Fees

Spot Bitcoin ETF will be ‘bloodbath’ for crypto exchanges, analyst says

Spot Bitcoin ETFs could trigger unwanted consequences for crypto exchanges like Coinbase due to lower transaction fees, according to ETF analysts.

While the crypto community eagerly awaits the possible approval of a spot Bitcoin (BTC) exchange-traded fund (ETF) in the United States, some analysts are warning this could potentially trigger unwanted consequences for cryptocurrency exchanges.

Several industry observers have predicted that a spot BTC ETF could start trading in early 2024, in an event that, when paired with Bitcoin’s upcoming block reward halving expected in April, Blockstream CEO Adam Back believes could propel BTC to $100,000.

Bitcoin proponents such as Jan3 CEO Samson Mow have said that approval of a spot Bitcoin ETF in the U.S. could even drive Bitcoin as high as $1 million in the “days to weeks” following.

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Bitcoin fees hit 20-month high as miner revenues match $69K BTC price

Bitcoin miners are the main beneficiaries of current sky-high transaction fees, data shows, but many longtime market participants have little time for complaints.

Bitcoin (BTC) on-chain transaction fees are dividing opinion as the cost of sending BTC skyrockets.

Data from the statistics resource BitInfoCharts puts the average transaction fee at nearly $40 as of Dec. 17.

The latest wave of Bitcoin Ordinals inscriptions has resulted in elevated transaction fees for all network users — but some believe that they are here to stay.

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NYDFS adopts regulation to assess supervisory costs for licensed crypto firms

Since 2015, crypto firms operating in the state of New York have largely been required to apply for a BitLicense to offer services.

The New York State Department of Financial Services has adopted a regulation that will allow the government agency to assess supervisory costs from licensed crypto firms operating in the state.

In an April 17 announcement, the NYDFS said the supervisory costs enforced by the new regulation would be used for “adding top talent to its virtual currency team.” The government department will assess costs for the supervision and examination of crypto firms operating in the state with a BitLicense.

“This regulation provides the Department with additional tools and resources to regulate the virtual currency industry now and in the future as innovators create new products and use cases for digital assets,” said NYDFS Superintendent Adrienne Harris.

Crypto firms operating in the state of New York are largely required to apply for a BitLicense, a requirement for companies since 2015. The NYDFS proposed adopting the regulation to assess costs in December 2022, after which time it met with “key stakeholders” and received feedback. According to the regulator, the proposed rule was added in response to the state’s Financial Services Law not including such a provision on the assessment of operating costs.

Related: New York Assembly introduces crypto payments bill for fines, taxes

The NYDFS listed 33 companies involved in crypto and blockchain operating in the state under a virtual currency license, limited purpose trust charter, or money transmitter license as of Feb. 10. New York City Mayor Eric Adams suggested the state scrap the BitLicense regime in April 2022, claiming the requirements stifled innovation and economic growth.

Magazine: Crypto City: Guide to New York

Update (April 17 at 8:57 PM UTC): This article incorrectly stated the NYDFS announcement was on April 16. It has been updated to reflect the correct date, April 17.

Ethereum projects unite to protect users from MEV-induced high prices

In total, 27 Ethereum projects joined the initiative as launch partners, including Balancer, Gnosis DAO, Shapeshift and StakeDAO, to name a few.

Over 27 prominent Ethereum projects joined hands to launch MEV Blocker, a solution that aims to tackle and minimize the amount of value extracted from their users — aka maximally extractable value (MEV), Ethereum’s invisible tax. 

MEV is a tax imposed on decentralized finance (DeFi) users on transactions. MEV bots can hijack transactions midway, such as Ether (ETH) trades, nonfungible token (NFT) purchases and Ethereum Name Service registrations, and inflate prices for the users. MEV Blocker was jointly developed by CoW Swap, Agnostic Relay and Beaver Build as a free and censorship-resistant tool to counter this “$1.3 billion dollar problem” persistent across the Ethereum ecosystem.

In total, 27 Ethereum projects joined the initiative as launch partners, including Balancer, Gnosis DAO, Shapeshift, and StakeDAO, to name a few. Explaining the intention behind launching MEV Blocker, Martin Köppelmann, CEO of Gnosis, stated:

“With the launch of MEV Blocker, users can profit from the backrunning opportunities they create. Today all of that money is taken by the searcher, but why shouldn’t it be split with the people who create the value?”

MEV Blocker can be added as a custom remote procedure call endpoint to a crypto wallet, which, in turn, can protect users from frontrunning and sandwiching when using any Ethereum decentralized application. According to the official announcement, MEV Blocker sends at least 90% of the profits from winning bids back to users and 10% to validators as a reward — thus giving “power back to Ethereum users.”

Related: Sandwich trading bots lose bread and butter in $25M exploit

While entrepreneurs attempt to reduce the taxation on users, the excitement around the upcoming Shanghai and Capella upgrades resulted in a bull sprint for ETH.

On April 5, Ether breached $1,900 for the first time in over seven months. However, it is important to note that the price of ETH dropped sharply following the execution of the Merge on Sept. 15, 2022.

Magazine: ‘Account abstraction’ supercharges Ethereum wallets: Dummies guide

PancakeSwap changes its recipe with the launch of Version 3

PancakeSwap has released version 3 of its BNB Chain, Aptos and Ethereum-based DeFi platform, touting improved performance and lower fees.

Decentralized finance (DeFi) protocol PancakeSwap has launched version 3 of its automated market maker platform on BNB Chain and Ethereum, with the upgrade encompassing performance improvements and lower fees.

Enhanced capital efficiency is cited as a key aspect of the upgrade, with a change in how liquidity providers can allocate capital on specific price intervals. In the previous version of PancakeSwap, liquidity from providers (LPs) was distributed uniformly along the price curve of trading pairs, which the platform notes was inefficient given that assets typically trade within certain ranges.

V3 allows liquidity providers to select a custom price range to provide liquidity, allowing specific control over capital investments to higher volume trading ranges. The release also touts the provision of four new trading fee tiers from 0.01%, 0.05%, 0.25%, and 1%, which is a change from V2’s standard 0.25%.

Related: PancakeSwap governance proposal set to cap CAKE supply at 750M

Every token pair can have liquidity pools for each tier. PancakeSwap expects asset pairs to be drawn to tiers where incentives for LPs and traders align, with the approach an effort to balance between traders targeting the lowest fees while still incentivizing LPs.

The PancakeSwap team unpacked the different trading fee tiers in correspondence with Cointelegraph. Assets such as stable pairs where impermanent loss is low (price changes after depositing to a liquidity pool) and prices typically match fall into the 0.01% tier.

The higher percentage trading fee tiers cater to assets that have higher impermanent loss or lower liquidity. This mechanism intends to provide more fee revenue and incentive for LPs.

PancakeSwap caters to a broad DeFi user base, accounting for over $2.5 billion of total value locked and serving over 1.5 million unique users.

The platform also revealed upcoming features that are still in development, including a trading rewards program incentivizing traders with exclusive benefits, while a position manager feature aims to improve user experience when depositing tokens as liquidity.

Arbitrum (ARB) has been front and center in DeFi-related news in March, with its highly-anticipated airdrop seeing around $3.3 million consolidated from over 1,400 addresses into two controlling wallets.

Magazine: 4 out of 10 NFT sales are fake: Learn to spot the signs of wash trading

Xapo Bank enables faster Bitcoin payments with Lightning Network

Xapo Bank members will now be able to instantly pay for small purchases of up to $100 at any vendor accepting Lightning payments.

Xapo Bank, an international private bank headquartered in Gibraltar, has integrated the Lightning Network to improve its Bitcoin (BTC) capabilities.

On March 2, Xapo officially announced a partnership with the Lightning Network infrastructure platform Lightspark, which allowed the firm to implement Lightning on its platform.

The integration enables faster and cheaper transactions on Xapo, reducing blockchain confirmation waiting times and transaction fees on the original Bitcoin network.

According to the firm, Xapo Bank members will now be able to instantly pay for small purchases of up to $100 at any vendor accepting Lightning payments. High-volume transactions will not initially be supported with the integration.

The new integration was introduced on Feb. 27 as part of a new update for Xapo bank’s apps on the App Store and the Google Play Store.

Lightning Network transactions on Xapo via Lightspark

According to Xapo Bank CEO Seamus Rocca, Bitcoin’s transaction confirmation can take up to one hour during periods of high usage, which makes BTC unsuitable for small daily payments like groceries. By integrating the Lightning Network, Xapo allows its customers to pay with Bitcoin without having to convert it to the U.S. dollar, he said.

Related: Bitcoin node connection shuts down: BlueWallet users urged to withdraw funds

Bitcoin average confirmation time has seen a huge spike in mid-February amid a massive activity on the Bitcoin network, with the mempool size reaching November 2022 levels. According to data from YCharts, BTC confirmation time hit nearly 600 minutes on Feb. 19.

Source: Ycharts

Rocca also noted that Bitcoin payments are especially crucial during times of hyperinflation, economic uncertainty and political turmoil.

Founded in 2013, Xapo operates a private bank as well as a Bitcoin custodian and wallet regulated by the Gibraltar Financial Services Commission. The company is known for combining traditional banking with crypto by offering USD and BTC accounts in one place.

Xapo claims that, at the peak of its Bitcoin custodianship, the firm held more than 800,000 BTC ($18.7 billion) for family offices, funds and high net-worth individuals. Such an amount of Bitcoin is more than 4% of the entire number of all BTC in circulation.

OpenSea implements 0% fees to win over NFT user base lost to Blur

NFT marketplace Blur surpassed OpenSea in daily ETH trading volume as users — anticipating greater returns on their NFT investments — are looking for a trading arena that works in their favor.

Major nonfungible token (NFT) marketplace OpenSea announced a massive structuring around lower platform fees and greater creator earnings as competing marketplaces continue to drain away its once dominant user base.

According to data from Nansen, on Feb. 18, NFT marketplace Blur surpassed OpenSea in daily Ether (ETH) trading volume as users — anticipating greater returns on their NFT investments — are looking for a trading arena that works in their favor.

Daily trading volume of major NFT marketplaces. Source: Nansen

As a reactionary measure, OpenSea announced three major changes to win back its migrating customers. The measures include a 0% fee for a limited time, introducing optional creator earnings and leniency on other operators.

OpenSea admitted losing users to other “NFT marketplaces that don’t fully enforce creator earnings,” and the new measures are an attempt to revitalize its dominance in the space, adding:

“Recent events – including Blur’s decision to roll back creator earnings (even on filtered collections) and the false choice they’re forcing creators to make between liquidity on Blur or OpenSea – prove that our attempts are not working.”

OpenSea believes that it defended creator earnings on all collections while reiterating its support for Operator Filter — a function aimed at helping creators secure their revenue for the resale of their work. However, this filter proactively blocked recommendations of marketplaces that sported the same policies.

OpenSea’s plan of action to counter falling market dominance. Source: OpenSea (via Twitter)

Blur’s daily trading volume supremacy can be attributed to its new royalty policy showcasing differences in royalty payment options between its platform and OpenSea. It read:

“OpenSea’s current royalty policy prevents collections from being able to earn royalties everywhere. They have cited various reasons for this (see FAQ), but the end result is that creators are limited to earning royalties on only one platform at a time.”

Amid the royalty war between the two marketplaces, community members highlighted the importance of competition in the industry. If it weren’t for zero royalty marketplaces, more prominent players like OpenSea would eventually increase fee structure, which would hurt creators and collectors.

Moreover, OpenSea plans to continue testing the model and identify what works best for the community and the organization. Community members speculate that OpenSea would probably increase its platform fees in the future if it successfully manages to amass its lost customers — a predatory move often noticed in industries with less competition.

Related: eBay NFT platform KnownOrigin launches creator smart contract

YouTube’s appointment of new CEO Neal Mohan was perceived as a win for the crypto community considering Mohan’s inclination to use NFTs and Web3 as revenue streams for creators.

As Cointelegraph reported, while serving as YouTube’s chief product officer, Mohan outlined tentative plans in February 2022 to integrate features such as metaverse-based content experiences and content tokenization via NFTs.

Celsius publishes list of users eligible to withdraw majority of assets

Eligible creditors will not be able to withdraw their funds from Celsius unless they update their accounts with AML and KYC data.

Bankrupt cryptocurrency lending firm Celsius had come up with a withdrawal process for users who had their crypto in its custody when it stopped withdrawals in June 2022.

Celsius released an official update on upcoming withdrawals on Jan. 31, providing the list of users eligible to withdraw approximately 94% of qualified custody assets.

The firm laid out the process in a 1,411-page court filing with the United States Bankruptcy Court for the Southern District of New York, listing the full names of all the eligible users alongside the type and amount of debted crypto assets.

Celsius stressed that eligible users would be asked to update their Celsius account with certain required information before any withdrawals are processed. The requested information includes customer data related to Anti-Money Laundering and Know Your Customer policies, as well as details about the destination address of the withdrawal, Celsius said, adding:

“Unless and until an eligible user updates his or her account with the required account updates, such eligible user will be unable to withdraw his or her distributable custody assets from the debtors’ platform.”

The filing also notes that it’s not yet known whether eligible users will be able to withdraw the remaining 6% of the assets as the court will make a decision regarding this question at a later date.

Eligible users will also receive specific details related to gas and transaction fees associated with the upcoming withdrawal procedures. “Eligible users who do not have sufficient assets in their accounts to satisfy these fees will not be permitted to withdraw their assets,” Celsius wrote.

Related: Judge denies motions from Celsius users seeking to reclaim assets

The news comes amid Celsius’s court-appointed examiner submitting a court filing on certain aspects of operations at the lender, including details about its complex dealings with the collapsed FTX exchange. The examiner report also revealed that Celsius used the accounting software Quickbooks to keep track of its finances, just like FTX and Alameda Research did.

Court-appointed examiner Shoba Pillay also wrote that Celsius and its founder Alex Mashinsky did not deliver on their promises surrounding its native Celsius (CEL) token and other business activities.

NYDFS proposes regulation to assess costs of ‘supervision and examination’ for licensed crypto firms

Though some crypto firms operate in New York with a BitLicense, many including NYC Mayor Eric Adams have criticized the licensing regime as a difficult barrier to cross.

The New York State Department of Financial Services, or NYDFS, has proposed a regulation that would allow the government department to assess supervisory costs from licensed crypto firms operating in the state.

In a Dec. 1 announcement, NYDFS Superintendent Adrienne Harris opened the proposed budget measure for public comment. The regulation, if approved, would grant the department the authority to assess costs for the supervision and examination of firms operating in the state with a BitLicense — a state requirement for crypto companies since 2015.

“This assessment authority will allow the Department to continue building the team that is leading the nation with a suite of regulatory tools,” said Harris. “The ability to collect supervisory costs will help the Department continue protecting consumers and ensuring the safety and soundness of this industry.”

Though some crypto firms continue to operate in New York with a BitLicense, many including New York City Mayor Eric Adams have criticized the measure as a difficult barrier. The BitLicense originally cost $5,000 in application fees, with the NYDFS setting certain capital requirements for operations.

Related: NYDFS calls for crypto firms to use blockchain analytics

The proposed regulation built upon a rule signed into law in April granting the NYDFS “authority to collect supervisory costs from licensed virtual currency businesses.” Harris said the rule would help bring regulations of crypto firms in line with those imposed on banks and insurance companies.

According to the NYDFS, the proposal will initially be open to public comment for 10 days, then an additional 60 days upon publication in the state register.

How to transfer $1 billion for basically free: Bitcoin whale watching

At just 15 sats/vByte, a Bitcoin user is demonstrating just how cheap it is to send vast sums of money across the internet.

Billionaires, take note. It’s one million times cheaper to send huge sums of money on the Bitcoin (BTC) blockchain.

A Bitcoin user sent over 50,562 BTC ($1 billion) to an address on the blockchain, paying a fee of just 2,513 satoshis, or sats (the smallest denomination of a Bitcoin), equivalent to half a dollar, for the pleasure. 

Transaction sankey diagram showing fees, value and time. Source: mempool

The unknown wallet address paid a tiny fraction (less than 0.0001%) of the total value transacted. Put simply, the user paid 50 cents to move double the gross domestic product of the Bitcoin-friendly islands of Tonga. The billion-dollar transaction was processed in block 761374, at a transaction fee of just 15 sats per unit of data, or sats/vByte.

Cointelegraph experimented with various online banking services to estimate the cost of sending vast sums of money through legacy finance tools. For the transfer of $10 million, a well-known remittance provider charges a tiny fraction, 0.3%, which equates to $30,000. That’s one million times more expensive than using the Bitcoin blockchain to send money.

Experimenting sending vast sums of money with legacy financial tools. Source: Wise

Before a new Bitcoin block is mined, every Bitcoin transaction request sits in the memory pool, or “mem pool,” which is kind of like a Bitcoin bus stop. On average, miners take 10 minutes to mine a new block.

Bitcoin miners sort through transactions, processing the passengers that have the most expensive bus tickets (transaction fees) first. Typically, the higher the transaction fee, the faster the transaction is confirmed. At 15 sats/vByte, the cost of sending over 50,000 Bitcoin is very low, indicating that this Bitcoin whale was not in a hurry.

By way of comparison, in late October, a fat-fingered Bitcoin user paid a whopping 8,042 sat/Byte, or 1,136,000 sats to move 3.8 Bitcoin ($65,000).

The process of sorting through transactions in the mempool is relatively straightforward for miners. Contrary to many Bitcoin critics’ beliefs, it is not an energy-hungry process. Ultimately, Bitcoin’s energy consumption comes from block reward issuance, not transactions.

Related: BTC miner CleanSpark scoops up thousands of miners amid ‘distressed markets’

The Bitcoin whale address continued to send over 50,000 Bitcoin to various other addresses on the blockchain. The addresses are not publicly known addresses, such as Binance’s cold storage wallet or the Bitcoin mined in 2009, which was subsequently lost in a landfill in Wales.