Ethereum rally, crypto custody & ecosystem development
In Weekly Blockchain Insights, we share the most interesting Blockchain Tweets, discussions about crypto from all blockchain ecosystems and various blockchain solutions from the past week. Make sure to sign up for the newsletter below and get all blockchain insights to your inbox.
This week’s blockchain insights include positive crypto custody news from the US authorities, insights to blockchain project growth and the overall development of the blockchain industry.
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— Stephan Livera (@stephanlivera) July 22, 2020
Most explanations of blockchain, crypto and DeFi are still very technical and the utility of blockchain is still unclear to many people as we saw when J. K. Rowling asked people to explain Bitcoin to her. Are we able to explain it with 3 words or for children to understand this?
Explain #DeFi in 3 words.
— Binance (@binance) July 24, 2020
Haseeb Qureshi shared a great introduction to the most prominent decentralized exchange (DEX) called Uniswap, to automated market-making and impermanent loss. If you are currently getting started with DeFi this is a must-read.
In the last 6 months, AMMs like Uniswap and Curve rose up to overtake order book DEXes. Thanks to them, DeFi trading has grown more than 10x.
But why? What explains the rise of AMMs? Are order books a thing of the past?
(Spoiler: I don't think so.) https://t.co/RarjjEIXSx
— Haseeb Qureshi (@hosseeb) July 22, 2020
General blockchain insights & blockchain ecosystem developments
Stablecoin demand is at an all-time high for a number of reasons in a time of economic uncertainty. Many new stablecoins are launched and they can be used as collateral in DeFi lending or as hedge for crypto assets.
In a record quarter, stablecoin monetary base grew $3.8B, bringing the total market cap to over $12B
+ $USDT grew $3.5B, becoming the first stablecoin to breach $10B https://t.co/SeOpUn0ZGw
— Messari (@MessariCrypto) July 20, 2020
In 2020, with the launch of many new layer 1 protocols such as Europechain, Celo, Polkadot or Symbol from NEM and the presence of established protocols such as Ethereum, positioning is becoming more important than ever. While many layer 1 protocols are for general purpose, there is now a clear trend towards focus (DeFi, Gaming, Enterprise) and flagship projects per chain because that helps with positioning, onboarding of users and enables network effects.
Similar to how game consoles have "flagship titles", crypto protocols will have "flagship applications" that they ship with.
Examples:@flow_blockchain → @nba_topshot @0xProject → @matchaxyz @rally_io → @takivids
— Brian Flynn (@Flynnjamm) July 18, 2020
After a long DeFi rally, Ethereum broke out this week and the discussion about transaction costs and scalability started to return. Various blockchain protocols are starting to utilize scaling solutions such as sharding, multi-chain architectures, side chains and state channels (See Overview). But only a few layer 2 blockchain protocols such as the Lightning network are in production and adoption is low.
The dominant crypto narrative has officially shifted from L1 to app layer. That’s great to see. But as apps hit scalability bottlenecks the L1 narrative will return in the next 6-12 months. Like it did with Cryptokitties. Which L1 chains other than ETH are winning dev mindshare?
— Qiao Wang (@QWQiao) July 17, 2020
So far, current onramp activity doesn’t show meaningful inflows from new investors. The current increase in Total value locked (TVL) in DeFi is mostly a recirculation of money within the crypto market. Some investors choose to put their existing assets to work as collateral and chase liquidity mining rewards or short-term gains in token prices.
1/ Issue #42
Is Yield Farming bringing new users to DeFi?
With the rise of Yield Farming, billions of dollars flooded into various DeFi protocols. In less than two months, the total dollar value locked in DeFi tripled, going from $1B to more than $3B pic.twitter.com/j0xCLJA7Ex
— Token Daily (@tokendaily) July 24, 2020
Total Value Locked is an indicator of DeFi adoption but whales (large stakeholders) can deceive the real adoption curve. Crypto capital assets generate revenues and can be valued with the price-to-earnings ratio. Ultimately, the price-to-earnings ratio (P/E) is more important to determine the real growth of protocols and their valuations. Note: These open-source protocols can easily be copied and their defensibility is yet to be seen.
1/ Too much of the market's focus on DeFi has been about price, rather than the feature that gives many of these tokens intrinsic value: earnings.
Annualized DeFi earnings are up nearly 150% on the year, standing at $42 million USD today. pic.twitter.com/n5wZjyohEp
— Max Bronstein (@max_bronstein) July 26, 2020
Blockchain is more than cryptocurrency or technology. In fact, open-source blockchain technologies can be copied but a strong community can enable long-term growth and network effects. A shared mission, thought leaders, believe in a platform and good incentive structures are beneficial.
Some crypto VCs still think the moat for crypto networks is the “tech”.
If that were the case, BTC would have “died” by now.
ETH flourishing in spite of other “better tech” is another example.
In open source software, tech by definition cannot be the moat.
— SpartanBlack (@SpartanBlack_1) July 22, 2020
In the USA, the Office of the Comptroller of the Currency (OCC) published a letter that clarifies that national banks can provide cryptocurrency custody services to customers (See Full Announcement). This is an important milestone for cryptocurrency adoption and could result in banks acquiring digital asset custodians in the USA.
1/ GAME ON! The @USOCC's announcement that it's following #Wyoming by allowing national banks to custody #digitalassets is GREAT news for #crypto! Long overdue & hopefully will help U.S. regain ground it lost to other developed world countries by dilly-dallying for so long. pic.twitter.com/ODYM6bHSVZ
— Caitlin Long 🔑 (@CaitlinLong_) July 23, 2020
Visa just shared that they collaborate with players such as Coinbase & Anchorage and have been researching blockchain technology for years (See Full Announcement). The Block reported about Paypal’s growing involvement in blockchain while Paxos announced its crypto brokerage service.
5) Last week, @PaxosGlobal announced, "Paxos Crypto Brokerage" which enables any party to integrate cryptocurrency buying and selling. @RevolutApp is the first partner to leverage the solution for US customers.https://t.co/Gl5Lb0fMiu
— Blockchain-Comparison.com (@BCComparison) July 24, 2020
Sunny Aggarwal shared a great writeup that explains a potential future of crypto and what’s needed for mainstream adoption. According to him the integration with existing systems, open Finance and Open Law are the future of crypto while Web3 & the decentralized web are a parallel movement.
Wrote up “all my thoughts” on crypto and defi
tl;dr I ❤️ fiat-native, reputation-based open finance. screw these cryptocurrency shenanigans 😜https://t.co/zDJc36kDdL
— Sunny Aggarwal (@sunnya97) July 23, 2020