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Token Daily Newsletter #26

How Zap's Strike Can be Fundamental Moment in Bitcoin's Journey

A few days ago, Zap founder Jack Mallers, announced an important project he's been building named Strike. The ingenuity of Strike is that it allows the use of Bitcoin and LN to settle everyday financial transactions without the payer being necessarily aware they are using Bitcoin. Before discussing why Strike can be a critical turning point in Bitcoin history, let’s provide a succinct overview of how Strike works and the advantages of using it. For more details about Strike's origin story and the team's long term vision, read Jack’s article in its entirety. 

How Does Strike Work?

Let’s start with a simple scenario: you are a customer of a business that uses Strike/Zap to settle transactions. The business offers you a discount for using Strike, so you download the Strike app, and load it with a few bucks from your bank account. When you shop at this business and it’s time to check out, you will see a QR code that you just scan and the payment is then completed. For the end user, it's a very simple and straightforward checkout experience.

Under the hood, the QR code is actually an LN receipt, your USD in the Strike app was used to buy enough BTC, through a commercial liquidity provider, to pay this LN receipt. Strike immediately sent the BTC to the business LN channel. As a user, you were not involved with any of these details, all you saw was an immediate payment to the business.

So, the question becomes why? Why execute a payment this way? 


Why Strike/BTC Can Become a Favorable Payment Rail

One of the best things about Strike is that the payment was performed in the described manner because there was a need for it, not for fun, not for cosmetic frivolities, and not because the merchant or the customer is a "Bitcoin fanboi." 

Businesses that favor this payment rail generally cannot get or afford to bank at a legacy institution. This might be due to the nature of the business, the business owner's credit history, or because they are being charged exorbitant fees to settle payments. Just look to cannabis dispensaries in Colorado that are being charged 5-15% for every transaction. These businesses would immensely benefit from using LN and BTC as a settlement layer, so long as users could pay without excessive friction. 

Strike can, of course, still charge a fee but it'd undercut the egregious 15% pricepoint. This alternative payment method offers faster, more secure and economical ways of settling everyday transactions. 

Strike Can be a Pivotal Product For Bitcoin 

Unfriendly tax law that classifies Bitcoin as property is one of the main reasons Bitcoin has struggled in the Payment arena. The other reason has been volatility. As Bitcoin believers, we want to see Bitcoin as SoV and, perhaps, as electronic cash. Strike cleverly solves these issues. Strike's users can use Bitcoin as electronic cash to pay for their transaction without being subject to volatility or taxable events. Bitcoin and LN in this context become an efficient payment rail that directly competes with current rails without having any of the “regular” Bitcoin transactions drawbacks such as time to settle transactions, on-chain fees or volatility. This brings Bitcoin closer to the goal of becoming a globally accepted currency and financial settlement layer.


State of Digital Assets Event

Last week, we hosted an investor event on The State of Digital Assets in Boston. Catherine Wood of Ark Invest delivered an insightful keynote on assessing Bitcoin's opportunity. There were also several panels with speakers from TD Ameritrade, Fidelity, CFTC, Square, Bakkt, CMT Digital, and MIT.

We'll be releasing videos of the presentations soon, so keep an eye out for them!



⚡️ Schnorr, Taproot, and Tapscript Assigned BIP Numbers 340-342 

After structured review sessions in November and Decemebr, awaited Bitcoin proposals Schnorr signatures, Taproot, and Tapscript are moving closer to implementation and were assigned the BIP numbers 340, 341, and 342. This brings more community focus to the BIPs and starts the discussion (and potential debate) about the timeline of the upgrade process. Some supporters are already starting a Twitter handle change campaign to publicize the BIPs.

⚡️ Square Crypto Lightning Development Kit (LDK)

Given the importance of Lightning Network development for the Bitcoin ecosystem, Square Crypto decided to focus its resources on building a development kit that will allow easy integration of LN with other wallets, improved UX, and multi-platform access to individual wallets. 



🔹  More Than 35,000 Validators on The Ethereum 2.0 Testnet

In their last update on Ethereum 2.0 development, the Prysmatic Labs team indicated they currently have more than 35,000 participants in their testnet.

This number is actually more than double the number of the initial set of validators on Ethereum 2.0 mainnet. To put numbers in context, other PoS networks allow a number of validators below 300. This design choice was made by Ethereum Foundation researchers to ensure the widest possible decentralization in Ethereum 2.0.

🔹  MolochDAO $40K Proposal to Review ETH 2.0 Economic Design

Delphi Digital, one of the leading research companies in the crypto space, has submitted a proposal for MolochDAO to perform a review of the Ethereum 2.0 economic design. The proposal cost is 300 shares in MolochDAO's Guild bank. Each share is currently valued at ~$143, putting the actual proposal cost at nearly $43K. If the proposal is approved by the DAO members, Delphi Digital will become a member of the MolochDAO and can redeem all or part of their shares to ETH. Moloch has funded similar research reports before which was performed by Kyokan but was much smaller in terms of funding ($6k). 




☠️ Trezor Hardware Vulnerability

The Kraken Labs team has disclosed the details of an attack that can be executed against the Trezor One and Trezor Model T hardware wallets. The attack requires physical access to the Trezor wallet, cracking open the case, removing the microprocessor chip and plugging it into special hardware that performs the attack against the microprocessor. A successful attack also required the wallet to be protected by a pin and not through a passphrase.

Given the published technical details, the best protection against the attack is to keep the wallet secure and prevent access to the hardware wallet. 


🧾 Are You Ready For Taxes? 

It's the most wonderful time of the year for the IRS.

Crypto users have resurfaced one of the important changes the IRS made last year to tax forms (Schedule 1) which explicitly asks whether the taxpayer has used "virtual currencies" in 2019.

Some think the change will make more people aware of Bitcoin and cryptocurrencies, others think it's a trap that will allow the IRS to curate a list of individuals to audit. 


💵 Bitcoin Cash Fiscal Policy (Or Lack Thereof)

In a move that surprised the Bitcoin Cash community and the crypto community as a whole, a group of BCH mining pools announced a plan to forcefully create a dev funding pool by forcing mining pools to donate 12.5% percent of the coinbase reward to fund development activity. The CEO of the BTC.TOP mining pool announced the group intention to orphan any block that doesn't follow the group's plan and refuses to donate. The aggressive attitude caused a wide backlash around how a cartel of mining pools can decide the direction of a $6B+ network through closed-door meetings. 

The backlash ultimately caused the BTC.TOP CEO to retract some of his aggressive announcements and suggesting bringing the topic to a miner vote. 



Disclosure: Token Daily Capital and/or its partners may have exposure to some of the cryptocurrencies mentioned in this newsletter.

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