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Blockchain and Web3 Weekly Bytes Edition #9
Blockchain & Web3 Weekly Bytes: Coins vs. Tokens Decoded + USDC & Crypto Tax Insights
March 23, 2024
Hello Fellow Enthusiast,
Welcome back to Blockchain & Web3 Weekly Bytes. This week, we're exploring the differences between coins and tokens to clarify these fundamental concepts in the crypto world.
You'll also find a spotlight on USDC's impact in the stablecoin arena and a look at top crypto tax software options just in time for tax season. Plus, the 'Chart of the Week' offers insights into Bitcoin's holder supply trends.
Let's uncover the latest in blockchain and Web3!
Weekly Trivia
What is a fundamental characteristic of Web3?
A) Centralized data control
B) Use of traditional payment methods
C) Decentralization and blockchain integration
D) Exclusive access to digital services
Find the answer at the bottom of this newsletter.
Coins vs. Tokens: Understanding the Difference
Coins and Tokens often get used interchangeably in the blockchain and cryptocurrency world, but they represent distinct concepts with unique characteristics and uses.
Coins — The Native Currency of Blockchains
Coins are digital currencies inherent to their blockchain. They facilitate transactions and fees and are essential for the blockchain's operation. Bitcoin (BTC) on the Bitcoin blockchain and Ether (ETH) on Ethereum are prime examples of coins, each integral to its respective blockchain's functionality.
Tokens — Diverse Digital Assets
Tokens are digital assets built on existing blockchains. They can represent a variety of assets or rights, from tangible goods like real estate to intangible services and voting rights. Ethereum's ERC-20 tokens, for example, allow developers to issue their assets with diverse purposes, such as utility tokens for decentralized applications (DApps) or governance tokens for protocol decision-making.
Illustrative Token Examples
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Chainlink (LINK): Functions as a decentralized oracle network token, linking external data to smart contracts.
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Uniswap (UNI): Acts as a governance token, empowering holders to participate in the protocol's decision-making process.
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Tether (USDT): A stablecoin pegged to the U.S. dollar, providing a stable value in the often volatile crypto market.
Core Differences
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Origin: Coins are fundamental to their blockchain, whereas tokens are created on existing blockchains.
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Purpose: Coins primarily support blockchain operations, while tokens can serve various functions, from representing physical assets to enabling access to services.
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Creation Process: Introducing a coin typically entails establishing a new blockchain, whereas tokens can be readily minted on existing platforms like Ethereum.
Deciphering the Ecosystem
Distinguishing between coins and tokens is crucial for understanding the cryptocurrency landscape. Coins like BTC and ETH support the fundamental operations of their blockchains, whereas tokens, leveraging existing blockchain infrastructure, drive innovation and application in many fields.
This Week’s Blockchain and Web3 Highlights
Standard Chartered Predicts BTC Surge to $150K by Year-End, Eyes $250K in 2025: Standard Chartered forecasts a significant rise in Bitcoin's value, projecting a $150,000 price by the end of this year and a potential high of $250,000 by 2025.
BlackRock Launches 'BUIDL' Tokenized Asset Fund on Ethereum with $5 Million Entry: BlackRock has announced the launch of 'BUIDL,' a tokenized asset fund based on Ethereum. The fund targets a minimum investment of $5 million and emphasizes its commitment to developing digital asset solutions for clients.
Five Reasons Why the UK is Poised to Become a Crypto Powerhouse: The UK is gearing up to become a leading crypto hub, backed by legal clarity, forthcoming regulations, and a strategic push to attract crypto businesses.
Japan's GPIF Explores Bitcoin for Portfolio Diversification: The world's largest pension fund, Japan's GPIF, is investigating bitcoin as part of a diversification strategy, responding to economic shifts and technological progress.
Solana Outpaces Ethereum in Decentralized Exchange (DEX) Trading Volume: Solana has surpassed Ethereum in DEX trading volume, propelled by the meme coin frenzy and its capital efficiency advantages.
Countdown to Bitcoin's Halving: <30 Days to Go, Expected on April 20: The Bitcoin halving, set to reduce mining rewards by half, is anticipated to happen on April 20, marking a significant milestone in the cryptocurrency's timeline.
Avalanche Launches' Meme Coin Rush' with $1 Million in Incentives for Traders: The Avalanche Foundation is sparking interest in meme coins with a $1 million reward program for traders, featuring coins like Kimbo, Coq Inu, and Gecko.
Affiliate Spotlight: Cryptocurrency Tax Software
With tax filing season upon us, navigating the complexities of cryptocurrency taxes is more important than ever. For those looking to streamline this process, I recommend considering Koinly and CoinLedger, two platforms designed to ease the burden of crypto tax reporting.
Koinly: Your Crypto Tax Assistant
Koinly offers a comprehensive solution for tracking cryptocurrency transactions and calculating tax liabilities. Its intuitive interface and seamless integration with various exchanges and wallets make it an essential tool for ensuring compliance with tax regulations.
👉 Discover Koinly and simplify your crypto tax process: Koinly
CoinLedger: Your Partner in Crypto Tax Filing
CoinLedger provides a streamlined approach to crypto tax filing, offering detailed transaction tracking and automated report generation. It's designed to help you manage your cryptocurrency portfolio and tax obligations with ease.
👉 Learn more about CoinLedger and ease your tax season: CoinLedger
Your support through these affiliate links helps me continue delivering the insights you value in the blockchain and Web3 space. I recommend these tools for their effectiveness and user-friendly experience handling crypto taxes.
Chart of the Week: The Balance of Bitcoin HODLers
This week, I spotlight a compelling chart illustrating the ebb and flow of Bitcoin's long and short-term holders or HODLers. It's a narrative captured in data, reflecting the steadfastness of long-term investors against the backdrop of market fluctuations.
Notable Observations:
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Long-Term Holder Supply Increase: The steady rise in long-term holder supply suggests growing confidence in Bitcoin as a 'store of value', with more investors willing to hold through various market cycles.
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Short-Term Holder Supply Fluctuations: Short-term supply fluctuates more, indicating reactive responses to market news or price changes. This can inform us about the sentiment and liquidity in the market at different times.
Credit: Glassnode
A Little Blockchain Humor
Credit: CoinMarketCap
That's all for this issue of Blockchain & Web3 Weekly Bytes. From dissecting the nuances between coins and tokens to highlighting the practicalities of USDC, my goal remains to present you with content that empowers and educates.
I'm here for your questions, your insights, and the blockchain topics you're itching to explore. Your engagement is the cornerstone of this newsletter.
Trivia Answer: What is a fundamental characteristic of Web3? The answer is C) Decentralization and blockchain integration—core elements that are shaping a more open and user-empowered internet.
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Keep curious, keep learning, and until next time—stay connected to the pulse of blockchain and Web3.
Warmly,
Ajay Tomar
Disclaimer:
Content in this newsletter is for educational and informational purposes only and is not intended as financial, tax, or legal advice. Always do your research and consult with a professional before making financial decisions. As a solopreneur, I may earn commissions from affiliate links in this newsletter at no extra cost to you. This support helps me bring you valuable content. I only endorse products I trust and believe could benefit you.
Weekly Digital Assets Spotlight
Spotlight on USDC (USDC)
USDC — Bridging Traditional Finance and Crypto
USDC, or USD Coin, stands as a stablecoin firmly pegged 1:1 with the U.S. dollar, blending the stability of fiat with the flexibility of digital currency. Every USDC in circulation is backed by a corresponding U.S. dollar, held in cash or short-term U.S. Treasury bonds, ensuring its value stability.
Background and Operation
Launched in September 2018 by the Centre consortium, co-founded by Circle and Coinbase, USDC was designed for the digital age, facilitating cashless transactions across various sectors, including DeFi and gaming. Its widespread acceptance across wallets, exchanges, and dApps underscores its utility and trust in the digital asset ecosystem.
Regulatory Compliance and Transparency
What sets USDC apart is its commitment to transparency and regulatory compliance. Regular attestations by prominent accounting firms confirm the matching reserve funds, fostering user trust. USDC's clean record and transparent operations have significantly increased its market presence, unlike other stablecoins marred by regulatory challenges.
Integration and Security
Primarily an ERC-20 token on the Ethereum blockchain, USDC benefits from seamless integration with Ethereum-based apps, enhancing its utility across numerous platforms. Its robust security framework, backed by audited reserves, establishes USDC as a reliable and secure stablecoin choice in the volatile crypto market.
Growth Picture
USDC's circulation has skyrocketed, particularly with the DeFi boom, acting as a crucial bridge to the wider blockchain ecosystem. Its current market cap sits above ~31B, making USDC one of the top 10 digital assets.
In conclusion, USDC is more than a digital dollar; it's a cornerstone of the evolving crypto ecosystem, offering stability, transparency, and wide-ranging applicability from DeFi to everyday transactions.