When the Ethereum Merge finally concluded on September 15th, investors didn’t see the massive market shift they were anticipating.

However, one significant outcome of this event was that meme-inspired cryptocurrency Dogecoin has now become the second-largest Proof-of-Work (PoW) consensus-based network, trailing only the Bitcoin network in terms of market value.

According to ETHPoW’s official Twitter account, Dogecoin is likely to compete with ETHPoW, which is the Ethereum PoW hard fork chain that is expected to keep mining.

Bitcoin is still the most valuable PoW blockchain with a market capitalization of $380 billion, based on data by TradingView. Next to Bitcoin and Dogecoin, Ethereum Classic, Litecoin, and Monero have the third, fourth, and fifth largest PoW blockchains, respectively.

Dogecoin was launched in 2013 and has since risen to the top 10 cryptocurrency rankings. The crypto is currently trading at $0.060888, a decrease of 4.8% over the last seven days.

The joke coin is now ranked 10th on Coingecko’s list of the leading cryptocurrencies. In the previous 24 hours, BTC was trading at $19,709, down 2.5%, while ETH was trading at $1,474, falling 9.7%.

As with Bitcoin, DOGE is mined using proof of work, which requires miners to use powerful computers and a significant amount of energy to solve complex mathematical problems in order to validate transactions and earn DOGE.

Regulatory authorities have recently upped their monitoring of network validators as many nations advocate for a total ban on crypto mining activities since they place a significant strain on national grids.

Approximately 14.4 million DOGE are mined daily, according to the cryptocurrency tracking platform Currency.com, adding to the coin’s supply of 132.6 billion. In contrast to Bitcoin, which has a restricted supply of 21 million, Dogecoin has no supply limit.

Meanwhile, the Dogecoin Foundation has been contemplating a transition of Dogecoin to a proof-of-stake (PoS) mechanism after Ethereum co-founder Vitalik Buterin, who is also an advisor to the foundation, suggested the change in September of last year.

In recent years, the dog-inspired crypto has gained an odd champion in the world’s richest person, Tesla chief executive Elon Musk, who has tweeted about the coin as far back as 2019 and on multiple times caused the price of Dogecoin to surge.

Ethereum, the second most known cryptocurrency after Bitcoin, has unveiled its most significant upgrade to transform the network from Proof of Work (PoW) to Proof of Stake (PoS) consensus on September 15. Alongside, it unemployed a big part of miners on the Ethereum network as its upgrade to PoS has killed the need for mining. But as the billions of mining accessories purchased can’t go wasted, miners tend toward Ethereum Classic (ETC) to continue their work. 

Related Reading: Nansen Reports Five Entities Control About 64% Of Staked Ether

Although the sudden increase in the hashrate coincides with the Ethereum merge, the ETC’s hashrate has been increasing already though. For example, the ETC hashrate has increased nearly 500% in the previous month.

Citing the transition to PoS, Vitalik Buterin, the founder of Ethereum, also has been endorsing miners to move on to Ethereum Classic to continue their work. Vitalik added in a statement;

Who here wants to cancel Proof of Stake?…There are plenty of blockchains, like there is Ethereum Classic, which is the original Ethereum which did not betray the vision by forking TheDAO. It’s a very welcoming community and I think they’ll definitely welcome Proof of Work fans…If you like Proof of Work, you should go use Ethereum Classic. It’s a totally fine chain.

Besides the miners moving to Ethereum Classic post the merge, they also showed interest in some other PoW platforms, including Ergo, Ravecoin, and Flux. Likewise, a data analysis firm dedicated to mining, 2Miners, concluded that Ergo’s network has recorded a rapid growth of 400% in 24 hours following the merge, sitting the hashrate at 137 Th/s. And the Ravecoin’s hashrate sees a jump from 9 Th/s to 14.34 in a day following the merge.  

Mining of ETC can be done quickly via prior developed accessories of Ethereum. ETC needs GPU and ASIC-based machines for mining that are already built by ETH. In addition, the top mining pool on the Ethereum network, Etheremine, is currently become the most significant contributor generating 57 Th/s. The group relies on 30,647 miners in total.

Related Reading: Ethereum TVL Drops By More Than $1 Billion After Merge

ETC, the native asset of Ethereum Classic, currently trades above $33, up by over 2% in the last hour. However, contrary to the higher mining activity, ETC lost over 10% in a day and more than 11% last week. 

HSBC, one of the world’s biggest multinational banks, says they’re not too confident about crypto and thus, will not be offering any service  related to it in the future.

Noel Quinn, HSBC CEO, says:

“I do worry about the sustainability of the valuations of crypto and I have done for a while. I’m not going to predict where it will go in the future.”

In a recent interview with CNBC-TV18, Quinn confirmed that they will not be treading into the crypto space such as exchanges or trading, not now or ever as they believe that it is not too clearly defined and tested in terms of stability and suitability for a lot of consumers today.

In May 2021, Quinn has revealed to Reuters his perspective on Bitcoin as unsuitable for payments because it’s difficult to quantify on a balance sheet judging by its high volatility. On the other hand, Quinn sees it as generally an asset class.

He also says that due to the volatile nature of Bitcoin, they refuse to support or promote it as an asset class.

For the same reasons, HSBC is also cautious about jumping into stablecoins. Although stablecoins have some stored value or are backed by the US dollar, it will really still depend on the accessibility, structure, and the organization backing it.

In April 2021, there were some changes implemented in the digital assets policy of HSBC Canada that included the suspension of sales transactions or exchange of products that are related to crypto. 

Quinn has a rather pessimistic view regarding digital assets and how it will fit today’s market or consumer base.

Apart from the high volatility of cryptocurrencies, the rise of cyber attacks in connection to the crypto space has also prompted many financial institutions to lose faith and confidence in Bitcoin and the like.

In fact, more than 56% of cyber attacks have been targeted towards crypto and were able to hack roughly $1 billion. Lazarus, a notorious hacking group, was able to steal around $540 million worth of digital assets on Ronin Bridge and other DeFi platforms. In that light, HSBC is not considering it as an asset class.

Meanwhile, as the popularity of the metaverse rises, several businesses, including HSBC and JPMorgan Chase, are establishing virtual presences.

HSBC last March bought a plot of land within The Sandbox’s metaverse, the first global financial institution to do so.

JPMorgan Chase was the first of the big banks to establish an Onyx lounge in Decentraland, where users could purchase property using cryptocurrency, a month earlier.

Besides that, what does this whole situation have to do with Coin Center? The organization defines itself as “the leading non-profit research and advocacy center focused on the public policy issues facing cryptocurrency and decentralized computing technologies like Bitcoin, Ethereum, and the like.” Coin Center’s article “Does the Merge change how Ethereum is regulated? (No.)” tackles the issue at hand.

“We do not believe that the technological differences between POS and POW warrant any different treatment,” Coin Center states summarizing its position. “On the securities law side, the SEC has always stressed that they look at the economic realities of transactions rather than the terms or technologies used to create those realites. The approach is substance over form,” they say summarizing the SEC position.

To soften the blow from this section title’s affirmation, Coin Center limits the scope to “the economic realities of validating.” We all know what they’re saying, though.

“The economic realities of validating a chain through mining and validating a chain through staking are similar. In both cases validators are an open set of participants and the only precondition to participation is provably suffering some cost. In proof-of-work that cost is energy and computing resources, in proof-of-stake it is the time value of money (e.g. the opportunity cost of holding an asset needed for staking rather than spending it).”

In Bitcoinist’s first article about the Post-Merge Ethereum, we quoted Gabor Gurbacs, Strategy Advisor at VanEck, whose thesis was that “even if it’s not a security, Ethereum was bound to attract regulatory attention post-merge.” He recently tweeted:

“I am not saying that ETH is necessarily a security because of its proof model, but regulators do talk about staking in the context of dividends which if one feature of what securities laws call a “common enterprise”. There are other factors in the Howey test too.”

The Howey test, in turn, refers to these “four criteria to determine whether an investment contract exists:”

1. An investment of money
2. In a common enterprise
3. With the expectation of profit
4. To be derived from the efforts of others

That leads us to…

Now that we’re all familiar with the Howey test, this paragraph makes more sense:

“Central to classification as a security is ongoing reliance for profits derived primarily from the efforts of others. Both consensus mechanisms are explicitly designed to avoid any such reliance by creating an open competition amongst strangers wherein any self interested participant can and will fill the gap left by any other unresponsive, corrupt, or censorious participant.”

That might be true, but, what about the effort of all the companies and developers working on the Ethereum platform? They provide value that translates into profits. And people buying ETH are investing in them, in a way. Chairman Gensler’s other example included an additional element. “If an intermediary such as a crypto exchange offers staking services to its customers, Mr. Gensler said, it “looks very similar—with some changes of labeling—to lending.”

Coin Center disagrees with extreme prejudice:

“Our analysis of the technology, however, suggests that there should be no differential treatment of projects based merely on the choice of one or another permissionless consensus mechanism.”

Not only that, they go as far as to call them “commodities”:

“Otherwise decentralized cryptocurrencies that use proof of stake consensus are commodities, and, therefore, the CFTC has spot market policing authority and derivatives market supervisory authority.”

Maybe, but, is there a decentralized Proof-Of-Stake cryptocurrency? That’s certainly up for debate. Especially considering Proof-Of-Stake’s inherent propensity towards centralization.

After this, the federal agencies introduced a joint fact sheet on six principal directions for regulation in the U.S. Joe Biden’s administration has earlier lobbied for more control and increased laws on cryptocurrencies owing to the increased popularity of digital assets.

The joint fact sheet made by the federal agencies primarily adds up the content of the nine separate reports that have been provided to the President to ensure an “articulate and clear framework for responsible digital asset development and paves the way for further action at home and abroad.”

The decision to pass an order could be suggestive of the nature of cryptocurrencies, which means that high volatility is associated with digital assets.

Volatility has been one of the major concerns related to the cryptocurrency industry and that has created problems throughout the industry, as seen in new reports.

This has made the United States form and structure regulations on digital assets.

The framework mentions the various methods by which a financial services sector would be able to transform in order to conduct borderless transactions more easily.

This framework also targets bringing down fraud within the industry.

A statement from the Biden administration quoted that,

Digital assets pose meaningful risks for consumers, investors, and businesses. The prices of these assets can be highly volatile: the current global market capitalization of cryptocurrencies is approximately one-third of its November 2021 peak.

This fact sheet was published today, September 16, 2022. It comprises seven sections, to be specific.

(1) Protecting Consumers, Investors, and Businesses; (2) Promoting Access to Safe, Affordable Financial Services; (3) Fostering Financial Stability; (4) Advancing Responsible Innovation; (5) Reinforcing Our Global Financial Leadership and Competitiveness; (6) Fighting Illicit Finance; (7) Exploring a U.S. Central Bank Digital Currency (CBDC).

The White House statement mentioned how various government agencies could come together and ensure that the digital currency space grew without many hindrances.

The crypto framework mentions the various methods by which a financial services sector would be able to transform in order to conduct borderless transactions more easily.

The risks that were alluded to by the White House were mainly related to price volatility and crypto scams.

The statement by the White House encouraged the Securities and Exchange Commission and Commodity Futures Trading Commission to “aggressively pursue investigations and enforcement actions against unlawful practise in the digital asset space.”

At the present moment, neither the SEC nor the CFTC has oversight over the crypto industry today.

The SEC in particular has been scrutinising the crypto market after the agency’s chairman, Gary Gensler, mentioned this week again that most digital assets need to be classified as securities.

This report has also asked the Consumer Financial Protection Bureau and the Federal Trade Commission to reprimand ill-conceived practices in the industry.

It has also been suggested that government agencies team up and address the associated consumer risks to publish clear guidance and rules on the crypto space.

Ex-leaders at Citadel Security initially launched their own market maker in April 2021 and named it Portofino Technology. The platform aims to enable high-frequency trading (HFT) and provide advanced features to the digital asset users of web 3 and other institutions. It provides liquidity services to crypto users of web 3 and relies on highly-efficient and fast algorithms to open and close a trade seamlessly. 

Related Reading: Michael Saylor Censures On Misinformation On BTC Mining

Moreover, it offers strategic partnerships to web 3 startups looking to list their tokens. The company already claims to have traded billions of funds on centralized and decentralized exchanges. 

Venture capitalists who backed the funding round include Global Founders Capital, Valar Ventures, and Coatue. 

Lancia, the co-founder and CEO at Portfolio Technology, added in the statement;

Having worked at the forefront of the modernization of traditional markets, we believe that our liquidity provisioning infrastructure can deliver enormous benefits to digital asset participants globally and drive the next leg of adoption. This is only the start for Portofino. In web3, every action is a transaction, and we’re building the underlying technology that is going to enable entirely new services and industries in the future.

After enabling investors to access liquidity at very competitive prices, the company intends to expand its reach in the entire crypto space, including non-fungible tokens (NFTs), Decentralized Finance (DeFi), ecosystem tokens based on gaming, etc. 

The Switzerland-based startup company Portfino Technology detailed in the press release that the platform employs 35 technology experts working in Portfonio’s offices across New York, London, and Singapore, and it plans to further increase its staff headcount by 50 in 2022. The company has not expressed its valuation yet.

The funds for Portofino are accumulated amidst the long-lasted bloodbaths and inflation that wiped billions of dollars from the crypto market. It further drove more selling pressure, and the lawmakers added fuel to the fire with their aggressive approach to digital assets. 

Similarly, this climate led the market toward lower trading volumes and fewer arbitrage opportunities. And it also increased the borrowing costs. But, Portofino Technology could compete with big market makers on leverage with the help of its automotive inventory management and unique algorithms.

Oliver Samwer, an investor at Global Founders Capital and CEO at Rocket Internet, commented on the launch of Portofino Technology and added;

Related Reading: Crypto Lender Voyager’s Bankruptcy Auction Begins

We’re really excited about the potential of Portofino. It’s rare that you find a founding team with such fantastic expertise to solve the problems that digital asset market participants face today. We are convinced this is the right team to help facilitate the next leg of institutional and retail participation in this market.

After the exit of Ethereum as a proof of work network, the top 10 proof of work coins now share a combined market cap of $403 billion. Bitcoin alone commands a massive market cap of $378 billion, which makes it not only the largest proof of work coin but the largest cryptocurrency by market cap. Given this, bitcoin now commands approximately 94% of the market cap of all the proof of work coins. 

The second-largest proof of work coin by market cap is now Dogecoin at $7.8 billion. The meme coin, which had grown to prominence back in the bull run of 2021, continues to see favorable growth in the crypto market, although its price is currently down more than 90% from its all-time high.

Ethereum Classic comes in 3rd place with a market cap of around $5.2 billion. Interestingly, Ethereum Classic had grown to this market cap by capitalizing off the hype from the Merge. Additionally, Ethereum miners who were being kicked off the network began transferring their mining capacity to what is referred to as the ‘Original Ethereum,’ causing a surge in its price.

Coming in at 4th and 5th place are Litecoin and Monero, with market caps of $4 billion and $2.6 billion, respectively. The latter is interesting in the fact that it is a privacy coin that is untraceable, making it popular among cryptocurrency investors who wish to keep their dealing completely secret.

Although bitcoin is now showing significant strength across the proof of work coins, it is still having a hard time maintaining its dominance over the larger crypto market. Interestingly, just five years ago, bitcoin’s crypto market dominance was higher than 95%. However, this has changed as altcoins gain favor among investors. 

From 2017 until now, bitcoin’s market dominance has declined by more than 50%. It is currently sitting just above 40% at the time of this writing, a level that it has struggled to maintain over the last couple of months. The bear market has also played significantly into the decline of bitcoin’s crypto market dominance.

The market crash has triggered a flee to safety on the part of investors, and they have been taking refuge in stablecoins such as USDT, USDC, and BUSD. As a result, the market dominance of these stablecoins has been growing. 

Ethereum’s dominance, on the other hand, has grown significantly in the last five years. It is now the second-largest cryptocurrency by market cap, with a market dominance of 19.58%.

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A blockchain analytics company, Nansen, gave a recent report on the distribution of staked Ether (ETH) and the significant holders. According to the report, five entities control up to 64% of staked ETH.

While outlining the details of its report, the firm noted that Lido DAO stands as the largest staking provider for the Merge. The DAO has about 31% share distribution of all staked Ether.

The next three more significant holders are the popular exchanges Binance, Kraken, and Coinbase, with a combined share of 30% of staked ETH. Their respective proportions of staked Ether are 6.75%, 8.5%, and 15%.

The fifth holder, tagged as ‘unlabeled,’ is a group of validators. The group controls about 23% proportions of staked ETH.

Also, the analytics firm reported on the liquidity proportions of all staked Ether. It disclosed that only 11% of the cumulative circulating Ether is staked. 65% are liquid from this staked value, while 35% are not. The report from Nansen added that the Ethereum blockchain has a total of 426 thousand validators while depositors are 80 thousand.

The development of Lido and other DeFi on-chain liquid staking platforms is for a specific agenda. First, they are to counter the risk from centralized exchanges (CEXs) as the latter amass more significant proportions of staked ETH. This is because the CEXs must operate under the regulations of their jurisdictions.

Hence, DEXs such as Lido must be fully decentralized to resist censorship continuously, per Nansen’s report. However, the data from the on-chain firm showed a contrary stance for Lido.

The data indicated that the ownership of Lido’s governance token (LDO) has a tilt. Therefore, the groups with bigger token holders have more risk of censorship.

The firm cited that the top 9 addresses of the Lido DAO control 46% of the governance power. This signifies that just a small number of addresses are the dominants of proposals. So, there’s a need for sufficient decentralization for an entity such as Lido with the most considerable proportions of staked Ether.

Additionally, the analytics firm mentioned that the LIDO community is already making moves to prevent over-centralization risks. For example, it has plans involving dual governance and creating proposals for legal and physical distributed validators.

Also, Nansen highlighted the non-profitability of the majority of staked Ether. But it noted that illiquid stakers still hold 18% of staked ETH, which is in profit.

The firm mentioned that these stakers would likely engage in massive sell-offs when withdrawals become possible. However, the move will take about 6 to 12 months following the Merge.