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Contents

Introduction

After a blistering up-only start to the final quarter of 2023 with excitement around the BlackRock Bitcoin spot ETF and 2024’s Bitcoin Halving turning into unbridled FOMO, markets came back down to earth this week as far-reaching news hit global headlines.

On November 21, 2023, Binance, the world’s largest cryptocurrency exchange, and its founder Changpeng Zhao, also known as CZ, reached a long-awaited settlement with US authorities, concluding many of the civil and criminal investigations into the exchange, but also leaving CZ to possible jail time

As part of the settlement, Binance agreed to pay a staggering total of $4.3 billion in fines. This includes $2.7 billion in civil monetary penalties and disgorgement and $1.6 billion in criminal fines and forfeiture. The fines will be paid to various government departments, including the U.S. Treasury and the Commodity Futures Trading Commission (CFTC),  who all had ongoing legal actions against Binance. 

In a shocking turn of events, CZ, possibly the biggest name in the crypto space, pleaded guilty to breaking U.S. anti-money laundering laws and agreed to step down from his role as CEO of Binance, which will now be filled by the experienced ex-Abu Dhabi regulator Richard Teng. 

CZ posted bail for $175 million after persuading the judge that he be allowed to return to his residence in the UAE and he will also pay a $50 million fine to the CFTC.

The SEC also delivered new charges against  US exchange Kraken, despite its payment of a $30 million fine only 10 months ago, worryingly again declaring several cryptocurrencies, including Solana and Cardano, to be securities. Interestingly, Ethereum and XRP are not on the list. 

The Case Against Binance and CZ

The SEC previously filed 13 charges against Binance entities and CZ, alleging that they operated unregistered exchanges, broker-dealers, and clearing agencies, misrepresented trading controls and oversight, and engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and evasion of the law

The SEC’s complaint alleged that since at least July 2017, Binance.com and Binance.US, while controlled by Zhao, operated as exchanges, brokers, dealers, and clearing agencies, earning at least $11.6 billion in revenue from transaction fees from U.S. customers. 

The securities regulator, which has been criticized for being on a perceived witchhunt against crypto companies, charged Binance for the unregistered offers and sales of BNB, BUSD, and crypto-lending products known as “Simple Earn” and “BNB Vault.” 

In addition to the SEC’s charges, Binance and CZ faced accusations from the U.S. Department of Justice and the U.S. Commodity Futures Trading Commission (CFTC). The CFTC sued Binance for offering unregistered crypto derivatives products in the U.S., alleging that Binance had a “maze of corporate entities” demonstrating the exchange’s “willful evasion of U.S. law”.

Why Did Binance and CZ Settle?

So, why did Binance settle? The answer lies in the severity of the charges and the potential consequences of not settling. The U.S. authorities accused Binance of prioritizing profits over the safety of the American people, and of using new technology to break the law. The settlement allows Binance to continue operating, albeit with significant penalties and compliance requirements over the next few years, as it exits the US market (BinanceUS will remain). This can be considered a win, as it avoids what would have been a long and arduous court battle over multiple years.

Looking ahead, the future of Binance is uncertain but not necessarily bleak. While the settlement may result in a short-term loss of market share (over $1 billion in funds have been withdrawn in the 24 hours after the news broke), Binance could regain its dominance in the long term. The settlement also concludes many of the civil and criminal investigations into the exchange, providing some level of closure and stability. With a new bull cycle anticipated for 2024 and 2025, creating a clean slate to operate from is a smart play.

The need for self-custody

The US’ latest actions against centralized exchanges (CEXs) again underscore the importance of using a self-custody hardware wallet like CoolWallet.  As we saw in the past with horror events like the collapses of Mt. Gox and FTX, no exchange is too big to fail, especially when targeted by regulators and hackers. This doesn’t mean Binance will go under, however, it definitely adds more risk to its services. As we’ve seen with other failed exchanges like Mt. Gox, FTX, and Cryptopia, liquidators can take years to refund exchange users, if at all. 

Reputable centralized exchanges like Binance, Coinbase, and Kraken have all been targeted by US regulators this year and threatened with a long list of consequences if they don’t comply.

Last year’s cascade of crypto custodian failures showed us that taking control of your crypto assets is the safest option. If you don’t own your private keys, then you don’t own your crypto.
Self-custody with a non-custodial wallet gives users full control over their private keys and, therefore, their funds at all times. This means that even if a regulatory body were to take action against the wallet provider, users’ funds would remain safe and accessible as only you have access to your funds thanks to the power of blockchain cryptography.

With so many hacks and scams happening in the crypto space, the smart choice for users is a hardware wallet with a proven track record and ample features. 

Look no further than CoolWallet, a trusted Web3 hardware wallet brand established in 2014 that allows you to HODL and stake your crypto in elite and easy cold storage for the next bull run, retaining full control over your funds at all times.
Its open-source EAL6+ secure element, encrypted Bluetooth, 2+1 FA verification, and convenient tamperproof and waterproof design keep your portfolio discreet, safe, and within reach, anywhere, anytime. 

But don’t take our word for it. The world’s biggest crypto exchanges like Binance, OKX and Crypto.com have all partnered with us in the past for special co-branded CoolWallet editions (see our Binance-branded CoolWallet S below).

In addition, the CoolWallet App boasts almost all the functionality of centralized exchanges, but with the peace of mind of cold storage and without the ills of centralization. You can purchase cryptocurrencies with a credit card or trade them for other digital assets or NFTS on platforms such as UniSwap, 1inch, MetaMask, OpenSea, and more.

Our latest Bridge Swap integration with XY Finance also allows you to easily and affordably bridge your assets across different blockchains (for example, bridge USDT ERC20 tokens for USDC BEP20 tokens).

Conclusion

The Binance settlement is a dramatic turn of events that could mark the end of Binance’s global dominance. However, it can also be considered a win for the crypto exchange and the industry, as it likely brings to an end the fear of Binance being sanctioned and CZ being arrested, and brings to an end speculation about the fate of the crypto exchange.

 It certainly took a lot of courage for CZ, possibly the most popular person in the crypto industry, to fly to the US and subject him to the country’s laws, as the UAE where he resides has no extradition treaty with the United States, and Sam Bankman-Fried was found guilty only last month, and could possibly be sentenced to over 100 years in 2024. At the very least the settlement provides a clear road ahead for Binance to get fully compliant and in the good graces of regulators. 

The result also boosts the prospects of a Bitcoin spot ETF by BlackRock and others being approved soon, since the regulatory housecleaning against  FTX, Binance, Coinbase and Kraken leaves less of an argument for SEC chairman Gary Gensler and company that crypto markets continue to be manipulated. 

The Binance saga serves as a stark and timely reminder of the regulatory challenges still facing the crypto industry. 

While most CEXs shrugged off their AML responsibilities in the early days of their existence, the crypto landscape has permanently changed and compliance is no longer optional. Ignorance of the law is no excuse and there are real consequences for failing to meet regulatory standards. 

As the dust settles, the crypto industry will be watching closely to see how Binance navigates its new reality and what this means for the future of crypto exchanges. In the meantime, explore how self-custody with CoolWallet Pro and CoolWallet App can help you HODL safely in style.

Contents

This article is not financial advice of any kind and serves only as educational content based on the opinions of the author. Please do your own research.

Written by Werner Vermaak

Introduction

Since the crazy DeFi Summer of 2020 kicked things off,  decentralized exchanges (DEXs) like Uniswap and 1Inch have become an essential part of crypto trading for more experienced crypto users. With centralized exchanges (CEXs) under siege from both regulators and bad actors and DEXs making huge innovations, there is a growing debate whether smart investors should just give up CEX in favor of DEXs.

In 2022, the failure of crypto custodians like FTX erased billions of dollars in retail investor funds. This in turn resulted in US regulators in particular sharpening their knives for CEXs in 2023, with the biggest exchanges like Binance, Coinbase, Kraken and now also Bybit targeted by the SEC, CFTC and other federal agencies. While Binance could afford its $4.3 billion fine, how many other exchanges can stay afloat in these conditions? In the battle of Proof of Keys vs Proof of Reserves, control matters.

This is leading more and more crypto owners to give up on CEX, moving away from centralized finance (CeFi) and into the world of decentralized finance (DeFi), where there is no risk of intermediaries getting sanctioned or hacked. And it’s not only users, but even exchanges themselves, as we’ve seen with Coinbase’s launch of its Base network this year, while others like Binance and Crypto.com already have their own chains (BNB Chain and Chronos). 

CoolWallet has been Team Self-Custody since day 1. Soon after our launch in 2014,  the cataclysmic Mt.Gox hack gave us a mission to provide crypto users with a safer alternative: ultra-secure and portable cold storage you can keep in your actual wallet. Nearly a decade later, our prized Web3 hardware wallet models the CoolWallet Pro and CoolWallet S still stay true to a simple vision: Not your keys, not your crypto. 

As we head into 2024, is it time to definitively say that using a DEX is better than a centralized exchange? We certainly feel so, but let’s weigh up the arguments. 

CoolWallet Founder Says The Future is DeFi, How We Get There Matters

CoolBitX CEO and creator of CoolWallet Michael Ou recently commented on LinkedIn on ex-Binance’s CEO Changpeng “CZ” Zhao’s intention to explore DeFi at some stage in the future.  

Ou pointed out that Uniswap has already surpassed Coinbase in trading volume in the first half of this year, and that centralized exchanges are launching their own public chains and decentralized applications for clear reasons.

He believes that the full potential of Web3 can only be reached if we combine self-custody with DeFi and Dapps. While DeFi is set to overtake CeFi, how it does it and captures new users will be critical, and CoolWallet will throw its full support behind this journey.

Current State: DEX to CEX Spot Trade Volume

Looking at CEX vs DEX data in the graph below (January 2019 to November 2023), we can see that DEXs have steadily grown their trading volume in the last few years. Still, as of November 2023, DEXs account for less than 10% of the trading volume compared to CEXs, after it reached an all-time high of 22% in June 2023 when the SEC first went after Binance and Coinbase.

In terms of specific exchanges, Binance, the largest CEX, processes a $14 billion spot trading volume per 24 hours. In comparison, Uniswap, a well-known DEX, has a lower volume but in the last year its trading volume outpaced that of Coinbase, a major CEX, for several consecutive months.

January 2019 to November 2023

Understanding Centralized Exchanges (CEXs)

Centralized exchanges function similarly to traditional stock exchanges. They are operated by a central authority which controls the platform’s operations. This includes overseeing the order book, executing trades, and holding user funds. Well-known examples include Coinbase, Binance, and Kraken.

Key Benefits of CEXs – User-Friendly Interface: They often provide a more user-friendly interface that is suitable for beginners. – Higher Liquidity: CEXs generally offer higher liquidity, facilitating quicker trades and better prices. – Customer Support: They provide customer support and services, which can be crucial for new users.

Key Limitations of CEXs – Security Risks: Holding funds centrally makes CEXs a target for hacks. – Regulatory Oversight: Being centralized entities, they are subject to governmental regulations, which can impact their operations. – Privacy Concerns: Users have to go through KYC (Know Your Customer) processes, compromising anonymity.

How Decentralized Exchanges (DEXs) Work

In contrast, DEXs operate without a central authority. They utilize smart contracts on blockchain networks, like Ethereum, to facilitate peer-to-peer trading. Users retain control of their private keys and thus their funds, trading directly from their wallets. Leading examples include Uniswap, 1Inch, Raydium (Solana), Sushiswap, PancakeSwap (BNB Chain) and Osmosis (Cosmos). All these DEXs can be accessed in the CoolWallet App by using native features such as WalletConnect.

Key Benefits of DEXs – Enhanced Security: Since there’s no central point of failure and users hold their funds, the risk of large-scale hacks is minimized. – Anonymity: DEXs typically do not require personal information, preserving user privacy. – No Counterparty Risk: Users trade directly from their wallets, mitigating the risk of losing funds due to the exchange’s insolvency.

Key Limitations of DEXs – Complex Interface: They can be less intuitive, posing a challenge for beginners. – Lower Liquidity: DEXs often suffer from lower liquidity compared to CEXs, leading to price slippage. – Limited Customer Support: The lack of centralized customer support can be a drawback for users requiring assistance.

Quick Comparison: CEX vs DEX Features

• Security: DEXs have a clear advantage in terms of security. The decentralized nature and user control over funds significantly reduce the risk of large-scale breaches.
• Privacy and Anonymity: DEXs offer greater privacy as they usually don’t require personal information for transactions.
• Regulatory Compliance: CEXs, being centralized, are more compliant with regulatory frameworks, which can be seen as both an advantage and a limitation.
• Ease of Use: CEXs are generally more user-friendly, catering to a broader audience including beginners.
• Liquidity and Trade Execution: CEXs excel in providing higher liquidity, resulting in better trade execution and less slippage.

6 Reasons To Use A DEX instead of a CEX in 2024

Source: Medium

In most cases though, choosing a centralized or decentralized exchange hinges on personal preference and what’s most important to you. Here are a few benefits that DEXs have over CEXs that you might not be aware of.

1. Better Security

DEXs are generally considered more secure than CEXs because they operate on a decentralized network, making them less vulnerable to hacks and other security breaches. Users maintain control of their private keys, ensuring full ownership and control over their assets at all times.

2. Total Control Over Your Funds

In a DEX, you have full control of your wallet and private keys. This grants you complete ownership, but it also means you are solely responsible for protecting your assets. Learn more about the Proof of Keys movement here.

3. More Privacy

DEXs do not require users to disclose their personal information or identity, such as through Know-Your-Customer (KYC) procedures, which is important for users who prioritize privacy. Traders using DEXs don’t need to disclose their private keys or identity (yet!) because wallets are held externally, and the DEX is not liable for the funds.

4. Less Market Manipulation

DEX automation, along with the fact that they do not hold user-submitted data, means that these new-generation exchanges are harder to manipulate.

5. Transparency and Verifiability

All transactions on a DEX are recorded on an immutable public blockchain. This ensures complete transparency and allows any user to verify the legitimacy of transactions.

6. Access to small-cap altcoin gems

It’s a well-known fact that by the time a cryptocurrency is listed on a big exchange, it’s already well-established and with a large market cap. DeFi degens know the real money is made earlier, and want to frontrun CEX listings by buying promising tokens as soon as they are created. The only way to do this is to get the smart contract address and swap assets or provide liquidity on a DEX like Uniswap in exchange for staking rewards. Of course, these early-stage tokens come with a very high risk of fraud and scams, so keep this in consideration at all times. Also, be really careful of signing any transaction with a wallet that holds significant funds, as it can be drained.

This is where CoolWallet’s SmartScan feature comes in handy- It analyzes smart contract code in real time and flags any suspicious behavior immediately.

What are DEX drawbacks?

However, it’s important to note that DEXs also have their drawbacks. 

Complex Learning Curve

They can be more complicated to use, especially for those less familiar with decentralized blockchain technology. This is why most newbies opt to get started on big centralized exchanges. 

Security concerns

DEXs also have potential security concerns, such as smart contract vulnerabilities, rug pulls (when the team drains all liquidity and exits)  and protocol and implementation risks. The newer the coin and smaller the market cap, the bigger the risk.

Liquidity Fluctuations

Furthermore, DEXs may struggle more than CEXs when working with larger investors due to issues with liquidity, since the trading pairs are often newer and therefore have less coins circulating. 

Non-reversible

Lastly, the irreversibility of transactions means that if your funds are stolen or lost due to inadequate security measures, there’s usually no recourse to recover them. This is a feature, not a bug, of blockchain technology, where immutability is gained by giving up centralized control over transactions. 

Regulations

Regulators are slowly turning their gaze to DeFi, and in the US, regulators have made it clear that decentralized protocols will have to comply with AML/CFT laws and other regulations. As the arrests of some DeFi developers have shown, they mean business.

How are DEXs boosting liquidity? 

The perception of DEXs having low liquidity is becoming increasingly outdated, as they evolve and become more and more sophisticated, sucking up liquidity from a range of sources to cater for traders both big and small. Here’s how:

1. Liquidity Pools: DEXs use liquidity pools, which are crowdsourced pools of cryptocurrencies or tokens locked in a smart contract. These pools facilitate trades between assets on a DEX, allowing digital assets to be traded in an automatic and permissionless manner
2. Automated Market Makers (AMMs): AMMs are algorithms that set the price of a token pair in a liquidity pool based on the ratio of the tokens in the pool. This mechanism allows for continuous and automated trading, which can increase liquidity. 
3. Incentives for Liquidity Providers (LPs): DEXs incentivize users to provide liquidity by offering rewards, often in the form of governance or native tokens.
4. Fragmentation of Liquidity Supply: DEXs allow for fragmentation of liquidity supply between low- and high-fee pools. This means that small liquidity providers (LPs) can converge to high-fee pools, accepting lower execution probabilities to mitigate smaller liquidity management costs. On the other hand, large (institutional) LPs can dominate low-fee pools, frequently adjusting positions in response to substantial trading volume.
5. DEX Aggregators: DEX aggregators optimize token prices, swap fees, and slippage by sourcing liquidity from multiple DEXs, offering better rates for users and improving overall liquidity.
6. Direct Peer-to-Peer Trading: DEXs allow users to trade directly from their wallets by interacting with the smart contracts behind the trading platform. This direct trading can increase the overall liquidity of the platform.

By boosting liquidity, DEXs can offer more stable prices, reduce slippage (price changes due to large trades), and improve the overall trading experience for users.

How do DEXs handle user disputes?

In a DEX, the terms of a trade are decided using a smart contract, and an Automated Market Maker (AMM) handles the trade itself. This process does not involve scrutiny by a third party. 

Decentralized exchanges (DEXs) may handle disputes between users through a process known as Decentralized Dispute Resolution (DDR).

Smart contract dispute resolution is another method used to resolve disputes in DEXs. This involves resolving disputes that occur when a smart contract is executed. Smart contracts are self-executing programs contained in a blockchain, such as Ethereum. The program ensures the actions agreed on in the contract happen, which removes the trust generally required when exchanges occur. 

In some cases, blockchain startups have created dispute-resolution solutions using blockchain technology, smart contracts, and online applications. For instance, a user might find a dispute transaction button on the decentralized application (dApp), and a smart contract would execute dispute resolution actions. The blockchain network would then select a group of mediators or arbiters.

Another approach is the use of Online Dispute Resolution (ODR) mechanisms, which are being adapted to the blockchain context.

Conclusion: Is a DEX Better Than a Centralized Exchange in 2024?

The answer largely depends on the user’s priorities and expertise. If security, privacy, and self-custody are paramount, a DEX is superior. However, for users valuing ease of use, higher liquidity, and regulatory compliance, a CEX might be more suitable.

Or at least, that was the old argument. While the above drawbacks certainly applied to decentralized exchanges at the start of the decade, and smart contract risks and hacks are still very much a big concern in DeFi, there has also been a lot of innovation in what is still a very young industry with a very big mission. 

Recent DeFi innovations such as perpetual DEXs which allow for leverage trading, Telegram trading bots which enable you to automate your trading strategy and “snipe” good buying opportunities, and convenient features such as limit orders on DEXs like 1inch have blurred, if not erased, the lines between the existing ideas of a DEX vs CEX. Add to this exciting swap bridges like XY Finance, our latest partner, and the answer is clear:

It’s simply faster, cheaper, safer and more private to use a DEX, if you know what you’re doing.

And the great news is that you can do it all on CoolWallet, in cold storage.

What Is DOT Staking?

DOT Staking is based on the Nominated Proof-of-Stake (NPoS) mechanism. Polkadot is a decentralized network of validators selected by nominators to secure Polkadot‘s entire multi-chain ecosystem. Validators and nominators get a share of DOT in return. Now, you can easily participate in the Polkadot network and earn rewards via CoolWallet.

How to Stake DOT on CoolWallet?

Staking DOT requires 2 actions:

1. Bond: Locking tokens on-chain.
2. Nominate: Selecting a set of validators, to whom these locked tokens will automatically be allocated to.

Once staked, DOT assets cannot be used for transactions. After staking is completed, you can add more stake at any time to increase the total staked amount.

Step 1. Download the latest CoolWallet App and have your CoolWallet Pro ready.

 

Step 2. Open the app and go to the “Marketplace” section located at the bottom. Then, select “Staking” and choose “DOT”. Finally, click on the “Stake” button.

 

Step 3. Enter the amount you wish to stake. It’s important to be aware that Polkadot staking utilizes a “bag list mechanism”. For a detailed understanding of how this mechanism works, you can watch the official video.

 

https://www.youtube.com/watch?v=hIIZRJLrBZA

Minimum Staking Requirements: Ensure your staking amount meets these minimums to qualify for rewards. Check the most recent staking requirements in the FAQ on CoolWallet App. *At the time this post was created, the minimum amount required to stake DOT is 451.

To successfully stake DOT, you’ll need to complete two transactions: “Bond” and “Nominate.” Click on “Continue” to proceed and follow the verification process to finalize the “Bond” transaction.

 

Step 4. Once you’ve successfully completed the “Bond” transaction, proceed to finalize the “Nominate” transaction.

 

Step 5. Now, all that’s left to do is wait for your rewards to accumulate! Enjoy the benefits of DOT staking with CoolWallet.

What should I do if I’ve completed the “Bond” transaction but not the “Nominate” transaction?

No worries! You can simply click on “Action pending, click here to proceed” on the “Manage Stakes” page and choose “Nominate” to complete the “Nominate” transaction.

How can I check if my staking amount is insufficient to earn rewards?

You’ll see a reminder on the “Manage Stakes” page that says, “Please click here to reconfirm your staking status” if your staking amount is below the minimum requirement or close to it. Simply click on the reminder to add more to your staking amount and ensure you can accumulate rewards.

How to Retrieve Staked Assets?

Unstaking DOT requires 3 actions:

1. Chill: Chilling is the act of stepping back from any nominating or validating.
2. Unbond: Unlocking the tokens on-chain to make them transferable.
3. Withdraw: Once the 28-day unbonding period has passed, your unbonded funds can be withdrawn and made transferable.

After you start the Unbond action on Polkadot, your tokens will go through a mandatory 28-day unbonding period. They’ll be locked and cannot be moved during this time. Once the 28 days are up, you’ll need to claim your rewards to get your tokens sent to your address. Just remember, you won’t earn any rewards while your tokens are in the unbonding period.

 

Step 1. To unstake your DOT, you’ll need to complete two transactions. Start by clicking on “Request to unstake” and selecting the staking item you wish to unstake. Then, click “Continue” to proceed.

 

Step 2. After that, complete the verification process and click “Got it” for the second transaction, which is “Unbond.”

 

Step 3. Once the “Unbond” transaction is completed, you’ll need to wait for your assets to be unfrozen.

 

Step 4. When your assets are unfrozen, you’ll see a reminder saying “Unlocked, please tap to retrieve your asset” on the “Manage Stakes” page. Click on it and follow the steps to withdraw your staking assets.

What should I do if I’ve completed the first transaction but not the “Unbond” transaction?

No worries! You can simply click on “Action pending, click here to proceed” on the “Manage Stakes” page and choose “Unbound” to complete the “Unbound” transaction.

About the Validator P2P.org

Founded in 2018, P2P.org is dedicated to providing staking services and has emerged as a leading proof-of-stake validator and RPC node provider. P2P.org assists investors in compounding their cryptocurrency investments and offers high uptime, secure staking with advanced monitoring and support.

FAQ – DOT Staking

Is there a minimum amount for DOT staking?

Yes. The minimum staking threshold is subject to change with each era based on the mechanisms on the Polkadot chain. Ensure your staking amount meets these minimums to qualify for rewards. Check the most recent staking requirements in the FAQ on CoolWallet App.

If there’s a chance you might not get rewards for your DOT staking, the CoolWallet App will let you know. You’ll see a message saying, “Please click here to reconfirm your staking status.” Just click it to adjust your staking and keep your rewards coming.

How is the reward calculated?

When a stake is completed, it will take at least one era to accumulate rewards and waiting time ranges from 1 to 24 hours. Once started, the rewards will be settled every 24 hours. Rewards may vary based on the returns of the validator and other impacting factors.

How to claim the reward?

During stake, the validator will automatically send the reward to your address, no extra action is required.
CoolWallet currently does not support modifying the receiving address for the reward.

What are the penalties?

According to the operating protocol of Polkadot, if the validator is punished by the Polkadot network due to misbehaving, part of your locked DOT asset will be taken as a penalty.

Last week saw Ledger, the world’s biggest crypto hardware wallet manufacturer, fall victim to a targeted high-profile supply chain attack that breached hundreds of thousands of dollars in cryptocurrencies from users’ wallets. 

However, experts believe that the hack could’ve been truly catastrophic if it remained undetected for longer, and it could have siphoned off tens of millions in users’ funds and contaminated the entire DeFi ecosystem in the process. Ledger’s popularity as a cold wallet and its self-reported 1.5 million customers made it an easy target for the hacker, and it and other leading USB-format cold wallets like Trezor are often in the cross-hairs of bad actors for this reason. Alarmingly, the breach was first spotted by a third-party firm, not Ledger, which points to a potentially serious lapse in Ledger’s security monitoring.

The French wallet maker’s latest kerfuffle comes after previous slip ups such as 2021’s database phishing hack and 2023’s seed recovery service controversy. This time it involved the compromise of Ledger’s widely-used Connect Kit JavaScript library, leading to the theft of an estimated $700,000 in digital assets from wallets that connected to services through Connect Kit.

The hack’s sneaky attack vector and capacity to annihilate the entire DeFi industry offer several serious security considerations for all crypto users and service providers, which we will discuss later in this article.

 

 

How the Ledger Supply Chain Attack Occurred

The Ledger Connect Kit hack was a new iteration of a classic “supply-chain attack,” which gained notoriety with the SolarWinds hack. Such attacks compromise behind-the-scenes infrastructure software and may have caused significant damage to crypto users. 

• An attacker phished the account of a former Ledger employee, to gain access to Ledger’s Connect Kit software.
• They then injected malicious “drainer” code into Ledger’s software component that was designed to siphon off digital assets from wallets connected through the Connect Kit. 
• The code redirected user funds to the hacker’s own wallet during transactions with dapps that interacted with the infected software.
• The malicious code snatched crypto from wallets connected to services through Connect Kit for a few hours before it was patched. 
• Before the issue was patched, the entire web3 ecosystem was at risk.The compromised file was active for only five hours, during which two hours it was actively draining funds.

Other wallet makers like CoolWallet quickly alerted DeFi users to the crisis, with its technical director Wesley Wen warning users not to connect with any dApps due to the compromised software.

                              

Impact on Decentralized Finance (DeFi) Protocols

The impact of the vulnerability extended beyond Ledger, affecting other protocols in the decentralized finance (DeFi) space, such as SushiSwap, Kyber, Revoke.cash, and Zapper. Kyber and Revoke.cash took immediate action, deactivating their respective front ends to prevent further exploitation.

Sushi Swap CTO Matthew Lilley warned Dapp users to not interact with any applications until the situation was resolved. 

                                   

Ledger Hack: Crypto Security Lessons To Heed For Industry and Users

As David Schwed explains in Fortune, what’s particularly alarming about this incident is that the damage to crypto users wasn’t as catastrophic as it could have been, but the implications for Ledger were severe. The company, known for its strong security, faced a crisis that was entirely preventable. To prevent such internal process failures, crypto projects need to reorient their security standards around more robust security reviews and best practices.

Proper code management

The root of the problem lies in process failures and gaps in security practices, issues that are unfortunately common in the crypto and blockchain world. Many projects in this space have security measures that are either immature or underfunded, focusing too narrowly on finding code vulnerabilities. However, the Ledger hack wasn’t about a flaw in the code itself; it was about how the code was managed and updated.

Employee access control

The initial breach stemmed from a phishing attack targeting a former Ledger employee’s accounts. This raises questions about the need for better anti-phishing training and practices. More concerning was that the former employee still had access to Ledger’s code on a third-party service. This is a glaring oversight in access control.

But the most critical failure was the automatic updating of the Connect Kit code from a live database without any human review. This practice created a significant vulnerability, as there was no check to ensure that the changes were legitimate and not malicious.

Holistic auditing

This incident highlighted the limitations of security audits that focus only on code, instead of covering all the bases. A more comprehensive approach is needed, one that assesses the entire development lifecycle. This includes internal security measures, phishing prevention, and change-management processes.

User Responsibility

As in any industry, the customer eventually gets to determine the level of quality that they’re willing to accept by voting with their purchases. Crypto users can keep wallet makers on their toes by choosing reputable wallet providers with stellar track records and industry-best standards. This includes implementing strong authentication methods, regularly updating software and firmware, and following best practices for backup storage and recover.

Conclusion

The Ledger hack should serve as a wake-up call for the entire crypto industry. It shows that crypto isn’t inherently insecure, but there’s a pressing need for more rigorous and standardized security practices. 

By learning from this incident and implementing best practices, crypto wallet users can better protect their digital assets and avoid similar security breaches in the future.

As the industry matures, companies that invest in robust security measures will stand out for their trustworthiness and longevity. Those who don’t risk being left behind due to avoidable failures. 

Crypto users looking to diversify their risk should check out CoolWallet Pro, a pioneering battle-tested hardware wallet reputable track record which has been in existence as long as Ledger has (2014). Its maker CoolBitX celebrates an unblemished 10-year anniversary next year.

With an EAL6+ secure element, biometric verifications, encrypted military-grade Bluetooth and a tamperproof and waterproof wafer-thin design, this elite and convenient hardware wallet allows you to access Web3 and your digital assets anywhere, anytime with absolute discretion. 

Learn more about CoolWallet Pro (for DeFi power users), CoolWallet S (for HODLers) and its CoolWallet App, which features SafeScan, an integrated real-time Web3 transaction and dapp scanner to detect and thwart phishing threats, at the links below:

CoolWallet Pro: https://44f03c-3.myshopify.com/products/coolwallet-pro-1
CoolWallet S: https://44f03c-3.myshopify.com/products/coolwallet-s
CoolWallet App: https://44f03c-3.myshopify.com/pages/coolwallet-app

Contents

Last week Taiwan became the epicenter of the blockchain space again for a few days when it hosted Taipei Blockchain Week 2023. The dynamic six-day event themed “Scale”, organized by BuZhiDAO, TABEI and Sora Ventures, was the second of its kind and served not just a gathering but a celebration of Taiwan’s home grown tech talent and burgeoning status as a global Web3 hub. Over 5,000 blockchain enthusiasts, experts, and innovators converged at the Songshan Cultural and Creative Park in the city center, immersing themselves in the latest crypto narratives and trends that will shape 2024.

Among the standout participants was CoolWallet, the trailblazer in the crypto hardware wallet industry. Recognized by the government in 2021 as a leader in blockchain technology, Team CoolWallet was out in full force at the flagship regional event, hosting a well-attended booth full of promotions as well as contributing to VIP attendees’ gift boxes.

An event highlight was CoolWallet Technical Director Wesley Wen’s panel discussion, where he shared some insights below on wallet technology’s future and current challenges.

CoolWallet Technical Director Discusses Future of Crypto Wallets

Envisioning the Next-Gen Crypto Wallets

As CoolWallet approaches its 10th anniversary in 2024, it’s gearing up for a landmark year with exciting plans, including new product launches and a potential token introduction. Wen has a clear vision for the future of crypto wallets, seeing them evolve into personal vaults that offers seamless access to a diverse range of digital assets, including cryptocurrencies, personal data, and content across various blockchains. This evolution aims to address the fragmentation in the current wallet experience, enabling effortless interaction with multiple blockchains without the need to set up and access several different wallets.

Wen pointed out in his panel discussion “Amplifying Web3 Access: Innovations in Wallet Technology” that CoolWallet has always prioritized user-friendly design. Its CoolWallet Pro and S models are testament to this, being card-sized with Bluetooth connectivity and an elite secure element. The upcoming model promises to further simplify hardware wallet usage, making it more accessible, especially for newcomers to the Web3 space.

Balancing Simplicity and Privacy

Wen also addressed the ongoing debate about using a single wallet for all Web3 activities versus multiple wallets for different purposes. CoolWallet’s design offers a solution, allowing users to create up to 99 different addresses, each with its own identity. This flexibility ensures a balance between simplicity and privacy needs.

Enhancing Safety and Expanding User Base

CoolWallet is committed to supporting multiple new blockchain networks and enhancing its Smart Scan feature to protect users against harmful dApps, addresses, and tokens. Plans are also underway to develop a new product tailored for new Web3 users, as part of their strategy to broaden their user base.

“We were thrilled to participate and connect again with Taiwan’s vibrant blockchain community at this important event,” said Wen. “Judging by the tremendous energy and optimism here despite tough macro-economic conditions this year, the future is brighter than ever for Web3 and blockchain technology not only in Taiwan, but globally. Enhancing wallet safety and ease of use remains a top priority and must be addressed if we want to reach mass adoption.”

Highlights from Taipei Blockchain Week 2023

Taipei Blockchain Week boasted over 200 expert in-person and virtual speakers, including industry giants like Vitalik Buterin, Brian Armstrong, and new Binance chief Richard Teng. Topics ranged from cryptocurrencies and DeFi to NFTs and more. The Sora Summit focused on Bitcoin utility, cryptography, decentralized science, and NFT applications, with speakers from leading organizations like Coinbase and AMD.

Side events covered gaming, investment, infrastructure development, and women empowerment in blockchain. The first three days featured hackathons, challenging developers to create innovative solutions using platforms like Avalanche and BNB Chain. A significant focus was on the growing ecosystem of Bitcoin Ordinals , with keynotes and discussions by Ordinals inventor Casey Rodarmor and BRC20 creator Domo.

Taiwan: A Rising Star in Blockchain

Taipei Blockchain Week 2023 not only set new records but also reinforced Taiwan’s position as a major force in blockchain adoption and a breeding ground for industry talent.

As Wen aptly commented, “The future is brighter than ever for Web3 and blockchain technology, not only in Taiwan but globally.” He emphasized CoolWallet’s strong community and big coverage in Asia, and added that new markets in Europe and US would be a focus for the cold wallet brand in 2024.

Stay tuned on our blog and Twitter for some huge announcements in 2024, and happy holidays to everyone!

Contents

Introduction

Let’s be honest. After the huge fails of 2022, the challenge for the crypto industry in 2023 was clear: to survive before we can thrive. While this can be said for most mid-cycle years, this year counted more than others, with some regulators looking to cripple the industry and new favorites like artificial intelligence (AI) taking all our shine as the future of technology.

Looking back across the battle fields of 2023 now, the objective has been achieved, and then some. Nearly triple its $16,500 price tag on January 1st at present, Bitcoin and others like Solana (started at under $10, now $105) have shown that we’re back. Of course, some of us never left!

It wasn’t an easy year, of course. Court cases, sell the news events, and trading sideways tested the patience of everyone as we awaited the next Bitcoin halving event and new narratives like the Bitcoin spot ETF and Ethereum sharding to wake up the crypto markets and send them parabolic. So congratulations, you are likely about to be awarded with a 2024 bull market, IF things go to plan. But before you fully invest your portfolio in alt coins and animal pictures, let’s look back on 2023 and observe how it will influence one of the most important years in crypto, 2024.  

Here are the key events that defined 2023 and will shape the next year in the worlds of Web3, blockchain and crypto.

–>>Read about CoolWallet’s exciting roadmap for 2024 here

Before we begin, a quick warning:

Don’t be another crypto victim in 2024.

Scammers and hackers are flocking back into crypto like vultures, just as they do with every bull(ish) market before, looking to rob you blind. Please protect your assets. Top tips to start with: Use cold storage if you can afford it, be careful which sites and Dapps you interact with, don’t blind sign any transaction, , watch out for phishing scams, use a wallet that screens Web3 transactions, protect your private key or recovery seed (don’t store digitally) and spread your risk across a few different wallets if you can.

Of course it goes without saying that at least one of them should be a CoolWallet Pro (for serious users), a CoolWallet S (for HODLers) or CoolWallet App (includes a free hot wallet). Everything should come in three, so why not get one of each? Not financial advice.

The Bitcoin Juggernaut is Back, despite AI

The crazy AI narrative driven by OpenAI’s ChatGPT ascent took crypto by surprise in the early part of the year, and also took most of its VC funding. The AI crypto narrative was compelling, and while crypto and AI are fundamentally different (just ask Cronje), it provided an impetus for digital asset markets to get moving again. However, with every month revolving around new factors like the United States’s CPI inflation reading and FOMC interest rates announcements, markets remained subdued while investors waited out the quantitative tightening and resulting recession.

If you took Bitcoin’s pulse over the summer or even early fall, you would have assumed it was on life support. Bitcoin struggled to first creep over $20,000, then spluttered at $28,000 while many altcoins and meme tokens were being hoarded by traders hoping to generate short-term gains before the bull market began.

But something happened in mid-October this year. As if Bitcoin was waiting for the moment Sam Bankman-Fried’s trial began, Bitcoin sprang back to life and took almost everyone by surprise.

Not everyone though. Enter the new crypto catalyst, BlackRock, an asset manager with over $9 trillion in managed assets globally, has been in a legal battle with the United States government to create a spot Bitcoin ETF. The creation of a federally-approved ETF could create an avenue for millions of people to direct investments straight into Bitcoin. Other ETFs would likely follow once BlackRock has ironed out the fine details. Altcoins have been following BTC, which currently sits around $42.000.

With the current rate-cuts forecasted for next year, Bitcoin is in a unique position to have one of the most volatile halving events yet, which is scheduled to happen at block 840,000 this April. With how dramatic previous halvings have been, we are in for a wild ride in 2024 as we watch the charts.

SBF Is Found Guilty and CZ of Binance Steps Down

Crypto bogeyman Gary Gensler lived rent-free in the minds of crypto holders all year-long, with his SEC and other Operation Chokepoint 2.0 agencies going after everyone from Coinbase to Richard Heart to Kraken, but it seems that once BlackRock stepped in, things got cleared up pretty quick. Or was that always the plan?

In any case, the two top players in last year’s FTX drama both had an inevitably bad year.

Last year’s scourge on crypto has officially been convicted on multiple charges by the United States government, and SBF will have to watch the bull market from behind bars while we enjoy ourselves.

Chengpeng Zhao from Binance, known as CZ for short, has stepped down as CEO of Binance as he faces charges from the SEC. CZ has been accused of violating the Bank Secrecy Act by allowing locations sanctioned by the US government to conduct crypto transactions and faces a 10-year prison sentence. Besides a $4.3 billion dollar fine for Binance, the details of the settlement with the SEC is not yet known and still ongoing.

Overall, the conclusion of these negative storylines is a good thing. Cleaning up the House of Crypto is a prerequisite for mass adoption and couldn’t be avoided. 

Ethereum, Layer-2s and Solana mania

Ethereum has had a rough year, even by bear market standards. While it’s up since January of 2023, it’s hard to find a coin that isn’t, and the ETH/BTC chart is at a yearly low, down 30% since January 2023. We’re a long way off from the Flippening. 

However, look deeper and you’ll see that Ethereum has wrapped another year of reinvention and reinforcement. Last year’s Merge was followed up by this year’s Shanghai upgrade, which made unstaking ETH possible, and next year’s EIP4884 (expected this year) will bring the first stage of sharding, proto-danksharding, to Ethereum and its army of layer-2s.

Meanwhile, Solana has had a late and crazy surge after its Breakpoint conference, multiplying its market cap by 5x in Q4 and beating Ethereum by most metrics, be it active addresses, DEX volume, and NFT sales. This is largely due to nearly a year of uninterrupted uptime, new projects like Bonk, Pyth, Jito, Jupiter and MadLads stirring things up and injecting new life and liquidity into the original Ethereum killer, as well as a new announcement about its Firedancer protocol. Also, a slew of massive airdrops sent farmers rushing over to SolanaLand. Don’t underestimate the importance of Ethereum however, as it continues to be the leading Layer 1 chain in DeFi and smart contracts, locking in over $46 billion of TVL compared to Solana’s $1.5 billion according to DeFiLlama. 

Ether has been lagging behind many other Top 10 coins during the recent rally, but if you’re highly invested in Layer 2 protocols and tokens, you probably didn’t notice. Vitalik himself has been very focused on improving the role L2 chains play in the DeFi space, noting important applications that work in finance, require privacy, or interact with social media or gaming would not mind slightly slower transaction times in exchange for lower fees. 

Layer 2 chains such as Arbitrum (ARB), Optimism (OP), and Polygon (MATIC) are helping solve the scalability, privacy, transaction speed, and cost issues of operating on Ethereum by rolling up transactions and processing them in bulk. Underestimating Ethereum in 2024 would be a terrible mistake, but protocols that build on ethereum and make it more affordable and accessible to DeFi users and traditional financial services seem like a guaranteed way to stay in the green next year.

Memecoins never left

Source: CoinMarketCap

After Elon Musk appeared on live television talking about DOGE and the price immediately plummeted, you might have assumed memecoins would not appear for some time. PEPE emerged during the middle of the bear market this year in April and caught everyone off guard, creating a horde of bear market millionaires before transactions became too expensive to justify trading the frog token on a DEX any longer (thanks Ethereum).

Memecoins continue to pop up unexpectedly, as currently dogs are once again the favorite animal of meme traders, with Solana being the new favorite place to trade, thanks to transactions remaining cheap and fast. Tokens such as BONK and dogwifhat (WIF) are exploding with popularity as Solana NFT bros and memecoin traders unite to make short-term profits. 

Will the markets follow the predictable pattern of BTC, to alt coins, to memecoins, to dumping, or have animal tokens just replaced NFTs as a way of traders bored of low volatility to speculate while markets go sideways? We will hopefully find out in 2024, but with any luck the markets will mature and retail traders will retain enough capital for the bull run just beginning to show signs of life.

LFG 2024!

If you are still here at the end of 2023, you’ve already done better than a large number of investors that aren’t welcome home for the holidays after convincing their family to buy Bitcoin at $60,000 USD two years ago. If you convinced them to buy SOL last month, they would already be up over 100%. But who knows, they might be down next month. Staying informed on narratives and industry trends still created many millionaires overnight this year, and this will be no less true as we ring in the new year and welcome in 2024.

Expect the major events next year such as the Bitcoin halving, a likely Bitcoin ETF, predicted rate cuts by the US government, and the American election to cause volatility that will make 2023 look like a walk in the park.

If you’re worried about getting shaken out when markets get rough, why not get a CoolWallet?  It’s the world’s most convenient crypto hardware wallet, made for everyone from DeFi degens to Bitcoin HODLers. With an EAL6+ secure element, biometric verification and Web3 transaction anti-phishing smart scanning, it keeps your crypto safe while you’re on the go. And unlike some of our biggest competitors, we’re open-source, we don’t collect personal data and we remain highly diligent on all possible attack vectors. 

CoolWallet has HUGE plans for 2024, so if you haven’t started yet, download our CoolWallet App, create a hot wallet if you can’t afford our hardware wallets just yet, and start playing around. 

Thanks for supporting us in 2023, and see you in 2024!
To the Moon!

Contents

Introduction

Despite huge global economic challenges in 2023, the crypto sector, boosted by a resurgent Bitcoin, has had an incredible year and all eyes and ears are now on where it’s going in 2024. 

There is an overload absolutely legitimate reasons why crypto can recapture the world’s attention after the rise of artificial intelligence stole most of its thunder last year. It all starts with Bitcoin of course, but there’s so much more going on. 

We gazed into the looking glasses of smart money, seeing what firms like a16Z, Van Eck, Bitwise and others believe 2024 might hold for crypto and Web3, but keep in mind that these companies all have significant skin in the game and will therefore in most cases be very bullish. 

Here are some of the biggest predictions, trends and narratives for 2024. Please note that this article is for educational purposes only, purely speculative in nature and should not be considered as financial advice of any kind. 

Source: Decrypt.co

Spot ETF Approval Helps Bitcoin Beat US Recession

Crypto markets spinned like a yoyo in 2023 on fears of a delayed global economic meltdown and unbridled FOMO for next year’s Bitcoin halving and expected Spot ETF approval. According to Van Eck, the U.S. is expected to enter a recession in early 2024, which will cool off the economy and lead to declining economic indicators. 

By the end of 2023, inflation is once again on the up according to the latest CPI data and with the Nasdaq at near record highs and the majority of investors expecting the money printers to start BRRRing in 2024, anything is possible. 

Despite this, over $2.4 billion is projected to flow into newly approved U.S. spot Bitcoin ETFs in the first quarter of 2024, helping to keep Bitcoin’s price above $30,000 despite significant potential volatility. A BitWise report holds that spot bitcoin ETFs could capture 1% of the $7.2 trillion U.S. ETF market, or $72 billion, within five years.

Fourth Bitcoin Halving Comes and Goes

In 2023 everyone and their grandma became an expert on the intricacies of Bitcoin’s diminishing mining rewards algorithm and those that didn’t get the memo in 2016 and 2020 and missed the huge bull runs the following years, are now lying in wait to cash in on the expected price surge that will follow once BTC’s block rewards drop from 6.25BTC to 3.125BTC. What many may be missing is that the Bitcoin halving and ETF approval will be the moment where many HODLers finally take some profit. 

The fourth Bitcoin halving in April 2024 is predicted to occur smoothly without major forks or missed blocks. This event will likely cause a consolidation in the market as unprofitable miners disconnect, followed by a rise in Bitcoin’s price above $48,000. 

The smart money has been on accumulating BTC under $20,000 and betting on mining companies, which has seen their stock prices spike last year. Low-cost miners like CLSK and RIOT are expected to outperform others, with at least one publicly traded miner predicted to increase tenfold by year’s end.

Laser Eyes Rejoice! Bitcoin Hits $100k in Q4 2024

After the Halving is done and Bitcoin ETFs are hopefully finally a reality, there could potentially be a temporary slump in interest in crypto markets. In the latter half of 2024, amidst a landscape of high global electoral activity and potential regulatory shifts, Bitcoin is forecasted to reach an all-time high, potentially coinciding with the US elections on 5 November 2024. Will we finally see $100,000 and “I told you so” posts from all those laser eye Bitcoin maxis? Analysts like Van Eck believe so and Bitwise holds that Bitcoin will trade above $80,000, setting a new all-time high. 

Ethereum Rips, But Doesn’t Flip and Then Slips to L2s and Solana

Since its Beacon Chain launch in 2020 and Merge in 2022, Ethereum has left its competitors in the dust as the planet’s biggest proof-of-stake chain and Web3 ecosystem. Its Dencun fork in Q1 2024 will introduce EIP-4884’s proto-danksharding upgrade an important step on the journey to full sharding, and make L2s cheaper in the process, driving the average transaction cost below $0.01, paving the way for more mainstream uses. Ethereum revenue will more than double to $5 billion as users flock to crypto applications.

Talks of the Great Flippening will be everywhere again, but analysts don’t think Ethereum will surpass Bitcoin’s market cap in 2024 just yet. Ethereum should have a very strong year, and may outperform all major tech stocks and even Bitcoin,  but will likely lose some market share to other smart contract platforms, like Solana, due to uncertainties around its scalability roadmap centralized staking pools like Lido and high price which might drive degens elsewhere to earlier-stage opportunities.

ETH L2 Wars: 10x Transactions, 2-3 Dominant Chains

Post the EIP-4844 upgrade, Ethereum’s Layer 2 chains like Polygon, Arbitrum, Optimism and the slew of new ZK rollup chains are predicted to explode in terms of value and usage, collectively reaching twice the current DEX volume and a crazy 10x the number of Ethereum transactions by Q4 2024. According to a16z layer-2s’ contribution to Ethereum transactions 4x’d from 1.5% to over 7% in 2023, and this figure will continue to spike in 2024. We’ll see a consolidation by the end of 2024 where 2-3 dominant players will rule the market due to liquidity fragmentation, with one of them overtaking Ethereum in monthly DEX volume/TVL. 

FASB and Coinbase Makes Corporate Crypto Holdings Sexy

New accounting treatments will encourage corporate crypto holdings. Companies like Coinbase will report significant Layer 2 blockchain revenues, and non-crypto financial entities may explore creating quasi-public blockchains, spurred by favorable accounting guidelines for crypto assets.

The new FASB regulations that come into effect in December 2024 (and sooner for other companies) will make it very appealing for companies to keep crypto like Bitcoin on their balance sheets. 

Companies will have to record gains and losses on crypto each quarter based on market prices (fair value) instead of just recording losses like before. This better reflects crypto’s value and will give investors better information to evaluate companies with crypto, making investment more attractive and the crypto market more legitimate. 

NFTs Make a Comeback Thanks To Bitcoin Ordinals and Web3 Games

After being ridiculed in 2022 and most of 2023, the NFT sector is set for a huge comeback next year. NFT volumes are anticipated to hit new heights in 2024, driven by Ethereum’s top collections, enhanced Web3 crypto games that are actually fun to play, and of course, the ascent of Bitcoin Ordinals, which might see the NFT issuance ratios between ETH and BTC move as close as 3-1, with Stacks (STX) emerging as a significant player. 

Binance and US Lose Number 1 Spots

After a challenging 2023 which was always expected after the FTX collapse devastated so many retail investors the year before, the world’s biggest exchange Binance is expected to lose its top position in spot trading volumes following a $4 billion settlement with U.S. regulators and the resignation of its high-profile CEO Changpeng “CZ” Zhao. 

According to Van Eck, new competitors like OKX, Bybit, Coinbase, and Bitget could potentially take the lead, although they’ll likely get the same scrutiny from regulators if they grow big enough. This shift will also influence the eligibility of exchanges to provide liquidity for ETF-authorized participants and sponsors. 

The ramifications of 2023’s Operation Chokepoint 2.0 may well come to haunt the US in the coming years, as US-based Web3 projects continue to leave the States in favor of friendlier destinations like the UAE, Hong Kong and Singapore and cost the United States its crown as the global leader in Web3. 

Stablecoin Market Cap Crosses ATH of $200 Billion

With the bull market, risk-on conditions and well-defined regulations such as Europe’s MiCA all encouraging investment, new money will continue to pour into crypto in the form of stablecoins like USDT, USDC, and PYUSD. The total value of stablecoins is projected to exceed $200 billion, a new all-time high. More money will settle using stablecoins than using Visa.

Surprisingly Circle USDC is expected to overtake USDT, reflecting a growing institutional preference for US-compliant USDC. This shift might be influenced by potential regulatory actions against entities involved with USDT for various infractions. 

Solana Summer Continues?

After crashing to $8 post-FTX, Solana has been on tear in 2023 and its Breakpoint conference served as a call to arms, with high-profile new projects such as memecoin BONK, price oracle Chainlink usurper Pyth and DeFi darlings Jito and Jupiter bringing in hundreds of millions (if not billions) of dollars into the Solana ecosystem and more than doubling the  price of SOL. 

As the primary alternative to Ethereum, 2024 could be one long Summer of Solana as its lack of network outages, ultra-low transaction fees and superfast TPS capabilities sees it surpass its former glory as it becomes a top three blockchain by market cap, TVL, and active users. 

Solana is predicted to become a top 3 blockchain by market cap, TVL, and active users. Its price oracle, Pyth, may surpass Chainlink in Total Value Secured, driven by innovations and growing TVL on high-throughput chains.

DEX Market Share Increase

Decentralized exchanges (DEXs) will see a surge in market share for spot crypto trading, driven by high-throughput chains like Solana and improved wallet features. This shift will be accompanied by a decline in BTC and ETH dominance post-halving, favoring DEXs that help DeFi users to transact on layer-2 and layer-2 chains, which are cheaper and faster and perfect for frequent transacting. New DeFi trends like LSD restaking will suck in a lot of ETH in the process, to be utilized across many upcoming ecosystems.

Web3 Gaming Gets A New Poster Boy

After a disappointing collapse in 2022 , the nascent blockchain gaming sector will finally see significant growth with at least one game surpassing a million daily active users. High-budget games on platforms will overcome technical challenges in Web3 gaming and make it appealing to actual gamers. 

Axie Infinity kicked off the Web3 gaming craze in 2021, but the sector took a knee under the weight of industry hype and a crushing bear market. Luckily, builders kept building thanks to huge VC funds and it’s time to level up. A new  blockchain game behemoth will rise and in the process surpass 1 million daily active users, as users go from Play-to-Earn (P2E)  to simply playing games and earning rewards in the process. Platforms like Immutable, with high-budget games and super-effective token models, are prime candidates for this revolution, potentially rivalling the success of mainstream AAA games.

Decentralized Physical Networks (DePin) Go Global

Decentralized physical infrastructure (DePin) networks have seen some solid traction towards the end of 2023, and innovators like Hivemapper and Helium will see substantial growth in 2024. Hivemapper will aim to challenge Google Street View with its community-owned mapping protocol, while Helium’s decentralized 5G network will try to make P2P WiFi a global reality. 

DeFi Accepts KYC And Gets Institutional Adoption

Unfortunately, Know Your Customer (KYC) measures may become an unavoidable part of DeFi, particularly in the US, with platforms like UniSwap leading this integration. This shift will hopefully attract institutional liquidity and increase protocol fees, enhancing the competitiveness and token value of participating protocols.

Conclusion

We could easily write another 20 pages on what’s potentially in store for crypto in 2024, with half on it devoted to the rise of zero knowledge rollups, Solana airdrop season, DePin and the new generation of meme coins like Bonk and Pepe, but we can’t do all the work for ya. 

In the end, the narrative will likely be on Bitcoin till its spot ETF approval and halving happens, after which it’ll shift to Ethereum and its layer-2s and L1 competitors. With billions of new dollars pumped into crypto by institutional and retail investors, degens will be on the lookout for brand new opportunities on surging ecosystems like Solana and Base, so remember this golden rule of crypto: Expect the unexpected at all times and educate yourself. Tread carefully!

One thing that is within your control though is how you secure your crypto assets. Look no further than CoolWallet’s powerful CoolWallet Pro hardware wallet and feature-abundant CoolWallet App, from which you can buy, sell, stake, store and transfer crypto protected by elite cold storage and real-time Web3 transaction smart scanning.

What to Know About Bitcoin Spot ETFs

1. What is a Bitcoin Spot ETF?
2. How does a Bitcoin Spot ETF differ from a Bitcoin Futures ETF?
3. Why did the SEC approve Bitcoin Spot ETFs now?
4. What are the benefits of investing in a Bitcoin Spot ETF?
5. What does the SEC’s approval signify for Bitcoin?
6. Can we expect an influx of new investors in Bitcoin due to this approval?
7. Will the approval of Bitcoin Spot ETFs affect Bitcoin’s price?
8. Are Bitcoin Spot ETFs risk-free investments?
9. Could this approval lead to the launch of other cryptocurrency ETFs?
10. What should potential investors consider before investing in a Bitcoin Spot ETF?

Hallelujah! After years and years of waiting, weathering crazy bull and bear market cycles, three halvings and painful hacks and bans, we finally did it. For real this time.

On Wednesday 10 January 2024, the US Securities and Exchange Commission (SEC) announced that after a decade of rejections, it had FINALLY approved a Bitcoin spot ETF (in fact, 11 of them) in the United States. This concludes years of lobbying, dozens of application rejections, and finally makes it as easy to buy and own BTC as a traditional stock. And we’re only in the second week of January!

Bitcoin is now a legitimate financial asset, in fact the fastest-growing one in history, and not some shady money laundering and terrorism-funding vehicle for bad actors that should be banned. 

The ETF approval puts the entire crypto industry firmly on track on the road to mass adoption, by making it possible for all institutional investors to invest in Bitcoin (and soon others?) in a regulatory compliant manner. It not only legitimizes Bitcoin in the eyes of many traditional investors but also paves the way for broader acceptance and integration of cryptocurrencies into mainstream financial systems. And thanks to the Taproot upgrade and innovations like Bitcoin layer-2s like Stacks and Lightning Network, BRC20 tokens and Ordinals all transforming the world’s oldest blockchain, Bitcoin is far from just safe old”digital gold”. We’re only just getting started.

But wait up: wasn’t Bitcoin invented to fight the traditional financial system?

Ahh yes, the elephant in the room: crypto was founded and built on the idea of financial self-governance, to fix the problems around those greedy TradFi intermediaries, and the idea that those same big Wall Street fat cats like BlackRock, who has 10 trillion dollars of assets under its management, and JP Morgan, who has been one of crypto’s biggest adversaries, will now be making big profits off our backs, might be jarring to many, especially Bitcoin maximalists who see them as the reason Satoshi Nakamoto invented it in the first place. 

However, there is simply no other way for the worlds of Bitcoin, Web3 and DeFi to thrive without mainstream acceptance and some regulation that makes it possible for any investor, big or small, to own a slice of the new financial system that it’s creating. A Bitcoin spot ETF bridges the gap between traditional finance and the crypto world, making it easier for a broader audience to engage with and invest in cryptocurrencies. It brings in a whole new generation of crypto investors, from the biggest businesses, to your pension fund, to your grandma and yes, even that irritating neighbor who laughed at you in 2022 when you lost money on FTX and Luna.

So, Bitcoin is the gateway drug, and where it goes, eventually others will follow. We are moving from analog to digital money, and this is the way. And quickly too please, before central bank digital currencies (CBDCs) try to enslave us. 

Satoshi Nakamoto’s Bitcoin and the blockchain technology it introduced is a remarkable technical achievement that will forever change the way the world creates digital networks and transfer value and information across it. It created for the first time in human existence a transparent, trustless and immutable network that’s backed by a public ledger that is there for anyone to see, and it fairly rewards network participants, instead of all-powerful intermediaries, for their services of securing and supporting the decentralized network in the form of a cryptocurrency. 

Yes, the value of that currency is completely speculative and arbitrary, based on market forces and human emotion, but the system that it enables is rooted in fact and concrete, dynamic on-chain data. 

The Bitcoin Spot ETF launches this week certainly marks the end of an era. Where Bitcoin was once the rebellious teenage financial dissident standing outside the gates of TradFi shining a light since 2008 on its excesses and inherent flaws, now it’s been invited inside, into the belly of the beast, where its former enemies are lauding it and preparing a banquet this week in its honor.

As they say in economics, there’s no such thing as a free lunch, and the likes of BlackRock are certainly not the charitable types. 

So should we even self-custody our Bitcoin anymore, or just give it to the big dogs now to manage it for us? Self-custody is very important, as it helps to ensure the network is very decentralized and therefore immune to attacks on privacy and anti-censorship, but here’s what’s important:

Bitcoin is a decentralized peer-to-peer network that is open to anyone to use to transfer value, anywhere in the world, at any time, with a fixed maximum supply of 21 million BTC, the last which will be mined in 2140. Let’s read that again: Anyone, anytime, anywhere.

Whether that is a billion-dollar investment fund in New York, or a young student paying for a coffee in Bali, or a Kenyan small farmer cashing out some satoshis to buy new equipment, nothing’s changed. It’s still about saying yes to personal financial freedom, and no to bloated intermediaries and manipulated and inflationary centralized money supply. 

So, keep it on an exchange, buy it as an ETF through your financial broker, or just keep it safe in cold storage on a hardware wallet like CoolWallet, where nobody can take it from you thanks to our open-source EAL6+ secure element, encrypted Bluetooth, real-time malicious transaction scanning, and tamperproof design.

The choice is, and has always been, yours and yours alone. That is the promise of Bitcoin, and that is the power of crypto. Mass adoption cannot be stopped anymore, so sit back, HODL and enjoy the journey. Next stop: The 4th Bitcoin Halving!

To the Moon!

Written by Werner Vermaak for Team CoolWallet

Disclaimer: This article is not financial advice, and for educational purposes only.

What to Know About Bitcoin Spot ETFs

1. What is a Bitcoin Spot ETF?

A Bitcoin Spot ETF is an exchange-traded fund that tracks the current price of Bitcoin, allowing investors to invest in Bitcoin without directly purchasing the cryptocurrency.

2. How does a Bitcoin Spot ETF differ from a Bitcoin Futures ETF?

A Bitcoin Spot ETF tracks the current, or “spot,” price of Bitcoin, while a Bitcoin Futures ETF is based on futures contracts predicting Bitcoin’s future price.

3. Why did the SEC approve Bitcoin Spot ETFs now?

The SEC’s approval comes after increased market maturity, improved regulatory frameworks in the crypto industry, and growing institutional interest, addressing earlier concerns about market manipulation and investor protection. Also, some might say it’s a US election year and that Gary Gensler, who cast the deciding vote in favor of Bitcoin, was under immense pressure to do so!

4. What are the benefits of investing in a Bitcoin Spot ETF?

Bitcoin Spot ETFs provide a regulated, simpler way to gain Bitcoin exposure without the complexities of direct cryptocurrency ownership, such as storage and security issues.

5. What does the SEC’s approval signify for Bitcoin?

The SEC’s approval of Bitcoin Spot ETFs adds legitimacy to Bitcoin as a viable asset class and signifies its growing acceptance in mainstream finance.

6. Can we expect an influx of new investors in Bitcoin due to this approval?

Yes, the approval is likely to attract new investors, especially from traditional finance, who prefer regulated investment vehicles.

7. Will the approval of Bitcoin Spot ETFs affect Bitcoin’s price?

The introduction of Bitcoin Spot ETFs could potentially drive up Bitcoin’s price due to increased demand, but it may also bring more stability due to higher liquidity from institutional investors.

8. Are Bitcoin Spot ETFs risk-free investments?

No, like any investment, Bitcoin Spot ETFs carry risks, including market volatility and regulatory changes in the crypto space. However, you won’t have to worry about private keys or exchange hacks anymore.

9. Could this approval lead to the launch of other cryptocurrency ETFs?

Yes, the approval sets a precedent and could pave the way for spot ETFs based on other major cryptocurrencies in the future, IF they’re deemed to be commodities, and not securities. 

10. What should potential investors consider before investing in a Bitcoin Spot ETF?

Potential investors should consider their risk tolerance, market volatility, the evolving regulatory landscape, and conduct thorough research before investing in a Bitcoin Spot ETF.

What are Bitcoin Layer-2 Networks?
Bitcoin Layer-2 Chains

• Lightning Network
• Stacks
• Rootstock
• Liquid Network
• Dovi
• Statechains / Mercury Layer
• MAP Protocol
• OMNI Layer

Contents

Introduction

As 2024’s bull market gains momentum in the wake of the SEC’s recent Bitcoin spot ETF approvals and the upcoming Bitcoin Halving, there are lofty expectations for not only Bitcoin but also the Layer 2 chains that are helping it to scale and offer DeFi services and build Dapps on top of it,  following the success of Ethereum L2s like Arbitrum and Optimism and incoming zero knowledge proof rollups. 

Executing transactions on Layer 2 in parallel to the Bitcoin main network has been possible for a few years now, thanks to the Taproot upgrade and the innovative technologies put forth by several key players. Some of these L2s, as they’re known, offer more than others in terms of functionality. Other popular blockchains have had a great deal of development in Layer 2 solutions in all categories and use cases, and the tech gets more refined each year. Bitcoin is still not to be counted out for regular transactions and continues to serve its purpose as “digital gold” and a scarce safe haven asset well  Recent developments in Bitcoin Layer 2 technologies are showing promise and some of the shortcomings are being ironed out, and could very well help Bitcoin to reach Satoshi Nakamoto‘s vision of it as a P2P electric cash system.

What Are Bitcoin Layer-2 Networks?

Layer 2 solutions are frameworks that build on Bitcoin to leverage its security and decentralization and help it to scale with faster and more transactions. work to solve the ever-present issue of how to conduct smaller day-to-day transactions using Bitcoin without the inconvenience of having to wait an unreasonable amount of time for your transaction to clear on the Bitcoin main network while paying a big fee for the pleasure. Especially now with the rise in Ordinals and BRC20 transactions which bring with them massive network congestion, it’s more important than ever to try and settle them on a a layer 2, where these small transactions can be transacted in just a few seconds with very minimal fees (a few pennies or less). Users are free to settle their tabs on the main Bitcoin chain whenever they wish.

Since Bitcoin is the granddaddy OG of the blockchain/cryptocurrency universe and home to patient HODLers and fervent Bitcoin maxis, there is high demand for a robust and effective Bitcoin Layer 2 that can facilitate micro-transactions while wallets (both hot and cold) hold the main icebergs of BTC for the long term. Smart contracts and a DApps are a welcome bonus and keep the Bitcoin ecosystem competitive.

The Best Bitcoin Layer-2 Chains in 2024

Lightning Network

Lightning is probably the best-known Bitcoin Layer 2 and has been live since 2018. It has gained a good chunk of market share and developers are working to make using it seem seamless. It works by opening payment channels via multi-signature wallets between users. It can be a bit cumbersome because the channels need to be adequately funded to allow payments through the network, but it enjoys the support of many key Bitcoin opinion leaders like Michael Saylor and its deployment in Bitcoin nations like El Salvador has helped it gain a lot of traction.

Various payment apps have emerged to pool users together to form a web of connections so that users don’t have to keep opening new payment channels and can instead connect through these networks and rely on the logic of the code to ensure transactions find a quick and reliable route to their destinations. It has been compared to the Internet in the way it relies on a web of connections between users, but since it is a currency that is being transferred, it does introduce additional security risks from potential “bad actors”. 

Stacks (STX)

Previously known as Blockstacks, Stacks aims to bring smart contracts and decentralized applications (Dapps) to the Bitcoin blockchain. It is a layer-2 blockchain associated with the Bitcoin ecosystem, designed to enhance Bitcoin’s capabilities by enabling the execution of smart contracts and the creation of DApps such as Ordinals, Demex and stakingDAO. Stacks has its own native cryptocurrency called STX and is built on a consensus mechanism called Proof of Transfer, which connects directly with the Bitcoin blockchain. Bitcoin is staked and replaced with the Stacks token (STXK) for use in quick and cheap transactions with massive scalability. The project has received attention for its unique approach of leveraging the security and robustness of the Bitcoin blockchain while adding new functionality and use cases. Stacks has also been notable for being the first token offering qualified by the U.S. Securities and Exchange Commission (SEC). This has its pros and cons, and Stacks has received criticism for kowtowing to regulators and the L2’s tendency toward centralization.

Rootstock (RSK)

Claiming to have the world’s most secure smart contracts, this L2 solution operates as a sidechain to Bitcoin and runs on the basis of “merged mining” where Rootstock miners secure and earn the Rootstock native RSK tokens as they mine Bitcoin. Similar to Stacks, users can stake BTC on Rootstock to receive RSK tokens for use in transactions and smart contracts. People have complained about the extended time it takes to stake on Rootstock while you wait for 100 BTC to be accumulated by users to form a staking block. Once staked, however, a user has access to a system where transactions can be sent to and fro with high throughput and scalability. It is also fertile ground for DApp development.

Liquid Network

The Liquid Network is a Bitcoin sidechain and also conducts transactions in units of Bitcoin, as does the Lightning Network. However, the Bitcoin that you transact with on the Liquid Network is called “Liquid Bitcoin”. A user locks up Bitcoin on the main chain in exchange for 1:1 Liquid Bitcoin that is unlocked to freely transact on the sidechain that is the Liquid Network. 

The network is adept at handling smart contracts and can also be used to store other tokens and assets. Developers can add functionality for stablecoins, on-chain assets, gaming integration, and more. It leaves the door open for creative uses of the sidechain while maintaining the ability for any user to “cash out” and settle on the Bitcoin mainchain.

Additionally, there is functionality on the Liquid Network to verify different classes of investors, such as “accredited investors” in the US for purposes of investing in businesses, technology projects, or securities. This is an area of great potential and there is somewhat of a technological arms race to see which L1s and L2s can best facilitate this and gather partnerships and market share.

Dovi Network (DOVI)

Dovi  is a newer Bitcoin Layer 2 just launched in 2023 with support from crypto heavyweight Kucoin Labs. The system enables a variety of more advanced DeFi services such as decentralized exchanges and various types of market-making and lending platforms.  The focus has primarily been on privacy and efficiency and all of the added services are programmed on top of the Bitcoin mainchain. Best of all, it’s EVM-compatible, allowing the deployment of Ethereum-designed smart contracts on the Bitcoin network.

Mercury Layer

Statechains is a new technology that enables users to transact along a chain of other users through digital signatures to ensure that the transaction gets to its ultimate destination, collaboratively sharing UTXO with a pre-signed transaction as a last resort tool for Bitcoin users to enforce their ownership. The Statechains allow transfers off of the Bitcoin chain, thereby saving fees and allowing greater scaling. They operate similarly to the Lightning Network but require a degree of trust between parties in a transaction, but it is more censorship resistant than some other L2s.

An interesting new project launched in January 2024, known as the Mercury Layer, which builds on Statechains technology by adding “blinding”, which prevents the operator of a Statechain service from knowing anything about what is being transferred.

MAP Protocol

Also quite new on the scene is the MAP Protocol which uses BRC-20 tokens that utilize individual satoshis (100 million satoshis in one Bitcoin) on the Bitcoin network and imbues them with qualities that allow them to be part of smart contracts. This is very similar to Bitcoin ordinal collectibles, but here the ordinal inscriptions are used for instructions for smart contracts. This can also be used to allow D-Apps to operate and perform various functionalities. A comprehensive Bitcoin L2 ecosystem has been built using the MAP Protocol.

Honorable mention: OMNI Layer

Formerly known as Mastercoin, OMNI Layer is one of the original layer 2 protocols, going back to 2014. It also can facilitate smart contracts, custom currencies, and decentralized crowdfunding. Its popularity has waned in the last few years as many other layer-2 networks sprung up, and it has been dropped by the Binance exchange and stablecoin issuer Tether that has stopped supporting it.

Conclusion

With so much happening on a plethora of layer-2 chains that uses Bitcoin’s renowned security and decentralization to scale, build Dapps and deliver DeFi services, it’s clear that the world’s biggest blockchain is much more than just boring old “digital gold”. Expect an avalanche of new layer-2s and eventually layer-3s that will continue to build out the world’s most valuable and decentralized blockchain in the coming years.

Looking to keep your Bitcoin safe on a highly secure Bitcoin hardware wallet that you can take with you wherever you go? The answer is CoolWallet.

This blockchain security pioneer’s CoolWallet Pro is a leading Bitcoin cold wallet with an EAL6+ secure element (open source), military-grade encrypted Bluetooth, a powerful CoolWallet App and various additional cutting-edge security measures such as 2+1FA and SmartScan anti-phishing transaction monitoring.

CoolWallet launched the first Bitcoin mobile-native hardware wallet in 2016 and has since iterated with powerful newer versions such as CoolWallet S (2018) and CoolWallet Pro, their flagship DeFi model. In 2024 it has an exciting new roadmap that will redefine the cold storage landscape yet again.

Contents

Introduction

One of the hottest narratives and trends predicted last year to drive this year’s crypto bull run is the interesting and potentially economy-reshaping sector of DePIN, or Decentralized Physical Infrastructure. It resides at the intersection where Web3, blockchain networks and other tech fields like artificial intelligence (AI) meet real-life hardware that make it possible for them to scale to every home and device on the planet.

Let’s dig into DePIN!

What is DePIN?

DePIN is the decentralization of physical infrastructure networks as the name denotes. Much like IoT (Internet of Things) technology, it connects physical resources to a network where users can access, share, and monitor many kinds of technological resources, and the number of connected devices and ecosystems is growing rapidly. The key feature is the decentralization aspect. Through blockchain and Web3 technology, the spare technological capacity around us, should we choose to connect it, can be shared and streamlined without using centralized platforms or giving corporate and government gatekeepers control, through the use of smart contract-powered chains like Ethereum, Solana and even Bitcoin.

DePIN has some of the characteristics of crowdsourcing platforms such as AirBnB and Uber. However, instead of being governed from a central network of corporate servers, it uses blockchain technology to pool the resources of individuals together. These individuals can share and profit from infrastructure capacity they may have to offer.

Common examples include hard drive space or computing power but can also include just about any valuable resource that can be stored or represented on a blockchain. Contributors then have their contributions measured, tracked, and sold at a fair price to users who can benefit. This is all transacted in a market that is open, democratic, and free from corporate profit motives.

Rewards

On centralized corporate crowdsourcing platforms, the platform provider incentivizes their infrastructure providers (AirBnB apartment owners, etc.) with fiat currency. The company retains control of most aspects of the business and is motivated to keep a significant percentage of the potential profits of the resource provider. Through DePIN protocols and platforms, providers of resources are incentivized with cryptocurrency rewards. Users and providers alike benefit and it can be run very efficiently. The platforms get tested in the marketplace and the ones that prove to be the most stable, secure, fairly priced, and easy to use gain their deserved market share.

Big Tech vs. DePIN

Facebook, Google, Amazon, and their big-tech ilk amass a great deal of data from their users but don’t offer those users much more than the use of their ad-laden platforms. As corporations, they will continually squeeze more data out of customers and sell it to the highest bidders in the quest for ever-higher profits. DePIN has the power to keep prices fair and rein in the profit motive while still delivering powerful incentives for those powering and maintaining the decentralized infrastructure.

Infrastructure Types

DePIN can be used to manage the pooling and sharing of almost any kind of resource that can be electronically linked. Some of these resources are native to the digital world and others are “digitalized” in some manner. These resources can be categorized as physical or digital.

1) Physical Resource Networks (PRNs)

These are resources that are pooled together and networked but are still attached to physical locations. They include computer hardware resources as well as commodified services such as digital mobile bandwidth, energy, and many others. The future use cases are innumerable.

2) Digital Resource Networks (DRNs)

Digital resources are natively digital and include computing power and data storage. DePIN has been most developed in these areas thus far, and there are examples of projects that have been active since before the term DePIN was coined as a label, such as Filecoin, which kicked off in 2017.

Inside DePIN

DePIN Protocols

For DePIN to function, protocols have been developed to enable communication between all the hardware linked together on networks. Incentives are built in to keep growing the pool of available resources and to make sure providers are adequately compensated (or penalized in some cases). Ideally, this will lead to an infrastructure provider and user base that can continue to scale up and be self-sustaining.

DePIN Crypto Tokens

DePIN network incentives are dispersed in the form of tokens on blockchains that host DePIN projects. The tokens can be bought and sold like other tokens on the open crypto market. Some DePIN protocols may have two different tokens, one to be spent (or “burned”) to purchase the DePIN resources, and another as payment to the infrastructure providers. Others may have a system using the same token on both ends of the user-provider arrangement.

The DePIN Flywheel

In a report by Messari Research, they describe the DePIN flywheel, which elegantly depicts the virtuous cycle that is born out of the DePIN ecosystem. All components of DePIN work together synergistically through incentives and benefits delivered to infrastructure providers and users alike. This attracts new founders, developers, users, and infrastructure providers as platforms become more innovative and efficient.

The Messari report identified six key industries for DePIN to flourish in:

• Compute 
• Wireless
• Sensors
• Energy 
• Services
• AI

DePIN vs. Traditional Physical Networks

DePIN differentiates itself from standard physical networks through its decentralized, crypto-driven incentive structure. This approach is crucial for building a resilient physical infrastructure, leveraging on-chain settlements to enhance decentralized robustness, crowdsourced funding, and innovation. Unlike traditional networks that struggle with multi-currency transactions and lack privacy, DePIN’s use of cryptocurrencies simplifies settlements and upholds decentralization and privacy.

Key Advantages of DePIN

Messari highlights four main advantages of DePIN over traditional infrastructure.

• First, DePIN utilizes crowdsourcing for capital, offering easier access and fair token rewards, in contrast to the high initial capital required by traditional networks.
• Second, its on-chain ledger system streamlines international payments and maintains transparency, reducing overhead costs.
• Third, DePIN eliminates the single points of failure inherent in centralized networks, enhancing reliability.
• Lastly, DePIN encourages technological innovation and risk-taking, a stark contrast to the often stagnant nature of traditional network development.

What Are the Benefits of Decentralized Physical Infrastructure Networks (DePIN)?

Immense Scalability

Blockchain technology has proven its scalability over the last decade as adoption of the technology has ramped up and DePIN is a direct beneficiary. Capacity can be easily brought online to expand the pool of available resources in DePIN projects. Participants can scale the allocation of their resources up or down efficiently, thereby maximizing their resources without concern that those resources will be tied up and unavailable when they need them, but penalties may be incurred if the providers fail to live up to their end of the deal to provide the infrastructure they agreed they would.

Security

DePIN systems bring with them transparency, security, and accountability. Operating on a decentralized blockchain means that there is no single point of failure, and systems can keep running normally, even when irregularities occur. Blockchain cryptography ensures data integrity and authentication, keeping the DePIN ecosystem flywheel strong.

Fair Pricing

Through DePIN, users have a better set of choices when it comes to getting value for their purchasing power. Big Tech will find it difficult to compete and keep shareholders happy when DePIN can offer the same services, only with the added advantages of lower prices and decentralization. As an example, Akash offers DePIN compute services at a rate much lower than that of Google or Amazon. Filecoin also beats Google and other big cloud storage providers on price.

What are the Hottest DePIN Sectors for 2024?

Mapping

Projects such as Hivemapper are collecting large amounts of geospatial data thanks to a worldwide network of drivers using specialized dashcams. Street-level imagery is collected from the dashcams and made available to customers in competition with mapping services offered by the big centralized tech companies.

Cell Phone Data

Projects are being developed such as the GIANT protocol which allows smaller players to package eSIM cell phone data packages and sell them to the public, thanks to DePIN. There is massive potential here, especially for countries where the cell phone market is monopolistic and ripe for disruption.

Health Data

Healthcare is another area where data can be collected and monetized anonymously through DePIN. More and more people are carrying sensors with them in the form of health trackers or fitness monitors, and the data generated, when collected en masse, are worth something. Projects such as Health Blocks are monetizing this through DePIN. These data are valuable to researchers and companies developing products to improve the well-being and longevity of citizens. Many people appreciate the opportunity to opt in to have their data uploaded anonymously for research purposes in exchange for currency.

Electricity

The electricity grids of the future will vary tremendously by geographic location depending on a large number of factors. Spare capacity in one place can be shared in another, and DePIN is a great way to manage this. Got solar panels? Share your excess power via DePIN. Does your jurisdiction have excess hydroelectric power? Get that shared on a DePIN network. The Green Power Network offers this type of service and the potential benefits to society are tremendous.

Bandwidth Networks

Decentralized bandwidth networks have been established to deliver media content and compete with the likes of YouTube or Rumble. They deliver content on bandwidth crowdsourced via DePIN. One such example is the Theta Network. The THETA token is used for transactions and incentives to keep the system running well. Users get on board to receive ad-free multimedia content at low cost. And in terms of performance vis a vis YouTube and the like, the more users Theta accrues, the better the quality of the streaming media experience.

Looking Beyond 2024: What’s Next for DePIN?

The future looks bright for DePIN, with the number of protocols and projects increasing at a steady rate. More individuals and organizations are getting excited as they learn about how they can benefit while contributing to decentralization in the spirit of Web3. What crowdsourcing did for vacation apartment rentals and transportation, DePIN can do for those and many other sectors. The possibilities are immense, and it has the potential to be a major driver of Web3 and blockchain technology more generally.

Challenges Ahead

It’s still early days, but things move fast in tech, especially in the crypto universe.  DePIN protocols and their associated blockchains and projects are likely to run into a few snags along the way. Crypto market volatility as well as public sentiment will be factors for how well the DePIN flywheel gains and maintains momentum. Another concern is the security of smart contracts and potential vulnerability to hacks. That’s not a new theme in crypto and DePIN needs to be airtight if it is to continue on its upward path.

Profitability

The incentives for participants to provide their physical infrastructure are the main drivers of DePIN to keep it active and growing. Projects that get the platforms, incentives, and distribution right will be the ones that survive and thrive. The pricing of the DePIN offerings for users will also be part of a new market, a market that will find its footing as the advantages of these decentralized offerings become more widely known.