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Crypto Weekly: Ethereum rhymes with proof-of-stake
Summary: Ether holders are largely hopeful about the future of Ethereum upon a successful test last week. If you ask El Salvador, investors are also hopeful on its Bitcoin Bond with it allegedly being oversubscribed, but the country’s doubling down on Bitcoin is not without risks. Following in the footsteps of Twitter, Instagram is adding support for non-fungible tokens (NFTs) in the near term.
The first public Ethereum test of the awaited merge was successful
Ethereum’s highly anticipated – and long-awaited transition from its present proof-of-work consensus mechanism to a proof-of-stake consensus protocol, known as the merge, is one step closer. Ethereum managed last week to orchestrate the merge on its first public testnet called Kiln. Based on the fact that the Kiln merge was largely successful except for some minor issues, it seems likely that a true merge by June is possible.
Ethereum’s transition from proof-of-work to proof-of-stake will decrease its energy usage by as much as 99.98%. Not to mention that the Ether supply will likely turn deflationary, although Ether holders are expected to receive rewards of up to 10% yearly, providing they stake their Ether, thus verifying transactions on the network. It seems Ether holders are pleased by these economics and by the fact that the merge is likely to be around the corner due to a notable increase in Ether staked last week, while the Ether balance on exchanges is the lowest since 2018. The latter often indicates a possible milder sell pressure. In case you are interested, we wrote last week a more detailed commentary on the prone economics of Ethereum following the merge.
El Salvador’s Bitcoin Bond is allegedly oversubscribed but delayed
El Salvador was last year the first country to make Bitcoin legal tender. This happened upon great worldwide attention in September 2021. Six months in, the country has multiple times doubled down on its commitment towards Bitcoin. El Salvador has since kept acquiring Bitcoins for its treasury, now counting over 1,500 Bitcoins. At a presentation held in November, the country’s president Nayib Bukele announced the construction of a new city to be called Bitcoin City to further enhance the country’s position on Bitcoin. Following the presentation, Bukele announced that El Salvador will issue $1bn in bonds with an annual coupon of 6.5% to fund the construction of the city and purchase additional Bitcoins, respectively. The bonds quickly came to be known as Bitcoin Bond.
It was earlier reported that the bond issuance could come as early as last week. However, according to the Finance Minister of El Salvador Alejandro Zelaya, the Russian invasion of Ukraine has slowed down the process. As of last week, the laws required to be passed had not been sent to the Salvadoran Congress yet, so the issuance will likely not occur within the next month. On the other hand, according to Zelaya, El Salvador has allegedly demand of up to $1.5bn worth of Bitcoin Bond. If this is true, the bonds are likely to be oversubscribed. Nevertheless, with El Salvador continuing to double down on Bitcoin, it likewise boosts its risk further, as this is largely a great experiment not guaranteed to succeed, for instance, if broad Salvadoran adoption of Bitcoin is nowhere to be seen or the Bitcoin price tumbles further.
Instagram to add non-fungible tokens, joining Twitter
According to Meta co-founder and CEO Mark Zuckerberg, the company will soon support non-fungible tokens (NFTs) on Meta-owned Instagram. Zuckerberg said last week that the support of NFTs is expected to occur in the near term. However, Zuckerberg did not clarify plenty more than that: “I’m not ready to announce exactly what that’s going to be today, but, over the next several months, the ability to bring some of your NFTs in, and hopefully over time be able to mint things within that environment.” Nonetheless, it seems Instagram joins Twitter shortly in supporting NFTs in one way or another. Twitter launched in January the option to verify an NFT and use it as a profile picture. This suggests that web2 companies slowly embrace web3 projects.