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Layer-1 blockchains: How crypto winter could slow the challenge to Ethereum

Given Ethereum’s dominance coupled with the current crypto bear market, it remains questionable if L1s will flourish. This was recently highlighted in a Chainalsys blog post entitled “New layer 1 blockchains are expanding the DeFi ecosystem, but no ETH killers yet.” Ethan McMahon, an economist at Chainalysis, told Cointelegraph that Chainalysis published this report to raise awareness for the current L1 ecosystem:While Ethereum allowed decentralized finance (DeFi) to flourish in 2020, a number of layer-1 blockchains (L1s) have since been developed to address the challenges associated with the network. For instance, as Ethereum’s proof-of-work (PoW) consensus mechanism and high gas fees continue to impact transaction speed and scalability within its ecosystem, L1s like Algorand, BNB Chain, Avalanche and others aim to solve these problems.“Chain comparison is important because it seems as if most crypto services are only offered on Ethereum, but this isn’t true. There are a few different blockchains with competitive offerings that have advantages Ethereum doesn’t provide.” In order to demonstrate this, McMahon explained that Chainalysis gathered data from different blockchains to determine the strengths and weaknesses of the networks. For example, the post points out that with gas fees running high on Ethereum, many developers have chosen to build decentralized applications (DApps) on Algorand. Binance Smart Chain, or BNB Chain, is also recognized for its capability to support new tokens and DApps without the high gas fees of Ethereum. “It’s interesting to see that people are paying exuberant gas fees on Ethereum’s network. Our findings show that transactions less than $1,000 result in a significant amount of money spent on gas fees,” McMahon said. Source: ChainalysisBased on Chainalysis’s overall findings, however, the post concludes that none of the L1-blockchains analyzed have been successful in solving all challenges associated with the Ethereum network. This also raises the question if L1s will survive long-term. For instance, the current crypto winter may slow down investments in these ecosystems. In addition, the merge of Ethereum 2.0 — which is set to take place this year but may be pushed to 2023 — could lead to improvements in the Ethereum ecosystem that may impact alternative L1 uses. L1 developments to drive adoption In order to determine how L1s will advance, it’s important to take a closer look at recent developments within the various ecosystems mentioned by Chainalysis. For example, the report categorizes Algorand as a top-10 L1 blockchain by market capitalization, stating:“During Q3 2021, Algorand saw its transaction volume grow 65%, while Bitcoin and Ethereum saw volumes drop 37% and 45% respectively. This may have reflected Algorand’s growing hype — having launched in April 2019, Algorand was a relatively new blockchain, and reached an all-time price high in September 2021.”Findings also show that 10% of Algorand’s transaction volume comes from retail investors, compared with 5% for Bitcoin (BTC) and 8% for Ether (ETH). Given this, the report notes that this could signify Algorand’s success in enabling a high volume of smaller transactions. Source: ChainalysisStaci Warden, CEO of the Algorand Foundation — the organization behind Algorand’s monetary supply economics, governance and ecosystem — told Cointelegraph that Algorand uses a Pure proof-of-stake (PPoS) consensus mechanism, allowing the network to specifically solve problems that require scale. “The most fundamental difference between Algorand and other L1s is the network’s ability to deliver financial inclusion to the two billion people in the world that don’t have access to modern financial systems,” she said. Warden elaborated that Algorand’s PPoS consensus mechanism enables this due to its low staking requirements. According to the Chainalysis post, only 1 Algorand (ALGO) token is needed to stake on the network. Warden also pointed out that Algorand is very focused on decentralized finance (DeFi) development, noting that the network is capable of settling about 1,200 transactions per second, with gas fees equating to .001 ALGO. Recent: Integrating blockchain-based digital IDs into daily life“These requirements are necessary for networks to scale,” said Warden. In comparison, the Chainalysis report mentions that Ethereum can only handle roughly 15 transactions per second. Yet, it’s been noted that Eth2 aims to increase this considerably to about 150,000 once upgrades are completed. In order to stay competitive, Warden shared that Algorand is in the process of rolling out a new feature that would allow the network to settle transactions in 2.5 seconds, compared with the 4.5 seconds it currently takes. Moreover, as multichain networks become more important, Algorand plans to deliver “state proofs” that will allow users to move tokens from one chain to another. “Algorand could end up being a router for all transactions across chains, since it can handle fast transactions, with little carbon footprint for sub-penny fees,” explained Warden. While state proofs and other developments won’t be rolled out immediately, it’s notable that FIFA recently announced that it will use Algorand to develop its digital asset strategy. “FIFA is building their own wallet on Algorand and creating an NFT marketplace that can accomodate secondary ticket sales,” added Warden. BNB Chain is also mentioned in the Chainalysis report and is praised for its capability to support new tokens and DApps without high gas fees. In fact, DappRadar found there to be more L2 projects built on BNB Chain than any other blockchain. Gwendolyn Regina, investment director of BNB Chain, told Cointelegraph that the goal behind the network is to help builders create DApps that scale for massive crypto adoption. She said:“This year, BNB Smart Chain will have 30 times the computing power of Ethereum and will also work on decentralized storage solutions. As a result, blockchain technology will be increasingly integrated into real-world applications.” According to Regina, the key focus areas for BNB Chain’s 2022 roadmap include decentralization, faster transaction speed, multichain integration and an increased focus on supporting developers and sustainability. Specifically speaking, Regina shared that the BNB Chain community recently released plans for further decentralization via the BEP-131 proposal, which will introduce candidate validators to BNB Smart Chain. “This proposal would increase the number of BNB Smart Chain Mainnet validators from 21 to 41, providing more decentralization and incentives for validators to constantly innovate their hardware and infrastructure,” she said. While this may create more decentralization, there has been criticism regarding whether or not DeFi is decentralized following Solend’s spontaneous governance proposal related to one of the whale wallets at risk of liquidation. Decentralization aside, it’s notable that BNB Beacon Chain — a blockchain developed by Binance and its community that implements a decentralized exchange for digital assets — recently became open-sourced. “BNB Beacon Chain is now accessible for developers to build on,” said Regina. She further explained that the benefits of the BNB Beacon Chain are broad, noting its high-speed order book based decentralized exchange to ensure quick transactions. “Harnessing native secure cross-chain support will open doors for blockchain interoperability, meaning users can seamlessly navigate the chains they use,” she remarked. In addition to Algorand and BNB Chain, Avalanche was mentioned in Chainalysis’s findings. According to the report, Avalanche specializes in customizability, scalability and interoperability. John Wu, president of Ava Labs — the lead developer of the Avalanche blockchain — told Cointelegraph that the network specifically aims to solve a number of problems within Web3 ecosystems. He said:“Avalanche has the fastest time to finality in the industry at about 500 milliseconds to 2 seconds. This means that all cross-chain and subnet transactions are immortalized in a blink. Financial institutions building DeFi products and Web3 gaming studios developing AAA shooters and RPGs need near-instant finality. It is a precondition to success. Without it, their apps cannot work.” To Wu’s point, finality is extremely important as more institutions enter the DeFi sector. In fact, Avalanche’s quick finality time could be much greater in comparison with Eth2 finality time, which some believe may never reach under 15 minutes. Ethereum currently processes 15–30 transactions per second with over one-minute finality.Wu added that regardless of market conditions, the Avalanche community will continue to build. For example, Wu shared that subnets — a set of validators working together to achieve consensus on the state of a set of blockchains — will open new doors for DeFi. For example, he mentioned that a subnet’s ability to incorporate Know Your Customer (KYC) requirements and circumvent the bottlenecking that might occur on a chain shared with third-party applications appeals to institutions. “The first Subnet engineered specifically for institutional DeFi is in production right now,” he said. Survival of the fittest? Although L1 blockchains are advancing, the Chainalysis report still notes the possibility of Ethereum becoming the “dominant player” due to market conditions and expected upgrades to the network. For instance, Raul Jordan, one of the core devs working on the Eth2 merge, told Cointelegraph that soon anyone in the world will be able to run an ETH node, which demonstrates the true power of decentralization.It’s critical that we give power to people all over the world, especially in developing countries, to run full nodes on consumer software. Full nodes preserve the security of the protocol by enforcing its rules #ethereum https://t.co/UVucpOQnzM— rauljordan.eth (@rauljordaneth) April 21, 2022Alex Tapscott, author and co-founder of the Toronto-based Blockchain Research Institute, further told Cointelegraph that there are two reasons to question the longevity of L1s:“First, bear markets generally see a drop in interest for crypto-native applications, so if gas fees drop on their own on Ethereum, why use a newer or less proven chain when you can use Ethereum? Second, the merge to proof-of-stake will improve Ethereum’s performance, so even if demand returns, it may be able to handle new growth.”However, Tapscott added that he believes any decreasing interest in L1s will be short-lived. “Long term, there will be surging demand for block space, with some developers and users willing to trade off between security (Ethereum) for speed and convenience. Also, I think many alternative L1s for all their potential are still pretty early stage tech, and as they mature they will become more reliable, useful and broadly adopted.” Recent: How to start a career in crypto? A beginner’s guide for 2022Tapscott further pointed out that “L1s were initially successful not because they attracted investor capital, but because they drove user adoption and interest.” And, if history has taught the crypto space anything, it would be that bear markets are a perfect time for projects to build. “A bear market would be a fantastic way to assess and support projects that actually make a difference in the blockchain ecosystem as long as innovative teams keep emerging to solve real-world problems using blockchain technology,” Regina pointed out. On the other hand, a number of projects also tend to fail in bear markets. Warden commented that there will indeed be fallout for several L1 blockchains: “Crypto winter is a time when every component of the crypto ecosystem is going to be questioned and tire-kicked, and not just DApps, but all aspects of crypto infrastructure, including L1s.” However, Warden added that projects that can scale and handle transactions will continue to accelerate, posing a challenge to Ethereum: “Businesses or projects that are building for long-term utility and real-world adoption will accelerate and garner attention during this period.”

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Binance to assist Cambodia in developing crypto regulations

Crypto exchange Binance has signed a memorandum of understanding (MoU) with the Securities and Exchange Regulator of Cambodia (SERC), according to a June 30 announcement.Binance and SERC will work together to develop crypto regulations in the country. SERC is looking to leverage Binance’s technical expertise and experience in the field to develop its own legal framework for the digital asset market.Cryptocurrencies are not regulated in Cambodia and any unlicensed activity involving these digital assets is highly prohibited. The partnership could prove pivotal for the South Asian nation where any crypto-linked activity is deemed illegal since 2018.Asia has become a crypto hotspot over the years with several nations in the region adopting a pro-crypto approach. The likes of Thailand, Singapore, Malaysia, Philippines have come up with progressive regulations to promote the use of crypto assets in their respective countries.Binance has paid special attention to good regulatory relations, especially after its 2021 debacle that saw nearly half a dozen countries issuing compliance warning against the crypto exchange. The leading crypto exchange has mended its relations since then and has forged critical partnerships in Asia over the past year in countries such as Thailand, Malaysia and Singapore.The crypto exchange has also made a name for itself when it comes to offering technical expertise to governments about crypto and helping them with regulating the nascent sector, The exchange had signed a $15 million investment agreement in Bermuda to teach and educate the community about crypto.Related: Binance U.S. makes BTC trading fee-free as competitors feel the heatBinance’s regulatory in-roads in the emerging markets have caught the attention of many including the likes of Alex Gladstein, chief strategy officer at Human Rights Foundation. Gladstein lauded Binance’s recent expansion in emerging markets such as Asia, Africa, and the Middle East and said:“While Western cryptocurrency companies are buying Superbowl ads and sports stadium rights, Binance is ruthlessly and custodial taking over emerging markets in Asia, Africa, the Middle East, and Latin America. They are winning.”Earlier in May Binance signed a similar MoU with the government of Kazakhstan, to help them with crypto adoption and regulations. Similarly, it had signed an MoU with the Dubai World Trade Centre Authority (DWTCA) in December last year and later bagged a license to operate in the country as well.

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Unizen 'CeDeFi' smart exchange secures $200M investment from GEM

Cryptocurrency exchange Unizen has scored a $200 million investment from private equity group Global Emerging Markets (GEM) which it will use to expand its business and its ecosystem.Rather than receiving the $200 million in funding all at once, Unizen noted on June 27 that the investment will come in the form of a “capital commitment’, with part of the funding released upfront and the rest will be provided later based on achieved milestones. Unizen did not disclose what particular criteria it had to achieve to receive the funding.Unizen calls itself a “CeDeFi” exchange mixing features of both centralized exchanges (CEXs) and decentralized exchanges (DEXs), it runs on the BNB Chain, formerly called the Binance Smart Chain. It aims to attract both retail and institutional investors by finding and aggregating the most cost-efficient trades across CEX’s such as Binance and DEX’s like Uniswap.GEM is described as a $3.4 billion alternative investment group that focuses on emerging markets, it selected Unizen with the aim to “have a hand in technology that will shape the future of finance.”Unizen stated that it will use the investment to expand its team, shore up its innovation and marketing pipeline, and speed up the implementation of its trade aggregation ecosystem, also hinting at an upcoming investor token release update for early July though no further details were provided.Related: Crypto brokerage FalconX raises $150M at $8B valuationAnother arm of Unizen is its ZenX Labs business, a CeDeFi incubator aimed at investing in and supporting decentralized projects by providing technical expertise and assisting with compliance.ZenX Labs most recently said it was building and launching a small satellite into orbit aboard a SpaceX rocket with the mission funded by entirely by Dogecoin (DOGE), it is expected to launch sometime this year.For GEM, it’s another investment into a blockchain-related business. In May through its digital asset investment firm GEM Digital Limited, it provided $400 million in funding to KaJ Labs to develop ‘Lithosphere’, a platform for cross-chain decentralized applications powered by artificial intelligence.

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‘Bad’ crypto projects should not be bailed out says Binance founder CZ

Binance founder and CEO Changpeng “CZ” Zhao argues that “bad” crypto projects should be left to fail and not receive bailouts from crypto firms with healthy cash reserves. In a June 23 blog post, CZ said that firms that have been poorly operated, poorly managed or have released poorly designed products shouldn’t receive bailouts — and should instead be left to crumble: “In short, they are just ‘bad’ projects. These should not be saved. Sadly, some of these ‘bad’ projects have a large number of users, often acquired through inflated incentives, ‘creative marketing, or pure Ponzi schemes.”“Further, in any industry, there are always more failed projects than successful ones. Hopefully, the failures are small, and the successes are large. But you get the idea. Bailouts here don’t make sense,” he added. The comments come amid recent moves by crypto billionaire Sam Bankman Fried and his firm Alameda Research to bail out companies and projects with recent liquidity troubles such as Voyager Digital with a revolving loan of 350 million USD Coin (USDC) and 15,250 BTC, which is worth $464.48 million at time of writing. CZ went on to note however, that Binance could look to support some cash-light firms that either have “problems but are fixable” or are “barely surviving but have great potential.”“Many projects have come to us who want to engage and talk. Again, in real life, these categories are not clear labels. All projects view themselves as the third category, and we need to look at each project in detail to decide. There is some subjectiveness to it,” he said. A number of firms are undergoing liquidity issues as a result of the current bear market, while others are reeling from exposure to potentially insolvent firms and projects such as Three Arrows Capital and Celsius. Related: Cristiano Ronaldo to get football fans into Web3 with Binance partnershipThe comments from the Binance CEO echo similar sentiments from U.S. Securities and Exchange Commission (SEC) commissioner Hester Peirce on Tuesday, who argued against crypto bailouts altogether. In an interview with Forbes on June 21, the crypto-friendly commissioner known as “Crypto Mom” argued that instead of bailing out struggling firms, it’s better to “let these things play out” to create a more sustainable industry. “When things are a bit harder in the market, you discover who’s actually building something that might last for the long, longer term and what is going to pass away,” she said. Centralized BinanceOn June 23 CZ stated during an interview with Bloomberg Business week the mission of his company is to support autonomous blockchain-based projects that can operate without a central authority or leader, as opposed to the traditional centralized model. The CEO also referred to his own company as an “organization” and his employees as “team members,” as part of this mission of decentralization.However, the publication cited comments from supposed anonymous former Binance employees saying that the company may not be as decentralized as claimed, stating that CZ has the sole authority over the company and its business decisions. “At the end of the day, he’s the holding company,” a former employee told the publication. The angle of the Bloomberg article may require a pinch of salt, given that CZ has never explicitly stated that Binance was a decentralized company despite his advocacy for the concept. Although the Binance Smart Chain does claim to be a decentralized eco-system but has drawn valid critiques over a lack of such in the past. While CZ has taken aim at poorly managed companies this week, the management structure of Binance has also been brought into question.

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Binance-owned Trust Wallet adds buy option via Binance Connect

Trust Wallet, a major self-custodial cryptocurrency wallet owned by the Binance crypto exchange, has completed a significant integration to enable easier crypto purchases.The Trust Wallet platform has integrated Binance’s official fiat-to-crypto provider Binance Connect, allowing users to purchase more than 200 crypto assets directly from credit or debit cards, the firm announced to Cointelegraph on June 22.Trust Wallet’s new crypto buy option is designed to simplify the process of buying crypto, enabling verified Trust Wallet users to fund their wallet with more than 40 fiat currencies.In order to add funds on Trust Wallet via Binance Connect, users will need to proceed with the similar Know Your Customer (KYC) checks to those on Binance. “It will keep a similarly high standard and process as Binance’s KYC,” a spokesperson for Binance told Cointelegraph.The fee for adding deposits on Trust Wallet via Binance Connect is 2%, the representative noted.The integration is available to all Trust Wallet customers except those located in restricted countries like the United States, Singapore, China, Canadian Ontario, Cuba, Belarus, Crimea and others. The integration went live on June 21, according to the spokesperson.The new integration is designed to provide a seamless and simplified method for users to access Web3, or decentralized assets. “Previously, Web3 users needed to undergo a long process to buy crypto on the blockchains directly. They had to do it through different centralized exchanges before finally sending their assets onto a blockchain,” the announcement reads.Related: Binance ends support for anonymous Litecoin transactionsBinance did not elaborate on benefits and drawbacks of funding an account on Trust Wallet versus adding funds on the Binance exchange. The representative only stated:“It depends on how you wish to use your crypto, by using Trust Wallet, it will be an easier way to get the crypto assets on different blockchains and enter the Web3 world.”Formerly known as Bifinity, Binance Connect is a new Binance’s subsidiary focused on fiat-to-crypto payments technology, launched in March 2022. Bifinity subsequently received a warning from the United Kingdom’s Financial Conduct Authority regarding the firm’s partnership with the investment firm Eqonex.

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