New To Crypto? Buy This
With all the buzz surrounding cryptocurrency, many investors might be ready to take the plunge. The fantastic gains don’t hurt, either. Bitcoin, the original cryptocurrency, is up more than 200% this year alone. Shiba Inu, the 2021 cryptocurrency breakout story, is up a mind-boggling 60,000,000% over the past year. It’s enough to whet any potential investor’s appetite.
But between Bitcoin and Shiba Inu, there’s a whole slew of cryptocurrencies growing in market cap. It can be confusing, since many of them offer similar benefits. That’s why if you’re new to cryptocurrency, I recommend getting your feet wet in a cryptocurrency that’s easy to understand but also offers high potential for gains. That’s why I’d start with Ethereum ( ETH -3.30% ).
What is Ethereum?
Ethereum is a platform that uses blockchain to facilitate transactions, and developers use its native token, Ether, for payments. Because it’s a platform, not just a digital token, it has intrinsic value that could make it a more secure investment than cryptocurrencies that are strictly currency. Blockchain, in short, is a digital database of transactions, like an online ledger where records of transactions are sealed and kept.
The platform is a hub for Defi, or decentralized finance. That indicates transactions that are performed peer to peer without a central authority. It makes it simpler and faster for two parties to shake digital hands, so to speak, without interference or regulations. This extends beyond financial transactions to all sorts of programs, or smart contracts, that are replicated across all computers tied to the Ethereum network. That makes it a scalable model that can be used for many purposes.
While that has positive implications in terms of the democratic nature of the beast, as well as simplicity, it also needs extra protocol to maintain its security. For now, it does that in the form of proof of work, or POW, the same protocol as Bitcoin. It involves mining, or users who validate transactions by solving complex math puzzles and earning Ether in the process.
What is Ethereum’s future?
Ethereum is practically a crypto dinosaur compared to newer tokens. That gives it some stability and security that hyped-up crypto tokens with limited utility don’t yet possess, but it also means that Ethereum, which launched in 2015, may be behind the curve with its older technology. The three main issues that need to be addressed are energy consumption in the mining process, limited disk space as the blockchain grows, and limited capacity, or speed, as more people use the platform.
That’s why developers are working on a big upgrade, called Eth2. The main way they want to solve this “trilemma” is by expanding the block on the chain, allowing for more and faster transactions. The upgrade is meant to speed up transaction time from about 30 per second to an industry-leading more than 100,000 TPS. The platform is also moving from a proof-of-work validation system to a proof-of-stake validation, where miners stake their Ether to transact instead of solving puzzles. These upgrades, which should take place in 2022, make the platform more scalable and less energy-guzzling and bring it into the modern crypto world. Users get the best of both worlds: a tried-and-true system with state-of-the-art technology.
Why Ethereum is a good place to start
Investing in cryptocurrency is a whole new system to understand for investors. There are similarities to the stock market, but it requires a new set of ideas and fundamentals. Ethereum gives investors some stability while they’re learning the ropes, as opposed to some of the newer and more speculative cryptocurrencies. It also still provides room for growth as the system expands and improves.
That’s not to say that I recommend investing in cryptocurrency altogether. There’s a lot of potential for gains, but cryptocurrency is still a relatively new phenomenon with a short track record and huge market caps. Investors should only put in what they can afford to lose.
Celsius Network loses millions in BadgerDAO Bitcoin heist amid crypto selloff
Crypto lender Celsius Network lost funds in a recent cyber hack, the latest decentralized finance (DeFi) attack that comes amid a broad retrenchment in cryptocurrencies.
On Wednesday night, BadgerDAO, a decentralized autonomous organization (DAO) which builds DeFi products using Bitcoin as collateral, announced over its Discord it would halt the functioning of its products after reports of “unauthorized withdrawals of user funds.”
During an “ask me anything” (AMA) session on Friday, Celsius Network CEO Alex Mashinsky acknowledged the heist, but would not confirm the amount of crypto stolen. Yet via Etherscan data, up to 594 BTC of the stolen funds has been linked to a Celsius Network-related wallet.
As of Friday’s close, that translated into at least $32 million worth of Bitcoin (BTC-USD) — and is likely to be even higher based on known Celsius Network wallet information, BadgerDAO community members, and a deepening selloff in digital coins that drove Bitcoin below $50,000 on Saturday.
“It wasn’t a Celsius hack. It was a Badger hack. But some of the Celsius funds were there, so Celsius lost money. But none of the Celsius [customers] lost money,” Mashinsky insisted in a live Youtube AMA. “We’re working with Badger to recover those funds,” he added.
The company’s loss is the latest development in the cryptocurrency-related BadgerDAO hack worth at least $115 million. It comes during a volatile period that’s seen more crypto investors hunting for investing opportunities beyond Bitcoin, seeking to tap into the movement toward nonfungible tokens and DeFi.
Meanwhile, the rise of the Omicron variant of COVID-19 has rattled markets, driving down cryptocurrencies across the board.
Not a ‘covered event’
Representation of Bitcoin is seen with binary code displayed on a laptop screen in this illustration photo taken in Krakow, Poland on August 17, 2021. (Photo by Jakub Porzycki/NurPhoto via Getty Images)
With investor interest booming and regulators trying to figure out how to protect them, illicit flows in crypto have become a widening concern. Last month, the IRS reported that it seized some $3.5 billion in fraudulent cryptocurrency-related activity.
BadgerDAO has alerted law enforcement in both the U.S. and Canada, in addition to seeking help from the blockchain forensics company, Chainalysis. The group has determined between $115 to $120 million in wrapped-Bitcoin (WBTC), a tokenized representation of Bitcoin on the Ethereum (ETH-USD) blockchain, was stolen. The stolen funds have been traced to pseudonymous addresses on the Ethereum blockchain.
Story continues
Although the investigation is ongoing, attackers appear to have slipped malicious code into application programming interface (API), according to BadgerDAO administrators and members.
“It was an exploit to their API. And the attackers used badger’s bridge product to convert the stolen funds to Bitcoin,” a Chainalysis spokesperson told Yahoo Finance.
Meanwhile, based on the type of theft, DeFi insurance provider Nexus Mutual said this week that the attack “would not be a covered event” — suggesting BadgerDAO may not be made whole financially. Currently, BadgerDAO members report there are still 249 accounts “granting approval to the known hacker address,” meaning more funds could still be stolen.
So far this year, more than $700 million in cryptocurrency has been stolen within the DeFi segment of the crypto sector. The level of theft is one reason why Securities and Exchange Chair Gary Gensler told Yahoo Finance recently that DeFi is “going to end poorly” unless the free-wheeling market is given more guardrails by regulators.
Celsius Network’s out-of-pocket expense for the stolen funds come just after the lending firm recently announced an additional $350 million in their latest series raise at a $3.25 billion valuation according to Coindesk. At the time, the company stressed the additional funds would boost its credibility with regulators.
David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.
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FTX releases crypto regulation proposals before US congressional hearing
Bahamian-based cryptocurrency exchange FTX released a list of principles and proposals to help policymakers build the regulatory framework. The policy recommends the market-structure choices made by several leading crypto exchanges and suggests its implementation across all jurisdictions.
FTX shared the “FTX’s Key Principles for Market Regulation” blog after Maxine Waters, the chair of the House Committee on Financial Services, invited several CEOs of major crypto firms to testify on the topic of digital assets and the future of finance.
Out of the 10 key principles, one of the recommendations calls for an alternative regulatory approach that proposes a unified regulatory regime for spot and derivatives marketplaces. According to the blog:
“The regulatory label on a given product or market need not change the core goals of regulation, and the same rulesets should generally apply across all markets.”
FTX also explains the need for a direct membership market structure, i.e, allowing entities to perform regulated trades without the involvement of a third party. The exchange also suggests a regulation demanding greater transparency around the custodians of crypto assets, arguing that the platform “users should be given visibility” into how custodial services plan to address concerns related to fraud and theft.
The blog further demands frameworks for reporting transactional activity to avoid market manipulation and ensure customer protection. FTX also pointed out the need for regulating stablecoin issuance:
“A platform operator that permits the use of stable coins for settlement of transactions should be required to explain the standards the platform operator uses in deciding which stable coins it permits for such purposes.”
Related: KYC tools can minimize hassle for US crypto market, FTX CEO says
In August, FTX CEO Sam Bankman-Fried announced the exchange’s proactive measures to streamline its Know Your Customer (KYC) operations.
Citing the importance of KYC tools for cryptocurrency’s mainstream adoption, Bankman-Fried inaugurated a new feature on FTX that confirms a user’s jurisdiction based on their registered phone number:
“We check users’ phone numbers against their submitted names in KYC1, in order to further verify them. When this doesn’t work or there isn’t data, we’ll require KYC2 to access some features of the site, including futures.”