduction of blockchain technology, the traditional gaming industry hasn’t exactly been receiving this innovation well. Steam/Valve banned all blockchain-based games from its platform earlier this year. In response, however, over 26 companies and advocacy groups have called on the company to reverse the ban.Additionally, the South Korean government has now blocked the release of new play-to-earn (P2E) games and asked the existing blockchain games with a P2E model to be removed from Apple Store and Google Play Store. In contrast, Epic Games, the creator of Fortnite, has said that the company is open to blockchain-based games that support cryptocurrency and blockchain-based assets.Even Elon Musk, the CEO of SpaceX and Tesla, recently stated in an interview on Dec. 22 that he believes his company’s technology, Neuralink, is better than the Metaverse in the long term as he doesn’t see “someone strapping a friggin’ screen to their face all day.” Musk added: “In the long term, a sophisticated Neuralink could put you fully into virtual reality. I think we’re far from disappearing into the metaverse, this sounds just kind of buzzwordy.”Related: Concerts in the Metaverse could lead to a new wave of adoptionDespite the pushback from the traditional gaming industry and some regulators, GameFi has been growing at an incredibly fast pace. The company behind the first Bitcoin-based ETF in the United States, ProShares, has announced its plans to launch a Metaverse-focused ETF that will include companies like Apple, Meta and Nvidia. The company has filed for the ETF with the United States Securities and Exchange Commission (SEC) under the name ProShares Metaverse Theme ETF, which will track the performance of the Solactive Metaverse Theme Index (SOMETAV).Even one of the consulting Big4 firms, PricewaterhouseCoopers (PWC) Hong Kong, have dipped their toes into the Metaverse. The company purchased a land plot in a metaverse game Sandbox. Even the Italian luxury sports car manufacturer Ferrari hinted at NFTs after a deal with the Swiss blockchain startup Velas Network.Enterprises as such can utilize blockchain technology to create business models in the Metaverse and achieve efficiency and cross-compatibility with the real world. If 2021 can be considered to be the year of DeFi and NFTs, it is almost certain that 2022 will be the year of GameFi and the Metaverse.

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