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ETHEREUM DOMINANCE BECOMING A DONE DEAL
If the upcoming Ethereum “merge” to a proof-of-stake consensus method comes off without any hitches, it’s likely to further cement the crypto network’s dominance—and that spells trouble for “Ethereum killer” rivals.
So says Blockchain.com co-founder and CEO Peter Smith.
“The challenge for all of those blockchains is that you really have to hope that something goes wrong for them to be successful,” Smith told theblock.co in an interview post on 13 August. “If Ethereum delivers on the merge and on the sharding roadmap, there isn’t going to be a huge reason for a lot of those chains to exist.”
Smith pointed out that capital investors in other sectors don’t typically spread out investments to as many different projects as investors in the crypto space continue to do.
He said the fact that a good portion of money going into other Ethereum rival Layer-1 projects has come from crypto investors who made out well with Bitcoin and Etherum, has created a fairly unique, more spread out style of investing.
He mentioned projects like Solana, Avalanche and Near network as having particularly benefited.
And currently, new blockchains like Aptos and Sui, both built with the Move programming language developed at Facebook, are finding favor.
Smith said while the spread of capital has certainly benefited investors who entered and exited at the right time, he believes at some point money will have to coalesce around the likely winners dominating in the space.
And the winner, barring serious problems with its upgrade path, is looking more and more like Ethereum, Smith believes.
“None of these alternative Layer 1s have come close to beating Ethereum, but they have made investors a lot of money,” Smith said to theblock.co.
He also noted, “[I]t becomes necessary in this conversation to differentiate between ‘is this stuff going to have a huge and meaningful impact on users and daily lives and building the future of finance?’ from ‘can we make money?’ Because the two things are not always one-to-one.”
Of course, many others would disagree with Smith’s assessment that Ethereum will still be dominating as the go-to network for building crypto-incentivized and powered blockchain apps over the next decade.
Those investing in protocols that already have low transaction costs, scalability and low energy consumption “green” consensus mechanisms, say Ethereum has too many problems at its core, and its multi-stage upgrade path, which still has a long way to go even after the next update, is bound to be rocky. In the meantime, its transaction speeds will remain a bottleneck, and prices won’t touch other networks like Hedera, Algorand, Solana and others.
For now, Layer 2 protocols like Polygon and Loopring that speed transactions and lower costs using the Ethereum base layer network, are crucial to Ethereum staying in the game and dominating.
Suffice to say, though Smith’s points are well taken, perhaps the crypto sector money is operating a little differently, because the technology and pace and breadth of innovation in the crypto space is quite a bit more complicated than the VHS Betamax wars, or even the dot.com era battles between Yahoo and Google, and MySpace and Facebook.
Ethereum is currently leading, but the game is still very early in crypto. The dust hasn’t settled just yet.
AUSTRALIAN CBDC PROJECT WORKING WITH HEDERA?
Last week Australia announced intentions to fast track development of a CBDC.
At a conference of projected participants in the CBDC study, including ANZ, one of the largest banks in Australia, the Hedera (HBAR) network was identified as one already having proven itself regarding an Australian stablecoin.
That could signal Hedera as a possible choice for CBDC study.
An ANZ bank spokesperson detailed the factors that were considered crucial in the development process:
“When we make comparisons, across the range of available networks, and we’re pretty chain agnostic, but when we’re trying to fall in line with our principles around sustainability, the Hedera network is very defensible in terms of the consumption of energy to arrive at consensus. And of course the cost is extraordinarily much…lower, by a factor of about a thousand, in a recent transaction we did, just to prove a point, right? So it’s very favorable from a set of use cases that require high throughput and scalability. And we believe that in the future, stablecoins will be so commonplace, that that will be a fundamental requirement.”
On 8 August a Yahoo News article citing Bloomberg said Australia would conduct a year long study of CBDC implementation.
The study project is intended to examine the possible economic advantages of implementing such a currency in Australia, the Reserve Bank of Australia, Treasury, and others said, according to Yahoo News.
The article noted that global central banks are moving quickly to ensure they don’t lag behind as money approaches its most significant reinvention in millennia and new ideas like cryptocurrency gain traction. The innovations offered by crypto technology, and world events like the COVID War, have led to consumers relying more on digital transactions instead of cash.
In the coming months, a report that goes into further depth about the project’s goals and methodology will be released, according to the RBA.
About-Face For ANZ
ANZ is noted for its close relationship with Australian Central bank authorities.
The evolution of ANZ regarding crypto technology has been notable, and not dissimilar to other institutional players around the globe, many of who derided cryptos, then embraced the technology.
An article on thedefiant.io outlined how ANZ in 2018 voiced a strong anti-crypto stance. The banking group declined to work with companies using cryptocurrency.
Fast-forward to March of this year, and ANZ became Australia’s first bank to issue a stablecoin tied to the Australian dollar. The A$DC was issued as an Ethereum-based stablecoin.
THEY CAN’T STOP DECENTRALIZED TECH, BUT THEY CAN ARREST ENGINEERS
Tornado Cash, an open source project where crypto holders can anonymize their transactions, met the heavy hand of the U.S. government last week.
Wallets associated with the DApp were sanctioned.
The decentralized app can’t be easily shut down. But people associated with creating software can be arrested. And that’s what happened to one of Tornado Cash’s engineers.
In an action that was obviously coordinated between nations, the Dutch Fiscal Information and Investigation Service arrested Alexey Pertsev, as reported by theblock.co.
Pertsev’s wife told The Block that the Dutch government has not ruled out more arrests and that she is presently working with attorneys.
In a statement regarding its actions, the U.S. Treasury labeled Tornado Cash as a “notorious virtual currency mixer.”
The Department contended:
“Today, Treasury is sanctioning Tornado Cash, a virtual currency mixer that launders the proceeds of cybercrimes, including those committed against victims in the United States,” said Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson. “Despite public assurances otherwise, Tornado Cash has repeatedly failed to impose effective controls designed to stop it from laundering funds for malicious cyber actors on a regular basis and without basic measures to address its risks. Treasury will continue to aggressively pursue actions against mixers that launder virtual currency for criminals and those who assist them.”
Unmentioned was the fact that Tornado Cash in April had taken steps that sought to comply to a degree with sanctions, by limiting known wallet addresses associated with sanctioned actors, as reported at the time by blockworks.co.
The crypto community, and a number of human rights groups reacted with dismay at the Fed crackdown, as reported by bitcoin.com and others. Fight For The Future pointed out that crypto anonymity was literally a matter of life and death for dissident voices fighting tyranny:
“Anonymity is not a crime, and there are many legitimate reasons to seek anonymity in financial transactions. Privacy tools are important to, for example, activists in authoritarian states where revealing financial information could get someone jailed or executed.”
Many argue that the U.S. government, via its increasingly strident anti-crypto moves, is really only acting to preserve wealthy entrenched financial interests, and spy activity to ensure and squeeze its cut from the sector.
Luis Cuende, a blockchain developer and the co-founder of Aragon, was among those shaken by the U.S. arrest of Alexey Pertsev: “I’m short of words. I’m short of breath. They detained him for writing code. Writing code. These terrorist organizations called traditional nations must be dismantled.”
Peter Van Valkenburgh of Coin Center, a leading U.S. based crypto rights group, broke down the Constitutional violations of the Treasury Dept action at a “ZCon” ZCash conference. The group is considering filing suit.
The Trends Journal has previously detailed how younger people cut out from benefiting from devolving western economies, are the ones most involved with crypto technologies (see “CRYPTO OPENING WEALTH TO YOUNGER GENERATION,” 2 Nov 2021). They will be the most direct casualties of what some are describing as an escalating U.S. anti-crypto war.
TRENDPOST: Government has a lawful right to tax income. Demanding to surveill transactions, and preemptively and indiscriminately proclaiming those seeking privacy as criminals, is another thing entirely.
The move against Tornado Cash is another malicious use of “regulation by enforcement,” an unfortunate reality of a late-stage, declining power where narrowly interested and selfish bureaucracies run wild inventing rules directly contrary to the economic well-being of average people.
The years-long lawsuit against Ripple Networks and its XRP token has been the poster child of the disease. That prosecution has impeded a technology that could literally remake the international settlements system to vastly benefit people, and provide game-changing liquidity improvements to entrepreneurs and businesses.
But entrenched powers make money and exert control via the dinosaur Swift system and current banking processes, so XRP remains under legal jeopardy.
Privacy, and ownership of one’s own labor and initiative, are fundamental human rights. Crypto technologies represent a radical empowerment with regard to both of those rights.
But corrupt and disingenuous authorities literally fomenting wars and destruction across the globe are now ramping up a war on cryptos to ensure vested government and corporate powers continue to control and primarily benefit from innovations created by the crypto community.
Crypto pioneers meant to provide people wrecked by financial manipulation with a means to directly transact, and exchange goods and services without enriching entrenched powers.
The success of the technology is obvious. The threat it presents to legacy powers is also now fully understood by those interests.
TECH CRACKDOWN CAUSING “DEJECTION” FOR CHINA’S GEN Z
A new Bloomberg report details how Chinese repression, with “zero COVID” lockdown policies, and crackdowns on the tech sector, is creating higher unemployment and dejection in younger generations.
Unemployment for those aged 16 to 24 rose to 20 percent in July, and even those with college degrees are being affected, according to Bloomberg.
When China moved decisively against Bitcoin miners in 2021, Trends In Cryptos predicted China’s need to control their population would lead to further tech crackdowns and inevitable problems.
In “The Geopolitics of Bitcoin,” (27 Jul 2022) we told readers:
“China’s system cannot take advantage of the decentralized blockchain revolution, because their political, and increasingly, their economic vision is directly opposed to the decentralization and autonomy literally embodied in the code of blockchain protocols.
The U.S. and the western nations that still, at least by heritage and a residue of common experience, value freedom, have an opportunity right now. They can embrace the crypto revolution. China can’t.
By supporting crypto innovations, the West can supercharge its economies, and move to restore the integrity of money. It can realize enormous benefits from the financial efficiencies that the blockchain is already introducing to millions utilizing decentralized money market borrowing and lending without mediating institutions like banks. It can also introduce a level of integrity and resilience to corruption or co-option into a virtually endless array of processes.”
We also forecast the effects that Xi Jinping’s more general tech crackdown would have on its economy, in “XI RAMPS UP ECONOMIC ‘CULTURAL REVOLUTION’ IN CHINA” (27 Jul 2021). And numerous Trends In Technocracy articles have argued that China’s social credit and surveillance state represent huge negatives in its quest for true world leadership, not plusses.
Unfortunately, as China has stepped up their repressions, the West and the U.S. have been busy blowing the opportunity by embroiling themselves in stupid wars and misguided crackdowns of their own on the crypto sector.
Between New York chasing bitcoin mining operations out of the state, the SEC persecuting Ripple Networks and now Coinbase over “securities” tokens, crypto “sanctions” attempts to weaponize the sector against enemies, the Euro region’s hypocritical “green crypto” regulations, and now the Treasury Department coordinating with Europe to arrest coders, the West is a mess.
It could soon get worse, if the views of powerful players like Senator Elizabeth Warren (D-MA), who serves on the Finance Committee, prevail. Warren wants to crush cryptos and copy the Chinese Digital surveillance and control Yuan.
There are intelligent regulations that could support the crypto sector without crushing it, as we recently pointed out in “COULD STABLECOINS SAVE THE DOLLAR?” (9 Aug 2022). The upcoming midterm elections may well prove crucial for the direction of crypto technology.
It may well end up being the Chinese century, but only by default, because the U.S. insisted on trying to emulate “the Chinese way,” instead of unleashing and trusting the power of freedom.