PayPal Is Developing a Stablecoin

The biggest crypto news and ideas of the day

Jan. 10, 2022

If you were forwarded this newsletter and would like to receive it, sign up here.

Sponsored by

Welcome to The Node.

Questions? Feedback? We'd love to hear from you – simply reply to this email.

–Daniel Kuhn

Today's must-reads

Top Shelf

NET WORTH: Binance CEO Changpeng "CZ" Zhao is worth an estimated $96 billion, excluding his crypto holdings, according to the Bloomberg Billionaires Index. The estimate puts Zhao in league with Facebook's Mark Zuckerberg, ex-Googler Larry Page and Asia's richest person, Mukesh Ambani. Bloomberg analysts assumed Zhao owns 90% of Binance and estimated its revenue, coming to a figure that the crypto exchange disputes. Never far from controversy, Pakistan's Federal Investigation Agency (FIA) is in talks with Binance regarding a suspected scam that has cost several thousand investors more than $100 million.

HASHRATE REBOUND: The hashrate of major bitcoin mining pools neared recovery on Monday, days after computing power on the network fell following an internet blackout in Kazakhstan, data from BTC.com shows. Between Jan. 5 and 6, the hashrate of top mining pools fell by 11% amid protests in the country, and has since narrowed to around 2.2%. Kazakhstan is the second-largest crypto mining hub, a big winner following China's crypto ban, though some miners are looking to exit because of rising energy constraints and costs.

CONSOLIDATING HOLDINGS: Canada-based crypto miner Hive Blockchain held onto all 1,768 bitcoins it mined in 2021, while selling some of the ETH and all of the ethereum classic (ETC) it produced to pay for chip upgrades, the company said on Monday. Bitfarms, separately, purchased 1,000 bitcoins worth $43.2 million last week, increasing its bitcoin holdings by 30%. Finally, an analyst at investment bank Jefferies said a lower bitcoin price will deter new crypto mining entrants and help incumbents gain market share.

STABLECOIN CONFIRMATION: PayPal confirmed it is looking into launching its own stablecoin. Sources told CoinDesk in September that PayPal subsidiary Curv was actively working on developing a stablecoin. This comes after iPhone app developer Steve Moser found code for a dollar-backed "PayPal Coin," which Bloomberg reported is the result of a hackathon.

PENGUINS HUDDLE: The beloved non-fungible token project Pudgy Penguins voted out its founders on Thursday after they allegedly failed to deliver on stated goals and drained the treasury of funds. Last week, rumors spread that developers of the NFT project – which has done 45,400 ETH in sales – were asking around for buyers after failing to develop a game, token and other perks as promised. Now leaderless, the Penguin community is discussing whether to take various buyout offers, run it as a DAO or even migrate to a new project called Wrapped Penguins.

The Cardano Foundation planted 1 million trees. Binance.US is building a meta-HQ on Solana. A16z has a guide for countries to become "Web 3 republics." A Twitter data scientist quit the company for Aave.

A message from Nexo

Grow your wealth securely with Nexo's high-yield interest account. Earn up to 17% interest on your crypto, including BTC, ETH, LTC, stablecoins and more, paid out daily. With full flexibility to add or withdraw assets at any time without losing your accrued interest.

Get instant access to the interest earned and up to $375M guaranteed insurance for all your digital assets by our industry-renowned custodians. No fees or lock-in periods.

Over 2.5M+ people worldwide are already using the Nexo platform – so you definitely don't want to miss out. Your Nexo account is less than a minute away – just top up and you'll start earning interest instantly. No further action is required from your side.

Get started today at nexo.io.

Overheard on CoinDesk TV...

Sound Bites

"The only limitation ... is your imagination."

–The Sandbox co-founder Sebastien Borget, on CoinDesk TV's "First Mover."

What others are writing...

Off-Chain Signals

Cryptocurrency Investors Try to Turn Private Islands Into Blockchain Utopias (VICE)
Suzuha's very in-depth look at Web 3 architecture (Mirror)
Developer of 'The One' California Mega-Mansion Wants to Tokenize the Property (Decrypt)
NFT marketplace LooksRare goes live with vampire attack on OpenSea (The Block)
ETH Burn Rate Surges Amid Market Chaos and Record NFT Volume (The Defiant)
Norton Antivirus installs a crypto miner with its software, "but it isn't going to do anything unless you specifically opt in" (The Verge)

A message from BitMEX

It's never been easier to earn interest on Tether with BitMEX EARN.

Enjoy up to 10% APR on tenures ranging up to 3 months, fully backed by the BitMEX Insurance Fund.

With new products, reliable security, and responsive customer service, there's never been a better time to join BitMEX.

Start earning interest on USDT today by subscribing to EARN here.

BitMEX products and services are not available to US Persons and in other specified jurisdictions.

Sponsored Content

XW Games: If You Build It, They Will Come: The Rapid Expansion of GameFi

The blockchain gaming ecosystem is rapidly evolving with new developments all the time in crypto (play-to-earn), NFTs (digital assets), and social-fi (individual DeFi). On a wider scale, a parallel can be drawn - how Las Vegas was built. At first, there was one bistro with a few slot machines and poker tables. Then more places opened with new games to play, and all winnings could be cashed out and then re-staked at each one of them. That fluidity cultivated the whole ecosystem.

Another parallel would be the growth of alternative asset classes such as financial derivatives, which confer both value and utility to their users. These tend to arrive during periods of uncertainty and over time become investable in their own right. The same is being applied in the crypto gaming space, only that it's still at an early stage.

Putting the news in perspective

The Takeaway

Is Moxie Marlinspike Right About Web 3?

"Web 3" isn't all that easy to critique, since it tends to mean different things to different people.

Critiques abound, each with slightly different operating definitions of the term, but it's rare to encounter one with the kind of technical depth you might expect from a crypto developer –

someone who's played around with the code and gotten a feel for how these systems really work.

Late last week, the cryptographer and privacy expert Moxie Marlinspike, best known for creating the encrypted messaging service Signal, released a longish essay on the current state of "Web 3" and the ways in which utopian rhetoric around cryptocurrencies tends to obscure the technical realities of the blockchain-backed internet as it exists today.

For Marlinspike, "Web 3" is a decentralized internet backed by blockchains and cryptocurrencies. If "Web 2" is the internet as we know it today, where companies like Amazon Web Services, Google and Microsoft provide the back-end tools for users to make their own websites (i.e. cloud computing structures and rentable servers), then "Web 3" should be an internet built on public blockchains, without centralized corporate mediators.

But as Marlinspike points out, that's not how the crypto ecosystem is developing in practice.

Because most personal computers aren't running a node, and therefore don't maintain a whole copy of the blockchain locally, they need another way of accessing the data on the ledger. Enter specialized application programming interfaces (APIs): code libraries that offer handy shortcuts for pulling data from a given blockchain.

Infura, a product of the blockchain software giant ConsenSys, and Alchemy, a startup recently valued at $3.5 billion, are the two main purveyors of these APIs, as Marlinspike points out. So-called "decentralized applications," or "dapps," like Mirror, OpenSea and Zora rely on these systems to retrieve data from public blockchains – sort of like middlemen.

This is true for most sites that ask you to log in with a "connect wallet" button as opposed to a username and password, and for online wallets like MetaMask, which exist as both dedicated websites and add-on extensions for internet browsers. They live on the centralized internet we're already used to.

Here's what Marlinspike has to say about MetaMask's reliance on APIs from private companies.

A wallet like MetaMask needs to do basic things like display your balance, your recent transactions and your NFTs, as well as more complex things like constructing transactions, interacting with smart contracts, etc. In short, MetaMask needs to interact with the blockchain, but the blockchain has been built such that clients like MetaMask can't interact with it. … MetaMask accomplishes this by making API calls to three companies that have consolidated in this space.

Those three companies are Etherscan, now the leading explorer service for perusing transactions on the Ethereum blockchain; Infura, which offers a shortcut for accessing a wallet's balance; and OpenSea, which provides a list of the wallet's non-fungible tokens (NFTs). (Though Etherscan is considered a "public good" in the crypto sphere, it's a Malaysian company that happens to be backed by Digital Currency Group, which also funds CoinDesk.)

Here's that command in MetaMask's source code, which Marlinspike reproduces in his piece:

GET https://api.etherscan.io/api?module=account&address=[PASTE YOUR ETH ADDRESS HERE]&offset=40&order=desc&action=txlist&tag=latest&page=1 HTTP/2.0

Whatever Etherscan coughs up is then plugged into MetaMask. That isn't a problem as long as Etherscan – a centralized service from a private company – is behaving correctly. It's another step in the process, one without which MetaMask wouldn't function.

The same goes for OpenSea. To prove his point, Marlinspike minted an NFT that displays a different image depending on the server you view it from. For some reason – Marlinspike said he never learned why – OpenSea took it down.

OpenSea, a multibillion dollar private company, is within its rights to take down images, and does so fairly often. The issue is that MetaMask, purportedly a non-custodial, censorship-resistant wallet controlled by its users, stopped displaying the NFT, too. The token was still on the blockchain, but MetaMask was scanning data only from OpenSea, as opposed to the blockchain itself. And because it's built to operate without a working node, MetaMask can't pull the data directly from Ethereum.

This is all a very technical way of looking at a larger-scale issue with the state of crypto infrastructure in 2022. What does it mean for an application to be truly decentralized? Maybe the benefits of crypto are such that mainstream users won't care whether a few large companies end up playing this crucial role in the data pipeline. But the reality is that the market is already somewhat consolidated, just like "Web 2."

Vitalik Buterin, one of the inventors of Ethereum, responded to Marlinspike on Reddit, essentially conceding many of these points. "Moxie's critiques in the second half of the post strike me as having a correct criticism of the current state of the ecosystem… but they are missing where the blockchain ecosystem is going," he wrote.

Marlinspike anticipated that response.

"Even if this is just the beginning (and it very well might be!)," reads Marlinspike's blog post, "I'm not sure we should consider that any consolation. I think the opposite might be true; it seems like we should take notice that from the very beginning, these technologies immediately tended towards centralization through platforms in order for them to be realized, that this has ~zero negatively felt effect on the velocity of the ecosystem, and that most participants don't even know or care it's happening."

On Twitter, Jake Brukhman, the founder of a crypto investment firm called CoinFund, made the bold claim that "Web3 is in its early stages, it is not built or adopted yet." Which is to say, the real promise of Web 3 is in the idea that you can run your own node. Even if consumers don't want to, or don't even know what a node is, argues Brukhman, it's the potential that matters.

That's the thing with crypto: It's always arriving. Although the total market was worth some $3 trillion as recently as November, we're still working out what it's good for, what problems it actually solves for a mainstream audience.

There's enough money and development going into these systems that it's not unreasonable to expect certain aspects of the space could become more decentralized over time, as Buterin and Brukhman predict. But there's also a huge amount of money to be gained by staking a centralized claim in the new internet, selling the vision of trustless computing from a venture capital-backed private company.

If Buterin is right, Web 3 could offer something genuinely new. Otherwise, it risks enshrining the very power dynamics it's always tried to escape.

–Will Gottsegen