All the important letters coming out of China.
The global stablecoins race is back on, and has even gained extra momentum due to the coronavirus-induced flight to safety. China’s national blockchain platform and DCEP are in various stages of pilot and rollout, and Libra has come out with its revamped plans. All this has put the G20’s Financial Stability Board on notice, and the general interest in stablecoins is what gave Ethereum the push to reach parity with Bitcoin on value transferred.
On the podcasts this week, I’ve got a fabulous essay by Mariano Conto who talked about his personal journey with crypto. Out of all the essays, this one definitely got the most social media attention, so if you haven’t had a chance to listen, I highly recommend it! It’s also the last in the series — next week, we are back with regular episodes! On Unconfirmed, Stephen Palley and I get into the juicy deets on the various class-action lawsuits that have popped up in crypto recently.
This Week’s Crypto News…
Lots of blockchain news out of China this week. China’s Blockchain Service Network or BNS, launched domestically on Wednesday and is set to launch globally on April 25. It is designed to make it easy for companies and software developers to plug-and-play to build blockchain applications. CoinDesk quotes James Cooper, a law professor at California Western School of Law, who says, “The move is very much like the ‘One Belt One Road Initiative’ in which China provides other countries with infrastructure and gains some first-mover advantage.”
CoinDesk says the BSN is not a blockchain protocol, but “a centralized platform that has done the heavy lifting for developers so they can plug in and code, choosing from several enterprise blockchain protocols or public chains. The goal is to reduce their operational costs, improve flexibility and provide better regulatory oversight, according to the white paper.” So far, the permissioned blockchain protocols included are HyperLedger, Baidu’s Xuper Chain and FISCO, from a consortium of China’s Shenzhen government agencies and local tech companies such as Tencent, WeBank and Huawei. The white paper says that the BSN will also include public blockchains Ethereum and EOS.
Screenshots from a test of a DC/EP wallet application from the Agricultural Bank of China made the rounds this week. In a tweet storm, last week’s Unconfirmed guest, Matthew Graham said that it shows the four test cities, which are Shenzhen, Xiong-an, Chengdu and Suzhou, which he called tier 1 or tier 2 cities that are home to tech talent. One especially notable feature is “touch/offline payment,” which enables users to transact via near-field communication, or NFC, when the users are offline.
He also notes that the system for issuing DC/EP follows a two-tier system, in which the People’s Bank of China (PBOC) connects to commercial banks and other financial intermediaries, which in turn connect with retail customers. The issuance of cash as DC/EP is more like a conversion event, and takes a bottom-up approach, he says, “starting from the user’s own bank wallet, as opposed to top-down from the PBOC.”
Molly from Hashkey wrote a tweetstorm about it and said, “If China decide [sic] to fully regulate the crypto exchanges, using DC/EP might become the only way to buy/sell crypto to fiat.”
While China’s central bank digital currency plans get underway, Libra is retooling to create a handful of stablecoins tied to the US dollar, euro, British pound and Singapore dollar. It will still issue the Libra token, but that is now becoming a smart contract that aggregates these single-currency stable coins. The approach is similar to the IMF’s special draw rights or SDR.
The system, which they initially said would begin permissioned but over time transition to permissionless, will instead move to what David Marcus described in a tweet as “a market-driven open and competitive network” — one in which the participants will always remain known to each other.
As for what people think of the changes, one Silicon Valley investor told CoinDesk governments could be interested in outsourcing the transition of their currencies to digital to an organization like Libra, but he questioned whether partners will remain interested in a project whose business model features such low returns.
The Financial Stability Board, which advises the G20 on how to improve the global financial system, published a report on the risks posed by global stablecoins such as Libra. It said, “If users relied upon a stablecoin to make regular payments, significant operational disruptions could quickly affect real economic activity. Large-scale flows of funds into or out of the GSC [global stablecoin] could test the ability of the supporting infrastructure to handle high transaction volumes and the financing conditions of the wider financial system.”
Meanwhile, the rise of stablecoins has helped fuel activity on Ethereum, to the point where value transfer on Ethereum is now equal to that on Bitcoin, Messari reports. In a tweetstorm, Messari’s Ryan Watkins said this was driven by the fact that Q1 was the best quarter ever for stablecoins, due in part to the flight to safety caused by the coronavirus pandemic. He tweeted, “The action this quarter was so dramatic it shook the prevailing order in cryptocurrencies.
- Ethereum is becoming the dominant value transfer layer in crypto
- Tether cracked the top 3 cryptocurrencies by market cap
- Stablecoin challengers have gained serious momentum.
Stablecoins now account for 80% of daily transfer value on Ethereum, and they’re used for significantly larger transfers on average than Bitcoin.”
In Q1 of 2020, Grayscale Investments raised $504 million, with the Grayscale Bitcoin Trust, GBTC, garnered the most investment, at $389 million. Institutions such as hedge funds, crypto-native investors and family offices constitute 90% of the inflows since inception.
On a related note, the Financial Times reports that Andreessen Horowitz is raising a second fund, eyeing $450 million.
This week, crypto entrepreneur Alex Masmej announced he’d sold $20,000 worth of personal tokens called $ALEX to 29 participants. Alex holders will receive 15% of his income in the next three years, capped at $100,000, plus one-on-one sessions with Masmej, access to his network and possible participation in the seed round of his next startup. He’s going to work on building a new DeFi savings startup. The $20,000 will fund his relocation from Paris to San Francisco.
Am I the only one who heard this and was like, how the hell does the math work out for him on this? Because either he’s underestimating how far the $20,000 will go in San Francisco, or his idea of how much money he’s going to make is pretty low. Plus, he’s got all these Kickstarter-like bonuses he has to give out, some of which are time-consuming, and time is the most precious resource. Maybe I’m wrong — I guess we will see how this all pans out.
Last week, I mentioned some crypto community efforts to fight COVID-19, and I forgot to mention one called COVIDathon, which is a hackathon working on building privacy-centric solutions for CoVID-19 using AI & Blockchain technologies. It’s put on by the Decentralized AI Alliance, under the leadership of SingularityNET and Ocean Protocol. The first phase runs until April 30, which is the deadline to submit. So, if you have an idea, you still have a bit less than two weeks!