CRYPTO LIBERTARIAN ECONOMICS

Why Ethereum and Bitcoin Are Very Different Investments
Dec 3, 2020 

Ethereum art(CoinDesk archives)

Muyao Shen

Why Ethereum and Bitcoin Are Very Different Investments

Those new to crypto, such as the institutional investors recently buying into bitcoin’s “digital gold” narrative, might now be looking around for the next big thing.

With the long-anticipated arrival of phase 0 of the Ethereum 2.0 upgrade launching on Dec. 1, that could be the network’s native token, ether (ETH). But analysts say ether should be judged on its own merits and not as a bitcoin replacement.

“I’ve always thought this digital asset space is huge – and it’s not just bitcoin – because there are going to be different applications for different things,” Raoul Pal, CEO and co-founder of financial media group Real Vision, said in Real Vision’s documentary “Ethereum – An Investigation,” which was released on Nov. 30. “I think of the two [bitcoin and ether] as having a very nice combined asset allocation.”

For Pal, an early bitcoin investor, the rationale seems even more plausible these days: As bitcoin’s price hits a new all-time high, the number one cryptocurrency by market capitalization is now more expensive and thus potentially a riskier bet for new investors.

It can be expected investors are looking for a new opportunity in crypto at affordable prices. Given that ether is trading roughly 59% below its all-time high of $1,432.88, it is tempting to believe there’s a bargain to be had. What’s more, the Ethereum 2.0 upgrade to increase the network’s scalability, security and energy efficiency has generated a lot of hype.

Read more: Investment Giant AllianceBernstein Now Says Bitcoin Has Role in Investors’ Portfolios

However, at least for now, analysts and traders who spoke with CoinDesk don’t think ether will replace the FOMO over bitcoin.

“For institutional investors, they are buying BTC for the digital gold narrative,” Ryan Watkins, senior research analyst at Messari, told CoinDesk. “ETH just isn’t in that conversation yet.”

Ether “benefits from spillover and likely has more conversation around it from crypto-natives,” Vishal Shah, founder of derivatives exchange Alpha5, told CoinDesk. “For the uninitiated, [it is] hard to see how bitcoin is not the sole on-ramp.”

Weakening correlation between bitcoin and ether

Some analysts say that as more institutions pour money into bitcoin and push up its price, ether and other cryptocurrencies will gradually decouple from bitcoin.

Indeed, while bitcoin this week logged a record high price, ether isn’t even close to its all-time high of $1,448.18. Data from CoinDesk shows the 90-day correlation coefficient between the prices of the top two cryptocurrencies, while still strong, has gradually weakened a bit since the summer from as high as 0.93 to nearly 0.7 at the beginning of December.



Source: CoinDesk Research

“The thing about correlation is it can disappear at any time,” Ashwath Balakrishnan, research analyst at digital asset research firm Delphi Digital, told CoinDesk. “In that case, you want to understand the core fundamentals of what you hold because if you hold ether as a proxy [to your] bitcoin exposure, and [when] prices decouple, you are now exposed to something very different.”

Bitcoin has been used by many investors this year as a hedge against a drop in the purchasing power of U.S. dollars. Ether is considered the currency of “the world computer,” which aims to build an ecosystem of decentralized applications.

The close historical correlation between bitcoin and other cryptocurrencies may be due to how tiny the digital-asset ecosystem is relative to the global economy. The total market capitalization of crypto assets is estimated at $562 billion, a mere 1.7% of the S&P 500 stock index’s combined market cap of $32.2 trillion. With almost every crypto asset built on different fundamentals, non-bitcoin cryptocurrencies may be trending with bitcoin prices simply because the nascent market is still so small and insular.

Read more: Volume Surge Brings 25% Turnover to ‘CoinDesk 20’

Correlation data doesn’t tell the whole story. Prices may move in tandem but the degree to which that happens is another matter. When the explosive decentralized finance (DeFi) boom hit the market during the summer, ether’s price rallied to its highest in more than two years because most DeFi projects are built on the Ethereum blockchain. At the time, bitcoin was struggling to break a similar two-year record.

What Ethereum 2.0 could mean for investors

The market will have to wait and see what kind of real impact the ongoing Ethereum upgrade could have on its native currency because the final phase of the process is scheduled to be completed in 2023. But a major fundamental upgrade on the network underpinning ether could lead its price to move on its own fundamentals, instead of merely following bitcoin’s price.


“The heart of ETH 2.0, which makes the entire system possible, is ether,” according to a report by Messari. “ETH will not only be Ethereum’s native store of value asset and fuel for transactions, but will also be Ethereum’s ultimate source of security from its role in the [proof-of-stake] system.”

Thus, while bitcoin can be seen as somewhere between a store of value and a commodity on the “asset superclass triangle,” ether could ultimately become the first asset to be a combination of all three classes of assets: capital assets, commodities and stores of value.

“When ether’s price starts to be driven by its own catalysts, holding it as a proxy to having BTC exposure will not work as expected,” Balakrishnan added.

READ MORE ABOUT...EthereumBitcoinEthereum 2.0

DISCLOSURE

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Bitcoin ETFs poised for US pension plan inflows, Standard Chartered analyst says


Brian McGleenon
Thu, 15 February 2024 

Bitcoin (BTC-USD) spot ETFs could see an influx of capital from US pension plan managers, according to an analyst. This expectation could indicate a broader acceptance and adoption of bitcoin-related investments within retirement portfolios.

On this week's episode of Yahoo Finance Future Focus, Standard Chartered (STAN.L) head of crypto research Geoff Kendrick shared his insights into the evolving cryptocurrency landscape where traditional finance incumbents, such BlackRock (BLK) and Franklin Templeton (BEN), are participating via the recently launched spot bitcoin exchange traded funds (ETFs).

Read more: Crypto live prices

Following the increased inflows from asset managers into the eleven existent spot bitcoin ETFs, Kendrick expects participants from the US 401(k) market, such as retirement fund managers, to begin allocating into the newly launched funds.

"What we now see in the US is the 401(K) market, such as pensions, enter bitcoin and other assets in this space, when we get the spot ether ETF in May, for the first time," Kendrick told Yahoo Finance.

According to data from the Investment Company Group (ICI), 401(k) plans hold $6.9tn (£5.5tn) in assets, in more than 710,000 plans, on behalf of about 70 million active participants and millions of former employees and retirees.

Spot bitcoin ETF inflows

Kendrick told Yahoo Finance UK that in total he expects "around $50bn to $100bn in net inflows into spot bitcoin ETFs in 2024."

A spot bitcoin ETF is a financial product that investors hope will pave the way for mainstream capital to flood the crypto market. Currently, the indications are favorable, with fund managers having allocated over $4bn in net inflows to the eleven spot bitcoin ETFs since they were approved by the US Securities and Exchange Commission (SEC) on 11 January.

Spot ether ETFs anticipated

Kendrick also expressed optimism about the possibility of a spot ether ETF (ETH-USD) being approved by the SEC, marking out 23 May as a potential date. He added that this is expected to contribute to positive market sentiment and suggested that net inflows into anticipated spot ether ETFs in 2024 could reach between $20bn and $35bn by the end of year.

Read more: Bitcoin success with SEC fuels anticipation for ether spot ETF

Kendrick noted that the excess demand might surpass that seen surrounding the approval of bitcoin's spot ETFs. He emphasised the smaller size of proxies, such as the Grayscale Ethereum Trust, which may impact supply and demand dynamics for ether.

"It's likely the price impact will be even greater for ether than it has been for bitcoin in the run-up to the approval of a spot ether ETF. That's partly because the proxies, such as the European ETFs, the Canadian ETFs and the Grayscale Trust for ether are smaller as a percentage of market cap than they are in bitcoin. So the build up of excess demand is more likely to be even larger for ether than it was for bitcoin," he said.

Kendrick said that, despite recent volatility in US Treasury yields and a potential delay in a US Federal Reserve rate cut, bitcoin and ether, along with other risk assets, have performed well.

As the market broadens, he anticipates increased liquidity and the emergence of options for both spot bitcoin and spot ether ETFs, signaling a new phase in the maturity of the cryptocurrency investment landscape.

The cost of a single tulip bulb surged to the same price as 

a mansion 400 years ago: 

Are NFTs the ‘tulipmania’ of the 21st century?

Similarities between the new digital technology craze in the art world and the surge in value of tulips in 17th-century Holland suggest that it could all end in (real) tears

SCOTT REYBURN

16th April 2021

THE ART NEWSPAPER

At tulipmania’s peak in 17th-century Holland, specimens cost the same as a mansion Norton Simon Art Foundation

It is not often that the commercial churn of the art world produces a moment that feels truly seismic. Plenty of people thought that moment had come on 11 March when the digital artist Beeple’s non-fungible token (NFT) sold at Christie’s in an online auction for $69.3m, a price far higher than anything yet paid for works by canonical greats such as Georgia O’Keeffe, Eugene Delacroix, Francisco Goya, Jackson Pollock and Marcel Duchamp.

For the first time, Christie’s accepted payment in Ethereum cryptocurrency—including for its own fees. The work, which has no physical existence, was bought by Metakovan, a pseudonymous crypto investor who already owns numerous Beeple works, for 42,329.453 Ether, including Christie’s buyer’s premium.

“It’s like Duchamp. We’re dealing with the same kind of conceptual leap,” says Candace Worth, a New York-based art adviser. “Are we just the wrong generation?” adds an uncomprehending Worth, who wonders whether Beeple’s jpeg could turn out to be the 21st-century equivalent of Duchamp’s Fountain readymade, which proved equally baffling when first exhibited in 1917.

Beeple’s Everydays: The First 5000 Days was a digital collage of all the images he had posted online since 2007. NFTs are essentially digital files in which authenticity and ownership are certified, at considerable environmental expense, by blockchain computer networks. They can turn almost anything into a virtual collectible: cars, tweets, land, sneakers, music, even video clips of basketball shots. During the past few months, these tokens have been traded at heady prices on specialist platforms by speculators who have made digital fortunes from cryptocurrencies such as Bitcoin and Ethereum. The aggregate value of this virtual money has soared to more than $1trn after backing from Elon Musk’s Tesla group, hedge funds and other major investors.

As a stunned analogue art world is now realising, the crypto-wealthy are paying the headiest prices of all for NFT art. As well as tokens by Beeple, CryptoPunks, a collection of 10,000 algorithm-generated characters made since 2017 by Larva Labs, have also been selling at mind-altering levels. On 11 March, Punk no. 7804, one of only nine rare “alien” CryptoPunks, sold for 4,200 Ether, around $7.5m at the time.

That price, given for a computer file containing a Space Invader-like image comprising just 576 pixels, was way above the latest auction highs for works by in-demand analogue artists such as Amoako Boafo and Matthew Wong. Just three years earlier, Punk no. 7804 had sold for 12 Ether, or about $15,000.

Taking the pixel: Larva Labs’s Punk no. 7804 sold for around $7.5m last month Larva Labs

“In 30 years, I’ve never seen such a reaction in the art world. It’s nothing less than an earthquake,” says the New York-based writer, collector, dealer and NFT convert Kenny Schachter, who in recent months has himself become a successful digital token artist, selling more than $200,000 of works on Nifty Gateway, the online sales platform owned by the Bitcoin billionaire twins, Tyler and Cameron Winklevoss. “This is a whole new audience. They don’t know about the art world, and they don’t care about it,” Schachter says.

Do NFTs represent a truly significant cultural shift? Or is this just the speculative madness of the crypto-crowd, like the mania for tulips in the mid-1630s or South Sea Company stock in 1720?

Christine Bourron, the chief executive of the London-based art market analysts Pi-eX, has a simple explanation. “Ether has gone from $100 a year ago to $1,800. A group of people have become millionaires and billionaires in cryptocurrency,” Bourron says. “It’s very complicated to turn it back into dollars or another fiat currency, and they don’t have many options for spending their ether.” And NFTs are one of those few options.

Ether is the key

Bourron also points out that the Christie’s Beeple sale of one NFT grossed 44% more than the $48m the auction house had turned over from all its January and February auctions combined, comprising some 3,000 lots.

No wonder auction houses, along with others in the analogue art world, suddenly see NFTs as financial El Dorado. This is art that is made online, viewed online, bought online and owned online, incurring no transportation, storage, photography or insurance costs. And it makes huge prices. What’s not to like?

Well, the problem is that most NFT art, like Beeple’s Everydays is traded in Ether, a highly volatile cryptocurrency that is not widely accepted for consumer payments.

“Many cryptocurrency payment apps have been created in recent years to promote its use,” Chi Lo, an economist at BNP Paribas, recently pointed out in Investors’ Corner, the official blog of the French bank’s asset management division. “But none of them has made it to the core of the world’s daily transactions and payments, except for some underworld transactions.”

The value of an NFT work, having no physical existence, is umbilically dependent on the price of Ethereum. If Ether is on a high, then Ether art is on a high. It’s all about the digital money.

“Christie’s auction wouldn’t have been a success if it hadn’t accepted Ether,” Bourron says. “That was the key.”

For the moment at least, with the price of Ether having more than doubled since the beginning of the year, it is onwards and upwards for NFT art.

Sotheby’s collaborated with the digital artist Pak on an NFT sale this week that totalled $16.8m. In a statement, the auction house said that ultimately it is “looking to expand upon this first venture in the months to come with new ideas and concepts, such as introducing well-known contemporary artists into the digital art space”.

500 cubes from Pak's Fungible collection Courtesy of Sotheby's and Pak

Buy an NFT, get a painting free

The potential of using cryptocurrency to lever the price of analogue works of art has also been spotted by Mintable, a specialist online NFT marketplace. In March, Mintable held what it billed as the “greatest NFT auction ever”, consisting of Abstract Composition (around 1925) by the Russian avant-garde artist Wladimir Baranoff-Rossiné and an accompanying digital certificate to be purchased in Ether.

The choice of a work by Baranoff-Rossiné as the focus of this seven-day hybrid offering might have struck many in the mainstream art world as a bold move. Russian avant-garde art is a sector of the market notorious for the proliferation of fakes, many of which carry bogus provenance and certificates of authentication.

The possibilities of this kind of buy-an-NFT, get-real-art-free (Bangraf) offer are virtually endless, given the $1trn of digital cash looking for something to buy.

If, for instance, Christie’s had offered all of those 3,000 analogue lots it auctioned in January and February with accompanying digital tokens, purchasable in Ether, then maybe they might have sold for $4.8bn, rather than a paltry $48m. Admittedly the blockchain computing of that many NFT transactions would use energy equivalent to the average daily consumption of 6,000 American homes, but it would at least transform the auction house’s Covid-battered turnover figures.

It is surely this kind of combination and confusion of the crypto and analogue that represents the biggest threat to the equilibrium of the wider art economy.

Back in January 1637 in Holland, at the height of tulipmania, a single bulb of the most coveted Semper Augustus flower had an asking price of 10,000 guilders—the cost of a mansion in one of Amsterdam’s smartest districts. The market for the colourful flowers collapsed the following month, leading to prices falling by as much as 90%.

Five years later in Amsterdam, Rembrandt was paid about 1,600 guilders by a company of musketeers, the Kloveniersdoelen, to paint his monumental masterpiece, The Night Watch, now in the Rijksmuseum.

Though plenty of wonderful paintings of flowers were made and sold in Holland in the 17th century, the markets for flowers and art remained distinct. In the 21st century, societies are under enormous economic and cultural pressure to regard digital technology as the solution to everything. To be sure, new technology has brought us enormous benefits, but certain aspects, such as speculation in cryptocurrencies, also bring risk. The Nobel Prize-winning economist Paul Krugman, writing in the New York Times, has called Bitcoin “a bubble wrapped in techno-mysticism inside a cocoon of libertarian ideology”.

Selling tangible works of art in virtual currencies could well end in tears. And they won’t be digital.

At Satoshi’s Tea Garden
Ben Walker

LRB
Vol. 43 No. 9 · 6 May 2021

Prin 1979 words

Buzz Lightyear​ is naked, save for his standard-issue purple balaclava and a banana taped to his hairy stomach. He stands in front of the white wall of an art gallery; a label to his left reads ‘The Impossible Dream of a Pubic Fruit’ and an audience looks up at his giant grey legs. The image is one of five thousand that make up the digital artist Beeple’s collage Everydays: The First 5000 Days, the first purely digital artwork to be auctioned at Christie’s, on 11 March this year. It sold for $69.3 million, making it the third most expensive work by a living artist, after Jeff Koons’s Rabbit and David Hockney’s Portrait of an Artist. The buyer, Vignesh Sundaresan, called it a ‘significant piece of art history’. Sundaresan doesn’t own the copyright to Everydays. All he bought was a non-fungible token (NFT): a collection of data stored using blockchain technology. There is nothing stopping you from downloading the image yourself, printing it off and sticking it above the fireplace. It will look exactly the same.

Each time an NFT is created – or ‘minted’ – or is transferred from one digital account to another, the data recording the event is stored as part of a ‘block’ on a chain. Each block contains information from the previous block in the chain; sneakily try to change a line of code and the chain collapses, so the erroneous entry is easily discovered. This makes a blockchain, in theory, incorruptible. As soon as a transaction is made, it is broadcast across a vast network of computers: it is ‘decentralised’, meaning that anyone can be the detective who spots the crime. There is no single authority declaring what’s what. For almost as long as this technology has existed, people have been excited about its potential use as a means of securing the provenance of assets. If records of financial transfers can be made totally tamper-proof, then why not deeds to houses, or medical records, or entire digital artworks?

The artist Kevin McCoy and the technologist Anil Dash minted the first NFT in 2014 as a way for digital artists to keep control of their work. ‘McCoy used a blockchain called Namecoin to register a video clip that his wife had made,’ Dash explained in the Atlantic, ‘and I bought it with the four bucks in my wallet.’ Later that year a company called Counterparty set up a few NFT ‘marketplaces’ – websites where NFTs are bought and sold. The biggest was the Rare Pepe Directory, devoted to images of Pepe the Frog, the comic book character beloved of the alt-right. In 2017, Larva Labs released ten thousand pixellated cartoon characters – for free – on the Ethereum blockchain. They can now fetch millions of dollars apiece. After Beeple’s Everydays, the second most expensive NFT sold so far is CryptoPunk #3100, a bald alien with a headband, which fetched 4200 ether, or about $7.6 million (ether is a currency, just like bitcoin). One collector is planning to sell nine CryptoPunks at an upcoming auction in New York.

1. CryptoPunk 3100 - Larva Labs

   https://www.larvalabs.com/cryptopunks/details/3100

   

   33 rows · CryptoPunks are 10,000 collectible characters on the Ethereum blockchain. These are the details for Punk #3100

‘Cryptopunk #3100’

After CryptoPunks – inevitably, because this is the internet – someone came up with the idea of CryptoKitties, a game involving a digital marketplace where people could buy, sell and breed digital cats. An alarming number of CryptoKitties – fat little felines in a rainbow of colours – seem to have some form of anisocoria, where one pupil is larger than the other. Unlike the punks, which were all visually as well as cryptographically unique, two cats can look exactly the same, but since each kitten is attached to a unique NFT they’re treated as separate artworks, like prints in a series. Millions more dollars were made.

Because NFTs are essentially just digital deeds, they can be used to turn almost anything online into a saleable asset – pictures, video clips, even words on a webpage. In March the New York Times auctioned off an article about NFTs for 350 ether – half a million dollars. NBA Top Shot, the official NFT marketplace for the National Basketball Association, is a trading site for classic moments in basketball matches, like LeBron James dunking. William Shatner sold an X-ray of his teeth. I saw one developer offering NFTs of famous dates. Do you want to own Michael Jackson’s first moonwalk, on 25 March 1983? That’ll currently set you back 0.5 ether, or $1300. Bill Clinton’s impeachment on 19 December 1998? One ether. The first witch-burning at Salem on 10 June 1692? A steal at just 0.3 ether, or $780. One of the founders of Twitter, Jack Dorsey, auctioned an NFT of the first ever tweet, five words – ‘just setting up my twttr’ – that cost the winner some $2.9 million.

A CryptoKitty

A CryptoKitty itself isn’t a currency token, however. Instead, it’s a “digital asset” that’s stored on the Ethereum blockchain. Technically, each CryptoKitty is a unique ERC-721 token that’s stored on the Ethereum blockchain. Each CryptoKitty has a combination of “cattributes” that make it unique.

What the &#%$ is a CryptoKitty? - How-To Geek

www.howtogeek.com/354535/what-the-is-a-cryptokitty/

A CryptoKitty

The owners of these digital artefacts have no rights to the intellectual property. Sina Estavi, who bought Dorsey’s tweet, can’t stop people retweeting it. Whoever bought the New York Times article can’t reprint it without permission. And of course no one can own a date: what people are actually buying are just JPEGs of a calendar with the purchased event marked in bold. So what’s the point? For richer investors, it’s an exercise in clout, a tech-bro muscle flex. Only a certain type of person wants to be able to lean over your shoulder as you watch the latest viral video or meme and shout: ‘That’s mine! I own it!’ For less wealthy traders, NFT ownership operates more like a collectible card game. The programmers who developed CryptoPunks were amazed by the number of people willing to take a ‘conceptual leap’ about what ownership can now mean. Estavi said that buying Dorsey’s first tweet was like owning the Mona Lisa.

One problem with NFTs – which Dash and McCoy first developed in a ‘one-night hackathon’ – is that the data storage capacity of a blockchain is limited. It’s really just a string of code, which is capable of representing anything, but it can’t be too long or it will be too expensive for the network to process. (It is possible to store images on the blockchain, but it costs way too much.) What Dash and McCoy came up with was a system that records a link to an image that exists somewhere on the web. ‘We took that shortcut because we were running out of time,’ Dash wrote. ‘Seven years later, all of today’s popular NFT platforms still use the same shortcut.’ Worse still, the link that is bought and sold leads to ‘the website of a new start-up that’s likely to fail within a few years’. Suddenly, NFTs seem no more indestructible than certificates of authenticity on plain old paper.

NFT artists and buyers are thrilled that they allow them to bypass the traditional gatekeepers of the industry and interact directly with their audience. The banana taped to the nude Buzz in Beeple’s Everydays has become something of a motif for digital artists – a big fuck you to gallerists and art-biz moguls. (Beeple’s picture is a reference to the satirical artist Maurizio Cattelan’s Comedian, an actual banana taped to a wall at Art Basel in 2019, which was the occasion for Twitter to explode with images of people sticking grapes, leeks and frozen peas to their kitchen cabinets.) The hope is that once venture capitalists and tech pioneers get bored of the novelty of NFTs, there will be some innovations worth holding on to. As one developer put it: ‘We will see some scammy projects, but there may be some gems with actual utility.’ A feature of NFTs that may make the gatekeepers superfluous is the option for artists to attach royalty clauses to their work. In this scenario, every time something is resold, the creator automatically takes a cut. If you buy an NFT of a song from a small band you like, the band gets an immediate investment as well as a royalty payment every time the token is sold on a secondary marketplace. If in a few years’ time they become global superstars, the NFT owner can make a lot of money – or, if they want to hold on to it, prove that they were there at the beginning.

‘CryptoBanana #4’

‘CryptoBanana #4’

Champions of NFTs should be alarmed by Christie’s smooth consumption of the concept, however. Maybe the buyers are different – so far, tech entrepreneurs and bitcoin fundamentalists rather than conventional collectors – but the business is the same: the perception of value can be exploited and translated into big bucks for the big beasts. The technology has already, and inevitably, been co-opted by corporations on the lookout for fresh markets. Nike has reportedly patented a ‘system and method for ... mining, intermingling and exchanging blockchain-enabled digital shoes’. Taco Bell sold digital pictures of its products with a $500 gift card attached (only the first buyers were entitled to the free food). There will be a multitude of beneficial uses for blockchain technology, and the promise of true decentralisation is a boon, but the bleak fact is that NFTs are quickly becoming another tool for companies to sell us things we already own.

There’s another problem with NFTs: they have an exorbitant environmental impact. The computing power that underpins decentralisation consumes a huge amount of energy. Earlier this year, Cambridge researchers reported that bitcoin was using more energy than the whole of Argentina. In December 2020, the artist Memo Akten estimated that the average carbon footprint of a single NFT artwork was equivalent to driving a car more than six hundred miles. The sculptor Joanie Lemercier discovered that six NFTs he minted had used 8.7 megawatt-hours of energy, as much as he had expended in his studio in two years. Artists and marketplaces are trying to compensate for their environmental impact with somewhat glib gestures to carbon offsetting. When the musician Grimes sold a series of video art pieces on the Nifty Gateway marketplace, she donated an unspecified percentage of the $6 million proceeds to the climate-change NGO Carbon-180. (Access to Nifty Gateway, one of the biggest marketplaces for NFT artworks, is by invitation only. No gatekeepers, though, right?)

A screenshot from Decentraland

A screenshot from Decentraland

One of the most curious uses for NFTs so far has been in managing the exchange of digital building blocks in virtual gaming worlds. Decentraland is the latest in a long line of world-building videogames (Sim City, Civilisation, Theme Park World, Minecraft), and is underpinned by NFTs and cryptocurrency. Since its launch in 2017, tens of thousands of players have travelled, often using virtual reality headsets, through its digital world, using Decentraland’s own cryptocurrency (MANA) to buy and sell individual land parcels (LAND) on which citizens can build computer-generated real estate. Each piece of land is represented by an NFT. It’s still an embryonic universe, with many plots containing only a few benches and bushes, but the possibilities are bountiful – and lucrative. Decentraland has virtual book launches and virtual art galleries displaying digital artworks: one gallery houses miniature versions of paintings by Keith Haring and Jean-Michel Basquiat. Decentraland has bars, casinos, chapels, mosques. There’s even an electoral system in which users vote in referendums. It’s more like a plutocracy than a democracy: those with the most LAND and MANA get more votes. A couple of years ago a Decentraland user purchased 64 empty plots of land and combined them into a single estate. He called his new property ‘The Secret of Satoshi’s Tea Garden’ – a reference to Satoshi Nakamoto, the pseudonymous founder of bitcoin. But it also put me in mind of Borges’s ‘The Garden of Forking Paths’, in which the narrator, on learning of his great-grandfather’s theory of multiple dimensions, describes his surroundings in a way that could apply to the Decentraland universe: ‘I sensed the pullulation ... that the dew-damp garden surrounding the house was infinitely saturated with invisible people ... secretive, busy and multiform in other dimensions of time.’ Satoshi’s Tea Garden sold for $80,000, its price inflated because of its appealing location, completely surrounded by digital roads.

Ben Walker is an editor at the LRB.

Tailoring fluorine-rich solid electrolyte interphase to boost high efficiency and long cycling stability of lithium metal batteries

Peer-Reviewed Publication

SCIENCE CHINA PRESS

 

IMAGE: SCHEMATICS ILLUSTRATING THE ROLE OF DFEC IN IMPROVING SOLID ELECTROLYTE INTERPHASE (SEI) AND AFFECTION ON LI DEPOSITION IN ETHER ELECTROLYTE. view more 

CREDIT: ©SCIENCE CHINA PRESS

This study is led by Prof. Ji Qian and Prof. Renjie Chen (Department of Energy and Environmental Materials, School of Materials Science and Engineering, Beijing Institute of Technology). In this work, fluorinated cyclic carbonate (DFEC) is introduced into ether electrolyte as a SEI-forming additive. The modified electrolyte can improve the interface of Li metal anode and achieve high efficiency and long cycling stability of LMBs.

LMBs are regarded as the most promising next-generation battery system due to the high specific capacity (3860 mAh g−1) and low electrode potential (-3.04 V vs. SHE) of the Li metal anode. However, there are many limiting factors which limit the development of LMBs, as follows: side reaction between Li anode and electrolyte, Li dendrite growth and serious volume effect of Li anode, etc., which lead to low coulombic efficiency (CE) and poor cycle life. Stable solid electrolyte interphase (SEI) is the key to achieve high efficiency and long cycling stability of LMBs. Adjusting SEI through electrolyte optimization is regard as a low-cost and efficient way to improve Li metal anode interface. So, it is critical to design an electrolyte formulation which can form a stable SEI, the key is the choice of solvents and film-forming additive.

Recently, Prof. Renjie Chen and Prof. Ji Qian proposed an ether-ester mixed electrolyte in which trans-difluoroethylene carbonate (DFEC) was introduced into the ether electrolyte as a film-forming additive. Firstly, ether electrolyte has good anti-reduction stability with Li metal. Secondly, due to the lower LUMO level of DFEC, it can be preferentially reduced during the initial cycle, forming LiF-rich SEI on the Li metal anode. LiF-rich SEI can inhibit the growth of lithium dendrite, alleviate side reactions, and induce dense lithium deposition. Thanks to the above advantages, the LMBs using modified electrolyte show high efficiency and stable cycling performance. The first author of this paper is Tianyang Xue, a graduate student at Beijing Institute of Technology, and the corresponding authors are Prof. Renjie Chen, Prof. Ji Qian, and Prof. Xingming Guo.

A few implications thus emerge for designing an electrolyte to boost high efficiency and long cycling stability of LMBs. This work explores the interphase chemistry of LMBs, and provides important insights for further study on the novel electrolyte system for LMBs.

See the article:

Tailoring fluorine-rich solid electrolyte interphase to boost high efficiency and long cycling stability of lithium metal batteries.

https://doi.org/10.1007/s11426-022-1623-2

---

JOURNAL

Science China Chemistry

DOI

10.1007/s11426-022-1623-2 

Chemists make tough plastics recyclable

New method for producing thermoset plastics allows them to be broken down more easily after use

MASSACHUSETTS INSTITUTE OF TECHNOLOGY

 

CAMBRIDGE, MA -- Thermosets, which include epoxies, polyurethanes, and rubber used for tires, are found in many products that have to be durable and heat-resistant, such as cars or electrical appliances. One drawback to these materials is that they typically cannot be easily recycled or broken down after use, because the chemical bonds holding them together are stronger than those found in other materials such as thermoplastics.

MIT chemists have now developed a way to modify thermoset plastics with a chemical linker that makes the materials much easier to break down, but still allows them to retain the mechanical strength that makes them so useful.

In a study appearing today in Nature, the researchers showed that they could produce a degradable version of a thermoset plastic called pDCPD, break it down into a powder, and use the powder to create more pDCPD. They also proposed a theoretical model suggesting that their approach could be applicable to a wide range of plastics and other polymers, such as rubber.

"This work unveils a fundamental design principle that we believe is general to any kind of thermoset with this basic architecture," says Jeremiah Johnson, an professor of chemistry at MIT and the senior author of the study.

Peyton Shieh, an American Cancer Society Postdoctoral Fellow at MIT, is the first author of the paper.

Hard to recycle

Thermosets are one of the two major classes of plastics, along with thermoplastics. Thermoplastics include polyethylene and polypropylene, which are used for plastic bags and other single-use plastics like food wrappers. These materials are made by heating up small pellets of plastic until they melt, then molding them into the desired shape and letting them cool back into a solid.

Thermoplastics, which make up about 75 percent of worldwide plastic production, can be recycled by heating them again until they become liquid, so they can be remolded into a new shape.

Thermoset plastics are made by a similar process, but once they are cooled from a liquid into a solid, it is very difficult to return them to a liquid state. That's because the bonds that form between the polymer molecules are strong chemical attachments called covalent bonds, which are very difficult to break. When heated, thermoset plastics will typically burn before they can be remolded, Johnson says.

"Once they are set in a given shape, they're in that shape for their lifetime," he says. "There is often no easy way to recycle them."

The MIT team wanted to develop a way to retain the positive attributes of thermoset plastics -- their strength and durability -- while making them easier to break down after use.

In a paper published last year, with Shieh as the lead author, Johnson's group reported a way to create degradable polymers for drug delivery, by incorporating a building block, or monomer, containing a silyl ether group. This monomer is randomly distributed throughout the material, and when the material is exposed to acids, bases, or ions such as fluoride, the silyl ether bonds break.

The same type of chemical reaction used to synthesize those polymers is also used to make some thermoset plastics, including polydicyclopentadiene (pDCPD), which is used for body panels in trucks and buses.

Using the same strategy from their 2019 paper, the researchers added silyl ether monomers to the liquid precursors that form pDCPD. They found that if the silyl ether monomer made up between 7.5 and 10 percent of the overall material, pDCPD would retain its mechanical strength but could be broken down into a soluble powder upon exposure to fluoride ions.

"That was the first exciting thing we found," Johnson says. "We can make pDCPD degradable while not hurting its useful mechanical properties."

New materials

In the second phase of the study, the researchers tried to reuse the resulting powder to form a new pDCPD material. After dissolving the powder in the precursor solution used to make pDCPD, they were able to make new pDCPD thermosets from the recycled powder.

"That new material has nearly indistinguishable, and in some ways improved, mechanical properties compared to the original material," Johnson says. "Showing that you can take the degradation products and remake the same thermoset again using the same process is exciting."

The researchers believe that this general approach could be applied to other types of thermoset chemistry as well. In this study, they showed that using degradable monomers to form the individual strands of the polymers is much more effective than using degradable bonds to "cross-link" the strands together, which has been tried before. They believe that this cleavable strand approach could be used to generate many other kinds of degradable materials.

If the right kinds of degradable monomers can be found for other types of polymerization reactions, this approach could be used to make degradable versions of other thermoset materials such as acrylics, epoxies, silicones, or vulcanized rubber, Johnson says.

The researchers are now hoping to form a company to license and commercialize the technology. MIT has also granted Millipore Sigma a non-exclusive license to manufacture and sell the silyl ether monomers for research purposes.

Patrick Casey, a new product consultant at SP Insight and a mentor with MIT's Deshpande Center for Technological Innovation, has been working with Johnson and Shieh to evaluate the technology, including performing some preliminary economic modeling and secondary market research.

"We have discussed this technology with some leading industry players, who tell us it promises to be good for stakeholders throughout the value chain," Casey says. "Parts fabricators get a stream of low-cost recycled materials; equipment manufacturers, such as automotive companies, can meet their sustainability objectives; and recyclers get a new revenue stream from thermoset plastics. The consumers see a cost saving, and all of us get a cleaner environment."

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The research was funded by the National Science Foundation and the National Institutes of Health.

Will Crypto Ever Be a Safe Investment?

Analysis by Andy Mukherjee | Bloomberg
January 4, 2023 at 11:32 p.m. EST

The Bitcoin logo on souvenirs during the listing ceremony for the CSOP Bitcoin Futures and CSOP Ether Futures exchange-traded funds (ETFs) at the Hong Kong Stock Exchange in Hong Kong, China, on Friday, Dec. 16, 2022. A pair of Hong Kong ETFs investing in Bitcoin and Ether futures raised $79 million as the city pushes ahead with a plan to become a crypto hub even as the sector globally reels from the FTX collapse. (Bloomberg)

In the annals of cryptocurrencies, 2022 will go down as the year when the industry nearly died. But then December saw the birth of a pair of exchange-traded funds in Hong Kong, offering new hope to both retail and professional investors.

Asia’s first futures ETFs for Bitcoin and Ether join a growing list of initiatives that will go some way toward ameliorating the current crisis of legitimacy facing virtual assets. A big dampener is the confusion surrounding safe custody of crypto holdings. Sam Bankman-Fried’s FTX, the most spectacular of last year’s string of crypto debacles, has brought the hapless customers of the failed Bahamas-based exchange in front of a bankruptcy judge in Delaware who’ll determine if they’re entitled to their funds ahead of other creditors.

But FTX is not the only test for crypto custody. Last month, a US bankruptcy judge ordered the insolvent Celsius Network LLC to return the roughly $50 million that had never earned any interest. However, the fate of billions of dollars of users’ funds stuck in interest-bearing accounts is still in question: Does the money belong to the debtor’s estate or the customers?

This anxiety-inducing uncertainty should ease with more crypto investments moving to normal bourses as regular securities, no different from stocks and bonds. That will bring customer assets under the umbrella of standard safeguards, precluding the need for costly legal maneuverings to recover one’s money. For instance, the newly launched CSOP Bitcoin Futures ETF will entrust custody of customer funds to HSBC Holdings Plc’s licensed Hong Kong trust company that, as Bloomberg Intelligence notes, undergoes regular bank examinations and audits.

This is what fund managers have been waiting for. Adults getting into the crypto playpen will bring grown-up rules with them. Nobody knows if any of today’s digital assets will amount to anything more than vehicles for speculation. But tokens of the future might represent meaningful economic value. On that premise alone, it may be worthwhile to create a safe and secure setup now for capital to flow toward them.

The Hong Kong crypto ETF is just one of several recent examples of the financial industry trying to provide protection in a legal vacuum. Bank of New York Mellon Corp., the custodian of $43 trillion in customer assets, recently opened its vaults to receive some institutional clients’ cryptocurrencies. BlackRock Inc. has also entered the fray by adding crypto to its Aladdin platform, used by pension funds and other large investors to oversee their portfolios. Fidelity Investments, the brokerage unit of the asset management behemoth, has been offering custody services to hedge funds since 2018. It’s now launching a zero-commission Bitcoin and Ether trading service for retail clients.

Olivier Fines, the London-based head of advocacy for Europe, Middle East and Africa at CFA Institute, cautions against reading too much into private, industry-level efforts. “The de facto insurance offered by a BNY Mellon, a Fidelity or an HSBC is very much a product of their size and scale; it’s not something smaller institutions can easily replicate. For there to be a competitive market in custodial services for crypto, new laws must fill the existing legal holes,” Fines said.

One such gap is in the US Securities and Exchange Commission’s Customer Protection Rule. Under it, broker-dealers are required to segregate customers’ cash and securities from their own. This is an important assurance to clients parting with their money. They would be loath to stand in line alongside general creditors to recoup pennies on the dollar in the event of the bankruptcy of an intermediary.

But is an exchange token — such as FTX’s cryptocurrency FTT or Binance’s BNB — a security or a utility? In its complaint against FTX co-founder Gary Wang and former Alameda Research Chief Executive Officer Caroline Ellison, the SEC is claiming that FTT is a security. So far though, “custodial protections, like other investor protections for digital assets, remain largely untested in court,” Fines and his Washington-based colleague Stephen Deane wrote in a new report that summarizes the investment management industry’s current views on putting crypto on their menu.

“Revolutionary or not, technology alone cannot offer protection from age-old financial misdeeds, ranging from market manipulation and front-running to fraudulent disclosures and Ponzi schemes,” says the CFA Institute report. “The crypto ecosystem urgently needs a strong, clearly defined regulatory framework.”

For too long, the focus of crypto supervision has been on preventing money-laundering. Customer protection wasn’t the priority. Now the pendulum is beginning to swing, though, perhaps a bit too much in the other direction. In March, the SEC came up with new accounting guidance for financial companies that have an obligation to safeguard customers’ crypto assets: They need to explicitly record a liability and a matching asset. But this requirement may backfire if it’s perceived to be too onerous. A bloated balance sheet will push up banks’ capital requirements, making them reluctant to offer custodial services to clients.

This regulatory tug of war will ultimately settle down, hopefully with investors feeling better protected than now and intermediaries not shying away from the field. The techno-anarchist founders of trustless blockchains won’t be pleased that the same large middlemen they wanted to banish are trying to hijack their creation. But with some luck, future historians of the industry would conclude that crypto’s worst vulnerabilities crawled out of the woodwork in 2022. After that, things progressively got better. Digital assets continued to remain unsuitable for the majority of risk-averse small investors, but at least they became a safer bet for those who didn’t mind the volatility.

Silvergate Capital shares plunge nearly 50% amid crypto-related negativity

By: Benson Toti
on Jan 5, 2023

Silvergate shares fell sharply after report investor deposits fell $8 billion after FTX collapse.

The crypto-friendly bank is also cutting its workforce by 40% amid crypto market downturn.

The company's shares fell nearly 50%, dropping to lows of $11.52 on Thursday.

Silvergate Capital Corp (NYSE: SI) shares dropped sharply on Thursday, with intraday declines as of midday more than 47% to see the crypto-focused bank’s stock trade around $11.52.
Silvergate shares fall as investors withdraw $8 billion in deposits

Losses for crypto-friendly bank’s shares followed the company’s fourth-quarter report before markets opened. Per the update, Silvergate customers, most probably concerned by the shocking collapse of crypto exchange FTX, moved to make massive withdrawals. In total, investor deposits fell from $11.9 billion to $3.8 billion. Crypto-related deposits fell more than $8.1 billlion during the quarter.

The company also recorded a huge decline in average customer deposits across board, which dropped by $4.7 billion to $7.3 billion.

Silvergate to cut workforce by 40%

Shares were also down as Silvergate management announced plans to cut its workforce.

According to the bank’s announcement, the move to lay off 40% of the workforce – about 200 employees – are part of the measures being taken to reduce costs as the broader crypto industry continues to battle with the effects of the brutal 2022 bear market.

According to Silvergate CEO Alan Lane, the measures taken have been in response to the crypto market’s outlook and events as the year drew to a close. He noted in a statement:

“In response to the rapid changes in the digital asset industry during the fourth quarter, we took commensurate steps to ensure that we were maintaining cash liquidity in order to satisfy potential deposit outflows, and we currently maintain a cash position in excess of our digital asset related deposits.”

The reaction in the market saw the company’s shares plummet more than 47%, with prices moving from around $22 to the aforementioned lows of $11.52.

Silvergate shares have declined more than 69% since FTX’s implosion. Indeed, with broader crypto sentiment down, the crypto-friendly bank’s stock has dipped even further after US prosecutors announced they had seized FTX-related bank accounts at Silvergate.