Blockchain Bites: Fully loaded Ethereum 2.0 deposit agreement, IRS sends confusing letters – again

More than 500,000 ETH have been blocked and loaded into the Ethereum 2.0 deposit agreement, kicking off the main multi-year development phase of the network. JPMorgan analysts say institutions are piling up in bitcoin. And the IRS has again sent (possibly incorrect) letters to cryptocurrency traders stating that they owe taxes on unrealized gains.

The taxman knocks
The Internal Revenue Service (IRS) again sends conflicting messages related to cryptocurrency trading and tax reporting obligations. Allegedly, “dozens of individuals” have received CP2000 letters detailing how much the IRS believes traders should – based on earnings from undeclared crypto holdings in 2018, according to CryptoTrader.tax. However, as in previous years, it is possible that these traders have never made these gains and owe nothing. The problem could stem from the way crypto exchanges report transactions to the IRS, using Form 1099-K, which shows all transactions as revenue-generating. Exchanges could prevent this problem by submitting 1099-B reports to the IRS, which accurately track gains and losses, TaxBit co-founder Austin Woodward last told CoinDesk in March.

Institutional analysis
JPMorgan analysts say institutions are accumulating in bitcoin this quarter at a stronger pace than they were in the third quarter, according to the banking giant’s “Flows and Liquidity” report. Released on Friday, the analysts’ report compares institutional to retail purchases. For example, in the third quarter, retail clients bought $ 1.6 billion worth of bitcoin using Square’s Cash app, nearly three times more than what was invested in Grayscale’s bitcoin product. Although in the fourth quarter, the grayscale Bitcoin Trust is three times its numbers in the third quarter. To be on the safe side, Square has yet to publish the numbers related to customers’ fourth quarter bitcoin purchases. (Grayscale, like CoinDesk, is wholly owned by the Digital Currency Group.)

Gold bug for BTC ‘cockroach’
Pendal Group, an Australian-listed investment manager with over AUS $ 100 billion ($ 73.6 billion) in assets under management, is moving into bitcoin. Vimal Gor, Pendal’s head of bond, income and defensive strategies, said on Monday that the company is now investing in bitcoin futures on the Chicago Mercantile Exchange. As quoted by the Australian Financial Review, Gor thinks that not only is bitcoin “entering the realm of the mainstream”, as demonstrated by the entry of major hedge fund managers, but that “bitcoin is a cockroach that exists. They cannot banish it from existence. “Pendal also reportedly aims to place BTC for its clients, as it has previously done with gold.

Crypto … currency?
In case you missed it, PayPal CEO Dan Schulman is optimistic about bitcoin as a real currency. Fortunately for him, PayPal will soon allow its merchant network to accept bitcoin payments. Schulman, who appeared on CNBC’s Squawk Box Monday, said bitcoin’s usefulness as a currency will coexist with its buy-and-hold status. The CEO also said that a central bank digital currency is a global inevitability, although this could bolster bitcoin’s usefulness. “I think there will be more and more use cases for cryptocurrencies” that make bitcoin more accepted, more stable and probably “more valuable” over time.

Electronic money license
Crypto.com is looking to increase its Maltese financial licenses in search of a competitive edge across Europe. The Hong Kong-based crypto firm has received preliminary approval from the Malta Financial Services Authority (MFSA) for two financial licenses that govern how payment companies operate and what services they can provide. Crypto.com may soon begin offering payment services and issuing e-money as an authorized financial institution under the supervision of the MFSA. It may also internally execute, hold and process clients’ crypto assets as one of the first holders of a Class 3 Virtual Financial Assets license from Malta.

Powder magazine
Bitcoin broke above $ 19,000 on Tuesday, with the momentum to potentially reach its all-time high of $ 19,783 set on December 17, 2017. Bitcoin broke the $ 17,000 level and then the $ 18,000 level in the same week, reaching $ 7,000 in a month. Bitcoin’s market capitalization also reached an all-time high this week at around $ 329 billion, according to data provided by crypto analytics firm CryptoQuant. With the rise of institutional investors entering the bitcoin market, the ease of retail buying from PayPal and Square (among other providers), as well as miners who don’t liquidate their positions, “it seems likely that the price will continue to rise. “, according to a CryptoQuant newsletter on November 13th.

Airdrops and inflows
XRP continues to grow, hitting a $ 0.79 watermark early Tuesday, the highest since 2018. The world’s third largest cryptocurrency by market value rose 130% from its lows near $ 0.30 seen. Saturday. Analysts say a recent launch of 45 billion tokens “spark” to XRP holders related to a future smart contract platform developed by Ripple’s investment arm could set the price. However, as XRP increases, the selling pressure increases: as evidenced by the nearly $ 1 billion in XRP flowing into exchanges, possibly for liquidation.

Deposit set
Yesterday morning (at least in the USA), Ethereum Anthony Sassano pundit tweeted that 307,392 ETH ($ 181 million) had been awarded to a smart contract that would kick off the first phase of Ethereum 2.0, in what is shaping up to be the largest blockchain overhaul to date.

That was nearly 220,000 ETH less than the total amount needed to get things running on schedule. Exactly 524,288 ETH (worth over $ 325 million) had to be locked into the so-called deposit agreement to begin the next development phase by December 1st.

Last night that figure was equaled, a significant undertaking of community commitment. Now the hard part begins.

Ethereum will undergo a transition in the consensus model, from the proof-of-work system implemented in Bitcoin to the proof-of-stake mechanism designed to improve the scalability of the blockchain. Eth 2.0 will also see the implementation of sharding, another cryptographic technique designed to improve transaction throughput.

While the launch of the current Eth 2.0 network is a long way off, a proof-of-stake parallel blockchain called “the Beacon chain” will air on December 1. In this early stage of development, the PoW Ethereum and Beacon chain will coexist side by side.

Those who have pledged funds for the deposit agreement will be validators on this experimental network and will earn rewards for processing transactions and creating new blocks. CoinDesk is just one of many network validators.

A potential reason why the deposit agreement funding has gone to the limit is that the staked ether is irrecoverable in the short term, at least until the development of Ethereum 2.0 progresses significantly.

Viktor Bunin, a protocol specialist at blockchain infrastructure service provider Bison Trails, said that while some users may be put off by the one-way nature of ETH staking in the contract, “in general the community is extremely excited to launch Eth 2.0. “

Activating the Beacon chain is the first of the four phases of the Ethereum 2.0 migration, which begins with the onboarding of the validators and ultimately leads to the complete transition of all users and dapps to the new network.

“There is no chance that Eth 2.0 will not be launched,” Bunin told CoinDesk. “Eth 2.0 is a vision. It’s a push to improve Ethereum to scale support for the entire planet. Even if this launch is unsuccessful for some reason, you can rest assured that the community will learn from it and will try and try again. “