Crypto IRL

Welcome to the 5x5 Crypto podcast. Each week, we cover the “so what’ of 5 key crypto stories in about 5 minutes. My name is Afo and I’m interested in crypto. I think you’ll enjoy this week’s episode. Like and subscribe on iTunes, Spotify, and Substack. Let’s go!

Happy Easter y’all! Q1 2021 is over and we are in a new month. I hope you have been keeping up with your new year resolutions. If you have fallen off the horse, now is a great time to get back on. Last week, I shared that I will be tinkering with the format over the next couple episodes. I appreciate the feedback. Please keep it coming. Let me know why you subscribe and what you are looking to see. Thanks!

This episode includes 5 news stories and a link to help you explore bitcoin mining.

News

* Visa to support digital currency payments

* Visa became the first payment network to settle transactions on USDC. USDC is a digital currency that is pegged to the value of the dollar. Unlike Bitcoin, the price of USDC is stable (1 USDC = $1), hence the name stablecoin.

What does this mean? Why should I care? Why is this important?

* Have you ever wondered why some gas stations offer a discount if you pay with cash instead of card? Well, it is because when you swipe your debit card, it takes several days and dollars before the funds reach the gas station’s bank account.

* With USDC, the funds will be transferred near real-time and cost a fraction of a cent. It’s plausible that some merchants could eventually offer discounts to customers who pay with USDC. This is a win-win for the customer and merchant.

* USDC will achieve near real-time payments by batching transactions on the Ethereum blockchain. 

Figure 1. Illustrates fees associated with a credit card payment

* Ether soars to an all-time high (ATH)

* This week’s announcement that Visa would utilize Ethereum to settle USDC transactions fueled an 18% rally in the price of ether to ~$2100

* Ether has almost tripled this year as deposits in DeFi doubled to $38B in Q1 and new Bitcoin investors explored Ethereum and the suite of applications built on top of it  

* Coinbase to finally go public on April 14

* Lots of retail and institutional investors are prepping funds to go shopping on April 14.

* The US largest crypto exchange will directly list 115 million shares. They are expected to price around $350 each which was the average weighted price in the private market in Q1.  

* Up to $40B could be raised putting Coinbase valuation up to $100B. This would make the highly anticipated debut one of the largest tech IPOs. Coinbase would be larger than some banking heavyweights like UBS, Barclays and BNP Paribas.   

* Coinbase will release its Q1 2021 earnings report before the going public. It’s most recent disclosures indicate it had $90B assets under management, over 43 million customers in more than 100 countries. 

Figure 2. List of largest tech IPOs (CNBC)

* Goldman Sachs goes crypto but don’t hold your breath for the others 

* Goldman Sachs wealth management to allow high net worth clients invest in bitcoin. This follows Morgan Stanley’s lead two weeks ago. 

* It’s unlikely that Wells Fargo would follow suit shortly. The bank has been under significant regulatory scrutiny in recent years. 

* Many retail banks won’t move on crypto until they have to. They are focused on upgrading their dated technology, being compliant with regulators, and keeping up with FinTechs and Neobanks. Some traditional retail banks have not yet put in the work to fully appreciate the promise and challenge of crypto and decentralized finance. They view it as a fad or an experiment waiting to crash

* Former Chainalyis exec becomes FinCEN boss

* The rise of digital currencies is expected to attract more regulation. There are concerns that some legislators and regulators may not be sufficiently well-versed in these technologies to adequately police and/or support them. 

* Some of these fears were abated with the recent appointment of Michael Mosier as the head of FinCEN (the US Financial Crimes Enforcement Network). Michael was previously the Chief Technical Counsel of Chainalysis, the leading crypto surveillance firm.

Explore

* Bitcoin mining for dummies: Yesterday I dived into Compass, a company which makes it easy for anyone to become a bitcoin miner. I profiled Meltem Demiror’s experience, she used to be a treasury analyst with ExxonMobil but now she is the Chief Strategy Officer at CoinShares. Check it out if you are curious about what bitcoin mining is and the potential returns you could earn. Click here.

I hope you have a great day. Let me know what you think and what you’d like to see.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit afolabio.substack.com

I periodically do a deeper dive on relevant topics. I am simply sharing my thoughts not offering financial advice. My thoughts are subject to change. I am not a registered financial adviser.

They shuffled around excitedly jabbering on about hash rates and mining pools. It sounded like Greek to me. I had accepted that I may not always be able to keep up with my tech bros. Besides this latest idea sounded intense and risky. The first rule of investing is to invest in what you know. The only rig I knew about was used to produce oil and gas. I resolved within myself to stay away from this harebrained experiment.

Those were my thoughts back in 2016-2017 when my friends were tinkering around with bitcoin mining. Flash forward a couple years and here I am enthusiastically investing and learning about bitcoin and other crypto assets. I have more fully embraced a growth mindset. Better late than never!

The crypto industry has a UI (user interface) problem. Early adopters were highly technical. They built products for other highly technical people...and it showed. Fortunately, it’s been getting easier for lay people off the street to engage with crypto assets. Just as Mt Gox (early clunky crypto exchange) gave way to the likes of Coinbase, could basement mining rigs give way to Compass?

What is Compass?

Compass provides white glove service for customers who want to mine crypto assets like bitcoin but do not want to bother with hosting or maintaining operations. Finally, you could have a machine that “prints” (crypto-) money. One could sign up in less than 10 minutes and sync up your digital wallet to receive payments. There are 3 key steps in the process.

* Mining rig: The first step is to select a mining rig. Mining rigs are high powered computers which work to solve a complex math problem. Successfully solving the equation in the allotted time would yield crypto assets. Compass currently has 2 mining rig models to choose from ranging from $5k to $8k each. 

* Hosting: Next up, select which facility you would like the mining rig to be hosted in. Compass has dozens of facilities from China to Canada and across the US too. The cost of electricity is the biggest operating cost. You definitely want to select a facility that has low electricity costs. Compass’ facilities have access to lower industrial rates ($0.06 per kwh) whereas basement miners pay residential rates ($0.12+ per kwh). It is important to note that Compass charges a monthly fee of $160+ to cover the cost of hosting. This does not include electricity cost. I wonder if there are tax implications for owning mining rigs abroad. 

* Mining pool: Mining pools are networks of computers who work together to solve the math problem that yields crypto assets like bitcoin. Joining a mining pool increases the odds of solving the equation. Go ahead and join one, just recognize they usually charge 1-4% fee on yields. Slushpool is the oldest one and F2Pool is the largest mining pool. Finally, connect the rig with your crypto wallet and watch the crypto pile up as you sleep. 

Is bitcoin mining profitable?

The answer is it depends. Meltem Demirors, a former corporate treasury analyst at ExxonMobil turned investor and Chief Strategy Officer of Coinshares shares the details of her bitcoin mining experience with Compass. Let’s dig in. 

Figure 1: Meltem Demiror’s bitcoin mining performance sourced from Twitter

Revenue: Meltem averaged 0.0006 bitcoin mined per day (0.0331 bitcoin / 55 days) from Feb to March 2021. If this holds steady for a year, she would mine 0.22 bitcoins. The value of the yield would vary with the price.

Figure 2: Estimated bitcoin mining yield at different bitcoin prices

At high bitcoin prices, the mining rig pays for itself in less than a year. That said, there is a growing sense that this bitcoin bull market could be drawing to a close. Pantera Capital produces a monthly price outlook for bitcoin. Their forecasts have performed well versus actual. They have a view that the bitcoin bull market could end by December 2021, certainly over before December 2022. Turns out, when you start bitcoin mining could have a significant impact on the payback period. 

Figure 3: Monthly bitcoin miner revenue sourced from Glassnode

Bitcoin miners earned a record $1.6B revenue in March 2021 up 5x from September 2020. Monthly revenue is highly variable. It is influenced by the price of bitcoin and size of the reward.

About 18.5 million bitcoin have been mined out of a total 21 million bitcoins available. Every 10 minutes, miners confirm one block of bitcoin transactions. The reward is currently 6.25 bitcoins. Every 4 years, the size of the reward is halved. Therefore, bitcoin mining is expected to continue through 2140. The most recent halvening occurred in May 2020. Miners achieved record revenues despite the halvening because the price of bitcoin increased to sufficiently cover the reduced reward. 

Hardware: Meltem is mining bitcoin using a Bitmain S19 mining rig. These are some of the most popular and efficient mining rigs. High demand for mining rigs has run up the price. Computer chip manufacturers simply can’t keep up the pace with demand. This has led to the unusual scenario that the resale value of the mining rig is higher than the initial upfront cost. A flood of new high power mining equipment is estimated to be delivered in November 2021 and January 2022. This may push down the resale value and bitcoin yield.

Costs: There are 3 key sets of costs to bear in mind: electricity costs, hosting fees and mining pool commission. 

* Electricity: Compass has a range of hosting facilities with access to low-cost electricity prices ($0.04 to 0.065 per kwh). This is more than 50% lower than residential rates in the US. The selection of an energy efficient mining rig and operating system could also help manage consumption. Some miners like Meltem are concerned about the environmental impact of their activity. They choose to offset their carbon impact by buying carbon credits. Carbon credits work by providing lower carbon solutions ex modern cooking stoves for women in India who would otherwise be using firewood. This is an optional additional expense to keep in mind. 

* Hosting: Compass charges about $160 per month for operating, maintaining and housing your mining rig. Customers sign a 1-year hosting contract.

* Mining pool: Participating in a mining pool would significantly increase the odds of earning bitcoin. The cost ranges from 1 to 4% and mining pools have a variety of payout mechanisms. 

Verdict

Bitcoin mining is not just about minting bitcoin. It strengthens the bitcoin network. Additionally, becoming a miner is an education in itself. It would push one to dive deeper into the industry. The returns from bitcoin mining are highly variable. Many have argued that it is better to simply purchase bitcoin instead of going through all the hassle. If Meltem had invested $7,500 in bitcoin on February 1st instead of becoming a miner, she would have acquired 0.22 BTC (1 bitcoin = $33k). That purchase would now be worth $13,200 (1 bitcoin = $60k). But this is just a snapshot. Meltem’s set-up provides her with an engine that could churn out 0.22 bitcoins per year. Over the course of 2 years she could earn 0.44 BTC. If you are bullish on the price of bitcoin and have a long-term price target greater than $100k+ then mining might not be an unattractive target (0.44BTC = $44k+ at $100k bitcoin price)

Opportunities

I think Compass has done a great job simplifying the mining process. They are able to reach people who would otherwise not have considered mining. I am not aware of a direct competitor at scale. Increased competition could drive down the hosting fees and increase miner profitability. 

The upfront capital required is a stumbling block for some potential customers. I think Compass could take the democratization of mining one step further and let customers purchase fractions of a mining rig. This could lower the barrier of entry and experimentation from $6k mining to $1k. The trouble, however, is that owners would need to be aligned on how to dispose of a mining rig. 

I think Compass could also do a better job helping customers understand the tax implications of mining. It would be helpful to understand if there are implications from owning a mining rig outside of the US. Additionally, it would be helpful to understand if customers could write off the mining investment and operating cost. This could change the equation. 

Lastly, would-be customers who are not ready to proceed with mining directly could consider investing in publicly traded mining companies like Marathon Patent Group, Riot Blockchain and Hive Blockchain. These stocks tend to move with the price of bitcoin. 

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit afolabio.substack.com

This week, I have been reflecting on the journey so far. I did not start out with the intention of creating a newsletter or a podcast. Rather, my goal was to learn more about crypto. Then it evolved to sharing my learnings with others curious about the space. Lately, I have been considering how best I might serve you. One reader suggested more actionable insights while another asked for more brevity. I am going to be experimenting with the format over the next several weeks beginning with this episode. Today, I am shortening the news stories followed by one longer piece with actionable insight. Please let me know what you think.  

News

1.     Fidelity wants to launch Bitcoin ETF

* Fidelity Investments has applied to the SEC to launch a bitcoin ETF. Since 2013, dozens of firms have tried to launch bitcoin ETFs – none have been successful.

* Fidelity is the highest brow company to throw it’s hat in the ring. It is one of the largest asset managers in the world with almost $5T assets under management. Fidelity has an army of experienced lawyers and a deep understanding of SEC.

* If Fidelity is successful it would be a big step in taking bitcoin mainstream. That said, it would almost seem unfair to the bitcoin pioneers who have spent almost a decade knocking on the SEC’s doors.

2.     Goldman Sachs goes bitcoin

* Goldman Sachs has applied for an ETF with an option to invest in Bitcoin

* The bank is also offering payouts on notes linked to performance of ETFs that track bitcoin. This is way for the bank to enable its customers gain exposure to bitcoin without directly holding the asset.

* Additionally, Goldman Sachs recently relaunched its cryptocurrency trading desk.

* In the past couple weeks, we have reported moves by Morgan Stanley, JP Morgan and BNY Mellon. These are not mere coincidences. Rather, it is an unmistakable pattern of Wall Street’s growing acceptance of bitcoin.

3.     FTX wins naming rights to Miami Heat’s stadium

* FTX will replace American Airlines as the naming sponsor of Miami Heat basketball team’s stadium by bidding $135M for a 19-year contract.

* FTX is a cryptocurrency derivatives exchange founded by 28-year old Sam Bankman-Fried who reportedly has a net worth approaching $10B

* Miami Heat is one of the most recognizable sport team’s in North America. Mayor Saurez wants to make the city a leading center for crypto and blockchain developments. The FTX arena puts Miami and crypto squarely on the map.

4.     Ripple XRP

* Many central banks are developing digital currencies. The underlying technology is similar to that used for cryptocurrencies.

* Ripple contends that central banks are focused on domestic use cases and are not collaborating to ensure interoperability. They propose XRP could provide efficient solution.

* The trouble is that Ripple has mired in legal disputes with the SEC to since Dec 2020. It remains to be seen whether central banks will bite while the lawsuit is in session. I doubt it. That said, speculators have started buying XRP in the hopes that the price will soar in the future. Stay tuned.

5.     Uniswap launches version 3

* Uniswap is a leading decentralized exchange. Coinbase is the largest centralized crypto exchange in the US. Last year, Uniswap surpassed Coinbase in trading volume. Yet, Uniswap only has 13 employees while Coinbase has over 1,200 employees. I love the decentralized

* Uniswap will be launching version 3 on May 5. This new version has concentrated liquidity, new fee structure and more flexibility.   

Explore

Earn high interest savings

Banks proudly advertise high interest savings accounts with 0 – 0.6% annual interest per year. It’s a joke because US inflation has averaged 2% over the past several years. Unfortunately, funds saved in these accounts are steadily losing value like clockwork. Fortunately, there are some other options.

BlockFi, Nexo and Celsius are like the crypto equivalent of banks. These institutions receive deposits, pay out interest and provide loans for digital currencies. It’s possible to earn 2-10% annual interest on deposits. They simply blow bank interest rates out of the water. It’s not even close. Let’s dig in.

There are 3 types of digital currencies: cryptocurrenices, stablecoins, and Central Bank-backed digital currencies.

* Cryptocurrencies are created and transmitted using blockchain. Their values are set by supply and demand.  

* Stablecoins are pegged to another commodity such as the US dollar. Unlike cryptocurrencies, the exchange value of stablecoins is fixed. Tether (USDT) and USDC are the two largest stablecoins pegged to the US dollar.

* Central Bank-backed digital currency (CBDCs) are legal tenders that exist only in digital form. The value is influenced by national monetary policy.

BlockFi, Nexo and Celsius offer high-interest savings accounts for cryptocurrencies and stablecoins. Some consumers are exchanging some of their fiat savings with stablecoins in order to earn 2-10% annual interest. Would be converts should recognize that unlike banks these institutions are not yet FDIC insured. This means that if they were to fail, there is no recourse to getting funds back. On the other hand, deposits at traditional banks are insured up to $250,000.

I am deliberately focusing on stablecoins recognizing that you might be at an early stage on your digital assets journey. Stablecoins provide an easy on-ramp.

So how can these crypto banks afford to pay high interest rates?

These companies generate interest on deposits by lending them to institutional or corporate customers. Crypto assets are lent in over-collaterized fashion.

That’s all this week. Let me know what if you experiment with these high interest savings account. As always, I appreciate your feedback.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit afolabio.substack.com

Welcome to the 5x5 Crypto podcast. Each week, we cover the “so what’ of 5 key crypto stories in about 5 minutes. My name is Afo and I’m interested in crypto. I think you’ll enjoy this week’s episode. Like and subscribe on iTunes, Spotify, and Substack. Let’s go!

The 15th of March aka The Ides of March are best known as the day that Julius Caesar was assassinated. What I did not know until recently, is it’s the traditional deadline for Romans to settle their debts. I was thinking about this as I read stories of early bitcoin investors who have paid off mortgages, student loans and basically achieved financial independence. I hope you achieve your goals too.

This week, the news ranges from the bizarre to the thought provoking. Let’s go.

* NYC man sells fart for $85

* Yes, you heard that right. And frankly, that could have been you.

* Alex Ramirez-Mallis, a 36 year old Brooklyn artist and his friends, recorded the sound of their farts every day for a year

* They are selling each fart sound as an NFT for $85. Fans are also bidding on the entire year long collection and the highest bid is currently $183.

So what?

* So Alex did not originally intend to sell his (sniff) farts. It’s actually kind of a protest. He finds the current NFT craze absurd and is frustrated that the buzz is more about price tags than creativity.

* Look, I can see how the current hype could feel like a bubble. The price tags are astronomical and NFTs are everywhere. There are two things to keep in mind

* Collectors will always collect. They buy original art pieces then store them behind Matrix like security. Some collectors only care about appreciation. This is not new. This is not going to change. Sorry Alex.

* If NFTs were in place 500 years ago, then Leonardo da Vinci and his heirs would have gotten a slice of the pie every time one of his masterpieces was sold. Instead, when a Saudi prince bought one of his paintings for almost $0.5B, all of the spoils went to the collector. NFTs enable creatives to get their fair share. They are here to stay.

* Morgan Stanley goes crypto

* Morgan Stanley wealth management is enabling its customers to invest in bitcoin

* However, it’s only limited to individuals with $2M assets at the bank or corporations with $5M

So what?

* This is a big deal because Morgan Stanley is the first major bank to do this. Last week, we talked about how JP Morgan was creating an index to mimic bitcoin exposure. It’s clear that there is demand from clients. Expect more banks to follow suit.

* That said, I’m kinda frustrated that it is limited to only high net worth individuals. Many of the best investment opportunities have a high minimum of $100k or more. Whereas you could start with bitcoin with as little as $5. Fortunately, regular folks could get started using CashApp, OKCoin, Swan Bitcoin or one of other options.

* Taking a step back, Morgan Stanley has been making steady moves in this direction. Last year, they acquired 10% of MicroStrategy which is one of the largest corporate holders of bitcoin. This weekend, it was rumoured that Morgan Stanley was trying to acquire South Korea’s largest cryptocurrency exchange. Stay tuned.

* The promise of decentralized insurance

* A study by Accenture found that 65% of insurance executives believe that they must adopt distributed ledger technology in order to remain competitive.

So what?

* It is important to keep in mind that there is a lot more to crypto than bitcoin. Decentralized insurance is just one of the many applications that could one day have billions of users.

* McKinsey estimates the global insurance industry is valued at about $5 trillion, that’s equivalent to a quarter of the US GDP. The growing middle class in developing countries is driving growth as they seek coverage for their health and property as their purchasing power expands.

* The insurance industry is ripe for disruption: payouts are often slow and transparency is limited. Decentralized insurance utilizing smart contracts could expand access, lower costs and speed up payouts.

* So who are the winners? It’s still early days. Nexus Mutual is one of the companies to watch. The 3-year old company now has over $300M total value locked. There’s definitely more to come.

* Kentucky wants bitcoin mining

* Kentucky’s state legislators overwhelmingly voted in favor of passing 2 laws aimed at attracting more bitcoin mining to the state

* Miners won’t have to pay 6% sales taxes nor 6% excise taxes on their rigs' electric bills and mining equipment

So what?

* The cost of electricity is the biggest driver of bitcoin mining operating costs. Kentucky already has some of the lowest electricity prices in the country, the tax breaks make it even more attractive.

* According to the EIA, 71% of Kentucky’s energy is sourced from coal. An increase in bitcoin mining in Kentucky would likely increase the carbon impact of the cryptocurrency. Hmmnn. Is this what we want to do?

* Taking a step back, we have seen an uptick in cities, states and countries competing to lure in tech companies. Amazon’s search for it’s second headquarters and Miami’s ongoing overtures to crypto companies are great examples.

*

Source: US Energy Information Administration (EIA), November 2020

* Watch list: Upcoming crypto IPOs

* Coinbase delays IPO to April 2021: direct listing on Nasdaq for the largest US-based crypto exchange with 43M users is expected to be valued at $70-100B

* Krakken aiming to IPO in 2022: US-based company is considering a direct listing on Nasdaq in 2022, the crypto exchange has more than 5 million users. Expected to be valued around $10-$20B.

* eToro IPO in 2021: Israel-based firm is going public by SPAC IPO, eToro provides customers to purchases stocks and cryptocurrencies through its exchange. Expected to be valued around $10B.

* Northern Data AG in 2021: Germany-based company claims to be biggest bitcoin miner. It is considering issuing shares on Nasdaq to raise about $500M

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit afolabio.substack.com

Hey, so I am trying something new. I have been reading books as I’ve been going down the crypto rabbit hole. Figured it might be helpful to share some key takeaways and guidance if you are also on this journey. Today, I'll be providing a quick book review of Bitcoin & Black America by Isaiah Jackson.

Summary: 

What would you do if a stranger knocked down your door and stole a little money each month?

Isaiah Jackson says most people sit by and let inflation steal their hard earned savings. He argues bitcoin is one way to fight back. 

Black America is particularly vulnerable. The net worth of a typical black family is about 10% of a typical white family. The FDIC found that 32% of Black Americans are underbanked. Older African Americans in particular have deeper distrust given banks long and recent history of discrimination. For example, in 2012, Wells Fargo paid $175M for charging black and Hispanic customers higher mortgage interest rates than similarly qualified white customers. 

Isaiah shares his own “Come to Bitcoin” story and his passion for crypto evangelism. He argues that Black America has more to gain from embracing digital currency and decentralized finance (DeFi). For example, race is not a factor when obtaining credit from DeFi. He lays out how individuals, professionals, business owners, churches, HBCUs etc. can get involved. He also highlights a ton of people and organizations who are developing programs and capabilities for digital currency economy. For example, there’s a summer camp in North Carolina that teaches school-aged children about crypto. 

Review: 

Bitcoin & Black America is an easy to read. This stands out in a good way in a sea full of technical jargon and weird terminology. This was the third crypto book I bought but it was the first I finished. Props to the author for making this topic more accessible.

He highlights a lot of people and companies from a wide variety of backgrounds who are embracing and driving crypto forward. I enjoyed learning these stories and finding new people and projects to follow. 

While the book is easy to read, at times, it wasn’t the most enjoyable. This is because I’m partial to a story with a good plot twist. Parts of this book feel like a reference book. This isn’t a bad thing, it’s actually quite helpful. Just mange your expectations.  

Overall, I think it’s a good book to read if you want a new perspective or if you are new to crypto. For more information, check out Isaiah on Twitter: @BitcoinZay

Next book

I have a couple books lined up next. Let me know if you have any recommendations or want to join the crypto reading club.

Have a great week!

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit afolabio.substack.com

Welcome to the 5x5 Crypto podcast. Each week, we cover the “so what’ of 5 key crypto stories in about 5 minutes. My name is Afo and I’m interested in crypto. I think you’ll enjoy this week’s episode. Like and subscribe on iTunes, Spotify, and Substack. Let’s go!

Ladies and gentleman, it’s finally here. Tomorrow is pi-day. One of my newer traditions is to gorge myself with a variety of pies every 14th of March. I hope you celebrate too. Hopefully we don’t blow up like NFTs have this week. Let’s dive in.

* NFTs are blowing up

* Christie’s auctioned 5,000 digital art pieces by Beeple for a record $69M, this is the third highest sale by a living artist

So what?

* You might have only just heard about NFTs but they have been around since 2012. Like many innovations that seem like an overnight success, the current NFT digital art buzz has been years in the making. Beeple, the artist who is now $69M richer, had created one digital art piece everyday for the past 13 years. There are no shortcuts. I’m inspired by his consistency in honing his craft.

* The fact that Christie’s, the venerable 255 year old British auction house, hosted the sale speaks to the inroads NFTs have made into high end art scene. NFTs will likely prove to be a key gateway for folks to engage with the crypto universe.

* So the big question is what next? I’m not sure. Beeple’s success will draw more creatives into NFTs. Collectors will also pile in. The NFL is not far behind and I bet companies like Disney and Marvel are figuring out how to play in this new world.

* Who are the winners? I think the Winklevoss Twins are well positioned to do well. They own Nifty Gateway which is one of the leading marketplaces for NFTs. Some analysts now estimate this company is now valued at $1B.

This is one of the 5,000 digital works of art that sold for $69M

* Binance launches app for merchant payments

* Binance Pay is an app that enables person-to-person payments along the lines of Venmo for crypto. The news is that, it now enables users to pay merchants using the app.

* For some background - Binance is the world’s biggest crypto exchange, yes bigger than Coinbase. It was founded in China and has significant market share in Asia-Pacific. It also has a US subsidiary that is quite popular too.

* Although Binance Pay supports 30 currencies including euros, Brazilian Real and Bitcoin, it is NOT available in the US. Boohoo!

So what?

* McKinsey estimates the global payments revenue in 2020 was $2.1 trillion. Banks account for about 38% of this revenue with the rest accruing to payment providers and FinTechs.

* Jeff Bezos famously remarked that “your margin is my opportunity”. Crypto enabled payments are faster and cheaper than traditional payments. This year, PayPal plans to enable its 26 million merchants to accept cryptocurrencies. Binance Pay is positioned to handle both fiat and crypto currencies too.

* The race is on to provide the pipelines for the future of payments. Banks beware.

* Aker to set up bitcoin company

* Aker is a Norwegian conglomerate with over $5B annual revenue from oil & gas, maritime, and other business units

* Aker is forming a new company, Seetee, to invest in bitcoin and other blockchain projects

So what?

* Kjell Rokke, the CEO and majority shareholder of Aker, wrote a 24-page announcement sharing his reasoning and aspirations

* Kjell shared that he regrets not being an early investor in internet businesses two decades ago. He expects crypto and blockchain applications are another opportunity to reimagine industries. He wants in.

* I was excited by the thoughtfulness and vulnerability of Kjell’s long letter. I think there are great opportunities to build solutions that leverage Aker’s existing expertise. Additionally, I’m inspired by a 62-year old who wants to keep learning and dive deep into a whole new space.

* JP Morgan to launch fund with indirect bitcoin exposure 

* The new fund is a basket of 10 companies stocks with some exposure to cryptocurrency. It includes MicroStrategy which holds about $5.5B of bitcoin and PayPal which is committed to supporting crypto payments

So what?

* The Winklevoss twins of Facebook infamy were the first to propose a bitcoin ETF in 2013. They were not approved. There have been many applications since which the SEC has similarly not approved. A bitcoin ETF would enable investors to access bitcoin like a stock.

* In lieu of a bitcoin ETF, JP Morgan has proposed an investment offering made up of a basket of companies with bitcoin exposure. The idea is that the performance of these companies would move in sync with bitcoin. This could prove attractive to investors curious about bitcoin but unable or unwilling to invest it.

* I am not convinced that this basket approach will be as sensitive to the price of bitcoin as some investors may hope. For instance, while NVIDIA produces chips used in bitcoin mining, it is not a big driver of the company’s revenue and share price. The same could be said for many companies on the list. Buyer beware.

[Investors might be better served by going straight to a company with direct exposure. Argo is a bitcoin miner listed on the London Stock Exchange]

* Argo acquires 320 acres in West Texas

* Argo Blockchain, a publicly traded bitcoin miner, has completed the acquisition of 320 acres in West Texas to build a 200MW mining facility in the next 12 months

So what?

* Bitcoin miners run computers to rapidly solve difficult math problems. It’s a relatively low margin business, thus, miners aim to minimize their costs. West Texas has some of the most abundant and low-cost supplies of electricity.

* Argo is committed to powering its mining operations with sustainable energy. It primarily uses hydroelectric supplies for its mines. In West Texas, Argo aims to use wind energy.

* Much has been said about high energy consumption associated with bitcoin mining. Argo’s operations are an example of low carbon bitcoin mining.

* Meanwhile, Kentucky, one of the leading coal-producing states in the US, is considering new laws to give bitcoin miners tax breaks

* In general, I think miners like other businesses, will seek to minimize costs by using the cheapest energy available. It is up to government and policy makers to put in place carbon taxes or other measures to incentivize the use of low carbon solutions.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit afolabio.substack.com

Welcome to the 5x5 Crypto podcast. Each week, we cover the “so what’ of 5 key crypto stories in about 5 minutes. My name is Afo and I’m interested in crypto. I think you’ll enjoy this week’s episode. Like and subscribe on iTunes, Spotify, and Substack. Let’s go!

This year has been flying by. Can’t believe its already one week to pi day. I’m looking forward to some good shepherds pie, key lime pie, and Patti LaBelle’s sweet potato pie…hmm. But that’s not why we are here. Crypto. This week did not disappoint. NFTs are still booming, corporates are making moves and bitcoin mining is under pressure. Let’s dive in.

* Pay with crypto

* Rakuten launches a cryptocurrency that enables users to pay within their ecosystem

* Customers can earn rewards too

So what?

* One of the biggest criticisms of cryptocurrencies is the inability to pay for regular expenses like rent, utilities, and groceries.

* To be clear, it’s possible but not easy. I know of a guy who lived off bitcoin for 3 years in San Francisco. That’s a different story.

* Rakuten is often called the “Amazon of Japan”. The company serves over 1 billion people across 30 countries. The conglomerate includes a range of businesses including the largest e-commerce site in Japan

* Rakuten is launching Rakuten Cash, a cryptocurrency that can be obtained for free by exchanging bitcoin or other cryptocurrencies. This enables users to essentially shop across Rakuten with cryptocurrencies.

* I am excited to see how much traction this gets. I bet other platform companies like Amazon and Apple are paying attention but they would need to tread carefully given how the Facebook-backed Libra (now called Diem) project fared.

* PayPal deepens crypto ambitions

* PayPal is creating a new business unit focused on crypto and digital currencies

* PayPal is reportedly acquiring a Curv, a crypto custodian

So what?

* PayPal wants to become a SuperApp. Enabling users to pay, however, they want is a big part of that. The company also recognizes efficiencies from using cryptocurrencies.

* Last year, PayPal enabled its US users to buy and hold bitcoin and a few other cryptocurrencies using their app. This year, they will extend that offering to a greater share of its 346 million users while also enabling its 26 million merchants to receive cryptocurrency payments

* The purchase of a crypto custodian like Curv would position PayPal to offer more crypto services while driving down the costs of operations

* We should expect more activity as PayPal builds out the new crypto business unit

* China bitcoin mining down; Canadian Bitfarms bought 48,000 new machines and 8x production by Dec 2022; Bitcoin miners brought in record $1.36B in Feb

* Chinese province cracking down on energy intensive industries including bitcoin mining

* US and Canadian bitcoin miners continue to invest

So what?

* Bitcoin miners earned $1.36B in Feb 2021. High revenue helped fuel vigorous debate about high energy consumption.

* Inner Mongolia, a Chinese province, accounts for 8% of global bitcoin production. The local government has banned new projects and is shutting down existing ones in April. The local government is also taking a look at other high consumption industries like steel production. That said, bitcoin mining is a lot more mobile than steel, so it makes to focus on that first.

* Meanwhile, US and Canadian bitcoin miners continue to expand. We have previously new projects in West Texas and now Bitfarms is buying 48,000 new machines to 8x its production capacity by next Christmas. In a reversal of manufacturing trends, we could see more bitcoin mining migrate from the East to the West. Let’s see.

* Brave is launching search

* Brave is the privacy-first web browser. This week, it announced plan to launch search in the first half of 2021.

So what?

* Brave was launched in 2019 by one of the co-founders of Mozilla. It is ad free web browser that loads 60% faster than Chrome.

* One of the cool things, is that Brave allows you to opt into watching ads and earn BAT - Brave’s cryptocurrency. Additionally, you can also tip some participating websites in BAT.

* I am a power user of Wikipedia and you know how they run campaigns asking for donations. Honestly, I think I tried to contribute at least once but not sure if I finished the transaction. That said, I would be much more inclined to donate to Wikipedia if I had money coming into my Brave wallet.

* Anyway, search is a huge business. Google has over 90% market share. If Brave can develop a competitive offering that gets traction, they could onboard millions of people onto cryptocurrencies and help usher in Web 3.0

* I’ve joined the waitlist. Stay tuned.

* NFT craze continues

* King of Leon and 3LAU launch NFT albums

* Jack Dorsey is auctioning the first tweet as an NFT

* Square buys Tidal

So what?

* Last week, we touched on the booming NFT art market. Now it’s extending to music with the Kings of Leon selling collectible albums as NFTs.

* Jack Dorsey jumped into the action by auctioning off the first tweet. Last, I checked, the highest bid was $2.5M. The cool thing about NFTs is that Jack will get a slice of the pie whenever the tweet is resold.

* This week, Square announced it was buying Tidal with Jay Z joining Jack Dorsey and others on the board of Square. Perhaps there’s a world where Square helps musicians and other creatives issue NFTs and get their far share. Not sure how this is going to play out, but I’m curious. What do you think?

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit afolabio.substack.com

Each week, I cover the “So what?” of 5 key crypto stories in about 5 minutes. Let’s go.

This week:

* Federal Reserve Outage

* MIT to strengthen bitcoin

* Coinbase is $100B

* NFT record art sale

* Dubai Fund sells bitcoin, buys Cardano and Polkadot

* Federal Reserve outage exposes single point of failure

* Federal Reserve Bank’s payment systems were out of service for several hours due to an operational error.

* The impacted services include but not limited to FedACH, FedWire, FedCash, and settlement

* FedACH system handles direct deposits of payroll, Social Security and income tax refunds as well as scheduled payments for mortgages and utility bills. It supported 62 million transactions a day in 2019.

So what?

* The outage disrupted payment transactions across the economy and highlighted the single point of failure. A pattern could be emerging as FedACH had 2 disruptions in 2019.

* Recently, I read Sandworm by Andy Greenberg, this book helped drive home the point that the next great war might be fought in cyberspace. High traffic systems with a single point of failure built on dated technology are attractive targets.

* The US might be better served by a more resilient decentralized system perhaps one that leverages blockchain technology

* MIT to strengthen bitcoin

* MIT’s Digital Currency Initiative has launched a 4-year R&D effort to strengthen bitcoin security

* The program has been endorsed by cryptocurrency industry leaders

So what?

* Bitcoin ascended from an obscure project to a robust network that secures over $1 trillion in value due to millions of hours invested by open-source developers

* The program will contribute neutral, expert resources to improve the robustness of Bitcoin protocol and security. This could include exploring new programming languages and pre-emptive investigations against possible attacks

* I think this is great news particularly in light of the recent outage at the Fed

* Coinbase releases financials ahead of $100B IPO

* Coinbase, the US leading digital currency exchange, is now expected to be valued over $100B at IPO

* In 2020, Coinbase reported $322M profit on $1.28B revenue. The company also served 43M retail investors and 7,000 institutional investors. 76% of customers are based in the US.

So what?

* The Block Research has forecasted that Coinbase could generate $2.4B revenue in Q1 2021 alone. That’s more than 2x full year 2020 in the first quarter.

* IPO at $100B would make Coinbase a top 20 financial services company right below Goldman Sachs and above S&P.

* The data implies about 10% of Americans have a Coinbase account. It is not farfetched to anticipate the valuation rising 5-10x as adoption of digital currencies scale. Some industry observers believe Coinbase will become a trillion dollar company.

Select Coinbase Financials from The Block Research

* NFTs: Beeple art sells for record $6.6M

* Mike Winkleman is the artist also known as Beeple. Everyday for the last 13 years he creates one piece of digital art. This week, one of those pieces was sold as an NFT for a record $6.6M.

* Next week, Christie’s will begin a 2-week auction of 5,000 pieces by Beeple with payments accepted in ether.

So what?

* NFTs have been booming lately. The market size grew over 700% from $42M in 2017 to $338M at the end of 2020 according to NonFungible.com

* Think of NFTs as a new type of file like JPEG or MP3. NFTs are encrypted files authenticated by blockchain technology. They are not limited to art, for instance NBA Top Shot enables fans to purchase officially licensed video of key plays.

* NFTs are ushering a new era for creators. Leonardo da Vinci painted Salvatore Mundi which sold for $450M in 2017 setting a world record. Yet, in his lifetime, he likely was a cut or two above a starving artist. With NFTs, in the future, the creator or their estate could receive commission (~10%) upon the resale of their work

* Bottomline: Digital Art and NBA Top Shot are opening doors for new consumers to engage with cryptocurrencies and blockchain applications

Crossroads by Beeple sold for $6.6M this week

* Dubai fund sells $750M Bitcoin to buy Cardano and Polkadot

* FD7 Ventures has $1B under management; the crypto fund’s thesis is that Cardano, Polkadot and Ethereum will be the foundation of Web 3.0

So what?

* Investors are going beyond bitcoin. FD7’s decision highlights growing excitement about Ethereum, Cardano, and Polkadot; these blockchains support greater functionality than Bitcoin.

* Cardano is a third generation cryptocurrency network, it aims to improve upon Bitcoin by having faster and more secure blockchain. It is also more scalable and safe than Ethereum. There are pilot projects in Ethiopia and Tanzania leveraging Cardano to extend financial services to the unbanked.

* Polkadot aims be the platform for Web 3.0 by connecting a new web of decentralized blockchains. In Web 3.0, trust is built in the network, individuals have more power than corporations and governments, and people own their data.

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit afolabio.substack.com

Each week, I cover the “So what?” of 5 key crypto developments in about 5 minutes. Let’s go.

* Bitcoin now has a $1 trillion market cap

* This week the price of bitcoin soared to new highs over $56,000

* Adoption continues to grow as BlackRock revealed it has started “to dabble” in bitcoin. BlackRock is the world’s largest asset manager with $8.7 trillion under it’s nose. I wonder what “dabble” means to them.

So what?

* The bigger bitcoin becomes, the more attractive it is for institutional investors with big bucks to park

* Bitcoin is seen as “digital gold” but it still is only a fraction of gold’s $8 trillion market cap

* Modern solutions tend to be much better than older technology. For example, cars can travel more than 4x as fast as horse-drawn carriages (15 mph). By extension, bitcoin is a better store of value than gold because it is has more characteristics of “hard money”. Some bulls believe that the long-term target market cap for bitcoin is 2-10x gold. If this holds true, we are still in the first innings. Expect the price of bitcoin to rise over time while going through dips and cliffs along the way.

[Transition: Speaking of rising prices]

* Bitcoin is now trading at $80,000 in Nigeria

* Yes, you heard that right. Bitcoin is now trading at a 36% premium in an African country where 40% of people live in poverty.

How does this makes sense?

* Two weeks ago, the Central Bank of Nigeria banned local banks from engaging with cryptocurrency exchanges. The CBN’s rationale is that cryptocurrencies were being used for money laundering. By that extension, we should expect the CBN to also ban local banks from using the naira, dollars, pounds, euros, yen, rand…..you get the picture.

* Prior to the ban, Nigerians had traded over $560M worth of bitcoin from 2015 to 2020. The ban does not appear to have crushed the demand, rather, it has redirected consumers to person-to-person (P2P) exchanges like Paxful where users do not have to engage with the banking system. Demand for bitcoin in Nigeria is significantly outstripping supply, this has led to a price spike.

[Transition: Now, Nigeria is not the only country grappling with crypto laws]

* India proposes crypto tax

* India like Nigeria is considering a ban on private cryptocurrencies

* The government is considering an 18% tax on cryptocurrency exchange commissions and an income tax on cryptocurrency transactions

So what?

* The Indian government could implement the new taxes retroactively for the period between April 2020 and March 2021, this could be a rude surprise for traders and investors

* There continues to be vigorous arguments both for and against the ban; some opponents of the ban encourage the government to tax crypto instead of blocking it; it would be difficult to enforce a ban; it would likely be bypassed by person-to-person (P2P) exchanges as in Nigeria.

[Nigeria is a big oil producer just like the state of Texas. That brings us to #4]

* Texas freeze impacts crypto

* Record low temperatures and an onslaught of snow brought Texas to its knees. Widespread power outages wreaked havoc. I know because I lived through it. We did not have power or heat for 3 days while it was 12F (-11C) outside. Not fun.

So what?

* West Texas is an emerging destination for cryptocurrency mining. Miners’ profitability likely plummeted as the price of electricity skyrocketed with surging power demand. Probably made sense to halt mining.

* Good news is that wind energy proved to be the most resilient piece of Texas power infrastructure. This would be encouraging for the bitcoin miners who recently signed agreements with wind energy producers. Expect more to follow suit.

* We were already in the midst of a global chip shortage when Austin-based manufacturers like Samsung, Infineon, and NXP shut down production. Chips are used by cryptocurrency miners and there’s increasing competition from computers, gaming, and car manufacturers. The Texas freeze could drive up chip prices.

[Transition: This week, NVIDIA announced it is developing chips for ethereum mining only; ethereum is the basis for many DeFi protocols]

* Bitwise launches first DeFi ETF

* Bitwise, creator of the largest crypto index fund, has now launched a DeFi index fund

So what?

* Interest in decentralized finance (DeFi) is booming with $39B total value locked up, up from $1.2B last year; this week Uniswap became the first decentralized exchange (DEX) to reach $100B volume

* DeFi enables users to access a range of financial services peer-to-peer using blockchain and cryptoassets rather than legacy systems. Financial services could include trading, loans, interest accounts and much more. I am increasingly excited about the potential for DeFi to drive greater inclusion and better products in Africa and other developing regions.

* This new ETF enabled retail investors participate in the emergence of this new category

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit afolabio.substack.com

Nigerians go gaga over education. Parents strain to send their children to the best schools possible to give them an edge in a country plagued by rampant unemployment. About 15 years ago, my mum told me about her friends who were sending their teenagers to boarding school in Kenya. The school had a track record of churning out MIT and Oxford graduates who blossomed into government ministers and captains of industry. The school sounded ritzy and getting there would cost a pretty penny. Our family friends had to fly from Lagos to London then switch over to another flight from London to Nairobi. It blew my mind that the safest path to travel across Africa from Nigeria to Kenya was through Europe. They repeated this long and expensive journey multiple times a year until each child completed high school. Surely, there had to be a better way! 

Traditional cross-border payments are also equally expensive and circuitous. If my mom’s friend, Mrs Ade, wanted to pay her children’s tuition, the payments would similarly travel the world just to cross the continent. Mrs Ade would initiate the transaction in Lagos with her local bank, Access Bank, who would charge a service fee. Access Bank would transfer the funds to their US-based correspondent bank to convert naira to dollars. This correspondent bank would charge a 4-6% fee for foreign exchange before passing the funds onto the correspondent bank of the receiving bank in Kenya. The second correspondent bank, again likely US-based, would charge another 4-6% fee to convert the dollars to Kenyan shillings. Finally, the second correspondent bank would transfer the Kenyan shillings to the receiving bank in Nairobi. This whole process is expensive (up to 10+%) and long (3+ days). Surely, there had to be a better way! 

A number of FinTechs such as TransferWise have emerged to disrupt this inefficient system. They offer faster (usually 2 hours) and cheaper service. TransferWise maintains bank accounts in countries across the world. Money is never transferred across borders. Mrs Ade would pay her children’s tuition in naira into TransferWise’s Nigeria account and then TransferWise would pay out the equivalent amount of Kenyan Shillings in Nairobi a few hours later. This system depends on a large network of users providing a steady flow of funds in and out TransferWise’s accounts. Transfers of large amounts of funds on low traffic payment corridors run the risk of delays if TransferWise’s local bank account is insufficiently stocked. While this system is a step up from the traditional cross-border payments, there is still room for improvement.

What if I told you that there was a solution which enabled cross-border transfers in less than 10 minutes and more than 50% cheaper than leading FinTech solutions like TransferWise? Blockchain enabled solutions like Strike by Zap and Send Cash Africa provide this level of service. Here’s how it would work. Mrs Ade initiates the fund transfer on a mobile wallet. Strike instantly exchanges the naira for bitcoin and then bitcoin for Kenyan shillings. Send Cash Africa goes the extra mile and directly deposits the funds in the school’s bank account in Kenya. The volatile price of bitcoin raises concerns that value could be lost during the transfer. Strike mitigates this risk by using the Lightning Network to process the payments in almost real-time. In fact, there’s often an arbitrage opportunity across markets such that the exchange rate is more advantageous than directly exchanging fiat currency. 

Each year trillions of dollars are transferred across borders. These transfers run the gamut from consumer to business (C2B) like Mrs Ade through business to business (B2B) like British Airways ordering jets from Boeing. Remittances or person-to-person transfers are a lifeline for many families. Migrants scrimp and save to send funds home to pay for medicine, school, and general upkeep of loved ones. Reducing transfer costs lowers the burden on their shoulders. Blockchain based solutions whether they use cryptocurrency or stablecoins can drive significant efficiencies. Let’s get to it! 

This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit afolabio.substack.com