Tag: cex

Author: Dmytro Volkov, CTO of the international cryptocurrency exchange CEX.IO

Bitcoin has features that can be seen as both strengths and weaknesses, especially in comparison to other cryptocurrencies that are present in the market.

Let’s try taking a closer look at the first crypto – what advantages does it have, what problems is it facing, what could it look like in the future?

First of all, it needs to be noted that Bitcoin has no original team behind it. What it has is an open source community, and, in a way, that’s what makes Bitcoin’s further development hard. The size of its community means that a lot of effort is required to reach consensus on implementing big changes in its blockchain network. 

This can looks like a weakness if we compare Bitcoin to other blockchains – like Ethereum, for example. Ethereum has a native team and a community leader, which makes large-scale changes to its network relatively easier to pull off. But on the other hand, it can also be seen as a strength. Because Bitcoin offers high decentralisation in terms of altering the blockchain’s code, it means that for changes to take place, a proper worldwide consensus is required. This, in turn, acts as a guarantee that only the truly desired features will be added, and that the changes will happen in a secure way. This keeps the Bitcoin blockchain reliable and straightforward.

Then there is the matter of blockchain consensus and the debate of choosing between Proof-of-Stake and Proof-of-Work framework. Many modern blockchain projects choose PoS for the sake of transaction processing speed, but Bitcoin will likely continue to employ PoW. With Proof-of-Work format, high hash power means that the blockchain network has better protection against data loss and attacks – it has proven to be secure in the past. Proof-of-Stake, however, is still relatively new as a concept and potentially not quite as reliable.

And speaking of hash power – this factor rests heavily with the miners’ willingness to invest effort into finding new blocks. Miners’ revenue comes in Bitcoin, and now that its price is on a major rally, it represents a huge motivational factor for miners. And this, in its stead, increases the blockchain’s reliability compared to alternatives. 

To sum up, we can say that Bitcoin is fundamentally slow – there have been attempts to solve this issue (like SegWit and Lightning Network), but ultimately they could not solve the issue of low network throughput. Because of the complexity of reaching consensus in the network in order to implement changes, it is likely that, in terms of scalability, Bitcoin in the future will remain mostly the way it is now.

This means that other blockchains are likely to surpass Bitcoin when it comes to speed and transaction algorithms. But that is fine, because that is not where Bitcoin’s true value lies. In my opinion, it is likely that, rather than the currency of choice for everyday payments, Bitcoin is going to play the role of a long-term method of storing value in the crypto world, going forward. As well as a reliable way of transferring large amounts of capital and paying for expensive goods and services.

Image source: CEX. Io Media

Author: Dmytro Volkov, CTO of the international cryptocurrency exchange CEX.IO

NFT stands for “non-fungible token” – meaning that each one of these is unique and one of a kind. One token can’t be replaced with another, which is what makes NFT different from, say, straightforward BTC coins.

NFTs are used to tokenize digital goods for the purpose of monetizing them. This means creating a digital certificate of ownership over an object, which can then be freely sold or bought.

The uniqueness stems from the fact that each piece of content is linked to a single NFT token and stored in a smart contract – for example, on Ethereum blockchain. This way, while someone else may have copies of the same content, only one person can own the specific token that proves ownership of the original piece.

Considering their unique nature, the demand for NFTs will depend less on the cryptocurrency market and more on the demand for virtual creations. IoT (Internet of Things) may also become an additional source of demand here. Given that we live in an age when the influence of virtual reality is constantly growing, it is only to be expected that NFTs stand to gain in popularity the further we go. 

NFT first got their recognition in the field of gaming – in particular, thanks to CryptoKitties blockchain game. But now they are steadily expanding into other areas, as well. It is my belief that non-fungible tokens will get further usage in the field of art: music, paintings, etc. 

At the beginning of 2020, the market capitalization of non-fungible tokens was at $141 million. In 2020, it increased by $196M, reaching the mark of $338 million by the end of the year. The main demand, which stimulated the growth of this market, came from the metaverse – the fusion of the physical world, augmented and virtual reality -, the world of art, and online gaming. Metaverse accounted for 25% of deals worth over $1,000, art objects accounted for 24% of such deals, and items from online games – 23%.

But at the same time, it has to be admitted that the NFT technology has not yet received sufficient enough reach. This is why it’s too early to talk seriously about what kind of impact it could have on the world. The main demand will likely come later. 

As with any new product, there is uncertainty about how NFTs should be regulated or how to even bind their value to existing objects. So far, the costs of artworks differ so much that it is hard to consider what an “average” cost of an NFT would be. A token’s value is equivalent to the value of the item the ownership of which it represents, which means that the cost of both is equal. 

The most expensive NFT in history – the “Dragon” collectible from CryptoKitties, was sold at the end of 2020 for 600 ETH (about $270,000 at the time of sale). In March 2021 the art piece “Everydays: The First 5,000 Days” by artist Beeple was sold for over $69 million. 

According to CoinGecko, the capitalization of the NFT market in March 2021 exceeded $8 billion, which is a clear evidence of the rapidly growing demand for non-fungible tokens and the digital assets they mainly represent.

Considering all this, it is safe to say that, while NFTs are still a relatively new and somewhat confusing field, its growing popularity is indisputable. Non-fungible tokens could be a basis for very beneficial relationships between creators of content and buyers. The prospects for this market are quite looking quite nice.

Image source: CEX.IO Media