Maven's Insights March 2021

01 April 2021

This month’s Maven’s Insights are special because we are not starting them with more institutional capital being allocated into Bitcoin. Instead, we are kicking it off with big news from the second major digital asset, Ethereum. This month, the Ethereum Improvement Proposal (EIP) 1559 has been moved into the final stages of deployment. This means it will be included in the next hard-fork (upgrade mechanism) of the Ethereum network, which is set to take place in July. EIP-1559 is meant to change the fee structure on the Ethereum network. Using a different pricing mechanism it allows for more certainty for users in determining fees to utilize the network. More importantly, from our perspective, it also adds a burning mechanism into Ether which will greatly reduce the inflation on Ether, and might even make it deflationary. In effect, Ethereum will see a greater alignment of network usage and value capture of the asset Ether.  

March was also an interesting month for Bitcoin. Most notably, Fidelity applied for a Bitcoin ETF. Back in 2018/2019 a long list of ETF applications, which were filled by crypto native firms, were rejected by the SEC. The reason for doing so was the fact that the market had not matured enough for an ETF approval. The fact that a respected institution like Fidelity is now applying for an ETF indicates a major shift in sentiment. Furthermore, this is proven by their comment on their application: "The digital assets ecosystem has grown significantly in recent years, creating an even more robust marketplace for investors and accelerating demand among institutions. An increasingly wide range of investors seeking access to bitcoin has underscored the need for a more diversified set of products offering exposure to digital assets”. If approved, the ETF would add a lot of legitimacy to the digital asset industry at large. 

Interesting adoption news for the payment use-case of blockchains was announced in March. Payment giant VISA announced that they would start settling payments in the USDC stablecoin on top of the Ethereum network. VISA stated that this is "one small step forward" for its settlement platform, but "one giant step forward" to integrate digital assets. Launching a similar service with other partners should take place later in this year. Another company ready to embrace the payments of digital assets, Tesla, was quick to follow up on their announcement. Last month Tesla announced they allocated USD 1.5B into Bitcoin. Additionally, they stated the intention of accepting Bitcoin as a method of payment for buying a car. This has now been rolled out in the US. Interestingly, Tesla states they won’t convert the BTC to USD but rather hold BTC itself on their balance sheet. 

Exciting regulatory events took place in the State of Wyoming. Wyoming passed a bill that allowed for a Decentralized Autonomous Organization (DAO) to be recognized as a legal entity. This will allow DAO’s to operate within the “real” legal world, close agreements, transact, hire and so forth. This legal step will allow for more utilization of the DAO as an organisational structure. 

The increased institutionalization of Bitcoin has not gone unnoticed by the major US banks. This month, Goldman Sachs announced that they were relaunching their digital asset trading desk after an increased demand from their clients. This was followed by a report that JP Morgan is looking to acquire a digital asset clearinghouse to be able to provide more liquidity, as liquid markets are a requirement for more parties to enter the market. 

This month, New York City governor Andrew Cuomo announced that his city will be rolling out a blockchain based solution for COVID-19 vaccination verification. The digital “passport” will be used to track either a negative test result or a proof of vaccination by simply showing your smartphone. Various venues such as the Arenas Madison Square Garden in Manhattan and the Times Union Center in Albany will implement the digital passport solution in order to allow for events to take place again. 

This month, Maven 11 Capital was excited to publicly announce two more of our venture investments, namely LazyLedger and Shyft Network. LazyLedger is a pluggable consensus and data availability protocol. When live it will drastically reduce the efforts of spinning up an application specific blockchain. To read more about this investment, we recommend reading our announcement.
Shyft Network is a distributed verification network and a clear play on the increased demand for easy solutions towards regulation inside our industry. It allows for more efficient and effective compliance by exchanges that allow for trading of digital assets. The demand for this will only rise after the FATF travel rule is rolled out. Additionally, Shyft aims to build out compliance solutions for DeFi protocols as this is the quickest growing ecosystem. To read more about why we are backing Shyft, read our announcement of the investment.

Download Maven's Insights March 2021