Category Archives: Bitcoin

In the absence of regulations, people in Pakistan have invested a serious amount of money in digital assets. New research claims Pakistanis keep some $20 billion in cryptocurrency, allegedly more than what their central bank has in foreign reserves.

The Pakistani nation owns more cryptocurrency than foreign reserves, according to the Pakistan Frontier and other media outlets quoting a new report by the Federation of Pakistan Chambers of Commerce and Industry (FPCCI). The study, produced by the associations Policy Advisory Board (PAB), has estimated that Pakistanis have held cryptocurrency worth $20 billion in the 2020-21 period.

The authors point out that the popularity of digital currencies like bitcoin has rapidly increased in the last couple of years. With a 711% market growth in 12 months, Pakistan climbed to third place in this years Global Crypto Adoption Index calculated by blockchain forensics firm Chainalysis. The country is behind only India and Vietnam.

However, the true total of crypto holdings may be much higher than the figure mentioned in the PAB report. Many residents of the country are buying coins via peer-to-peer deals and these investments remain largely undetected, the Business Recorder notes in an article. Cryptocurrencies are still a gray area in Pakistan as the countrys current legislation does not cover the digital assets.

During a press conference, FPCCI President Nasir Hayat Magoon urged Islamabad to introduce a government policy that would facilitate cryptocurrency transactions, remarking that neighboring India has already taken steps to implement some rules. Magoon insisted that such regulations are needed so that investors can trade their coins in the country instead of in places like Dubai.

The report recommends that Pakistan adopt a legal framework aligned with guidelines issued by the Financial Action Task Force and the International Monetary Fund. The study has been released after Pakistans Minister of State for Parliamentary Affairs Ali Muhammad Khan indicated in October that the government is not opposed to cryptocurrency investments in general. Pakistans courts have also called on the executive and legislative powers to introduce crypto regulations.

Do you expect authorities in Pakistan to soon regulate the countrys crypto space? Let us know in the comments section below.

Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchenss quote: Being a writer is what I am, rather than what I do. Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is 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 in this article.

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Pakistanis Own $20 Billion in Crypto, Report Reveals Bitcoin News - Bitcoin News

Often considered the king coin of the crypto market, Bitcoin was trading at $48,611 at the time of writing. With that, BTC is down almost 1% in the last one day and slipped by 3.7% over the last two weeks on CoinGecko.

That being said, Argo CEO Peter Wall recently told CNBC that what drove the price of Bitcoin in 2021, will also be its drivers in 2022. Adding to that, Wall also analyzed that the market has matured overtime when it comes to both the capital markets and the regulatory outlook. From a mining perspective, he said,

Weve seen this year, the industry go from being essentially teenagers at the start of the yearkind of uncertain in themselves to a very confident young professionals in their 20s.

He further explained in the age analogy that the mining ecosystem is even more mature in its 30s. He also commented,

regulators are now taking the space more seriously.

Having said that, Wall predicts that 2022 will see more hashrate come online as more miners get added to the system. This is when miners are extremely on the profitable end of things right now. He also explained,

The margins are still very, very strongbut itll be a little probably less profitable in 2022 than its been in 2021.

Meanwhile, it is worth noting that the Bitcoin network hashrate at the time of writing is 178.01M. A significant increase from the levels seen in October.

With that, lets also look at an analysis by Arcane Research around BTC mining and mining stocks as per its recent monthly report. Until November, the report pointed at a growth in mining returns. However, since then, there has been a fall in profitability.

Not to mention that the relative measure of BTC difficulty has been on a rise in the last 3 months, with a value of 24.20T at press time.

Despite the fall, the report called mining highly profitable, stating,

Even though cash flows have fallen, mining is still highly profitableEven after the recent decline, cash flow margins have improved in 2021 since the bitcoin price has increased faster than the hashrate.

If we look at the past year, another research report has found that Bitcoin miners made over $15.3 billion in revenue, representing a year-on-year increase of 206%, a record year.

More:
Why this exec expects Bitcoin mining to be 'less profitable' in 2022 than in 2021 - AMBCrypto News

Bitcoin (BTC) may have fluctuated in price this year, but BTC remains a better play than the biggest crypto stocks.

New data currently circulating shows that for all the growth in the industry surrounding Bitcoin, it still pays simply to buy and hold.

Looking at the stock performance of firms with the largest BTC allocations on their balance sheets, it becomes immediately apparent that it was more profitable to hold BTC than those equities at least this year.

Buying crypto stocks to outperform coins is hard, Three Arrows Capital CEO Zhu Su commented alongside comparative performance data from Bloomberg.

Both Bitcoin and Ether (ETH) have fared significantly better than stocks from companies, such as MicroStrategy (MSTR) and Coinbase (COIN), despite the successes of both in 2021.

The figures highlight the differences between traditional and crypto markets, the latter having a degree of freedom of expression long absent from equities, commodities and other assets.

Markets are forward looking. Crypto even more so bc its not under anyones control. Its the only free market left in the world, popular trader and analyst Pentoshi noted earlier this month.

For retail entities, in particular, a dollar-cost averaging strategy involving allocation into BTC, mitigating short-term volatility, thus looks all the more attractive.

Further data from the largest publicly traded mining corporations supports the trend.

Related:Bitcoin nears $50K Here are the BTC price levels to watch next

Versus their inception and even stock price at the time of their initial public offering, the vast majority are significantly lower in BTC terms.

Only BitFarms (BITF) is currently turning a profit as of December.

Nevertheless, the extent of progress among United States mining industry participants has been eye-opening, and as Cointelegraph reported, listing deals continue to flow in.

Texas, looking to become a mecca for mining, could see demand for power jump severalfold by next year.

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Missed out on hot crypto stocks in 2021? It paid just to buy Bitcoin and Ethereum, data shows - Cointelegraph

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On Dec. 15, crypto firm Valkyrie Investments which recently launched the second Bitcoin-futures exchange traded fund (ETF) launched the Balance Sheet Opportunities ETF, trading as VBB on Nasdaq, to meet the rising demand for crypto investing in an easy way.

See: How Much You Would Have If You Invested Your Stimulus Money in CryptocurrencyFind: Jack Dorsey Says Bitcoin Will Replace the Dollar

The fund is an actively managed ETF that invests in innovative public companies with exposure to Bitcoin: companies that directly or indirectly invest in, transact in, or otherwise have exposure to Bitcoin, per the funds prospectus.

This fund is meant to satisfy the needs of any investor that wants to invest in companies with exposure to Bitcoin without the risks of holding spot Bitcoin such as security, custody, a lack of familiarity with various trading venues, and more, Brian McQuade, director of business development at Valkyrie Investments, told GOBankingRates.

McQuade explained that the launch was prompted by a series of discussions with investment and financial advisors. The topic? How to best meet the rising demand for crypto investing in a familiar, easy to understand product that is available in traditional investment and retirement accounts.

Related: Bitcoin-Backed Mortgage Product To Launch in 2022 Thanks to $70 Million Funding Round

Also, this is a product that aligns well with our philosophy of bringing crypto asset investments to the broader public, and with our belief that companies holding Bitcoin on their balance sheet may outperform those that dont, McQuade said.

VBBs top holdings include MicroStrategy, Block, Coinbase, Tesla, Global, Paypal, MasterCard, BlackRock and Robinhood, according to the funds brochure.

The Fund will not invest in bitcoin directly or indirectly through the use of derivatives. Investors seeking direct exposure to the price of bitcoin should consider another investment other than the Fund, the prospectus continues.

Story continues

In October, the firm launched the Valkyrie Bitcoin Strategy, which is trading on the Nasdaq under the ticker BTF. That fund aims to solely track the value of Chicago Mercantile Exchange (CME) Bitcoin futures, according to Valkyrie. Bitcoin futures, which are agreements to buy or sell an asset in the future at a specific price, are fully regulated in the U.S. on the CME. The goal of the fund which does not invest directly in Bitcoin is to track the value of these products in a liquid basket of securities. By doing so, BTF provides exposure to a wider audience of investors, advisors and more, without the pitfalls and hurdles typically associated with investing directly in crypto assets, the company said in a statement.

Learn: Bitcoin-Focused NYDIG Raises $1B to Accelerate Bitcoin For All Mission: Company Valued at $7BExplore: Bitcoin Bulls Argue for Crypto as a Hedge Against Soaring Inflation

And in November, Valkyrie launched a decentralized finance (DeFi) fund off the back of client demand.

The Valkyrie Onchain DeFi fund, in addition to investing in the DeFi tokens, holds our assets on-chain, CEO Leah Wald told GOBankingRates at the time. This allows us to participate in the upside, while gaining additional yield from lending, liquidity pools, farming & staking in the on-chain DeFi ecosystem. We get the appreciation plus the compounded yield generated from on-chain DeFi participation. In addition to investing in DeFi tokens, the fund will hold assets on-chain.

More From GOBankingRates

This article originally appeared on GOBankingRates.com: Valkyrie Launches Balance Sheet Opportunities ETF With Exposure to Bitcoin, Targets Rising Demand for Crypto Investing in an Easy Way

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Valkyrie Launches Balance Sheet Opportunities ETF With Exposure to Bitcoin, Targets Rising Demand for Crypto Investing in an Easy Way - Yahoo Finance

Pro-bitcoin U.S. Senator Cynthia Lummis is preparing to introduce a comprehensive cryptocurrency bill next year that would define how to classify and tax different digital assets.

Welcome bipartisan cosponsors! Please encourage your senator to reach out and consider it, Lummis tweeted, quoting Bitcoin Magazines tweet announcing the news.

A senior aide for the senator told Bloomberg that, if enacted, the bill would provide regulators with clear guidance on which assets belong to different asset classes, offer protections for consumers, regulate stablecoins, and create a new organization under the joint jurisdiction of the Commodity Futures Trading Commission and the Securities and Exchange Commission to oversee the digital asset market.

Since its inception, Bitcoin has brought innovation to the U.S. and uncertainty to its regulatory body. As the monetary network advances in usage and recognition across the country, Washington has had a hard time figuring out how to fit the new technology under existing legislation.

On December 8, chief executives of prominent cryptocurrency companies joined the U.S. House of Representatives for a hearing that sought to enlighten lawmakers on the techs novelty, as, according to the hearings leader Rep. Maxine Waters, several questions remain as to how traditional rules apply to the asset class. The C-level executives argued that Bitcoin and cryptocurrencies are fundamentally different from the established system and suggested lawmakers should consider writing specific legislation for the industry.

Lummis is outspoken about Bitcoin and its benefits, as well as about her support for the technology. The senator also has drawn a dividing line between Bitcoin and other cryptocurrencies, saying in November that the peer-to-peer monetary network is fully decentralized and clearly a commodity while everything else has to be monitored differently, likening their behavior to that of securities.

In the previous month, Lummis had criticized her colleagues approval of the American debt limit increase by $480 billion, saying that Bitcoin is a blessing of God amid irresponsible policies at the government level.

Lummis had between $100,001 and $250,000 worth of bitcoin as of December 2020, according to her financial disclosures, and has since bought at least $50,000 more of BTC.

Read the original here:
Senator Lummis To Propose New Bitcoin Bill Next Year - Bitcoin Magazine

Closely followed crypto analyst Willy Woo says that Bitcoin (BTC) is moving toward a major breakout phase.

In a new interview with crypto channel host Scott Melker, Woo says that even though BTC is still recovering from the most recent crypto market pullback, its gearing up for a massive rally that should kick off during the first two months of 2022.

Id say were not in the main run of the bull market. Theres a main run phase where its just going to go up, the momentum is strong.

Were just coming out of a reaccumulation, we just had this massive sell-off in May, the sideways reaccumulation happened, and then there [was] that first tentative climb out, and often theres another sort of accumulation and then were off to the races.

Thats when everythings strong. Thats the main phase of the bull run. Were not there yet. Were [still] recovering and setting up for it. I think were not going to get there until 2022. [The] early phase, January [and] February might be interesting.

According to Woo, BTC may have had a weak December, but the next six months appear structurally sound due to a shift of token ownership from short-term holders to long-term holders.

If were looking over the next six months, structurally, its pretty strong. What gives me confidence about that is that there are really a lot of coins that have been moved to long-term holders who have held their coins for five months or more, and so theyre at maximum accumulation.

Theyre slowly divesting [and] as they do, the price runs up. They may take some profits but predominantly the coins are with long-term holders and bear markets dont usually start until the long-term holders [are] divested.

Bitcoin is exchanging hands at $48,732 at time of writing, a 6.5% increase from its seven-day low of $45,782.

I

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On-Chain Analyst Willy Woo Says Bitcoin Approaching Off-to-the-Races Phase Heres His Timeline - The Daily Hodl

What happened: A Bitcoin (CRYPTO: BTC) whale just sent $98,358,249 worth of Bitcoin off Coinbase.

The BTC address associated with this transaction has been identified as: 18aWdgXV7CpRYHa6jrz16UA9wK3WY2eciZ.

Why it matters: Bitcoin Whales (investors who own $10 million or more in BTC) typically send cryptocurrency from exchanges when planning to hold their investments for an extended period of time. Storing large amounts of money on an exchange presents an additional risk of theft, as exchange wallets are the most sought-after target for cryptocurrency hackers.

The best way to secure Bitcoin is through holding it on a hardware wallet, which cant be done through holding digital assets on an exchange. Hardware wallets store ones private keys in an offline device, making it impossible for funds to be hacked via the internet.

According to Glassnode, only 13.34% of the total supply remains liquid across all centralized exchanges.

The removal of BTC from an exchange reduces potential sell side pressure, allowing the price of Bitcoin to increase more easily.

See Also: Best Crypto Apps 2021 and Best Crypto Portfolio Trackers

Price Action: Bitcoin is down 0% in the past 24 hours.

See Also: How To Buy Bitcoin

Public Blockchain data sourced from Whale Alerts Twitter.

This article was generated by Benzingas automated content engine and reviewed by an editor.

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Bitcoin Whale Moves 2,000 BTC Off Coinbase - Benzinga - Benzinga

Recently, in an apparent response to a largely-flawed critique of stablecoins from the Open Markets Institute, cryptocurrency exchange FTX clarified its position on transaction fees for withdrawals.

Its blog post was striking in that it appeared to associate proof-of-work (PoW) blockchains with high fees (which users are partly responsible for upon withdrawal) and proof-of-stake (PoS) blockchains with low fees. The conclusion: FTX wants to encourage users to use low-fee, less-energy-intensive, proof-of-stake blockchains. We can see the appeal of associating PoW with extractive, consumer-unfriendly, high fees, and PoS with efficiency and user-friendliness. But FTX is mistaken to associate consensus and fees.

In its article, FTX claimed:

The actual amount that a blockchain requires to send a transaction differs widely based on the underlying structure of that blockchain. Platforms like Bitcoin and Ethereum are known as Proof of Work blockchains, where the work required to add that transaction to the blockchain uses a large amount of computing time and energy. On such platforms, average transaction fees are quite high: around $2 per transaction for Bitcoin, and around $40 per transaction on Ethereum!

Leaving aside our surprise at seeing a major exchange take such a partisan approach, the analysis relies on a misconception regarding the relationship between consensus (or Sybil resistance) methods and blockchain fees. There simply is no inherent association between proof of work and high fees, or proof of stake and low fees. The fact that the only meaningful fees exist on two blockchains (Ethereum and Bitcoin), both of which currently happen to be PoW-based, does not mean that PoW implies or causes fees. It simply means that the two most popular blockchains both use PoW and are somewhat congested, leading to high fees (Ethereum, more so than Bitcoin).

In PoW coins, work must be performed and verified before a block is appended to a blockchain. Producing work requires miners to perform several attempts before finding the number that grants them permission by the protocol to add a block to the blockchain. At first glance, it may appear that proof of works trial-and-error architecture naturally entails a delay in block production and that, in times of congestion, that delay pushes fees higher. However, this is a misunderstanding of what drives throughput.

The time in between blocks is not what determines throughput in crypto networks. Instead, the main determinant of throughput is block size, i.e., the number of bytes (and hence, transactions) that can fit into a block. Consider that a blockchain designed to produce one block per second with 1,000 transactions in each block has the very same throughput of a blockchain that produces one block per minute that is large enough to fit 60,000 transactions.

Critics of proof of work might be tempted to claim that an increase in the interval between blocks affects settlement time, which in turn increases congestion. That would also be misguided. A transaction included in a block is not final. All blockchains, including those that follow new architectures such as Solana, require users to wait before considering a transaction final. The reason behind this wait is that there are events that might take place within that period where the blocks in the blockchain are reorganized. Depending on the severity of these events, a transaction that was once in a block might be permanently removed from the blockchain.

The cause of fees is simply more demand for blockspace than there is available supply. Under conditions of scarcity, a prioritization method for transactions must be determined. One way is to create an auction in which eager transactors can pay up for priority inclusion in a block.

Having material fees is extremely healthy for a public blockchain system: it eliminates the spam problem by making it costly to insert junk data, and it constitutes protocol revenue that can be directed to a number of causes.

In Bitcoins case, this fee-based revenue will pay for security once issuance trails off. For Ethereum, fees are already being burnt to introduce a deflationary mechanic. You could also redirect fees to finance various public goods like paying Core developers. To make a rough corporate analogy, fees are revenue and issued supply is equity. Many firms do finance their operations by continually issuing stock, but shareholders generally prefer not to get endlessly diluted. The existence of fee revenue frees blockchains from dependence on dilution-based financing.

In such blockchains, fees also play a critical role in supporting their long-term security. They make it costly for information to be stored on the blockchain, thereby disincentivizing spam and DDoS attacks that have historically plagued zero-/low-fee networks, like Nano, EOS and XRP. Most crucially, fees promote a competitive environment among miners which in turn makes it prohibitively expensive for single parties to successfully attack a network. Thus far, proof of work in high-fee environments is the only battle-tested mechanism known to the industry to be resilient against attacks.

In its post, FTX claimed that the work required to add [a] transaction to the blockchain uses a large amount of computing time and energy. This is erroneous. Contrary to this common characterization of PoW, there is no energy payload required to make a transaction. You are not using joules to push transactions through the pipes. Making, registering and validating a transaction costs very little, computationally.

The thing which is expensive (financially, and, in the case of PoW, in terms of energy, too) is winning the eligibility rights to include a block, obtainable by brute-forcing for a valid nonce. And its expensive because the reward for creating a block is significant around $290,000 at the time of this writing. Logically, miners will pay up to $99 to win a bounty worth $100. But this bounty exists due to the issuance of new coins as fees are de minimis (in Bitcoin at least). The bounty is also available whether a block contains 4,000 transactions or none.

The per-transaction energy cost figure that FTX and the affiliated Solana make frequent reference to is not a useful analysis. Bitcoin could produce far more blockspace, thus driving fees to zero (as BSV did indeed do, for instance), without expending a joule more energy. Bitcoin could also process zero transactions per block, and miners would expend virtually the same amount of energy. There simply isnt a linear correlation between transactions and energy expenditure, and there is barely any causal linkage between the two.

As to why fees exist in the first place, they are the consequence of crowded block space. Congestion exists in a blockchain context because the basic security model of blockchains requires that end users can independently audit and verify the transactional history from the very first block should they choose to, and theres a limit to the quantity of data that can be audited per unit time.

A blockchain is a replicated ledger. The orthodox security model requires that users be able to actually run a current version of that ledger, and recreate and validate all historical transactions, thereby ensuring that the rules are being followed. Bitcoins design philosophy aims to permit anyone with at least a weak internet connection and consumer-grade hardware to perform a full audit of the transaction log.

Ethereum takes a more liberal approach, adding computational complexity and some scalability at the cost of more challenging and expensive verification. But still, running an Ethereum node should be doable on high-end consumer hardware if users discard some historical information after validating it, a technique called pruning. It is not out of the reach of a somewhat technical individual with a modest budget.

The design philosophy of both Bitcoin and Ethereum (at least in its current form founder Vitalik Buterin has more ambitious plans which deviate from this idea) stresses the importance of an individual being able to run a current copy of the ledger. Therefore, the growth of the ledger must itself be constrained to keep the cost of node operation within reasonable bounds. The major constraints are disk i/o, bandwidth and storage capacity.

Its not enough to store the blockchain you have to stay up to date with its latest entries, which means downloading a lot of data and performing new computation by verifying data as it arrives. Here is where we arrive at the key constraints: Theres only so much computation modern hardware can perform per unit time only so many signatures that can be verified and state changes verified. Of course, node software can (and has been) optimized, to eke more computation (and hence transactional validation) out of the same number of bit flips. Storage and bandwidth are generally becoming cheaper with time, too. But these still represent genuine constraints grounded in the laws of physics. A computer can only do so much.

So, we arrive at the status quo. Bitcoins protocol makes available a theoretical maximum of 4 MB of new block space every 10 minutes in practice, this hovers around 1.2 MB at the current weekly average. Ethereum post-EIP-1559 creates roughly 6 MB every ten minutes. If demand exceeds supply, a queue emerges, and the highest bidders get priority access to block space. Hence, fees.

As demonstrated, fees are not a PoW thing or an energy thing. They are a security model thing. If you want to keep the decentralization high, you want to keep the cost of node operation low, and thus you want to limit the quantity of data a validator must process per unit time. If you do all of these things, and your blockchain is popular, fees will organically emerge, as they did in Bitcoin and Ethereum.

Now, if you take a much looser view of security, and you are content to have a small number of very performant nodes doing all of the validation, then you can create more block space, and drive fees effectively to zero.

This is not a new idea; its the foundation of the big block movement in Bitcoin, which embroiled the protocol in a civil war for the better part of a decade. That movement gave birth to the perfect counterexample to the claims of FTX: BSV.

The designers of BSV created virtually-unlimited quantities of blockspace, content as they were to have a small number of industrial nodes perform validation. Fees are effectively zero in BSV. But this is a PoW network, and its miners absolutely consume energy. Conversely, at some point next year, Ethereum will move to a proof-of-stake model, at which point it will stop consuming meaningful amounts of energy. But I expect Ethereum will still having meaningful fees at the base layer and these fees will be considered desirable in many respects, since they support the deflationary mechanism introduced with EIP-1559.

The reason that Solana, for instance, has low fees, is simply because the designers of that network were happy to adopt a different security model from Bitcoin or Ethereum. In Solana, there is virtually no difference between running a node for the purposes of verifying the integrity of the chain and running a node for mining blocks. As such, running a Solana node requires extremely specialized hardware and an experienced devops team.

We can attest to this, as Coin Metrics runs one (alongside 100 other nodes spanning 25 distinct Layer 1 blockchains). It costs Coin Metrics dozens of thousands of dollars a month to run a SOL node. That is a magnitude higher than the couple of hundreds of dollars a month we spend running BTC nodes.

At current rates, Solana produces approximately 550-times more blockspace than Bitcoin per day. Solana validators, at current rates, must process around 100 GB per day of data, or 36 TB per year. Most of that data is removed, or pruned, which impacts the ability of third parties to check all transactions from genesis.

Bitcoin node operators, by contrast, ingest around 180 MB per day, or 65 GB per year. Solana validators must therefore manage two orders of magnitude more data than Bitcoin validators. Ethereum is a bit more complex and computationally intense than Bitcoin, but still far more limited than Solana in terms of the computational work validators must do to maintain the ledger.

Solana can offer users more abundant blockspace and therefore a cheaper all-in transactional experience, but this comes at a cost. The network has recently experienced outages, as its relatively few nodes were successfully targeted with DDoS attacks. Effectively, Solana obtained (a measure of) scalability, but at the cost of more centralization, and consequent fragility.

Ultimately, the Sybil-resistance mechanism used is largely irrelevant to the question of fees. A PoS network could be completely costless from an energy perspective and constrict block space, causing fees to emerge; a PoW network could increase blockspace and drive fees to zero.

While FTXs analysis is off base on the question of fees and PoW, we can nevertheless sympathize with the desire of an exchange operator to align itself with proof-of-stake networks, and to minimize the importance of PoW networks.

After all, if you can influence the world toward an outcome in which PoS-based monetary goods are dominant, and you run a large custodial exchange which stands to accumulate lots of those PoS assets, your incentives are clear. Other things being equal, you probably prefer to have more rather than less influence over the worlds future monetary protocol.

In a PoS-dominant world, exchange operators, custodians and banks that accumulate the most coins are king. Users that deposit coins generally surrender their coin-based network voting rights to the exchanges themselves. There are already examples of exchanges being used to influence PoS networks, as occurred when Justin Sun colluded with Binance, Huobi and Poloniex to commandeer the Steem network. These exchanges voted with user funds in Suns favor, demonstrating an obvious principal-agent problem created by the custody of PoS assets.

In a PoW world, large intermediaries are much less empowered. The failure of SegWit2x, a movement supported by most of the large exchanges and custodians at the time, demonstrates this. Imagine a similar movement today, except taking place on one of the larger PoS networks. The largest exchange operators, custodying as they do a large plurality of all the outstanding coins, would simply shape the protocol to their liking with no resistance.

And in a world where operating an exchange is a decidedly hazardous profession, as demonstrated by the travails of BitMEX, Huobi and OKEx executives, the inclination is surely to offend the powers that be as little as possible.

So, it stands to reason that FTX leadership would align itself with ecological PoS, eliminating what has historically been the most strident objection to public blockchains from the policy crowd. Why rock a boat which is already swaying quite precariously?

But we would argue that even though the naive analysis suggests that exchanges should, as a group, support and foster the growth of PoS while marginalizing PoW, this is unwise in the long run. If these exchanges/brokerages/banks accumulate a large fraction of all the coins, they will amass enormous political power, especially if these blockchains become monetary assets of global consequence. At that point, accumulating voting power proportional to coins held becomes a poisoned chalice. The exchange becomes a gigantic honeypot for the state a state which will not surrender its power of sanctions easily.

As we transition from a world where the U.S. projects power through correspondent banks and international systems like SWIFT, to a world of stablecoins, MetaMasks and Layer 2 protocols, the state will have to develop new ways to control financial flows. It would be convenient in the extreme if a small handful of exchanges accumulated a large portion of supply in PoS networks, and then submitted (as they ultimately must and will) to increasingly onerous regulation.

At this point, exchanges would simply become deputized just as banks are today into carrying out state policy, which could well extend to controlling public blockchains at the protocol layer. PoS networks explicitly grant control and discretion to the largest stakeholders, so at this point, the jig would be up. The state would be free to pursue its merry ambitions of deep financial deplatforming.

This isnt just fantasy. Already, the U.S. financial policy establishment is demanding that stablecoins obtain federal bank charters, which would bring issuers directly under the aegis of the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC) and the Federal Reserve. The exchanges, currently loosely regulated in the U.S. under a patchwork of state-by-state regulations, will likewise be asked to submit to federal regulation.

So, the exchange CEOs that lionize purportedly ecological PoS and dismiss the merits of PoW should be careful what they wish for. It may seem appealing on a surface level to control consensus from the seat of a large custodial exchange, but it is a power that is best spurned in the first place.

Public blockchains exist to eliminate centralized points of control and to remove the political constraints that are inherent in traditional finance. The combination of PoS and large quantities of coins held in regulated exchanges or banks is one that is very conducive to the state reasserting control over these nominally-decentralized systems. Unless you are eager to be deputized into a hall monitor for the new financial system, it is best to repudiate the influence that helming a PoS network would grant you.

This is a guest post by Nic Carter and Lucas Nuzzi. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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Bitcoins Proof Of Work Is Well Worth Its Fees - Bitcoin Magazine

It was a wild year in the markets, with mega-cap stocks doing great and speculative small-cap stocks not so great.

Heres a review of my predictions for 2021 and an update of my thoughts for next year. My predictions from a year ago are in italics.

1. Small-caps underperform, especially the most speculative small-cap stocks that are up huge.

Update December 2021: The small-cap index was up less than half as much as the S&P 500 SPX, +0.62% and other major indices. And the most speculative small-cap stocks are down 50% or more. One of one predictions is correct so far.

Prediction for 2022: Small-caps underperform again, but the good companies among those speculative stocks that have crashed are ripe for picking. Many will triple or quadruple in 2022.

2. FAANNG (FB, AAPL, AMZN, NFLX, NVDA, GOOG) trades in disparate ways, with FB, AAPL, GOOG having a good year, NVDA trades flattish, while AMZN and NFLX underperform.

Update December 2021: They all had a good year, and NVDA was up double. This prediction was clearly a miss.

Prediction for 2022: FB, NFLX outperform this year, NVDA is, yes, flattish, while AAPL, AMZN and GOOG are down a bit on the year.

3. Oil trades down to $25 at some point, spends most of the year in the high $30s.

Update December 2021: Haha, not even close. That said, oil was at only $40 when I wrote that. But it never looked back and spent most of the year at double my expectation.

Prediction for 2022: Oil trades down below $50 at some point, but spends most of the year in the $60s.

4. Real estate prices stabilize, as urban area prices stop falling while suburban and rural prices lose momentum.

Update December 2021: This prediction was correct.

Prediction for 2022: Real estate has a tough year as interest rates climb for home buyers and the frenzy of having a second or third or 10th Airbnb ABNB, +1.19% peters out.

5. Interest rates creep up all year and the cost to borrow money for businesses, homeowners and the U.S. government are up 50%-100% after bottoming at the current historic levels we are at.

Update December 2021: Rates are indeed up about 50% across the board for businesses, homeowners and on Treasurys too.

Prediction for 2022: Rates gradually continue to climb, but maybe just 20%-30% higher than current levels.

6. Chinas communist government continues to clamp down on its giant corporations, on Hong Kong and pushes the limits of its power on the geopolitical scale. Governments around the world will continue to feign dismay but will continue to do nothing about it but send out press releases about their dismay.

Update December 2021: Wow, this one turned out to be prescient as Chinas crackdown on its biggest corporations got harsher and China pushed the limits of its power on a geopolitical scale indeed. Meanwhile, the Olympics are going to be held in China and most governments around the world feign dismay.

Prediction for 2022: Chinas pendulum swings in the other direction, and the Chinese stock market has a good year. Still, nothing really fundamental changes, and the Chinese stock market will be in a good place to be shorted.

7. Biden and the Democrats pass some form of new tax code, which will include thousands of pages of new loopholes, subsidies and protections for giant corporations, banks and special interests, just like Trump and the Republicans did. Real tax rates will go down for most giant corporations, banks, special interest groups and people who make millions but will go up for the middle class and poor, just like they did under Trump and the Republicans. Republicans will pretend to hate the tax bill but it will pass anyway, while Democrats will pretend that it will do lots to help their base, just like how Democrats pretended to hate Trumps tax bill but it passed anyway while Republicans pretended that it did something to help their base.

Update December 2021: Republicans will say this isnt true and so will Democrats, but I think if you step back from the rhetoric, this is exactly what Build Back Better and all the rest of what our federal government does to pretend its doing something to help you or to help protect your rights.

Prediction for 2022: Partisan tensions continue to rise, fueled by angry headlines from both sides, and that makes it impossible to pass bills that are measured in multi-trillion-dollar increments. The election contentions get ratcheted up in the next elections and neither side will admit that the other side won. And I dont know how that ever resolves itself in a good way if partisan people keep growing their ranks and keep going down this contentious path but that wont be a 2022 thing.

8. Green stocks, including alternative energy and cannabis stocks, will pull back hard at some point early- to mid-2021 and then Bubble Up again into a giant unbelievably big bubble, which will crash soon after the Biden administration passes its aforementioned tax package, which will of course have shifted the billions of subsidies, welfare and protections that Republicans prefer for oil/natural gas companies to the alternative energy companies that Democrats prefer.

Update December 2021: Still playing out, as the Build Back Better package festers.

Prediction for 2022: Green stocks have terrible performance in 2022, and I eventually start sifting through the wreckage for the good ones.

9. Bitcoin trades in a stable bullish pattern for most of the year, ending somewhere around $38,739.92 per bitcoin or so.

Update December 2021: Bitcoin BTCUSD, +0.61% did trade in a bullish pattern for most of the year, but it quickly ran to the $60,000s and then fell back in half and is above what I thought was a pretty bullish price target for bitcoins year-end when it started out trading at $29,000. Heck, bitcoin could end up near my price target after all, given that theres still another 10 days of who-knows-what kind of action will play out.

Prediction for 2022: Bitcoin has a tough year but doesnt crash, ending up somewhere around $38,739.92 per bitcoin or so.

10. The Space Revolution gets more hyped as Virgin Galactic SPCE, -0.48% and other burgeoning Space companies pull off a succession of successful launches.

Update December 2021: Yes, the Space Revolution got more hyped, but space stocks are not doing well into year-end here.

Prediction for 2022: Space hype goes into hyperdrive as SpaceXs giant rocket ships get into orbit and start heading to the moon for 2023.

11. SpaceXs Starlink changes the world for its customers, especially those in rural areas who will suddenly have faster internet than their urban neighbors on old-fashioned cable/DSL or 5G.

Update December 2021: Still waiting turns out its hard to create a space communications network that changes the world in just a year or two. Might take another year or two, but its coming and I know it will change my own personal world to have low-latency, reliable high-bandwidth internet at my house instead of the unsteady, slow and expensive DSL we currently use.

Prediction for 2022: Starlink files for an IPO as 2022 closes and the valuation being bandied about is around $200 billion.

12. Im going to put a lot of pressure on myself to keep outperforming, to find the next Tesla TSLA, +5.76% at $50, to avoid painful losses, to be disciplined.

Update December 2021: Yup, same as it ever was.

Prediction for 2022: Same as it shall be.

Thanks and happy holidays from my family to yours.

Cody Willard is a columnist for MarketWatch and editor of theRevolution Investing newsletter. Willard or his investment firm may own, or plan to own, securities mentioned in this column.

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Here's what I got right and wrong on stocks, bitcoin and China this year and my predictions for 2022 - MarketWatch

Cryptocurrency has been touted as a new form of digital money not tied to government or a central bank and is therefore inherentlyfree from bias and unequal distribution. However, a recent studyby the National Bureau of Economic Research suggests that bitcoin has developed its own group of one-percenters who will likely reap most of the gains in coming years.

The NBER study found that the top 10,000 bitcoin investors own a combined 5 million bitcoins, or roughly $230 billion's worth at recent prices. Those figures mean that, even though bitcoin launched in 2009, "participation in bitcoin is still very skewed toward a few top players even at the end of 2020," said finance experts Igor Makarov and Antoinette Schoar, who wrote the study.

Those top players represent a mere 0.01% of all bitcoin holders and yet they control 27% of the digital currency, the Wall Street Journal reported. That compares to the old-fashion dollar, where the top 1% controlled 30% of total U.S. household wealth, according to Federal Reserve data.

Makarov and Schoar said in their study there's a "significant skewness in ownership" in bitcoin and that "implies that the majority of the gains from further adoption are likely to fall disproportionately to a small set of participants."

Bitcoin and other digital currencies have been at the center of many of this year's wildest financial gains and losses. Although considered a highly unstable form of money by most financial experts, bitcoinreached new highs earlier this year, in part because more companies are accepting it as a form of payment.

The messaging service WhatsApp this month began piloting a new feature it said allows U.S. users to send money without paying fees, using cryptocurrency. The new payment service marks yet another example of how digital currencies are becoming more accepted in themainstream U.S. financial scene.

As their popularity rises, digital currencies have been the target of many multimillion dollar scams in recent history. Between January and July, crypto accounted for $681 million in scam losses, according to a report from cryptocurrency intelligence firm CipherTrace.

Despite crypto's growing popularity, relatively few people own a large chunk of bitcoin, making the digital currency much more vulnerable to large price swings from week to week, Makarov and Schoar said in their study. Makarov and Schoar collected data from bitcoin's inception 13 years ago to the end of 2020, when there were roughly 15 million bitcoin in circulation. There are 19 million bitcoins currently in circulation, according to Blockchain.comdata. The maximum number of bitcoins that can ever exist is 21 million.

The study does not reveal the names of people who own the most bitcoin.

Still, Makarov and Schoar's work adds credibility to the lists floating around the internet of investors with the highest crypto fortunes. Matthew Roszak, chairman of blockchain company Bloq, has a crypto portfolio worth more than $1.5 billion, Forbes reported in April. The Winklevoss twins Cameron and Tyler also reportedly became billionaires from investing in bitcoin.

"Our results suggest that despite the significant attention that bitcoin has received over the last few years, the bitcoin ecosystem is still dominated by large and concentrated players, be it large miners, Bitcoin holders or exchanges," Makarov and Schoar concluded.

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Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.

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Bitcoin has its own 1% who control outsized share of wealth - CBS News