Ethereum 2.0 Coming Soon
Market Movers
The largest coins by market cap rallied this week, led by Ethereum rising almost 14%
Shiba Inu (SHIB), our pump coin of the week, rose just south of 41%.
SHIB, a memecoin who labels itself the “Dogecoin Killer,” has gained popularity since its inception in 2020 through its cult-like following and backing from influential people such as Elon Musk
First Sip
WRAPPED COINS
If you’ve traded on OpenSea, you’ve probably seen some offerings listed in Wrapped Ethereum (WETH), but what does the “wrapped” part of wrapped coins mean?
To understand this, we need to zoom out to understand the broader web3 ecosystem. Projects that are creating their own tokens built on their own blockchains do not have interoperability in mind. The created token is simply supposed to work on the blockchain it is native to. Then, what if you want to use your Bitcoin on the Ethereum blockchain without converting it to Ethereum or vice versa? This is the gap that “wrapped” tokens fill. Now, if you want to use your Bitcoin on Ethereum then just convert it for wrapped Bitcoin (wBTC), which is ERC-20, the Ethereum token standard, compatible.
In most cases, you send your crypto, BTC, for example, to the wrapping contract, which then sends you the wrapped coin back, wBTC in the example case. What’s important about this is that wrapped coins are typically backed 1:1 to their underlying asset. You can always swap back your wrapped coin back for the original coin at a 1:1 ratio minus fees. Popular options for swapping include Uniswap (which we discussed in last week’s newsletter) and AirSwap.
Table Talk
ETHEREUM 2.0 COMING SOON
A much-anticipated phase of the Ethereum 2.0 upgrade is near.
Anthony Sassano, a trusted crypto “educator” dedicated to following and reporting on Ethereum, tweeted out mid-week that an Ethereum upgrade is tentatively set for September 15th and 16th (via Twitter). This comes after the successful merge of Ethereum’s Goerli testnet on Wednesday, which is the final step before the official mainnet merge (via CNBC). The move would mark completion of the second phase of Ethereum 2.0, known as “the Merge.”
The second phase would be highlighted by the changing of a couple of main features in regards to the network’s infrastructure, most notably, the switch from a proof-of-work (PoW) mechanism to a proof-of-stake (PoS) mechanism. Aka no more miners.
The overall upgrade, which is set to have one more phase and be fully complete by 2023, “aims to enhance the speed, efficiency, and scalability of the Ethereum network so that it can avoid bottlenecks and process more transactions simultaneously” (via Decrypt).
The news had a positive impact on ETH’s price for the week as it rose 13.88 percent—the largest increase in the blue-chip coins bucket this week.
NFT Buzz
OPENSEA CHANGES STOLEN NFT POLICY
OpenSea, the world’s largest NFT marketplace (valued at over $13B in January), tweeted midweek to announce that they are changing their stolen items policy (via Twitter).
OpenSea’s previous stolen items policy halted NFTs from being bought, sold, or transferred if they were flagged by users as being stolen.
Although this method may seem reasonable on the surface, it has been met with substantial backlash from many of the marketplace’s users, who noted one main issue:
There were a heightened number of “over flagging” instances, noting items as stolen when they weren't, which often led to someone being unable to buy, sell, or send a recent NFT purchase given that it was wrongly flagged after they bought it.
OpenSea’s solution to these complaints?
Users who flag items must also file a police report within seven days of the flagging; if they do not, the hold on the NFTs will be lifted.
OpenSea, like many other web3 protocols, aims to find the perfect balance between protecting its customers from theft without compromising the user experience. The company’s recent move was enacted to align with that goal.
DeFi Demographic
TORNADO CASH SANCTIONED BY U.S. TREASURY DEPARTMENT
Earlier this week, the U.S. Treasury Department Office of Foreign Assets Control issued sanctions for well-known crypto mixer Tornado Cash (via U.S. Treasury). Tornado Cash has been linked to $7B in laundered money (via U.S. Treasury).
In a July newsletter, we reviewed a Chainalysis report on crypto mixers, which discussed crypto mixer usage and its connections to Russian and North Korean hacking groups (via Chainalysis). This action from the U.S. Treasury comes on the heels of that report and, while this does not shut down Tornado Cash’s operations, it does hinder them, especially for U.S. users/operations, as American usage of the protocol has been banned (via U.S. Treasury). This move has been met with backlash from some in the crypto community as a Tornado Cash user has rebelled against the sanctions by sending the wallets of several U.S. celebrities Ethereum from a wallet address linked to Tornado Cash (via Decrypt). The receipt of this Ethereum is considered illegal per the sanctions but is impossible to stop (via Decrypt).
Crypto mixers, though a tool for money laundering, have also been used as a privacy tool as they obfuscate owners of cryptocurrencies. Ethereum founder Vitalik Buterin has even admitted to using the protocol to privately send funds to Ukraine (via Decrypt).
Per the U.S. Treasury, interestingly, they say, “The ultimate goal of sanctions is not to punish, but to bring about a positive change in behavior” (via U.S. Treasury). Tornado Cash could be removed from the sanctions list should they comply with the U.S. Treasury’s demands which are likely to be around implementing improved Know-Your-Customer (KYC) and Anti-Money Laundering (AML) measures.
As a follow-on to this action, Dutch financial prosecutors have arrested an unnamed man with links to the protocol (via AP). We’ll be looking to see if other crypto mixers are sanctioned, especially by entities with a reach beyond the United States.
Final Cup
The “Merge” phase of Ethereum 2.0 is near. Keep an eye on the coin’s price over the next month.
OpenSea announced the changing of its stolen item policy to decrease the number of instances of NFTs being wrongly reported as stolen. One can expect that the move is not the last time OpenSea, or any other NFT platform, will have to adjust its policies surrounding thefts.
U.S. Treasury issues sanctions on American usage of crypto mixer Tornado Cash—likely the first of a series of crypto-mixer-related law-enforcement activities.
Meme of the Week (via Twitter)
Stay strong.
Pat + Ari ✌️
Disclaimer: None of this is investment advice, financial advice, or trading advice. CRYPTOPONG does not endorse any of the cryptocurrencies, DeFi applications, or NFT collections mentioned in this article. Perform your own due diligence and/or consult a financial advisor before investing. All of the opinions expressed here are our own unless cited otherwise.