How the Luna Foundation Guard Raises the Money to Buy Bitcoin for Its Reserves

Alexander Salazar
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How the Luna Foundation Guard Raises the Money to Buy Bitcoin for Its Reserves

The Luna Foundation is one of the ten largest Bitcoin holders worldwide, with a reserve of 80,373 BTC. The mechanism of burning and issuing coins through which that organization generates income has critics and defenders.

A recent purchase of Bitcoin (BTC) positioned the Luna Foundation Guard (LFG) among the ten largest Bitcoin holders worldwide. That non-profit organization claims to have 80,373 BTC reserves, equivalent to around USD 2.88 billion.

Do Kwon, the CEO of the LFG, is also the creator of the Terra network and the stablecoin TerraUSD (UST). He has said that he wants to turn the entity into the highest Bitcoin holder. The South Korean entrepreneur seeks to give economic support to his creation through the pioneering cryptocurrency.

The LFG revealed that it has USD 3.178 billion worth of crypto assets in its reserves. They include 90.7% in BTC, 4.3% in LUNA, 3.5% in Avalanche (AVAX), 0.8% in Tether (USDT), and 0.7% in USD Coin (USDC).

That Is How the LFG Obtained All That Money

In March, Adam Back, CEO of Blockstream, asked Do Kwon about USD 10 billion in BTC that the Luna Foundation Guard planned to buy. The American businessman wanted to know where the organization would get all that money.

The South Korean executive replied that they only had USD 3 billion at the time. However, he explained that a portion of the seigniorage would go toward building reserves in BTC as the UST monetary supply grew.

Unsatisfied with that answer, Back asked Kwon where the LFG had obtained the USD 3 billion they claimed to have. He wondered whether they were pre-mined tokens or tokens from an ICO whose value could suddenly drop to zero.

The founder of Terra explained they recently raised USD 1 billion and received about USD 1.2 billion for selling UST in exchange for USDT. The LFG had held the remaining USD 800 thousand in the cryptocurrency LUNA.

The Luna Foundation Guard Generates Income from Seigniorage

Seigniorage is the difference between the issuing cost of a currency and its face value. For example, if it costs a central bank USD 2 to produce a USD 5 bill, it earns USD 3. It is necessary to know the stablecoin UST and its counterpart LUNA work to understand how the LFG generates income from that profit.

In decentralized stablecoins such as DAI, collateral deposits must be in other cryptocurrencies that back their value. However, it is necessary to burn/destroy the US dollar equivalent of LUNA to issue UST. The opposite can happen, as it is possible to burn UST to emit LUNA, achieving price stability.

The price of UST might lose parity with the US dollar and become worth USD 1.50. That would incentivize LUNA holders to burn their tokens to buy cheap UST (always considered to be worth USD 1). When UST hits USD 1, they will earn a 50% profit.

If UST were worth USD 0.50, UST holders would receive an incentive to burn their coins for profit on LUNA. They could get units of that cryptocurrency at half price.

The above indicates that an entity with such a high amount of LUNA or UST could make a lot of money by seigniorage. In other words, the Luna Foundation Guard benefits from burning and issuing those coins.

By Alexander Salazar

Binance Helps with $500 Million to Elon Musk for the acquisition of Twitter

Jenson Nunez
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The exchange will have an obligation to pay at the time of acquisition or before. Last February, Binance managed to become the most prominent exchange in Forbes.

The CEO of Tesla, Elon Musk, had a companion in his desire to carry out the acquisition of Twitter. And among those supporting him is the most prominent bitcoin and digital currency exchange worldwide: Binance.

The exchange approved the contribution of at least 500 million dollars to acquire the social network. That money takes part of a fund of 7,139 million that possessed the commitments of a dozen or more participants, as shown by the files given by Musk to the SEC.

This money splits into at least 5,240 million enacted by a group of investors and the possible retaining of at least 35 million shares by Alwaleed Bin Talal Bin Abdulaziz Alsaud, a Saudi prince. All those hares run in parallel with just under 1,900 million dollars, which would set a completion on collecting a sum close to 7,139 million.

The total amount for the fund runs in parallel with about one-sixth of the total $44 billion that Musk put on the table to acquire Twitter. On the other hand, the CEO of Binance, Changpeng Zhao, expressed on the social platform that the amount offered by the entity is just a tiny contribution to the cause.

In February, before this investment took effect, the Zhao exchange had already become the most prominent shareholder of the specialized media Forbes. Counting on a capital investment registered at 400 million dollars, Binance managed to take control of at least 50% of the public sale of the mentioned magazine. The same magazine that years earlier had received charges alleging defamation.

Binance pointed out in the lawsuit that a report revealed by Forbes on Oct. 29 got filled with numerous false, misleading, and defamatory statements. The media outlet published an article denouncing that the company had designed a strategy to evade regulations in the United States.

The 12-page document reads that all these statements and the complete list of words in the article provided are false and defamatory. Neither Binance nor anyone on its behalf generated the alleged 2018 slideshow presented in the report.

The company claims compensation for damages and gets granted permanent measures to prevent the defendants from making the same defamatory statements” that the published article removed. This resolution leads to the costs of the trial and any other compensation that the court sees as appropriate.

Binance had previously requested a public apology from reporters for the release of the note. However, in the lawsuit, the defendants or the media did not answer the request.

By: Jenson Nuñez

European Union Could Request NFT Issuers to Centralize and Register

Jenson Nunez
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European Union Could Request NFT Issuers to Centralize and Register

A report suggests that the capacity of MiCA, the EU’s regulatory framework for digital assets, could be broader and include policies aimed at NFTs.

A new regulatory framework for digital assets from the European Union could request issuers of non-fungible tokens (NFTs) to register with regulators.

According to a report revealed by CoinDesk, lawmakers in France submitted a file highlighting the proposal that would impose more robust measures on the burgeoning NFT environment. The document, which got reviewed by that news agency, is part of ongoing discussions on MiCA, the EU’s broad legislative package to set regulations on digital assets.

According to the file, “an NFT issuer has to be a legal individual rather than an under entity decentralization and have to register with the authorities following other consumer protection procedures set up in the law.

According to the report, the document got updated but got prepared ahead of a closed-door meeting on Friday morning European time. CoinDesk also determined that it got ready by France, whose government is in charge of chairing talks within the EU council around MiCA.

The Real Context Around MiCA

The European Union works hard on a comprehensive regulatory framework for digital assets. The Regulation of Markets in Crypto assets, called MiCA, got initially presented in 2020 as part of the European Commission’s Digital Finance set.

The file spent much of last 2021 under a study led by the European Council, the European Central Bank, and the European Protection Supervisor. Debates for final approval would take effect this year.

The presentation relies on various struggles connected to digital currencies, including a categorization of digital currencies and stable coins. It also sets policies for digital asset issuers and service providers.

One of the axes of the project will be to unify cryptocurrency regulations among member countries. MiCA will offer “universal” licenses to cryptocurrency platforms that will allow them to operate within the European Economic sector, even if they do not comply with each country’s specific standards of each legal system. According to some general guidelines, EU countries have to issue their regulatory requirements for crypto-assets.

The news outlet also expressed that lawmakers seem to receive backup from the European Commission, which negotiated the remaining talks for MiCA approval. It has also raised concerns about the integrity of the NFT environment as it relates to the latest proliferation of frauds.

According to the report, EU legislators and governments are not only talking about stronger regulations for NFTs. Other problems directly linked to the digital currency space, such as decentralized autonomous organizations (DAOs), Web3, and possible limitations for crypto mining, are also included among the subjects to get discussed.

A controversial provision that would limit the use of PoW-based digital assets such as Bitcoin due to their environmental impact was recently under debate within the EU Parliament. After many votes, most legislators rejected the provision, and a draft MiCA without such a prohibition moved forward in discussions.

By: Jenson Nuñez

Argentines Express in a Survey What They Think When they Talk about Bitcoin

Alexander Salazar
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Argentines Express in a Survey What They Think When they Talk about Bitcoin

Sixty-one percent of the people surveyed in Argentina claimed to have a positive image of Bitcoin. Other better-known and used investment methods include the US dollar, Mercado Pago, and fixed terms.

When asked about Bitcoin and other cryptocurrencies, Argentines think of terms like these: future, currency, investment, virtuality, money, savings, and scam.

Consulting firm Opinaia and Grupo Muchnik recently surveyed 2,400 people in the South American country. The consultation also detailed that other words that respondents relate to Bitcoin are gain, Internet, doubt, and volatility.

The word cloud formed from the answers in the study Imaginary about cryptocurrencies in Argentina is consistent with the responses by the respondents. Sixty-one percent of the participants claimed to hold crypto assets in good esteem and ranked them as the fourth investment alternative.

In 2021, cryptocurrencies lagged behind other savings and investment alternatives with 32% of knowledge and 10% of actual use. The US dollar recorded 65% and 22% in those aspects, Mercado Pago 61% and 38%, and fixed terms in national currency 59% and 19%.

The above explains the emergence of terms like future, investment and savings in the responses of many respondents. However, other words that stand out related to security are a scam, doubt, and volatility.

A low percentage of the participants (12%) expressed a negative opinion about Bitcoin and other cryptocurrencies. However, 62% said they do not know or disagree with the phrase cryptocurrencies are safe and reliable.

Likewise, 30% of the respondents believe that it is better to save in US dollars than in cryptocurrencies. The same percentage leans toward using crypto assets instead of the US fiat currency as a savings method. Over the last year, the latter has had record inflation, which might reach a double-digit figure in 2022.

More Statistics on the View of Argentines about Bitcoin

Even though some of the above respondents are skeptical, 47% said they believe that cryptocurrencies are profitable and beneficial.

Almost half of those who participated in the survey (49%) consider that it is better to save Bitcoin than Argentine pesos. That makes sense amid the soaring inflation that continues devaluing the South American fiat currency and diluting savings.

Curiously, although 63% of the people expressed their willingness to know about Bitcoin, only 38% claimed to have some knowledge of it.

Concerning the possibility of acquiring Bitcoin, 25% of the participants stated that they intend to buy it. Meanwhile, another 49% said they would but do not know where to do it in Argentina. Among the population under 40 years of age (centennials and millennials), the percentage of purchase intention is higher and amounts to 30%.

Finally, the media agenda, advertising, and word of mouth increasingly include Bitcoin among their topics. In that regard, 58% of the people claimed they have recently heard about the subject, although they do not know about it.

Bitcoin is trading at around USD 36,602 and has accumulated a 1.1% loss over the last 24 hours. Its daily trading volume is above USD 31.60 billion, and its market capitalization is about USD 685.73 billion, according to CoinGecko.

By Alexander Salazar

Elon Musk Likes the Idea of Using Dogecoin for Solving the Spam Problem with Twitter

Alexander Salazar
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Elon Musk Likes the Idea of Using Dogecoin for Solving the Spam Problem with Twitter

Renowned investor Mark Cuban proposed a DOGE-based monetary system to reward spam detection and penalize fraudulent Twitter accounts. Elon Musk and the creator of the popular meme coin, Shibetoshi Nakamoto, liked the idea very much.

Billionaire investor Mark Cuban thinks that Dogecoin (DOGE) could solve the problem with a scam spreading on Twitter.

Dallas Mavericks basketball team owner recently tweeted the proposal in response to a discussion started by Marc Andreessen. The businessman discussed possible ways to address the problem of cryptocurrency scams and spammy ads spreading on the social network platform.

Andreessen shared a screenshot showing the account of a Twitter user posing as him to promote a seeming cryptocurrency scam. Next to the image, the businessman asked what algorithm could detect that problem.

Elon Musk, who recently became the owner of the social media company, replied to the post with the word Humans. The CEO of Tesla suggested that an algorithm might help specify that type of content. However, he believes that a group of people responsible for curating the content on the platform could do it.

Cuban Proposes a DOGE-Based Anti-Spam System

Amid various comments from Twitter users, Cuban presented the proposal for an unconventional solution. The renowned US investor considers it is possible to solve the problem with a system based on Dogecoin (DOGE). It would consist of posting and rewarding those who detect fraudulent posts or accounts on the social network.

The proposal establishes that everyone would have to put up 1 DOGE (USD 0.13) as collateral to post on Twitter unlimitedly. If a user identified a post as spam and the others confirmed it, those flagging it would receive the DOGE of the malicious account. However, they would lose their DOGE if the post was not spam.

The account posting the scam would have to put up 100 DOGE as collateral for the right to create more posts. In other words, Twitter users could actively participate in detecting and stopping scams in that monetized spam deterrent system.

The idea by Cuban is not perfect since the fraudulent accounts might have more resources than those detecting spam. However, some users like Musk himself expressed their enthusiasm about the solution. In response to Cuban, Musk said that it was a good idea, while the creator of Dogecoin, Shibetoshi Nakamoto, praised it.

Musk Thinks that Fighting Spam on Twitter Is a Priority

After closing a deal to buy Twitter for USD 44 billion, Musk has tossed around a few ideas about his plans for the social media platform. They include cracking down on spambots and verifying all users to curb account fraud and scam spreading.

The billionaire businessman considers people have discussed the topic of the spread of fraudulent ads on Twitter for a while. Earlier this year, Musk criticized Twitter for implementing a non-fungible token (NFT) feature before addressing spam issues. He alleged that the company was wasting engineering resources on the junk feature while crypto scammers acted.

Musk, the wealthiest person worldwide, has also pointed out that the algorithm on the platform should be open source. He has stated that he wants to unblock the potential of Twitter to become the platform for freedom of expression. The tycoon has not yet made official statements on the course the company will follow after signing the purchase on May 2nd.

By Alexander Salazar

The Profits from Mining Bitcoin Drop by 4% While the Hash Rate of the Network Rises

Alexander Salazar
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The Profits from Mining Bitcoin Drop by 4% While the Hash Rate of the Network Rises

After remaining above 205 EH/s in April, the Bitcoin hash rate hit all-time highs around 230 EH/s this week. The creation of more Lightning channels could cause a drop in miner fees, allowing for an increase in profits.

Revenues from Bitcoin (BTC) mining fell in April compared to March, an ongoing trend over the last few months. However, that has not been a pretext for a drop in the participation of miners in the network.

Bitcoin mining firm Compass Mining reported that the profits from the activity fell by 4.5% in April compared to the previous month. That includes the reward of 6.25 BTC per mined block, plus transaction fees of around 1%. Those incomes went from USD 1,210 million in March to USD 1,160 million in April, calculated in US dollars.

Mining revenues closely relate to the price of Bitcoin, a currency that struggled between USD 38,000 and USD 42,000 throughout April. That situation could have helped explain the decline in profits during that month.

Data from BitInfroCharts indicate the Bitcoin hash rate, or transaction processing power on the network, remained above 205 EH/s. It rallied from that level and hit all-time highs of 230 EH/s this week, showing there are many operators online.

Bitcoin miners continue to operate, participating in the network and guaranteeing its security, despite earning less for their investment. Although it is notable, there have been reports on that trend for several months now.

A Factor Could Be the Growth of Channels on the Lightning Network

The growth of channels in Lightning may lead to a drop in on-chain transactions. That means fewer blocks with transactions for miners to process beyond those generated by the protocol. That would lead to a loss on transaction fees, which allows increasing the profits from mining.

Over the last month, there was an average of 80 thousand open-payment channels on the Lightning network. The figure does not reveal the massive use of the layer but clearly shows the incentive for more participation.

Data from blockchain analytics firm Glassnode indicates the number of Lightning Network channels remained above 80,500 throughout April. Although it led to a slight drop of 2% compared to March, it is more than the figures registered in previous months. That shows a greater integration of technology in various services.

Those Lightning payment channels also have a capacity of 3,721 BTC, equivalent to about USD 148 million, according to 1ML. That is the amount blocked between channels to generate liquidity in the Bitcoin micropayment network, allowing permanent movement.

That reveals that it is increasingly necessary to use the Lightning Network as a payment mechanism. Far from damaging the Bitcoin ecosystem, that technology makes it possible to accelerate transactions, decongest the network, and promote balanced mining.

How the Lightning Network Works and Why Bitcoin Needs It

The micropayment solution Lightning Network allows streamlined peer-to-peer transactions almost instantly. Transactions occur between channels in that layer, and their details go to the chain when they close.

That solution emerged as a faster and cheaper network for the exchange of Bitcoin. It solves the scalability problems of the main chain, where miners process the blocks with transactions. They later confirm those operations and take them to the network ledger.

That confirmation process usually takes about 10 minutes, such as the protocol pre-establishes. That leaves a fee for each transaction, considering the total income from mining.

By Alexander Salazar

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