Crypto’s Last Week
This edition of “Crypto’s Last Week” accounts for some of the most notable, and crypto-related — institutional, investment, or regulatory — news published between Saturday, November 14, 2020, and Friday, November 20, 2020
Fidelity Digital Assets, one of the subsidiaries of Fidelity Investments a top-tier asset management organization with over $3.3 trillion, yes trillion as in, close to the German GDP for 2017, in assets under management has recently published an analysis addressing persistent “criticisms and misconceptions” about Bitcoin.
Ria Bhutoria, Director of Research, enumerated what could be determined as the top 6 criticisms found globally among dozens of industries or individuals based on what seems to be a high level of ignorance towards the fundamentals that brought blockchain to be used as a real-world application, through Bitcoin, after decades of development.
Bhutoria begins by addressing the volatility issue that has scared hundreds if not millions of investors from this digital asset, stating: “Bitcoin’s volatility is a trade-off it makes for perfect supply inelasticity and an intervention-free market. However, with greater adoption of bitcoin and the development of derivatives and investment products, bitcoin’s volatility may continue to decrease, as it has historically.”
She continues, with why Bitcoin is considered to have failed as a means of payment “Bitcoin makes deliberate trade-offs, such as limited and expensive capacity, to offer core properties such as decentralization and immutability. Given its high settlement assurances, Bitcoin optimizes its limited capacity for settling transactions that aren’t well-served by traditional rails.”
Followed by, the misconception that Bitcoin is wasteful “A substantial portion of bitcoin mining is powered by renewable energy or energy that would otherwise be wasted. Additionally, the energy the Bitcoin network does consume is a valid and important use of resources.”
She also takes on the common idea that Bitcoin is a breeding ground for illicit activities, as stated by many. “Bitcoin, like cash or the internet, is neutral and has properties that may be valuable to good actors and bad actors. However, as a share of total transactions, Bitcoin transactions connected to illicit activity are very low.”
The lack of backing is another fundamental issue that has been mentioned for years, comparing it to the backing of fiat by governments or even gold at some point. “Bitcoin is not backed by cash flows, industrial utility, or decree. It is backed by code and the consensus that exists among its key stakeholders.”
Finally, she shares her thoughts on the first-mover vs last mover stance, where it is common to find comparisons with Google or Amazon as kings of industries or sectors in which they were not the first movers. “While Bitcoin’s open-source software may be forked, its community and network effects cannot. Bitcoin makes trade-offs for core properties that the market deems valuable.”
We believe this could be a basic, yet powerful analysis, due to the well-done research work by an informed director backed by a high-level asset management institution.
Ethereum Classic Labs, Ethereum Classic blockchain’s biggest supporter, and an important component of the Digital Finance Group (DFG) portfolio has recently made the valuable announcement of providing the DeFi market on the Ethereum blockchain with a wrapped version of the Ethereum Classic token (WETC).
James Wo, founder and Chairman of ETC Labs explains “We wanted to make sure ETC could go to a different ecosystem and use different applications on top of that ecosystem […] I expect at least 10% of ETC holders will want to participate and use WETC.”
James highlights the difference between WBTC being backed and guaranteed by a centralized organization, BitGo, while ETC and WETC use smart contracts, using the advantages of the ChainBridge, supported by ChainSafe, and the connection between ETH and ETC to efficiently lock wanted amounts of ETC on smart contracts. Minting the equivalent amount of WETC on Ethereum.
This recent announcement follows the DAI — ETC bridge, which allows access to MakerDao’s basket pegged stable coin, a valuable actor within the global DeFi ecosystem.
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