GEM Digital commits $50M to ParallelChain Lab for L1 protocol development

September 22, 2022 Coin Telegraph

GEM Digital commits M to ParallelChain Lab for L1 protocol development

CeFi

As a proof-of-stake layer-1 protocol, ParallelChain intends to deliver an architecture that operates in confidentiality while allowing to validate transactions.

Digital asset investment firm GEM Digital Limited (GEM) has committed $50 million to finance ParallelChain Lab following the launch of its mainnet and native token listing, XPLL, in Q4 2022.

As a proof-of-stake (PoS) layer-1 protocol, ParallelChain aims to bridge the infrastructure divide between centralized (CeFi) and decentralized finance (DeFi). The soon-to-be-launched ParallelChain Mainnet is open source and based on a PoS consensus mechanism dedicated to maintaining a fair distribution of power.

The permissioned ParallelChain Enterprise, on the other hand, will ensure the secrecy of transactions using a patented Proof-of-Immutability mechanism. The two platforms, together, intend to deliver an architecture that operates in confidentiality while allowing to validate transactions. Speaking about the innovation, ParallelChain CEO Ian Huang stated:

“We see this solution as the answer to enterprises’ privacy and compliance demands while simultaneously addressing the need for scalability across many public applications, namely DeFi.”

GEM’s $50 million investment in ParallelChain is planned to be redirected to market expansion, community development, research and development and funding of decentralized projects and decentralized app (DApp) developers.

Showcasing the diverse interest of crypto investors, institutional crypto lending protocol Maple Finance announced its commitment of up to $300 million in secured debt financing to public and private Bitcoin (BTC) mining firms.

Today, @IcebreakerDeFi joins Maple and opens a $300M capacity pool to provide secured debt financing to blue-chip Bitcoin mining and digital asset infrastructure companies. pic.twitter.com/ZWyLV2P9hr
— Maple (@maplefinance) September 20, 2022

Mining firms from North America and Australia that meet the treasury management and power strategies standards are eligible to apply for the funding. Sidney Powell, CEO and co-founder of Maple Finance, highlighted the recent pullback from lenders, adding that:

“Miners play an essential role in growing the crypto ecosystem and local economies, and we are proud to extend a new financing vehicle to direct capital where it is needed the most.”

As Cointelegraph reported, Maple currently holds 50% of the institutional crypto lending market as measured by total loans outstanding.

Selling physical items as NFTs, explained

September 21, 2022 Coin Telegraph

Coin Telegraph

A growing number of physical items are being immortalized in NFT form. What are the opportunities here... and the challenges that need to be addressed?

Where are the challenges that face the NFT sector in the future being discussed?

Mattereum is hosting a dedicated event to discuss physical asset NFTs on Sept. 21.

The meetup begins at 6pm London time — that's 7pm in Berlin, 1pm in New York, and 10am in California.

A previous event was held in July 2022, and set out how coveted high-value assets such as red wine, fine art and real estate could benefit from Mattereum's approach to NFTs.

With an ever-growing number of blue-chip companies exploring this space, adoption among everyday consumers will continue to skyrocket. Mattereum is determined to ensure that the industry gets off on the right foot, with investor protection a number one priority.

Learn more about Mattereum

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you with all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor can this article be considered as investment advice.

What happens if something goes wrong?

Typically, disputes will end up going through the courts — but this can have mixed success.

It's easy to forget that NFTs remain a nascent technology, and this means that legal systems still lack understanding about how they work. This may mean that the nuance surrounding digital assets may get missed during civil action… but those in the lawsuit will still have to contend with hefty legal bills.

Mattereum — a new protocol that delivers transferable proofs of digital ownership — aims to do things differently. It offers its customers the legal technical capability to create Trustable NFTs for their physical assets, and legally binding mechanisms for dispute resolution that can be enforced in over 160 jurisdictions around the world. Such smart contracts establish a bond between ownership of the NFT and ownership of the physical asset, whether it's six bottles of red wine, a luxury car or a rare instrument.

While it may appear that this approach takes more time at first, it can have advantages. Offering valid authenticity documentation can significantly increase an asset's value — and boost the likelihood of a sale. It also creates a solid legal framework for the future.

What are the safeguards in place to prevent scams?

It's crucial to ensure that an asset's authenticity, provenance, condition and ownership rights can be verified — giving buyers confidence in what they're buying.

Standards across the NFT industry can help here. When the physical items that back an NFT go into a vault, it's crucial to be crystal clear on who will have the rights to take it out again. External auditors could also be tasked with assessing the background behind a transaction, and information about the condition of an item could be woven into metadata.

More than anything else, it's crucial for NFT platforms to gain a reputation for being trustworthy and credible. Not only is word of mouth a powerful marketing tool, but it can also assure consumers that they'll be in safe hands if they buy a collectible through one of these platforms.

Are there any big brands that are getting involved with physical NFTs?

Yes — and that's despite the bear market, which has seen trading volumes cool. More major companies are inevitably going to join in the future.

Nike has dominated the rankings when it comes to mainstream brands generating revenue from NFTs. Recent research shows the sportswear giant has netted a whopping $185 million in revenue after delving headfirst into the world of digital sneakers — in part thanks to a canny acquisition of the Web3 studio RTFKT.

But Nike's efforts aren't just about ensuring that avatars in the Metaverse look good in cutting-edge virtual threads. It's also been dabbling in NFT collections that accompany digital designs with a real-world version of the sneakers they buy. This could shape up to be a new wave for the fashion industry — and the innovation doesn't stop here.

Another particularly desirable memento for music fans relates to ticket stubs after they've been to a concert — a lasting memory they can stick on their wall that says "I was there." Ticketmaster is now dabbling in establishing NFT tickets that can serve as a commemoration of memorable gigs, immortalized forever on the blockchain. Other forms of technology, known as Proof of Attendance Protocols (or POAPs) could take this concept even further.

Could this help modernize the lucrative world of collectibles?

Yes — and potentially ramp up safety in the process.

Sports memorabilia remains incredibly popular — with Pokemon cards also enjoying something of a renaissance in recent years.

NFTs can be used to create digital representations of items that exist in the real world. This can help clamp down on counterfeiting, and create a crystal-clear record of ownership.

Some crypto companies have been established which even offer custody services for blue-chip collectibles — ensuring they're kept in a safe place and in mint condition. While this may sound counterintuitive at first, this can prove especially compelling if you regard memorabilia as an investment opportunity.

It can also streamline the process of auctions in secondary markets.

How is it possible to sell real-world items as NFTs?

Practically anything can be tokenized these days — and several companies have already started transforming physical items into nonfungible tokens.

Perhaps one of the biggest and most compelling use cases to emerge so far concerns property. If you've ever bought a place before, you'll know how arduous and time consuming this process is — with reams upon reams of paperwork and antiquated systems.

NFTs are being touted as a way of modernizing how things are done, with ownership being duly recorded on the blockchain. This can speed things up, reduce disputes, and help clamp down on fraud, too.

This also opens up the door to house purchases being made with cryptocurrencies instead of fiat — and a number of businesses, especially in Miami, have sprung up in recent months to bring this to reality.

Blurring the line between crypto and TradFi could redefine global finance

September 21, 2022 Coin Telegraph

Coin Telegraph

The merging of crypto and TradFi is inevitable, with the latter potentially mitigating the volatility permeating the digital asset industry.

Despite the current struggle in the global economy, the gap between traditional finance (TradFi) and crypto seems to be closing with each passing day.

For example, earlier this month, Vienna-based fintech unicorn Bitpanda announced that it was adding commodities to its list of investment options, thus allowing investors to rake in profits from short-term price fluctuations related to traditional instruments such as oil, natural gas and wheat.

In a recent interview with Cointelegraph, the company’s CEO, Eric Demuth, noted that the bear market had had no major impact on investor demand. He claims that more people are now looking for solutions that can bring the world of TradFi and decentralized finance (DeFi) together.

Not only that, there are lessons to be learned about what works out best for consumers operating within both realms. For example, while TradFi platforms can improve their accessibility and transparency mechanisms, DeFi ecosystems can learn a lot about risk mitigation from traditional finance entities.

Furthermore, with statistical data showing that more than 300 million individuals now own some cryptocurrency, more and more players from the two worlds are beginning to arrive at a middle ground. For example, many major institutions worldwide have been adopting crypto at breakneck speeds, with a recent research study showing that 76% of all major financial institutions will most likely be making use of digital assets within the next 36 months.

Is the confluence of TradFi and crypto imminent?

According to Victor Tran, co-founder and CEO of Kyber Network — a liquidity hub powering the Ethereum-based decentralized exchange (DEX) KyberSwap — it is only logical that traditional finance players are turning toward crypto since they want to increase their market share within an exponentially growing industry — one that has been witnessing more and more peer-to-peer (P2P) and commercial transactions by the day.

By the same token, he highlighted that DeFi, too, is experimenting with more use cases, those that can maximize market participation as well as help boost transaction volumes, adding:

“It’s all about giving users benefits. We believe that TradFi and DeFi can co-exist synergistically and provide users unparalleled access, control and choice. Greater institutional participation, security measures and use cases will create choice, excitement and confidence for users. Sustainable overall liquidity in the market with institutional participation will also help with the challenges of volatile liquidity during downturns.”

Furthermore, Tran believes that privacy-focused noncustodial solutions will become mainstream soon, with multichain, secure DEXs such as KyberSwap laying the bedrock for such a transparency-oriented economy. “Addressing users’ security wants, and pain points are always first priority,” he concluded.

Jazear Brooks, CEO and founder of omni-chain DEX SifChain, shared a somewhat similar opinion, telling Cointelegraph that crypto and TradFi markets have been circling each other for the past few years, with many individuals from the latter having already joined the digital currency bandwagon after realizing that the best crypto projects can massively out-earn almost all of their conventional finance counterparts. He added:

“The chaos of crypto markets due to the collective inexperience of the industry reflects a world of pitfalls that have already been mastered by TradFi. TradFi is the elder statesman in the room representing timeless virtues of profitable investing in an unpredictable world.”

Brooks closed out by saying that the protective mechanisms of corporate governance can be combined with the populist, fast-paced, communal benefits of decentralized autonomous organizations (DAOs) to create a holistic finance system, one that is fair, transparent and inclusive in nature. “We’ll see market efficiencies increased as trad-fi systems are reimagined to import crypto values, and those market efficiencies can then generate additional societal value,” he opined.

Crypto and TradFi stand to benefit each other

Nicola Onassis, co-founder and CEO of regulated investment platform Rebuschain, told Cointelegraph that the integration of crypto into TradFi — and vice versa — can be seen as the natural evolution for both environments, especially as the two domains stand to help each other. In his view, DeFi has created new investment opportunities that don’t exist within traditional markets, allowing more people to accrue wealth for themselves, adding:

“The crypto sector can sometimes be hard to make inroads into, especially for those sitting on the fence. That’s why it is vital for platforms to be created that allow users to participate in these novel investment forms with ease. The goal on both sides is to generate more revenue and investments by working together, they have a chance to increase that outcome exponentially since there is no conflict.”

He further highlighted that, as things stand, investors unfamiliar with the crypto market have to deal with platforms that can often be difficult to use. However, everyone can benefit immensely by bringing players from the traditional realm and fostering new ecosystems that provide a more user-friendly experience. “Having a platform that takes out all of the operational complexities and minimizes risks will increase confidence and adoption,” Onassis stated.

Lastly, he thinks that it is important that regulators allow crypto and TradFi to come together and create viable solutions for their customers instead of complicating things by introducing unnecessary regulations. “Regulators giving fair, specific and clear rules can push the crypto sector forward. The crypto industry should work with regulators to achieve these results,” he said.

Could this reduce market volatility?

Maximiliano Stochyk, head of marketing for ChainPort.io — a permissionless blockchain bridge for crypto tokens — told Cointelegraph that the confluence of crypto and traditional finance will not only allow non-tech savvy investors to make their way into the crypto sector but also introduce a level of stability previously unwitnessed in the digital asset space.

He noted the already growing list of mainstream financial institutions that are offering their clients the option of buying crypto using their fiat assets, among other similar options. “The fintech’s that offer debit cards are also acting as major gateways to mass adoption,” Stochyk stated.

Stochyk said that for mass crypto adoption to happen in the near-to-mid-term, the two spaces need to co-exist with one another. And much like Onassis, he also believes that regulation is right around the corner, with companies now needing to act accordingly to help introduce more confidence within this space:

“Building products that are ready to comply with regulations is the way to go. The merging of crypto and TradFi will bring a lot of new institutional investors and also a lot of retail investors who don’t want to invest in crypto. When it comes to centralized and decentralized, you can’t live without the other, you will always need a centralized exchange to withdraw money to your bank for example. So, they all need to coexist.”

Therefore, as the world continues to gravitate toward an economic landscape that favors the ethos of decentralization/transparency, it will be interesting to see how players from the crypto and conventional finance ecosystems continue to synthesize their goals and create a new paradigm that allows users to enjoy the best of both worlds.

Can the Metaverse exist without blockchain?

September 20, 2022 Coin Telegraph

Applications

Read this article to understand why a metaverse can thrive and scale better on blockchain rails.

So, is blockchain ready to take on the Metaverse journey?

In essence, the ideal metaverse must be on blockchain rails, which mandates inclusive incentives centered around creators and users while still offering immersive and seamless virtual experiences.

The Metaverse is not just about the experiential elements; it is also about the economic aspects. The financial incentives must be centered around the real value creators. Those who create content, and regularly interact and transact on the platform are the ones who are creating value.

While the economic model possibilities are exciting, and several hopeful glimpses of these possibilities have emerged, there are significant technical challenges to overcome. The deficiencies in user experiences need to be addressed too.

In the short term, a few scalable Web2 versions of the Metaverse would embrace the Web2 ethos of incentivizing participants. As blockchain matures, more hybrid models would emerge, where Web2 elements bring scalability and user experience, and blockchain takes care of incentivization. A fully scalable on-chain Metaverse may seem utopian now, but it would be the ideal way to build the future internet.

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Blockchain challenges in delivering the Metaverse

The Metaverse of the future sounds great, but is it all just hype? Serious technological, experiential and economic model headwinds need to be addressed for the Metaverse narrative to come true.

Blockchain suffers from scalability, interoperability and security challenges. Even the best chains with meaningful user bases can handle only about 50,000 transactions per second. The internet has millions of data interactions per second in emails, tweets, posts, Google searches, messages and more.

This comparison assumes that data interactions in a metaverse must be on-chain. As cryptographic techniques (like zero-knowledge Rollups) get better at addressing scalability challenges, the economic features will rightly take the limelight to create new Metaverse-based models for the future.

Apart from the scalability challenges, there are major interoperability issues across blockchains. This is particularly related to bridges used to transfer value from one blockchain to another.

Many cyber attacks on Web3 platforms have occurred through these bridges. The Ronin bridge attack and Solana wormhole bridge attack are examples. Interoperability is an ample opportunity within Web3 but it is equally a vulnerability that needs to be addressed.

These blockchain infrastructure layer challenges keep returning to haunt the ecosystem. One of the more recent issues is creating a sustainable economic model of the Metaverse. While GameFi has been leveraged as a growth hack to attract users, a scalable token model is yet to be identified.

To date, there have been many failed economic models that have informed and inspired new models and economic approaches. Yet, innovators in this space are at least a cycle away from identifying a sustainable model.

The last headwind is that of user experience. VR hardware and the Web3 onboarding user experience need to be more seamless to attract hardcore gamers, creators and users into the Metaverse.

Why would blockchain fix the internet?

The internet handles several million data transactions per second. The blockchain infrastructure is in its technological infancy compared to the current iteration of the internet. Yet, blockchain is not just an infrastructure layer; it is an economic layer too. These economic features of the blockchain can potentially address the challenges of the internet.

In a blockchain-based world, the tokenomics of a metaverse (the new internet) platform allows more inclusive incentives. These metaverse applications can be inclusive from a shareholding (governance token) and user incentivization (utility token) perspective.

Active participants in the metaverse ecosystems often hold utility tokens. For instance, participants in a gaming metaverse earn their utility tokens by playing and creating games. Participants in an art metaverse earn tokens by creating art and being ambassadors of art by writing useful reviews.

The Metaverse allows participants to earn as users and creators of the platforms. As long as participants in these ecosystems keep creating value, they are incentivized. As these participants generate more value in an ecosystem, they accrue credentials and become influencers.

Yet, if an influencer in one Web3 metaverse wants to create a profile on another ecosystem, they should be able to carry their friends and network along with them. Ecosystem credentials such as “XP” (experience points) in a gaming platform should not get carried along as they are ecosystem specific.

The fundamental ethos is that users own their credibility and network, not the platforms.

The other fundamental design construct of the Metaverse is nonfungible tokens (NFTs). NFTs offer value permanence. When a gamer buys an in-game asset in a Web2 game, they offer a revenue opportunity to the game studio. They don’t own the asset. That changes in the blockchain world.

NFTs not only offer users the ability to create, buy and sell Metaverse assets but also allows them to accumulate ecosystem credentials in the form of “soul-bound tokens.” Soul-bound tokens behave like credit scores in financial services and as Metaverse users accumulate more, they tend to accrue more value faster.

Why do we need a new internet?

Our current internet is inadequate. Incentives are skewed toward a limited set of stakeholders, creators get exploited and users have very little control over their data. Can the new version of the internet change that?

The internet has been built and evangelized through applications like Google, Meta (previously Facebook), Instagram and Amazon. These applications deploy several techniques to grab users’ attention, and monetize that when they have it. Despite creating monetizable value through these apps, users get a very tiny slice of the value accruing to them.

Even when users who have created value receive very little money, the applications that grabbed the users’ attention have generated wealth for themselves and their shareholders — several trillion dollars. The internet must be more inclusive for this to change.

This is not because of the applications, themselves, but because they were bred in a capitalist ecosystem. Here, the winners take all the value and the wealth. It is okay for this to happen with the new internet, as long as “winners” has a more inclusive definition.

The other key challenge with the current internet is the exploitation of content creators. The internet has left us overfed with content. Yet even high-quality content creators seldom get paid their due. The platforms and intermediaries that offer web-shelf space to these content creators make most of the money. This needs to change; the internet must be more creator-friendly.

Apart from skewed incentive mechanisms, the current internet also takes user data for granted. Internet users have very little control over their data and their network. Why would a user need to start from scratch to build their network when they move from Facebook to Twitter? This needs to change and the Metaverse is the change.

Does the Metaverse need to be on a blockchain?

Blockchain-based solutions have seen financial, legal, gaming and social applications, albeit at a relatively small scale over the last few years. However, whether the blockchain infrastructure layer will be a must-have for the growth of the Metaverse narrative remains unanswered.

The answer to that question depends on how we define the Metaverse. Some definitions of the Metaverse focus only on its experiential elements. The word Metaverse often makes us imagine wearing a virtual reality (VR) headset and going through an immersive experience in a virtual world.

This is not all wrong, but it is an incomplete definition of a Metaverse. The Metaverse is expected to be a futuristic version of the internet. That is a great vision, but why do we need a new internet? The answer to that lies in the answer to another question — do we need blockchain for the Metaverse?

Roth IRAs: The ideal long-term cryptocurrency investment?

September 20, 2022 Coin Telegraph

Bitcoin Price

Considering investing in cryptocurrencies for the long run? Roth IRAs and other tax advantages investment vehicles are worth considering.

As the cryptocurrency market matures, more governments throughout the world introduce legislation to tax proceeds from crypto-related activities, with traders often triggering taxable events that can lead to future complications.

Avoiding paying taxes is illegal, but there are legal ways to dodge triggering taxable events while hodling onto one’s cryptocurrency holdings: Roth IRAs. These are individual retirement accounts (IRAs) with a special type of tax-advantaged system.

Using IRAs to avoid triggering taxable events with cryptocurrency investments is a strategy that has been considered for some time, with North American mining and hosting firm Compass Mining offering a solution for BTC users to mine directly to their IRAs last year.

Before diving deeper, it’s important to point out that Roth IRAs are only available in the United States, although other countries often have their own form of tax-advantaged investment vehicles. Often, stocks with significant exposure to Bitcoin — such as MicroStrategy — have to be used as a proxy for some of these vehicles.

What are Roth IRAs?

A Roth IRA is a type of individual retirement account to which investors contribute after-tax earnings. What makes Roth IRAs stand out is that what investors place in these savings accounts can grow tax-free and be withdrawn without any other taxes being owed after they’re aged 59 ½, if the account has been open for at least five years.

Essentially, a Roth IRA considers that since taxes have been paid on the funds being contributed into the account, investors do not need to pay any further tax as long as they meet the specific conditions outlined above.

Roth IRAs can be funded in various ways beyond regular contributions, which have to be made in cash. Assets permitted into Roth IRA accounts include stocks, exchange-traded funds, money market funds, bonds, mutual funds and cryptocurrencies.

The Internal Revenue Service (IRS) does not allow for direct cryptocurrency contributions into these accounts, but these are various Bitcoin IRA solutions that are designed for investors to save cryptocurrencies in these accounts. It’s worth pointing out that yearly contributions to Roth IRAs are limited based on IRS specifications and that investors can keep Roth IRAs as long as they please, as there are no required minimum distributions.

Is it a good idea to add crypto to a Roth IRA?

Cryptocurrencies are known for being extremely volatile, which means they aren’t for every investor out there. More conservative investors will likely be happier holding bonds, mutual funds and exchange-traded funds, while investors with a larger risk appetite may consider allocating to crypto.

The growth potential of cryptocurrency holdings in a portfolio is enough to lure in investors who believe cryptocurrencies will keep on growing in popularity as the infrastructure around them boosts accessibility and new crypto-related products and services are created. This growth potential, it’s worth pointing out, comes with heightened risk.

As tax-free withdrawals from Roth IRAs require accounts to be at least five years old, cryptocurrency investors looking to take advantage of them should always be prepared to hold onto their funds for a long time.

Chris Kline, co-founder of cryptocurrency IRA platform Bitcoin IRA, told Cointelegraph that there are no tax benefits on contributions to Roth IRA accounts, but there are tax benefits on distributions:

“If you have a longer time horizon in Bitcoin and crypto, a Roth IRA could be an appealing choice for those looking to take advantage of the long-term promise digital assets offer.”

To Kline, cryptocurrencies are going to “disrupt the very fabric of our everyday lives in ways like the internet disrupted communication and email disrupted the post office.” The co-founder of Bitcoin IRA added that while real estate and gold were premier examples of diversification in the past, crypto has “asserted itself as an alternative in the modern economy.”

Recent: The Metaverse is becoming a platform to unite fashion communities

Kline added that cryptocurrencies can offer an “alternative path forward for people of all ages” and that there’s been a surge in interest in investing in crypto assets for diversification.

Kunal Sawhney, CEO of equity research firm Kalkine Group, seems to disagree with Kline’s approach. Speaking to Cointelegraph, Sawhney said that if a person has “spent time and labour to earn money, it should ideally not go into extremely risky assets like cryptocurrencies.”

Otherwise, he added, it “defeats the idea of investing for retirement.” Sawhney cautioned that cryptocurrencies aren’t just Bitcoin (BTC) and that betting on these increases the risk that investors fall prey to Ponzi schemes.

As an investment category, he said, cryptocurrencies “might not be so bad” as these assets may become the “biggest contributor to the overall amount in the Roth IRA when the contributor retires and plans to withdraw.” Once again, their potential outsized performance is weighed against their risk.

For long-term investors expecting these outsized returns, placing cryptocurrencies in a Roth IRA lets them realize their capital gains without getting taxed, although they’ll have to stomach the ups and downs for a while.

Portfolio diversification

The extreme volatility of cryptocurrencies makes them a not-so-easy investment when talking about retirement, with the jury being out on whether including cryptocurrencies in a 401(k) retirement plan is sound financial planning or gambling with the future.

To Sawhney, investors need to have a pre-determined strategy for their Roth IRA. The CEO noted that a 60/40 portfolio, with greater exposure to stocks than to bonds, was “long considered balanced and financially rewarding” but suggested cryptocurrencies are changing things:

“Now that there is an option available to hold relatively the most volatile asset, cryptocurrency, a new strategy, say 50/40/10, might be considered. Here 10% could go to the new asset class comprising cryptos. Investors should have the option to change the allocation share per their risk appetite.”

Recent: Does the Ethereum Merge offer a new destination for institutional investors?

Due diligence, Sawhney concluded, is crucial as Roth IRAs are often “viewed as one of the best investment vehicles for young and low-income earners.”

Speaking to Cointelegraph, Kevin Maloney, interim CEO at crypto retirement account provider iTrustCapital, said that volatility is actually “one of the main reasons why many investors prefer using a Roth IRA or any other type of IRA to invest in crypto.” He added that even day-traders could benefit:

“For those who want to ‘day-trade’ due to the volatility of crypto, an IRA still represents a solid option because they won’t be paying yearly taxes on their gains so long as they aren’t taking distributions.”

Whether investors are looking to add cryptocurrencies to their Roth IRA accounts, it’s important note that crypto assets are only available for these accounts through custodians, which may charge hefty trading fees.

It’s up to every investor to analyze what type of investment vehicle best suits their situation and risk appetite. Roth IRAs may be extremely beneficial for long-term investors, as, since 2014, the IRS has taxed cryptocurrencies as property, and capital gains taxes can be owed on depreciated assets.

The views and opinions expressed do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Beyond the NFT hype: The need for reimagining digital art’s value proposition

September 17, 2022 Coin Telegraph

Coin Telegraph

The true potential of NFTs lies beyond profile pictures and art and into solving real-world use cases, implying the need for brainstorming fresh ideas.

With cryptocurrency prices wavering this year, nonfungible tokens (NFTs) and other sub-ecosystem investors have also found themselves in the grips of a bear market.

However, looking beyond the trading value of Ether (ETH), NFTs were primarily created to represent assets and ownership in the real and virtual world. The bear market, as a result, has reignited discussions around how NFTs can backtrack and focus on attending to use cases while the market recovers.

In a conversation with Cointelegraph, Tony Ling, the co-founder of analytics platform NFTGo, shared insights into the NFT ecosystem, revealing the expected trajectory of the ecosystem.

Cointelegraph: NFTs’ rise to mainstream popularity is often attributed to the various real-world use cases it can and has solved. What is your take on the falling NFT market? Do you think the market is set to recover?

Tony Ling: Answering this question requires explaining the value base of NFTs first. Currently, the NFT market is mainly driven by four categories: art, PFP (profile pictures), land and membership. At the moment, PFP is the most dominant. The value base of PFP NFTs mainly includes three parts: financial products, collectibles/luxury goods and memberships, among which the financial products are currently dominant, whereas the derivatives model of NFTs is still in the very early stage. Therefore, with the overall de-bubbling of the crypto market, NFTs, as a low liquidity derivative of fungible tokens (FT), are bound to fall accordingly. This is to be expected.

However, I believe that as the crypto market picks up in 2023–2024, the value of NFTs has room to grow several times that of the larger Crypto market. Its value growth will come from at least two aspects:

One, with the development of NFTs and meta-universe-related technology, NFT use scenarios will be more abundant, and the consumption property of NFTs will grow, and this consumption property is not only to solve real-world problems but also to create new scenarios that do not exist in the real world.

For example, all assets in Otherdeed’s metaverse are NFTs, and these NFTs themselves will generate various economic interaction scenarios, thus realizing new consumption to help people better fulfill their needs and even develop into new productivity tools and business forms.

Two, the development of various NFT derivatives, including NFT fragmentation, NFTFI, NFT mortgage lending, and NFT fixed income products. These new financial products will enable investors to participate in NFT-related investments in a more flexible format, thus attracting more capital, both institutional and individual investors, to this market.

CT: Despite the losses and reduced hype, many projects are still considered viable investments. What do you think is driving this trend? How important is it for NFTs to serve use cases, or is it just investors looking to make a quick buck?

TL: The driving force of any trend is both the “story created by the speculator” and the “real value.” Especially in the early days of an industry, a bubble is more of a reaction to uncertainty, and I believe that it’s primarily builders like us who embrace the uncertainty that is driving the trend. Of course, in addition to builders, large funds, including funds in the crypto space, mega funds and even funds that used to focus on traditional areas are also very important drivers. Indeed, some of them want to make a quick buck, but from the perspective of capital efficiency, I don’t think right now is a good time to make a quick buck in the crypto market.

CT: What trends are still relevant from the early NFT days, irrespective of price fluctuations? And what are new trends you believe will get popular in the coming future?

TL: First of all, more and more people are paying attention to NFTs and there are bound to be orders of magnitude more in the future. Data from NFTGo shows that there are currently over 2.96 million wallets on Ethereum that hold an NFT, compared to just over 200,000 in August 2020. Despite the current market sentiment being cold, there are still 20-30,000 addresses trading NFTs every day. Of course, this figure still has tremendous room for growth. Secondly, builders are continuing to build. You can see that many NFT-related companies have recently acquired financing. Furthermore, although the market has recently been bearish, there are still successful new projects like goblintown and Memeland emerging in the market.

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Although the various PFP projects in the last NFT summer had their own unique characteristics, many were still following the paradigm set forth by the Bored Ape Yacht Club (BAYC). With the further development of the NFT industry, a new mega-trend is bound to emerge. This new trend, I guess, will be the outbreak of the content ecology of the metaverse. The definition of “content” here is broad, and games in the Metaverse can also be defined as “content.” As mentioned earlier, the enhanced consumer attributes of NFTs will help the industry recover, and the consumer attributes mean that NFTs will generate non-investment income cash flow for their holders. One important way to do this is to build “content” in the Metaverse and let the builders own the content and generate revenue. The enjoyers of the content receive intrinsic rewards and are seemingly happy to pay for them.

CT: What is your take on current investor sentiment? How do you think it affects the overall NFT market? What can NFT projects and companies do to improve engagement?

TL: The NFT market sentiment is cold for two main reasons: One, the price of Ether is in a volatile period and a large number of investors are in a wait-and-see phase; two, the PFP narrative and growth pattern are nearing their end, and the recent emergence of projects has not yet brought a new pattern, thus making it difficult to bring new expectations to the market.

The crypto industry is cyclical in nature. I personally recommend that you continue to explore new directions in the industry while keeping enough capital to wait for the next cycle of the crypto industry and seize the opportunity.

CT: As you’ve mentioned, the scope of the NFT market is only limited to the imagination of entrepreneurs. What are some of the use cases that NFTs can and should serve as it beaches further into the mainstream?

TL: In this regard, I want to point out three major subsets of use cases where NFTs are well-positioned for causing mainstream disruption.

New Art form: Digitization allows for richer forms of artistic expression, and the emergence of NFT and related eco-products solves the problem of digital art ownership and better helps art creators to make a profit. As the digital world merges with the real world, the penetration of digital art in human society will become more and more widespread, thus becoming a huge new market for collectibles as well as luxury consumer goods.

Recent: Crypto for foreign trade: What do we know about Iran’s new strategy

PFP, self-expression and new forms of organization: I think one of the main reasons for the popularity of PFP projects is that they better meet the human need for self-expression. The ability to tell others “who I am” is an important human spiritual need, and the PFP NFT projects and related ecologies create a good way to meet this need. The PFP NFT projects and their extended community has not only given users a medium for self-expression but also made it easier for people to form communities with others who share similar expressions. Likewise, as the community evolves, these similar people may create new forms of organizations, such as decentralized autonomous organizations (DAOs), to influence society outside of their niche community.

New “public-blockchain-like” carrier: Current land-based projects, such as Otherdeed, Sandbox and Decentraland, may evolve into something similar to public blockchains in the future. New NFT projects, games, and applications may all operate within the ecosystems of these land-based projects.

Global inflation mounts: How stablecoins are helping protect savings

September 16, 2022 Coin Telegraph

Coin Telegraph

More people are using stablecoins to hedge against inflation, as they offer numerous benefits.

Economies around the world are facing a motley of challenges caused by rising inflation. High inflation devalues national currencies, which, in turn, pushes up the cost of living, especially in scenarios where earnings remain unchanged.

In the United States, the government has responded aggressively to inflation. The nation hit a 9.1% inflation rate in June, prompting the Federal Reserve to implement a series of fiscal countermeasures designed to prevent the economy from overheating. Hiking interest rates was one of them.

Soaring Fed interest rates have consequently slowed down consumer spending and business growth in the country.

The counter-inflation approach has also strengthened the value of the U.S. dollar against other currencies due to tight dollar liquidity checks. As 79.5% of all international trades are undertaken using the dollar, many countries are now paying a premium for imports to compensate for the dollar’s rising value, worsening inflation in those importing countries.

Subsequently, citizens in some flailing economies have started to convert their money into more stable foreign currencies to safeguard their money against value depreciation, and many of them are turning to stablecoins to achieve this.

Whitney Setiawan, a research analyst at the Bitrue crypto exchange, told Cointelegraph, “With the U.S. dollar recording steep appreciation against other fiat currencies, most crypto-savvy users have a special interest in holding stablecoins.”

Setiawan also predicted that the stablecoin sector was likely to disrupt the remittance industry in the near future due to the medley of benefits that stablecoins offer.

“With interest in stablecoins being fueled by various factors, I can predict it will be a matter of time before this asset class topples the remittance industry by a significant margin,” she said.

On this last point, remittance companies have indeed been taking notice and have, in recent months, made moves to claim a share of the stablecoin market. MoneyGram, for example, recently partnered with Stellar to offer stablecoin remittance services on its network.

What are stablecoins?

A stablecoin is a digital currency whose value is often pegged to an asset or regulated by an algorithm to maintain a stable value.

Collateralized stablecoins are the most popular and are backed by reserves of their underlying assets. In most cases, their value tracks that of popular national currencies such as the U.S. dollar, the British pound or the euro.

This category of stablecoins is used extensively by crypto traders looking to avoid crypto market upheavals and users looking to protect their money against inflation.

Other types of stablecoins include commodity-backed, crypto-backed and algorithmic stablecoins.

Why stablecoins are ideal as instruments against inflation

Stablecoins are ideal as instruments against inflation for numerous reasons. One of them is their immutable and borderless nature.

The decentralized nature of blockchain technology on which stablecoins operate allows them to travel across borders that may otherwise be closed to cross-border financial activities.

Stablecoin transactions are also fast and cost-effective when compared to fund transfers made via commercial bank networks. This makes them convenient for people looking to send and receive money and a hedge against inflation.

Another disruptive property that stablecoins possess is their capacity to cater to the unbanked. Approximately 2 billion people in the world today lack a bank account. Stablecoins have demonstrated the ability to reach this marginalized demographic by allowing anyone with a device that can host a digital wallet, like a smartphone or laptop, to use stablecoins.

In some developing nations, many people lack the necessary documentation to open a bank account, and so they are shut out of their nation’s main financial systems. Using stablecoins allows this group of users to send and receive money easily and use their monetary assets to hedge against inflation when the need arises.

Brian Pasfield, chief technology officer of Fringe Finance — a crypto lending platform that provides lending opportunities to stablecoin holders — told Cointelegraph:

“Banks have strict monetary policies that generally taper down the dollar’s supply. This trend makes stablecoins an attractive option for those aiming to access the USD’s value, as they are generally accessible with little barrier to entry.”

He also underscored that governments had the ultimate power when it comes to mainstream stablecoin adoption.

“The likelihood of them (stablecoins) becoming commonplace and therefore disruptors lies in the hands of governments themselves, which may seek to implement their own solutions or censor the existing avenues,” he said.

While governments have been slow to adopt official policies regarding stablecoins, or may even undercut private stablecoins with the advent of central bank digital currencies, there are several countries in which citizens have taken matters into their own hands by using stablecoins to protect their savings.

Venezuela

Venezuela has experienced an inflation rate averaging about 3,711% since 1973. The bolivar has lost so much value over the past four decades that it’s had to be reconverted several times. For perspective, the country has had to remove 14 zeroes from its currency over the past 14 years to simplify the monetary scale.

Because the Venezuelan bolivar is volatile and has a value that fluctuates throughout the day, it is common practice for traders to list merchandise and service prices in U.S. dollars. Customers who don’t have dollars are usually expected to pay using bolivars, but at the prevailing exchange rate relative to the dollar.

That said, dollar bills can, at times, be scarce, and this gap is currently being filled by stablecoins. With internet penetration standing at around 72% as per 2020 statistics, online payment companies supporting stablecoin use have already started to set up shop in the country.

The companies include Reserve, a startup backed by Coinbase. Its app is now widely used in Venezuela to buy and sell stablecoins.

Even the U.S. government has joined the stablecoin foray and is increasingly using Circle’s USD Coin (USDC) stablecoin to circumvent corrupt government institutions when providing aid to Venezuelan citizens.

Turkey

Earlier this month, Turkey’s annual inflation rate hit 80%, with the Turkish lira losing approximately 27% of its value against the U.S. dollar so far this year. In 2021, the lira lost 44% of its value against the greenback. Its steep decline has caused demand for stablecoins to rise as people move to protect their money against inflation.

According to data derived from CryptoCompare, the Turkish lira is the second highest fiat-to-Tether (USDT) trading pair and currently accounts for about 21% of all national currency swaps. Tether is a dollar-denominated stablecoin backed by a basket of different assets.

The lira is also the second-most traded Binance USD (BUSD) stablecoin pair and is used in about 5.2% of trades. Binance USD is the dollar-denominated stablecoin from major cryptocurrency exchange Binance.

The growing popularity of cryptocurrencies in the country has, in the recent past, led to monetary control concerns and prompted the authorities to ban the use of cryptocurrencies as a mode of making payments.

However, crypto utility is still high despite the prohibition.

Nigeria

Nigerians are starting to use stablecoins to temper the effects of rising inflation.

According to the latest statistics released by the country’s National Bureau of Statistics (NBS), the inflation rate in the country reached 19.64% in July — a 17-year high.

According to the NBS report, the cost of necessities such as food, transport, fuel and clothing has risen sharply as a result.

The situation has been brought on by climate change, the economic aftershocks caused by the coronavirus and rising insecurity. It has been further compounded by Russia’s invasion of Ukraine, which disrupted crucial import supplies from the two countries. Nigeria imports over $2 billion worth of essential commodities annually from both Russia and Ukraine.

Inflation problems are forcing many Nigerians to start using stablecoins to prevent the devaluation of their savings. According to data pulled from Google Trends, Nigeria ranks top among countries with significant interest in stablecoins. Search statistics indicate that the nation has the highest Tether stablecoin search interest in the world.

USDT is presently the most traded stablecoin.

Argentina

Argentinians are increasingly turning to U.S. dollar stablecoins to shield their money against high inflation. The country’s inflation rate is expected to hit 95% by the end of the year.

Recent developments that have accentuated the demand for stablecoins include the July stablecoin buying frenzy that was triggered by the resignation of Economy Minister Martín Guzmán.

Major crypto exchanges serving Argentinian citizens recorded a spike in stablecoin sales in the aftermath of the announcement, with purchases jumping by over 200%.

The news also caused the value of the Argentine peso to fall by approximately 15%.

Today, Argentinian traders quote dollar prices for high-value items due to the high volatility that’s afflicted the national currency. The Argentine peso has lost over 30% of its value so far his year.

Prevailing U.S. dollar trading restrictions have also helped to increase demand for stablecoins.

Roadblocks for stablecoins

There are numerous limitations that prevent the widespread use of stablecoins as a hedge against inflation. One of them is the changing regulatory landscape that threatens to block their use in some jurisdictions. The European Union, for example, is looking to prohibit the use of dollar-pegged stablecoins in the region in the near future. Such embargoes are likely to limit the use of stablecoins as a hedge against inflation.

Moreover, most countries lack elaborate policies needed to legitimize the crypto industry. Right now, the stablecoin sector would do with extensive Anti-Money Laundering, tax policy and fraud prevention regulations in order to truly go mainstream, but many countries are unwilling to go this far due to the sheer complexity of such processes.

This has led some countries, such as China, Algeria and Egypt, to ban the trading of cryptocurrencies altogether.

Crypto for foreign trade: What do we know about Iran’s new strategy

September 15, 2022 Coin Telegraph

Banks

Iran has decided to legalize the use of crypto in cross-border payments, which could impact how some countries view crypto.

With the Trade Ministry officially approving the use of cryptocurrencies for foreign trade, Iran will become the first-of-a-kind adopter in the world.

The obvious problem with the news is that the country’s innovative policy obviously aims at circumventing financial sanctions that have been hampering its participation in the global economy for many years.

These circumstances set an ambivalent tone for Iran’s experiment — while for some, it could prove crypto’s emancipating ability to shirk the all-too-real hegemony of the United States political will and international financial institutions that enforce it, hardline crypto skeptics could get the proof they need for their prophecies about decentralized digital assets being a weapon of choice for disrupting the fragile global order.

Putting aside the ethical debates, it is still curious to know how exactly this strategy will work, what influence it will have on Iran’s trading partners and what challenges it will draw from the hostile enforcement bodies.

The road to adoption

The first public announcement of a trading system allowing local businesses to settle cross-border payments using cryptocurrencies in Iran came in January 2022. At the time, Iran’s Deputy Minister of Industry, Mine and Trade, Alireza Peyman-Pak, spoke of the “new opportunities” for importers and exporters in that kind of system, a product of joint action by the Central Bank of Iran and the Ministry of Trade should provide:

“All economic actors can use these cryptocurrencies. The trader takes the ruble, the rupee, the dollar, or the euro, which he can use to obtain cryptocurrencies like Bitcoin, which is a form of credit and can pass it on to the seller or importer. [...] Since the cryptocurrency market is done on credit, our economic actors can easily use it and use it widely.”

In August, Peyman-Pak revealed that Iran had placed its first import order using crypto. Without any details about the cryptocurrency used or the imported goods involved, the official claimed that the $10 million order represents the first of many international trades to be settled with crypto, with plans to ramp this up throughout September.

On Aug. 30, Trade Minister Reza Fatemi Amin confirmed that detailed regulations had been approved, outlining the use of cryptocurrencies for trade. While the full text still couldn’t be attained online, local businesses should be able to import vehicles into Iran and a range of different imported goods using cryptocurrencies instead of the United States dollar or the euro.

Recent: Crypto’s correlation with mainstream finance could bring more bleeding soon

Meanwhile, the local business community voiced its concerns over the policy’s possible design. The head of Iran’s Importers Group and Representatives of Foreign Companies, Alireza Managhebi, emphasized that stable regulations and infrastructure should be prepared to be able to successfully use cryptocurrencies for imports. He also the possible threat of the new payment leading to the emergence of rent-seeking business groups.

How would it work?

Speaking to Cointelegraph, Babak Behboudi, co-founder of digital asset trading platform SynchroBit Hybrid Exchange, said that although the official policy was approved only in recent years, the Iranian government and corporations have been using crypto as a payment method for a couple of years now.

But, there is a range of reasons why the government decided to acknowledge such practices on a national scale, such as the disappointment of Iranian negotiators in achieving a win-win deal with the West on the nuclear deal, the frustration of the economy and hyperinflation in the domestic market.

The emergence of the Chinese digital yuan and the Russia-Ukraine geopolitical conflict also greatly influence such a decision, Behboudi added.

There remains the question about the effectiveness of the new strategy. Almost any potential foreign partner will face difficulties in conducting the deals in crypto, as, unlike Iran, most countries do not have a legal framework for using crypto as a corporate payment method or, at worst, directly prohibit it. The pseudonymous nature of Bitcoin (BTC) and other mainstream cryptocurrencies doesn’t leave possible partners too assured of their invisibility from U.S. financial enforcement.

This leaves foreign companies with two possible options, Behboudi believes. They could use either the intermediacy of proxy companies in crypto-friendly jurisdictions to convert the crypto to fiat or use the services of companies from third countries that conduct trade with Iran, such as Russia, Turkey, China, the United Arab Emirates and others.

Christian Contardo, global trade and national security attorney at law firm Lowenstein Sandler LLP, sees the scope of Iran’s potential partners as rather limited. The ease of crypto transactions can facilitate legitimate trade, particularly in regions where traditional banking may be impractical or unreliable. But, due to the regulatory regimes involved, it is unlikely that large legitimate commercial entities would transact in crypto with Iranian counterparties “unless they were seeking to hide their involvement in the transaction,” he adds.

Allies and enforcers

Up to this point, reports about circumventing sanctions with crypto in Iran were rather scarce. While Binance didn’t get any allegations after journalists claimed Binance was serving Iranian customers, another major crypto exchange, Kraken, came under the investigation of the U.S. Treasury Department’s Office of Foreign Assets Control in 2019 for the very same reasons. At least one individual is currently alleged of sending more than $10 million in Bitcoin from a U.S.-based crypto exchange to an exchange in a sanctioned country.

Recent: Boom and bust: How are Defi protocols handling the bear market?

Contardo is sure that enforcers, the United States, in particular, will increase their scrutiny of transactions linked to countries like Iran. And although, in practice, it is next to impossible to track all large transactions, they still have all the tools they need:

“Enforcement agencies and even commercial investigative services have multiple sources of information to identify parties involved in a transaction. Once that information is aggregated and the parties identified, the evidence on the ledger makes for a strong enforcement case.”

Given recent announcements by Russian officials, who are also actively exploring the potential of using crypto for cross-border payments, the Iranian strategy may initiate the digitalization of a parallel market, which would include sanctioned countries and the nations that are willing to trade with them. Behboudi links this possibility to the further development of central bank digital currencies (CBDCs):

“The rise of CBDCs, like digital yuan, ruble, rial and lira, can minimize the risks if these countries can manage their transactions through bilateral and multilateral agreements, allowing the businesses to deal with each other using their CBDCs.”

Thus, in a way, Iran’s innovative strategy of adopting crypto as a cross-border method doesn’t change much — unless the use of decentralized currencies as a method of payment for private companies is allowed — this loophole would attract a limited list of nations that haven’t shy away from the trade with Iran earlier.

Boom and bust: How are Defi protocols handling the bear market?

September 14, 2022 Coin Telegraph

Coin Telegraph

A look at how DeFi protocols have fared during the recent bear market and the importance of continuing to build during market downturns.

Decentralized finance (DeFi) has been one of the fastest-growing sectors in the crypto space since its emergence in 2018. However, like many other sectors, DeFi has seen a negative impact in the current bear market.

While 2022's downturn has taken its toll many DeFi projects — and the cryptocurrency space in general — some continue to build.

Bear markets, while difficult for investors, can spark game-changing breakthroughs in the industry, and a new era of creativity seems inevitable if past events are any indication.

This leads to the question: Which protocols will usher in DeFi's next generation of technological advancement, and which won't?

The fable of the ant and the grasshopper may give some indication.

While the ants are busy storing food for the winter, the grasshopper is busy playing his fiddle and singing away the summer. Finally, when winter arrives, the grasshopper goes to the ants for help because he is freezing and hungry. Unfortunately, the ants don't want to help him and tell him that he should have spent his time getting ready for winter instead of wasting it on other things, so he's on his own now.

The moral of the story is that it pays of to make diligent use of ones times in order to prepare for the future.

Similarly, many projects that fueled the euphoria that led up to the present market downturn did not significantly advance the underlying technology of DeFi. They employed over-leveraged tokenomics to concentrate on cash flow creation instead.

So, it seems reasonable to think that the protocols focused on hype and profit are the most likely to fail during a bear market, while projects focusing on creating real user value are more likely to survive.

John Patrick Mullin, co-founder of SOMA.finance, a decentralized marketplace for digital assets and compliant digital securities, told Cointelegraph:

"Many founders of DeFi projects seem to focus on riding the hype train and doing more of what has already worked to earn a quick buck. However, I believe that what the space and its users actually need to flourish, regardless of the market situation, is more foresight and innovation from industry leaders."

Recent: Crypto’s correlation with mainstream finance could bring more bleeding soon

While it's clear that some projects in the space seem to be driven mainly by profit, some believe that there are more sustainable-minded founders.

Linh Han, CEO of Hectagon, a DAO-based investing platform, told Cointelegraph, "The pressure and characteristics of the market force project to achieve short gain. In addition, it also makes founders have to compromise more. However, founders in the Defi space are not short-sighted. Truly, no one who comes to crypto space to build this early is short-sighted."

How DeFi platforms have performed during the bear market

A portion of the DeFi sector, most notably the lending market, has shown its ablitiy to weather the ups and downs experienced by the industry overall. The aggregate quantity of loans created demonstrates that there is still a substantial demand for these DeFi protocols.

Despite the current market conditions, DeFi lending platforms continued to grow in user engagement. According to data from Defillama, the amount of money locked into DeFi platforms rose over 500% since last year.

In addition, Aurora, an Ethereum Virtual Machine compatible network on the Near Protocol, launched a $90 million fund to support DeFi apps on the network. This will help developers to continue building within DeFi, potentially bringing new platforms into the space.

Aurigami, a liquidity and lending protocol on Aurora, raised $12 million to help them build out their platform during the current market conditions. The platform currently has the highest TVL on Aurora, and they conducted a risk analysis and simulation of worst-case scenarios for the protocol.

Building during a bear market enables platforms to gain loyal users and set a foundation for themselves before the next bull market. However, there have been some negatives during this period too.

For example, the Terra blockchain ecosystem collapsed earlier this year, dropping over 80% and leading to over $40 billion in investor losses. During a previous interview with Cointelegraph, Mike McGlone, a senior commodity strategist at Bloomberg, said that Terra's collapse was part of a natural purge in the crypto space that occurs in every bear market.

This leads back to the point about some protocols being unprepared to deal with market downturns, especially when large, coordinated sell off's have been suspected as one of the causes behind Terra Classic (LUNC) — formerly Terra (LUNA) — and its stablecoin TerraUSD (USTC) collapsing.

The bear market is an opportunity

Bear markets can help legitimate projects that continue to build and innovate stand out, while hype-based projects slow down or fail. Mullin agrees with this viewpoint, telling Cointelegraph:

"Bear markets tend to weed out the weaker projects and founders looking for a quick buck. If projects are to not just survive but also thrive during the bear market, they have no other options than to innovate and create real value to the space and its community."

Lucas Huang, co-founder of Aurigami, told Cointelegraph, "The market has always been cyclical in nature, and no matter the circumstances, there'll be opportunities to capitalize on. This market slowdown serves as a chance for platforms to build, refine, and innovate — all without the excitement and distractions of a bull market." Huang continued:

"Experienced investors will always find value no matter the market conditions, and we see this bear market as simply a shift in user behavior. Does the bear market have a negative effect on DeFi platforms? Of course. But DeFi is dynamic enough to provide utility in both bull and bear; the question is, what can you do to capitalize on it?"

Projects that continue to build during bear markets can also gain long-term users who are more likely to stick around, instead of the fair-weather investors who only show up during the bull markets.

Recent: Collapse of Terra blockchain ecosystem forces talent migration

The bear market is a great time for new technology to come into the crypto space. Indeed, some great innovations have emerged from crypto winters. For example, Ethereum had its token sale in the bear market of 2014, while the decentralized swap platform Uniswap was deployed on Ethereum in the bear market of 2018.

Milana Valmont, founder and CEO at KIRA, a decentralized network for hosting DeFi applications, told Cointelegraph:

"The best innovations happen during a bear market because teams are head deep in developing revolutionary technology. Standards are high during the bear market, so new ideas are tested under pressure and not kept alive by bull market liquidity. Innovation during a bear market is exactly how the renaissance period came to fruition."

Vid Gradišar, CEO at NewsCrypto.io, a social and educational crypto platform, told Cointelegrpah that the bear market is like a “self-care routine” for the cryptocurrency space, in that “the excessive noise of unsustainable business models is silenced, giving everyone the opportunity (and the need) to focus on what counts in the long term.”

"Some of the best innovations in crypto happen in bear markets, but when you look behind the scenes, this shouldn't come as a surprise. In a bull market, incentives are often skewed towards unsustainable business models. At the same time, those that want to build something truly long-term are more attracted to the relative calm and rationality that comes with a lack of excessive mainstream interest in crypto."

Norway Releases Source Code for Digital Krone Sandbox, Utilizes Ethereum Technology

September 14, 2022 Bitcoin.com

Tokens