INTRODUCTION

As humans, we have been consistently evolving. weve constantly develop more accessible alternatives to make life “Easy and comfy”. We came from mailing at the post office and waiting for days to get a response, to sending electronic mail powered by the internet and many other advancements.

It takes around 3-4 days to settle a transaction between banks in the US. and  It can take up to 3-4 weeks to settle a transaction from the US to Nigeria. But the 21st-century businessman wants an infrastructure that will allow him to settle business transactions as fast and as easily as possible. Peer-to-peer transactions were the trend in the past, and it looks like we might be going back to those days but this time it will happen On-Chain.

What is Bitcoin?

Bitcoin is a decentralized digital currency that was created in 2009 by an anonymous person or group of people using the pseudonym Satoshi Nakamoto. It operates on a technology called blockchain, which is a distributed immutable ledger that records all Bitcoin transactions.

Bitcoin has gained significant attention and significance in the financial world due to its potential to revolutionize the way we make payments. It offers several advantages over traditional fiat currencies and has the potential to serve as the world’s reserve currency and best payment alternative.

Transaction settlement on the Bitcoin network

Bitcoin settles transactions through a decentralized peer-to-peer network. When a transaction is initiated, it is broadcasted to all network participants. Nodes validate the transaction and once confirmed, it is grouped with others into a block. Miners compete to solve a puzzle and add the block to the blockchain. Once added, the transaction is settled. The speed of settlement depends on factors like network congestion and fees. No middlemen are involved, ensuring speedy and direct transactions.

A step-by-step approach to how Bitcoin transactions are settled:

 A user initiates a Bitcoin transaction.

The transaction is broadcasted to the Bitcoin network.

Miners (which are computers) compete to add the transaction to a block.

The block is verified by the network.

The transaction is added to the blockchain.

The transaction is settled and the recipient receives his bitcoins.

note that these transactions happen in a few seconds or minutes without an intermediary and cannot be stopped or censored.

Problems facing Bitcoin as a Means of payment

Price Volatility: Bitcoin is known for its extreme price volatility. The value of Bitcoin can fluctuate significantly within short periods, making it challenging to determine its precise purchasing power. This volatility poses a risk for both merchants and consumers, as the value of Bitcoin at the time of a transaction may differ greatly from its value when received or spent.

Scalability: Bitcoin's blockchain has scalability limitations, meaning it can handle only a limited number of transactions per second. During peak times, transaction confirmation times can be slow, resulting in delays and higher transaction fees. The scalability challenge hampers Bitcoin's ability to serve as a widely adopted payment system, especially during periods of high transaction volume.

Regulatory Uncertainties: The regulatory landscape for Bitcoin is complex and varies across different jurisdictions. Governments worldwide are still grappling with how to regulate cryptocurrencies, including Bitcoin. The lack of clear and consistent regulations can create uncertainties for businesses and consumers, potentially hindering the widespread adoption of Bitcoin as a means of payment.

User Experience and Technical Complexity: Bitcoin transactions can be complex for non-technical users, requiring an understanding of wallet addresses and seed phrases. The user experience of Bitcoin wallets and payment interfaces may vary, leading to potential usability challenges. The technical creates an adoption barrier for individuals less familiar with cryptocurrency technology.

Is Bitcoin sustainable as a peer-peer payment network?

Although Bitcoin has steadily gained popularity and acceptance over the years due to its ability to scale several financial challenges. The minds of the public especially none crypto users have continued to wonder;

What could the possible future of Bitcoin be?

What will regulators do about it?

Will the network ever fail?

To further strengthen the network, make it suitable for growing demand and clear the doubts in the minds of potential users, important upgrades have to be made. There has recently been a lot of innovation to help Bitcoin become the currency of the future. 

Here are a few Technological Upgrades On bitcoin

Lightning Network:

One significant innovation that has increased the usage of Bitcoin globally is the Lightning Network. This layer-two scaling solution addresses the network's scalability issue by enabling faster and cheaper transactions. By leveraging payment channels, the Lightning Network facilitates instant transactions with reduced fees, effectively increasing Bitcoin's potential for everyday use. The development and growing adoption of this technology underscore the belief that Bitcoin can become a viable medium of exchange for microtransactions and everyday purchases. 

Taproot upgrade

The most significant upgrade for Bitcoin in the past four years is the recently implemented Taproot upgrade. This groundbreaking update introduces the ability to batch multiple signatures and transactions together, resulting in a more efficient and expedited verification process for transactions on the Bitcoin network.

Furthermore, Taproot incorporates a mechanism that blends transactions with both single and multiple signatures, enhancing privacy and making it considerably more challenging to identify specific transaction inputs within Bitcoin's blockchain. By streamlining transaction verification and bolstering privacy measures, Taproot holds the potential to facilitate the scalability of the Bitcoin network, by accommodating a higher volume of transactions. 

Decentralized finance on Bitcoin

While Ethereum has traditionally been the dominant platform for decentralized finance (DeFi), recent innovations have brought DeFi capabilities to the Bitcoin network. Projects such as Rootstock (RSK) and the Liquid Network offer smart contract functionality on top of Bitcoin, enabling the creation of decentralized applications, that will facilitate the building and usage of Decentralized finance on Bitcoin.

The introduction of  DeFi on Bitcoin goes to show that Bitcoin's secure and robust network can be leveraged for a broader range of financial applications, like borrowing, lending, staking, and storing of data.

Early this year, the BRC20 token standard an experimental token standard on the bitcoin network became a trend, alongside ordinals which are bitcoin NFTs.

Data from Brc-20.io shows that there are currently 37,200 brc20 with a market cap of over $1 billion. Goes to show that people believe so much in the innovations on the bitcoin network and are ready to continuously support the ecosystem

Institutional and General Interest in Bitcoin

In recent years, we have witnessed a surge in institutional interest and adoption of Bitcoin. we have seen big institutional fund managers including BlackRock with over $9 trillion in assets apply to offer bitcoin spot etfs to their clients.

Renowned companies, including Tesla, MicroStrategy, and Square, have also allocated significant portions of their treasury reserves to Bitcoin, signaling confidence in its long-term value.

The interest of the general public in Bitcoin has witnessed an impressive upward trajectory, this is evident in the continuous increase in the number of active addresses.

Data from Glassnode shows that Over 44.15 million unique addresses have a non-zero Bitcoin balance. On May 13th, the number of Bitcoin wallet addresses holding one full BTC or more surpassed one million, according to Glassnode data.

This signifies that the number of people that use Bitcoin is increasing by the day. As people worldwide realize the benefits and potential of Bitcoin, they are increasingly embracing it as a viable financial instrument.

Financial Inclusion and bitcoin

Bitcoin offers accessibility to anyone with an internet connection, enabling financial inclusion for the unbanked population. This inclusive nature of Bitcoin has attracted users from all corners of the globe.

Technological Advancements have also contributed immensely to its growth and usage. User-friendly interfaces, improved security measures, and enhanced accessibility has lowered the barriers to onboarding new users.

Bitcoin Stands Tall

Bitcoin's relentless evolution and constant upgrades are testaments to its robustness and potential as the payment system of the future. With an unyielding commitment to scalability and security, Bitcoin will solidify its position as a global peer-to-peer payment network.

Additionally, the ongoing advancements in environmental sustainability, with the integration of renewable energy sources and the adoption of greener mining practices, further reinforce Bitcoin's viability as a sustainable payment system.

As it continues to evolve, Bitcoin stands poised to revolutionize the way we transact and pave the way for a more inclusive financial future

#BRC20 #bitcoin

INTRODUCTION

With the volatile nature of the crypto market, stablecoins are the desired alternative to protect investors from the ever-fluctuating prices of crypto assets. But Currently dominating the stablecoin markets are centralized fiat-backed stablecoins susceptible to regulatory uncertainties and censorship and we need a decentralized alternative.

What are stablecoins

Stablecoins are digital currencies designed to maintain a steady value, typically by linking their worth to a specific fiat currency, like the US dollar. They combine the advantages of cryptocurrencies, such as secure and decentralized transactions, with the stability typically associated with traditional financial assets like the USD or gold.

As earlier mentioned Cryptocurrencies can be highly volatile, making its use for everyday transactions risky for both buyers and sellers. Merchants don't want to take a hit if the value of a cryptocurrency suddenly drops after receiving payment. To solve this, stablecoins step in as a solution, and offers assurance to users that it will retain its purchasing power in the long term. This stability sets them apart and gives crypto more acceptance as a legal tender.

Classification of Stablecoins

Stable coins can be broadly classified into, Centralized stablecoins or decentralized stablecoins. Each of this categories can be either over-collaterized or under-collaterized

Centralized Stablecoins

These stablecoins rely on a centralized authority to maintain their stability and manage the reserves that back their value. The centralized entity holds real-world assets such as fiat currencies or commodities such as gold and silver to support the stablecoin's value. Examples of centralized stablecoins include Tether (USDT) and USD Coin (USDC).

Centralized stablecoins provides a sense of security and trust since they are managed by a known entity, but it also means that users have to rely on that entity's operations and transparency. Thus they are mostly fully collaterized stablecoins and fully collateralized stablecoins are highly regulated and require external audits.

Decentralized Stablecoins

Decentralized stablecoins operates without the control or involvement of a central authority or entity. They are built on decentralized blockchain platforms, like Ethereum, and their stability is achieved through algorithms or smart contracts rather than relying on a centralized entity to hold reserves.

“Ultimately, decentralized and stable cryptocurrencies pave the way for a modern financial revolution that will remove inefficiencies, reduce risk stemming from centralized parties and change the way we transact.” — Rune Christensen, Founder of MakerDAO

The lack of collateral backing makes purely algorithmic stablecoins the most permissionless form of money. Over the last few years, decentralized stablecoins have gained substantial market share. Most algorithmic stablecoins fall into this category, being either over-collateralized or relying purely on coded monetary policy.

Algorithimic Stablecoins

Introduced by Robert Sams in 2014, Algorithmic stablecoin uses a set of predefined rules in the protocol that adjust the supply level based on the deviation between the market price and the target price without human intervention, They are programmed to respond to presiding supply and demand forces to maintain a pre-defined peg and price stability. They operate on smart contracts and are fully decentralized.

Algorithimic stablecoins are important building blocks for future growth in DeFi and and crypto as they are less exposed to regulation and go hand-in-hand with the ethos of crypto, offering a permissionless and decentralized alternative to regulated assets

Advantages

Algorithmic stablecoins offer several advantages that differentiate them from other types of stablecoins. Here are five key advantages, along with examples of projects that leverage these benefits:

Decentralization and Governance: Algorithmic stablecoins are typically governed by decentralized communities, allowing participants to have a say in the decision-making process. This enables a more democratic and transparent approach to managing the stablecoin's parameters. An example is Ampleforth (AMPL), which adjusts its supply algorithmically to maintain price stability.

Scalability and Accessibility: Algorithmic stablecoins can be easily accessed and used by anyone with an internet connection, without the need for a bank account or traditional financial infrastructure. This makes them particularly beneficial in areas with limited access to banking services. Terra (LUNA) is an example of an algorithmic stablecoin that focuses on scalability and accessibility for global users.

Stability in Volatile Markets: Algorithmic stablecoins use dynamic algorithms to adjust their supply and demand mechanisms in response to market conditions. This adaptability helps maintain stability even in highly volatile cryptocurrency markets. Empty Set Dollar (ESD) is an example of an algorithmic stablecoin that aims to provide stability by dynamically adjusting its supply based on market demand.

Reduced Counterparty Risk: Algorithmic stablecoins eliminate or reduce counterparty risk by design. Unlike centralized stablecoins, which rely on a trusted custodian to hold reserves, algorithmic stablecoins derive their value from the protocol itself. This reduces the risk of custodial failure or mismanagement. Frax (FRAX) is an example of an algorithmic stablecoin that minimizes counterparty risk by relying on collateralized assets within its protocol.

Potential for Decentralized Monetary Policy: Algorithmic stablecoins enable the exploration of new monetary policy frameworks in a decentralized manner. They allow for experimentation and innovation in designing and implementing monetary systems, potentially offering greater resilience and adaptability compared to traditional monetary systems.

Algorithmic Stablecoins have come a long way since they were first introduced in 2014. While centralized and fiat-backed stablecoins are still dominating, we see how crypto-backed stablecoins are continuing their growth journey and more and more algorithmic stablecoins being launched, having learned from past projects. like terra Luna, there are also inherent risks that come with algorithmic stablecoins.

Amid chaos between the US Securities and exchange commission and two major crypto exchanges Binance and Coinbase, Bank of China's investment banking arm (BOCI) today issued the couthe country'stokenized security on the Inhereum blockchain.

BOCI in collaboration with UBS, a financial advice and solutions provider just issued CNH 200million digital structured notes, an equivalent of $28 million. This makes BOCI the first Chinese institution to offer a tokenized security in Hong Kong.

The product was originally created by UBS and has been issued to its clients in Asia Pacific. UBS in December 2022 issued a $50 million tokenized fixed rate note under English and Swiss law, digitized on a permissioned blockchain.

This is a unique product in the Asia Pacific region, incorporating both Hong Kong and Swiss legal frameworks and being tokenized on the renowned Ethereum blockchain. It proudly demonstrates a successful integration of regulated securities onto a transparent and accessible public blockchain platform.

“BOCI is very pleased to be at the forefront of innovation in technology finance and digital finance...Working together with UBS, we are driving the simplification of digital asset markets and products, for customers in Asia Pacific through the development of blockchain-based digital structured products, designed specifically for customers in Asia Pacific.

Per Ms Ying Wang, Deputy CEO at BOCI

This event comes days after China released a whitepaper for the development of a metaverse, while the sec is chasing crypto exchanges in the US for listing unregistered securities, China seems to be embracing the innovation and making regulations to accommodate.