Category Archives: Satoshi Nakamoto
Who is the mysterious Bitcoin creator Satoshi Nakamoto? – Cointelegraph
Who is Satoshi Nakamoto?
The first Bitcoin (BTC) was mined on January 3, 2009, by someone known as Satoshi Nakamoto. Now, Satoshi Nakamoto is recognized as the pseudonym of the person or group of people who created Bitcoin the invisible figure or figures whose technological creation has influenced the world.
Satoshi Nakamoto was already a familiar name among cryptography enthusiasts like computer scientists and hackers long before the Bitcoin boom. Someone had posted on online message boards and corresponded with fellow developers via email under the same name years prior. Although unconfirmed, it is widely suspected that the person (or persons) behind the pseudonym was also behind those communications.
Months before mining the first Bitcoin, Satoshi Nakamoto had published a white paper on a cryptography mailing list entitled Bitcoin: A Peer-to-Peer Electronic Cash System. The paper, published on October 31, 2008, outlined a decentralized peer-to-peer protocol that was cryptographically secure.
In the white paper, Nakamoto described it as a purely peer-to-peer version of electronic cash that would allow online payments to be sent directly from one party to another without going through a financial institution or any intermediary.
This article will explore what is known about the founder of Bitcoin, those who have claimed to be Satoshi Nakamoto, whether Nick Szabo is Satoshi Nakamoto and the mysteries and truth behind the creator of Bitcoin.
Although Nakamoto remains a mysterious figure, his goal for creating cryptocurrency, in itself, was never a mystery. Simply put, he created it to take financial control back from financial elites, giving ordinary people a chance to take part in a decentralized financial system.
Bitcoin remains open-source, meaning that no one has the power to own or control it in its entirety. Its design is public and it is open for anyone to participate.
Bitcoin was a response to the Great Financial Crisis, which showed that even the worlds biggest banks can fail. It highlighted the fragility of the modern financial system and called for the decentralization of financial transactions. As such, cryptocurrency was born, and Bitcoin was one of the first options outside the traditional financial system for the public to participate in intermediate-free financial transactions.
The blockchain is how cryptocurrencies like Bitcoin develop trust among users and ensure security, as it is a network-based ledger that all participants can access. The genesis block of Bitcoin was mined on January 3, 2009, by Satoshi Nakamoto, officially launching the blockchain. A genesis block is the first block of a cryptocurrency to be mined and acts as the foundation of the blockchain.
For the first few months of its existence, Bitcoin had no monetary equivalent worth. Miners, people who used their computers to solve complex math problems to discover or mine new Bitcoin, were doing so only for the novelty.
Miners also helped to verify the validity and accuracy of Bitcoin transactions. The actual Bitcoin payout received by miners is essentially a reward for auditing and processing the highly-encrypted data that is part of each transaction. This ensures that each Bitcoin is properly accounted for and cannot be spent more than once.
The first real-world transaction happened on May 22, 2010, when a man from Florida agreed to exchange two $25 pizzas for 10,000 Bitcoin, thereby making May 22 Bitcoin Pizza Day. It marked the first economic transaction for cryptocurrency. Back then, Bitcoin was valued at four Bitcoin per penny. Since then, its value has multiplied exponentially.
Bitcoin was born after the subprime mortgage crisis of 2008, where liquidity in global financial markets was significantly affected by the housing market collapse. The crisis inspired the creation of Bitcoin, a fully functional form of digital currency based on a distributed ledger technology (DLT) called the blockchain.
Nakamotos white paper laid the groundwork for future forms of cryptographically secure systems that are designed to be tamper-proof, transparent and censorship-resistant. The systems goal was to allow individuals to reclaim financial power through a decentralized financial system.
The idea of decentralization eliminated the need for middlemen, such as companies, financial systems or governments, to be involved in digital currency exchange. The transactions would be secure and tracked through a blockchain. The difference with blockchain was that it was visible to all participants and securely distributed across an entire network.
Three years after publishing his white paper on Bitcoin and mining the genesis block, Nakamoto bowed out of the cryptocurrency scene.
He sent an email to another Bitcoin developer on April 23, 2011, saying that he had moved on to other things, and that the cryptocurrencys future was in good hands. Since then, there has been no communication from Nakamotos previously known email addresses.
Throughout Bitcoins long history, nothing has been more controversial than the identity of its founder. Numerous speculations have surrounded Nakamotos identity. Some people claimed that Nakamoto was the pseudonym of a group of cryptographers, not just one person. Yet others surmised that he might be British, a member of the Yakuza, a money launderer, or a woman disguised as a man.
Over the years, a few individuals have been suspected of being the man behind the elusive pseudonym:
In 2014, Newsweek journalist Leah Mcgrath Goodman published an article entitled The Face Behind Bitcoin. In one of the highest-profile attempts to reveal Nakamotos identity, Goodman identified Dorian Nakamoto as the elusive Bitcoin creator.
Goodman cited similarities between the two Nakamotos, including mathematical skill, temperament, Japanese descent and political leanings. Dorian Prentice Satoshi Nakamoto, then 64 years old, was living in Temple, California when Goodman reached out to him. Dorian had previously worked on computer engineering and classified defense projects, according to Goodman.
However, Dorian Nakamoto later denied any involvement with Bitcoin. He dismissed any published quotes as a mere misinterpretation on the reporters part. Nakamoto claimed that his quote was taken out of context and that he had been talking about engineering rather than Bitcoin at the time of the interview.
Later, Satoshi Nakamoto confirmed on an online Bitcoin forum that they are not Dorian Nakamoto putting an end to the rumors.
The Newsweek article sparked a debate regarding Dorian Nakamotos privacy, which the crypto community felt had been violated when Newsweek published a photo of his Los Angeles home.
As a result, the crypto community raised over 100 Bitcoin on behalf of Dorian Nakamoto to express their gratitude and support concerning his ordeal. Dorian later appeared in a YouTube video in 2014 thanking the community, saying that he was going to keep his Bitcoin account for many, many years. Although the video has since been taken down from the original account, copies of it still exist online.
Whereas Dorian Nakamoto denied being Satoshi Nakamoto, Australian computer scientist Craig Wright claimed that he was the man behind the pseudonym.
Wright claimed the identity in 2016 after Wired Magazine released a profile on him in December 2015. The article was entitled Is Bitcoin's Creator this Unknown Australian Genius? and was based on documents leaked to Wired.
The evidence consisted of a paper on cryptocurrency supposedly published on Wrights blog a few months before the infamous Bitcoin white papers release. Leaked emails and correspondence regarding a P2P distributed ledger also surfaced as well as transcripts of tax officials and lawyers containing statements from Wright regarding his involvement in creating Bitcoin.
But evidence came to light proving the contrary. The blog entries had been backdated, as were the supposed public encryption keys linked to Nakamoto.
A major identifier on the blockchain is the public encryption key one-half of the two-key system that crypto holders need to carry out encrypted transactions. In Wrights case, it appeared that both Nakamotos public keys and the blog entries were backdated making his claims much more suspicious.
Wired later recanted its claim and edited its article under the title, Is Bitcoin's Creator this Unknown Australian Genius? Probably Not. The publication cited the supposedly fraudulent evidence that Wright released to back his claim as the reason behind their conviction.
Following suspicions from the crypto community, Wright eventually backed away from the claim.
Crypto expert Nick Szabo was also one of the medias suspected Satoshis. In 2015, The New York Times published an article entitled Decoding the Enigma of Satoshi Nakamoto and the Birth of Bitcoin.
Comparisons were made between him and the mysterious Nakamoto owing to similarities in writing and preoccupations, as well as Szabos significant contribution to the development of Bitcoin.
Nick Szabo is a computer engineer by profession. He is also a cryptographer and a legal scholar and has published works that were tangentially related to Satoshi Nakamotos intellectual preoccupations at certain times. For example:
Szabo pioneered the concept of Smart Contracts in a 1996 paper entitled Smart Contracts: Building Blocks for Digital Markets. Szabo conceptualized Bit Gold in 2008, which was also a decentralized form of currency and a precursor to Bitcoin. Szabo also previously worked for DigiCash, a digital payment system that used cryptography.
Both Nakamoto and Szabo reference economist Carl Menger in their communications.
In his book, Bitcoin: The Future of Money? author Dominic Frisby was convinced that Satoshi Nakamoto and Nick Szabo were the same person and presented arguments to support his hypothesis. Szabo, however, denied the allegations concerning his supposed secret identity.
Hall Finney was a computer scientist, coder, and cryptography enthusiast even before the Bitcoin boom. He died in 2014 at the age of 58 after battling amyotrophic lateral sclerosis, or ALS, for five years.
Other than Nakamoto himself, Finney was reportedly the first person to have worked on debugging and improving Bitcoins open-source code. He also received the first Bitcoin transaction in 2009 from Satoshi Nakamoto, himself.
He was also neighbors with Los Angeles-based engineer Dorian Satoshi Nakamoto, a fact that Forbes journalist Andy Greenberg found interesting, if not suspicious. Greenberg took writing samples from Hal Finney and Satoshi Nakamoto to a writing analysis consultancy service.
Because of the similarities in their writing style, Greenberg initially surmised that Finney may have been Nakamotos ghostwriter, at the very least. He also floated the idea that Finney might have used Dorian Nakamoto as a front to hide his identity.
However, Finney denied such claims and presented evidence to prove that he was not Satoshi Nakamoto. Upon meeting Greenberg, Finney presented the emails that he and Nakamoto had exchanged over the years, as well as his Bitcoin wallets history.
The writing consultancy likewise concluded that Nakamotos alleged emails to Finney were a match with Nakamotos other published writings, cementing Finneys claim that he was not Nakamoto.
The figure Satoshi Nakamoto matters, whether he is a person or a group not because of his identity (or lack thereof) but because of his contribution to the greatest technological invention of all time. Nakamoto paved the way for cryptocurrency to evolve and develop to respond to the 2008 crisis, creating an alternative currency system.
Of course, despite attempts to secure crypto, compromising cryptocurrencies remain a genuine possibility. However, this risk is something that even more traditional models of finance face regularly.
The difference that cryptocurrencies like Bitcoin represent is the concept of decentralization and equality. A distributed public ledger via blockchain effectively records, verifies, and validates Bitcoin transactions while making them secure via cryptography.
Since its inception in 2009, no hacker has managed to infiltrate it. Bitcoin also remains relevant years after it was introduced by Nakamoto. Large corporations and investors are becoming increasingly aware of its value and potential. Likewise, even businesses are beginning to accept Bitcoin as payment. The crypto market has also grown exponentially as more people become interested in mining and trading Bitcoin.
Furthermore, Nakamotos creation represents innovation and disruption. It was (and still is) a powerful reminder that all things must continue to improve to survive. In an industry notorious for its resistance to technology, cryptocurrency delivered a jolt to the financial world and shook things up for the better.
Crypto paved the way for various forms of digital currencies and peer-to-peer payment systems to evolve and be integrated into modern society. Innovations such as digital currencies work for the consumers good by offering them alternative modes of payment and investment.
Financial institutions are likewise responding to the challenge by adopting more customer-focused and innovative approaches to finance.
Despite the medias efforts to investigate and reveal Satoshi Nakamotos identity, he remains a mysterious figure whose real-world persona is unknown.
However, it might be interesting to look at the bits of information that we do know about Nakamoto, either from public records or skillful sleuthing. Lets dive in.
The New Yorker cites Nakamoto as a preternaturally talented computer coder who created Bitcoin with thirty-one thousand lines of code. To the uninitiated, the reason why the platform remains safe, secure and trustworthy is thanks to Nakamotos virtually perfect code. It has no mistakes. This, in part, is why it has not been hacked since its creation.
In a 2011 article entitled The Crypto-Currency: Bitcoin and Its Mysterious Inventor, the New Yorker reported how renowned and highly-experienced internet security researcher Dan Kaminsky tried to break Bitcoins code and failed.
For everyones appreciation, Kaminsky wasnt an average coder. He is famous among hackers because he discovered a major flaw in the internet in 2008. He alerted the Department of Homeland Security and Microsoft and Cisco executives to address the problem immediately. Without his discovery, any skilled coder could have been able to shut down the internet or take over any website.
That being said, Kaminsky was excited to potentially find similar fatal flaws in Bitcoin. He saw it as an easy target, something that might be easily compromised. However, what he encountered was Satoshis near-perfect code, which he later found to be impenetrable.
Nakamotos code and white paper on Bitcoin reveal that the infamous coder is fluent in English, particularly British English. This, in part, is why some people believe that Nakamoto might be British, despite his claims of being Japanese.
He also employs British usage in emails to fellow coders like Finney, as evidenced in some of their email correspondences. Programmer John McAfee claims to know who Satoshi is, on account of a linguistic analysis of Nakamotos white paper.
There are also claims that Nakamoto may not be just one person. Instead, they may be a group of people who worked on perfecting and creating the code behind Bitcoin. Owing to its outstanding code, Bitcoin continues to thrive alongside other cryptocurrencies.
Some people, like Bitcoin developer Laszlo Hanyecz, believe that the level of coding at which Bitcoin was created would have necessitated more than just one person. According to him, it is highly likely that it was created by a team of coders.
For all we know, the whole Satoshi thing could be a smokescreen to hide the identity of a female genius. Satoshi Nakamoto claims to have been born in April of 1975.
In the same way that no one is sure if Satoshi is Japanese, people are theorizing that he could also be a female. Also, many are curious about Satoshi Nakamotos net worth. No doubt, whether Satoshi is a male or female, the person is a billionaire.
In a male-dominated industry like tech, its not far-fetched for a woman to use a male name to gain an equal footing among her peers. Historically, female writers have used male pseudonyms in an attempt to penetrate the literary scene and gain the respect traditionally accorded to male authors.
What if Satoshi employed a similar trick? No one can say for sure, but this idea has been an empowering thought for a lot of women in development. New York Congresswoman Carolyn Maloney popularized the tagline Satoshi is female at an event for women in blockchain.
Since its creation, Bitcoin has had a storied past, and not without scandals. Originally designed to be a decentralized and borderless alternative to fiat currency, Bitcoin has been slowly centralized to some degree. Large banks and financial institutions, for example, have begun opening crypto trading desks and custody services for crypto.
Some would call this a compromise, a departure from Nakamotos original vision of a revolutionary platform that eschewed financial institutions.
However, with the rise of Bitcoin whales who own most Bitcoin, the cryptocurrency is said to have fallen under the control of the elite few yet again. These large investors control Bitcoins price in the markets and have the funds to put up Bitcoin mining farms. Consequently, the more miners, the more difficult the mining is (since the mathematical problems become more complicated).
The good news is that Nakamotos creation doesnt seem to be going anywhere anytime soon. It has paved the way for the creation of over 11,000 different forms of cryptocurrency and continues to grow in value.
Should the right technological advancements be in place, it is a genuine possibility that people are going to embrace Bitcoin in more everyday transactions. Many organizations believe that Bitcoin may soon become the currency of choice in the global trading scene.
However, Bitcoins blockchain also needs to evolve and be able to handle more transactions in a short time. Until then, we shall wait and see.
Original post:
Who is the mysterious Bitcoin creator Satoshi Nakamoto? - Cointelegraph
Opening Remarks of Commissioner Kristin N. Johnson Before the … – Commodity Futures Trading Commission
Introduction
Good afternoon. Its a pleasure to be here for the inaugural meeting of the Technology Advisory Committee (TAC) under Commissioner Goldsmith-Romeros sponsorship. The work of the Commissions Advisory Committees is critical to the development of the CFTCs regulations and policies, as well as industry best practices.
I want to thank Commissioner Goldsmith-Romero and Anthony BiagioliTACs Designated Federal Officer, for convening this meeting today. I also want to thank you, TACs membership and todays panelists. The Advisory Committee has an ever-more important role in furthering and fostering the knowledge and understanding of the Commissioners and Commission. The Committee is fortunate to have the leadership of Chair Carole House from Terranet Ventures and previously the White House National Security Council where she served as Director for Cybersecurity and Secure Digital Innovation and Vice Chair Ari Redbord of TRM Labs.
In the spring of 2000, the TAC held its inaugural meeting. A year later, following the tragic events of September 11th, members of TAC demonstrated tremendous resolve, holding a meeting in November of 2001 and focusing on electronic order routing and disaster recovery, business continuity plans, and technology-centered recovery and resilience planning.
Over the following years, TAC continued to focus on the unique and important issues outlined in the Committees charter and at the intersection of the integration of technology in finance. Specifically, in 2005, TAC examined critical questions including how best to define prior art in the patents process; intellectual property in trading and settlements technology; restrictions on the usage of exchange settlement prices; and market data piracy. More recently, TAC has led the Commissions efforts to understand and explore high frequency and algorithmic trading practices; the role of technology in pre- and post-trade transparency in implementing the Dodd-Frank Act; universal product and legal entity identifiers; standardization of machine-readable legal contracts; semantics; and date storage and retrieval.
As we gather today, consider how our world has changed. Much has been made (and publicized) about distributed ledger technology within the context of tokens, currencies, and other stores of value or medium of exchange uses. Even if Satoshi Nakamotos white paper, published over a decade ago, offers a precise description of the archetypal use case, there is much to explore and discover in the context of the introduction of this technology in our society.[1]
Allow me to highlight a few of interesting and I believe important, uses for distributed ledger technology.
As we think about the many potential use cases for distributed ledger technology (DLT), the need to focus on climate risks in financial markets comes quickly into focus. As a recent report explains:
The 2021 estimate by the Interagency Working Group on Social Cost of Greenhouse Gases puts the social cost of carbon at $56 per metric ton of carbon dioxide (CO2) by 2025 and $85 per metric ton of CO2 by 2050 (in 2020 dollars, at a 3% discount rate). These consistently higher estimates for the future social cost of carbon are largely driven by expectations of increasing costs of climate-related damage.[2]
The authors of the recently published report further explain that, whether we are discussing compliance or voluntary carbon markets, financial markets can perform a price discovery and risk allocation function in determining the price of carbon emissions.[3]
In addition to providing critical infrastructure for developing carbon markets, others have proposed the use of DLT technology in agricultural markets. For example, IBM recently launched the IBM Food Trust program.[4] This program facilitates better handling of perishable fruits and vegetables through information sharing and dynamic optimization. In other contexts, supply chains have introduced DLT tools that enable end-to-end traceability.
Beyond food production, DLT also helps farmers with other challenges in data management and operation. DLT may aid cotton farmers and others who seek to authenticate or verify information regarding crops.[5]
Another important use case for DLT in financial markets is the digital identity use case.[6]
Technology developers increasingly present novel solutions empowering individuals to manage their own data. In its simplest form, digital identity is self-managed identity information stored on the blockchain. Using DLT, these systems would track and certify data, events, and information relating to an individuals personal and financial information.[7] The information would be stored in an individuals digital wallet and instantly verifiable on the blockchain. Proponents of this use for blockchain technology tout many benefits including encrypted information and pseudonyms to ensure privacy, autonomy for individuals to control access to their data, and reduced opportunity for mass data leaks and cyber threats.[8]
There is tremendous promise in the possibility of developing and deploying digital technologies that enable the creation of digital identities with effective embedded privacy protection. As I have previously explained during testimony before the U.S. House Financial Services Committee in July of 2019:
Supplementing traditional credit underwriting data inputs and processes, [distributed digital ledger technology employs] newer modeling techniques and consider[s] a broader range of source data referred to descriptively (rather than normatively) as alternative data. These new inputs include information regarding consumers financial transactions [and] recurring payments history.[9]
The opportunity to gain access to additional sources of information such as utility bill payments or rental payments offers great promise but also present unique concerns. There are, however, notable concerns, including the need to ensure effective privacy protections are embedded in the development of such technologies. Legislative and regulatory authorities must balance these laudable promises of greater inclusion with the significant risks posed, particularly the risks that vulnerable populations may face. Today, we will have the benefit of hearing from TAC Chair Carole House on this matter and I very much look forward to her presentation.
Earlier this year, ION Cleared Derivatives acknowledged that a cybersecurity event had affected some of its services.[10] ION provides back-office trade processing and settlement of exchange-traded derivatives for many futures commission merchants (FCMs) and other participants in our markets.
Because of this central role in trade processing, the cyberattack disrupted not only IONs operations but also the operations of other market participants, triggering a ripple effect across markets. Because they could not rely on ION, affected parties returned to manual (old-school) trade processing, leading to delays in reconciliation, information sharing, and reporting.
Earlier this month, at a meeting of the Market Risk Advisory Committee (MRAC) that I sponsor, I invited speakers to engage in a deep dive discussion exploring cyberthreats that create risk management concerns.[11] During the meeting, Walt Lukken, the Chief Executive Officer and President of the Futures Industry Association announced the creation of a Cyber Risk Task Force focused on improving operational resilience across diverse market participants. In addition, Tom Sexton, President and Chief Executive Officer of the National Futures Association described recent initiatives to enhance cyber risk oversight and acknowledge efforts to expand oversight to critical third-party service providers.
First, cyber risks are not siloed, individual enterprise risk management concerns; all too often, cyber threats demand coordinated action across several market participants, with thoughtful incorporation of large, systemically important market participants.[12] The National Cybersecurity Strategy, released just prior to the MRAC meeting, makes this point clearly: [A]cross both the public and private sectors, we must ask more of the most capable and best-positioned actors to make our digital ecosystem secure and resilient.[13] Accountability must be top of mind and at the center of the systems development and regulatory oversight.
Second, our economy is a digital economy. Reliance on third-party service providers and non-proprietary software for key operational functions such as trade processing, margin determinations, and data distribution underscore the importance of revisiting our risk management regulations to ensure that the Commission has adequate visibility into the system safeguards of firms that may impact the operational integrity of registered market participants.[14] Even robust and well-designed safeguards and regulatory frameworks may be inadequate if they are not broad enough in scopewe cannot train our focus only on our registered entities and market participants, but must cast a wider net to ensure sufficient identification and mitigation of cyber risks.[15]
We must also note that benefits and challenges of integrating an increasingly prominent service provider that plays a critical role in our financial system: the cloud-services industry. Three large cloud-service providers (CSPs), Google Cloud, Amazon Web Services, and Microsoft Azure, provide a significant percentage of cloud-services.[16]Most major futures exchanges and stock exchanges rely on these CSPs.[17] CSP market concentration and exchanges reliance on CSPs may potentially engender broader risk management concerns from common exogenous threats such as hacking to nuanced concerns such as outages.[18]
CSPs provide a particularly complex challenges.[19] Due to their size and market power, regulation may present unique challenges.[20]
The disruption in financial markets over the past several weeks further establishes the implications of interconnection in markets. Interconnectedness and correlations may amplify the consequences of cyber-attacks against critical infrastructure resources. As noted at the MRAC meeting, I have long advocated for regulators and market participants to prioritize cybersecurity and investigate the potential for cyberthreats to create systemic risk or national security concerns.[21]
While I called for MRAC to serve as a timely and transparent forum for critical discussions regarding resilience, recovery, and resolution, these issues are so significant and multifaceted that there is substantial benefit to be gained from a diversity of voices. Accordingly, I look forward to hearing from TAC members today about their perspective on these important issues.
In recent months, we have witnessed the potential for artificial intelligence (AI) to address endemic challenges in financial markets.[22] This includes the potential for AI to improve the efficiency of trading in financial markets, as well as the accuracy and dexterity of market surveillance and fraud detection.[23] There are, however, challenges to the increasing adoption of and reliance on AI. Several years ago, commentators began to focus on the ethical implications of AI and concerns regarding the potential for limited data sets and shortcomings in the curation, structuring, partitioning, and cleaning of data to lead to hardwiring bias in the real world deployment of AI.[24] I have spoken previously about the potential for innovative technology to further goals of financial inclusion.[25] While these challenges extend beyond the markets and entities regulated by the CFTC, I am hopeful that todays discussion will reach these questions and that TAC will foster a systematic effort to study and address them.
Thank you again to Commissioner Goldsmith-Romero, Chair House, Vice Chair Redbod, and DFO Biagioli. I look forward to hearing from each of you today.
[1] Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System.
[2] E.g., Alessandro Cocco, Jesse Leigh Maniff, David Radziewicz & Michael Werner, Distributed Ledger Technology, Carbon Accounting, and Emissions Trading, Chicago Fed Letter (Nov. 2022), https://www.chicagofed.org/publications/chicago-fed-letter/2022/474.
[3] Id.
[4] IBM Food Trust (accessed Mar. 7, 2023), https://www.ibm.com/blockchain/resources/food-trust/fresh-produce/.
[5] Terry W. Griffin, Keith D. Harris, Jason K. Ward, Paul Goeringer & Jessica A. Richard, Three Digital Agricultural Problems in Cotton Solves by Distributed Ledger Technology, Applied Econ. Perspect. Policy (2022), https://onlinelibrary.wiley.com/doi/epdf/10.1002/aepp.13142.
[6] Shlock Gilda, Tanvi Jain & Aashish Dhalla, None Shall Pass: A blockchain-based federated identity management system, Arxiv (July 5, 2022), https://arxiv.org/pdf/2207.02207.pdf.
[7] Id.
[8] Id. See also Linda Jeng, How self-custodied identity works, presentation at the CFTC Market Risk Advisory Committee meeting, March 8, 2023, https://www.cftc.gov/media/8326/MRAC_PowerPoint032223/download.
[9] Kristin N. Johnson, Examining the Use of Alternative Data in Underwriting and Credit Scoring to Expand Access to Credit, written testimony before the U.S. House Committee on Financial Services Task Force on Financial Technology, July 25, 2019, https://democrats-financialservices.house.gov/UploadedFiles/HHRG-116-BA00-Wstate-JohnsonK-20190725.pdf.
[10] Cleared Derivatives Cyber Event, ION Cleared Derivatives, Jan. 31, 2023, https://iongroup.com/press-release/markets/cleared-derivatives-cyber-event/.
[11] Opening Statement of Commissioner Kristin N. Johnson Before the Market Risk Advisory Committee Meeting, Mar. 8, 2023, https://www.cftc.gov/PressRoom/SpeechesTestimony/johnsonstatement030823.
[12] See FIA's CEO Walt Lukken speaks on cyber resilience before CFTC, Remarks by FIA President and CEO Walt Lukken delivered to MRAC, Mar. 8, 2023, https://www.fia.org/fia/articles/fias-ceo-walt-lukken-speaks-cyber-resilience-cftc (noting the importance of communication to coordinate action); Remarks by NFA President and CEO Tom Sexton delivered to MRAC, Mar. 8, 2023 (noting the importance of communication and a unified response between industry, government, and SROs to mitigate the impact of the ION hack).
[13] National Cybersecurity Strategy, Mar. 2023, at 45, https://www.whitehouse.gov/wp-content/uploads/2023/03/National-Cybersecurity-Strategy-2023.pdf. Notably, the document identifies governments role, in part, as ensur[ing] private entities, particularly critical infrastructure, are protecting their systems. Id. at 5.
[14] NFA requires Members to adopt and implement a supervisory framework over functions that they outsource to third parties, including with respect to cyber risks. See Sexton remarks, supra; see also NFA Interpretive Notice 9079NFA Compliance Rules 2-9 and 2-36: Members Use of Third-Party Service Providers, Feb. 18, 2021, https://www.nfa.futures.org/rulebooksql/rules.aspx?Section=9&RuleID=9079.
[15] Notably, the Futures Industry Association announced at MRAC that it was forming a global Cyber Risk Taskforce to look at the ION event and develop recommendations, including with respect to safeguards around third-party service providers. See Lukken remarks, supra. FIA intends to release an initial report on recent cyber incidents by the second quarter of 2023 and we look forward to reviewing that report.
[16] Carolina Asensio, Antoine Bouveret, & Alexander Harris, Financial Stability Risks from Cloud Outsourcing, ESMA (May 2022), https://www.esma.europa.eu/sites/default/files/library/esma_wp_cloud_may_2022.pdf.
[17] CME Group Signs 10-Year Partnership with Google Cloud to Transform Global Derivatives Markets Through Cloud Adoption, CME Group (Nov. 4, 2021), https://www.cmegroup.com/media-room/press-releases/2021/11/04/cme_group_signs_10-yearpartnershipwithgooglecloudtotransformglob.html; NYSE Market Data Via Amazon Web Services, NYSE (accessed Mar. 21, 2023), https://www.nyse.com/nyse-cloud; Nasdaq and AWS Partner to Transform Capital Markets, Nasdaq (Nov. 30, 2021), https://www.nasdaq.com/press-release/nasdaq-and-aws-partner-to-transform-capital-markets-2021-12-01.
[18] Erik Feyen, Jon Frost, Leonardo Gambacorta, Harish Natarajan & Matthew Saal, Fintech And the Digital Transformation of Financial Services: Implications For Market Structure And Public Policy, BIS (July 2021), https://www.bis.org/publ/bppdf/bispap117.pdf. Third-Party Dependencies in Cloud Services: Considerations on Financial Stability Implications, FSB (Dec. 9, 2019), https://www.fsb.org/wp-content/uploads/P091219-2.pdf; Juan Carlos Crisanto, Johannes Ehrentraud, Marcos Fabian & Amlie Monteil, Big Tech InterdependenciesA Key Policy Blind Spot, BIS FSI Insights on Policy Implementation (July 2022), https://www.bis.org/fsi/publ/insights44.pdf.
[19] See, e.g., U.S. Dept of the Treasury, The Financial Services Sectors Adoption of Cloud Services, sec. 6 (Challenges with the Financial Sectors Use of Cloud Services) (Feb. 8, 2023), https://home.treasury.gov/system/files/136/Treasury-Cloud-Report.pdf.
[20] See id. sec. 6.46.5 (describing several challenges associated with greater cloud adoption by U.S. financial institutions, including risks related to concentration in the CSP market and resulting difficulties in contract negotiations).
[21] See, e.g., Kristin N. Johnson, Cyber Risks: Emerging Risk Management Concerns for Financial Institutions, 50 Ga. L. Rev. 132 (2015) (explaining that cybersecurity concerns are an ever-increasing threat, and concluding that enterprise risk management solutions focusing only on an individual firms cyber defenses may be inadequate to address concerns arising from reliance on third party service providers or resulting from the networking or interconnectedness created by transactional relationships); Kristin N. Johnson, Managing Cyber Risks, 50 Ga. L. Rev. 528 (2015) (emphasizing market participants adoption of the NIST cybersecurity framework).
[22] See generally, German Lopez, The Brilliance and Weirdness of ChatGPT (Dec. 8, 2022), https://www.nytimes.com/2022/12/05/technology/chatgpt-ai-twitter.html.
[23] E.g., Podcast, Deep Learning: The Future of the Market Manipulation Surveillance Program, FINRA (Jan. 25, 2022), https://www.finra.org/media-center/finra-unscripted/deep-learning-market-surveillance.
[24] Reva Schwartz, Apostol Vassilev, Kristen Greene, Lori Perine, Andrew Burt, & Patrick Hall, Towards a Standard for Identifying and Managing Bias in Artificial Intelligence, U.S. Dept. of Commerce National Institute of Standards and Technology (Mar. 2022), https://nvlpubs.nist.gov/nistpubs/SpecialPublications/NIST.SP.1270.pdf.
[25] E.g., Commissioner Kristin Johnson, Opening Remarks of Commissioner Kristin Johnson for the CFTC and OMWI Roundtable on Digital Assets and Financial Inclusion, CFTC Roundtable on Digital Assets and Financial Inclusion (Aug. 19, 2022), https://www.cftc.gov/PressRoom/SpeechesTestimony/opajohnson1.
Originally posted here:
Ethereum as a deflationary asset, explained – FXStreet
What is a deflationary cryptocurrency?
Although cryptocurrencies are often promoted as investment opportunities, their primary purpose was originally to serve as an alternative form of currency. Considering this narrative, the rules of supply and demand apply to cryptocurrencies as to fiat currencies.
An undergraduate economics student might say the basics of money, economy and market forces is balancing supply and demand. How much of an asset is in circulation versus the demand how many people want that particular asset helps decide its price. This equation between supply and demand underlies the fundamentals of all economies and also applies to cryptocurrencies.
Deflationary cryptocurrency is one where the value of the crypto increases due to a reduction or stagnation in supply. This ensures that the coins market value is attractive for more people to invest in and can be used as a store of value. While deflationary cryptocurrencies look more attractive, not all are designed that way.
Many well-known cryptocurrencies are not deflationary. In addition, there is often no supply limit to them. Some are disinflationary because inflation gradually reduces over time due to its tokenomics. Bitcoin (BTC), for instance, wont be deflationary until all 21 million coins have been mined. Ether (ETH) was not deflationary until the Merge happened in September 2022.
Developers of tokens create deflationary mechanisms during the design of the economic model behind the token. The economic model tokenomics can be fundamental to how stakeholders add and accrue value in a Web3 ecosystem.
The supply and demand dynamics of a token are decided at the level of development. Deflationary characteristics like burn mechanisms are decided as the economic model underlying the token is being developed. This can be a point-in-time process like with Bitcoin or an evolving mechanism like with Ethereum.
When creating Bitcoin, Satoshi Nakamoto ensured there would only be a finite supply of 21 million. Once 21 million Bitcoin are mined, no new BTC can be created. This limited supply has helped the narrative that Bitcoin is a true store of value compared with fiat currencies that increase supply due to central bank monetary policies.
In contrast, Ethereum had an inflationary supply at its inception. Ether supply was increasing at an annual rate of 4.5%. However, after the Ethereum Merge that saw it move from proof-of-work to proof-of-stake, it is now a non-inflationary asset due to its burn rate. The number of Ether burned in maintaining the network activity is more than the amount of Ether entering circulation.
Implementing the EIP-1559 protocol has altered the economic nature of the Ethereum token by incorporating the burning of a fraction of the gas fees per transaction. As a result, some experts argue that Ethereum has become more deflationary than Bitcoin.
As deflationary tokens are considered a better store of value, new tokens created for both protocol and application tiers may be designed to be deflationary.
Investments in deflationary cryptocurrencies can yield growth and returns for investors. But being deflationary alone may not be a criterion to be identified as a better investment.
Due to their supply cap, deflationary tokens are typically perceived as more valuable by holders and investors. This was also demonstrated by the rise of nonfungible tokens (NFTs), where the rarity of the NFTs often decided the prices. Limited supply driving prices higher was also true with the Ethereum Name Service (ENS), where some three-digit ENS names were sold for even more than 100 ETH.
Ethereum may not necessarily be classified as a better asset after it became deflationary. Ethereum has a rich ecosystem that drives transactions on the chain, and as more Ether gets burned in the process, it causes deflation. An unused Ethereum blockchain wouldnt be able to achieve this economic feat.
The underlying chain fundamentals must remain strong for Ethereum to thrive as an investment. A chain with strong fundamentals typically has a developer ecosystem to create many applications that users widely adopt. As users flock to these applications, developers are encouraged to continue innovating.
The resulting network effect would make Ethereum deflationary, making it a more attractive investment asset.
Centralized regulatory organizations typically govern the inflation of asset prices in traditional capital markets. Is that the same in Web3? Who ensures fair play?
In the United States, the Federal Reserve (the Fed) assumes the responsibility of maintaining inflation at reasonable levels by implementing tools such as altering interest rates, bond-buying programs and money printing. This obligation is typically similar across most other nations. In Web3, inflation is controlled by the protocols monetary policy, which is determined by the community through decentralized governance.
Deflationary mechanisms are interwoven into the tokenomics while creating the ecosystem. Where tokens have an unlimited supply, as the token ecosystem matures, there would be more opportunities for burn. Therefore, the organization managing the token must proactively identify these opportunities and embed them into the tokenomics to reduce the supply.
The Ethereum Merge is a fine example of how the Ethereum supply and demand was tweaked to make it deflationary. Such significant tokenomics changes are typically proposed, approved and executed by a decentralized autonomous organization (DAO) that governs the token and the platform behind it.
These tokenomics changes are then embedded into smart contracts as the rules of the ecosystem. Smart contracts drive the new business rules and the economic model of the ecosystem. As a result, DAOs could play a significant role in ensuring efficient and effective governance of the tokens.
Since decentralization is one of the tenets of the blockchain world, an economic system not controlled by the founding teams, investors, venture capitalists and whales is crucial to delivering sustainable tokenomics based on sound business models.
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Jamie Dimon Is Bullish On Blockchain, But Not Bitcoin Satoshi … – Investing.com UK
Benzinga - Are investors making too many assumptions about Bitcoin (CRYPTO: BTC)? JPMorgan Chase & Co (NYSE: JPM) CEO Jamie Dimon is bullish on blockchain technology, but Bitcoin is another story.
"How do you know it's going to stop at 21 million? ... maybe it's going to get to 21 million and Satoshi's picture is going to come up and laugh at you all," Dimon said during a Jan. 19 appearance on CNBC's "Squawk Box."
What To Know: Satoshi Nakamoto is a presumed pseudonymous person responsible for the creation of Bitcoin. Many argue that Bitcoin holds value because of its scarcity, given the maximum number of coins that can be mined is capped at 21 million, according to Bitcoin's source code.
Related Link: Satoshi Nakamoto's Last Messages Before Disappearing, The Odds Of $250K BTC In 2023
Dimon reminded listeners that no one really knows what will happen, but he has strong opinions on the world's oldest and most valuable cryptocurrency.
"Bitcoin itself is a hyped-up fraud, a pet rock," Dimon said.
"I think all of that has been a waste of time and why you guys waste any breath on it is totally beyond me," he told CNBC during an interview at the World Economic Forum.
Blockchain, on the other hand, is a technology leger system and it's much different than cryptocurrency tokens, he said, adding JPMorgan uses blockchain technology to move information and money around.
The rest is more of a "decentralized Ponzi scheme," Dimon said.
"I don't care about Bitcoin, so we should just drop the subject."
It may take a while to find out if Dimon is right in his thinking. Bitcoin isn't expected to reach the 21-million mark until 2040.
Check This Out: If You Invested $1,000 In Bitcoin When Tesla Bought The Crypto, Here's How Much You'd Have Now
Originally published on Jan. 19, 2022.
Photo: Tumisu from Pixabay.
2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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Jamie Dimon Is Bullish On Blockchain, But Not Bitcoin Satoshi ... - Investing.com UK
VIDEO: What is XRP and what does it do? What is Ripple? – InvestorsObserver
2023-03-21 11:33:37 ET
Cryptocurrency is not an old industry. Bitcoin kicked off the industry as we know it when Satoshi Nakamoto mined the Genesis block on January 3rd 2009, as the world reeled from one of the worst financial crashes in recent memory.
Only three years later, XRP was launched, a decentralised asset built for payments. Today, it remains one of the most well-known and biggest cryptocurrencies, currently sitting in sixth place with a market cap of close to $20 billion.
And yet, so many are still confused as to what XRP does, as well as the distinction to Ripple, the company behind it. This week on the Invezz podcast, I interviewed Brendan Berry, Payment Products Lead at Ripple, to get into the weeds of what exactly XRP is, what Ripple is, and the distinction between the two, as well as what they both do.
We covered a bunch of topics. One of these was the issues with conventional banking a particularly pertinent topic given the startling events in the sector over the last couple of weeks.
But we focused mainly on payments. Ive criticised the process behind bank transfers, and I put to Brendan my curiosity around what feels like a total lack of innovation in the digital age from banks. I asked him about fees and lag times and why these were taking days for cross-border payments.
Of course, this is a big reason why XRP exists. We talked about the ins and outs of this, as well as a subsection within the area of payments: remittances. When I visited El Salvador last summer, I was fascinated by this area but the data shows that the pickup hasnt happened yet. I wanted to get Brendans take on this and how XRP can contribute in this area.
We also discussed the future of crypto, including what Brendan believes will be a streamlining of the front-end experience of a lot of transactions within the space.
Another topic we touched on was whether the recent banking turmoil would push people further into crypto, and what this could mean for the industry, and XRP, going forward.
All in all, it was a wide-ranging discussion centred on payments and what role XRP could have in this world.
Link:
VIDEO: What is XRP and what does it do? What is Ripple? - InvestorsObserver
Billions of Dollars Missing from US Banks, CryptoQuant CEO Reacts … – Investing.com
The Economist recently shared a news piece that reveals that hundreds of billions of dollars are missing from American banks. Binance CEO Changpeng Zhao shared the news on Twitter. CryptoQuant CEO Ki Young Ju couldnt keep calm as he replied to the tweet, sharing his thoughts.
Ki commented on the tweet, asking people to call out the banks from which the client funds are missing. He also stated that he wouldnt be surprised if they inserted the name of any bank, except for the ones that dont use client funds or have proof of reserves.
CryptoQuants CEO has been quite vocal against banks amidst the bank runs. He recently dropped a tweet speaking of the coordinated effort by central banks to help with US dollar liquidity.
Ki has requested that individuals who have faith in the US dollar system contemplate three scenarios. Firstly, he proposed a hypothetical situation where cryptocurrency exchanges allocate all client funds toward shitcoin. Secondly, he urged them to envision a scenario where Satoshi Nakamoto generates an infinite amount of bitcoins to rescue these exchanges.
The statement comes amidst a time when banks are going through a fair share of turmoil, with client funds missing and top US banks collapsing. Despite all the chaos, the cryptocurrency market was up and running.
Amidst all this, the SEC has also tightened its scrutiny of the cryptocurrency realm. The SEC sued Tron founder Justin Sun on the grounds of fraud and market manipulation, alongside other celebrities, including Jake Paul, for promoting it.
The post Billions of Dollars Missing from US Banks, CryptoQuant CEO Reacts appeared first on Coin Edition.
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Billions of Dollars Missing from US Banks, CryptoQuant CEO Reacts ... - Investing.com
Bitcoin eyes $30,000 ahead of the Fed meeting on Tuesday that … – Crypto News Flash
The Bitcoin market continued to flourish amidst the global banking crisis, which analysts indicate is in the early stages. With United States officials reportedly studying ways to let the Federal Deposit Insurance Corporation (FDIC) temporarily insure deposits beyond the current $250,000 cap on most accounts without getting approval from Congress, confidence in Bitcoin is expected to rise exponentially. Notably, the United States Federal government is working to prevent further bank insolvency.
Moreover, recent bank insolvency has been compared to the pre-2008 Lehman Brothers bankruptcy after being in operation for 158 years. The results of the 2008 financial crisis brought forth the Bitcoin digital asset by Satoshi Nakamoto, which will now be experiencing its first major global recession.
Having been tested for the past fourteen years, Bitcoin is expected to shield ordinary people from impending financial implosion. Moreover, Bitcoin is hard printed to 21 million units despite the increasing global demand.
The Bitcoin market has held $28k for the past few days, despite the altcoin industry remaining generally calm. According to our latest crypto market data, Bitcoin price is up over 26 percent in the last 14 days. Having remained above the 200 WMA in the past three days, analysts are getting more confident the effects of the weekly death cross will fade off over time.
Moreover, the Bitcoin fundamental aspects have been outweighing the technical outlook. Notably, the 2-Year Treasury yield has dropped over 4 percent, the most significant 5-day decline in yields since the October 1987 crash. With more calls for the Fed to tighten its monetary policies, including a cut on tomorrows interest rate, Bitcoin price could rally to $30k.
The Bitcoin market has led the recent crypto rally, with cash inflow to altcoins largely reduced. The ETH/BTC chart is a clear testimony that altcoins are yet to register gains. Analysts expect the altcoin season to happen after a rebound on the ETH/BTC four-hour chart.
Nonetheless, the Bitcoin market has recorded cash outflow as reported by on-chain analytics firm CoinShares. According to the report, Bitcoin funds saw massive outflow last week despite the inflow outweighing the outflows YDT.
Bitcoin, being the largest digital asset, was the primary focus, seeing outflows totaling US$244m last week. Short-bitcoin also saw outflows totaling US$1.2m, although it is now the investment product with the largest inflows year-to-date of US$49m, CoinShares noted.
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The spike in outflows is coupled with increased Bitcoin miners profit-taking since the asset hit $28k.
Crypto News Flash does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products, or other materials on this page. Readers should do their own research before taking any actions related to cryptocurrencies. Crypto News Flash is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods, or services mentioned.
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Bitcoin eyes $30,000 ahead of the Fed meeting on Tuesday that ... - Crypto News Flash
The Mount Rushmore of Crypto 2023? Bitcoin, Ethereum, Cardano … – Euro Weekly News
As we brace ourselves for a turbulent crypto year, the market has seen expansions of more than $80 billion despite the Securities and Exchange Commissions (SEC) stringent regulations. Crypto markets are finally displaying signs of a bullish run and accelerating speed after a challenging first, ignoring any obstacles or unfavourable news.
The newest meme coin in the cryptoverse, Big Eyes Coin (BIG), is in the lead after raising over $31.5 million during its presale. Only time will be able to determine when and where this will land. On the other hand, Bitcoin and Ethereum are two crypto industry leaders. Bitcoin dominated the market, and users followed SEC regulations when converting other cryptocurrencies into BTC. Players like Cardano are also putting themselves out there.
The king of cryptocurrencies, Bitcoin (BTC), reached a height of $24,755 as we entered the second half of February. This was the highest level since June 2022. The value of BTC soared once many users and investors shifted their funds away from other cryptocurrencies and towards the crypto beast. BTCs price at the time of writing was $24,551, up almost 10% over the previous day, and it had a $473.59 billion market cap.
In order to establish an autonomous and interconnected network of digital currencies, Satoshi Nakamoto, a mysterious person or entity, launched Bitcoin as a different means of payment in 2009. Bitcoin uses a Proof-of-Work (PoW) technique to verify transactions, and the digital currencys 21 million coins are in limited supply.
Like Bitcoin, Ethereum (ETH) experienced growth and increased by more than 8% to $1,700. In August 2022, Ethereums last value of $1,800 was recorded. ETH was worth $1,683 and had a market value of $205.75 billion at the time of writing.
In addition to serving as a platform for decentralised apps and smart contracts, Ethereum debuted as a De-Fi coin in 2015. Its security, and reliability make it the platform that consumers and developers want the most in the world compared to Bitcoin. Ethereum relied on the Proof-of-Work method, but last year the network saw a shift PoS (Proof-of-Stake), which is quicker, requires less energy, and is more secure.
A blockchain that uses proof-of-stake is called Cardano (ADA). As a result, the coins energy efficiency is increased. Traditional proof-of-work consensus requires more mining and transaction time. The blockchain was created in 2017, and the Alonzo hard fork was introduced four years later. It has smart contract capability as a result. Smart contracts encrypted security makes them tough to hack. Transactions using the proof-of-stake mechanism can be done very quickly, effectively, and precisely!
Cardanos dedication to transaction security has aided in the platforms growth into a potent blockchain. Its greenness is aided by the quickness and effectiveness of its transactions as well as its smart contract. The likelihood of investing being successful is high.
Big Eyes Coin (BIG) is a community-owned, meme-themed cat coin that aims to improve the environment of the planet while also providing useful services and use cases. Big Eyes Coins presale has already reached $31 million, and it now aims to achieve $50 million by the end of the presale. This brand-new meme coin has a cat as its symbol, and it has the potential to grow into the biggest meme coin ever.
In the past few weeks, Big Eyes have run a number of marketing initiatives, including a tattoo competition, discount codes, and the great set of loot box offerings that are currently available.
The community-led token has repeatedly shown that it is here to stay and has a bright future ahead of it, dispelling any concerns being expressed by these crypto gurus, despite some internet critics casting doubt on the currency and its genuineness.
With incredible technological advancements, usability, accessibility, NFTs, loot boxes, and more, Big Eyes Coin is aiming to establish itself as a crypto mainstay.
Presale: https://buy.bigeyes.space/
Website: https://bigeyes.space/
Telegram: https://t.me/BIGEYESOFFICIAL
Sponsored
WARNING: The investment in crypto assets is not regulated, it may not be suitable for retail investors and the total amount invested could be lost
AVISO IMPORTANTE: La inversin en criptoactivos no est regulada, puede no ser adecuada para inversores minoristas y perderse la totalidad del importe invertido
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The Mount Rushmore of Crypto 2023? Bitcoin, Ethereum, Cardano ... - Euro Weekly News
Ethereum as a deflationary asset, explained – Cointelegraph
What is a deflationary cryptocurrency?
Although cryptocurrencies are often promoted as investment opportunities, their primary purpose was originally to serve as an alternative form of currency. Considering this narrative, the rules of supply and demand apply to cryptocurrencies as to fiat currencies.
An undergraduate economics student might say the basics of money, economy and market forces is balancing supply and demand. How much of an asset is in circulation versus the demand how many people want that particular asset helps decide its price. This equation between supply and demand underlies the fundamentals of all economies and also applies to cryptocurrencies.
Deflationary cryptocurrency is one where the value of the crypto increases due to a reduction or stagnation in supply. This ensures that the coins market value is attractive for more people to invest in and can be used as a store of value. While deflationary cryptocurrencies look more attractive, not all are designed that way.
Many well-known cryptocurrencies are not deflationary. In addition, there is often no supply limit to them. Some are disinflationary because inflation gradually reduces over time due to its tokenomics. Bitcoin (BTC), for instance, wont be deflationary until all 21 million coins have been mined. Ether (ETH) was not deflationary until the Merge happened in September 2022.
Related: Inflationary vs. deflationary cryptocurrencies, Explained
Developers of tokens create deflationary mechanisms during the design of the economic model behind the token. The economic model tokenomics can be fundamental to how stakeholders add and accrue value in a Web3 ecosystem.
The supply and demand dynamics of a token are decided at the level of development. Deflationary characteristics like burn mechanisms are decided as the economic model underlying the token is being developed. This can be a point-in-time process like with Bitcoin or an evolving mechanism like with Ethereum.
When creating Bitcoin, Satoshi Nakamoto ensured there would only be a finite supply of 21 million. Once 21 million Bitcoin are mined, no new BTC can be created. This limited supply has helped the narrative that Bitcoin is a true store of value compared with fiat currencies that increase supply due to central bank monetary policies.
In contrast, Ethereum had an inflationary supply at its inception. Ether supply was increasing at an annual rate of 4.5%. However, after the Ethereum Merge that saw it move from proof-of-work to proof-of-stake, it is now a non-inflationary asset due to its burn rate. The number of Ether burned in maintaining the network activity is more than the amount of Ether entering circulation.
Implementing the EIP-1559 protocol has altered the economic nature of the Ethereum token by incorporating the burning of a fraction of the gas fees per transaction. As a result, some experts argue that Ethereum has become more deflationary than Bitcoin.
As deflationary tokens are considered a better store of value, new tokens created for both protocol and application tiers may be designed to be deflationary.
Investments in deflationary cryptocurrencies can yield growth and returns for investors. But being deflationary alone may not be a criterion to be identified as a better investment.
Due to their supply cap, deflationary tokens are typically perceived as more valuable by holders and investors. This was also demonstrated by the rise of nonfungible tokens (NFTs), where the rarity of the NFTs often decided the prices. Limited supply driving prices higher was also true with the Ethereum Name Service (ENS), where some three-digit ENS names were sold for even more than 100 ETH.
Ethereum may not necessarily be classified as a better asset after it became deflationary. Ethereum has a rich ecosystem that drives transactions on the chain, and as more Ether gets burned in the process, it causes deflation. An unused Ethereum blockchain wouldnt be able to achieve this economic feat.
The underlying chain fundamentals must remain strong for Ethereum to thrive as an investment. A chain with strong fundamentals typically has a developer ecosystem to create many applications that users widely adopt. As users flock to these applications, developers are encouraged to continue innovating.
The resulting network effect would make Ethereum deflationary, making it a more attractive investment asset.
Centralized regulatory organizations typically govern the inflation of asset prices in traditional capital markets. Is that the same in Web3? Who ensures fair play?
In the United States, the Federal Reserve (the Fed) assumes the responsibility of maintaining inflation at reasonable levels by implementing tools such as altering interest rates, bond-buying programs and money printing. This obligation is typically similar across most other nations. In Web3, inflation is controlled by the protocols monetary policy, which is determined by the community through decentralized governance.
Deflationary mechanisms are interwoven into the tokenomics while creating the ecosystem. Where tokens have an unlimited supply, as the token ecosystem matures, there would be more opportunities for burn. Therefore, the organization managing the token must proactively identify these opportunities and embed them into the tokenomics to reduce the supply.
The Ethereum Merge is a fine example of how the Ethereum supply and demand was tweaked to make it deflationary. Such significant tokenomics changes are typically proposed, approved and executed by a decentralized autonomous organization (DAO) that governs the token and the platform behind it.
These tokenomics changes are then embedded into smart contracts as the rules of the ecosystem. Smart contracts drive the new business rules and the economic model of the ecosystem. As a result, DAOs could play a significant role in ensuring efficient and effective governance of the tokens.
Since decentralization is one of the tenets of the blockchain world, an economic system not controlled by the founding teams, investors, venture capitalists and whales is crucial to delivering sustainable tokenomics based on sound business models.
Read more:
Gold Vs. Bitcoin: Delving Into Diverse Investment Strategies For Weathering Turbulent Market Conditions A – Benzinga
When the stock market faces turbulence, investors often look to an alternative haven for their capital - GoldContinuous Contract (Comex:GCW00).
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Its reputation as a reliable asset has solidified its role in times of economic instability. Investors flock to this precious metal due to its ability to remain or even appreciate during periods of unpredictability.
For years, Gold has been considered a reliable store of wealth in uncertain times.
However, with the rise of digital assets like Bitcoin(CRYPTO: BTC) and other cryptocurrencies to prominence over recent months - especially amidst increased concern about banks on unsteady ground such as Silicon Valley Bank(NASDAQ:SIVB) - many investors are beginning to look towards cryptocurrency markets for greater security when safeguarding their financial future.
Gold and cryptocurrencies represent two distinct asset types, one physical and the other digital.
Bitcoin holds a special place in cryptocurrency history as it was first released back in 2008 by Satoshi Nakamoto with no need for central banking intermediaries during transactions.
This led to the launch of the worlds initial cryptocurrency exchange platform shortly after allowing people around the globe to trade virtual currencies such as Bitcoin.
Investments in these secure havens exhibit varying performances on the charts, adding a layer of intrigue to their financial landscape.
During the decade between 2001 and 2011, Gold experienced an impressive 630% growth in value - from $250 to its historical peak of over $1,900.
Since then it has endured a long consolidation period where price fluctuations were minor. However, this stability ensured that their investment was preserved against any decreased valuation risk for investors.
Surprisingly, the current value of Gold has surpassed its highest peak from 11 years ago by a mere 2.60%. This may not be the most lucrative option for investors seeking substantial capital growth.
In a remarkable divergence between asset classes, Bitcoin has skyrocketed by an astounding 584,917% over the past 11 years, leaving traditional investments in the dust.
Despite a 59% plunge from its all-time high, Bitcoin has witnessed an impressive 42% rise in March following the collapse of various banks. Gold has also experienced a 9% ascent during the same period.
Meanwhile, the stock market seems to be facing a downward trajectory, with the Dow Jones dropping 3%. The financial landscape displays an intriguing interplay between these diverse investment options.
While Bitcoin tends to ride a rollercoaster of fluctuation, its track record showcases its impressive capacity for accelerated and substantial growth.
Gold is a steady asset that provides reliable security and peace of mind. Over an extended period, this precious metal has demonstrated consistent growth, proving it to be a dependable safe haven when you need reassurance the most.
After the closing bell on Friday, March 17, Gold closed at $1988.50, trading up by 3.49%. Bitcoin closed at $28054.00, trading up 3.96%.
2023 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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