Daily Archives: May 2, 2022

On Monday, Crypto.com’s Cronos (CRO) slide followed suit with a sharp drop after the crypto exchange said it was reducing some staking and rewards tied to its popular pre-paid Visa cards. 

According to Tradingview.com, the coin dropped by 19% to $.265. On Sunday before the announcement, CRO was trading above $.33 per coin. 

Related Reading | TA: Bitcoin Consolidates Below $39k: What Could Trigger Another Decline

Crypto.com announced the changes in a blog post:

To ensure long-term sustainability, we are introducing a number of changes to the CRO Card rewards programme, effective 1 June 2022 00:00 UTC.

CRO Card Rewards Cut Down

Next month, the company will reduce the usage rewards on four of the exchange’s card tiers.  The most premium tier, the Obsidian tier, will see a Cronos card reward reduction from 5% to 2%. In addition, the Icy White / Frosted Rose Gold tier reward will be pulled down from 3% to 1%.

The top tier of the company’s card program, Obsidian carries a $400,000 staking requirement and offers up to 8% cashback at retailers.

According to company policy, there will be a limit on how much a person can earn CRO card rewards for two tiers. For example, the Ruby Steel Card earns are limited to $25 or equivalent in other fiat currencies like Dollars and Euros. While for the Royal Indigo/Jade Green tier, the cap is set at $50.

In Addition, Crypto.com is phasing out CRO staking rewards for cardholders. Cards include Jade Green, Royal Indigo, Frosted Rose Gold, Icy White, and Obsidian. Staking rewards involves coin owners “locking up” or delegating a portion of their crypto holdings to earn more interest on deposits.

While explaining staking rewards, the exchange said;

Cardholders with an active 6-month stake and who staked before 1 May 2022 13:00 UTC will continue to earn CRO Card rewards on spending at the current rate until their 180-day stake expires. Thereafter, the revised rates will apply. Cardholders who stake CRO after their 180-day lock expires will earn card spending rewards as per the schedule.

Cronos Price Performance

Since the start of January 2022, Cronos has been trading lower. The price of CRO was over $0.50 at the beginning of the year, but it has been retreating since then. At one point, CRO was close to sliding below $0.30. Cronos’ price skyrocketed during the NFL Super Bowl. But after that, there hasn’t been any sign of a recovery as the price of CRONOS crashed continuously.

Related Reading | Analysts Predict ApeCoin To Hit $50 By End Of 2025 – And $100 By 2030

In the last 24 hours, CRO started the day in green, but after the company announcement price crashed below $0.30. Since then, the coin has lost 19% of its value and reached $0.26 lowest level. 

                         Featured image from Flickr, chart from Tradingview

Shaun Maguire, a crypto partner of Sequoia Capital, one of the venture capital firms most active when it comes to investments in the cryptocurrency space, issued its opinion on the future of many VCs investing in crypto. To him, many of the companies that are now experimenting with crypto investments will “pull back” due to market conditions and a misunderstanding of crypto as an investment.

Sequoia Partner Not Optimistic About VCs Entering Crypto

Shaun Maguire, a cryptocurrency partner in Sequoia Capital, one of the most active VC firms in the crypto sector, is not very optimistic about the future of other venture capital companies in the area. Maguire, who specializes in companies in the tech and crypto sectors that are either in seed or early investing stages, stated in a recent podcast that other firms that are now entering the crypto space are going to “pull back” on these investments when the markets get less frothy.

However, he stated that Sequoia will not fall in this category due to the way in which these investments are made in the firm. According to Maguire, the company has “permanent intentions” when it comes to its investments in the sector. Maguire explained:

Sequoia is very deliberate with everything we do and we spend huge amounts of time debating every strategy change, everything, we debate every seed investment to sometimes excruciating detail, but it helps us make really good decisions and make decisions as a team rather than as individuals.

The firm, which has already invested in several companies in the sector like Polygon, launched a $500- $600 million fund in February to invest in “liquid” crypto assets as a complement to its other investments to “participate more actively in protocols” and “better support token-only projects.”

Misunderstanding Crypto

This abandonment of crypto investments will also be caused by other elements. According to Maguire, there is a fundamental misunderstanding of what crypto and Web3 might offer as new technologies, with some investors touting decentralization as a ”silver bullet.” Maguire declared:

Decentralization is not a silver bullet that just solves all problems and is better for everything. You know for the vast majority of compute, you want it to be centralized.

The influx that blockchain-based companies have gotten from venture capital funds has been massive, being fueled by the interest that the market has developed by NFTs, Web3, and metaverse as trends this year. Just in Q1, $30 billion were invested in fintech and crypto startups by VC companies.

What do you think about Sean Maguire’s take on the future of some VC investments in crypto? Tell us in the comments section below.

Sergio Goschenko

Sergio is a cryptocurrency journalist based in Venezuela. He describes himself as late to the game, entering the cryptosphere when the price rise happened during December 2017. Having a computer engineering background, living in Venezuela, and being impacted by the cryptocurrency boom at a social level, he offers a different point of view about crypto success and how it helps the unbanked and underserved.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Tl;dr: This report updates on what Josie, a Bitcoin CoreDev, and Coinbase Crypto Community Fund grant recipient, has been working on over the first part of their year-long Crypto development grant. This specifically covers their work on bitcoin transaction privacy.

Since late last year, I have been working with a group of researchers on a project centered around Bitcoin transactions with two or fewer outputs. While the research is still on-going, we identified an opportunity for improvement with respect to Bitcoin transaction privacy. This post details the motivation for the change and work completed thus far.

Privacy in Bitcoin transactions

When thinking about privacy in Bitcoin, I find the following definition helpful:

“Privacy is the power to selectively reveal oneself to the world” — Eric Hughes (1993)

This definition motivates the following statement, “Software should never reveal more information than necessary about a user’s activity.” Applied to Bitcoin transactions, this means we should attempt to keep the payment address and amount private between the payer and payee. One way to break this privacy today is through the “Payment to a different script type” heuristic.

In short, this heuristic works by inferring which of the outputs in a transaction is the change output by examining script types. If a transaction is funded with bech32 (native segwit) inputs and has two outputs, one P2SH and the other bech32, it is reasonable to infer the bech32 output is a change address generated by the payee’s wallet. This allows an outside observer to infer the payment value and change value with reasonable accuracy.

How big of a problem is this?

But how often does this happen? Is this worth improving at all or is it a rare edge case? Let’s look at some data!

Payments to different script types over time

In analyzing transactions from 2010 — present, we found this type of transaction first appearing after the 2012 activation of P2SH addresses, and growing significantly after the 2017 segwit activation. From 2018 onward, these types of transactions account for ~30% of all transactions on the Bitcoin blockchain. This is expected to continue to increase over time as we see increased taproot adoption, which introduces the new bech32m address encoding. This means that we have an opportunity to improve privacy for up to 30% of all Bitcoin transactions today if every wallet had a solution for this.

How can we improve this?

The first step to solve this problem is to match the payment address type when generating a change output. From our earlier example, this means our wallet should instead generate a P2SH address so that the transaction is now bech32 inputs to two P2SH outputs, effectively hiding which of the outputs is the payment and which is the change.

This was logic was merged into Bitcoin core in #23789 — meaning that our wallet will now have a mix of output types depending on our payment patterns. What happens when we spend these UTXOs? Is our privacy from the original transaction still preserved?

Mixing output types when funding a transaction

As it turns out, we might still leak information about our first transaction (txid: a) when spending the change output in a subsequent transaction. Consider the following scenario:

mixing input types in subsequent transactions

• Alice has a wallet with bech32 type UTXOs and pays Bob, who gives them a P2SH address
• Alice’s wallet generates a P2SH change output, preserving their privacy in txid: a
• Alice then pays Carol, who gives them a bech32 address
• Alice’s wallet combines the P2SH UTXO with a bech32 UTXO and txid: b has two bech32 outputs

From an outsider observer’s perspective, it is reasonable to infer that the P2SH Output in txid: b was the change from txid: a. To avoid leaking information about txid: a, Alice’s wallet should avoid mixing the P2SH output with other output types and either fund the transaction with only P2SH outputs or with only bech32 outputs. As a bonus, if txid: b can be funded with the P2SH output, the change from txid: b will be bech32, effectively cleaning the P2SH output out of the wallet by converting it to a payment and bech32 change.

Avoid mixing different output types during coin selection

I have been implementing this logic in Github with ongoing work and review..

If this topic is interesting to you, or if you are looking for ways to get involved with Bitcoin Core development, you can participate in the upcoming Bitcoin PR Review Club for #24584 (or read the logs from the meeting).

Ongoing work

If this logic is merged into Bitcoin Core, my hope is that other wallets will also implement both change address matching and avoid mixing output types during coin selection, improving privacy for all Bitcoin users.

This work has inspired a number of ideas for improving privacy in the Bitcoin Core wallet, as well as improving how we test and evaluate changes to coin selection. Many thanks to Coinbase for supporting my work — I hope to find other opportunities for improvement motivated by analysis as our research continues.

On-chain data shows while the price of Bitcoin has continued to struggle recently, miners have shown diamond hands.

Bitcoin Miner Reserve Holds Still Amid The Recent Price Consolidation

As pointed out by an analyst in a CrypoQuant post, BTC miners have been accumulating for some time now, and the dwindling price hasn’t scared them.

The “Bitcoin miner reserve” is an indicator that measures the total amount of coins present in wallets of all miners.

When the value of this indicator observes a decrease, it means the supply held by miners is going down. Such a trend may be a sign that miners are dumping right now as they usually withdraw coins from their reserve for selling them on an exchange. And therefore, this can be bearish for the price of the coin.

On the other hand, an uptrend in the indicator, when prolonged, can prove to be bullish for the value of Bitcoin as it may show miners are accumulating at the moment.

Related Reading | Quant Explains Similarities Between Current And Summer 2020 Bitcoin Markets

Now, here is a chart that shows the trend in the Bitcoin miner reserve over the past couple of years:

Looks like the value of the metric has been trending sideways in recent months | Source: CryptoQuant

As you can see in the above graph, the Bitcoin miner reserve was at a very high value before the start of the 2021 bull run, but as soon as it kicked off a lot of miners harvested profits.

Following the crash in May of the same year, miners held on for a while, but it wasn’t too long until they the metric saw a plunge as they dumped.

Related Reading | Bitcoin Perfectly Follows Market Cycle Comparison, What Comes Next For Crypto?

Active miners have running costs like electricity so in times of low profitability, they have to sell their coins to pay off these bills.

These holders started accumulating again in July as a new rally kicked off. This time, however, they didn’t sell off when the ATH was hit and a crash occurred.

Though, miners have also not been adding further to their Bitcoin reserves in recent months either. But nonetheless, they have held strong through the seemingly endless sideways movement the price of the crypto has shown lately.

BTC Price

At the time of writing, Bitcoin’s price floats around $38.4k, down 1% in the past week. Over the last month, the crypto has lost 17% in value.

The below chart shows the trend in the price of the coin over the last five days.

The value of the crypto seems to have slid down over the last few days | Source: BTCUSD on TradingView

Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com

Anchor Protocol, one of the most popular platforms in the Terra ecosystem, rolled out a change in its Earn Rate. The latter will begin to operate in a semi-dynamic fashion rather than the previously fixed 20% annual percentage yield (APY).

Related Reading | Terra Price Continues Moving North; How Soon Will It Cross $100? 

With a massive shift in the protocol’s reward mechanism, the new models aim at making Anchor “more sustainable”. As a result, users started earning an 18% APY as of yesterday, May 1. The earn rate will be modified each month for the foreseeable future.

The team behind this Terra project said the following via their official Twitter account:

The Anchor Earn rate adjusts dynamically by up to 1.5% each month based on if the yield reserve appreciated or depreciated. The floor is 15% APY & the ceiling is 20% APY.

The changes in Anchor’s earn rate are triggered by the protocol’s yield reserve. A .25% modification in this element will be followed by an adjustment in the Earn Rate.

This shift in the Terra protocol was approved, via Proposition 20, on March 24 this year. At the time, Anchor Protocol said:

The addition of a semi-dynamic Earn rate will contribute to the long-term sustainability of Anchor & will benefit users of the protocol by enabling yield reserve growth while continuing to provide an attractive yield on UST.

As seen below, the total borrowed versus total deposits on Anchor shows significant divergence. This is why the yield reserves on the protocol trend to the downside, especially in times of bearish price action on larger cryptocurrencies.

Some of the users believe that this trend could trigger a deppeging event for UST which could jeopardize the entire Terra ecosystem. The introduction of a semi-dynamic rate is the first step to avoiding this possibility.

Terra Is Not The Most Attractive Venue For Stablecoin Yield?

Some users believe that the new earn rate might not be enough and have been suggesting the implementation of investment strategies that can contribute to the yield reserves. Another part of the community seems focused on increasing the borrowing rate at Anchor.

However, as the chart above shows, deposits on the Terra protocol have been trending to the upside at a fast pace. In the meantime, the number of borrows has been moving sideways with a slight uptick in recent months.

Over the same period, other network launched their own stablecoins with alternatives to Anchor. NEAR and TRON stand out because of the hype and the APY that they are offering to their users.

TRON seems to have the largest incentives as it provides depositors with a 30% APY. Like Terra users with Anchor, many wonder if those rewards will be sustainable.

Related Reading | Terra Users Heads Up, Why NEAR May Launch Native Stablecoin With A 20% APR

At the time of writing, Terra (LUNA) trades at $83 with a 6% profit in 24-hours.

Jared Polites is a partner at Rarestone Capital, an active Web3 fund with a marketing arm (Rarestone Labs). Since 2020, Rarestone has been at the forefront of investing in and marketing DeFi protocols, NFT drops, and Web3 infrastructure plays. As the industry is ever-changing, we wanted to catch up with Jared to see what has changed since the last cycle and how projects can best position themselves for success when thinking about marketing.

What are some tips you can offer to projects building out a marketing plan?

Polites: Similar to traditional tech user acquisition, projects need to build an effective communications strategy that discusses what value they are providing and how it directly impacts their users and communities. First, the key is to be consistent. Going “stealth” is a wild card strategy that can be used early on to gain momentum, but should not be the focus as a roadmap progresses. Over-communicate vs. under-communicate is my advice. Especially since attention spans are decreasing and community members will take their interest elsewhere if they don’t know exactly what is happening and when.

Second, make sure to have at least one marketer on your team. It sounds simple, but we find numerous dev-heavy teams that neglect marketing until the very last minute. In these situations, it is completely fine to outsource to agencies, but you need to have a point of contact internally to help coordinate and review each activity. Even someone junior is fine. A common misconception is that a good enough product will market itself, but the industry is becoming more crowded and moves at warp speed – you have to stand out from the crowd.

What has changed since 2017 in how projects should market themselves?

Polites: Communities, users, and even speculators are more sophisticated and to an extent, unforgiving. Short-term focused tactics that were often seen in the last cycle are now quickly exposed if detrimental to a project. For example, there is a recent trend that is questioning the long-term impact of staking. Often seen as a necessary early-stage strategy that helps reward engaged long-term users (and makes for a strong community announcement), industry players are now questioning the sustainability of staking. Is staking just a ploy to maintain a positive price trajectory and reduce sell pressure, or is it really about the community?

These are the questions and dilemmas that projects need to question when building a well-rounded marketing strategy.

What are some common pitfalls you see with how companies market themselves?

Polites: Many are not long-term focused. Make sure your marketing strategy aligns with your long-term vision and roadmap. For example, I see founders get caught up with flashy marketing campaigns that are detrimental to a project’s long-term token health. With generous emissions, interest spikes early on and then wanes as community members move on to the next shiny object. During this process, you need to evaluate what risk a marketing campaign must hold and why. Without this knowledge, all it would take is one bad market downturn to eliminate all momentum and possibly create a situation that is impossible to recover from.