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.
Within a short period of time, the “metaverse” evolved from a niche term to the buzzword of the year. Facebook, newly known as Meta, and other tech giants such as Microsoft are now staking their claim to it. According to the definition, the metaverse is a virtual space accessible via the Internet in which various interactions can take place, thus forming a virtual universe of its own. The term describes the gradual shift of our reality into the digital realm – a process that began a decade ago with the introduction of social media. The metaverse already encompasses broad parts of today’s Internet and is often associated with immersive technology such as virtual reality (VR), augmented reality (AR) and virtual alternate worlds. But cryptocurrencies and non-fungible tokens (NFTs) also have a place in the metaverse. A digital form of money and blockchain-backed proof of ownership will become essential when significant parts of the economy transition to the digital world.
Just over six months ago, El Salvador made history when the small South American country introduced Bitcoin as legal tender. It was a previously unseen decision that was just the beginning of President Nayib Bukele’s Bitcoin strategy. A few weeks later, the state announced a tax exemption on Bitcoin profits for foreign investors. Now Bukele wants to launch a geothermal-powered Bitcoin city, which will be backed by $1 billion in funding. The funds will be covered by 10-year bonds to be issued by El Salvador next year using a sidechain of the Bitcoin network. It will be interesting to see if the president’s strategy can help the country achieve greater prosperity.
Blockchain technology is opening up new worlds in the digital space. However, the advantages of decentralized architecture come at the expense of scalability. The current broad user growth often leads to transaction congestion in the most popular public blockchains, resulting in excessive transaction fees. Due to the blockchain trilemma, the properties of scalability, decentralization, and security cannot be increased arbitrarily. An overview of the scalability problem of traditional blockchains and potential solutions.
As part of the “London” upgrade of the Ethereum Blockchain, a new charging mechanism was introduced in August through EIP-1559. This “burns” a portion of the network’s transaction costs, resulting in a decrease in the total amount of Ether supply. To date, the implementation of EIP-1559 has already burned one million Ether worth over $4 billion, resulting in a 62% reduction in the annual inflation rate. Combined with the upcoming shift to proof-of-stake, the cryptocurrency could soon become deflationary. Forecasts predict a reduction in issuance to -3.2% per year once the switch to Ethereum 2.0 is completed.
In addition: Another traditional financial services provider in Switzerland introduces a comprehensive offering for cryptocurrencies. VZ VermögensZentrum’s core offering includes asset management, retirement and estate planning for private individuals, and insurance and pension fund management for companies. The range is now being expanded to include digital assets through a partnership with crypto bank Sygnum.
Selected articles in the weekly review:
The metaverse is not a single video game, but it will create its own digital reality that transcends today’s Internet.
In El Salvador, a volcano-powered “Bitcoin City” will be partially funded by a government-issued, dollar-denominated, Bitcoin bond.
To ideally serve users with diverse use-cases, blockchains need to overcome the scalability problems of decentralised networks.
The burning mechanism that was introduced as a part of the Ethereum London upgrade in August has now destroyed more than one million ETH.
VZ VermögensZentrum is expanding its range of services and products involving digital assets in cooperation with crypto bank Sygnum.
