Everything is crashing. Here's the bad AND the good.
GM, we take the latest Web3 news and translate it into plain old English - so you can stay up to date, without your eyes glazing over.
In today’s edition:
Everything is crashing. Here's the bad AND the good.
The 'electricity backed stablecoin'.
RESOURCE: Raoul Pal’s perspective on the current crypto crash (In 9:30)
Don’t worry, your funds are SAFU.
Terms used (click for translation):
NFTs, Bull Run, Decentralized, Stablecoins.
Everything is crashing. Here's the bad AND the good.
You know those overly positive friends ?
The ones that, in the worst of times, will say:
"Eeey, chin up there bud. Things'll get better."
...and you kind of want to strangle them?
Because, while you know they mean well, the bad news can't just be glossed over - you need it to be acknowledged before you can absorb any positive sentiment.
We have no intention of being that 'meditates a little too frequently' friend, with rose colored glasses taped to their emotional filter.
We're going to give you the bad AND the good.
Alright, pain first:
Stock and crypto markets are crashing.
It's a sea of red, just about everything is down, and billions of dollars of value have been wiped from the market.
It hurts. A lot. If you're feeling it, know that you're not alone.
One of the worlds largest crypto lenders, Celsius, halted all account withdrawals citing “extreme market conditions”.
Sub text: 'we may have overextended ourselves and we're doing all we can to keep our heads above water'.
Not great.
U.S. crypto exchanges Gemini, Coinbase, BlockFi and Crypto.com have all announced job cuts.
(This is not a trend found in healthy markets).
Ethereum crashed on Uniswap, from $1,300 to $950 and back up again in a 'flash crash', after a single investor sold out $84.5M worth of ETH.
Ooft. Ok, that sucked. But we got through it.
Now for the silver linings:
Long term investment just got a whole lot easier.
All of the noise created by hype projects with weak fundamentals are about to be silenced and shaken out of the market.
Only the strong will survive, and those strong long term opportunities will be being sold at a discount.
(Sub text: things may seem grim, but there's more opportunity now than there was at the peak of the market).
The faster we crash, the faster we can start to recover.
(Remember the 2020 market crash? It was fast. It started in February and ended in April).
The more negative the market sentiment becomes, the more impact any good news will have.
This feels like the start of a recession, and if it is - we may already be halfway through it.
A recession is marked by two quarters (6 months) of negative Gross Domestic Product (GDP) growth.
In the first quarter of this year, we saw negative GDP growth. If that happens again at the end of June, we'll officially be in a recession.
Ouch.
BUT! While the length of any single recession is hard to predict, on average, they last ~11 months.
Which means if we're in one right now, there's a chance that we're already halfway through it.
The next crypto bull run is due to begin in less than two years.
Bitcoin scarcity drives the price of the entire crypto market, and it is programmed to become more scarce in early 2024.
As of this writing, it's projected that Bitcoin miners will start earning 50% less Bitcoin each day as of Mar 02, 2024 (07:45:53 AM GMT).
Which means less Bitcoin will enter the market each day, making it more scarce, which has historically triggered a crypto bull run (like the one we just experienced).
So...things kinda suck right now, but the future isn't all bad?
Yep, pretty much.
And when things start feeling rough, we like to remember the mantra of the noble Coachella paramedics, tasked with talking folks out of bad trips:
"This too shall pass".
We hope you're all doing ok out there.
The 'electricity backed stablecoin'
Alright, time for some easy, breezy news that'll make you go:
'Hey, that's cool!'
Scientists claim to have designed a fully decentralized stablecoin, whose value is pegged to electricity.
They're calling it the 'E-Stablecoin'.
Here's how it would work:
You input 1kwh of energy into the system, 1 E-Stablecoin is created (valued at the market price of energy, currently 1kwh of energy = ~0.10c) and given to you.
You give the system 1 E-Stablecoin, you get 1kwh of energy in return, the E-Stablecoin is then destroyed (or 'burnt') by the system.
This means that for every 1kwh of electricity that is used up, an E-Stablecoin is also 'used up', which ensures the amount of electricity on offer always matches the amount of E-Stablecoins in existence.
The folks behind the E-Stablecoin theorize that it would be easily sustainable, because electricity has a highly stable price and consistent demand.
The bad news:
Our technology isn't quite there yet.
Newer/faster cloud storage systems and 'scalable information engines' (i.e. blockchains that can handle a stupid, crazy amount transactions per second) would be required to pull this off.
Still cool though!
Resource of the day
Raoul Pal’s perspective on the current crypto crash.
(In 9:30)
Don’t worry, your funds are SAFU
Binance's CEO, Changpeng Zhao (aka CZ), just tweeted that his customers funds are 'SAFU'.
Which reads like a sneeze...did our guy just sneeze - is that it?
Turns out SAFU is the ‘Secure Asset Fund for Users’, and it acts as an emergency insurance fund for Binance users.
Basically, Binance commits a percentage of trading fees to its own fund, that's then used to safeguard its users in case anything crazy happens (like a hack).
Yesterday, something crazy happened.
A BTC transaction got stuck and Binance temporarily paused all Bitcoin withdrawals on their platform.
(All while BTC prices were dropping).
BTC withdrawals on other networks remained open as normal so people could still technically withdraw BTC from the platform. But anyway...
In a tweet, the company said:
“A batch of $BTC transactions got stuck due to low TX fees, resulting in a backlog of BTC network withdrawals.”
In other words, a rag tag group of penny pinchers were all trying to withdraw BTC, but were offering such low transaction fees that the miners responsible for processing them, ignored them altogether.
Here's the maths on that:
Too many transactions with low fees = miner's saying 'pfffft, nope. Not processing your transactions for that price'.
...and a backlog was created.
(For anyone interested, here’s the long form explanation).
All in all, it took about 3hrs before things were back up and running.
And if you're wondering why this is big news - or news at all - it's because Bitcoin is widely considered the 'gold standard' of reliability.
From a broader 'tech industry' perspective, this sort of thing ins't new. In fact, issues like this are often what create super stable products in the long run.
The whole 'whatever doesn’t kill you, makes you stronger' thing.
Your Daily Dose of Web3
Crypto users take to Twitter to lament the ongoing market downturn
US trademark filing hints at Arizona State University planning classes in the metavers
Goldman Sachs begins trading Ethereum-linked derivative product
Alright, that’s it for today!
Love to the family,