Another seven days have flown by, and as always, we are on guard for the most exciting and fun news of the past week. This time around, we’ve got tales of NFT-backed loans reaching seven-figure sums, discussions on Bitcoin’s prospects in El Salvador post yet another victory for their crypto-friendly president. Plus, we’ll delve into the social network that touched Vitalik Buterin’s heart and a tough ultimatum to Hong Kong’s cryptocurrency exchanges. Join us!
A Million-Dollar NFT Loan
The owner of CryptoPunks NFTs has decided to put naysayers of NFTs to shame by taking out a seven-figure loan against one of the rarest assets in the collection of these iconic profile images (PFPs).
“Here we are, a solid four or five months longer than a Rolling Stone article claiming NFTs are useless” proclaimed collector and entrepreneur Gmoney on the live broadcast of “FOMO Hour” on Rug Radio. “So I thought, what better way to prove them wrong than to snag a million-dollar loan against an NFT, right?”
Well, our protagonist received a loan via Gondi, one of several NFT lending protocols that decentralize connections between NFT owners and liquidity providers. Holders can take out loans by staking their prized NFTs as collateral, while the counterparty, floating the cash, bets on making a tidy profit from the deal, or perhaps seizing the NFT itself if loan obligations aren’t met.
This particular loan was issued for $1 million in USDC stablecoin, with a hefty 14% interest rate over 180 days, meaning our borrower must pay over a whopping $69,000 in interest every six months. It was called as the biggest loan to date through an NFT lending platform.
Gmoney revealed he’s an investor in Gondi, along with rival NFT lender Arcade. But platforms like these don’t require any real-world connections, reputation, or ID verification. Any NFT holder with a valuable asset could potentially snag a loan without trust.
Who would’ve thought we’d end up in an era where you can loan against a PFP? Some folks struggle to get a mortgage on a house, and here we are, throwing up images as collateral. But hey, it’s a vivid example of how the rise of NFT-backed loans could push this space even further.
Does Bukele’s Victory in El Salvador Elections Boost Bitcoin?
Nayib Bukele, who held the Salvadoran presidency from June 2019 to December 2023, was the driving force behind Bitcoin’s legal tender status in El Salvador in September 2021. On February 4th, Bukele won a landslide victory in the re-election, with preliminary results showing he bagged 83% of the votes from 70% of the counted ballots.
Local Bitcoin traders and enthusiasts reckon that El Salvador’s lofty ambitions to lead the world in Bitcoin adoption might need more than just the re-election of their Bitcoin-loving prez, Nayib Bukele.
According to Jamie Robinson, chief strategist at The Bitcoin Hardware Store, the so-called “Bitcoin experiment” in El Salvador will be complicated due to a tech-illiterate population, lack of law enforcement over merchants, and the Bitcoin market mostly treading water.
Robinson explains that the troubles began right after the launch of El Salvador’s Chivo wallet in September 2021, which, according to him, crashed upon takeoff. But even after ironing out those wrinkles, he elaborated that Chivo devices often ended up uncharged and outdated, and many shopkeepers lacked the technical chops to reboot them.
Less Than Half of the Population Actually Uses Bitcoin
According to a recent survey by the Central American University José Simeón Cañas, in 2023, only 12% of the local population had even used Bitcoin to pay for goods and services at least once, compared to 2022.
However, Robinson notes that since then, the private sector has stepped in to help the government address many of these issues.
“Ditobanx, Tiankii, IBEX, and Athena are offering lightning-fast solutions for major global brands like Walmart, Starbucks, Re-Max, and Domino’s.”
Robinson noted that several casinos and restaurants have also made renewed efforts to accept Bitcoin as payment now that Bitcoin is trending upwards again.
The price movement upwards will help start more businesses that deep down know they have legal obligations.
Initially, the Salvador government warned businesses of potential repercussions if they decided not to accept Bitcoin. But Robinson says he hasn’t seen any fines or punishments yet.
Meanwhile, consumer demand for Bitcoin payments has been lacking, especially after Bitcoin plummeted from its record-high price of $69,000 USD to $15,600 USD in early 2023.
Hong Kong Crypto Exchanges Given Clear Ultimatum
The Securities and Futures Commission of Hong Kong (SFC) has issued a firm mandate to all virtual asset trading platforms (VATPs) operating within its jurisdiction. Starting from February 29th, all crypto exchanges in Hong Kong must either obtain or apply for a VATP license.
Investors currently using unlicensed platforms are advised to transfer their assets to a licensed entity by May 31st. Failure to comply with this requirement could potentially result in the closure of their accounts.
Emphasizing the importance of trading through licensed exchanges, the Commission urged investors to regularly check the regulatory status of their platforms. The SFC stated:
“Investors should verify whether the VATP is included in the ‘List of Licensed Platforms for Trading Virtual Assets‘ or the ‘List of Applicants for Platforms for Trading Virtual Assets’.” This list distinguishes fully licensed VATPs from those with pending applications.
In this list, fully licensed VATPs are distinguished from those with pending applications. Reiterating the seriousness of these rules, the SFC warned that trading on unlicensed platforms could pose significant risks, as approval of pending applications is not guaranteed.
Hong Kong positions itself as a hub for digital asset trading. The SFC directive marks a crucial step in creating a regulated and secure environment for investors in virtual assets. These recent developments signify a balanced approach between fostering innovation and ensuring reliable investor protection.
Vitalik Buterin Raves About New Crypto Social Network
The daily active users of the decentralized social protocol Farcaster, built on Ethereum Layer 2 Optimism, have skyrocketed nearly tenfold, hitting record highs since the launch of the built-in mini-apps called Frames. These Frames allow users to perform various functions within the social network app, such as gaming, online shopping, and NFT creation, without relying on third parties.
As a result, the daily protocol revenue has also soared to record levels, increasing by almost 1500% from $2500 on January 25th to over $39,000 as of yesterday. The protocol’s cumulative revenue now stands at just under $450,000 since its launch in August 2022.
Farcaster was founded by former Coinbase executives Dan Romero and Varun Srinivasan, offering Ethereum wallet holders a censorship-resistant solution to take control of their social media data and sling it over to decentralized apps within its ecosystem. X-like Warpcast, the flagship app built on this protocol, accounts for a whopping 45% of Farcaster sign-ups.
According to Romero, the Farcaster ecosystem boasts over 5 million unique followers, 6 million reactions, and 2.8 million broadcasts, which is akin to about 30,000 Ethereum addresses on-chain. Notable users like Ethereum co-founder Vitalik Buterin have been kicking it with this protocol for some time now, probably using it to broadcast his latest cat memes.
Unlike resorting to “financial speculation as a replacement for entertainment,” as Buterin seemingly views it, Friend.tech did, the creator of Ethereum praised Farcaster, as well as the decentralized social network protocol Lens, as products that will stand the test of time.
“Prediction registered: Farcaster and Lens WILL NOT be abandoned in 4 months or 1 year,” wrote Buterin.
It’s quite astonishing that some social network managed to hook Vitalik himself enough to defend it on Twitter. That says a lot! Maybe it’s worth signing up after all. And that’s all for the news today. “So soon?” you ask. Never mind, we’ll be back next week with even juicier and fresher crypto tales. Subscribe to our digest so you don’t miss out!
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