1. Crypto Long & Short: Bitcoin’s Taproot Update Shows How It’s Not Like Gold
When Bitcoin undergoes a technological shift, it’s a test of narratives that underpin the asset’s value.
Bitcoin’s strongest narrative is “digital gold.” Investors buy it not out of an expectation that it will behave like gold behaves in the market today, but that it will some day take on the historic importance that gold has held across cultures and ages.
My colleague George Kaloudis recently reminded me that there’s one important aspect in which bitcoin (BTC, +0.91%) will never be like gold: In a vault or in the ground, gold will always be gold; bitcoin, however, is a technology, and a technology will be updated. This quality is now on display with the Bitcoin network’s progress toward an update called Taproot.
Taproot is a bundle of several improvement proposals. Notable among them, it would add data efficiencies that could ease supply-side pressure in Bitcoin’s transaction-fee market. It also includes updates to multi-signature transactions, a Bitcoin feature that is significant for custodians and other organizations that take direct custody of bitcoin. In this column, I’ll focus on the latter.
Multi-signature addresses are a governance tool for organizations that directly custody bitcoin. Taproot includes updates designed to make multi-sigs easier to use, and to improve their privacy: a multi-signature Taproot transaction cannot be distinguished from other Taproot transactions. This could be significant for organizations that require multi-signature transactions, but do not wish to advertise to the network that they are using them.
Bitcoin’s pseudonymity has made it a target for criticism that the network can be used for criminal purposes. Pseudonymity also provides security for legitimate operators. On the internet, nobody knows you’re a dog; on Bitcoin, nobody knows you’re a financial institution. For organizations using the Bitcoin network, privacy reduces the likelihood of cyberattack.
2. President of El Salvador Says He’s Submitting Bill to Make Bitcoin Legal Tender
An emotional Jack Mallers announced the news at the Bitcoin 2021 conference in Miami.
El Salvador is developing a bill to recognize bitcoin (BTC, +0.91%) as legal tender, according to President Nayib Bukele. In a videotaped announcement shown Saturday, he said he will submit the bill next week.
Zap’s Jack Mallers announced the news at the Bitcoin 2021 conference in Miami. He said his company is working with Bukele to implement a plan.
The bill must still be reviewed by the country’s legislative assembly. But with the populist Bukele’s upstart political party in firm control of that body, approval seemed all but assured Saturday afternoon.
The bill’s approval would likely make El Salvador the first nation to adopt a bitcoin standard. Its full text was not immediately available.
“As of now, El Salvador is set to be the first bitcoin country,” Mallers said. “And the first country to make bitcoin legal tender and treat it as a world currency and have bitcoin on their reserves.”
3. Musk’s Crypto Tweets ‘Destroyed Lives,’ Anonymous Says as Hacker Group Targets Tesla CEO
The video accuses the Tesla CEO of abandoning bitcoin as a form of payment in order to keep government subsidies.
A video on YouTube claiming to be from the hacker group Anonymous takes aim at Tesla and SpaceX CEO Elon Musk, saying his tweets that have roiled the cryptocurrency markets have “destroyed lives” of hardworking people who’ve had “their dreams liquidated over your public temper tantrums.”
Given the very nature and name of the decentralized hacker group, it’s impossible to determine with 100% certainty that the video was created by a member(s) of Anonymous. Still the video bears all the hallmarks of past videos that are accepted as having been created by group members.
Wearing the group’s trademark Guy Fawkes mask and using a voice changer, the narrator of the video accuses Musk of being little more than a Bond villain, someone with a carefully cultivated image as a visionary that’s a disguise for “nothing more than another narcissistic rich dude who is desperate for attention.”
After taking issue with Musk’s environmental and labor record, the video zeroed in on Musk’s recent dabbling with cryptocurrencies and saying that Musk only turned his back on bitcoin (BTC, +2.06%) because he was afraid of Tesla losing government subsidies.
“It is now widely believed you have been forced to denounce your company’s involvement with Bitcoin in order to keep that green government money flowing into Tesla’s coffers,” the video says.
The hacker group further calls Musk’s recent move to create a bitcoin miner council an attempt to take control of the industry.
The video reserved some of its harshest comments for Musk’s recent tweets that have helped wipe billions of dollars of value from the crypto market, saying “Millions of retail investors were really counting on their crypto gains to improve their lives…. As hardworking people have their dreams liquidated over your public temper tantrums, you continue to mock them with memes from one of your million dollar mansions.”
The video, which at press time has 1.2 million views, ends with a variation of the group’s signature sign-off. “You may think you are the smartest person in the room, but now you have met your match. We are Anonymous! We are Legion! Expect us.”
Despite numerous people having posted a copy of the video to Musk’s Twitter feed, the Tesla CEO has yet to directly respond. However, Musk did post a tweet Saturday afternoon that could be interpreted as a response. In the tweet, Musk simply said “Don’t kill what you hate. Save what you love.” In addition, Musk’s profile picture was changed to a completely filled-in black circle that could be a reference to the color most associated with Anonymous.
But then again, given Musk’s history of enigmatic tweets, perhaps not.
4. Polygon’s MATIC Token Ended May Up 120% Despite Bitcoin’s Price Crash
MATIC’s monthly gain proves that a cryptocurrency backed by growing usage can weather broader market sell-off.
Surging usage of Polygon Network’s Ethereum layer 2 scaling solution allowed that platform’s token (MATIC) to largely escape the fate of other cryptocurrencies in May brought down by crash in the price of bitcoin (BTC, +1.88%).
MATIC, currently ranked 18th as per market capitalization by Messari, rallied 120% in May even as bitcoin fell by 35%. Ether (ETH, +4.73%), polkadot (DOT, +3.06%), cardano (ADA, +2.44%), XRP (+3.89%), and decentralized finance (DeFi)-blue chips suffered bigger losses, pushing the total market capitalization of the crypto universe down by 24%.
MATIC was able to withstand the the worst effects of the downdraft thanks to Polygon’s soaring usage and constant growth in the congestion and high costs that plague the DeFi-dominating Ethereum blockchain, as analytics firm IntoTheBlock mentioned in its research note published on June 2.
5. Bitcoin, Other Cryptos Fall After Weibo Blocks Rekindle Fears of China Crackdown
Concerns of a crackdown by Beijing have been weighing on the market over the past weeks.
The price of bitcoin (BTC, +1.88%) and other cryptocurrencies fell Saturday morning after a large number of cryptocurrency “Key Opinion Leaders” (KOL) on Weibo were blocked, a move some are viewing as signs of a further crackdown on crypto by China’s government.
According to a Twitter post by Chinese crypto journalist Colin Wu, accounts not involved in ads of exchanges have not been blocked.
Still, reports of the block, which hit around 5:30 a.m. ET, triggered a simultaneous drop in the price of most major cryptocurrencies. The drop you see in the following 12-hour price chart of bitcoin starting at that time was repeated again and again throughout the market.
According a tweet by Dovey Wan, founding partner of crypto asset holding company Primitive Ventures, the blocked accounts are a mix of influencers, media outlets, miners and wallets.
“This time is much more widely cleansing it seems like, many industry players like wallets, individual influencers, media outlet, top traders and even meme accts are all shut,” Wan said in a subsequent tweet.
The blocking of the accounts is rekindling fears of a crackdown on cryptocurrencies in China, concerns that have been weighing on the market over the past several weeks.
In recent trading, the price of every member of the CoinDesk 20 (with the obvious exception of stablecoin USDC (-0.02%)) is down over the last 24 hours, ranging from Yearn Finance’s (YFI (+3%)) 1.59% drop to NuCypher’s 15.9% plunge.
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June 7, 2021