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Ethereum Inventor Starts 2022 Revisiting Ideas, Where Was He Wrong?

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The inventor of Ethereum Vitalik Buterin has come out of a self-imposed Twitter hibernation period, as he called via his personal account. On his first post of 2022, Buterin reviewed some of the ideas, proposals, and thoughts from this past decade to find if he maintains the same position as when he first talked about them.

Related Reading | TA: Ethereum is Showing Early Signs of Fresh Rally, But 100 SMA is the Key

The inventor of Ethereum listed over 10 ideas, many of which have been a source for controversy amongst the crypto community. Buterin begun his “mini-tweetstorm” with Bitcoin, a project in which he was very active during its early stage.

In 2013, Buterin published an article talking about Bitcoin’s capacity to help people suffering from inflation and central bank money policy in places like Iran and Argentina. At the time, the inventor of Ethereum said that the cryptocurrency was capable of offering respite, but due to its “internationality” and not its limited supply.

In that sense, he predicted the rise of stablecoins and assets with less volatility than Bitcoin in such places. Now, he said:

I actually went to Argentina! My verdict: generally correct. Cryptocurrency adoption is high but stablecoin adoption is really high too; lots of businesses operate in USDT. Though of course, if USD itself starts showing more problems this could change.

Moreover, Buterin revisited his position on regulation. Around the same time as when he published his article on Bitcoin’s supply, he wrote about this cryptocurrency’s potential to “resist governments” and circumvent regulations.

Now, Buterin believes the crypto industry must use a combination of technological robustness, public legitimacy, and decentralization in other to “thrive”. The alternative, a fully hostile environment, could stagnate Bitcoin and any other cryptocurrency.

Conversely, the inventor of Ethereum admitted that in 2015 his estimation from when this cryptocurrency was going to be able to migrate to a Proof-of-Stake (PoS) were wronged. At that time, Buterin expected Ethereum to transition in 6 month or 1 year.

The migration ended up taking much longer with the deployment of the Beacon Chain, the PoS blockchain that will support Eth 2.0, taking place in 2020. Buterin said:

My projections from 2015 of when we will get PoS and sharding. Honestly, these were very wrong and worth laughing at (…)

How Ethereum And Its Developers Have Evolved In A Decade

In that sense, Buterin admitted that he underestimated the “complexity of software development” as he classified his 2014 ideas as “too complex”. He added:

Today the Ethereum research team values simplicity much more – both simplicity of the final design *and* simplicity of the path to getting there. More appreciation of pragmatic compromises.

In the same tone as the rest of his Twitter thread, where Buterin showed transparency and the capacity to admit mistakes, he addressed the congestion and high transaction fees that have affected the Ethereum blockchain. In 2017, Buterin famously said that “the internet of money” needs to be able to process cheap transactions.

Buterin claims this remains one of the goals for this blockchain. Therefore, why “we’re spending so much time working on scalability”.

Buterin also admitted he was wrong on Bitcoin Cash and called the cryptocurrency a failure. He also admitted feeling “proud” about its proposals to build Uniswap, or more specifically a decentralize exchanges on this network, and many other use cases for Ethereum which “basically predicted DeFi”.

In that sense, he summarized his experience across a decade by calling out his early “naiveness” and lack of appreciation for the challenges that come out of running large organization with complex politics and cultures.

Related Reading | Bullish Signal? Ethereum Market Dominance Sitting Above 20%

As of press time, ETH trades at $3,775 with sideways movement in the past day.

ETH moving sideways in the 4-hour chart. Source: ETHUSD Tradingview

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Why Gold Is Beating Bitcoin In 2022

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Bitcoin continues to underperform as a general “risk-off” sentiment has investors driving toward gold as a safe haven asset.

Not Risking It

Concerns about the Russo-Ukrainian war continue. The U.S. inflation struggles at a four-decade high and Fed rate hike fears prevail. The uncertainty extends to the world economy as a recession is expected instead of a recovery. The IMF’s managing director Kristalina Georgieva called it “a crisis on top of a crisis.”

“The war is a supply shock that reduces economic output and raises prices. Indeed, we forecast inflation will accelerate to 5.5 percent in advanced economies and to 9.3 percent in emerging European economies excluding Russia, Turkey, and Ukraine. ” The IMF stated last week.

Reuters recently quoted Commerzbank analyst Daniel Briesemann, who talked in a note about the factors that have “lent buoyancy to gold in recent days,” mentioning the “strong buying interest on the part of ETF (Exchange Traded Fund) investors” and news about the Ukraine war.

“Russia appears to be preparing to launch a major offensive in the east of the country – that is generating considerable demand for gold as a safe haven,” the analyst said.

This summarizes the “risk-off” sentiment at the moment. As expected, equities suffer as investors are selling risky assets and purchasing the ones negatively correlated to the traditional market. Thus, the crypto space is struggling alongside de stocks market and gold is rising.

Bitcoin Outperformed By Gold

Data from Arcane Research’s latest weekly report notes that it has been a gloomy year for the “digital gold.” In the first three weeks of 2022, Bitcoin sank 25% and it is still down by 18% in the year despite its slight recovery.

Similarly, Nasdaq records a 19% decline in the year, having underperformed against bitcoin “by a small margin,” notes the report, adding that “This is surprising given that bitcoin has tended to follow Nasdaq, albeit with higher volatility.”

The general fear over geopolitical and macroeconomic uncertainty has given gold the safe-haven asset spotlight once more. The asset outperformed all the other indexes seen below with a 4% gain.

Physical gold outperforming “digital gold” in 2022 | Source: Arcane Research

Meanwhile, the currency market is performing with “the same risk-off patterns.” The Dollar has been proving its “risk-off” dominance as the US Dollar Index (DXY) is up 7%. The Chinese yuan has taken a hit over concerns about the country’s “zero-covid” policy –which creates issues for the global supply chain– and the slowing down Chinese economy. In contrast, investors have been running to the US Dollar for safety.

Bitcoin supporters usually refer to the coin as “digital gold” alleging it is a safe haven asset, and this narrative had held well while BTC had been “uncorrelated with most other major asset classes,” but the tide is shifting with the 2022 scenario as investors are rather placing the coin “into the risk-on basket”.

A previous Arcane Research report indicated that bitcoin’s 30 -day correlation with the Nasdaq is revisiting July 2020 highs while its correlation with gold has reached all-time lows.

A pseudonym traded noted that “As Bitcoin adoption goes on and more institutional investors enter the market, the correlation of BTC and stocks becomes more and more tight. That is a paradigm that the crypto world struggled to come to terms with in the past but is now more real than ever. A healthy stock market is good for Bitcoin.”

Meanwhile, the general sentiment of traders seems to be bearish, with many saying that the coin could visit the $30k level soon.

Bitcoin
Bitcoin trading at $39k in the daily chart | BTCUSD on TradingView.com

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Attendees talk the future of NFTs

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The crypto community headed to Nassau in the Bahamas this week for the inaugural Crypto Bahamas conference.

Like most conferences, panels fill up the agenda and on Wednesday the topics at Crypto Bahamas ranged from NFTs to crypto in sports and to asset allocation in Web3. During one particular conversation, titled Evolution of NFTs: Culture, Utility and Regulation, panelists had some insightful musings on the NFT market.

To put the Crypto Bahamas conference into context, Sam Bankman-Fried’s cryptocurrency exchange FTX moved its headquarters from Hong Kong to the Bahamas in Sept. 2021. It recently inked a multi-year partnership with Anthony Scaramucci’s investment firm SkyBridge Capital, and its events arm SkyBridge Alternatives, or SALT. They jointly presented the conference.

That’s why the NFT panel consisted of multiple perspectives from Tristan Yver, head of strategy at FTX U.S., Joseph Doll, attorney at Fenwick law firm, Roham Gharegozlou, the chief executive officer at Dapper Labs, and Sarah Hammer, the managing director of The Stevens Center for Innovation in Finance at The Wharton School. Zack Guzman, writer for the Meta-owned newsletter platform Bulletin, moderated.

Gharegozlou pointed out how new the NFT market truly is when “most people have only been thinking about it for a year and a half,” making valuations “very immature.” As the CEO of Dapper Labs, the company behind NBA Top Shot,  Gharegozlou recognized that “utility, rewards and the how you value and NFT is primarily based on the strength of that of the community.”

He added that a good way for an NFT collection to build a strong community is to have multiple tiers of scarcity. In the case of NBA Top Shot, at the higher price end there is extreme scarcity, but there are also millions of “common” moments so that people can “get their first NFT and see how it feels without breaking the bank.” 

Tristan Yver echoed that the current valuation and pricing model for NFTs is based on a collective perception on value based on the amount of people willing to buy an asset for a certain amount. He anticipated a “movement away from this consensus view to a more unique singular view where people buy things that resonate with them rather than what resonates with a larger community.”

Joseph Doll chimed in to say that “communities need to be thoughtful about democratizing access.” There are some “massive” barriers to entry to certain projects, he said, including not being early enough or not having enough capital at the time. He questioned, “That’s not what crypto is about, right? It’s kind of about the exact opposite of that.” Democratization, he suggested, can come in the form of derivative projects at better price points.

Another important point brought up by Yver was the reality of scams, especially on Discord and Twitter. He said that “we need to move past security aspects to be able to really bring in the next large mass of users.” He recommended talking among family and friends or asking a Discord moderator to make sure “you click the right link when minting that NFT” because “wallet security sucks right now.”

Gharegozlou even said that Elon Musk, the new owner of Twitter, should use Web3 to fix Twitter’s fraud problem, just as Discord should use Web3 authentication and verification as well. “Once NFT’s are the sort of identity bridge across all these different social networks, identity and assets, authenticity, provenance,” then the system can be more resilient he added.

When asked what “main alpha” the audience should bear in mind, Doll said to engage with and be part of these NFT communities even if it’s “scary,” because getting scammed is a “part of the journey.”

Sarah Hammer, who leads the Cypher Accelerator at Wharton business school, said that the school is launching an incubator specifically for NFT projects in partnership with Dapper Labs because the “NFT model is a business model for the future.” She emphasized that the greatest way to grow and innovate in the space is to increase education efforts in order to get more people learning and working together.

Related: Goldman Sachs reportedly eyes FTX alliance with regulatory and public listing assistance

Recently the Bahamian government allowed residents to use digital assets, including the world’s first central bank digital currency, or CBDC, to pay for taxes in 2022.