Crypto Market Rollup - 3
Welcome back! Episode 3 of my weekly crypto rollup, and we have a lot to talk about. I hope you enjoyed my previous two Newsletters - If you did, it would go a long way if you subscribe, comment, and share so that even more people can read my content.
Enough advertisements for now - let's talk crypto. This week we've seen how Ethereum co-founder Vitalik Buterin and Ripple chief technology officer David Schwartz launched into a heated tit-for-tat on crypto Twitter. The heated dispute saw both of them arguing about a central question in crypto - which tokens are legit and which ones aren’t? Without giving away too much, why don't you read the dispute yourself:
Other news this week include Crypto.com laying off more people than previously thought (they announced a layoff of 260 people earlier this year), the Federal Deposit Insurance Corporation (FDIC) issued a cease-and-desist letter to FTX US, Tether's auditor confirmed a 58% drop in Commercial Paper Holdings, and Bitcoin fell below $21,500 again - oh well.
In today's issue, I will talk about 1) Ethereum and Censorship to shed some light on the resistance of the currently biggest L1 in existence and 2) Dogechain - the "holy grail" that could give Dogecoin an actual use case. Let's get started.
1) Ethereum and Censorship
Last week I talked about the weak points of decentralization, and considering them becomes crucial when considering censorship within the Ethereum network. As a matter of fact, Ethereum's main infrastructure providers like Infura and Alchemy?could easily sanction access to data. But the answer if Ethereum can be censored has multiple layers that need to be discussed, and validators are at the center of the debate.
To understand why we first have to learn how the Ethereum network works.
Like many other blockchains, Ethereum relies on validators (or miners for now) to assemble blocks and subsequently issue them to the network. When you transact on Ethereum, your transaction is added to the mempool – a big pile of transactions that have yet to get confirmed. Validators (miners) select transactions from the mempool and place them in some order, and abracadabra, they have created a block. They then propose those blocks to the broader network so they may be confirmed by others and added to the chain.
While it is not clear that validators would censor the chain even if required, it is still important to be aware that the risk exists.
For US-based beacon-chain validators such as Coinbase, Kraken, but also Bitcoin Suisse, there could be a risk that they will need to comply with the Office of Foreign Assets Control (OFAC) regulation. If a majority of validators will not sign a specific block, transactions could be excluded. Essentially, if a block builder knows that the proposed block will not be accepted, the builder will exclude sanctioned transactions to continue operating.
As such, it is possible that US validators try to push for protocol-level censorship because they might struggle to actually avoid blocks containing US-sanctioned transactions. As of now, we don't have any legal certainty that merely signing a block with sanctioned transactions does not violate OFAC regulation.
Coinbase co-founder Brian Armstrong clarified that in a scenario where regulators ask to censor at the Ethereum protocol level, the company would shut down the staking service and preserve network integrity.
Considering that a full proper-builder separation (PBS) is still a couple of years away, discussions around protocol-level censorship are important to have. I, for once, believe that we will come out of this stronger and love to see leaders like Brian Armstrong taking a stance.
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2) Dogechain
The new Dogechain Network opens up smart contracts to Dogecoin holders.
Dogecoin was created by the infamous Billy Markus and Jackson Palmer, who created the coin as a joke, making fun of the wild speculation in cryptocurrencies at the time. As a?fork of the source code of?Litecoin, its first block was mined in?December 2013. The coin has come a long way since its launch, with Elon Musk being a prominent supporter. Ever since Elon Musk began tweeting about DOGE, its popularity has skyrocketed, and Tesla even began?accepting it as payment for merchandise.
But what exactly is Dogechain? Dogecoin, the dog-themed?cryptocurrency,?has no use case outside of being a competitor to Bitcoin, but with?Dogechain, this may no longer be the case. Dogechain lets users bridge over Dogecoin to tap into DeFi services, along with potential future NFT marketplaces and apps. Dogechain does everything essentially for Dogecoin that Polygon does for Ethereum. It even uses the Polygon Edge framework to provide?L2 smart contracts for DOGE holders that are fast and cheap. However, Dogechain isn’t a true layer-2 network because it’s not built on top of Dogecoin.
The current Dogechain mainnet includes:
Futures that will be added in the future include:
It is important to know that Dogechain has no official affiliation to Dogecoin, and Dogecoin developer?cb_doge?emphasized this. Additionally, the project's developers are anonymous, which I oftentimes see as a red flag. Finally, to use Dogechain, you must "bridge" your DOGE, which means their DOGE is locked inside a Dogecoin wallet controlled by Dogechain, and?as we have all learned over and over again, blockchain bridges are still very vulnerable.
What we need to see now is for the developer to reveal their identities and potentially even partner with the Dogecoin core developers to solidify community trust.
On a side note - Shiba Inu?(SHIB) is set to launch its own layer-2 scaling network called Shibarium.
That's it for today. Thank you for reading!!! ...Hasta la vista, baby.