Wednesday, August 31, 2022

Our chat with Ethereum's Vitalik Buterin

Ahead of the Merge, Coinbase CEO Brian Armstrong caught up with ETH's co-founder.

08.31.22

Ahead of the Merge, Ethereum co-founder Vitalik Buterin had an in-depth conversation with Coinbase CEO Brian Armstrong about the future of crypto. [Michael Ciaglo via Getty Images]

What's up? It's Coinbase Bytes

There's never a dull moment on the blockchain. Here's what you need to know this week:

  • Crypto stumbled after the Fed's hawkish inflation remarks. Fed Chair Jerome Powell spooked crypto and stock markets on Friday.
  • Vitalik Buterin and Brian Armstrong discussed Ethereum. Highlights from a wide-ranging chat between the ETH co-founder and Coinbase's CEO. 
  • The most important election season in crypto's history is approaching. Learn how you can become engaged on the key issues ahead of the U.S. midterms.

Price changes are for the past week, ending on Sep 1, 2022 at 01:00 AM UTC

MARKET UPDATE

The Fed's latest inflation remarks rocked crypto and stock markets. What happens next?

Every year since 1981, key leaders from central banks all over the world, including top brass from the U.S. Federal Reserve, gather in Jackson Hole, Wyoming to assess the global economy's most pressing issues and discuss plans to address them — kind of a high stakes vibe check for global financial markets.

At last year's event, Fed Chair Jerome Powell predicted that rising inflation would be "transitory," and unlikely to stay much above 2%. A full year later, with inflation at its highest point in decades and still hovering north of 8%, Powell took a notably different tone about taming inflation last Friday in Wyoming, dashing investor hopes for a straightforward "soft landing" and prompting both crypto and stock markets to fall sharply. 

So what did the Fed say exactly, why did it impact crypto, and what should investors be on the lookout for as September nears? Let's dive in.

  • On Friday, Powell said Fed policy actions could "bring some pain to households and businesses" as an "unfortunate cost of bringing down inflation." These comments, his most hawkish to-date about fighting inflation, suggested the continuation of higher interest rate hikes, a tool that also chills investor confidence across markets. Since his remarks, Bitcoin revisited sub-$20,000 levels and Ethereum has shed about 9%, while the tech-heavy NASDAQ and the S&P 500 have dropped roughly 5% and 4%, respectively.
  • Why does the Fed have so much impact on crypto markets? The short answer: It's complicated. The longer answer: One of the primary ways the Fed maintains price stability in the economy is by setting interest rates, which determine how cheap (or expensive) it is to borrow money. In a low-interest climate — like during the pandemic stimulus era — investors often pile into riskier assets like tech stocks and crypto in search of growth (remember how sharply BTC rose from 2020 to 2021?). But too much of this so-called "easy money" can contribute to inflation as demand outpaces supply — that's (roughly) why the U.S. is seeing surging inflation right now. 
  • Historically, inflation can have severe, long-term consequences, hence the Fed's aggressive efforts to tame it. But the side effects of rate hikes can be far reaching as well. Initially, investors fled riskier assets like crypto (BTC is down 70% since November, when investors first feared the Fed would need to hike rates), but ripple effects can include a "softer labor market" (you've likely seen more layoff news lately) and even recession. So when Powell mentioned "maintaining a restrictive policy stance for some time," markets lost confidence that the fight to end inflation was nearly over — hence Friday's steep selloff.
  • Crypto Investors are also bracing for September, a typically rocky month for Bitcoin. Over the last five years, September has been the worst month for BTC, with the top cryptocurrency by market cap having seen an average price drop of about 10%. BTC's history of late-summer weakness is being met by skittishness in the options market as traders are paying higher premiums for protection below the $18,000 mark.

Why it matters… As the macroeconomic picture grows cloudier following Powell's remarks, stock and crypto markets (both still highly correlated) are bracing for even stormier conditions ahead. But zoom in a bit, and the news looks more optimistic, as global crypto adoption continues to accelerate, financial institutions expand their digital asset offerings, and in the coming weeks, the long-awaited Ethereum Merge will upgrade the underlying tech and economics of the second-biggest cryptocurrency, a technical feat one market analyst described as a "once-in-a-lifetime moment."

CRYPTO CHAT

Ethereum's Vitalik Buterin and Coinbase's Brian Armstrong talk the Merge and crypto's future

We're officially on the verge of The Merge. Next Tuesday, Ethereum's blockchain is anticipated to begin its transition from proof-of-work (PoW) mining to more energy-efficient proof-of-stake (PoS) validation, shifting the way the DeFi-enabling network verifies transactions. Ahead of the upgrade — a technological endeavor years in the making — Ethereum's co-creator Vitalik Buterin sat down with Coinbase CEO Brian Armstrong in a wide-ranging conversation about the blockchain, the importance of decentralization, and how crypto will shape the future of technology.

Below are a few highlights from their discussion (which have been edited and condensed for clarity.) You can listen to Brian and Vitalik's full conversation on our Around the Block podcast.

On the advantages of Ethereum's upgraded PoS blockchain

Vitalik Buterin: It is more accessible to be a participant and it's even more censorship resistant to be a participant. 

If you're a [PoW] miner, you [need] a large amount of capital to make a mining farm, and you have to be pretty significant in size. These are things that are quite detectable. Government has plenty of experience detecting large energy consumers in the context of wanting to arrest people growing the wrong kind of plants from time to time.

Whereas in PoS, all you need is just a computer with an internet connection somewhere. And that's much more censorship resistant. It's much smaller, more nimble, and more people can do it because of the lower capital requirements.

If you want to hear the pro-PoW view, there's plenty of [Twitter] accounts with words like HODL in their name that you can consult for those views.

On the early days of PoS as a theoretical concept

VB: Personally, I was never hostile to PoS. If you look back to some of the articles that I wrote in Bitcoin Magazine in 2013 — I wrote one piece about how PoS is still a very new idea, and there's still a bunch of problems people are thinking about.

Over the course of 2014, [Ethereum developers] were doing research to see just how far this can go. Can we make Proof of Stake actually be more secure than Proof of Work? 

Brian Armstrong: I have to admit, I was actually skeptical of PoS when I first heard about it. But after a couple of years, I really got proved wrong on that, and I started looking more into it. I credit [Coinbase co-founder] Fred Ehrsam. I think he was watching a lot of this stuff closely and he pushed me to take another close look at it, and just seeing Vitalik make progress on it, and the apps that started to come out.

I think we eventually came around to this idea at Coinbase where like, okay, you know what? We're gonna have to be agnostic on every chain that's coming out, every token. We're gonna have to support many things over time.

On key themes for the future of the crypto industry

VB: International inclusiveness and international diversity. It's something that's been very important for me personally. And I think it's something that the crypto space, especially historically, has really done a very good job of.

BA: Let's all work together. There's too many little tribal things happening in crypto. It's not just Bitcoin. There's a million apps and tokens and things out there. Sometimes people get too inwardly focused about which one's better, but the whole point of this is: Let's just get a couple billion people in the world using crypto every day.

VB: If you believe in crypto, because you want crypto to bring about some particular thing, then go build the thing. We need to have a bit more of that lovely, juicy, definite optimism in our crypto world.

AROUND COINBASE

Understanding what's at stake for crypto in the U.S. midterm elections, and more of the latest Coinbase news

  • This year's U.S. midterm elections "are the most important in crypto's history," says Coinbase Chief Policy Officer Faryar Shirzad. That's why Coinbase has launched a voter registration and education initiative to help encourage the crypto community to get engaged in the upcoming election and learn more about where candidates stand on policy issues central to crypto's future. 
  • The U.S. Treasury Department's decision to sanction cryptocurrency mixer Tornado Cash has raised a number of critical questions related to privacy and censorship on the blockchain. Coinbase Institute Director Hermine Wong led a panel discussion to explore the implications of this action and answer key questions from the crypto community, which you can watch here
  • Coinbase has confirmed that it will be fully supporting the upgraded Ethereum Proof of Stake chain following the Merge, and will evaluate any potential future forks of the Ethereum network that emerge on a case by case basis in alignment with our standard asset listing policy. See our guide on what to expect from Coinbase regarding the Merge here
  • If you're looking to explore more ways to receive yield from your crypto, check out Coinbase's revamped guide to our suite of Earn products, which includes Staking, DeFi yield, and standard rewards.

TOKEN TRIVIA

Which of the following is not crypto slang?

A gm!
B Rekt
C Gool
D FUD

Find the answer at the end of the email.

NOW TRADING ON COINBASE

CBETH

Coinbase Wrapped Staked ETH ("cbETH") is a utility token that represents Ethereum 2 (ETH2), which is ETH staked through Coinbase.

Trivia answer

C Gool
Coinbase
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Disclaimer: This material is the property of Coinbase, Inc., its parent and affiliates ("Coinbase"). The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Coinbase or its employees and summarizes information and articles with respect to cryptocurrencies or related topics that the author believes may be of interest. This material is for informational purposes only, and is not (i) an offer, or solicitation of an offer, to invest in, or to buy or sell, any interests or shares, or to participate in any investment or trading strategy, (ii) intended to provide accounting, legal, or tax advice, or investment recommendations or (iii) an official statement of Coinbase. No representation or warranty is made, expressed or implied, with respect to the accuracy or completeness of the information or to the future performance of any digital asset, financial instrument or other market or economic measure. The information is believed to be current as of the date indicated on the materials. Recipients should consult their advisors before making any investment decision. Coinbase may have financial interests in, or relationships with, some of the entities and/or publications discussed or otherwise referenced in the materials. Certain links that may be provided in the materials are provided for convenience and do not imply Coinbase's endorsement, or approval of any third-party websites or their content. Coinbase, Inc. is not registered or licensed in any capacity with the U.S. Securities and Exchange Commission or the U.S. Commodity Futures Trading Commission.



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Friday, August 26, 2022

Price alert: Bitcoin (BTC) is down -8.11%

 
Coinbase
 

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Bitcoin (BTC) is down -8.11% to $20,009.70 in the last 17 hours.

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Wednesday, August 24, 2022

🏦 Crypto awaits the Fed's remarks

This Friday, Fed Chair Jerome Powell is expected to signal rate hike plans for the rest of 2022.

08.24.22

All eyes are on the Federal Reserve this week as Fed Chair Jerome Powell is expected to lay out rate hike plans for the remainder of the year on Friday. [Rudy Sulgan via Getty Images]

What's up? It's Coinbase Bytes

There's never a dull moment on the blockchain. Here's what you need to know this week:

  • Crypto markets sold off over the weekend. A closer look at how BTC and ETH responded to market pressure, and what caused the slump. 
  • CryptoPunks surpassed Bored Ape Yacht Club by a key metric. Plus the latest headlines from the world of NFTs.
  • The Federal Reserve released guidance for crypto banks. A new tiered system can determine how "novel" institutions can access the central bank.

Price changes are for the past week, ending on Aug 24, 2022 at 08:25 PM UTC

MARKET UPDATE

A closer look at crypo's late-August slump and the contributing factors

Crypto markets can be a lot like weather in the Midwest — never the same for very long. After July's Ethereum merge rally saw crypto's market cap recover from the depths of June's selloff and retake the $1 trillion mark, things got rocky again last Thursday. The market has since shed about $1.2 billion, dipping below that psychologically significant $1 trillion dollar mark three times, most recently on Monday. So how are BTC and ETH faring? And what's contributing to the downward pressure? Let's take a closer look.

  • Several Federal Reserve officials recently spooked markets with the possibility of another 0.75% rate hike in September, suggesting that inflation might not have peaked yet. Last Thursday's comments from St. Louis Fed President James Bullard coincided with tailspins in both the equity and crypto markets as the likelihood of a less hawkish 0.50% rate hike next month decreased. Now, markets remain skittish as investors and analysts await Fed Chair Jerome Powell's remarks this Friday at the Federal Reserve Economic Symposium, where he is expected to discuss planned rate increases for the remainder of the year. 
  • Bitcoin has shed roughly 10% since last Thursday, with intraweek lows in the $20,000 range. The largest cryptocurrency's price drop accelerated on Friday after $210 million of leveraged (borrowed) BTC was liquidated to pay back lenders after prices began their descent alongside the broader stock market — the S&P 500 is down roughly 4% in the same time frame.
  • Ethereum is down about 12% over the last week, and the price drop prompted issues for an NFT lender. Over the weekend, a group called BendDAO that specializes in NFT-collateralized loans (this enables Bored Ape owners to borrow money against the value of their simian NFTs) struggled with liquidity issues when depositors drained the company's reserves from 10,000 wrapped ETH to 5 ETH, adding downward pressure to the second biggest crypto by market cap. By Monday, some depositors returned, giving the firm time to vote on new ways to "build confidence" like adjusting its liquidation threshold. 

Why it matters… As major financial institutions continue to double down on crypto, and stock and crypto markets remain near peak correlation, macroeconomic uncertainty continues to drive the market. And this week (like most recently), the primary macroeconomic driver is the Federal Reserve's strategy to combat inflation. As one investment advisor recently told Forbes, "Investors are hanging on every word that the Fed is saying." 

PUNKY BUSINESS

Bored Ape Yacht Club Gets Punk'd

On Monday, classic NFT art project CryptoPunks overtook the ubiquitous Bored Ape Yacht Club for the title of digital collection with the highest floor (aka minimum purchase) price for an individual NFT, a designation that BAYC had held since December 2021. As of Tuesday morning, CryptoPunks' floor is about 71 ETH. BAYC's floor? About 63 ETH.

The change in market leadership came not as a result of surging popularity for CryptoPunks but from the ongoing impact the crypto winter has had on sales volumes and prices even for well-known NFT collections like BAYC, whose floor price has dropped more than 50% from its April all-time high. 

Meanwhile, leading NFT marketplace OpenSea has seen its trading volume plummet this month to its lowest level in more than a year, as the red-hot enthusiasm for NFTs has cooled during the larger crypto down cycle. 

Despite the market downturn, lots of interesting developments in the space are continuing to emerge. Here's what else you need to know this week in NFT news.

  • Spanish football powerhouse Atletico Madrid is launching an NFT collaboration with popular web3 fitness app Stepn. The collection between the soccer club and the "move-to-earn" app that pays users crypto for exercising will feature 1,001 soccer boot NFTs. 
  • The Pudgy Penguins NFT collection is having a banner month, with its floor price up 69% over last month. The Pudgys have been working on extending their presence into the physical realm of plush toys and children's books.
  • Tom Brady-backed NFT-site Autograph is rolling out a new product that combines collectibles with exclusive in-person events. The company says Signature Experiences will feature everything from exclusive merch to a chance to meet TB12.

FED & COMPANY

The Federal Reserve's new rules for crypto banks

Last Tuesday, the Federal Reserve released "final guidance" for "novel" institutions like crypto custodians to access the U.S. central bank. The 49-page document outlines how "institutions offering new types of financial products or with novel charters" (like Custodia, a Wyoming-based crypto bank) can obtain "master accounts," a financial status that enables direct banking with the Federal Reserve.

The Fed's guidance includes a new multi-tiered evaluation process that ranges from "more streamlined" review for FDIC-insured banks to "more extensive review" for institutions that "engage in novel activities." Regarding the new guidance, Fed Vice Chair Lael Brainerd said the goal was to "support a safe, inclusive, and innovative payment system."

NUMBERS TO KNOW

$185M 

The total revenue Nike has received from NFT sales, making it the undisputed leader in the space among traditional brands. The apparel brand collected more than seven times as much revenue as Dolce & Gabbana, which ranked second according to data from Dune Analytics. 

$56M

The amount raised in a Series B round by Estonian startup Ready Player Me, a maker of avatars for use in virtual worlds. The company, which counts Andreessen-Horowitz among its investors, is focused on creating avatars that can be used across metaverse experiences and not just in one virtual space. 

2,000,000+

The approximate number of Ethereum Name Service names that have been issued as of last week. ENS names are web3 usernames that represent long alphanumeric crypto wallet addresses — sort of like how you type in coinbase.com into your browser instead of our full IP address. The popularity of custom .ETH usernames has been increasing rapidly ahead of the upcoming Ethereum merge — the service went from the 1 million to 2-million-name mark in roughly 90 days, while it took almost 5 years to attract the first million. 

840,000

The number of app downloads for Nigeria's central bank digital currency (CBDC), the e-naira, since it launched in October. The government says it is looking to drive greater adoption of the e-naira by focusing on connecting with citizens who lack bank accounts. (CBDCs are state-issued money, unlike BTC, which is decentralized.)

AROUND COINBASE

The latest security tips and features to avoid online scams

  • Password recyclers, take note — strong, unique passwords (and multifactor authentication) are essential to help you boost your online security. That's why Coinbase has added enhanced password protection. Anytime a customer creates or changes their password, Coinbase automatically checks to see if the password has ever been exposed to a third-party data breach and alerts you if so. Learn more here.
  • As if dating were not difficult enough, a type of scam called a "romance scam" has seen an alarming rise on dating and social apps lately. These social engineering scams can be hard to detect at first, but we've identified some things you should be on the lookout for in a new article on the Coinbase blog.
  • The upcoming Ethereum merge is one of the most important events in crypto's history, and will play a key role in defining its future. Learn all about what is taking place with the merge from Coinbase's Jesse Pollak on this episode of the CRYPTO 101 podcast. (When it comes to your Coinbase account and the merge, see here for what you need to know.)

TOKEN TRIVIA

Which consensus mechanisms does Solana use?

A Proof of work & proof of stake
B Proof of copy & proof of time
C Proof of history & proof of stake
D Proof of time & proof of space

Find the answer at the end of the email.

NOW TRADING ON COINBASE

CELR

CELR is an Ethereum token that powers the Celer Network, a layer-2 scaling platform to build fast, easy-to-use, low-cost and secure blockchain applications at internet scale.

Trivia answer

C Proof of history & proof of stake
Coinbase
Download on iOS App store Download on Google Play

Disclaimer: This material is the property of Coinbase, Inc., its parent and affiliates ("Coinbase"). The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Coinbase or its employees and summarizes information and articles with respect to cryptocurrencies or related topics that the author believes may be of interest. This material is for informational purposes only, and is not (i) an offer, or solicitation of an offer, to invest in, or to buy or sell, any interests or shares, or to participate in any investment or trading strategy, (ii) intended to provide accounting, legal, or tax advice, or investment recommendations or (iii) an official statement of Coinbase. No representation or warranty is made, expressed or implied, with respect to the accuracy or completeness of the information or to the future performance of any digital asset, financial instrument or other market or economic measure. The information is believed to be current as of the date indicated on the materials. Recipients should consult their advisors before making any investment decision. Coinbase may have financial interests in, or relationships with, some of the entities and/or publications discussed or otherwise referenced in the materials. Certain links that may be provided in the materials are provided for convenience and do not imply Coinbase's endorsement, or approval of any third-party websites or their content. Coinbase, Inc. is not registered or licensed in any capacity with the U.S. Securities and Exchange Commission or the U.S. Commodity Futures Trading Commission.



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