Daily Crypto, Finance and Tech News Summary – May 31, 2023

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Welcome, and thank you for being part of the MyZucoins community! Dive into our daily crypto, finance and tech news summary to stay in the know.

People reading instructions on a big advertisement in Beijing city centre, crowds of people flocking to read it, cinematic, oil painting

Beijing Releases White Paper For Web3 Innovation and Development

Beijing, in an audacious move towards the future, has released the “Web3 Innovation and Development White Paper (2023)”, boldly declaring web3 technology as the “inevitable trend for future Internet industry development”. The paper, released by the Beijing Municipal Science & Technology Commission, signals Beijing’s resolve to solidify its position as a global hub for digital economy innovation. To galvanise this endeavour, the Chaoyang district plans to inject a minimum of 100 million yuan (approx. $14 million) annually until 2025 into the initiative, painting a picture of a confident Beijing doubling down on Web3, against the backdrop of Silicon Valley’s Chinese counterpart, Zhongguancun.

Interestingly, the timing of the white paper’s release coincides with the impending enforcement of Hong Kong’s new crypto regulations on June 1, as observed by Binance CEO, Changpeng Zhao. This regulatory shift in Hong Kong, which now allows retail investors to trade cryptocurrencies, could potentially turn it into a magnet for crypto businesses. We covered this here.

China’s nuanced stance towards the crypto industry is of note. On the one hand, it has officially forbidden the use of cryptocurrencies since 2021. On the other, its recent overt endorsement of Web3 technology suggests a growing receptivity to the industry. State broadcaster China Central Television (CCTV) further stirred the pot by airing a segment featuring the Bitcoin logo and a Bitcoin ATM, although the segment was subsequently taken down.

What emerges is a bold and calculated narrative from Beijing. Amidst global apprehensions around crypto, Beijing chooses to not only embrace but champion the Web3 era. This move – a mixture of policy, technology, and a dash of opportunism – encapsulates China’s grand digital ambition and the formidable stance it is willing to take in shaping the industry’s future. Read more here and here.

Beijing’s white paper, and its broader implications, could serve as a springboard for emerging crypto products in the region. The interplay of investment opportunities, favourable regulatory shifts and the potential for reputational enhancement form a potent mix that could catalyse their trajectory into mainstream adoption and use.

Lastly, this open stance from a major world player like China mitigates some of the reputational risks associated with crypto products. Beijing’s endorsement might spur other jurisdictions to reassess their stance on crypto, potentially leading to continued favourability in the global regulatory landscape for the growing crypto industry.

Why DeFi is Broken and How to Fix It

The world of decentralised financial (DeFi) is facing severe underlying security issues. Over $3.8 billion was stolen via crypto hacks in 2022 alone, questioning the suitability of DeFi for mainstream adoption. The article author’s work at the company “Nascent” has been tackling this concern by putting a strong emphasis on security, though they admit more needs to be done. In order to make DeFi universally accessible, a significant rethinking of how protocols are designed and secured is required.

The author proposes the idea of “oracle-free protocols” as a robust and secure architecture for DeFi. Oracles in DeFi are places where a source of external, real-world truth are retrieved. For example, you’d get the weather from a weather station’s sensor in some location. This is an “oracle”, in this sense. The author outlines some recommendations, such as having “zero external dependencies”. Eliminating these dependencies, such as governance, upgradeability, and oracles, would inherently make these protocols more robust against potential exploits.

The author also covers some crypto lending protocols that attempt to improve on this too, including new “oracle-free” protocols like Ajna, Ethereum Credit Guild, and Metastreet’s Automated Tranche Maker. These platforms allow lenders to decide the level of collateral they require from borrowers without the intervention of a single oracle dictating “true” asset prices. Thus, each individual lender maintains responsibility over the solvency of their own loan, removing the concept of “bad debt” needing to be absorbed by a treasury or spread across lenders.

Building DeFi on top of such truth-based primitives might be a key to ensuring its strong future. These approaches provide more robust marketplaces with less attack surface. Moreover, it adds to the robustness of the system by enabling diversity and modularity across all layers. While the path of monolithic protocols has facilitated rapid growth, our priority should shift towards prioritising security and resilience. This won’t be a mere improvement, but rather a leap towards a 50x better future of DeFi. Read more here.

This is a great opportunity for up and coming products and protocols to solve these issues. It proves that while the mainstream crypto news often hypes up exciting developments in the industry, there is a long road of tough problems that need hard solutions and ground-up rethinks. This is something the team from Zucoins have spent a lot of time considering when it comes to traditional blockchains’ shortfalls and even some areas of cross-chain safety.

They’ve done it by, in many cases, removing the need for them. Having a very extendable base layer 1, in the Splitchain protocol, goes a long way towards this. If a system’s foundation is flexible enough, there would be less need for alternative solutions and layers. Even though cross-chain communication bridges to other cryptocurrencies are still required, one idea is they could be wrapped between Splitchain’s two-factor transaction process, increasing cross-chain security for transaction completion.

Bitcoin Transaction Fee Revenue Soared This Month Thanks to Ordinal NFTs

This May, Bitcoin experienced a striking surge in transaction fee revenue, reaching levels unseen in two years. Thanks to the rising trend of Bitcoin NFTs, particularly through a method known as Ordinals that links on-chain artworks to satoshis—the smallest denomination of Bitcoin—the revenue from transaction fees hit 14.3% of mining revenue by May 29th. This represents an over 11% increase from April, showcasing the most significant growth since April 2021.

With Ethereum traditionally dominating the NFT space, Bitcoin has emerged as a robust contender in recent weeks. Bitcoin’s NFT volume has witnessed significant acceleration, with Ordinals driving a substantial part of the momentum. It’s a fascinating pivot that showcases the adaptability of the Bitcoin network and the innovative spirit of its users. We covered Bitcoin’s Ordinals a few times, most recently here.

Transaction traffic for Bitcoin in May soared to a record monthly high of 14.9 million. Concurrently, overall monthly mining revenue approached the $840 million mark, the highest level since last May. While the raw transaction volume and the increased mining revenue are notable, the deeper significance lies in the role of NFTs and the creative use of satoshis.

The prominence of Ordinals in this upsurge indicates a compelling shift in the Bitcoin ecosystem. It suggests a potential diversification of Bitcoin applications beyond the usual financial transactions, breathing new life into the network. As this trend continues, the Bitcoin landscape could fundamentally transform, opening up unexplored avenues for digital art and blockchain utility. Read more here, alternative link here.

These factors have powered a resurgence in Bitcoin’s mining revenue, which has been suffering in recent times as network fees rose, but the earned Bitcoin coin price hadn’t reached new highs, confirming once again that innovative applications are an essential catalyst for growth in the cryptocurrency sector.

The rise of NFTs in Bitcoin proves that the industry’s source of focus can very quickly shift when a new preferable solution joins the space. This is great news for Zucoins, as it shows the NFT world is open to accepting new solutions to long-standing problems, if they make things more useful, simpler, easier and faster.


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All the best,
Peter
MyZucoins