Shanghai and USDC

We are excited to launch our new technical blog series that delves into the latest developments and trends in the crypto industry. Our inaugural posts will cover the following topics:

  1. Ethereum Shanghai Hardfork: An in-depth analysis of the upcoming major update to the Ethereum network's protocol, which requires all nodes to upgrade to the new version of the node software.

  2. USDC Depeg: How the $40 Billion Cryptocurrency giant lost it peg

                                 **ETHEREUM SHANGHAI HARDFORK**

    To begin with, what’s a hard fork?
    A blockchain hard fork is the process of updating the predefined protocol  by making an intentional change to its node software that renders it incompatible with all the node clients running the previous version. This results in a split in the blockchain, creating two divergent chains with different rules and transaction histories from the point of the fork.
    So basically, one can call term Hardfork as “the fission of a blockchain”

Hardfork has played a major role in the development of the Ethereum Protocol.
Everyone knows about the 2016 DAO Hack right? It resulted in the illicit transfer of
3.6 Million Ether. What did the Ethereum Community came up as a solution?
You guessed it right. A hardfork. This was quite a controversial decision, pertaining to the fact that a hardfork denies the core values of Ethereum. Read more about it it’s interesting.

Hardfork is used to do consensus level changes, implement better and more secure functionalites, aiming to make the Ethereum Protocol more permissionless, secure and decentralized.


  1. The cryptocurrency industry is often associated with the unpredictable fluctuations in the value of digital currencies. There are several drawbacks to having a volatile cryptocurrency such as:

    1. Difficulty as a medium of exchange: Cryptocurrencies that experience frequent and drastic price changes can make it challenging for people to use them as a reliable medium of exchange. Merchants may be hesitant to accept payments in a currency whose value fluctuates wildly, and consumers may be reluctant to spend a currency whose value could appreciate significantly in the near future.

    2. Regulatory issues: Regulators may be more likely to scrutinize cryptocurrencies that exhibit high levels of volatility. They may be concerned about the impact of these currencies on financial stability and the potential for market manipulation.

    Stablecoins are cryptocurrencies whose value is “pegged” to a certain value by various mechanisms and which aims to solve these issues.

    Types of Stablecoins
    Different mechanisms for the stability of stablecoins lead to different types:

    1. Fiat-collateralized stablecoins are backed by a reserve of fiat currency. This means that for every unit of the stablecoin that is issued, there is an equivalent amount of fiat currency that is held in reserve. This type of stablecoin is considered to be the most stable because it is backed by a physical asset.

    2. Commodity-collateralized stablecoin is a stablecoin that is backed by a commodity, such as gold or silver. This means that for every unit of the stablecoin that is issued, there is an equivalent amount of the commodity that is held in reserve. This type of stablecoin is considered to be more stable than a fiat-collateralized stablecoin because the value of commodities tends to be more stable than the value of fiat currencies.

    3. Crypto-collateralized stablecoins are backed by other cryptocurrencies. This means that for every unit of the stablecoin that is issued, there is an equivalent amount of cryptocurrency that is held in reserve. This type of stablecoin is considered to be less stable than fiat-collateralized stablecoins because the value of cryptocurrencies can fluctuate more than the value of fiat currencies.
      4 .Non-collateralized stablecoins are not backed by any reserve assets. Instead, they usealgorithmic mechanisms to maintain their peg to a fiat currency. This type of stablecoin is
      considered to be the least stable because it is not backed by any physical or digital assets

    USDC is a Fiat-collateralized stablecoin that operates on a fully reserved-backed system, whereby each unit of USD Coin is backed by a corresponding amount of real cash and short-term United States treasuries. However, recent developments have demonstrated a disconnect between USDC and the U.S. dollar, with Circle, the issuer of USDC, revealing on March 10 that a significant portion of its $40 billion reserves were trapped in the now-defunct Silicon Valley Bank. The bank's collapse on March 10 marked one of the largest bank failures in U.S. history, with approximately $3.3 billion of USDC reserves affected. This resulted in USDC losing it’s peg to the dollar and going as low as $0.89.

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