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What is Ethereum (ETH)?

What is Ethereum:

Ethereum is an open software platform based on blockchain technology that enables developers to build and deploy decentralized applications. Ethereum is a distributed public blockchain network.

Ethereum is the Do it Yourself platform for decentralized programs also known as Dapps-Decentralized Apps.

With the second largest market cap in the cryptocurrency world, Ethereum has drawn a lot of attention from investors and crypto enthusiasts alike.

Ethereum focuses on running code for any decentralized application that’s deployed on its network.

The Ethereum platform has thousands of independent computers running it, meaning it’s fully decentralized. 

Once a program is deployed to the Ethereum network, these computers, also known as nodes, will make sure it executes as written.

Ethereum is the infrastructure for running Dapps worldwide.

Ethereum allows developers to create whatever interactive operations they want in their smart contracts. This means that developers can build thousands of different applications that go beyond anything built on a blockchain before. 

It’s not a currency, it’s a platform.

On the Ethereum blockchain, Ether is the cryptocurrency that fuels the network.

Ether is a currency like Bitcoin, but it is also used by people on the network to pay for code execution.

Ethereum’s goal is to truly decentralize the internet.

Ethereum’s Origin:

Ethereum was first proposed in late 2013 and then bought to life in 2014 by Vitalik Buterin who at the time was the co-founder of Bitcoin magazine.

Ethereum gained awareness in 2014 when Buterin bought the concept of the blockchain project into the public eye at a Bitcoin conference in Miami Florida. 

The project raised capital via an Initial Coin Offering (ICO), selling millions of dollars worth of ETH coins in exchange for funds to use for the development of the project.

Although ETH coins were available to purchase in 2014, the Ethereum blockchain did not actually go live until 30 July 2015, meaning ETH buyers had to wait for the blockchain to launch before they could move or use their ETH.

How Ethereum works:

Smart Contracts:

Ethereum coding language “Solidity” is used to write “Smart Contracts” that are the logic that runs Dapps.

Ethereum developers write the conditions for their program or Dapp and then the Ethereum network executes it.

They are called smart contracts because they deal with all of the aspects of the contracts:

Enforcement

Management

Performance

Payment

For example, if I have a smart contract that is used for paying rent, the landlord doesn’t need to actively collect the money. The contract itself knows if the money has been sent. If I indeed sent the money, then I will be able to open my apartment door. If I missed my payment, I will be locked out. 

Once a smart contract is deployed on the Ethereum network, it cannot be edited or corrected, even by its original author. It’s immutable. The only way to change this contract would be to convince the entire Ethereum network that a change should be made and that’s virtually impossible.

Ethereum Virtual Machine (EVM):

The Ethereum virtual machine executes the smart contracts. It helps translate the smart contract which is written in Solidity language which computers can’t read to a language Bytecode that they can read. 

Once you write your smart contract in Solidity, that contract gets converted into the bytecode and gets deployed on the EVM, thereby guaranteeing security from cyber attacks. The EVM can execute at least 140 different codes with specific tasks.

Simply, EVM is a software framework that allows developers to construct Ethereum-based Dapps. All Ethereum accounts and smart contracts are stored on these virtual computers.

Proof-of-Work:

Ethereum uses proof-of-work protocol. When a block of a transaction is created, the network of participants known as Miners runs software, in an attempt to get the correct value of the block, and generate values until they get it. 

A hash value is then sent across the network for the nodes to verify when the miner finds it.

The first miner to prove the validity of the number is rewarded in Ether.

A new block is opened on the blockchain, and information from the previous block is encrypted and placed into the new block along with new data.

Ether:

Ether (ETH) is Ethereum’s cryptocurrency. It is the fuel that runs the network. It is used to pay for the computational resources and the transaction fee for any transaction executed on the Ethereum network.

Users can send Ether to other users and developers can write smart contracts that receive, hold and send Ether.

When miners successfully verify a group of transactions, they are awarded Ether.

Ether transactions are recorded and verified on a digital public ledger called blockchain.

What is Ethereum used for:

Ethereum aims to provide a system that gives users more control over their data, and it allows for applications to be built and run on the blockchain. 

Decentralized Finance (Defi): Decentralized finance (Defi) is a term used to refer to financial services and products that are available and accessible to anyone that can make use of Ethereum. In the Defi system, the user holds and has total control over their entire money, the transfer of funds takes just a few minutes, and it is open to anyone. 

A peer-to-peer network: Ethereum allows you to move your money or make agreements directly with someone else. You don’t need to go through intermediary companies.

Non-Fungible Tokens (NFTs): NFTs are tokens that can be attached to unique items, and they are not interchangeable with any other item. They allow value to be given to art, music, etc. in terms of digital currency. They are secured on the Ethereum blockchain and can have only one owner at a time. NFTs can be sold anywhere, and the owners have access to the global market. 

A more private internet: You don’t need to provide all your personal details to use an Ethereum app. Ethereum is building an economy based on value, not surveillance.

Decentralized Autonomous Organizations (DAOs): DAOs are owned and governed collectively by their members, and they function based on smart contracts. They cannot be accessed without being granted permission by the group. They make decisions by proposals and voting to ensure that everyone in the group can give their opinions. Examples of DAOs are charity organizations, ventures, freelancer networks, etc.

Banking for everyone: Not everyone has access to financial services. But all you need to access Ethereum and its lending, borrowing, and saving products is an internet connection.

All products are composable: Since all apps are built on the same blockchain with a shared global state, they can build off each other. This allows for better products and experiences being built all the time.

Where to buy Ethereum:

Ethereum is available with almost all cryptocurrency exchanges. A cryptocurrency exchange will allow you to buy Ethereum in exchange for other assets, including traditional currency or other digital currencies.

The best cryptocurrency exchanges are secure, cost-effective, quick to set up, easy to use, and accept a variety of funding sources.

Best crypto exchanges to buy Ethereum in 2022:

FTX

Gemini

Coinbase

Kraken

Binance

KuCoin

To read more, visit Cryptoknowlogy.

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A $1 trillion market cap was eliminated from the cryptocurrency market in the most recent sell-off, which dealt investors a devastating blow

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White House Releases Framework on Regulating Crypto

The Biden White House just unveiled the first-ever framework for crypto regulation in the United States, outlining how the financial services sector should develop to facilitate borderless transactions and how to stop fraud in the market for digital assets.

Crypto companies have been anxiously anticipating a number of US government reports they anticipated would make clear what the Biden administration and regulators intend to do about digital assets. The majority of the documents are now open to the public, although the circumstances are still unclear.

The federal government recognizes several potential concerns associated with cryptocurrency, and the various agencies believe that stepping up enforcement operations may be a crucial step.

The framework comes after President Joe Biden called on federal agencies to investigate the advantages and disadvantages of cryptocurrencies and publish public reports on their findings in an executive order released in March.

Government agencies have been working to create their own frameworks and policy recommendations for the past six months to address the half-dozen priorities listed in the executive order, including financial inclusion, responsible innovation, countering illicit finance, promoting financial stability, and protecting consumers and investors. These suggestions make up the first “whole-of-government approach” to industry regulation.

The new regulations are intended to establish the nation as a leader in the administration of the digital assets ecosystem at home and abroad, according to national security adviser Jake Sullivan and head of the National Economic Council Brian Deese in a joint statement.

Digital Dollars:

Whether the United States will launch a digital currency (CBDC) issued by a central bank – Federal officials came to the conclusion that no digital dollar should be developed unless it is determined to be in the “national interest” despite the studies’ proposals and recommendations that the Federal Reserve “continue its continuing CBDC research, experimentation, and review.”

Who determines what is in the country’s best interest?

That’s a little unclear. Since the Fed will be in charge of managing it, the Fed will undoubtedly have a say in this. The government might also need to issue a decree, and Congress might also need to get involved. Future legal guidance from the Justice Department, which is anticipated to specify the credentials the Federal Reserve needs before it can issue a digital dollar, may provide the answer.

Although the Fed is independent, it will work with lawmakers, the government, and other federal agencies to determine the best course of action in the interest of the country.

Fighting Illicit Finance:

The White House’s new framework for crypto regulation includes a section on fighting illegal activity in the sector, and the suggested restrictions seem to have some actual impact.

A White House fact sheet states that the president will consider whether to ask Congress to amend the Bank Secrecy Act, anti-tip-off laws, and laws against unlicensed money transmitting to explicitly apply to providers of digital asset services, such as digital asset exchanges and nonfungible token (NFT) platforms.

The president is also considering whether to ask Congress to increase the fines for unauthorized money transmission and whether to change some federal laws to enable the Department of Justice to pursue crimes involving digital assets in any location where a victim of those crimes is detected.

The fact sheet states that Treasury will finish its assessment of the risk of illegal finance related to decentralized finance by the end of February 2023 and before the end of July 2023, it will have examined all non-fungible coins.

There is a lot of crime on the market for digital assets. The Federal Trade Commission’s investigation shows that since the beginning of 2021, more than $1 billion in cryptocurrency has been lost to fraud.

The SEC revealed 11 allegations against a fraudulent crypto pyramid and Ponzi scheme that raised more than $300 million from millions of retail investors worldwide, including in the US. Meanwhile, in February, in connection with the 2016 hack of the cryptocurrency exchange Bitfinex, U.S. officials conducted their largest-ever cryptocurrency seizure when they seized $3.6 billion worth of bitcoin.

National Security Advisor Jake Sullivan and Director of the National Economic Council Brian Deese stated in a statement that the various studies express concerns about consumer protections and illegal activity and offer solutions for the government to address these problems.

“Together, we are establishing the foundation for a smart, all-encompassing strategy to reduce the serious risks associated with digital assets and, when possible, to make use of their advantages. The future of this ecosystem will be shaped by our collaboration with allies, partners, and the larger community of digital asset holders.”, the statement stated.

A senior administration official told reporters that while the agencies are independent of the executive branch, the assessments urge that regulators “release new rules and advice” to fill in any gaps over how current financial regulations apply to cryptocurrencies.

The official stated, “The advice is for the agencies to evaluate, clarify, and coordinate their policies, and I believe that the view is just saying… they have the required authorities… for corporations who are not complying.”

Other Recommendations:

Senior administration officials stated that they are looking for a “redoubling” of investigations and enforcement activities against the industry in response to the question of what other practical next steps the reports propose. The SEC and Commodity Futures Trading Commission were singled out in a document released by the White House on Friday.

The Consumer Financial Protection Bureau and Federal Trade Commission, two federal regulatory bodies that have not been as active in the crypto sector as earlier regulators, should “redouble their efforts to monitor consumer complaints and to enforce against unfair, deceptive, or abusive practices,” the White House added.

Biden would advocate a federal license or oversight scheme for nonbank payment firms, according to the White House memo. One of the Treasury papers elaborated on this, stating that a legal framework for payments would reduce risks while assisting these kinds of businesses.

“Nonbanks are increasingly offering payment services, such as processing payments and issuing liabilities with a monetary value. Nonbank payments companies’ involvement could, on the one hand, promote greater levels of competition, inclusivity, and innovation. On the other hand, there may be dangers to customers, the financial system, and the whole economy if these enterprises are not effectively regulated and overseen.”, according to a Treasury report.

The report did not, however, describe a potential design for this structure. The federal regulatory framework that would allow crypto exchanges to operate nationwide with just one license, as opposed to needing to apply for a money transmitter license in each state where they wish to conduct business, has long been sought after by the industry.

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The Link between Cryptocurrency and Inflation: Many enthusiasts of cryptocurrencies assert that they are resistant to inflation.

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El Salvador’s Bitcoin experiment has proven a failure - Cryptoknowlogy

El Salvador, a nation in Central America, adopted the US dollar as its official currency in 2001 and became the first nation to do the same

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Early in May, on hearing that the FED was raising interest rates,after hearing about the interest rate increase, cryptocurrencies experience

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The Merge, a move that will take place, is intended to please those who believe that cryptocurrencies are bad for the environment.

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Rapper Razzlekhan Requests Access To Crypto Wallets To Assess Tax Burdens - Cryptoknowlogy

American rapper Heather Morgan, also known as Razzlekhan and one-half of the duo accused of laundering $3.6 billion in stolen Bitcoin (BTC),

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Top 5 Crypto Picks for 2022

Cryptocurrency is digital money that isn’t controlled by a centralized system, like a government. Instead, it’s built on the most widely used blockchain technology. As the use of digital currency on Wall Street keeps rising, more opportunities are becoming available. Currently, there are over 20,000 cryptocurrencies in the market.

Cryptocurrencies can be used to make purchases, but most people see them as long-term investments. The recent freefall across cryptocurrencies, including stablecoins linked to the U.S. dollar, illustrates how volatile cryptocurrencies make investing in them risky. Before you invest, it is important to understand what you’re getting into.

A fresh “crypto winter” may be about to hit the cryptocurrency market. However, following every previous bear market, cryptocurrencies have roared back stronger than before.

Therefore, risk-taking investors should be on the lookout for chances and make informed judgments to buy when the market is down.

I will show you the top 5 new cryptocurrencies to buy in 2022 in this guide.

Bitcoin (BTC):

Bitcoin (BTC) is the first cryptocurrency, having been developed in 2009 by a person using the name Satoshi Nakamoto. BTC operates on a blockchain, which is a ledger that records transactions and is shared across a network of thousands of computers, just like the majority of other cryptocurrencies.

Bitcoin is maintained secure and guarded against fraudsters because additions to the distributed ledgers have to be validated by resolving a cryptographic puzzle, a procedure referred to as proof of work.

Bitcoin is a wise investment because so many companies currently accept it as payment. For instance, Visa accepts bitcoin transactions. Additionally, after a four-year absence from cryptocurrencies, Stripe will now allow users to accept bitcoin payments. Even the bigger banks have started to include bitcoin transactions in their services.

Tesla only briefly took bitcoin, but if its mining becomes more environmentally friendly, it might do so once again.

Ethereum (ETH):

The second name you’re most likely to remember in the cryptocurrency world is Ethereum. The currency, Ether, is often used in the system for a variety of tasks, but Ethereum’s smart contract feature contributes to its popularity.

Ether (ETH), which serves as a means of transportation on the Ethereum network, is sought after by developers who want to create and run apps on the Ethereum platform as well as investors who want to acquire other digital currencies using ether.

It may have been introduced a little later than some other cryptocurrencies, but thanks to its cutting-edge technology, it has outperformed them all. It is currently the blockchain with the highest level of popularity and the second-largest cryptocurrency after Bitcoin.

Once an upgrade known as “The Merge” is fully implemented, it has the potential to advance even further. The change will move Ethereum to a proof-of-stake-based consensus, which will decrease the number of coins and make mining useless. The update is planned for the 3rd or 4th quarter of 2022.

Tether (USDT):

One of the first and most well-known stablecoins, Tether (USDT), is a cryptocurrency that aims to connect its market value to a currency or other outside reference point in order to lessen volatility. The majority of digital currencies, including popular ones like Bitcoin, have frequently experienced times of extremely high volatility.

Tether and other stablecoins aim to reduce this volatility in order to draw in consumers who may otherwise be hesitant. The cost of Tether is directly correlated with the value of the US dollar. The mechanism allows users to transfer money more quickly and easily from other cryptocurrencies back to dollars rather than actually converting to fiat money.

Investors who are skeptical of the severe volatility of other coins choose Tether because its value is said to be more stable than that of other cryptocurrencies.

Binance Coin (BNB):

One of the biggest cryptocurrency exchanges in the world, Binance, offers its users the ability to trade and pay fees using the Binance Coin cryptocurrency.

Since its debut in 2017, Binance Coin has developed, and it now performs more functions than only allowing transactions on Binance’s exchange platform. Now, it can be utilized for trading, processing payments, or even making trip plans. Additionally, it can be traded or converted into other cryptocurrencies like Ethereum or Bitcoin.

Investors who engage in a lot of trading should be aware that recently, Binance temporarily suspended deposits and withdrawals for various networks, including Polygon and Solana, in order to execute updates. Airdrops—rewards based on a percentage of consumers’ deposits—were unaffected by a more recent one, which occurred on April 8.

Initially, Binance Coin was an Ethereum blockchain-based ERC-20 coin. It eventually had a mainnet launch of its own. A PoS consensus model is employed by the network.

Polkadot (DOT):

A special blockchain compatibility protocol called Polkadot (DOT), which was established in 2016, is created to link several networks. It also makes it possible for parachains, or parallel blockchains, to perform transactions and exchange data in a secure manner. The Polkadot security allows developers to create their own blockchains.

Polkadot was created by Gavin Wood, who also worked as Ethereum’s chief architect. The exciting thing about DOT is that the total supply is not strictly capped. Instead, a new token is consistently given forth.

The Substrate blockchain building framework is used to create the relay chain for Polkadot. Known as libp2p, Polkadot incorporates adaptable cross-platform network frameworks for peer-to-peer applications.

Another well-known feature of Polkadot is its ability to let users stake DOT tokens, which rewards them for their contributions.

Each time a user bets DOT tokens, they are utilized to validate and mine the blockchain, aiding in the security and upkeep of the network while also earning rewards for their efforts. The DOT token’s value rises as a result of each of these use cases.

Conclusion:

Because of the volatility of the cryptocurrency market, those who speculate on these digital assets should not risk more money than they can afford to lose. Cryptocurrency assets have experienced severe volatility in 2022. Since the market’s record-breaking highs in November 2021, it has been falling. Additionally, it might be risky for beginners to trade because they may be up against highly experienced competitors.

Here are some other considerations to bear in mind when you choose whether cryptocurrency is the best investment for you:

How quickly transactions are completed

The costs of doing a transaction

The possibility to use your cryptocurrency for standard transactions and bank transfers

Remember that cryptocurrencies aren’t a get-rich-quick scheme if you’re only trying to invest and not performing any network transactions. You should view it as a long-term investment instead.

Lastly, if you like what we do here at Cryptoknowlogy, do give us a shoutout in your own community of wonderful human beings who are interested in cryptocurrency.

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Ancient Bitcoin Whale Moves $100 Million - Cryptoknowlogy

A Bitcoin whale address has become active for the first time in nine years, sending Bitcoins (BTC) worth $100 million to the cryptocurrency

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LG to Launch Crypto Wallet Wallypto

A cryptocurrency wallet app Wallypto is now being developed by LG, the South Korean electronics giant, and it will be released later this year. The Wallypto wallet is a part of a new business phase for the organization, which recently turned its attention away from mobile devices and toward software solutions. At the debut, Wallypto will only support Hedera Hashgraph assets.

About the Wallypto Crypto Wallet:

The debut of LG’s cryptocurrency wallet will be a first step toward modernizing the company’s business portfolio, which has historically focused on electronics.

Since LG Electronics has been conducting an active beta test of the application with developers since August, the path to the launch was not straightforward. Nevertheless, the beta test is reportedly already in its final verification stage, and the corporation is now anticipating its rollout, according to local media sources.

The Hedera Hashgraph blockchain supports the Wallypto cryptocurrency wallet. When it is officially released, there are plans to increase the number of cryptocurrencies and tokens it supports, including Hedera’s HTS token.

The functional utility of the cryptocurrency wallet application is still not entirely obvious according to LG Electronics.

One of the company’s representatives reportedly told a local news outlet, News1, that LG has not yet decided if the wallet app is indeed useful. However, the business is still working on incorporating upcoming blockchain technology use cases into its corporate charter.

Outstanding Wallypto Capabilities:

According to the report, “it is also predicted to create synergy benefits by combining blockchain technology with current flagship enterprises like as home appliances and electric fields.”

Utilizing blockchain technology, the wallet will manage inventory management for cryptocurrency exchanges and handle and verify cryptocurrency transactions.

The idea of LG incorporating blockchain technology into their network is not new. The company declared in February of this year that its line of smart televisions will include non-fungible token (NFT) platform characteristics. However, LG chose to follow the lead of rival Samsung Electronics.

The adoption of blockchain technology by one of the largest electronics manufacturers in the world may serve as a launching pad for other businesses interested in the craze to follow.

With a staggering sales record of 27.11 trillion Korean won (about $20 billion), LG Electronics was the world’s largest seller of home appliances last year.

Although LG Electronics may be the first to provide crypto wallet software, it won’t be the only one. Sooner than you might anticipate, Wallypto’s launch will lead to an increase in the adoption of blockchain technology by other electronic enterprises.

Shareholders endorsed LG crypto brokerage:

At the company’s annual general meeting in March, stakeholders approved the brokerage of cryptocurrency modifications and entry into Web3 advancements.

Samsung, its main adversary, has announced the Galaxy 10 series, which supports the NFT and metaverse world, as well as a wallet feature for its Galaxy line of smartphones and a TV that supports non-fungible tokens in an aggressive effort to overtake it as the market leader in electronics.

Lastly, if you like what we do here at Cryptoknowlogy, do give us a shoutout in your own community of wonderful human beings who are interested in cryptocurrency.

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Euro CBDC is Coming

Governments all over the world are rushing to introduce their Central Bank Digital Currencies, or CBDC’s, before their physical fiat currencies collapse as trust in the current financial system continues to decline.

Euro CBDC is Coming:

The European Central Bank (ECB), which has been leading the charge in this area, recently published a working paper about the forthcoming digital euro that describes how CBDC’s would function.

In this article, I will discuss about why CBDC’s will be both bullish and bearish for cryptocurrencies.

Digital Payments:

The first part of the paper provides a bit of background about digital payments.

The authors of the paper immediately identify the three things central banks are afraid of which are:

Fintech Companies

Big Tech Companies 

Cryptocurrencies.

Central banks are afraid of these entities because they’re quite literally disrupting the existing financial system.

As far as the central banks are concerned the only solution is a central bank digital currency which the authors note would result in quote abrupt and potentially irreversible changes to the financial system. 

The Economics of CBDC’s

The implications CBDCs would have on the financial system

The challenges associated with a CBDC rollout

The author reiterates that the paper does not concern a wholesale CBDC because it would quote entail a less significant change to the status quo of the financial system. The status quo of the financial system includes central banks printing money into the accounts of big banks and asset managers many of which have been caught laundering billions of dollars while regulators crack down on regular people with strict KYC.

The authors also note that quote our paper largely steers clear of the topics of cryptocurrencies and decentralized finance probably because an educated reader would look at this technology and think this is so much better than the CBDC.

Digitization Of Business :

The second part of the paper explores the quote- digitization in business and payments and it covers all the factors that have given rise to CBDC’s.

The first factor is the gradual shift of economic productivity from the physical to the digital meaning that more and more money is being made by goods and services that are available partially if not wholly online.

The authors note Google, Amazon, and Facebook as easy examples here. The authors point out that this rapidly growing digital economy creates serious centralization issues wherein the first adopters of the technology are required to compete in this economy become larger and more monopolistic eventually making it impossible for new companies to enter the ring.

The authors highlight data as a core component of this first mover advantage, companies that have been around for longer have a lot more data about the user and consumer behavior and this gives them an edge that new companies will take years to get.

This is the rationale behind the digital markets act that was recently passed by the European Union as it focuses on data sharing and transparency by big tech including with new competitors in the industries they currently dominate. 

Why Central Banks Want CBDCs:

Why central banks want to roll out their digital currencies?

The first reason is one that all central banks love to throw around and that’s that central bank money is the safest form of money.

The authors then claim that quote- as the use of cash is declining the promise of convertibility at par becomes less and less meaningful.

The second reason why central banks want CBDC’s is monetary sovereignty.

A CBDC would make it possible for governments to prevent foreign currencies from competing with their national currencies. If you’re wondering why governments and central banks don’t like this currency competition it’s because it would fundamentally force them to act more responsibly with their spending and printing which most governments and central banks don’t want to do because it benefits them and their friends.

As such just about every country would quickly see its national currency replaced by some foreign currency likely the US dollar in the form of stable coins like USDT and USDC, given that this is slowly but surely starting to happen in countries that are experiencing the most inflation.

CBDC And Monetary Policy:

The fourth part of the paper pertains to how CBDC’s would impact monetary policy which some of you will know is everything the central bank does namely raising and lowering interest rates, and creating money out of thin air for the government, the commercial banks, and their buddies.

The authors of the paper start by going over some research that suggests commercial banks could get squeezed by a CBDC. This is partially because there wouldn’t really be a need for them and partially because most people would opt to keep their CBDC holdings directly at the central bank for safety reasons. 

The authors seem to suggest that a solution would be to just have commercial banks compete by raising interest rates offered on CBDC deposits.

The authors assess the actual use of CBDC’s to modify monetary policy which the authors claim is quote not the main focus of central banks looking to roll out CBDCs. That’s because most central banks want CBDC’s to act like digital cash. However, the ECB does want to use its digital Euro to modify monetary policy and also wants it to replace physical cash.

To read more, visit Cryptoknowlogy.

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Ethereum Merge Explained

The long-awaited Ethereum merge, which will change the technical foundations of the second-most valuable cryptocurrency in the world, is expected to be finished between September 10 and September 20.

Ethereum Merge Explained:

Due to Ethereum’s prominence in the cryptocurrency world, the adjustment may have implications for investors in the overall industry. Multiple different cryptocurrencies can be supported by the Ethereum platform, which is also frequently used to conduct decentralized cryptocurrency financial transactions.

While the technical aspects of the merge are complicated, the end result is that Ethereum’s developers are getting ready to change how its users validate new transactions in its decentralized economic system.

The most significant forthcoming change is a shift from the proof-of-work (PoW) paradigm to the proof-of-stake (PoS) model, which aims to increase the blockchain network’s security and scalability.

The merge could decrease the network’s power consumption by more than 99.95% and aim to shift Ethereum away from the energy-intensive mining process.

The integration has been postponed in the past and is a topic of intense controversy in the crypto community.

Why the merge is happening:

The Ethereum Foundation compares Ethereum to a spaceship in midflight to explain this transition: “The community has built a new engine and a hardened hull. It’s almost time to hot-swap the new engine for the old mid-flight after extensive testing. By doing this, the present ship and the new, more effective engine will be integrated.”

Why then is the old engine malfunctioning? Proof-of-work is a technique used to safely add new transactions and other data to the Mainnet blockchain, which has been in use since Ethereum’s launch in 2015. Before being permitted to add a new block, proof-of-work requires user computers to successfully complete increasingly challenging calculations. Many cryptocurrencies, including Bitcoin, employ this process known as mining. Although secure, mining consumes a lot of energy. The proof-of-work Ethereum’s method consumes as much energy yearly as some entire countries do in the same time frame.

A less energy-intensive alternative is proof-of-stake. Users who want to participate in the verification process stake their own cryptocurrency, which is a procedure similar to staking, rather than committing electricity, which powers computational power. These people, known as validators, are chosen at random to validate newly added information before it is added to a block. They receive cryptocurrency if they confirm the information as accurate. They risk losing their stake if they behave dishonestly.

How The Merge could work:

The Merge is the merging between Ethereum’s new Beacon Chain proof-of-stake consensus layer with its current execution layer (the Mainnet that we currently use). Instead of using energy-intensive mining, it uses staked ETH to safeguard the network. An incredibly exciting step toward achieving the more scalability, security, and sustainability goals for Ethereum.

It’s critical to remember that the Beacon Chain first shipped independently of Mainnet. The Ethereum Mainnet, with all of its accounts, balances, smart contracts, and blockchain data, continues to be protected by proof-of-work even though the Beacon Chain runs concurrently with proof-of-stake. When these two systems eventually coincide at the next Merge, proof-of-stake will completely replace proof-of-work.

Transactions on the Mainnet have not been processed by the Beacon Chain. However, to reach a consensus on its own state, it has agreed on active validators and their account balances. After lengthy testing, it is now time for the Beacon Chain to agree on more. Following The Merge, the Beacon Chain will act as the consensus engine for all network data, including execution layer transactions and account balances.

The Beacon Chain will now be the official method for producing blocks as of the Merge. Mining can no longer generate valid blocks. In its place, the proof-of-stake validators take on this responsibility and are in charge of processing all transactions’ validity and proposing blocks.

The history is not lost. The complete transactional history of Ethereum will be merged as Mainnet and Beacon Chain. Nothing needs to be done by you. Your funds are secure.

How you could be affected if you currently own ETH:

You don’t need to take any action if you already have Ethereum or an ERC-20 token (the cryptocurrencies that use the Ethereum platform), whether they are stored in a software wallet, hardware wallet, or an exchange. Ethereum should continue operating normally after the transition if all goes according to plan, with no downtime.

You should be extremely vigilant for scammers attempting to take advantage of people during this transition as The Merge of Ethereum Mainnet draws closer. Never give ETH to anyone or anywhere in an effort to “upgrade to ETH2.” There is no “ETH2” token, and your funds are protected without any more action on your part.

Will Gas become cheaper while Ethereum becomes faster?

Common misconceptions regarding The Merge include the notion that it will fix all of Ethereum’s issues, primarily its high gas costs and slow network. That is incorrect. The Merge is a multi-step procedure, and this stage only prepares the ground for future optimizations.

In particular, gas prices won’t drop after the Merge. The Ethereum Foundation claims that following the Merge, transaction speed will “largely remain the same”.

Last but not least, people who have been staking their ETH in anticipation of The Merge won’t be able to withdraw it just yet. After an Ethereum upgrade called Shanghai, which is scheduled for a later date (six to twelve months from now, according to current plans), this will be made available.

Will Ethereum surge in price because of the Merge?

Ethereum’s price is difficult to predict because it depends on so many multiple parameters. The Merge has various elements that could lead to an increase in the price of Ethereum. For instance, the end of traditional mining will result in less ETH being awarded as compensation to the computers powering the network, which would cause the overall supply of Ethereum to rise very slowly. The fact that some ETH is destroyed (or “burned” in crypto terminology) by specific network operations makes Ethereum deflationary, which means that the overall amount of ETH will gradually decline over time.

You may have seen something similar mentioned as a sign that the value of ETH, the native coin of Ethereum, is set to increase. But there are other factors to think about.

The Merge is a public event that has been years in the making. It’s likely that any adjustments resulting from the Merge have already been factored into ETH’s current pricing. Additionally, ETH’s price may change due to unrelated variables like modifications in the macroeconomic environment.

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