Hello and welcome to this week's edition of Overbit Insights.
Our first story of the week covers a sign of the maturity of cryptocurrency firms, as cryptocurrency firms are seeking more access to the Federal Reserve payments infrastructure.
Among those firms interested are Avanti Bank, which plans to provide custody services for institutional investors in cryptocurrencies, and Kraken, a cryptocurrency exchange platform. Crypto firms are seeking direct access to the Fed's payment systems, which, according to these firms, would allow businesses to handle orders from clients buying and selling digital assets more quickly and cheaply.
To no surprise, traditional banks are resisting the move. Banks argue that the newer crypto firms are under-regulated and lack the internal controls needed to prevent money laundering and other illicit activities.
In a push back crypto firm, Avanti and Kraken both have Wyoming "special purpose" bank charters and claim all of the same compliance, controls, and supervisory requirements as a traditional bank. Nonetheless, the Bank Policy Institute, which represents large banks, and the Independent Community Bankers of America wrote to the Fed last month, "It is reasonable to expect that such applicants will pose heightened risks regarding matters of anti-money laundering, cybersecurity and consumer protection, as well as safety and soundness,"
We'll watch this as this battle of the behemoths unfolds between the traditional banking worlds and crypto, heading to our next story of the week.
Rounding out this week's edition of Overbit Insights is some jaw-dropping numbers coming from the Ethereum network.
Ethereum miners are seeing their Ether burn—precisely as the network planned. According to Bitcoin News, the London hard fork's modifications have resulted in more than $12,000 worth of ETH being destroyed per minute. According to the source, a Dune Analytics dashboard titled "Ethereum after 1559" measures the quantity of Ether burnt after London went online on August 5.
To date, more than 100,000 ETH has been burned. At the time of writing, the price of Ether on Coinbase was about $3,309, implying that over $300 million worth of the cryptocurrency was destroyed as a result of the London hard fork.
Ethereum Improvement Proposal 1559 was one of the improvements that debuted with London.
EIP 1559's authors explained that "Ensuring the miner of a block does not receive the base fee is important because it removes miner incentive to manipulate the fee to extract more fees from users." The proposal was also designed to protect ETH, fight inflation, and reduce the "Risks associated with miner extractable value."
Miners continue to receive the block reward, and transactions can include a supplemental fee as a gratuity, but EIP 1559's changes mean that the Ethereum network is effectively burning more than $12,000 worth of ETH every single minute just to prevent miners from profiting so much from transactions on the platform.
While it's hard to say the two are directly correlated, the market has been strong around Ethereum ever since this upgrade. Perhaps the high usage on the network from exploding NFT volume may play a part, which in turn causes more ETH burns. Nevertheless, these are all crucial factors in the crypto ecosystem, and we'll do our best to keep you updated on these and more going forward. Thanks as always for reading Overbit Insights.