I have added a Definitions page which will include all of the terms and abbreviations that I use from now on and will be referred to on every post.
This is one of those posts that I was struggling and fighting to create on my travel laptop. Some of the content on this post is several weeks old as a result.
Anyways, consider this post to be an update of the Crypto Macro post from December. I will be making this into a quarterly series, with updates even more frequently if major events occur. Consider this to be an update on the new major trends as they develop and posts where I provide status updates of the existing trends that I have previously outlined. For those of you that have invested in any of the previous trends I suggested I will also provide advice for managing those positions and comparative prices outlining performance and whether or not those protocols outperformed Bitcoin.
Anyways, lets get started.
Table of Contents
Value Proposition - Interoperability
Interoperable Protocols
$ATOM
Airdrop - EVMos
$DOT
$ICX
$LINK
Bridge Protocols
Future trends
1. Value Proposition - Interoperability
Back in December, the main trend that I saw emerging and gaining in value was interoperability. I said this was being driven by at least two factors. The first being a desire to escape the no-fun police and regulatory bodies trying to further clamp down on the users ability to freely transact in crypto. The second being the targeting of stablecoins by regulation causing the emergence of algorithmic stablecoins to replace stablecoins backed by assets being held in a bank.
We are going to review how those trends have advanced in the last 3 months. One trend is that South Korea has moved further towards regulation, which is decreasing any South Korean’s ability to access centralized exchanges. As of January one of the 4 centralized exchanges still offering services to South Koreans blocked all withdrawals to any wallet that is not fully KYCed, which means no more transactions to metamask, or any wallet that is for self-custody.
Binance also suspended activity in South Korea and required all accounts to transfer their assets by the end of January or lose their assets. Bithumb also enacted the same rule blocking withdrawals to outside wallets that were not KYCed, which also went into effect this January.
Why the focus on South Korea? This is an example of how quickly the legislative door can shut for your usage of a centralized exchange. From late 2019 to 2021 the South Korean government figured out a way to legislate rules for financial transactions that made it impossible for any centralized exchange registered to do business within the country to send assets to an anonymous crypto wallet. Just 2 years. I often say that I expect the same to come into play here in the US sometime between 2023 and 2024. For those of you that are new to crypto, consider this your period to learn while it is still relatively easy and unregulated. This is a time for you to make mistakes, familiarize yourself with basic web security, and learn to manage your crypto assets on your own while you still have the safety blanket of a centralized exchange available for use. This will be much harder to learn when you no longer have the option to buy assets on a centralized exchange.
As a note, this section about South Korea is one of those older sections from several weeks ago. Since then a new President has been elected in South Korea that is extremely crypto friendly (he has his own wallet and his signature as an NFT within it from before the presidential primaries), and I expect many of these rulings to be reversed.
This is of course where the value proposition of interoperability comes in. For a basic rundown of what an interoperability protocol is, please read the crypto macro intro from December 2021. The high level explanation is that an interoperability protocol allows two separate blockchains to communicate with each other, send information back and forth and to send assets back and forth. The ability to do this side-steps centralized exchanges entirely and allows you to deploy your $ETH onto $FTM or another protocol like $AVAX, etc. Being able to do this without having to go to a centralized exchange has many benefits, including avoiding regulatory oversight, but also allows you to deploy capital from one chain to another without having to exit your capital position.
As we have seen with recent current events and geo-politics, governments the world over are extremely willing to aggressively regulate the finances of their citizens in reckless ways. We are seeing banks that have not only attempted to target their own citizens (Canada) for merely daring to protest, but we are also seeing central banks and global commerce being shut down for the citizens of a country, simply because their leaders enacted a war on a neighbor. I do wonder how Americans would feel were they held to the same standard for their participation in the destruction of Iraq, Afghanistan, Yemen, Somalia, Libya, Syria, Yugoslavia, Sudan, and others. We actually vote for our leaders here, and many of us voted to keep Bush, Clinton, and Obama in power despite the additional aggressive wars we launched. In that sense you can say that we are lucky to have never been treated by the international community the same way Russia is being treated now. That being said, it is imperative for all of us to understand the precarious positions we are in as we entrust our finances to the oversight of 3rd parties who do not have our best interests at heart and are looking for more avenues of control.
Interoperability protocols are offering the ability for this financial communication that allows for us as users to sidestep the SWIFT system in the same way that Russia and China have rolled out CIPS and SFPS to sidestep SWIFT. Regardless of your own political views of whether the conflict is right or wrong, we cannot deny that having neutral communication networks is of benefit for everyone.
I was told a story recently on Monday by a man who’s identity I will leave out of this blog post as he may not wish to be cited. It is how we should view the creation of any system that ourselves and others will be dependent on. It is called the candy bar test. Put a candy bar in front of two children that they will share. One child is given a knife to cut the candy bar in half, the other child gets to choose who gets each piece. You can guess that such a situation would result in some of the fairest cuts of candy you might ever see from a child. Those in the libertarian or an-cap circle might already be familiar with this axiom, but in general you should never design a system that you wouldn’t be completely okay with giving to your worst enemy for them to control. The financial systems of the future must be so fair that even after giving up complete control of them we would all feel comfortable operating under their control. The existing system is not such a system, and crypto as it exists now is incomplete. Interoperability is just another piece of this puzzle being put together, and I believe that as trends advance further we will see big winners from this sector, so lets get started with a review of these protocols.
I was told this story on Feb. 21st, and was trying to type this up back on Feb 23rd to give you an idea of how long it’s been.
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