While the contract does wrap ETH sent to the address into WETH, the opposite is not true.
In a now-deleted deleted profile, an anonymous Reddit user allegedly lost close to $500 thousand on Sunday after sending wrapped Ether (WETH) directly into a WETH wrapping smart contract. WETH came into existence as a way for Ether (ETH) to conform to the ERC-20 token standard so that it can be traded directly with altcoins minted on the Ethereum blockchain.
To wrap Ether, users first send ETH to the WETH smart contract address and receive an equivalent token in return. However, to unwrap WETH, users must either swap for ETH on a decentralized exchange like Uniswap (UNI) or call the withdrawal function in the WETH smart contract. Instead, the anonymous Reddit user sent the WETH directly back into the WETH smart contract address in the hopes of receiving ETH back. Unfortunately for the user, this process is the equivalent of "token burning" and resulted in an irreversible loss of the trader's crypto.
While the user's identity is no longer available on Reddit, the transaction still appears on Etherscan, showing that 195.2 WETH ($501,358) was sent to the WETH smart contract at the time of publication contract and therefore lost forever. Most Reddit members were sympathetic with the trader, with u/0150r writing:
"Losing a half-million dollars worth of crypto by mistake is something that needs to be addressed before crypto can become mainstream. When it's this easy to lose everything, there's no way your grandma is going to be using it."
However, others pointed out that the original poster should have done far more to research the technology before using it, with u/jadecrystal writing:
"No, you don't need to design the technology, but if you don't have a basic grasp of … a microwave oven, a car's starter, engine, and steering column… or public key crypto and blockchain addresses, this is what happens."
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MULTI, SYN and CELR saw a substantial boost in price as the crypto ecosystem focused on integrating cross-chain interoperability as a new fundamental component in DeFi.
Interoperability is shaping up to be one of the main themes for the cryptocurrency market in 2022 as projects across the ecosystem unveil integrations that make their networks Ethereum (ETH) Virtual Machine (EVM) compatible.
While this has been one of the long-term goals of the ecosystem as a step on the path to an interconnected network of protocols, it has also created a new decentralized finance (DeFi) market for multi-chain bridges and decentralized finance.
Here are three of the top volume cross-chain bridges that the cryptocurrency community uses to transfer assets between blockchain networks.
Multichain
Multichain (MULTI), formerly known as Anyswap, is a cross-chain router protocol that aims to become the go-to router for the emerging Web3 ecosystem.
According to data from Defi Llama, Multichain is the top-ranked cross-chain swap protocol by total value locked, with $8.95 billion currently locked on the platform.
Multichain total value locked. Source: Defi Llama
One of the main reasons for the high TVL on Multichain is the large number of blockchain networks supported by the protocol. Currently, 30 different chainscan be accessed on the network.
Blockchain protocols supported by Multichain. Source: Multichain
According to data provided by Multichain, the protocol has processed a total of $53.15 billion worth of volume since launching, with $19.08 billion of that being transacted in the past 30 days alone. There are currently 485,399 users that have interacted with the Multichain protocol, amounting to nearly 2.256 million transactions.
Multichain network statistics. Source: Multichain
Users who deposit tokens into one of the pools supported by Multichain receive a sare of the transaction fees generated by the pool in question.
The protocol's native MULTI token is used to vote and participate in the governance of the Multichain ecosystem and has a circulating supply of 18.64 million tokens out of a total 100 million.
Synapse
Synapse (SYN) refers to itself as a “cross-chain layer ∞ protocol” that is designed to offer users interoperability between separate blockchain networks.
According to data from Defi Llama, Synapse recently hit an all-time high in total value locked of $1.16 billion prior to experiencing a wave of outflows that lowered the TVL to 740.43 million.
Total value locked on Synapse. Source: Defi Llama
The Synapse protocol currently supports 12 different chains which have a combined total bridged volume of $5.33 billion according to data from the platform’s dashboard.
Total bridged volume on each network supported by Synapse. Source: Synapse
A large percentage of the total volume recorded on Synapse has come since the start of 2022 with the protocol seeing an all-time high bridge volume of $157.8 million on Jan. 23.
Synapse bridge volume. Source: Synapse Analytics
The protocol's native SYN token has several uses within the ecosystem. Token holders can use it to conduct community governance votes via the SynapseDAO, liquidity providers (LPs) receive a percentage yield paid out in SYN for their deposits and it is also used as a subsidy to pay for the gas expended by network validators to secure transactions across the network.
LPs also receive a share of the protocol fees earned by the Synapse platform on each transaction.
Another popular cross-chain bridge is the Celer cBridge, a multi-chain network that enables instant, low-cost value transfers between 19 different networks.
The cBridge is a subsector of the larger Celer (CELR) ecosystem and utilizes the CELR token for operations on the protocol and as the reward token for liquidity providers.
Along with the CELR rewards paid to LPs, a percentage of the transaction fees generated by people who use the liquidity pools to bridge funds across chains are paid out to LPs and added directly to the pools, allowing the rewards to compound.
According to data from cBridge analytics, the total value of funds locked in the bridge contract (pool-based bridge) and the funds locked in the token vault contract (canonical token bridge) currently stands at $240.92 million.
cBridge usage statistics. Source: cBridge
A total of 89,897 unique addresses have interacted with the protocol since inception and have conducted a total of $2.842 billion in transaction volume.
Similar to the transfer trend seen with Synapse, the transaction volume on cBridge has gotten noticeably higher in 2022 with a record $71.12 million being transacted on Jan. 22.
Daily transaction volume on cBridge. Source: cBridge analytics
Some of the protocols currently supported by cBridge include Ethereum, Binance Smart Chain, Avalanche, Polygon, Fantom, Metis, Harmony, Gnosis, Arbitrum and Optimism.
Want more information about trading and investing in crypto markets?
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
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LooksRare aims to be an alternative to OpenSea, but the amount of wash trading on the platform raises questions on whether users really view it as a viable competitor.
LooksRare made its debut on Jan.10 and the recently launched NFT marketplace has drawn a lot of attention, not only because its daily trade volumes were more than double Opensea’s on the second day of trading, but also because it has become the new playground for wash traders.
Wash trading is a series of trading activities involving the same trader buying and selling the same instrument simultaneously, creating artificially high trading volume and a manipulated market price for the asset in play.
In the United States, wash trading in traditional financial markets has been illegal since 1936 and the most recent highly publicized scandal related to wash trading is the manipulation of LIBOR in 2012.
While wash trading has been highly regulated and closely monitored by exchanges and regulators, it seems to have found its new path in the unregulated crypto space and especially in NFT marketplaces like LooksRare.
A community-owned marketplace is a double-edged sword
LooksRare started with good intentions to share profits within the community. The token incentives and the trading rewards were essentially the secret weapon that attracted high volumes and beat Opensea in light-speed fashion right after its launch, but these same factors have also become the very weapon wash traders are using to flood the marketplace.
LooksRare appears to have foreseen the possibility of wash trading that could be induced by the lucrative trading rewards, but according to LooksRare Docs, they believed the cost of trading from platform fees and royalty fees would be too high to create any incentives for wash trading. Interestingly, reality shows the opposite.
The graphs above show that daily users and daily transactions from LooksRare are only a tiny portion (2% to 3%) of OpenSea, but the volumes are more than triple or even quadruple OpeaSea’s.
Using Jan. 19 as an example, the average trade volume on LooksRare is approximately $380,000 per user whereas on OpenSea it is only $3,000. Similarly, the average trade volume per transaction is around $415,000 on LooksRare, whereas for OpenSea it is only $1,676.
Basically, what the data shows is a very small group of users executing trades worth hundreds of thousands dollars. This surely does not sound like a playground for normal NFT buyers. With a 2% platform fee, royalty fee and the volatile gas fee from the Ethereum network, wash traders seem to still be able to find a sweet spot to balance their cost and profit.
Let’s have a look at how wash traders profit from buying and selling the same NFT.
LooksRare’s trading rewards are distributed over a total of 721 days over four phases. The daily reward is the highest during the first 30 days in Phase A and the total reward is the highest in Phase C (240 days).
The amount of trading rewards a single trader can obtain for any given day is the product of the fixed daily LOOKS trading reward (2,866,500 LOOKS) and the ratio between the individual trader’s trading volume and the total trading volume of the day. Therefore, the more trading volume created by the trader, the more reward they get. This mechanism creates great incentives for large volumes of wash trading.
In addition to the trading rewards, traders can also earn a portion of the platform fees collected based on the amount of LOOKS staked as well as staking rewards and liquidity provider rewards. But compared to the trading rewards gained from wash trading, the other rewards are too insignificant and close to a rounding error, so they will not be considered here.
A closer look at a wash trader with $90 million in daily trade volume
The largest LooksRare single-day trade volume was on January 19, 2022. By plotting the top 10 wallets traded on that day, two wallets stand out with more than $90 million U.S dollars traded on the day from each one as shown in the graph below. The activities from these two wallets also show back and forth buy and sells between them, which is a clear indication of wash trading.
Most of the time the wash traders choose NFTs with 0% royalty fee such as Meebits or Terraforms so the only costs from the trade are the 2% platform fee and the gas fee. In this specific example, on Jan. 19, the trader bought and sold Loot multiple times using these two wallets at a price around 6,500 times the floor price.
An example of a wash trading on Loot. Source:LooksRare
Based on the trading reward allocation and assuming the two wallets belong to the same trader, the total trading volume from this trader on Jan. 19 was $186 million; the trading reward earned from the trades is $6.2 million and the fee paid is $3.7 million (using $4.9 as LOOKS market price and 2% platform fee), resulting in a net profit of $2.5 million, which is 1.34% of daily return or equivalently 12,661% of annual return.
Most trading rewards on LooksRare go to the wash traders
Rewards claimed 24 hours prior to time of writing (Jan. 24, 2022). Source:Dune Analytics @elenahoo
Looking at the last 24 hours (as of Jan.24), 29% of the LOOKS rewards went to the top 10 traders. Similarly, when looking at the largest trade volume day, Jan. 19, 28% of the rewards went to the top 10 traders.
A large portion of the rewards go to a small number of wash traders. This does not exactly follow LooksRare’s philosophy of “By NFT people, for NFT people.” Sharing the profit within the community seems to have failed so far and the lion’s share of the profit only goes to just a few traders.
As Delphi Digital correctly pointed out, this model is unsustainable in the long-term and the trading volume is likely to drop significantly as wash traders gradually leave when it is no longer profitable.
LooksRare still has a long way to go to compete with OpenSea in terms of number of users and non-zero royalty NFT trade volumes. It will be interesting to see how the dynamic changes when the trading reward reduces by half in Phase B starting on Feb. 10, 2022.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
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BTC is attempting to form a bottom while LINK, HNT, FLOW and ONE are showing early signs of accumulation.
Bitcoin’s (BTC) relief rally rose above $38,500 on Jan. 29, but the bulls are struggling to sustain the higher levels. For the past few days, Bitcoin’s sentiment has closely followed the U.S. equity markets. Hence, analysts warned traders to be careful and not to read much into any possible weekend rallies when traditional markets are closed because it could be a trap.
However, analysts at trading suite Decentrader said in a recent report that a “near-term relief bounce” is possible. The report also highlighted that “meaningful buyers” were stepping in and that could result in “a potential change in the higher time frame trend from bearish to bullish.”
The recent downturn in Bitcoin seems to have turned the JPMorgan analysts bearish as they believe the increased volatility could “hinder further institutional adoption.” In a note, the strategists have reduced their long-term theoretical Bitcoin price target from $150,000 to $38,000.
If Bitcoin extends its recovery, select altcoins could attract buying from the aggressive bulls. Let’s study the charts of the top-5 cryptocurrencies that could extend the recovery in the short term.
BTC/USDT
Bitcoin’s relief rally has reached the stiff resistance zone between $37,332.70 and $39,600. The 20-day exponential moving average ($39,475) is also present in this zone making this important for the bears to defend.
BTC/USDT daily chart. Source: TradingView
The downsloping 20-day EMA and the relative strength index (RSI) in the negative zone indicate advantage to bears.
If the sellers pull the price back below $37,332.70, the BTC/USDT pair could gradually drop to $35,507.01 and later retest the Jan. 24 intraday low at $32,917.17. A break and close below this support could clear the path for a possible drop to $30,000.
Alternatively, if the price turns up from the current level and breaks above $39,600, it will suggest a possible change in the short-term trend. The pair could then rally to $43,505 and later retest the 200-day simple moving average ($48,833).
BTC/USDT 4-hour chart. Source: TradingView
The 4-hour chart shows that the 20-EMA has started to turn up gradually and the RSI has risen into the positive zone. This indicates that bulls are trying to make a comeback. If buyers drive the price above $39,600, the pair could reach the 200-SMA, which may act as a resistance.
On the other hand, if the price turns down from the current level and slips below $37,312.70, it will indicate that bears have not yet given up. The sellers will then try to pull the price to $35,507.01, which is an important support for the bulls to defend.
If the price rebounds off this level, it will suggest that traders are buying on dips. That may increase the possibility of a break above $39,600.
LINK/USDT
Chainlink (LINK) has been range-bound between $15 and $36 for the past several months. Several attempts to escape the range have failed, indicating that bulls are buying at the support and bears are selling at the resistance.
LINK/USDT daily chart. Source: TradingView
The bears pulled the price below $15 on several occasions in the past few days but they could not sustain the lower levels. This may have attracted buying from aggressive traders who are attempting to push the price above the 20-day EMA ($18.91).
If they succeed, the LINK/USDT pair could rise to the 200-day SMA ($24.75). Contrary to this assumption, if the price turns down from the 20-day EMA, the bears will again try to pull the pair below $15 and start a new downtrend.
LINK/USDT 4-hour chart. Source: TradingView
The 4-hour chart shows that bulls have pushed the price above the $16.88 overhead resistance. The 20-EMA is turning up and the RSI is in the positive territory, indicating that bulls have a slight edge.
If buyers sustain the price above $16.88, the pair could start an up-move to $20 and then to $23. Conversely, if the price turns down and plummets below $16.88, it will indicate that bears continue to sell on rallies. The pair could then drop to $14.
HNT/USDT
Helium (HNT) plunged below the 200-day SMA ($26.67) on Jan. 21, but the bears could not sustain the lower levels. The bulls aggressively purchased the dip to $20 and pushed the price back above the 200-day SMA on Jan. 26.
HNT/USDT daily chart. Source: TradingView
The recovery hit a wall at the 20-day EMA ($28.84) and turned down but the bulls did not allow the price to dip below the 200-day SMA. The price has been trading between the moving averages for the past three days.
This tight-range trading is unlikely to continue for long. If bulls drive and sustain the price above the 20-day EMA, the HNT/USDT pair could rally to $36 and then to the downtrend line.
This positive view will invalidate if the price turns down and plummets below the 200-day SMA. That may pull the pair down to $20.
HNT/USDT 4-hour chart. Source: TradingView
The price broke out of the downtrend line, indicating that the bears may be losing their grip. The bears tried to sink the price back below the 20-EMA but the bulls are attempting to defend the support.
The up-move may pick up momentum after bulls drive the price above $31 as that could signal a 1-2-3 bottom. There is a minor resistance at the 200-SMA but once that is cleared, the pair could start its march toward $40. Conversely, if the price turns down and plummets below $26, the pair could drop to $24.
Flow (FLOW) has been in a strong downtrend for the past few months. The bears pulled the price below the strong support at $6 on Jan. 22 but have not been able to build upon their advantage. This indicates accumulation at lower levels.
FLOW/USDT daily chart. Source: TradingView
The bulls have pushed the price back above the breakdown level and the 20-day EMA ($6.41) today. If they sustain the price above the resistance level, it will signal a possible change in trend.
The 20-day EMA is flattening out and the RSI has recovered into the positive territory, indicating that bulls are on a comeback.
This positive view will invalidate if the price turns down from the current level and plummets below the $6 support. Such a move will indicate that bears continue to sell aggressively at higher levels.
FLOW/USDT 4-hour chart. Source: TradingView
The 4-hour chart shows the price is facing resistance at the 200-SMA. This is a critical level to watch out for because the previous recovery had faltered at this resistance. If the price turns down from the current level, the FLOW/USDT pair could drop to the 20-EMA.
If the price rebounds off this level with strength, it will indicate that bulls are buying on dips. The buyers will then make one more attempt to push the pair above the 200-SMA. If they manage to do that, the pair could rally to the overhead resistance zone at $9.27 to $9.70.
ONE/USDT
Harmony (ONE) is trading inside a large range between $0.16 and $0.36. The bears recently tried to sink the price below the range but the bulls firmly held their ground.
ONE/USDT daily chart. Source: TradingView
The price has rebounded off the support and the bulls will now try to push the ONE/USDT pair above the 200-day SMA ($0.19). If they succeed, the pair could rise to the 20-day EMA ($0.23) where the bears may again mount a stiff resistance.
A break and close above the 20-day EMA could clear the path for a possible rally to $0.28. Conversely, if the price turns down from the current level, the bears will attempt to pull the pair below $0.16. If they can pull it off, it will signal the possible start of a new downtrend.
ONE/USDT 4-hour chart. Source: TradingView
The 4-hour chart shows the formation of a symmetrical triangle pattern. The 20-EMA has flattened out and the RSI is just below the midpoint indicating a balance between supply and demand.
This indecision could tilt in favor of the bulls if the price rises and sustains above the triangle. That could suggest a possible trend reversal and the pair may rise to $0.22 and later to $0.26.
This positive view will invalidate if the price turns down and plummets below the support line. Such a move will indicate that the triangle acted as a continuation pattern.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, you should conduct your own research when making a decision.
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A recent meetup on the Capitol Hill highlighted several key debates that will define the mining industry’s development in the years to come.
On Jan. 27, a group of eight U.S. lawmakers, led by Senator Elizabeth Warren, sent letters to the world’s six largest Bitcoin mining companies, demanding to reveal the detailed data on their electricity consumption. This isn’t the first time Senator Warren requested this information from a mining operation — last month a similar letter was sent to Greenidge Generation, which uses a natural gas plant to power its facility.
These moves highlight the increasing regulatory pressure on crypto mining businesses in the United States. But, as last week’s Congress hearing showed, the growing scrutiny might turn out to be an opportunity to align the mining sector’s development with the broader political push for clean energy. Here are some of the key themes around crypto mining that have captured the lawmakers’ attention and that will likely inform the intensifying policy conversation.
Total energy consumption
A cornerstone of any environmental critique of Bitcoin and crypto in general, the question of how much energy cryptocurrency mining consumes was expectedly prominent at the hearing. In a 2018 paper published in the prestigious journal Nature, a group of researchers predicted that Bitcoin’s growth could singlehandedly push global emissions above 2 degrees Celsius within less than three decades — not a good look given the international community’s stated mission to prevent the planet’s temperature rise of the exactly same magnitude.
Cambridge University Bitcoin Electricity Consumption Index set the tone of comparing the yearly Bitcoin-driven consumption to various nation’s levels — and as for now, with its 131.1 TWh per year the most popular cryptocurrency consumes more energy than Ukraine (124.5 TWh) or Norway (124.3), according to this source. The current estimate of Ethereum’s annualized energy footprint by Digiconimist stands at around 73.19 TWh.
None of the most widely cited estimates is beyond dispute, as the recent fact-check report by Bitcoin Policy Institute (BPI) suggests. It cited three separate articles from the peer-reviewed Nature Climate Change journal, one of them debunking the 2 degrees argument as “fundamentally flawed” and criticizing its methodology.
Crypto proponents prefer to compare Bitcoin energy consumption not to nations, but to other industries — in that case, according to the BPI report, BTC’s 0.27% of global energy consumption is less than that of gold mining, although the Cambridge Index sets the two equal.
Fossils vs renewables
In the context of the ever-growing political pressure on energy consumption, the search for a sustainable energy framework becomes crucial for any industry that wants to flourish in the digital age.
The critics of the crypto mining industry have recently highlighted several instances of mining operations relaunching the existing fossil power plants. The authors of the letter that some 70 NGOs sent to Congress ahead of the crypto mining hearing called the legislators’ attention to several such instances, like the relaunch of coal waste plants in Pennsylvania by Stronghold Digital Mining and the partnership between Marathon Digital and coal-fired plants in Montana.
There is also evidence that these are not the only American companies buying up the old ‘“dirty energy” plants to feed their mining operations — the pattern is observed from Texas to Missouri. At the Congress hearing, it was Steve Wright, a former general manager of Chelan County’s in Washington public utility district, who talked at length about the problem. He explained that miners’ interst in dormant fossil facilities is driven by a simple market mechanism: As renewable energy prices (on the West Coast specifically) grow in line with increasing demand, coal prices drop due to investors’ flight ahead of the upcoming 2025 ban on any coal usage in Washington state.
As Represenatives kept returning to this issue over the course of the hearing, it became clear that the tension between the use of fossil fuels for crypto mining and the industry’s potential shift to renewable energy sources is at the center of policymakers’ thinking on the issue. Witness John Belizaire, CEO of green data centers developer Soluna Computing, argued that there exist scenarios under which crypto mining can shift from a being “dirty” energy concern to a vehicle complementing and empowering the renewable energy sector.
Belizaire’s core argument is that computation-intensive tasks like Bitcoin (BTC) mining can be powered by the recaptured excessive (or, in the industry terms, “curtailed”) energy otherwise wasted by clean power plants. According to him, solar and wind farms waste up to 30% of generated energy due to incompatibilities with the old energy grids. Belizaire also addressed the problem of energy shortages allegedly driven by crypto miners, highlighting the fact that the kind of computations that miners execute can be stopped at any moment on-demand.
For now, the problem of “dirty mining” is here to stay simply due to the U.S. level of electricity production from renewable sources being below 7.5%. A recent study by DEKIS Research group at the University of Avila ranks the United States as the 25th country in the world in terms of its sustainable mining potential, with Denmark (65% of energy generated from renewables) and Germany (26%) leading the chart.
Nevertheless, America remains a safe zone for mining, while many other nations' electrical grids are less suited to handle additional load. With a reasonable regulatory framework in place, this could be a massive competitive advantage, laying the groundwork for the U.S. to become a global mining haven. Speaking to Cointelegraph, Belizaire explained that there are certain policy steps that can nudge crypto miners to “go green.” He listed a number of specific measures: “Extended tax credits and special investment tax credits for miners that use green energy and serve as flexible load, along with DOE loan guarantee that is extended to encourage the development of green crypto mining.”
PoW vs. PoS
Any discussion of a possible alliance between crypto mining and green energy tends to bump into a Proof of Work (PoW) versus Proof of Stake (PoS) debate, and the recent hearing was not an exception. It was Cornell professor Ari Juels who repeatedly stated that “Bitcoin does not equal blockchain,” in the sense that the energy-intensive PoW consensus mechanism is not the only way to enjoy the decentralization advantages of crypto.
And, of course, the number one alternative on the table is PoS consensus mechanism that will possibly be adopted by the Ethereum ecosystem and is currently used in a large number of new blockchain projects. It is also central to the development of smart contract-based technologies such as decentralized finance (DeFi) and non-fungible tokens (NFTs).
In the U.S., dominating the global Bitcoin mining market with the 35% share, the issue is way more pressing than in Thedeen's native Sweden, where only about 1.16% of BTC is mined. However, the real problem lies in the Asia-Pacific region, where, according to the The Global Cryptoasset Benchmarking Study, almost 50% of electricity to Proof-of-Work miners comes from coal.
None of the three experts who spoke with Cointelegraph on the matter see the the juxtaposition of the two consensus protocols as productive. John Warren, CEO of crypto mining firm GEM Mining, noted that there are “slim to none” chances of Bitcoin transitioning to PoS. With that fact in mind, and given Bitcoin's status as the biggest cryptocurrency, ‘the industry should focus its attention on increased adoption of carbon-neutral energy sources versus trying to alter the Bitcoin verification process.”
John Belizaire rejected the idea that the government should support any of the bulletins over another:
Congress does not have enough knowledge to make a call on the technical architecture of a global platform that powers billions of dollars in assets [...] The technology community should be the final arbiter of innovation [...] The POW camp will innovate to solve its problems itself.
Mason Jappa, co-founder and CEO of mining company Blockware Solutions, remarked that both Proofs have their comparative advantages, but, in echoing Belzaire’s testimony, underscored the compatibility potential PoW networks possess towards renewable energy. In that sense, Jappa sees PoW mining as a "net positive for society":
Mining is a perfect complement to the energy grid and is repurposing infrastructure that was otherwise not being utilized, along with providing a use case for building out our energy grid.
What’s next?
As Jappa noted, "It is bullish for the ecosystem that this hearing took place", as once again the lawmakers expressed their understanding that cryptocurrencies are here to stay.
Warren specifically appreciated the part of the discussion that “underscored the ability for the mining industry to innovate more eco-friendly solutions.” We still witnessed plenty of 101 explanations of blockchain technology that reminded of the long way lawmakers should go in terms of their understanding of crypto economy, but, as Warren poined out:
It's important to acknowledge that there were a number of positive remarks that stemmed from the discussion, showcasing to the nation that mining has created many new jobs and that Bitcoin introduced valuable blockchain technology to the world. That perspective has been largely missing from some of the recent public discourse around crypto mining.
Besides the obvious need for both the general public and legislators to get better educated on the issue, there are some clear focal points around which the digital mining industry could rally, Belizaire believes.
For example, laws or governmental programs that encourage the use of renewable energy over legacy fossil fuels to power the industry, like “Incentives for job-creating in rural parts of the country where mining operations are set up – at both the state and federal level.”
Thus, it appears that the green mining card is the one that can present a straightforward economic and environmental argument in favor of the crypto industry, while the PoW/PoS debate is something that should be reserved for the crypto community rather than regulators.
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Fee-less system or flexible blockchain with smart contracts: What do you choose to build your DApp? Or you don’t need to choose at all?
Cointelegraph is following the development of an entirely new blockchain from inception to mainnet and beyond through its series, Inside the Blockchain Developer’s Mind, written byAndrew Levineof Koinos Group.
People use social applications daily, but despite all the hype around supposedly “next-gen” blockchains, none of those social applications are decentralized. Let’s unpack why, using two blockchains as a reference: Ethereum and Steem.
Ethereum has far more developers than any other general purpose blockchain, and yet none of those developers have managed to build a social application with mainstream adoption. At one time, Steem was one the most widely used blockchains of any kind in the world, making it also one of the most used social DApps in the world, with a market capitalization that reflected this with an all-time high of about $2 billion.
Steem was able to grow extremely fast and onboard hundreds of thousands of ordinary users, but never received the level of developer adoption that Ethereum did, and ultimately failed to live up to its potential. How and why this happened is a valuable lesson about building both DApps and blockchains.
When Steem was being built, Ethereum was the only viable blockchain that a developer could use to build their DApp without forking and modifying the code of an existing blockchain like Bitcoin.
Thanks to Ethereum, instead of having to build a blockchain from scratch just to support some specific application (like a social network), the developer could just write up the code needed for their application and upload it to the Ethereum blockchain as a “smart contract.” This would enable the developer to piggyback off of all the hard work already done by the Ethereum blockchain developers and focus on their application.
Allowing developers to upload code to the blockchain created infinite possibilities, including the possibility to upload code that uses up all the network resources making it useless. Some limit had to be imposed on this “limitlessness.” To solve this problem, Vitalik Buterin invented “gas” — a decentralized system for charging a fee to execute code on a blockchain (Ethereum).
The fee-based design of Ethereum was brilliant and set the direction of general purpose blockchain design for a decade with nearly every subsequent blockchain implementing some variant of gas.
The genius of Ethereum is that it gave developers access to a limitless (“Turing complete”) programming language. The genius of gas is that it created a decentralized limitation on what developers could do with that language. It is this underlying conflict (limitless v. limited) that explains why there are still no mainstream social DApps on Ethereum.
Fee-less blockchains
The Steem developers took a fundamentally different approach than Ethereum. They built a very basic blockchain (a “framework”) named Graphene that they could easily transform into a specific social blockchain (an “application-specific” blockchain).
In addition to social features, the Steem developers experimented with a system for regulating network usage that was fundamentally different from gas. In short, it was fee-less.
When Steem first launched, a lot of people said it was a scam precisely because of its fee-less “bandwidth” system. They believed that since Bitcoin and Ethereum had fees, a blockchain without fees was bound to fail.
While the bandwidth system Steem launched with was far from perfect, by offering social features and allowing users to transact for free, Steem quickly became one of the most valuable blockchains in the world, and by far the most used … but it ultimately never really competed with Ethereum.
Smart contracts rule
The reason Steem was never able to rival Ethereum, to many people’s surprise, had nothing to do with its fee-less model, which the core developers continued to refine over the years and which is still in operation to this day.
Steem never rivaled Ethereum for the simple reason that Graphene (the blockchain framework it was built on) lacked smart contracts. Graphene made it easier to launch blockchains with specific features, but it was by no means “easy” and changing those features or adding new features was incredibly difficult, unlike Ethereum, which allows any developer to upload any code they want, whenever they want.
From this perspective, the solution becomes obvious. If we could combine the fee-less system developed for Steem with the flexibility of a blockchain with smart contracts like Ethereum, we could give developers the best of both worlds enabling them to create free-to-use applications with the freedom to add new features whenever they want! Simple, right?
Stay tuned for the next article in the series to find out more!
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Andrew Levine is the CEO of Koinos Group, a team of industry veterans accelerating decentralization through accessible blockchain technology. Their foundational product is Koinos, a fee-less and infinitely upgradeable blockchain with universal language support.
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Despite the price of BTC, the Bitcoin network is the strongest it’s ever been, according to industry experts.
Bitcoin (BTC) seems to be on everyone’s mind lately as the world recently witnessed the price of BTC take a rather unexpected bearish turn this month. On January 21, 2022, Bitcoin reached six-month lows, sinking below $40,000 for the first time in months.
While some panicked, other industry experts pointed out that the Bitcoin network has become verifiably stronger than ever before. The growth of the Bitcoin network has become apparent, as hash rate figures for BTC continue to set new highs this month. For example, on Jan. 22, the BTC network recorded an all-time high of 26.643 trillion with an average hash rate of 190.71 exahash per second (EH/s).
The hash rate will continue to grow, which is a good thing
Samir Tabar, chief strategy officer at Bit Digital — a publicly listed Bitcoin miner — told Cointelegraph that the BTC hash rate refers to the amount of computing power being contributed to the network at any given time. Tabar explained that when it comes to Bitcoin mining, a higher hash rate equates to a good hash rate. “The more computing power going towards maintaining a network, the more secure it will be and the more transactions it will be able to handle,” said Tabar.
As such, the recent hash rate figures for Bitcoin are extremely notable, even with the price of BTC being down. Peter Wall, CEO of crypto mining firm Argo Blockchain, told Cointelegraph that he wasn’t surprised to see the BTC hash rate hit close to 200 EH/s. Wall further stated that even with events that have recently disrupted BTC mining hash rate like the political upheaval in Kazakhstan, the hash rate will continue to grow higher each month:
“Argo Blockchain’s mining margin last year in 2021, which is our revenue minus our direct costs, was over 80%. It was a very good year for miners. In 2020, where BTC prices were much lower, our margin was 41%. So, this year I think we will still see strong margins in the space despite the recent drop in the price of Bitcoin and the increase in the hash rate.”
Darin Feinstein, co-founder and co-chairman of Core Scientific — a major publicly-traded blockchain infrastructure provider — told Cointelegraph that based on previous Bitcoin mining hash rate data, the BTC network grew by 200% following the mass exodus of miners from China:
“The Bitcoin network one year ago was approximately 143 EH/s. Following the mining ban in China, the network fell to 63 EH/s. Today, the hash rate has grown to approximately 198 EH/s. This recent increase represents three important metrics. One, it represents a 130 EH hash rate increase on the network. Two, it represents 130 EH of new hosting infrastructure and primarily new generation hardware deployment and three, this deployment has taken place in geographic regions that use far cleaner energy than the energy used in China.”
With this in mind, Feinstein noted that even though the BTC network has hit all-time highs in terms of EH/s, due to the massive improvements in miner chip technology and geographic distribution away from China, the network is now the most efficient and sustainable than it has ever been. Feinstein added that this data is important because it shows how much energy every terahash uses, which is generally represented by a metric called jules/terahash. He noted that this ratio has fallen greatly over the last several years, demonstrating a major increase in mining energy efficiency.
Michael Levitt, co-founder chairman and CEO of Core Scientific, told Cointelegraph that he fully anticipates for the BTC global hash rate to continue growing at an aggressive pace.
However, Levitt mentioned that this growth is dependent on the price of Bitcoin moving forward, along with the success of the infrastructure currently being built. “The amount of infrastructure expected will be challenged by global supply chain issues,” he remarked.
Feinstein added that infrastructure is the biggest challenge when it comes to mining Bitcoin. “The bottlenecks for Bitcoin mining are land, energy, equipment, and lastly, infrastructure. There is plenty of ASIC hardware to be purchased, energy and land are also readily available, but miners need a place to plug in power, and, historically, that is where miners run into issues,” he commented.
North America has become one of the world’s largest Bitcoin mining hubs, as per data from the Cambridge Bitcoin Electricity Consumption Index, which shows that 35% of the average monthly BTC hash rate comes from the United States, while 10% comes from Canada. Wall explained that North America has taken the lead as a global Bitcoin mining hub for a number of reasons. “This is the case due to the region’s crypto-friendly jurisdiction, its stable regulatory environment, pro-innovation nature and, most importantly, access to the most important thing miners need — low-cost power, preferably renewable.”
Wall elaborated that the low costs of power in the U.S. have been significant for miners, especially when organizations tap into the right part of the power grid. “We’ve seen significant growth in Texas over the last 12 months,” he said.
Cointelegraph previously reported that the Bitcoin mining industry in Texas consumed around 500 to 1,000 megawatts (MW) of power during Nov. 2021. The Electric Reliability Council of Texas reportedly anticipates that demand could increase as much as fivefold by 2023 and has planned an additional 3,000 to 5,000 MW.
Wall elaborated that many miners are moving to Texas due to the fact that the state operates its own power grid that consists of a high degree of power from sustainable generation sources, but needs more flexible demand, or load:
“Miners can provide a consistent load that is flexible. It’s also helpful that Texas has demand response programs in place, where miners will shut down and give power back to the grid when there is high demand. This makes the grid more resilient.”
Benefits such as these have prompted Argo Blockchain to build its next 200 MW facility in Dickens County, west Texas, directly next to a 5.5-gigawatt substation. “There is a lot of congestion at that substation and they need local load to relieve it. The power from west Texas needs to go a long way to reach major urban cities like Dallas and Houston. But, if we can use that energy much closer to where it’s being generated, that relieves the congestion,” remarked Wall.
By drawing power from a nearby substation, Argo Blockchain is demonstrating the use of sustainable energy. According to Wall, the mining company has been carbon negative since 2020. This is important, as Tabar stated that a massive environmental, social and governance movement is currently facing the crypto mining industry:
“Miners must draw from clean sources of power or else they will be regulated out of business. It can’t always be about the cheapest sources of power. Miners will eventually suffer valuation discounts if they use dirty power, even if that source is cheap.”
The perks of going public
A rush of mining firms to go public is another trend the Bitcoin mining industry is likely to witness this year. Most recently, Texas-based Bitcoin mining company Rhodium announced plans to offer 7.69 million shares at $12–$14 each in an initial public offering (IPO).
Core Scientific went public on Jan. 20 after merging with Power & Digital Infrastructure Acquisition in a SPAC transaction. Although shares of Core Scientific have fallen since then, Feinstein mentioned that every publicly listed crypto company — like Coinbase, Galaxy Digital and others — brings institutional investment opportunities to the U.S. market. “This is enhancing and bringing credibility to the entire industry,” he remarked.
Levitt added that Bitcoin miners going public brings about a number of benefits, including better access to capital while having publicly traded equity that can be used for acquiring and building other businesses. Moreover, Levitt added that having a public presence is useful for conversations in and around the financial services industry. “However, the principal benefit is much more ready access to capital for growing and developing our business,” said Levitt.
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