Crypto Crash Stokes Some Financial Crisis Fears

TLDR: Deals are potentially being repriced or crumbling apart, and even founders are being “ghosted” by prospective investors; Or how else could the downfall of TerraUSD lead to a decline in venture capital investment?

The past week has unquestionably been one of the most difficult in cryptocurrency history, showing clear patterns of exaggerated and irrational fears. The entire cryptocurrency market, which peaked at $3.1 trillion in November, has now dropped to $1.3 trillion as of Monday night, with Bitcoin’s price falling by more than half from its all-time high in November. This resulted in increased liquidations and a drop in funding rates to levels not seen since July. Over the last several years, a tremendous amount of money has poured into the crypto sector via venture capital firms. TerraUSD itself has benefited from a number of brand-name investors. Many of the firms that have invested in the industry are likely to suffer significant short-term losses, resulting in a decline in venture investment. Currently, Terra’s significant investors are being forced to choose whether to assist bail the project out or abandon it.

This is a frequent argument in the crypto community: Exuberance may lead to the creation of numerous new projects, some of which might be questionable or downright fraudulent — downturns can help wring out excesses. Many experts in my network aren’t detecting any signs of contagion from the crypto crash yet which might expand to the overall economy and bury venture investments.

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Panic-Driven Crypto & Stablecoin Regulation Would Create Further Instability

TLDR: It’s critical not only to preserve entrepreneurs from government overreach but also to limit the volatility that results from it.

The stock and cryptocurrency markets have both taken a dive in reaction to the tumultuous events of the last few weeks. While this downturn is worrisome for many, it has bolstered forward-thinking politicians and activists who advocate for “never let a crisis go to waste.” Critics of bitcoin have doubled down on their calls for stringent regulation. They have latched on to the problems facing stablecoin TerraUSD (UST), which has plummeted from its $1 peg to around 8 cents. However, there are a few things to bear in mind before we get carried away with fear-driven legislation. One is that TerraUSD appears to be an outlier among stablecoins — cryptocurrencies that are linked to real assets like the dollar — and the majority of the leading stablecoins have thus far maintained their value. Arbitrary regulatory clampdowns in the United States have previously had negative consequences for the cryptocurrency industry. When the U.S. Securities and Exchange Commission (SEC) issued a warning about potentially severe penalties for cryptocurrencies as an asset class in January and February of 2018, Bitcoin’s price dropped by 36%.

In uncertain and volatile times, which have been mostly caused by government spending, shutdowns, and lockdowns of businesses, it’s more essential than ever to avoid adding more chaos to the cryptocurrency or any other sector with broad and unstructured regulation. Instead, lawmakers must devise regulatory systems that emphasize disclosure and fraud prevention and punishment but that nonetheless allow consumers, businesses, and investors to make their own decisions and assume their own risks.

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DeFi-ing Exploits: New Chainalysis Tool Tracks Stolen Crypto Across Multiple Chains

TLDR: Busted! With the new feature, you can identify and prevent cryptocurrency-based crimes by interpreting smart contracts and classifying common transaction types.

With an ever-changing picture, DeFi and NFTs have grown to play critical roles in the ecosystem, with Chainalysis projecting two sectors to account for more than half of global cryptocurrency transactions. However, the advent of this evolution has resulted in an increase in cryptocurrency-related crimes. In 2021, DeFi protocols processed a growing number of value from illicit addresses, becoming an easy target for hackers. A year later, 97% of the $1.68 billion worth of stolen cryptocurrency was accounted for DeFi protocols. Tracing illicit transactions through DeFi networks is a problem for cryptocurrency exchanges. The complexity of these platforms, with automated smart contracts generating intricate transactions that involve multiple blockchains, makes them difficult to navigate. The ability to chain-hop, which means users may exchange or move cryptocurrencies in a single transaction, is one of the most important features of DeFi protocols. Purchasing an NFT entails a number of moving parts, including numerous smart contracts on different marketplaces.

The goal of the web3-native blockchain analysis tool is to track and visualize smart contract transactions, particularly nonfungible tokens (NFTs) and DeFi platforms. Users can utilize an early beta version of the software to construct their own story of a transaction route, starting with a transaction hash that is a unique string of characters that is given to every transaction that is verified and added to the blockchain. In many cases, a transaction hash is needed in order to locate funds Then a timeline may be formed out of notable transactions and token interactions. When it comes to cryptocurrency investigations, the software can automatically categorize typical transaction types like NFT purchases or token exchanges, as well as interpret smart contracts. Users may include linked transactions and addresses from various blockchains to help keep track of specific addresses, tokens, and transactions in order to detect and prevent crypto-based crimes.

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Norway’s Central Bank Taps Ethereum Layer 2 For CBDC Trial

TLDR: Ethereum Layer 2 technologies may help the Norwegian Central Bank Digital Currency (CBDC) to execute transactions more securely, quickly, and efficiently.

Following the technological advantage it may provide to their financial system, several nations have been revealed to be exploring CBDCs. Following its goal of becoming the world’s most cashless society, Norway’s Central Bank (Norges Bank) has been looking at the possibility of adopting a CBDC for the last five years. During Fall 2020, only 4% of spending in the country was done in cash, emphasizing a demand for a secure, attractive, and successful payment system now as well as in the future.

The transaction capacity of both Bitcoin and Ethereum networks has historically been low. An experimental Ethereum Layer 2 sandbox aims to address this problem by combining the security of the Ethereum main net with new methods to speed up and regulate transactions for Norway’s CBDC. The sandbox will include both technical and blockchain services, as well as the development, maintenance, and training of bank users and partners in the sandbox environment.

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Why Build in Web3?

TLDR: Launching products in Web3 might be considerably simpler.

Despite all of the public discussion about metaverse and hyper-financialized NFT projects, Web3, more than anything, is a substantially different method that some developers have committed to. Web3 is not based on the concept of data exploitation to make money; rather, it is based on the idea that developing open platforms that contribute value back to users will result in greater value for everyone, including the platform itself. Users own whatever digital objects they have purchased, as well as any content they have generated, in Web3, rather than platforms having complete control over the underlying data. Additionally, these digital assets are typically built according to interoperable standards on public blockchains rather than being privately hosted on a company’s servers.

As a result of all this, it may be much easier to start a product in Web3. Even an inexperienced entrepreneur may develop products that connect to an existing network without the need for permission from a prominent platform. Moreover, in Web3, users may simply rely on the code itself rather than the organization (or people) behind a project. Smart contracts have been used to execute fundraising campaigns that automatically transfer all funds received to the chosen charities, ensuring that contributors’ money is utilized appropriately even if the campaign’s organizers are completely unknown.

The future of Web3 is exciting. Technology has the potential to unleash a more valuable internet for everyone. New businesses may use Web3 infrastructure to create communities around their brands and product ideas more easily than they could in the past. Even well-established platforms can benefit from this by connecting their users to blockchain-based content networks, providing data ownership. All of this implies that the next era of the web will almost certainly be significantly different — and more open — than the one we have now.

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VezTek has been an expert in the field of innovation consulting and on-demand talent for emerging technologies like 𝐁𝐥𝐨𝐜𝐤𝐜𝐡𝐚𝐢𝐧 and the 𝐌𝐞𝐭𝐚𝐯𝐞𝐫𝐬𝐞. We build digital products for tomorrow’s technologies today.

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Sani Abdul-Jabbar

Sani Abdul-Jabbar

Sani is the Board chair at VezTek, a Los Angeles based provider of software development and on-demand tech. talent for Blockchain and Web3.0 initiatives.