BitGo: Crypto Water Cooler — April 24

Received this from a friend? Subscribe here. New to the Water Cooler? Read past issues on Medium.

GM. It’s Wednesday, April 24.

Newsmakers

Bitcoin Halving Showcases Code as Law

Bitcoin block number 840,000 was mined last Friday, completing the fourth halving. It generated a record 37.6 BTC fee (over $2.4MM) as miners competed for the milestone block. The privilege went to the ViaBTC mining pool whose block reward gave it ownership of the first post-halving Satoshi. There are now four of these “epic sats” in existence, and there will only ever be thirty-two (the total number of Bitcoin halvings), making them highly sought-after collectibles.

The halving, which is built into Bitcoin’s design and takes place automatically, is also an occasion to marvel at the technological feat. CoinDesk writes how it “symbolizes Bitcoin’s original concept as an autonomous, decentralized financial network whose monetary policy is set by code, as opposed to human organizations like governments and central bankers.” This is the first halving in which institutional players have a significant presence, so more people than ever may pause to consider the implications of code as law in crypto and beyond.

Bitcoin halvings have historically been a catalyst for bull markets. However, this time around, spurred at least partially by flows into Bitcoin ETFs, BTC reached a new all-time high ahead of the halving, hitting $73,500 on March 14.

Since the halving is a planned event, miners have been preparing in a variety of ways. However, the market doesn’t seem wholly convinced that miners will emerge unscathed as JPMorgan found that the stocks of the fourteen publicly-traded, U.S.-listed miners, which account for 21% of the Bitcoin network, collectively fell 28% over the first half of April. Many within the industry expect consolidation amongst miners post-halving.

The next halving is slated for 2028. While it’s too early to begin the hype cycle, it’s probably safe to say that it will occur in a landscape that has significantly changed.

Read more →CNBC

With Comprehensive Legislation Stalled, U.S. Senators Present Stablecoin Bill

With their previous two efforts at comprehensive crypto regulation languishing in Congress, U.S. Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) last week narrowed their approach by introducing the Lummis-Gillibrand Payment Stablecoin Act.

The bill, crafted in collaboration with federal and state agencies, is designed to work within the country’s dual federal/state banking system. “It preserves states’ current authority over non-depository trust companies and ensures parity between federal and state bank charters, while acknowledging the Federal Reserve’s role as the guardian of monetary policy, the duo write on CoinDesk.

It requires stablecoins to be fully backed by reserve assets and prohibits algorithmic stablecoins. Federally authorized institutions can issue an unlimited amount of stablecoins while issuance by non-depository state trust companies is capped at $10B. All issuers must convert stablecoins to dollars upon request. Robust custody requirements would prevent commingling of funds, and issuers would need Federal Deposit Insurance Corporation coverage.

Although Senate Banking Committee Chair and noted crypto critic Sherrod Brown (D-OH) didn’t call out this bill, he has said he is now open to passing stablecoin legislation if it has sufficient guardrails. He also wants it combined with a bill that lets banks do business with cannabis companies and another that claws back executive compensation packages at failed lenders. Both bills have passed in the Senate Banking Committee with bipartisan support but haven’t been presented for full votes in either chamber of Congress.

The Lummis-Gillibrand Responsible Financial Innovation Act, introduced in June 2022, was last considered in committee in November 2022. An expanded version, adding stronger consumer protections and safeguards against rehypothecation, was last heard in committee in October 2023.

Read more →Bloomberg ($)

Worldcoin Joins “Build Your Own Layer 2” Trend

If layer 1s are the superhighways of the blockchain world, layer 2s are the side streets and frontage roads that run parallel. Though they are supposed to address the speed and scalability challenges of the main blockchain, a growing number of firms are deciding that they need to build their own layer 2 for a variety of reasons. Last week, the Worldcoin Foundation became the latest to join the trend, following in the footsteps of Coinbase, OKX, and Kraken.

Worldcoin Foundation plans to launch World Chain, an Ethereum layer 2 blockchain, later this year. In a statement, the company said that, with 10MM users and 70MM transactions in its wallets, it was “time to graduate to a dedicated network.” The goal is to accelerate adoption of its World ID project in which people receive Worldcoin tokens in exchange for having their eyeballs scanned for online identification. So far, most Worldcoin transactions occur on the OP Network (formerly known as Optimism) where it currently accounts for about 44% of transactions. Worldcoin is not dumping OP entirely; World Chain will be built on OP’s Superchain technology and will be deployable across multiple blockchains.

Meanwhile, OKX has launched its new layer 2, X Layer, using Polygon’s chain development kit, which includes zero knowledge technology. OKX says its 50 million users will have easy access to X Layer and 170 dApps in the Polygon ecosystem through Polygon’s AggLayer.

In November 2023, Kraken announced that it was exploring the launch of its own layer 2 network. In September 2023, Sony announced its own blockchain plans after investing $3.5MM into Japanese startup Startale Labs. Startale’s founder, who also built the Astar Network, a parachain on the Polkadot network, said the new blockchain could easily surpass Coinbase’s Base blockchain, its Ethereum layer 2 that started this trend.

As for Base, which Coinbase hopes will be an additional revenue source: after a slow start following its August 2023 launch, it hit 1.21B in transaction volume on March 30.

Read more →Fortune ($)

News In Brief

Business of Crypto

• Grayscale Files to Launch Low Fee ETF Spinoff With Ticker Name BTC — The Block
• Venezuela’s State-Run Oil Company Shifts to USDT Payments as U.S. Sanctions Return — Reuters
• Ernst & Young Launches Ethereum-Based ZK Solution for Complex Contracts — Cointelegraph

Regulation and Security

• SEC Delays Decision on Franklin Templeton, Grayscale Spot Ether ETF — The Block
• FTX Plaintiff Group to Drop Claims Against SBF for Help Pursuing Other Defendants — Bloomberg ($)
• Thai Authorities Will Block Unregulated Crypto Platforms — CoinDesk

DeFi and Web3

• Report: DeFi and Gaming Dominate Q1 Transactions — NewsBTC
• Aptos to Partner With Microsoft, Brevan Howard, SK Telecom on DeFi Gateway — CoinDesk
• Binance Launches New Platform for Airdrops and Web3 Quests — Blockchain.news

Midweek Market Pulse

Total Market Cap: $2.45T — 7 day change as of Tuesday 4/23/24 12 PM EST: +8.9%

Chart and quotes via CoinMarketCap

Just like that, the crypto market is back in high gear. After a 13.5% decline last week, the market showed its resilience by bouncing back 8.9% to a total market cap of $2.45T.

Bitcoin (BTC, +7.4%)’s short-lived dip below $60,000 was quickly absorbed by whales who used it as an opportunity to buy at lower prices. Data from IntoTheBlock shows that BTC addresses holding at least 0.1% of the BTC supply bought 19,760 BTC worth over $1.2B on Friday at an average price of $62,500. BTC also got a jolt from the launch of Runes, a new protocol developed by Casey Rodamor (of Ordinals fame) and launched shortly after the halving. Runes allows users to “etch” fungible tokens in a manner akin to meme coins.

Ethereum (ETH, +7.1%) also posted a strong weekly gain. Solana (SOL, +23.2%) seems to have put recent network congestion behind it and also shook off news that blockchain investigator ZachXBT found that at least a dozen presale meme coins that collectively raised $26.7MM from investors have been “completely abandoned” by their founders over the past 30 days. Solana’s top meme coins were unfazed with Dogwifhat (WIF, +24.0%), Bonk (BONK, +60.1%), Book of Meme (BOME, +40.4%), and Slerf (SLERF, +45.0%) posting big gains.

Solana’s NFT market is quietly picking up momentum; volume again surpassed that of Ethereum last week. NFT collectors are using Solana for the same reasons as meme coin traders: low fees and fast transaction times.

Meanwhile, Shiba Inu (SHIB, +21.9%) reminded the market that it is more than a meme coin, raising $12MM in funding from high-profile investors in a token sale to fund the development of a new privacy-focused blockchain on top of its layer-2 Shibarium network.

The Last Word

Rehypothecation

Noun

: A practice whereby banks, brokers, or individuals use collateral they do not own to finance assets

/ Rehypothecation creates leverage and is legal when contractually agreed to, but it also creates greater risk of default.

About BitGo

BitGo provides the most secure and scalable solutions for the digital asset economy, offering regulated custody, borrowing and lending, and core infrastructure to investors and builders alike.

Founded in 2013 — the early days of crypto — BitGo pioneered the multi-signature wallet and later built TSS to improve upon other companies’ MPC offerings. Between multi-sig and TSS, BitGo offers the safest technology on the market and safeguards over 600 tokens across a wide variety of blockchains.

Over the years, BitGo has expanded from offering wallets into providing a full-suite solution that lets clients hold assets safely and then put them to work.

BitGo launched BitGo Trust Company in 2018, providing fully regulated, qualified cold storage to complement BitGo Inc’s original hot wallet solution. In 2020, BitGo launched BitGo Prime, which allows its clients to trade, borrow, and lend. Moreover, BitGo also provides access to DeFi, staking, NFT wallets, and beyond, and serves as the world’s sole custodian for WBTC, or wrapped Bitcoin.

Today, BitGo is the leader in digital asset security, custody, and liquidity, providing the operational backbone for more than 1500 institutional clients in over 50 countries — a list that includes many regulated entities and the world’s top cryptocurrency exchanges and platforms. BitGo also processes approximately 20% of all global Bitcoin transactions by value.

For more information, please visit www.bitgo.com.

©2024 BitGo Inc. (collectively with its affiliates and subsidiaries, “BitGo”). All rights reserved. BitGo Trust Company, Inc., BitGo Inc., and BitGo Prime LLC are separately operated, wholly-owned subsidiaries of BitGo Holdings, Inc., a Delaware corporation headquartered in Palo Alto, CA. No legal, tax, investment, or other advice is provided by any BitGo entity. Please consult your legal/tax/investment professional for questions about your specific circumstances. Digital asset holdings involve a high degree of risk, and can fluctuate greatly on any given day. Accordingly, your digital asset holdings may be subject to large swings in value and may even become worthless. The information provided herein is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. BitGo is not directing this information to any person in any jurisdiction where the publication or availability of the information is prohibited, by reason of that person’s citizenship, residence or otherwise.