Investors with shorts out on pepecoin (PEPE), the Pepe the Frog-themed token launched days ago on Ethereum that notched a valuation above $1 billion amid a trading frenzy, have lost millions as the meme coin’s rally continues. CoinGlass data shows short sellers have lost $5.5 million on OKX, $2.2 million on Huobi, $3.6 million on Bybit and a few hundred thousand dollars on BitMEX – all exchanges which began offering PEPE futures in the past week. Retail traders be warned: the data also shows much of the token’s circulating supply is held by a few early investors (meaning everyone else could become “exit liquidity”). The economic impact of PEPE isn’t limited to day traders, as the meme coin mania has driven the average gas price on Ethereum to a 12-month high.
Crypto Crackdown
Israel has seized 190 accounts at crypto exchange Binance allegedly tied to terrorist organizations including Daesh and Hamas since 2021, according to never-before-published documents from the Israeli Defense Ministry’s counter-terrorism division. “This is why our team collaborates with law enforcement, and leverages information that is only available to them,” Binance said Thursday in a public response to Reuters, which first published the news. Binance’s 700-member compliance team processes about 1,300 law enforcement requests per week, the company has said. Meanwhile, the U.K.’s Financial Conduct Authority (FCA) has been cracking down on crypto ATMs across the country. CoinATMRadar counts only 17 crypto ATMs on the island nation, though the FCA said no licensed crypto company is permitted to offer this service.
Heavy Metals and Metaverse Clouds
Alibaba Cloud, the computing division of China’s tech behemoth, has built a launchpad for businesses to deploy metaverses on Avalanche, the layer 1 blockchain. Named Cloudverse, the tool is designed to enable companies to customize and maintain “metaverse spaces.” Avalanche will serve as the base tech for the digital spaces, while Alibaba, which is also hosting node services for Sui blockchain developers Mysten Labs, will provide the computing and storage, according to a statement. Elsewhere, the Reserve Bank of Zimbabwe is now onboarding citizens and companies onto its upcoming gold-backed digital token. The novel token project was announced in April, and will launch on May 8 in an attempt to counter the country’s infamous problem with inflation.
Sound Bites
“We’re not building yet another blockchain that basically looks and feels the same as any other blockchain.”
– Mysten Labs CEO Evan Cheng, on CoinDesk TV’s “First Mover”
The Takeaway: ‘These Will Be Worthless’
A new frenzy is sweeping cryptoland – so-called “BRC-20s” are fungible tokens deployed on the Bitcoin blockchain, and some are beginning to see major market activity. The proposed new standard was introduced in March by a coder known online as Domo, and it has a lot of interesting potential. The main point of the BRC-20 experiment, enabled by new features introduced in Bitcoin’s recent Taproot upgrade, is to see exactly what the new tech can do.
When I reached out, Domo generously recommended a few resources for techies who want to dig deeper on BRC-20s. This basic intro for builders explains how to deploy BRC-20s and discusses some of the broader questions yet to be resolved. This is a more in-depth technical rundown by Domo. And this is a video introduction by YouTuber pazNGMI, which includes info on minting and wallets. But Domo, and most other experts, have issued strong warnings against financial speculation in the new token format. In fact, just after the experimental standard was launched, Domo declared that “These will be worthless. Please do not waste money mass minting.”
With a flood of new BRC-20 memecoins being traded for real money, at least some people are clearly ignoring that warning. And it’s hard to blame them: in crypto, getting in first on anything new tends to be a decent strategy for speculators. So why would the first assets created with this exciting new technology be “worthless?” There are two prongs to the explanation. On the one hand, the BRC-20 standard is just a proposal at this point, and there’s no guarantee it will be widely integrated into blockchain tools like wallets and exchanges.
Average users will probably have a hard time accessing BRC-20s for the foreseeable future. Wallets have to have special features to read ordinals, and even more special features to read the new BRC-20s. Indeed, standardization could be a long way off: the design of BRC-20 isn’t necessarily finalized, much less fully vetted or adopted. In theory, there might be other ways to deploy tokens on Bitcoin, or further improvements to BRC-20 in its current form. If a competing or improved standard winds up being more widely adopted, the current wave of BRC-20s could become little more than digital museum pieces.
But second, and more fundamentally, it remains unclear just where the economic value of tokens issued on Bitcoin might come from. Despite borrowing their nomenclature from Ethereum’s ERC-20s, BRC-20s cannot be integrated into smart contracts or decentralized finance (DeFi) across chains, and regardless, Bitcoin itself doesn’t have DeFi features. Moreover, getting BRC-20s onto DeFi will likely involve bridges or other higher-risk structures. For now, this means BRC-20s also cannot serve as the backbone of decentralized autonomous organizations (DAOs) or other more complex systems that would give them utility and value.
There’s a much more immediate downside to BRC-20s current limitations, even for degens happy to play the decentralized Ponzi game of memecoins. The lack of DeFi compatibility means that BRC-20s can’t benefit from liquidity provided by DeFi services like trading pools. So even pure speculation in the tokens may not have the frothy upside of a similar token issued on Ethereum. In fact, we’re seeing that play out right now. A BRC-20 known as “Pepe” is among those now being traded by a few daring basement-dwellers. BRC Pepe and all the other BRC-20s that currently exist had a combined fully diluted value (FDV) of $137 million as of May 2. But there’s also a “Pepe” memecoin on Ethereum, which was launched in April. Its FDV now sits at $1.2 billion.
In short, BRC-20s are a fascinating innovation with seriously interesting potential. But if you’re looking for the lowbrow thrill of riding ephemeral pumps in animal-based casino tokens, it seems Ethereum should still be your home base.
Though there have been recent signs of crypto winter thawing, developers have continued to make the most of the current builder’s market. NEAR, in particular, has seen significant growth in new projects and increased adoption over the past year.
NEAR’s expansion is due in part to some significant upgrades and announcements from its core team. Most recently, NEAR announced its transition to a Blockchain Operating System (BOS), an industry first that further establishes NEAR as the direct entry point into Web3. With the BOS, NEAR is no longer just a Layer 1 — it’s the OS for an open web, free from the centralized platforms of Web2.
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How to Cope
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