What happened this week around blockchain and cryptocurrencies? The most relevant local and international events as well as appealing background reports in a pointed and compact weekly review.
Selektierte Artikel der Woche:
Since the successful Merge, the Proof of Stake (PoS) consensus algorithm has secured Ethereum, the largest smart contract network. Consensus algorithms play a central role in the security and stability of decentralized systems, allowing for decentralization and ensuring that all network participants act on a common information basis. With a Proof of Stake (PoS) algorithm, validators provide pledged cryptocurrencies (referred to as “stakes”) instead of computing power. In return, “stakers” receive native token payouts as well as network transaction fees. In Ethereum’s case, each validator requires a minimum of 32 ETH, currently valued at over $60,000 USD. However, the rules after the merge required validators to lock up their ETH and rewards until a later chain update. This long-awaited network upgrade occurred this week in the form of the Shapella Upgrade, completing Ethereum’s transition to Proof of Stake. The native cryptocurrency Ether (ETH) is now a productive digital asset with estimated returns ranging from 4-10% p.a.
The Shapella upgrade (Shanghai & Capella) allows stakers to withdraw their Ether (ETH) and further prepares the network for sharding.
The term Decentralized Finance (DeFi) refers to a blockchain-based financial system that enables peer-to-peer transactions without the need for traditional intermediaries such as banks. This alternative financial system offers users more control and transparency over their assets, as well as the ability to earn interest and participate in various decentralized applications. DeFi has significant potential, including providing access to the financial system for millions of people without banking relationships. However, like any technology, decentralized financial applications can also be used for illegal activities such as money laundering and other forms of financial fraud. The US Department of the Treasury highlights these risks in the first risk assessment of the DeFi sector, taking a very critical position on the industry and recommending that regulators implement stricter KYC/AML requirements. They make clera that decentralization should not protect against regulation.
In a study, the U.S. Treasury Department identifies significant risks related to illicit financial flows via DeFi applications.
Crypto custody refers to the secure storage and management of digital assets. This is important because digital assets, unlike traditional investments, are not physically tangible and can be easily lost or stolen if not stored properly. On one hand, crypto veterans advocate for responsible self-custody, which allows for unrestricted control over one’s assets. On the other hand, third-party custody solutions provided by banks or crypto service providers generally offer higher security. For market participants, it’s simply a matter of weighing the pros and cons. An overview of the different options available.
Crypto custody refers to the secure storage and management of digital assets such as cryptocurrencies. An overview of different solutions.
One of the biggest challenges in scaling blockchains is the limited processing capacity for transactions, leading to slow transaction speeds and high fees during periods of high network traffic. This is because each transaction must be verified and added to the blockchain, which can take time and computing resources while maintaining decentralization. Layer 2 solutions are technologies that build on top of blockchains as a secondary layer and address this issue. “L2s” process transactions off the blockchain and then settle them periodically on the underlying network, reducing congestion and increasing network throughput. Various scaling solutions operate on different technologies, with “zkEVMs” being considered the holy grail of Layer 2 platforms.
With the launch of the first zkEVMs we analyze the bridging activities from zkSync and Polygon to Ethereum to provide an overview of the adoption.
Additionally: As financial actors, crypto service providers (also known as Virtual Asset Service Providers, VASPs) are subject to the guidelines of the Financial Action Task Force (FATF) – an international institution that sets standards for combating money laundering and terrorist financing for member states. In the context of crypto transfers, VASPs are required to verify the identity of every party involved in transactions, even when transferring to a self-custodied (unhosted) wallet. Compliance specialist 21 Analytics provides an overview of the various verification methods that crypto service providers can use to comply with regulations.
Virtual asset service providers (VASPs) can use various wallet ownership verification methods to comply with FATF guidelines.
