This week in crypto. August 2-8: The state of crypto regulation, EIP1559 and more...
The state of crypto regulation
Crypto becomes an increasingly important matter for the legislators all over the world, as they are expected to choose between the lure of innovation and the pressure of the existing financial structures, all while following closely what other countries are doing. It might be a good opportunity for some to take a more progressive stance than the others, as it could pay off in the future with a developed high added-value industry.
This week we saw Spain’s leading Partido Popular introducing a bill that would allow for the payment of mortgages with crypto, Uruguay’s Senator proposing a bill to accept crypto as a valid means of payment, and Ukraine preparing a comprehensive law that would make crypto payments legal and protect both the investors and the crypto industry actors. However, the biggest regulation drama is unfolding now in the US.
US Senate debating the future of its crypto industry
Who could have thought that a crypto-related issue will be one of the reasons a major piece of American legislation be stuck in the Senate?
And yet that’s what’s happening with President Biden’s gigantic $550 Bn infrastructure bill, which contains a section on toughening reporting rules for crypto-related companies. While the Senators hope that it would raise $28 Bn to be used to fund the bill, its provisions include the obligation for “brokers”’ to report all details on crypto transfers. The main problem is to define what a “broker” is, and the original language was so broad that it could include virtually everyone interacting with crypto, be it a miner, a wallet, or a software developer. And taking into account the very structure of the blockchain, for the majority of these actors it would be technically impossible to comply with such reporting obligations.
Several pro-crypto Senators stepped in and proposed an amendment with a narrower “broker” definition, but a second amendment by the anti-crypto Senators only leaved miners out of it (maybe it’s the one side of crypto they understand ?..) This second amendment was supported by the Biden administration and the person who really should not speak up on crypto - Janet Yellen from Treasury. After a wave of indignation from the crypto industry another amendment was proposed, leaving out all blockchain validators and companies selling wallets, which is still not good enough.
The debates on the bill and its amendments started this Saturday and are likely to continue for some time. In the meantime, every crypto company is now reaching out to its American users, asking them to call their Senators and make their voice heard. In the worst-case scenario the DeFi industry, PoS blockchain validators, and a big number of diverse crypto companies will not be able to comply with the law and will have to either close shop or move someplace else.
El Salvador, for one, would be happy to welcome them. Will America let go?
Art and NFT
The NFT craze continues and OpenSea marketplace registered $397M worth of transactions in the last week (the total volume of the whole 2020 year was $21M).
A lot of it came from the renewed interest in CryptoPunk NFT collectibles series, with some Ethereum whales paying hefty prices: Gary Vaynerchuk spending the equivalent of $3.7M on CryptoPunk #2140, an unknown whale going on a $6M shopping spree for 100 NFTs…
Markets
Bitcoin
Bitcoin price rose another 16% this week, marking a $45k milestone and then correcting to $43’700 level.
With the exiled Chinese miners installing their rigs elsewhere, the hashrate is now at the level of November’20 and the difficulty is rising once again.
Ethereum
The highly anticipated London hard fork went live this Thursday. It contained EIP1559 update that changed the way miners’ fees are calculated: instead of users bidding for blockspace with a solid fee, it is now separated in two parts – the “base fee” (determined algorithmically) and the “priority fee” (set by users). The base fees, fluctuating from 25% to 75% of the total, are being burned with each transaction. Since Thursday over 14k Ethers were burned.
This is definitely a positive thing for Ethereum and will decrease its inflation from the actual 3.33% to 1.26%-2.66% depending on the network activity. In the best-case scenario, Ether’s inflation could be even lower than the current Bitcoin’s (1.77%) - and that’s a very significant benchmark.
Surfing on this good news, Ethereum continued its rally for the second week in a row, reaching $3190 before correcting to $2950.
New article on D.Center
This week a fork off a fork off Bitcoin - Bitcoin SV, was hit by a 51% attack. In one of our previous Newsletters we wrote about the precarious state of Bitcoin “knock-offs”, and especially the dangers of centralization, one of which is… well, the 51% attack.
Security of a blockchain depends on its protocol and its network, and Bitcoin is an uncontested champion in this field. Learn exactly why in our newest article.
Quote of the week
“How do you know that Bitcoin is the key to financial freedom? Some in the federal government are coming after it”,
Scott Conger, mayor of Jackson, Tennessee