The Weekly Wrap - 28 May 2021

1. Bitcoin mining discussed

The Facts:

• In a panel next week organized by the Sichuan energy regulatory office, the impact of stopping local Bitcoin mining will be discussed. Bitcoin miners help to absorb excess hydropower.
• Meanwhile, Inner Mongolia has outlined eight measures to restrict crypto mining and businesses that support it.
• Iran has temporarily banned Bitcoin mining due to multiple power blackouts in cities.

Why it’s important:

• Bitcoin mining and its environmental impact has been a hot topic over the past week. China is one of the largest Bitcoin mining hubs, so its actions and regulations regarding the topic are closely watched.
• China has recently reiterated their stance on the topic; however, it remains to be seen how much follow-through there is.

2. Arbitrum launches

The Facts:

• Arbitrum is opening its mainnet to developers on May 28.
• It is a second layer scaling solution using optimistic rollups and requires only few code changes from current Ethereum mainnet smart contracts.
• Typical transactions on Arbitrum use 2-3k gas.

Why it’s important:

• In recent times, the cost of transactions on the Ethereum mainnet has risen, which has certainly hindered full DeFi adoption. Layer 2 solutions, such as Arbitrum or Optimism, might alleviate this issue.
• Many DeFi protocols are looking into using such layer 2 solutions to improve the user experience and transaction costs – recently, the Uniswap community conducted a vote to deploy v3 smart contracts to Arbitrum.

3. Crypto companies raise capital

The Facts:

• FTX is raising up to $1 billion at a $20 billion valuation.
• The spot and derivatives exchange currently holds about 10% of the total open interest in the BTC futures markets.
• Crypto venture capital firm 1confirmation raised $125 million for its third fund, focusing on early-stage crypto projects.

Why it’s important:

• Crypto infrastructure continues to improve, both on the centralized as well as decentralized fronts. Fresh capital seems to look for investment in the “shovels during the gold rush”.
• Providing funding for early-stage projects will help to secure the future and pace of developments of the crypto space.

4. CBDC plans advance

The Facts:

• The Federal Reserve has announced its plans to release a discussion paper on digital payments and CBDCs.
• It also noted that a CBDC rollout would require the Fed to have additional legal rights.
• The central bank of Indonesia has also made its future steps into the digital payments space public.

Why it’s important:

• The development of CBDCs continue to advance around the world – the majority of central banks are now at least very closely evaluating the topic or have already made plans for pilot projects.
• China is likely the closest to launching its digital yuan. Other central banks are starting to catch up, but for most, a widespread launch still seems to be years out.

5. Demand for GPUs might reduce

The Facts:

• GPU manufacturer Nvidia sees demand for graphics cards potentially dwindle once Ethereum switches to proof-of-stake. Ethereum’s current proof-of-work mining algorithm uses graphics cards.
• Nvidia reported an 84% YoY increase in revenue to $5.7 billion – during the same time, the total Ethereum hash rate has increased by about 3.5x.
• Meanwhile, there is currently a graphics cards shortage in the market, likely due to high demand from cryptocurrency miners.

Why it’s important:

• Ethereum’s switch to proof-of-stake (currently anticipated end of this year/early next year) will bring some relief to the graphics cards markets – cryptocurrency miners have driven up the cost of the hardware, since Ethereum mining is highly profitable due to the rise in price and activity on the chain.
• While it is hard to gain insight into the exact supply chain mechanisms of Bitcoin’s ASIC-driven mining, publicly traded companies selling GPUs can offer some insight into the mining hardware markets of Ethereum.

In other news

• Apple hires payments specialist with crypto experience (via CoinTelegraph)
• Carl Icahn looks to get involved in crypto with $1.5 billion (via CoinDesk)
• PayPal is working on crypto withdrawal capabilities (via The Block)