On this week’s Breakdown weekly recap, NLW looks at a cross-section of regulatory news, including:
CFTC and DOJ action against BitMEX and its leadership
The U.K. Financial Conduct Authority’s ban of crypto derivative products for retail investors
The DOJ’s new cryptocurrency enforcement framework
NLW discusses why these might reflect a new moment in crypto history, what it means for current builders in bitcoin and DeFi, and why recruiting corporate allies like Square will become more important than ever.
Forbes called her “the newest superstar investor,” and it’s not hard to see why.
Cathie Wood is radically disrupting the way money is allocated. Fighting the rise of passive – what she calls the “greatest misallocation of resources in history” – Wood’s funds are actively managed exchange-traded funds that give investors exposure to public companies in key areas of innovation.
In this conversation, NLW and Wood discuss:
Why she had conviction in Tesla before the market caught up
Why her fund offered the first bitcoin investment opportunities to Wall Street
Why it doesn’t hire traditional Wall Street analysts
Why it gives away all research for free
Why it shares the trades made in a completely open-source way
A special breaking edition of The Breakdown follows the market’s reaction to Square’s surprise $50 million bitcoin investment.
NLW breaks down the foundations for the investment, including:
2020’s alignment between the bitcoin narrative and structural economic realities
An increase in bitcoin’s perceived resilience
The precedent set by MicroStrategy
He also discusses the market’s reaction, from the (potential) connection to Coinbase’s “apolitical” stance from last week to the notion of Square intentionally setting a framework others can follow.
Our main discussion: The U.K. has banned crypto derivatives.
Just days after the U.S. announced significant action involving BitMEX, the U.K.’s Financial Conduct Authority has made its own move to stop crypto derivatives.
In this episode, NLW breaks down what actually happened, and looks at the reactions from the crypto industry including:
Markets gain as Pres. Trump’s condition stabilizes
SEC Chairman Clayton sees future where all stocks are tokenized
Uniswap had more volume than Coinbase in September
Our main discussion: central bank coins and financial privacy.
The EU recently released a new research paper on a possible digital euro. Like many other official central bank reports, it assumes there is no possibility of an anonymous digital bank currency. NLW dissects arguments from people including JP Koning and CoinCenter’s Jerry Brito on why this shouldn’t be true.
With final preparations for the launch of Ethereum 2.0 soon to be underway, CoinDesk's Christine Kim spoke to Cayman Nava, technical lead at ChainSafe Systems and Alexey Akhunov, an independent researcher and software developer about the kinks in ETH's evolution that still need to be worked out.
The Ethereum blockchain processes about three to four times as many transactions as Bitcoin. It’s still not enough, however, to meet rising user demand for the cryptocurrency and prevent network congestion.
One of the most highly anticipated fixes to Ethereum’s transaction bottleneck and its lack of scalability is an ambitious software upgrade called Ethereum 2.0. According to Vitalik Buterin, the creator of Ethereum, Ethereum 2.0 will boost network speeds from around 15 transactions per second (TPS) to 100,000 TPS.
How? The solution is sharding. Cayman Nava, technical lead at ChainSafe Systems, explains sharding as “a natural way to break things up.”
“If you’re wanting to process a lot of data but you don’t want any one party to be overloaded with that data, you can naturally think of breaking up your problem into smaller pieces,” said Nava. These “smaller pieces” Nava is referring to are called shards. In Ethereum 2.0, 64 shards will be created to break up the transaction load of Ethereum.
While sharding sounds effective in theory, there are other Ethereum developers who are skeptical about the benefits of this technique in practice.
“If I were to design scaling [for Ethereum], first I would squeeze as much as possible out of Ethereum 1, which I think hasn’t been done yet, and then after that I would actually introduce sharding logically in order to see whether users would actually be able to use [sharding] effectively,” said Alexey Akhunov, an independent researcher and software developer for Ethereum that has been contributing code to the network’s development since 2016.
Sharding logically refers to breaking up data within the same blockchain as opposed to sharding physically, which necessitates the creation of multiple mini-blockchains. As mentioned, Ethereum 2.0 will spawn a physically sharded system of 64 linked databases. Optimizing the communication between shards in this environment, Akhunov goes on to explain, may pose an even greater challenge to network scalability than a transaction bottleneck.
Nava agrees there are kinks and holes in the design of Ethereum 2.0 and its sharded system that need to be worked out. But in Nava’s view, these problems that call for further detailing and research can be delayed in the short term while developers work toward an upgrade launch.
“I think we can delay these harder problems like how sharding should work or what it should look like. That can be pushed off a little bit so we can think about it and get it right. In the near term, we can get a lot of the benefits from the [Ethereum 2.0] work that we’ve been doing,” said Nava.
NLW argues the piece reflects a changing conversation in mainstream financial circles about the possibility of inflation on the other side of new Federal Reserve policy.
A recap of September, which NLW calls a transitional month between the post-lockdown excitement of the summer and the growing macro insecurity around second wave fears and election volatility.
Featuring some of the most interesting insights from our guests, including:
Luke Gromen on the four options for countries that can’t pay their debts
Tavi Costa on the Fed’s new “mandate” to keep asset prices high
