What has been happening around Blockchain Technology and Cryptocurrencies this week? The most relevant local and international developments as well as appealing background reports in a pointed and compact weekly review.
One of the dominant macroeconomic questions is whether we should expect rising inflation figures going forward. The first signs of a potential inflation problem are signaled by tightening employment conditions combined with rising global producer prices. If inflation picks up sustainably, it will be difficult for central banks to exit their unprecedentedly loose monetary policy without causing market turmoil. The original conceptual idea of Bitcoin providing inflation protection is now being reflected by increasing investor participation. Data suggests that the digital currency is beginning to fulfill the role of an inflation hedge. The correlation between Bitcoin and the inflation rate is now showing a higher correlation than the traditional inflation hedge, gold.
Microsoft wants to counter commercial software piracy with a transparent incentive system. A new blockchain technology-based approach, aims to curb illegal trade in the future. With the Ethereum-based Argus system, cryptographic watermarks are created that enable the traceability of pirated content back to the source. Normally, this process would require thousands of Ethereum transactions. However, researchers have optimized the system to reduce a piracy report all the way down to sending just a few ETH transactions.
For the storage and handling of cryptocurrencies, so-called wallets are utilized. Meanwhile, the digital wallets also serve for the usage of DeFi and NFT platforms. In a detailed basic knowledge article, we go into the functionalities and the different types of wallets. The ease of use, as well as the security, differs depending on the application and the intended use. A wallet stores a user's private key. When a transaction is initiated, the wallet creates a digital signature based on this key. Private keys and seed phrases must therefore never be publicly accessible. They are the only way to access the distributed values in the blockchain.
While Bitcoin will soon be introduced as an officially recognized means of payment in El Salvador, institutional adoption of the cryptocurrency as a method of payment is also on the rise. Several consumer companies have now announced that they will accept the digital currency for payments. AMC Entertainment is planning a bitcoin payment option for movie tickets, while popular sandwich chain Quiznos will soon enable bitcoin payments. Even leading US mortgage lender United Wholesale Mortgage (UWM) has announced plans to offer crypto options for mortgage payments as early as this year. This week, Dutch professional soccer club PSV Eindhoven also announced it would allow sponsorship payments to be made in Bitcoin.
In addition: Until now, crypto brokers in Switzerland could transfer cryptocurrencies not exceeding the value of CHF 5,000 directly to their customers' wallets without an extensive KYC check. The Swiss regulator now wants to drastically reduce this limit. While Switzerland is one of the leading countries in terms of regulatory clarity when it comes to dealing with cryptocurrencies, the reduced KYC exemption could have an impact on the attractiveness of the jurisdiction. The new regulation further creates a legal distinction between cryptocurrencies and traditional currencies, as for the latter the limit remains at CHF 5,000.
Selected articles in the weekly review:
Bitcoin's conceptual inflation protection is increasingly being reflected.
A cryptographic watermark is intended to enable the traceability of pirated content back to the source.
An introduction to the different types of crypto wallets and their functionalities.
Bitcoin is achieving expanded institutional adoption as a means of payment.
The Swiss Financial Market Supervisory Authority creates a legal distinction between cryptocurrencies and traditional currencies.
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