Q&A: Guy Gotslak
President & Co-founder, MDM
With the rise in interest in blockchain technologies, learn why Ethereum is at the forefront of the crypto revolution and why it might be a safer investment than other cryptos in the market today. To start, the Ethereum network has been around long enough to be considered a proven and experienced player. Many developers today are building applications on the network, and it seems this trend will only continue to grow as more people learn about the network. There are also constant updates being made to it to make transfers more affordable and to have a more efficient network in general. Watch this short vid as MDM Co-founder and President, Guy Gotslak explains Ethereum’s role in the crypto market today.
#1- What’s Causing the surge of Ethereum?
- Crypto is gaining adoption, and people that are giving crypto attention are trickling down to cheaper cryptos that are as reliable in gains and naturally ethereum is the second runner up in terms of market cap.
- It also has seen better gains than bitcoin since december so that doesnt hurt.
- But an important factor is also that Ethereum powers important decentralized applications. Whereas bitcoin has been compared to gold, you can compare ethereum to oil. It is used to buy computing power and space to build applications such as NFTs. NFTs are super hot right now in the art community to verify ownership of digital art, and so this increase in usage of such applications is also responsible in my opinion for the rising price. And investors also realize that ether is more than just storing value and transacting but there are actual valuable applications that it fuels so I think that would attract investors that are interested in innovation.
- Gas fee, however, is going up which means usage is going up. This points to actual usage, not just investment s
- NFTs are built on blockchain and it’s been on a run, Banksy, Eminem, and other mainstream artists are getting into NFT
- Also Ethereum is upgrading which will make transactions more efficient and the cost would go down. That may cause some sophisticated investors to be more active right now.
- Most used blockchain by Fortune 500 companies, it’s maturing
#2- What do you think can truly hold back Bitcoin’s growth?
- Unfortunately, Bitcoin’s deprecation of privacy is also a flaw that it has sought to solve. Some of Bitcoin’s original users mistakenly believed that because wallet addresses were pseudonymous, that using Bitcoin was anonymous.
- However, legal action against darknet sites like the Silk Road proved that all it takes is a small amount of information in order to reveal the true identity behind a Bitcoin wallet.
- Zcash innovated by adopting Bitcoin’s open ledger system and encrypting information about the ledger’s users.
- This means that even though all ZCash transactions are recorded on a blockchain, the transactions are encrypted and can only be viewed by users that have been given access to them.
- ZCash employs a cryptographic tool called zk-SNARKs, which stands for Zero-Knowledge Proofs. This tool allows two users to engage in transactions without either party revealing their payment addresses to each other.
- This tool also makes ZCash transactions untraceable on ZCash’s blockchain by obfuscating the payment addresses of both parties and the amount involved in each transaction.
#3- Why do you think people are suddenly interested in DeFi?
First, regulators have been behind the curve, and DeFi has been able to flourish in this vacuum. For instance, in traditional unsecured lending, there is a legal requirement that lenders and borrowers know one another’s identities and that the lender assesses the borrower’s ability to repay the debt. In DeFi, there are no such requirements. Instead, everything is about mutual trust and preserving privacy.
Regulators are having to weigh the delicate balance between stifling innovation and failing to protect society from such risks as individuals putting their money into an unregulated space, or banks and other financial institutions potentially being unable to make a living as intermediaries. But it seems more sensible to embrace change – and that seems to be happening. In July, the US Securities and Exchange Commission (SEC) made a major shift towards embracing DeFi by approving an ethereum-based fund, Arca, for the first time.
This is welcome and important, since one of the major challenges towards financial innovation is the hostile environment created by archaic regulations written for a bygone era. This has caused some DeFi projects to fail – including major ones such as New-Jersey-based Basis, which returned US$133 million to investors in 2018 when it concluded it couldn’t work within the SEC rules.
A second reason for the DeFi surge is that mainstream players are getting involved. Many high-street financial institutions are beginning to accept DeFi, and seeking ways to participate. For example, 75 of the world’s biggest banks are trialling blockchain technology to speed up payments as part of the Interbank Information Network, spearheaded by JP Morgan, ANZ and Royal Bank of Canada.
Major asset management funds are starting to take DeFi seriously as well. Most prominent is Grayscale, the world’s largest crypto investment fund. In the first half of 2020, it was managing over US$5.2 billion of crypto assets, including US$4.4 billion of bitcoin.
Third is the effect of COVID-19. The pandemic has driven global interest rates even lower. Some jurisdictions, such as the eurozone, are now in negative territory and others such as the US and UK could potentially follow.
In this climate, DeFi potentially offers much higher returns to savers than high-street institutions: Compound, for example, has been offering an annualised interest rate of 6.75% for those who save with stablecoin Tether. Not only do you get interest, you also receive Comp tokens, which is an added attraction. With two-thirds of people without bank accounts in possession of a smartphone, DeFi also has the potential to open up finance to them.
One final important reason for the surge in people putting money into DeFi tokens is to avoid being left out of their explosive growth. Many tokens are worth nothing or close to nothing in practical terms, so we are seeing a lot of irrational exuberance.
But like it or not, we are heading towards a new financial system that is more liberalised and decentralised than before. The central question is how best to guide its development with checks and balances that minimise the risks and spread the potential benefits as widely as possible. That is the challenge for the next few years.
#4 What is the next Crypto to watch out for?
Diem (formerly Libra).
It aims to enhance international remittances and merchant payments for the world. Users can make digital payments with just a smartphone and Novi
Diem, now a stablecoin, can help make payments over Facebook’s WhatsApp and Messenger, as well as on a standalone app. There will be no hidden charges to add, send, receive or withdraw money and transfers will arrive instantly. All Novi customers will be verified using government-issued ID, and fraud protections will be built in throughout the app.
Diem will also enable digital payments on various services such as Uber, eBay, Spotify, Mastercard, etc.
Just like how Visa and Mastercard are accepted for almost all payments, Diem would be too. It may expand until customers can pay for their coffee and public transit via digital currency. Such mass adoption of digital currency can prove to be a boon for the billions of unbanked individuals.
Diem will be quite easy to purchase, as well. You can buy Diem from crypto exchanges in the future, Facebook Messenger, WhatsApp, and via Visa, MasterCard or PayPal.
Facebook Diem’s Future and What It Means for Finance
Diem’s white paper claims that Diem is not out to replace fiat currencies or our traditional financial system. It is aimed at providing an alternative for traditional forms of money transfer. This is mainly beneficial for those who have no access to financial institutions.
With just a smartphone, users can send and receive money digitally. This will open up a lot of financial opportunities for individuals and businesses alike. The value of Diem will not fluctuate as much as cryptocurrencies, due to it being a stablecoin pegged with the US dollar.
And while data privacy remains a concern, Diem is reportedly no longer under the control of Facebook as per the revised whitepaper released in December this year. Diem is a non-profit organisation owned by 27 different member firms.
Our traditional financial system is yet to open its gates for digital cash. Although cryptocurrencies have been around for more than a decade, not everyone shown interest or invested in it. Diem can be the right step towards digital currency adoption.
#5- What can the US government do to nurture crypto?
- Fund blockchain development
- Accept crypto in government transaction
- Policies to protect consumers to inspire better cryptos