Month: April 2021

Ethereum Berlin Is Here, Next Stop Is London

The Ethereum blockchain has implemented the Berlin hard fork at block 12,244,000 this past Thursday (April 15, 2021). This was not the anticipated Optimism Rollout yet, but instead are a set of improvement proposals to help the network with gas costs and security.

Berlin was supposed to implemented in 2020, but as with most Ethereum projects it got pushed back. There were centralization concerns around the Geth client on which most Ethereum nodes operate. An important feature of Berlin is the live swapping of Ethereum from a proof-of-work to a proof-of-stake blockchain.

Other important features of Berlin are optimizations for smart contracts including gas efficiency, updates to EVM code and protection against DDOS attacks.

The upgrade implements the following:

  • EIP-2565, reduces gas cost for a specific transaction type that uses modular exponentiation.
  • EIP-2718, makes all transaction types “backwards compatible” using so-called “envelope transactions,” which allows the addition of new transaction logic into Ethereum.
  • EIP-2929, increases gas costs for “op code” transactions, a pain point for denial of service attacks on Ethereum in the past.
  • EIP-2930, a new transaction type (made possible by EIP-2718’s envelope transactions) which allows its users to create templates for future, complex transactions in a bid to lower gas costs.

The upgrades are in line with the bigger upgrade that will introduce EIP 1559 called London.

Tokenizing Stocks Is The Next Financial Instrument

Binance is offering a new financial instrument on its digital exchange. They are offering a way to purchase fractions of a company’s shares using a tokenized stock trading service. This will provide stock traded equities in financial markets for investors. Binance will begin with Tesla stock on their exchange. The instrument is called a Binance Stock Token, and this allows users to buy a stock or a fraction of a share and earn dividends as well. The prices will be settled in Binance’s BUSD stablecoin token.

For users who have no access to financial markets, they now have an opportunity to own as little as 1/4 of share in an equity like Tesla (TSLA). There is no more need to purchase several stocks when you can have just a fraction and earn from it. This gives exposure to the non-traditional crypto investors who don’t have to wait for other platforms to offer the service.

S = Shares of A Stock
p = Price of the Stock
b = BUSD

b = S(p)

The user will purchase the stock in BUSD prices (b).

Binance claims that they are not creating synthetic assets to offer as stock. They have an asset that is backed by a depository portfolio of underlying securities, which is also managed by a German investment firm. In order to follow compliance, the service is not available to all jurisdictions and only where the exchange is allowed to offer such a service. Those interested will definitely be required to submit a KYC/AML document for legal purposes.

Two things that I can expect to see:

  1. Increase in BUSD trading as a result of the tokens use for investing in stocks. BUSD prices will not surge because it is pegged 1:1 with the USD.
  2. Open up the stock market to first time investors who have never had exposure to equities. This allows users who were either not allowed to trade because of lack of funds or not have access to stock investments to get their chance.

It is interesting to note if other DeFi products will follow that can interact with the Tesla stock. Binance also has its native Binance Smart Chain(BSC) which uses smart contracts that can lock tokenized stocks in a different protocol and earn from it. Some DeFi protocols may even accept tokenized stocks as collateral, depending on how valuable it is in the market.

This can also further boost Tesla stock prices as it has seen a phenomenal surge. Binance can gain more investors while helping bring Tesla stocks higher. While the trends look good for Tesla, investment always involves risk so users must do their due diligence and research always before investing.

Disclaimer: This is not financial advice. The information provided is for educational and reference purpose only, not for making investments. Do your own research always.