Blockchain Confidential - 10 December 2021
The U.S. is the king of Bitcoin mining, Ubisoft launches in-gaming NFT's, and the mongoose is now our spirit animal
The Week
Ethereum’s developers bought themself some time for their long-anticipated switch to proof-of-stake, delaying the current proof-of-work mechanism’s “difficulty bomb” again with the Arrow Glacier upgrade. Solana hit more headwinds, this time due to network congestion, slowing down the high-performance blockchain. The U.S. claimed the crown this week as the king of Bitcoin mining after the collapse of the industry in China post-crackdown, and hashpower is also back up near its all-time high of 180 million terahashes per second from May 2021, at 176 million TH/sec. Bitcoin mining took a kicking and kept ticking, it seems.
In a test of a key part of the emerging decentralized financial system, Nexus Mutual indicated they will not pay out on smart contract insurance after the BadgerDAO hack if it’s confirmed to be due to a frontend issue. After getting shut down in the U.S. by the SEC, Coinbase launched its Lend DeFi yield product for overseas customers.
Over in the metaverse, the artist behind Bored Ape Yacht Club is debuting five new NFT’s at Art Basel in Miami. Rarible expanded its NFT marketplace to the Tezos blockchain, with Solana and Polygon up next. And Ubisoft is also leveraging Tezos for in-game NFT’s, launching its Quartz platform this week. Given the potential for in-game purchases as a commercial use case for NFT’s, this is definitely worth watching.
The CME is now offering micro ether futures to try and attract more small investors, following on its micro-BTC future launch earlier this year. Also in the listed product space, Nasdaq Stockholm now offers Bitcoin- and Ether-backed ETN’s from 21Shares. Kickstarter wants to move crowdfunding to the blockchain, building on Celo. Fidelity will start offering Bitcoin-backed loans through Nexo.
Finally, in a great example of needing to be careful what you wish for, Rep. Brad Sherman accidentally minted mongoose meme coins during a Congressional hearing.
The Good Read
For this week’s Good Read we recommend lexdaoism’s post on connecting the legal system to NFT’s. Read When DAOs Get Real: Managing Real Property on the Blockchain. Fascinating stuff.
From the Research Desk
This week Ilya reviews a 2019 paper on analyzing digital asset risk & volatility. Read Managing cryptocurrency risk through Realized Variance forecasting.
Regulator Radar
In the U.S., SEC chair Gensler hedged on his views about digital assets as securities in response to follow-up questions after a recent Senate hearing — a key regulatory question hanging over the market. What could have been a circus, with crypto CEO’s testifying before Congress this week, was fairly friendly, with a lot of attention on stablecoins and exchange regulation. The OCC’s latest report on banking risks called out digital assets as a concern, with more guidance to come.
Worldwide, Bank of Thailand wants its banks to stay out of crypto, and Bank Indonesia framed its digital rupiah CBDC plans as a way to “fight” private digital assets, while Australia offered a somewhat warmer welcome, with plans to use a new regulatory framework to bring clarity to the market and set guardrails. Finally, French and Swiss central banks conducted a successful test of digital currency FX transactions in collaboration with the BIS, demonstrating that regulatory concerns are often mixed in with interest in the potential for innovation.
In the systemic risk department, Tether released its latest report on reserves, which again raised questions about its collateral from sharp-eyed observers. The Japan FSA aims to regulate stablecoin issuers in 2022. The BIS also called out stablecoin systemic risk as well as concerns more broadly about DeFi in a recent report. Interestingly, they also expressed concerns about centralization of decision-making authority in decentralized protocol governance.
At the Office
We wrapped up work on the new Cloudwall Capital website with the fabulous folks at 1st Main this week, and expect it to go live over the weekend. If anything goes wrong, remember: it’s always DNS. We launched our company portal on AngelList and posted our 2022 hiring pipeline. This week we are also delighted to announce that Bob Guzman is joining as Cloudwall Capital's first advisory board member. Bob brings deep asset management industry experience from Wall Street powerhouses like BlackRock, UBS, Aberdeen and Merrill Lynch, and will be providing invaluable advice on our product direction as we build Serenity, our flagship digital asset portfolio management platform.