#7: The Battle Over Blockspace ⚔️
Newsletter Content:
📰 Main Topic: Bitcoin Network - Use Cases
📈 Quote + Weekly Price Recap: See Below
🚨 Top Stories: Solana App Store / Visa Testing ETH Settlement / Russia Biggest Bank in DeFi / GTX Funding / Samsung Metaverse Hardware
📖 Thread / Read of the Week: Why I Quit My Job at Google to Work In Crypto - Shivsak
📊 Visual of the Week: Average Cost Basis of Staked ETH
🔭 Week Ahead: Fed Chair Powell / Corporate Earnings
Bitcoin was created solely for the purpose of decentralizing payments and creating a peer to peer financial system. Satoshi Nakamoto (the anonymous creator) designed the network to accomplish only this - a main reason Ethereum and many other “alts” have emerged.
Some of these alts allow for decentralized applications and other innovations to be built on them through smart contracts. Others have launched to power a specific ecosystem, DAO or community.
These networks all have different characteristics in terms of transaction speed, security, level of decentralization and use case.
Utilizing a change from a recent network upgrade, a developer was able to “mint” an NFT (called “digital artifact” in this case) on the Bitcoin blockchain for the first time this week. This has caused controversy around the Bitcoin community.
While this debate may not interest the average person, there are important fundamentals and lessons that can be learned by looking into the details
Blockspace refers to the capacity of a blockchain to store information and run code. Every transaction that occurs on the blockchain takes up a little bit of this space to a varying degree. For example, deploying a smart contract or minting an NFT will consume a lot more blockspace than a simple money transfer. Bitcoin was not designed for these complex transactions.
An easy comparison to make is between the congestion of the blockchain and traffic.
Blockchains can process transactions quickly and efficiently when conditions are normal, just as it is easy to drive around in normal conditions. However, when lots of people are transacting on the Bitcoin network, or many people are engaging in higher capacity transactions, this will look more like being stuck on the highway during rush hour.
If this transportation route was not designed to accommodate the amount of drivers in an area or the type of driver (trucks etc.), then many problems would arise within this “network”.
The two sides of this argument:
1️⃣ Bitcoin should only be for payments:
As the first-mover in the space, Bitcoin has a longstanding and passionate community behind it. Additionally, being a decentralized network has allowed Bitcoin to be community-driven and many of its supporters feel it is the only cryptocurrency that should exist.
Main argument: Other use cases crowd the block space and make payments slower and more expensive for participants. Satoshi did not intend for other use cases.
2️⃣ Bitcoin should explore allowing multiple use cases:
The emergence of digital artifacts has brought a lot of attention to Bitcoin and has gotten new people to explore the network. Some people are excited by the possibilities that new use cases could bring. Others are happy to see the network generating more fees, specifically those invested in the coin or the miners themselves.
Main argument: More use cases = more transactions = more network fees / revenue + attention
Quote of the Week:
“Live as if you were to die tomorrow. Learn as if you were to live forever.” - Gandhi
Price Performance:
Top Stories:
NFTs Coming to Bitcoin Sparks Handwringing About Crypto Purists (Bloomberg)
Russia’s Largest Bank, Sberbank, Aims to Launch a New DeFi platform by May (Coin Telegraph)
Sberbank holds 1/3 of the banking assets in Russia so this is a significant headline. It will be Ethereum-compatible and usable with Metamask, which is the most popular self-custodial wallet.
Visa Testing Settlement of USDC Transactions on the ETH blockchain (Blockworks)
This is a big step forward for legitimizing digital currency. This quote really amplifies the mission:
“The same way that we can convert between dollars in euros on a cross-border transaction, we should be able to convert between digital tokenized dollars and traditional dollars."
Note: USDC is a digital stable coin that is pegged to the U.S Dollar and is fully backed 1:1 by Circle, a company who is headquartered and regulated in the U.S
Solana Unveils App Store for Their “Saga” Phone (The Defiant)
Solana opens up an app store on their new Saga phones, a push to get their network into the hands of the masses for adoption. The problem with this is that no one is buying their phone, so providing the owners with an app store doesn't strike me as something that would entice too many people to buy it.
Or maybe it does?
This leaves us with something to note for all crypto+blockchain projects: Understand what is being sold, look at the non-blockchain competition for this industry, and determine whether there's a chance that someone can infiltrate the industry or not.
IF I was a betting man, I'd bet that one of the major phone makers will open up their own dApp store before the Saga Phone infiltrates the wider phone market.
Kyle Davies & Su Zhu Successfully Raised $25M for Their New Venture - GTX (Arthur Hayes)
Samsung is Teaming Up With Google & Qualcomm to Build New Metaverse Hardware Devices (Tech Crunch)
Interesting story here, companies are continuing to attack the potential of the metaverse. However, their approach is becoming more nuanced.
Before there's a mass adoption of metaverse exploration by the public, there needs to be trustworthy tech that not only provides users with a good experience, but also properly interacts with other devices.
Thread / Read(s) of the Week:
Visual of the Week:
This Week Ahead:
Quieter week in terms of macro - but never a quiet week in crypto:
Tuesday: FED Chair Powell is speaking at a conference
Friday: Consumer Sentiment Info
Many more corporate earnings out this week as well.
Here are some definitions from terminology used above:
Alts: Refers to any crypto other than Bitcoin / Ether
Smart Contracts: Self-executing agreements that execute, control or document events when certain conditions are met
Mint: When a new token or NFT is brought into existence and recorded on the blockchain (think of minting new currency)
DAO (Decentralized Autonomous Organization): Corporation whose rules are encoded in computer code and who is controlled by its members
Miners: The equivalent of stakers/network validators for the Bitcoin network that generate a fee by verifying and broadcasting transactions
Dapp: Decentralized application
Appreciate you reading - enjoy the week!