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Busting Myths Around BLOCKCHAIN Ecosystem & Cryptocurrencies

The idea of Blockchain came into existence around 1991. But it’s only around 2008, credit to the whitepaper from Satoshi Nakamoto on “Bitcoin: A Peer to Peer Electronic Cash System”, the platform on which a bitcoin could be utilized started becoming popular. As the decentralized and digitalized currency seemed promising as an alternative, the framework […]

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The idea
of Blockchain
came into existence
around 1991. But it’s only around 2008, credit to the whitepaper from Satoshi
Nakamoto on “Bitcoin: A Peer to Peer Electronic Cash System”, the platform on
which a bitcoin could be utilized started becoming popular. As the
decentralized and digitalized currency seemed promising as an alternative, the
framework on which it functions came into limelight, and hence people
started taking Blockchain Ecosystem earnestly
.
The blueprint of blockchain initially focused on financial services only. But
after observing and examining its potential, the architecture started being
employed in several other industries as well.

Inter-Connection between Cryptocurrencies, Stablecoins,
and CBDC’s:

For someone who knows the inside-out of
the financial industry may observe the connecting points between Cryptocurrencies,
Stablecoins, and Central Bank Digital Currencies (CBDC)
.
For a layman, he/she may view these terms as different iPhones coming into the market
or the updates for the software making it more efficient. In the initial
interval since blockchain’s entrance, several hurdles came across in the forms
of scams, phishing, etc leading to the increment of volatility in the
structure. Just like in the scenario of the entrance of the World Wide Web,
with empirical evidence, the overall structure got modified. As
cryptocurrencies started being prominently utilized around 2014, various frauds
also occurred in that interval. Due to numerous cases of volatility being
compromised, Multinational Corporations and other stakeholders lost a big
proportion of money. To compensate and fix the issue, stable-coins came into
the picture. One key factor among others which appealed stakeholders because of
its similarity with traditional currency. That objective is acting as a store
of value and a medium of exchange and a unit of account as well.

A stablecoin at the core is a
cryptocurrency that maintains a stable value concerning the target price like
the US Dollar. Mostly, stablecoins combine the algorithmic techniques along
with the management of supply. Doing so makes the market incentivize by making commerce
the coin for $1 or less. A stablecoin unlike other cryptocurrencies can minimize
the exchange rate of volatility but isn’t entirely open and permission-less. Technically
speaking, stablecoins are fabricated over Ethereum Blockchain Protocol. The
reason for it is to swiftly modify the compatibility of the freshly issued
asset along with the pre-existing infrastructure. The most recent modification with
regards to stablecoins is in corporate governance. Specifically,
crypto-exchanges, clearinghouses, and many more to come can be categorized
under Electronic Shares on a Distributed Ledger. In a nutshell, the recent
version of stablecoins may establish an architectural layer for crypto assets.
Theoretically and practically as well, stablecoin could become the norm for
usage as it can permit liquidity to exchanges. To make the blockchain ecosystem
enter the mainstream financial institutions, CBDC’s would have to imbibe such
newer digital currencies and invest in them to regain the people’s trust.
Observing and using such technologies in daily activities will make them
(individuals utilizing the technology) want to use blockchain,
cryptocurrencies, stablecoins, consciously, or unconsciously.

Cryptocurrencies perceived as Speculative Bubbles:

The most recent bubble in the technology
industry was the dotcom bubble also referred to as the internet bubble. A
bubble or one may also call it an illusion, starts with an assumption that firms
in which venture capitalists invest may deliver profits in the future. But due
to several factors like non-genuine technology, discarding financial
accountability, focusing more on brand building, etc, the bubble or the
illusion busted. At the core, a
speculative bubble
can be examined and
deduced of consisting economical and behavioral factors. A bubble is defined as
a scenario where the circulation or the broadcasting of some information
propels the investor’s eagerness psychologically from one individual to another.
Economists and people in the Financial Services Industry as well have
scrutinized prior bubbles busted. Some common factors/biases include:

  1. Purchasing an overvalued
    commodity even after knowing it beforehand.
  2. Building expectations based
    on preceding prices.
  3. Thoughtful disparity.
  4. Herd behavior.
  5. Overconfidence.
  6. Fear of missing out.
  7. Exaggerated optimism.

According to Hyman Minsky, an American
economist, there consists of 5 phases in a life-cycle of a bubble, namely:
Displacement, Boom, Euphoria, Profit-Taking, Panic phase. In the displacement
phase, investors commence intriguing about a fresh idea’s prototype. In the
boom phase, a slight increase in the price is observed. The third phase or the
euphoria phase experiences a tricky scenario where a commodity is purchased at
an overvalued price knowing about it beforehand, just to sell it to an amateur
at a higher rate. In the profit-taking phase, financial institutions, institutional
investors, and several others start identifying a forthcoming crash and selling
assets for a profit before the bubble bursts (specifically those who’re able to
detect the unavoidable crash). In the last stage, the price of the
asset/commodity starts collapsing gradually.

The internet bubble happened around the mid-1990s
to 2002. The initiation took place with the launch of the Mosaic browser. The
displacement phase took off in 1993, as people were getting new ideas to do
business online, and fresh regulations to back them up. Credit to that, more
companies began opening up, and hence, more investors started investing in
firms being operated through World Wide Web. This made the entrance of the boom
phase. With investors becoming overly optimistic and confident, the euphoria
stage entered the picture. The simple reason being, the NASDAQ index indicated
a value of around 500 in the initial 1990s, while it reached 5048 in March
2000. As a large percentage of Dot-com firms believed the motto, “get big
fast”, the profit-taking phase started around 2000. Various pieces of research
imply that as the blockchain ecosystem is in its growth phase, stablecoins,
cryptocurrencies, and alike digital currencies would be of big aid in the long
term.

Functional Approach against boasting of Regulatory Uncertainty:

Individuals or firms mostly tend to go
against the Rules and Regulations because of uncertainty in the policy designed
and implemented, loopholes not getting rectified, political or personal
vendetta, etc. As the overall Blockchain
Ecosystem’s policies and regulations

are still underway, some portion of the population has started boasting about
the regulatory uncertainty out of fear or constructive criticism. There’s a
saying in the sales and marketing field, “one should know the appropriate time,
place, medium of communication, and the psyche of the consumer to convince them
to purchase or think of buying a product/service”. Similarly, thorough research
needs to take place before implementing a policy, and that to which has a
nature of modifying constantly depending upon numerous variables. A premature
regulatory or postmature regulatory would have certain drawbacks and not offer
a desirable result. On one side, the blockchain
architecture and applications

run through it updates quickly, while policy drafting and implementing on the
ground is a time-taking process.

Political, Personal, and Economical Hurdles:

There are quite a handful of people who
prefer to view everything from a pessimistic perspective. Few economists who
might be renowned globally for their contributions in the area of economics,
but don’t know much about the latest technology, and still want to offer their
point-of-view just for namesake. One illustration of it is an individual by the
name Nouriel
Roubini
. The individual may not a lot about
economics, but not much about the inside-out of the technology. Him making a
decision that may impact hundreds of thousands of lives (socially,
technologically, economically) would not be a good idea. An individual or a
group of individuals who have expertise in both the financial industry and
technology industry should be allowed to make pivotal decisions and not create
fear among the population across the world just for their personal or political
gains.

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Blockchain

Coinbase Secures Another Millionaire Deal With the US Government to Let Them Use Its Blockchain Analytics Software

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Coinbase and the U.S. Homeland Security have struck a million-dollar deal to allow the U.S. government to use the exchange’s services to analyze American citizens’ data.

According to official documents, The Immigration and Customs Enforcement (ICE) – a branch of the U.S. Homeland Security Dept. dedicated to cross-border crime and illegal immigration – paid Coinbase $1.36 million in licensing fees for Coinbase Analytics software.

Pay to Trace, Pay to Tell

This would be the juiciest contract for Coinbase, which has a long history of collaboration with the U.S. government.

According to the official documents, there is no word on what information will be analyzed or shared by Coinbase. Data from the SAM.gov database assures that the exchange “is the only vendor who can reasonably provide the services required” by the ICE, and the information available to the public will be minimal due to the sensitive nature of the relationship between the ICE and Coinbase.

Previously, Coinbase had inked a deal with the U.S. Secret Service to license its Coinbase Analytics tools. The contract would last until May 2024 and for $183,750 would entitle the Secret Service to use its blockchain forensics tools.


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Others interested in using Coinbase’s analytics tools include the Drug Enforcement Administration (DEA) and the Internal Revenue Service (IRS) which also paid Chainalysis $625.000 to develop a tool to deanonymize Monero.

Coinbase and the US Government: A controversial Relationship

Coinbase has received heavy criticism in the past for its collaboration with the U.S. government. Still, its CEO has never regretted its lucrative relationship with law enforcement.

In a previous Twitter thread, Brian Armstrong assured that the creation of this service is actually positive for the growth of his company and that they do not deliver information other than what is already available on the blockchain:

“Have seen a few articles talking about Coinbase Analytics – figured I would share my thoughts on it, since I don’t think it’s particularly newsworthy – and lots of conjecture out there. Blockchain analytics software is essentially just compiling publicly available data that is already out there on the blockchain … There is an existing market for blockchain analytics software, so we sell it to a handful of folks as well.”

Armstrong later deleted it due to the strong wave of negative comments and criticism, but an archived version is still available.

Generally speaking, many privacy purists argue that Coinbase’s interests are contrary to the very philosophy of cryptocurrencies. Others even claim that Coinbase could facilitate the cross-referencing of its KYC data with that of the tools it provides.

The exchange maintains that its customers’ data is handled separately from its analytics tool so there is nothing to fear.

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Source: https://cryptopotato.com/coinbase-secures-another-millionaire-deal-with-the-us-government-to-use-its-blockchain-analytics-software/

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Blockchain

U.S. Treasury Targets Stablecoins in Latest Regulatory Risk Assessment

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As regulatory pressure mounts in the U.S., policymakers are putting stablecoins at the top of their agendas.

Citing “people familiar with the matter,” Bloomberg has reported that officials are crafting a policy framework set to be released in the coming weeks. Their primary concern is ensuring that investors can reliably move money in and out of tokens, it added.

The anonymous insiders are worried that a “fire-sale run on crypto assets could threaten financial stability and that certain stablecoins could scale up dangerously fast.”

Strengthening Regulatory Efforts

The Financial Stability Oversight Council is also preparing a formal review into whether stablecoins pose an economic threat.

The officials are focusing on how stablecoin transactions are processed and settled and whether market conditions have an impact, it added. Tomicah Tillemann, global head of policy at a crypto fund run by venture capital giant Andreessen Horowitz, commented:


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“It is significant and very consequential that we are witnessing early steps to create a regulatory framework around digital assets. That’s a big deal.”

The report, when released, will go to the President’s Working Group on Financial Markets. The body includes key agency heads such as Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, and Securities and Exchange Commissioner Chair Gary Gensler.

In late July, Yellen called for urgency in regulating stablecoins after stating that they are not adequately supervised. Gary Gensler echoed the sentiment in early August, stating that regulators must act to protect investors from fraud.

Also, in late July, Acting Comptroller of the Currency, Michael Hsu, said regulators are looking into Tether’s commercial papers to see whether each USDT token was really backed by the equivalent of one U.S. dollar.

Tether has repeatedly issued assurances that its reserves are fully backed but has yet to produce a full independent audit.

Stablecoin Ecosystem Update

Tether remains the market leader with a current supply of 69.4 billion, according to the Tether Transparency report. This is close to the all-time high for USDT, which tapped 70 billion earlier this week.

Of that total, 36 billion or 51.8% is based on the Tron network, with 33.8 billion or 48.7% running on Ethereum. USDT supply has grown by 232% since the beginning of the year.

Rival stablecoin, USDC, from Circle currently has 29.3 billion in circulation after gaining 651% in terms of supply growth so far in 2021.

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Source: https://cryptopotato.com/u-s-treasury-targets-stablecoins-in-latest-regulatory-risk-assessment/

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Blockchain

Bitcoin dominance is an irrelevant metric unless…

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The volatile cryptocurrency market has given way to multiple metrics for the market observers to analyze and predict what’s coming next. One such metric has been Bitcoin dominance, but as per Su Zhu, it should not be relevant to you unless you are a billionaire.

How so?

The CEO of Three Arrows Capital opined this after noticing the trend of the newcomers avoiding Bitcoin and Ethereum and opting for risky crypto tokens. When the largest digital asset was stuck in a wider correction period, altcoins like Dogecoin [DOGE] grabbed much attention. This was possible due to the hype created by Tesla CEO or, self-proclaimed “doge-father,” Elon Musk and the Doge community.

However, understanding the newcomers’ enthusiasm Zhu opined that if he were to bet on projects now, he would choose Solana and Avalanche.

Despite the popularity of altcoins, the exec remained bullish on Bitcoin and Ethereum as he expected, the former to flip gold’s market cap, and the latter to eventually hit a value above $25,000. Bold predictions, but nothing we haven’t heard before.

However, newcomers were more bothered about the dominance metric but as data suggested, Bitcoin dominance has recently been falling. The dominance was hit earlier but recovered to form a peak at 49.25% on 30th July. But given the correction phase that followed, the dominance of BTC fell and was last noted to be at 40% on 10th September.

It is interesting to note that despite plenty of adoption related news such as that of El Salvador, coming in over the past few weeks, it looks like the dominance has remained unaffected by it.

Source: CoinMarketCap

Twitter user and crypto enthusiast, @HsakaTrades also noted that Bitcoin dominance was not a relevant metric for anyone who has a “sub mid 9fig portfolio]. Agreeing with Hasaka, Zhu added,

“To clarify, if you’re holding for 5+ yrs, you shouldn’t be thinking about btc dominance in the first place. And obv btc and eth have a strong place in that portfolio.

If you’re allocating actively atm, and think debating btc v eth v alts is a good framework, you’re ngmi.”

While this advice could stand true for experiences, long-term trader interested in making money, but not the ones looking out to invest in tech. This was especially highlighted in the comments wherein the crypto users were upset about the CEO’s Solana [SOL] recommendation that recently witnessed an outage.

Nevertheless, the trading advice and strategies differd from trader to trader and Zhu’s opinion to not focus on the BTC dominance, prebably stemmed from a hodlers perspective. While interesting projects were now erupting in the crypto space, it looks like Bitcoin’s dominance, not only in terms of price, but as a crypto project could be challenge.

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Source: https://ambcrypto.com/bitcoin-dominance-irrelevant-for-anyone-not-10figs

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