What bear market? That's the most common response I've heard from venture capitalists when I ask how the sustained downturn in the cryptocurrency market has affected their line of work. As of March 27th, VCs have already invested $334 million into blockchain projects this year, according to PitchBook, a financial data and software company. While that's far off the pace of last year, when a record $5.5 billion was invested, it's on track to match or surpass 2017's total of around $1 billion. What kinds of things are they investing in? Check out my new piece.
Coinbase is staking out a new business model. You can now make money just by leaving cryptocurrency in your Coinbase account. Clients of the popular exchange's custody service, which provides secure storage for crypto-assets, can now make up to 8% annually—as long as they hold Tezos (currently the 11th-most valuable cryptocurrency).
Though it may sound like it, however, Coinbase is not committing to pay interest on these accounts. Instead, it's rolling out the first mainstream offering of a new, crypto-specific financial service called "staking." Perhaps just as important, it is directly associating its prestigious brand name with proof-of-stake, the promising but still unproven approach to validating cryptocurrency transactions.
Unlike proof-of-work, the process by which Bitcoin and similar cryptocurrency networks reach consensus on the accuracy of their ledgers, proof-of-stake doesn't require network nodes to expend vast amounts of computing power. Instead, they must deposit and lock up (stake) a specified amount of cryptocurrency. Like proof-of-work "miners," proof-of-stake validators earn rewards in the form of newly-minted coins—but they don't have to burn through so much electricity in the process.
Although Ethereum is still struggling to implement its own version, a number of other smaller cryptocurrency networks, including Tezos, have implemented proof-of-stake systems. Now Coinbase is positioning itself as the most trusted of the handful of services that have emerged to stake customers funds for them in return for a cut of the staking reward. Though it will kick off its staking service with Tezos (the reward will also be paid out in that cryptocurrency), the company has plans to expand to other proof-of-stake coins in the near-future.
"The industry has to evolve from just holding these things to doing interesting stuff with them," Sam McIngvale, head of product for Coinbase's custody division, told the Wall Street Journal.
Perhaps, but many would argue that we haven't yet seen enough, well, proof, that proof-of-stake can work at a large scale in a fair and decentralized way. Either way, Coinbase's foray into staking is likely to draw more scrutiny to the larger idea.
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Loose Change
Fill your pockets with these newsy tidbits.
- Bithumb, South Korea's largest cryptocurrency exchange, has revealed that it in June of last year it lost around $19 million worth of cryptocurrency to an attack "involving insiders." (The Block)
- Facebook has listed five more blockchain-related positions, in addition to the 20 it has posted in the past month. (CoinDesk)
- Meanwhile, JPMorgan has posted more blockchain-related job openings than any other Wall Street firm. (Forbes)
- Paypal has made what appears to be its first blockchain-related investment, in a startup developing identity management software. (TheNextWeb)
- Bitcoin's price gained 17% in just 30 minutes yesterday, and it has reached its highest level since December. (Fortune)
- TrustToken, which already has a popular dollar-backed stablecoin, has launched a new one backed by the British pound. (CoinDesk)
