Cryptocurrency Market Overview 09/18/2023
News block
1. Japan will allow startups to issue tokens instead of shares
According to local media, the Japanese government plans to allow startups to raise public funds by issuing digital tokens instead of shares. This updated system is particularly applicable to the category of funds known as Investment Business Limited Partnerships (LPS). Until now, Japan has lagged behind the rest of the world in the development of digital assets. However, the situation has changed in recent months.
Japan's main financial regulatory body, the Financial Services Agency (FSA), took a significant step on August 31, seeking to amend the tax code related to cryptocurrencies, thereby assuming a more active role in regulating cryptocurrencies. This step is aimed at freeing local businesses from the tax levied at the end of the year on "unrealized profits" from cryptocurrencies.
Japanese Prime Minister Fumio Kishida reaffirmed the country's commitment to the development of the Web3 industry in his keynote speech on the first day of the WebX conference in Tokyo. He highlighted the potential of Web3 to transform the Internet and drive social change.
2. Google Cloud: Web3 is a solution to business problems
According to the head of Google Cloud Web3, the crypto industry is too focused on token prices, and not on figuring out how smart contracts can be used to solve real business problems.
In his interview, the head of Google Cloud Web3, James Tromans, stressed the need to pay more attention to business logic in a smart contract, rather than the dynamics of supply and demand for a token: "What business tasks do you want to solve? When you use a smart contract to execute some business logic to solve your business problem, you use a token, but it's not about the token, it's about the business problem."
One of the main services of the Google Cloud blockchain is its Blockchain Node Engine, which offers users an autonomous node for accessing blockchain data, conducting transactions, creating smart contracts and launching decentralized applications.
Tromans argues that blockchain and smart contracts can lead to innovation, lower operating costs and new revenue streams.
Despite the bear market, Tromans said that Google Cloud is still in great demand from enterprises seeking to integrate blockchain technology: "Over the past 12-15 months, in the traditional corporate space, interest in using blockchain technology to increase efficiency, reduce costs and increase the speed of innovation has not disappeared."
According to Tromans, most of this demand comes from the TradFi sector to solve major financial and accounting problems. But Google Cloud customers are increasingly considering integrating blockchain-based solutions into digital identity and supply chain.
At the same time, Tromans argues that blockchain technology is unlikely to become widespread, at least until the user experience improves: "If the average end user, who is not a computer scientist and does not understand blockchain, should know about their private keys, we are mistaken. When you load a web browser, you use a lot of high-tech features, such as TCP-IP and HTTPS. None of these protocols mean anything to most people," Tromans added, suggesting that Web3 should aim for the same.
According to him, when the user experience is optimized, blockchain technology will solve problems in a number of industries.
"When Web3 gets mass adoption, we won't call it Web3. We'll just call it the Internet again," he said.
Overview of the crypto market
🔸 The current capitalization of the crypto market is $1.102 trillion
🔸 Trading volume for the last day is $24.97 billion
🔸 BTC dominance 47.2%
🔸 Fear and greed index:
- today 46, yesterday 46 a week ago 30
where 0 is extreme fear (may be a sign that investors are too scared - often it's a good time to buy), and 100 is extreme greed (the market needs correction).
Bitcoin has finished the week quite positively, the price is holding above the $26.6k level. And although the recovery is still at an early stage, the meeting of the Federal Open Market Committee on September 20 may increase volatility. Most market participants expect the Fed to maintain the status quo on rates, but surprises may arise during Chairman Jerome Powell's press conference after the rate decision.
Ethereum: anniversary of the transition to Proof-of-Stake
On September 15, 2022, the Ethereum network made a historic transition from the Proof-of-work consensus algorithm to the new Proof—of-Stake algorithm. As a result, miners lost the ability to verify transactions in the blockchain and form new blocks, and they were replaced by validators.
The most noticeable improvement in the Ethereum blockchain after switching to Proof-of-Stake was a sharp decrease in total energy consumption. Thus, according to the Cambridge Center for Alternative Finance, energy consumption in the Ethereum network has decreased by more than 99.9%:
In addition to using less energy, the change in the algorithm also led to the fact that the Ethereum network became deflationary due to the fact that the number of ETH coins issued daily by validators became less than the number of coins that are burned daily in the form of intra-network commissions for transfers. So over the past year, the number of ETH coins in circulation has decreased by 300,000 coins (worth $488 million at current prices). At the current rate, the number of ETH coins is decreasing at a rate of 0.25% per year:
The quantitative characteristics of the blockchain have also improved:
- The number of addresses in the network has grown from 205 million to 243 million;
- The number of new daily users has increased from 69k to 85k.
The subsequent update of Shapella in April 2023 led to the massive spread of ETH staking. Platforms such as Lido (LDO) and Rocket Pool (RPL) have benefited the most from this.
However, there is also a negative point in the transition to Proof-of-Stake — currently, most of the 5,901 active Ethereum nodes are managed through centralized web providers such as Amazon Web Services, which, according to many experts, makes the Ethereum blockchain vulnerable to a centralized point of failure:
According to Buterin, in order for Ethereum to remain sufficiently decentralized in the long term, it is necessary that ordinary people have a simple opportunity to manage nodes, but this is still difficult to implement in practice due to the high hardware requirements for node operators. Therefore, it will not be possible to solve the problem with the centralization of Ethereum in the near future.
Unlocking DOT for $400 million
At the end of 2021, the first auctions for Parachain in the Polkadot network began. In exchange for blocking their DOT, users received tokens of those projects that won the auction for the blockchain.
Participation in auctions provided for the blocking of DOT coins for 2 years. And now, starting from October 24, these coins will begin to return to their owners.
Why is this so important?
The first auctions were held just at the peak of the bull market in 2021 and caused a lot of excitement among users. As a result, the total amount of DOT blocked as a result of participation in auctions amounted to about 100 million coins. As a percentage of the circulating supply, this amount is about 8% and at current prices corresponds to $400 million.
In the next few months, 100 million DOT coins will return to their owners. But it is not a fact that a significant part of them will immediately enter the market. The fact is that when users blocked their DOT, the price of the coin was close to $50, and after 2 years, the current price is only $ 4. However, it is likely that DOT will remain weaker than the market for some time.
