Crypto Weekly: Proof-of-Work is Spared For Now

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Written by Mads Eberhardt, Cryptocurrency Analyst Saxo Bank

On Saturday, the Ukrainian government started receiving donations in cryptocurrencies, likely being one of the first governments to do so. On the day before, the European Union spared proof-of-work for strict regulation, and the large Japanese e-commerce firm Rakuten launched its own NFT platform.

Ukraine receives donations in crypto

On Saturday, the official Twitter account of Ukraine sent out a tweet asking for donations in Bitcoin, Ethereum, and the largest stablecoin known as USDT. The addresses have so far received over $12mn worth in cryptocurrencies. It seems the donated crypto is continuously sent to an exchange, which tells that the Ukrainian government is presumably selling the crypto to fiat to make use of the donations. The Ukrainian government is arguably one of the first governments to ask for donations in crypto.

Proof-of-work is spared – for now
The European Union was today supposed to vote on a bill named MiCA intended to regulate crypto in the EU. The primary objective of the bill was to regulate the hugely energy-intense consensus protocol named proof-of-work used in verifying Bitcoin and Ethereum transactions over environmental concerns. However, the European Union announced on Friday that it canceled the vote planned for today.

According to Cointelegraph, following the announcement, European Parliament economics committee member Stefan Berger said, “The discussion about MiCA indicates that individual passages of the draft report can be misinterpreted and understood as a [proof-of-work] ban,” and continued: “It would be fatal if the EU Parliament sent the wrong signal with a vote under these circumstances.”

Based on the statement by Berger, it seems the proof-of-work protocol has been spared for tough regulation by the European Union, for now at least. Since Ethereum has planned to replace proof-of-work with significantly more environmental-friendly proof-of-stake later this year, the issue of proof-of-work solely relates to Bitcoin.

However, as we wrote in our Q1 Quarterly Outlook, proof-of-work is a millstone around the whole crypto market’s neck. Due to growing environmental consequences, even though proof-of-work was spared in the EU for now, it is simply too fragile to operate harmlessly through an ever-changing regulatory environment and the ascending intention to be sustainable from regulators, users, and developers across the globe. To withstand the possible future tension from stakeholders on this matter, we believe Bitcoin has to follow in the footsteps of Ethereum and adapt an environmentally-friendly consensus protocol such as proof-of-stake.

Rakuten launches NFT platform
We reported last week that the New York Stock Exchange has filed a trademark to possibly trade non-fungible tokens (NFTs) in the future. On Friday, the great Japanese e-commerce firm Rakuten launched its own NFT platform named Rakuten NFT. At the moment, the platform offers the feature to purchase and sell NFTs, while the feature to issue NFTs is planned for 2023 or later. The NFT platform by Rakuten has the potential to make NFTs mainstream in Japan and other nations. In substance, Rakuten continues the trend of 2021 with large corporations worldwide tapping in on the NFT market, either by acquiring, issuing, or adapting their products to the world of NFTs.

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