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Exploits, Liquidations, and What Lies Beneath the Surface
Crypto’s market cap declined by 6% over the past month. The main reason for this drop is the market’s low volatility, following Curve’s $62M exploit on July 30, until August 17. A combination of events could have influenced this sell-off, including a possible upcoming interest rate hike, the Ripple case getting longer, and rumors about SpaceX liquidating its Bitcoin holdings. Bitcoin and Ethereum fell by 6.62% and 8.19%, respectively, over the past month. The largest decentralized exchange by total value locked (TVL), Uniswap, suffered the most in August, declining by 29.05%. On the other hand, Curve’s TVL rebounded, growing by 19.78% over the past month, indicating that the 65.9% recovered funds remain on-chain.
Figure 1: Price and TVL Development of Major Crypto Sectors in August
Source: 21shares, CoinGecko, DeFi Llama. Data as of August 30 close.
5 Trends to Remember from August
• Declining market activity, FUD, and macro backdrop fueling the largest liquidations since FTX
In late August, the crypto market experienced approximately $1.04 billion in liquidations, with around $833 million from long positions. Various factors fueled the chain of liquidations, notably the Fed’s minutes emphasizing ongoing inflation and the potential for more interest rate hikes. This, combined with elevated US long-term bond yields and a hawkish Fed stance, prompted short-term risk aversion that impacted both the crypto and stock markets. This relationship is highlighted by Bitcoin’s renewed positive correlation with S&P 500 and Nasdaq, reaching 0.8 and 0.72, respectively, and implying that the three markets are once again moving in tandem.
The downturn was also exacerbated by erroneous reports of SpaceX liquidating its Bitcoin holdings. While many speculated about a potential sell-off, it’s important to note that write-downs are a standard accounting practice and do not necessarily imply that the investments have been sold or liquidated. In addition, global markets experienced a mild shock due to news of Evergrande’s bankruptcy filing under US Chapter 15, raising concerns about its impact on the global real estate market.
Finally, the SEC’s ability to appeal specific judgments about the Ripple case added to the negative sentiment, which we will briefly touch on next. Although August’s events pale in comparison to the gravity of the FTX debacle, Bitcoin’s annualized volatility recently hit its lowest level in over five years, which indicated an anticipated market breakout. That said, the market modestly rebounded on the news of a Federal Appeals Court ruling siding with Grayscale in their case against the SEC on converting GBTC into a spot ETF.
Figure 2: Liquidations Across the Crypto Market
Source: Coinglass (on August 17)
• Ripple Continues Saving Grace by Forging New TradFi Partnerships
On August 18, the SEC filed an interlocutory appeal against the inconclusive summary order in the Ripple case issued by Federal Judge Analisa Torres on July 13. The appeal primarily objects to the court’s view that the programmatic sales of XRP (on exchanges) are not considered securities, highlighting a disagreement among district courts regarding the controlling issues. In response, XRP fell by around 30% over the past month. Ripple has until September 1 to submit a response to the SEC’s appeal. There are no definite dates for the trial yet; Judge Torres suggested that the court would be in session later in the second half of 2024. Until then, we expect XRP to experience speculation to drive its price movement while Ripple continues to secure strategic partnerships to enforce its value proposition as a crypto-native software solution for players in traditional finance. In its latest move, Ripple is collaborating with fintech giant MasterCard and ConSensys, among others, to build a central bank digital currency (CBDC) program to support central banks and governments in pursuing a digital currency. The program will explore the design of CBDCs, interoperability, and limitations.
• Did Tether’s Profit Surge Lure PayPal’s Venture into Stablecoins?
The issuer behind the biggest US-dollar stablecoin is now the 11th-largest holder of Bitcoin. Following their announced plans to convert profits into Bitcoin, Tether has amassed 55K BTC (~$1.6B). The latest attestation report shows a ~$800M rise in excess reserves in Q2, reaching $3.3B. This significant development enhances demand for Bitcoin’s role in corporate treasury management. Conversely, Tether should convert surplus BTC and profits into cash to fortify the company’s resilience against unforeseen issues. For context, Tether’s cash reserves dropped from $5.3B in December 2022 to $90M in Q2 23, a concern for an $85B stablecoin, despite access to liquid instruments like US treasuries, and REPOs. Finally, although not confirmed by Tether, the wallet holdings align with the issuer’s quarterly holdings. That said, Tether’s thriving business endeavor might have piqued the curiosity of traditional financial behemoths cautiously entering the stablecoin landscape.
Figure 3: Tether’s Potential BTC Holdings
Source: 21.co on Dune
On August 7, Paypal partnered with stablecoin issuer Paxos to launch their own USD-pegged stablecoin, PYUSD, built on Ethereum and fully backed by U.S. dollar deposits, short-term U.S. treasuries and similar cash equivalents. According to the press release, eligible U.S. customers will be able to pay for their purchases using PYUSD in the same manner that Gnosis Pay announced it will empower European customers to pay for their purchases with Monerium’s euro-pegged stablecoin (EURe) via its Visa card, with a convergence mechanism running in the backend. This trend aims to boost mass adoption by solving two ailing issues stifling the industry, by providing users with a familiar user interface while being compliant to regulations. Moreover, onboarding more traditional players from the second generation of the internet shows the institutional appetite for the stablecoin subsector, whose market cap is valued at $125B, with USDT dominating by 66%. More traditional players, especially those with existing tools to their advantage, will likely follow suit, aiming to topple this dominance in their favor. In the grand scheme of things, the more regulated players in the space, the healthier the market.
• Coinbase Scores Two Points for Adoption
After a year in application, Coinbase won regulatory approval to offer crypto futures to its retail clients in the U.S. According to a recent study, 58.8 million Americans hold crypto, up 18% from the previous year. This move can bring more American retail investors into crypto, thanks to regulations, an essential element for mass adoption. The trading volume of the global crypto derivatives market represents almost 75% of the entire crypto market. The Coinbase Derivatives Exchange has established a deep liquidity pool with $4.7B worth of BTC and $2B worth of ETH futures traded in notional volume in 2023. We’re also seeing more adoption on the infrastructure level, with Coinbase’s scaling solution Base launching on Ethereum on August 9, attracting $226.59M in assets under management.
• Visa’s Experimentations to Abstract the Complexity of Crypto
After Visa initially announced their experiment utilizing Account Abstraction (AA) to streamline crypto native payments on top of Ethereum back in May, the financial services giant revealed the piloted project’s latest updates. Namely, leveraging the ERC-4337 standard, more commonly known as AA, Visa abstracted the process of paying gas fees in ETH using a credit card. As AA allows for asset conversion in the backend, users will not have to worry about holding the right native token to pay for transaction costs. Thus, users would be met with the flexibility of paying with their cards or any other ETH-based token, and the AA smart contract will simply trigger the conversion via what’s known as a paymaster smart contract that sponsors transactions on users’ behalf. That said, Visa’s experiment has the power and potential to transform the crypto native ecosystem and make them more accessible using the average users’ traditional financial instruments, and could, thus, catalyze the adoption of native blockchain applications without users necessarily becoming aware of the technical intricacies.
Figure 4: Visa’s Process to Abstract ETH Gas Fees
Source: Visa
What to Expect
• OP Stack Establishing its Presence and EVM Maintaining Dominance
Optimism’s modular framework, OP Stack, is maintaining its position as the leading scaling solution for Ethereum, with established players like Binance, Coinbase, Worldcoin and A16Z all opting to leverage the solution to build their customized networks. Coinbase launched public access to its scaling solution dubbed Base in August, leveraging the OP Stack. The scaling solution Base experienced tremendous growth, amassing close to ~$275M in AuM around two months and generating $3.2M in revenue, of which Coinbase will share 2.5% of the total amount with the OP Stack to help develop the broader Optimism ecosystem, while welcoming the deployment of some of DeFi blue chips like Uniswap, Aave, 1Inch and others.
Figure 5: Coinbase Scaling Solution AuM
Source: 21.co on Dune
While the initial shift was prompted by a meme coin frenzy, the ongoing surge in user activity signifies enthusiasm for the Ethereum ecosystem. Moreover, Base holds significant growth potential due to Coinbase’s extensive 110M user base, which can seamlessly transition to the on-chain ecosystem through user-friendly interfaces. In line with this, Coinbase revealed “on-chain summer”, an initiative to introduce users to Base’s vibrant ecosystem and the network’s enhanced performance. The program was a success as Base logged close to 136K daily active users at peak, surpassing Optimism and Polygon. It remains to be seen whether Base can sustain its user base in the long run. However, it will certainly be a key network to look out for over the next few months.
Finally, the enthusiasm for the Ethereum ecosystem has also reverberated across the wider smart contract landscape. For instance, Fantom is considering building an optimistic-based rollup linking to Ethereum, while Celo proposed pivoting into an ETH scaling solution using the OPStack. Binance has similarly launched its own ETH scaling solution dubbed OpBNB, aligning its technical approach with Base. Conclusively, all three decisions stem from the desire to harness Ethereum’s network effects and its liquidity amidst the declining on-chain activity.
Figure 6: Daily Active Addresses of the Four Leading Ethereum Scaling Solutions
Source: Artemis.xyz
• Where Are Stablecoins Headed?
Coinbase is doubling down on the stablecoin space by taking an equity stake in Circle. While it may not immediately impact investors, as Circle will still be issuing USDC, the move speaks volumes of the level of consolidation the community has reached. The more competition heats up in this space, the tougher it will be for smaller stablecoins to shine, which – in theory – should filter out the ones with weak underlying technology or little added value. Contrarily, with a clear added value, PayPal’s new stablecoin will take some time to catch up with the rally, especially since 90% of the stablecoin’s supply is still in addresses that belong to its issuer, Paxos Trust.
More legal clarity on stablecoins in the U.S. is on the way, and it could be PayPal’s golden ticket to set sail. On August 28, representatives from the Financial Services Committee sent a letter to Federal Reserve Board Chairman Jerome Powell objecting to the Fed’s recent “Creation of Novel Activities Supervision Program,” published a day after PayPal’s PYUSD launch. The supervisory guidelines aim at monitoring stablecoin activities engaged by banks under the Fed’s jurisdiction. In the letter, the Committee wrote that the Fed’s move undermines Congress’ progress on legislation to establish a regulatory framework for payment stablecoins. We believe the Committee’s letter indicates a political will to reach legal clarity, just like the Fed’s move was a strong indicator that stablecoins will inevitably soar in mass adoption.
• The Debut of Friend.tech and the broader Social-Fi movement
Friend.tech, a novel social app launched on Base network, letting users tokenize and trade Twitter account shares. Share prices scale with availability; more shares mean higher prices with a 10% tax split—5% for the protocol and 5% for the Influencer, while shareholders access private chats, exclusive content and deepen social ties with their influencers.
Despite early glitches, Friend.tech’s arrival is noteworthy. It employs Base’s Account Abstraction tech for a smooth on-chain user experience, letting users join with web2 credentials, deposit without a wallet setup, and trade shares fee-free. A web app model also evades Apple/Google limits, facilitating mobile deployment. Finally, Friend.tech integrates finance into social networking, reshaping the relationship to offer both financial and social gains and reflecting what is known as Social Finance (SocialFi).
Impressively, Friend.tech surpasses rivals like Lens protocol, achieving significant visibility in the social vertical. In 10 days, it traded ~$60M worth of shares, with up to $3M in daily fees, exceeding smart-contract platforms in peak hype. Remarkably, at the depth of the bear market, the application drew nearly 127K users, although some were possibly driven by the prospect of an airdrop while being amongst the rare crypto apps capturing the attention of external figures. High-profile personalities like NBA player Grayson Allen, CEO of Y Combinator Garry Tan, and even gaming influencers like FaZe Banks all joined the platform.
Figure 7: Total Trading Volume & # of Traders on Friend.tech
Source: @21co on Dune
In summary, Friend.tech could bring untapped web2 innovations into SocialFi, aligning with web3’s empowerment goals by converging social relationships with financial opportunities. However, pricing and wallet privacy need to be enhanced for trust. Vulnerabilities like linking wallets to Twitter emphasize the exigency for robust privacy safeguards within SocialFi applications to protect the technology’s integrity. Regulatory risks could also arise driven by expectations of user profits and revenue sharing. That said, Friend.tech’s is still worth monitoring as a blueprint for future crypto apps in terms of abstracting crypto’s complexity.
Bookmarks
• Exploits, Liquidations, and What Lies Beneath the Surface.
• Our researcher Tom Wan shared his insights in Blockworks’ webinar: Next-Level Web3 Data Strategies to Ride the Latest Trends.
• We published a dashboard tracking the post-mortem of the Curve exploit; check it out here.
• Have you heard of re-staking your staked ETH? EigenLayer is a new staking primitive that enables the reusing of staked ETH. We built a dashboard to track its progress and adoption. Check it out here.
Next Month’s Calendar
These are the top events we’re closely monitoring in September.
• September 20-22: Messari Annual Event
• September 30: Optimism Token Unlock (3.37%)
Source: 21shares, Forex Factory, CoinMarketCap
Research Newsletter
Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com
Disclaimer
The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.
Handeln på den nordiska ETF-marknaden november 2023 uppgick till cirka 9,1 mdkr (11,8 mdkr i oktober) varav cirka 8,6 mdkr omsattes i den svenska marknaden. Av den totala nordiska ETF-omsättningen var XACTs marknadsandel cirka 97%.
Av den totala börsomsättningen i Sverige i november svarade ETF-handeln för cirka 2,2.%.
Den nordiska ETF-marknaden november 2023
Som vanligt var det XACT som hade störst marknadsandel på den nordiska ETF-marknaden i november 2023, med en marknadsdel på 96,78 procent. Finska Seligson & Co hade en marknadsandel om drygt 2,6 procent, vilket faktiskt gör att detta företag hade 100 procent av den finska ETF-marknaden. Resterande andel, 0,57 procent, svarade norska DNB OBX för. DNB är, sedan XACT lagt ned sina norska ETFer, den enda aktören som är verksam i Norge.
Statistik för den nordiska ETF-marknaden för perioden: 2023-11-01 – 2023-11-30
Antal handelsdagar: 22
Under november 2023 var den mest omsatta börshandlade fonden den traditionella XACT OMXS30 ESG (UCITS ETF).
Den näst mest omsatta börshandlade fonden hävstångsfonden Xact Bear x 2. Xact Bear x 2 tillsammans med Xact Bull x 2 handlas frekvent, och på kort sikt, vanligt förekommande i till exempel daytrading.
På fjärde plats hittar vi XACT Svenska Småbolag, en fond som sällan hamnar så pass högt på denna lista,
På femte plats finns Xact Norden Högutdelande, en ETF som oftast ingår i varenda utdelningsjägares portfölj, just för att denna börshandlade fond delar ut varje kvartal. Denna ETF lämnade årets fjärde utdelning under november vilket kan ha bidragit till det stora intresset.
Av de mest omsatta ETFerna på den nordiska ETF-marknaden oktober 2023 var elva av de tretton mest handlade börshandlade fonder emitterade av XACT. Utöver ovanstående ETFer finns även två börshandlade fonder från Lyxor, numera Amundi samt en från isländska Landsbréf, som handlas på den nordiska marknaden.
Markets flourished in November. The total crypto market cap increased by ~13%, month-over-month, with increased institutional interest in this burgeoning asset class. Stocks also had a comeback last month, with S&P 500 and Nasdaq recording their best performance since July 2022. In line with the market sentiment, Europe’s inflation dropped more than expected to 2.4% in November, down from 2.9% in October, the lowest over two years. The cost of living has eased with plummeting energy prices, but higher interest rates limit the economy’s ability to grow. However, with a cooling inflation towards the ECB’s 2% target, markets are hopeful that interest rates will stop by April 2024. In the U.S., inflation data is coming out on December 12, with indicators like the personal consumption expenditures price index (+0.2% month-over-month) already pointing towards cooling inflation and potential interest rate cuts in 2024.
Ahead of the historically calm holiday season, Bitcoin and Ethereum increased by 9.31% and 13.38% in November, respectively, as shown in Figure 1. The biggest winners of last month were Solana (+69.28%), Avalanche (+86.72%), and Uniswap (+42.34%). Additionally, in this report, we’ll explore what Argentina’s new president could mean for South America’s troubled, second-largest economy. We’ll also discuss Bitcoin’s expanding utility and how it reflects on its fundamental metrics; exchanges looking at Polygon for deploying their own custom blockchain; Avalanche aiming to position itself as the platform for financial institutions; and Lido decentralizing its node-infrastructure operations.
Figure 1: Price and TVL Development of Major Crypto Sectors in November 2023
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Source: 21shares, CoinGecko, DeFi Llama. Data as of November 30, 2023.
5 Trends to Remember from November
Argentina’s New President
Bitcoin rallied back to pass the $37K mark as Argentina elected a pro-Bitcoin, right-wing president, Javier Milei. Although the president-elect made no promise to make Bitcoin a legal tender, the volumes indicate some hope that Milei’s appointment could mean economic revitalization for South America’s second-largest economy with the help of Bitcoin, a la El Salvador. El Salvador’s GDP is expected to reach $33.4B by the end of 2023, a ~20% increase from when it declared Bitcoin as a legal tender in 2021. With an inflation rate exceeding 140% in 2023, Argentina’s GDP growth has been sluggish, averaging 0.51% from 1993 until 2023, as shown in Figure 2.
“The central bank is a scam. What Bitcoin represents is the return of money to its original creator, the private sector,” Argentina’s president-elect said as part of his presidential campaign, vowing to shut down the central bank, replacing the Argentine peso with the US dollar, and embracing decentralized finance. Samson Mow, CEO of JAN3 (a startup scaling Bitcoin) and an advisor to El Salvador during its adoption of Bitcoin, has said he’s planning to meet with Argentina’s new president. Indicators of whether Milei’s plan will work in Argentina’s favor are yet to be discovered.
Figure 2: Argentina’s GDP Growth Rate
Source: Trading Economics
Bitcoin Fees Skyrocket While the Network Expands its Utility
Bitcoin’s fees have increased by 593.94% over the past month, mostly driven by Ordinals, a protocol that allows users to inscribe digital assets akin to nonfungible tokens. Ordinals have had the most inscriptions since May 2023, as shown in Figure 3. With the backdrop of Ordinals’ success rate, Bitcoin developer Robin Linus introduced BitStream, a decentralized file hosting on Bitcoin, where users can upload unique files, enabling anyone to monetize their excess bandwidth and data storage capacities without relying on trust or heavy-weight cryptography. BitStream’s pay-to-download approach allows the server to charge for each download, ensuring that the revenue scales with the popularity and demand for the media, creating a balanced and profitable ecosystem. This development is another expansion of Bitcoin’s burgeoning use cases and would onboard a diversified audience. With BitStream’s promise, Bitcoin can capture the total addressable market of data storage, which stands at at least $230B. Although BitStream’s pricing scheme is not clear yet, decentralized data storage solutions, like Filecoin and Arweave, have been proven to be a lot cheaper than Google Cloud, Amazon S3, and its other centralized peers, varying by usage, as showcased extensively in the tenth issue of our State of Crypto, which you can find here.
Figure 3: Fees from Ordinals and non-Ordinals (%)
Source: 21.co on Dune Analytics
Exchanges Looking at Polygon for Deploying their Own Custom Blockchain
Kraken and OKX are strategically eyeing the Polygon network, aiming to capitalize on its CDK framework for constructing their individual blockchains. This strategic move aligns with Coinbase Base’s remarkable success, amassing approximately $5.4M in profit since inception, translating to an annualized profit of around $20 million. Boasting 9M and 50M monthly users, respectively, Kraken and OKX processed a daily average of ~$1B in 2023 and would potentially foster substantial growth within the on-chain ecosystem. Both moves would contribute to Ethereum’s revenue via anchored networks paying security costs to settle their transactions. Additionally, leveraging CDK modules proves advantageous for Polygon, empowering network stakers to bond POL and enhance earnings amid escalating network usage — a positive demand loop for the POL token within the new Polygon 2.0 staking layer design. Notably, Polygon’s efforts to onboard diverse companies are gaining traction, surpassing BNB and Ethereum in supporting new applications (Figure 4).
Figure 4: Total number of new applications on the five leading Smart-Contract Platforms
Source: Artemis
Avalanche Aiming to Position themselves as the Platform for Financial Institutions
For instance, Citibank and Fidelity unveiled a foreign FX exchange solution operating on a private permissioned Avalanche Subnet to enable instantaneous settlement and cost-effectiveness. Further, JP Morgan and Apollo Global collaborated on an asset-agnostic portfolio management solution. The latter empowers fund managers to tokenize portfolios using JP Morgan’s ONYX and the Oasis Pro asset-issuing platform while leveraging multiple crypto interoperability protocols to seamlessly exchange and rebalance portfolios across various blockchains, bridging EVM and non-EVM, private and public chains.
The experiment demonstrated the power of smart contracts in automating over +3000 operational steps and reduced costs by almost 20% via programmatic settlement despite involving multiple parties in the asset management process. The experiment also demonstrated the benefits of interoperability, providing a holistic solution for managing traditional and alternative assets in a single discretionary portfolio spanning multiple asset classes.
Both initiatives underscore Avalanche’s unique value proposition, positioning it as a standout choice among smart contract platforms. The Evergreen subnets, designed for compliance with KYC and AML checks, offer native privacy and customizability, providing enterprise-level blockchain support without the constraints of a siloed private blockchain system. The model also facilitates a pioneering connection between traditional finance’s proprietary software and native crypto railways, potentially fostering synergies and accelerating ecosystem integration. Ultimately, despite the initial surge in Avalanche’s transaction volume following these integrations, reaching its peak since inception, as illustrated in Figure 5, the network activity sharply declined after that. This underscores the imperative for the network to intensify its initiatives in onboarding high-demand projects as subnets.
Figure 5: Total number of transactions on the Avalanche Network
Source: Subnets.avax.network
Lido is Decentralizing its Node-Infrastructure Operations
Lido DAO, the largest non-custodial staking provider, approved two proposals to adopt Distributed Validation Technology. DVT refers to a mechanism spreading out key management and signing responsibilities across multiple parties to reduce single points of failure and increase validator resiliency. That said, Lido will integrate DVT modules with Obol and SSV protocols, which is set to introduce a more diverse profile of node operators beyond its current list of 38 validators and help address a key concern around centralization. This is a key development as Lido stirred a debate since it’s close to accounting for a third of staked ETH (see Figure 6); it could have undesired influence over the network’s validation process and block production. This implementation is crucial to ensure the diversification of the protocol’s node operators and increase their reliability in case of validator failures or censorship attempts. Conversely, SSV and Obol networks represent new primitives, so they must remain vigilant regarding any unforeseen vulnerabilities they could introduce.
Figure 6: Dominance of Entities Staking on the Ethereum Network
Source: 21co at Dune
What to Expect
Binance, CZ, and the softening headwinds leaning into 2024
On November 21, Binance pleaded guilty and agreed to pay over $4 billion to resolve the Justice Department’s investigation into violations related to the Bank Secrecy Act, failure to register as a money-transmitting business, and the International Emergency Economic Powers Act. Binance’s founder and CEO, Changpeng Zhao (commonly known as CZ), also pleaded guilty to failing to maintain an effective anti-money laundering program and has resigned as CEO of Binance. The world’s biggest crypto exchange by assets under management has experienced $47.3B in outflows and $44.6B in inflows in November, as seen in our Dune Analytics dashboard tracking Binance’s proof of reserves.
What should we expect in 2024? CZ could face up to 18 months in prison after his sentencing in February 2024. Binance’s new CEO Richard Teng, has outlined his vision to continue building on Web 3, with a special focus on decentralized applications that empower data ownership. With Binance’s Greenfield venturing into decentralized file storage, we can expect more investment in this space to diversify revenue streams and return Binance’s brand image to industry leadership. One catalyst for that is the fact that Teng is a member of the World Economic Forum, which can yield further institutional interest in the broader industry of decentralized finance. One challenge remains untackled: Binance’s dwindling market share, especially in derivatives. In the first weeks of November, the Chicago Mercantile Exchange (CME) toppled Binance in Bitcoin futures following speculation around a spot Bitcoin ETF in the U.S.
Figure 7: Binance Asset Flow
Source: 21.co on Dune Analytics
Interoperability Protocols are Rethinking Strategies to Remain Relevant
Polkadot, for instance, is replacing its long-standing parachain auction system with Bulk Coretime and Instantaneous Coretime. For context, the existing auction system is a model for applications to enter into a competitive bidding war to lease a slot on the Polkadot network as an interconnected network known as a parachain. That said, the new two models would introduce either a pay-as-you-go model where developers rent blockspace as needed for their projects or alternatively use the conventional lease model with shorter rent periods that make it more cost-effective for projects.
Polkadot’s imminent 2.0 system redesign, slated for the second half of 2024, incorporates the aforementioned modules and introduces a trustless bridge to link with the Ethereum ecosystem. These enhancements, addressing the network’s waning interoperability against competitors like Chainlink, are pivotal for Polkadot to sustain its relevance and fortify its accessibility towards more vibrant ecosystems such as Ethereum.
On the Cosmos side, the community approved a proposal to decrease the network’s inflation from 14% to 10%, reducing the staking APR from 19% to 13.4%. While the proposal addresses the challenge of ATOM’s high inflation, which dilutes the token’s value, it highlights a utility conundrum. ATOM lacks a clear role in facilitating access to the Interchain security economy powered by its InterBlockchain Communication protocol (IBC). This absence of a distinct value proposition beyond its attractive yield may prompt smaller validators to unstake, potentially leading to increased centralization and compromising IBC security.
That said, the discord led the founder to propose a hard fork of the network into ATOM1, as he argues the inflation rate cut compromises the security of the Cosmos hub due to the network’s interoperability design, which is more crucial than elevating ATOM as a sound medium of exchange currency akin to ETH. Further, Cosmos’s interoperability technology has also been exported to the Avalanche network on testnet, a significant milestone marking the first integration outside the Cosmos ecosystem and bringing crypto closer to a trustless multichain future. Finally, Cosmos is experiencing heightened chain activity, likely driven by the launch of dYdX and USDC on Cosmos and evidenced by increased fees and active users, reaching a YTD peak, as illustrated in Figure 8, which we’ll be closely monitoring over the next few weeks.
Figure 8: Growth of Active Users and Fees on the Cosmos network
Source: Token Terminal
Bookmarks
• Get a digital copy of State of Crypto issue 10!
• Stay tuned for our Market Outlook for 2024! Join us as we share more details in our next Analyst Call.
Next Month’s Calendar
These are the top events we’re closely monitoring in December.
Source: 21shares, Forex Factory, CoinMarketCal
Research Newsletter
Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com
Disclaimer
The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.
Den nordiska ETF-marknaden november 2023
WDGE ETF investerar i amerikanska utdelningsaktier och valutasäkras i euro
Bitcoin Expands Utility and All Eyes on Polygon: What Happened in Crypto in November?
Polygon (MATIC) Research Primer
Denna utdelningsfond går aldrig ned
Uranfond når över 200 miljoner USD när världens kärnkraftskapacitet ska tredubblas
Utdelning i XACT Norden Högutdelande november 2023
Virtune introducerar en koldioxidneutral Bitcoin ETP på den tyska marknaden
AuAg Funds VD avslöjar det verkliga raketbränslet för guldpriset
Denna utdelningsfond går aldrig ned
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Nyheter2 veckor sedanUranfond når över 200 miljoner USD när världens kärnkraftskapacitet ska tredubblas
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Nyheter4 veckor sedanUtdelning i XACT Norden Högutdelande november 2023
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Nyheter2 veckor sedanVirtune introducerar en koldioxidneutral Bitcoin ETP på den tyska marknaden
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Nyheter4 veckor sedanAuAg Funds VD avslöjar det verkliga raketbränslet för guldpriset
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Nyheter1 dag sedanDenna utdelningsfond går aldrig ned
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Nyheter4 dagar sedanTvå procent av alla adresser äger 93 procent av alla Bitcoins
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Nyheter2 veckor sedanBlack Friday hos Vikingen 24 till 26 November med 40% rabatt
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Nyheter2 veckor sedanTech MegaTrend Update avslöjar överraskande tillväxt och global konvergens
