Matrixport Forecasts Bitcoin Bull Market Breather Ahead

Beijing-headquartered crypto mining equipment manufacturer Canaan recently revealed its financial results for the fourth quarter of 2023, demonstrating that it continues to struggle with profitability despite positive numbers relative to revenues and growth.Photo by Sasun Bughdaryan on UnsplashIncreased revenues and salesAccording to the company’s filing, during the last quarter of 2023 Canaan reported a surge of 45.7% in total computing power sold compared to the preceding quarter, reaching 5.5 million Thash/s. This ascent, which reflects a 191.9% increase from the same period in 2022, signifies not just a recovery but a robust resurgence in demand and operational ability. The company's dispatch of 19.6 million Thash/s throughout the year, marking a 29.6% leap from 2022, aligns with the rebound in bitcoin prices observed in Q4 2023, a pivotal factor shaping Canaan's operational revitalization. 47% growth on previous quarterA closer examination of the financials reveals not only surpassing total revenues but also a notable 47.3% quarter-over-quarter growth. Canaan's foray into international markets, bolstered by securing substantial orders from esteemed public company clients, underscores a buoyant sales performance and a positive outlook for the computing sector. Despite the buoyant sales and revenue figures particularly in the mining machine market, the sector has faced ongoing regulatory uncertainties and market fluctuations. Nonetheless, the company's strategic initiatives, alongside the positive market effects of the approval and listing of spot bitcoin exchange-traded funds (ETFs), have been positive. Moreover, Canaan's investments in wafer supply capabilities and strategic financial maneuvers garnered approximately US$136 million through at-the-market (ATM) programs and preferred shares. Recording a lossYet, the company’s journey in 2023 was not without its hurdles. Q4 2023 witnessed a significant increase in product revenues from the previous quarter but a decline from Q4 2022, attributed to dwindling sales prices as the halving event loomed, underscoring the volatility inherent in the cryptocurrency market. Results published last year are indicative of the company’s difficulty. In Q2 2023, revenues were strong, yet the company wasn’t turning a profit.With Q4 results, it’s now clear that the firm lost $421 million in 2023. In Q4, Canaan recorded a net loss of $139 million. That compares with a loss of $91 million in Q4, 2022. The company also expects tough market conditions in 2024. In its forward-looking outlook, it stated:”For the first quarter of 2024, and the second quarter of 2024, the Company expects total revenues to be approximately US$33 million and US$70 million, respectively, considering the challenging market conditions across the industry. This forecast reflects the Company’s current and preliminary views on the market and operational conditions, which are subject to change.” The crypto mining sector remains a very challenging market. With the upcoming Bitcoin halving event set to occur in April, it’s expected that as much as 20% of mining capacity could be forced offline, as some equipment would simply fail to mine on a profitable basis. Indicative of the challenges within the sector, crypto miner Core Scientific was forced into bankruptcy due to market difficulties in December 2022. It has only recently exited that bankruptcy process and now expects to generate revenues of $600 million in 2024. Another Bitcoin miner, Riot Platforms, has warned that profitability may be difficult to achieve in 2024 due to chip shortages.   

Singaporean Researchers Devise More Effective DAO VotingResearchers at the Singapore University of Social Sciences have come up with a more efficient governance model for decentralized autonomous organizations (DAOs).Photo by Shubham Dhage on UnsplashDAO governance reviewThe scientists presented their work via a paper titled “Voting Schemes in DAO Governance,” which was published earlier this week. The paper is due to appear in the Annual Review of Fintech in due course.The research paper initially sets out with a review of the different forms of voting currently used to affect DAO governance in the various early stage projects that are already up and running. Having taken a deep dive into existing approaches, the research team of Qinxu Ding, Weibiao Xu, Zhiguo Wang and David Kuo Chuen Lee decided that they could go one better themselves.Their review encompassed eight current approaches including the following: token-based quorum voting, knowledge-extractable voting, conviction voting and reputation-based voting. Each voting scheme was then evaluated based on the following factors:Efficiency: An assessment of the speed at which proposals are selected and approved.Fairness: Each voter should have equal rights to vote.Scalability: The degree to which storage, computation and communication needs can be adjusted relative to the number of voters.Robustness: An assessment of the relative resistance of the voting scheme to attacks and collusion.Incentive Schemes: The extent to which DAO members are motivated to vote.Following on from that analysis, the scientists put forward a hypothetical voting mechanism with design considerations relative to fully decentralized and permissionless DAO governance. When it came to ratings, the holographic consensus approach scored highest, with a “high” rating in the categories of efficiency, fairness and robustness, dropping down to medium when it came to scalability. None of the other approaches came close.In trying to go one better, the team took the holographic consensus approach and set out to create their own hypothetical voting mechanism based on this model. As evidenced from the paper, they tried to effect improvements to this approach:“We know that the downside of the conviction voting mechanism is that it takes time to approve an urgent proposal. To address this concern, we introduce a blind betting mechanism: each member could choose whether to bet on any proposals with a certain number of their tokens.”The researcher’s hypothetical model allows stakeholders to gamble their tokens on the likelihood of a proposal passing or failing. The logic with this approach, they claim, is that it would speed up the governance process, while making it more robust at the same time.In concluding remarks, the researchers acknowledged that all approaches were not without their pros and cons. They point out that the further development of DAOs shouldn’t be confined to a static organizational future. While they believe that their own hypothetical scheme is in theory superior, they acknowledge that it too has flaws. With that, the realities of implementing it in the real world may be a challenge.

28 crypto service providers register with India’s FIUIn India, 28 entities providing services related to virtual digital assets (VDAs) have successfully registered with the Financial Intelligence Unit (FIU), the body responsible for combating money laundering in the world’s most populous country.Notable names in this list include Neblio Technologies, more commonly known as CoinDCX, Zanmai Labs, the company responsible for the WazirX crypto platform, Bitcipher Labs’ CoinSwitch, Nextgendev Solutions and Awlencan Innovations India’s Zebpay.Photo by Big G Media on UnsplashA need to register as ‘reporting entities’This information comes in response to a question posed in the Lok Sabha (India’s lower house of Parliament), where the government emphasized the significance of these entities complying with the Prevention of Money Laundering Act (PMLA). In March, the government had formally designated companies dealing in VDAs, crypto exchanges and related intermediaries as “reporting entities” under the PMLA.According to the notification, crypto exchanges and their intermediaries are obligated to conduct Know Your Customer (KYC) procedures for their clients and platform users. This includes maintaining KYC details, identity documents, account files and business correspondence records with clients.Offshore exchanges required to registerMinister of State for Finance Pankaj Chaudhary mentioned that the registration process for VDA service providers catering to the Indian market is underway. Non-compliance with these regulations may result in appropriate action under the PMLA. It has been clarified that offshore crypto exchanges operating in India are required to adhere to these guidelines. Despite that, none of the 28 entities who have registered so far appear to be offshore companies.Commenting on the development via the X social media platform, Sumit Gupta, Co-Founder of CoinDCX, wrote:”Emphasizing compliance to PMLA is vital for the safety and financial integrity of Indians, as dealing with non-registered platforms exposes citizens to nefarious actors, putting their finances at risk.” . . . “It’s encouraging to witness the Government initiating actions against non-compliant offshore entities.”While steps to provide guidelines for the industry are largely positive, the Reserve Bank of India (RBI) has been vocal in its criticism of cryptocurrencies and calls for potential bans have cast a shadow over the industry in India. The recent collapse of prominent platforms like FTX have not been helpful, only serving to exacerbate concerns relative to India’s crypto ecosystem.The negative sentiment, coupled with an ongoing funding winter, has resulted in the closure of operations for some crypto platforms, including Pillow and WeTrade, this year. Firms like CoinSwitch and Gupta’s CoinDCX have had to reduce headcount in 2023 amid challenging market conditions.Despite these challenges, there are also positive signs. A recent report by blockchain analytics firm Chainalysis found that India has been the frontrunner more recently in terms of crypto adoption in Asia.This latest development provides guidelines where anti-money laundering processes are concerned for crypto firms in India. However, the government needs to follow through with a complete regulatory framework for the industry. The Indian courts recently declined to act on such a petition on the basis that it falls within the remit of the country’s legislature and is outside the purview of the courts.