The Weekly Roundup: BAYC "Breaks" Ethereum, Okay Bears Run Solana, and Goldman Issues BTC-Backed Loan
It was a red wedding for all major coins
XinFin (XDC) was our biggest mover of the week, rising a little over 7 percent
XinFin is a hybrid network that uses Xinfin Digital Contracts (XDC) and elements of both private and public blockchains to connect people and companies from around the globe while minimizing transaction cost, increasing transaction speeds, and using significantly less energy (via XinFin.org).
The network runs on a modified proof of stake mechanism, making it free of mining to create those improvements
THE BITCOIN LIGHTNING NETWORK
Last week we discussed Layer 1 (L1) vs. Layer 2 (L2) networks, so this week, we’ll be taking a deeper dive into an L2 network: Bitcoin Lightning.
Bitcoin Lightning was created because even though Bitcoin was the largest coin by market cap, it couldn’t really be used as an every-day money. This was primarily due to the large transaction costs caused by the Proof of Work (PoW) algorithm, which we’ve discussed extensively in this newsletter. For example, if you’re trying to use BTC at the grocery store, in the pre-inflation era, at least, the transaction fee would be more than your grocery bill and take ~10 minutes to validate.
Bitcoin Lightning lowers transaction costs in a few ways. The first is that it works essentially like a bar tab (thanks CuriousInvestor on YouTube for the analogy). One of the reasons you’d open a tab at a bar from the bar’s perspective is that instead of charging you for each individual drink and eating the credit card fee each time, they charge you for all your drinks when you close out, so they only pay the fee once. The Bitcoin Lightning works like an automated, web3 version of the bar tab system. The parties are pre-charged some amount of BTC to enter into a transaction. Transactions are recorded between parties but not broadcast to the network. Then, once they are, the transaction fee is distributed among the parties, allowing multiple transactions to only pay the cost of one transaction on the actual Bitcoin network.
To implement this, there are a few additional safeguards and optimizations to implement this system trustlessly. The most significant one can be thought of like this: every drink you bought before you closed out your tab can also be considered a valid transaction. So if you were somehow to transmit that to the real Bitcoin network, you’d be able to access funds you shouldn't have. The Bitcoin Lightning network implements a game theory solution to this problem. In that case, the other side of that transaction has a special key that lets them prove it’s an intermediary transaction within 24 hours and take all of the other user’s pre-charged BTC they initially offered up as part of the transaction. In this way, the Bitcoin Lightning network de-incentivies cheating the system and enables the significant speed increases and cost decreases.
BAYC STARTS GAS WAR
World-leading NFT collection Bored Ape Yacht Club (BAYC) launched its metaverse project Otherside on Saturday night. People could use the NFT collection’s native token ApeCoin ($APE) to purchase one, or several, of the 55,000 plots of land made available within the Otherside Metaverse. Each specific plot was sold as an NFT under the name Otherdeed and could be bought for 305 $APE (approximately $7K).
(via NFT Culture)
The project sold out and had netted approximately $320M come Saturday night (via CoinDesk). As the company behind the project, Yuga Labs, stated in a lengthy Twitter thread, “this has been the largest NFT mint in history by several multiples.”
Although the project was a huge success for Yuga Labs, some customers were frustrated, to say the least, by the insane Ethereum gas prices as a result of the increase in transactions. Known as a “gas war,” users were competing by spending more ETH to have their transactions processed at the top of the miner’s queue, which kept driving gas prices even higher. Blockchain data found from Reddit user johnfintech showed that one person paid up to $14K to mint an Otherdeed, approximately double the mint price of the NFT itself.
One can wonder if Ethereum is a scalable network for large-scale NFT projects. Solana, which charges much lower transaction fees, shut down temporarily a couple of times throughout the weekend due to a sudden uptick in volume due to a separate NFT collection, something we will talk about in the next section.
OKAYBEARS IS MORE THAN OKAY
Okay Bear #7869. You can browse the full collection here.
Okay Bears, a Solana-backed NFT collection, sold ten thousand bears for 1.5 SOL (roughly $150) each during its public mint on April 26th.
A few days later, the floor price, or minimum amount you could purchase a bear, rose as high as $18k. By Sunday night, the collection’s floor dropped to a more reasonable, relatively speaking, $8k. Regardless, safe to say you would’ve been in a great position if you managed to buy one during its initial mint for $150.
Okay Bears’ launch will go down in the record books of NFT sales as the bears broke the 24-hour sales volume record for Solana-based NFTs, toppling more than $18.4M. Additionally, the project sat atop OpenSea, which mainly includes Ethereum projects, for 24 hours as well and still stands in the top ten in terms of sales volume come Sunday night.
Last week, we wrote about OpenSea introducing Solana-backed NFTs to their platform. If anything, Okay Bears validates the company’s move and signals bright days ahead for future Solana projects on the platform.
Even if you did not manage to buy a bear, as Okay Bears’ slogan reminds us, “We’re all gonna be okay.”
GOLDMAN SACHS ISSUES FIRST CRYPTO-BACKED LOAN
While a relatively simple action—Goldman Sachs issued its first loan backed by Bitcoin this week (via B2C). It’s unsurprising given Wall Street’s bullish attitude towards cryptocurrencies in recent months. Still, it is a full u-turn from comments like calling Bitcoin “a vehicle to perpetrate fraud” from former Goldman CEO Lloyd Blankfein in 2017 (via B2C).
Given a default on this loan, Goldman would add even more BTC to its balance sheet. While we know nothing about the terms of the cash loan and suspect that they reflect Bitcoin’s recent price volatility, it’s still another step to the universal adoption of cryptocurrencies. To many Bitcoin hardliners who are betting on the collapse of the global financial system, this may seem insignificant, but cryptocurrencies’ integration into the traditional financial system will continue to build an on-ramp for more skeptical investors. Bullish.
BAYC launched its metaverse project through the selling of their Otherdeed NFTs. Huge success for Yuga Labs and a huge annoyance for Ethereum transactors during the time frame of the drop
Okay Bears broke all previous 24-hour Solana sales volume records. It’ll be interesting to see if the project it will be able to reach greater heights. You can keep track of the project through their discord.
Goldman issued its first loan backed by Bitcoin, further integrating cryptocurrencies into the financial system. The Wall Street banks have come to stay in the crypto sphere.
Meme of the Week (via CryptoMemes)
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.