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G20 Moving On With Global Crypto Framework

G20 leaders, convening in 🇮🇳 New Delhi, have taken decisive steps towards a global crypto regulatory framework. This initiative, known as the Crypto Asset Reporting Framework (CARF), aims to enhance transparency in digital asset transactions. Beginning in 2027, G20 nations will exchange information on crypto transactions, covering even unregulated exchanges.

The European Union has already embraced similar disclosure standards. Finance ministers and central bank governors will discuss further measures in October 2023, while the IMF and FSB collaborate on a coordinated approach to crypto regulation. The G20 will remain vigilant in monitoring crypto developments to mitigate associated risks.

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VCs Enduring Hesitation On Crypto Space Post 2022

Venture capital firms are cautious about crypto investments following the turmoil of 2022. VC investments in the crypto industry hit a three-year low in 2023, with Q2 seeing less than $2.3 billion invested. In the first half of 2023, VC crypto investments dropped by nearly 75% YoY to $5 billion, and the number of deals decreased by about 56%.

The CEO of Ledn, Adam Reeds, attributes this caution to the fallout from 2022, which included the implosion of Terra and the closure of FTX and other crypto firms. VC interest may rise later in 2023 as crypto prices tend to influence investment with a lag.

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Emerging Economies And Tokenization

Tokenization, driven by blockchain technology, holds the potential to revolutionize emerging economies. It involves converting real-world assets into blockchain-based tokens, disrupting traditional finance. The tokenization market is projected to grow from $2.3 billion in 2021 to $5.6 billion by 2025. Emerging markets, home to billions, are embracing cryptocurrencies and can further benefit from tokenization, especially in areas like remittances and stablecoin adoption.

Tokenization offers greater economic participation by fractionalizing assets, such as real estate, making investments more accessible. While regulatory challenges exist, developing countries may lead in tokenization adoption, propelling economic growth, financial inclusion, and innovation.

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Google’s Crypto Policy Update Regarding NFTs

Google has updated its crypto policy regarding NFTs. Starting from September 15, advertisers promoting gambling-related content won't be allowed. In September 2023, Google will further update its policy, providing clarification on advertising blockchain-based games involving NFTs.

It specifies that promoting blockchain games with NFTs is permitted, as long as they are certified and don't involve wagering or staking NFTs to win real-world items. Social casino games rewarding NFTs are also restricted.

Google won't immediately suspend violators but will issue a 7-day warning for ads violating the policy. Additionally, Google is actively monitoring crypto-related scams, where scammers redirect users to malicious websites through URL injection.

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'Multiple Blockchains', Says Head of Crypto at VISA

Visa's Head of Blockchain, Cuy Sheffield, drew parallels between blockchain technology and the early days of the internet, emphasizing their evolution from skepticism to widespread use. He foresees blockchain maturing over the next decade and expects Visa's payment network to encompass multiple blockchain networks, stablecoins, and central bank digital currencies (CBDCs), not just multiple currencies and bank settlement rails. Visa has been actively using stablecoin USDC and Solana to enhance client fund transfers, emphasizing the potential for blockchain to improve settlement efficiency and cross-border transactions.

Sheffield also alluded to the initial skepticism surrounding the internet, which has transformed from being slow and unreliable to ubiquitous. He contrasted this with Nobel Prize-winning economist Paul Krugman's past skepticism about the internet and Bitcoin. Krugman's previous predictions about the limited impact of the internet on the economy and negative views on Bitcoin have been widely challenged.

In recent comments, Krugman criticized cryptocurrency enthusiasm as a tendency among "wealthy tech individuals" who think they understand money better than economists. Sheffield's post reflects a growing acceptance of blockchain technology within the financial industry.

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Open Source And The Copycat Issue

The open-source ethos in the crypto space, while rooted in collaboration, security, and transparency, often leads to a copycat problem. Many projects lift innovations wholesale, rebrand them, and offer them without proper credit to the original creators. This copycat culture tends to prioritize marketing over advancing technology.

For instance, when a new layer-1/layer-2 ecosystem gains traction, developers may quickly fork a moderately successful DEX (Decentralized Exchange), rebrand it, and claim to be the first DEX on the new chain.

Open source's origins trace back to the mid-90s, evolving from the "free software movement." The movement championed the belief that software use, reproduction, and editing are fundamental human rights, akin to "freedom of speech" in the digital age. However, not all open-source licenses adhere to the same ethos; some, like the permissive MIT license, are more neutral.

What is a potential solution?

To address the copycat problem and maintain genuine open source principles, crypto ecosystems should provide incentives, mentorship, and foster a culture of recognition. Grant and bounty programs can reward developers for improving code and introducing features that benefit the greater good. Mentorship is crucial, as some founders mistakenly believe that repackaging existing open-source code provides the same results without considering long-term consequences.

Instead… ☝🏽

It needs a decentralized social conscience to strike a balance. By respecting original creators, reviewing code, giving credit, and making meaningful improvements, the crypto space can evolve into a global, inclusive internet financial system with revolutionary network effects benefiting both micro and macro economies.

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The Answer To DeFi’s Shaky Foundations

The DeFi (Decentralized Finance) industry faces challenges due to its rapid growth during the bull market. Projects rushed to market with unsustainable designs, creating an inefficient and risky environment. Lending protocols operate in isolation without shared data, making it difficult to assess asset health. Recent events, like CRV as collateral on Aave v2, highlighted liquidity depth issues.

So What’s The Solution?

DeFi needs transparent data and multichain relationships to evaluate asset health accurately. The lack of visibility is a problem, driven by centralized paths that profit from data monetization. Achieving the $1 trillion milestone in on-chain value requires permissionless infrastructure to remove centralized dependencies and eliminate weak points.

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Addressing Reputational Damage In DeFi

DeFi (Decentralized Finance) faces a reputation problem, as it's increasingly viewed as a space where criminals take advantage of less-savvy users.

So far everyone has heard something along those lines, right?

Current criticism suggests that DeFi needs to shift its focus from speculation to value creation and stop equating itself with traditional financial markets.

Builders should rely less on token incentives and airdrops and focus on showcasing real value creation and sustainable business models.

Additionally, there's a need to innovate in the legal and regulatory infrastructure to fit the DeFi ecosystem while guarding against illegal activities.

The concept of Real World Assets (RWAs) is presented as a way to merge traditional sectors and DeFi, digitizing tangible assets like real estate on the blockchain.

How do we get there?

To rebuild DeFi's reputation, accountability for builders and borrowers is essential, and measures should be taken to enhance security and establish legal agreements for accountability.

Ultimately, DeFi can become a decentralized financial system that empowers everyone with equal access to global capital through RWAs, addressing financial challenges in various regions and driving Web3 innovation while leaving speculation behind.

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Adoption in Web3 Will Be Determined By Intuitive UX And Convenience

Web3, with its foundation in blockchain, smart contracts, and cryptography, promises a decentralized and autonomous world. However, for it to succeed, it must prioritize user experience (UX) and convenience. Many people still find web3 complex and unappealing, which hinders its adoption. While tech-savvy users appreciate web3's focus on privacy and autonomy, the broader population needs simpler onboarding and intuitive interfaces.

The evolution of web3 spans nearly four decades of technical advancements aimed at making processes more convenient for end-users, despite the threat of centralization. To compete with web2 giants like Google and Apple, web3 must offer more than just decentralization. The consensus mechanisms in web3, such as proof-of-work (PoW) and proof-of-stake (PoS), play a crucial role in UX by affecting transaction speeds.

To make web3 practical, it should transition to platforms that offer effortless onboarding, intuitive interactions, and user-friendly features. Transitioning from web2 to web3 should be smooth, from Know Your Customer (KYC) processes to handling digital assets.

Balancing convenience and resilience is challenging, but technological advancements like multi-party computation (MPC) and Threshold Signature Schemes (TSS) provide solutions. These innovations enhance security while simplifying key management and wallet usability. Layer-2 frameworks, like account abstraction and zero-knowledge proofs, further improve the web3 experience.

Web3's success lies in its ability to offer both decentralization and user-friendly features, meeting users in their digital habitats. As developers continue to innovate and address real-world needs, web3's widespread adoption becomes inevitable.

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Education And Crypto Literacy Scale To Measure Consumer Financial Awareness

Researchers at the University of Cincinnati have developed a Crypto Literacy Scale (CLS) to measure and standardize economic and financial knowledge related to cryptocurrencies. This scale aims to bridge the gap between traditional financial literacy and crypto literacy and is designed to improve cryptocurrency education, protect consumers from scams, and enhance wealth generation opportunities in the crypto space.

While traditional financial literacy has encouraged financial empowerment and decision-making skills, there was no corresponding scale for measuring crypto literacy. The CLS focuses on the unique knowledge requirements needed to understand cryptocurrencies, distinct from traditional finance. Although the research paper did not disclose the questions used in the scale, it emphasized the importance of educating individuals about cryptocurrency.

Despite the growth of crypto adoption, global crypto literacy remains relatively low, with studies indicating that a small percentage of the population possesses sufficient knowledge about cryptocurrencies and blockchain technology.

The CLS represents an effort to address this knowledge gap and promote informed decision-making in the crypto world.

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Web3 Is Not a Straight Sequel To Web2

In the context of Web3, traditional marketing approaches fail to account for the importance of communities. Web3 communities represent a unique and invaluable aspect of projects, as they cannot be easily replicated or copied.

In contrast to Web2, where there are customers and clients, Web3 involves users forming a community. The key is to raise awareness without attempting to convince anyone of anything, as Web3 users are typically more autonomous and self-driven in their decisions. In Web3, treating everyone within the community with respect, regardless of their anonymity, is crucial. Transparency, user-focused strategies, and personalized interactions are emphasized. Marketing in Web3 is about nurturing relationships, not selling products.

Traditional marketing budgets and tactics are less effective than creating a welcoming and engaging community space. Retaining users is the primary challenge, and fostering a sense of belonging and value within the community is essential.

In Web3, community is a store of value, representing the collective heartbeat, passion, and vision that drive projects forward. Tokens may fluctuate, but the trust, commitment, and inspiration of the community are the true sources of value. 

Web3 marks a cultural renaissance, where the community is not just an audience but co-creators and stakeholders, integral to a project's success and legacy.

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