Part 2 - Web 3.0 Accelerates
Since Part 1 of our series, Bitcoin has increased by 17+%. Not bad for a 6-week return. But what is behind the increasing number of people, organizations and even nation states who are exchanging 'fiat money' for 'magic internet money'? Is it simply that society has lost faith in the paper based financial system or is crypto real the next phase of the internet (Web3.0)?
From a geopolitical and investment standpoint, not only has a Bitcoin strategic reserve bill now been prepared for Trump to sign but last week Canadian Prime Minister Justin Trudeau resigned, likely to be replaced this year by Opposition Leader and long-time Bitcoin proponent Pierre Poilievre. Pierre has made no secret of his desire for Canada to also stockpile BTC. Having two of the world's G10 nations hold Bitcoin will start a race between other nations to secure their own stockpiles. If this happens, then crypto could be about to revolutionize the world's financial system.
From a technology and productivity standpoint, crypto more broadly opens up new methods of conducting business in a digital world. Because of its standardized and trustless characteristics, cryptographic technology will transform how we enter into contracts and prove our ownership credentials.
If this all sounds a bit foreign, take a few moments read these highlights of the top types of Cryptos You Should Know About:
Bitcoin:
Bitcoin (BTC) is the most prominent and largest cryptocurrency. Developed on a decentralized mining framework, BTC utilizes the blockchain to authenticate each transaction between holders. The maximum supply is capped at 21 million BTC, which means that its scarcity will drive up the price as long as demand for BTC rises. Each BTC can be divided into 100,000,000 'Satoshis', allowing its value to be allocated to goods, services, and economies in smaller units. Bitcoin can be bought or sold through a centralised exchange (CEX) or transferred directly between two individuals (peer to peer).
As trust in the financial and debt reserve status of countries declines, nation-states are increasingly seeking to secure BTC reserves to bolster confidence in their fiat currencies. Similarly, large organizations aim to hold BTC reserves as collateral to borrow against. MicroStrategy is currently the largest NASDAQ entity holding Bitcoin. Bitcoin is often referred to as 'digital gold'. Its current circulating supply is 19.81M out of maximum supply of 21M.
Ethereum:
Developed by Vitalek Buterin, Ethereum is a smart-contract digital platform that enables not only the transfer of coins (referred to as ETH) on the blockchain but also the programmability of these coins. Programmed coins allow for the addition of data to each transaction, enabling governance by blockchain code. This capability facilitates the tokenization and management of Real-World Assets (RWA) on a digital ledger. Crypto developers create their applications within a (chain) ecosystem and use its native token, (ETH), to support their applications' operations. Each ETH-managed transaction incurs a variable 'gas fee' (comparable to Uber pricing). Due to this operational model, Ethereum is often called 'digital oil'. Its current circulating supply is 120M and there is no maximum supply of ETH.
Binance (BNB):
Binance is the world's largest Crypto exchange. Think of an exchange as the digital stock market where crypto holders meet to buy, sell and swap crypto tokens. Exchanges are known as the on and off ramps for crypto trading. Binance has developed its own smart contract coin known as BNB. It has the functionality of Ethereum with the added bonus point for using it within the Binance eco-system. Think of it like loyal points with a credit card or frequent flyer miles. Other large exchanges in the marketplace include the US based Coinbase, Kraken and Gemini and the Australian based CoinSpot, CoinJar and SwyftFx.
Other Ecosystems (each with their own native token):
Chainlink: (Link) In addition to Ethereum and Solana, numerous other blockchains exist where developers create their cryptographic applications. Similar to proprietary software architecture, facilitating interaction between applications hosted on different chains is challenging. This is where Chainlink plays a role. LINK acts as an intermediary, interpreting and converting transactions across distinct ecosystems. Its current circulating supply is 631M out of maximum supply of 1B.
AAVE: While many holders of crypto assets are content to hold (HODL) their assets and simply wait for their value to appreciate, other investors wish to lend out their assets for interest through a process known as staking. AAVE is a protocol that allows users to gain staking rewards by lending out their crypto tokens.
The ISO 2022 Coins:
One of the inhibitors to crypto adoption by the financial industry is the lack of regulations and standards surrounding the technology. Historically banks and federal reserves are risk adverse. The ISO2022 standards are helping to alleviate some of that uncertainty.
XRP (Ripple Labs) XRP is a cross-border payment system that allows banks to make near instantaneous and verifiable monetary transfers globally. The XRP coin is the native token used by institutions to facilitate these transfers. XRP allows banks to process large transactions in a wholesale manner on the Ripple system. Transactions are processed within 3-5 seconds for just a few cents. XRP would speed up international trade and could replace the aging SWIFT intermediary banking system. Its current circulating supply is 57.5B out of maximum supply of 100B.
XLM (Stellar): Similar to XRP, XLM is an open-source digital payment system which is designed to be used by members of the public. It could be placed on social media platforms as a means of trade between individuals regardless of where in the world they live. Its current circulating supply is 30.4B out of maximum supply of 50B.
Hedera: (HBAR). Hedera is a newer type of cryptography utilising a verification method called a DAG (Directed Acyclic Graph). DAGs use a graph like data connection pattern to verify transactions. This means that the complexity of managing the mining process will not grow with age. As quantum computing grows, the costs of mining DAG systems will decrease.
Hedera has a fixed supply of 50 billion tokens (38.3B which is in circulation). HBAR is governed by a council of 39 brand name multinationals - including Google, Dell, Hitachi, IBM and Australian Payments Plus (AP+) which is working with PayID, Osko, and BPay. It is these use cases which are driving FinTech and moving crypto from speculation into real world application. A hybrid Blockchain/DAG protocol offering also exists called Kaspa (KAS). KAS' is a layer 1 technology and designed to be used in retail. Its current circulating supply is 25.5B out of maximum supply of 28.7B.
Cryptographic Applications:
Crypto tokens are not just for means of transferring financial value but also form means of securely storing information including property rights. Two examples of crypto powered applications are buying and selling homes and managing and paying for our electricity bills.
Propy; Propy is a crypto based real estate closing site. It is designed to use smart contract to provide real time exchanges that protect all parties through the blockchain.
PowerLedger (POWR) Powerledger is a peer-to-peer renewable energy sharing ledger. Founded out of Perth, WA, its applications help maximise power use efficiency by allowing neighbors to share excess power with each other.
Other types of Tokens and Coins:
NFTs: Non-Fungible Tokens are digitally authenticated products that cannot be reproduced or altered beyond what was originally programs. NFTs help verify unique quantities and assign ownership of a digital product to an individual or individuals. Examples of how NFTs can be used in real life can include property titles, driver's licenses, qualifications, and limited-edition prints (e.g. an artwork where only 100 prints are ever authorised).
Stablecoins: USD Tether, RLUSD, PAX Gold are digital coins which are pegged to a historical asset, such as a nation states currency or a commodity like gold. Ripple USD (RLSUSD) is a newly created stable coin issued by Ripple labs. Each RLUSD is pegged to one US dollar. Unlike floating crypto currencies, stable coins are designed for retail use by the public as digital currency for transactions.
Meme Coins: Meme coins are crypto coins that are created and gain notoriety based on pop culture. DOGE Coin, Shiba Inu and even the crudely named 'Fart-coin'. Often these coins have an unlimited supply and not back by anything except the attention of the community. Like popular cultural moments, they can appear out of nowhere, seem larger than life, and then disappear quickly. For this reason, many consider meme-coins to be 'shit-coins' and equate investing in them as gambling.
Tracking all of the above coins can be done on one of two leaderboards: CoinMarketCap and CoinGecko. For those who are involved in frequent trading of tokens, they generally keep their coins on the exchange. For those who want to hold their token's longer term, they generally remove them off the exchanges and on to cold hardware wallets. Examples of hardware wallets include Tangem and Ledger. When it comes to taxes, applications like Koinly help crypto holders stay compliant with their tax reporting obligations.
None of the content above is intended as financial advice. Rather it is provided as a fast-moving technical overview of the cryptographic landscape.
The ACS Foundation and Crypto:
The ACS Foundation exists to help Australia's next generation of technology professionals plan and build their careers. The Foundation encourages students to build their skills in emerging technologies, including cryptographic technologies. The Foundation offers technology scholarships and work placements to help students build applied technology skills.
Comments