Dispatch #55: Is Cross-Chain the New Black?

Oct 01, 2021 5 min read

Dispatch

In this patch of your weekly Dispatch:

Visa is getting in on the bridge game
China goes after crypto trading
Higher TX limits on the Nexo Exchange

The Big Idea

How Big a Deal Is Visa’s Latest Crypto Announcement?

Visa got the crypto world buzzing this week when they dropped their white paper "Universal Payment Channels: An Interoperability Platform for Digital Currencies."

"As the number of DLT networks increases, each with varying design characteristics, the likelihood that transacting parties are on the same network decreases. Thus, it is crucial to facilitate payments that are universal across networks, scalable to massive loads, and highly available. We envision a future payment network that may be built on top of DLT networks without being subject to their limitations on interoperability, scalability, and availability faced by DLT payment solutions today."

So what's interesting about this?

Positioning for the CBDC era — As a huge portion of the world's governments explore new forms of digital currency, there is a natural question of how those currencies are going to interoperate.
Positioning for a multi-chain future — As a vast array of blockchains win allegiance, bridges between them are of more and more focus to the industry.
Ethereum connection — As part of developing this UPC concept, Visa has deployed a smart contract on Ethereum's Ropsten testnet for the first time, showing a payment channel that can accept both ETH and USDC. The fact that one of the biggest payments networks of the last generation is staffing up like crazy to develop on Ethereum has not escaped notice.

There is no one single network that can help scale the blockchain. This is why, Nexo is also aiming to position itself as a cross-chain solution provider, bridging between various cryptocurrencies on various blockchains. We’ve got some non-Ethereum news coming as early as next week, so stay tuned.

The Latest In…

The Nexo Exchange

Attention, swappers. You can now make much bigger transactions on the Nexo Exchange because we have just increased the TX limit to $250K from $100K on more than 120 market pairs. And with the latest addition of seven new $USDC pairs, our instant exchange – which grants you the best market price thanks to its Smart Routing System – now supports 150+ market pairs. Nexo to the Moon!

The Latest In…

China

Late last week the People’s Bank of China pushed out new guidance that made involvement with any sort of crypto trading activity in the country even more problematic. In previous “bans” China restricted things like fiat-to-crypto transactions and ICOs, while still allowing people to p2p trade.

Now, seemingly all crypto trading activity is getting the axe. Chinese employees of foreign crypto exchanges are even subject to persecution. Two of the world’s largest Ethereum mining pools — Sparkpool and BeePool — are ceasing operations. There are debates over why now, with many pointing to the impending release of the official digital yuan. But whatever the reason, the rest of the world is taking them seriously given how thoroughly they’ve carried through on their mining ban.

The Latest In…

Regulation and Enforcement

It was an interesting week on this front.

Former CFTC share and DeFi antagonist Dan Berkovitz is joining the SEC as General Counsel (the office that deals with enforcement, fwiw).
Speaking of the SEC, Chair Gensler reiterated his openness to a Bitcoin Futures (not spot) ETF in prepared remarks for the FT.
The CFTC and Kraken settled for $1.25M around the latter’s margin trading product. More significant than the settlement was the concurring statement from CFTC and Commissioner Dawn Stump writing that while she agreed with the decision, she advised the CFTC to replace the current “guidance” with some real, articulated rules that incorporated voices from the crypto industry. That’s what we’re all asking for, really.

The Latest In…

Global Macro

Markets continue to be shaped by macro trends and topics. The dollar and US treasuries have strengthened on the back of a number of factors this week. One is continued questions around Chinese real estate developer Evergrande and their mountain of debt. Perhaps even bigger, however, is the transition to a tapering environment where the Fed peels back its asset purchases as early as this November, with potential interest rate raises coming next year. The riskiest areas of the market are the most sensitive to those changes, and some of that seems to be spilling into crypto as well.

The Latest In…

NFTs

Do you even tip? Twitter has started rolling out ‘Tips’ – a Bitcoin-based payment feature that supports Lightning wallets – with the cooler ones among us over here at Nexo already tipping each other. The social platform has also unveiled plans to "explore NFTs for authentication." It's still unclear which blockchain the tokens would be hosted on, or when exactly they will be offered. What we know, however, is that users will be able to track and showcase their NFT ownership and use the feature as a form of authentication. Is this the new $Bitcoin in bio?

The Week’s Most Interesting Data Story

What Bitcoin’s Low Transaction Count Means

Much hay has been made on Twitter of the low utilization of Bitcoin’s block space. Currently, transaction counts stand at between 175,000 and 200,000 transactions per day. For reference, those are similar numbers to what we saw during the 2018 bear market. When there are bullish conditions, new users stream into the network and demand block space. However, these low numbers have more than one potential explanation, according to Glassnode. The bear case is that the 50% correction in BTC price in may pushed out a significant number of retail traders, decreasing demand and interest in the asset. The bull case is that there is growing adoption of more efficient techniques such as SegWit and transaction batching, as well as utilization of the Lightning Network. Their bet? Both are likely true.