Weekly DeFi Digest - July 22

Rebounding markets, incoming bipartisan bills, and Tesla dumps BTC (4.5m read)

Author

Philippa de Boissière
July 22, 2022

Market: Hot Take

📈 Market Summary

Is this the week crypto fully bounced back? Crypto’s top ten each either held their positions or, for the most part, saw increases compared with the previous week’s price action. DeFi TVL is also up, reflecting growing market confidence after a couple of pretty hairy months.

Bitcoin (BTC) may have taken a slight hit yesterday, falling 5% on the back of the news that Tesla has sold 75% of its BTC holdings. Crypto’s “bellwether” is still holding strong though, up over 13% on last week. But the star of the week is, without doubt, Ethereum (ETH). Mark September 19th in your calendars because this is the date that has officially been set for the merge and launch of Ethereum 2.0’s Proof of Stake network. It appears that the merge is being priced in, with ETH making a spectacular 34.49% leap this week.

News of the Week

We've slightly adjusted our format to have a bit more structure with 4 major themes, and deliver more relevant news in each section. We hope you find this more valuable!

👮🏼 Policy & Regulation

  • Members of the US House of Representatives are busy working on a bipartisan bill to regulate stablecoins; a process that has been considered with greater urgency following the fallout from the Terra ecosystem. The House of Financial Services Committee aims to release the bill to the public next Wednesday 27th

  • In a similar vein, The Financial Services and Markets Bill, which seeks to regulate the use of stablecoins as a currency, was presented to the UK Parliament this Wednesday.

  • Meanwhile, The Australian Competition and Consumer Commission (ACCC) has announced that it is launching a trial program in a bid to detect and remove scam crypto sites. The move comes after the ACCC revealed that USD$113m had been stolen from Australians last year through scams.

💻 Technology & Exploits

  • In what is anticipated to be “a giant leap forward for Ethereum scaling and ZK innovation”, the Polygon network has announced the test net launch of an ambitious Ethereum scaling solution. According to the network, the zkEVM L2 rollup solution maintains the security and decentralization of Ethereum whilst “increasing throughput and radically reducing fees.”

  • Premint, the NFT registration platform, has confirmed that it will be refunding USD$500k to users who were affected by a hack that occurred over the weekend. Over 300 NFTs were drained from unsuspecting wallets before the exploit was resolved.

  • A former Coinbase employee was charged with fraud on Thursday due to alleged insider trading. The US SEC has since declared nine cryptocurrencies that were linked to the case to be securities.

🏪 Market & Ecosystem

  • The market looked on in horror as Zipmex became the latest exchange to pause withdrawals on Wednesday. The platform tweeted yesterday that withdrawals and deposits would be re-enabled today after maintenance. Apparently, those transactions are now live again, so we can breathe a collective sigh of relief.

  • Elsewhere, Blockchain.com has announced plans to close its Argentina offices and cut back on approximately 25% of its staff. The exchange cited exposure to 3AC as a major factor in its decision.

  • Tesla confirmed earlier this week that it has sold 75% of its BTC holdings. The news follows slumping profits and ongoing supply chain issues for the manufacturer.

  • By contrast, a new study released by market analysts, Forrester, has revealed that BTC adoption is surging in emerging markets. According to the report, the cryptocurrency is being increasingly used in everyday transactions - just as Satoshi dreamed it would be.

💰 Funding & Acquisitions

  • Decentralized trading exchange (DEX), Hashblock, has been granted USD$25m in a Series A funding round. This latest injection of capital brings the company’s valuation to USD$400m.

  • Investment firm, Skybridge Capital, has declared that it is planning to launch a fund for privately held web3 and crypto fintechs. It is expected that more details on the fund will be released at Skybridge’s annual Conference, this September.

  • KuCoin, has raised USD$10m in a funding round from Susquehanna International Group. Bucking the trend of layoffs that has gripped crypto firms in recent months, Kucoin plans to use the funds to expand its team and solidify its role as a major player within web3.

  • Finally, The Open Metaverse Alliance for Web3 (OMA3) launched this week with the goal of overcoming industry barriers and creating standards for web3 and metaverse-based companies. The Alliance, which includes players such as Dapper Labs, The Sandbox, Voxels and others, has launched its own DAO to collectively meet the challenge.

Crypto 101 - Proof of Work vs Proof of Stake

Did you know that Bitcoin uses, on average, 1485.98 kWh of electricity per transaction? This is roughly equivalent to the power consumption of an average US home over 50 days! Why is this the case?

Well, that’s because Bitcoin uses a mechanism called Proof-of-Work, or PoW for short. PoW is a mechanism that helps the Bitcoin network reach consensus, or a shared understanding of which transactions have occurred. The “work” part of PoW is what consumes the energy.

This energy is used by millions of ‘miners’, which use cryptographic algorithms to generate special hashes, in order to compete for the prize of writing the next block of transactions. The prize, at the moment, is 6.25 Bitcoin, or about $23,300 USD, and this prize is given out every 10 minutes, which is the interval between new Bitcoin blocks.

While this entire process uses an extreme amount of energy, it’s not the only consensus mechanism used by blockchains. An alternative, and greener, approach is a mechanism called Proof-of-Stake, or PoS for short. Instead of crunching algorithms, participants put up collateral, typically called Staking, which they would forfeit if they behave maliciously.

In contrast to PoW, PoS uses comparatively little energy, as consensus is reached by randomly selecting one of the ‘validators’ in the network, instead of computing arbitrary hashes. Etherem’s new ETH2 network, as an example, writes new blocks every 12 seconds, providing 7200 chances each day to win the reward.

The coolest thing about staking is that it’s open to everyone who holds ‘stakable’ coins, empowering users to share in the rewards of running the network (which is often upwards of 5% of staked assets).

If you haven't done so yet, head over to the Cybrid blog to check out our latest articles!

Helpful Guides

You might find the following two guides helpful on your learning journey in Crypto.

  • Crypto Tech Primer: Get an understanding of the basics of blockchains, cryptocurrency and decentralized finance

  • Fintech Guide to Crypto Products: This is the "Hitchhicker's Guide to Crypto" for fintechs looking to launch cryptocurrency based products

How Cybrid Can Help

Cybrid enables FinTechs and Neobanks to unlock crypto-led growth with an array of crypto products including crypto trade, earn, rewards and more. Book a sales demo, or register in our sandbox.