White Star Capital Digital Assets Fund - newsletter #127
The Latest Debate in the Crypto Community: Bitcoin, Ordinals and BRC-20s
The Latest Debate in the Crypto Community: Bitcoin, Ordinals and BRC-20s
In 2008, the anonymous Satoshi published his famed Bitcoin whitepaper, describing the specifications and motivations of a peer-to-peer electronic cash system including the cryptocurrency Bitcoin.
The goal of Bitcoin was to resolve the issues with trusting third-parties like central banks and financial institutions from facilitating electronic payments. Today, Bitcoin Maximalists tend to be Libertarians, fervent about the separation of Money and State. They strive towards a global reserve currency, one that a state cannot control and inflate. In many ways, it is a political statement and an identity- it is a fight for permissionless, peer-to-peer money. Bitcoin maxis therefore ardently separate themselves from other blockchains and cryptocurrencies, and are typically anti-DeFi, NFTs, meme coins and other activities enabled by the likes of the Ethereum Virtual Machine.
Now, a debate is raging amongst the crypto community between the two broad camps, as a new Ordinals Protocol and a BRC-20 token standard enables Bitcoin to be more than just money. Ordinals inscribe a serial number onto a satoshi, the smallest currency unit of Bitcoin. In other words, Ordinals means NFTs on Bitcoin.
This has more than a theoretical implication for Bitcoin. One of the problems Satoshi pointed out was the cost of mediation, which ‘increases costs, limiting the minimum practical transaction size and cutting off the possibility for small casual transactions.’ Ordinals, meanwhile, go against this ideal of micro-transactions without third-party trust, since they lead to increased transaction fees, increased block sizes, and the need for moderation.
Ordinals
In January 2023, the new Ordinals protocol launched, allowing digital artifacts like images, text, programs, and even video games to be inscribed directly on the Bitcoin blockchain. The ordinal’s data, along with this serial number, are inserted into the bitcoin transaction and this data verifies legitimate ownership of the funds.
This inscription is different from the non-fungible tokens (NFTs) we know on Ethereum and other blockchains where the token contains a link or data that points to an external service where the art is stored. With ordinals, the data is stored directly onto the Bitcoin blockchain - i.e. whatever picture or data is added is part of the transaction.
BRC-20
BRC-20 is an experimental token standard, taking a cue from Ethereum’s ERC-20 tokens, enabling the minting and transferring of fungible tokens via the Ordinals protocol on the Bitcoin blockchain. It was recently introduced by an anonymous developer known as Domo.
They utilise Ordinals inscriptions of JSON (JavaScript Object Notation) data to deploy token contracts, mint, and transfer tokens. BRC-20 tokens use ordinals, but not all ordinals are BRC-20 tokens- so there are millions of ordinals but just over 24k BRC-20 tokens.
Why are Ordinals and BRC-20s controversial?
BRC-20 tokens and ordinals have inspired debate for two reasons. Firstly, compared to simple peer-to-peer transactions, creating and transferring BRC-20 tokens is complex and requires more space on the blockchain. A conventional bitcoin transaction might be measured in kilobytes, while an ordinal inscription – on which a BRC-20 token is layered – can be up to 4MB in size. Some have gone as far as to taunt maxis by loading up superfluous data to clog up the network. Therefore, it can unnecessarily clog up the network and raise transaction fees.
The second objection raised by some is that BRC-20 tokens and ordinals "pollute" the blockchain with data that is not aligned with Satoshi’s mission of a peer-to-peer system of money transfer. For Bitcoin maximalists, anything other than this is an inappropriate use of the Bitcoin blockchain.
What to think
NFTs and inscriptions on the Bitcoin network do not contribute to Satoshi’s original vision for Bitcoin. But like any religion, there will always be fundamentalists overzealously clinging to original scripture, and it is important to not reduce the debate to what exactly follows the original words in the 2008 whitepaper. If NFTs on Bitcoin mean wider network adoption, this may work in favour of maxis since more people will begin exchanging currency in a permissionless peer-to-peer manner using the Bitcoin blockchain. Equally, just because you can mint NFTs on Bitcoin, doesn’t mean you must. NFTs may be better suited to other blockchains and it might better suit the wider ideals of the crypto community to maintain Bitcoin as a purely monetary innovation. We look forward to watching this play out.
🔦 White Star & Portfolio Spotlight
Ledn receives regulatory approval in the Cayman Islands
Ledn has obtained regulatory approval from the Cayman Islands Monetary Authority as a Virtual Asset Service Provider (VASP). This allows Ledn to offer Bitcoin-backed loans and digital asset savings accounts to its global clients in a stable regulatory framework.
Atlendis Labs launches Atlendis Protocol V2 & Opens First Pool
Atlendis has launched V2 on the Polygon mainnet. Banxa, a Web3 on-and-off ramp solution, has initiated its V2 functionality by providing a $2M USDT liquidity pool. Atlendis V2 offers increased flexibility for lenders and borrowers, such as the ability for borrowers to roll over loans and lenders to exit before the end of a loan cycle. It also includes additional compliance options for liquidity pools and improved due diligence on borrowers, catering to a broader range of financing use cases.
Thala disrupts DeFi landscape with 0% interest loans backed by Tokenized US Treasury Bills
Thala now provides 0% interest loans that are collateralized by wTBT, a digital token backed by US Treasury bills and issued by TProtocol. This breakthrough not only enables high yields backed by real-world assets but also represents a significant advancement in decentralized finance (DeFi), allowing for more efficient and competitive borrowing options compared to traditional financial systems.
Index Coop launches "$icSMMT", a Stablecoin Yield Index Token
The Money Market Index ($icSMMT) is a recently introduced token representing a diversified basket of top stablecoins (USDC, DAI, and USDT). These stablecoins are allocated across different lending positions on the Ethereum mainnet. $icSMMT holders can earn multiple types of lending yield, potentially increasing their Annual Percentage Rate (APR), as the underlying stablecoins are deposited into trusted money market protocols like Morpho, Notional, Aave v2, and Compound.
ALEX introduces B20, a new meme coin that celebrates the launch of the B20 platform
$B20 is a newly introduced BRC20 token on the Bitcoin Chain, symbolizing the meme coin of B20 by ALEX orderbook, commemorating the B20 platform's launch. The token will be exclusively distributed to users and ALEX community members, starting with an airdrop to sUSDT depositors, and can be transferred to Bitcoin wallets.
🏦 Enterprises & Institutions
Binance Bails on $1B Voyager Asset Deal
Binance.US terminated its deal to purchase Voyager Digital's assets due to the uncertain US regulatory environment. The acquisition faced significant government scrutiny, including a Department of Justice attempt to block the purchase and SEC staff opinions that Binance.US may be operating an unregistered securities exchange in the US.
Google pushes forward in Web3 with Cloud Startup Program
Google Cloud's Startups Cloud Program is now open to Web3 startups, offering benefits such as grants totaling up to $1 million from foundation partners including Aptos, Celo, Flow, HBAR Foundation, NEAR, and Solana.
Twitter ends legacy Blue Checks and Bluesky emerges as a decentralized alternative
Twitter's discontinuation of its legacy verification program has left some users searching for alternatives such as Bluesky, a decentralized Twitter alternative supported by former CEO Jack Dorsey. The removal of blue checkmarks has left notable figures and journalists vulnerable to impersonation, with non-verified accounts receiving lower visibility across Twitter feeds.
Euro-pegged Stablecoin from Societe Generale in the works
Societe Generale is launching a euro-pegged stablecoin called EUR CoinVertible (EURCV) on the Ethereum blockchain, providing institutional investors with a way to manage cash flow and bridge the gap between traditional and digital asset markets while complying with EU banking, legal, and regulatory standards.
⚖️ Government & Regulation
Europe ‘Ahead of the Game’ in Web3 after MiCA law
The EU's new crypto law, MiCA, puts them ahead of the US in Web3 technology regulations by offering a licensing regime for wallet providers, exchanges, and stablecoins from 2024, while similar bills in the US have failed to gain political support.
Coinbase sues SEC to demand regulatory clarity on Crypto
Coinbase is suing the SEC to obtain regulatory clarity for the cryptocurrency industry by asking a US federal court to compel the SEC to respond to its previous rulemaking petition within seven days. Coinbase claims that the absence of clear rules for determining which digital assets are securities and how securities laws apply to them impedes market efficiency.
DAOs could get official standing under proposed California Law
California's Assembly Bill 1229 would add a legal framework for DAOs, blockchain networks, and smart contract protocols to the state's corporate code, allowing DAOs to incorporate in California, pay taxes, and provide better protection for Californians in the Web3 economy.
Crypto exchange Binance is back in Russia
Binance has reportedly lifted its ban on deposits from Visa and Mastercard cards issued in Russia and larger accounts with balances exceeding 10,000 euros. However, the company has not yet officially confirmed these changes, and a spokesperson stated that all current restrictions related to sanctions against Russian nationals are still being applied.
Zimbabwe to introduce Gold-backed Digital Currency
The country's central bank wants people to be able to exchange Zimbabwe dollars for the gold-backed token so that they can hedge against the currency's volatility.
💰 Funding & Exits
Bitcoin Miner marathon digital-linked startup Auradine raises $81M
Valor Equity Partners has led a Series B funding round of $60 million for Unchained Capital. The company intends to use the new capital to increase its customer base, enhance its product suite, and introduce new products.
DeFi-Focused Layer 1 Berachain Raises $42M Series A at $420.69M Valuation
Berachain, a DeFi-focused layer 1 blockchain, enables staked assets to be used in DeFi protocols, increasing on-chain liquidity and capital efficiency.
Ethereum staking provider P2P.org raises $23M Series A
Non-custodial staking provider P2P.org raised $23 million in Series A funding to expand its Ethereum portfolio, citing increased institutional interest from the recent Shanghai upgrade.
Karate Combat closes $18M to build Web3, mixed reality live sports
Karate Combat secured funding for its unique full-contact martial arts league, which features immersive CGI environments and real-time virtual effects. The funding will support the launch of the Karate Combat app, token, and unique DAO structure.
Thetanuts Finance Secures Institutional Funding Round, Raised $17 Million
Thetanuts Finance's newly onboarded strategic investors will support its ambition to advance structured products and derivatives in decentralized finance. With their backing, the company aims to forge valuable partnerships with L1/L2 projects, liquidity providers, foundations, market makers, and exchanges.
Fluree closes $10M Series A round for Web3 data management & modern data infrastructure
Fluree will use the new capital to expand its Web3 data platforms and enterprise offerings to adopt trusted data ecosystems and secure data collaboration
MetaGravity closes $9.5M Seed funding round
The company intends to use the funds to bolster its engineering and product teams to build the infrastructure layer to support the metaverse experiences.
EdTech startup TinyTap has secured $8.5 million in a funding round that includes Sequoia and other investors
TinyTap, an Israeli EdTech startup and Animoca Brands subsidiary, secured funding for staff expansion and product development. It offers a platform for user-generated educational content, claiming to be "the world's largest library of games by teachers."
CoinFund Leads $8M Round for Decentralized Database Firm Tableland
Tableland, a decentralized cloud database, raised an $8 million Series A round to support its mainnet launch, new developer tools, and the upcoming release of Tableland Studio.
DeFi protocol DFlow raises $5.5M to bring payment for order flow to Crypto
DFlow raised funds to introduce payment for order flow to the cryptocurrency market, allowing market makers to purchase order flow from wallet apps and ensuring execution at the best public price across centralized and decentralized exchanges.
🚀 Project Launches & Updates
Ethereum Shanghai Upgrade Brings Record Inflow of 572K ETH Staked in a Week
Institutional staking service providers and investors reinvesting rewards after withdrawal drove a record-breaking weekly inflow of ether (ETH) deposits for staking following Ethereum's Shanghai upgrade.
Binance adds AI-powered ‘Sensei’ chatbot to its Crypto academy
Binance has launched Binance Sensei, an AI-powered chatbot for its Binance Academy to enhance user engagement with crypto education. The chatbot uses ChatGPT to provide users with easily digestible information using keywords and natural language questions.
Binance launches liquid staking token
Binance has launched Wrapped Beacon ETH (WBETH), a liquid staking token on its Ethereum staking service that enables users to acquire Ethereum staking rewards and participate in decentralized finance protocols off the exchange. Users can wrap BETH tokens to WBETH and vice versa on Binance's Ethereum staking page without any fees.
Solana now measures Network Carbon Emissions data in real time
Solana will regularly update a dedicated dashboard with statistics monitoring key environmental metrics for the network: its energy consumption, carbon footprint, and network power intensity, among other data. It pulls real-time data from software installed on Solana validator nodes, but the dashboard is only updated every two weeks.
🔥 Other Bits We're Excited About
‘Avengers’ Director Predicts AI-Generated Movies Within Two Years
Joe Russo, director of Marvel Studios blockbuster “Avengers: Endgame,” has predicted that it'll only be two years until we see an AI-generated movie that's convincing enough to give viewers pause.
CryptoPunks NFT in Centre Pompidou
The world-renowned art museum in Paris has made special room for the emerging NFT space, adding a exhibition of blockchain-related art.
Dogecoin leads Meme coin rally with Pepe and Baby Doge
Dogecoin's surge this week has also led to an increase in the value of other meme coins such as PEPE and BABYDOGE.