In this issue
- Bitcoin halving fever breaks
- Famed investor Tim Draper predicts China’s DCEP will flop
- NEAR Protocol: new bogeyman against Ethereum
- Free Telegram Open Network
- TRON gets $2 million in Covid aid for small struggling businesses
- In China: DCEP pilots in 4 cities, new tech talent database, Bitmain’s civil war
- This week’s VC highlight: another endorsement for Ripple
From the Editor’s Desk
The week started off celebrating mothers around the world. It is a reminder of how frozen businesses, lives and economies still rest on the shoulders of mothers and their co-pilots, whomever they are… when the world wakes from its forced slumber as it hopes to get back to health. And we are beginning to see that the real world is catching up to the true value of cryptocurrency. The Current Forkast for bitcoin is hot.
This past week, Paul Tudor Jones, the legendary hedge fund manager and possibly one of the best macroeconomic traders in the world, is taken with bitcoin as a store of value and has put almost 2% of his assets in the cryptocurrency. This is a big deal. While unprecedented stimulus efforts around the world continue to try to support a global economy made floorless by Covid-19, bitcoin just halved again. The price reaction to the halving was muted; as in true market form, it was already priced in if you take a look at the swings and the volatility we witnessed ahead of the event. Those are bets made by bitcoin speculators. But as the world starts to realize traditional fiat markets don’t match the weakening fundamentals of the global economy, we will likely see more hedges made by those with deeper pockets than most of us.
Meanwhile, halfway around the world, in China, efforts are intensifying over its own digital currency. Li Lihui, a former president of the People’s Bank of China (China’s central bank), voiced concerns about a future global digital currency with “no clear country label” and dampened the vision to internationalize the RMB.
Add this up to institutional and legacy systems adopting cryptocurrency and digital asset thinking that will determine the post-Covid #NewWorldOrder. While millions of people around the world remain shelter-in-place and face real life consequences of wilting economies, there are forces in motion right now aiming to determine what economies will look like when things resume. Blockchain is leading that narrative.
Until the next time,
Founder and Editor-in-Chief
1. Bitcoin halving elicits yawns
By the numbers: Bitcoin halving timer — over 5,000% increase in Google search volume.
The third bitcoin halving officially took place on May 12, dropping the mining reward to 6.25 BTC. Although the community was on the high after bitcoin’s $35 billion surge just last week, this past weekend, at one point, saw bitcoin prices plummet by $1,500 in just under an hour.
- Bitcoin’s nosedive was accompanied by a Coinbase outage. The community pointed out the exchange’s frequent underperformance in times of dramatic movements.
- Rachel Siegel of @CryptoFinally: “How many times do we have to say take your #Bitcoin off of coinbase if you want to have access to it. Please I urge you to move to non custodial wallets. This is not the first time Coinbase has gone down & it surely will not be the last.”
Forkast.Insights | What does it mean?
Coinbase downtime aside, it turns out the real event surrounding the bitcoin halving wasn’t the actual halving itself, but rather the lead up to it.
In the days and weeks prior to the halving, the price of BTC, and as a result many other crypto assets, was in for a topsy-turvy wild ride amplified by the aggressive trading of futures. As mentioned on a prior edition of the Current Forkast, while the price of crypto initially boomed during the first week of May, shorts and leveraged tokens for a bear market were in full force and having major price rallies, signifying that the market believed the BTC price rally was temporary.
And sure enough, the market was right. There hasn’t been a major price rally post-halving (because of future perceived scarcity). Bitcoin seems very comfortable below the $9,000 mark, and the markets seem to agree: on FTX, volatility tokens that represent future positive movement have negligible price gains, signifying the market will be standing still whereas their opposite counterparts, which symbolize a negative gain, have major price declines — meaning the market doesn’t think the price will go that way either.
Pre-halving, there was concern that one of the other key metrics, hash rate, would also drop precariously as the lower block reward would not make mining economical for many. But that also hasn’t happened, as a number of mining companies had already made the upgrade to next-generation machines capable of maintaining profitability in a market environment with a lesser reward. As CoinTelegraph reported, Riot Blockchain, the largest mining firm in the U.S., has doubled down on its purchases of new mining machines, and it expects to have more than 2,000 total units operational by Q3.
So, the halving didn’t bring a big bull market (nor a bear market!) and bitcoin volatility is on the decline. Was this all really much ado about nothing?
2. Tim Draper gives thumbs down to China’s new digital currency
Let’s take a quick break from our regularly scheduled programming and take a look at a recent interview that Forkast.News scored with Tim Draper. Chatting with Forkast.News editor-in-chief Angie Lau on the Word on the Block podcast, the billionaire venture capitalist shared his views on a proposed digital dollar for the U.S. and China’s DCEP, which is being trialled right now. His prediction? Each will flop, and flop badly.
“Both of them will bomb, and the reason is; the whole point of cryptocurrency is that, you look at bitcoin — it’s decentralized, it’s open, it’s global, it’s transparent — it is not subject to political whims or the idea that somebody can just print two trillion of them. And if you digitize the dollar or the renminbi, you are still stuck with most of the problems that you have with current political currency, with fiat currency,” Draper said. “I wouldn’t want to take Chinese digital currency anymore than I’d want to take renminbi.”
Draper also doubled down on his belief that bitcoin would hit $250,000 by 2022 or the beginning of 2023, and negated the risk of Salmonella and a litany of other bacterial nasties that exist in raw eggs.
To hear more, and to find out why Draper is so bullish on bitcoin, check out the latest Forkast.News episode of Word on the Block.
3. NEAR Protocol: the next Ethereum killer?
By the numbers: NEAR Protocol — over 5,000% increase in Google search volume.
The sharding race intensifies, and NEAR is the new “Ethereum killer.” Closing a $21.6 million funding round led by Andreessen Horowitz, NEAR’s public proof-of-stake (PoS) blockchain is built using Nightshade and Doomslug, a new consensus mechanism.
- NEAR, a PoS network looking to improve scalability through sharding, also launched its mainnet long before Ethereum 2.0.
- NEAR calls its launch of mainnet as the first phase of NEAR becoming the “first fully sharded, fully operational and operational PoS blockchain platform to run [on] an open MainNet.”
Forkast.Insights | What does it mean?
The race for enterprise adoption of blockchain is also the race to replace Ethereum in its current iteration. This is coming in multiple formats, with new blockchains and also extensive upgrades to Ethereum itself. It could be that Ethereum 2.0 takes on this mantle, but it could also be that a new platform such as NEAR or Quorum is able to pull this off. Ethereum’s long-in-the-tooth Etherum virtual machine, or EVM, needs to be replaced to allow the platform to properly scale, and instead of patiently waiting for this virtual heart surgery to finish, the community might migrate elsewhere in the meantime.
NEAR, a proof-of-stake network, uses a consensus mechanism called Doomslug. As the foundation explains it, this is similar to sharding and “splits the network into multiple pieces so that the computation is done in parallel. Parallelism radically increases throughput and allows the network to scale up as the number of nodes on it increases.” By making block producers work in parallel instead of in a linear fashion, this creates a dramatically more efficient network and destroys the scaling problem that limits Etherum from broader adoption.
Although the a16z investment is a $21.6 million endorsement of NEAR, this isn’t the first platform to brand itself as an Ethereum killer. EOS aggressively marketed itself as such, and in 2018 it became the fifth-biggest blockchain with a $7 billion market cap thanks to a successful ICO. But did users migrate? No. According to CoinMarketCap, EOS is now the ninth biggest blockchain by market cap and its market value has slipped to $2 billion from $7 billion since its launch. State of the dApps reports that there are only four dApps on the platform with over 1,000 users, while Ethereum has 11. Neither metric is remarkably impressive, but it shows that creating an “Ethereum killer” is going to take some time. Basing this solely on a dApp library isn’t going to drive value for the network, as users just aren’t that interested — yet.
4. Free Telegram Open Network
By the numbers: Free TON blockchain — 1,650% increase in Google search volume.
The Free TON community has launched its own and free version of the Telegram Open Network (TON). During a Zoom conference session with TON Labs, it was clarified that the Free TON blockchain did not fork from TON blockchain, as there is “no network to fork.”
- Free TON’s announcement comes after Telegram announced the delay of launch of its original TON and Gram token to April of 2021.
- Telegram has also agreed to hand information, including bank records, to the Securities and Exchange Commission for its legal battles over its $1.7 billion token sales in 2018.
Forkast.Insights | What does it mean?
Tired of waiting for Telegram and the Securities and Exchange Commission to resolve their differences, developers have launched their own version of the promised Telegram blockchain network.
When Telegram decided to pursue an ICO and subsequent launch of a blockchain network, developers had two things in mind: first, use blockchain and the ICO to raise capital; second, to use the underlying blockchain technology to monetize the platform with things like P2P payments and in-app purchases.
The potential for the latter is enormous. Telegram reported in April that it had 400 million monthly active users. Snapchat, with half the reported users of Telegram, generates $462 million in revenue per quarter on the sales of things like in-app stickers and augmented reality (AR) filters. LINE, with 164 million active users mostly based in Asia, takes in approximately $2 billion a year with a similar business model. In short: monetizing Telegram can turn out to be very lucrative, and the revenue generated — denominated in the Gram cryptocurrency via the TON blockchain network — would give the eponymous platform liquidity and users.
But it can’t happen quite yet. The SEC has blocked the launch of TON over its choice to do an ICO for fundraising. However, if Free TON could start monetizing the TON network while staying in the regulatory clear, it would prove to be a promising proof of concept for the project.
The big question is, why didn’t Telegram just do a security token offering (STO)? An STO would have a legal green light. Equity crowdfunding platforms are another option too. Telegram rival KIK raised money via an ICO, and that also earned the SEC’s ire. Neither of these platforms are vaporware, and there are other ways to raise money aside from token sales on shaky regulatory grounds.
5. TRON gets Covid aid for struggling small businesses
By the numbers: TRON — 800% increase in Google search volume.
According to controversial TRON CEO Justin Sun, TRON — a company worth $980 million per CoinMarketCap — has been rewarded $2 million in coronavirus relief aid by the U.S. government. The company’s WeChat post was translated and shared on Twitter by Sino Global Capital CEO Matthew Graham.
- Last month, TRON was one of the major exchanges hit with the “Red Wedding” lawsuits, for alleged sales of unregistered cryptocurrencies. TRON was one of 42 defendants in 16 countries hit by 11 class action lawsuits.
- Sun also announced that his new stablecoin, JUST token, in a flash sale sold out in 4 minutes and 26 seconds on Poloniex, as the first digital asset sold on LaunchBase. However, there are hundreds of responses to Justin Sun’s Tweet, numerous users detailing how no one was able to purchase, nor access the Poloniex server.
Forkast.Insights | What does it mean?
Controversial take: TRON did nothing wrong.
The Paycheck Protection Program (PPP) loan scheme run by the Small Business Administration provides a loan of up to 2.5 times a firm’s monthly payroll for a period of eight weeks in order to keep U.S.-based employees on the books during the worst of the Covid-19 crisis. At the end of the eight-week period, should the firm have kept the same headcount, the loan is forgiven (some of the funds can also be used for overhead).
While it might seem incongruous that TRON — whose braggadocious founder shelled out $4.56 million USD last year for a charity lunch with Warren Buffett — receives Covid relief aid intended to help struggling small businesses, the fact is the company was probably just taking advantage of what is provided by a poorly written law. Foreign-controlled companies are eligible for the funds, per an update from the SBA, provided the funds are used to cover the payroll of U.S.-based employees. Although TRON has a market cap of $980 million per CoinMarketCap, that’s crypto math. It’s not the same thing as profit nor revenue as it’s solely based on the current value of the token, and the vulgarities of the crypto market could change this rapidly. There’s no clause in the CARES Act — which provided funds for the PPP — that excludes cryptocurrency companies, nor companies with a hugely unpopular CEO with a penchant for throwing around money. By the letter of the law, TRON’s operations seemingly fit the category of a small business by headcount and revenue.
Money was available. TRON’s U.S. arm was likely eligible, and so they got the money. It’s probably as simple as that.
6. In China: DCEP pilots in 4 cities, new tech talent database, and Bitmain’s civil war
People.cn, the digital version of People’s Daily, the mouthpiece of China’s Communist Party, introduces the central bank’s new digital currency, known as DCEP (“Digital Currency Electronic Payment”) and provides details of its application scenarios and characteristics for the first time. DCEP is rolling out for trial use Shenzhen, Suzhou, Xiong’an New Area, Chengdu, and some parts of the Winter Olympic Games in Beijing, according to the Digital Currency Research Institution, a unit of the People’s Bank of China (PBoC).
- This announcement is the most official announcement of DCEP since rumors of DCEP’s imminent introduction began circulating a few weeks ago.
- It emphasized that DCEP would be more convenient for people to use for payments, and also that it would reduce money laundering and tax-dodging.
- 510 news publications have covered DCEP in the past week, and some media are reporting that trials are starting this month in Shenzhen, Suzhou, Xiong’an and Chengdu. Half of the coverage is positive while 10% of the coverage expressed negative sentiments. The main concern is that a DCEP would be legal tender and that no one would be allowed to refuse it.
Forkast.Insights | What does it mean?
The launch of DCEP is coming closer, with testing accelerating across the country.
With the trade wars of 2019 evolving into heated rhetoric about the origins of Covid-19, China’s internal thinking is that efforts to develop its DCEP need to be accelerated so that it can be in use at the ground level alongside efforts to repair the global economy. In addition, there’s an internal sense of urgency about the threat of “supranational digital currencies” that are not tied to a central bank but still denominated in USD.
In a recent streamed seminar, Li Lihui, a former president of the People’s Bank of China, predicted that there will be a “globally circulating supranational digital currency that may no longer have a clear country label,” which will stymie the internationalization of the RMB. Although Libra will likely never operate within China, Facebook is popular within most of China’s regional trading partners, and thus a market will likely follow. A “China-led, global, digital currency implementation plan,” as Li put it, won’t be possible when the current balance of payments still favors the USD by a long shot, and neighboring countries that support the USD hegemony or the future Libra will help push down the RMB.
Considering this, expect the PBoC to accelerate development of DCEP and rapidly expand trials. An official launch date has yet to be announced, and an international launch is further in the future. But along with the recent unveiling of China’s new blockchain service network (BSN), it will be part of China’s digital story for 2020. So stay tuned.
China’s Ministry of Industry and Information Technology (MIIT) published a two-year plan to build a forecast of industrial talent demand and worker database to meet employer needs. The forecast is intended to analyze and predict the scale, qualifications and structure of the future labor talent for the technology sector.
- The government plans to build a technology talent database for tracking workers with sought-after skills in artificial intelligence (AI), blockchain, aviation, industrial internet and more areas. Included in this database will be worker names, positions, company names and worker contact information. The database is expected to be complete and open for employer use in 2022.
- The plan aims to build evaluation standards for the most-wanted industrial talent and support the decision-making for policies and education programs to cultivate more talent in certain areas.
- Since MIIT issued the two-year implementation plan on April 21, more than 200 Chinese media publications have reported on it, with 70% of the stories expressing positivity. One prominent story that has been copied and republished in different news outlets 10 times said: “blockchain talent will stay in the status of demand exceeds supply in the following two to three years.”
Forkast.Insights | What does it mean?
Although China has big plans for blockchain, it struggles with the labor supply for it. As covered in Forkast Insight’s “China Blockchain Report,” there isn’t a large, experienced developer corps for blockchain as there is in other segments like AI and big data.
China is starting to offer more blockchain education and training programs. But as recently reported in Forkast.News, there’s a huge mismatch between what the industry thinks it needs and what China’s current tech labor supply is willing or able to provide to blockchain employers.
The low number of blockchain developers in China, particularly compared to India, is a product of the relatively immature software development sector. According to a developer survey in 2017 by Alibaba, the industry as a whole is relatively inexperienced and young. A majority (56.7%) of developers in China have only 0-3 years of work experience. This suggests that China’s developer community is less experienced than international peers (42% have 3-10 years of experience).
This will all be subject to change given the tempo of development for China’s national blockchain infrastructure. Expect a lot of incentives to get developers more familiar with the languages that power major blockchain networks so they can begin work on these projects. But another hurdle is blockchain’s reputation and attractiveness as an employment option on the mainland.
While Beijing wants blockchain to play a pivotal role in the next generation of China’s technology infrastructure, the fact is, there still are hundreds of questionable companies for every real one in the sector. It also wasn’t that long ago that China was cracking down on blockchain companies associated with crypto and scores of workers in that sector lost jobs.
So, it’s not that blockchain talent doesn’t have the potential to exist in China. It’s just that on the mainland currently, the best and brightest tech talent doesn’t want to work for blockchain startups despite offers of higher salaries and perks, as explained in the recent Forkast.News exclusive report. The solution is something that China’s government and blockchain employers will have to figure out.
The fight between the founders of Bitmain, the world’s biggest maker of cryptocurrency mining rigs, escalates. As reported by Caixin, when ousted co-founder Zhan Ketuan tried to get the company’s operating license from governmental service office in Haidian District, Beijing on May 8, he was blocked by 60 men, including Bitmain’s Chief Executive Liu Luyao, and the operating license was taken away by them.
- That same day, Bitmain announced that Liu Luyao is the currently effective legal representative of Beijing Bitmain and “during this period, we will not acknowledge any action taken by Zhan Ketuan as a legal representative of Beijing Bitmain and reserve the rights to file legal claims against Zhan and related parties.”
- Bitmain’s co-founders Zhan Ketuan and Wu Jihan have been fighting for the leader position of Bitmain since 2019. In October 2019, Wu Jihan ousted Zhan and Zhan no longer held any position in Bitmain. Within a month, Zhan filed a complaint, requesting the cancellation of the paperwork that pushed him out. Then he filed the same complaint in February 2020, the authority backed Zhan, and the drama culminated with the confrontation in front of the governmental office.
- Within a day, 385 stories popped up in Chinese media covering the Bitmain scandal. Around 40% of the stories expressed negative sentiments. One of the most-liked comments, reacting to Bitmain’s announcement, says: ”Does your company still abide by the law? If you think [what Zhan has done] is illegal, then you go to the court to sue him! Just snatched it by violence. Do you think China is a primitive society without law?”
Forkast.Insights | What does it mean?
As the mining industry seeks calmer weather in the turbulence of crypto commodity prices and the halving, chaos reigns at Bitmain. Bitmain has a lot at stake right now: the bitcoin halving will determine the future profitability of the company and thus dictate how it approaches its upcoming IPO. All the while the company is facing tightening regulatory pressure from Beijing, which culminated last December in a court ordering the seizing of RMB 4.7 million worth of assets due to a “contract dispute.”
This is not the time for infighting and disputes. Bitmain rival Canaan had a rocky IPO in November last year, followed by plummeting earnings this quarter that resulted in investors filing a suit against the company. Another one of its peers, Ebang, is also looking to file an IPO but questions loom. Given how turbulent and tempestuous the market is right now, Bitmain needs to resolve these internal disputes and move forward with a unified voice. Obviously there are two factions duking it out for control, it might be for the best if a neutral, caretaker party stepped in and ran things until this dispute can be resolved. Netizens are also getting tired of the infighting, given the number of negative stories. It would be better for the community at large if the two parties worked to resolve their disputes in an amicable fashion, before the government has to step in and legislate a resolution. Mining companies play an important role in the health of the blockchain industry, so there’s a lot riding on their stability.
7. VC highlight: another win for Ripple
Nium — Series C, $20 million, Singapore
Singapore-based fintech startup Nium closed its Series C led by Visa, Ripple and BRI Ventures, a subsidiary of the Indonesian bank BRI. Nium’s application program interface (API) links up existing financial institutions to Ripple, a real-time gross settlement system powered by blockchain, that allows for near instant remittances between banks that use Nium. As it’s understood, Nium handles the crypto-fiat offramps and onramps that would give banks regulatory breathing room. Nium has previously received funding from the Vertex Growth Fund, Silicon Valley Bank and MDI Ventures for a total of $39 million.
Forkast.Insights | What does it mean?
The fact that Nium’s series C has buy-in from a venture fund backed by a major bank in an emerging market shows that digital disruption is taking hold in parts of Asia with an urgency only the continent can pull off.
Remittances have always been such a logical use case for blockchain, but regulatory headaches have prevented this from happening at scale. That was before Ripple came along, as prior solutions for this problem involved the exchange of crypto assets. Although there’s a cryptocurrency called XRP that’s owned by Ripple, crypto is not at the core of Ripple’s technology — blockchain is. Ripple’s mainstream product, xCurrent, uses a blockchain called Interledger protocol to connect various different types of payment gateways and ledgers between banks. In many ways it’s a modern, blockchain era version of what Fedwire does — a shared ledger between domestic US banks — but at a much larger scale across international borders and timezones.
Nium’s API ties this all together. While Bank Rakyat Indonesia (Southeast Asia’s 10th biggest by market cap), BRI Venture’s parent, would have the technical know-how to integrate products like Ripple into its stack, smaller banks would not. So Nium is an out-of-the box solution that allows for easy deployment, and once it’s integrated, clients of these banks can receive remittances at the low costs that Ripple provides. Other regional banks are also doing the same thing. UAE-based bank RAKBank is expanding its offerings for instant payment corridors to Indonesia via Ripple, to support the large pool of migrant laborers in the Emirates. Per data from the World Bank’s report on remittances, Indonesia had $11 billion of inward remittances in 2019, or about 1% of its GDP. Digital distribution will eventually impact this market in a big way. BRI knows the value of this market very well as it processes the inbound cash, and it wants to make sure it can continue to profit from this in the future.