Category Archives: Bitcoin

The chief investment officer of global fixed income at Blackrock, the worlds largest asset manager, says bitcoin and crypto are durable assets. I think theres a healthy recalibration going on, he said, noting that if you look two to three years hence, they will be higher than today.

Rick Rieder, chief investment officer (CIO) of global fixed income at Blackrock, shared his view on bitcoin and cryptocurrency in an interview with Yahoo Finance Live on Thursday. Blackrock is the worlds largest asset manager with about $10 trillion in assets under management (AUM).

Rieder was asked how the crypto market is going to react as the Federal Reserve begins tightening aggressively. The Fed hiked its benchmark rate by 75 basis points this week the largest increase since 1994.

The CIO explained: I think people underestimate. When you leave rates at such low levels for such an extensive period of time when you keep policy too easy, the leverage builds in the system slash how do I capture return quickly and you are seeing a lot of the leverage that was built up around crypto come unglued pretty darn quickly.

However, he emphasized:

I still think bitcoin and crypto are durable assets. Its a durable business, but there was so much excess built around it.

Rieder described: Its not terribly dissimilar from the internet bubble if you go back to the 99 and 2000, was the internet a bad idea? No, it wasnt a bad idea. But you created so much excess around it and you just have to de-gear that dynamic, and I think we are seeing that today. He noted: Markets go down five times faster than they go up Thats why you were seeing this incredible unwind.

While reiterating that he still thinks bitcoin and crypto are durable assets that are going to go on, the Blackrock executive opined:

I think theres a healthy recalibration going on. Its a question of how much that recalibration is going to go.

When asked about the prices of major cryptocurrencies, he admitted that for crypto: Its pretty hard when there is no true intrinsic value. So, what is it worth? Its worth what the next person will pay.

He continued: My sense is, in all these situations, you overshoot, and my guess is you have probably got some downside to go from here. But its hard to say what fair value is. The Blackrock chief investment officer further shared:

My sense is like a lot of assets, if you look two to three years hence, they will be higher than today.

But it could overshoot on the downside. This is hard to figure out, just like gold, because I cant figure out my free cash flow multiple and what my security is underneath it, he concluded.

Rieder has made some pro-bitcoin comments in the past. In November 2020, he said cryptocurrency is here to stay, noting that bitcoin could replace gold. He also said BTC is so much more functional than passing a bar of gold around. In September last year, he revealed that he owns a small piece of bitcoin, emphasizing: I like assets that are volatile that have upside convexity. I could see bitcoin go up significantly.

What do you think about the comments by Blackrocks chief investment officer? Let us know in the comments section below.

A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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Blackrock's CIO: Bitcoin and Crypto Are Durable Assets Prices Will Move Higher Markets and Prices Bitcoin News - Bitcoin News

What is BOLT 12? Well, it is a lot of different features and moving pieces put together to accomplish multiple different things static QR codes, modular invoices, privacy for the person receiving the payment.

But what is the whole package? It's a way to have a single QR code, an "offer," allow you to grab invoices from a node in a privacy preserving way, while also allowing for things like requesting that a remote node pay your invoice.

Now, anyone familiar with LNURL should already be thinking, This sounds a lot like LNURL. But for those of you who don't know what LNURL is or how it works, here's a quick breakdown.

LNURL is a stack of simple protocols for coordinating information needed to make payments over the Lightning Network using HTTP. The full list of LNURL protocol pieces can be found here, but I'm just going to go into a few core uses that overlap with BOLT 12.

Three core pieces of the LNURL protocol are an authentication scheme, where a public key can be used to log in to a service, an invoice request scheme where a wallet can ping a server through a static QR code and retrieve an invoice, and a withdraw request scheme where a wallet can ping a server and request that the server pays an invoice provided by the wallet. Lightning invoices are much longer than on-chain Bitcoin addresses, the payment itself is already an interactive process requiring both parties to be online, so coordinating payment details interactively over a network connection makes sense.

The authentication protocol is effectively just the server providing a randomly generated number which the users wallet signs with a newly generated key. After the signed random value is received by the server, it saves the associated key to be used in future logins.

The invoice request functionality is a way to provide information to a user about a payment they wish to make in a format that is not an invoice. This provides a description of the payment, the minimum and maximum amount the service expects to be paid, and a URL for the wallet from which to request an actual invoice. From here, the wallet displays this information to the user, allowing them to set a final amount and request an invoice. After sending the invoice request and receiving one back from the server, the wallet verifies that the amounts match what the user set and pays the invoice.

The withdrawal request works by pinging the service, and receiving in response a description, a URL to send an invoice to, a random string (or deterministic to tie to an account or user), and a minimum amount and maximum amount that can be withdrawn. After filling in the appropriate value, the wallet returns an invoice to the server, and if it is valid and within the amount parameters, the service pays the invoice. The LNURL authenticate protocol can be used in addition to this to ensure that only the intended user can successfully withdraw using the LNURL link.

LNURL has smoothed over and improved much of the UX experience around using the Lightning Network, but it requires the use of a web server in order to be utilized. All of the requests and responses are handled through HTTP, and additional infrastructure beyond the Lightning node itself is required to handle these streamlined ways of coordinating and making payments. This is a perfectly reasonable requirement for any online service provider or merchant, who is realistically going to need a web server anyway to provide their service or products online. However, for a non-technical end user at home who simply wants such a streamlined experience, a street vendor, a physical shop or other users who do not already require the use of a web server, this can be a burdensome and potentially risky requirement.

BOLT 12 offers an attempt to achieve some of the core functionality that LNURL provides without requiring the use of a web server. An offer encodes the data necessary to reach a node to request an invoice to make a payment, either a node_id, or a blinded path (the last few hops in an onion route, pre-computed and encrypted) to that node using onion messages. It also can encode a minimum amount for a payment, the currency being paid in, an expiry time and minimum/maximum quantity numbers (for purchasing multiple items).

This is all of the information necessary to fetch an actual invoice from the node that issued the offer. Someone who wants to pay an invoice does so over onion messages, one of the core features of BOLT 12. It allows nodes to make a direct, end-to-end-encrypted connection between each other that does not involve a Lightning channel. Just like Lightning payments, these can be used to onion route messages. After obtaining an offer, a payer will use the information encoded in it to send an invoice_request message. The creator of the offer will then respond back with an actual invoice.

There is also support for generating unique per user offers that allow the receiver to request a payment from the creator of the offer, similar to LNURL's withdrawal request feature. BOLT 12 invoices commit to a unique payer key this can be used in the case of issuing refunds to prove you are the person who actually paid the invoice. This can also be used in combination with the withdrawal offer to guarantee that only the correct person can succeed in getting an invoice paid by the creator, as opposed to whoever is able to get a copy of the offer.

These two uses of offers effectively fulfill the same functionality as the invoice and withdrawal requests of LNURL, without the need to run a web server.

LNURL and BOLT 12 both accomplish the same general functionality, so what is really the difference between them? What is the need for BOLT 12 if LNURL already exists? The key distinction is the web server. A web server requires running more infrastructure, a domain name, a TLS certificate and the expertise to manage these things.

While this is not an issue even worth mentioning for most businesses and services, as these things are needed to operate any online business in the first place, this is a big issue for your typical non-technical end user. It is not a reasonable expectation for a user to maintain extra infrastructure bolted on top of their Lightning node in order to have access to a streamlined and simple user experience. There is also the question of the centralization of DNS; a domain is not something that can ever be truly controlled by the owner.

These issues aside, both can co-exist. LNURL works just fine, and is already very widely adopted in the Lightning ecosystem, it is just not a realistic solution for users other than businesses or services. BOLT 12 as it is adopted can fill that gap, and provide the same streamlined user experience for end users at home who are not businesses.

Both solutions accomplish roughly the same thing for two different classes of users, and that is OK.

This is a guest post by Shinobi. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

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BOLT 12 And LNURL: What Is The Future For Bitcoins Lightning Network? - Bitcoin Magazine

During the last week, while crypto markets got hammered, digital currency-centric over-the-counter (OTC) trading desks were swamped with orders. The cryptocurrency OTC trading desk Cumberland, a subsidiary of DRW, explained that on June 13, the firm saw 30% more volume than the previous year-to-date high on May 13.

Over-the-counter (OTC) trading desks allow high-net-worth crypto traders to trade coins without affecting spot markets as much as they would trading on a traditional exchange. OTC trading desks also provide liquidity for big buyers that smaller exchanges cannot provide. A number of companies offer OTC services to crypto traders like Kraken OTC, Falconx, Cumberland, Athena Investment Services, Crypto Desk, B2C2, Bankhaus Scheich, Bitpanda Plus, and Coin Cola.

Amid the recent crypto market carnage, the DRW company Cumberland tweeted about the firms OTC flow during the past week and let people in on some of the moves that were made. The most frequent question were asked on weeks like this is what does the flow look like? Cumberland tweeted on June 14. OTC flow gives some insights into how the market is handling these major moves, the OTC trading desk added. Cumberland was founded in 2014, and over the last few years, it has become one of the top OTC desks worldwide.

When Cumberland first started, news reports noted that the company was able to acquire massive amounts of bitcoin (BTC) via a few U.S. Marshalls operated auctions. Cumberland offers more than 30 different digital assets against 500 pairs, and the company claims to be one of the largest liquidity providers in the cryptocurrency space. Speaking about the recent crypto market rout, Cumberland disclosed that lots of crypto volume came directly to OTC desks.

Cumberland said:

On big swings, more volume tends to come to OTC desks, and yesterday was no exception; it was the most volume weve seen so far this year. In fact, it was 30% more volume than the previous YTD high, May 13th. Traders tend to use OTC during fast markets because its much easier to move size. Volumes were very BTC-centric, with about 75% of the total flow in bitcoin. ETH was the majority of the remainder. When looking to exit risk, traders tend to trade the most liquid products.

The crypto market bloodbath had shown a significant amount of leverage was wiped out during the last two weeks. Cumberland suggested that quite a bit of the flow on June 13 was liquidations. A number of crypto lending firms have been accused of being liquidated on very large positions in recent times such as Celsius. Large crypto hedge funds like Three Arrows Capital (3AC) are also being accused of having financial hardships and dealing with liquidations from over-leveraged positions.

The flow ratio suggests a lot of the flow was liquidations, with a 2:1 ratio of sellers to buyers, Cumberlands Twitter thread concluded. As always, Cumberland is proud to act as the backstop of liquidity during the most severe market moves.

What do you think about Cumberlands summary of OTC flow from the recent crypto market bloodbath? Let us know what you think about this subject in the comments section below.

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 5,000 articles for Bitcoin.com News about the disruptive protocols emerging today.

Image Credits: Shutterstock, Pixabay, Wiki Commons

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Cumberland Sees Massive OTC Moves During Crypto Market Rout 'Most Volume We've Seen This Year' Bitcoin News - Bitcoin News

Billionaire Bond King Jeffrey Gundlach believes Bitcoin (BTC) will plummet further despite having already fallen by about 70% from its all-time high.

In a new CNBC interview, the CEO of asset management firm DoubleLine Capital sayshe wouldnt be surprised at all if the flagship crypto asset fell by more than 50% from the current levels to around $10,000.

The trend in crypto is clearly not positive. I mean it topped out a long time ago. Remember, I was with you in July of last year, and Bitcoin was up at like $60,000 or something. And then it dropped down to $30,000

It managed to rally back but it looks like it is being liquidated. So Im not bullish at $20,000 or $21,000 on Bitcoin. I wouldnt be surprised at all if it went to $10,000.

At time of writing, Bitcoin is trading for $21,062, an increase of about 5% from the 2022 low of $20,111 reached earlier this week.

Gundlanch also warns the recent collapse of some cryptocurrencies could be a sign of a looming crisis in the digital asset space.

Weve had such a huge decline in parts of the stock market. Emerging market equity year-to-date is down 15%. Most equities are down. Nasdaqs down 28%, Bitcoin is down 53% year-to-date and 45% just since the last Federal Reserve meeting.

Weve already seen around the edges some blow-ups in parts of the crypto world and that could be foreshadowing some problem.

DoubleLine Capital, headquartered in Tampa, Florida, had more than $122 billion of assets under management at the close of this years first quarter.

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Billionaire CEO of $122,000,000,000 Asset Manager Predicts Bitcoin (BTC) Could Crash by Another 50% - The Daily Hodl

Arman Shirinyan

Cardano shows better performance compared to Bitcoin and Ethereum while market enters limbo

While the majority of the top-tier assets on the cryptocurrency market are struggling under unseen selling pressure, projects like Cardano are feeling reliefas they avoid a massive plunge down and even show significant growth in assets like Ethereum andBitcoin.

Unexpectedly, Cardano easily beattop-tier digital assets like XRP, ETH and BTC, thanks to the lack of leveraged positions openon the market and lower institutional exposure, as they appeared to be two main reasons behind the strong plunge of the market.

Both neutral performance on the ADA/USD pair and a plunge below $900 forEthereum is fuelingthe 75% gain. The strongest plunge on Ethereum since 2020 helps with ADA's short-term rally against major players on the market.

While Ethereum's massive sell-off is the biggest support for ADA, Bitcoin's 32% drop in value caused only a 25% return for Cardano, which does not make it the best hedge against the cryptocurrency market but still a better option than holding large caps like BTC or ETH.

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While ADA's growth is mostly tied to the lack of exposure to institutional funds that are being liquidated, industry experts are also highlighting the fundamental wellness of the network, which is receiving a massive amount of updates and releases thissummer, including Djed stablecoin, Vasil hard fork and others.

Withthe constant updates and relatively low pressure from investors because of the low-leveraged nature of the asset, Cardano has all the chances of being among the leaders when the cryptocurrency market sees new funds inflows. This may takeanother couple of years, especially with the hawkishness of the Fed.

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Cardano Massively Outperforms Bitcoin and Ethereum as It Avoids Market Sell-Off - U.Today

Global consulting firm McKinsey & Company has forecasted that the metaverse may generate up to $5 trillion by 2030. In addition, more than 80% of commerce could be impacted by activities in the metaverse.

Global management consulting firm McKinsey & Company published a report last week titled Value creation in the metaverse.

The report details: Our work began by surveying more than 3,400 consumers and executives on metaverse adoption, its potential, and how it may shift behaviors. We also interviewed 13 senior leaders and metaverse experts.

According to McKinsey:

By 2030, it is entirely plausible that more than 50 percent of live events could be held in the metaverse.

In addition, more than 80% of commerce could be impacted by activities in the metaverse, the firm described, adding that most learning, development, and collaboration could happen in the metaverse. Furthermore, McKinsey said, We expect the average internet user to spend up to six hours a day in metaverse experiences by 2030.

More than $120 billion has already flowed into the metaverse space in 2022 more than double the $57 million in 2021, the report notes.

While estimates vary widely, we forecast it [the metaverse] may generate up to $5 trillion by 2030, the firm described. Our estimate of the metaverses potential impact by 2030 is based on a bottom-up view of consumer and enterprise use cases, derived from discussions with around 20 internal and external experts In short, our forecast is our best estimate given the very high levels of technical, regulatory, and societal uncertainty.

Noting that the metaverse will have a major impact on peoples commercial and personal lives, the report concludes:

With its potential to generate up to $5 trillion in value by 2030, the metaverse is simply too big to be ignored.

Several major banks and investment houses now have a presence in the metaverse, including JPMorgan, HSBC, Standard Chartered Bank, and Fidelity Investments.

In addition, a survey conducted in April showed that the metaverse will be the most popular place for crypto, with 70% of respondents agreeing that cryptocurrency and blockchain technology advancements will be critical to shaping the future of the metaverse.

Besides McKinsey, there are other estimates of the size of the metaverse. Citigroup predicted that the metaverse could be a $13 trillion opportunity with 5 billion users by 2030. Goldman Sachs sees the metaverse as an $8 trillion opportunity.

What do you think about the metaverse? Let us know in the comments section below.

A student of Austrian Economics, Kevin found Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open-source systems, network effects and the intersection between economics and cryptography.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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McKinsey: The Metaverse Could Generate $5 Trillion by 2030 'Simply Too Big to Be Ignored' Metaverse Bitcoin News - Bitcoin News

Global financial markets once again find themselves trending lower on June 10 after the Consumer Price Index (CPI) came in at a blistering 8.6% year-over-year increase, the highest print since 1981.

The hotter-than-expected CPI print resulted in a collapse of the $30,000 support and Bitcoin (BTC) price sold off to a daily low of $28,852 before dip buyers managed to bid the price back above $29,000.

Heres what several analysts in the market are saying about the outlook for Bitcoin moving forward since there appears to be little relief on the inflation front and the Federal Reserve is still determined to raise interest rates.

The effect of the high CPI print on two benchmarks of financial markets, the dollar index (DXY) and the S&P 500 (SPX), was touched on by il Capo of Crypto, who posted the following charts noting that After CPI results, #DXY continues its pump and #SPX keeps free-falling.

Market analyst Kevin Svenson also said that the Fed's inability to curb inflation is likely to translate to choppy price action for the next year.

Should the price of BTC continue to trend lower, crypto trader and pseudonymous Twitter user Altcoin Sherpa says trading below $28,000 is possible.

Altcoin Sherpa said,

Related: Bitcoin price falls under $29.5K after 'unexpected' 40-year high US inflation

Insight into what it would take to avoid a pullback to the support at $28,000 was provided by market analyst and pseudonymous Twitter user CrediBULL Crypto, who posted the following chart showing the unfortunate retrace from $30,000, the area. The analyst suggested that this was the moment where we needed to see follow through.

CrediBULL Crypto said,

The overall cryptocurrency market cap now stands at $1.192 trillion and Bitcoins dominance rate is 46.6%.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Bitcoin, altcoins sell-off on record-high inflation, but traders still expect BTC to consolidate - Cointelegraph

Cointelegraph introduces Crypto Street, a series of spontaneous conversations with strangers on the street to educate, entertain and take a temperature check on the worlds relationship with crypto.

The first episode comes from the gates of the World Economic Forum (WEF) in Davos, Switzerland. Cointelegraph reporter Joseph Hall attempted to speak with the worlds elite where he was rejected, ridiculed, and ignored before stumbling across crypto believers among the WEF attendees.

Sporting aCointelegraph sweatshirt with the loudest Bitcoin(BTC) logo, Hall asked passersby to guess what was print represented. Some WEF-goers refused to talk on camera while others claimed ignorance.

Thats not Bentley, its Bugatti! One passerby at the World Economic Forum joked. That, or they genuinely believed that the Bitcoin logo is a luxury car brand.

The shoot then moves to the blockchain streets of Davos, wherecryptocurrency companies outweigh the tradfi presence. Irina Heaver, a crypto lawyer and Bitcoin believer told Cointelegraph that Bitcoin is freedom. She explained that for her family:

When the Soviet Union Collapsed, they were left absolute penniless so did millions of other people [...] If they could have some of that (Bitcoin) can you imagine how their families would be better off?

Heaver also explained that more and more Russians transact with Bitcoin and crypto, reflecting thegrowing popularity of cryptocurrencyin the country. WEF attendees from India, wherecrypto education is weak at best, explained that the younger generation is a lot more curious about Bitcoin and cryptocurrency.

Some rethinking and action need to happen to make it [crypto] more sustainable.

The International Monetary Fund is close friends with the WEF, and itconsistentlypushes for central bank digital currenciesas well as moving cryptocurrencies away from proof-of-work blockchains to less energy-intensive proof-of-stake blockchains.

Related:CBDCs are the natural evolution, says HyperLedger director Barbosa

Theres also a cameo from Nas Daily, the Youtuber and Bitcoin HODLerwho lost $200,000 on Bitcoin to date. He appears on camera and exclaims, I lost so much money.

Finally, theres also a Golden Retriever who holds his tongue regarding Dogecoin (DOGE) price predictions for 2022, and an acapella rendition of Nina Simone by up-and-coming vocalist, Evan Klassen. Incidentally, Klassen is signing at the FIFA World Cup in Qatar this year; will he croon a crypto tune?

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Bitcoin at the WEF: What did the world's elite think of crypto? - Cointelegraph

The adoption of Bitcoin (BTC) could occur more rapidly than the adoption of past disruptive technologies such as automobiles and electric power, with global take-up likely to hit 10% by 2030 according to a new report.

In its Wednesdayreport, Blockware Intelligence said it arrived at this forecast by examining historical adoption curves for nine past disruptive technologies including automobiles, electric power, smartphones, the internet and social media, along with the growth rate of Bitcoin adoption since 2009:

Using the average and weighted average of historical technology adoption curves, as well as the growth rate of Bitcoin adoption, the report was then able to arrive at its prediction.

It said that based on a metric called Cumulative Sum of Net Entities Growth and Bitcoins predicted CAGR of 60% we forecast that global Bitcoin adoption will break past 10% in the year 2030.

Blockware Intelligence is the research arm of Blockware Solutions, a Bitcoin mining and blockchain infrastructure company, so you might expect it to be bullish on adoption.

The intelligence unit said it expects Bitcoin adoption to reach saturation quicker than many other disruptive technologies, given direct monetary incentives to adopt, the current macro-environment and because adoption growth will be accelerated by the internet.

From a consumer perspective, past technologies had convenience/efficiency-related incentives to adopt them: adopting automobiles allowed you to zoom past the horse and buggy, adopting the cell phone allowed you to make calls without being tied to a landline, the report explains:

Bitcoin, like the internet, smartphones, and social media, also derives benefits the more people that adopt the technology, which is known as the network effect.

Case in point if you were the only user on Twitter would it be of any value? It would not. More users make these technologies more valuable.

Related: 75% of retailers eyeing crypto payments within 24 months: Deloitte

However, the authors of the Blockware report stressed that the model used to predict the rate of adoption was only conceptual at this stage, adding it is neither meant to be used as investment advice nor a short-term trading tool, and it would continue to be refined:

The report and model were reviewed by several crypto investors and analysts, including executives from Ark Invest, Arcane Assets, AMDAX Asset Management and M31 Capital.

Cryptocurrency adoption has been growing rapidly over the last few years. In 2021, global crypto ownership rates reached an average of 3.9%, with over 300 million crypto users worldwide, according to data from TripleA, a global cryptocurrency payment gateway.

Blockchain data platform Chainalysis last year revealed that global adoption of Bitcoin and cryptocurrency surged 881% from July 2020 to June 2021. It found Vietnam to have the highest cryptocurrency adoption, leading 154 countries analyzed, followed by India and Pakistan.

In April, a survey conducted by cryptocurrency exchange Gemini found that crypto adoption skyrocketed in 2021 in countries like India, Brazil and Hong Kong, as more than half of respondents from its 20 countries polled stated that they started investing in crypto in 2021.

Originally posted here:
Global Bitcoin adoption to hit 10% by 2030: Blockware report - Cointelegraph

With DeFi scams, exploits and collapses becoming more and more common within the digital asset space, the need for comprehensive regulation that protects consumers has never been more important. While the space has often fought against oversight from any sort of centralized body, the popularity of modern-day digital assets and the plethora of applications that have been built using blockchain technology have necessitated the need for some level of regulatory guidance, especially to safeguard citizens from predatory financial schemes that only serve to fill the pockets of the creators and their stakeholders.

Note: The cypherpunk group that originally came up with many of the ideas surrounding digital assets valued cryptography as a tool to protect oneself against authoritarian governments.

The purpose of this article is to provide an overview of Bitcoins role in digital asset regulation, and why its differences from a majority of other cryptocurrencies should encourage regulators to view it in a different light.

This past week, Wyoming Senator Cynthia Lummis, in a bipartisan collaborative effort with New York Senator Kirsten Gillibrand, released a proposal for regulation surrounding cryptocurrencies and other digital assets. This mostly pertains to security and taxation laws in the United States, but if passed, could serve as a standard for other jurisdictions. This proposal is certainly good news for cryptocurrency developers and users; it serves to ensure that the United States can become a leader in digital asset innovation while protecting its own citizens against fraudulent schemes. While the entirety of the proposal is beyond the scope of this article, the major takeaways follow, as reported in this article in Fortune:

While this bill does codify and introduce some authority and oversight to the space, it does so while ensuring that development in the space is not hindered, a concern that was previously posed by Jack Dorsey, among others. Senator Lummis in particular has long been a staunch supporter of Bitcoin, and unlike her contemporaries, is focusing on innovation rather than just the potential downside of its energy consumption.

Bitcoins design, however, gives it some unique advantages that should serve to make it a unique asset in terms of both user protection and broader regulation. For starters, a lot of disclosure and transparency concerns surrounding other base-layer platforms do not apply to Bitcoin (they may apply to companies building sub assets or other products on top of the Bitcoin blockchain) because of the lack of a centralized organization that oversees Bitcoins operations. You will often hear the adage that bitcoin is the purest form of digital money because it does not offer, or even try to offer, anything different. You are not entitled to any special rights by holding bitcoin: You do not have a voting right in any entity, you are not entitled to receive rewards in the form of yield and you cannot gain control of the underlying protocol by simply buying more of it due to the underlying proof-of-work consensus mechanism. This is not meant to deride alternative platforms that may offer these features. After all, a lot of alternative platforms have played an active role in helping to decentralize the internet, and have also allowed stablecoins (along with bitcoin) to be an alternative financial instrument for those of us who are less fortunate. Rather, it is meant to underscore the fact that bitcoin is the best form of digital money specifically because of its simplicity.

In a previous article, I argued that it is Bitcoin, rather than the broader cryptocurrency market, that is helping to fight authorianism and acting as a tool for financial freedom. A variation of the same argument applies to differentiating Bitcoin when it comes to thinking of regulation specifications for digital assets. No centralized party within Bitcoins vast ecosystem can exert a significant influence over its protocol, nor can any one party cause new bitcoin to be created to meet some need that serves its own interests.

The core ethos that separates Bitcoin from other protocols is its decentralization. While many in the space argue that Bitcoin is actually quite centralized due to its supply distribution and the presence of mining pools, the reality is that measuring the decentralization of any protocol be it a peer-to-peer digital asset network, a government or your local recreational sports league goes beyond just analyzing quantitative data such as the concentration of hash power or the concentration of wealth. Rather, perhaps the most important part of measuring decentralization is the decision-making power any centralized party has to make long-standing decisions for the protocol. A majority of, if not all, alternative platforms have some form of foundation or organization that makes significant protocol or tokenomic (the economics of the underlying asset) decisions. In many cases, there may be some form of governance or voting mechanism that enables holders to vote on certain proposals. While this is certainly more decentralized than your traditional Web 2.0 protocol, let's present Bitcoins decision-making protocol.

In Bitcoin, anyone can make a proposal for a protocol change through a Bitcoin improvement proposal (BIP). For the protocol-change to be codified, it must be approved by miners, whose current ownership has no weight. Most significantly, there is no centralized authority that may influence the decision of miners. Bitcoin is much more akin to a software rather than a company, unlike alternative platforms. (The anonymous creator/founder has completely removed themself from the public eye, and has not made any transactions with their own bitcoin for almost a decade.)

It is specifically this decentralization that allows Bitcoin to be a tool for human rights activists and those living in authoritarian countries. It is this decentralization that allows bitcoin to be a version of sound money and be an active hedge against inflation. It is this decentralization that regulators and lawmakers must take into account when designing regulation for cryptocurrency-based assets. Senator Lummis and Senator Gillibrands proposal takes a massive step in the right direction by specifically differentiating between protocols/assets that have characteristics of a traditional company and those that are independent, autonomous and helping to create legitimate change within our society.

This is a guest post by Archie Chaudhury. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.

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Bitcoins Role In The Recent Digital Asset Regulation - Bitcoin Magazine