How were Donald Trump’s tariffs calculated?

Les droits de douane de Trump : comment ont-ils été calculés et leur impact

Donald Trump has announced tariffs on a large number of countries. How much are they, and how have they been calculated? Spoiler: bad

Donald Trump’s announcement of duties on Tuesday sent shockwaves through various groups: politicians, citizens, companies, and especially the markets. Specific points were particularly emphasised. One notable aspect is the range of countries targeted by the US president’s decision—nearly all countries, including an island in Australia home only to penguins, except Russia, Cuba, North Korea, and Belarus.

However, the most intriguing aspect of this sovereignist, anti-globalisation decision is how the duties were calculated. This article will explore this aspect in greater detail.

A wave of global tariffs

The Trump administration’s trade offensive includes additional tariffs on nearly all goods imported into the United States, varying rates based on the country of origin. Here are some key details from the tariff plan:

  • Universal Basic Duty: A 10% tariff will be applied to all imports into the U.S.

“Worst Offenders”: Approximately 60 countries accused of unfair trade practices will face significantly higher tariffs starting April 9. These include:

  •  China: 34% tariff, added to the existing 20%, for 54%.
  •  Vietnam: 46% tariff.
  •  Thailand: 36% tariff.
  •  Japan: 24% tariff.
  •  European Union countries: 20% tariff.

The following section will discuss how misleading this classification can be.

Automobile Tariffs: A special 25% tariff will be imposed on all foreign cars and their components, significantly impacting foreign car manufacturers.

President Trump did not hold back in his trade offensive; countries from Europe to China, Japan to Brazil, are all set to “pay the price.” This list includes microstates and remote territories, ranging from the Svalbard Islands in the Arctic Circle to the uninhabited Heard and McDonald Islands, home only to penguins.

“We have been robbed for more than 50 years, but that won’t happen again,” thundered Trump, asserting that jobs and factories will return to the U.S. thanks to the tariffs. He even invited foreign companies: ‘If you want zero tariffs, come produce in America.’ In summary, this is America First version 2.0, which this time criticises virtually anyone living beyond the borders, even penguins.

How are duties calculated? The confusion between duties and VAT

As you may have noticed from the quotes, Donald Trump’s narrative has consistently centred on reciprocal tariffs. The former president has referred to his tariffs as “reciprocal tariffs,” claiming that the United States will impose duties only equivalent to the tariffs other countries have on American products. On the surface, this reasoning seems almost reasonable; however, the calculation method used by the White House is flawed.

In practice, Washington classified any existing foreign levy to justify high tariffs, confusing value-added tax (VAT) with actual duties. For instance, regarding Europe, Donald Trump claimed, “The EU is charging us 39%!” However, this figure is derived from Europe’s actual duties on some American products (less than 3%) and the VAT. This consumption tax varies from country to country. This calculation also includes any environmental or technical regulatory taxes, leading to a misleading representation of the actual tariff burden.

In simpler terms, the U.S. administration interpreted every existing tax on European products as punitive tariffs against the U.S.. It used basic mathematical operations to calculate the duties we see today. 

No serious economist would equate the Added Tax (VAT), which all consumers pay, including Europeans, with a duty specifically targeting foreign goods. However, this is how it is perceived to work in the “alternative reality” of the Trump trade war.

Reverse engineering on the trade deficit

The second part of the creative process by which the Trump administration determined the duties to impose on other countries is quite intriguing. The primary focus here is the trade deficit. Trump has consistently viewed this deficit as a scorecard: if the US imports more from one country than it exports, he interprets it as ‘losing’ and believes the other country is cheating.

For instance, it is well known that the US has a trade deficit of around $2.5 billion with Russia (importing more from Moscow than it exports). Trump frequently highlighted this fact in the past to justify implementing punitive measures.

During his narrative, the president mistakenly conflated the trade deficit with subsidies and integrated it into the formula discussed earlier. The result? The duties announced by the Trump administration are simply derived from the trade deficit divided by the respective country’s total exports to the United States.

Let’s illustrate this with a practical example by calculating the duty applied to Indonesia. The United States has a trade deficit of $17 billion with Indonesia, while Indonesian exports to the US amount to $28 billion

Calculating it: 

17 / 28 = 0.64 → 64%, precisely the figure on Donald Trump’s chart.

This aligns with ​​the government’s Reciprocal Tariff Calculations page: you take the US trade deficit in goods with a specific country, divide it by the total imports of goods from that country, and then divide the result by two. A trade deficit occurs when a country imports more physical goods from other countries than it exports to them.

The possible impact of these decisions

We have already observed the impact of the tariffs imposed by Donald Trump, at least on the surface. During the first day following the announcement, the US stock market plummeted approximately 8% (S&P 500), while the NASDAQ dropped about 9% since the beginning of the week. 

On the other hand, Bitcoin has held up slightly better. Although it is currently down about 7%, it remains in a favourable position compared to last week. 

From a geopolitical perspective, the situation appears even more critical. It is difficult to understand the rationale behind the decisions made by the US president. Trump seems to be aiming to dismantle globalisation, which is the process that has gradually removed barriers to free trade and facilitated economic integration between countries.

There’s an interesting paradox: for many countries, selling goods abroad at higher prices has been a means to accelerate capital accumulation and move closer economically to wealthier nations. This is how China experienced rapid growth, and Europe has also benefited somewhat from this process. However, the real winner of globalisation has been the United States. Why is that?

The U.S. gained favour with half the world by defeating the Soviet system, which failed to provide both consumption and growth. The United States initiated this process by reducing tariffs and showcasing the strength of its market economy. Free trade allowed the U.S. to emerge as a cultural, technological, and economic superpower, contributing to the decline of both the Soviet Union and Maoist China. This approach has generated significant wealth.

Contrary to what Trump might suggest, global trade does not harm the United States today. Thanks to its technological advantages, the US has focused on sectors that yield high productivity and added value. The outcome is a wealthier nation that produces fewer low-cost goods (which it imports) while buying these products at a low price, thus maintaining a very high per capita income.

This success is primarily due to American dominance in the services sector. Consider how many digital services we use daily—such as social media, search engines, streaming platforms, and software—are designed, operated, and monetised in the United States.

BTCFi: What is Defi on Bitcoin and how it works

BTCFi: qu’est-ce que la DeFi sur Bitcoin et comment ça fonctionne

Taproot has enhanced Bitcoin’s competitiveness by introducing new features like smart contracts and decentralised finance (DeFi). This gave rise to BTCFi. What is it all about?

The Taproot update in 2021 enhanced Bitcoin’s competitiveness by improving its efficiency and privacy while enabling features previously outside its protocol, such as smart contracts and decentralised finance (DeFi). Since then, significant progress has been made, leading us to the concept of BTCFi (Bitcoin + DeFi). What does this entail?

DeFi: Finance for all

DeFi, the synthesis of Decentralised finance and Finance, is a universe of financial services that aims to exclude traditional intermediaries—typical of centralised finance—and their associated costs. This is possible because DeFi is built on blockchain and works thanks to smart contracts, self-executing digital agreements written in code and registered on a blockchain. These contracts are automatically activated without intermediaries when predefined conditions occur. 

We have been discussing decentralised finance since 2015, when Ethereum launched smart contracts, which are fundamental to its functioning. This article provides everything you need to learn more about this topic.

Today, the total TVL (Total Value Locked, an indicator that measures the total value of assets deposited in a decentralised finance protocol) in DeFi is around $90 billion, and more than 50 per cent of it is locked up in Ethereum. However, something has changed in recent months.

Taproot: Let the DeFi on BTC begin!

The Taproot update is considered a significant upgrade for the Bitcoin network. It increases its efficiency and privacy and, above all, extends the capabilities of smart contracts. Two main functions, the MAST and Schnorr signatures and Tapscript, Bitcoin’s programming language update, make this possible. We have discussed this in detail here.

Taproot has enabled new possibilities for programmability and privacy within the protocol. These changes naturally also affect Bitcoin, which is gaining use cases

Bitcoin dominates the market but is little exploited in DeFi.

As is well known, BTC represents about 63% of the crypto world’s total market cap, with a value of about USD 1.6 trillion. However, due to the incompatibility between its blockchain and Ethereum, it is tricky for holders to find a secure solution to profit from the asset held. Of course, some ways, such as wrapping and bridging, allow Bitcoin to be ‘transferred’ from its native blockchain to other chains, such as Ethereum.

Wrapping and bridging: risky solutions

The main problem is the security of the transactions, as one is exposed to the risks of the entities involved in these processes: merchants, custody services, and bridges could be subject to attacks and exploits, in addition to the inherent risk of the individual platforms operating in DeFi. However, the main deterrent is only one: Usually, those who hold Bitcoin do not want to part with it for any reason, and these transactions necessarily go through custodial wallets

Hence, there is a need to implement something that meets these demands: DeFi on Bitcoin or BTCFi.

What is Bitcoin DeFi?

BTCFi is an ecosystem of decentralised applications (DApps) of a financial nature built on Bitcoin. As simple as this may seem to be a definition, it carries complex consequences, especially if one relates it to the ‘old’ ways of using BTC in DeFi. The main differences:

  • Network: In Ethereum’s DeFi ecosystem, one has to use WBTC to trade, exposing oneself to the risks we saw earlier. On BTCFi, transactions are processed directly with BTC.
  • Security: Unlike wrapping BTC, which requires trusting the custodian, merchant, bridge, DeFi platforms, and underlying infrastructure, BTCFi is based on Bitcoin’s blockchain, which is unique regarding security and decentralisation.
  • Usage: While WBTC on Ethereum (or other chains) is mainly used as collateral or a medium of exchange in DEX, BTCFi potentially opens up all the use cases of traditional DeFi, as we will see below.
  • Custodianship: While wrapped, Bitcoin is held by a custodian such as BitGo, a centralised entity. BTCFi is natively non-custodial, as it is managed exclusively by decentralised protocols.

The advantages of a native DeFi on Bitcoin are apparent, and Bitcoiners seem to have understood this well. Defillama’s graphs speak for themselves: since April 2024, the TVL on the Bitcoin chain has increased from $490 million to $5 billion, equivalent to 63,000 Bitcoins. 

At the moment, the protocols that have catalysed the most BTC are Babylon, Lombard, and Solv Protocol. The first of the three dominates the ranking, with almost 4 billion (out of 5) Bitcoins on the chain. Lombard and Solv Protocol follow.

BTCFi: How to use it?

As we mentioned, Toot Bitcoin has use cases similar to traditional Bitcoin. The difference is that it is built and developed on the native blockchain without wrapping or bridging. Look at some practical use cases introduced by BTC’s native blockchain protocols.

Staking with Babylon

Babylon, for instance, allows BTC to be put on lockdown on the Bitcoin network to guarantee and actively participate in the security of other Proof-of-Stake networks. This mechanism, which has long been popular on the Ethereum mainnet, is called restaking. In this case, it uses the computing power dedicated to mining BTC by indirectly transferring it onto proof-of-stake networks. All this happens without the user being aware of it, since it is as if he receives rewards by staking his BTC, while on the opposite side, Proof-of-Stake blockchains can exploit locked Bitcoins to improve their systemic security. 

Liquid staking with Lombard and LBTC

Lombard also offers a similar service with an extra feature: liquid staking. Once one’s BTC is locked up, one can mine LBTC, an asset collateralised 1:1 with Bitcoin, to generate additional income. Due to its cross-chain nature, it is possible to use LBTC ‘around’ DeFi, as collateral for lending and borrowing, or even to provide liquidity to DEX. In short, LBTC is the equivalent of stETH for BTCFi.

Solv Protocol: towards unified liquidity

Finally, Solv Protocol, which offers restaking services, issues a version of BTC called SolvBTC. This represents an interesting attempt at BTC wrapping because it aims to solve the problem of Bitcoin’s fragmented liquidity: the various wrapped versions of BTC – WBTC, BTCB, BTC.b, etc. – are chain-specific and have little cross-chain interoperability, resulting in de facto ‘siloed’ Bitcoin. – The various wrapped versions of BTC – WBTC, BTCB, BTC.b, etc. – are chain-specific and have little cross-chain interoperability, being in fact ‘siloed. ‘ 

SolvBTC aims to unify Bitcoin’s liquidity across multiple chains as a universal BTC pool for DeFi’s users. This will allow for more agile asset use across different protocols. 

Advanced liquid staking: SolvBTC.LSTs

In addition, Solv Protocol, like Lombard, also has liquid staking functionality since you get SolvBTC by blocking SolvBTC.LSTs (SolvBTC Liquid Staking Tokens) in return. These, in turn, are divided into Pegged LSTs, which are pegged 1:1 to the value of Bitcoin, and Yield-Bearing LSTs, which grow in value over time because the revenue gained from the stake is automatically reinvested in the token.

We are only at the beginning of BTCFi

As you may have guessed, this is a newly developing world with infinite return opportunities: using your Bitcoins in DeFi while maintaining custody, without necessarily having to use WBTC, was a long-overdue possibility. If you want to be part of the change affecting BTC and DeFi on BTC, click below!

Are Bit Bonds, US government bonds with underlying Bitcoin, on the way?

Obligations sur Bitcoin: les Bit Bonds sont-ils en approche?

The Bitcoin Policy Institute has proposed Bitcoin bonds, an innovative financial instrument that guarantees good returns without risk. Learn more about it.

Bonds based on Bitcoin may soon become a reality. The Trump administration’s favourable stance towards cryptocurrency is evident and has been demonstrated at various times, particularly with the approval of government reserves in Bitcoin.

Recently, however, discussions have emerged regarding an innovative financial development: a new method for integrating Bitcoin into the global financial system. Could BTC potentially serve as one of the pillars supporting U.S. debt through “Bit Bonds”? How do these instruments work?

US debt rises and worries.

The proposal to introduce Bitcoin-backed bonds has emerged in response to the growing US public debt, which has steadily increased relative to the GDP since the pandemic began. Naturally, when a problem becomes acute, the search for solutions accelerates. In this case, that could lead to the launch of Bitcoin-backed bonds.

Bitcoin does not fully collateralise these bonds; ​​they are financial instruments that include a strategic allocation to cryptocurrencies. The fundamental concept is quite ambitious, so we find it appealing. The idea is to enhance virtually risk-free financial instruments with a digital commodity, creating a net benefit for both governments and investors.

Buy BTC!

How Bit Bonds Work

Bit Bonds function similarly to traditional US government bonds. They are essentially Treasuries—debt securities issued by states to raise funds at a lower interest rate (coupon rate) than the market average. The yield on these financial instruments is lower not because they are inefficient but because a market segment that accommodates Bitcoin must be created.

The interest—or yield—is lower because part of the money raised through these bonds is invested in Bitcoin. As Bitcoin’s value increases, it could positively impact the bonds’ interest.

As you can see, the theoretical framework for how Bit Bonds work is straightforward and advantageous for both parties involved: the state and the investors. Since the rate associated with these bonds is lower, the state saves billions of dollars in interest payments on debt. At the same time, investors gain indirect exposure to Bitcoin (BTC), an asset historically appreciated over the long term.

Why are they not risky financial instruments?

The most interesting thing about Bitcoin bonds is that they are not risky. Rather, they have the same degree of risk as government bonds. How is this possible? The price of Bitcoin does not always rise, so there must be some risk associated with it.

False! Every time a new Bit Bond is issued, a small part of the capital raised is used to buy Bitcoin, which is then locked in a separate pool. At the bond’s maturity, you receive back all the initial capital (principal), just like when you buy a normal bond. In addition, if the price of BTC has increased, you will receive an extra payment proportional to the increase

This means that your investment is unpacked in two: a fixed tranche (typical of government bonds) and a variable tranche that follows the price trend of Bitcoin. Similar instruments such as TIPS (inflation-linked bonds) or gold-linked ones exist. 

However, as historical data shows, Bit Bonds incorporate higher volatility and a much higher expected return. The reason? The price of Bitcoin has always experienced soaring bullish movements in every market cycle, whereas the fluctuations that gold or inflation are subject to are much smaller.

This makes Bit Bonds more attractive for the state, which can afford lower interest rates, and for the investor, who can obtain a return similar to that guaranteed on average by the stock market (around 10 per cent) and a minimum degree of risk.

Buy BTC!

How much could the US save thanks to ‘Bit Bonds’?

According to some estimates, refinancing $2 trillion of debt with Bit Bonds at 2% instead of 5% would save the US government about $700 billion over 10 years. These savings could lower some debt, finance public programmes, or make infrastructure investments without raising taxes.

The key concept behind Bit Bonds is familiar to anyone interested in the investment world: the asymmetry between risk and return:

  • In the worst-case scenario, Bitcoin does not go up, but the government still pays less interest.
  • In the best case, Bitcoin will rise, and the state will collect extra income to repay the debt.

This structure is not very different from many structured products already used in traditional finance, in which a low-risk asset is combined with a more volatile one to create a profile with a more favourable risk-return balance.

Moreover, pension fund issuers, insurance companies and sovereign wealth funds are often reluctant to invest directly in cryptos. But if rating agencies were to classify Bit Bonds as ‘quasi-risk-free’ (because the state guarantees the principal), these instruments could enter institutional portfolios.

In short, for the retail investor, Bit Bonds could be the perfect gateway into the crypto world. They don’t require wallet setup or the vagaries of custody. They’re just like government bonds but with an edge.

In an era of trillion-dollar deficits and a total lack of fiscal discipline, Bit Bonds offer an innovative solution: harnessing the growth of Bitcoin to ease the burden of interest and lower (at least some of) the national debt. 

One thing is sure: if even part of this idea becomes a reality, we could be at a turning point. In a few years, we might say, “This is when everything changed.”

Casino: The house always wins; investing your money instead of gambling is better.

casino

It is often said that “the house always wins.” The house does not always win but it wins more often than the players. What are the odds of winning at the casino, and why is it better to invest?

What is the expected value of playing casino games, and how is this concept measured in investments? Besides the inherent probabilistic laws that govern them, what commonalities exist between these two activities?

The house always often wins.

Interestingly, both casino games—colorful and vibrant—and what some might consider the duller financial assets can be statistically analysed and compared. Each has an expected value, but how is this calculated, and for which asset is it higher?

It’s often said that “the house always wins.” This popular saying underscores the undeniable advantage of gambling establishments (or the state) and effectively illustrates the underlying reality.

The fundamental statistical concept related to this is expected value. This concept is also prevalent in the investment world, where it is referred to as expected return. It is an essential tool for investors seeking to evaluate the potential outcomes of their decisions.

What is the expected value?

Before we delve into the formal definition, let’s consider a practical example to understand the concept better. Imagine we’re in a casino playing Craps, a game in which players bet on the outcome of a roll of six-sided dice. What is the probability of rolling a two?

The answer to this question is ⅙, as there are six faces on a die, and the probability of rolling each number is the same. To find the expected value, we sum the possible outcomes (the numbers on the die) and multiply each by the probability of that outcome occurring, which, as we mentioned, is ⅙.

Here is the calculation to be performed: 

(1*⅙) + (2*⅙) + (3*⅙) + (4*⅙) + (5*⅙) + (6*⅙) = 3.5

The next time you see a die rolled in a casino, you’ll understand that the expected value is 3.5. This means that if you roll a six-sided die many times, the average result will be 3.5. Now, let’s focus on a more formal definition.

“In probability theory, the expected value (also called mean or mathematical expectation) of a random variableX is a number denoted byE(X) formalises the heuristic idea of mean value of a random phenomenon.”

In summary, the expected value of an event is calculated by multiplying each possible outcome by the probability of its occurrence and then adding those products. In simpler terms, it can be understood as the weighted average of all possible outcomes. This definition will be helpful when discussing investments.

The house always wins: why it is not worth playing at the casino

Let’s teleport to a casino. Now that we understand expected value, everything shines a new light on the situation: this value is always negative for players but always positive for the house.

If this point went unnoticed, you may have missed an important detail: We have just scrutinised an industry that generated EUR 131 billion in revenue in Europe alone in 2023.

The explanation is straightforward. Gambling games are structured to give the casino an advantage, known as the house edge. This house edge ensures the casino’s business model remains viable; if the expected value were positive for players, running a casino would mean giving money away to customers over time.

However, not all games are the same. Some, like roulette, have only a slightly negative expected value, while others, such as SuperEnalotto, have such unfavorable odds that winning big is virtually impossible. Let’s look at the expected value of the most popular casino games.

A practical example: the expected value of Roulette

One of the most generous casino games for players is European roulette, which features a single zero. To illustrate this, let’s calculate the odds of a simple bet, such as on red or black, even or odd, or the ranges 1-18 or 19-36. In European roulette, there are 37 possible numbers: 18 red, 18 black, and 1 green zero.

For example, when betting on red:

  • Since there are 18 red numbers, the probability of winning is 18 out of 37 (approximately 48.65%).
  • The probability of losing is 19 out of 37 (approximately 51.35%) because, in addition to the 18 black numbers, there is also the zero, which causes red bets to lose.

The payout for a winning bet on red is 1:1. If you place a bet of 1€, you will receive a total of 2€ if you win, which includes a net profit of 1€. Conversely, if you lose, you forfeit the entire amount wagered.

Therefore, the total expected value will result from the difference between the expected value of the probability of victory (18/37) and defeat (19/37), resulting in a loss of 0.027€ per euro wagered. To simplify matters, we have not given the formula, but you can check it by calculating this difference after applying the same procedure as we did for the dice.

The Expected Value in Financial Investments

Now that you’re familiar with the concept of expected value in casino games, it’s time to discuss investments. Similar probabilistic principles estimate the future performance of financial instruments such as stocks, bonds, indices, and even cryptocurrencies.

First, it’s important to note that changing the reference system alters the approach to probability. We cannot analyse the financial world in a purely objective probabilistic manner, as it does not consist of perfectly symmetrical and well-constructed events (like a coin toss). In this context, probabilities are modeled based on historical data.

The expected value of investments, also known as the expected return, is the weighted average of the possible returns on an investment, factoring in the probability of each potential outcome. This definition closely resembles the one used in the context of casino games.

This article will explore the concept of expected value in finance using one of the longest-running stock indices: the S&P 500. The S&P 500 is one of the most significant stock indices globally, tracking the performance of the 500 most prominent and capitalised companies in the United States. With a historical data record spanning nearly a century, it is a reliable tool for estimating long-term stock returns. Historically, the S&P 500 has provided a positive average annual return.

The expected one is currently about +10%, considering historical data from 1928 to today, including reinvested dividends, over long periods. It would be interesting to do the same with Bitcoin, but unfortunately, fifteen years of history is minimal to evaluate a financial phenomenon from a statistical point of view. To date, the expected return would be 85%, analysing its performance from 2011 to the present.

Buy Bitcoin!

Why investing is not like gambling: conclusions

While both investing and gambling involve risking capital to make a profit, the key difference lies in the nature and sign of the expected value.

In gambling, the expected value is negative for the player. The system is effectively closed and operates as a negative-sum game: the house always keeps a portion of the bets as its margin. No matter how long a person plays or their betting strategies, the expected value remains unchanged. Systems like the Martingale can alter the short-term distribution of winnings but do not affect the predicted value in the long run.

In the long run, players tend to lose, on average, a percentage that reflects the house’s advantage. The saying “the house always wins” is not just a cliché; it is a mathematically proven reality due to the structure of casino games.

In contrast, financial investments, particularly in the stock market, typically offer investors a positive expected value. This is because the economy continuously generates new wealth: Companies grow, produce profits, and innovate, contributing to a long-term increase in value. Investors can participate in overall economic growth by investing in a diversified market index.

While there is always the risk of choosing the wrong investment or facing short-term downturns, these risks can be managed through diversification, setting long-term goals, and maintaining discipline. This level of strategic planning is impossible in gambling, where each bet is independent and inherently disadvantageous.

Volatility and expected value: the relationship

The final point to consider when comparing casino games with the world of investments is volatility, particularly in contrast to the certainty of incurring losses. In casino games, including scratch cards and Superenalotto, the long-term outcome is predictable—players can expect to lose a fixed percentage of their total wagers. As wagering increases, the volatility typically decreases relative to the volume played.

In investments, however, volatility does not diminish over more extended periods. It can lead to more significant uncertainty regarding outcomes in the medium term. Nevertheless, the likelihood of achieving a positive return increases over time because the expected value of investments is positive.

Holding a stock for just one day is akin to flipping a coin—it usually results in a 50% chance of a positive day and a 50% chance of a negative one. However, if you hold a stock for a year, there’s a good chance of achieving a positive return, although it’s not guaranteed. On the other hand, holding stocks for 10 or 20 years has historically always ensured a significant return.

In contrast, if you play roulette repeatedly for 10 or 20 years, you will likely have a negative net result that approaches the theoretical expected value unless you experience extraordinary and unrepeatable events.

In conclusion, wise investing is statistically successful over the long term, while gambling is guaranteed to lead to losses. Investment creates wealth within the economic system, whereas gambling merely redistributes value and often diminishes it, with a portion of the losses going to the banks. It’s important to note that investing involves risks; however, investors are rewarded with a premium for the risks they take. In contrast, gambling typically results in further disadvantages without any expected rewards.

Pectra: Ethereum’s next big update explained simply

Ethereum Pectra update: How does it work?

The Ethereum Pectra update is set to arrive on May 7. This article explains what it is, how it works, and the improvements it introduces.

The Ethereum Pectra update is set to be activated on the Ethereum blockchain. Currently undergoing testing, this update has clear objectives: to enhance the network’s speed, scalability, and user-friendliness.

With the Pectra update, users will no longer be required to pay gas fees solely in ETH. Additionally, it aims to improve the execution of smart contracts. In the long term, innovations such as Verkle trees and Peer DAS are expected to make the entire network more affordable, powerful, and capable of accommodating millions of additional users.

Pectra may not be as well-known as The Merge, but has the same revolutionary potential. It is a hard fork, representing a significant structural change that will create a clear division between the ‘before’ and ‘after’ of the Ethereum blockchain. The name Pectra comes from combining two distinct updates: Prague, which affects the execution layer and Electra, which impacts the consensus layer. For example, in 2024, with Dencun (from Deneb + Cancun), Pectra merges two components into one evolutionary upgrade.

How does Pectra work?

To truly understand what Pectra is and how it works, we must focus on practical aspects that are more effective for successfully mastering technology.

1. Account Abstraction

The Ethereum Pectra update’s first focus is account abstraction, a key concept that has gained significant attention in the on-chain world over the past two years. Account abstraction refers to a technology introduced through the technical proposal EIP-4337 on the Ethereum blockchain. It merges the functionalities of traditional accounts with smart contracts, resulting in the creation of smart wallets.

This innovation simplifies the user experience by eliminating the need for a seed phrase, automating transactions, and reducing gas fees. Account abstraction is the technology that will make decentralised applications (dapps) as seamless as traditional applications.

This change will also impact the current status quo, where users must hold at least a small amount of Ether (ETH) in their wallets to cover gas fees—transaction costs incurred whenever a transfer is made or when interacting with a dapp.

2. More efficient smart contracts

The second focal point of the Pectra update is the efficiency of Ethereum smart contracts, particularly concerning their execution. One planned improvement is the introduction of proposal EIP-7692, which consolidates several other technical proposals. 

To summarise, this proposal alters how smart contracts are compiled from a coding perspective and managed overall. For example, contracts will be divided into sections with clear headers, making code analysis, maintenance, and security easier. New commands will be introduced to jump between sections, manipulate the stack, and read data more efficiently. 

Additionally, code validation will occur only once during deployment rather than at each execution, which will help reduce costs and errors. These changes will occur at the bytecode level instead of in a high-level language like Solidity. In practice, the EVM Object Format (EOF) will change how Solidity code is compiled and executed within the Ethereum Virtual Machine (EVM).

3. More flexible validators

Let’s focus on the consensus front, where the Ethereum Pectra update will significantly improve the Ethereum network. Currently, a validator must stake a minimum of 32 ETH ETH to receive rewards. However, any amount staked above 32 ETH does not generate additional rewards; it remains idle and unused. The Pectra update will modify this system by introducing flexible staking (EIP-7002) and increasing the maximum staking limit per validator from 32 to 2048 ETH (EIP-7251). These changes will enhance the system’s flexibility and efficiency, particularly for entities managing large amounts of ETH, such as companies or institutional traders.

Another essential feature of the update is the “consolidation of validators.” This function will enable platforms like Lido, which stake on behalf of multiple users, to manage fewer validator nodes for the same amount of ETH. The outcome will be reduced pressure on the network, increased efficiency, and a more sustainable use of resources.

4. Verkle Tree

This integration is quite technical, so we will explain it without delving into the details. Verkle Trees will enable network nodes to store less data than currently. The outcome? A lighter, faster, and more scalable network. 

This is a new and more efficient way of organising data compared to the current method. This change will ultimately make Ethereum more efficient and cost-effective to use in the long run.

5. Peer DAS for Layer 2

Ethereum relies on Layer 2 solutions, such as Arbitrum (ARB) and Optimism (OP), to enhance network scalability. With the recent Ethereum updates, Peer Data Availability Sampling has been introduced. This technology helps reduce costs and improve transaction speeds on these Layer 2 solutions by allowing rapid verification of transaction data without downloading it. It is a practical measure to keep fees low, even during periods of high on-chain activity.

A double update in two stages

Pectra will be released in two phases. The first phase, which will feature the more visible new enhancements, such as account abstraction and updates for validators, is scheduled to be released in less than a month, with the official date set for May 7, 2025. The second phase will focus on more technical improvements, including the EVM Object Format (EOF) and Peer DAS, which are intended to enhance Layer 2 solutions and smart contracts., This phase is expected to arrive in 2026. What is the impact on ETH price? Hard to say…

Ethereum is currently facing some challenges. After reaching multiple all-time highs, it has lost over 60% of its value and appears stuck in a continuous downward trend. For this reason, we are not confident that the Pectra update will significantly impact its price.

However, this update could pave the way for broader adoption and may positively affect Ethereum’s fundamentals, which is the most crucial aspect. With features such as the ability to pay gas fees using any token, more efficient writing and deployment of smart contracts, and flexible staking management, it’s clear that these enhancements make Ethereum more attractive to both developers and end users.In summary, Pectra is not just another upgrade; it represents a critical step toward creating a more scalable, affordable and accessible Ethereum network. This update is a quiet but significant stride toward overcoming the blockchain trilemma of scalability, security, and decentralisation, ultimately preparing the network for mass adoption.

Why is the bull market struggling?

Will quantitative easing kick-start the explosive bull market?

According to the most optimistic investors, the recent bearish movement will kick off the altcoin season. According to the most pessimistic the bull market is over. What is the truth? Does it all come down to quantitative easing?

The season of quantitative easing still appears distant, while the prices of significant assets—ranging from cryptocurrencies to equities—have dropped significantly in recent days. What is lacking in this bull market, which seems quite different from previous ones? While nothing has been lost, the global landscape regarding monetary policies, particularly those of the United States, appears far from a turning point.

In this article, we will explore quantitative easing and discuss why igniting the next alt season might be necessary.

Quantitative easing: what is it?

Understanding quantitative easing is crucial for navigating the current market landscape. Simply put, it is “the central banks‘ secret weapon” for stimulating the economy. This contrasts with quantitative tightening, which involves raising interest rates and decreasing the money supply.

Quantitative easing involves significantly lowering interest rates, making it easier for individuals and businesses to borrow money. It also includes the purchase of government bonds and other financial assets. It acts like an “all you can eat” buffet for central banks. This influx of cheap liquidity, which comes from the money that investors choose not to invest in bonds due to their very low yields, then flows into assets that are considered riskier, particularly stocks and cryptocurrencies.

For the past fifteen years, quantitative easing has been the solution for every crisis, from the collapse of Lehman Brothers in 2008 to the COVID-19 pandemic in 2020. It has also fueled recent bull markets. However, the current situation is different. Despite declining inflation between 2021 and 2023, interest rates remain above the 2% target, at 3% in January 2025. This limits the potential for aggressive monetary policy easing. Additionally, this comes on the heels of Trump’s recent announcements about new tariffs, which have been confirmed for Canada and Mexico. According to the Federal Reserve, cutting rates too quickly could lead to excessive speculation in the financial markets and an overheated economy.

The growth of Bitcoin’s market capitalisation

Despite the absence of quantitative easing monetary policies, the market has experienced explosive growth in the final months 2024. Since November 2022, Bitcoin’s price has surged by 448%, and its market capitalisation has risen from USD 300 billion to USD 1,760 billion, peaking at USD 2,150 billion.

This impressive growth is partly due to the approval of spot ETFs. These financial instruments have attracted approximately $38 billion to Bitcoin and currently hold $101 billion worth of BTC, representing 5.79% of the circulating supply. Bitcoin had never before seen a market capitalisation increase of $1.7 trillion at its peak in January 2025. A look at past cycles reveals the following performance:

  • 2015-2017: +11,082% over 1,068 days, with a $326 billion increase in market capitalisation.
  • 2018-2021: +2,021% over 1,060 days, with a $1.21 trillion increase in market capitalisation.

Overall, this market cycle appears strongly positive when analysing Bitcoin’s performance and the milestones achieved over the past three years.

For example, Bitcoin (BTC) has become a central topic in global financial discussions, significantly influencing debates in the United States, including during the presidential elections. Notably, Senator Cynthia Lummis and former President Donald Trump have both advocated for creating a strategic reserve of BTC for the U.S. Treasury.

Some considerations on the market cycle we are currently experiencing

Let’s set aside quantitative easing, which we’ve already noted is a missing element in this market cycle, and instead focus on how this cycle differs from previous ones. The key question for many crypto enthusiasts is: Will there be an altseason, and will it follow the recent market crash?

It is difficult to determine ‘where we are in the cycle’.

On one hand, we can confidently say that we have not yet experienced a true altcoin season. On the contrary, we have gone through one or more meme coin seasons, the most recent coinciding with the launch of TRUMP, a meme coin introduced directly by the former U.S. president in January.

On the other hand, the price of Bitcoin has increased significantly, rising by 60% from the previous cycle’s all-time high. Additionally, it has been over 12 months since Bitcoin first broke its all-time high in January 2024, making this cycle even more unusual.

Despite this, some industry experts believe the outcome is still uncertain. The new retail investors who have entered the market—partly due to the launch of TRUMP—could return if an altcoin season finally takes place.

Has the meme coin casino replaced the altseasons?

This point is closely related to the previous one. The launch of numerous new meme coins, along with the strong performance of associated platforms such as pump.fun, acts as a funnel that attracts and drains liquidity from the crypto market.

As a result, many investors have shifted their focus to the meme coin sector, while others are giving up on altcoins. Additionally, the high expectations surrounding Donald Trump’s election have somewhat diminished. The president has notent has commented in a while on crypto, particularly since the launch of his meme coin.

An axiom that has always applied in previous crypto market cycles—likely triggered by quantitative tightening and liquidity injections—states that the price of Bitcoin rises first, then Ethereum’s price follows. Finally, liquidity flows into smaller altcoins. However, today, the situation seems to have changed. Only time will tell if this marks a paradigm shift or a delay.

Major market players are continuing to accumulate.

Let’s conclude this article with some positive news. Despite the lack of quantitative easing, which has historically catalyzed bull markets, the current cycle demonstrates remarkable resilience. Bitcoin, fueled by institutional ETFs and unprecedented political recognition, has defied historical patterns by growing in a more restrictive monetary environment. However, the absence of a traditional ‘alt season’ and the dominance of meme coins prompt questions about the future of cryptocurrency: Are we witnessing a paradigm shift or merely a temporary pause?

The answer may be found in patience. Institutional investors continue to accumulate assets, indicating that long-term confidence remains strong. While the current macroeconomic climate—characterised by high interest rates and geopolitical tensions—may dampen enthusiasm, it also creates opportunities for strategic accumulation, potentially setting the stage for a future surge. The actual ‘trigger’ for market movement may not be the return of quantitative easing but rather the market’s adaptation to new rules, where innovation, regulation, and mass adoption craft a different narrative. As the history of past cycles teaches us, one certainty remains: markets always surprise us, often just when expectations are low.

Out Tesla, in Bitcoin: Standard Chartered revolutionises index Mag 7

Standard Chartered replaces Tesla shares with Bitcoin

Standard Chartered has replaced Tesla with Bitcoin in its Mag 7B index, citing higher yield and lower volatility. Discover how cryptocurrency has entered the realm of elite assets.

The banking giant Standard Chartered has released a new report proposing a variation of the well-known “Magnificent Seven,” which includes seven major tech companies that dominate the global stock market. In this latest version, called “Mag 7B,” Tesla shares have been replaced by Bitcoin.

This approach evaluates whether cryptocurrency can be a viable alternative—if not a superior oneto one of the most iconic companies in the technology sector. Early results indicate that Bitcoin has provided higher returns with less volatility. Tesla is struggling due to the significant downturn it experienced following Donald Trump’s arrival in the White House.

Tesla shares and Bitcoin: what is the Mag 7B index and the information ratio

Substituting Bitcoin for Tesla shares in the Mag 7 index, which replicates the behavior of top global technology assets, creates what we can call the Mag 7B. This idea is not original; it comes from Standard Chartered, one of the leading banks in the UK. Interestingly, Geoffrey Kendrick, the bank’s Head of Digital Assets Research, stated that this new composition could generate returns approximately 5% higher from 2017 to the present while reducing average annual volatility by nearly 2%.

This claim is particularly evident when analysing the information ratio, which measures an asset’s extra return compared to a market benchmark about the volatility of its differential returns against a reference index. The information ratio helps evaluate an asset’s performance by comparing it to its associated risks.

Replacing Tesla shares with Bitcoin within the Mag 7 index yields a higher information ratio, suggesting better performance: 1.13 compared to 1.04. Kendrick’s decision to include Bitcoin instead of Tesla shares is based on the observation that Bitcoin behaves more like a tech stock than a traditional store of value. Consequently, it is more correlated to the Nasdaq 100—an index tracking the performance of the 100 most capitalised American tech companies—than gold.

Additionally, the data indicate that since January 2025, following Donald Trump’s assumption of the presidency, Bitcoin’s price performance has shown similarities to Nvidia’s, while Tesla’s seems to be more closely aligned with Ethereum’s in terms of volatility.

Will Bitcoin in institutional wallets become the norm?

The decision to include Bitcoin in the Mag 7B index at the expense of Tesla shares is more than just an academic exercise; it signifies a significant shift in the investment landscape. Various funds, including sovereign wealth funds, are increasingly exploring direct exposure to Bitcoin. BlackRock CEO Larry Fink has emphasised this trend over the past two years. With the recent launch of BlackRock’s Bitcoin ETF in Europe, the prospect of institutional investors allocating capital to Bitcoin has become even more tangible. Furthermore, Europe is home to many affluent savers considering investing in a new but undeniably solid asset.

In summary, Kendrick’s analysis extends beyond potential returns. The lower volatility that could be achieved by substituting Tesla shares with Bitcoin indicates that this cryptocurrency may help rebalance the overall risk of a technology-focused portfolio. The conclusion is clear: Bitcoin is no longer an outsider; it can now be regarded as a legitimate asset in innovation-oriented portfolios.

The new stablecoins of Fidelity and Donald Trump

The stablecoins of Fidelity and the Trump family

Fidelity Investments and World Liberty Financial, the decentralised finance project (DeFi) backed by the Trump family, announced the launch of two new stablecoins.

Two significant pieces of news regarding stablecoins have recently garnered attention in the crypto market. The first involves Fidelity Investments, one of America’s leading investment firms and an issuer of Bitcoin spot ETFs.

The second stablecoin is USD1, promoted by World Liberty Financial (WLFI), a decentralised finance (DeFi) project backed by former US President Donald Trump. Read on to learn more about these two new stablecoins in the crypto market!

Fidelity Investments prepares to launch a stablecoin

Fidelity Investments, a leading global asset manager, is set to launch its stablecoin, which is expected to be released by the end of May 2025. The Boston-based investment firm aims to create its version of digital cash, following its exploration of the cryptocurrency sector with the introduction of spot ETFs for Bitcoin and Ethereum in 2024.

The upcoming stablecoin is part of Fidelity’s recent proposal to the U.S. Securities and Exchange Commission (SEC) to introduce a tokenised version of its Treasury Digital Fund. This fund comprises cash and U.S. treasuries (government bonds) and is only available to institutional investors and hedge funds.

This initiative may have been influenced by Donald Trump’s election, which marked a shift in the previous administration’s stance toward cryptocurrency. Since the early stages of his election campaign, Trump has promoted pro-cryptocurrency policies and supported the growth of stablecoins.

World Liberty Financial introduced USD1

To illustrate our earlier point about Donald Trump’s support for stablecoins, we present recent news about World Liberty Financial. The Trump family’s DeFi project has launched USD1, a stablecoin.

This stablecoin, similar to the fund Fidelity plans to introduce to blockchain through tokenisation, will be fully backed by U.S. Treasury bonds, cash, or equivalent assets. Not much is known about USD1 except for the blockchains on which it will initially be available: Ethereum and the Binance Smart Chain, which is compatible with EVM.

In summary, recent developments in the cryptocurrency world reveal that Fidelity Investments has decided to launch its stablecoin in preparation for the public release of its Treasury Digital Fund. This product falls into the Real World Asset (RWA) category and has great potential to drive increased crypto adoption.

President Donald Trump has also shown a growing interest in cryptocurrencies and has actively promoted initiatives to position the United States as a leader in this sector. The establishment of World Liberty Financial and the launch of USD1 are concrete examples of this commitment.

Investing is simple but not easy: 5 paradoxes of personal finance and the crypto world

personal finance

Laziness is a virtue in the investment world! Discover five other paradoxical and counterintuitive (but true) assumptions from the world of personal finance.

What are the central paradoxes of personal finance? Our blog primarily focuses on cryptocurrencies but occasionally explores other areas of the vast investment landscape.

Recently, we came across an intriguing article by Dedalo Invest. The author, Andrea Gonzali, outlines personal finance’s 10 contradictions (or paradoxes). We decided to revisit this article because many of its points resonate strongly with the crypto world.

The investment world can often be counterintuitive. 

While the primary goal of those exploring the markets is logical—maximising returns and minimising losses—many investor actions can seem irrational, especially without the benefit of hindsight. In summary, the objective is clear, intuitive, and rational, but its methods can be complex.

There isn’t a single reason for this complexity. Historically, humans have developed intuition for two key purposes: to ensure the survival of our species and to perpetuate it through procreation. This focus does not include increasing financial capital. To quote the original article’s author, “The fundamentals are intuitive: save regularly, invest wisely, diversify your portfolio, and maintain it over the long term. It is the management of money that is complex.

Laziness is a virtue.

Let us start with perhaps the most paradoxical statement: laziness often maximises performance, while hyperactivity tends to hinder it. Of course, this observation is not meant to generalise; exceptions certainly exist, such as the highly active meme coin trader who is our friend’s cousin. However, when analysing broader investment and personal finance trends, many of society’s beliefs about the value of hard work and commitment are challenged.

It is essential to clarify that in this context, laziness refers specifically to the operational side of investing, such as the frequency of buying and selling or rebalancing, rather than the time spent studying concepts or theories. This idea also applies to the world of cryptocurrency. The more trades one makes in a particular timeframe, the greater the risk of making mistakes that can lead to significant losses, especially when dealing with certain types of cryptocurrencies.

In traditional finance, so-called “lazy portfolios”—portfolios that simply diversify among a few asset classes using financial instruments that require minimal intervention—have historically outperformed many more complex, actively managed strategies. The same can be said for portfolios predominantly composed of Bitcoin and a few altcoins, even over shorter investment horizons.

Several reasons account for this phenomenon. First and foremost, every trade made on a brokerage platform or a crypto exchange incurs costs and increases the likelihood of making errors. Due to the unpredictable nature of the markets, even professional investors do not try to time the market effectively—that is, they do not attempt to sell assets at their peak value or buy them at their lowest point. Finally, it’s important to note that any capital gains realised from trading are subject to taxation.

You have to follow your intuition

Intuition is crucial for our safety, alerting us to danger before it becomes apparent. However, relying on intuition can be risky when it comes to investments. While humans have only recently begun investing their money, our intuition and the cognitive biases linked to it have developed over hundreds of thousands of years. In simpler terms, our intuition evolved to protect us from threats like wild animals or poisonous plants, not to navigate the complexities of the post-Trump trade market crash.

These cognitive biases are mental shortcuts that shape our beliefs and influence quick decision-making, significantly affecting our investment choices:

1. Anchoring: We assign excessive and irrational value to specific price points. A notable example is the $100,000 threshold for Bitcoin, where many investors made mistakes during the 2021 bull market because they believed BTC would reach this level.

2. Overconfidence Bias occurs when we overestimate our knowledge, decision-making abilities, or predictions’ accuracy.

3. Confirmation Bias: This bias leads us to selectively seek information supporting our existing opinions while ignoring data that contradicts them.

For this reason, rigid investment approaches characterised by clear, unbreakable rules—such as a recurring and buy-and-hold strategy—tend to yield better results than those based on an investor’s instincts or subjective perceptions.

Sales do not attract buyers.

In finance, especially in cryptocurrency, a price decline often drives buyers away, contrary to what typically occurs in other markets. For instance, if we are interested in a pair of shoes and their price drops by 50%, we will likely welcome this reduction and make a purchase. This creates a paradox where, in the markets, the opposite behavior is observed. The well-known meme illustrating a long line of buyers when Bitcoin’s price is $100,000 and an empty line when it falls to $6,000 effectively captures this reality.

The herd effect can explain the concept: when everyone is selling, our instinct prompts us to follow suit, even though we know rationally that it might be the best time to buy. Discounts can be intimidating in the markets because falling prices are typically linked to negative news or behaviors, altering the perception of investors anticipating further declines.

Investing near the highs is the norm, not the exception.

Let’s shift our focus from the crypto sector to traditional financial markets, particularly the stock market. This shift isn’t because the concepts we’re discussing are exclusive to traditional markets but because crypto assets are relatively young compared to stock indices. As a result, we have insufficient historical data to support our thesis fully.

Those entering the investment world for the first time often fear buying at market peaks or feel they are entering too late. However, this concern is unfounded mainly when we examine the history of the S&P 500, the leading stock index that tracks the performance of the 500 largest companies in the United States and, in many ways, reflects general market trends. 

The S&P 500’s chart, which begins in 1957, shows that it spends a significant amount of time near its all-time highs. Between 1957 and March 2025, the index recorded 1,242 new highs. Typically, these all-time highs are separated by very short periods, although there have been a few notable exceptions, such as the seven-year gaps between 2000 and 2007 and between 1973 and 1980. 

In summary, reaching new all-time highs in traditional finance is not an extraordinary event but the norm.

The notion that investing during a bearish market is easier is often misleading. When markets collapse, fear and uncertainty prevail, making investing paradoxically more challenging, even when prices are significantly lower.

What about the world of cryptocurrency? Currently, Bitcoin cannot be compared to the S&P 500 due to the 50-year history that separates them. This difference contributes to Bitcoin’s value being more cyclical and subject to volatility. However, Bitcoin has recently reduced the time between reaching all-time highs, likely due to increased interest from institutional investors. Over time, although we cannot be sure, Bitcoin’s price movements will probably start to resemble those of traditional assets, with gold being a prime example, as both share the characteristic of scarcity.

Investing near the highs is the norm, not the exception

We arrive at the fifth and final point, aptly summarised by Daedalus Invest, in the following paradox:

  • It is essential to start investing as early as possible to benefit from compound interest
  • However, you cannot act blindly; you must fully understand what you are doing and educate yourself before you begin investing.

The first statement is straightforward if you know how compound interest works. It refers to the percentage return you earn on an amount that includes previously accumulated interest—essentially, it’s interest on interest. Nevertheless, jumping in without a solid foundation of knowledge can lead to mistakes that may be costly and disheartening, prompting individuals to step away from investing altogether.

So, how can you overcome this challenge? Start by exploring the wealth of resources available on our Academy and Blog!

Crowdfunding in crypto: all the advantages and how to do it

Crowdfunding in crypto

How does crowdfunding operate in the cryptocurrency sector? It is an innovative approach to raising capital.

Cryptocurrency crowdfunding is a new, direct, immediate, simple and participative way to raise capital. This approach has gained popularity because it allows companies and individuals to quickly access funding or invest in rapidly growing startups.

Businesses seeking financial support and individuals wanting to fund their projects can use cryptocurrency crowdfunding platforms. These platforms enable them to reach a broad base of potential investors without depending on traditional banking channels or venture capital. In this article, we will explore crypto crowdfunding and how it works.

What it is and how it works

Crypto crowdfunding is a fundraising method that utilises cryptocurrencies instead of traditional fiat currency as the primary source of capital. Unlike conventional fundraising, this process often occurs without intermediaries or third parties, enabling investors to access opportunities directly.

This approach significantly speeds up the fundraising process and improves security and transparency. Today, startups can leverage blockchain technology and smart contracts to raise capital quickly and efficiently, bypassing the cumbersome procedures that were common before the digital age.

The advantages of crowdfunding in crypto

Cryptocurrency crowdfunding offers several advantages over traditional funding methods. First, it is generally more efficient, faster, and flexible, providing a reliable infrastructure. This efficiency is crucial for both companies seeking funding and investors.

Companies benefit from the security provided by smart contracts, which leverage the transparency of blockchain technology to manage fundraising effectively. The blockchain permanently records all transactions and details related to fundraising, ensuring complete transparency. This allows investors to monitor how their funds are used in real-time.

Additionally, cryptocurrency crowdfunding provides global access to investors, eliminating the geographical barriers often found in traditional funding. Like conventional crowdfunding, investors are encouraged and supported in evaluating the organisations or projects they wish to fund, but they have access to more independent information for their research.

The main types

There are various types of crowdfunding in the crypto space, with the most well-known—though often misused—being Initial Coin Offerings (ICOs). This fundraising method can be safe and beneficial; a prime example is the ICO of Ethereum, which allowed the project’s first supporters, led by Vitalik Buterin, to invest early on. However, when successful ideas emerge, they tend to be exploited by many, including those with questionable intentions who are simply looking to profit.

Only two parties typically participate in Initial Coin Offerings (ICOs): the company and the investors. Initially, the start-up launching the fundraising event presents its project to potential investors through a whitepaper summarising the business plan. Additionally, the presence of a token is crucial, and it must have a specific function. For example, the token may grant investors access to certain services related to the product or provide them with a share of the company’s future dividends.

Following the rise and decline of Initial Coin Offerings (ICOs), new forms of crowdfunding in the cryptocurrency space emerged, including Initial Exchange Offerings (IEOs). IEOs signify a notable advancement in crypto crowdfunding, as cryptocurrency exchange platforms directly handle them. Unlike independent ICOs, IEOs involve an exchange that oversees the crowdfunding process.

The main advantages of Initial Exchange Offerings (IEOs) include:

1. Increased Security: IEOs are conducted on regulated exchange platforms, providing investors greater trust and security than Initial Coin Offerings (ICOs), often linked to fraud and scams.

2. Access to Markets: IEOs provide startups with a direct channel to investors through the exchange platform, enabling them to access a large user base without establishing their investor network.

3. Simplified Procedures: IEOs streamline the participation process, allowing investors to use funds directly from their accounts on the exchange platform. This eliminates creating a separate digital wallet or navigating complex procedures.

4. Technical Support: Exchange platforms hosting IEOs typically offer technical support and assistance to investors and startups, reducing the risk of errors when purchasing cryptocurrencies.

5. Regulation: Since IEOs are hosted on regulated platforms, rules and procedures are established to prevent illegal activities and fraudulent behaviour and ensure compliance with national and international laws.

Initial Exchange Offerings (IEOs) provide a secure and convenient way for start-ups to raise funds through cryptocurrencies and for investors to participate in these projects. Thanks to blockchain technology, IEOs enable quick and transparent transactions.

To learn more about how our B2B services can support your company’s growth through this type of fundraising and other blockchain and cryptocurrency-related services, please visit our B2B services page or contact us at [email protected].

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