Blockchain and Web3 Weekly Bytes Edition #12

Blockchain & Web3 Weekly Bytes: Oracle Insights, Cosmos Connects, Bitcoin ETFs & Tax Tips

April 13, 2024

Hello Fellow Enthusiast,

Welcome to the latest Blockchain & Web3 Weekly Bytes. This edition discusses the function of blockchain oracles and their importance in the functionality of smart contracts.

I'm turning the spotlight on Cosmos (ATOM) and highlighting its contributions to blockchain connectivity. Plus, I'm thrilled to introduce our new segment—the Weekly Video Spotlight—focusing on making crypto taxes understandable in this issue.

I also examine the striking patterns in Bitcoin's trade volume and offer a moment of fun with our blockchain-themed humor.

Weekly Trivia

In anticipation of the upcoming Bitcoin halving, what significant change occurs to Bitcoin during this event?

A) Bitcoin's block size is halved
B) The time it takes to mine a Bitcoin block is halved
C) Bitcoin's transaction fees are halved
D) The number of Bitcoin released per block is halved

Find the answer at the bottom of this newsletter.

Tech Spotlight – Blockchain Oracles

Blockchain oracles are essential yet often underappreciated components within the blockchain ecosystem. They function as bridges between the external world and the blockchain, enabling smart contracts to interact with and react to real-world data. This interaction is crucial because, by design, blockchains cannot access external systems due to their inherent security protocols and the need to maintain trust and decentralization.

How Oracles Work

Blockchain oracles act as data feeds that send information to a blockchain system, such as temperature readings, stock prices, and flight statuses. The smart contract relies on this data to perform actions under specific conditions. For instance, a weather insurance contract might pay out based on data received about rainfall levels from a trusted weather oracle.

Types of Oracles

Software Oracles: These oracles handle data available online, such as temperatures, prices, or flight times. They pull information from the web and feed it into the blockchain.
Hardware Oracles: These involve physical data collection, such as RFID sensors in supply chains or data from IoT devices. Hardware oracles can ensure the authenticity of physical goods or monitor environmental conditions.
Consensus Oracles: These oracles aggregate data from multiple sources to ensure accuracy before feeding it into the blockchain. This method reduces the risk of relying on a single data source, which might be incorrect or biased.

Practical Examples

Insurance: Blockchain oracles facilitate crop insurance contracts that automatically payout when climate data oracles verify certain conditions, like drought or flooding.
Supply Chain: In supply chain management, oracles can provide real-time data about goods as they move, verifying their status and location to ensure compliance and authenticity.
Financial Services: Financial derivatives relying on stock prices or currency rates use oracles to fetch this data, allowing decentralized finance (DeFi) platforms to function like their traditional finance counterparts.

Challenges with Oracles

Despite their utility, oracles pose unique challenges concerning security and trust. Since the data provided by an oracle can influence significant transactions, the integrity of this data is paramount. Any manipulation or error in the data can lead to incorrect outcomes in smart contracts, potentially leading to financial losses.

Blockchain oracles are indispensable for bridging the gap between decentralized blockchain networks and external data sources, enabling smart contracts to respond intelligently to real-world inputs.

This Week’s Blockchain and Web3 Highlights

Hong Kong on the Cusp of Spot ETF Approvals: Anticipation is building in Hong Kong as regulatory approval for Bitcoin and Ether ETFs is expected imminently. This development could catalyze significant activity in the crypto markets, as ETFs make it easier for institutional investors to engage with digital assets.

Strategic Expansion at EigenLayer: EigenLayer's network is expanding with high-profile additions—Coinbase and Google Cloud have signed on as operators following its mainnet launch. This strategic growth enhances EigenLayer's capacity to offer scalable blockchain solutions, solidifying its position in the infrastructure landscape.

Peak Mining Difficulty Precedes Bitcoin Halving: Bitcoin's mining difficulty has reached an all-time high a week before the much-anticipated halving event. This milestone underscores the growing computational effort required to mine Bitcoin, reflecting robust network security as it prepares for reduced block rewards.

U.S. Lawmakers Convene on Stablecoin Regulation: Significant legislative movements are underway as key U.S. House Financial Services Committee members discuss strategies for stablecoin regulation. This meeting highlights the increasing focus of U.S. lawmakers on establishing a framework for digital currencies.

London Mayoral Candidate's Crypto Initiative: In a bold electoral promise, a London mayoral candidate has proposed to distribute £100 in a new cryptocurrency to every city resident, showcasing the innovative use of digital assets in political platforms and public engagement.

DeFi Meets Traditional Banking with 1inch Debit Card: The 1inch Network has partnered with Mastercard and Baanx to launch a Debit Card that bridges DeFi and traditional banking. This card allows crypto assets to be used seamlessly for everyday transactions, enhancing the utility of digital currencies.

BlackRock Bitcoin ETF Marks Remarkable Gains: BlackRock's iShares Bitcoin Trust (IBIT) has become a monumental success, amassing $15 billion in total inflows since its launch on January 11. This achievement highlights the strong investor confidence and growing mainstream acceptance of Bitcoin as an investment vehicle.

El Salvador Advances Crypto-Financed Infrastructure: Bitfinex Securities has announced a tokenized debt issue to raise funds for a new El Salvador International Airport hotel complex. This initiative exemplifies the practical use of blockchain technology in funding significant infrastructure projects.

Affiliate Spotlight: Ledger Halving Promotion

Ledger has launched a compelling promotion for its robust hardware wallets, which aligns with the upcoming Bitcoin halving. When you secure one of these wallets, you can receive up to $50 of Bitcoin, enhancing both your security and your investment.

Why Ledger?

Ledger wallets are celebrated for their superior security features, support for a diverse array of cryptocurrencies, and smooth integration with various blockchain applications. They cater to all users, from beginners to experienced crypto enthusiasts.

Promotional Offer Details

Take advantage of the Bitcoin halving momentum by investing in a Ledger wallet now. For a limited time, purchasing a wallet through my affiliate link secures your digital assets and rewards you with up to $50 in Bitcoin while supporting my free newsletter.

Boost your crypto security and grow your portfolio before the halving—take action today!

Weekly Video Spotlight—Simplifying Crypto Taxes

Your Guide to Easy Crypto Tax Filing

Dealing with taxes is rarely straightforward, and adding cryptocurrency to the mix can complicate matters further. This week's featured video, "Simplifying Crypto Taxes: Your Clear Guide to a Stress-Free Season," offers practical advice to demystify the tax obligations associated with cryptocurrency.

Why This Video Matters

The video provides clear explanations to help you prepare your crypto tax filings confidently. Whether a beginner or a seasoned investor, you'll find valuable insights to traverse tax season more smoothly.

Disclaimer: This video is for educational purposes only and is not intended to provide financial, legal, or tax advice. Please consult with a professional tax advisor for advice specific to your situation.

Chart of the Week: Bitcoin Spot Trade Volume

This week's chart presents a compelling view of Bitcoin's spot trade volume and its recent journey. Since the inauguration of US Spot ETFs in early January 2024, there's been a noticeable uptick in trade volume.

Spot Volume Peaks with All-Time High

As Bitcoin ascended to an all-time high of $73k in mid-March, the daily trade volume spiked, reaching around $14.1 billion. This activity level mirrored the peak times of the 2020-2021 bull market, showcasing a vibrant trade environment.

Current Trends

However, the latest trend shows a reduced daily trade volume, now hovering at about $7 billion. This cooldown phase reflects the market's natural ebb and flow after a period of intense activity.

Source: Glassnode

A Little Blockchain Humor

To Cut or Not Cut. Source: Arun S. Chopra

Thank you for tuning into this week's edition of Blockchain & Web3 Weekly Bytes. We've covered the strategic role of blockchain oracles, spotlighted the innovative Cosmos (ATOM) network, decoded crypto taxes and observed the intriguing trends in Bitcoin trade volumes.

Trivia Answer: D) The number of Bitcoin released per block is halved. Bitcoin halving occurs approximately every four years. The reward for mining new blocks is halved, meaning miners receive 50% fewer bitcoins for verifying transactions.

I'm excited to share more insights with you next week. Until then, stay connected, keep learning, and mark your calendars—the Bitcoin halving is on the 19th!

Best regards,
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 Cosmos (ATOM)

This week's spotlight shines on Cosmos (ATOM), known for its fresh approach to addressing blockchain scalability and interoperability issues.

What Sets Cosmos Apart?

Cosmos aims to enable an "Internet of Blockchains," a network where independent blockchains can communicate and exchange information and transactions effortlessly. This vision is supported by:

Tendermint Core: Powers a reliable consensus engine that secures agreement across nodes regarding the system's state.
Inter-Blockchain Communication (IBC) Protocol: Facilitates the transfer of tokens and data between compatible blockchains, increasing usability and connectedness.

ATOM: The Operational Token

ATOM, the native cryptocurrency of Cosmos, is utilized for transaction fees, staking, and governance participation. Owners of ATOM contribute to network decisions, helping secure and refine the system.

Cosmos’ Role in Advancing Blockchain Technology

Cosmos tackles key challenges like scalability and interoperability head-on. By allowing blockchains to retain their unique characteristics while accessing a more extensive network, Cosmos improves overall operational flexibility and effectiveness.

Why Cosmos Is Worth Watching

Cosmos stands out with its advanced network design and active community engagement, making it a key player in the ongoing development of blockchain technology. Cosmos will likely influence how blockchains connect and operate as the network grows, marking its importance in the tech community.

Blockchain and Web3 Insights