What has been happening around Blockchain Technology and Cryptocurrencies this week? The most relevant local and international developments as well as appealing background reports in a pointed and compact way in retrospect in our weekly review.
Cryptocurrencies like Bitcoin are undoubtedly entering into mainstream and numerous myths continue to surround the digital assets. Some are particularly persistent and are based on a flawed set of facts. Sometimes it also helps to put things into perspective. From Ponzi schemes over money laundering to power consumption: The most important myths and facts about the largest cryptocurrency.
Credit card giant Visa has been exploring blockchain technology for quite some time. As early as 2018, the company filed a patent application for its own digital currency. This project has been cancelled in the meantime. Instead, the financial service provider is now focusing on the implementation of existing projects. Accordingly, the company wants to integrate the direct use of the Ethereum-based stablecoin “USDC” in its payment network. This decision is a great proof of the validity of the smart contract platform.
Decentralized Finance (DeFi) is a buzzword that is here to stay in the Blockchain world. DeFi applications usually represent tools from the traditional financial world on the Blockchain. In particular, the field of decentralized exchanges (DEXes) is growing strongly. In this context, a user can not only trade cryptocurrencies, but even participate in the liquidity pool of the respective order books. This is ensured by so-called “Automated Market Maker” algorithms (AMMs). Since the first project in 2017, the applications have been constantly evolving. Liquidity providers (LPs) pool their tokens against of which traders can enter their trades. In the transaction, a fraction of the trade value flows back to the LPs as fees. A dive with Yves Longchamp into the interesting evolution and history of decentralized exchanges.
Critical voices about the high energy consumption of cryptocurrencies such as Bitcoin and Ethereum are increasing. This circumstance is due to the computationally intensive “proof of work” algorithm that both blockchains currently use. It guarantees a significant part of the security and censorship resistance of the respective networks. In order to generate new blocks on the blockchain as well as to confirm transactions (mining), real economic resources in the form of equipment and electricity must be expended. Thus, attacks on the network and block restructuring (51% attacks) become prohibitively expensive as a result. Although current electricity consumption is high, various studies estimate the share of renewable energy sources used for mining to be over 40%. It is also worth putting the energy consumption of the application-rich new technology in the overall context.
In addition: The first phase of the Ethereum 2.0 upgrade was already launched in December. The final switch to Proof of Stake should take place at the end of 2021 to early 2022, according to the developers. Deposits into the staking contract are already accessible. Currently, more than $7 billion worth of Ether (ETH) has already been deposited. This represents about 3% of the total supply. This achievement demonstrates the community’s strong trust in the development team. Ethereum users hope that the 2.0 conversion will ensure scalability and reduce the network’s transaction costs.
Selected articles in the weekly review:
Some myths surrounding cryptocurrency remain persistent.
Credit card giant Visa implements Ethereum-based stablecoin in its payment infrastructure.
An overview of the fast-growing decentralized exchanges.
Critical voices regarding the energy consumption of some blockchains like Bitcoin and Ethereum are getting increasingly stronger. How do cryptocurrencies work and why is their resource consumption considered too high?
Expectations for the Ethereum 2.0 protocol upgrade are high. Proof of user confidence can be derived from the increasing number of Ether (ETH) deposited in its “Staking Contract”.
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