Casey Wagner

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Welcome to the On the Margin Newsletter, brought to you today by Casey Wagner exclusively. Here’s what you’ll find in today’s edition:



<ul class="wp-block-list">
<li>We’re heading into one of the more volatile months for equities. Here’s what to watch for.&nbsp;</li>



<li>Bitcoin-based stablecoins may be the reality soon enough. Let’s unpack how.&nbsp;</li>
</ul>



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<h2 class="wp-block-heading">We’re in Leo season, so buckle up&nbsp;</h2>



Happy birthday to our Leo readers!&nbsp;



As we approach the end of July, I’m starting to think about what is ahead for August, and I’m not talking about astrology. It’s a historically tough month for markets, and I have a feeling this year will be no different. (I’m also wondering how the summer flew by so quickly, but I digress.)



The S&amp;P 500 and Nasdaq Composite indexes in August 2023 lost 1.6% and 2.1%, respectively. The year prior, the S&amp;P 500 lost just under 1% and the Nasdaq Composite slid 4.6% during August.&nbsp;



This August is special — just like every other month of 2024 — because it’s an election year. Curiously, the CBOE Volatility Index (VIX) has historically peaked more often during the first half of the year in the past eight presidential election years.



Normally, by the third quarter of an election year, we have a better sense of how voters are feeling, or at the very least, who will be on the ballot. But <a href="https://blockworks.co/news/kamala-harris-memecoin-pump-2024-elections">nothing about 2024 has been normal</a>.&nbsp;



Today, the VIX stands at approximately 17.3, having risen over 20% in the past five days. However, it remains below the key threshold of 20, which analysts suggest almost always signals increased volatility. So far this year, the VIX reached its peak in April at 19.2.



The next 30 days are fraught with uncertainty. Earnings season rages on, the FOMC is set to convene for a consequential policy-setting meeting and Democratic delegates will choose their presidential candidate.



It’s no wonder the VIX is climbing, but why is it still relatively low? My best guess is that no one wants to ruin a good thing. Stocks have performed exceptionally well this year, and there’s nothing investors like more than a stable environment. For that reason, I think they may be turning a blind eye to the uncertainty.&nbsp;



Markets are confident the Fed will cut rates this fall and that the Dems will select Vice President Kamala Harris as Biden’s replacement. For now, at least, that appears to be enough.&nbsp;



Another month stocks tend to hate is October, which will see the peak of presidential election speculation as campaigns make their last efforts to woo voters as early voting kicks off.



The S&amp;P 500 and Nasdaq Composites lost 2.1% and 2.8%, respectively, in October 2023.&nbsp;



Still, as DataTrek Research co-founder Jessica Rabe pointed out, stocks more often than not peak during the final quarter of the year. In the past four-plus decades, the S&amp;P 500 has posted its high during Q4.&nbsp;



But what about in years when stocks posted double-digit returns in the first half of the year?&nbsp;



“The S&amp;P’s rally tends to slow in the back half after rising by double-digits in the first half, so the bulk of the index’s gains are likely already in for this year,” Rabe said. “That said, the S&amp;P is only up 1.7% in 2H thus far versus the average of 6.7%, so history says there’s still gains to be had.”



And then, of course, there’s crypto. The wild-card asset class tends to keep us on our toes, but has generally adhered to the “August is a bad month” narrative for the past two years. Bitcoin and ether lost 11.3% and 10% in August 2023, respectively. In August 2022, BTC ended the month 14% lower while ETH dipped 8.5% during the 31-day period.&nbsp;



With regulatory headwinds and the expectation of new investment product launches (we’re <a href="https://blockworks.co/news/nine-us-spot-eth-etfs-live-post-approval">looking at you, ether ETFs</a>), crypto prices face other factors. However, we think the macro narrative is one to watch.



— Casey Wagner



<h2 class="wp-block-heading">$1.08 billion&nbsp;</h2>



This is the collective trading volume for ether ETFs on their first day of trading in the US. This is about a quarter of the volume that bitcoin spot ETFs brought in on their first day of trading in January.&nbsp;



The Grayscale Ethereum Trust saw the most volume, with $456 million worth of trades yesterday. Net inflows across all products came in at $106.7 million.&nbsp;



“Now day one is behind us, the market will continue to analyze the data to gauge underlying demand, while refocusing on upcoming catalysts such as Friday&#8217;s PCE data and Saturday&#8217;s Bitcoin conference where Trump is scheduled to speak,” analysts at Wintermute Trading wrote in a Wednesday note.&nbsp;



<h2 class="wp-block-heading">BTC stablecoins?</h2>



On Tuesday evening, Lightning Labs released Taproot Assets version 0.4. This update allows the Bitcoin layer-2 Lightning Network to support assets other than bitcoin, paving the way for bitcoin-based stablecoins.



&#8220;With Taproot Assets, users can make instant, low fee asset transfers, bringing trillions of stablecoin volume to bitcoin,&#8221; Lightning Labs wrote in a <a href="https://x.com/lightning/status/1815768786752164213">post</a> on X.&nbsp;



The news is exciting for bitcoin fans because it showcases a use case beyond an investment vehicle, Noelle Acheson, author of “Crypto is Macro Now” said.&nbsp;



“Lightning already connects to major exchanges (<a href="https://blockworks.co/news/coinbase-bitcoin-lightning-network-adoption-brian-armstrong">Coinbase</a>, <a href="https://blockworks.co/news/bitcoin-lightning-network-binance">Binance</a> and <a href="https://blockworks.co/news/kraken-supports-bitcoins-lightning-network-after-delayed-launch">others</a>), and it’s not a stretch to imagine new stablecoins forming the base of new trading pairs, especially of bitcoin-based tokens,” she said.&nbsp;



Stablecoins currently have a total market cap of more than $172 trillion. Why add more to an already crowded market? The Lightning Labs team says it’s less about market share and more about interoperability.&nbsp;



“While stablecoins do tend to have a network effect, including the dominance of USDT, the design of Taproot Assets also makes it easier to do cross-asset transfers, for example sending a USD stablecoin and receiving in BTC or sending between two different stablecoins,” CEO Elizabeth Stark said in an <a href="https://bitcoinmagazine.com/technical/stablecoins-are-coming-to-bitcoins-lightning-network">interview</a> with Bitcoin Magazine.&nbsp;



You won’t find us launching any BTC stablecoins anytime soon, but it’s an area we are interested in watching.&nbsp;



— Casey Wagner&nbsp;



<h2 class="wp-block-heading">Bulletin Board&nbsp;</h2>



<ul class="wp-block-list">
<li>Thanks to a recent market rebound, bitcoin miners are expected to return to profitability soon, according to a <a href="https://blog.bitfinex.com/wp-content/uploads/2024/07/Bitfinex-Alpha-114.pdf">report</a> from exchange Bitfinex.&nbsp;</li>



<li>HSBC Australia <a href="https://www.hsbc.com.au/help/security-centre/cryptocurrency-payment-changes/">said</a> Wednesday that it will automatically block clients from making payments to crypto exchanges due to a recent increase in scams and hacks.</li>



<li>One more shameless plug from <a href="https://x.com/caseywagnerr">Casey</a>, our solo newsletter writer today: If you will be in Nashville at Bitcoin 2024, come say hi!</li>
</ul>



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A notoriously rough month for markets is upcoming

Sebastian Sinclair

After more than a month of public deliberations, Coinbase has finally decided to integrate Bitcoin’s Lightning Network onto its exchange platform.



CEO Brian Armstrong said Tuesday that his publicly-listed company would do its part to advance “faster / cheaper” transactions, made possible by the technology’s design.



“Bitcoin is the most important asset in crypto,” Armstrong said in a <a href="https://x.com/brian_armstrong/status/1701806701853507886?s=20">post</a> on X, formerly Twitter. A timeframe for the integration was not provided. Coinbase declined Blockworks’ request for comment.



Following in the footsteps of Jack Dorsey’s Cash App and David Marcus’ Lightspark, the development on Tuesday adds yet another step in the slow march toward the adoption of bitcoin payments — a core concept initially intended for the 14-year-old crypto.



The Lightning Network is a layer-2 solution built on top of the <a href="https://blockworks.co/tag/bitcoin">Bitcoin</a> blockchain that aims to enable fast and scalable transactions. 



In essence, <a href="https://blockworks.co/tag/lightning-network">Lightning</a> allows two parties to open a payment channel between them, bypassing the need to record every single transaction on the Bitcoin blockchain.



Read more: <a href="https://blockworks.co/news/binance-bitcoin-lightning">Binance boosts Bitcoin Lightning Network with promised integration</a>



It was originally conceived to address some of the scalability issues inherent in Bitcoin&#8217;s design, such as high fees and slow transaction times during periods of higher network activity.



Early last month, Armstrong flagged that his company would begin exploring how to best add Lightning, calling the idea “non-trivial” but “worth doing.”



“Not sure why you think we’re ignoring Bitcoin — we’ve onboarded more people to Bitcoin than probably any company in the world,” the CEO <a href="https://x.com/brian_armstrong/status/1686596515765362688?s=20">said at the time</a> in response to public questions from Dorsey.



“I’m all for payments taking off in bitcoin,” Armstrong said last month.



Dorsey’s Block subsidiary, Cash App, <a href="https://x.com/MichaelRihani/status/1584729594124697601?s=20">announced additional Lightning support</a> for Bitcoin in October of last year following initial integration <a href="https://blockworks.co/news/cash-app-integrates-lightning-network-for-bitcoin-payments">eight months earlier</a>.



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Coinbase to integrate Bitcoin Lightning Network in bid to drive adoption

Jesse Shrader

The influx of spot bitcoin ETF filings from institutional juggernauts like BlackRock and Fidelity is a critical moment for Bitcoin’s adoption. 



By giving passive investors an opportunity to gain exposure to bitcoin through vehicles familiar to traditional investors — and without having to understand how to store bitcoin — the ETF will unlock a watershed moment for adoption.&nbsp;



But I believe that it’s actually a missed opportunity to focus all of our attention on what a bitcoin ETF could bring to crypto —&nbsp;instead, we should be exploring how a Lightning Network Fund could bring greater economic incentives to institutional participation in Bitcoin.



<h2 class="wp-block-heading">Bitcoin spot ETFs: 45 days away for 10 years</h2>



While the real magic of bitcoin happens with self-custody, it’s still a net benefit that an entirely new wave of people will gain access to a scarce commodity <a href="http://blockworks.co/news/sec-bitcoin-etf-september">through a bitcoin ETF</a> (once one eventually gets approved).



But the current bitcoin ETF applications are missing the greater upside potential by failing to tap into bitcoin’s network effects: The Lightning Network.



BlackRock’s ETF will provide price exposure to bitcoin and protect the buying power of many people, but it lacks exposure to the unprecedented utility of the network. By tapping into only one component of bitcoin’s utility — namely its uses as store of value and debasement hedge — large institutions like BlackRock have shown only a surface-level understanding of what’s possible with bitcoin.&nbsp;



<h2 class="wp-block-heading">Disrupting payments networks&nbsp;</h2>



For BlackRock or any large asset manager to launch an ETF, they actually need to buy and custody bitcoin anyway.&nbsp;



If BlackRock was really thinking ten steps ahead, they would deploy those bitcoin funds on the Lightning Network, earn non-custodial yield by providing payments infrastructure and pave the way for investors to gain exposure to the world&#8217;s best form of money with the world&#8217;s best payment network at the same time.&nbsp;



While the Lightning Network is still in its infancy, it is proving to be a disruptive force, with settlement costs a tiny fraction of existing settlement methods. The public Lightning Network has nearly $150 million in settlement capacity at this point in time, with banks like <a href="https://www.santander.com/en/stories/lightning-network-blockchain">Santander</a> and now the<a href="https://twitter.com/cloudatio/status/1618596660917186561?s=20"> Federal Reserve Bank of Cleveland</a> also showing an interest in its potential for borderless transactions.&nbsp;



<h2 class="wp-block-heading">Tapping into a Lightning Network fund</h2>



A Lightning fund would allow investors to gain exposure to not only bitcoin’s price, but also its emergent and growing utility as a medium of exchange.&nbsp;



Large holders of bitcoin are uniquely capable of providing settlement rail infrastructure that could be used to drive the cost of commerce to negligible levels. This is increasingly important as we in the US stare down the barrel of recession and desperately need to trim the fat accumulated from easy money policies of the past.



In practice, a Lightning fund would consist of investors purchasing shares of bitcoin that are held in Lightning-capable infrastructure. Fund managers could strategically deploy the bitcoin held within the fund into various Lightning channels. Node operators are already familiar with the process of deploying bitcoin in Lightning channels: The fees generated from supplying and maintaining the ledger more than pay for the costs of converting on-chain bitcoin to Lightning channels and back.



Read more from our opinion section: <a href="https://blockworks.co/news/on-chain-gaming-community" target="_blank" rel="noreferrer noopener">Making friends online is easier with blockchain&nbsp;</a>



Fund managers would potentially be extremely interested in this setup, as it would enable them to show their skill in the emergent expertise of node management while capturing a yield and higher returns for their investors (or a higher admin fee percentage for the fund manager).&nbsp;



What’s more, this type of Lightning Network fund would increase the utility underlying bitcoin as a global store of value and medium of exchange. And on the demand side? Look no further than retirees, as this type of fund would be able to pay dividends to its shareholders.&nbsp;



<h2 class="wp-block-heading">Gradually, then suddenly&nbsp;</h2>



Just like the spot bitcoin ETF, the Lightning fund would pose some challenges, including finding the right legal structure to enable this type of investment.&nbsp;



Managing Lightning channels is a challenging art and requires an immense amount of data to perform the task well. Regulatory issues may also inevitably emerge, as the fund would need to be actively managed with allocations from within bitcoin to different nodes around the world. Protocol stability will pose another challenge as the various Lightning implementations may still experience costly force channel closures.&nbsp;



The Lightning Network&#8217;s success relies on its ability to attract users and liquidity. Large holders play a significant role in supporting and promoting the scalability and usability of both the Lightning Network and the Bitcoin ecosystem as a whole, and a fund would open up the potential for all investors to share in that growth.&nbsp;



We are living in a time of rapid change and opportunity where things happen gradually, then suddenly. Those that find a way to tap into the full stack of Bitcoin’s potential, like launching a Lightning Network fund, will be rewarded immensely. Like it or not, the truth is that these legacy institutions are in a position to either adapt or die. Only time will tell.&nbsp;



<hr class="wp-block-separator has-alpha-channel-opacity"/>


<div class="wp-block-post-author-biography">Jesse Shrader is Co-Founder and CEO of Amboss, the leading provider of Bitcoin Lightning Network data and insights. Formerly an engineer, Jesse is focused on supporting the ongoing development of the decentralized and social payments layer for Bitcoin.</div>


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Forget about bitcoin ETFs — let’s make a Lightning Fund

Shalini Nagarajan

Crypto exchange Binance enabled deposits and withdrawals on Bitcoin&#8217;s <a href="https://blockworks.co/tag/lightning-network" target="_blank" rel="noreferrer noopener">Lightning Network</a> on Monday.



Lightning is now alongside other options including Bitcoin mainnet, BNB Smart Chain and Ethereum.



Lightning serves as a layer-2 scaling solution for Bitcoin. The network is intended to speed up transactions and reduce fees, reminiscent of <a href="https://blockworks.co/news/optimism-bedrock-upgrade-superchain" target="_blank" rel="noreferrer noopener">Ethereum layer-2 protocols like Optimism</a>.



It supports direct payment channels between users, allowing bitcoin (<a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a>) to be sent off-chain while settling on-chain in batches. This design has <a href="https://bitcoinmagazine.com/technical/good-griefing-a-lingering-vulnerability-on-lightning-network-that-still-needs-fixing" target="_blank" rel="noreferrer noopener">presented</a> its own risk profile, with Lightning developers warning users that the software is still under development.



&#8220;Most software deployed in the Lightning Network is still considered beta software, meaning it may contain bugs that could lead to irrevocable loss of funds. For most operators, the biggest risks are data loss from power outages, hardware failures and bugs,&#8221; per Lightning&#8217;s <a href="https://docs.lightning.engineering/community-resources/faq" target="_blank" rel="noreferrer noopener">FAQ</a>.



Bitcoin sent over Lightning should appear in seconds, with the network often used for micropayments and real-world transactions.&nbsp;Twitter, for instance, enabled BTC tipping in 2021 via payments app Strike, which uses Lightning.



Binance <a href="https://blockworks.co/news/binance-bitcoin-lightning" target="_blank" rel="noreferrer noopener">pledged to integrate</a> Lightning last month but said doing so required further technical work.



Other exchanges such as Bitfinex, Kraken, River Financial and OKX have already integrated Lightning into their platforms. Coinbase CEO Brian Armstrong in April <a href="https://twitter.com/brian_armstrong/status/1644794656570617856" target="_blank" rel="noreferrer noopener">hinted</a> that his platform may do the same but hasn’t yet provided a specific timeline.



Lightning adoption has steadily increased over the past few years, although it hasn&#8217;t been without <a href="https://twitter.com/lightning/status/1587443868617818113" target="_blank" rel="noreferrer noopener">hiccups</a>. There’s about 4,900 BTC ($148.2 million) on the network right <a href="https://www.lookintobitcoin.com/charts/lightning-network-capacity/" target="_blank" rel="noreferrer noopener">now</a> — up from under 1,000 BTC ($30.2 million) in 2020.



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Bitcoin Lightning Network is now supported by Binance

Cryptocurrency exchange Binance is working to integrate the <a href="https://blockworks.co/tag/lightning-network" target="_blank" rel="noreferrer noopener">Bitcoin Lightning Network</a> to make deposits and withdrawals easier and faster.



The exchange said that keen observers had recently noticed the presence of new lightning nodes.



“Yes — that&#8217;s us! However, there&#8217;s still more tech work to be done. We&#8217;ll update once Lightning is fully integrated,” Binance said in a tweet on Tuesday, without elaborating further on a potential timeline for completion.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><a href="https://twitter.com/hashtag/Binance?src=hash&amp;ref_src=twsrc%5Etfw">#Binance</a> is working to integrate the <a href="https://twitter.com/hashtag/Bitcoin?src=hash&amp;ref_src=twsrc%5Etfw">#Bitcoin</a> Lightning Network for deposits and withdrawals. Some eagle-eyed users spotted our new lightning nodes recently. Yes &#8211; that&#39;s us! However, there&#39;s still more tech work to be done. We&#39;ll update once Lightning is fully integrated. <a href="https://t.co/N0oN8561sN">https://t.co/N0oN8561sN</a>&mdash; Binance (@binance) <a href="https://twitter.com/binance/status/1671042638592589826?ref_src=twsrc%5Etfw">June 20, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



A Binance spokesperson didn’t comment beyond the tweet.



The Lightning Network is a layer-2 scalability solution built on the Bitcoin blockchain. It enables users to send and receive bitcoin (<a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a>) rapidly and with minimal fees.



Binance dropped a hint about integrating the lightning network on May 8 when it paused BTC withdrawals twice within a week, each time for some two hours, due to a flood of pending transactions.



“The Bitcoin network has struggled with processing a large number of transactions, currently managing just seven to ten transactions per second,” Binance said in a <a href="https://www.binance.com/en/feed/post/501886" target="_blank" rel="noreferrer noopener">blog</a>.



“This limitation has long been known as a drawback of the Bitcoin network and is why projects like the Lightning Network, which can speed up transactions without impacting the main network, have gained popularity,” the exchange said.



Exchanges like <a href="https://support.bitfinex.com/hc/en-us/articles/360039801053-Lightning-Network-BTC-LN-BTC-Deposits-Withdrawals">Bitfinex</a>, <a href="https://support.bitfinex.com/hc/en-us/articles/360039801053-Lightning-Network-BTC-LN-BTC-Deposits-Withdrawals" target="_blank" rel="noreferrer noopener">Kraken</a>, <a href="https://rls.dev/" target="_blank" rel="noreferrer noopener">River Financial</a> and <a href="https://www.okx.com/help-center/360059600412" target="_blank" rel="noreferrer noopener">OKX</a> have already integrated the Lightning Network into their platforms.



Kraken claims that the Lightning Network can handle millions of transactions per second, surpassing Visa&#8217;s processing capability of around 65,000 transactions per second.



Twitter also has a <a href="https://blockworks.co/news/twitter-users-can-now-get-paid-in-bitcoin">feature</a> for users in El Salvador and the US (excluding Hawaii and New York) to tip with bitcoin using the Lightning Network.



Lightning Network capacity has been in a steady uptrend, even as the price of bitcoin has fallen over the past 18 months, and currently stands at about 5,400 BTC ($145 million), <a href="https://studio.glassnode.com/dashboards/btc-lightning-network" target="_blank" rel="noreferrer noopener">data</a> from Glassnode shows.



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="2560" height="689" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/06/btc-lightning-scaled.jpg?w=1024&amp;h=1024" alt="" class="wp-image-59355" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/06/btc-lightning-scaled.jpg?w=2560 2560w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/btc-lightning-scaled.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/btc-lightning-scaled.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/btc-lightning-scaled.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/btc-lightning-scaled.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/btc-lightning-scaled.jpg?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/btc-lightning-scaled.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/btc-lightning-scaled.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/btc-lightning-scaled.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/06/btc-lightning-scaled.jpg?w=80 80w" sizes="(max-width: 2560px) 100vw, 2560px" /><figcaption class="wp-element-caption">Bitcoin Lightning Network Capacity (yellow) vs price (black); Source: <a href="https://studio.glassnode.com/dashboards/btc-lightning-network" target="_blank" rel="noreferrer noopener">Glassnode</a></figcaption></figure>



Although Lightning payment channels can dramatically reduce the cost of BTC transfers, it also introduces some risk of centralization and additional trust assumptions, and has <a href="https://twitter.com/ercwl/status/1638314106913423361?s=20" target="_blank" rel="noreferrer noopener">struggled</a> to gain adoption.



Macauley Peterson contributed reporting.



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Binance boosts Bitcoin Lightning Network with promised integration

James Cirrone

Robert F. Kennedy, Jr., told a stage Friday at Bitcoin Miami that his presidential campaign would accept bitcoin donations to cheers and whistles. Novel announcement right?



Not really. Dozens of politicians, political action committees, and party organizations have already accepted bitcoin (<a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a>) and crypto as legitimate forms of donations. Not all lawmakers are hostile toward digital assets like Senators Elizabeth Warren, D-Mass., and Roger Marshall, R-Kan., who recently had to push back <a href="https://blockworks.co/news/warren-crypto-bill-delayed">the introduction of their crypto anti-money laundering bill</a> due to lack of support, according to insiders.&nbsp;



Even past presidential contenders have accepted bitcoin, though Kennedy made the distinction that his campaign will be the first to use the Lightning Network.&nbsp;



Senator Rand Paul, R-Ky., allowed people to donate to him in bitcoin for his 2016 presidential campaign, a move The New York Times deemed “secretive” at the time.&nbsp;



“Presidential fund-raising, never known for its transparency, may have just become even more secretive,” the NYT’s Eric Lichtblau wrote on April 9, 2015, shortly after Paul announced his candidacy.



Lichtblau continued, “Senator Rand Paul of Kentucky waded into new waters when he said he would accept campaign contributions in Bitcoins, a largely untraceable virtual currency, in amounts up to $100.”



Since the hesitant days of the 2016 election year, crypto has become more widely adopted by various politicians on both sides of the aisle.



Rep. Eric Swalwell, D-Calif., and Andrew Yang both accepted crypto donations for their respective 2020 presidential bids. Yang’s new political party, the Forward Party, accepts 60 different crypto tokens.&nbsp;



Other high-profile Republicans who are comfortable with crypto donations include Sen. Cynthia Lummis from Wyoming, Rep. Warren Davidson from Ohio, and former Republican congressional and senatorial candidates Laura Loomer and Blake Masters. 



The National Republican Congressional Committee also accepts crypto donations, becoming the first party committee to do so, Axios <a href="https://www.axios.com/2021/06/17/house-gop-nrcc-cryptocurrency-campaign-donations" target="_blank" rel="noreferrer noopener">reported</a> in June 2021.



Beyond the growing adoption among various politicians and political arms, making donations to candidates in the form of bitcoin has been allowed for just shy of ten years now.&nbsp;



In fact, it’s been expressly permitted since May 2014 by the Federal Election Commission (FEC), the regulatory agency responsible for enforcing campaign finance law in the US.



According to the 1971 Federal Election Campaign Act, a political contribution can be <a href="https://uscode.house.gov/view.xhtml?path=/prelim@title52/subtitle3/chapter301&amp;edition=prelim" target="_blank" rel="noreferrer noopener">defined</a> as “any gift, subscription, loan, advance, or deposit of money or anything of value made by any person for the purpose of influencing any election for Federal office.”



Working under that definition, the FEC <a href="https://www.fec.gov/updates/ao-2014-02-campaign-may-accept-bitcoins-as-contributions/" target="_blank" rel="noreferrer noopener">concluded</a> “that bitcoins may be accepted as contributions under the Act.”



So, when it comes down to it, crypto has been a part of American political life for a while now. And with <a href="https://blockworks.co/news/doj-claws-back-ftx-donations">the FTX disaster still unraveling</a>, the <a href="https://blockworks.co/news/sec-responds-to-coinbase-request-for-action-no">SEC still providing murky guidance</a> on whether digital assets are securities, and <a href="https://blockworks.co/news/us-presidential-candidates-crypto">a presidential election right around the corner</a>, crypto is very likely to continue to be a part of the national conversation.



Updated May 23, 2023 at 5:13 pm ET: A previous version of this article incorrectly listed Cynthia Lummis as a senator from Wisconsin. Cynthia Lummis is a senator from Wyoming.



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RFK Jr’s Presidential Campaign Accepts Bitcoin, Like Dozens of Politicians Before

Macauley Peterson

A pseudonymous Bitcoin and Lightning Network developer going by the name “Supernestnet” was poking around Ordinal Theory — <a href="https://blockworks.co/tag/ordinals">Ordinals</a> for short — on Thursday, when he discovered a bug.



Ordinals are <a href="https://blockworks.co/news/new-bitcoin-ordinals-marketplace">an attempt to make Bitcoin fun again</a>. They allow text, images and code to be “inscribed” on a satoshi — the smallest denomination of bitcoin. Each satoshi has <a href="https://github.com/casey/ord/blob/master/bip.mediawiki">a unique number</a> between 0 and (eventually) 2,100 trillion, assigned in the order in which they are mined. While usually thought of as fungible, the Ordinals protocol makes them non-fungible, like an NFT.



Just as each satoshi is numbered, each Ordinals inscription has a number — there are more than <a href="https://dune.com/dgtl_assets/bitcoin-ordinals-analysis">3.7 million</a> of them to date.



Supernestnet found a way to break inscription numbers, by inscribing a satoshi that he didn’t own. Then, just as he <a href="https://twitter.com/super_testnet/status/1654383946782629888?s=20">inadvertently</a> riffed on the <a href="https://www.holy-bhagavad-gita.org/chapter/11/verse/32">Bhagavad Gita</a>, thinking it was an homage to the film Oppenheimer, he also <a href="https://twitter.com/super_testnet/status/1654212346171064328?s=20">asked</a> rhetorically whether he had “broken” Ordinals.


<div class="wp-block-image">
<figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1280" height="720" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/05/image-5.png?w=1024&amp;h=1024" alt="" class="wp-image-54642" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/05/image-5.png?w=1280 1280w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/image-5.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/image-5.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/image-5.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/image-5.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/image-5.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/image-5.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/image-5.png?w=80 80w" sizes="(max-width: 1280px) 100vw, 1280px" /><figcaption class="wp-element-caption">Source: https://github.com/supertestnet/breaker-of-jpegs</figcaption></figure></div>


Not so much, according to Danny Diekroeger, founder and CEO at Deezy, who works on infrastructure for the <a href="https://blockworks.co/tag/lightning-network">Lightning Network</a>.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">the legend <a href="https://twitter.com/super_testnet?ref_src=twsrc%5Etfw">@super_testnet</a> has produced the first valiant attack on ordinal inscriptions by inscribing a 0-value transaction, causing joy from hater maxis, and panic from JPG grifters like me but the situation is not as bad as it sounds, here&#39;s my understanding:&mdash; danny ⚡️ deezy (@dannydiekroeger) <a href="https://twitter.com/dannydiekroeger/status/1654259984375615490?ref_src=twsrc%5Etfw">May 4, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



&#8220;Inscription numbers are just a vanity metric putting an order to which inscriptions came first,” he tweeted. “[S]ome collectors like having the 100,000th inscription, for example…these are all messed up now, because [Supertestnet]&#8217;s transaction exposed some logic in the software.”



It was an “edge case” and only provides a new example of a known issue, according to Ordinals advocate, LeonidasNFT. They <a href="https://twitter.com/LeonidasNFT/status/1654281261609877504">said</a> on Twitter, “there has been debate about inscription numbers being off by a lot more than one for almost three months now.”



Plus, it may all have been a <a href="https://twitter.com/dannydiekroeger/status/1654259996937560064?s=20">marketing ploy</a>.



Is it funny? A little. Is it important? Not really.



What is notable is that mean-average transaction fees have increased by just shy of 300% in the past two weeks, according to a Galaxy Research <a href="https://glxy.galaxy.com/weekly-research-brief-tokens-on-bitcoin-spiking-fees-to-2021-highs">note</a> on Friday.



It currently costs between $5 and $6 to get a transaction through the Bitcoin <a href="https://mempool.space/">mempool</a>.



That’s one of the points of Ordinals, as its originator, Casey Rodarmor, <a href="https://github.com/casey/ord/blob/master/bip.mediawiki">noted</a> right off the bat: “Since Bitcoin requires the development of a robust fee market, this is a strong positive of the proposal.”



But the recent bump in transaction fees likely has more to do with the “<a href="https://blockworks.co/news/defi-on-bitcoin">DeFi on Bitcoin</a>” efforts around the BRC-20 token standard, which shares a similar technique with Ordinals but is used differently.



Galaxy Research views this as “a notable development for Bitcoin,” but whether it has any long-term significance remains to be seen. It seems rather like trying to fit a <a href="https://ethresear.ch/t/proposal-change-ether-currency-symbol-from-to/120">diamond</a> peg in a round hole.



But fine: Experiments are <a href="https://blockworks.co/news/defi-on-bitcoin">being run on Bitcoin</a>. Some people think it’s <a href="https://twitter.com/LeonidasNFT/status/1653102966474256384?s=20">fun</a> and <a href="https://twitter.com/ercwl/status/1653508862631084036">good</a> for Bitcoin. Others are <a href="https://twitter.com/mission_bitcoin/status/1654299881215778816?s=20">mad</a>.



Bitcoin continues, as always, just with slightly higher transaction fees.



In any case, Supertestnet has now <a href="https://twitter.com/super_testnet/status/1654518626345537543?s=20">changed</a> their story.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">I did not break ordinals, just crashed the ordinal explorer used by unisat and ordinalswallet (that explorer is now fixed) and uncovered a bug in another that lets you misnumber inscriptions They clarify this in the article but the headline is clickbate h/t <a href="https://twitter.com/udiWertheimer?ref_src=twsrc%5Etfw">@udiWertheimer</a> <a href="https://t.co/ItVFEQiSk8">https://t.co/ItVFEQiSk8</a>&mdash; Super Testnet (@super_testnet) <a href="https://twitter.com/super_testnet/status/1654518626345537543?ref_src=twsrc%5Etfw">May 5, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



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Who ‘Broke’ Bitcoin Ordinals? What Does it Mean?

<div id="highlights-block_62ac3ee796bd9" class="highlights">
 <ul>
 <li>The Tesla CEO reiterated his determination to get rid of farm trolls and bots on Twitter</li>
 <li>“If one can use [Twitter] to make convenient payments, that’s an increase in usefulness,” he said</li>
 </ul>
 
</div>



After securing a <a href="https://cms.blockworks.co/elon-musk-secures-44b-deal-for-social-media-platform-twitter/" target="_blank" rel="noreferrer noopener">$44 billion deal</a> to acquire Twitter in April, billionaire Elon Musk spoke to employees of the social media platform in a virtual meeting on June 16, his first Twitter all-hands meeting.



Musk discussed his plans for the company, including the integration of digital payments and the elimination of cryptocurrency-related scams.



The Tesla chief executive said it would be logical to incorporate digital payments on the network to facilitate direct transfers within Twitter.



“I think it would make sense to integrate payments into Twitter so that it’s easy to send money back and forth, and if you have currency as well as crypto,” he said, according to a <a href="https://www.vox.com/recode/23171541/leaked-transcript-inside-elon-musks-first-meeting-with-twitter-employees" target="_blank" rel="noreferrer noopener">transcript</a> of the meeting posted by Recode.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“My goal would be to maximize the usefulness of the service — the more useful it is, the better,” he said. “And if one can use it to make convenient payments, that’s an increase in usefulness.”</blockquote>



He highlighted three areas critical to Twitter’s purpose — news, entertainment and payments. He also wants to address spam accounts on the platform.



“There’s quite a lot of crypto scams on Twitter,” he said. “It’s gotten better, but there’s still a fair bit of that.”&nbsp;



Earlier this month, Musk threatened to abandon his deal with Twitter unless the company provides him with evidence that fake accounts make up less than 5% of its users. Twitter’s <a href="https://www.reuters.com/technology/twitter-estimates-spam-fake-accounts-represent-less-than-5-users-filing-2022-05-02/" target="_blank" rel="noreferrer noopener">own estimate</a> is that fake or bot accounts count for less than 5% of its active users.&nbsp;



&#8220;My offer was based on Twitter&#8217;s SEC filings being accurate,&#8221; Musk <a href="https://twitter.com/elonmusk/status/1526465624326782976" target="_blank" rel="noreferrer noopener">tweeted</a>.



Twitter <a href="https://www.washingtonpost.com/technology/2022/06/08/elon-musk-twitter-bot-data/" target="_blank" rel="noreferrer noopener">agreed</a> to comply with Musk’s demands for internal data, according to the Washington Post.



Separately at the all-hands meeting, Musk said he prefers in-person work at Tesla, where cars cannot be assembled remotely. While he didn’t shoot down the possibility of remote work for Twitter employees, he suggested they periodically drop into the office.



“Even if somebody’s working remotely, they gotta show up at the office occasionally so that they recognize their colleagues and don’t walk down the street and pass your colleagues, and you don’t recognize them,” he said. “That would not be good.”



<h3 class="wp-block-heading">Elon Musk the target of dogecoin pyramid scheme allegations</h3>



The tech mogul has previously proposed building digital payments into Twitter. After acquiring a 9.2% stake in the company, he pitched dogecoin as a payment option for users with a <a href="https://blog.twitter.com/en_us/topics/company/2021/introducing-twitter-blue" target="_blank" rel="noreferrer noopener">Twitter Blue</a> subscription in April.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Maybe even an option to pay in Doge?&mdash; Elon Musk (@elonmusk) <a href="https://twitter.com/elonmusk/status/1512954808394731521?ref_src=twsrc%5Etfw">April 10, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Musk has often been criticized for making comments that may have influenced the price of dogecoin. On Thursday, one investor launched a $258 billion <a href="https://www.pacermonitor.com/public/case/44928222/Johnson_v_Musk_et_al" target="_blank" rel="noreferrer noopener">class action lawsuit</a> against Musk and his companies SpaceX and Tesla, alleging a scheme to illegally inflate the price of the meme coin.



“Defendants falsely and deceptively claim that dogecoin is a legitimate investment when it has no value at all,” the plaintiff wrote in a federal court filing.



Twitter already has a <a href="https://cms.blockworks.co/twitter-users-can-now-get-paid-in-bitcoin/" target="_blank" rel="noreferrer noopener">bitcoin tipping</a> feature available on its platform for users in El Salvador and the US, which uses the Lightning Network, a bitcoin scaling solution.



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Elon Musk Teases Crypto Integration at His First Twitter All-hands

Ben Strack

<div id="highlights-block_624766c9030f0" class="highlights">
 <ul>
 <li>A scalability solution, the Lightning Network allows for faster and cheaper bitcoin transactions</li>
 <li>Kraken originally expected to allow clients to withdraw and deposit bitcoin on Lightning Network in the first half of 2021</li>
 </ul>
 
</div>



Kraken has implemented Lightning Network to provide clients with instantaneous settlement of bitcoin transactions in an effort to help accelerate use of the asset as a medium of exchange.



The Lightning Network is a scalability solution, or layer-2, built on top of the Bitcoin blockchain that allows users to quickly send and receive BTC with virtually no fees.



“In addition to enabling instant and inexpensive deposits and withdrawals, Kraken is providing core network services that enable the Lightning network to route payments,” a company spokesperson told Blockworks. “Overall, we hope our integration signals our support of Lightning to the broader industry.”



The network can execute millions of transactions per second — compared to Visa’s processing of about 65,000 transactions per second, according to the company.



Its system of payment channels does not publish intermediate transactions to the blockchain while open, holding them off-chain to enable instant and efficient value transfer, an April 1 Kraken blog post states. These off-chain channels remain secured by the Bitcoin blockchain’s multi-signature and timelocking features.



&#8220;Bitcoin has proven to be an effective store of value over the last decade and is now seeing increased use as a borderless global currency,&#8221; Pierre Rochard, Kraken&#8217;s bitcoin product manager, told Blockworks in an email. &#8220;The Lightning Network provides real-time settlement of Bitcoin payments, larger capacity than any other system and for the first time microtransactions at scale.”



The integration comes after Kraken had <a href="https://blog.kraken.com/post/7225/a-need-for-speed-kraken-to-launch-bitcoin-lightning-%E2%9A%A1%EF%B8%8F-integration-in-2021/" target="_blank" rel="noreferrer noopener">announced in December 2020</a> that it expected to allow clients to withdraw and deposit bitcoin on Lightning Network in the first half of 2021.



The crypto exchange revealed at the time that it would be hiring a team to focus specifically on the network. The blog post stated that “easier deposits and withdrawals are just the beginning of the additional features we are aiming to provide.”



The spokesperson declined to comment on potential future features.&nbsp;



The “rapid scaling” of Kraken’s business caused the Lightning integration to take longer than anticipated, the representative added, noting that the exchange saw trading volumes across all markets hit all-time highs and its client base double in 2021.



Matthew Gould, founder and CEO of Unstoppable Domains, noted that layer-2 solutions are a big part of improving digital assets’ usability, making it easier for the mainstream population to adopt and transact with digital currencies.



“The Lightning Network is a saving grace for scaling Bitcoin, and this represents a large-scale test for the network,” Colin Pape, founder of decentralized search engine Presearch, said. “I hope that Kraken’s integration is a proof point for the validity of the Lightning Network and something that other exchanges consider, because the success of Bitcoin is the success for the digital-asset space as a whole.”



Spokespeople at competing exchanges did not immediately return requests for comment.



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Kraken Supports Bitcoin’s Lightning Network After Delayed Launch

Jacquelyn Melinek

<div id="highlights-block_61ddbd6adc5e0" class="highlights">
 <ul>
 <li>Cash App is a mobile money transfer service that allows people to send and receive money as well as bitcoin</li>
 <li>Block (formerly Square) developed Cash App; Block’s CEO is Jack Dorsey</li>
 </ul>
 
</div>



Mobile payment service Cash App has added a layer-2 payment protocol Lightning Network to help users transact with bitcoin, according to reports by users.&nbsp;



The feature was rolled out to a handful of users and the Lightning Network feature can be used as “the fastest, free way to pay anyone in bitcoin,” according to <a href="https://twitter.com/yeg0rpetrov/status/1480743605467815945?s=20" target="_blank" rel="noreferrer noopener">screenshots</a>.&nbsp;



At the time of publication, it was not clear how users were selected and how many users have received the new feature.



Cash App was not available for immediate comment requested by Blockworks. But Jack Dorsey, the co-founder and CEO of Block, which developed Cash App, has been acknowledging and <a href="https://twitter.com/ODELL/status/1480927111087104009?s=20" target="_blank" rel="noreferrer noopener">liking</a> tweets on Twitter by Cash App users posting screenshots of their Lightning Network transactions on Cash App.&nbsp;



Dorsey is the former co-founder and CEO of Twitter. Block, <a href="https://cms.blockworks.co/?s=dorsey#:~:text=Jack%20Dorsey%E2%80%99s%20Square%20to%20Change%20its%20Name%20to%20Block" target="_blank" rel="noreferrer noopener">formerly known as Square</a>, owns Cash App, TIDAL and <a href="https://cms.blockworks.co/jack-dorsey-tbd-will-be-open-platform-for-decentralized-bitcoin-exchanges/" target="_blank" rel="noreferrer noopener">TBD54566975</a>, a platform for decentralized bitcoin exchanges being developed by Dorsey.&nbsp;



<h3 class="wp-block-heading">The Lightning Network</h3>



Lightning Network is a decentralized protocol that uses smart contracts on top of blockchain-based cryptocurrencies like bitcoin. Through the network, participants can instantly send, receive or transact payments without creating an on-blockchain transaction for individual payments, according to its <a href="https://lightning.network/" target="_blank" rel="noreferrer noopener">website</a>.&nbsp;



In February 2019, Dorsey said during an <a href="https://stephanlivera.com/episode/52/" target="_blank" rel="noreferrer noopener">interview</a> that rolling out the Lightning Network on Cash App, is “not an if, it’s more of a when.” Nearly three years later, his plans have come to fruition.



Dorsey has recently been an outspoken advocate for crypto and said that bitcoin will <a href="https://cms.blockworks.co/jack-dorsey-says-bitcoin-will-replace-us-dollar-and-you-dont-own-web3/">replac</a><a href="https://cms.blockworks.co/jack-dorsey-says-bitcoin-will-replace-us-dollar-and-you-dont-own-web3/" target="_blank" rel="noreferrer noopener">e</a><a href="https://cms.blockworks.co/jack-dorsey-says-bitcoin-will-replace-us-dollar-and-you-dont-own-web3/"> the US dollar</a>. He has also <a href="https://twitter.com/jack/status/1424854924194729984?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1424854924194729984%7Ctwgr%5E%7Ctwcon%5Es1_c10&amp;ref_url=https%3A%2F%2Fcms.blockworks.co%2Fwp-admin%2Fpost.php%3Fpost%3D12995action%3Dedit" target="_blank" rel="noreferrer noopener">tweeted</a> that bitcoin will “unite a deeply divided country (and eventually world).”



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Cash App Integrates Lightning Network for Bitcoin Payments

<div id="highlights-block_61b8b92aa0f7f" class="highlights">
 <ul>
 <li>NYDIG will use the capital to develop its Bitcoin-focused platform by integrating Bitcoin protocol upgrades like Lightning payments, asset tokenization and smart contracts</li>
 <li>NYDIG’s CMO previously told Blockworks the company will continue to integrate into the market in a “major way” by next year</li>
 </ul>
 
</div>



NYDIG completed a $1 billion growth equity funding round led by WestCap, according to a company announcement Tuesday.&nbsp;



The equity raise increased the company’s valuation to “more than” $7 billion, the company revealed. Prior investors, including Morgan Stanley, Affirm, New York Life, Mass Mutual, Bessemer Venture Partners, FinTech Collective, FIS and Fiserv also contributed to the round.&nbsp;



“Bitcoin as an asset class has become more of an institutional topic, certainly from macro investors,” Morgan Stanley’s Head of Digital Asset Markets Andrew Peel <a href="https://cms.blockworks.co/morgan-stanleys-peel-bitcoin-is-becoming-an-institutional-topic/" target="_blank" rel="noreferrer noopener">told Blockworks</a> in September. “The growth [in DeFi] can’t be ignored,” Peel said.&nbsp;



The capital will be used to develop its Bitcoin-focused platform by integrating Bitcoin protocol upgrades like Lightning payments, asset tokenization and smart contracts.



“&#8230;this new equity capital will further accelerate progress towards making this exciting network accessible – and useful – to all,” Robert Gutmann, co-founder and CEO of NYDIG, said in a statement.&nbsp;



NYDIG <a href="https://nydig.com/" target="_blank" rel="noreferrer noopener">began</a> in 2016 and spun off into a separate entity in 2017 with a mission to “make Bitcoin accessible to all” by providing technology and financial services solutions to banks, FinTech companies, investment managers, and institutions, among others. It is also a subsidiary of holding company Stone Ridge, a $12 billion alternative asset manager.&nbsp;



The firm is known for partnering with a range of institutions, from traditional financial companies and <a href="https://cms.blockworks.co/nydig-and-q2-launch-bitcoin-platform-to-help-banks-credit-unions-transact-bitcoin/" target="_blank" rel="noreferrer noopener">banks</a> to national <a href="https://cms.blockworks.co/houston-rockets-partner-with-nydig-through-bitcoin-paid-deal/" target="_blank" rel="noreferrer noopener">sports teams</a>.&nbsp;



NYDIG’s Chief Marketing Officer Kelly Brewster declined to comment further on the capital raise when requested by Blockworks on Tuesday.&nbsp;



But last month, Brewster <a href="https://cms.blockworks.co/nydig-plans-to-bring-bitcoin-to-thousands-of-us-banks-in-2022/" target="_blank" rel="noreferrer noopener">said to Blockworks</a>, “Over the course of the next year, we plan to bring bitcoin to hundreds, if not thousands, of banks around the country and the first banks are coming online right now.” The current demand from companies looking to integrate Bitcoin is unlike anything Brewster has ever seen before in this space, he mentioned at the time.&nbsp;



Although there are banks that have already partnered with NYDIG, the company will continue to integrate into the market in a “major way” by next year, Brewster said.



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NYDIG Closes $1B Funding Round, Raising Valuation Above $7B

Sam Martin

<div id="highlights-block_617725d07bf3f" class="highlights">
 <ul>
 <li>The Bitcoin Network has successfully implemented the highly anticipated Taproot upgrade</li>
 <li>Paraswap announced a new airdrop strategy in an attempt to out-smart &#8216;airdrop hunters&#8217;</li>
 </ul>
 
</div>



Taproot is officially live as Bitcoin successfully underwent its largest upgrade in roughly four years. 



The Bitcoin Lightning Network continues to expand its channel count, node count and liquidity. 



Senators Lummis and Wyden propose a bill to clarify tax reporting requirements for industry players. 



Paraswap rolled out a retroactive airdrop of its token PSP, allocating 7.5% of the 2 billion token supply to early, active users.



NFTs are seeing a resurgence in volume to kick off the week. 



<h3 class="wp-block-heading">Latest in Macro:</h3>



<ul class="wp-block-list"><li>S&amp;P 500: 4,682, +.00%</li><li>NASDAQ: 15,853, -.04%</li><li>Gold: $1,862, -.14%</li><li>WTI Crude Oil: $80.95, +.20%</li><li>10-Year Treasury: 1.625%, +.041%</li></ul>



<h3 class="wp-block-heading">Latest in Crypto:</h3>



<ul class="wp-block-list"><li>BTC: $64,011, -.19%</li><li>ETH: $4,569, +.44%</li><li>ETH/BTC: .0716, +1.56%</li><li>BTC.D: 43.45%, -.57%</li></ul>



<h3 class="wp-block-heading">Taproot</h3>



Yesterday, Bitcoin block 709,632 was processed and the <a href="https://cms.blockworks.co/anticipating-bitcoins-taproot-upgrade-heres-what-you-need-to-know/" target="_blank" rel="noreferrer noopener">Taproot upgrade</a> was activated. This is widely considered to be the largest update to Bitcoin in the past four years.



The Taproot upgrade enables Schnorr signatures, taproot and tapscript, according to a <a href="https://kraken.docsend.com/view/9e9y7may8526z934" target="_blank" rel="noreferrer noopener">Kraken Intelligence paper</a>. While users should not expect Ethereum-like smart contract capabilities, it is a big step that lays the ground work for innovation atop of the Bitcoin network. 



Noelle Acheson, Head of Market Insights at Genesis, noted the important enhancements in an email to Blockworks: 



<ul class="wp-block-list"><li>It will boost Bitcoin’s smart contract functionality, potentially broadening its use cases.</li><li>It increases privacy by obscuring what type of transaction is being executed.</li><li>Bitcoin transactions will become more data-efficient, which could optimize block capacity and lead to lower transaction fees.</li><li>Taproot&nbsp;makes transactions on the Lightning Network more flexible and more private, which should further boost Bitcoin adoption.</li></ul>



A rough timeline of the Taproot upgrade from birth to implementation:



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="750" height="609" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-3.01.24-PM.png" alt="" class="wp-image-11195" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-3.01.24-PM.png?w=750 750w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-3.01.24-PM.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-3.01.24-PM.png?w=317 317w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-3.01.24-PM.png?w=321 321w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-3.01.24-PM.png?w=270 270w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-3.01.24-PM.png?w=80 80w" sizes="(max-width: 750px) 100vw, 750px" /><figcaption>Source: Kraken Intelligence</figcaption></figure></div>



<h3 class="wp-block-heading">The Lightning Network</h3>



The Lightning Network (LN) is a protocol that enables high­-volume, low­-latency digital micropayments without the need for trusted intermediaries, according to the project&#8217;s <a href="https://lightning.network/lightning-network-technical-summary.pdf" target="_blank" rel="noreferrer noopener">website</a>. Using novel Bitcoin multi-signature transactions and scripts, Lightning participants do not give unilateral custody of funds to a third party, reducing transaction costs and counterparty risk.



Bitcoin node operators are able to download the Lightning Network daemon, fund their Lightning account, and begin opening channels in exchange for <a href="https://www.nasdaq.com/articles/how-to-operate-a-profitable-lightning-node-2021-03-01" target="_blank" rel="noreferrer noopener">some passive income</a>. 



<a href="https://defipulse.com/lightning-network" target="_blank" rel="noreferrer noopener">Defi Pulse</a> explains that because LN nodes (i.e., users in LN channels) are interconnected, nodes do not always need to open a direct channel with everyone they want to transact with. Payments can be routed through other channels, provided that a path with adequate liquidity exists between the two transacting nodes.



The Lightning Network has seen massive growth over the past year, with the total number of channels open <a href="https://1ml.com/statistics" target="_blank" rel="noreferrer noopener">crossing 80,000</a> and the amount of liquidity continuously reaching all-time highs. The more channels and liquidity in the LN, the more useful it becomes. Some of this growth is likely attributed to the <a href="https://cloudtweaks.com/2021/07/how-bitcoin-brought-lightning-network-el-salvador/" target="_blank" rel="noreferrer noopener">adoption of BTC as legal tender</a> in El Salvador. 



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="700" height="450" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Unknown-2.jpg" alt="" class="wp-image-11200" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Unknown-2.jpg?w=700 700w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Unknown-2.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Unknown-2.jpg?w=400 400w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Unknown-2.jpg?w=406 406w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Unknown-2.jpg?w=341 341w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Unknown-2.jpg?w=80 80w" sizes="(max-width: 700px) 100vw, 700px" /><figcaption>Source: lookintobitcoin.com</figcaption></figure></div>



<h3 class="wp-block-heading">Senators propose fix to crypto reporting laws</h3>



Senators Wyden and Lummis introduced a bill to narrow some of the cryptocurrency tax reporting rules in the Infrastructure Bill being signed into law today, according to a <a href="https://www.bloomberg.com/news/articles/2021-11-15/senators-seek-crypto-reporting-fix-as-biden-signs-infrastructure?sref=uaUCx1z2" target="_blank" rel="noreferrer noopener">Bloomberg article</a>. The primary goal of the proposal is to ensure innovation is not stifled due to a lack of clarity around reporting requirements in the bill.



“Our bill makes clear that the new reporting requirements do not apply to individuals developing blockchain technology and wallets,” Wyden said in a statement. “This will protect American innovation while at the same time ensuring those who buy and sell cryptocurrency pay the taxes they already owe.”



Senator Lummis, a long-time supporter of Bitcoin, has been very vocal about her concerns related to government spending and its resulting inflation. She took to <a href="https://twitter.com/CynthiaMLummis/status/1458475839641763844?s=20" target="_blank" rel="noreferrer noopener">Twitter</a> to say &#8220;Bottom line: Inflation is a reflection of the debasement of US dollars by the federal government. New spending is at the root of the price increases at your grocery store.&#8221;



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="731" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/goldvinflationvbtc-1024x731.jpg" alt="" class="wp-image-11203" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/goldvinflationvbtc-1024x731.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/goldvinflationvbtc-1024x731.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/goldvinflationvbtc-1024x731.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/goldvinflationvbtc-1024x731.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/goldvinflationvbtc-1024x731.jpg?w=360 360w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/goldvinflationvbtc-1024x731.jpg?w=366 366w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/goldvinflationvbtc-1024x731.jpg?w=307 307w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/goldvinflationvbtc-1024x731.jpg?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/goldvinflationvbtc-1024x731.jpg?w=2000 2000w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: Ycharts</figcaption></figure>



Despite the successful implementation of Taproot, red-hot inflation numbers and a positive regulatory proposal, the BTC price has traded flat to negative over the last 24 hours. BTC was last hovering near $64,000, down roughly .5% on the day. 



<h3 class="wp-block-heading">Paraswap airdrop</h3>



Paraswap, a decentralized exchange (DEX) aggregator that provides rates over multiple DEXs on the Ethereum blockchain, airdropped its token (PSP) to certain users this morning. Roughly 20,000 addresses were allocated 7.5% of the 2 billion PSP token supply. 



The Paraswap team noticed a large amount of &#8216;airdrop hunters&#8217; and chose to select eligible recipients based on various usage metrics from a snapshot taken on Oct. 8, rather than airdropping tokens to every wallet that used Paraswap. Paraswap detailed its plan in a company released medium <a href="https://medium.com/paraswap/whats-an-active-user-clarifying-psp-token-distribution-filtering-logic-81df6096d410" target="_blank" rel="noreferrer noopener">article</a>, however, the airdrop led to confusion and discontent among users.



An overview of the PSP airdrop can be seen in the following photo:



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="492" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.41.33-PM-1024x492.png" alt="" class="wp-image-11188" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.41.33-PM-1024x492.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.41.33-PM-1024x492.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.41.33-PM-1024x492.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.41.33-PM-1024x492.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.41.33-PM-1024x492.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.41.33-PM-1024x492.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.41.33-PM-1024x492.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.41.33-PM-1024x492.png?w=1404 1404w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: Dune Analytics</figcaption></figure></div>



<h3 class="wp-block-heading">Non-Fungible Tokens (NFTs)</h3>



NFTs are starting to see signs of life after a rough week last week. Bored Ape Yacht Club and its&#8217; Mutant derivative have seen a lot of attention today. Trading data from <a href="https://opensea.io/rankings" target="_blank" rel="noreferrer noopener">OpenSea</a> and <a href="https://solanalysis.com" target="_blank" rel="noreferrer noopener">Solanalysis</a> of some of the top Solana and Ethereum projects can be found below:



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="332" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.37-PM-1024x332.png" alt="" class="wp-image-11189" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.37-PM-1024x332.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.37-PM-1024x332.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.37-PM-1024x332.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.37-PM-1024x332.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.37-PM-1024x332.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.37-PM-1024x332.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.37-PM-1024x332.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.37-PM-1024x332.png?w=1238 1238w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Top Ethereum Projects</figcaption></figure></div>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="283" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.45-PM-1024x283.png" alt="" class="wp-image-11191" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.45-PM-1024x283.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.45-PM-1024x283.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.45-PM-1024x283.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.45-PM-1024x283.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.45-PM-1024x283.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.45-PM-1024x283.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.45-PM-1024x283.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/11/Screen-Shot-2021-11-15-at-2.42.45-PM-1024x283.png?w=1214 1214w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Top Solana Projects </figcaption></figure></div>



If you made it this far, thanks for reading! I am looking forward to catching up tomorrow.



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<hr class="wp-block-separator"/>

BTC Price Flat After Taproot, Lightning Network Continues to Grow: Markets Wrap

On this episode of Blockworks&#8217; podcast &#8220;<a href="https://youtu.be/1j5mDQnA4i4" target="_blank" rel="noreferrer noopener">On the Margin</a>,&#8221; Michael Ippolito, co-founder, is joined by returning guests Jeff Booth &amp; Greg Foss. Jeff &amp; Greg discuss breaking news as the first ever U.S Bitcoin ETF was approved and what this could mean for institutional exposure to Bitcoin.



Mike, Jeff &amp; Greg also discuss the recent developments in El Salvador as Bitcoin was made legal tender, The Lightning Network, the deflationary forces &amp; network effects of technology, and the outlook for 2021 &amp; the future of Bitcoin.



They also covered: 



<ul class="wp-block-list"><li>Bitcoin mining</li><li>Altcoins vs Bitcoin</li><li>and more!</li></ul>



Watch the full episode down below! 👇



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="Everything You Need to Know: Bitcoin ETF, Lightning Network, &amp; Altcoins | Jeff Booth &amp; Greg Foss" width="1024" height="576" src="https://www.youtube.com/embed/1j5mDQnA4i4?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



&#8220;On the Margin&#8221; is a two-part show.&nbsp;Once a week, Mike interviews industry experts, and then at the end of the week he is joined by a co-host where they break down the top crypto and macro stories. Episodes go live every Wednesday and Saturday morning.



Subscribe to &#8220;On the Margin&#8221; today on <a href="https://podcasts.apple.com/us/podcast/lyn-alden-explains-connection-between-inflation-bitcoin/id1558223079?i=1000513411286" target="_blank" rel="noreferrer noopener">Apple</a> or <a href="https://spoti.fi/3bTa9uw" target="_blank" rel="noreferrer noopener">Spotify</a>, or watch episodes on <a href="https://youtube.com/playlist?list=PLvER9nHSRN3xVs_p-dl7L7K_ZgL6lSudu" target="_blank" rel="noreferrer noopener">YouTube</a>.



Are you a UK or EU reader that can&#8217;t get enough investor-focused content on digital assets? <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a> in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket. <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.

Podcast: Bitcoin ETF, Lightning Network, & Altcoins | Jeff Booth & Greg Foss

Sam Reynolds

<div id="highlights-block_6141f6db39d9f" class="highlights">
 <ul>
 <li>Transaction fees paid to miners have dropped to a low not seen since March 2020</li>
 <li>Investors in the industry remain confident in North American infrastructure shift trend</li>
 </ul>
 
</div>



Transaction fees paid to bitcoin miners are at a low not seen since the <a href="https://www.cnbc.com/2020/03/13/bitcoin-loses-half-of-its-value-in-two-day-plunge.html" target="_blank" rel="noreferrer noopener">Covid crash of March 2020</a>, but experts think the decline is unlikely to affect the industry’s mining push into North America due to block subsidies which will remain in place <a href="https://www.bitcoinblockhalf.com/" target="_blank" rel="noreferrer noopener">until sometime in the spring of 2024</a>.



As of writing, bitcoin can be sent for 5 &#8220;satoshis&#8221; per byte (currently about $0.35), even at a high priority, meaning the transaction will be processed in the next block, or 1 satoshi per byte (about $0.07) if you&#8217;re willing to wait for 20-30 minutes. The fee is not linked to the value of the transaction, so a person could even send $1 billion for 7 cents and have settlement essentially guaranteed within a couple of hours.



<h3 class="wp-block-heading">How it works</h3>



The Bitcoin blockchain is made up of “blocks” of transaction data, cryptographically linked together. Blocks can vary in size (think of them as a page of a ledger or record book), based on a variety of factors. Currently, each block is <a href="https://www.blockchain.com/charts/avg-block-size" target="_blank" rel="noreferrer noopener">approximately 1MB</a> in size.



Block subsidies are rewards given to miners for their effort in securing the network and are determined by an algorithm in <a href="https://bitcoincore.org/" target="_blank" rel="noreferrer noopener">the protocol’s source code</a>. Subsidies are distributed upon the completion of a new block after the preceding one is finished, which occurs — on average — every 10 minutes.



<div class="wp-block-image"><figure class="aligncenter size-full is-resized"><img loading="lazy" decoding="async" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-blocks-copy.jpg" alt="BTC blocks" class="wp-image-7938" width="630" height="200" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-blocks-copy.jpg?w=630 630w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-blocks-copy.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-blocks-copy.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-blocks-copy.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-blocks-copy.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-blocks-copy.jpg?w=80 80w" sizes="(max-width: 630px) 100vw, 630px" /><figcaption>Recently mined Bitcoin blocks; Source: mempool.space</figcaption></figure></div>



Currently, the block subsidy is 6.25 bitcoins per block completed. Block subsidies comprise one part of the revenue miners generate from their activities. The remainder is transaction fees — the fees users of the blockchain pay to send bitcoin over the network.



<h3 class="wp-block-heading">Transaction fees matter</h3>



Transaction fees have fallen sharply since mid-April, due to a combination of lower network activity and <a href="https://bitcoinvisuals.com/ln-capacity" target="_blank" rel="noreferrer noopener">growing capacity</a> on the Bitcoin layer-2 Lightning Network. 



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="933" height="470" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-fees.jpg" alt="BTC fees" class="wp-image-7945" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-fees.jpg?w=933 933w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-fees.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-fees.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-fees.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-fees.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-fees.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-fees.jpg?w=80 80w" sizes="(max-width: 933px) 100vw, 933px" /><figcaption>Fee revenue since April 2021; Source: blockchain.com</figcaption></figure>



“Although fees declining isn&#8217;t great for miners, I don&#8217;t see this as a long-term issue. We are still so early in the digital asset adoption curve that I think this will iron itself out over time,” Brian Dixon, Chief Operating Officer of Digital Currency and Blockchain asset management firm Off the Chain Capital, told Blockworks. “Most well-known mining operations are very profitable and can sustain themselves during this period of volatility.”



Indeed, in an August 3 note, Compass Point Research analyst Michael Del Grosso gave publicly listed miner Marathon Digital a buy rating, and called Riot Blockchain, another miner, a buy in an August 24 note.&nbsp;



Kevin Zhang, vice president of business development at Foundry, a Digital Currency Group subsidiary that provides financing for bitcoin and other mining equipment, also agrees that fee compression isn’t a huge deal for miners and won’t be making a “direct impact into the investment thesis or expansion plans in North America.”



“That being said, longer term, if the price of bitcoin in USD doesn’t continue to appreciate along the same pace as hashrate and network difficulty then the fee’s will need to increase to offset the lost revenue over time,” he added.



<h3 class="wp-block-heading">The hashrate factor</h3>



Bitcoin is programmed such that subsidies become easier or harder to achieve depending on the amount of hashrate available, and is updated roughly every two weeks to keep the average block time consistent. Increased hashrate improves the security of the network and is correlated with the $BTC price.



Despite some market volatility, generally speaking the mining industry has been on a bit of a bull run as it <a href="https://cms.blockworks.co/china-mining-exodus-seen-as-positive-for-bitcoin/" target="_blank" rel="noreferrer noopener">moves</a> to North America from China given the recent crackdowns in-country on the industry.&nbsp;



“It’s been a huge net positive for the market,” said Dixon, noting that as an investor he’s seen significant interest from energy companies looking at how bitcoin mining can use off-peak <a href="https://cms.blockworks.co/microstrategy-and-galaxy-bitcoin-mining-council-claims-mining-is-one-of-most-sustainable-industries/" target="_blank" rel="noreferrer noopener">power</a> making the grid more efficient overall.&nbsp;



Several of the largest US-listed bitcoin mining firms with operations predominantly in North America have collectively mined over 10,500 BTC year-to-date with nearly 40% of the output coming from the past two months, according to Off the Chain Capital. Five of the largest bitcoin mining firms have added almost all of their mined bitcoin to their balance sheets — adding up to 17,960 BTC as of August, valued at around $820 million, the firm also noted.&nbsp;



Dixon said that it&#8217;s going to take some time before companies are able to ramp up to full capacity. Generally, bitcoin miners don’t use data centers, but prefer to build out their own hosting facilities, which will take some time given the tight labor market in the US. And then there’s the monumental task of getting all the dedicated mining <a href="https://cms.blockworks.co/bitmain-set-to-add-56k-bitcoin-mining-rigs-in-georgia-state/" target="_blank" rel="noreferrer noopener">machines</a> to North America, in spite of the challenging freight market.&nbsp;



“This isn’t going to happen tomorrow,” Dixon said. “Covid continues to be a challenge when you are moving this much freight between countries.”



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