WHAT ETHEREUM UPGRADE TO PROOF OF STAKE MEANS. Ethereum is already a platform that has literally thousands of other blockchain projects building on it. As detailed before in the Trends Journal, (see 20 April 2021 “WILL BLOCKCHAIN SAVE THE DAY?” and other articles) think of it as a blockchain operating system, due to its dApp software building capabilities.
Ethereum isn’t the only platform that can host app projects on its blockchain platform. But it enjoys the widest use in that respect. And the platform will soon get another boost: a move from a “proof of work” method of validating transactions, to a proof of stake. It’s part of an upgrade project that will transform Ethereum to a 2.0 version, called Serenity or Eth2.
According to ethereum.org, the proof of stake changes will:
Proof-of-stake comes with a number of improvements to the proof-of-work upgrade means:
- better energy efficiency – you don’t need to use lots of energy mining blocks
- lower barriers to entry, reduced hardware requirements – you don’t need elite hardware to stand a chance of creating new blocks
- stronger immunity to centralization – proof-of-stake should lead to more nodes in the network
- stronger support for shard chains – a key upgrade in scaling the Ethereum network
The upgrade project has been in the works for some time, and has seen delays. But it’s set to happen this summer.
As noted by industry analysts, Ethereum is now overtaking Bitcoin in trustless money settlement, as a result of rapid increases in the adoption of Ethereum-based decentralized lending and finance apps, popularly known as “DeFi”.
Institutional Investors worldwide are noticing. CoinShares noted in mid-March, “Fund flows data highlighted Ethereum as being increasingly popular amongst investors with inflows of $113 million last week, comprising almost 50% of total flows.”
It’s considered quite likely that Ethereum’s upgrade will spur renewed upward momentum. Also note that the Trends Journal previously reported on likely upgrades that will enhance Bitcoin (“WILL ‘TAPROOT’ HELP BITCOIN REBOUND?”, 18 May 2021).
CRYPTOS QUESTIONED BY TRUMP AND WARREN. Last week former President Trump and Senator Elizabeth Warren (D-MA) found something to agree about: the “fakeness” of…cryptos.
“Bitcoin, it just seems like a scam,” Trump commented on Fox News. “I don’t like it because it’s another currency competing against the dollar.”
Trump said he wanted the dollar to be “the currency of the world”.
MSM outlets picked up on the comments, with a notable lack of the usual derision that characterizes most coverage of the longtime real estate businessman.
“Bitcoin is dangerous because it’s trying to create a level of credibility to unreliable and wholly unfounded value,” Justin Urquhart-Stewart, co-founder of Seven Investment Management, told the BBC.
The investment pro also predicted governments would take action:
“Governments don’t like other people creating money – they’ve seemed to tolerate crypto-currencies for some time, but they will eventually get their own digital currencies established and will squeeze Bitcoin out into the margins.”
Senator Warren also disparaged cryptos, citing the energy used in digital mining, and the way cryptos have been a preferred form of payment of cyber criminals.
After exhorting the Federal government to go after cryptos, she pivoted and advocated for the establishment of “public” digital currencies: “Legitimate digital public money could help drive out bogus digital private money.”
The Senator failed to mention the Fed’s own horrendous monetary policies, which have led to the worst inflation erosion over the past two months of any period in the last 40 years. Fed money printing only accelerated with the onset of THE COVID WAR.
EL SALVADOR RATTLES IMF WITH BITCOIN PASSAGE. It’s official: Bitcoin can be used as legal tender in El Salvador. The Central American nation became the first in the world to formally adopt the crypto for use in payments, and servicing all monetary debts, including paying taxes.
The legislation also does several important things like excluding Bitcoin from a capital gains tax. The bill didn’t just pass: it earned a supermajority of 62 out of 84 votes.
Other countries like Japan have previously recognized Bitcoin as a “property value”, but the new law passed by El Salvador’s legislature goes much further. Salvadoran President Nayib Bukele promoted the law and submitted it for consideration.
So who’s not happy? The central banks of the world, represented by the International Monetary Fund. IMF spokesman Gerry Rice reacted to the news:
“Adoption of bitcoin as legal tender raises a number of macroeconomic, financial and legal issues that require very careful analysis. What we have said in the past, in general, is that crypto assets can pose significant risks, and effective regulatory measures are very important when dealing with them.”
But that didn’t stopped Bukele from celebrating with a tweet to the rest of the world: “The #BitcoinLaw has been approved by a supermajority in the Salvadoran Congress. History!”
BRITISH HEDGE FUND BILLIONAIRE MOVES TO CRYPTO. Alan Howard, co-founder of the Breven Howard hedge fund, is reportedly taking big positions in cryptos. According to industry outlet The Block, Howard is transitioning to build a business that will focus on crypto liquidity.
Created in 2002, Howard’s hedge fund became one of the largest macro investment vehicles in the world. The 57 year old left his position as CEO in 2019, having made billions directing the fund.
According to sources who spoke to The Block, Howard is out to build “a one-stop technology platform to enable institutions such as neobanks, fintechs, and asset managers to access and trade crypto assets across exchanges and liquidity providers with a single API.”
401K CRYPTO INVESTMENT AROUND THE CORNER. Some workers may be able to add cryptocurrency investments to their 401(k) plans soon.
It may happen via a partnership between Coinbase, the NASDAQ listed crypto exchange, and ForUsAll, an investment platform for the government regulated retirement investment accounts.
A new account called “Alt 401(k)” lets people acquire over 50 cryptocurrencies, but limits the portfolio percentage that can be invested in cryptos to five percent.
It’s seen as a start. There are mechanisms being put in place that would have the ForUsAll platform intervene with help and alerts when invested amounts in cryptos exceeded that five percent amount.
BLOCKCHAIN PERSPECTIVE. Cryptos have had wild swings before. A September 2020 article in U.S. News & World noted at the time:
“From humble beginnings in 2008 to its 2017 price peak, Bitcoin has taken investors and the world for quite the ride. In just over a decade, it’s spiked and crashed and rallied and fallen again.”
As a practical technology, blockchains and the assets and software built off them are still in their infancy. The same could be said of personal computers in the years between 1977 and 1991. Or popular use of the internet in the years from 1991 to, say, 2003.
Bitcoin was introduced as a concept in 2008, and the first “coin” was mined on a blockchain in early 2009. In 2010, that apocryphal but true story of a guy who paid 10,000 bitcoins for delivery of two large pizzas happened. The guy who took those 10,000 bitcoins also let them go. Cryptocurrencies didn’t exactly set the world on fire.
By 2017, the blockchain had gained a lot of investing enthusiasm from mostly geeky adherents, and had minted plenty of new young crypto tycoons. Plenty also lost crypto fortunes in boom and bust cycles.
That “world on fire” moment didn’t really happen until January of 2021. Will the blockchain prove as revolutionary as the personal computer or the Internet? It’s possible. And there are reasons for that.