The Fourth Bitcoin Halving is done. How Has It Stacked Up Historically? What can you expect in the coming months? 

The Bitcoin halving, a highly anticipated and pivotal event in the cryptocurrency industry, has finally taken place. As history has demonstrated, when the supply of new BTC is reduced while demand remains steady or increases, Bitcoin tends to reach record levels, significantly impacting the entire cryptocurrency market.

The Bitcoin halving event has sparked concerns about its potential impact on Bitcoin miners, which could, in turn, affect the value of the cryptocurrency and the broader market. This article explores the Bitcoin halving, examining its historical effects on the crypto market and its implications from the most recent halving in April 2024.

What Is The Bitcoin Halving?

It's important to differentiate between Bitcoin, the network, and BTC, the digital currency, to understand Bitcoin's halving. The Bitcoin network is a series of data blocks, each with a record of BTC transactions and a link to the previous block, forming a chain-like structure called a blockchain.

Bitcoin (BTC), on the other hand, functions as a virtual medium of exchange that incentivizes specialized computers, known as miners, to gather and validate outstanding Bitcoin transactions. These transactions are then bundled into a block and linked to the decentralized ledger, referred to as the blockchain. As a result of this process, the miner is rewarded with a predetermined quantity of Bitcoin.

Source: Techopedia

The BTC reward is sourced from two different places. The initial source is the coinbase transaction, also known as the block reward, which is the origin of the name for the Coinbase Exchange. The second source of rewards is miner tips, which are transaction fees paid by users who attach BTC tips to their transactions to expedite their inclusion in blocks.

Source: bitcoin.com 

A fascinating point to note is that Bitcoin initially did not involve any transaction fees due to the presence of primarily empty blocks with no transactions. However, as the use of Bitcoin expanded, the number of transactions rose, leading individuals to add fees to guarantee the inclusion of their transactions in subsequent blocks.

Unlike transaction fees, which fluctuate, block rewards are predetermined and hardcoded into the system. The generation of new Bitcoins is automated. Initially, when Bitcoin's first block was extracted in January 2009, the reward was 50 Bitcoins; however, it has since decreased to 3.125. 

This reduction results from the Bitcoin halving mechanism, which systematically slashes the block reward in half every four years. The initial block reward reduction occurred in November 2012, followed by subsequent reductions in July 2016 and May 2020, with the most recent one occurring on April 19th of this year. 

Source: Coindcx

According to fundamental economic principles, prices tend to rise when demand remains steady or grows while supply decreases. In the context of Bitcoin's halving, a 50% supply cut should theoretically lead to a doubling of its price. However, past trends have shown that the price surge following each halving has been even more dramatic, primarily due to the concurrent rise in demand for the cryptocurrency.

Let's take a step back to appreciate the remarkable growth of Bitcoin. When it first launched, only a small group of around a few dozen individuals owned BTC. Fast forward to today, and that number has skyrocketed to over 200 million people worldwide. This surge in adoption has had a profound impact on the value of BTC, causing its price to rise exponentially. What's truly astonishing is that since its humble beginnings in July 2010, when it was worth nine cents, BTC has returned a staggering 720,000 times its initial value. This historical growth is a testament to the potential of Bitcoin and its ability to generate significant returns for investors.

What Has Been the Outcome of Previous Halving Events?

The results of past halving events have shown significant price increases for Bitcoin. For instance, after the first halving in November 2012, Bitcoin's price surged from about $11 to $1,100 in November 2013. Similarly, following the second halving in July 2016, the price jumped from around $650 to almost $20,000 by December 2017. In the third halving, Bitcoin reached over $69,000 the following year.

Historical examples indicate that the decreased availability of newly generated Bitcoins following a halving event may result in greater scarcity and, thus, elevated prices. It is crucial to recognize that although a relationship between these factors exists, it does not necessarily indicate a direct cause-and-effect relationship. Multiple elements, such as market sentiment, adoption patterns, and macroeconomic circumstances, also play a role in influencing price fluctuations.

This brings us to the current halving, with Bitcoin's widespread recognition reaching an all-time high. Some pundits believe that this increased awareness has already been factored into the current market price, leading to a relatively stable future for BTC. On the other hand, others contend that the introduction of spot Bitcoin ETFs has generated a consistent flow of investment, which, when paired with the impending reduction in new coin supply, will likely trigger a rapid and dramatic surge in price following the halving.

What About The Bitcoin Miners?

Halving Bitcoin has an immediate and significant effect on miners, who experience a 50% reduction in their earnings from block rewards. This drastic cut can alter the profitability of mining operations, potentially leading to a shift in the cryptocurrency mining landscape. Following the latest halving event, the payout for successfully mining a Bitcoin block dropped from 6.25 BTC to 3.125 BTC.

About a week before the halving event on April 13, the value of a single Bitcoin plummeted from over $67,000 to $62,000. At that time, with the block reward standing at 6.25 Bitcoins, an individual miner would receive a payout of roughly $387,500 for each block of Bitcoin successfully mined.

By April 20, the bitcoin price had stabilized at around $64,000, meaning the new 3.125 BTC reward was roughly $200,000. However, reducing mining rewards could pose difficulties for smaller-scale mining operations in the post-halving period: the increased processing power and energy required to produce new coins pressure miners' profit margins. Numerous predictions have been made that several major Bitcoin miners will struggle to stay afloat following the halving event.

The established, more prominent mining operations should have the financial means to upgrade their equipment and explore more efficient power options. Others believe that given their ample time to adapt to the impending Bitcoin halving, it's reasonable to expect them to be prepared. On the other hand, the halving event poses an existential threat to smaller, less-resourced mining entities, making their survival increasingly uncertain with each successive occurrence.

The Bitcoin halving in April 2024 stands out from its predecessors. Unlike in the past, the crypto landscape has shifted due to the influx of new mining operations, leading to decreased profitability as the growing number of miners share the same rewards pool. 

Another notable shift this time is that the block reward is no longer miners' primary source of income. According to reports, mining companies are expanding their business scope beyond traditional Bitcoin mining to explore alternative revenue streams, venturing into complementary areas such as energy harvesting, data warehousing, and AI development to boost their earnings.

So, How High Could Bitcoin Go?

Some experts believe that introducing ETFs has opened the floodgates to a new wave of investment that could propel Bitcoin's price to unprecedented heights. Moreover, these ETF inflows may also serve as a buffer, mitigating the severity of any future downturns in the cryptocurrency's value. Historically, Bitcoin has experienced drastic declines of over 70% following market peaks. However, the subsequent correction may be less severe, with more seasoned investors entering the fray and accumulating more significant stakes in BTC.

If ETFs are not the driving force, central banks could step in to make an impact instead. In a new development, central banks can allocate 2% of their balance sheets to cryptocurrency starting January 1, 2025. In 2022, the Central Bank of Switzerland expressed interest in purchasing BTC. A significant BTC purchase by a major central bank might trigger a peak in BTC's price. On the other hand, it could also signify the start of the blow-off top phase of the crypto bull market cycle, similar to when MicroStrategy acquired BTC in mid-2020.

Source: Coinmarketcap

Historical Decline Of Bitcoin Dominance. What That Means For Altcoins

The impact of Bitcoin's halving on the broader cryptocurrency landscape is closely related to the shift in market dynamics that follows this event. Analyzing the changes in Bitcoin's market share after the halving is essential to understanding this phenomenon better. This market share, known as Bitcoin dominance, represents the proportion of the total market capitalization of all cryptocurrencies attributed to Bitcoin alone. However, it's worth noting that historical data on Bitcoin dominance is limited and does not extend back to the first-ever Bitcoin halving in November 2012.

It's probable that altcoins still needed to hold a substantial portion of the market during that time, which limited their influence. Additionally, the entire cryptocurrency infrastructure was still in its early stages, making this point somewhat moot. What's intriguing is that following the second Bitcoin halving event in July 2016, Bitcoin's market dominance decreased by around 4%. This implies that investors shifted their focus away from Bitcoin and towards altcoins. Notably, even when Bitcoin's value plummeted by 40%, its relative strength compared to altcoins failed to rebound.

In other words, BTC is considered the go-to choice for cryptocurrencies' safety. Therefore, a significant 40% drop in BTC's price should have increased BTC's dominance since other cryptocurrencies would have likely decreased in value as well, causing investors to move their funds into BTC. The fact that this shift did not occur could be due to the overall immaturity of the cryptocurrency market.

Despite this, Bitcoin dominance plummeted by 60% during the 2017 cryptocurrency boom, dropping to approximately 40% of the overall market capitalization. Notably, this decline occurred towards the peak of the 2017 cycle, specifically in December 2017, indicating a high level of speculation in alternative cryptocurrencies at that time.

Following the third Bitcoin halving event in May 2020, BTC dominance dropped by 14%, a threefold more significant decrease than the aftermath of the second halving. This considerable decline implies that investors shifted their funds away from Bitcoin and into altcoins even faster after the third halving. Similarly, during the 2021 crypto bull market, Bitcoin's market share plummeted by approximately 35%, falling to around 40% of the total market capitalization, mirroring the trend seen in 2017.

In contrast to the 2017 scenario, this phenomenon occurred earlier in the cycle, emerging around April 2021 and persisting until April 2022. This prolonged rotation into alternative cryptocurrencies implies a more enduring trend than the 2017 cycle, which is reasonable considering that most alternative cryptocurrencies lacked significant utility until 2021.

The brief historical data indicates some unique trends in altcoin dominance for this cycle. BTC's dominance could decrease significantly, up to 40% after the halving, but only around 10% as we near the next cycle's peak. Additionally, altcoins may demonstrate greater resilience during the next crypto bear market.

The significant 40% decrease in BTC's dominance may seem surprising. Still, it becomes more understandable when considering the rising influence of stablecoins and the recent approval of spot Ethereum ETFs. As we move closer to the next bullish crypto market phase, the market capitalization of stablecoins is expected to see substantial growth, while ETH's market cap is likely to increase following the introduction of spot Ethereum ETFs.

How High Will Altcoins Go?

The critical factor is the extent and duration of the rally that altcoins may experience. It is important to note that the prices of altcoins are closely linked to the price of BTC. Altcoins perform well when BTC's price is stable (trading sideways) or increasing slowly. This scenario tends to prompt traders to seek opportunities in more speculative cryptocurrencies due to boredom.

Source: Investopedia

The experts at Coinbureau recommend analyzing altcoin performance compared to Bitcoin by applying conventional stock market measures. They suggest looking at the "Beta to Bitcoin" concept to gauge the volatility of altcoins with BTC. As a general guideline, altcoins with a market capitalization over $1 billion tend to have a beta of 2, meaning they are twice as volatile as Bitcoin. Those with a market capitalization under $1 billion have a beta of up to 4, while those with a market capitalization under $100 million have a beta of around 8, indicating significantly higher volatility compared to Bitcoin.

So if BTC’s price goes up by 2.5x between now and the cycle top, some large capital coins should eventually go up by around 5x, some mid caps should eventually go up by around 10x, and some small caps should eventually go up by around 20x. It is important to note that this is a general guideline and not a definitive prediction for every coin. It is crucial to emphasize the term "eventually" because these projected outcomes are not immediate and may not unfold simultaneously for all alternative coins.

It's a given that the growth won't be a steady upward trajectory; instead, there will be significant downturns and reversals, which will become more pronounced as the market reaches its peak. If Coinbureau's forecasts about dominance hold true, altcoins may experience prolonged periods at or near their record highs, unlike in past cycles. Conversely, this implies that they will face similar declines during the next downturn in the cryptocurrency bear market.

However, a catch could be that this phenomenon may be limited to well-established alternative cryptocurrencies like Ethereum, which have already inspired their own exchange-traded funds (ETFs) and could consequently exhibit the previously mentioned dynamics: unexpected high points, reduced volatility in downturns and potentially propped up by central banks. 

How Can You Take Advantage of Potential Gains?

It is essential to be aware of upcoming opportunities to maximize potential profits. There are three critical steps to take advantage of these gains. The initial step involves recognizing the key narratives expected to dominate the upcoming cryptocurrency bull market. This article explores the narratives likely to experience significant growth in the next bullish cycle.

Your next step is establishing a presence on the most suitable cryptocurrency trading platforms. The third is to remember that not all altcoins will surge in value simultaneously. If you notice specific cryptocurrencies surging in a particular narrative, avoid rushing to invest in them. Look for other cryptocurrencies within that narrative that have yet to experience a rally. 

Likewise, if your portfolio's cryptocurrencies are underperforming compared to the broader market, they may be experiencing a temporary delay. While it's true that some may never recover if you've conducted thorough research, likely, this won't be the case, and they'll eventually catch up.

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Tim Moseley

How To Add Hivecoin To Three Non-Custodial Software Wallets 

Understanding the Role of a Crypto Software Wallet

A software or digital wallet is a powerful tool that simplifies and empowers your cryptocurrency experience. It's a handy app or site that securely stores your cryptocurrency keys, always at your fingertips, ready to be accessed anytime, anywhere with an internet connection.

This convenience puts you in the driver's seat of your digital assets, allowing you to manage them with ease and confidence. Importantly, non-custodial means you have complete control over your keys and funds, unlike custodial wallets, where a third party holds your keys.

Software wallets play a vital role in your cryptocurrency journey. They don't store your crypto; your coins are stored on the blockchain. Instead, they provide you with access to your passkeys, enabling you to transact with your digital currencies. This accessibility allows you to buy, sell, trade, or transfer crypto from your computer or mobile device without needing a physical device. Moreover, these software wallets are fortified with robust security measures, providing protection surpassing centralized exchanges. 

Today, we’ll explore three non-custodial software wallets that allow you to list and transact with Hivecoin. Hivecoin is a crypto asset that is part of the Markethive community. It is instrumental in creating transactional activity within the community as we prepare to list Hivecoin (HVC) on crypto exchanges, where it will be available for free market trading. 

Upon setup, each wallet prompts you to save a secret recovery phrase, a unique combination of 12 words. This phrase, best stored on paper and kept secure, not on your computer, serves as your key to access your wallet from any device. This feature ensures that even if you lose your mobile phone or access to your computer, your digital assets remain secure.

Solflare Wallet

The Solflare wallet is a comprehensive crypto wallet offering various features. It allows you to send, receive, and securely store tokens on the Solana blockchain. It also grants access to decentralized applications (dApps) on Solana, including decentralized finance (DeFi) platforms, decentralized exchanges (DEXs), and decentralized social media platforms. (DeSo) Additionally, Solflare offers a swap function that allows you to swap between tokens within your wallet.

Key Features

• Send, receive, and store tokens on the Solana blockchain
• Access to decentralized applications (dApps) on Solana
• Support for staking Solana to a validator of your choice
• Swap function for swapping between tokens within the wallet
• Compatible with hardware wallets like Ledger
• Available as a desktop and mobile browser app, as well as a mobile app on the App Store and Google Play
• User-friendly interface with easy onboarding and advanced features for experienced users

Key Benefits

• Secure and robust crypto wallet for Solana users
• Easy to use, with a user-friendly interface and advanced features for experienced users
• Supports multiple platforms, including desktop and mobile devices
• Compatible with hardware wallets like Ledger for added security
• Offers a swap function for swapping between tokens within the wallet

How to Add the Hivecoin Token to the Solflare Wallet

Once you’ve downloaded the Solflare wallet onto your device, which is comprehensively explained in this video, you can add the Hivecoin token (HVC) to your wallet. Adding a new asset to your wallet is a simple process. 

On your Portfolio homepage, you'll find an option to "Add new asset," as shown in the image below. Clicking on this will prompt you to enter the details of the new asset, including its token address and number of decimals. Once listed, you can send and receive Hivecoin to the Markethive Wallets and associated wallets where the HVC token is listed. 

The Hivecoin mint address is APRXuct2fy7yXeSPcS5r4pTdh6P34xhqj1Pio1dyc1j6
The token's representation has nine decimal places. Below is an image of Hivecoin’s mint token address and decimal places on Solana Explorer. 

Source: Solana FM Explorer

Exodus Wallet

The Exodus wallet is a popular cryptocurrency wallet with a user-friendly interface and a wide range of features for managing and securing digital assets. Here are some key points about Exodus Wallet:

Key Features

• Exodus is a non-custodial wallet, meaning users have complete control over their private keys and funds. To protect user assets, the wallet uses advanced security measures, including multi-sig technology and cold storage.
• Exodus supports over 319 cryptocurrencies and offers features like in-app swaps, staking, and NFT marketplaces. It also supports Trezor Model T and Trezor One hardware wallets for offline cryptocurrency storage.
• Exodus's user interface is designed to be easy to use, even for beginners. The wallet offers a clean and intuitive design, making navigating and managing digital assets simple.
• Exodus is available on multiple platforms, including desktop (Windows, macOS, and Linux), mobile (iOS and Android), and browser extensions (Chrome and Brave).
• Exodus has received positive reviews from users and critics alike, with many praising its ease of use, security, and feature set.

Key Benefits

• Easy to Use: Exodus is designed to be user-friendly, making it easy for beginners to get started with cryptocurrency.
• Security: Exodus uses advanced security measures to protect user assets, including multi-sig technology and cold storage.
• Comprehensive Support: Exodus supports over 319 cryptocurrencies, making it an excellent option for users who want to manage various digital assets.
• In-App Swaps: Exodus allows users to swap between cryptocurrencies within the wallet, making managing and diversifying their portfolios easy.

This short video explains how to download the Exodus wallet on your mobile phone, and here is a brief tutorial illustrating the desktop download. You can then synchronize both wallets.   

How to Add the Hivecoin Token to the Exodus Wallet

Once downloaded, you can add The Hivecoin token by scrolling down on your Portfolio page and clicking “+ Add More,” as shown above. 

That will take you to the Assets page. Click on the three dots next to ‘show all, ' and select “Add Custom Token,” as shown below. 

First, select the Solana Network, click Search, and paste the HVC mint token address. The Hivecoin mint address is APRXuct2fy7yXeSPcS5r4pTdh6P34xhqj1Pio1dyc1j6

Click on the Hivecoin display banner. A pop-up will appear asking to Add Hivecoin?  Click on ADD TOKEN. A message appears: “You’ll be able to send and receive this token.” 

Trust wallet

The Trust Wallet is a multi-chain self-custody cryptocurrency wallet and secure gateway to thousands of Web3 decentralized applications (dApps). With over 100 million users, Trust Wallet is one of the market's most popular and trusted cryptocurrency wallets.

Key Features

• Trust Wallet supports over 100 blockchains, including Bitcoin, Ethereum, Solana, Cosmos, Optimism, and many more.
• Trust Wallet allows users complete control over their digital assets, ensuring the security and ownership of their cryptocurrencies.
• Trust Wallet provides a built-in browser for accessing and interacting with decentralized applications (dApps) on the Web3 ecosystem.
• Trust Wallet lets users store, send, and receive non-fungible tokens (NFTs).
• Trust Wallet supports various decentralized finance (DeFi) and game finance (GameFi) protocols, enabling users to participate in DeFi lending, borrowing, and gaming.

Key Benefits

• Ease of use: Trust Wallet is designed to be user-friendly, making it easy for new users to get started with cryptocurrency and Web3.
• Security: Trust Wallet prioritizes security, providing a secure gateway to the Web3 ecosystem and protecting users’ digital assets.
• Community-driven: Trust Wallet has a large and active community that strongly emphasizes user support and collaboration.

Here is a step-by-step tutorial on downloading the Trust wallet on your mobile phone and using it as an extension in your browser. 

How to Add the Hivecoin Token to the Trust Wallet

Again, it’s simple to access by clicking “Manage Crypto” at the bottom of your app extension on your browser. Enter the Hivecoin mint address, which is APRXuct2fy7yXeSPcS5r4pTdh6P34xhqj1Pio1dyc1j6. It’s also known as the contract address. It will then appear as shown in the image below. 

A Message To All Markethivers

To transact using any wallet, including the Markethive wallet, you must have a small balance of Solana’s Token, SOL, for transaction fees. These fees are minuscule, so a little bit of SOL goes a long way.  

Take the first step towards energizing our blockchain by acquiring one or more of these wallets, and let's work together to galvanize our Hivecoin network through frequent transactions. Every exchange of Hivecoin serves as a catalyst, stimulating community interaction and fortifying the connections that unite us.

The frequent exchange of Hivecoin within and beyond the Markethive network has a profound impact. Doing so fosters a thriving and dynamic blockchain ecosystem, bolstering its strength and adaptability. Additionally, it demonstrates Hivecoin’s real-world value and appeal among our community members, highlighting its practical uses and popularity.

This intensified participation significantly increases the token's worth and is crucial in furthering Markethive's vision. As it stimulates more activity on the blockchain, it strengthens Markethive's efforts to list Hivecoin on leading exchanges, ultimately expanding its presence and capabilities beyond the Markethive ecosystem.

Become a valued member of the Markethive Community Group and play a pivotal role in influencing Hivecoin's development within the dynamic Markethive network. Once in the group, you can send Hivecoin back and forth to other members. Enter your Hivecoin wallet address on the post with an active thread, and other members will send HVC to your wallet. You can then reciprocate by returning the HVC to the specific members. When interacting with members, quoting your HVC wallet address each time is advisable. 

Additionally, To increase your Hivecoin holdings, make a habit of visiting our faucet every day at https://gotco.in. Simply input your wallet address and complete the captcha to receive a reward of 0.00001 HVC. This wallet address can belong to your Markethive wallet or any other one you own. This faucet is just one of the many that Markethive plans to introduce to support our operations and make it convenient for everyone to access.

Tim Moseley

From Financial To Physical. The Next Big Thing In Crypto – DePIN

Recently, there has been significant interest in decentralized physical infrastructure, also known as DePIN, within the crypto space. People are curious about the potential of this niche and which specific projects within it are worth noting. The latest detailed study, titled State of DePIN 2023 by Messari, aims to provide insights into these questions. This summary will highlight key findings from the report and discuss their potential impact on the cryptocurrency market.

What Is DePIN? 

The report commences with a concise delineation of DePIN, an acronym for decentralized physical infrastructure. It encompasses a cluster of ventures that employ cryptocurrency-based incentives to foster a range of physical infrastructure. These initiatives span from decentralized Wi-Fi systems, decentralized computing clouds, decentralized cloud storage solutions, and decentralized mobile networks to other similar endeavors. A salient feature that sets most DePIN projects apart, in addition to their crypto-based incentives, is the accessibility for individuals to contribute, provided they possess the requisite hardware.

Source: The Messari Report.pdf

The report highlights that DePIN solutions have the advantage of being more efficient, resilient, and high-performing than their centralized counterparts. Additionally, DePIN projects can rapidly innovate and evolve due to community participation, which gives them a unique edge over centralized projects. This efficiency and resilience not only make them attractive to investors but also instill confidence in their long-term viability.

Source: The Messari Report.pdf

The authors posit that DePIN initiatives possess a self-reinforcing mechanism known as a flywheel, whereby their growth and influence fuel further adoption and expansion. As these projects gain traction and popularity among users and service providers, they become even more potent and widespread, creating a positive feedback loop. The authors project that DePIN will substantially impact the global economy, with the potential to augment GDP by a staggering $10 trillion over the next decade. This ambitious projection underscores the transformative potential of these projects.

Source: The Messari Report.pdf

The authors go on to list the industries in which DePIN is currently causing significant changes. These industries encompass various areas such as digital maps in the crypto sector, energy grid management, home internet services, food delivery platforms, ride-sharing services, and, surprisingly, even pet and livestock-related projects. It should be noted that these endeavors are still in their initial phases.

The authors have categorized crypto projects in the DePIN niche into six categories: compute, wireless, energy, AI, services, and sensors. According to their analysis, there are over 650 cryptos across these categories, with a combined market capitalization of over $20 billion.

 
Source: The Messari Report.pdf

The DePIN projects have garnered significant interest from venture capitalists, resulting in substantial capital being invested. To put it in perspective, the top ten DePIN projects alone have collectively secured a significant amount of funding. It's worth noting that many of these projects continue to attract investments even after their initial coin offerings (ICOs) and the launch of their main networks.

It is uncommon for a crypto project to secure substantial funding after its ICO. However, when this does happen, it indicates that investors have tremendous confidence in the project's potential. The DePIN niche has attracted significant post-ICO funding, with numerous projects raising substantial amounts. The top ten DePIN crypto projects in terms of funding raised include Filecoin and Helium, each securing $250 million, RNDR Network with $100 million, Fetch AI with $75 million, Livepeer with $50 million, Really with $35 million, Hivemapper with $25 million, Andrena with $25 million, Braintrust with $25 million, and DIMO with $20 million.

DePIN Blockchains

Intriguingly, most of the nearly thousand crypto projects operating within the DePIN space are opting to deploy on a select few cryptocurrency blockchains. This observation encompasses both layer one and layer two blockchains, with Solana emerging as the most favored layer one choice among DePIN projects.

The authors cite the high speed, affordability, and use of the Rust programming language as reasons for this. Among layer two solutions, Caldera and Eclipse are favored for DePIN projects. These platforms offer flexibility, enabling DePIN projects to blend Ethereum's security with Solana's performance, as seen in the case of Eclipse.

In addition to layer one blockchains that prioritize DePIN, the authors highlight some notable examples. Iotex is one such example, which was already utilized by the US military for health monitoring trials in November 2021. Peaq, on the other hand, is still in the pre-launch phase, but it has already generated significant interest and excitement within the community.

The importance of DePIN adoption cannot be overstated, as it will have a profound impact on both layer one and layer two. The success of DePIN chains and projects hinges on the demand side of the equation, which is carefully examined in the second part of the report.

Unlike many other cryptocurrencies, the authors emphasize that DePIN revenues are fueled by utility rather than speculation. They highlight that participants in DePIN projects typically need to purchase and lock or burn their associated tokens in return for access to the decentralized service or product being provided. This characteristic aligns DePIN projects with traditional crypto coins, which are utilized for various purposes, such as payment of fees and staking.

According to the authors, DePIN projects consistently yield an estimated $15 million in yearly on-chain revenue throughout the bear market. Given the large number of DePIN projects, this amount may seem insignificant. The authors, however, need to offer a clear answer to which DePIN projects are the most profitable, leaving it open to speculation.

However, it is worth mentioning that Livepeer has developed a dashboard named the Web 3 Index, which monitors the earnings of major DePIN projects. Decentralized storage and computing are generating the highest revenue.

Source: The Messari Report.pdf

The authors highlight the evolution of DePIN projects, with many expanding their offerings to become comprehensive platforms providing a variety of decentralized products and services. They cite Filecoin, Helium, RNDR Network, and Bittensor as five notable examples of such platforms, demonstrating the diversification of DePIN projects beyond their initial scope.

DePIN Categories

Compute
In the next section, the authors divide the Compute category into its previously discussed main elements: Storage, Compute, and Retrieval. They mention that specific DePIN projects within the compute category, such as Filecoin and Akash Network, provide a “full stack experience.” 

Source: The Messari Report.pdf

In terms of Storage, it's suggested that DePIN could gain widespread acceptance by utilizing decentralized data storage. While other cryptocurrency projects and protocols have primarily adopted this technology, it's promising to see increased decentralization across the crypto space. This article provides an opportunity to delve deeper into the meaning of decentralization.

The authors highlight that Compute faces the opposite issue compared to storage. While there is an abundance of decentralized data storage but insufficient demand for it, the supply of decentralized computing power is lacking. Yet, there is a surplus of demand for it.

The authors note that decentralizing Retrieval poses a significant challenge, especially in maintaining competitiveness. This is primarily due to the fact that Cloudflare, a centralized retrieval protocol, currently serves 20% of all regular websites at no cost, making it challenging to monetize alternative solutions.

Wireless
This relates to the next DePIN category the authors detailed earlier: Wireless. The growth of the total addressable market for decentralized wireless services has been exponential, and it's no surprise why. The demand for decentralized wireless services is rising as the world becomes increasingly interconnected. This category of DePIN has even earned its own name – DeWi, short for decentralized wireless – highlighting its significance in the industry.

The authors also divide this category into three parts: mobile, fixed internet, and Wi-Fi. Helium, in particular, is gaining significant attention due to its rapid expansion and popularity. As an illustration, Helium has collaborated with T-Mobile to offer affordable mobile plans across the US.

Source: The Messari Report.pdf

Data Sales
The authors decided to examine a new category not initially included in their list but gaining significant interest: Data sales. They point out the importance of data in a world that is becoming more digital. 

That is why they are optimistic about DePIN initiatives such as Hivemapper, which motivates individuals to map their local surroundings, similar to Google Maps but without a central authority. They also highlight other specialized DePIN projects, such as one that monitors noise pollution in a community-driven manner.

This relates to another category detailed earlier: Services. According to their perspective, they classify services into two types: horizontal services, like decentralized marketplaces for freelance work, and vertical services, such as decentralized ride-sharing systems.

The conversation shifts to the emerging DePIN category of  Vertical Ads, but surprisingly, they don't offer much insight into it. Notably, they fail to mention the Brave browser in this context. The situation is similar regarding energy-related DePIN initiatives, as they are also in the early stages of development.

DePIN Growth, Potential 

The report now shifts its attention to the supply side of the equation, specifically examining the remarkable growth and potential of DePIN nodes. The authors begin by presenting an interesting fact: The number of DePIN nodes continues to grow and has now surpassed 600,000. The graph below illustrates that the Wi-Fi map nodes are the most numerous, with more than 200,000 nodes being a part of the DePIN project.

Source: The Messari Report.pdf

The authors note a rapid increase in the quantity of DePIN nodes. This growth is attributed to DePIN initiatives addressing scalability challenges related to the expansion of physical infrastructure. Consequently, DePIN offerings are becoming more affordable and of higher quality. It is worth noting that the development of this physical infrastructure is being encouraged through the distribution of crypto incentives, particularly tokens awarded to individuals contributing to such infrastructure.

The tokenomics of these tokens are integral to the supply-side equation, and the authors recognize three distinct strategies. First, supply-based tokenomics encourages growth. Second, demand-based tokenomics promotes efficiency. Lastly, a combination of supply- and demand-based tokenomics strikes a balance between development and efficiency.

The advantages and disadvantages of the three methods are outlined in the image below. The authors also observe that certain strategies have been more effective for specific DePIN projects. For example, they note that projects that require a lot of hardware benefit the most from supply-based tokenomics, as it essentially rewards contributors with a large number of tokens. On the other hand, DePIN projects that are primarily software-based can expand by offering points that may eventually be converted into tokens.

Source: The Messari Report.pdf

In assessing the value of various DePIN projects, the authors recommend focusing on both the market cap and the fully diluted valuation. Their rationale is that DePIN projects often involve significant investments from venture capitalists, which can influence price movements. 

Essentially, the authors suggest that the demand for specific DePIN offerings may be tempered by the influx of tokens from initial project backers. They imply that lower-quality DePIN projects may encounter challenges and predict that many early investors will opt to sell once their portfolios have appreciated five to tenfold.

Before making any investment decisions, it's crucial to thoroughly investigate cryptocurrencies, especially those in emerging sectors like DePIN. While some experts recommend investing in blockchains that support DePIN projects to mitigate risk, this approach may not yield returns as substantial as identifying and investing in promising DePIN projects early on, with their potential for 100x growth.

Source: The Messari Report.pdf

DePIN 2024 Forecast 

The section of Messari's DePIN report that garnered the most excitement is the predictions for DePIN in 2024. According to the authors, the first theme you need to watch out for is the intersection of DePIN and AI, which is expected to play a crucial role in DePIN's development. DePIN AI has the potential to surpass centralized AI in terms of capabilities and effectiveness within the next one to two years.

The second important topic is the intersection between DePIN and meme coins. While the idea may seem odd, the authors acknowledge this and use the Solana phone Bonk airdrop as an example to show how these two can be paired. This also hints at a future where physical infrastructure is encouraged through the use of meme coins.

The third important aspect to be mindful of is the intersection of DePIN with zero-knowledge technology. By leveraging advanced zero-knowledge technology, DePIN could carry out a form of cyber attack known as a vampire attack on Web 2, which involves taking control of users' content and activity.

The fourth theme to watch is similar to the third but focuses on the intersection between DePIN and gaming. Think of it as GameFi on steroids, where the cryptocurrency elements of gaming are integrated with cutting-edge gaming technology, such as VR headsets, to create a more immersive and interactive experience.

The fifth theme to be mindful of is the intersection between DePIN and privacy, with a particular focus on decentralized virtual private networks (VPNs) as a critical intersection area.

The authors highlight a curious trend in DePIN: The intersection between DePIN and Asia, referring to the continent, is expected to yield unexpected results. They foresee multiple top 10 DePIN projects emerging from this region, with most still in the nascent stages of development.

What It Means For Crypto

The DePIN report's findings have significant implications for the cryptocurrency market. In essence, they suggest that the most successful cryptocurrency narratives and niches during the current bull market will be those that are not financially focused. A previous article on crypto narratives supports this and is reinforced by the fact that some DePIN projects have already acknowledged this trend.

Several crypto initiatives acknowledge that applications related to finance will face increased scrutiny. In contrast, DePIN presents a significantly lower likelihood of antagonizing regulators, and its credibility is evident. The increasing presence of DePIN projects on global app stores and their partnerships with established companies and brands demonstrate that it operates within a safer realm, particularly in regulatory compliance.

Given its immense potential and the nascent stage of most DePIN projects, the DePIN niche is expected to be highly unpredictable from an investment standpoint. While some tokens may experience astronomical growth, others will likely plummet in value or become worthless. Despite the risks, the long-term outlook for DePIN indicates that it will have a lasting impact on the cryptocurrency landscape, contributing to increased adoption and mainstream acceptance.

Previously, the main factors driving cryptocurrency demand were primarily based on speculation. However, real-world adoption may occur with the rise of DePin and other non-financial sectors. This shift could make everyday individuals feel more at ease using and putting money into cryptocurrency, consequently boosting further adoption and investment. Advocates believe that the ultimate goal of cryptocurrency is to decentralize all aspects of life. If that is the desired outcome, we are on the right path.

The reaction of centralized equivalents to the decentralized alternatives of popular products and services is a topic of much speculation. Some anticipate a similar response to DeFi and other disruptors of the traditional financial system, characterized by intense regulatory opposition, mainstream media-fueled FUD, and attempts to suppress their growth. However, DePIN networks have an inherent advantage that will make them more resistant to suppression, as they are generally more decentralized than most cryptocurrencies. This resilience will demonstrate the staying power of crypto.

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Tim Moseley

What Is Altcoin Season? When Will It Start? Or Is It Already Here?

Altcoin season, a term on the lips of many cryptocurrency enthusiasts since Bitcoin's recent surge to unprecedented heights, is a phenomenon many have eagerly anticipated. However, despite this anticipation, only a select few coins and tokens, along with many meme coins, have experienced substantial growth. This has led to speculation that altcoin season may never arrive, as funds flowing into spot Bitcoin ETFs may not be redirected towards the broader cryptocurrency market. But is this the full story?

With the invaluable insights of some highly credible crypto experts, this article takes a deep dive into the current state of the cryptocurrency market. It focuses on the 'altcoin season' concept and its potential impact on market trends. The article explores why altcoin season has yet to occur and predicts when it may begin. It also offers insights on how to recognize its onset. Additionally, the article highlights the types of alternative cryptocurrencies (altcoins) that may be worth watching during this period.

The Concept of Altcoin Season

Firstly, let's touch on the concept of altcoin season, a term that lacks a universally accepted definition. Some assume it refers to a period where numerous altcoins are experiencing a surge in value, with many believing that it's already underway. Given the recent performance of certain altcoins, one could argue that it's already here. However, this definition falls short of accurately capturing the concept, so here’s a more precise and nuanced explanation.

An altcoin season is an extended timeframe during which most alternative coins exhibit notable outperformance compared to Bitcoin. This can be gauged by analyzing the price of an altcoin with Bitcoin, for example, ETH/BTC. When assessing the BTC pair for various altcoins, it becomes evident that their performance has not been particularly strong. However, this does not imply that they have not experienced price increases in fiat currency; rather, it indicates that their gains have been comparatively lower when measured against Bitcoin. 

The current situation with ETH and BTC is a significant development in the cryptocurrency market. ETH's value has decreased compared to BTC, which has raised concerns among traders and investors. Historically, increases in BTC's value have often been followed by a shift in investments towards alternative cryptocurrencies, leading to a period where most altcoins perform better than BTC. 

Source: Coinmarketcap

In the past, the trend has been to invest in ETH and then move on to other major alternative cryptocurrencies, followed by mid-cap and small-cap altcoins. It is important to note that this progression is not always precise but generally aligns with the idea that investors gravitate towards more speculative crypto assets as market momentum continues. Interestingly, in the current scenario, there has been limited shifting of funds into ETH, as indicated by the underperformance of the ETH/BTC pair mentioned earlier.

Furthermore, it appears that the influx of capital did not favor midcaps and small-caps but instead directed attention towards micro-cap meme coins for speculative purposes. It is important to note that while certain altcoins like Solana's SOL have shown impressive performance compared to BTC, most altcoins, including ETH, have not surpassed BTC's growth. This suggests that the altcoin season may have yet to arrive fully.

As indicated earlier, cryptocurrencies with smaller market capitalizations tend to be riskier. This is because crypto with a smaller market cap has the potential to experience more significant and rapid price increases compared to those with larger market caps. However, on the flip side, small-cap cryptocurrencies are also prone to more substantial drops in value, highlighting the risk/reward ratio. 

The notable 100x returns often associated with certain altcoins are typically achievable with those that have smaller market caps, explaining the hype around the altcoin season. Nevertheless, there are indications that the current cryptocurrency market cycle differs from previous ones, which could have significant implications for the returns on altcoins.

The Question on Everyone's Mind: When Will Altcoin Season Arrive?

Many wonder why the current market cycle hasn't followed the same pattern as previous ones, with altcoins yet to take center stage. To understand this, we must first acknowledge the unique factor setting this cycle apart: spot Bitcoin ETFs.  As discussed earlier, some believe these ETFs are hindering the rotation into altcoins, as investors cannot easily switch from ETFs to altcoins, at least in theory. However, some investors may be cashing out their ETF gains and moving their funds to cryptocurrency exchanges like Coinbase, where they can invest in altcoins. 

The catch is that most investors in spot Bitcoin ETFs are not your average retail investors but seasoned institutional investors. These institutional investors, also known as TradFi whales, have a significant influence on the market. As a result, their preferences for alternative cryptocurrencies may diverge from those of the typical crypto enthusiast. Notably, there has been substantial institutional interest in SOL, which could explain its outperformance compared to BTC. 

However, the crypto market is not solely composed of institutional investors. There are two other types of crypto investors: crypto whales and retail investors. Crypto whales, which are large holders of cryptocurrencies, have been the primary influencers in the crypto market so far. Their shift from Bitcoin to alternative coins has led to past cycles in altcoins, while retail investors have pushed these coins to their peak values. Put simply, the crypto market has not lost anything. It has merely introduced a new main character, figuratively speaking. 

The lack of an alt season is not caused by the introduction of ETFs but rather by the actions of crypto whales and retail investors. The analysts at Coinbureau suggest that these crypto whales are not shifting their investments or rotating into altcoins because there currently needs to be more retail investors interested in purchasing them.

Source: Crypto Max on X

Numerous indicators suggest that retail investors are gradually becoming more interested in cryptocurrency despite their limited participation in the current market upswing. This is evidenced by increased retail trading activity on cryptocurrency exchanges, the growing popularity of crypto exchange apps, rising search volumes for crypto-related terms, and heightened social media engagement with crypto content. However, these metrics have not reached the levels indicating a massive influx of new retail investors into the cryptocurrency market.

The crucial factor here is the influx of new retail investors. While millions of retail investors from previous cycles are still active or returning, we need to see more new entrants into the market. This is a significant concern, as altcoins rely heavily on new investors to drive their growth and create upward momentum. As a retail investor, you can influence the altcoin season. There need to be marginal buyers.

As Coinbureau states, “We need new people for our altcoin bags to pump, probably because most of us have already allocated as much as we can to our favorite coins and tokens. In the absence of these new people, there's not that much for us to do except speculate on memecoins, and it's quite possible that the memecoin pumps we've seen have been coordinated by the crypto whales. They probably know that the only retail investors around right now are experienced enough to use DEXs.” 

The Onset of Altcoin Season

After analyzing the delay in the arrival of altcoin season, the next question is when we can expect it to begin. The straightforward answer is that it will start when a sufficient number of retail investors take notice. This will prompt crypto whales to shift their focus from Bitcoin to altcoins that retail investors will then eagerly buy into, leading to a chain reaction of FOMO (fear of missing out). However, a more in-depth analysis, which necessitates a look back at the previous cycle, reveals a more intricate scenario. Most of us envision the upcoming altcoin season as a repeat of the last cycle, but the reality may be more complex. 

The issue lies in the significant differences observed in the previous cycle. Due to a worldwide pandemic, billions of individuals were confined to their homes while a few hundred million received a stimulus payment, providing them additional funds. These events led to widespread speculation in both stocks and cryptocurrencies. Today, the situation is starkly contrasted as interest rates across various nations are at their highest levels in years. Unofficial inflation rates are soaring in most countries, reaching double digits. Several countries are experiencing or nearing recession.

Above all, most individuals are reportedly accumulating unprecedented levels of debt to maintain their standard of living. This trend starkly contrasts with the circumstances observed during the previous alt season. A positive aspect is that the prolonged persistence of these conditions may prompt governments and central banks to provide comparable forms of economic support, never mind the possibility of an existential shock. 

This means that there will likely come a time when economic conditions mirror those seen during the pandemic, with similar fiscal and monetary support levels. The exact timing is uncertain, but it may take a significant event to prompt such action. Identical to past patterns, this could cause a brief decline in cryptocurrency and other asset values, followed by a stabilization period and a sharp price increase as the stimulus takes effect.

If the current state of the market persists, altcoins may suffer under unfavorable circumstances. If trends continue, including high interest rates, rising inflation, recurring recessions, and mounting retail debt, the subsequent altcoin season may fall short of expectations. It's essential to recognize that the cryptocurrency market has undergone significant changes since the previous cycle, with factors beyond spot Bitcoin ETFs contributing to its evolution. 

Regulations in the US, UK, and other countries have made it more difficult for retail investors to reach offshore trading platforms where highly speculative altcoins are traded. The upcoming EU stablecoins regulations are anticipated to impact the cryptocurrency market significantly. It has been announced that USD stablecoins will no longer be allowed in the EU by the end of the year, potentially reducing the options for retail investors to trade cryptocurrencies.

Identifying the Arrival of Altcoin Season

To determine the onset of the altcoin season, keep a close eye on several key indicators. These include retail trading volume, the popularity of crypto exchange apps, Google searches, and social media views related to cryptocurrency. When you observe a steady increase in these metrics, alt season is likely imminent. Interestingly, there are signs that this trend may already be underway. For instance, search queries related to buying cryptocurrency have started to rise after years of stagnation, although they still have a long way to go before reaching their previous peak.

Source: Google Trends

The current market dynamics are making it challenging to determine whether we are witnessing the inception of a new alt season or a fleeting speculative surge. A valuable approach to shed light on this puzzle is examining how cryptocurrency projects promote themselves, specifically during periods of heightened attention. A typical pattern among cryptocurrency projects is to unveil significant announcements when public interest is at its peak.

There have been instances where crypto projects have postponed significant updates and announcements due to a lack of interest from retail investors. Despite this, numerous crypto projects have been making notable announcements, which could suggest the beginning of a new altcoin season. However, these announcements have not resulted in significant speculative buying, indicating that retail investors remain scarce.

Source: CoinMarketCal

As the popularity of cryptocurrency projects grows, you may notice a surge in big announcements and subsequent price increases for their coins or tokens. This is often a sign that retail investors have entered the market. When these altcoin announcements start making headlines in mainstream news, it could indicate that the market is nearing its peak. 

Some of you have probably encountered additional key indicators, like inquiries from friends and family regarding the crypto market or, worse, seeking advice on investing in meme coins. However, these signals may not hold much weight unless individuals actively invest. Suppose widespread media coverage of altcoins is not leading to a substantial market increase, and your acquaintances are not showing significant interest. In that case, it may not truly be an alt season. 

A possible indicator of an impending alt season is to evaluate whether these signs are present when, based on historical patterns, an altcoin season would be expected to occur from a cycle perspective. However, this can be difficult to determine as the introduction of spot Bitcoin ETFs has disrupted the typical cycle. For reference, the current phase of the cycle should resemble the early 2020 period, characterized by gradually increasing prices followed by a sudden crash triggered by an unexpected event before ultimately continuing their upward trend.

It's worth considering that our timeline may be advancing at an accelerated pace. Specifically, we could be closer to the late 2020 stage of the crypto market cycle, irrespective of the introduction of Bitcoin ETFs. With two completed crypto cycles (2017 and 2021) under their belts, millions of individuals are now familiar with the narrative and its subsequent developments.

Source: Bitcoin News on X

The impact is that we won't have to wait 12 months for the altcoin season to begin like we did in 2020. Instead, it could start in just a few months. However, this is based on the assumption that we're on an accelerated timeline. It's possible that cryptocurrency is still following the same schedule, which means we might be ahead of schedule for alt season.

Which Altcoins Should Be Monitored

Which altcoins should you watch this season? I concur with Coinbureau that it might be ideal to start building up your portfolio if we are in the early stages of the altcoin season. However, it's essential to note that this is not financial advice, and it's equally possible it's not the best time to do so.

Coinbureau analysts suggest that the altcoins you must watch this season will be the most accessible to retail investors.  As mentioned earlier, EU regulations and, consequently, the structure of the crypto market will ensure that most retail investing will take place on onshore exchanges like Coinbase. In light of this potential scenario, focusing on altcoins listed on Coinbase may be prudent.

This is connected to a previous point about market capitalization. The higher the market cap, the lower the risk and the potential reward. The smaller the market cap, the bigger the risk, but the bigger the reward. Selecting a cryptocurrency with a lower price tag may also be advantageous. Many individual investors assume that a lower price indicates the possibility of more significant price increases, but the market cap is the most important. Therefore, by choosing a low price and market cap cryptocurrency, you can establish some solid fundamentals, often referred to by some influencers as "pumpamentals."

While being listed on Coinbase and having a low price point and market capitalization can benefit an altcoin, more is needed to guarantee success. For an altcoin to truly thrive, it must fit into a broader, bullish narrative that resonates with the average retail investor. This article explores the dominant narratives likely to drive the next bull market.

Image: Markethive.com

Researching the tokenomics of the crypto you want to invest in is vital to ensure it is genuine and has maximum potential. This involves examining the future circulation of coins or tokens, as you wouldn't want to invest in a promising altcoin only to face a sudden sell-off by the developers and their venture capital supporters. Also, you need to select a smart contract cryptocurrency on which the most promising tokens are trading. 

Image: Cointelegraph

It is essential to understand that holding onto a promising altcoin for a longer term could be beneficial if you enter the market at the right time. Numerous cryptocurrency enthusiasts can confirm that they would have been equally successful today if they had kept their altcoins during the market downturn. Cryptocurrency, at its core, is designed to revolutionize various systems, so it's important to have a long-term perspective on your investments.

Although many of these systems and their associated projects may fail, a few will endure. The ones that survive have the potential to become extremely valuable, possibly even worth trillions of dollars in the future, much like Bitcoin, which is currently valued at over $1 trillion. It is crucial to note that BTC boasts the lengthiest and most proven track record among all coins and tokens, rendering it the most secure cryptocurrency to retain in comparison.

Other cryptos will more than likely someday achieve the same safe haven status as BTC, so considering all the key indicators along with a crypto’s community, utility and purpose, ecosystem, and solutions it offers in the spectrum, it shouldn’t be too hard to work out which ones to watch out for. For that large-cap security, you might want to consider investing in the original cryptocurrency that has the potential to become the global reserve currency. 

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Tim Moseley

The Dynamic Crypto Industry Building A Bitcoin-Backed Monetary System. Consider Banks Without Bankers 

One of the main advantages of cryptocurrency is the independence it offers by enabling individuals to become their own bank. With cryptocurrency, you have complete control and ownership of your assets, whereas traditional banks have technical ownership over the assets you store with them. While the concept of being your own bank is impressive, critics argue that specialized crypto banks may be necessary for crypto to compete effectively with the established financial system.

This article summarizes a report outlining a method for establishing financial institutions without the need for traditional bankers. This method utilizes Bitcoin to achieve this goal, and the approach aligns with the broader aim of revolutionizing the financial sector by harnessing the power of cryptocurrency to replace the existing flawed monetary system. 

Banks Without Bankers Prioritizing User Agency

Today's summary is of a report called "Banks without Bankers," released by AxiomBTC, a venture capital firm focused on Bitcoin. The report starts with a powerful quote from Hal Finney, a pioneering Bitcoin developer who received the first Bitcoin transaction.  In the quote, Hal Finney envisions a future where BTC is crucial in reshaping the banking system. 

Source: Axiom.BTC

In the report authored by Eric Yakes, he explores two potential outcomes for the future of Bitcoin. On one end of the spectrum, all BTC could be held in custody by third parties like banks, with individuals trading receipts instead. This is similar to the historical concept of fiat money, representing a gold claim held by a bank. On the other end of the spectrum, Bitcoin could become a widely-used medium of exchange, with individuals directly transacting with each other and BTC effectively replacing money and its associated functions.

The idea presented is impractical due to several factors. Bitcoin faces limitations in scaling at its core level and is missing the necessary smart contract capabilities for sophisticated financial operations. Similarly, the scenario where all BTC is held in custody is not feasible because some BTC holders prefer to maintain control over their cryptocurrency assets through self-custody and peer-to-peer transactions. Therefore, it can be reasoned that the future of Bitcoin lies in a balance between custody services and individual self-custody practices.

Eric points out in the report that advancing technologies in the Bitcoin sector will allow for striking this balance carefully, emphasizing prioritizing greater peer-to-peer interactions. This approach is logical, as Bitcoin was initially designed to distance itself from traditional financial institutions like banks. In other words, the primary goal of Bitcoin was to remove the reliance on third parties to safeguard assets, hence the inherent trustless quality of cryptocurrency.

Eric contends that not all trust is misplaced, as it's crucial to place confidence in the right individuals and ensure their motivations align. He reinforces this notion by highlighting evolutionary biology findings emphasizing communities' importance in survival and reproduction. He then draws parallels between these findings and the contemporary financial system, where community-oriented banks are less likely to fail.

Eric believes that community banks are restricted by their geographical reach, meaning those nearby can only access their benefits. This limitation stems from the physical constraints of the world. In contrast, the digital realm knows no boundaries or distances. Eric suggests that with the appropriate technology, Bitcoin could enable the establishment of a digital community bank that transcends geographical limitations.

A critical technological component is multi-signature (mult-sig) wallets, which enable multiple individuals to manage a single Bitcoin wallet. In essence, multi-sig wallets enable the creation of conditions that allow this shared wallet to spend BTC. This technology allows the establishment of a ‘federation,’ which Eric defines as a system where “multiple participants hold keys that are useless in isolation, but can be combined to produce a signature that is required to make a transaction.” 

Source: https://fedimint.org/

Fedimint: A Decentralized Solution

The first part of the report introduces a federated network called Fedimint. It’s designed to address issues related to trust in third parties and the complexities of self-custody. The concept is to rely on your community for trust rather than depending on external entities or solely yourself for technical matters of self-custody. A combination of four underlying technologies powers Fedimint;

1. Federations can be considered a collection of reliable, trusted nodes that work together to operate a network. These nodes are responsible for maintaining the integrity of the system. 
2. Multi-sig wallets, as previously mentioned above.
3. A privacy-preserving digital currency called eCash which is backed by BTC.
4. The Lightning Network: (LN) A layer two protocol on the Bitcoin Network.

At the protocol level, Fedimint consists of four participants; 

1. Users who can mint, redeem, and transfer eCash. 
2. Guardians that function as nodes on the network and facilitate the minting, redemption, and transfer of eCash.
3. Gateways that can be simply understood as nodes that make eCash transferable on the Lightning Network. 
4. Modules, which are the applications on Fedimint. 

Each Fedimint system has three built-in modules: BTC, eCash, and a connector for integrating with the Lightning Network. Users can expand the functionality of their Fediment system by adding extra modules like eCash payments and advanced eCash exchanges. Fedimint networks have the potential to function as virtual community banks, operate independently, and manage financial transactions without traditional bankers. The community-driven infrastructure allows seamless interaction with other Bitcoin-based Fedimint networks.

Source: Bitcoin magazine

Eric explores an alternative method in which Bitcoin could replace traditional banks, this time through utilizing a different protocol known as Cashu. Like Fedimint, Cashu utilizes a privacy-preserving eCash supported by Bitcoin, crypto’s store of value. However, Cashu is notably more centralized, operating on a single server. The trade-off is that the centralized aspect allows for efficient monitoring of the eCash circulation without jeopardizing user privacy, which contrasts with the challenge faced by Fedimints, where tracking the supply of eCash is hindered by its inherent privacy features.

Money and e-Cash

In the second part of the report, Eric asserts that a single form of money will eventually become the universal standard for transactions. He argues, “In theory, market participants converge upon a monetary standard. In a perfect world, there would only be one form of money. Yet, throughout history, this has never been the case.” Eric provides three explanations for the historical absence of a singular form of money.

The first is opacity or the general lack of information about other currencies available to the average person. Another reason is governments' desire to control their own currencies, a concept called sovereign coercion. The third factor to consider is the trade-offs associated with money. For instance, in today's world, real estate is often viewed as a more reliable store of value compared to the US dollar, as explained by Eric. 

For reference, the concept of money refers to a medium that holds value, while currency is a means of exchange used to purchase goods and services. This video clarifies the distinction between the two, highlighting how they were once equivalent when backed by gold. However, once currency was no longer tied to gold, it lost its value as a form of money. Despite this shift, we continue to operate under the belief that we are working for money through indoctrination, both explicitly and implicitly. 

Eric explains we are not out of the woods regarding BTC being the complete solution to this problem. He notes that although BTC addresses numerous obstacles that have previously hindered the widespread adoption of a single currency, it faces its own obstacles regarding scalability (speed) and privacy. The Lightning Network is a potential remedy for Bitcoin's scalability issue, while eCash is a solution for enhancing Bitcoin's privacy.

The report recognizes that while each of these solutions has its own obstacles, they may still effectively address the issue. However, eCash's success in creating viable money markets depends on its ability to gain widespread acceptance and adoption. Without delving into complex details, this process would entail individuals or organizations with substantial financial resources engaging in arbitrage activities between various eCash systems, stabilizing their value relative to the underlying BTC. This positive feedback loop would boost eCash adoption, fostering more precise pricing, increased market-making, and further adoption. The cycle would repeat, driving up the use and reliance on eCash while maintaining a consistent global value.

Source: Axiom.BTC

The Potential Risks Of An eCash System

The report's third section highlights the potential risks involved with the eCash system, which is built on Bitcoin (BTC) and utilizes the Lightning Network and Fedimint technology. Eric explains that eCash is designed to be minted and redeemed for BTC on the Bitcoin blockchain or BTC on the Lightning Network using a Fedimint Network. This system should ensure that all types of eCash issued by different Fedimint networks are interchangeable and hold equal value. In other words, eCash minted for BTC using one Fedimint network's lightning Network BTC can be redeemed for Layer One BTC at another Fedimint network.

While Fedimints offers the benefit of privacy for eCash transactions, there is a potential drawback. Specifically, Fedimints can generate more eCash than the amount of BTC that backs it, which could result in an imbalance in the system. For instance, one Fedimint network might produce ten times more eCash than others, causing users to claim a disproportionate amount of BTC from other Fedimints. This issue arises because eCash is entirely private, making it difficult to keep track of the total amount in circulation. This issue is mitigated by using Cashu, which maintains a record of circulating eCash and ensures that BTC always backs it.

Now, there's already a precedent for how to solve this problem. It's called free banking, which is banking before central banks existed. In the free banking era, banks could issue currency at their own discretion. In theory, this currency was backed by gold; in practice, it wasn't always. Unfortunately, this led to a situation where customers were not always aware of the actual value of the currency they were using, as they were at the mercy of the banks' honesty. This information imbalance between banks and their customers can be compared to the privacy aspects of eCash issued by Fedimints, where the issuing authority can access more information than the users.

Source: AreaBitcoin

The caveat is that free banks did not have a widespread relationship with all individuals. Only a select few were privy to the financial workings of the free banks, and these were often the first to withdraw their funds before the system collapsed. The report highlights three such groups: competitors, brokers, and clearing houses. Eric suggests similar participants could provide comparable assurances in a decentralized eCash system. This could include entities such as Fedimints, Lightning Network gateways, eCash brokers, and even speculators who wager against unreliable Fedimints. The most crucial participant that could be introduced to an eCash system would be one capable of furnishing proof of reserves.

Those who have been involved in the crypto space since the downfall of FTX will be familiar with the emphasis placed on proof-of-reserves by exchanges aiming to enhance credibility. However, it's important to note that proof-of-reserves alone does not provide insight into a crypto exchange's obligations or debts. This means that an exchange could show evidence of holding $1 billion in BTC for its users who have deposited the same amount while simultaneously being $2 billion in debt, a detail unknown to users.

However, in an eCash system, the concept of liabilities doesn't apply in the traditional sense, as all eCash in circulation is supported by BTC held in a multi-signature wallet. The existence of this BTC collateral ensures the legitimacy of eCash minted by a Fediment, making it unnecessary to worry about liabilities.

Proof Of Liabilities

The fourth section of the report focuses on proof of liabilities. In this context, it alludes to the Cashu-created method for preserving the privacy of eCash users while monitoring the digital currency in circulation. Cashu's proof of liabilities protocol relies on three deliberate steps, which are crucial for its effectiveness.

1. To publicly commit to regularly rotating its eCash private keys over a predetermined period (“epoch”). This allows all eCash in circulation to recycle from old epochs to the current epoch.
2. Produce a publicly auditable list of all issued eCash tokens in the form of mint proofs.
3. Produce a publicly auditable list of all redeemed eCash tokens in the form of burn proofs.

A system with these properties can ensure that Fedimint users can verify whether a mint has issued unbacked eCash during a previous epoch. This system sets an expiration date on user eCash, which prompts users to update their eCash to the latest epoch. The expiration of eCash compels users (through automated processes in their wallet software) to take actions that will lead to the mint disclosing past eCash issuance and redemptions.

The intriguing aspect is that the periodic alteration of eCash private keys is designed to mimic a bank run on the Fedimint. If the Fedimint is unable to modify the private keys used for eCash minting, it suggests that the eCash they've issued is not supported by the BTC reserves they claim.

In the fifth section of the report, Eric examines the possibility of a Bitcoin eCash system being impervious to political influence, provided that there is a sufficient number of decentralized financial networks, known as Fedimint networks. The report speculates that up to 10 million digital community banks could be in the future. Additionally, the report highlights that Fedimint networks are also resistant to politics because they are currently exempt from financial regulations but admit that this could change. If you’ve followed the crypto regulation saga, you would know that the authorities’ goal is ending all custodial crypto. 

The sixth section of the report analyzes why Bitcoin and the Lightning Network are deemed inadequate. The report then shifts its focus back to comparing free banking with the eCash system in the seventh section. The risks associated with each system are highlighted in a diagram presented below.

Source: Axiom.BTC

The report then discusses the potential for Fedimints to start practicing fractional reserve banking. For those unfamiliar with the concept, fractional reserve banking refers to retaining only a portion of the funds backing a currency in circulation. Most financial institutions worldwide maintain a reserve requirement of less than 30%, meaning they must hold 30 cents for every dollar they have issued.

Significantly, the Federal Reserve eliminated all reserve requirements for American banks at the onset of the pandemic and has seemingly yet to reinstate them. Eric highlights that this has raised concerns that Fedimint networks may begin operating like fractional reserve banks, meaning they would issue more eCash than BTC in reserve. However, competition among Fedimints is believed to help mitigate this risk, with those maintaining full reserves coming out on top.

Emerging Technologies

In the latter section of the report, the discussion revolves around new technologies that can bring the eCash concept to life. Eric highlights a novel protocol named Ark, currently in its conceptual phase and can be viewed as a mixing service and an onboarding mechanism that minimizes on-chain activity. Like the Lightning Network (LN) has LSPs, Ark will have Ark Service Providers (ASPs). This is a solution to the onboarding problem and a trustless custodial solution.

Interestingly, Ark's main limitation is that it can only support up to 10.5 million BTC due to technical reasons outlined in the report. Despite this, Eric believes this inherent restriction could be advantageous in the long run. The main point to remember is that Ark has the potential to overcome the technical challenges faced by the eCash system. As noted by Eric, “The Arc protocol could provide the necessary infrastructure for a trustless free banking system of service providers to emerge, removing agency from fundamental economic functions.” 

Next, Eric synthesizes the information in the concluding section of the report, presenting a comprehensive overview as follows:

“Imagine a system where users dollar-cost-average into Bitcoin via Ark, use federated technology for custody, use eCash as the private cash balance for everyday transactions, and on the backend, all service providers are clearing balances between one another via the Lightning Network. Fedimints and ASPs could act as banking infrastructure, and the LN could act as the clearing houses amongst them as a hub and spoke model.”

In essence, it is a monetary framework of decentralized, community-owned, and operated digital Bitcoin banks.

What It Means For BTC

The potential impact on Bitcoin (BTC) is significant, assuming the implementation of the eCash system as described. Such a system would generate substantial demand for BTC, thereby boosting its value. In essence, the eCash aspect of this alternative financial system would serve as a powerful catalyst for BTC's growth.

The more significant concern is how this trend might impact both the financial system and your personal financial autonomy. It's important to remember that economic freedom doesn't equate to having a large sum of money. Instead, it means having the flexibility and control to make choices about your money whenever you see fit. Unfortunately, this level of autonomy is becoming increasingly scarce in traditional financial circles.

As previously stated, having a large sum of money in your bank account may hold little value if you cannot use it. When encountering someone with significant wealth, inquire about the challenges of managing such funds. The process of transferring large sums of money is complex and increasingly so. This difficulty may be attributed to the fractional reserve banking system's ongoing trend towards extreme fractionalization. Put simply, banks are putting up hurdles that make it harder to move your money around because the cash you have there doesn't even really exist. 

The banking crisis from last year highlighted how convenient it is to transfer money in today's world. In the past, customers would have to physically line up at the bank to withdraw their money in the event of a problem, which is the classical definition of a bank run. Nowadays, all you need to do is click a button, which is a big problem for banks. 

In any case, the growing sentiment globally is towards a financial framework that enables individuals to possess their assets and maintain their financial autonomy. The system examined in this report may or may not be the ultimate answer, but it's undoubtedly a move in the right direction toward a future where such a system will be imperative.

Image: Markethive Wallet

On The Right Side Of History

Markethive is also on the right side of history regarding financial sovereignty and keeping the entrepreneurial spirit alive. It is a domain where the individual can thrive in an expanding community of critical thinkers who uphold liberty and free expression, prioritize financial autonomy, and foster an environment where ingenuity and independence can flourish. These aspiring and seasoned entrepreneurs alike reject the constraints established financial systems impose and embrace the potential of decentralized technology. 

In response to the autocracy of governments and mega-corporations on a global level, Markethive has developed its own comprehensive financial accounting hub that can be likened to a bank. This system provides users with a secure platform for financial transactions, including merchant accounts, free from the risk of account closure or seizure by authorities seeking to restrict freedom of expression for any reason.

Markethive’s evolution will include multiple sovereign servers to avoid being censured or shut down and a dynamic and innovative crypto exchange that leverages the platform's unique strengths, including innovative inbound marketing strategies, blogcasting capabilities, dynamic social engagement, and community-driven support. These endeavors are a natural progression for Markethive, allowing it to expand its reach and provide users with a seamless trading experience that integrates the platform's proven features.

With divine guidance, we will resist the oppressive totalitarian regimes that seek to subjugate humanity. Despite the power wielded by the elite, tech titans, government, and mega-corporations, a higher authority exists that eludes their control. The discerning individual cannot help but perceive the larger forces at play.

This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Tim Moseley