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From Promises Enforced by Law to Promises Enforced by Code
Blockchains are the first technology ever invented that gives software systems the ability — without trusted intermediaries — to make highly credible promises. These promises are enforced by a novel combination of technological innovations spanning peer-to-peer networking, encryption, and consensus mechanisms.
The first blockchain was created in 2009 by Satoshi Nakamoto as a solution to the long-standing problem of how to create a digital currency that operates outside of the control of banks and governments. This solution was named Bitcoin, and it successfully coordinated the establishment and maintenance of a new, independent system of money that is native to the internet. Bitcoin works and has grown magnificently because it makes several very important promises that are deemed highly credible by the individuals and businesses who use it.
The invention of blockchains represents a paradigm shift because the institutions that coordinate resources and activities in human society are fundamentally built on promises.
Take for instance the banking system, which we fund in exchange for promises to help us save and invest, operate businesses, and manage financial risks; or the legal system, which we fund in exchange for a promise to enforce a set of societally and economically beneficial rules; or the institution of the US Dollar, which we fund in exchange for promises to facilitate trade and maintain economic stability.
With blockchains, we can represent many of these promises in software. But why would we want to do that?
Today’s Institutions Will Not Scale for the Internet Age
The aforementioned institutions (along with many others) have pushed society forward immeasurably and have greatly improved our standard of living, but they have critical limitations that have only become clear over the last several decades — namely, in an increasingly global world, their promises don’t extend across borders, and too often those promises are broken altogether, in ways that irreversibly destroy trust and hinder progress.
This insight leads to the understanding that blockchains, by providing a means of making stronger promises, are an institutional innovation that has arrived at a most opportune time. They are a technology that enables us to architect new types of institutions that are purpose-built for a global, internet-connected society.
The World Needs Scalable Institutions
As we continue to transition from life driven by analog institutions and fragmented across national boundaries, to an internet-based, digital-first society, the need for globally scalable institutions has never been greater.
The internet sector made up over 10% of US GDP in 2018 and grew 9 times faster than the US economy as a whole from 2012 to 2018. It is likely that the GDP of the Internet will far surpass that of any individual nation-state within the next decade or two.
This underscores the potential gravity of the opportunity presented by blockchains: in a world defined by instant, global communication and global markets, what types of institutions will people use to coordinate resources and economic activities?
Bitcoin Exposed Latent Demand for New Institutions
The growth of Bitcoin and the ecosystem surrounding it serves as evidence that blockchain-based institutions have the potential to fill in the gaps left by our analog institutions and allow the internet economy to thrive. In its first 10 years of life, Bitcoin has facilitated over $2 trillion worth of money transfers and has spawned one of the most liquid, global marketplaces in the world.
On the back of its growth, some of the world’s fastest growing startups in history have flourished — the crypto brokerage Coinbase grew from 0 accounts to more than 30 million in 5 years, vastly outpacing the reach of traditional brokerages, and the crypto exchange Binance generated over $1 billion in cumulative profit less than 3 years after launching.
These are not merely vanity stats; the first use case of blockchain, internet-native money, offers tangible benefits that no other form of money has ever been able to offer. In particular, Bitcoin is the first form of money that is resistant to inflation, censorship, and involuntary seizure, and it is accessible to anyone in the world with an internet connection.
These properties make it attractive to a number of different parties:
1) to investors, as a form of digital gold;
2) to people that reside in countries with weak or restrictive monetary systems, as a means of participating in the global economy; and
3) to businesses that facilitate large amounts of cross-border trade, as a cheap and efficient means of settlement.
The use case for money alone has a total addressable market in the tens of trillions, and the growth of internet-native money will propel blockchain startups to a much greater scale than they have already achieved.
From Money to Other Institutions
Outside of money, a generation of entrepreneurs are asking what other blockchain-based institutions might be able to flourish in the internet age, and there are exciting early developments spanning the fields of financial services, identity, cloud computing, social networks, and more. In financial services, new institutions are being created to fundamentally rethink how lending, trading, investing, and insurance could be architected for the internet economy.
The promise of these institutions is to offer similar benefits to Bitcoin: highly secure, tamper-proof services that mitigate counterparty risk and are accessible to all people with an internet connection.
These new institutions are not replacements for our analog institutions. Rather, they augment their capabilities and extend the places that we are able to do business with the comfort that promises will be delivered on. Simply put, these developments have the potential to expand the size of the internet economy by orders of magnitude.
Where Are We Today?
Today we’re at a critical juncture in this technology’s arc of evolution. Only in the last several years has it become clear that Bitcoin has been a successful experiment, but the tools to make it widely usable have not yet reached maturity, making apt an analogy to the internet before Netscape.
However, all future blockchain-based applications benefit from the infrastructure build-out that Bitcoin has catalyzed, and vice versa. This is particularly relevant in light of major new entrants to the space both from the financial world (Fidelity, Square), Big Tech (Facebook/Libra) and governments (China’s central bank digital currency), who will contribute to this infrastructure build-out and may ultimately serve as massive on-ramps to a blockchain-powered digital economy.
If Bitcoin’s growth so far is any indication of the potential of internet-centric institutional innovation, the blockchain space is positioned to offer many attractive investment opportunities with asymmetric return profiles, both in new institutions directly and in the ecosystems that form around them.
Ethereum DEX Volumes Drop As DeFi Incentives Slowly Dry Up
The Ethereum DEX volumes drop as the Defi incentives dry up but it’s not all bad news as the price of ETH increased and the locked value in DeFi hasn’t been greater. In our ethereum news today, we are reading more on the analysis.
The Ethereum DEX volumes dropped over the past month and one analyst believes it’s because DeFi incentives dropped. However, prices increased. The volumes on the ETH-based decentralized exchanges dropped off a cliff this month and the trading volume got down by 41% over the most month according to the data from Dune Analytics.
The weekly trading on decentralized exchanges hit a little bit over $8 billion but later on reached a monthly high of $6 billion on September 14. The weekly trading volumes have dropped significantly to under $3 billion as the most recent data from the Dune Analytics platform shows. This marks a decrease of more than 62% since the summer peak. Decentralized exchanges are non-custodial crypto exchanges as the protocols don’t hold custody over your crypto. On some platforms like Uniswap, it’s possible to list any tokens so regulators can’t shut it down.
DEXs boomed in popularity this year during the defi boom, starting at the end of June when people invested billions of dollars into DeFi lending protocols and exchanges to take advantage of the high incentives that they offered to users with more than 1000% yields some of the time. The boom was not meant to last so to keep the magic going, protocols offered more incentives to entice people to use their platforms but many didn’t stick around once the protocol ran out of money. Even trading volume on decentralized exchange Uniswap dropped as well despite the increasing dominance over the market. Johnson Xu, the director of research at Huobi said:
“I believe DEX volume is highly correlated with the DeFi market in general.”
With the decline in trading volumes, Xu said that there are other factors at play but that “one of the main reasons is that people are not earning as much yield right now just because these crazy yields are not sustainable and often come with risks.” He continued:
“The market is now returning to a more rational level, thus the lower DEX trading volume. “When the market cools down a little, these yields will be adjusted accordingly to reflect market consolidation in a healthy way.”
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Data firm: OKEx saw $113m in Bitcoin outflows just before suspending withdraws
The crypto industry was struck with another unexpected development last night that sent shockwaves throughout the market and caused Bitcoin’s price to reel lower.
Bitcoin’s sell-side pressure began growing earlier today after news broke of the OKEx not being able to process withdraws due to the founder being arrested by Chinese authorities.
He is the sole holder of the key required to process withdraw requests, which must be regularly inputted for withdraw requests to continue being processed on schedule.
His arrest has sparked questions as to why the exchange structured their multi-sig withdraw system in such a way that there is a single point of failure, and has venerated those who believe that decentralized exchanges are superior to centralized ones.
Interestingly, data from Glassnode also reveals that significant sums of BTC were moved off the platform in the 48 hours before withdraws were suspended.
OKEx Bitcoin and crypto withdraws suspended due to Chinese police investigation
For reasons still unknown, a Chinese police investigation targeted the popular cryptocurrency exchange serving individuals throughout Asia, with the founder getting caught in the crosshairs.
It remains unclear as to when the founder was arrested, but it does appear that there was a flurry of Bitcoin being moved out of the exchange in the 48 hours prior to the recent suspension.
“Prior to the suspension of cryptocurrency withdrawals from OKEx, we observed large BTC outflows from the exchange. According to our data, a total of 10,000 BTC (~$113 million) were withdrawn in two large batches in the past 48h.”
OKEx founder’s arrest highlights serious centralization flaw
Dovey Wan – a founding partner at Primitive Crypto – mused this recent imbroglio, noting that it strikes her as odd that a major crypto exchange holding billions worth of Bitcoin and other digital assets has such a single point of failure.
“Something is weird. If multi-sig, then how come the police hold majority of the signers under custody all at once? Usually signers spread out across different geo locations to avoid such case I suppose? Hard to imagine how such single point of failure occurs.”
It does seem as though there’s more to this story that has yet to be revealed, but in the meanwhile, over 200,000 Bitcoin – as well as tons of other digital assets – all remain in limbo.
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Bitcoin Price Prediction: BTC/USD Struggles to Gain Momentum as the Price Hits $11,641
Bitcoin (BTC) Price Prediction – October 15
As reveals by the daily chart, the Bitcoin market has been struggling to maintain its momentum as its buy-side pressure wanes.
BTC/USD Long-term Trend: Bullish (Daily Chart)
Resistance Levels: $12,100, $12,300, $12,500
Support Levels: $11,000, $10,800, $10,600
BTC/USD bulls may slowly come back into action after a minor battering from the bears in the last two days. If this happens, then the expectation of more recoveries could turn out to be true. Today, BTC/USD is seen trading at $11,549 after soaring to $11,641. The coin then pulled back to where it is trading currently and may continue to head downwards if the bears step back into the market.
Where is BTC Price Going Next?
The market is deciding around $11,549 above the 9-day and 21-day moving averages, where the buyers and sellers are anticipating for a clear breakout or breakdown. Meanwhile, the $11,700 and $11,900 levels may further surface as the key resistances should the $7,600 level holds. However, a strong bullish spike may take the price to $12,100, $12,300, and $12,500 levels.
Moreover, if the market makes a quick turn to the south, the BTC/USD price may likely drop to $11,200, and should this support fails to contain the sell-off, traders may see a further roll back to $11,000, $10,800, and critically $10,600. Meanwhile, the RSI (14) is suggesting an upward movement for the coin.
BTC/USD Medium – Term Trend: Ranging (4H Chart)
The 4-hour chart for BTC is still looking bullish, but the market has been showing a sign of weakness since the daily opening. However, the intraday trading is looking bullish; following the recent rebound at $11,263 which is now a key support level. The next key support levels are $11,300, $11,100, and $10,900.
However, considering the recent sharp rebound, the Bitcoin price may re-enter the bullish rally to $11,600 resistance. A climb above the mentioned resistance may further push BTC price to $11,800, $12,000, and $12,200 resistance levels. As it appeared now, it seems the bears may likely return into the market as the RSI (14) may cross below the 60-level and could resume a downward direction.
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