The role of transaction fees in cryptocurrencies is essential for maintaining the efficiency, security, and integrity of blockchain networks. Transaction fees are charges that users pay to the blockchain network for processing and verifying transactions. These fees compensate miners and validators who secure the network by adding transactions to the blockchain. Transaction fees vary based on factors like network congestion, transaction urgency, and computational complexity. They incentivize miners to prioritize transactions when they are higher, ensuring faster processing and maintaining a competitive market where users can choose to pay more for quicker transaction verification. Transaction fees play a crucial role in preventing spam transactions, deterring malicious activity, and sustaining a healthy and competitive cryptocurrency market.

### **How are fees calculated?**

To understand how fees are calculated in the world of cryptocurrencies, particularly in transactions like Bitcoin, Ethereum, and others, it is crucial to delve into the mechanics behind these calculations. Cryptocurrency transaction fees play a pivotal role in maintaining the efficiency, security, and integrity of blockchain networks. These fees cover the processing and verification of transactions on decentralized networks of nodes, ensuring that transactions are added to the blockchain securely and efficiently.

### **Factors Influencing Fee Calculation**

1. **Transaction Size**: The size of a transaction in bytes directly impacts the fee charged. Larger transactions that require more space in a block incur higher fees.
2. **Transaction Complexity**: The complexity of a transaction, determined by the number of inputs and outputs it contains, influences the fee. Transactions with multiple inputs and outputs are larger and more complex to process, leading to higher fees.
3. **Network Congestion**: During peak periods when network capacity is strained by a high volume of transactions, fees increase as users compete for faster processing.
4. **Urgency**: Users can prioritize their transactions by paying higher fees to incentivize miners to verify their transactions promptly.

### **Fee Calculation Process**

- **Base Fee**: Each network sets a base fee per transaction.
- **Fee Rate**: The final fee charged is calculated based on factors like computational complexity, urgency, and network congestion.
- **Satoshi per Byte**: Bitcoin Fees are measured in satoshis per byte, reflecting the cost of transaction space on the blockchain.

### **Practical Examples**

- **Bitcoin**: Transaction fees in Bitcoin are calculated using the formula: Fee (in BTC) = Transaction Size (in bytes) × Fee Rate (in satoshis per byte)
- **Ethereum**: Ethereum introduces gas fees for executing smart contracts or token transactions, with higher complexity leading to increased fees.
- EIP 1559 was recently introduced for crypto enthusiasts to have a better way of estimating EVM transaction fees

### **Impact on Users**

Cryptocurrency transaction fees offer a cost-effective alternative compared to traditional financial services, especially for cross-border payments. Unlike traditional systems where fees can be substantial percentages of the amount sent, cryptocurrency transaction fees are often fixed or vary based on network conditions.  Factors like transaction size, complexity, network congestion, and urgency all contribute to determining the final fee users pay for their transactions. By grasping these complexities, one can optimize their fee strategies and make informed decisions when engaging in cryptocurrency transactions

### **Understanding Different Transaction Fee Approaches in Blockchain Systems**

In blockchain, transaction fees are managed through various approaches, each with unique characteristics tailored to different blockchain networks. Let's explore the three main methods: UTXO, Account-based, and Tron, shedding light on their distinct functionalities.

### **UTXO (Unspent Transaction Output) Model**

The UTXO model, prevalent in networks like Bitcoin, involves consuming different inputs (UTXOs) for each transaction while generating new UTXO outputs. These UTXOs represent unspent cryptocurrency amounts, and users must provide sufficient UTXOs to cover transaction fees. To illustrate, imagine owning 10 Bitcoin addresses with 0.11 BTC each. When making a 1 BTC transaction (with a 0.05 BTC fee), you can utilize the combined balance across all addresses. The change from this transaction is returned to a new or existing change address within your wallet, equal to the fee paid (0.05 BTC).

### **Account-based Blockchains**

In account-based blockchains like Ethereum, Tron, and Binance Smart Chain, a balance management system akin to traditional bank accounts is employed. Users can spend a specific portion of their address balance, simplifying transactions. For instance, if you own 50 ETH and transact 12 ETH, you will retain 38 ETH (minus fees), while the recipient receives 12 ETH directly.

### **Tron Blockchain Fee Structure**

Tron's fee calculation revolves around energy and bandwidth metrics unique to its blockchain. Bandwidth, paid in points equivalent to transaction size in bytes, requires 1,500 free points daily for validated addresses with a minimum balance of 0.01 TRX. Energy, obtained through TRX staking, is not provided daily. Insufficient energy or bandwidth points necessitate burning a portion of transacted TRX to cover fees. Larger transactions demand more resources for mining, aligning with the resource-intensive nature of fee models across blockchain networks. In conclusion, understanding these diverse transaction fee mechanisms empowers users to navigate blockchain transactions effectively, optimizing their interactions within different blockchain ecosystems.

### How to avoid high transaction fees with Bitpowr

Bitpowr helps businesses avoid high transaction fees by providing tools that make transactions cheaper on the blockchain. Users can implement fee optimization techniques such as estimating fees accurately, selecting the right wallet structures, making use of batching for multiple transactions, and strategically timing transactions during low-fee periods. Additionally, Bitpowr supports Bitcoin SegWit addresses, enabling faster transaction processing times, reduced fees, and enhanced network capacity. By leveraging these strategies you can effectively mitigate the impact of high transaction fees, and reduce running costs thereby increasing your overall business profit. 

Bitpowr now also supports EIP 1559 so estimating transaction fees will be much more effective. [Feel free to reach out if you require further clarification.](https://bitpowr.com/contact-us)

Transaction fees are essential in  crypto, preventing spam and malicious activities while ensuring the network remains efficient, secure, and competitive.







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Roles of Transaction Fees In Cryptocurrencies

## **Coins**

Coins are digital assets that have their own independent blockchain networks, similar to traditional currencies like the US Dollar or Euro.

They are designed to be used as a medium of exchange, with the primary purpose of storing value and facilitating transactions.

Examples of coins include Bitcoin (BTC), Ethereum (ETH), and Cardano (ADA)

Coins can be created through various consensus mechanisms, such as Proof of Work (PoW) or Proof of Stake (PoS).

They are often used for general transactions and value preservation, making them suitable for everyday use and long-term investment.

## **Tokens**

Tokens, on the other hand, operate on existing blockchain networks instead of having their own independent blockchains.

They are built on top of other blockchains, such as Ethereum, and are designed to provide utility and functionality within specific ecosystems.

Tokens can represent various assets or features, such as ownership in a Decentralized Autonomous Organization (DAO), digital products, or even physical objects.

Tokens are often used to power decentralized applications (DApps) and can be traded like coins on various cryptocurrency exchanges.

They are more suitable for specific purposes and value creation, making them essential for interacting with DApps and participating in decentralized finance (DeFi) projects.

## **Key Takeaways**

In summary, coins are native to their own blockchain networks and are designed for general transactions and value preservation, while tokens are built on top of existing blockchains and provide utility and functionality within specific ecosystems. Both coins and tokens play crucial roles in the cryptocurrency market, enabling a wide range of use cases and applications.

# **What Are Cryptocurrency Coins and Their Common Uses?**

The terms "coins" and "tokens" are often used interchangeably, especially among newcomers to the industry. However, it is essential to understand that coins and tokens are not synonymous; they possess unique characteristics and serve distinct purposes, despite both being instrumental in enabling value exchange within decentralized systems.

In essence, coins represent digital currencies that are native to their respective blockchain networks. For example, Bitcoin (BTC) functions as the native coin for the Bitcoin blockchain, Ethereum (ETH) for the Ethereum network, and XRP for Ripple. The value of these coins is intricately tied to user activities within their respective ecosystems, including factors like transaction volumes, user engagement, and overall demand. Increased usage typically correlates with higher prices due to heightened demand. While external factors can also impact coin prices, they are beyond the scope of this discussion.

On the other hand, cryptocurrency tokens are specifically created to support decentralized projects by leveraging existing blockchain infrastructures through smart contracts. Tokens offer a range of functionalities tailored to specific platforms and blockchains, encompassing utility features, governance mechanisms, and security protocols.
In summary, while both coins and tokens play vital roles in the crypto landscape by facilitating transactions and leveraging distributed ledger technology, they operate on different principles and cater to diverse use cases.

# **What Are Cryptocurrency Tokens and Their Common Uses?**

Cryptocurrency tokens are digital assets that are built on existing blockchain networks, unlike coins that have their own independent blockchains.

Tokens can represent various assets, from physical objects to virtual currencies, and are often created through processes like [Initial Coin Offerings](https://bitpowr.com/blog/understanding-initial-coin-offering-a-comprehensive-guide) (ICOs).

These tokens play a crucial role in powering decentralized applications (DApps) and can offer functionalities such as utility, governance rights, and access to services within specific platforms and blockchains.

**Common uses of cryptocurrency tokens include:**

- Representing assets like physical goods or currencies.
- Providing access to services or applications within decentralized ecosystems.
- Enabling users to participate in governance processes.
- Facilitating cross-chain functionality and interoperability.
- Serving as tradable and transferable assets among participants in blockchain networks.

# **Are Stablecoins, Coins or Tokens?**

Another class of digital assets worth noting is Stablecoins, which, as the name suggests, must maintain a stable value to fall under this category. This stability is often achieved by pegging them to various assets, which acts as a guarantee for maintaining constant levels. For example, USDT is a Stablecoins linked to the value of the US dollar, meaning that 1 USDT is roughly equal to $1 USD.

One distinctive aspect of Stablecoins is that the majority of these assets operate on the Ethereum blockchain through smart contracts. In reality, they are considered ERC-20 tokens as they lack their own independent blockchains. As discussed earlier, all coins are associated with their own blockchains and are native to their respective networks, which makes Stablecoins an exception to this rule.

*At Bitpowr, we offer ready-to-deploy blockchain infrastructure that financial institutions including banks and fintechs can plug into to simplify cross-border remittances, expand their customer base, and grow their revenue. **[Reach out to us to learn more](https://bitpowr.com/contact-sales)**.*

Coins are native to their own blockchain networks and are designed for general transactions and value preservation, while tokens are built on top of existing blockchains and provide utility and functionality within specific ecosystems. 

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Differences Between Coins And Tokens

The approval of the first Bitcoin Exchange-Traded Fund (ETF) is a turning point in the crypto space. It was first Initiated by Cameron and Tyler Winklevoss in 2013, co-founders of the Gemini crypto exchange, since then the journey toward regulatory acceptance has been difficult. This article will provide a clear and detailed overview of Bitcoin ETFs, covering their history, the current situation, implications for the ecosystem, and potential benefits for the ecosystem.

### **What is ETF?**

In simple terms, an Exchange-Traded Fund (ETF) is a type of investment fund that is traded on stock exchanges, similar to individual stocks. ETFs are designed to track the performance of a specific group of assets, such as stocks, bonds, commodities, or, in the case of a Bitcoin ETF, the price of Bitcoin. Investors can buy and sell shares of an ETF on the stock market, providing them with a way to gain exposure to a diversified portfolio or a specific asset class without directly owning the underlying assets. ETFs offer flexibility, liquidity, and the ability to trade throughout the trading day at market prices, making them a popular investment choice for many individuals.

There are two primary categories of Bitcoin ETFs: physical and futures. A physical Bitcoin ETF holds actual bitcoins in custody, while a futures Bitcoin ETF uses derivatives contracts to track the price of Bitcoin. Both types of Bitcoin ETFs have their advantages and disadvantages, which depend on the investor's risk appetite, cost sensitivity, and regulatory preference. Physical ETFs offer direct ownership and simplicity but may involve storage costs, while spot ETFs provide flexibility but are susceptible to market volatility. Futures-based ETFs offer flexibility but are exposed to market fluctuations, while leveraged and inverse ETFs amplify risks. Evaluating the pros and cons of each type aids in making informed investment decisions, and investors should align their preferences, risk appetite, and investment goals when selecting an ETF.

### **What is the history behind  Bitcoin ETF?**

The history of Bitcoin ETFs in the US has been a rocky one, with the first concept for a Bitcoin futures ETF emerging shortly after investors and brokers noticed that Bitcoin prices were trending upward in 2013. Retail and average investors lost the opportunity to invest in Bitcoin directly, and brokerages began to design Bitcoin exchange-traded funds. However, the Security and Exchange Commission (SEC) continued to reject these proposals, and it was not until October 2021 that the first official Bitcoin-linked ETF, the Proshares Bitcoin Strategy ETF (BITO), was approved by the SEC and listed on the New York Stock Exchange.

The approval of the BITO ETF was a significant milestone in the adoption of cryptocurrency by mainstream financial institutions. The fund debuted as one of the most heavily traded ETFs in market history, attracting more than $1 billion in assets in the first few days. The anticipation of the ETFs has already boosted the price of Bitcoin in recent months, and the approval is seen as a significant step in increasing investment in the cryptocurrency industry.

The approval of the BITO ETF is expected to lead to the conversion of the Grayscale Bitcoin Trust, which holds about $29 billion of the cryptocurrency, into an ETF. Additionally, traditional asset managers including BlackRock and Fidelity are poised to launch Bitcoin ETFs. More than 10 different firms are now in the formal process of a launch, with some of the largest financial firms in the world being approved to offer the products.

The history of Bitcoin ETFs in the US reflects the increasing willingness of mainstream financial institutions to deal in cryptocurrencies, and it is likely to pave the way for a new wave of investment in digital assets. The approval of the BITO ETF and the anticipated approval of other Bitcoin ETFs is expected to have a far-reaching impact on the adoption and investment in Bitcoin, and it is likely to boost the price of Bitcoin and unleash new demand for the asset class.

### **What is the current situation of the Bitcoin ETF?**
 
In a [statement on January 10, 2024, Gary Gensler](https://www.sec.gov/news/statement/gensler-statement-spot-bitcoin-011023), the Chairman of the U.S. Securities and Exchange Commission (SEC), addressed the recent approval of spot bitcoin exchange-traded funds (ETFs).

The Securities and Exchange Commission approved 10 different applications at the same time, including  BlackRock  Ark Investments Fidelity, Invesco, VanEck etc. 
Here is a list of spot Bitcoin ETFs and their fees as of now

- Invesco Galaxy Bitcoin ETF (BTCO): 0.39%
- Valkyrie Bitcoin Fund (BRRR): 0.80%
- Grayscale Bitcoin Trust (GBTC): 1.50%
- Bitwise Bitcoin ETF (BITB): 0.20%
- Ark 21Shares Bitcoin ETF (ARKB): 0.21%
- iShares Bitcoin Trust (IBIT): 0.25%
- VanEck Bitcoin Trust (HODL): 0.25%
- Fidelity Wise Origin Bitcoin Fund (FBTC): 0.25%
- Franklin Templeton Digital Holdings Trust (EZBC): 0.29%
- WisdomTree Bitcoin Fund (BTCW): 0.30%

These ETFs are designed to track the price of Bitcoin, and the funds hold “physical” BTC. However, there’s no guarantee that the share price will deliver the same returns as the underlying asset.

Gensler conceded that what led to spot bitcoin ETF approvals was the regulator's loss in court over rejecting Grayscale's application. However, he emphasized that the SEC did not approve or endorse Bitcoin. Gensler also highlighted the need for investor protection in the rapidly evolving cryptocurrency market and the SEC's role in ensuring fair and transparent markets

### **What does the Bitcoin ETF approval mean for the Ecosystem?**

The approval of spot bitcoin ETFs in the U.S. has significant implications for investors and the ecosystem at large:

The approval of a spot bitcoin ETF in the U.S. opens up the audience of people and institutions that can buy and sell bitcoin, significantly changing the perception of crypto for the mainstream public.

Bitcoin is no longer considered shady or infamous, and it could start appearing in mainstream portfolios

The approval of the Bitcoin ETF is also anticipated to accelerate market adoption and foster the development of regulated crypto products offered by reputable and trusted crypto companies

Additionally, the approval extends far beyond national borders, signaling a move toward global recognition and acceptance of Bitcoin

Lastly, Bitcoin is a speculative and volatile asset, and investors should remain cautious about the risks associated with it.

The approval of Bitcoin ETFs could trigger a domino effect, leading to increased investor interest and capital inflow into both Bitcoin and other cryptocurrencies, potentially driving a price surge and revolutionizing the crypto market. 

However, investors need to be aware of the risks and potential market manipulation associated with cryptocurrencies

The green light given to a Bitcoin ETF in the United States is triggering a significant transformation. Here is a brief overview of the implications for the ecosystem.








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Bitcoin ETF Why its Matters and What Its Approval Mean

When we explore how Ethereum works, we come across two important terms: "Layer 1" (L1) and "Layer 2" (L2). These terms are key to dealing with the challenge of making Ethereum handle more transactions smoothly. Layer 1 is like the main foundation, the basic blockchain where everything starts. Examples of Layer 1 blockchains are Ethereum and Bitcoin. On the flip side, Layer 2 involves separate blockchains that build on Ethereum, keeping its safety features.

These additional frameworks or protocols sit on top of the main Ethereum blockchain. They're designed to make transactions faster and cheaper while keeping things safe and decentralized.

In this article, we'll talk about the newest and most promising solutions for making Ethereum work better, known as Layer 2 solutions.

### **Ethereum's Role as Layer 1 and the Need for Layer 2 Solutions**

Ethereum, functioning as Layer 1, forms a network involving node operators, block producers, the blockchain itself, transaction data history, and a consensus mechanism. Additionally, it acts as a data availability layer for Layer 2 projects. These Layer 2s rely on Ethereum's strong infrastructure, posting their transaction data onto it. This setup enables users to understand the state of Layer 2 and dispute transactions when needed.

Considering the challenge posed by the blockchain trilemma — the difficulty of achieving decentralization, security, and scalability all at once — Ethereum, processing over a million transactions daily, faces congestion during peak demand, resulting in high transaction fees. Layer 2 solutions emerge as a response to this challenge, aiming to improve scalability without compromising decentralization or security.

## **How Layer 2 Works**

Layer 2 encompasses various scaling solutions that handle transactions off Ethereum Layer 1 while leveraging its decentralized security. These solutions operate as separate blockchains extending Ethereum. Notable types of Layer 2 solutions include Rollups, which bundle multiple transactions into a single transaction on Layer 1.
- **Optimistic Rollups**

Optimistic Rollups assume transaction validity, challenging invalid transactions if suspicion arises. A fault proof is then executed to verify transaction legitimacy.

- **Zero-Knowledge Rollups**

Zero-Knowledge Rollups utilize validity proofs, where transactions are computed off-chain, and compressed data is submitted to Ethereum Layer 1 as proof of their validity.

## **Embracing Layer 2: Projects and Platforms**

### **Generalized Layer 2s**

- **Arbitrum**

Arbitrum is a Layer 2 solution that uses a roll-up mechanism similar to Optimism, focusing on improving the scalability and cost-effectiveness of the Ethereum network

It allows for faster transaction processing times and lower transaction costs compared to the main Ethereum network. Arbitrum support will be officially announced on Bitpowr in the near future.

- **Optimism**

Optimism is another Layer 2 solution that aims to address Ethereum's scalability issues by implementing a rollup mechanism, which groups multiple transactions into a single batch and reduces the amount of data stored on the main chain

This allows for faster and cheaper transactions compared to the main Ethereum network. This amazing Layer 2 solution will also be announced soon on Bitpowr.

- **Polygon**

Polygon is a Layer 2 solution that focuses on improving the efficiency and scalability of the Ethereum network by enabling off-chain computation and scalability of payments

It allows developers to create and manage their own side chains, reducing the complexity and cost of scaling the main network

- **Boba Network**

Boba, an Optimistic Rollup, aims to cut gas fees, improve throughput, and extend smart contract capabilities.

- **Starknet**

Starknet, a Validity Rollup Layer 2, provides high throughput, and low gas costs, and retains Ethereum Layer 1's security levels.

- **XDai Chain**

XDai Chain is a Layer 2 solution that focuses on providing a decentralized and permissionless platform for smart contracts and decentralized applications

It uses a combination of staking and proof-of-stake mechanisms to ensure security and scalability

- **Immutable X**

Immutable X is a Layer 2 solution that aims to provide a decentralized platform for digital assets and non-fungible tokens (NFTs)

It uses a combination of Ethereum and Polygon to enable faster and more secure transactions compared to the main Ethereum network

- **Skale**

Skale is an open-source Layer 2 scaling solution that aims to address the scaling problem on Ethereum-compatible blockchains by creating a network of parallel chains

This allows for increased transaction throughput and improved scalability

### **Application-Specific Layer 2s**

- **Loopring**

Loopring's zkRollup L2 solution boosts throughput by 1000x and reduces costs to 0.1% of Layer 1, offering security akin to Ethereum mainnet.

- **zkSync**

zkSync is a Layer 2 solution that uses zk-SNARKs (zero-knowledge Succinct Non-Interactive Arguments of Knowledge) to enable off-chain transactions while maintaining the security guarantees of the main Ethereum network

This allows for faster and more secure transactions compared to the main Ethereum network

- **ZKSpace**

ZKSpace, utilizing ZK-Rollups, comprises an AMM DEX, payment service, and NFT marketplace for enhanced performance.

- **Aztec**

Aztec Network, the first private zk-rollup on Ethereum, provides privacy and scalability for decentralized applications.

### **Sidechains, Validiums, and Alternative Blockchains**

Sidechains and validiums allow bridging assets from Ethereum to another blockchain, operating parallel to Ethereum. These alternatives offer scalability but with different trust assumptions. Some Layer 1 blockchains report higher throughput and lower transaction fees than Ethereum, albeit with trade-offs.

### **Transitioning to Layer 2: Bridging and Withdrawal**

To get assets onto Layer 2, users can bridge funds from Ethereum via a smart contract or withdraw funds on an exchange directly onto the Layer 2 network.

### **Tools for Effective Layer 2 Navigation**

### Information

- **L2BEAT:** A resource for technical risk assessments of Layer 2 projects.
- **L2 Fees:** Displays the current cost of transactions on different Layer 2s in USD.
- **Chainlist:** Imports network RPCs into supporting wallets, aiding connectivity to Layer 2 projects.

### Wallet Managers

- **Zapper:** Manages the entire web3 portfolio from DeFi to NFTs.
- **Zerion:** Builds and manages DeFi portfolios from one platform.
- **DeBank:** Keeps users updated on significant developments in the web3 world.

## **Benefits of Layer 2 Solutions**

**1. Lower Fees**

Layer 2 solutions consolidate multiple off-chain transactions into a single Layer 1 transaction, drastically reducing transaction fees. This accessibility boost makes Ethereum more inclusive for a broader user base.

**2. Maintain Security**

Layer 2 blockchains settle transactions on Ethereum Layer 1, ensuring users benefit from the security provided by the Ethereum network.

**3. Expand Use Cases**

Higher TPS, lower fees, and innovative technology empower projects to explore new applications, enriching user experiences across diverse domains.

### Wrapping up

Layer 2 solutions bring numerous advantages, including enhanced transaction capacity, reduced transaction costs, and maintained security. Nevertheless, they present challenges such as centralization and the risk of congestion on Layer 1.

As the development and adoption of Layer 2 solutions progress, there is significant potential to revolutionize the Ethereum ecosystem, opening doors for broader acceptance in the cryptocurrency space.

Eager to explore the full potential of Layer 2 solutions? Look forward to the upcoming addition of Arbitrum, Base, Optimism, and Avalanche on Bitpowr. These additions will provide you with greater flexibility to scale Ethereum solutions on our platform.


Uncover the essence of Ethereum's functionality by exploring the roles of "Layer 1" (L1) and "Layer 2" (L2). Learn how L1 serves as the foundational blockchain, while L2 introduces solutions to boost transaction efficiency and maintain security on Ethereum. 

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Ethereum Layer 2 Latest Solutions

Blockchain technology has revolutionized the way we think about transactions and data storage. However, each blockchain has its own standard and set of rules that are rarely compatible with other chains. This has led to a fragmented ecosystem where different blockchains operate in silos, unable to interact with each other. Blockchain bridges are a solution to this problem, allowing the transfer of tokens or data from one blockchain to another. In this article, we will explore what blockchain bridges are, how they work, their benefits, security challenges, and their future potential.

### What are they

Blockchain bridges, also known as cross-chain bridges or interoperability protocols, are systems or technologies that enable the transfer of digital assets and data between different blockchain networks. These networks often have their own distinct protocols, consensus mechanisms, and native tokens. Blockchain bridges facilitate seamless communication and interaction between these diverse blockchains, enabling the exchange of value and information across previously isolated ecosystems.

The need for blockchain bridges arises from the fact that various blockchain platforms were developed independently and lacked a standardized way to communicate with one another. These bridges serve as connectors, allowing users to move assets, such as cryptocurrencies or tokens, from one blockchain to another while preserving security, transparency, and decentralization.

Blockchain bridges can take different forms and approaches, including:

1. **Wrapped Tokens:** One blockchain's native asset is "wrapped" or represented on another blockchain through a token that mirrors its value and properties. For instance, Bitcoin can be "wrapped" as an Ethereum-based token (WBTC).
2. **Decentralized Exchanges (DEXs):** Certain decentralized exchanges use bridges to facilitate trading between tokens on different blockchains, effectively creating a cross-chain trading experience.
3. **Atomic Swaps:** These allow for the direct exchange of assets between two different blockchains without the need for intermediaries.
4. **Multi-Chain Platforms:** Some projects aim to create multi-chain platforms that host multiple blockchains in a single ecosystem, with built-in bridges to enable communication and asset transfers.
5. **Protocol Bridges:** These bridges are often developed by blockchain projects themselves or by third-party developers to establish direct communication between two specific blockchains.

### How Blockchain Bridges Work

Blockchain bridges work by connecting two or more blockchains, enabling users to transfer data and assets across different blockchains. They break down the dividing wall among different blockchain networks so they can interact efficiently. A bridge can take an asset on blockchain A and give the equivalent of the same asset on blockchain B. Blockchain bridges can be centralized or decentralized, and they can be unidirectional or bidirectional. Examples of blockchain bridges include Polygon, Binance Smart Chain, and Cosmos.

### Types of Blockchain Bridges

Blockchain bridges can be centralized or decentralized. Centralized bridges are controlled by a single entity, while decentralized bridges are run by a network of nodes. Blockchain bridges can also be unidirectional or bidirectional. Unidirectional bridges allow you to port assets only to the target blockchain and not the other way around, while bidirectional bridges allow for the transfer of assets in both directions.

### Benefits of blockchain bridges

Blockchain bridges offer several benefits, including increased interoperability, lower transaction costs, and faster processing times. By using a bridge, DApp developers can send their tokens onto another blockchain for processing at a higher speed and a lower cost. Blockchain bridges also offer more opportunities for development and innovation, as they allow developers to build on multiple blockchains simultaneously.

### Security challenges of blockchain bridges

While blockchain bridges offer many benefits, they also come with their own security challenges. Bridge hacks take up to 50% of all the losses in crypto, so it is important to use secure bridges. Bridge developers must ensure that their bridges are secure to avoid security challenges.

### The future of blockchain bridges

Blockchain bridges have the potential for further development and innovation. They can play a significant role in the growth of the Web3 ecosystem by facilitating communication and movement of assets between different blockchain networks. As the Web3 ecosystem continues to grow, blockchain bridges will become increasingly important.

### Conclusion

Blockchain bridges are a solution to the limited interoperability that blockchain technology faces today. They allow the transfer of tokens or data from one blockchain to another, enabling interaction with another chain's dApps and facilitating the connection of separate blockchains. Blockchain bridges can be centralized or decentralized, and they can be unidirectional or bidirectional. They offer better opportunities for increasing the number of users and more opportunities for the development and transfer of assets. However, bridge hacks take up to 50% of all the losses in crypto, so it is important to use secure bridges. Blockchain bridges can play a significant role in the growth of the Web3 ecosystem by facilitating communication and movement of assets between different blockchain networks.

Blockchain Bridges facilitate  communication and movement of assets between different blockchain networks.

Blockchain Bridge.jpg

Blockchain Bridges: Connecting the Web3 Ecosystem

### **What are Ethereum rollups?**

Ethereum rollups are a type of layer 2 scaling solution for the Ethereum blockchain. Rollups allow for increased transaction throughput on the Ethereum network by taking transactions off the main chain and bundling them into a compact form on a separate layer. This allows for faster and cheaper transactions, which is especially important for decentralized finance (DeFi) applications and other high-volume use cases.

### **How do Ethereum Rollups work?**

Rollups work by taking a batch of transactions and combining them into a single "rollup" transaction, which is then recorded on the Ethereum blockchain. This reduces the number of transactions that need to be processed by the Ethereum network, allowing for faster and cheaper transactions.

Ethereum rollups come in two main varieties: optimistic rollups and zero-knowledge rollups (zk-rollups).

**Optimistic rollups** assume that the data in a rollup is valid, and they use dispute resolution to guard against fraudulent transactions. If someone tries to submit a fraudulent transaction within a rollup, it is submitted directly to the Ethereum network for validation. Both parties involved in the transaction are required to have staked ETH, and they stand to lose money if the transaction is found to be fraudulent or if they try to deceive the network.

**Zk-rollups**, on the other hand, use a cryptographic technique called zero-knowledge proof to verify the validity of transactions within a rollup. This method allows someone to mathematically prove that a statement is true without revealing any additional information about the statement. In the context of Ethereum rollups, this means that only valid transactions can be included in a zk-rollup. This eliminates the need for a dispute-resolution system, as is used in optimistic rollups.

### **Advantages of Ethereum Rollups**

- One of the main benefits of rollups is that they allow for significantly higher transaction throughput on the Ethereum network. This can be especially beneficial for decentralized applications (dApps) that require a high volume of transactions, such as games or exchanges.
- Rollups also offer improved security compared to other scaling solutions, such as off-chain payment channels. Because rollups use the Ethereum blockchain to secure transactions, they are less vulnerable to hacks and other attacks that could compromise the integrity of the network.
- Another advantage of rollups is that they are compatible with existing Ethereum infrastructure and tools. This means that developers can use their existing knowledge and resources to build on top of rollups, making it easier for them to incorporate this technology into their dApps.

### **Conclusion**

There are currently several different implementations of rollups on the Ethereum network, each with its own unique features and benefits. Some of the most popular rollups include Optimistic Rollup, ZK-Rollup, and Validium.

Overall, Ethereum rollups offer a promising solution for scaling the Ethereum network and improving its capabilities. By allowing for faster and cheaper transactions, rollups can help make the Ethereum network more accessible and user-friendly, and pave the way for more widespread adoption of decentralized technologies.

Bitpowr supports Ethereum-based assets making it easy for you to easily build DApps , DeFi platforms & exchanges, [reach out to find out how](https://bitpowr.com/contact-us) we can help your business launch and scale quickly.

Ethereum rollup is a Layer 2 scaling solution that helps to increase the scalability and throughput of the Ethereum blockchain- making Ethereum transactions faster and cheaper.



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Ethereum Rollups

In 2015, researchers Thaddeus Dryja and Joseph Poon proposed the Lightning Network in a paper titled “[The Bitcoin Lightning Network](https://lightning.network/lightning-network-paper.pdf) ” Their writings were based on previous discussions by Satoshi Nakamoto. These conversations described how payment channels could help facilitate payments between parties. Below we will look at what exactly lightning network is and what it solves.

## What is a lightning Network

The Lightning Network is a decentralized system for instant, high-volume micropayments that remove the risk of delegating custody of funds to trusted third parties.

## **What does Lightening Network solve?**

 It is one of the first implementations of a multi-party Smart Contract(programmable money) using Bitcoin's built-in scripting. Here are some of the problems it solves. 

**Instant Payments**. Bitcoin aggregates transactions into blocks spaced ten minutes apart. Payments are widely regarded as secure on Bitcoin after confirmation of six blocks or about one hour. On the Lightning Network, payments don't need block confirmations and are instant and atomic. Lightning can be used at retail point-of-sale terminals, with user device-to-device transactions, or anywhere instant payments are needed.

**Micropayments.** New markets can be opened with the possibility of micropayments. Lightning enables one to send
funds down to 0.00000001 bitcoin without custodial risk. The Bitcoin blockchain currently enforces a minimum output
size many hundreds of times higher, and a fixed per-transaction fee which makes micropayments impractical. Lightning
allows minimal payments denominated in Bitcoin, using actual Bitcoin transactions.

**Scalability.** The Bitcoin network will need to support orders of magnitude higher transaction volume to meet demand
from automated payments. The coming increase in internet-connected devices needs a platform for
machine-to-machine payments and automated micropayment services. Lightning Network transactions are conducted
on the blockchain without delegation of trust and ownership, allowing users to conduct nearly unlimited transactions
between other devices.

## How does the lightning Network work

Funds are placed into a two-party, multi-signature "channel" Bitcoin address. This channel is
represented as an entry on the Bitcoin public ledger. In order to spend funds from the channel, both parties must agree
on the new balance. The current balance is stored as the most recent transaction signed by both parties, spending
from the channel address. To make a payment, both parties sign a new exit transaction spending from the channel
address. All old exit transactions are invalidated by doing so.
The Lightning Network does not require cooperation from the counterparty to exit the channel. Both parties have the
option to unilaterally close the channel, ending their relationship. Since all parties have multiple multi-signature channels with many different users on this network, one can send a payment to any other party across this network.
By embedding the payment conditional upon knowledge of a secure cryptographic hash, payments can be made
across a network of channels without the need for any party to have unilateral custodial ownership of funds. The
Lightning Network enables what was previously not possible with trusted financial systems vulnerable to
monopolies—without the need for custodial trust and ownership, participation on the network can be dynamic and
open for all.

## Lightning network vs bitcoin network

The lightning network is a second-layer solution that allows for the instant and cheap transfer of Bitcoin between users.

The Bitcoin network is a public ledger that records all transactions in the network. It also serves as a way to check if someone has enough funds to send, or if they're trying to send something fraudulent.

## Conclusion

The Lightning Network has experienced impressive growth since the launch of its main net in 2018. Though due to the fact that operating a Lightning node currently requires more technical knowledge, there are still some usability issues to be resolved. The entry barriers, however, might become less burdensome in the future given the pace of development.
The Lightning Network has the potential to be a crucial component of the Bitcoin ecosystem, greatly enhancing scalability and transaction speeds, if the problems are fixed.

At Bitpowr, we offer ready-to-deploy blockchain infrastructure that financial institutions including banks and fintechs can plug into to simplify cross-border remittances, expand their customer base and grow their revenue. [Reach out to us to learn more](https://bitpowr.com/contact-sales).

Lightning Network is a layer-2 payment protocol on Bitcoin that enables fast transactions.



Lightening network.jpg

Understanding Lightning Network

A private key is a secret number or phrase that allows users to access their digital assets. It is used to sign transactions, which allows users to send and receive cryptocurrency. Private keys are stored in wallets, which can be hot wallets or cold wallets. Hot wallets are connected to the internet, while cold wallets are not.

```jsx
Here is an example of a [Bitcoin](https://academy.binance.com/en/articles/what-is-bitcoin) key: L2hjTJNhjpUTdAVMArh3UqmnTXEVx6J6Faui8cUXCPpyQMUEkJ55
```

When a user creates a wallet, they are given a private key and a public key. The public key is used to receive cryptocurrency, while the private key is used to sign transactions. The private key is kept secret, while the public key is shared with others.

When a user wants to send cryptocurrency, they use their private key to sign the transaction. This transaction is then broadcasted to the network, and other nodes on the network verify the signature. If the signature is valid, the transaction is added to the blockchain.

The blockchain is a public ledger that records all cryptocurrency transactions. It is a distributed ledger, meaning that it is not stored on any single computer. Instead, it is stored on thousands of computers around the world.

When a transaction is added to the blockchain, it becomes permanent and cannot be reversed. This makes cryptocurrency a very secure way to store and transfer value.

Here are some of the key properties of private keys:

- They are long and random strings of numbers and letters.
- They are used to sign transactions.
- They are kept secret.
- They are used to access cryptocurrency wallets.
- They are essential for the security of cryptocurrency.

If you lose your private key, you will lose access to your cryptocurrency. It is important to keep your private key safe and secure. You can do this by storing it in a cold wallet or by writing it down on a piece of paper and storing it in a safe place.

### The synergy between Private keys and Digital Wallets

Private keys and wallets play a crucial role in managing cryptocurrencies. However, users are not required to manually create or memorize their key pairs. Instead, digital wallets automate the generation and storage of key pairs. When initiating a transaction, the wallet software utilizes the private key to produce a digital signature by processing the transaction.

The private key serves as authorization for the transaction, ensuring that it remains unaltered once broadcasted. Even slight modifications to the transaction information would result in an incorrect signature since the algorithm generates the same key from identical data.

Losing the private key implies losing access to the wallet, which consequently prevents spending, withdrawing, or transferring assets. Hence, it is vital to securely store the private key.  

Two main types of key storage exist, each with two corresponding types of wallets. Custodial wallets involve a trusted third party, like an exchange, storing your keys on your behalf. [Noncustodial wallets](https://bitpowr.com/features/mpc-custody-wallet), on the other hand, enable you to store your own keys. Both categories offer cold wallets (offline, no internet connection) and hot wallets (online, internet-connected).

### How to keep your Private Key Safe?

Like any password, it’s crucial to keep your private keys safe. Here are some ways to do that.

- **Use a reputable wallet provider:** Only use well-known and reputable wallet providers to ensure your private key is kept safe.
- **Use a hardware wallet:** These devices store your private key offline, making it much more difficult for hackers to access.
- **Use a strong password:** A strong password will make it difficult for anyone to guess your private key.
- **Keep your private key offline:** Storing your private key offline, such as on a USB drive or piece of paper, reduces the risk of it being hacked.
- **Use a multi-sig wallet:** A multi-sig wallet requires multiple signatures to authorize a transaction, adding an extra layer of security. [Bitpowr](https://bitpowr.com) allows you to store your wallet using multi-sig in the form of approvals.
- **Keep your software up to date:** Ensure your wallet software is up to date with the latest security updates.
- **Encrypting your private key with a password:** Encrypting your private key with a password adds an extra layer of security to your private key, making it much more difficult for hackers to access.

### Conclusion

The private key provides you with the ability to access your wallets and funds. It's really important to keep this key safe, no matter what kind of wallet you use. If you don't keep it secure, you could lose all your money. Unlike other keys that you can get help with if you lose them, the private key is your responsibility to look after.

**[Bitpowr technologies](https://bitpowr.com/) help your businesses build on the blockchain, manage your digital assets, and accept crypto payments. Check out [our documentation](https://docs.bitpowr.com/docs) to learn more about our wallet services and other related products. [Contact sales](https://www.bitpowr.com/contact#contact) or send an email to [sales@bitpowr.com](mailto:sales@bitpowr.com) to get started!**

Private keys represent the final control and ownership of digital asset. Learn why.

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Private Keys

The growth and development of the blockchain industry have sparked debates about how to regulate its players. The latest high-profile case that has brought this issue to the forefront is the ongoing legal battle between Coinbase, a leading cryptocurrency exchange, and the U.S. Securities and Exchange Commission (SEC). The crux of the matter is whether cryptocurrency should be classified as a security or a commodity, a question that has far-reaching implications for the entire industry. This article will examine the Coinbase-SEC dispute and its potential impact on the regulation of cryptocurrency.

### **Background on Coinbase and the SEC Case**

Coinbase is a popular cryptocurrency exchange that allows users to buy and sell a variety of digital currencies. In December 2020, the SEC notified Coinbase that it planned to sue the company over allegations that it had sold unregistered securities in the form of cryptocurrency. Specifically, the SEC was focused on Coinbase's proposed Lend program, which would allow users to earn interest on certain cryptocurrencies.

The SEC argued that the Lend program constituted a security under U.S. law and that Coinbase had failed to register it properly. Coinbase, on the other hand, maintained that the Lend program was a commodity and thus did not need to be registered with the SEC.

### **Securities or Commodities, What's the Difference?**

At the heart of this dispute is the question of whether cryptocurrency should be considered a security or a commodity. Let’s look closely at what these two terms really mean.

**Securities** are tradable financial assets, like stocks or bonds. These assets represent ownership in a company or a debt obligation. For example, if you buy stock in a company, you own a small piece of that company. This means that you have a stake in the company's profits and losses. Similarly, if you buy a bond, you are essentially lending money to a company or government and they will pay you back with interest.

**Commodities**  on the other hand, are physical or virtual goods that are traded in financial markets. Examples of commodities include gold, oil, wheat, and other natural resources. If you buy a barrel of oil futures, for instance, you are essentially buying the right to receive a certain amount of oil at a future date at an agreed-upon price.

Crypto assets can be classified as securities or commodities. If a crypto asset is a functioning cryptocurrency or utility token, it's generally considered a commodity. However, if a crypto asset comes into existence via an initial coin offering (ICO) or a token-generated event (TGE) where investors expect to make a return, it's most likely going to be classified as a security and will have to follow securities laws.

There are a few factors to consider when evaluating regulatory risk for any particular crypto asset. These include whether it's a coin or token if it's mineable or decentralized, and if it's functioning in production. Additionally, if there was an ICO or TGE, if it was offered in the U.S. in a public or private sale, and if there was KYC/AML completed are also important considerations. The least risky crypto asset is a mineable coin running on a functioning decentralized blockchain network. The most risky type of coin is a pre-mined and centralized coin that was created through an ICO.

Overall, the difference between securities and commodities boils down to whether the asset represents ownership in a company or a debt obligation (securities) or whether it is a physical or virtual good that is traded in financial markets (commodities).

### Implications for the Cryptocurrency Industry

The outcome of the Coinbase-SEC case could have significant implications for the broader cryptocurrency industry. If the court ultimately rules that cryptocurrency is a security, it could mean that other platforms will also be subject to SEC regulation. This could include requirements for registration, reporting, and compliance with anti-money laundering and know-your-customer rules.

On the other hand, if cryptocurrency is ultimately deemed a commodity, it could mean that platforms like Coinbase will be subject to less regulation and oversight. This could make it easier for these platforms to innovate and grow, but could also make it easier for bad actors to engage in fraudulent activities.

### Final Thoughts

While the ultimate outcome of the case is still unclear, it is clear that this is a complex issue that will continue to be debated for some time. In the meantime, investors and traders in the cryptocurrency space should be aware of the potential risks and uncertainties involved.

But one thing is certain, managing your digital assets has never been easier. Bitpowr offers a comprehensive range of blockchain solutions at competitive prices, including secure wallet solutions. We understand the requirements of digital asset businesses and financial institutions to succeed in the blockchain world. **[Let’s chat about how we can help you today](https://bitpowr.com/contact-sales).**

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Are Digital Assets Securities or Commodities? Understanding the Coinbase and the SEC Case

Bitcoin users are experiencing some of the highest transaction fees in years, as the network struggles to keep up with growing demand. According to BitInfoCharts, the average Bitcoin transaction fee as of the time of writing is **$11.05 per transfer**, or **0.0004 BTC**, which is more than double the fee a year ago. The backlog of unconfirmed transactions is also at a record high, with Mempool Space reporting over **413,436 TXs** pending transactions at the time of writing. 

In the last couple of days, we have seen some transactions with outrageous fees ranging from as low as $50 to as high as $15,000. Here’s a [link](https://mempool.space/tx/22315dab4af7fc0bef2b8b657a3386988e41addbc224fdba8af74665e5777135) to such transactions: 

Let’s look at some reasons for the surge and possible ways to navigate through it.

### Why are Bitcoin fees surging?

In the past, blockchain congestion has been caused by various factors such as high transaction volumes, slow block times, and inadequate block size limits.

Currently, Bitcoin's block size limit of 1 MB limits the number of transactions that can be processed per block, leading to competition among users for limited space. Second, the recent price surge of Bitcoin has attracted more users and traders, who are willing to pay higher fees to ensure timely confirmations. Third, the upcoming Bitcoin halving event, which will reduce the block subsidy reward from 12.5 BTC to 6.25 BTC, may be causing miners to prioritize high-fee transactions to compensate for the reduced income.

### **How can this be addressed?**

To address these issues, the Bitcoin community has implemented several solutions in the past, such as the SegWit upgrade and the Lightning Network. While these solutions have helped to reduce fees in the past, they have not been able to keep up with the recent surge in demand.

But how can you do to optimize your Bitcoin fees and save money? Here are some tips:

- Estimate your fees: Before sending a Bitcoin transaction, use a fee estimator tool to get an idea of the optimal fee based on the current network conditions. Some popular fee estimator sites are [Bitcoin Fees](https://bitcoinfees.net/) and  [Estimatefee.com](https://estimatefee.com/)
- Choose the right wallet: Not all Bitcoin wallets are created equal when it comes to fees. Some wallets allow you to customize your fees, while others use a fixed fee structure. Look for wallets that support Segwit, which can reduce your fees.
- Use batching: If you frequently send multiple small transactions, consider using a wallet that supports batching, which allows you to combine several transactions into one and save on fees.
- Wait for low-fee periods: If your transaction is not urgent, consider waiting for periods when the network is less congested, such as weekends or late nights.
- Consolidation: Consolidation helps in coin management if dealing with multiple addresses. It basically helps to create and combine small transactions from multiple addresses to a single address.

### In conclusion

Bitcoin's recent surge highlights both its growing adoption and the challenges facing the blockchain ecosystem. The network's high fees and congestion underscore the need for efficient scaling solutions. Regulatory and institutional developments could also impact Bitcoin's value and role in the digital economy. It's crucial for every party to be aware of the risks and opportunities of cryptocurrencies and other assets, as their future success depends on their ability to meet user demands and provide secure, efficient, and inclusive financial services.

[At BitPowr](https://bitpowr.com/blog/bitpowr-wallet-now-supports-bitcoin-seg-wit-addresses), we understand that the key to staying ahead in the blockchain game is innovation. That's why we've made sure that our wallets support Bitcoin SegWit addresses, allowing you to take full advantage of the latest blockchain technology.

With SegWit support, you'll benefit from faster transaction times, lower fees, and greater network capacity, all of which can give you an edge in the competitive world of digital asset management. Plus, you can rest easy knowing that your funds are secure and accessible whenever you need them.

So if you're looking for a reliable and innovative partner in the blockchain space, look no further than BitPowr. Contact our sales team at **[sales@bitpowr.com](mailto:sales@bitpowr.com)** to learn more about our services and how they can help you achieve your financial goals.

In the past days, Bitcoin fees have been outrageously high. In this article we explore the reasons and look at ways to navigate through it 

bitcoin fee.jpg

Understanding the Reasons for the Recent Surge in Bitcoin Transaction Fees

### **Growth of NeoBanks in Africa, India, and Latin America**

“Neobanks” also known as challenger banks are online-only banks that offer lower fees and more convenient services than traditional banks. They have become increasingly popular in emerging economies, where many people are underserved by traditional banks. Latin America, Africa, and Asia are expected to experience the most growth in the Neo banking space over the next decade.

**In Africa**, Neobanks are also being used to improve financial access. 

According to Statista, the sector in Africa is expected to experience significant growth in the coming years. The transaction value of Neobanking in Africa is projected to reach US$30.97 billion by 2027, up from US$5.02 billion in 2020. This growth can be attributed to several factors, including the increasing adoption of digital technology, rising smartphone penetration, and changing consumer behavior and preferences toward more accessible and convenient banking services.

Neobanks in Africa have been able to cater to populations underserved by traditional banks, providing lower costs and greater flexibility. The rise of digital banking solutions, such as mobile banking and online account opening, has allowed Neobanks to offer accessible and convenient banking services to these populations. Additionally, Neobanks have expanded into new markets, including SME lending and investment services, and are increasingly partnering with traditional financial institutions to offer white-label banking services.

**In Latin America**, Neobanks have emerged as a way to provide financial services to low-income earners who have historically been excluded from the traditional banking system. Expensive banking licenses and a bureaucratic process for setting up accounts have limited access to the financial system. However, recent regulatory changes in Brazil and Mexico have lowered the regulatory hurdle and created large Neobanking sectors in these two countries.

**In India**, the number of Neobank users is projected to reach 135.2 million in 2023, up from 42.5 million in 2019. This growth is also being fueled by factors such as a large unbanked population, a high level of smartphone penetration, and the government's push for digitalization and financial inclusion.

In recent years, several Neobanks have entered the Indian market, including Paytm Payments Bank, Airtel Payments Bank, and DBS Bank India. These Neobanks are leveraging digital technologies such as mobile apps and digital wallets to offer customers a range of banking services, including account opening, money transfers, bill payments, and investment options.

One of the major advantages of Neobanks in India is their ability to serve underserved and unserved segments of the population. For example, many Neobanks are partnering with microfinance institutions and other financial intermediaries to reach customers in rural and remote areas. This is helping to promote financial inclusion and reduce the number of unbanked individuals in the country.

As the Neobanking market in Africa and across the globe continues to grow, the development of fintech infrastructure is expected to play a crucial role.

*Bitpowr offers the necessary infrastructure to seamlessly integrate blockchain solutions into your primary banking operations, enabling you to provide advanced and secure financial services*

This infrastructure will enable Neobanks to offer more sophisticated services and solutions, further driving the adoption of Neobanking services in the region. Overall, the future of Neobanking in Africa looks promising, with increasing smartphone penetration and changing consumer preferences expected to drive continued growth and expansion in the market.

### **How Stablecoins can help Neobanks improve operations**

Making cross-border payments through Neobanks comes with a lot of challenges and Stablecoins are helping to ease that whole process. These digital currencies, which are pegged to other assets like the US dollar or euro, offer less volatility than traditional cryptocurrencies, making them an attractive option for those looking to protect their savings. Stablecoins also offer a solution for small and medium-sized enterprises (SMEs) in Africa, who struggle to access dollars or other major currencies for cross-border trades.

Neobanks can also benefit from stablecoins, as they provide a faster, more efficient way to transfer funds across borders. Neobanks can leverage stablecoins to offer their customers low-cost, instant cross-border payments, making it easier for them to transact with customers and suppliers in different countries. Additionally, stablecoins can help Neobanks reduce the risk of currency fluctuations, as the value of stablecoins is tied to a stable asset, which can provide greater stability compared to traditional fiat currencies. Overall, stablecoins have the potential to revolutionize cross-border payments, and Neobanks that embrace this technology will be better equipped to operate in the global economy.

### **Bitpowr provides Neobanks with the infrastructure to thrive.**

Bitpowr is providing range of services that allow financial institutions, including Neobanks, to utilize blockchain technology for enhancing their operations, ultimately leading to business growth.

- With Bitpowr, financial institutions can manage customers' assets securely with a wallet infrastructure that provides flexible control. Bitpowr also leverages a multi-party computation (MPC)-based vault for secure custody and initiates automated anti-money laundering (AML) and know-your-transaction (KYT) procedures.
- Bitpowr's smart contract technology enables financial institutions to automate key processes and transactions while guarding against human error, ensuring error-free transaction processing and transparent auditing.
- Bitpowr enables financial institutions to tokenize assets, making it easier to manage, transfer, and sell assets. Financial institutions can also create and deploy security tokens.

In summary, Bitpowr provides ready-to-deploy blockchain infrastructure to financial institutions, including Neobanks, to simplify asset management and international payments while increasing customer base and revenue. **[Reach out to learn more](https://bitpowr.com/contact-sales).**

The future of Neobanking looks promising, here is how the blockchain can help accelerate it's growth.

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Neobanks: A Catalysts for Global Financial Transformation

The collapse that once seemed like a devastating blow to the crypto market ultimately became a catalyst for change. FTX's collapse was that devastating blow it resulted in customer losses exceeding $8 billion, this and more collapses left investors reeling, with some even losing all their assets. There was a general sense of fear and anxiety among crypto investors, as they speculated that the event could lead to a catastrophic downturn in the crypto market.

However, out of this crisis, a new breed of companies emerged. These companies offered self-custody wallets as a solution to the problem of centralized exchanges. Self-custody wallets allowed users to have greater control and security over their assets, and these companies quickly gained popularity.

As awareness of the benefits of self-custody wallets grew, so did interest in decentralized finance (DeFi) platforms. These platforms provided an alternative way for users to access financial services, without the need for intermediaries or centralized institutions.

Data from Glassnode, a cryptocurrency research firm, indicates that many long-term crypto investors have moved their assets to self-custodial wallets. In the week after the FTX incident, investors withdrew nearly $3 billion worth of BTC from exchanges.

Similarly, CryptoQuant data shows that crypto users withdrew $2.5 billion worth of ETH from centralized exchanges, and these assets are being channeled into DeFi platforms. Decentralized exchanges (DEXs) experienced a 150% increase in volume, with $32 billion in trades executed in the week following the FTX incident.

What difference does this make for the Blockchain ecosystem? let’s find out why below.

### What difference does a Self- Custody Wallet make?

Self-custody wallets offer several advantages over centralized custodians. Firstly, they eliminate the need for users to trust a third party with their funds, reducing the risk of hacks, loss of funds, or other security breaches. Secondly, they enable users to maintain complete control over their funds and private keys, allowing them to transact with their cryptocurrency assets as they see fit.

Prominent people like the founder CZ tweeted “*Self custody is a fundamental human right” advising the community “do it right”.*

Another factor contributing to the rise of self-custody wallets is the growing demand for privacy and security in the cryptocurrency industry. With the increasing prevalence of surveillance and data breaches, users are becoming more aware of the importance of safeguarding their personal information and financial assets. Self-custody MPC wallets like [Bitpowr](https://bitpowr.com/features/mpc-custody-wallet) provide a secure, private, and decentralized means of storing and transacting with cryptocurrency assets.

### Some Benefits of Self-Custody Wallets

Self-custody wallets, also known as non-custodial wallets, offer a range of benefits to cryptocurrency users. Here are some key advantages of using self-custody wallets:

1. **Control:** Self-custody wallets provide users with complete control over their digital assets. This is because the user holds the private keys necessary for accessing and managing their funds. With self-custody wallets, users do not have to rely on third-party service providers to manage and store their assets. This gives them the power to send, receive, and store their funds according to their own preferences and security measures.
2. **Security:** Self-custody wallets are generally considered to be more secure than custodial wallets. This is because the user has full control over their private keys and is responsible for their own security measures. By keeping their private keys safe and secure, users can protect their funds from hacks, scams, or other security breaches that can occur with custodial wallets.
3. **Privacy:** Self-custody wallets offer greater privacy to users by allowing them to transact anonymously and protect their personal information. Since the wallet is not connected to a central server, there is no need to share personal information with third-party providers. This protects users from unwanted surveillance, identity theft, and other privacy concerns.
4. **Flexibility:** Self-custody wallets like [Bitpowr](https://bitpowr.com/features/mpc-custody-wallet) can be used with a wider range of cryptocurrencies, giving users the flexibility to manage different digital assets in a single wallet. This means that users do not need to use multiple wallets to manage different cryptocurrencies, which can be inconvenient and time-consuming.
5. **Interoperability:** Self-custody wallets can connect to different blockchain networks and decentralized applications (DApps), allowing users to easily move their assets between different platforms. This means that users can participate in different blockchain ecosystems and take advantage of different DApps without having to move their funds to different wallets or exchanges.
6. **Openness**: Self-custody wallets are typically open-source and decentralized, which means that anyone can access and use them without the need for a central authority. This promotes greater transparency and inclusivity in the cryptocurrency industry, as anyone can participate in the development and improvement of the wallet.

### In Conclusion

As the FTX crash fueled the expansion of self-custody wallets in the cryptocurrency sector, it is important to note that these wallets provide users better autonomy, security, and privacy, making them an appealing option for institutions looking to manage their digital assets independently. As things unfold, Self-custody wallets will play an increasingly crucial role in the future of cryptocurrencies as demand for decentralized banking grows.

If you are looking for the safest and most reliable self-custody wallet for your business? Look no further than Bitpowr. Our cutting-edge MPC technology ensures next-level security and seamless digital asset management across multiple blockchains, all at an unbeatable price.

With Bitpowr, you can take your business to the next level by securely accepting crypto payments and getting paid instantly from anywhere in the world. Say goodbye to hefty transaction fees and appeal to a wider audience with the power of cryptocurrency.

And with our MPC wallet's multi-chain capabilities, you can store and manage all your digital assets in one convenient place. Don't settle for less when it comes to your business's financial security and growth. Choose Bitpowr today and experience the future of cryptocurrency. [Reach us here](https://bitpowr.com/contact-sales)

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The Rise of Self-Custody Wallets: Why Decentralization Matters?

Digital treasury transformation has become a priority for many organizations today. Treasury operations, which involve the management of a company's cash flows, investments, and liquidity, are now expected to provide real-time transparency and seamless integration of systems for reporting, processing, and compliance. This shift is driven by the need for treasurers to take on more strategic roles in financial management, addressing liquidity risk, working capital improvement, enhanced governance, and serving as strategic partners to CFOs.

**Understanding Digital Treasury Management**

At its core, digital treasury management is about leveraging digital technology to enhance financial visibility and control. It involves improving traditional methods and reinventing them for the digital age to meet changing market expectations. Implementations of digital treasury solutions can range from straightforward automation of specific processes, such as cash flow forecasting, to more comprehensive integrations that provide real-time insights into an organization's financial health.

Bitpowr aims to provide digital asset businesses with easy access to the blockchain tools and custody infrastructure they need to launch and scale financial products and services. Bitpowr emerges as a transformative solution by simplifying treasury operations through its comprehensive suite of digital asset automations and infrastructure.

**Key Benefits of Bitpowr’s Digital Treasury Solutions**

- Real-Time Transparency: Bitpowr provides real-time visibility into an organization’s cash flows and other treasury information, ensuring that businesses can make informed financial decisions swiftly.
- Seamless Integration: The platform integrates seamlessly with existing systems, facilitating smooth reporting, processing, and compliance. This integration eliminates common points of friction, enhancing overall efficiency.
- Enhanced Security: With advanced security protocols such as multi-signature wallets, MPC, hardware security modules (HSM), and end-to-end encryption, Bitpowr ensures the safety of digital assets against cyber threats.
- Regulatory Compliance: Bitpowr incorporates Know Your Customer (KYC) and Anti-Money Laundering (AML) solutions, assisting businesses in monitoring and maintaining compliance with global regulatory standards.
- Automated Processes: The platform automates routine tasks such as wallet management, reconciliation, collection policy, pending transaction re-estimation and settlement processes, reducing the administrative burden and minimizing errors.
- Real-Time Analytics and Reporting: Bitpowr offers robust analytics and reporting tools that provide detailed visibility into asset movements and financial health, aiding in liquidity management and strategic planning.

**Simplifying Digital Assets Treasury Automations with Bitpowr**

- Bitpowr's platform addresses the core challenges of digital asset treasury operations through automation and integration:
- Streamlined Operations: By automating routine tasks, Bitpowr allows businesses to focus on strategic activities, improving operational efficiency and reducing the risk of human error.
- Scalability: Bitpowr’s infrastructure is designed to scale with the needs of digital asset businesses. Whether a company is a startup or an established enterprise, the platform can accommodate growth and evolving requirements.
- Cost Efficiency: Automating treasury operations lowers operational costs for digital asset transactions, allowing businesses to achieve greater efficiency with fewer resources.

**Real-World Applications and Conclusion**

Several digital asset businesses have successfully leveraged Bitpowr's platform to streamline their treasury operations. Cryptocurrency exchanges, for instance, use Bitpowr to automate wallet management and transaction settlements, ensuring secure and efficient handling of user funds. Similarly, decentralized finance (DeFi) platforms utilize Bitpowr’s real-time analytics. As the digital asset industry continues to expand, efficient treasury and automation management becomes increasingly critical. 

Bitpowr’s comprehensive suite of digital asset management tools and infrastructure simplifies the complexities of treasury operations, providing businesses with the security, compliance, and efficiency they need to thrive. [Try us out](https://bitpowr.com/contact-us)

Our blog

Resources and insights

Demystifying Treasury Operations: How Bitpowr Simplifies Digital Assets Treasury Automations

Roles of Transaction Fees In Cryptocurrencies

Differences Between Coins And Tokens

Bitcoin ETF Why its Matters and What Its Approval Mean

Ethereum Layer 2 Latest Solutions

Blockchain Bridges: Connecting the Web3 Ecosystem

Ethereum Rollups

Understanding Lightning Network

Private Keys

Are Digital Assets Securities or Commodities? Understanding the Coinbase and the SEC Case

Understanding the Reasons for the Recent Surge in Bitcoin Transaction Fees

Neobanks: A Catalysts for Global Financial Transformation

The Rise of Self-Custody Wallets: Why Decentralization Matters?

Demystifying Treasury Operations: How Bitpowr Simplifies Digital Assets Treasury Automations

Roles of Transaction Fees In Cryptocurrencies

Differences Between Coins And Tokens

Bitcoin ETF Why its Matters and What Its Approval Mean

Ethereum Layer 2 Latest Solutions

Blockchain Bridges: Connecting the Web3 Ecosystem

Ethereum Rollups

Understanding Lightning Network

Private Keys

Are Digital Assets Securities or Commodities? Understanding the Coinbase and the SEC Case

Understanding the Reasons for the Recent Surge in Bitcoin Transaction Fees

Neobanks: A Catalysts for Global Financial Transformation

The Rise of Self-Custody Wallets: Why Decentralization Matters?

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