This week, Bitcoin’s halving is taking place, and senators have introduced a stablecoin bill, while Lido has added a new node operator. The bill aims to regulate stablecoin issuance institutions with over $10 billion in assets, and Lido has launched a Simple DVT module. The Ethereum layer 2 network has reached a new high in daily active addresses, but the total number has dropped by 44%. The mango market has been utilized, resulting in an increase in Bitcoin transaction fees. TikTok is partnering with Sui to develop web3 games, and Worldcoin has launched its second-layer blockchain. Bored Apes’ prices have dropped by 90%, and Hong Kong has approved the launch of Bitcoin and Ethereum ETFs. Solana has released a patch to alleviate network congestion, and EigenLayer allows for LST re-staking.
Bitcoin Halving: A New Chapter Begins
Less than 24 hours remain until Bitcoin’s fourth halving, which will occur at block height 840,000. This halving will reduce the newly issued Bitcoin rewards for each block miner from 6.25 BTC to 3.125 BTC. As a result, the daily issuance of new Bitcoin will decrease from around 900 BTC to approximately 450 BTC, further reducing Bitcoin’s annualized inflation rate to 0.85%.
Halving is a programmed event in Bitcoin that occurs approximately every four years, or every 210,000 blocks. This upcoming halving on April 20, 2024, will be Bitcoin’s fourth, and it is expected to go through another 30 halvings in the future.
For Bitcoin miners, halving is a crucial event as block subsidies are their main source of income, while transaction fees provide another portion of their revenue. However, in Bitcoin’s 15-year history, transaction fees have never accounted for more than 12% of miners’ income, with 2017 being an exception where fees accounted for 3-6% of income on average. With Bitcoin’s price and network hash rate remaining constant, halving will result in a halving of miners’ income. Therefore, miners are striving to maximize efficiency before the halving.
Galaxy Research has released a new report explaining the mechanics of halving and its significance to Bitcoin’s monetary policy.
Our perspective:
The transparency and predictability of Bitcoin are key characteristics that set it apart from any other asset or currency. The 50% reduction in Bitcoin’s block rewards through halving will make it even scarcer as an asset and potentially reduce selling pressure from miners. However, compared to the $10-25 billion in Bitcoin circulating daily, the decrease in issuance is relatively small, going from 900 BTC to 450 BTC per day. Nonetheless, prices are set at the margin, and a decrease in price could have marginal positive effects on the buy-to-sell ratio. Nevertheless, halving is an automated programmed event that showcases the viability of credible monetary tightening policies that can support healthy asset growth. This stands in stark contrast to the constant inflation seen in modern fiat currencies. For more information on Bitcoin’s fourth halving, read Galaxy Research’s latest halving report. – Gabe Parke
Lummis and Gillibrand Propose New Stablecoin Bill
On Wednesday, Senators Cynthia Lummis and Kirsten Gillibrand introduced the “Lummis-Gillibrand Payment Stablecoin Act,” which aims to provide a regulatory framework for stablecoins in the United States. The bill defines payment stablecoins as tokens issued by entities that have an obligation to redeem, repurchase, or exchange them for a fixed amount of US dollars and explicitly excludes algorithmic stablecoins.
The bill provides state and federal pathways for deposit-taking and non-deposit-taking institutions to issue stablecoins, with a limit of up to $10 billion in total issuance. However, non-deposit-taking institutions exceeding this threshold would need to convert to deposit-taking institutions. Regulatory oversight would be shared between state and federal regulatory agencies, with federal agencies having unilateral action authority over issuers with over $10 billion in scale and joint action for issuers below $10 billion in scale.
The bill emphasizes custody and third-party risk management, highlighting the importance of issuers taking appropriate custody measures, especially in light of events like FTX. The bill specifies specific regulations for managing reserves and operational practices, including requiring deposit-taking institutions to establish separate companies for stablecoin issuance and non-deposit trust companies to use sub-custodians that are deposit-taking institutions.
Senators Lummis and Gillibrand previously introduced the “Responsible Financial Innovation Act” in 2022, which proposed comprehensive regulatory frameworks for digital assets such as Bitcoin, Ethereum, and stablecoins. In July 2023, they introduced an updated version of the Market Structure Bill, specifically clarifying the division of digital asset regulation between the SEC and CFTC, an area of long-standing controversy. However, these bills have not garnered widespread attention.
Our perspective:
This bill marks bipartisan recognition of the importance of blockchain technology as a payment infrastructure and stablecoins as a medium of exchange. In another op-ed on CoinDesk, Senators Lummis and Gillibrand highlighted the benefits of sending stablecoins globally at a fraction of the cost of traditional providers and the potential for entrepreneurs to develop innovative applications and use cases.
The bill will have an impact on major stablecoin issuers like Circle that are non-deposit trust institutions but have issued over $10 billion in stablecoins. These entities would need to obtain appropriate licenses to continue operating under the proposed bill. More specialized stablecoin issuers like Maker’s DAI or Ethena’s sUSDe, who do not have a clear registration pathway as their issuances lack one-to-one acceptable collateral backing, may also face challenges. Additionally, the bill calls for interoperability standards among entities such as the Federal Reserve, the Office of the Comptroller of the Currency, and the National Bank Regulators, which may conflict with existing permissionless blockchains like Ethereum.
While the bill makes a positive contribution to advancing the regulatory framework for cryptocurrencies, it still faces significant procedural and political challenges. For example, on the same day the bill was proposed, Senator Warren wrote a letter to Treasury Secretary Yellen advocating for deeper integration of stablecoins with the banking system to facilitate transactions in the cryptocurrency market and increase risks of illicit financial transactions and underground criminals (further research can be found here). Warren’s ongoing push increases the possibility of including provisions for illicit finance at some stage. Furthermore, with summer recess approaching, actual progress on legislation will require a significant amount of time, which will compete with other more pressing legislative priorities.
The positive aspects of the bill lie in preserving a national-level registration pathway (allowing states to issue licenses to issuers) and providing robust consumer protections through prudent requirements such as reserve composition and prohibitions on rehypothecation. These provisions have also garnered support from the House Financial Services Committee, whose current chair, Patrick McHenry, is also keen on advancing stablecoin-related legislation by the end of the year. However, specific reserve requirements like these could pose liquidity and operational challenges, as noted by Austin Campbell, a professor at Columbia University and former portfolio manager for Paxos’ USDP stablecoin.
But these wordings are not final versions, and ifMaking progress in the Senate Banking Committee, they are almost certain to change. Although the bill is undoubtedly a carefully considered bipartisan proposal, it is hard not to conclude that it is an unfinished product aimed at sparking action on this issue rather than just a final proposal, after seeing statements from Banking Committee Chairman Brown and Senator Warren’s latest letter on anti-money laundering.
US regulators have repeatedly focused on the negative impact of blockchain and digital assets. While this bill is far from perfect, it is a refreshing recognition that there is a path forward for digital asset regulation, seeking to harness its advantages while limiting its risks. If the introduction of this bill can reignite the opportunity for progressive legislation this year, it will help maintain US innovation, support the US dollar, provide much-needed new buyers for Treasury securities, and promote the use of public blockchains. However, considering the calendar and the political situation, we believe the likelihood of this bill becoming law this year is 20% or lower. – Alex Sohn and Lucas Cheyan
Lido Adds 72 New DVT Node Operators
The number of Lido node operators has nearly doubled, increasing from 37 to 109, with 72 new operators added. On Tuesday, April 16, 2024, Lido DAO announced the official launch of the “Simple DVT Module” for the Lido protocol. This module is a subset of Lido node operators and will run Distributed Validator Technology (DVT) to enhance the decentralization and security of Lido. For more information on DVT and the Simple DVT Module, listen to this episode of the Infinite Jungle podcast. As previously highlighted in the Galaxy Research newsletter, the launch of the Simple DVT Module was approved through a governance vote of LDO tokens organized by Lido DAO in November 2023. Two DVT software providers, Obol and SSV, were selected to test and deploy the module.
After months of testing, the first batch of 10 Obol DVT node operators (NO) clusters are now live on Lido. All new ETH deposits into Lido will automatically flow to Obol DVT NO, and Lido stETH token holders will start earning rewards through these operators. In the coming weeks, an additional 14 Obol DVT NO clusters (approximately 98 NO) are awaiting deployment on Lido. Furthermore, there are several SSV DVT NO clusters waiting to be activated starting in May. According to a blog post by Lido DAO on Tuesday, the Simple DVT Module will add a total of 250 net new NOs from Obol and SSV, which means a 676% increase in the number of Lido’s NOs.
Considering that DVT is a relatively experimental staking technology being used for the first time by Lido, Lido DAO voted to limit the amount staked through the Simple DVT Module to 0.5% of the total ETH staked in Lido. As of the time of writing, 0.5% of the total ETH staked in Lido equates to approximately 46,683 ETH or $143 million. Lido DAO will evaluate the performance of the validators managed through the Simple DVT Module in the coming months. Based on the data, LDO token holders can vote to increase the limit and add more NOs to the Simple DVT Module.
Our Take:
The launch of the Simple DVT Module marks the first large-scale implementation of DVT on Ethereum. This is undoubtedly an important milestone for DVT software providers like Obol and SSV, as well as Lido DAO, which has long been committed to decentralizing its node operator set. With the addition of 72 new Obol DVT NOs and another 110 NOs in the pipeline, along with at least 68 SSV DVT NOs, the number of Lido’s NOs is expected to grow by nearly 700% in the coming months. Although the staked amounts managed by these new NOs are still limited and relatively small compared to the total ETH staked in Lido, it represents a significant step towards the decentralized adoption of DVT and the Lido protocol.
It is important to monitor the performance of the NOs in the Simple DVT Module compared to the curated Lido staking module, which manages 99.5% of the ETH staked in Lido. According to the latest testnet metrics, Obol DVT NOs have surpassed the minimum success criteria set by Lido DAO, with uptime over 95%, block proposal success rate over 70%, and effectiveness reaching 80%. If Obol DVT NOs can maintain these levels on the Ethereum mainnet in the coming months, Lido DAO members will soon propose a governance proposal to increase the module limit from 0.5% to 2%, expected to be implemented before the end of this year. Additionally, based on the seamless operational performance of the Simple DVT Module, particularly in terms of reward accumulation and stETH redemption, there may be increased support and discussion for proposals to launch other types of experimental staking modules, further enhancing the flexibility and decentralization of the Lido protocol. – Kristen Kim
Weekly Chart:
On March 31, 2024, the number of daily active addresses (DAA) using famous Ethereum Layer 2 (L2) reached a new all-time high of 1.9 million. By April 18, 2024, the number of daily active addresses was 1.34 million. The following chart shows the daily active addresses of Arbitrum, Optimism, zkSync Era, Linea, Base, Scroll, and Zora, categorized by addresses appearing on a single L2 per day and addresses appearing on multiple L2s per day. Although the total DAA on these networks has declined by 44% compared to the all-time high over the past three weeks, the proportion of DAA using multiple L2s is close to the historical high.
Daily Active Ethereum Layer 2 (L2) Addresses – Chart:
The chart below highlights the share of L2 DAA appearing on multiple chains per day. By April 18, 2024, nearly a quarter of observed L2 DAA (306,000 addresses) were seen on multiple chains. This excessive activity of L2 addresses can be attributed to cross-chain speculation and the flow of airdrops mining bridges that support users between L2s. It also reflects the fragmentation of cross-L2 use cases, where certain L2s may offer applications or functionalities that are not provided by other L2s, forcing users to transfer between different chains to meet their needs.
Share of Daily Active Ethereum Layer 2 (L2) Addresses Using Multiple L2s – Chart:
Other News:
Avraham ‘Avi’ Eisenberg convicted for exploiting a mango market worth $110 million.
Rune speculation leads to an increase in Bitcoin transaction fees.
ByteDance’s tech division partners with Sui developers to create web3 games and social networks.
Worldcoin to launch its own Layer 2 blockchain called Worldchain.
Bored Apes hit a new low in floor price, dropping over 90% from the all-time high in 2021.
Hong Kong regulator approves launch of spot Bitcoin and Ether ETFs.
Solana releases a patch to mitigate ongoing network congestion issues.
EigenLayer removes LST cap, allowing LST to be re-staked.
Tags:
2023 Market
DAI
Lido
MKR
SOL
Ethereum
Halving
Bitcoin
Stablecoins
Source Link:
https://news.marsbit.cc/20240422223448169442.html
Disclaimer: The views expressed in this article solely represent the views of the author and do not constitute investment advice.
Original Article Link: https://www.bitpush.news/articles/6634872
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