Riding The Wave News Summary #26
The Man Behind Ethereum Is Worried About Crypto's Future, Coinbase Hit With $5M Lawsuit Over 'Unlicensed' Sale of Dogecoin, 78 Other Crypto Assets, & What Is ApeCoin and Who Is Behind It?
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Tweets
Coinbase Hit With $5M Lawsuit Over 'Unlicensed' Sale of Dogecoin, 78 Other Crypto Assets
Sen. Warren Announces Sanctions Compliance Bill for Crypto Companies
We Could Be Near Crypto’s ‘Hyper-Inflection’ Point — What Does This Mean for Investors?
Tweets
The Man Behind Ethereum Is Worried About Crypto's Future
“Crypto itself has a lot of dystopian potential if implemented wrong,” the Russian-born Canadian explains the morning after the party in an 80-minute interview in his hotel room.
Buterin worries about the dangers to overeager investors, the soaring transaction fees, and the shameless displays of wealth that have come to dominate public perception of crypto. “The peril is you have these $3 million monkeys and it becomes a different kind of gambling,” he says, referring to the Bored Ape Yacht Club, an überpopular NFT collection of garish primate cartoons that has become a digital-age status symbol for millionaires including Jimmy Fallon and Paris Hilton, and which have traded for more than $1 million a pop. “There definitely are lots of people that are just buying yachts and Lambos.”
Buterin hopes Ethereum will become the launchpad for all sorts of sociopolitical experimentation: fairer voting systems, urban planning, universal basic income, public-works projects. Above all, he wants the platform to be a counterweight to authoritarian governments and to upend Silicon Valley’s stranglehold over our digital lives. But he acknowledges that his vision for the transformative power of Ethereum is at risk of being overtaken by greed.
His outspoken advocacy marks a change for a leader who has been slow to find his political voice. “One of the decisions I made in 2022 is to try to be more risk-taking and less neutral,” Buterin says. “I would rather Ethereum offend some people than turn into something that stands for nothing.”
In 2011, Dmitry introduced Vitalik to Bitcoin, which had been created in the wake of the 2008 financial crisis. After seeing the collapse of financial systems in both Russia and the U.S., Dmitry was intrigued by the idea of an alternative global money source that was uncontrolled by authorities. Vitalik soon began writing articles exploring the new technology for the magazine Bitcoin Weekly, for which he earned 5 bitcoins a pop (back then, some $4; today, it would be worth about $200,000).
Even as a teenager, Vitalik Buterin proved to be a pithy writer, able to articulate complex ideas about cryptocurrency and its underlying technology in clear prose. At 18, he co-founded Bitcoin Magazine and became its lead writer, earning a following both in Toronto and abroad.
For years, Buterin has been grappling with how much power to exercise in Ethereum’s decentralized ecosystem. The first major test came in 2016, when a newly created Ethereum-based fundraising body called the DAO was hacked for $60 million, which amounted at the time to more than 4% of all Ether in circulation. The hack tested the crypto community’s values: if they truly believed no central authority should override the code governing smart contracts, then thousands of investors would simply have to eat the loss—which could, in turn, encourage more hackers. On the other hand, if Buterin chose to reverse the hack using a maneuver called a hard fork, he would be wielding the same kind of central authority as the financial systems he sought to replace.
Buterin took a middle ground. He consulted with other Ethereum leaders, wrote blog posts advocating for the hard fork, and watched as the community voted overwhelmingly in favor of that option via forums and petitions. When Ethereum developers created the fork, users and miners had the option to stick with the hacked version of the blockchain. But they overwhelmingly chose the forked version, and Ethereum quickly recovered in value.
Buterin didn’t predict the rise of NFTs, and has watched the phenomenon with a mixture of interest and anxiety. On one hand, they have helped to turbocharge the price of Ether, which has increased more than tenfold in value over the past two years. (Disclosure: I own less than $1,300 worth of Ether, which I purchased in 2021.) But their volume has overwhelmed the network, leading to a steep rise in congestion fees, in which, for instance, bidders trying to secure a rare NFT pay hundreds of dollars extra to make sure their transactions are expedited.
The fees have undermined some of Buterin’s favorite projects on the blockchain. Take Proof of Humanity, which awards a universal basic income—currently about $40 per month—to anyone who signs up. Depending on the week, the network’s congestion fees can make pulling money out of your wallet to pay for basic needs prohibitively expensive. “With fees being the way they are today,” Buterin says, “it really gets to the point where the financial derivatives and the gambley stuff start pricing out some of the cool stuff.”
As the technical kinks get worked out, Buterin has turned his attention toward larger sociopolitical issues he thinks the blockchain might solve. On his blog and on Twitter, you’ll find treatises on housing; on voting systems; on the best way to distribute public goods; on city building and longevity research. While Buterin spent much of the pandemic living in Singapore, he increasingly lives as a digital nomad, writing dispatches from the road.
To Buterin, the worst-case scenario for the future of crypto is that blockchain technology ends up concentrated in the hands of dictatorial governments. He is unhappy with El Salvador’s rollout of Bitcoin as legal tender, which has been riddled with identity theft and volatility. The prospect of governments using the technology to crack down on dissent is one reason Buterin is adamant about crypto remaining decentralized.
It’s useful to know a bit about the key players in Crypto as well as what direction they are pushing towards so you aren’t surprised when they make a disruptive move. Its also nice to know how they approach major changes, in this case for Ethereum, any large decisions are most likely to be pushed through a community vote (which has strengths and weaknesses when compared with a centralized decision-making process, such as slower decisions to be made and less expert input).
Coinbase Hit With $5M Lawsuit Over 'Unlicensed' Sale of Dogecoin, 78 Other Crypto Assets
Three Coinbase users are accusing the company of selling unlicensed securities and are seeking at least $5 million on behalf of themselves and everyone else who purchased Dogecoin, Solana, Cardano, or more than 70 other tokens on the platform.
The users claim that, since Coinbase is allegedly selling securities (also known as investment contracts) the company should have registered with the SEC as a national securities exchange—a designation typically reserved for stock exchanges, and one that would subject Coinbase to a raft of regulatory and reporting obligations.
While all of this could, in theory, pose an existential threat to Coinbase's business, it's unclear how much traction the lawsuit will get, especially as similar lawsuits have flamed out in the past. Last April, for instance, at least seven class action lawsuits against crypto exchanges were thrown out by the courts or else withdrawn by plaintiffs.
As with many securities law class action lawsuits, the new Coinbase one is being driven by a law firm. Late last year, the firm advertised that they would file such a lawsuit, asking for Coinbase customers who would be willing to serve as lead plaintiff—a designation that requires putting one's name on the case and, in return, receiving a higher payout if the defendant loses or settles.
Whatever its merits, however, the new lawsuit does serve to highlight the legal exposure Coinbase faces as a result of its decision to aggressively list dozens of new tokens even as the legal status of those tokens was unclear.
Another great example of why companies are waiting for clear regulation, no one wants to get sued for not following rules that might or might not be applied to your project.
Sen. Warren Announces Sanctions Compliance Bill for Crypto Companies
U.S. Sen. Elizabeth Warren (D-Mass.) announced Thursday a new bill to block cryptocurrency companies from conducting business with sanctioned companies.
The Digital Assets Sanctions Compliance Enhancement Act, introduced with Sens. Jack Reed (D-R.I.), Mark Warner (D-Va.), Jon Tester (D-Mont.) and others, would allow the U.S. president to add non-U.S.-based crypto companies to sanctions list if they support sanctions evasion.
According to a draft of the bill, the presidential administration would be tasked with identifying "any foreign person" who operates a crypto exchange or otherwise facilitates digital asset transactions who has also supported sanctions evasion by Russian individuals named to the Office of Foreign Asset Control's sanctions list.
Moreover, the U.S. president could sanction these exchange operators unless there was a national security interest in not doing so.
The U.S. Treasury secretary could also require that crypto exchanges operating in the U.S. not conduct transactions for, or otherwise work with, crypto addresses belonging to people based in Russia if this is deemed to be in the national interest. The Treasury secretary would have to report to Congress about this decision.
The bill seems to extend beyond just Russian sanctions. Another provision would authorize the Financial Crimes Enforcement Network (FinCEN) to identify users transacting with more than $10,000 in crypto.
Crypto is increasingly being turned into an issue divided across political party lines, hopefully, this is just an initial reaction and over time Crypto becomes a non-political issue.
We Could Be Near Crypto’s ‘Hyper-Inflection’ Point — What Does This Mean for Investors?
If you watch or read the news with any regularity, it can be hard to get through a single day without hearing some mention of cryptocurrency. Many stories focus on the incredible returns that some cryptocurrencies have generated for investors, while others proclaim that crypto isn’t really an investment class and that it has no real future.
Some analysts take this and other signs to mean that cryptocurrency is reaching a “hyper-inflection” point. But, what does that mean exactly?
Cryptocurrency’s “hyper-inflection” point, as described by analysts at Wells Fargo, is the point at which the asset reaches critical mass, when momentum shifts toward rapid expansion and acceptance.
According to the Wells Fargo global investment strategy team, cryptocurrency might be very close to this point, similar to the way the internet exploded in the mid to late 1990s. Data from Crypto.com indicates that only about 3% of the world population uses cryptocurrency, but the number of users doubled from February to May 2021 alone.
If adoption rates keep rising exponentially — and world governments start to legitimize cryptocurrency — the hyper-inflection “point of no return” may arrive sooner rather than later. Then, crypto could be as much a part of the fabric of everyday technology as Microsoft Windows or Apple computers.
Many technologies and innovations approach the “hyper-inflection” point but never quite reach it, falling into the waste bucket of history. It’s certainly possible that cryptocurrency will never reach the point of global adoption, thanks to a multitude of factors. For example, governments may make their own digital currencies or even outlaw cryptos, roadblocks that could prevent a hyper-inflection point from ever happening. Or, cryptocurrencies may simply never prove to have great utility in everyday life, limiting their widespread adoption.
I agree we might be near the hyper-inflection point but it could easily be pushed back by a recession or other event. Based on current information this adoption point could take place sometime within the next 2 - 8 years assuming no events slow down or speed up adoption.
I also want to note that even if it occurs it wouldnt be a specific day, week or month. Most likely it would be a time period over several years similiar to the dot com bubble.
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