May 16th, 2023

What Investors Need to Know About BRC-20 Tokens

Previously, I have talked about Ordinal inscriptions and what it means for the future of Bitcoin. Here’s an update on the BRC-20 token.

BRC-20 is a new experimental fungible token standard designed for the Bitcoin blockchain, inspired by Ethereum’s ERC-20 token. In the last few weeks, you may have heard this term from your friends or seen posts on social media about BRC-20 memes and NFTs.

As of May 2, the combined market capitalization of over 8,800 BRC-20 tokens was $137 million, a remarkable 682% increase from $17.5 million just a week ago. But a week after, as of May 9, the market capitalization of BRC-20 Bitcoin tokens had exceeded $1 billion, and within the previous 24 hours, there was a total trading volume of $207.7 million. These tokens can be tracked on brc-20.io or traded on Ordswap. Some of them are also available on Gate. As more wallet providers and more centralized exchanges integrate, I believe there will be more movements within their ecosystem.

What is BRC-20?

This standard was created for the Bitcoin blockchain by an anonymous on-chain analyst called Domo. It is being used to issue and transfer fungible tokens on the Bitcoin blockchain. BRC-20 is similar to the ERC-20 token standard used on the Ethereum blockchain but specifically designed for Bitcoin. BRC-20 uses Ordinal inscriptions of JavaScript Object Notation to deploy token contracts and mint and transfer tokens.

BRC-20 tokens are stored on the Bitcoin base chain and built with the help of Ordinals and Inscriptions. An Inscription or Ordinal is a unique number attached to a specific piece of digital content, such as an image, video, or text, stored on the Bitcoin blockchain. Inscriptions are generated using a special protocol that ensures their uniqueness and immutability, making them valuable digital assets that can be bought, sold, and traded just like NFTs. These tokens can be attributed to satoshis and then traded or swapped with others, just like other tokens.

Adding on to the above points and to give some context, BRC-20 tokens were made possible by a loophole in Bitcoin’s 2021 Taproot upgrade, which allowed for the attachment of small amounts of arbitrary data to each transaction to limit the amount of data stored on the blockchain. BRC-20 tokens use this feature to add additional data to individual satoshis, which can then be used to create various types of assets and tokens.

How different are BRC-20 and ERC-20?

The BRC-20 token standard utilizes the proof of work (PoW) mechanism, while the ERC-20 uses the proof of stake (PoS) mechanism. PoW is a consensus mechanism in blockchain networks to validate transactions and add new blocks to the chain.

In PoW, miners compete against one another to solve complex mathematical problems using high-powered computational devices. PoS protocols are a class of consensus mechanisms for blockchains that work by selecting validators in proportion to their quantity of holdings in the associated cryptocurrency.

Unlike PoW, which relies on solving complex computational problems, PoS requires validators to stake a certain amount of cryptocurrency before participating in the consensus process. Validators are chosen based on the amount of cryptocurrency they have staked, with those who have staked more having a higher probability of being selected to validate transactions.

The significant difference between the two networks is EVM (Ethereum virtual machine) compatibility. The BRC-20 token standard does not support smart contracts, which limits the ability of developers to create different programmable tokens and financial products.

Understanding memecoins popularity

Due to the explosive growth of the BRC-20 token standard, particularly with the introduction of memecoins such as Pepe and Memetic, these coins are becoming increasingly popular on BRC-20. In just four days, the BRC-20 token market capitalization has soared from $95 million to $279 million, with over 13,530 tokens currently in circulation. The top five BRC-20 tokens, Ordi, Pepe, Piza, Memetic, and Moon, make up 86.55% of the total market capitalization.

Memecoins may be moving to BRC-20 due to the Ethereum network becoming congested by these coins. One notable meme token, Pepe, has contributed significantly to this congestion. BRC-20 tokens, which are an experimental token standard on the Bitcoin blockchain modeled after Ethereum’s ERC-20 tokens, enable developers to create and transmit fungible tokens through the Ordinals protocol. The rise of memecoins has made BRC-20 tokens more popular in the cryptocurrency community.

It’s important to note that the number of daily transactions on the Bitcoin network hit a new record of 682,000 recently, up from 250,000 daily transactions at the beginning of 2023. As a result, all BRC-20 transactions must take place on-chain, which has rapidly filled up the limited space in Bitcoin blocks. Due to memecoins and BRC-20s, Bitcoin and Ethereum fees have soared.

What to look out for on BRC-20

The surge in memecoins’ popularity on BRC-20 can be attributed to the explosive growth of the BRC-20 token standard and the congestion on the Ethereum network caused by memecoins. This is like teaser marketing in my point of view.

One of the primary use cases for BRC-20 tokens is in the area of decentralized finance (DeFi). BRC-20 tokens have found utility in decentralized finance applications like lending, borrowing, and yield farming. Unlike rigid Bitcoin, BRC-20 tokens are more flexible and can be used in various decentralized financial applications.

Another use case for BRC-20 tokens is peer-to-peer transfers. BRC-20 tokens utilize the Bitcoin network and can be moved between wallets on the network. The most basic thing one could do with a BRC-20 token is to transfer it to their peers as a representation of value. In the future, I would foresee that the demand for real asset tokenization on BRC-20 will continue to grow.

The development of BRC-20 tokens is continuing at a rapid pace, and it is likely that more use cases will emerge in the future. The impact of BRC-20 tokens has been significant, considering they began as an experiment. The tokens have exploded in popularity in the crypto community, and over 14,000 BRC-20 tokens are deployed on Bitcoin compared to an estimated 400 million on Ethereum. This means that there is still lots of room for growth.

Source: https://intpolicydigest.org/what-investors-need-to-know-about-brc-20-tokens/

Anndy Lian

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

www.anndy.com

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March 30th, 2023

Understanding the Blockchain Space: Opportunities and Challenges for Investors – Anndy Lian

Anndy Lian, intergovernmental blockchain advisor spoke at the 12th Family Office & Investment Forum in Singapore organized by Campden Club. The theme for the event is “Thrive and Prosper: How Family Office are Adapting to New Realities”.

The global pandemic has brought about a new set of challenges for family offices, which are private wealth management firms that cater to the ultra-wealthy. The economic uncertainty and market volatility have forced family offices to adapt to new realities and change their strategies to protect their clients’ wealth and ensure long-term prosperity.

One of the key ways family offices are adapting is by embracing technology. Blockchain and cryptocurrency are two topics that are widely discussed in the investment space.

Blockchain technology and cryptocurrency have been making headlines for over a decade now, and yet their widespread adoption has been slow due to various challenges. In 2023, the most significant hurdles facing the adoption of cryptocurrencies are related to their acceptance. Anndy highlighted the top ten major crypto adoption challenges in 2023 that investors should be aware of during his keynote speech.

1. Lack of Understanding of What Cryptocurrency is and How it Works.
This lack of understanding can lead to a lack of trust in the technology, which makes it difficult for people to adopt it as a means of payment or investment.

2. Volatility.
The value of cryptocurrencies can change rapidly, making it difficult for investors to make informed decisions.

3. Lack of Regulatory Frameworks.
Governments and regulatory bodies have been slow to develop policies that govern the use of cryptocurrencies, which makes investors wary of investing in them.

4. Uncertainty Regarding Taxation.
This uncertainty can discourage investors from investing in cryptocurrencies.

5. Security Risks.
Hacking and other cyberattacks can lead to the loss of cryptocurrencies, which can be devastating for investors.

6. Transaction Irreversibility.
Transactions on the blockchain are irreversible, which means that if a mistake is made, it cannot be reversed. This makes it essential for investors to be careful when making transactions.

7. Scalability Issues.
As the number of transactions on the blockchain increases, the network can become congested, leading to slow transaction times and increased fees.

8. Lack of Merchant Adoption.
Without merchants accepting cryptocurrencies as payment, it is challenging for people to use them as a means of payment.

9. Network Congestion.
It can lead to slow transaction times and increased fees. This can discourage investors from using cryptocurrencies for transactions.

10. Lack of Trust in Digital Currencies.
Finally, a lack of trust in digital currencies is a significant hurdle to their widespread adoption.

Lian also explored ten different ways to make money from cryptocurrency.

1. Crypto Saving.
Many blockchain projects and decentralized finance (DeFi) platforms offer high-interest rates for users who deposit their cryptocurrencies.

2. Protocol Tokens.
Protocol tokens are cryptocurrencies that are used to power decentralized applications (dApps) and blockchain protocols.

3. Application Tokens.
Application tokens are cryptocurrencies that are used to access and use specific dApps.

4. Staking.
Staking is a process that involves holding cryptocurrencies in a wallet to support the network’s operations.

5. Yield Farming.
Yield farming involves providing liquidity to DeFi platforms in exchange for rewards.

6. Crypto Stocks.
Several publicly traded companies offer exposure to the cryptocurrency market through their stock offerings.

7. Other Crypto Securities.
These include exchange-traded funds (ETFs), futures, and options.

8. Exchange-Traded Products.
Exchange-traded products (ETPs) are investment vehicles that allow investors to gain exposure to cryptocurrencies through their brokerage accounts.

9. Bitcoin Proxy Stocks.
Bitcoin proxy stocks are stocks of publicly traded companies that have exposure to the cryptocurrency market.

10. Web4.
Web4 is a new concept that aims to create a decentralized internet that is owned and controlled by users.

The Campden Club is a global membership organization that brings together family offices, ultra-high net worth individuals, and private investors to network, share knowledge and expertise, and discuss issues related to family wealth management and preservation. Founded in 1987, the club has over 200 member families from around the world and hosts regular events and forums to facilitate discussions on various topics, including wealth management, philanthropy, investment opportunities, family governance, and succession planning. Members of the Campden Club gain access to a network of like-minded individuals and family offices, as well as exclusive content, research, and resources related to family wealth management.

Anndy Lian

www.anndy.com

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March 10th, 2023

Hong Kong’s New Crypto Licensing Regime: A Boon or Bane for Investors?

The new regulations are expected to attract more foreign investment into Hong Kong.
Analysts remain unsure of how China will treat Hong Kong’s new crypto regime.

The new crypto regulations in Hong Kong have been a topic of discussion among investors and industry players alike. The announcement of the new licensing regime has brought hope for many who believe that it will make Hong Kong a major player in the crypto market. However, some remain cautious and have raised concerns about the potential risks that come with such a move. In this article, we will explore the opportunities and risks associated with the new Hong Kong crypto regulations, compare them with Singapore and South Korea, and discuss whether China is likely to back out.

New crypto exchanges

The new Hong Kong crypto regulations present several opportunities for the industry. Firstly, the licensing regime allows for the creation of new crypto exchanges, which will attract more investors and create more jobs. For example, a new exchange called Huobi Hong Kong is set to focus on institutional investors and high-net-worth individuals. This is good news for the industry as institutional investors are known to bring stability and liquidity to the market.

Secondly, the new regulations are expected to attract more foreign investment into Hong Kong. Hong Kong’s strong determination to regain the title of global crypto center is reflected in a series of policies and statements issued by the Hong Kong Monetary Authority. This is expected to create a favorable business environment that will attract foreign investors and companies to Hong Kong. This will benefit not only the crypto industry but also the overall economy of Hong Kong.

Thirdly, the new regulations are expected to enhance transparency and reduce the risk of money laundering and fraud. The Hong Kong Securities and Futures Commission has taken a regulatory approach to cryptocurrencies, which contrasts with recent actions in the US of regulation by enforcement. This approach will help build trust among investors and promote long-term growth in the industry.

However, while the new Hong Kong crypto regulations present several opportunities, they also come with risks. One of the biggest risks is the potential for increased market volatility. The crypto market is notoriously volatile, and the creation of new exchanges and the influx of more investors may exacerbate this. Moreover, there is the possibility of fraud and manipulation, which can further increase volatility and undermine investor confidence.

Lack of competition

Although the new Hong Kong crypto regulations present several opportunities, they also come with some risks. One of the biggest risks is the potential for increased market volatility. The crypto market is notoriously volatile, and the creation of new exchanges and the influx of more investors may exacerbate this. Moreover, there is the possibility of fraud and manipulation, which can further increase volatility and undermine investor confidence.

The new regulation may lead to a concentration of power in the hands of a few large exchanges. This can lead to a lack of competition, which can result in higher fees and a decrease in innovation. This is a problem that has been observed in other industries, such as banking and telecommunications, where a lack of competition has resulted in poorer service and higher prices.

Lastly, there is the risk of government interference. While the Hong Kong government has been supportive of the new regulations, there is always the possibility that it may change its stance. This could lead to a situation where the government restricts or bans crypto trading altogether. This would have a devastating impact on the industry and its investors.

Singapore as a major player

Hong Kong is not the only country in the region that is looking to regulate the crypto industry. Singapore and South Korea have also taken steps to regulate the industry. Singapore has been proactive in its approach, establishing a regulatory framework that encourages innovation while protecting investors. This has made Singapore a major player in the crypto market, with several major exchanges based in the country.

South Korea, on the other hand, has taken a more cautious approach. In 2017, the government banned initial coin offerings (ICOs), citing concerns about fraud and money laundering. However, the ban was lifted in 2018, and the government has since established a regulatory framework that requires exchanges to register with the Financial Services Commission. While this has led to a decrease in the number of exchanges in the country, it has improved investor protection and reduced the risk of fraud.

Compared to Singapore and South Korea, Hong Kong’s new crypto regulation is more similar to Singapore’s approach. Both countries have taken a proactive approach to regulation, with a focus on promoting innovation while protecting investors. However, Hong Kong’s new licensing regime is more focused on institutional investors, while Singapore’s regulatory framework is designed to cater to a broader range of investors.

Possible Backlash from China

Finally, there is the question of whether China is likely to back out of the new Hong Kong crypto regulation. China has been cracking down on the crypto industry, with a ban on ICOs and cryptocurrency exchanges in 2017. However, there are indications that China may be softening its stance. In 2019, President Xi Jinping stated that China should accelerate the development of blockchain technology. Moreover, in 2021, several Chinese companies announced plans to enter the crypto industry.

Despite these positive signs, there is still a risk that China may object to the new Hong Kong crypto regulations. China sees Hong Kong as part of its territory and may view the new regulations as a challenge to its authority. If this happens, it could lead to a deterioration of relations between Hong Kong and China, which would have far-reaching consequences for the industry and its investors.

Concentration of power

In conclusion, the new Hong Kong crypto regulations present both opportunities and risks. While they are expected to attract more investors and create a favorable business environment, there is also the potential for increased market volatility, concentration of power, and government interference. Compared to Singapore and South Korea, Hong Kong’s approach is more focused on institutional investors but shares a similar emphasis on promoting innovation and protecting investors. Whether China will back out of the new regulations remains to be seen, but there is a risk that it may object, leading to a deterioration of relations between Hong Kong and China.

Note: For new investors, be reminded that the crypto market is volatile. Please do your own proper research and do not get carried away by the hype. Today you can 10X, and tomorrow you may lose everything.

Source: https://www.financemagnates.com/cryptocurrency/hong-kongs-new-crypto-licensing-regime-a-boon-or-bane-for-investors/