Ep 12. Fed outage, NFT soars & more

Each week, I cover the “So what?” of 5 key crypto stories in about 5 minutes. Let’s go.

This week:

1. Federal Reserve Outage

2. MIT to strengthen bitcoin

3. Coinbase is $100B

4. NFT record art sale

5. Dubai Fund sells bitcoin, buys Cardano and Polkadot

1. Federal Reserve outage exposes single point of failure

   • Federal Reserve Bank’s payment systems were out of service for several hours due to an operational error.

   • The impacted services include but not limited to FedACH, FedWire, FedCash, and settlement

   • FedACH system handles direct deposits of payroll, Social Security and income tax refunds as well as scheduled payments for mortgages and utility bills. It supported 62 million transactions a day in 2019.

     So what?

   • The outage disrupted payment transactions across the economy and highlighted the single point of failure. A pattern could be emerging as FedACH had 2 disruptions in 2019.

   • Recently, I read Sandworm by Andy Greenberg, this book helped drive home the point that the next great war might be fought in cyberspace. High traffic systems with a single point of failure built on dated technology are attractive targets.

   • The US might be better served by a more resilient decentralized system perhaps one that leverages blockchain technology

2. MIT to strengthen bitcoin

   • MIT’s Digital Currency Initiative has launched a 4-year R&D effort to strengthen bitcoin security

   • The program has been endorsed by cryptocurrency industry leaders

     So what?

   • Bitcoin ascended from an obscure project to a robust network that secures over $1 trillion in value due to millions of hours invested by open-source developers

   • The program will contribute neutral, expert resources to improve the robustness of Bitcoin protocol and security. This could include exploring new programming languages and pre-emptive investigations against possible attacks

   • I think this is great news particularly in light of the recent outage at the Fed

3. Coinbase releases financials ahead of $100B IPO

   • Coinbase, the US leading digital currency exchange, is now expected to be valued over $100B at IPO

   • In 2020, Coinbase reported $322M profit on $1.28B revenue. The company also served 43M retail investors and 7,000 institutional investors. 76% of customers are based in the US.

     So what?

   • The Block Research has forecasted that Coinbase could generate $2.4B revenue in Q1 2021 alone. That’s more than 2x full year 2020 in the first quarter.

   • IPO at $100B would make Coinbase a top 20 financial services company right below Goldman Sachs and above S&P.

   • The data implies about 10% of Americans have a Coinbase account. It is not farfetched to anticipate the valuation rising 5-10x as adoption of digital currencies scale. Some industry observers believe Coinbase will become a trillion dollar company.

     

     Select Coinbase Financials from The Block Research

4. NFTs: Beeple art sells for record $6.6M

   • Mike Winkleman is the artist also known as Beeple. Everyday for the last 13 years he creates one piece of digital art. This week, one of those pieces was sold as an NFT for a record $6.6M.

   • Next week, Christie’s will begin a 2-week auction of 5,000 pieces by Beeple with payments accepted in ether.

     So what?

   • NFTs have been booming lately. The market size grew over 700% from $42M in 2017 to $338M at the end of 2020 according to NonFungible.com

   • Think of NFTs as a new type of file like JPEG or MP3. NFTs are encrypted files authenticated by blockchain technology. They are not limited to art, for instance NBA Top Shot enables fans to purchase officially licensed video of key plays.

   • NFTs are ushering a new era for creators. Leonardo da Vinci painted Salvatore Mundi which sold for $450M in 2017 setting a world record. Yet, in his lifetime, he likely was a cut or two above a starving artist. With NFTs, in the future, the creator or their estate could receive commission (~10%) upon the resale of their work

   • Bottomline: Digital Art and NBA Top Shot are opening doors for new consumers to engage with cryptocurrencies and blockchain applications

     

     Crossroads by Beeple sold for $6.6M this week

5. Dubai fund sells $750M Bitcoin to buy Cardano and Polkadot

   • FD7 Ventures has $1B under management; the crypto fund’s thesis is that Cardano, Polkadot and Ethereum will be the foundation of Web 3.0

     So what?

   • Investors are going beyond bitcoin. FD7’s decision highlights growing excitement about Ethereum, Cardano, and Polkadot; these blockchains support greater functionality than Bitcoin.

   • Cardano is a third generation cryptocurrency network, it aims to improve upon Bitcoin by having faster and more secure blockchain. It is also more scalable and safe than Ethereum. There are pilot projects in Ethiopia and Tanzania leveraging Cardano to extend financial services to the unbanked.

   • Polkadot aims be the platform for Web 3.0 by connecting a new web of decentralized blockchains. In Web 3.0, trust is built in the network, individuals have more power than corporations and governments, and people own their data.