Happy Third Bitcoin Halving, everyone! Who knew it would be so exciting watching a piece of software work reliably, as predicted, 11 years after it started? Linda Xie tweeted, “Is it weird I’m crying a little?,” and I said that was understandable because Bitcoin has overcome seemingly insurmountable odds, and said, “It’s like Rocky, but, you know — financial technology.”
We cover all things halving in a great episode with Amanda Fabiano, who is in charge of Fidelity’s Bitcoin mining, and Christopher Bendiksen of Coinshares. Be sure to check that out! Plus, Yan Liberman of Delphi Digital gives us all the ways you can slice on-chain data to suss out where Bitcoin is right now — and where it might go.
This Week’s Crypto News…
Oh my, times have changed. For years, crypto companies have struggled to obtain and maintain banking relationships, but now, JPMorgan Chase, the second-largest bank in the world, has taken on cryptocurrency exchanges Coinbase and Gemini as customers. Paul Vigna of the Wall Street Journal reported, “Coinbase and Gemini had to go through a long vetting process to get JPMorgan’s approval …. The fact that both are regulated by multiple parties played a big part in the approval process. Gemini obtained a trust charter from the New York State Department of Financial Services in 2015. Coinbase is registered as a money services business with Financial Crimes Enforcement Network, or FinCEN, and also has a specialized license for crypto businesses, called the BitLicense, from the DFS. Both are licensed as money transmitters in multiple states.” The news is also notable, because, in 2017, JPMorgan CEO Jamie Dimon had criticized Bitcoin as “a fraud” that “will eventually blow up.”
Participants in the r/cryptocurrency and r/FortniteBR subreddits, who have about one million members apiece, now have the ability to earn points on those subreddits as Ethereum-based tokens. The points for r/cryptocurrency will be called $MOONS and the ones for FortniteBR called $BRICKS. You can earn points by QUOTE “submitting quality posts and comments” — with the community basically deciding how many points someone deserves. They can be spent on badges, custom emojis and GIFs — and when you buy them, the points are burned. Additionally, points will be used in voting, which will have two sets of results — one in which each member gets one vote, and the weighted count, in which members get a vote for every point they have. Reddit explains, “By giving weight to votes, Community Points let a community see how core contributors feel about a question or decision.”
Reddit also launched a Vault, which would be familiar to any of you who have used a cryptocurrency web or app wallet before. And of course, it’s the same situation where if you lose your phone or private key, you might lose access to your points. So, Reddit recommends creating a secure encrypted backup of your private key on Reddit, using a password different from your Reddit password, or by manually protecting your Vault, using a seed phrase that you store in a secure place such as a password manager. It will be interesting to see how Redditors new to crypto manage being their own bank.
Other details that may be of interest: Community Points is currently in beta and will be on Ethereum Rinkeby testnet throughout the summer. Eventually, the points will be migrated to the Ethereum mainnet, and for the time being, Reddit will pay the gas fees, since Reddits may not own ether. Reddit itself will receive 20% of the tokens distributed, and each type of coin will approach a cap of 250 million.
In a blog post practically seething with frustration, Telegram founder and CEO Pavel Durov, announced that the messaging company, which has been engaged in a legal battle with regulators, has decided not to proceed with the TON network — but not after making a litany of explanations, practically in disbelief, over court judgments that did not go in Telegram’s favor. For instance, he compares Grams, the cryptocurrency Telegram was trying to build, to gold, and seems incredulous that a US court would also block Grams from being distributed globally, not just in the US. He says, “Sadly, the US judge is right about one thing: we, the people outside the US, can vote for our presidents and elect our parliaments, but we are still dependent on the United States when it comes to finance and technology.”CoinDesk reports that some investors are discussing suing Telegram. One investor, Vladimir Smerkis, head of crypto startup Tokenbox, told CoinDesk “We are considering filing a lawsuit, as the money [Telegram CEO] Pavel Durov spent on the project got investors nothing, while at least, it would be fair to talk about getting Telegram’s equity, for example.” However, CoinDesk writes, QUOTE, “Pavel Durov has famously been unwilling to dilute his ownership of Telegram, and, according to company spokesperson Remi Vaughn, an equity distribution is definitely not on the table now.”
According to data from Glassnode, the seven-day average of the number of unique addresses holding 10,000 ETH or more fell to 1,050, down 6% from December and the lowest level since January 2019. In contrast, the number of Bitcoin whale addresses has increased, to 111 at the end of April, which is the highest level since August 2019. Some analysts speculate that this may be due to an anticipated bull run following the third Bitcoin halving this past Monday. However, others believe that the ETH may have been moved into DeFi, where whales could, for instance, earn money from lending.
Meanwhile, the number of addresses containing 32 or more ether is at an all-time high. The minimum balance needed to become a validator in Ethereum 2.0 is 32 ETH.
Larry Cermak of The Block tweeted a graph showing that the 90-block average for block times is now at 14 minutes. Additionally, miners, who were making about $18 million dollars a day — with 4% of that from fees — before the halving, made only $7.9 million on Wednesday, with 13% of that coming from transaction fees. We’ll have to keep watching this space.
Forbes reports that New York Digital Investment Group disclosed that it had raised $140 million in a Bitcoin Fund. It previously had an investment fund called the Bitcoin Strategy Fund, which was advised by Stone Ridge Asset Management LLC, a $15 billion firm, whose head of regulatory affairs is Ben Lawsky, the much-maligned architect of the BitLicense. Lawsky has said that he is banned for life from working on any matters he dealt with during his time at the New York Department of Financial Services.
“NYTimes 09/Apr/2020 With $2.3T Injection, Fed’s Plan Far Exceeds 2008 Rescue” was the headline that F2Pool put in block 629999, the last block before the third Bitcoin halving on Monday. For those of you who don’t know, this refers back to the headline included in the genesis block, which read, “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.” Wang Chun, cofounder of F2Pool, explained at Consensus: Distributed how they chose that headline to include in that block. If you find the link in my show notes, you can watch the brief video clip. As Andreas Antonopoulos tweeted about the headline F2Pool chose, “Iconic.”
A16z Crypto Startup School began publishing its video courses, one of which will be released each week. The first two are out now, with the first talk by A16z Crypto general partner Chris Dixon talking about why crypto networks matter. The second one, called Blockchain Fundamentals: Cryptography and Consensus, by Stanford professor Dan Boneh, is also out. Coming up are a talk by Brian Armstrong of Coinbase on setting up and scaling a crypto company, business models by Ali Yahya, partner at Andreessen Horowitz, and protocol to product by Nitya Subramanian, product manager at Celo.
The last Fun Bits I’ll leave you with for the week is a piece that Matt Huang of Paradigm wrote up on why, as he puts it, “Never before have we seen more interest in Bitcoin and its potential as a digital companion to gold.” There’s nothing in the pdf that would be new for many of you listeners, and he even explains, “This paper does not claim any novel insight. Instead, it is a summary of the conversation we often have with investors seeking to understand Bitcoin for the first time.” I’m just sharing it because I know a lot of people in the space are often looking for ways to explain Bitcoin to newbies, and this could be really useful on that score. It’s clearly written and has subheads and bullets and just might come in handy for some of you.