Bitcoin busts down the doors of Congress

As ever, incentives matter.

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BITCOIN BOX SCORE

Exchange Rate: $67,820
Market Capitalization: $1.34T
Hash Rate (90 days): 605.1 EH/s
Transactions (30 days): 16,651,
Network Fees (day): 10 sat/vB
Bitcoin Dominance: 54.04%

Bitcoin has always been neutral money, not controlled by the government or a cabal of insiders – however, it has always been politically divisive – not everyone likes freedom money.

Yet today, it has become a pivotal political issue, driving congressional leaders to reassess their positions. Recognizing its potential to transcend traditional financial services and its growing popularity, many are now aligning themselves with the bitcoin and crypto industry.

This shift is illustrated by yesterday’s vote in Congress. The passage of the Financial Innovation and Technology for the 21st Century Act, with bipartisan support, marks the industry's most significant legislative victory to date. The bill seeks to establish clear rules for digital assets, providing a framework for classification, trading, and regulation.

The Chamber of Digital Commerce, a leading industry advocacy group, hailed this development as crucial in addressing the regulatory uncertainty that has driven business overseas and stifled innovation. 

The political landscape is evolving rapidly, driven by increasing public interest and political donations from industry participants – of which there are millions nationwide.

Bitcoin is winning. Politicians respond to incentives and, as a result, are now finding ways to welcome bitcoin back into the fold. Bitcoin’s impact on U.S. politics is finally being felt. Look for this trend to continue through the November election and beyond.

NEWS

⚡️ Lightning Labs enables stablecoins on Lightning

Lightning Labs has successfully tested a protocol to transmit stablecoins on the bitcoin blockchain. The announcement was made by CEO Elizabeth Stark at the Financial Times Crypto and Digital Assets Summit. Stark believes this solution will enable global transactions and attract more developers to bitcoin.

Layered money.

Such innovations make sense – and fit well within the layered money framework, demonstrating that bitcoin can serve as a base layer technology for protocols and use cases built on top of it.

🏛️ Disgraced FDIC chair steps down

Martin Gruenberg, head of the Federal Deposit Insurance Corporation (FDIC), announced his intention to step down following an independent investigation revealing widespread harassment, discrimination, and bullying within the agency. President Biden is expected to nominate a successor soon, while Gruenberg will continue his duties until a new chair is confirmed.

Chokepoint implications?

Gruenberg was a leading player in “Operation Chokepoint 2.0,” the regulatory assault on bitcoin and crypto in the U.S. Whether his successor continues this unfounded hostility remains to be seen.

❌ 🏦 The demise of dual-currency banking

The District Court of Wyoming ruled that the Federal Reserve has the discretionary authority to deny a master account to Custodia Bank, a state-chartered bank aiming to serve bitcoin and crypto companies. Custodia Bank operates on a full reserve banking model and will likely appeal the decision.

Though the decision was made almost two months ago, individuals and institutions are still analyzing its implications for the banking system if it is upheld.

Economist Gerald Dwyer surmises that, if the Fed can deny any newly chartered bank a master account, state charters no longer matter. The Fed essentially becomes the state-charter authority, and the dual banking system as we know it is dead, further centralizing banking in the U.S.

🇺🇸 Trump accepts bitcoin and crypto donations

Donald Trump has become the first major party candidate to accept bitcoin and crypto donations for his campaign. This move follows his recent public statements positioning himself as the pro-bitcoin and crypto candidate in contrast to the Biden administration's alliance with anti-crypto personalities like Elizabeth Warren and Gary Gensler.

With friends like Coinbase… 🤦‍♂️

Users are allegedly unable to support Trump using bitcoin because his campaign is using Coinbase Commerce, which no longer directly accepts UTXOs – only bitcoin already on the Coinbase platform, adding to a long succession of unforced errors by Coinbase at critical moments in the mainstreaming of digital assets.

BITCOIN ADOPTION CONTINUES

Metaplanet, dubbed 'Asia's MicroStrategy,' and employing a Director of Bitcoin Strategy, Dylan LeClair, saw its shares surge 158% in the past week, becoming Japan's top-performing stock and triggering multiple trading halts on the Tokyo Stock Exchange.

The Bitcoin Policy Institute launched the Peer-to-Peer Rights Fund to protect decentralized bitcoin tools and their developers from regulatory overreach.

The UK's Financial Conduct Authority (FCA) gave permission to WisdomTree to list bitcoin exchange-traded products (ETPs) on the London Stock Exchange.

Bitcoin supply on exchanges hits a seven-year low, indicating bullish momentum as investors move their holdings to self-custody in anticipation of price increases.

HOW BITCOIN WORKS

Learn one key idea about bitcoin each week. This week:

What is the difficulty adjustment?

Bitcoin's difficulty adjustment mechanism is a fundamental component of its protocol, ensuring the consistent issuance of new blocks approximately every 10 minutes. In fact, many believe it is Satoshi Nakamoto’s most elegant innovation.

The difficulty adjustment is essential for maintaining the Bitcoin Network’s stability and security. Bitcoin’s mining difficulty correlates to how much energy it takes to mine a block. Difficulty dynamically adjusts every 2016 blocks, or roughly every two weeks, so that no matter how much energy is used to mine bitcoin, it always takes about 10 minutes to mine a block.

The process works as follows: if the network's combined computational power, or hash rate, increases – resulting in blocks being mined faster than the target of 10 minutes – the difficulty will automatically increase. Conversely, if the hash rate decreases and blocks are mined more slowly, the difficulty will decrease, letting the miners who are still online find blocks faster, which preserves the 10-minute block interval.

Technically, the network adjusts the target number encoded in each block header, known as the 'bits'. This target inversely determines the difficulty: a higher target makes mining easier (lower difficulty), while a lower target makes mining harder (higher difficulty).

Bitcoin's difficulty adjustment ensures a steady and predictable time chain, and ensures that the usability of the network is not dependent on the amount of compute devoted to mining.

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COIN CHECK

How many bitcoins did Laszlo Hanyecz exchange for two pizzas 14 years ago on May 21st, 2010?

  1. 11,000

  2. 21,000

  3. 6,140

  4. 10,000

Check your answer at the end of the page.

FROM THE MEME POOL

ANSWER

  1. 10,000. For more information about this historical event, check out this excellent thread by Pete Rizzo.

That’s all for this week, folks! When you signed up for this newsletter, we promised to act as your personal guide and help you understand what’s happening in the world of bitcoin. What did you think of today’s newsletter? Reply to this email and let us know what you’d like to see more of.

Until next week!

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