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This week in crypto…

Everything you need to know to stay on top in Web3

👀 We’re back?

The crypto market rallied in the past two weeks, with BTC and ETH gaining 20% and the market going up to 1 trillion in value. At the same time, NFT sales on OpenSea also saw a January rise over December and November volumes. Is the bear market over? Still unclear, but January sure offered a respite in the midst of winter. This Bankless article offers an analysis of the most recent crypto rally, if you want to dig in deeper.

🧐 Vitalik thinks about privacy

Public blockchains are public. All information is available via block explorers, and although the information is contained within long strings of numbers, it’s anything but private. Crypto users who wanted to preserve their privacy used crypto mixers like Tornado Cash, but with the recent crackdown on such services, Web3 needs to solve the issue of privacy on-chain.

In his most recent article, Vitalik is proposing stealth Ethereum addresses. TLDR from Vitalik himself: “Stealth addresses give the same privacy properties as Bob generating a fresh address for each transaction, but without requiring any interaction from Bob.” Basically, you can get a new address for each new transaction without significantly altering the existing payment workflow. To see how this might work and what are the potential drawbacks, read Vitalik’s article here.

🗞️ In other news

👉🏽 Genesis, a digital currency brokerage, declared bankruptcy last week. Another domino to fall in the mess FTX and 3AC left behind. Genesis also owes money to Gemini, the crypto exchange. The two partnered up on the Gemini yield product. Here’s hoping Gemini customers are made whole.

👉🏽 Yuga Labs just launched a skill-based NFT game called Dookey Dash. You can play with a Sewer Pass (free for BAYC and MAYC holders, 2.6 ETH floor on OpenSea today). Yuga also took a stand and blacklisted royalty-free NFT marketplaces.

TLDR: Tokenomics, part 1 🌐

What are tokens? How are they different from cryptocurrencies? Why do we need them? Let’s dive in! 👇🏽

First things first - cryptocurrency and tokens are sometimes interchangeable terms, but usually, they mean slightly different things. 👀

👉🏽 When we talk about cryptocurrencies, we’re talking about tokens that are native to a particular blockchain, serve as a payment method, and are used to pay transaction fees and miners’ rewards.

In Ethereum, ETH is considered a cryptocurrency and a native token of the network.

👉🏽 Tokens, on the other hand, usually encompass any and all tokens built on top of the network. These are tokens enabled through Ethereum, but are not necessary for Ethereum to exist.

Since Ethereum is a permissionless, public blockchain, anyone can create Ethereum tokens. The only condition is that you use Ethereum token standards - read more about them here.

So, what type of tokens are there? What purposes do they serve?

On a technical level, we have fungible and non-fungible tokens. Fungible tokens act like regular fiat currency, non-fungible tokens are one-of-a-kind, collectible items.

We can also make a differentiation between utility and security tokens. Utility tokens serve a particular purpose within the network or DAOs and projects. Security tokens are similar to traditional securities and are seen as tradable financial instruments. Who decides if tokens are securities? SEC Chair Gary Gensler is still trying to figure it out.

And when it comes to utility, what is it exactly that tokens accomplish?

Here’s a non-exhaustive list:
​
💵 Currency: Native tokens and stablecoins can be used as a payment method, acting as a traditional currency.

💎 Incentives: Many DAOs have tokens used to pay contributors. Similarly, blockchains use their native tokens to pay miners and incentivize holders to stake.

👛 Ownership: NFTs serve as proof of ownership in digital or physical assets.

👯‍♀️ Social tokens: Tokens that grant membership or access to social groups.

🗳️ Governance: DAOs also use tokens to determine the voting power of holders and enact governance systems.

🌐 Network utility: Native tokens are used to pay for gas or as a stake in securing the network.

Each category has its own subsets, and often tokens serve multiple purposes.

This rise of tokenization and token-based organizations introduces new models called token economies, or tokenomics.

What are tokenomics? How are tokenomics different from existing systems?

Stay tuned as we dive deeper into this topic next week!

⭐️ Feeling a bit confused? Sign up for our Web3 Stack course to get a strong foundation and understanding of crypto infrastructure. Knowing how things work behind the scenes will make it easier to dive into more complex topics.

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See you next week!

​Dusanka​