Evolution of Staking: from PoS to Delegated Staking

Audy Castañeda
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Evolution of Staking: from PoS to Delegated Staking

Staking is one of the most important practices in the world of cryptocurrencies. Its historical evolution is narrated below.

All blockchains have a consensus mechanism which refers to how the nodes of a decentralized network agree on their state. There are numerous of these mechanisms, but two are fundamental in the cryptocurrency arena: Proof-of-Stake (PoS) and Proof-of-Work (PoW). In this work we analyze the evolution of the first of them, staking.

PoS was born as a low-cost and limited energy consumption alternative compared to PoW. Not to go into too much detail, the latter consists of digital mining. In any case, this system allows users to place their coins in a mechanism wallet. With the latter, data is confirmed and the security of the network is guaranteed and in exchange the user is rewarded with new coins.

PoS is the consensus mechanism of some of the main blockchains in the crypto world such as Ethereum, Solana and Avalanche, among others. Taking into consideration the particularities of this mechanism, it is worth setting up the microscope to see a few more things. It is obvious is that not all PoS work in a similar way.

A Look at the Evolution of Staking

The evolution of staking is an interesting process that aims to make the process easier for investors. Likewise, it seeks to improve the performance and security capacity of the protocols. The fundamental principles of PoS are always the same, the difference is in the adaptation to different networks.

This stage is when the so-called delegated staking (DPoS) appears on the horizon. Basically, it is a variety of PoS that features a voting and delegation mechanism. This makes the process much more democratic than the original varieties.

Users vote and elect the delegates (witnesses or block producers) who will validate the next blocks on the network. Just like traditional PoS, DPos uses a collateral staking system. Delegated staking is not a new concept, but dates back as far as 2013, although it was not until 2015 when it was first implemented on BitShares.

Taking into account the evolution of PoS, DPoS is not so much a continuation, but rather a kind of parallel line. Despite this, at the beginning of the change it was not considered the main form of staking.

The Most Striking Feature of DPoS

DPoS takes all the positive elements of the main mechanism and reinforces them with its own advantages. In that sense, the main characteristic of the mechanism is democracy and the limitation of the functions of the delegates.

Thus, depending on the blockchain in question, the mechanism limits the number of delegates that can process a block. Likewise, it limits the participation of the delegates themselves. This means that delegates processing one block are generally not eligible to process the next one.

To elect these delegates, users vote by pooling their tokens into a stake pool. Thus, they are linked to a specific candidate for the delegate. The candidate with the most votes is elected to process the block and receive the corresponding transaction fees. Your next task is to distribute it among users.

The reward varies according to the number of delegated tokens. On the other hand, it stands out that voters always have full control of the process. This means that delegates suspected of wrongdoing may be voted against. With this, the delegates with the highest reputation are the most attractive among voters to become witnesses.

In closing, DPoS have both advantages and disadvantages. Among the latter are high centralization, dependence on delegates, as well as the appearance of malicious delegates.

By Audy Castaneda

Coinbase Urges SEC: Five Reasons to Greenlight Ethereum Spot ETF

Leonardo Perez
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Coinbase Urges SEC: Five Reasons to Greenlight Ethereum Spot ETF

Coinbase Chief Legal Officer Paul Grewal announced via the social media platform X that the company submitted a comprehensive 27-page response, complete with 96 citations, to advocate for approval of the proposed ETP on Grayscale Ether Trust (ETHE).

Coinbase, a leading cryptocurrency exchange, formally responded to the Securities and Exchange Commission (SEC) regarding the proposal for a spot Ethereum exchange-traded fund (ETF).

Yesterday, Coinbase Chief Legal Officer Paul Grewal, via X, informed the following:

“… Coinbase responded to @SECGov’s request for comment on the proposed Grayscale Ether Trust ($ETHE) ETP. 27 pages and 96 citations that provide the (1) legal, (2) technical, and (3) economic rationale for approval.”

Ethereum’s Classification as Commodity

The cornerstone of Coinbase’s argument rests on the classification of ETH as a commodity rather than a security. Grewal’s argument that “ETH is not a security… before and after the merger, the SEC, CFTC and the market have treated ETH not as a security but as a commodity,” underscores the consensus among regulators and investors. market participants regarding the state of Ethereum.

This classification aligns with the legal framework necessary for the SEC to consider an ETH-based ETF.

Precedent Set by Bitcoin ETF Approvals

Coinbase leverages the SEC’s prior approval of Bitcoin ETFs as precedent, advocating for consistent regulatory treatment for Ethereum. Grewal posits that “The economics show that ETH is as resilient as BTC in meeting the Commission’s standard for ETP approvals,” highlighting the parallel between the strength and maturity of the Ether and Bitcoin markets.

This comparison serves to remind the SEC of the rationale for its previous decisions and suggests a similar approach for ETH.

Ethereum’s Technological and Operational Security

The presentation emphasizes the technological and operational security mechanisms inherent to the Ethereum blockchain, particularly after the merger. The transition to Proof-of-Stake is presented as a significant improvement to Ethereum’s security features, reducing its susceptibility to fraud and manipulation.

This technological strength is a critical factor in Coinbase’s argument, which underlines the reliability and stability of ETH as an underlying asset for an ETF.

Market Dynamics and Resilience

Coinbase presents a detailed analysis of Ethereum market dynamics, including its depth, liquidity, and spread rigidity. Grewal notes that “The depth of the ETH market, the tightness of spreads, and the price correlation between spot markets are highly indicative of a market resistant to fraud and manipulation.”

This argument is designed to assure the SEC of the stability of the ETH market and its ability to support an ETF without introducing significant risks to investors.

Shared Surveillance and Market Supervision Agreement

Finally, Coinbase highlights the shared surveillance agreement with the Chicago Mercantile Exchange (CME) as a mechanism to ensure comprehensive market supervision.

This agreement, as Grewal describes, “facilitates information sharing… through its surveillance of the CME ETH futures market,” which is crucial to monitoring and preventing fraudulent and manipulative practices in the ETH market.

In conclusion, Coinbase’s SEC filing is a rigorously constructed argument that combines legal precedent, technical security, and market stability analysis to advocate for the approval of an Ethereum spot ETF. Standard Chartered predicts SEC approval for an Ethereum ETF before May 23, which could cause the price of ETH to rise to $4,000.

However, Dave LaValle, head of Grayscale ETFs, recently said that there is only a 50% chance that the SEC will approve the conversion of its ETH trust to a spot ETF in May. Currently, ETH is trading at $2,961.

By Leonardo Perez

Circle Announces Discontinuation of USDC on Tron Blockchain, And other News

Audy Castañeda
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Circle Announces Discontinuation of USDC on Tron Blockchain, And other News

Circle, issuer of the USDC stablecoin, has revealed that it will end support for the token on the Tron blockchain. More news below.

Circle, the issuer of the USDC stablecoin pegged to the US dollar, has reported that it will end support for the token on the Tron blockchain. In a blog post on February 20, Circle announced that it will no longer mint USDC on Tron, effective immediately, and will proceed to gradually withdraw support for this blockchain network.

The company indicated that it will provide support for Circle Mint customers’ transfer of USDC to other blockchains until February 2025. Additionally, Circle advised retail users and other customers not affiliated with Circle to transfer their Tron-based USDC to an exchange. or distributor that supports USDC on other blockchains.

Circle emphasizes its commitment to expand USDC’s reach to additional blockchains to deliver the widest access, broadest developer choice, and most secure user experience of any dollar stablecoin in the world.

Hong Kong SFC Receives 18 Crypto License Applications in Two Months

The Hong Kong Securities and Futures Commission (SFC) has seen growing interest in the cryptocurrency space, receiving 18 license applications in just over two months, coming from both local and global actors.

On February 20, Huobi HK, the Hong Kong-based subsidiary of cryptocurrency exchange Huobi, joined the list by applying for a virtual asset trading platform license from the Hong Kong SFC, according to confirmed local sources.

This action joins a total of 18 cryptocurrency exchanges, including notable names such as Crypto.com, OKX, Bybit, and DFX Labs, all of which have filed the same license application since mid-November 2023.

Hong Kong Monetary Authority Establishes Guidelines for Tokenization and Custody of Digital Assets

The Hong Kong Monetary Authority (HKMA) took a significant step by publishing an 11-page note that details its standards for the tokenization and custody of digital assets by locally authorized institutions.

In the document, issued on Tuesday, the HKMA urges these institutions to commit to comprehensive risk assessments, as well as to allocate adequate resources to ensure appropriate governance and risk management in their cryptocurrency custody services.

Alan Au, HKMA’s Executive Director (Banking Conduct) concludes the document by saying that “The HKMA will keep in view the evolving digital asset market and international regulatory landscape, and may provide further guidance as and when necessary.”

CME Group to Launch Micro Bitcoin and Ethereum Futures in Euros to Meet Derivatives Market Demand

CME Group, the world’s largest derivatives exchange based in Chicago, plans to launch euro-denominated micro Bitcoin and Ethereum futures next month, in response to the growing demand in the derivatives market.

The trading firm announced on Tuesday that it will introduce cryptocurrency futures tailored to the European market, capitalizing on the popularity of its US dollar-denominated counterparts. The launch date is scheduled for March 18, subject to regulatory review.

Ripple’s Brad Garlinghouse Advocates an XRP ETF and Predicts Diversification in the Space

In an interview with Bloomberg, Ripple CEO Brad Garlinghouse said the company would “welcome” an exchange-traded fund (ETF) based on the XRP token, stressing that “we would certainly welcome it.” Garlinghouse shared the company’s perspective on the possibility of an XRP ETF on February 20.

The Ripple executive considers the presence of several ETFs for different tokens in the space inevitable. Additionally, he predicted the rise of ETFs on investment portfolios, arguing that they will “diversify risks” for investors, giving them a more balanced option.

By Audy Castaneda

‘Avoid Ethereum (ETH) At All Costs,’ Says Bitcoin Advocate – Here’s Why

Leonardo Perez
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‘Avoid Ethereum (ETH) At All Costs,’ Says Bitcoin Advocate – Here’s Why

Krueger’s comments, shared in a post on X, highlighted notable statistics about network activity and Ethereum’s transactional utility.

Bitcoin supporter Fred Krueger has recently expressed concerns about Ethereum (ETH) fundamental trends and potential regulatory hurdles.

Krueger’s critique highlighted Ethereum’s skyrocketing price, especially its two-year peak recently reached and juxtaposed with declining network usage.

Ethereum Utility Decrease Raises Alarms

Even though ETH hit $3,000, Krueger noted a significant drop in daily active users (DAU) from 120,000 in 2021 to just 66,000 in 2023. Bitcoin Maxi also highlighted the decline in user activity on the Blockchain’s “main application,” Uniswap V3, Ethereum’s main decentralized exchange protocol, and highlighted it as a remarkable concern.

Krueger said that “The main app, Uniswap v3, only gets 16k DAU. I remember in 2020 this number was 60,000 or more. It is definitely the case that ETH as a chain ​​is no longer used directly.”

Krueger also clearly compared the current state of Ethereum and a “meme coin,” citing similarities to assets like Shiba Inu (SHIB).

Despite Ethereum’s price performance, Krueger highlighted a perceived erosion in its usefulness, especially when compared to alternative blockchain networks such as Solana, Avalanche and Near. The Bitcoin Maxi continued, noting the following:

“Of course, that doesn’t stop investors from offering up to a market capitalization of $361 billion. It has really become a type of meme currency, similar to Shiba Inu. It is not particularly cheap ($1.50 per transaction) or fast. If you are only interested in reward points for casino style DeFi games or apps (Solana, Avalanche, etc.), everything is great.”

Regulatory Uncertainty and Community Reaction

Krueger’s criticism extended beyond Ethereum’s utility to its regulatory perspective. He expressed doubts about the possibility of a spot approval of an Ethereum Exchange Traded Fund (ETF), citing concerns about regulatory scrutiny in the following terms:

“Finally, I do not think Gensler is going to allow an Eth EFT. If you believe in fairy tales, have fun. I just don’t think Gary wants to make his second ETF a massive pre-mine. It set a very bad precedent.” The Bitcoin Maxi concluded: “Avoid ETH at all costs.”

Despite Krueger’s assessment, the ETH community’s belief in ETH remains unwavering. Under Krueger’s post, many were found to contradict Krueger’s comment. They argue that considering only daily active users (DAUs) on the mainnet is misleading, similar to assessing Bitcoin’s value based solely on its mainnet usage:

“Are you aware that Ethereum has a modular i.e. rollup centric roadmap? Using DAU on mainnet only is extremely disingenuous, as it would be with BTC mainnet.

I agree with your take that it was / is clownish to try and portray ETH as sound money, but you discredit yourself here.”

Another user, “John Doe,” maintains that there has been a significant decrease in total value locked (TVL) across the DeFi space, indicating a trend of decentralized finance (DeFi) users reducing their risk exposure sooner. to potentially reinvest in the future:

“Sir, as much as you are well respected in the ETF space, you’re not well aware of how DeFi Cycles work, just check out Defillama and see the TVL charts from the last bull run v/s today. There’s been sharp decline across the space. This is degenerates de-risking, before we Ape in again.”

By Leonardo Perez

Tom Lee: Bitcoin is ‘Solid Money’ and Mentions Three Reasons Why BTC Could Hit $150,000 in 2024

Audy Castañeda
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Tom Lee: Bitcoin is ‘Solid Money’ and Mentions Three Reasons Why BTC Could Hit $150,000 in 2024

Speaking on CNBC’s Squawk Box on February 21, the American businessman said he believes Bitcoin prices will reach $150,000 this year.

Fundstrat head of research Tom Lee has reaffirmed his bitcoin price prediction of $150,000, stating that the cryptocurrency could reach that price level this year. He cited three key reasons driving his bullish price forecast:

“Demand improves with new ETFs, supply reduces with halving, and if monetary policy eases, as we expect, that will support risk assets.”

Describing bitcoin as “sound money,” he emphasized that the cryptocurrency is incredibly safe and is proving to be a good risk asset and an excellent store of value.

Lee, managing partner and head of research at Fundstrat Global Advisors, shared his bitcoin price prediction in an interview with CNBC on Wednesday. Fundstrat is an independent financial research boutique providing strategic market insights.

Lee has more than 25 years of equity research experience. Prior to co-founding Fundstrat, he served as JPMorgan’s chief equity strategist from 2007 to 2014 and previously as a managing director at Salomon Smith Barney.

Will the Bitcoin Rally Continue?

The comments come as BTC appears to have reached resistance at $52,000 following a 30% rally over the past 30 days.

However, Lee seems unfazed, stating that “Bitcoin has held firm” before adding: “I don’t think a drawdown is going to start so soon.” Asked about performance over the next five years, he said: “It’s solid money and I think it’s paying off.”

“It has been a great store of value, it has been a good risk asset and it is also incredibly safe. There has not been a single fraudulent entry on the blockchain since its inception and I don’t think any bank can say that is true of their accounting.”

Lee has been a long-time Bitcoin bull and predicted the asset would reach $200,000 in the coming years.

In the same interview, co-host Andrew Sorkin was ridiculed for thinking that a store of value should maintain the same price. A post on X by user @HodlMagoo said that “Moron of the day goes to @andrewrsorkin for thinking a store of value needs to stay the same price.”

Other Analysts Have a Say

Other analysts suggested that BTC could cool down for a while.

Joel Kruger, market strategist at LMAX Group, suggested caution in the short term, pointing to possible volatility due to changes in central bank policies and the consequences of global macroeconomic weakness, which could temporarily affect crypto. He added that any economic crisis would provide the opportunity to take strategic positions.

Analytics firm Swissblock said in a market update on Wednesday that the overall outlook for bitcoin remains bullish, but it may experience a pullback to lower prices first before resuming its uptrend.

“While the prevailing sentiment suggests a possible continuation of the upward trajectory, the current scenario may necessitate a period of consolidation or even a pullback to the $47.5K support level,” Swissblock analysts said. “This adjustment would serve to alleviate excess volatility and reinforce market stability before possible new bullish movements.”

BTC Price Outlook

The asset was trading down 1% on the day at $51,507. However, it remains within the range-bound channel that formed over the past week.

The cryptocurrency market capitalization remains above $2 trillion, but major assets have begun to cool after a frothy week. Ethereum, Solana, Ripple, and Cardano are all down a couple of percent, with only Binance Coin making gains at the moment.

By Audy Castaneda

Mathematician Argues that the Future of the Economy Will Be Quantum, Not with Bitcoin

Leonardo Perez
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Mathematician Argues that the Future of the Economy Will Be Quantum, Not with Bitcoin

David Orrell argues that quantum mechanics, not Bitcoin, is the future of economics, and offers deeper insights into the financial system. Quantum economics surpasses classical theories by encompassing complexities and accurately predicting economic behavior. Orrell highlights the potential of quantum models in social sciences and decision making, challenging the assumptions of classical economics.

David Orrell, mathematician and acclaimed author, argues that the future of the economy does not lie in trendy cryptocurrencies like Bitcoin. Rather, it is the application of quantum mechanics.

Orrell, who earned his doctoral degree in mathematics from the University of Oxford, suggests that the same quantum models that can be useful in describing the physical processes of the very small are also useful in studying the flow of information in economics.

This innovative approach, known as quantum economics, promises a more precise and nuanced understanding of financial systems, overcoming the limitations of classical economic theories.

In a recent exclusive interview with The Quantum Insider, Orrell explained that classical economics, which is based on the same type of binary mathematics that underpins classical computers, does not offer enough depth to truly model the economy.

Classical computers use bits to perform calculations. Basically, these are on/off switches that can direct programs. However, in quantum computing, bits are replaced by qubits. While bits can be on or off, qubits can be on, off, both on and off at the same time, and neither on nor off at the same time.

Quantum Economy, Not Bitcoin

Classical economic theories have long been the basis of financial analysis and prediction, relying heavily on equilibrium models to forecast market behavior. These models, while fundamental, often fail to ignore the inherent complexities and uncertainties of real-world economic systems. Despite its innovative approach to decentralization and security, Bitcoin and similar cryptocurrencies still operate within these classic frameworks, thus inheriting their limitations.

Quantum economics, however, embraces these complexities and draws parallels with the wave-particle duality of quantum particles to model economic phenomena. Orrell emphasized that quantum economics leverages quantum models as mathematical tools to more effectively analyze and predict economic behavior. According to him, just as quantum probability is fundamental to understanding physical processes, it can also illuminate economics:

“I discovered that people were using quantum models in the social sciences for things like decision making; in other words, how to use a quantum model to inform decision making.

Just like in normal economics, instead of making completely rational decisions all the time, we find that other things are happening in the background that interfere with thought processes.”

Therefore, quantum models could account for non-rational behaviors that affect economic decisions. This approach offers a more complete framework for understanding the flow of money and information in the financial system. This challenges the traditionally rational assumptions of classical economics.

Mathematician: Bitcoin Victim of Market Fluctuations

He also reflected on an analogy between the binary nature of traditional computing and the capabilities of qubits in quantum computing. This paradigm shift, Orrell suggested, could revolutionize economic modeling and decision-making by embracing uncertainty and complexity:

“A qubit can be compared to a spectrum of colors, offering different shades and complexities. It’s not just zero or one. The qubits are entangled; They interact with each other, introducing uncertainty in the measurement. This difference is what sets it apart. And as I mentioned, the key point is to demonstrate that models based on this principle can be profitable and effective.”

While Bitcoin has revolutionized the concept of decentralized finance, it remains confined to the paradigms of classical economic theories. These often fail to capture the full spectrum of human behavior and market fluctuations.

Orrell believes that a greater understanding of quantum principles could lead to innovative economic models and strategies, benefiting the global financial system.

By Leonardo Perez

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