Ethereum Merge Maneuvers | Binance Shakes Up Stablecoin Competition

ETHEREUM’S BIG SWITCH DRAWS NEAR

The blockchain’s most anticipated upgrade, dubbed the Merge, entered its first phase called Bellatrix on Tuesday. If all goes well, around September 15 Ethereum will shift to the proof-of-stake method of securing the network from the much less efficient proof-of-work approach. The transition will also solidify ether, Ethereum’s native cryptocurrency, as a yield-bearing asset (the network’s validators currently earn about 4.2% annually) and is expected to reduce ETH’s issuance, coincidentally also by 4.2% a year, improving the asset’s prospects as a store of value. Some investors are calling the event “the most significant catalyst in crypto history” due to its scale and consequences for the second-largest cryptocurrency by market capitalization.

All major crypto exchanges, including Binance, Coinbase, Kraken and FTX, announced that they plan to briefly pause deposits and withdrawals for ETH and Ethereum-based tokens at various points during the Merge, though spot trading will largely remain unaffected. ”    

MINERS TURN TO CLOUD, AI 

Meanwhile, Ethereum miners, left with a lot of specialized computer gear that will no longer be useful in the network’s maintenance, are turning to cloud computing and artificial intelligence. Publicly traded miner HIVE Blockchain said Tuesday it had started testing a portion of its Nvidia graphic processing units (GPUs), previously used to mine ether, in cloud computing at a large data center. Another Canadian crypto miner, Hut 8, announced that in late August it had installed 180 Nvidia GPUs in its data center in Kelowna, British Columbia, to repurpose them for providing “artificial intelligence, machine learning or VFX rendering services to customers” on demand. Analysts predict that the likely outcome of a successful Merge is that GPUs will flood the resale market as alternative proof-of-work coins will only remain profitable for a small number of miners with access to cheap energy.

Source: Forbes Digital Assets, powered by Nomics.  Prices as of 4:00 p.m. on September 9, 2022.

WHITE HOUSE SOUNDS OFF ON CRYPTO MINING

The White House announced on Thursday that crypto mining operations in the U.S. are on track to consume as much energy as all the nation’s home computers, necessitating formalized measures for curbing the industry’s power demands. A new report issued by the White House Office of Science and Technology Policy (OSTP) addressed environmental concerns that industrial-scale crypto miners could strain local and federal energy grids and undermine global climate change efforts. As a result of its findings, the OSTP recommended that mining operations should be regularly assessed for risk in accordance with federal energy standards and that these companies should additionally make their data available to regulators. Miners are unlikely to be happy with the latter suggestion, as some companies have sought to redact information about power purchase agreements and energy usage, even when doing business with public utilities.

The report comes as a result of a March executive order in which President Biden directed OSTP and other agencies to examine the likelihood that crypto mining could “impede or advance efforts to tackle climate change at home and abroad.” In response to Biden’s order, OSTP asked crypto stakeholders to provide their input on how the sector can avoid or mitigate climate harm.

BINANCE TO CONVERT USDC INTO ITS OWN STABLECOIN

The world’s largest crypto exchange wants its customers to transact with its own stablecoin over rivals. The company said on Monday it will automatically convert existing user balances and new deposits of dollar-pegged stablecoins like USD Coin (USDC), Pax Dollar (USDP) and TrueUSD (TUSD) into Binance USD (BUSD). The conversion is scheduled to begin on September 29. Notably absent from the list was Tether, the largest stablecoin in circulation. Binance did not specify the reason for not including the asset, but Tether’s representative told Bloomberg, “The consolidation of stablecoins on one of the world’s most active exchanges foreshadows future competition among stable assets.”

Though initial headlines speculated whether the move is a power grab raising questions over Binance’s monopolistic behavior, Jeremy Allaire, CEO of USDC issuer Circle, took to Twitter to argue that the change is actually good for both USDC and overall market liquidity.

SWISS CRYPTO ETP GIANT CLAIMS $2 BILLION VALUATION

Swiss fintech firm 21.co, which numbers Ark Invest’s Cathie Wood among its owners, raised $25 million in a funding round that the parent of the world’s largest issuer of crypto-focused exchange-traded products (ETPs) said brings its value to $2 billion. The round was led by London-based Marshall Wace and included contributions from Collab+Currency, Quiet Ventures, ETFS Capital and Valor Equity Partners. The Zurich-based company–which also owns Amun, a token provider focused on accessibility to decentralized finance–will use proceeds to expand its product line and move into new regions like the Middle East.

BLOCKCHAIN 50 SPOTLIGHT

Visa: The credit-card giant has partnered with more than 60 crypto platforms including FTX, Coinbase and Binance to make it easy for people to spend digital currency through crypto-linked cards. All 80 million of Visa’s merchants now effectively accept crypto as payment, with the funds automatically converted to fiat currency before they receive it. While crypto transactions can be expensive, Visa leaves that headache to its partners, which charge as much as 2.5% in Coinbase’s case.  

ELSEWHERE

Coinbase Employees, Ethereum Supporters Sue U.S. Treasury [Axios]

GameStop’s FTX Partnership Draws Wave Of Retail Trader Buying [Bloomberg]

Crypto Lender Celsius Looked A Lot Like A Ponzi, Says State Regulator [Financial Times]  

Nina Bambysheva
Reporter
Forbes Money & Markets

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