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.
Well-known financial firms, including Standard Chartered, Nomura, and Charles Schwab, are entering the crypto market by creating or supporting new companies. They are betting that despite recent market turbulence, fund managers will favour trusted, regulated institutions for trading and safekeeping of digital currencies such as Bitcoin and Ether. This move is inspired by the impressive rise in the value of popular cryptocurrencies this year.
These institutions aim to offer a safer, more familiar alternative to existing crypto exchanges such as Binance and Coinbase, combining their traditional finance expertise and clean reputations. A key focus will be offering custody services, which involve securely storing digital assets to protect them from theft or hacking.
However, these newcomers face the challenge of breaking the dominance of established crypto exchanges, which are essential sources of liquidity. Traditional finance firms are structuring their businesses along traditional lines, such as separating trading and custody services, to reduce risk and conflicts of interest.
Experts predict that a two-tier structure may emerge as the crypto sector develops, with a shallow retail market and a deeper, more competitively priced institutional market. It’s expected that Binance could continue to dominate the retail industry, with traditional finance institutions potentially commanding a significant share of the institutional market. Read more here.
Established financial institutions entering into the cryptocurrency market is a positive development that could bring more legitimacy and stability to this emerging asset class, there are still many uncertainties surrounding how these players will fare against existing incumbents. What’s more, these institutions will undoubtedly play a stronger role in stalled US crypto regulations.
Interesting Hybrid Rollups: Attempt for Scalability and Security on Ethereum, but Not Without Drawbacks and How Zucoins Differs
Hybrid rollups, a novel solution combining two different architectures, may offer the answer to Ethereum’s scalability and security concerns. The concept merges optimistic rollups, which process transactions off-chain to reduce network congestion and lower costs, with zero-knowledge proofs (“zkproofs”) that offer security and faster transaction finality. This innovative technology is capable of decreasing transaction completion time from seven days to just four hours without needing additional data processing.
Developed by Ethereum-based layer 2 solution provider Metis, hybrid rollups promise to resolve the blockchain ‘trilemma’, maintaining decentralisation while enhancing scalability and security. This solution’s compatibility with the Ethereum Virtual Machine (EVM) makes it a user-friendly platform for developers and offers users the freedom to withdraw funds from layer-2 protocols without delay.
By offering enhanced scalability and security, hybrid rollups aim to stimulate the widespread adoption of blockchain technology and aid the growth of decentralised autonomous companies (DACs). Optimistic rollups base their operation on the presumption of all transactions being valid, offering a seven-day window to prevent fraud. Read more here.
Techniques like ‘hybrid rollups’ aim to enhance Ethereum’s scalability and security but essentially serve as ‘bandaid fixes’ to the underlying problems in foundational (layer 1) blockchain networks. In contrast, Zucoin’s Splitchain network uses a fundamentally different solution built from the ground up. It directly addresses the core challenges of blockchain technology, focusing on scalability, security, and efficiency without the need for extra layer two implementations.
Layer 2 solutions like rollups and zkproofs often have a fundamental problem. If the third-party company managing this layer 2 extension goes bust, there’s a lot of transaction data that becomes absent from the network. This is due to how many of these layer 2 solutions operate. In order to reduce costs in the underlying Ethereum layer 1 network, the second layer (hence “layer 2”), bundles and combines transactions together (in various ways—here it’s via rollups and zkproofs), sending less data back to the slower and more congested underlying layer 1 network. Many times, this means the missing data has to be managed by the layer 2 company, responsible for managing extra data. This is great, so long as that company continues to exist.
The Zucoin wallet app, on the other hand, stores your entire transaction history on your device. Your wallet user data doesn’t sit on servers managed by a company. The company only manages the app itself, so you can download and use it. Ways to further improve this have been discussed as well. There’ll possibly be a self hosted option (when open sourced) and a cut-down version of the app that may not need to be hosted at all (very experimental). Regarding what data is on the Splitchain network itself, it’s essentially a caching network that usually just keeps copies of your most recent data. This is so other peers can cross-validate what you claim you own (as you can’t trust anything in isolation). It’s all pretty clever and hidden behind the simple Zucoins wallet app.
Splitchain aims to provide a comprehensive, long-term solution to the challenges faced by blockchain networks, with capabilities and internal milestones being continually checked off. The Zucoins team is focused on driving innovation in the cryptocurrency and digital asset sectors, shaping the growth of the digital economy.
What did you think of this newsletter? Reply to send me feedback on what you liked or want to see featured more. There’s more coming, so stay tuned.
All the best,