News Updates December 29, 2022
1. Step Aside, Ethereum: Blockchain Project Stacks Wants to Bring Smart Contracts to Bitcoin
Blockchain project Stacks has published a whitepaper showing how a new digital asset called “Stacks bitcoin” (sBTC) can be used to make Bitcoin fully programmable.
Unlike Ethereum or Solana where developers can conjure up all manner of algorithmic machinations – think six-figure gorilla avatars – Bitcoin’s simpler scripting language limits what Bitcoin developers can create on the platform.
Stacks, an existing smart contract platform, wants to break through those limitations by introducing a new digital asset derived from bitcoin – sBTC (pegged at 1:1 with bitcoin) – that can be used to create smart contracts on Stacks, but can also be readily converted back to bitcoin (BTC).
“Bitcoin is, by design, relatively slow and does not natively provide the fully-expressive smart contracts needed to build sophisticated applications,” the whitepaper states. “Faster and more sophisticated applications must therefore be built outside of the base layer. Bitcoin layers enable this.”
The term “layers” is Stacks’ lingo for any system outside of Bitcoin’s base layer, such as a sidechain, which is a secondary blockchain that interacts with a primary blockchain. In the whitepaper, Stacks acts as a Bitcoin sidechain, powered by both sBTC and STX – Stacks’ native token.
The project claims in its white paper that its Bitcoin sidechain can unlock “hundreds of billions of dollars” in DeFi on Bitcoin.
The concept is still in the implementation phase and will be formalized under Stacks Improvement Proposal (SIP) 21, according to Stacks co-founder, Muneeb Ali.
“The vote went through and implementation has started,” Ali confirmed during an interview with CoinDesk.”This is going to be the next major release. My best guess is maybe eight to nine months from now.”
How sBTC works
The current Stacks protocol uses a consensus mechanism (how computers agree on the state of a network) called “proof of transfer,” where anyone can be a miner or “stacker.”
Miners earn STX rewards for mining Stacks blocks, but must first post bitcoin to earn mining privileges. That bitcoin is subsequently distributed as a reward to stackers who maintain a copy of the Stacks ledger; stackers must also lock up STX for a certain length of time to receive stacking privileges.
In the proposed sBTC peg system, users send regular bitcoin to a wallet controlled by stackers (a process referred to as “pegging in”). This action mints an equivalent number of sBTC that can be used in smart contracts on Stacks.
To get their bitcoin back (“pegging out”), users return sBTC to the wallet. Stackers then sign these peg out requests and release the equivalent amount of bitcoin back to the users. This also prompts the Stacks protocol to burn the corresponding sBTC.
“It's a fully trustless system. It's a protocol,” says Ali. “There is a dynamic set of signers who have economic incentives to be signers and they sign the peg transactions.”
Sidechain smörgåsbord
Bitcoin sidechains aren’t new. Blockstream, a Bitcoin infrastructure firm, published a whitepaper on sidechains as early as 2014, and currently has a fully functional sidechain federation called Liquid.
Earlier this month, Layer 2 Labs raised a $3 million seed round from angel investors to develop “drivechains,” another flavor of Bitcoin sidechains.
Bitcoin Development Company Layer 2 Labs Raises $3M to Bring Drivechains to Network
In addition, Bitcoin developer Ruben Somsen has been working on “spacechains,” which he describes as “one-way pegged sidechains for Bitcoin.”
So what new innovation does sBTC bring to the sidechains conversation? Ali claims the sBTC model is unique in that anyone can be a miner or stacker. He sees the use of STX to incentivize stackers to sign peg out requests as a distinct advantage, although alternative projects tend to avoid the use of altcoins such as STX like the plague.
“It's a trade off,” Ali explains. “The trade off you're making with Liquid is that users need to trust Blockstream and friends – the federation. On Stacks, because there is the extra [STX] token, there is no company in the middle. So you can pick one; you can't have both.”
2. Bitcoin Price Could End The Year Further Lower, Key Resistance Intact.
Bitcoin price is struggling to clear the $17,000 resistance. BTC remains at a risk of more downsides below the $16,000 support zone before the year end.
Bitcoin is showing bearish signs below the $17,000 and $17,200 resistance levels.
The price is trading below $16,700 and the 100 hourly simple moving average.
There was a break above a connecting bearish trend line with resistance near $16,610 on the hourly chart of the BTC/USD pair (data feed from Kraken).
The pair could resume its decline if it stays below the $17,000 resistance zone.
Bitcoin Price Faces Resistance
Bitcoin price gained pace below the $16,800 support zone. BTC even extended its decline below the $16,700 level and the 100 hourly simple moving average.
The price traded as low as $16,453 and is currently correcting losses. There was a move above the $16,500 and $16,550 levels. The price climbed above the 23.6% Fib retracement level of the recent decline from the $16,960 swing high to $16,453 low.
There was also a break above a connecting bearish trend line with resistance near $16,610 on the hourly chart of the BTC/USD pair. However, bitcoin price is now trading below $16,700 and the 100 hourly simple moving average.
On the upside, an immediate resistance is near the $16,650 level. The first major resistance is near the $16,700 zone and the 100 hourly SMA. It coincides with the 50% Fib retracement level of the recent decline from the $16,960 swing high to $16,453 low.
The key breakout zone is still near the $17,000 level. A clear move above the $17,000 resistance might start a steady increase in the near term. The next major resistance is near $17,500, above which the price rise towards the $18,000 resistance zone.
Fresh Decline in BTC?
If bitcoin fails to start a recovery wave above the $16,700 resistance, it could start another decline. An immediate support on the downside is near the $16,450 level or the recent low.
The next major support is near the $16,250 level. A clear move below the $16,250 support might spark a move towards the $16,000 level. Any more losses might send the price towards $15,500.
Technical indicators:
Hourly MACD – The MACD is now losing pace in the bearish zone.
Hourly RSI (Relative Strength Index) – The RSI for BTC/USD is now near the 50 level.
Major Support Levels – $16,450, followed by $16,250.
Major Resistance Levels – $16,700, $17,000 and $17,200.
3. Solana price bleeds amid SOL-FTX association concerns.
The value of the decentralized finance (DeFi) token Solana (SOL) continues to slump amid concerns over the network’s close association with the now-collapsed FTX cryptocurrency exchange. Notably, the price drop has accelerated after the arrest of FTX founder Sam Bankman-Fried.
At the moment, Solana is valued at $9.39, a drop of almost 7% in the last 24 hours, while on the weekly chart, the token has plunged by almost 20%. The latest drop follows a sustained trend of decline that saw the asset lose the $10 support position.
Furthermore, Solana has been recording sustained selling pressure, with the market capitalization dropping by almost $890 million in a week to stand at $4.35 billion by press time.
Impact of Solana-FTX association
Although Solana has battled the prevailing general market sell-off, the asset hopes of emerging as an ‘Ethereum (ETH) killer’ appear dented as the fallout from FTX continues. Notably, the general confidence in Solana’s future has faltered following the FTX incident.
In this case, investors are still determining if the close association between the two parties will jeopardize the future of Solana. Notably, at the height of operation, Bankman-Fried and FTX offered significant support to the Solana team.
However, Solana co-founder Raj Gokal has maintained the ecosystem is not concerned with the price movement of SOL, noting that the future looks promising.
“I think in the long term, it’s really good. We’ve always heard really negative criticism about FTX’s involvement in the ecosystem and that concentration of ownership stake,” Gokal said.
4. Turkish Central Bank Runs First CBDC Tests
The monetary authority said it will conduct further trials in the first quarter.
This article is adapted from CoinDesk Turkiye. Follow CoinDesk Turkiye on Twitter.
The Central Bank of Turkey (CBRT) has conducted the first tests of its Turkish digital lira.
According to a statement released on Thursday, the CBRT successfully carried out the first payment transactions on its central bank digital currency (CBDC) network as part of an initial test phase.
“In the first quarter of 2023, the CBRT will continue its small-scale, closed-loop application pilot tests conducted with technological stakeholders. The test results will be made public in a comprehensive evaluation report,” the bank said in the statement.
In 2023, the Turkish digital lira will move to advanced stages where the central bank will conduct pilot tests with broad participation, including banks and financial technology companies, the CBRT added.
“Studies on the legal dimension of the digital Turkish lira show that digital identification is of vital importance for the project. Therefore, studies on the technological requirements and the economic and legal framework of the digital Turkish lira will be prioritized throughout 2023,” the bank stated.
In October, the Turkish Presidential Strategy and Budget Directorate presented an annual program for 2023 that included the discussion of a CBDC that would be integrated with digital identity and FAST, a payment system operated by the Turkish central bank.
5. MicroStrategy Bitcoin purchase divides the crypto community
Many praised the move, while others brought up some potential negative effects of one entity holding a lot of Bitcoin.
Software analytics company MicroStrategy recently added more Bitcoin to the firm’s holdings. Members of the crypto community had mixed reactions to the move.
In a recent tweet, MicroStrategy’s executive chairman Michael Saylor announced that the firm had made another Bitcoin purchase. The move puts the firm’s total BTC holdings at 132,500 BTC, purchased for a total of $4.03 billion but worth only around $2.1 billion at the time of writing. Many commended the move, while some brought up some potential negative effects.
A community member praised the MicroStrategy chairman, calling him a “rock star” whose mission is to bank the unbanked. Others celebrated the new development by pledging that they would join in and buy more Bitcoin themselves.
However, not everyone is overly enthusiastic about the company’s crypto shopping. Some think this new action could potentially spark a new bottom price for the top digital asset.
In a back-and-forth conversation on Twitter, Bitcoin analysts Willy Woo and Dan Held shared their thoughts on MicroStrategy’s purchase. According to Woo, Bitcoiners should not be happy when the company adds more BTC to its holdings. The analyst argued that MicroStrategy accumulating more Bitcoin poses risks of centralization because the company’s decision-making is centralized. In addition, Woo suggested that it’s better to celebrate adoption by ordinary people.
In a counter-argument, Held said there would be no risks of centralization because ownership does not equate to network control. The analyst highlighted that there’s no way to control who buys Bitcoin and that people or firms can buy as much BTC as they want.
6. FBI Investigating 3Commas Data Breach
This week, an anonymous person leaked 100,000 API keys connected to the crypto trading service.
The FBI is investigating the 3Commas data breach, CoinDesk has learned. The investigation comes after weeks of criticism from users of the Estonia-based crypto trading service, who say its CEO repeatedly brushed off warning signs that the platform had leaked user data.
This week, 100,000 Binance and KuCoin API keys linked to 3Commas were leaked by an anonymous person. On Thursday, two 3Commas users told CoinDesk that they were contacted by agents from the FBI’s Cincinnati Field Office in connection to the leak.
Over the last several months, dozens of 3Commas users found that the service had, without their consent, traded away funds on crypto exchanges they’d linked to it. Initially, 3Commas said that these users were most likely phished and insisted that the platform was safe.
The API database leaker insinuated that the 3Commas keys had been sold by someone from within the company, but 3Commas CEO Yuriy Sorokin said in a statement on Thursday that “3Commas stresses that it has found no evidence during the internal investigation that any employee of 3Commas was somehow involved in attacks against the API data.”
“Since becoming aware of the suspicious activities taking place, we immediately launched an internal investigation. We will continue with the investigation in the light of the new information and also notify law enforcement authorities accordingly,” Sorokin said in the statement.
A 3Commas victim group, which has around 60 members, previously reached out to the U.S. Secret Service and other law enforcement agencies in an attempt to understand how their funds had gone missing. The group’s leader, Edmundo (Mundy) Pena, told CoinDesk that he has tallied the group’s losses at over $20 million.
The FBI and 3Commas did not immediately respond to CoinDesk’s requests for comment.
