Categories
Uncategorized

Nigerians’ passion for crypto is stopping short at the eNaira

With less than 0.5% adoption, the central bank of Nigeria is struggling to push its eNaira CBDC to its citizens.

Nigeria’s central bank digital currency (CBDC) is not getting the warm reception expected from its crypto-savvy population.

According to a Bloomberg report, less than 0.5% of Nigeria’s 217 million population are using the government-issued digital currency — the eNaira — a year after its launch.

This comes despite Nigeria being identified by Chainalysis as the top country in Africa for crypto adoption and ranking 11th globally, while a KuCoin report found that 35% of the Nigerian population aged 18 to 60 had owned or traded cryptocurrencies this year.

Bloomberg noted that Nigerians have been confused due to a lack of clarity from the state which cracked down on crypto last year.

In February 2021, the Central Bank of Nigeria banned banks from servicing crypto exchanges in an effort to sever fiat on and off ramps.

Educating people who are generally wary of the state and ruling elite has also become a challenge for the central bank, according to the report.

The #Nigerian eNaira is a central bank digital currency (CBDC) that launched 1 year ago, however only 0,5% of Nigerians are using it.

According to TripleA, more than 10% of the population own #Crypto.

Nigerians want Crypto, but they don’t want Government backed Crypto. pic.twitter.com/WaM8nmHxRg

— Crypto Rand (@crypto_rand) October 25, 2022

Furthermore, the naira has been devalued around six times since 2015 and economists expect a further 20% loss in value next year, as the economy has been further compounded by galloping inflation, which could make the push for a CBDC a hard sell to many of the country’s citizens. 

According to the director at Lagos-based emerging and frontier markets investment bank Renaissance Capital, Adesoji Solanke, “the eNaira does not address any of these basic use cases, so no surprise at its low adoption rates so far.”

The disappointing figures are now prompting the Nigerian central bank to ramp up efforts to increase its adoption, including offering a 5% discount to drivers and passengers of motorized rickshaws that ply the city streets, according to the report. 

Related: Nigeria becomes the most crypto-obsessed nation after April crash

In August, Nigerian Central Bank governor Godwin Emefiele announced the eNaira project entered its second phase in August with an adoption target of eight million users.

At the time, he added that the CBDC has had about 840,000 downloads, with about 270,000 active wallets. By August there had been around 200,000 transactions worth 4 billion nairas — approximately  $9.5 million at the time.

According to the Atlantic Council’s CBDC tracker, Nigeria is one of eleven countries to have fully deployed a central bank digital currency, the other ten are in the Caribbean.

Categories
Uncategorized

Nifty News: Reddit NFTs surge into OpenSea top 10, judge likens NFTs to ‘luxury’ property and more

Reddit’s NFT collections have taken some of the top 10 spots on OpenSea and seen millions in sales volume over the past week.

Reddit NFTs among OpenSea’s top 10 collections

Reddit’s Polygon-based nonfungible token (NFT) venture continues to impress with three of its tokenized avatar collections cracking the top 10 projects on OpenSea in terms of sales volume this week.

Looking at the 24-hour sales volume chart, Spooky Season by Reddit user poieeeyee is ranked second with 274 Ether (ETH) ($401,000) worth of sales, behind only Yuga Lab’s Bored Ape Yacht Club (BAYC) at 684 ETH.

The ninth and tenth spots are then taken up by Imagination Station from user Chipperdoodle and The Senses from user Rojom with 121 ETH ($177,400) and 120 ETH ($175,900) worth of sales over the past 24 hours.

Zooming out to the seven-day sales volume chart, Spooky Season is the sole Reddit project cracking the top 10 with its 880 ETH ($1.2 million) worth of sales placing it as sixth at the time of writing.

Spooky Season NFTs: OpenSea

For anyone unfamiliar with Reddit’s NFT project, it offers a Collectible Avatars Creator Program which enables users to create and sell profile picture (PFP) NFT collections with artwork based on the Reddit mascot logo Snoo.

The move has been a hit so far, with Cointelegraph reporting on Oct. 24 that the number of wallets holding Reddit NFTs had hit around 2.8 million since launch in July.

NFT considered physical property like ‘luxury watches’ in Singapore court

A judge from the High Court of the Republic of Singapore has drawn on existing property laws to grant a motion to refrain a defendant hodler from selling a BAYC NFT, as he likened the asset class to physical property such as luxury watches or fine wine.

The dispute in question involves Plaintiff Janesh Rajkumar, who alleges that defendant chefpierre.eth broke the terms of an NFT loan agreement and foreclosed on the token too early.

According to court documents, via the NFTfi platform, Rajkumar had borrowed crypto assets from chefpierre.eth by putting up his BAYC NFT as collateral, but had set terms in which the asset would not be liquidated without giving “reasonable opportunities to make full repayment of the loan.”

After the NFT was liquidated, chefpierre.eth went on to list the NFT for sale, however, Rajkumar then filed a lawsuit and motioned for the court to bar the sale for the duration of the case.

Explaining his decision to grant the motion, Judge Lee Seiu Kin compared NFTs to physical collector’s items, noting that:

“Cars, books, wine and luxury watches … are a few examples of highly sought-after items for collectors, [f]or digital nomads, especially those steeped in the world of blockchain and cryptocurrencies, NFTs have emerged as a highly sought-after collectors’ item.”

Get a teardrop tattoo in the Metaverse, your grandma won’t care

Freshly launched Australian Web3 tech firm Swallow is looking to expand the tattoo sector into the Metaverse.

In a launch announcement this week, the firm outlined that it will allow “metaverse-goers and gamers to customize their avatars and accessories with tattoos and skins from the world’s most exciting tattoo artists.”

A key focus for the firm will be offering tattoo artists ways to expand their presence outside of their shops, bring more exposure to their artwork and designs, and build a digital community.

“Giving people the ability to represent themselves online through wearable art is an important part of their digital experience. Likewise, tattoo artists are looking for ways to expand outside their physical studios and share their designs more broadly,” the announcement reads.

According to Swallow, more than 100 tattoo artists have signed on from the jump, such as popular podcaster Joe Rogan’s go-to artist Aaron Della Vedova. 25 business partnerships have also been penned, including two blockchain-based metaverses in Bloktopia and CrypCade.

Galaxy enters NFT royalties debate saying it’s a ‘core value proposition’

With the recent debate over whether royalties from NFTs are good for the industry or not, in which some projects have opted to move away from the model, asset manager Galaxy has emphasized that the community should be careful about shifting away from what it deems as a “core value proposition of NFTs.”

In a lengthy report, Galaxy highlights data indicating that more than “$1.8 billion worth of royalties have been paid out to creators of Ethereum-based NFT collections” so far, suggesting a “strong contingent of users willing to pay royalties.”

Related: Potential US ban is a reminder that influencers should dump TikTok

Ultimately, the report notes that it is too early to tell which NFT sales model will be best, as more solutions will likely emerge with different platforms and companies going down different paths.

“Only time will tell if creators continue to reap benefits from secondary sales, or if they will lose out on potential income in favor of a ‘pure’ ownership model.”

Other Nifty News:

After recently enabling NFT purchase support on its app store, Apple has essentially reiterated that its 30% sales commission fee on all in-app purchases will apply to NFTs, as it will not enable apps to direct users to external avenues to purchase the NFTs.

Cointelegraph reported on Oct. 24 that search data from Google Trends shows that the keyword “Web3” has picked up steam and recorded an all-time high in terms of peak popularity in 2022, while global Google searches for “Bitcoin” has reached their lowest point in over a year.

Categories
Uncategorized

Almost 50% of Gen Z and Millennials want crypto in retirement funds: Survey

Nearly half of Gen Z and Millennials are also already invested in digital assets outside of their retirement funds and cited “inflation” as the biggest obstacle to early retirement.

Nearly half of Gen Z and Millennials want to see crypto become a part of their 401(k) retirement plans, according to an October survey from United States asset manager Charles Schwab. 

Asking participants what they would like to see added to their 401(k) retirement products, the firm found that 46% of Gen Z and 45% of Millennials said they “wish” they could invest in cryptocurrencies as part of their retirement planning.

It shouldn’t come as a surprise, as the survey also found that 43% of Gen Z and 47% of Millennials are investing in cryptocurrencies outside their 401(k) already, which could suggest the group’s affinity for the asset class. 

The asset manager surveyed 1,100 401(k) retirement plan participants aged between 21 to 70 to complete the 10-minute survey conducted between Apr. 4 and Apr. 19, 2022.

Participants of the survey needed to have worked for a company with 25 or more employees and be current contributors to their company’s 401(k) plans. 

Millennials generally refer to those born in the early 1980s to mid-1990s, with Gen Z generally born between the mid to late 1990s to the early 2010s. 

The results are in stark contrast to the surveyed Gen X and Boomers — those born anywhere between the mid-1940s to late 1970s — with just 31% and 11% respectively wanting to invest in cryptocurrencies through their 401(k), and even less being current investors in the asset class. 

Across the board, inflation was seen as the leading obstacle to retirement. 

A similar study by Investopedia in April found only 28% of United States-based Millennials and 17% of Gen Z’s surveyed expected to use cryptocurrency to support themselves in retirement, however. 

Related: Roth IRAs: The ideal long-term cryptocurrency investment?

The asset manager currently does not offer any cryptocurrency investments as part of its 401(k) retirement plans, though crypto-based retirement funds have been in the works since Feb. 2019.

In April, Fidelity Investment reportedly put plans together to open up Bitcoin investment for ts 401(k) retirement saving account holders, with savers allowed to allocate as much as 20% of Bitcoin (BTC) to their savings portfolio.

In Australia, Rest Super became the first retirement fund to offer cryptocurrency allocation as part of a diversified portfolio to its 1.9 million members in Nov. 2021.

While most digital asset retirement funds are offered in the form of Bitcoin or Ether (ETH), a North Virginian county speculated putting a proportion of retirees’ pension funds into a decentralized finance (DeFi) yield farming account in May. 2022 — which was later approved in Aug. 2022.

But things can go wrong. A Quebec pension fund lost almost all of its $154.7 million which was heavily invested into the now-bankrupt cryptocurrency lending platform Celsius.

Controversies like this have left U.S. Senators divided on the seriousness of the risks involved with crypto-exposed 401(k) retirement plans.

Among those are Democrat Senators Elizabeth Warren, Dick Durbin, and Tina Smith, who’ve previously argued that it is a “bridge too far” to expose American’s “hard-earned” retirement funds to “cryptocurrency casinos.”

Categories
Uncategorized

Potential US ban is a reminder that influencers should dump TikTok

With TikTok facing the prospect of removal from the United States, users should realize that traditional tech companies are far less reliable than the decentralized web.

People are often skeptical about Web3, many of them influencers and digital content creators. Notably, many of those most reluctant to embrace Web3 are very successful on Web2. Since they’ve mastered monetization on popular Web2 platforms such as TikTok, Twitch and others, why bother learning the rules of a new game?

The current regulatory debate around restricting TikTok in the U.S. provides a salient example of the risks associated with Web2 platforms, and why embracing Web3 can both benefit and protect influencers and their fans. The value add of Web3 is twofold — autonomy and insurance. Let’s hope this TikTok proposal provides a wake-up call for influencers everywhere.

Cutting out the middleman

There is a common misconception (not helped by the name) that Web3 is here to replace Web2. Rather than thinking about Web3 as a “new web,” it’s best to think about Web3 as a new channel. Web2 isn’t going anywhere soon, and as a creator, it’s smart to monetize as many platforms as possible. Influencers should think of it this way: If TikTok was announced today, would you reject it out of hand just because you were already successful on YouTube? Of course not. It’s the same with Web3.

Related: The future of DeFi is on TikTok

In a Web3 world, where digital content can be “tokenized” as NFTs, creators can set their own payment terms, and fans can actually own the digital item that they’re paying for, whether that be an artwork, a video, a piece of music, etc. NFTs can include royalty parameters, so creators and collectors can benefit directly from the proceeds of secondary market sales. That kind of recurring revenue stream doesn’t exist on traditional Web2 content platforms.

Protecting your content for the long term

For successful influencers, censorship and “de-platforming” represent a major threat to their revenue, but many creators see it as an abstract risk. They argue that the removal of bad content is necessary and big tech companies can be relied upon to make sensible decisions. And anyway, good, rule-abiding creators like themselves won’t run afoul of moderation, right? They also seem to believe that platforms like Twitch, TikTok and Instagram are so successful that they’ll be around forever. Sadly, none of these arguments hold up.

In fact, popular platforms don’t stick around forever (remember MySpace and Vine?), and rule-abiding content creators get censored all the time. With so much content on their platforms, companies are forced to rely on automated solutions that frequently get things wrong, with costly consequences for creators. Healthy online communities need rules, and moderation is necessary in order to enforce them. But, if you’re a creator with an archive of valuable content, there’s a chance that your content will be lost or become unavailable to your fans.

Related: Nodes are going to dethrone tech giants — from Apple to Google

Web3 is different because it’s built on blockchains (or public ledgers) where data is added but never deleted or changed. Blockchains are decentralized by design, which means the data isn’t sitting on a server somewhere controlled by a big tech company; instead, a large network of nodes around the world maintains the accuracy of the network, making it transparent and virtually impossible to hack or corrupt.

An example of the resilience of Web3 platforms happened last year when the founder of Tezos-based NFT marketplace Hic et Nunc decided to abruptly shut down the project, leaving half a million NFTs in digital limbo. But, because Tezos is a public blockchain, and because the platform was built on Web3 open-source principles, the Hic et Nunc user community was able to relaunch it within hours, without serious disruption to sales. Imagine doing that with Instagram or TikTok.

Although a direct Web3 equivalent of TikTok doesn’t exist yet, it’s only a matter of time. And if you’re a digital content creator, there’s no need to wait. Web3 makes it possible, right now, to broaden your options for monetization and audience engagement through NFTs and other mechanisms. Creators should leverage as many platforms as possible. Web3 is what comes next — and it’s coming faster than you think.

Mark Soares is the founder and chief marketing officer of Blokhaus, a marketing and communications agency supporting global activities for the Tezos blockchain ecosystem. He was previously the general manager of marketing and communications at Nikon Inc., where he oversaw branding, product and content marketing, influencer activities, and more.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Categories
Uncategorized

After Mango Markets exploit, Compound pauses 4 tokens to protect against price manipulation

Compound users can no longer use YFI, ZRX, BAT and MKR tokens as collateral for loans.

Decentralized lending protocol Compound has paused the supply of four tokens as lending collateral on its platform, aiming to protect users against potential attacks involving price manipulation, similar to the recent $117 million exploit of Mango Markets, according to a proposal on Compound’s governance forum that was recently passed.

With the pause, users will not be able to deposit Yearn.finance’s YFI (YFI), 0x’s ZRX, Basic Attention Token (BAT) and Maker’s MKR (MKR) as collateral to take loans.

The proposal passed on Oct. 25 with 99% of all voters in favor. It stated:

“An oracle manipulation-based attack analogous to the one that cost Mango Markets $117m is much less likely to occur on Compound due to collateral assets having much deeper liquidity than MNGO and Compound requiring loans to be over-collateralized. However, out of an abundance of caution, we propose pausing supply for the above assets, given their relative liquidity profiles.”

In a security review of Compound v2 performed in September, the Volt Protocol team identified potential market manipulation risks related to low-liquidity tokens. The report explained: 

“The attack is possible when the amount of a token borrowable on markets like Aave and Compound is large compared to the liquid market. The most notable example is ZRX, which has borrowable liquidity on each of these markets comparable to or greater than the usual daily volume across all centralized and decentralized exchanges.”

On Twitter, Robert Leshner, founder of Compound, explained that the conservative approach wouldn’t impact existing users. 

Following the @mangomarkets exploit, @gauntletnetwork has proposed disabling new supply for the most thinly traded collateral.

This conservative approach won’t impact existing users, and encourages the migration of usage to Compound III (which is resistant to the attack vector). https://t.co/yMQDgRXru7

— Robert Leshner (@rleshner) October 21, 2022

On Oct. 11, Avraham Eisenberg, the hacker behind the Mango Markets exploit, manipulated the value of a posted collateral — the platforms’ native token, MNGO — to higher prices, then took out significant loans against the inflated collateral, which drained Mango’s treasury.

The exploiter, self-described as a digital art dealer on Twitter, claimed that he and a team of hackers undertook a “highly profitable trading strategy” and that it was “legal open market actions, using the protocol as designed.”

After a proposal in the Mango’s governance forum was approved, Eisenberg was allowed to keep $47 million as a “bug bounty” while $67 million was sent back to the treasury.

Categories
Uncategorized

MakerDAO community votes to approve custody of $1.6B in USDC with Coinbase

The MakerDAO community will earn a 1.5% reward on its USDC while holding funds with Coinbase Prime.

Coinbase Prime, an institutional prime brokerage platform for crypto assets, announced on Oct. 24 that it has entered into a partnership with MakerDAO to become a custodian of $1.6 billion worth of the stablecoin USD Coin (USDC), of which MakerDAO is the largest single holder.

The MakerDAO community voted to approve the custodianship, which will allow its community to earn a 1.5% reward on its USDC while holding funds with a leading institutional custodian.

The program described the following yield schedule for the USDC onboarded by @MakerDAO:

• 1% APY on the first 100 million USDC.

• 0.1% more APY on each 100 million USDC thereafter.

• Rewards are not to exceed 1.5% APY.

3/

— Maker (@MakerDAO) October 24, 2022

According to Coinbase Prime, this move will not only accrue tangible benefits for the MakerDAO community, but it also exemplifies the platform’s efforts to grow the stablecoin ecosystem. Coinbase expressed certainty that stablecoins will play a key role in creating an open, more efficient, more equitable financial system that bridges the gap between the crypto and fiat worlds.

Jennifer Senhaji, who is in charge of growth and business development at MakerDAO, said:

“The additional monthly revenue generated through this deal enables Maker to further advance its overarching mission to create a global, trustless financial future built on decentralized rails.”

Related: USDC adoption is lagging outside of the United States: Coinbase

Coinbase has a long history of supporting MakerDAO, having provided liquidity to the protocol and helped it with its initial listing of Dai (DAI).

On Oct. 14, Cointelegraph reported that MakerDAO’s revenue plummeted in the third quarter of 2022, caused by a fall in loan demand and few liquidations, while expenses remained high. In a series of tweets, Johnny_TVL, a Messari analyst and co-author of “The State of Maker Q3 2022,” shared that MakerDAO saw its revenue plunge to just over $4 million in Q3, down 86% from the previous quarter.

@MakerDAO third quarter was a painful one for the decentralized lender.

Notables:
– revs fell 86%, collateral ratio down to 1.1
– G-UNI dominating, is this increasing liquidity and on-chain volumes for DAI?
– wBTC reliance on whales/institutions
– RWAs
– Endgame

1/n pic.twitter.com/OrJ7JvFSM3

— Johnny_TVL (@john_tv_locke) October 13, 2022

Categories
Uncategorized

Chinese agents used Bitcoin transactions through Wasabi to allegedly bribe US government employee

According to an analysis by crypto risk management firm Elliptic, two Chinese intelligence agents used Wasabi Wallet to conceal BTC transactions allegedly used for bribes.

The United States Department of Justice has announced charges against two Chinese intelligence officers who allegedly bribed a double agent with Bitcoin.

In an Oct. 24 announcement, the Justice Department said Guochun He and Zheng Wang had attempted to obstruct the prosecution of an unnamed global telecommunications company based in China, which allegedly involved paying a U.S. government employee roughly $61,000 in bribes using Bitcoin (BTC). However, the individual was a double agent working on behalf of the Federal Bureau of Investigation and did not move against authorities in the Eastern District of New York in the case against the China-based company.

According to an analysis by cryptocurrency risk management firm Elliptic, He and Wang used Wasabi Wallet to conceal the BTC transactions allegedly used for bribes. The firm reported the privacy wallet had previously been used in an attempt to launder BTC from the July 2020 Twitter hack and the attacks on crypto exchanges Bitfinex in 2016 and KuCoin in 2020.

“The same properties of digital assets that make them attractive to criminals – such as censorship resistance, pseudonymity and the ease with which they can be transferred across borders – also make them valuable tools for all intelligence agencies looking to fund clandestine operations,” said Elliptic.

Source: Elliptic

According to the Justice Department, the two Chinese intelligence officers began the scheme in 2019 by directing the double agent to steal confidential information related to the prosecution of the company — which Elliptic suggested may be Huawei. He allegedly made separate bribes of $41,000 and $20,000 in BTC to the agent for providing “secret” documents and rewarding the release of information, respectively.

Related: No crypto for criminals: Coinjoin BTC mixing tool to block illicit transactions

Following the creation of the Justice Department’s National Cryptocurrency Enforcement Team in October 2021, the government department has taken many enforcement actions against individuals and entities using crypto for illicit actions including money laundering and related to cybercrimes. In 2022, the Department of Justice seized roughly $500,000 in fiat and crypto from a hacking group tied to the North Korean government, and has taken steps to move forward on a criminal prosecution case against a U.S. citizen who allegedly violated sanctions through crypto.

Categories
Uncategorized

Western Union may be planning to expand its digital offerings far beyond remittances

Trademark applications seem to hint at an asset and commodities exchange, insurance and Western Union’s own token as it faces increasingly diverse competition on the remittances market.

Western Union may be preparing to offer crypto-related services, judging from trademark applications filed by the company last week. This is the latest of several attempts the company has made to enter the cryptoverse. So far, it has had limited success.

Western Union filed for three trademarks on Oct. 18. According to trademark attorney Mike Kondoudis, activities covered by the applications include managing wallets; exchanging digital assets and commodities derivatives; issuing tokens of value and brokerage and insurance services.

Western Union is a major provider of cross-border remittance services, and it showed its interest and uncertainty in cryptocurrency early. It partnered with Ripple to settle payments of remittances in 2015, but that partnership remained in the test phase three years later and Western Union announced that it was not adding crypto transfer to its services in the foreseeable future.

#WesternUnion has filed 3 trademark applications claiming plans for
▶️ Financial + Banking + Insurance
▶️ Virtual currency exchange + transfer
▶️ Commodity and Crypto trading + brokerage
▶️ Issuing tokens of value
…and much more#Web3 #Metaverse #Cryptocurrency #NFT #DeFi pic.twitter.com/YvKysvj3mq

— Mike Kondoudis (@KondoudisLaw) October 25, 2022

Western Union did, however, continue to investigate and engage with electronic wallets. It partnered with blockchain platform Coins.ph to enhance its services to the Philippines with technical support from Thunes.

The remittance market is becoming more competitive. Coinbase targeted Mexico, the world’s second-largest remittance market, in February with a service that allowed users to send U.S. dollars and withdraw Mexican pesos. Several other companies have entered the Mexican market this year as well, and a number of financial inclusion solutions are also offering alternatives to traditional remittance providers.

Related: Crypto.com to roll out Google Pay integration as Big Tech continues to embrace crypto

Now Western Union seems to be positioning itself to offer remittance services and more on the crypto market, such as a digital assets exchange and insurance, and it might issue its own token. Western Union is still entering a crowded and competitive field, where companies such as PayPal and MasterCard have also recently opened up shop.

Categories
Uncategorized

US lawmakers question regulators over ‘revolving door’ with crypto industry

“Americans should be confident that regulators are working on behalf of the public, rather than auditioning for a high-paid lobbying job,” said five senators and House members.

Several Democratic members of the United States Senate and House of Representatives have requested information from top regulators and agencies in the country regarding crypto firms hiring government officials upon their departure.

In letters dated Oct. 24 addressed to the heads of the Securities and Exchange Commission, Commodity Futures Trading Commission, Treasury Department, Federal Reserve, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, and Consumer Financial Protection Bureau, five U.S. lawmakers asked for a response in regard to the steps the government departments and agencies were taking “to stop the revolving door” between themselves and the crypto industry.

Senators Elizabeth Warren and Sheldon Whitehouse and Representatives Alexandria Ocasio-Cortez, Jesús García and Rashida Tlaib cited reports claiming that “over 200 government officials” — including lawmakers, staffers, and White House officials — had taken positions as advisers, board members, investors, lobbyists, legal counsel and executives at crypto firms.

“We have long been aware of the revolving door in other sectors of the economy — from Big Tech, to the defense industry, to other parts of the financial services sector — and we are concerned that the crypto revolving door risks corrupting the policymaking process and undermining the public’s trust in our financial regulators,” said the letter, adding:

“Just as powerful Wall Street interests have long exercised their influence over financial regulation by hiring former officials with knowledge of government’s inner workings, crypto firms appear to be pursuing the same strategy in order to secure ‘a regulatory system to the industry’s exact specifications.’ Indeed, hiring former regulators and government officials provides the crypto industry with a sense of legitimacy that is ‘a vital currency for an industry that designs many of its products to skirt regulatory scrutiny.’”

The five senators and representatives requested information on ethics guidelines over how departing regulators may choose to seek employment, including whether they bar individuals from working at firms they interacted with or oversaw during their time in government within a certain timeframe. The letter set a deadline of Nov. 7 for regulatory agencies to respond to the information on “potential conflicts of interest.”

“Americans should be confident that regulators are working on behalf of the public, rather than auditioning for a high-paid lobbying job upon leaving government service,” said the lawmakers.

Related: The US Dept. of Commerce has 17 questions to help develop a crypto framework

Warren has criticized the crypto industry many times in her position on the Senate Banking Committee and in working with House members. On Oct. 12, she and six other lawmakers penned a letter requesting information on the energy usage and potential environmental impact of crypto miners from Texas’ electrical grid operator. The senator’s proposed bills affecting the industry reportedly include legislation aimed at shutting down bank-provided crypto services and cracking down on individuals attempting to use crypto to avoid sanctions.

Categories
Uncategorized

Sub-$20K Bitcoin price puts BTC miner profits under pressure as hash rate soars

Soaring hash rate, high electricity costs and BTC price hovering under $20,000 for months is complicating matters for Bitcoin miners.

October witnessed a surge in Bitcoin’s (BTC) hash rate which is pushing the metric to a new high of 245 Exahashes per second. These changes led to a sharp decrease in the hash price, resulting in a drop in the profit margins for BTC miners reaching a low of $66.8 USD/PH (per one quadrillion hashes per second) on Oct. 24, 2022.

According to Luxor Technologies, “hashprice” is the revenue BTC miners earn per unit of hash rate, which is the total computational power deployed by miners processing transactions on a proof-of-work network.

Hashprice Index. Source: Hash Rate Index

Not only has volume been inconsistent, the Bitcoin hash rate increased last week to an average of 269 EH/s. This means the difficult hash rate has been rising since July 2022.

Bitcoin market price vs Bitcoin difficulty. Source: Blockchain.com

Several factors, including expansion of mining operations, which creates miner competitiveness, increased use of ASIC miners which are more efficient than their alternatives and the Ethereum Merge led to some Ethereum (ETH) mining firms to fill empty rack space from non-operating ETH GPU mining with BTC specific ASIC miners.

Consequently, the surge in the hash rate resulted in an adjustment of the Bitcoin difficulty at a time when BTC’s price was dropping. As expected, after the spike of the hash rate and the increase in the Bitcoin difficulty, the hash price plummeted to $0.0657 tera hash per day, thereby reducing the level of profit.

Bitcoin price versus hash rate. Source: Glassnode

Increase in mining costs translates to compressed profits

A contributing factor to the depressed profit level is the general rise in BTC mining costs. For example, there has been a sharp increase in the price of electricity in the U.S. From July 2021 to July 2022 alone, its price increased by 25%, from $75.20 to $94.30 per megawatt hour. Energy prices also tend to increase in winter as people need to heat their homes. The Bitcoin mining industry is already seeing a rise of mining in Kazakhstan due to affordable energy.

Bitcoin miners face other rising costs such as the hosting fee, acquisition of miners and installing or upgrading of the cooling systems. During the 2020 to 2021 crypto bull market, Bitcoin mining companies took out loans when BTC and equipment prices were also much higher. This means that the interest on existing debts themselves could hurt newer and overleveraged mining firms.

It is clear that the increase in hash rate and Bitcoin difficulty, as well as the decrease in hash price leads to a compressed profit margins. The following graph shows a decrease in profits in a landscape where hash rate, difficulty and the cost of electricity continue to rise.

Mining expansion plans for major public BTC miners. Source: Twitter

If the hash rate continues to increase amid a falling hashprice, the profit margin will continue to decrease, possibly leading some mining firms to close up shop permanently.

One possible outcome is that lean (cooler balance sheets) mining firms like Marathon may be able to purchase liquidated equipment and rack space from bloated mining companies that fail.

Mining firms that are staying lean while attempting to scale may prove victorious. Mining companies such as Core Scientific, Marathon, Riot, Bitfarm and CleanSpark are preparing for expansion even as many miners are finding profitability difficult.

Related: Public Bitcoin miners’ hash rate is booming — but is it actually bearish for BTC price?

Is sustainability the answer?

In view of the difficulties discussed, BTC mining firms should adopt sustainable BTC mining models for both profitability potential and to ease regulators. This should include using renewable energy sources, increasing production capacity and installing advanced cooling systems.

Mining firms can enhance their operations by using renewable energy from wind power, solar power and hydro which concurrently reduces costs and the carbon footprint. This approach can lead to more consistency and sustainability in Bitcoin mining energy costs. Norway has managed to capture 1% of all Bitcoin mining through a 100% renewable energy approach.

The depressed Bitcoin price, high hash rate and Bitcoin difficulty as well as low hash price contribute to small profit margins which may lead to sustainable, decentralized mining practices across the industry.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Generated by Feedzy