26 September 2020

The beauty of crypto lies not in its decentralization but its volatility. In recent days, this has been tapering as the crypto liquidity deepens.  Still, traders relish huge price spikes. Irrespective of the turn, it triggers a weird euphoria that’s unique to digital asset traders.

Admittedly, this week was relatively uneventful and less volatile, save for the last two days. Bitcoin went down—dashing the hopes of many traders, then recovered—resulting in some beaming smiles, but then stagnated on Friday as it traded within a tight trade range.

Meanwhile, Ethereans had to contend with a kind-of a boring chart and flat-lining prices—at least in higher time frames.  As expected, the Ethereum price kept underperforming relative to Bitcoin and continues to be thrashed by the USD.

Undoubtedly, the greenback has its mojo back. But if airplanes were falling stars, crypto traders and especially ETH and DeFi fans should at least smile for now. DeFi traders can’t take it anymore.

Aave, Uniswap, and Synthetix Lead DeFi in Migration to Ethereum

The writing was on the wall. Even Vitalik Buterin had projected it early this year. He urged intensive heavy platforms to migrate to layer-2 protocols to ease the base layer.

Vitalik Buterin on DeFi’s Need to Migrate to Layer-2 Protocols (Source: Twitter)

Unlike other chains, Ethereum has a “sweet problem” to tackle. While others struggle with a super-scalable network with no demand, Ethereum is on-demand but with a painfully slow network. This is part of the blockchain trilemma and sacrifices were made. By Sep 24, the total network utilization rate was at 97 percent. The result was huge block sizes and the Ethereum bidding algorithm just couldn’t help but select the highest bidder wishing to include his/her transaction in the next available block.

To better improve user experience, Synthetix activated Fomalhaut on Sep 24 and the Optimistic Ethereum team launched their test network on Sep 25.

Later this year, Aave and Uniswap plan to join the Layer 2 bandwagon, a trend other popular platforms will hopefully join, in a collaborative move to lower transaction fees. This will have a multiplicative effect. Lower Gas prices trigger demand which in turn props prices.

All this is ahead of Eth2 which should shake the scalability of Ethereum. The drive towards efficiency doesn’t stop with Ethereum at least judging from developments in the United States.

Federal Reserve Unveils More Details About US Digital Dollar

On Thursday, September 24, the Federal Reserve Bank of Cleveland disclosed more details about their ongoing research in Digital Dollar. During the keynote address earlier this week, President Loretta Mester said that the U.S. has been exploring the CBDC even before the Coronavirus pandemic struck.

He said that the Board of Governors for the Federal Reserve has been “building and testing a range of distributed ledger platforms to understand their potential benefits and tradeoffs.” The President also spoke about a new initiative by the regional branches of the Federal Reserve. This includes a multi-year partnership between the Boston Fed and the Massachusetts Institute of Technology (MIT), as well as the recent collaboration between the Bank for International Settlements (BIS) and the Fed’s New York Branch.

President Mester also hinted that the ongoing research and development is in the early stage, and it would be too early to comment on the adoption of the CBDC. She added that the Board will consider several aspects and address concerns related to “financial stability, market structure, security, privacy, and monetary policy”.

Mester also spoke about the push for digital services caused by the spread of COVID-19. Thus she insisted on “making necessary investments to ensure that the U.S. payments system remains resilient in the face of extreme stress events will need to remain a priority.”

U.S. OCC & SEC Allow National Banks to Hold Reserve Funds for Stablecoins

Earlier this week, the US Office of the Comptroller of the Currency (OCC) has officially given a green signal to all national banks to hold reserve currency for stablecoin operators. This is a milestone achievement and a step towards bridging the gap between crypto companies and traditional financial institutions. The OCC’s interpretative letter notes that stablecoin operators can continue putting their reserve funds in national banks but only if the “coins are in hosted wallets”.

 So far, there was no clarity on the matter with many stablecoins operators being accused in the past of manipulating the market despite lacking sufficient reserve funds. Well, the new law will help banks to function transparently thereby protecting investors’ interests.

 “As the OCC recently reaffirmed, national banks may provide permissible banking services to any lawful business they choose, including cryptocurrency businesses, so long as they effectively manage the risks and comply with applicable law, including those relating to the [Bank Secrecy Act] and anti-money laundering,” the letter reads.

Visa Working on Digital Currency Payments

In a recent interview with Forbes, VISA executives shed some light on the companies plans and developments in the crypto space. Currently, the payments giant is researching the tech to process offline digital currency payments. While there are many technical challenges to pull this off, VISA’s head of crypto Cut Sheffield said: “There are a lot of technical challenges around enabling this functionality in a secure manner. So we are continuing to advance research on that front and we’ll hopefully have more to talk about in the coming year”.

On the other hand, Sheffield also mentioned that his company is actively engaging with central banks to work together on the matter of central bank digital currencies (CBDCs). He added: “Visa engages very closely with central banks across the world on a number of different topics, with CBDCs being one thats gaining increasing interest. We think that if a central bank is going to issue a CBDC, they will need to consider a number of the same factors that are facing private companies building tokenized stablecoins”.

 

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Edmund McCormack
Tech industry veteran and blockchain technology investor. Simplifying cryptocurrency for almost a decade.

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