September was a rough month for crypto investors, in particular for those betting big on ether, the token tied to the ethereum blockchain.
Etherdropped 13% for the month, its second-biggest monthly decline in the past year, behind only a 16% slide in June. Bitcoin fell 7% in September.
It’s difficult to link short-term price movements to any specific event, and with the historic rally in crypto over the past 12 months, pullbacks are to be expected. Ethereum, the second most-valuable cryptocurrency behind bitcoin, is still up about 830% in the past year.
Investors are now buying the September dip. On Friday, the first day of October, ether and bitcoin both climbed over 9%.
Ether 12-month price chart
CNBC
But the September roller-coaster reflects a particularly rocky stretch for the ethereum ecosystem, which has given investors and developers reasons for concern.
The speed of the network and high transaction fees continue to be a problem. The “London” upgrade in August was supposed to make transaction fees less volatile, but it’s had a limited effect.
Meanwhile, rival blockchains dubbed “ethereum killers” are taking advantage of ethereum’s challenges.
Ethereum also unexpectedly split into two separate chains in late August, after someone exploited a bug in the software that most people use to connect to the blockchain. That exposed the network to an attack, and not for the first time.
“All these factors could be having some impact on the speculation side, no doubt,” said Mati Greenspan, founder and CEO of Quantum Economics, in an interview. “But don’t forget that ethereum has appreciated quite handsomely so far this year and the entire market seems to be in consolidation at this time. So I wouldn’t try to read too deeply into these short-term movements.”
Still, ethereum, which serves as the primary building block for all sorts of crypto projects, like non-fungible tokens (NFTs), smart contracts and decentralized finance (DeFi), has some major hurdles to overcome to fend off the emerging competition.
Ethereum’s unexpected split
A central premise of ethereum’s security stems from the existence of only one set of virtual books, meaning you can’t create coins out of thin air. That ledger has to work, because the decentralized nature of the blockchain means there’s no rule keeper or bank that sits in the middle of transactions to act as accountant.
Ethereum developers were rightly alarmed in August when the chain split because of a bug.
“This fork temporarily created two separate records of transactions on the ethereum network – like parallel books,” said Matt Hougan, chief investment officer at Bitwise Asset Management, which created the first cryptocurrency index fund.
For a while, it was unclear whether the split would lead to a “double-spend attack,” where the same token can be spent more than once and transactions can be reversed, Hougan said.Smart contracts overseeing billions of dollars in assets could have also been at risk. Smart contracts allow people to build applications on top of ethereum with self-executing code, eliminating the need of third parties to handle transactions.
Such an attack would have been difficult to execute, since it was clear which nodes were on the correct side of the split and which were not. “But in theory, there was a risk,” Hougan said.
The good news for miners and exchanges is that most of them upgraded their software as recommended and the issue was resolved relatively quickly, said Tim Beiko, the coordinator for ethereum’s protocol developers.
Auston Bunsen, co-founder of QuikNode, which provides blockchain infrastructure to developers and companies, said it was a “responsibly disclosed vulnerability.”
“This is a reminder that blockchains in general and ethereum specifically are new and disruptive technologies,” Hougan said. “They can do amazing things – settle $1 billion transactions in minutes and program money like software – but they are not fully mature.”
Bugs keep happening
The longer-term problem for ethereum is that random glitches like this keep happening.
In April, the ethereum blockchain was hit with a bug in one of the software programs used to access it. And in November, many of ethereum’s DeFi apps temporarily went down after a Geth upgrade debacle, which led to the chain splitting in two.
Geth is short for for Go Ethereum. To access the ethereum blockchain, operators and miners have their pick of software. Most use Geth, which accounts for 64% of the network.
When the ethereum blockchain broke in half a few weeks ago, it was becauseGeth had a bug in its consensus mechanism. That’s what creates the single source of truth for transactions so everyone sees the same thing regardless of what software they’re using.
Developers discovered the bug, put out a new release with a fix and publicly told everyone to update. A lot of users upgraded, but others didn’t. When an unknown actor exploited the bug, ethereum forked, meaning that it broke into two separate chains: one for those who had updated their software and one for those who had not.
Ethereum “sought the veneer of decentralization by having many clients, but as a consequence, they have incompatibilities,” said Nic Carter, co-founder of blockchain data aggregator Coinmetrics.
When the software programs don’t talk to one another, it creates problems for the network.
Bitcoin takes a very different approach. It relies on a highly secure software program for nodes to access the blockchain. Bitcoin developers have long sought to avoid hard forks at all costs, so all changes in the core software tend to be opt in rather than pushed out to users,according to Carter.
“Ethereum prioritizes faster development, but that comes at the cost of a more fragile set of software implementations,” Carter said.
Some crypto experts attribute ethereum’s success to its first-mover advantage. Most NFTs and 78% of DeFi apps, or dApps, run on ethereum, according to the website State of The Dapps.
That’s starting to change, thanks to the growing popularity of rival blockchains.
Even before this latest split in the blockchain, users were complaining about ethereum’s heavy congestion and high transaction fees, which touched a record of $70 earlier this year, and just this week, bounced from $20 to $46 and back down to $32.
‘Ethereum killers’
At current prices, fees continue to drive some users away.
They’re turning to blockchains like Cardano, a platform used to build dApps, and Solana, whose native coin has risen nearly 4,800% since September 2020. Launched last year, Solana is gaining traction in the NFT and DeFi ecosystems because it’s cheaper and faster to use than ethereum.
Investors who had been largely focused on ethereum “have been increasingly diversifying their holdings to other cryptocurrencies, fueling alternative blockchains like Algorand, Solana and Cardano,” said Mark Peikin, CEO of Bespoke Growth Partners.
Bunsen tells CNBC that while Solana is making good strides in terms of being a usable blockchain, it’s not yet decentralized enough to satisfy the larger crypto community.
It’s also not immune to bugs. Last month, Solana suffered a 17-hour outage following a denial-of-service attack, which took the form of a flood of transactions caused by bots.
The list of so-called ethereum killers is long, and includes blockchains like Matic and Polygon, which are complementary to ethereum, according to Bunsen, as well Cardano, which is known for its security.
“I think some of those ethereum killers will make it,” said Bunsen. “But they won’t kill ethereum.”
Ethereum also has its own upgrade in the works. For several years, it’s been building ethereum 2.0, which is expected to be ready by the first quarter of 2022.
The makeover will move ethereum to a less energy-intensive mining process and, according to network founder Vitalik Buterin, could boost speed by over 7,000-fold to 100,000 transactions per second.
If it’s successful, Bunsen said, ethereum 2.0 will be a “huge upgrade in terms of throughput to the ethereum network and a huge win for the environment generally.”
Mario poses at the “SUPER NINTENDO WORLD” welcome celebration at Universal Studios Hollywood on February 16, 2023 in Universal City, California.
Rodin Eckenroth | Getty Images Entertainment | Getty Images
Nintendo on Tuesday cut forecast for Switch sales for its fiscal year ending March 2025 as demand wanes for its ageing console.
The Japanese gaming giant said it now expects to sell 12.5 million units of the Switch over the course of the period. That’s down from a previous forecast of 13.5 million units.
Nintendo has been contending with fading demand for its flagship Switch console, which is now more than seven years old.
Investors are waiting for news surrounding a successor to the Switch, which they hope will re-energize Nintendo’s gaming business. In the past, the company said that the Switch successor will be announced in its current fiscal year, which ends in March 2025.
Nintendo also cut full fiscal year forecasts for sales and operating profit. The company said it now expects sales of 1.28 trillion yen versus a previous forecast of 1.35 trillion yen. The operating profit outlook for the period was slashed from 400 billion yen to 360 billion yen.
Here’s how Nintendo did in its fiscal second quarter ended Sept. 30 versus LSEG estimates:
Revenue: 276.7 billion Japanese yen ($1.8 billion), compared with 273.34 billion yen expected.
Net profit: 27.7 billion yen, versus 48.06 billion yen expected.
Revenue fell 17% year-on-year. Net profit plunged just over 69% versus the same period last year.
Super Mario, Zelda boost fading
The Switch is Nintendo’s second best-selling console in history, behind the Nintendo DS. Despite the recent fall in sales, Nintendo has prolonged the console’s appeal for an extended period of time since its launch in 2017 by relying on its recognizable characters.
In its last fiscal year, Nintendo managed to reinvigorate sales of the Switch thanks to the the success of the “Super Mario Bros. Movie” and the highly anticipated release of the “The Legend of Zelda: Tears of the Kingdom” game, which underscored the appeal of its iconic characters.
But that effect is fading.
On Tuesday, Nintendo noted the boost that the company received in the first half of its last fiscal year, but said “there were no such special factors in the first half of this fiscal year, and with Nintendo Switch now in its eighth year since launch, unit sales of both hardware and software decreased significantly year-on-year.”
Sales of the Switch totaled 4.72 units in the six months ended Sept. 30, compared with 6.84 million units in the same period of last year.
In the face of falling sales, Nintendo has tried to license out its intellectual property for use everywhere, from movies to theme parks. A new Super Mario movie is slated for release in 2026.
Meta’s Mark Zuckerberg plans to visit South Korea, scheduling key meetings during the trip, according to a statement by Meta on Wednesday, which did not provide further details. Reportedly, Zuckerberg is anticipated to meet with Samsung Electronics chairman Jay Y. Lee later this month to discuss AI chip supply and other generative AI issues, as per the South Korean newspaper Seoul Economic Daily, citing unnamed sources familiar with the matter.
Alex Wong | Getty Images News | Getty Images
Meta extended its ban on new political ads on Facebook and Instagram past Election Day in the U.S.
The social media giant announced the political ads policy update on Monday, extending its ban on new political ads past Tuesday, the original end date for the restriction period.
Meta did not specify the day it will lift the restriction, saying only that the ad blocking will continue “until later this week.” The company did not say why it extended the political advertising restriction period.
The company announced in August that any political ads that ran at least once before Oct. 29 would still be allowed to run on Meta’s services in the final week before Election Day. Other political ads will not be allowed to run.
Organization with eligible ads will have “limited editing capabilities” while the restriction is still in place, Meta said. Those advertisers will be allowed to make scheduling, budgeting and bidding-related changes to their political ads, Meta said.
Meta enacted the same policy in 2020. The company said the policy is in place because “we recognize there may not be enough time to contest new claims made in ads.”
Google-parent Alphabet announced a similar ad policy update last month, saying it would pause ads relating to U.S. elections from running in the U.S. after the last polls close on Tuesday. Alphabet said it would notify advertisers when it lifts the pause.
Nearly $1 billion has been spent on political ads over the last week, with the bulk of the money spent on down-ballot races throughout the U.S., according to data from advertising analytics firm AdImpact.
Sam Altman, CEO of OpenAI, attends the 54th annual meeting of the World Economic Forum, in Davos, Switzerland, January 18, 2024 (L), and Amazon CEO Jeff Bezos speaks during the UN Climate Change Conference (COP26) in Glasgow, Scotland, Britain, November 2, 2021.
Reuters
Physical Intelligence, a robot startup based in San Francisco, has raised $400 million at a $2.4 billion post-money valuation, the company confirmed Monday to CNBC.
Investors included Amazon founder Jeff Bezos, OpenAI, Thrive Capital and Lux Capital, a Physical Intelligence spokesperson said. Khosla Ventures and Sequoia Capital are also listed as investors on the company’s website.
Physical Intelligence’s new valuation is about six times that of its March seed round, which reportedly came in at $70 million with a $400 million valuation. Its current roster of employees includes alumni of Tesla, Google DeepMind and X.
The startup focuses on “bringing general-purpose AI into the physical world,” per its website, and it aims to do this by developing large-scale artificial intelligence models and algorithms to power robots. The startup spent the past eight months developing a “general-purpose” AI model for robots, the company wrote in a blog post. Physical Intelligence hopes that model will be the first step toward its ultimate goal of developing artificial general intelligence. AGI is a term used to describe AI technology that equals or surpasses human intellect on a wide range of tasks.
Physical Intelligence’s vision is that one day users can “simply ask robots to perform any task they want, just like they can ask large language models (LLMs) and chatbot assistants,” the startup wrote in the blog post. In case studies, Physical Intelligence details how its tech could allow a robot to do laundry, bus tables or assemble a box.