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2022 Prediction #2 L2 Bridges

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Bridge from layer 2 is one of the scalability solutions. Since layer 1 has set a foundation for blockchain to operate, upgrading layer 1 may cause unnecessary disruption on existing operations. The bridge is a perfect choice for blockchain with massive traffic while seeking for expansion of more users to join in the different types of blockchain.

TL;DR

Layer 2 bridge is a technique to help layer 1 blockchain expand its user pool in the different types of blockchain without going through cryptocurrency exchange platforms. However, by trading off to gain more speed, the blockchain will face security concerns.

Here is a 1 min summary of the article if you want to skip the reading.

Why Bridge 

Layer 1 blockchain needs to validate transactions. They are costly and expensive when there is a massive amount of data traffic inflows into for validators to perform work in a short time. The bridge is a method to bring the data off the blockchain and conduct a side operation before sending them into the blockchain to validate. Also, bridges can connect with different blockchains and exchange data with the needs of the crypto exchange.

Why Not Cryptocurrency Exchange 

Going through cryptocurrency exchange platforms is costly and insecure. If Ethereum wants to go to Avalanche, you need to convert Ether into Avalanche through cryptocurrency exchange platforms. Most likely the cryptocurrency exchange platforms will require KYC or Know Your Customers. While you may want your identification to be hidden, cryptocurrency exchange may not be a viable route. Also, the exchange is insufficient to secure large amounts of funds with the capability to prevent hacking.

Bridge To Multi-Chains 

Bridges make a hub of different crypto to freely exchange without going through third parties services. It makes it very convenient for developers and investors to put together their assets in one place while freely exchanging them when they need to. The cross-chain bridge can also eliminate third-party service providers and make users custody their own crypto assets.

Security Concerns

Despite all the benefits cross-chain bridges can provide, they create a weak point for hackers to exploit. The Poly Network incident was one of the largest losses in bridge cross-chain hacking in 2021 with a $700M loss from the wallet address. Not if the White Hat who hacked the system and later returned all lost funds, the bridge project may be set back. Security in bridges is one of the biggest concerns while many blockchain developers hesitate to develop the technology. 

The bridge is developed through smart contracts which get privileges granted to developers to access sensitive data without going through the validation process. It opens a portal for hackers to tap their accounts and siphon funds away from the blockchain.

It can bypass private keys easily without ever needing to access funds and directly explore funds to hackers.

Check out my another article: 2022 Prediction #1: L1 Scalability

2022 Is Bridge testing Year

The bridge is a viable alternative to exchange different cryptocurrencies from different types of blockchain with a short time and less cost. It provides a possible way for developers to build a better DApps system to serve more users with different types of crypto. However, security is the biggest hindering of development and it will continue challenging the progress of the bridge technology. We will need a better solution to resolve hacking before providing users with bridge technology.

In Conclusion

The bridge is one of the ways to resolve the scalability of blockchain and provide a possibility for cross-chain transactions. If only we can resolve security issues, the bridge can be feasible to implement and help blockchain to grow.

Stay tuned for the 2022 Prediction #3: Zero-Knowledge Proofs or ZKPs


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UK Extends Crypto Tax Break for Investment Managers in Financial Reforms

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UK Extends Crypto Tax Break for Investment Managers in Financial Reforms



In a package of financial services reforms unveiled today, setting out how to replace European Union banking and financial-market laws, the Treasury said it would extend an existing tax break, which allows investors to use a U.K.-based manager without drawing extra tax liability, to the crypto sector. The change will be made via regulations this year.



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Turkey has an obsession with crypto — specifically Dogecoin: Study

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Turkey has an obsession with crypto — specifically Dogecoin: Study



The crypto market slump doesn’t mean interest in crypto is also down. A new study from the cryptocurrency education platform CryptoManiaks revealed that many countries are still scouring the internet, hungry for crypto-related information.

According to the study, the Netherlands and Turkey take the top two spots, with 8.2% and 5.5% of the population, respectively, searching for crypto-related terms. Turkey particularly accounted for 4.7 million searches, leading the searches with sheer numbers.

The study analyzed the combined number of searches for a select set of popular cryptocurrencies into a percentage of the population for each country in order to calculate the percentage of locals searching each month.

While it was in second for overall searches, Turkey came in first place for searches related to the memecoin Dogecoin (DOGE), with 812,000 monthly searches. This is nearly double that of Ethereum (ETH), the country’s third most searched crypto.

A spokesperson from CryptoManiaks commented on the DOGE curiosity, particularly over the last 12 month:

“Dogecoin’s popularity has surpassed that of Ethereum in a significant number of countries, with nearly 2 million more monthly searches worldwide for the coin.”

The cryptocurrency DOGE has remained a popular digital asset and crypto cultural phenomenon after it was adopted as the poster crypto for internet icon Elon Musk.

Some of the cryptocurrencies included in the search terms were Bitcoin (BTC), Solana (SOL), and Binance Coin (BNB), among others. 

Following the Netherlands and Turkey in the ranks were Germany, Canda and the Czech Republic.

Related: DeFi sparks new investments despite turbulent market: Finance Redefined

While the United States and the United Kingdom are major players in the global cryptocurrency industry, neither ranked in the top spots due to the number of searches equivalent to their population sizes. The U.S. ranked 15th with 1.9% of the population searching for these terms, while the U.K. takes the 12th spot with 2.6%.

Recent research from Cointelegraph also revealed that despite market conditions, major institutions still remain interested in the industry and continue to pour millions into crypto-related projects.



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Paraguayan Cryptocurrency Law Shelved After Presidential Veto – Regulation Bitcoin News

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The cryptocurrency and mining law that the Paraguayan Congress passed in June was finally shelved on Dec. 5. The document, which sought to bring order to crypto mining and exchange activities in Paraguay, was ultimately dropped after failing to obtain the votes needed to reject the presidential veto it received.

Paraguayan Crypto Law Dropped After Support Wanes

The Paraguayan cryptocurrency law that was introduced in Congress in 2021 was finally shelved after not receiving the support it needed in the Deputy Chamber. The project, which was vetoed in September by President Mario Abdo, failed to gather the votes needed in order to reject this veto.

The veto had previously been rejected by the Paraguayan senate, which aimed to approve and pass the law without presidential support. The veto had the support of the Commission for Industry, Commerce, Tourism, and Cooperatives; while the Economic and Financial Affairs, and the Fight against Drug Trafficking, Related and Serious Illicit Activities commissions rejected the motion.

Some deputies questioned the veto, stating that the cryptocurrency issue must be studied and regulated due to its importance. In this vein, deputy Sebastian Garcia criticized this outcome, stating that with this move, the cryptocurrency subject will remain in an “absolute informality.”

Reasons for Supporting the Veto Motion

One of the biggest reasons wielded by President Mario Abdo and other deputies to exert a complete veto on this bill has to do with the determinations it makes about the power delivered to cryptocurrency miners. Abdo stated that cryptocurrency mining was an activity featuring “high consumption of electrical energy, but little use of labor.”

Also, the law established limits for the fees that crypto miners pay for the power delivered to their operations. This would clash with the method of determining power tariffs by the National Power Administration (ANDE), an organization that also supported the veto measure after having found several cryptocurrency farms that were connected illegally to the power network.

Deputy Arnaldo Samaniego argued that rejecting the veto motion would put ANDE in a tight spot, facing potential losses of up to $30 million. Deputy Jose Rodriguez also supported this position, explaining that the organization could not operate with losses derived from this law.

This development puts the cryptocurrency regulation efforts in Paraguay back at square one, with legislators having to once more propose and discuss a hypothetical new cryptocurrency law.

What do you think about the final destiny of the cryptocurrency and mining law in Paraguay? Tell us in the comments section below.

Sergio Goschenko

Sergio is a cryptocurrency journalist based in Venezuela. He describes himself as late to the game, entering the cryptosphere when the price rise happened during December 2017. Having a computer engineering background, living in Venezuela, and being impacted by the cryptocurrency boom at a social level, he offers a different point of view about crypto success and how it helps the unbanked and underserved.

Image Credits: Shutterstock, Pixabay, Wiki Commons

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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