Blockchain Bites: Winklevoss’ Wild Prediction, Bitcoin Miners’ Horde, Ethereum’s ‘Critical Bug’

Mongolian authorities have put the kibosh on cheap electricity for crypto miners, Venezuela is seeing healthy crypto use outside government-approved exchanges and a “critical bug” has left 13% of Ethereum nodes useless.

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Top shelf

Bakkt’s back?

Growing institutional interest is helping to drive a recent spike in volume on Bakkt, according to its president, Adam White. Trading volumes for physically settled bitcoin futures on Bakkt rose to $134 million on Tuesday from a previous high of $132 million on July 28, Muyao Shen reports. Physically settled means buyers receive tokens at expiration instead of cash. “It’s not a bet on the price of bitcoin,” White said. “It doesn’t rely on an index price created from unregulated spot markets that are self-reporting their data.” Despite the recent surge, Bakkt still lags behind CME Group, a bigger, U.S.-regulated exchange. Data shows the aggregated daily volumes of bitcoin futures on Bakkt and the CME were at $279 million and $1.5 billion, respectively, on Monday.

Mongolian mining moratorium?

Over 20 bitcoin mining farms in China’s Inner Mongolia have been stripped of electricity perks after a clampdown by the local government. A document issued by the Department of Industrial and Information Technology of the Inner Mongolia Autonomous Region on Aug. 24, shows the government agency suspended electricity discounts provided by the state-owned regional energy trading firm, following onsite inspections that found many supposed data centers were actually bitcoin mining facilities. With the policy change, electricity costs could reach 0.38 yuan per kWh ($0.054), up from 0.26–0.28 yuan per kWh ($0.037 to $0.040), CoinDesk’s Wolfie Zhou reports.

Venezuela’s crypto economy

A new Chainalysis report focused on Latin America found Venezuela ranks third in the world for crypto adoption, behind Ukraine and Russia. Venezuela has adopted a crypto-friendly attitude amid crippling sanctions and hyperinflation, though most retail usage is happening through peer-to-peer marketplaces, not government-approved exchanges. State-owned Criptolago, one of only seven exchanges with government approval, saw $380,000 in dollar-adjusted volume over the last year compared to LocalBitcoins’ $242 million over the same period. 

Client centralization

A “critical bug” has left 13% of Ethereum nodes useless, and it could take weeks or months to fix. Parity-Ethereum and OpenEthereum versions 2.7 and later contain a bug that stops nodes from syncing with the $43 billion network’s latest block. Clients are  different programming language implementations of blockchain software, a  way to strengthen the network by having concurrent yet separate systems running. This bug has highlighted the issue of client centralization, as Ethereum Foundation-backed Geth client now supports some 80% of the Ethereum network, CoinDesk’s Will Foxley reports. 

Wild predictions

Tyler and Cameron Winklevoss, early crypto investors and founders of Gemini, believe weakness in the U.S. financial system and other factors mean bitcoin could one day reach $500,000 per coin. In a post on the Winklevoss Capital blog Thursday, the two set out outlined “fundamental problems” with gold, oil, and the U.S. dollar as stores of value. “Even before COVID-19, and despite the longest bull run in U.S. economic history, the government was spending money like a drunken sailor, cutting taxes like Crazy Eddie, and printing money like a banana republic,” the brothers write. They recently met with prominent day-trader Dave Portnoy and told him gold could be devalued if figures like Elon Musk begin gold mining asteroids. 

Quick bites

At stake

This could signal increased bullishness about future gains, CoinDesk’s Zack Voell said. 

Miners are holding more than 1.82 million bitcoins, an increase of roughly 2% in the last year, according to data from Glassnode. In fact, this is part of a larger trend, where the percentage of all inactive bitcoin (meaning it hasn’t been traded or cashed in) hit a four-year high last spring.

Thomas Heller, former director at leading mining pool F2Pool, said this was a bullish indicator, as it appears holders may be anticipating a higher price. 

To be sure, no one is clairvoyant, but we’re talking about market sentiment. But there is another technical reason miners, in particular, may be holding: mining factories are in a cycle of deploying newer mining machines. 

This phase in the “hardware cycle” means operation expenses have decreased, and therefore, so has the number of bitcoin sold to cover those expenses,  Harry Sudock, vice president of strategy at GRIID, said. Presumably, costs would have spiked months ago, when miners were ordering the machines now being deployed.

As miners deploy new machines, they also enjoyed a 7% monthly revenue increase in July, according to network data analyzed by CoinDesk, thanks to recent price appreciation and increased transaction fees.

Live Webinar: What to Expect When Phase 0 Launches

Ethereum, the world’s second-largest cryptocurrency by market capitalization, is expected to undergo a radical system-wide upgrade to improve network scalability and efficiency this by early next year. Join CoinDesk Research on Sept. 10 at 1:30 p.m. ET for a live discussion as we examine the potential market impacts of the launch of what’s known as Ethereum 2.0. 

Due to its sheer complexity, Ethereum 2.0 will be rolled out in several phases starting with Phase 0. Don’t miss the opportunity to understand the risks, benefits and predictions for the next phase of this technology.

Market intel

Hedges grow

Bitcoin and gold are reversing losses seen on Thursday after the Federal Reserve’s announcement of a more relaxed approach to tackling inflation sent a tremor across the markets. Bitcoin rebounded back above $11,450 on Friday, erasing nearly 70% of the decline from $11,594 to $11,141 yesterday. Gold, too, has risen back to $1,960, having dropped to $1,910 after the event. “Powell’s speech suggests that there is no end in sight [for the Fed’s easy money policy],” John Kramer, trader at GSR, said. Put simply, Powell’s speech looks to have strengthened bitcoin’s long-term bullish case, CoinDesk’s Omkar Godbole reports.

Tech pod

WabiSabi lobby

Privacy-focused Bitcoin software wallet Wasabi is working on a new protocol design, dubbed WabiSabi, to improve the user experience and privacy of the wallet’s CoinJoin transactions, CoinDesk tech reporter Colin Harper reports. The major design change would allow users to coinjoin with different values than their peers, a first for the technology, reduce the role of a centralized coordinator and potentially enable CoinJoin sends to other users. This process would operate in the background if it runs the way Wasabi envisions it, opening up the possibility to make “every spend a CoinJoin.” 

Fee-less

USD Coin (USDC) has integrated “meta transactions” to the stablecoin platform to eliminate fees paid to the Ethereum blockchain when sending money around. “This enables people to fund their non-custodial wallets with USDC and start using DeFi/dapps without also having to own ETH,” Coinbase developer Peter Jihoon Kim said. Adopted as part of a protocol update, USDC 2.0, the Centre Consortium also announced a new on-chain signature system, CoinDesk’s Will Foxley reports. Founded by Coinbase and Circle, USDC is the second-largest stablecoin by market cap at $1.4 billion.

Op-ed

Tech over laws

Shiv Malik, co-founder of the Intergenerational Foundation think tank and head of growth at Streamr, thinks policies like Europe’s GDPR or Andrew Yang’s “data dividend” are inadequate for putting users back in control of their data. “[T]here is a way of fighting tech with tech that might also result in changing the underlying economic structures,” he writes, namely through open-source, decentralized protocols. “We shouldn’t demand a tithe, we should take back control of our data.”

Podcast corner

Who won #CryptoTwitter?