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Ethereum Price Projections for 2022, 2025, 2030, 2050, and Beyond

ethereum price predictions

Ethereum Price Projections

When discussing Ethereum (ETH) in terms of its future prospects, we must raise two basic points at the very beginning. First, we should take into account that Ethereum has managed to establish its own identity and get out of the shadow of Bitcoin and second, that its usability goes further than being just a medium of exchange.

Due to its wide utility, Ethereum has become a challenging topic for juicy price predictions among the avid crypto community. The main selling point of Ethereum is that it can be used to build decentralized computer apps (dApps), applicable in many other industries outside the crypto ecosystem. The business world observes the perks of such decentralized instruments with amusement, so it seems that experts debate when, not whether, dApps will take over the global economy.

For ETH, this outcome will bring a breathtaking rise in its price, but you know that crypto stories have disruptive storylines. Thereby, let’s discuss ETH projections from multiple perspectives.

How Does Ethereum Work?

Ethereum is an immutable and public blockchain ledger operating through a global network of computers that runs smart contracts to create and manage decentralized apps (dApps). This allows users to make transactions with each other independently, without bureaucratic ineffectiveness and a third-party intermediary to conduct that transaction. In fact, smart contacts are self-executing programs that can be triggered only after certain conditions have been met. 

In plain language, these automated contracts operate similar to vending machines programmed to deliver a product after you insert the required amount of money and select the exact product. Technically, there isn’t a human factor or a corporate authority involved at any stage of the transaction process. The advantage of decentralized apps is that they immensely reduce the risk of fraud and data breaches. All transactions are publicly registered on the blockchain ledger but they don’t expose the credentials of the participants. 

You might ask, How is this related to a virtual currency? 

Well, programmers that execute the code to run dApps spend a lot of hash power while doing so. Accordingly, the network creates a certain amount of virtual currency—Ether (ETH)—to incentivize “miners” for verifying the transaction (developing a high-quality code). The current mining reward is 3 ETH per block.

However, you don’t have to be a programmer and make a token out of scratch. ETH is available on reputable crypto exchanges and the majority of them allow you to buy some Ether in exchange for your local currency or another cryptocurrency in your possession.

The Price History of ETH

Interestingly enough, Ethereum was envisioned by a teenager who saw the endless potential in blockchain systems. At the time when Vitalik Buterin was developing the Ethereum project, there were only Bitcoin-like coins on the early crypto market, which, according to the creator, didn’t even nearly convey the blockchain principles of decentralization. 

In 2013, Vitalik released a white paper explaining this concept and earned the $100,000 Thiel Fellowship award. The following year, he and two other enthusiastic developers, Gavin Wood and Joseph Lubin, threw a crowdfunding campaign and by July 2015, they raised over $18 million.

Ether set off with a denominal price of $1.25 in August 2015. In the following two years, its price smoothly fluctuated up to $15. The first noticeable rise occurred in May 2017 when ETH hit $216 and by the beginning of the next year, it reached a handsome exchange rate of $1,066. A huge price drop followed very soon, but the Ether price never fell below $100 again.

In the summer of 2020, ETH started rising at a rapid pace and that upward line didn’t stop for a year—in September 2021, the token skyrocketed to its all-time high of $3,900. This was greatly influenced by the sale of a digital art piece for over 38,000 ETH. However, this outstanding price didn’t last for long. Currently, ETH has been ranging in a highly volatile price gap of up to +/-30% per day. 

Now that you have the big picture of Ethereum’s basics, we can have a more detailed read about ETH’s possible outcomes in the years that follow. 

Ethereum Price Prediction 2021

Ethereum may have noticed a few critical falls in September 2021, but the surge for decentralized finance (also known as DeFi) has never been greater. This means that its price is expected to get back on track by the end of the year.

Furthermore, NFTs (non-fungible tokens) transacting on the Ethereum blockchain have caught the eye of crypto-savvy professionals amid the DeFi boom that started in 2020. Well established strategists like Billy Bambrough predict that Ethereum will round up the year with an exchange rate of $5,000. However, the average opinions and technical analyses appear to be more realistic, predicting a price of around $3,000 by December 2021. 

Ethereum Price Prediction 2025

When it comes to Ethereum, experts seem to be more confident in their long-term predictions. Based on both technical and fundamental analyses, Economy Watch estimates that ETH is on its way to reaching a price of $10,000. By 2025, dApps are expected to be deeply rooted in the mainstream economy and based on the current rank, Ethereum will be the first choice among all other smart-contract generators such as Cardano (ADA).

In addition, Vitalik announced that the new Ethereum 2.0 version has taken more time than planned, but it’ll certainly be in force by 2025. The upgraded version will present certain changes in the consensus protocol moving from Proof of Work (PoW) to Proof of Stake (PoS), which means more energetically efficient, more secure, and faster transactions.

Ethereum Price Prediction 2030

As with all cryptocurrencies, you can’t find accurate numbers for 2030 even though the outlook is mainly optimistic (encouraged by “casual” 6-figure expert opinions). However, external factors are crucial in the long run and when it comes to Ethereum, these include the deployment speed of the new 2.0 Ethereum, the overall ETH staked, the inflation rate of fiat money and most importantly, currency governmental regulations, as smart contracts have had no validity in any local legislation worldwide yet.

Ethereum Price Prediction 2050

Long-term predictions far into the future are open to personally biased opinions as the truth is that nobody can know what will actually happen by 2050. When it comes to cryptocurrency in general, there are two possible scenarios. The first one is that governments across the world will tighten the restrictions on crypto trading and weaken their power and potential growth. In this case, Ethereum will levitate around the light grey area and its price will be a symbolic two-digit number. 

According to the other, more optimistic scenario, the entire digital economy will turn to the blockchain network, with dApps fully replacing traditional commerce apps and financial provider services. Hence, Ethereum’s price will shatter all ceilings, with one token worth millions of dollars.

Ethereum Projections: What Does the Future Hold?

It seems that Ethereum has brought a new solution for managing apps much faster than we were able to imagine. Ethereum and other tokens built on top of Ethereum are technically superior over traditional transaction mechanisms but nothing can ensure full implementation of their broader usability any time soon. At the end of the day, it all depends on external factors and the readiness of people to accept changes and transfer their businesses on a “neighbour” blockchain network.

But once the world manages to overcome the initial fear of the unknown, Ethereum holders will benefit instantaneously. So, maybe it’s time to diversify your portfolio with a more usable token before the next crypto boom takes place.

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Five Questions with Alexander Höptner from BitMEX

alexander hoptner bitmex interview

Five Questions with Alexander Höptner

We are excited to ask Alexander Höptner, CEO of BitMEX, five questions. Alexander joined BitMEX earlier this year and has been spearheading changes to their platform to accommodate the rapidly changing regulatory landscape that crypto fintech faces.

Get to know a little bit more about Alexander and BitMEX in this edition of “5 Questions”.

Questions & Answers

Q: First of all, thank you for taking the time to give your valuable insight about the challenges BitMEX has overcome and still faces. People either loved him or hated him, Arthur will always be a big part of BitMEX’s history. What does the current leadership shakeup mean for the longevity of the brand? 

Alexander Höptner: My mission as the CEO is to take what the founders have created to the next level – transforming from a crypto derivatives exchange to something bigger. Earlier this year we announced that we will expand our service offering by adding five new global business segments including Spot, Brokerage, Custody, Information Products, and Academy. That, though, is just the starting point with many more ideas in the pipeline.

Our transformation has just begun, and the BitMEX brand is very strong. Part of my mission is to expand and deepen understanding of what we stand for, and what we think is right. That includes our vision for the crypto ecosystem as a whole and building understanding of digital assets and crypto among as wide an audience as possible. So we’re continuing to support Bitcoin development, and also setting an example of being responsible innovators.

Q: We’ve seen powerful regulating bodies around the world clamp down on cryptocurrency trading in unison. Why should your former and prospective clients embrace KYC/AML during the maturation of the cryptocurrency industry?


Alexander Höptner: The scrutiny attracted from global regulators is proof that the market is growing significantly as well as maturing. In particular, we are seeing more institutional players recognising the opportunity cryptocurrencies represent – which we think is a good thing.However, that scrutiny is proof that if we aspire to the ideals of cryptocurrency to transform financial services, we need to work cooperatively with regulators around the world. We cannot and should not operate in silos from the rest of the financial services industry so we need to work closely to ensure we create a system that benefits those who matter most – the users themselves.

KYC is a prerequisite; it builds trust with users and regulators. As the first crypto derivatives exchange of our kind to be fully KYC-ed, we’re glad to see other industry players embrace KYC and AML policies. 

Zooming out, we see education and open dialogue with regulators as essential to industry growth and, as you said, “maturation”. We are now in active conversations and have established collaborative relationships with regulatory authorities in a number of jurisdictions,

Q: Coming from Börse Stuttgart as the former CEO seems like a natural fit as you transition to BitMEX. Besides overcoming regulatory issues, what improvements to the performance and stability of BitMEX’s trading engine can clients look forward to?


Alexander Höptner: In terms of the BitMEX trading engine, we have been working hard to scale up platform capacity to handle orders, and we are focused on continuing to upgrade and enhance the platform. The net result is a stable, safe, and secure trading experience for our users even during times of extreme volatility, as we have seen over recent months.

Our ambition, though, is to transform BitMEX to go beyond derivatives, and we appreciate the loyalty our traders have given us and which is such a fundamental part of our growth.

Q: Being that BitMEX is the inventor of the perpetual swap, one of the most traded crypto derivatives products, in what other ways will BitMEX continue to innovate with products?


Alexander Höptner: As you say, we created the perpetual swap so innovation is in our DNA. We’re bringing a positive change to BitMEX in the next few weeks with the introduction of Tether-margined contracts – something users are going to be really excited about. 

This summer we also made progress rapidly listing more Altcoin products, something our users have been asking for. 

Other products include the BitMEX Basket Indices which cover both the Altcoin (.BALTMEX) and DeFi (.BDEFIMEX) markets.

But now is no time to rest and say ‘job done’. As I said earlier, we’re rapidly expanding our products and services and in the near term you’ll see some even bigger announcements from us with the goal of expanding the choices our clients have on the BitMEX platform. Stay tuned.

Q: What’s one of the biggest mistakes you see a trader make early in their career?


Alexander Höptner: While I won’t offer any specific trading advice, I do believe that traders need to have conviction in their core investment thesis, standing by it whatever headwinds come their way.

I also think it’s important to self-assess continuously and be prepared to adjust a strategy or position when those headwinds start to chip away at underlying assumptions that support your thesis.

That’s a fine balance to pull off – staying true to your conviction while having the self-awareness to know when to change tack – but I think that’s what marks out successful traders.

About BitMEX

BitMEX is the next-generation cryptocurrency trading platform, which supports leveraged trading via Perpetual and Futures Contracts. Our mission is to professionalise the trading of cryptocurrency derivatives. We offer a fast, safe, and liquid way to trade and hedge cryptocurrency risk.

For more information, visit bitmex.com

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What are Pegged Coins?

what are pegged crypto coins

Taming Volatility with Pegged Coins?

It’s no secret that the crypto industry is as volatile as they come. Yes, traders are able to acquire an excess of wealth in record times, but unfortunately the pendulum swings both ways, making it difficult to predict what the future or even tomorrow brings. As a result, traders have been looking for ways in which they can diminish the risks and develop strategies which will allow them to preserve their acquired value.

The problem is not holding on to the assets, it’s holding on to their value. Yes, it might go up but there is a good chance that their value might plummet as well. Pegged coins have emerged as the frontrunner to solve this concern, but it’s not a perfect fit by any means. Let’s take a closer look and get a sense of why that is.

So… What Are Pegged Coins?

Pegged coins, as the name suggests, are crypto assets whose value is pegged to another asset or currency, which in turn make the pegged coin more stable. They can be pegged to fiat currency, most notably the US dollar. There is no one-size-fits-all when it comes to pegging crypto, as each investment and situation is a story unto itself. 

In order for the pegged currency to be regarded as stable, it has to have the same or a higher-value backup than the currency that it’s pegged to. If a pegged currency is linked to US dollars, then it must have a dollar backing that can support the pegging. That way, the value has merit and can be audited.

Pegged currency platforms should be open and transparent in regard to their reserves so that users will be able to see that the numbers do indeed match. If a peg currency doesn’t offer this, we suggest that you skip it altogether and do business with one that does and that has a verifiable backing.

Should You Utilize Pegged Cryptocurrency?

Perhaps the concept of dealing in a currency that is a substitute for a fiat currency might come as a bit off to new investors, however times, they are a changin’. Pegged currency is a way of providing stability, or at least more stability, than the swinging crypto tide offers. With pegged currency, the crypto boat rocks as much as the underlying asset does, and let’s face it, even in today’s economy, fiat currencies are still a lot more stable than crypto.

If everything is in order, the conversion rate of the pegged currency is consistent with the underlying fiat, which in turn provides quick and effective money transfers. Investors that acquire a lot of crypto assets might be inclined to turn them into a pegged currency such as USDT, which allows them to secure their value in the face of  the high rises and low falls of Bitcoin and Ethereum.

Peg currencies are also a great way of delivering instant currency and fiat swaps because they maintain the value of the fiat they’re tied to. Nothing is safe like money under your mattress, but for the time being, this is the next best thing. In a sense, pegged currencies are in crypto limbo as they haven’t exited the crypto world but mirror and move like the analog fiat world.

This is a perfect scenario for most investors, however not all of them.

The Downside of Pegged Currencies

One of the main issues for investors, when it comes to pegged assets, is trust. There is no way to be certain and verify that the platform actually has their pegged currency backed up. Yes, you can try to find out, but you can never be 100% sure. And even though pegged currencies are more stable than crypto, they might fail and fall apart altogether and not return their pegged value. 

In other words, there is no risk-free solution, it’s just a different approach to solving a problem that will work for some and not for others.

Much like crypto coins, not all pegged coins are created equal. After all, they derive their value and mirror the underlying currency, which varies for different pegged currencies. It will take a bit of research in order to get a better sense of which stable currency will work for you and suit your needs. The main points that should be considered are the coin’s availability at large and its price history.

What good is a pegged asset that is supported by no one and its price history graph looks like a rollercoaster ride?

US Dollar Tether (USDT)

First on our list, and probably the best known and most utilized pegged digital asset, is the USDT. It’s US dollar-pegged and fully transparent when it comes to its asset balance, which you can check at any time at the coins’s page

USDT is in partnership with companies such as Bittrex, ShapeShift, and Poloniex that further its reputation and availability on the market. Furthermore, it’s made good on its name of being a stable coin, as it hasn’t deviated a lot from its target price. However, there are investors who have been quite skeptical, fearing that the platform is and has been producing tokens without properly backing them up, as USDT doesn’t allow third-party audits and doesn’t offer insurance on their tokens. 

Steem Backed Dollar (SBD)

Steemit is a social media platform that houses not one, but two cryptocurrencies. The crypto Steem and the tether Steem Backed Dollars (SBDs) are given out to active users. The coins can be turned around and converted to goods or spent on various services. The philosophy of Steemit is that SBDs are valued at a US dollar per Steem. However the ins and outs of how the coin maintains its balance are difficult to understand. 

The Steem Backed Dollar hasn’t proven to be a very stable asset and its availability is much narrower than the other crypto, Steem. The problem came when the coin started exhibiting wild swings and has since not returned to its established tether price. It’s very difficult to track and verify its full trajectory. A coin that can’t mirror it’s pegged asset is an equivalent to a gunfight in the wild West: no rules apply. 

TrueUSD (TUSD)

TrueUSD serves as another stable coin that has given USDT a good run for its money, as it hasn’t deviated much from its underlying asset – the US dollar. The platform utilizes an escrow protocol as a way of providing investors with the TUSD currency without getting in direct contact with any assets generated from the trades themselves. Instead, the assets are managed by a third-party platform that accounts for the token-to-US dollar ratio. 

The platform’s tokens can be converted into US dollars at any given time. What’s more, TrueUSD platform provides their customers with full transparency and third-party audit reports. Even though it looks near-perfect on paper, TrueUSD has an Achilles’ heel that lies in its availability, because only a handful of platforms support it and offer it to clients.

A Few Words Before You Go…

There are times and circumstances when having your funds in the form of stable assets is the best option, especially when you don’t want to remove your assets from the cryptosphere and convert them to fiat currencies. Pegged currencies offer better stability than regular cryptos and your funds are well protected.

However, it still comes down to your currency of choice and timing. Remember that pegged currencies are not the be all and end all of coin storage, they are simply another tool in the arsenal, another road to take when some of the usual avenues seem less appealing.

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Five Questions with Johan Eleveld from Deribit

johan eleveld deribit chief marketing officer

Five Questions with Johan Eleveld

We are excited to ask Johan Eleveld, Chief Marketing Officer of Deribit, 5 questions. He brings years of legal and creative power to the Deribit team. Get to know a little bit more about Deribit with Johan in this edition of “5 Questions”.

Questions & Answers

Q: First of all congratulations on your transition to Deribit as CMO. Can you give us a little background about where you’re coming from and how you got involved with crypto fintech?

Johan Eleveld: After finishing law school, I started working as a creative in advertising for over 15 years. John Jansen (our founder and CEO) is a long time friend of mine. He told me around 2014 that he would build the first crypto derivatives exchange in the world. That’s how I got involved.

Q: A driver of rapid growth for Deribit was delivering a stable and performant trading platform during a time where volatility would take an infamous competing platform offline. How do you see Deribit continuing to achieve strong user growth? 

Johan Eleveld: We will always be focusing on being the most technologically advanced platform. Crypto derivatives are complex products. One way to achieve user growth is to get more people interested by explaining our products better through education, hence our extensive free options course. Another way is to add less complex products to our portfolio in the near future.

Furthermore, from a development perspective, we will remain focused on continuous performance increases facilitating further user and messages per second growth and platform stability. 

Q: How should trading platforms like Deribit aim to drive efficiency while at the same time staying ahead of the curve with innovation? Is it possible to do both?

Johan Eleveld: We deliberately choose to keep our team relatively small. We believe that we have a good balance between enough innovation power and enough agility to be efficient. We like to see ourselves as a small but robust ship.

Q: We’ve seen powerful regulating bodies around the world clamp down on cryptocurrency trading in unison. Why should Deribit’s former and prospective clients embrace KYC/AML during the maturation of the cryptocurrency industry?

Johan Eleveld: I think that it’s a natural evolution. Mr Benz invented the car, and afterwards, there became a need for traffic rules. We have many big institutional clients, and no one left because we voluntarily introduced a strict KYC/AML. Our new clients wouldn’t join Deribit if we didn’t have these strict rules. Over time we have expanded our KYC/AML requirements and monitoring and we recently announced to join Veriscope to be able to abide by Travel Rule requirements. When you’ve been driving in a busy country with hardly any traffic rules, you’ll learn to appreciate them. 

Q: It was not too long ago anything crypto related would fall under a global advertising ban on the majority of traditional marketing channels. What marketing challenges do you see Deribit facing in the next 6 months?

Johan Eleveld: That isn’t easy to predict. We are based in Panama, and this week Gabriel Silva unveiled a bill to make Bitcoin a legal tender in Panama. If crypto gets more accepted by governments over time, the marketing challenges will also slowly disappear.

Our former CEO Andras Caron chose not to do aggressive marketing but relied on a reverse solicitation model where the client comes to us instead of the other way around. A wise decision. Deribit always focused on the product, education and things like excellent customer support. Some competitors may have grown faster, but got into a lot of problems also. We will try to be on the safe side, no need to poke the bear with a stick.

About Deribit

Deribit was founded in Amsterdam in 2016. It is a global cryptocurrency derivatives platform and the leading crypto options exchange by volume and open interest. High matching engine capacity, low latency, advanced risk management, and high liquidity make Deribit a unique industry player that has been tested by time and trusted by its users. It offers numerous futures and options products and is among the top crypto derivatives exchanges in the world.

For more information, visit deribit.com

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What are stablecoins and how do they benefit us?

what are stablecoins?

What Are Stablecoins?

The concept of how stablecoins work is not difficult to understand. Simply put, they aim to combine the best of both worlds: the decentralized operational model of cryptocurrencies and the price stability of fiat currencies.

In this article, we’ll cover all you need to know when talking about stablecoins: methods under which they operate, the mechanisms that stablecoins use in doing so, as well as the limitations from the perspective of a potential stablecoin user. What makes stablecoins stable? Which ones are the most popular? Let’s see.

How Do Stablecoins Work?

In a nutshell, stablecoins are digital currencies created to mirror the value of a particular currency, like a fiat currency (USD or EUR, for example). As they’re run through the blockchain network, users can transfer stablecoins quickly and securely worldwide while preserving the same price. Bitcoin, Ethereum, and other altcoins have evidently made a firm basis in the investment ecosystem in less than a decade.

Yet, their sharp volatility prevents them from being a well-suited payment method for daily transactions. That being said, despite the growing number of services that allow Bitcoin payments, its value can rapidly grow or drop between two clicks, leading to a drastic shift in the price of the good or service you intend to buy. In other words, cryptocurrencies did open a thrilling marketplace, but concerning usability, they are still uncertain grounds. This is where stablecoins enter the picture, as they tend to peg their value to an external reserve asset.

Stablecoins handle sharp fluctuations by tethering the cryptocurrency value to other, more persistent assets, most frequently fiat money. The team behind the stablecoin does so by setting up a “reserve” where it keeps the backup asset. Accordingly, the reserve is nothing but a regular central bank that matches the amount of circulating stablecoins. These are the most common ways of how stablecoins achieve that.

Fiat-backed Stablecoins

The most widely spread stablecoin type is the one that is tied to a fiat currency with a ratio of 1:1. They are usually referred to as fiat-collateralized stablecoins, supported by a central issuer (usually a bank) that holds a particular amount of fiat money in reserve while issuing a proportional amount of tokens. 

For example, the issuer possesses 2 million dollars and distributes the same number of tokens with a value of 1 USD. Users can afterward trade with and withdraw this stablecoin, in the same manner they do with any other cryptocurrencies or tokens – according to the rules each cryptocurrency marketplace or trading platform sets up individually.

It’s important to mention that you should find a well-established, trustworthy issuer. There is no way for you to know whether the issuer really holds the money. Tether (USDT), BUSD (Binance native stablecoin), and TrueUSD are some of the most reputable fiat-collateralized stablecoins on the market. 

Crypto-backed Stablecoins

As their name suggests, crypto-backed stablecoins are tethered to other cryptocurrencies. They have a fiat-backed counterpart since the crypto reserve itself is subject to short-term volatility as well. More specifically, these stablecoins are “over-collateralized” meaning that a huge number of cryptocurrencies serve as a reserve for issuing a smaller number of cryptocurrencies.

For instance, $1,000 worth of Ether can be stored as a reserve for issuing $500 worth of a stablecoin allowing up to 50% shifts in the reserve currency (Ethereum, in this case). DAI is the most widely spread example of this type. It is primarily pegged against the U.S Dollar, allowing other crypto assets to use it as a reserve.

In order to acquire such a stablecoin, you’ll need to lock your cryptocurrencies into a contract issuing the token. So, to obtain your collateral back afterward, you’ll pay stablecoins within the same contract, with some calculated interest. 

Algorithmic Stablecoins

Algorithmic stablecoins are mistakenly referred to as non-collateralized as they aren’t pegged against any other fiat asset nor another cryptocurrency. However, they reach a peg by algorithms and smart contracts that supply the issued tokens. So, if the price happens to drop below the price of the fiat currency in which the algorithmic stablecoin is tracked, the system will automatically reduce the supply. Basecoin (dollar-pegged) is a typical example that uses such a technique to adapt the supply of tokens.

Most Influential Stablecoins

Tether (USDT)

Launched in 2014, Tether is the first thing that comes to mind when talking about stablecoins. Since the very beginning, Tether has been one of the overall leaders on crypto chart trackers measured by the market cap. You needn’t go further than how frequently it’s offered as an underlying party in trading pairs on the majority of relevant crypto exchanges. The main role of Tether is the fast transferring of funds between exchanges so users can benefit from the arbitrage offers occurring when the cryptocurrency price is different from one exchange to another. Furthermore, Tether helps users keep record of their investments and convert them without going through Bitcoin first.

Recently, some suspicious signals were raised by experts about the legitimacy of USDT, which was followed by several lawsuits against the Tether parent company BitFinex. However, it doesn’t seem to have affected its popularity to any notable extent. 

Dai

Dai was designed in 2015 as a stablecoin on the Ethereum blockchain that runs on the MakerDAO protocol. It’s pegged against the US dollar and cryptocurrency-backed by Ether. Dai is the asset that MakerDAO users borrow and repay, created when a loan is pulled out on MakerDAO.

Dai is the only stablecoin that can be entirely defined as a widely used, decentralized model, which means that no centralized authority will conduct the transaction system. Accordingly, it will be automatically executed by Ethereum smart contracts.

Diem 

Diem is a product of Facebook and you may have heard about it under its original name, Libra. The greatest digital influencer, Mark Zuckerberg, decided to take part in the crypto scene by launching a stablecoin, which has become influential even before its release. Yes, you read well: Diem hasn’t been released yet, but its introduction to the public is impatiently expected any moment now. From what we’ve known so far, Diem is meant to be backed by several currencies including EUR and US. Diem’s launching has been delayed due to international regulatory issues, but this ambitious Facebook project is speculated to make a boom with an updated idea to develop multiple stablecoins, matching individual national currencies.

Final Thoughts

Even though stablecoins are an outstanding support in the smooth running of the blockchain industry, there are still some limitations in the way of public acceptance. If you analyze the first stablecoin type we spoke of – fiat-collateralized stablecoins – you will easily conclude that they’re far more centralized than regular cryptocurrency, with a central(ized) authority as the main holder in their issuing. Crypto-collateralized and uncollateralized stablecoins, on the other hand, require a technical background in the source code and complete trust in the wider DeFi community, but they’re definitely closer to the decentralized model of crypto. All in all, they’re a relatively new field and their moments of glory are yet to come.

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What is a Wrapped Bitcoin?

wrapped bitcoin

What Is Wrapped Bitcoin?

Wrapped Bitcoin, known as WBTC, is an innovative way of bridging Bitcoin, the world’s most popular cryptocurrency, with Ethereum-friendly DeFi and Dapps. Simply put, Wrapped Bitcoin allows you to explore opportunities created by different blockchains without selling your Bitcoin.

We prepared a guide that will help you to understand what Wrapped Bitcoin is, how it works, and the benefits of using WBTC.

How Does Wrapped Bitcoin Work?

Wrapped bitcoin is not really Bitcoin. It is an ERC-20 token based on the Ethereum network. Wrapping is a way of converting your BTC to WBTC and vica-versa. 1 WBTC is always equal to 1 BTC, which means you can convert your BTC to WBTC and reverse it easily without changing the number of coins you hold or the value of your Bitcoin assets.

You might think that wrapped bitcoins are not very special. After all, you can always sell your Bitcoin and buy Ether (ETH) to use for Dapps and Defi. What is the difference? Well, the neat thing about wrapped Bitcoins is that you don’t actually have to sell your BTC. Instead, your Bitcoin funds are held in reserve by a custodian which allows you to exchange your WBTC to BTC at any time without worries.

Converting BTC to WBTC is a fairly transparent operation. A protocol known as proof-of-reserve verifies that 1 WBTC is minted for 1 BTC that is being reserved by custodians. The custodianship was originally started by BitGo, Ren, and Kyber, and now it is maintained by the WBTC Decentralized Autonomous Organization (DAO), which has multiple members representing different organizations.

WBTC is backed by Bitcoin.This means that when 1 Bitcoin is reserved, 1 WTBC is minted through the blockchain. Conversely, when a token is redeemed for 1 Bitcoin, the token is “burned” to prevent re-use. Blockchain transparency makes it possible to verify minting and burning operations. WBTC custodians regularly perform audits to provide transparency and secure the public’s trust.

WBTC is a two-for-one solution. Since most DeFi apps are based on the Ethereum Network, the introduction of WBTC allows Bitcoin owners to participate in the decentralized finance (DeFi) and decentralized application (Dapp) markets, without having to sell their Bitcoin. Since Bitcoin is the most widely used cryptocurrency in existence, the interoperability of Bitcoin with Ethereum-based assets delivers a much-needed liquidity to DeFi and Dapp markets.

How Is Bitcoin Converted to Wrapped Bitcoin?

The process of “wrapping” bitcoins is initiated once a Bitcoin user requests WBTC, the special ERC-20 token, from a merchant in exchange for BTC. After receiving this request, the merchant verifies the identity of the Bitcoin owner and sets up a transaction with the custodian. The custodian is authorized to mint the new WBTC tokens. The merchant receives the newly minted WBTC, and sends the BTC to the custodian. In the last step, the merchant and the Bitcoin owner trade the BTC for WBTC either through a centralized cryptocurrency exchange or by performing an atomic swap.

In order to convert  WBTC to Bitcoin, another request is made to the merchant. The Bitcoin owner receives the same number of bitcoins they traded and the WBTC is sent to the merchant. The used WBTC is then “burned” on the blockchain, which means it is deducted from the merchant’s account, reducing the total number of WBTC on the network.

How to Buy WBTC

In order to buy WBTC, you need an account on a cryptocurrency exchange site that supports Wrapped Bitcoins. Pick a trustworthy exchange with a good reputation to open an account if you don’t already have one. Buy or deposit Bitcoin to your account. With Bitcoin in your account, you can order WBTC through these exchanges.

You might want to get a software or hardware wallet to transfer your WBTC token from the exchange wallet it arrives at. This will be the safer storage option for security purposes.

Note that it is possible to swap the Ethereum tokens you already own for Wrapped Bitcoin using a decentralized exchange service.

You pay merchant and custodian fees for converting BTC to WBTC. You can check the fees on the exchange you are using to convert Bitcoin to Wrapped Bitcoin.

What Are the Benefits of Wrapped Bitcoin?

The DeFi market has grown exponentially since its launch, paralleling the ubiquitous rise of Bitcoin in the last years. However, Bitcoin and DeFi Markets each grew separately from one another, and often have been compared to each other as competitors. Intense market speculation agitated the rivalry between Ethereum and Bitcoin supporters and fed the maximalist perspectives that predicted total domination of the market by their favored blockchain.

With the introduction of Wrapped Bitcoin, the rivalry between the Bitcoin and Ethereum blockchains turned into a collaboration that benefits both sides. Thanks to WBTC, decentralized exchanges and DeFi applications gain much needed liquidity resources from Bitcoin users. On the other hand, Bitcoin holders who are reluctant to sell their digital assets are now able to engage in decentralized finance and earn interest without losing their bitcoins. Since the introduction of Wrapped Bitcoins, more and more merchants and exchanges have started to accept WBTC. A new and fruitful ecosystem of finance is growing out of this collaboration.

One particular advantage WBTC has over Bitcoin is speed. Wrapped bitcoins transactions are accomplished through the Ethereum blockchain. The Bitcoin blockchain validates a new block of transactions every 10 minutes on average, while Ethereum is able to validate a block every 15 seconds. This means that WBTC transfers take a shorter time compared to Bitcoin transactions.

What Can You Do With WBTC?

WBTC is one of the largest and fastest growing digital assets. Once converted, wrapped bitcoins can be used for numerous Dapps. The DeFi market provides many opportunities for WBTC holders.

You can use WBTC as collateral to borrow crypto loans from DeFi platforms thanks to smart contracts. 

Another possibility is to put WBTC to decentralized lending pools. WBTC brings precious liquidity to lending pools and holders are able to make interest on their investments.

There are also liquidity pools which accept WBTC. You can deposit WBTC to these pools for yield farming. There is a higher risk to these operations, but the payouts are much more rewarding. 

You can also margin trade with WBTC on decentralized derivative trading platforms. These exchanges are non-custodial and work through smart contracts that ensure the security of funds during trades.

A Few Words Before You Go…

Wrapped Bitcoin is an innovative solution that allows Bitcoin holders to participate and bring liquidity to decentralized finance operations. It links Ethereum and Bitcoin, two of the most popular blockchains in the world, and facilitates the growth of DeFi operations in general. Bitcoin holders have the opportunity to explore the Dapp and DeFi platforms rising on the Ethereum blockchain without having to sacrifice their digital assets.

The transparency provided by WBTC Community and WBTC DAO make this a trustworthy alternative to cryptocurrency trading between ETH and BTC. Bitcoin holders can easily swap Bitcoin for Wrapped Bitcoin to make investments and earn an interest. They could also use it to borrow loans from DeFi platforms for their businesses. The opportunities for WBTC grow rapidly, as more exchanges and merchants start to accept WBTC. If you are a Bitcoin holder and you want to dip your fingers in the DeFi and Dapp markets, but you don’t know where to start, Wrapped Bitcoin is an excellent choice to test the waters.

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Five Questions with Matt Mamigonian from Bitstamp

matt mamigonian business dev bitstamp

Five Questions with Matt Mamigonian

We are excited to ask Matt Mamigonian, Business Development Manager of Bitstamp, 5 questions. Matt is no stranger to finance as he holds a Master of Science with a major in Finance, including Series 7 and 63 FINRA licenses. Get to know a little bit more about Bitstamp with Matt in this edition of “5 Questions”.

Questions & Answers

Q: Bitstamp holds the title of longest standing crypto exchange, and similarly we are the oldest crypto trade automation product dating back to late 2013. How does being a veteran in the crypto space influence the business relationships and social responsibility that Bitstamp pursues?

Matt Mamigonian: Being the longest standing exchange globally means we have the responsibility of providing a mature approach to the way we run our business and the relationships we pursue and maintain. We work with an incredibly large number of clients globally and ensure that security, reliability, and ease of use are all at the forefront of the client experience. Finally, since we operate with a compliance first approach, global regulation and operating within the letter of the law is of utmost importance.  

Q: With your background at J.P. Morgan, BNY Mellon, and currently Bitstamp, do you see cryptocurrency fintech replacing traditional investment vehicles and infrastructures that you previously worked with? 

Matt Mamigonian: To say that I am bullish on crypto would be an understatement. The current total market cap of the asset class currently sits at about $2.1 Trillion, which is less than the market cap of Microsoft or Apple. Traditional financial infrastructure will be disrupted, the capital raising process will look different, and more value will accrue to the end users and not the rent seekers. Capital markets will truly become global in nature and we haven’t even seen more than 1-2% of what this space is capable of achieving.

Q: Bitstamp boasts over 4 million clients; it’s known that whales and professional traders choose to trade with Bitstamp. In your opinion, will Bitstamp need to offer new products, like derivatives or margin trading, to compete with other growing trading platforms?

Matt Mamigonian: I believe that we will need to continue to innovate, add products and services, and expand our platform to keep our current institutions and clients happy as well as win more business. We continue to look at new products and services to offer – within the regulated framework we operate – and derivatives, futures, and options could be considered. We currently offer a margin product in partnership with Silvergate Bank and we have onboarded many firms who are using it day in and day out.

Q: Being in business development, you have a lot of conversations with startups and established companies in crypto fintech. Are there any themes that stand out over the past 6 months? How has your role changed?

Matt Mamigonian: There are a few themes that stand out. Startups and fintech players are seeking to more natively build crypto into their product at launch vs. adding features after they’ve been established. They want to build more natively in crypto – and want that to be the foundation or building blocks of their product or service. It’s become much more accepted, and dare I say, mainstream then it was a few years ago as well. Another theme would be building certain products and services to fit a market – or said differently – localizing a product. My role hasn’t changed that much in the last six months; however, I would say it’s only expanded and now encompasses a larger variety of incumbents.  

Q: Are there any new partnerships, sponsorships, or projects with Bitstamp that are coming up that you’re excited about (and can publicly share)?

Matt Mamigonian: The next few months are going to be incredibly busy for us and there isn’t anything I can formally announce right now. The best way to follow us would be our Twitter Handle @Bitstamp or our Blog!

About Bitstamp

Bitstamp is the world’s longest-running cryptocurrency exchange, continuously supporting the crypto economy since 2011. With a proven track record and mature approach to the industry, Bitstamp provides a secure and transparent trading venue to over four million individuals and enables a range of institutional partners to enter crypto markets through their time-proven infrastructure. Whether it is through their intuitive web and mobile apps or arsenal of industry-leading APIs, Bitstamp is where crypto enters the world of finance.

For more information, visit bitstamp.net.

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Thinking about using Uniswap?

uniswap decentralized exchange

Uniswap in Review

Uniswap is a completely different concept from regular crypto exchanges like a Coinbase or Binance. This is of course because it is a completely decentralized crypto exchange that runs on the Ethereum blockchain. Most crypto exchanges are centralized, meaning that there is an authority that oversees development, transfers, users, and user activity.

On Uniswap, users are able to swap tokens with nothing more than an Ethereum wallet. As part of the Decentralized Finance (DeFi), Uniswap runs on the Ethereum blockchain and supports decentralized token swaps. It’s basically an interlock of computer programs along with unicorns (yes, unicorns) that make trades possible. Ethereum tokens can swap assets directly or lend their crypto to the liquidity pools and earn fees for supplying liquidity. But we’re getting ahead of ourselves – first, let’s make things clear on what a DEX, or a decentralized exchange, is.

What Are Decentralized Exchanges?

Centralized exchanges rely on the order book method to facilitate trades. Order trading resembles a menu: there is a list featuring orders and the prices for each of them. How liquid a market is depends on how many buy and sell orders are open at any given moment. Trades are executed by matching orders with the party on the opposite side of the order book. There is nothing wrong with using centralized exchanges, as they can offer a vast array of features, speed, and high trading volumes. But on the other hand, they do administer fees on transactions, ask for more personal details, and place a third party in the middle, which DEXes manage to avoid.

Decentralized exchanges, or DEX, are built on trustless protocols that do not need a middleman in order to facilitate and execute trades. It all comes down to blockchain technology and the way it functions. Engineers have had to reverse engineer the whole process in order to come up with a viable solution, where traders can swap assets and currencies with only an Ethereum wallet. Due to rapid innovation, Uniswap has grown into one of the most popular exchanges of the Decentralized Finance (DeFi) movement.

What Is Uniswap?

Uniswap is an open-source software that functions on Ethereum protocols featuring automated liquidity protocols. There is no need for an order book or intermediary approval in order to engage in market trades.

Putting it simply, liquidity, when referring to the market, is how active the market place is. You can think of it in terms of supply and demand. If a seller decides that they want to sell their tokens, a liquid market means that there are a lot of people that would pay their asking price, the regular price. If they try to sell the tokens on a less liquid marketplace, there might not be any buyers willing to pay the asking price, so they either have to lower the price, or wait for other buyers to come to the marketplace and hope that some of them would be willing to pay the asking price. 

So, the higher the trade, the more liquidity for the marketplace. The more liquidity a market has, the more stable it is, as trades do not disrupt it by going in and out. Uniswap took the concept of “supply and demand” and modified it by taking the liquidity pools out of the hands of the centralized exchange and decentralized them by placing them into the hands of the traders themselves.

Liquidity pools are generated by liquidity providers. By making use of the system’s decentralized pricing mechanism, the platform doesn’t provide listings. Instead, users are able to swap ERC-20 tokens with no need for an order book, which means that there are no listing fees. 

The only thing that is required for a trade to go through is sufficient liquidity, 

How Does Uniswap Work?

Hayden Adams is credited as the creator of the Uniswap protocol. Back in 2018, he managed to further develop Ethereum co-founder Vitalik Buterin’s technology and bypass order books by introducing an Automated Market Maker (AMM) model variant called Constant Product Market Maker.

Smart contracts are automated market makers that manage liquidity pools, which allows traders and liquidity providers to deposit tokens and digital assets in the pool. For the service to be possible, traders are subjected to a pool maintenance fee that goes to the liquidity providers based on their shares.

The liquidity providers serve as the market creators by depositing two tokens equivalent in value, or stablecoins like USDC, DAI, or USDT, to the pool. The tokens can be an ETH and an ERC-20 token or a pair of ERC-20 tokens. In exchange, the providers receive liquidity tokens, as a representation of their liquidity pool shares. The Uniswap pool has to provide consistent liquidity for trades to go through. Naturally, larger trades are more expensive than lower trades because they cause more commotion and are harder to balance out.

Uniswap v3 and Uniswap LP Tokens

Uniswap’s technology is constantly being updated and is now on its third generational iteration with Uniswap v3. The implementation of Uniswap v3 brought a whole new way of processing capital, which has made it a lot more efficient. Uniswap v3 LP positions are unique since everyone can customize the price ranges that they support, meaning that their positions are non-fungible and each position is represented by an NFT token.

Uniswap v2 tokens can be deposited as collateral through Aave as well as MakerDAO because their position cannot be customized. So what they do is provide general liquidity across the pool. This way, most AMMs are capital-inefficient because most of the assets that they store aren’t being utilized. Uniswap v3 employs those dormant assets in order to improve pool liquidity when needed. Another interesting piece of programming is that liquidity providers are able to customize the price range which they provide liquidity for, which allows for a more liquid pool in the places where trades are being executed.

How to Use Uniswap

Getting started on Uniswap isn’t difficult. Users just need an ERC-20 wallet, such as Coinbase wallet, Portis, WalletConnect, MetaMask, or Fortmatic, to store Ether on it. This way, they can cover gas fees and participate in trades. The gas fees are calculated based on the network traffic and the speed at which trades are processed and executed by miners. Most of the time, users will be given three payment speed options, ranging from slow to fast. Naturally, quicker processing comes at higher gas fees.

Does Uniswap Make a Profit?

It might come as a surprise, but all Uniswap fees go to the liquidity providers, as the platform is run by decentralized protocols. Transaction fees for liquidity providers are 0.3% on a per-trade basis. The fees are added to the liquidity pool automatically, but providers do have the option to transfer them to their balance accounts if they please.

A Few Words Before You Go…

Uniswap took the industry a step further because it welcomes virtually everyone who has an Ethereum wallet to participate in trades without a central governing party. The problem is that the mining craze on Ethereum 1.0 is killing the planet’s environment through wasteful energy spending. In any case, once Ethereum 2.0 and POS replaces POW for good, Uniswap will probably be launched to new unprecedented heights.

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What is asset tokenization?

crypto asset tokenization

A Brief History of Asset Tokenization

Asset tokenization may be a bit perplexing at first glance, but we’ll try to explain it in plain English as an improvement on something that has existed for a long time in traditional finance. If you’re familiar with what an NFT is, then you’re already on the right path.

In fact, trading with assets was one of the earliest business ventures of human civilization. People have been trading commodities, private equity, real estate, artworks, and precious metals for centuries. However, the investment industry has reached a point where the very materialization of such trades became complicated, expensive, and exhaustingly time-consuming. This becomes more noticeable when the trading process involves a physical transfer or cross-border legislation. Both incur multiple layers of intermediaries, a bunch of paperwork, and take weeks to settle.

At the same time, the blockchain industry is quickly reshaping the world of finance, bringing the apparent advantages of a decentralized economy: immutability, transparency, and a distributed structure. Even though the blockchain was primarily created to generate cryptocurrency, it has been gradually applied in various segments of global business. The tokenization of assets is one of the most notable instances that divert investors towards exbracing new products from the blockchain ecosystem. Let’s see how real assets can be converted into digital assets using the process of asset tokenization.

So… What Is Asset Tokenization?

Asset tokenization is a method of digitizing both tangible and intangible assets by converting them into digital tokens. The newly converted tokenized asset is stored on a blockchain network. What is important to remember is that one asset (e.g. an apartment or painting) is not the same as one token. Through tokenization, the asset is broken down into hundreds or many thousands of smaller pieces that make up the entirty of the token’s equity.

So, once people have their desired personal assets tokenized and recorded on a blockchain ledger, they can either store or sell the assets on one of the various marketplaces, either fully or partially, or simply transfer them to other users.

Tokenization is closely associated with the concept of STO (Security Token Offering). STO platforms allow users to digitize their assets and convert them into a certain number of tokens. Then, the owners will need to create their so-called STO campaign and offer the tokenized assets to anyone who wants to invest.

How Does Asset Tokenization Work?

The best way to understand the process of tokenizing any asset is through an example. Let’s start from a real estate investor’s point of view. Imagine you want to invest in a property with an initial capital of $4,000. According to the industry standard, you can technically buy several square feet of the property, but things don’t go that way in today’s real estate industry. Now, let’s reverse the position. You have a property worth $250,000, but you want to cash out $30,000 equity, and logically, you can’t an evenly divided portion of the property.

This is exactly where asset tokenization comes to play. Your $250,000 property can be turned into 250,000 tokens, with each token representing a 0.0005% share of the complete property value. When your asset is converted into tokens, they are issued on a blockchain network that supports smart contracts (e.g. Ethereum). When someone buys a token, it means that they obtain a 0.0005% ownership of your property. If any investor decides to buy 125,000 tokens, then they would technically own half of your property.

By its very nature, blockchain is an immutable ledger ensuring that users’ ownership can’t be modified or deleted, regardless of whether or not the asset is registered within a government-run institution.

The Asset Tokenization Process Simplified

Benefits of Assets Tokenization

This trend is becoming highly attractive among a great number of investors, owners of valuable assets, and startups. As of February 2021, the market cap of tokenized assets is showing a disruptive upward tendency. Certainly, there are strong reasons behind it. You can already feel how tokenization contributes to low costs and faster transactions, but let’s discuss the benefits in detail.

Higher Accessibility and Liquidity 

Physical obstacles are easily overcome with the decentralized model of blockchain technology that allows users to tokenize their assets or invest in tokens from anywhere in the world, at any time of the day. Furthermore, the list of “tokenizeable” assets is highly extensive, including substantially liquid ones such as valuable pieces of art, real estate, vehicles, etc. Hence, removing the multiple burdens and delays arising from geographical restrictions directly contributes to providing greater liquidity.

Transparency

Blockchain is a public ledger that allows access to all participants out there. From a user’s perspective, transparency is of crucial importance when handling finances. The blockchain network enables users to track the entire transaction history, verify assets’ origin, and watch the entire transaction flow. 

Immutability

All information stored on the blockchain ledger is immutable. More particularly, once the data is recorded and verified on the network, nobody can change or manipulate it. The data is accurately updated in real time. 

Partial Ownership

The tokenized asset can be seamlessly divided into as small parts as it’s necessary. The opportunity to split the asset enables a broader investment audience, which adds to the asset’s liquidity. 

Cost-Effectiveness

Blockchain technology excludes any interference from a third-party intermediary since both participants in the transactions settle the terms of the transaction independently. This significantly reduces the intermediary costs from multi-layer provider services. On top of this, transactions can be completed within minutes. 

What Types Of Assets Can Be Tokenized?

As we have already implied, all kinds of assets can be tokenized, ranging from art and real estate to precious metals and even digital assets like securities. Here, we’ll focus on the most applicable examples:

Real Estate Tokenization

Blockchain and the real estate industry have been closely related in terms of using smart contracts to reduce intermediaries and costs. According to the research by Cushman & Wakefield, a leader in the industry, the most prosperous use cases of the blockchain network will be demonstrated in the tokenization of assets. 

As tokenization fractionalizes ownership, real estate will become more accessible to a wider base of investors and available on various types of virtual marketplaces, reducing the initial barriers and disputes between buyers and sellers.

Just for information, the first apartment tokenized on the Ethereum blockchain was a deluxe Manhattan condo of $30 million in 2018.

Gold Tokenization

The benefits of tokenizing gold are evident in the reduced level of bureaucracy while storing or transferring gold, which has been a leading store of value for a long time. Furthermore, the immutable nature of blockchain prevents selling the ownership to multiple buyers.

In general, trading tokenized gold is just as convenient as trading cryptocurrency. There are a lot of existing coins backed by hard gold, with a value corresponding with the current gold price. These include PMGT, DGX, Meld Gold, and XAUt.

Art Tokenization

Apparently, the art market hasn’t modernized its bureaucratic business model for ages, leading to considerable barriers as concerns transparency, liquidity, and copyrights.

The tokenization of artwork will possibly solve these obstacles and unlock the art market for the general public. Art tokenization is also a systematic method of developing an immutable archive of copyright records providing liquidity at lower costs. 

Monart and Maecenas are currently the most popular marketplaces for tokenized art. The first encourages users to invest in prospective artwork while the latter enables artists to tokenize their pieces of work.

Final Thoughts

The utility of tokenization seems to be endless. This global phenomenon has already entered various industries, from finance to real estate, and has even spiked the attention of investors in the entertainment business, music, and sports. However, there are certain challenges this decentralized approach is still facing, mainly as a result of lack of regulation.

In the years to come, the need for a general framework on cross-border mechanisms of interpretation will become more apparent. Moreover, tokenization lacks a clearly defined set of legal regulations within trans-national jurisdictions, which is currently the greatest concern of individual market participants and corporations when it comes to the tokenization of assets. It isn’t something that can’t be easily settled, though properly adjusted KYC and AML practices can help a great deal for the broader acceptance of tokenization in every industry.