8th May 2023 > > Liechtenstein and L2.

tl;dr

Liechtenstein and L2 solutions both drive crypto adoption.

Market Snap (at time of writing)

Market Wrap

PEPE is nearly 50% lower than its peak price on Friday. Readers of the CCC are not surprised by this price action.

But one poor mug is.

An anonymous buyer invested $3mm into PEPE Thursday and Friday and is currently sitting on an unrealised loss of close to $1mm. Providing others with exit liquidity is always going to hurt.

Occasional Series – Economists

The Federal Reserve has four hundred economists on its payroll.

Four hundred?

Curious Cryptos’ Commentary – Liechtenstein

In an interview with Handelsblatt, Prime Minister Daniel Risch declared his desire for the government to start accepting payments in cryptos:

https://www.handelsblatt.com/politik/international/kryptowaehrung-liechtenstein-will-staatliche-dienstleistungen-kuenftig-auch-in-bitcoin-bezahlen-lassen/29134712.html

Liechtenstein has long been a crypto friendly place since it first passed the Liechtenstein Blockchain Act in 20199. Though its reputation is somewhat sullied by its status as one of the two largest tax havens in the world (the other being the Republic of Ireland) this move will be watched closely by other countries in the EU.

Curious Cryptos’ Commentary – The mempool

The mempool is the place that BTC transactions sit in until they are processed and included in a block. Each transaction has a fee attached to it – miners select the highest fees available. The enthusiasm for ordinals, and meme type coins on the BTC network has meant a recent rapid rise in fees. Two days ago the fees on one block exceeded the 6.25 BTC reward for mining that block.

This is a handy mempool explorer if that’s your kind of thing:

https://mempool.space/

There are some who have been portraying the clogging up of the mempool as a fault, or a bug, or as a DDoS attack on BTC, perhaps even one perpetrated by sinister elements in Western governments keen to press on with CBDCs (Central Bank Digital Currencies). No topic is free from conspiracy theorists.

I am happy to report it is none of those things.

It is simply a reflection of demand for the network. This can only be a good thing.

A side-effect is that Binance has twice had to halt BTC withdrawals in the last day or so, causing some to be concerned that another FTX type fiasco was upon us. Binance assures us otherwise.

…

Situations like this make L2 (layer 2) solutions e.g. Lightning Network even more attractive.

Lightning allows almost instantaneous BTC transfers at a minimal cost. It does this by processing transactions off-chain, and later broadcasting a summary of activity to the blockchain. There are some issues with L2 around centralisation, and the risk of fraud. It is certainly a departure from the original vision of a decentralised and trustless payments system. But L2 is a practical solution to real-world problems, and it will help to drive BTC adoption.

Binance have stated they will now incorporate Lightning. I am surprised they hadn’t done so already.