Over the past week, a cunning hacker managed to steal $200,000 worth of EOS by exploiting a smart contract vulnerability in popular gambling app EOSBet, Electronic Arts trolled crypto fans with a mysterious tweet that turned out to be a crafty game promotion, a well-known ICO advisor was arrested in the US on extortion charges, Binance margin borrowing passed $100 million and Ripple dismissed a pending lawsuit by XRP investors, claiming the token isn’t a security.
Hedera Hashgraph Network Goes Live
The latest in a long line of ‘Ethereum killers’, Hedera Hashgraph has gone live with 26 dApps active on its network. Hedera is notable for its use of a directed acyclic graph (DAG) architecture and Proof of Stake consensus mechanism. The project has launched with a capability of 10k transactions per second (TPS), with future expectations that it can scale to more than 250k TPS. Since listing on UpBit, OKEx and Bittrex, the price of the token has already fallen from its 9c ICO price to under 4c at the time of writing.
Ethereum Gas Usage Hits New All-Time High
The Ethereum network hit a new landmark as gas usage – a fundamental metric of activity on the Ethereum blockchain – passed its previous highs. The spurt of transaction activity has come from a variety of sources, most notably – though less encouragingly for the health of the network – from the popularity of a questionable gambling dApp and from the ongoing transition of Tether from Omni to the Ethereum blockchain.
Coinbase Considering Listing 17 New Tokens
Coinbase has announcement that it’s considering a shortlist of 17 assets for inclusion on the platform. The news reinforces the exchange’s strategy of giving users ‘access to at least 90% of the market cap of all assets in circulation’, despite the less-than-spectacular performance of some of its recent listings. Many of those being considered are yet to launch, with popular “VC tokens” such as Avalanche (AVA) and Telegram’s TON included in the list.
The Long Take
Why Did Hedera Dump?
It’s been said that 2019 is the year of launches. While the introduction of Cosmos and Algorand into the crypto markets failed to live up to expectations, these remain high for a number of other networks due to go live by end of year, including Polkadot, Dfinity and Telegram.
Last week saw the launch of another project that’s received a great deal of hype among both the crypto public and enterprise ‘suits’ - Hedera Hashgraph. Pitched as a ‘third generation’ DLT, Hedera raised $124 million in 2018, largely from VC funds including Blocktower, Multicoin Capital and Digital Currency Group.
Its differentiation relies on its DAG-based infrastructure, which it claims will address the scalability challenge experienced by existing blockchain-based projects. According to its whitepaper, Hedera will ultimately reach transaction throughput of 250k+ per second, dwarfing Bitcoin (3+ TPS), Ethereum (12+ TPS), EOS (3000 TPS) and Visa (24k TPS).
The promises of high throughput and low latency has attracted the attention of global enterprises. Not least, its governing council members, which includes blue-chip companies such as IBM, Boeing, Deutsche Telekom, Tata and Nomura, among others. At launch, the project features 26 live dApps, along with claims that more than 500 teams are building on the network.
Given both the promise of the project and the current bullish vigour in the altcoin markets, one may have anticipated a fertile climate for its native token, HBAR, to reach the sorts of returns ICO investors became accustomed to in 2017/18.
Yet, at its launch on Bittrex and OKEx among others, HBAR proved a damp squib for retail investors, who had bought between 9-12c during the ICO. An initial drive to $0.12 in its first hour of trading was short lived. The token has since dropped to under 4c and with room yet to fall.
So why weren’t crypto investors snapping up HBAR? The answer appears to be that Hedera raised at an unsustainable valuation. The project raised at more than $5 billion, with preferential terms given to early VC investors in the SAFT seed rounds.
With only 3% of HBAR tokens currently in circulation (to increase to 8% by the end of the year), and a staggering 54% still being held by the Hedera company, investors could sense a major dump coming their way. The demand simply wasn’t there to support the high valuation, and as a result the market has entered price discovery mode.
This episode has no doubt been somewhat embarrassing for Hedera’s founders Leemon Baird and Mance Harmon, as they seek to show enterprises the appetite for their project in a maturing market.
The initial outcome suggests however that crypto investors are becoming more attuned to the asymmetries in the playing field and less willing to be the liquidity for early investors to make a profitable exit. It also serves as a warning for the major projects due to launch this year that their name alone will be unlikely to sustain inflated valuations. Displacing Bitcoin and Ethereum, it appears, requires more than just high throughput.
Tweets of the Week
Steven Zheng sums up the VC fascination with high TPS crypto projects:
Crypto VCs when they hear about a high throughput blockchain pic.twitter.com/LPblRTI2XX— 𝕊𝕥𝕖𝕧𝕖𝕟 (@Dogetoshi) September 22, 2019
Carter Thomas jests about moon signals being potentially more profitable than widely used technical analysis techniques:
If you buy BTC when there is a new moon and sell when there is a full moon, you'll outperform 90% of traders out there 🌒 pic.twitter.com/HIicEsWXEv— Carter Thomas (@carterthomas) September 20, 2019
Nic Carter serves a reminder than the SEC crackdown on 2017 bad actors is far from over:
If someone tries to reminisce at the next blockchain conf about that tokensale you pulled off together - good chance they are wearing a wire— nic carter (@nic__carter) September 18, 2019
The Week’s Best Content:
Recommendation 1 – Ray Dalio and Bitcoin
Messari researcher Qiao Wang assesses where Bitcoin fits in the macro landscape following billionaire investor Ray Dalio’s recent thesis on a global recession.
Recommendation 2 – Conversation with Mike Novogratz
The Block’s Frank Chaparro speaks with ex-Goldman Sachs executive, and now head of Galaxy Digital, Mike Novogratz about his long-term crypto thesis.
Recommendation 3 – Su Zhu of Three Arrows Capital on BTC Lending Markets
As more platforms offering collateralised lending emerge in the Bitcoin and Ethereum ecosystems, popular Popular Twitter personality Su Zhu shares his views at the Invest Asia summit. Watch the Q&A for discussion on some of the risks.
Wednesday 25 September
Blockchain Live returns to the Olympia for another year. Featuring more than 150 speakers, the event offers an opportunity for education, debate and networking.