Market Making Pro

Ben Strack

MicroStrategy’s net loss jumped quarter over quarter to $250 million — though executives said the firm is going to keep up its longtime strategy of buying and holding bitcoin on its balance sheet.&nbsp;



MicroStrategy’s stock closed the day at $292.13 — down about 14% in the past year, but up 100% from a month ago. The stock was down about 3% in early after-hours trading in New York.



MicroStrategy, co-founded by bitcoin bull Michael Saylor, increased its bitcoin holdings by 2,500 BTC in the fourth quarter to 132,500 BTC, according to the company’s earnings out Thursday. 



“Our corporate strategy and conviction in acquiring, holding and growing our bitcoin position for the long term remains unchanged,” MicroStrategy Chief Financial Officer Andrew Kang said in a statement.&nbsp;



Bitcoin is up about 43% year to date after a brutal 2022 for the asset.&nbsp;



Saylor, who is MicroStrategy’s executive chairman, said Thursday that bitcoin was up 98% from August 2020 — when the company began its bitcoin acquisition strategy — to Feb. 1. The S&amp;P 500 is up 23% over that span, he added.



The executive noted the bankruptcies of companies such as Voyager Digital, Celsius, BlockFi and FTX last year, as well as the collapse of tokens such as UST, LUNA and FTT.&nbsp;&nbsp;



“In our opinion these were all very weak use cases, they were very fragile structures and it was a matter of time before they did melt down,” Saylor said. “The meltdown of that has created short-term negative headwinds for bitcoin…but long-term the rationalization of the crypto market will be beneficial for bitcoin.”&nbsp;&nbsp;



MicroStrategy’s fourth quarter results came after the Virginia-based business intelligence firm reported a net loss of $27 million in the third quarter — a drastic improvement from its <a href="https://blockworks.co/microstrategys-saylor-to-step-down-as-ceo-to-double-down-on-buying-bitcoin">$1.1 billion net loss</a> in the prior three-month period. 



MicroStrategy’s digital asset impairment charges — which comes into play if the market value of bitcoin decreases below its market-adjusted purchase value — were $700,000 during the third quarter, compared to $918 million in the second.&nbsp;



Digital asset impairment charges reached roughly $198 million during the fourth quarter.&nbsp;



MicroStrategy <a href="https://blockworks.co/news/microstrategy-bitcoin-wash-trading-tax-harvesting">sold 704 bitcoins on Dec. 22 for roughly $11.8 million</a>, according to a <a href="https://www.sec.gov/Archives/edgar/data/1050446/000119312522313098/d398241d8k.htm" target="_blank" rel="noreferrer noopener">filing</a> — receiving about $16,700 per bitcoin. Two days later, the company bought 810 BTC for about $16,800 per token.&nbsp;



“MicroStrategy plans to carry back the capital losses resulting from this transaction against previous capital gains, to the extent such carrybacks are available under the federal income tax laws currently in effect, which may generate a tax benefit,” the filing stated.



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Bitcoin-hungry MicroStrategy Posts $250M Net Loss in Q4

Casey Wagner

David Canellis

It happened. Bitcoin runs DOOM.



To the delight of crypto Twitter and <a href="https://www.reddit.com/r/CryptoCurrency/comments/10rt887/someone_uploaded_doom_on_bitcoin/" target="_blank" rel="noreferrer noopener">Reddit</a> circles, someone has uploaded a cloned version of the 30-year-old video game classic DOOM to the Bitcoin blockchain as an inscription on the network’s own NFT protocol, Ordinals.&nbsp;



Thanks to a happenstance loophole enabled by Bitcoin’s Taproot upgrade pushed in Nov. 2021, a budget (read: free) version of DOOM has been permanently etched on a <a href="https://ordinals.com/sat/1905393798236699" target="_blank" rel="noreferrer noopener">single satoshi</a> via block 774526, which was added to the blockchain on Wednesday morning.



Being written to Bitcoin means the <a href="https://ordinals.com/inscription/521f8eccffa4c41a3a7728dd012ea5a4a02feed81f41159231251ecf1e5c79dai0" target="_blank" rel="noreferrer noopener">functional game</a> will forever live on the immutable blockchain. As long as the network is online, folks can play this version of DOOM.



While web browsers are still required to compile the code, forcing unconventional technologies to run DOOM is a meme in tech culture. Crafty hackers have forced DOOM to <a href="https://www.gamesradar.com/12-things-that-prove-that-doom-will-run-on-literally-anything/" target="_blank" rel="noreferrer noopener">run</a> on pregnancy tests, calculators, ATMs, smart watches, toasters and Pelotons — even “unhackable” crypto <a href="https://thenextweb.com/news/hacker-doom-bitfi-cryptocurrency-wallet" target="_blank" rel="noreferrer noopener">wallets</a>, among other zany conduits.



While the clone is fun in its own blocky-and-basic way, an actual copy of the real DOOM looks destined to make it to the Bitcoin blockchain sometime soon (a Reddit <a href="https://www.reddit.com/r/itrunsdoom/comments/7ue6vd/it_runs_on_the_ethereum_blockchain_doom_at_745/" target="_blank" rel="noreferrer noopener">thread</a> from Feb. 2018 suggests DOOM was once playable on Ethereum, however the linked YouTube video is now unavailable).



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="514" height="590" src="https://cms.blockworks.co/wp-content/uploads/2023/02/bitcoindoom3.gif" alt="" class="wp-image-46304"/><figcaption class="wp-element-caption">DOOM on Bitcoin via a single satoshi</figcaption></figure>



Meanwhile, Ordinals continues to pepper conversation amongst Bitcoiners as the community parses what bringing NFTs to the oldest blockchain really means for the future of network and the NFT ecosystem writ large.



The protocol notably just enabled the <a href="https://blockworks.co/news/inside-bitcoin-biggest-block" target="_blank" rel="noreferrer noopener">biggest-ever Bitcoin block</a> to be mined. A high-definition “Taproot wizard” was inscribed to a satoshi this week, clocking a 3.96MB transaction — close to Bitcoin’s 4MB block size limit (originally 1MB but stretchable via SegWit).



As for the DOOM Ordinal, it was only 31.2 KB big.&nbsp;



Remember: It’s not the size that matters. The ability to run DOOM is far more important.



Updated Feb. 3, 2022 at 3:42 am ET: Added context.



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You Can Now Play DOOM Directly On Bitcoin

Canadian crypto exchange Bitbuy’s upcoming Super Bowl ad has a different vibe than the company’s 2022 spot after an eventful year shook the industry.&nbsp;&nbsp;



Bitbuy is expected to be <a href="https://blockworks.co/news/whos-coughing-up-crypto-winter-dollars-for-super-bowl-ads">among the only crypto firms</a> set to advertise around the NFL championship game on Feb. 12 as companies in the space cut budgets and look to regroup as the crypto winter continues.



Of last year’s crypto advertisers, FTX <a href="https://blockworks.co/news/whats-next-for-ftx-and-its-customers-after-bankruptcy-filing">went bankrupt</a> and online brokerage eToro told Blockworks it won’t be running an ad. Coinbase last month implemented <a href="https://blockworks.co/news/coinbase-lays-off-950-staff-cuts-operational-costs-by-25">cost-saving measures</a> and exchange OKX, which <a href="https://blockworks.co/news/what-crypto-super-bowl-ads-can-we-expect-in-2023">planned to buy an ad</a>, has changed its mind.



The Bitbuy ad, which <a href="https://www.youtube.com/watch?v=02ivqdVzwS8" target="_blank" rel="noreferrer noopener">went live</a> online Thursday, will be the firm’s second consecutive Super Bowl showing. NBA star Kyle Lowry appeared in <a href="https://www.youtube.com/watch?v=aI3LNq_lres&amp;t=2s" target="_blank" rel="noreferrer noopener">the company’s ad</a> last year featured during the game’s Canadian broadcast. 



Bitbuy’s upcoming 60-second commercial, also to appear only in Canada, is set to run within an hour before the Kansas City Chiefs and Philadelphia Eagles kick off.&nbsp;



Crypto markets plummeted amid the collapse of Terra’s algorithmic stablecoin in May and the subsequent bankruptcies of companies such as <a href="https://blockworks.co/news/3ac-files-for-bankruptcy-as-co-founders-location-unknown" target="_blank" rel="noreferrer noopener">Three Arrows Capital</a>. The industry was once again rattled as FTX crashed in November, shaking confidence in centralized exchanges and similar entities. 



“Whereas the theme for Bitbuy&#8217;s 2022 commercial was missed opportunities, 2023&#8217;s theme is trust,” Binu Koshy, Bitbuy’s branding and communications director, told Blockworks.&nbsp;



“We wanted to remind people in a sort of outlandish way that by being locally based and fully regulated, Bitbuy provides investing services with a personal touch.&#8221;&nbsp;



The new Bitbuy spot features Toronto Raptors forward Scottie Barnes, who Bitbuy <a href="https://www.youtube.com/watch?v=2AjDKl6h_vA" target="_blank" rel="noreferrer noopener">marketed</a> as a brand ambassador Tuesday.



Exchanges typically send a confirmation email to a user who makes a digital transaction. In the upcoming Super Bowl commercial, Barnes gives a Bitbuy user a confirmation hug.&nbsp;



Koshy declined to comment on how much Bitbuy spent on the commercial.&nbsp;The executive previously <a href="https://blockworks.co/news/exchanges-compete-to-grab-super-bowl-spotlight">told Blockworks</a> that roughly 25% of the company’s 2022 marketing budget went to signing Lowry, as well as producing and buying last year’s Super Bowl ad.



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Bitbuy Shifts Super Bowl Ad Focus From ‘Missed Opportunities’ to ‘Trust’

South Carolina Sen. Tim Scott has his eye on a bipartisan regulatory framework for crypto following the crash of FTX and other industry players in 2022.&nbsp;



To serve as ranking member of the US Senate Committee on Banking, Housing and Urban Affairs, Scott is set to work with US Sen. Sherrod Brown, D-Ohio, a crypto critic who chairs the unit. 



Scott, a Republican elected to the Senate in 2013, acknowledged “expansive growth” of the digital assets industry in <a href="https://www.politico.com/f/?id=00000186-0fe2-df27-abcf-8fefd8610000" target="_blank" rel="noreferrer noopener">a Thursday memo</a>, first <a href="https://www.politico.com/newsletters/morning-money/2023/02/02/the-debt-ceiling-is-not-powells-problem-00080804" target="_blank" rel="noreferrer noopener">reported</a> by Politico, adding that an increasing number of consumers are interacting with crypto.



“Several high-profile failures resulted in lost consumer assets, exposed regulatory gaps, and highlighted concerns with illicit finance,” the memo states. “Moving forward, the committee should work to facilitate a bipartisan regulatory framework.”



The senator could not immediately be reached.



Brown, who became chair of the Senate Banking, Housing, and Urban Affairs Committee in February 2021, has historically compared crypto to risky mortgage bonds and over-the-counter derivatives during the lead up to the financial crisis.&nbsp;



After the bankruptcy of crypto exchange FTX in December, Brown <a href="https://www.brown.senate.gov/newsroom/press/release/sherrod-brown-on-ftx-crypto-puts-consumers-and-our-national-security-at-risk" target="_blank" rel="noreferrer noopener">called for</a> a framework “that looks at crypto products for what they are, not what crypto executives want them to be.”



“The things that look and behave like securities, commodities, or banking products need to be regulated and supervised by the responsible agencies who serve consumers,” he added at the time. “Crypto doesn’t get a free pass because it’s bright and shiny. Or because venture capitalists think it might change the world.”



Brown also urged US Treasury Secretary Janet Yellen in <a href="https://www.brown.senate.gov/newsroom/press/release/sherrod-brown-to-treasury-we-need-to-work-together-on-crypto-legislation" target="_blank" rel="noreferrer noopener">a November letter</a> to work on legislation that would create authorities for regulators to supervise crypto players. He noted that single agencies “currently generally do not have a comprehensive view of crypto asset entities’ activities.”



Crypto firms are seemingly anticipating intensified regulatory scrutiny this year, as companies including Binance, Tether, and a16z have <a href="https://blockworks.co/news/mike-pence-nephew-binance-newest-lobbyist">added lobbyists in recent months</a> to boost their presences in Washington, DC.



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Crypto Framework a Priority for Republican Senator Scott

Bessie Liu

A cryptocurrency linked to a cost of living index is now available to select users on Ethereum scaling solution Arbitrum.



DeFi protocol Nuon announced in a blog post that it would be gradually rolling out its <a href="https://blockworks.co/news/what-are-flatcoins-and-are-they-a-better-inflation-hedge">NUON flatcoin</a> over the course of a month-long trial.&nbsp;



Once operations are confirmed to run smoothly, the cryptocurrency will be available to all users for permissionless minting via added collateral.



The protocol has chosen this “guarded launch” approach to minimize financial risks and repercussions.



“The guarded launch means that the WebApp will be alternating between Open and Closed states so as to better manage and control the launch and protest user’s funds,” the company said in a <a href="https://nuon.fi/blog/launch-release-note-and-faqs/" target="_blank" rel="noreferrer noopener">blog post</a>.



<h2>What is a flatcoin?</h2>



Flatcoins operate similarly to stablecoins, but rather than being pegged to the value of an asset — such as the US dollar or gold — it is pegged to an independent measure of the cost of living and its purchasing power remains “flat.”&nbsp;



The concept of this type of cryptocurrency is not entirely new. It has been discussed by the likes of Brian Armstrong and Vitalik Buterin, who <a href="https://www.youtube.com/watch?v=GUhDXUA4mfQ&amp;ab_channel=Coinbase" target="_blank" rel="noreferrer noopener">noted</a> in a podcast in August last year that “there is value in having some kind of cryptoasset that is intentionally designed to be as stable as possible.”



In the case of Nuon, its flatcoin is designed to hedge against inflation by recalibrating its daily value to account for the rising cost of living, <a href="https://truflation.com/methodology" target="_blank" rel="noreferrer noopener">using</a> the Truflation Index as an <a href="https://www.blockworksresearch.com/glossary#oracles" target="_blank" rel="noreferrer noopener">oracle</a>.



<h2>Stability and design&nbsp;</h2>



Nuon maintained its peg through what the team calls a “triple redundancy mechanism” where the protocol incentivizes users to “mint or burn NUON.”



If the price goes above the peg, the liquidation ratio drops, creating an incentive for users to mint more and sell the token. On the other hand, when the price of the token dips, the liquidation ratio increases, urging users to increase collateral or burn NUON to maintain safe collateral.



That means minters will have to have a reason to risk their collateral and watch the liquidation ratio closely.



Nuon CEO Stefan Rust acknowledges the risk but remains optimistic.



“Our vision for Nuon — inflation-proof money — is ambitious to say the least,” Rust said.



The mechanics differ from the failed <a href="https://blockworks.co/tag/terra">Terra USD</a> design in that NUON is only minted from collateral. In theory, that should put a buffer for the arbitrage mechanism to keep the peg.



Just as decentralized protocols are the answer to risks posed by centralized currencies, and over-collateralization is the answer to maintaining value in the face of market instability, inflation-proof flatcoins are the solution to preserving value over time.”



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‘Flatcoin’ Targets Inflation With Collateral-backed Arbitrum Stablecoin

Michael Bodley

What’s an institutional allocator to do in a crypto winter like this?&nbsp;



Pay attention to the online footprints of the traders vying for the players with abundant dry powder still in the wings. Keep dialing up references. Call them again. And then call them again.



In sum: due diligence checks that run the gamut from crypto natives to Wall Street types with a vested interest, according to Joe Marenda, a partner at Cambridge Associates.&nbsp;



Marenda, for going on a year now, has held the title of global head of crypto investing for the Boston-based Cambridge, which specializes in devising customizable portfolio blends for the likes of pensions and endowments. He’s been drawing on his deep experience in vetting traditional asset management strategies to do due diligence on digital asset portfolio managers. And he has a suggestion or two along those lines.



Marenda spoke to Blockworks <a href="https://blockworks.co/news/regulators-speeding-up-crypto-timeline">at the iConnections Global Alts conference</a> in Miami this week, dishing out his thoughts on where we are in the cycle, how we got here and where we are going.



<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">&quot;Managers that are trying to raise now, wait until third quarter.&quot; &#8211; Joe Marenda<a href="https://twitter.com/michael_bodley?ref_src=twsrc%5Etfw">@Michael_Bodley</a> moderated the &#39;Fundraising Outlook for 2023&#39; panel today, joined by Zoe Cruz, <a href="https://twitter.com/SteveKurz?ref_src=twsrc%5Etfw">@SteveKurz</a>, Joe Marenda and Katherine Molnar.<a href="https://twitter.com/Blockworks_?ref_src=twsrc%5Etfw">@Blockworks_</a> <a href="https://twitter.com/galaxyhq?ref_src=twsrc%5Etfw">@galaxyhq</a> <a href="https://t.co/Fdw2I6jIwk">pic.twitter.com/Fdw2I6jIwk</a>&mdash; iConnections (@iconnections_io) <a href="https://twitter.com/iconnections_io/status/1620496398327382016?ref_src=twsrc%5Etfw">January 31, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The gist: The bottom may well be in. “Crypto is still very much emerging, with very few exceptions,” valuations are returning to something approaching normal, and volatility at the moment should <a href="https://www.institutionalinvestor.com/article/b1yhfhknybjnrg/Crypto-Hedge-Funds-Deliver-Bitcoin-Like-Returns-Without-the-Volatility" target="_blank" rel="noreferrer noopener">surprise</a> no one.



Picking up the phone and knocking on doors and doing the (due diligence) work is perhaps now <a href="https://blockworks.co/news/what-do-crypto-traders-tell-their-lps">more important in the industry than ever</a>, the San Francisco-based Marenda said. Managers may want to err on the side of patience for the foreseeable as those rigorous processes play out.&nbsp;



Read More: <a href="https://blockworks.co/news/what-do-crypto-traders-tell-their-lps">How “radio silence” from crypto traders drove LPs “all but mad” in Q4</a>



Here’s how he’s going about it. Marenda declined to comment on specific funds or clients, and expressed his personal opinion throughout.&nbsp;



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



Blockworks: Cambridge has been around for decades. Crypto has not. You all have due diligence on traditional strategies down, right? What’s different?



Marenda: There’s a lot more reference checks, to start…What the entrepreneurs in the space think of [venture capitalists] is crucial. And it’s their reputation that gets them deal flow — one of the fascinating things about crypto entrepreneurs is they have no filters. So, when you actually interview them, they’re very blunt and honest about <a href="https://blockworks.co/news/crypto-due-diligence-startup-vying-to-bring-transparency-to-opaque-industry">how they evaluate what they think</a> of this VC versus that VC.



They’ll just tell you if somebody promised something to get on the cap table, and they didn’t deliver, they will throw them under the bus.



Blockworks: Which you would almost never see in TradFi.



Marenda: Exactly…that has been wonderful. That tells you more about a fund than anything else. And the fact that they will talk about other funds when you’re like, “I’ll call them about Fund X. And then they start talking about Fund Y, Z, ABC.”&nbsp;



It’s incredibly useful, because the reputation of the fund ultimately is what drives the deal flow. That’s very different from traditional finance.



Blockworks: What else is different?



Marenda: The other aspect I think that’s really different is the fact that this is such a [broadly] social-dominated industry. There’s a lot more information out there that you have, that you can call on — and it’s not just crypto Twitter. It’s Reddit…It’s Substack and everything.&nbsp;



Because there, you can build an entire history of their thought processes on investing. And if they tell a different story now [compared to earlier in Cambridge’s due diligence process]…I see there’s a difference between what you say now and what you said before, so that’s a big deal.&nbsp;



The other one is something that I’ve been asking about recently, looking at their true social posts to see what kind of lifestyle they’re living.



Blockworks: The lambo lifestyle? A little less buttoned-up lifestyle?&nbsp;



Marenda: I’ve been thinking about whether they’re actually more interested in investing or in the lifestyle than investing, you know. [Crypto] allows them to do that, and I want people that just love investing, and, if they walk everywhere, that’s probably something that’s pretty exciting.&nbsp;



As long as they’re looking both ways when they cross the street.&nbsp;



This interview was edited for brevity and clarity.



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Inside Crypto LP Big Leagues: ‘A Lot More Reference Checks’

The biggest Bitcoin block ever has just been mined, 14 years after the blockchain went live.



It contained an Ordinal, the controversial <a href="https://blockworks.co/news/cant-ignore-bitcoin-nfts">new genre of NFT which recently debuted on Bitcoin</a>.



In an apparent tease for a forthcoming bitcoin NFT collection, Luxor Mining and popular Bitcoin figure Udi Wertheimer mined the largest-ever bitcoin block, the company announced Tuesday.&nbsp;



Block <a href="https://mempool.space/block/0000000000000000000515e202c8ae73c8155fc472422d7593af87aa74f2cf3d" target="_blank" rel="noreferrer noopener">774628</a> housed the “Taproot Wizard,” a play on the legendary “magic internet money” meme featuring a bitcoin wizard. It was 3.96MB large, close to Bitcoin’s block size limit (which can be <a href="https://blog.bitmex.com/the-segwit-transaction-capacity-increase-part-1/" target="_blank" rel="noreferrer noopener">stretched</a> to 4MB with SegWit). 



The <a href="https://mempool.space/tx/0301e0480b374b32851a9462db29dc19fe830a7f7d7a88b81612b9d42099c0ae" target="_blank" rel="noreferrer noopener">transaction</a> containing the Ordinal made up 3.94MB, about 99.5%. There were 63 transactions in total, including the 6.25 <a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a> ($149,000) coinbase reward, which also went to Luxor.



&#8220;The image is higher resolution so it contains more pixels (and thus more bytes),&#8221; Colin Harper, head of research and content at Luxor Mining, told Blockworks.



Luxor announced the block via <a href="https://twitter.com/LuxorTechTeam/status/1620921129287430144?s=20&amp;t=vje_Chh6vf4U_Q9UbW0bzQ" target="_blank" rel="noreferrer noopener">Twitter</a> Tuesday evening, teasing followers that other wizards may be available soon. The firm earned an additional 0.009 BTC ($209) in fees for successfully mining the block.



<a href="https://blockworks.co/news/cant-ignore-bitcoin-nfts">Ordinals</a> — the new platform taking the industry by storm — store texts, images, SCG or HTML on-chain, attached to individual satoshis, bitcoin’s smallest unit currently worth $0.000231.&nbsp;



Read More: <a href="https://blockworks.co/news/cant-ignore-bitcoin-nfts">Bitcoin NFTs: Love ‘Em or Hate ‘Em, You Can’t Ignore ‘Em</a>



Similar to the NFT concept, inscribed satoshis can then be transferred freely via the Bitcoin blockchain.



<figure class="wp-block-embed aligncenter 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">Behold, the Taproot Wizard, untethered and freed from his bondage! In his ubiquity, he&#39;s present in the hearts, minds, and hard drive space of Bitcoin node operators the world over. He refuses to be censored, he refuses to be silenced.<a href="https://t.co/WCjQpTRMLg">https://t.co/WCjQpTRMLg</a> <a href="https://t.co/gkxeAS4rOm">pic.twitter.com/gkxeAS4rOm</a>&mdash; Luxor Mining (@LuxorTechTeam) <a href="https://twitter.com/LuxorTechTeam/status/1620922782845669378?ref_src=twsrc%5Etfw">February 1, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div><figcaption class="wp-element-caption">This image is&nbsp;<a href="https://ordinals.com/sat/1308063627208201" target="_blank" rel="noreferrer noopener">inscribed</a>&nbsp;forever to satoshi 1308063627208201</figcaption></figure>



The features are made possible using a loophole from the Taproot upgrade in 2021, which enabled “practically unlimited (capped by block size) storage using Opcodes, an executable script in a txn that can store arbitrary data,” <a href="https://www.blockworksresearch.com/" target="_blank" rel="noreferrer noopener">Blockworks Research</a> analyst <a href="https://twitter.com/MattFiebach" target="_blank" rel="noreferrer noopener">Matt Fiebach</a> said.



Ordinals creator Casey Rodarmor boasts the NFT protocol holds digital artifacts to a “higher standard,” he wrote in a <a href="https://rodarmor.com/blog/" target="_blank" rel="noreferrer noopener">blog post</a>. Ordinals cannot be stored off-chain or on centralized servers, he said.&nbsp;



Industry members continue to take a mixed view on Bitcoin NFTs, but Ordinals appear to be here to stay.



Updated Feb. 2, 2023 at 12:05 pm ET: Added comment from Luxor Mining&#8217;s Colin Harper.



Updated Feb. 2, 2023 at 1:39 pm ET: Adjusted excerpt.



Updated Feb. 2, 2023 at 4:33 pm ET: Corrected Bitcoin&#8217;s block size limit.



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What Was Inside Bitcoin’s Biggest Block?

The world’s largest custodian bank has named a leader for its digital assets division as it seeks to accelerate initiatives in the segment despite the ongoing crypto winter.&nbsp;



BNY Mellon named Caroline Butler as its CEO of digital assets Thursday. The post is a newly created role for the bank. 


<div class="wp-block-image">
<figure class="alignright size-medium"><img decoding="async" loading="lazy" width="241" height="300" src="https://cms.blockworks.co/wp-content/uploads/2023/02/caroline-butler-ceo-digital-assets-241x300.jpeg" alt="BNY Mellon's CEO of Digital Assets Caroline Butler" class="wp-image-46260" srcset="https://cms.blockworks.co/wp-content/uploads/2023/02/caroline-butler-ceo-digital-assets-241x300.jpeg 241w, https://cms.blockworks.co/wp-content/uploads/2023/02/caroline-butler-ceo-digital-assets-206x257.jpeg 206w, https://cms.blockworks.co/wp-content/uploads/2023/02/caroline-butler-ceo-digital-assets-210x261.jpeg 210w, https://cms.blockworks.co/wp-content/uploads/2023/02/caroline-butler-ceo-digital-assets-176x219.jpeg 176w, https://cms.blockworks.co/wp-content/uploads/2023/02/caroline-butler-ceo-digital-assets-64x80.jpeg 64w, https://cms.blockworks.co/wp-content/uploads/2023/02/caroline-butler-ceo-digital-assets.jpeg 628w" sizes="(max-width: 241px) 100vw, 241px" /><figcaption class="wp-element-caption">BNY Mellon&#8217;s CEO of Digital Assets Caroline Butler | BNY Mellon</figcaption></figure></div>


Roman Regelman, CEO of BNY Mellon’s securities services and digital, said in a statement that Butler would lead their enterprise-wide initiatives as the company accelerates its efforts around digital assets and other emerging technologies.



“As institutional adoption of digital assets continues to evolve, we are committed to being a trusted provider of services to the broader financial ecosystem,” Regelman added.



A spokesperson declined to comment further.



Butler, who joined the company in 2020, was previously CEO of the bank’s custody services. In that role, she led development of BNY Mellon’s digital custody and administration platform for traditional and digital assets.



That platform went live in the US for select institutional clients in October.



BNY Mellon had $44.3 trillion in assets under custody or administration, as well as $1.8 trillion in assets under management, as of Dec. 31.&nbsp;



<a href="https://www.linkedin.com/in/caroline-butler-b489821/" target="_blank" rel="noreferrer noopener">Butler</a> said in an October statement that as the world’s largest custodian, BNY Mellon is the “natural provider” to create a safe custody platform in the space for institutional clients.



A research <a href="https://www.bnymellon.com/content/dam/bnymellon/documents/pdf/insights/migration-digital-assets-survey.pdf?mkt_tok=MzUzLUhSQi03OTIAAAGHvmLXAzH2AAbtr4WhHPMQ9VVq5uJ1KZRfRulJLv16X1_ZoOjbzOvT6K_QZLbyEh56IoS06me2xKP5MVsRYWOmWjfHUvagHGV1EWrMvzGY" target="_blank" rel="noreferrer noopener">report</a> by the bank published that month found 70% of surveyed institutional investors would increase digital asset activity “if services like custody and execution are available from recognized, trusted institutions.” 



Ed Groshans, a senior research and policy analyst at Compass Point Research &amp; Trading, told Blockworks last month, <a href="https://blockworks.co/news/banks-crypto-efforts-undeterred">BNY Mellon could be well-positioned to be a leader in the space</a> after events such as the crash of FTX shook the industry.&nbsp;



“They can really flesh out their business model over the next several months to several years to put themselves as a linchpin of trust in the crypto space from a custody perspective,” he said.



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BNY Mellon Names Digital Assets CEO

Shalini Nagarajan

New decentralized social network protocol Nostr officially went live via mobile app stores on Wednesday.



Nostr, which stands for Notes and Other Stuff Transmitted by Relays, aims to create a censorship-resistant global social network where users are identified by a public key rather than a name or user handle like on most social platforms.



“It doesn&#8217;t rely on any trusted central server, hence it is resilient; it is based on cryptographic keys and signatures, so it is tamperproof; it does not rely on P2P techniques, therefore it works,” its GitHub page says.



The protocol gained popularity after an endorsement from former Twitter CEO Jack Dorsey, which enabled its mobile app Damus to hit its beta testing limit before its open launch in <a href="https://apps.apple.com/in/app/damus/id1628663131" target="_blank" rel="noreferrer noopener">Apple’s App Store</a> and the <a href="https://play.google.com/store/apps/details?id=com.vitorpamplona.amethyst&amp;hl=en" target="_blank" rel="noreferrer noopener">Google Play Store</a>.



Nostr is similar to Twitter, meaning that users can publish posts, ‘like’ them, follow people they want and report content posted by others. And just like posts on Twitter are called Tweets, Nostr calls them a ‘note’ or just ‘post.’



Dorsey, currently chief executive at Block, <a href="https://twitter.com/jack/status/1603535971114487816" target="_blank" rel="noreferrer noopener">donated</a> 14 bitcoin (worth $245,000 at the time) to Nostr last year to fund its development after pointing out <a href="https://twitter.com/jack/status/1602800292424212480" target="_blank" rel="noreferrer noopener">flaws</a> in traditional social media. He also specifically mentioned the 280-character limitation on Twitter, which is not a feature on Nostr. He <a href="https://twitter.com/jack/status/1620552041600000000" target="_blank" rel="noreferrer noopener">hailed</a> its launch on Apple’s App Store as a “milestone for open protocols.”



The network itself points out what it thinks the problems with Twitter are: that it has ads, uses “bizarre techniques” to keep users addicted, doesn’t display a historical feed from people you actually followed, bans and shadow bans users, and that it’s full of spam.



Nostr is supported by bitcoin maximalists, and although it isn’t built on the Bitcoin blockchain, it supports payments over Bitcoin’s Lightning Network.



National Security Agency whistleblower Edward Snowden has also <a href="https://mobile.twitter.com/Snowden/status/1617626864016822274" target="_blank" rel="noreferrer noopener">touted</a> Nostr for its ability to replace Twitter and Instagram, while Ethereum creator <a href="https://twitter.com/VitalikButerin/status/1607372009356361729" target="_blank" rel="noreferrer noopener">Vitalik Buterin</a> and US Sen. <a href="https://twitter.com/CynthiaMLummis/status/1607216133933006849" target="_blank" rel="noreferrer noopener">Cynthia Lummis</a> are other supporters of the platform.



The tech world is increasingly seeing a desire for a next-generation, decentralized form of social media that prioritizes its users rather than a controlling corporate entity.



Last year, Aave <a href="https://blockworks.co/news/aave-launches-alternative-to-traditional-social-media">launched the Lens social platform</a> powered by NFTs to allow developers to build social media apps and recommender systems in marketplaces. Industry observers expect <a href="https://venturebeat.com/datadecisionmakers/web3-holds-the-promise-of-decentralized-community-powered-social-networks/" target="_blank" rel="noreferrer noopener">Web3 to disrupt</a> many of the existing Web2-based business models.



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Jack Dorsey-backed Web3 App Aims To Disrupt Twitter

Sebastian Sinclair

The European Investment Bank (EIB) is once again leveraging Ethereum in its quest to tokenize capital markets, this time while issuing the first-ever digital pound sterling (GBP) bond on a seperate private blockchain.



EIB, the primary lender of the European Union, deployed the £50 million ($86.6 million) bond to a permissioned network underpinned by HSBC’s tokenization platform, Orion. The EIB is a public institution owned by the EU&#8217;s 27 member states.



The bank opted for a private network for privacy and efficiency, according to a <a href="https://www.eib.org/en/press/all/2023-030-eib-issues-its-first-ever-digital-bond-in-british-pounds" target="_blank" rel="noreferrer noopener">statement</a>. In an effort to increase transparency, the bond was also recorded on Ethereum, a spokesperson told Blockworks. 



This was done to provide evidence the issuance took place while still maintaining the anonymity of bondholders (Blockworks reached out for some transaction IDs but they weren&#8217;t readily available. We&#8217;ll update this piece should EIB provide them).



HSBC debuted Orion last November, when it first flagged intent to launch the tokenized GBP bond. BNP Paribas, HSBC, and RBC Capital Markets were named as joint lead managers of the bond, with those firms serving as custodians. Client assets will be stored in digital securities accounts kept on Orion, the bank said.



The EIB&#8217;s new vehicle is expected to bring a range of benefits to market participants, including reduced costs, improved efficiency and real-time data synchronization in an otherwise cumbersome process.



Digital bonds have garnered interest from financial institutions in various countries, including Australia, Germany, France and Sweden since at least 2017.



A Luxembourg legal framework that enables firms to issue dematerialized securities using distributed ledger technology was enacted into law in January 2021, paving the way for further exploration.



Dematerialized securities refer to digital representations of financial assets that exist only in electronic form, rather than as physical certificates or paper documents.



&#8220;The time has come for further innovation in the financial sector,&#8221; said EIB Vice-President Ricardo Mourinho Felix. &#8220;This new financial tool will provide additional capital flow that the EIB will invest in projects with global impact.&#8221;



This isn’t the first digital bond issued by the EIB. That <a href="https://www.eib.org/en/press/all/2021-141-european-investment-bank-eib-issues-its-first-ever-digital-bond-on-a-public-blockchain" target="_blank" rel="noreferrer noopener">happened</a> back in Apr. 2021, when the European Union&#8217;s investment bank deployed a two-year, 100 million euro ($110 million) bond entirely on Ethereum.



David Canellis contributed reporting.



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European Union Bank Again Uses Ethereum to Explore Tokenized Bonds

MakerDAO governance has approved a new multi-million fund aimed at reimbursing certain individuals&#8217; legal expenses.



The Defense Fund, consisting of 5 million dai (<a href="https://blockworks.co/price/dai">DAI</a>) — Maker’s US dollar-pegged stablecoin — is intended to fund costs incurred from legal and regulatory bouts, the DAO said in a <a href="https://twitter.com/MakerDAO/status/1620795631668285443" target="_blank" rel="noreferrer noopener">tweet</a> on Wednesday.



Direct funding will only be provided for select Maker participants including recognized delegates, core unit facilitators, core unit permanent contributors and active MKR holders.&nbsp;



A <a href="https://vote.makerdao.com/polling/QmUbqKMy#vote-breakdown" target="_blank" rel="noreferrer noopener">ratification poll</a>, initially proposed early last month, approved the fund following a governance vote on Wednesday, with 72% of participants in favor of the move.



On paper, the budget appears to offer significant financial assistance to those locked in legal disputes. Though, according to <a href="https://www.contractscounsel.com/b/how-much-do-lawyers-cost#:~:text=Throughout%20the%20United%20States%2C%20typical,hour%20to%20%24400%20an%20hour." target="_blank" rel="noreferrer noopener">data</a> provided by legal services marketplace ContractsCounsel, typical attorney fees across 50 US states range from between $100 an hour to $400 an hour.



Based on the median cost for an attorney, around $350 an hour, legal fees could chew up significant portions of the fund in short order in the event multiple legal cases arise.



It is unclear whether the contingency budget of 5 million DAI is expected to grow over time. Maker did not immediately respond to a request for comment.



For now, Maker is concerned with laying the foundation for the fund, including how lump sum payments are expected to be delivered.



The organization has tapped insurance and risk management firms Gallagher and Artex to develop a claims procedure manual following a feasibility study on the average legal defense costs.



All claims and payouts will be handled by an “external technical committee” composed of insurance and risk management experts, Maker said. The committee will then issue a recommendation to approve or reject a payout based on a claim.



Self-insurance is a well-known risk management technique comprising setting funds aside to cover a possible future cost, Maker said in an <a href="https://forum.makerdao.com/t/mip55c3-sp14-defense-fund/19076" target="_blank" rel="noreferrer noopener">original proposal</a> laid out late last year.



Unlike Wyoming, <a href="https://blockworks.co/news/these-5-crypto-friendly-us-states-show-initiative-on-tax-laws">which recognizes decentralized autonomous organizations (DAOs)</a> in the same capacity as LLCs, most other US states and the wider world do not. That presents legal headaches for participants operating within the freshly conceived organizational construct.



&#8220;DAOs are novel organizational structures and, as such, may expose their participants to novel legal risks,&#8221; the organization said. &#8220;MakerDAO is not a legal subject, hence is unable to limit liability risks for its participants.&#8221;



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MakerDAO Earmarks $5M For Legal Defense

Artificial intelligence continues to grip the imagination of traditional market participants over its potential to disrupt entire sectors of the economy, though crypto is still miles ahead this year.



Several crypto-related exchange-traded funds (ETFs) are up between 9% and 64% in year-to-date terms, beating out the more mildly performing AI ETFs, up between 4% and 32%.



Global X Robotics &amp; Artificial Intelligence’s ETF (BOTZ) for instance, is up 16% YTD while Cathie Wood’s ARK Autonomous Technology &amp; Robotics ETF (ARKQ) has risen 18%.



Taking a look at crypto funds — the picture of whose ahead becomes clearer. Of the 39 AI/robotics ETFs Blockworks analyzed, performance across the board averaged around 12.4%. Crypto’s ETF performance for the year is averaging around 38.3% — a difference of roughly 26%.



VanEck’s Digital Transformation ETF (DAPP), the sector’s best-performing fund, is up a whopping 67% since the new year began. DAPP’s top 15 holdings include the likes of Coinbase, Block Inc, Bitfarms and Riot Platforms — all listed on major US exchanges.



That’s followed closely by Global X’s Blockchain ETF (BKCH) at 64% YTD and Bitwise’s Crypto Industry Innovators ETF (BITQ) — up 61% over the same period.&nbsp;



Like DAPP, both funds track roughly the same publicly-traded crypto and blockchain firms, as the choice remains relative to its more developed and long-standing AI cousins.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/12625850/embed#?secret=QiOEisD1Zt" data-secret="QiOEisD1Zt" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">DAPP is outperforming year to date, but BOTZ is a clear winner over the past year | Chart by David Canellis </figcaption></figure>



For the AI and robotics sector, performance is more muted, at least as the second month of the year gets underway.



Direxion Daily Robotics, Artificial Intelligence &amp; Automation Index (UBOT) is topping the list among best-performing AI-related ETFs this year, up 32%. But, it should be noted, UBOT features one of the lowest make-up of assets in its fund, when compared to its peers — totaling just $18 million.



Crypto funds total assets are also modest, averaging around $95 million, with one outlier — the $431 million Amplify Transformational Data Sharing ETF (BLOK) — up 25%.



By comparison, the average total funds in AI ETFs stand at roughly $5.89 billion, likely due to greater enthusiasm around the tech over crypto and blockchain, which is currently experiencing a lull.



Recently renewed interest in AI, courtesy of OpenAI’s ChatGPT 3 language model, Tesla’s self-driving cars and Jasper.ai’s ability to create art has led to an explosion of new business ideas.



An <a href="https://www.pwc.com/gx/en/issues/analytics/assets/pwc-ai-analysis-sizing-the-prize-report.pdf">analysis</a> by global “big-4” accounting firm PricewaterhouseCoopers (PwC) predicts the AI sector to contribute $15.7 trillion to the world’s gross domestic product by 2030.&nbsp;



Of that figure, roughly 6.6 trillion is likely to come from increased productivity while $9.1 trillion will derive from “consumption-side effects,” PwC said.



Cathie Wood’s Ark Invest expects blockchain and crypto to match that. The firm claims over the next 10 years, cryptocurrencies and smart contracts could command <a href="https://blockworks.co/news/ark-blockchains-are-future-of-money">$20 trillion</a> and $5 trillion in market value, respectively.



What does ChatGPT have to say about that?



<figure class="wp-block-image"><img decoding="async" src="https://lh4.googleusercontent.com/9WbaEpjf3I9rDmQKgT5Yvar9JIqML-lRVfct_pUGrwJHwN7lN9wHQxyux46xEYaY2lnVaW5EUENCCzfmt3Ky0pHIsxlK2dxPa6UCzJB9eua-Qk1fseKIxft8etusL-lopkXa2Z0jnv0j5Tw7dO_4qko" alt=""/></figure>



Fair enough.

Crypto ETFs Outperforming AI by 26% YTD

India announced its annual budget for the year 2023-24 on Wednesday, introducing a penalty for individuals that avoid paying taxes on cryptoassets.



The budget, which details the government’s fiscal roadmap for the upcoming year, set out several priorities covering infrastructure and investment, green growth, youth power and the financial sector.



“The Union Budget 2023 has unveiled several new policies and initiatives designed to foster growth through digital transformation. It&#8217;s great to see the financial sector as one of the seven priority sectors in the budget,” Ashish Singhal, CEO at CoinSwitch, said in a statement.&nbsp;



Anticipating the upcoming budget, several Indian-origin CEOs and investors had hoped the budget would bring in a deduction in crypto-related tax, but policymakers <a href="https://www.indiabudget.gov.in/doc/Finance_Bill.pdf" target="_blank" rel="noreferrer noopener">didn’t oblige</a>. India had established a <a href="https://blockworks.co/news/indian-crypto-trading-volumes-plunge-as-new-tax-rules-kick-in">crypto tax slab</a> effective July 2022, requiring investors to pay a 1% tax deducted at source (TDS), on top of a flat 30% tax on crypto profits, on the transfer of virtual digital assets. 



“A reduction in 1% TDS to 0.01% would have helped the millions of traders in India,” WazirX CEO Nischal Shetty <a href="https://twitter.com/NischalShetty/status/1620747247087656960" target="_blank" rel="noreferrer noopener">said</a> on Twitter, and indicated that he expects the country to wait until global regulations are clearer. 



Meanwhile, Singhal noted that although the TDS of 1% for crypto transactions remains as it was, a clarification should be made.



“The onus of deducting TDS has been on crypto exchanges or on the user (if using P2P or other means), but until now there was no penalty for non-deduction,” he said.



“This is to say, don’t try to avoid TDS by using offshore or non-compliant platforms. You may be penalized as per Section 271C of the Income Tax Act. If you are investing in crypto, use a tax-compliant platform.”



The government doesn’t mention cryptocurrencies specifically in its Income Tax Act, but refers to them as “virtual digital assets.”&nbsp;



Notably, the budget has introduced a penalty for offenders or platforms that don’t pay up TDS on VDAs through an amendment to <a href="https://incometaxindia.gov.in/_layouts/15/dit/pages/viewer.aspx?grp=act&amp;cname=cmsid&amp;cval=102120000000073646&amp;searchfilter=%5B%7B%22crawledpropertykey%22:1,%22value%22:%22act%22,%22searchoperand%22:2%7D,%7B%22crawledpropertykey%22:0,%22value%22:%22income-tax+act,+1961%22,%22searchoperand%22:2%7D,%7B%22crawledpropertykey%22:29,%22value%22:%222019%22,%22searchoperand%22:2%7D%5D&amp;k=&amp;isdlg=0" target="_blank" rel="noreferrer noopener">Section 271C</a> of the Income Tax Act.



From April 1, people failing to pay up TDS could be fined in the amount of the liability or get jail terms of between 3 months to 7 years.



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India Keeps Crypto Tax Provisions in New Budget

The net losses endured by Meta’s division responsible for producing metaverse-related technology continue to grow quarter over quarter — as the damage amounted to nearly $4.3 billion in the final three months of 2022.



Despite the hit to the unit known as Reality Labs, the tech giant’s net income for the quarter stood at $4.65 billion, as its family of apps unit posted a gain of $10.7 billion. The segment includes Facebook, Instagram, Messenger and WhatsApp.



Meta’s stock price was $153.12 at the end of the trading day, down more than 50% over the past year but up about 23% in the last month. The price was up about 19% in after-hours trading, as of 6 p.m. ET.



The results came after Meta revealed on its November earnings call that Reality Labs <a href="https://blockworks.co/news/metas-metaverse-division-loses-nearly-3-7b-in-q3" target="_blank" rel="noreferrer noopener">lost nearly $3.7 billion</a> during the third quarter — up from the division’s <a href="https://s21.q4cdn.com/399680738/files/doc_news/Meta-Reports-Second-Quarter-2022-Results-2022.pdf" target="_blank" rel="noreferrer noopener">second-quarter loss</a> of $2.8 billion and a $2.9 billion loss in the first quarter. &nbsp;



Reality Labs’ net loss totaled $13.7 billion last year, the company revealed Wednesday.



The division includes augmented reality, virtual reality and the company’s metaverse software platform.



Then-Meta Chief Financial Officer David Wehner said in a November statement that the company was expecting Reality Labs’ operating losses to grow year over year in 2023.



Susan Li, who has since taken over as Meta’s chief financial officer, reiterated that projection during Meta’s earnings call Wednesday.&nbsp;



“We’re going to continue to invest meaningfully in this area given the significant long-term opportunities that we see,” she said.



Meta CEO Mark Zuckerberg added the company is “constantly tuning the roadmap” for Reality Labs. 



“Even though none of the signals I’ve seen so far suggest that we should shift the Reality Labs strategy long-term, we are constantly adjusting the specifics of how we execute this,” Zuckerberg said.&nbsp;



The continued losses in this business segment come after Facebook <a href="https://blockworks.co/zuckerberg-says-facebooks-new-name-will-be-meta" target="_blank" rel="noreferrer noopener">changed</a> its name to Meta in October 2021 to capitalize on the anticipated metaverse trend.&nbsp;



Zuckerberg said on the company’s November call its future initiatives include a social metaverse platform with avatars, augmented reality and neural interfaces.



“I get that a lot of people might disagree with this investment,” the CEO added at the time. “But from what I can tell, I think this is going to be a very important thing, and I think it would be a mistake to not focus on any of these areas, which I think will be fundamentally important to the future.”



About a week later, Zuckerberg said in <a href="https://about.fb.com/news/2022/11/mark-zuckerberg-layoff-message-to-employees/" target="_blank" rel="noreferrer noopener">a letter</a> the company decided to layoff about 11,000 employees — roughly 13% of Meta’s workforce.



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Meta Metaverse Division Posts $4.3B Net Loss in Q4 2022

In the latest “Big Ideas” report by ARK Invest, the popular US asset manager claims blockchain will be one of the most significant technologies to shape an already technological era.



The report highlights 14 different technologies pegged to impact multiple sectors and serve as essential platforms for further innovation — including smart contracts and cryptocurrencies.



With global adoption, smart contracts and public blockchains will play a pivotal role in verifying digital scarcity and proof of ownership, Ark said.



“The financial ecosystem is likely to reconfigure to accommodate the rise of cryptocurrencies and smart contracts,” the report states.



“These technologies increase transparency, reduce the influence of capital and regulatory controls, and collapse contract execution costs.”



Ark has been a long-time supporter of crypto and blockchain. Its CEO Cathie Wood previously predicted that the price of bitcoin would reach $1 million by 2030.&nbsp;



The firm also boasts a <a href="https://blockworks.co/news/ark-invest-ftx-opportunity-for-coinbase">significant amount of shares</a> in top US exchange Coinbase, owning <a href="https://ark-funds.com/funds/arkk/">4.53%</a> of the company’s stock, representing roughly $347 million dollars.



<h2>An on-chain future driven by blockchain technology</h2>



The cryptocurrency industry has been continuously growing despite the collapse of prominent players in the market, which recently saw around $1.5 trillion wiped from the industry, the report said.



As the market slowly goes into recovery mode, Ark believes there will be a long-term opportunity for Bitcoin, DeFi and Web3. The firm claimed that over the next 10 years, “cryptocurrencies and smart contracts could command $20 trillion and $5 trillion in market value, respectively.”



The total value of all cryptocurrencies is currently just shy of $1.1 trillion; that figure would need to grow by 1,700% for Ark’s prediction to realize.



ARK pegged three revolutions of industry to get us there: upheavals across money, finance and the internet.



<h2>Money</h2>



The money revolution will see a movement away from fiat currencies and central banking systems into a global, more decentralized system. In particular, the report notes the long-term opportunity for Bitcoin is strengthening.



“Bitcoin’s volatility has obscured its long-term returns. Despite five drawdowns greater than 75% since its inception in 2009, bitcoin has delivered positive annualized returns over 3-, 4-, and 5-year time horizons,” Ark said.



Adding that, “the price of one bitcoin could exceed $1 million in the next decade,” more-or-less reiterating Wood’s bullish call.



<h2>Finance</h2>



On the finance side, there’s opportunity for decentralized financial (DeFi) to bring financial services to unbanked communities. Ark reasoned there are over 2 billion people who currently lack access to essential banking services.



“Financial services deployed on open protocols enable anyone with an internet connection access to custody, trading, and lending facilities,” the report said, “As insolvencies mounted across crypto lending businesses like Celsius and Voyager, decentralized lending markets like Aave continued to operate as designed.”



The report notes that if DeFi builders were to charge just a third of legacy finance rates — and financial services were to move to blockchain infrastructure at the same internet adoption rate in the early 2000s — the DeFi industry alone could be valued at $5.3 trillion by 2030.&nbsp;



<h2>Internet</h2>



ARK remains bullish on a potential internet revolution. Web2 thrives under tech monopolies that monetizes via user data — but this could change with the adoption of Web3 technologies which “introduces digital property rights for the first time.”



“Decentralized protocols enable the governance of — and open access to — distributed data, limiting central aggregator control,” the report said.&nbsp;



“Web3 embeds economics into software, enabling users to monetize and participate in network development.”



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The Future of Money and Contracts Is Public Blockchains: ARK

In a widely anticipated move, the Federal Reserve moved to bump interest rates by a quarter of a percentage point Wednesday, marking the start of what markets hope will be a prolonged period of smaller hikes.&nbsp;



The US central bank cited <a href="https://blockworks.co/news/crypto-hedge-during-ukraine-war">Russia’s ongoing war in Ukraine</a>, continued heightened inflation and a need to reach maximum employment as reasons for the slower-paced hike.&nbsp;



The move marks the Fed’s eighth <a href="https://blockworks.co/news/cryptos-stocks-rally-on-fourth-straight-0-75-interest-rate-increase">consecutive</a> rate increase, a strategy it hopes will curb the highest inflation the country has seen in more than four decades, but analysts remain worried a soft landing may be a tall order.&nbsp;



“The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time,” Federal Open Market Committee (FOMC) members wrote in a <a href="https://www.federalreserve.gov/monetarypolicy/files/monetary20230201a1.pdf" target="_blank" rel="noreferrer noopener">statement</a> at the end of their two-day policy meeting Wednesday.&nbsp;



Bitcoin and ether fell slightly on the news, declining 0.2% and 0.3%, respectively.&nbsp;



The S&amp;P 500 and Nasdaq Composite indexes also faltered, losing about 0.7% and 0.5%, respectively, immediately after the Fed released its decision.



Even with some relatively promising economic data, the major market moves are far from behind us, Craig Erlam, senior market analyst at Oanda, said, noting that Powell’s 2:30 pm ET remarks will give markets a better idea of whether peak hawkishness has really been achieved.&nbsp;



“There is growing evidence that rate hikes have worked in cooling the economy, inflation, and the labor market, but the question is whether the Fed believes it has done so enough, particularly on the core measure where inflation could prove more stubborn,” Erlam added. 



At the December meeting, committee members stated they believed that interest rates will ultimately hit between&nbsp; 5% and 5.25%, at a median level. These estimates are scheduled to be recalculated in March. When asked his expectations for what the final rate level may be, Powell said there is still uncertainty, but markets should be prepared for a higher level.&nbsp;



“I don&#8217;t feel a lot of certainty about where that will be,” Powell said during Wednesday’s press conference. “It could certainly be higher than we&#8217;re writing down right now.”



Traders should be certain that the Fed will continue to watch macroeconomic conditions, analysts say. While progress has been made, betting on a complete Fed pivot at this stage of the game would be ill advised.&nbsp;



“Clearly, inflation is declining (we are seeing that pretty much everywhere) but we should not expect it to be a linear process (there will be gains and some setbacks), but broadly, disinflation remains a positive for the market, and certainly much better than where we were last year, and that’s encouraging,” Tom Essaye, founder of sevens report research, wrote in a note Wednesday.&nbsp;



This is a developing story.



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