Blockchain Bites: Square’s $50M BTC Investment, MetaMask’s 1M Users, BitMEX’s New CEO
CoinDesk is preparing for the invest: ethereum Economy virtual event on October 14th with a special series of newsletters covering the past, present and future of Ethereum. Every day until the event, the team behind Blockchain Bites will dive into an aspect of Ethereum that excites or confuses us.
The Top Shelf News you have subscribed to can be found below.
Now a few words from CoinDesk market reporter Daniel Cawrey.
One of the best metrics for increasing usage in the Ethereum economy is the introduction of wallets, the entry point for anyone looking to interact with decentralized finance or DeFi.
Wallets are an important part of the DeFi launch discussion and a focus of CoinDesk's “Invest: Ethereum Economy” panel “Unlocked: TVL and Beyond - Measuring the DeFi Economy” on October 14th line numbers, but wallets are that Place where investors park their crypto.
The MetaMask wallet, a browser extension that allows users to interact with the Ethereum network and its multitude of intelligent contract-based DeFi applications, has exceeded 1 million users. That's a quadrupling of the wallet since 2019, developed and maintained by New York-based software company ConsenSys.
The hunt for juicy returns in the DeFi space, which can sometimes yield double-digit or triple-digit returns on crypto borrowing, is one of the reasons MetaMask has grown, said John Willock, CEO of Tritium Digital Assets, a provider of crypto liquidity. "I think we can all see that a lot of MetaMask's rollout came from recent DeFi craze and interest in short-term returns that has been perceived as a chase," he said.
However, that speculation brings real acceptance, Willock added when comparing MetaMask to a web browser, software that almost everyone has integrated on the Internet.
“I consider the MetaMask numbers to be the same early adoption indicator that the Netscape browser was used in the 1990s. It's exciting, ”he said.
What's even more interesting: Developing countries are leading the way in adopting MetaMask. India, Nigeria and the Philippines are the countries with the most MetaMask usage after the USA.
“Metamask overtaking 1 million users is an impressive achievement. It is by far the most widely used browser wallet and offers the community a great balance between security, functionality and usability, ”said Brian Mosoff, managing director of investment firm Ether Capital.
"I expect MetaMask will continue to dominate as DeFi and other Ethereum applications thrive in the months and years to come," Mosoff added.
It's simple: more wallet users mean more acceptance of the Ethereum economy. While MetaMask does require some knowledge of how users store mnemonic seeds, it's actually quite a delightful wallet for an increasingly growing DeFi ecosystem.
- Daniel Cawrey
See also: First Mover: Bitcoin 'Comatose' below $ 16,000 for the remainder of 2020 as Ether traffic fades
Stable Coins, Hyper-Collateralization, and the DeFi Economy
The rise of fiat- and algorithm-powered stablecoins has largely brought the volatility narrative of Crypto to a standstill. Now they are the bridge into the DeFi economy and an engine for hyper-collateralization and "money games". How will these tools evolve when DeFi is mature? What are the risks of these systems and how can they be managed as the stakes increase?
Jeremy Allaire, CEO of Circle, Stani Kulechov, CEO of Aave, and Maya Zehavi, Cryptorati, will go live at 4:30 p.m. to 5:00 p.m. ET on October 14th as part of Invest: Ethereum Economy.
The eagerly awaited 2.0 upgrade from Ethereum is intended to bring the network closer and closer to its original vision of a "world computer" on which a parallel, decentralized financial system is located.
At invest: ethereum Economy, on October 14th, we will deal with the implications for investors, as decentralized financing is taking the crypto world by storm.
Related Topics: Blockchain Bites: Crypto's Top Universities, Bitcoin's New Addresses, MetaMask's Token Swaps
In the run-up to the event, our two-part virtual miniseries CoinDesk Live: Inside the Ethereum Economy on October 8th and 12th presents the trending stories that we'll break down at the main event: Why all the hype behind crop farming and food-inspired tokens? Should investors take them seriously or are they a fading trend?
On October 8th, Brady Dale, Senior Business Reporter at CoinDesk, welcomes Priyanka Desai from Open Law, Mason Nystrom from Messari and Sam Bankman-Fried from FTX to assess the latest trends in the DeFi landscape.
Watch DeGeneration: How Ethereum Makes Finances Weird Oct 8th
Just as MetaMask has become a major port of call for the Ethereum economy, so is the narratives that grab people's attention.
Over the past year, new memetic trading strategies have emerged - ways to interact with and discuss Ethereum applications - that have set the pace of development.
Yield farming, “DeFi’s rocket fuel,” is one such strategy. A stupid name, but an important concept. CoinDesk's Brady Dale explained how it all works in July.
The hot new term in crypto is "Yield Farming", an abbreviation for clever strategies in which the temporary availability of crypto for the application of a startup earns the owner more cryptocurrency.
Another term that is floating around is "liquidity mining". The enthusiasm for these concepts has developed into a low rumble as more and more people are interested in them.
The casual crypto watcher who only comes into the market when activity picks up may get in a weak mood that something is happening. Take our word for it: high yield farming is the source of these vibrations.
In general, yield farming is any effort to get crypto assets up and running and to get the greatest possible return from those assets.
At the simplest level, an income farmer could move assets within the Ethereum-based credit market, constantly looking for the pool that offers the best APY from week to week. This may mean moving to riskier pools from time to time, but a high yield farmer can handle risk.
"Agriculture is opening up new arbitrage categories that can spill over to other protocols whose tokens are in the pool," said Maya Zehavi, a blockchain consultant.
However, since these positions are tokenized, they can go further.
In a simple example, a high yield farmer could invest USDT 100,000 in compound. You will receive a token back for this assignment called cUSDT. Let's say they get 100,000 cUSDT back (the formula for compound is insane so it's not 1: 1, but for our purposes it doesn't matter here).
You can then put that cUSDT in a liquidity pool that cUSDT uses for Balancer, an AMM that allows users to set up self-balancing crypto index funds. In normal times, this could result in a small amount of transaction fees. This is the basic idea of crop farming. The user looks for edge cases in the system in order to get as much profit as possible for as many products as possible.
However, for now, things are not normal and probably won't be for a while as liquidity mining recharges are boosting agriculture.
Liquidity mining is when a yielding farmer receives a new token as well as the usual rate of return (that's the "mining" part) in exchange for the farmer's liquidity.
"The idea is that stimulating the use of the platform increases the value of the token and thereby creates a positive usage loop to attract users," said Richard Ma of the smart contract auditor Quantstamp.
The above examples of high-yield farming are just agricultural yields from the normal operation of various platforms. Provide Compound or Uniswap liquidity and get a small portion of the business going through the logs - very vanilla.
But Compound announced earlier this year that it really wanted to decentralize the product and give a good level of ownership to the people who popularized it through its use. This ownership would take the form of the COMP token.
By giving a healthy percentage to users, this has very likely become a much more popular place to go for lending. This, in turn, would mean that every stake is worth a lot more.
Hence, Compound announced this four year period during which the protocol will hand out COMP tokens to users, a fixed amount every day until it's gone. These COMP tokens control the log, just like shareholders ultimately control public companies.
Each day, the Compound Protocol examines all of the individuals who have borrowed and borrowed money from the application and give them COMP in proportion to their share of the day's overall business.
COMP turned out to be a bit of a surprise for the DeFi world in technical and other ways. It has inspired a wave of new thinking.
"Other projects are working on similar things," said Hugh Karp, founder of Nexus Mutual. According to informed sources, these models will launch brand new projects from CoinDesk.
We might see more pedestrian yield applications soon. For example, forms of profit-sharing that reward certain behaviors.
As this sector grows more robust, its architects will find increasingly robust ways to optimize liquidity incentives in increasingly refined ways. We could see token holders open up more opportunities for investors to capitalize on DeFi niches.
- Brady Dale
This year, decentralized funding turned out to be the best choice for Ethereum to find the main attraction. While DeFi still accounts for a fraction of the activity on Ethereum and an even smaller chunk of crypto in general, it has drawn public attention.
For example, the Financial Times wrote a user manual for DeFi. However, some questions remained unanswered. CoinDesk employee Alyssa Hertig answers some frequently asked questions and tries to filter the signal out of the noise.
How do I make money with DeFi?
The value tied up in Ethereum DeFi projects has exploded. According to reports, many users make a lot of money.
With Ethereum-based loan apps, as mentioned above, users can generate "passive income" by borrowing their money and generating interest on the loans. The high yield farming described above has the potential for even larger yields, but with a higher risk. Users can take advantage of DeFi's credit aspect to capitalize on their crypto assets for the best possible return. However, these systems are usually complex and often lack transparency.
Is it safe to invest in DeFi?
No, it's risky. Many believe that DeFi is the future of finance and that investing in disruptive technology early on could result in massive profits.
However, it is difficult for newbies to separate the good projects from the bad. And there has been a lot of bad things.
As DeFi has increased in activity and popularity through 2020, many DeFi applications, such as: B. Meme Coin YAM, crashed and burned, causing the market capitalization to jump from $ 60 million to $ 0 in 35 minutes. Other DeFi projects, including hotdog and pizza, faced the same fate, and many investors lost a lot of money.
In addition, DeFi errors are unfortunately still very common. Smart contracts are powerful but cannot be changed once the rules are built into the protocol. This often makes errors permanent and increases the risk.
When will DeFi go mainstream?
As more and more people are drawn to these DeFi apps, it's hard to say where they will be going. Much of it depends on who finds it useful and why. Many believe that various DeFi projects have the potential to become the next Robinhood by attracting hordes of new users by making financial applications more inclusive and open to those who traditionally do not have access to such platforms.
This financial technology is new, experimental, and not without its problems, especially when it comes to security or scalability.
Developers hope to fix these issues at some point. Ethereum 2.0 could solve scalability issues through a concept known as sharding. This allows the underlying database to be broken up into smaller parts that are easier to manage for individual users.
How will Ethereum 2.0 affect DeFi?
Ethereum 2.0 isn't a panacea for all of DeFi's problems, but it's a start. Other protocols like Raiden and TrueBit are also in the works to further address Ethereum's scalability issues.
If these solutions are implemented, Ethereum's DeFi experiments have an even better chance of becoming real products and possibly even going mainstream.
- Alyssa Hertig
On the game
Despite the enthusiasm for DeFi, the risks are clear. Donna Redel, associate professor of law at Fordham Law School, and Olta Andoni, attorney at Zlatkin Wong, are two lawyers who got mad in the field (so to speak): regulators are circling, it said in an August.
A corner of the crypto universe that accounts for less than 1% of total crypto-asset market capitalization has been making headlines since June. This is the world of decentralized finance, or DeFi, alternatively referred to as an innovation center, experiment, or new wild west, where projects move forward quickly and break things.
A recent look at articles on CoinDesk shows the phenomenon. Once again, the crypto headlines focus on the "madness", the "frenzy of income farming", "investors getting money into" and "another protocol emerging in a fireball".
Will the non-stop headlines and framing of the “hot” new DeFi protocols detract from the institutional adoption that's starting in earnest for crypto, digital assets and blockchain technology?
We believe that the industry needs at least self-regulation. Without them, it is on the way to serious government scrutiny and reputational risk.
As with almost anything in cryptography, the strong feelings and opinions make it difficult to determine the true essence and reality of most DeFi projects. For us, this refrain is reminiscent of the foamy ICO (Initial Coin Offering) days of 2017, which ended badly for the good names Blockchain and Crypto.
There are certainly similarities: trading frenzy; Projects that arise with little or no testing and no testing; No clear regulatory guidelines and the recycling of the ETH are now leading to excessive gas prices. Are we on the brink of one of the regulators waking up and sending a letter similar to the Dao report?
In legal terms, there is no clear consensus on which authority should regulate. Again, there is a lack of guidelines from several agencies that could be responsible for DeFi projects or for the space in general.
We are alarmed and concerned about the apparent lack of a 360 degree understanding of the potential role of the various actors or operators and their possible interactions with the projects, governance and thus the DeFi ecosystem. Tokens appear overnight. Projects are reluctant to use or avoid completely terminology that suggests “issue”, “issue” or “issuer” as these are over-sensitive words in the securities world.
Calling a project an “experimental game” or “innovation” is not enough to take it out of the regulatory realm. The focus shifts from the securities regulation of the "issuer" and the Howey test that prevails during the ICO days and thereafter to a more complex analysis of the application of the goods regulation, questions of who the "controlling stakeholders" are and whether liability or responsibility lies with them .
Many questions should be re-examined from both the perspective of securities law and raw materials law to determine how they can be applied and reinterpreted to a disintermediated-decentralized financial model.
The open questions include whether the “controlling stakeholders” are determined by voting rights control on DeFi platforms, who among the investor group and founders have voting rights control, and whether there should be standards for stock exchange listing.
Furthermore, it remains to be seen whether defining these projects as "decentralized" puts them outside of regulatory scope or whether the "centralized" projects should be labeled as "disintermediated finance" - aka the ability to conduct secure financial transactions directly without the use of Financial intermediaries.
Despite the regulatory uncertainty, traders, projects and exchanges are in full swing, leaving tokens at high risk of unjustified price changes, which affects governance, liquidity and the well-being of the projects.
In our view, the DeFi experiment shows that new industry rules need to be created: audits, proper risk disclosure, and planning to foresee what could go wrong before it actually happens. The DeFi self-regulation should normalize the verification of sufficient collateral, the auditing standards, the ongoing and crisis-related governance as well as the distribution-centered ownership of tokens.
It remains to be seen what effect a regulatory loophole in which these tokens are created, distributed and traded without official supervision. At least with a modified Safe Harbor proposed by Commissioner Hester Peirce, which we commented on earlier this year, the SEC would have some control. At the moment, tokens appear daily in DeFi and the explosion of tokens leads to a distortion of purpose and "investors" are burned when projects implode.
- Donna Redel and Olta Andoni
Square <3s BTC
Square, the payments company led by Twitter CEO Jack Dorsey, announced Thursday that it had purchased 4,709 bitcoins, a $ 50 million investment that represents 1% of the company's total assets. "Square believes that cryptocurrency is a tool of economic empowerment and gives the world the opportunity to participate in a global monetary system that is in line with the company's purpose," the company said in a statement. "We believe Bitcoin has the potential to be a more ubiquitous currency in the future," said Amrita Ahuja, CFO of Square. "For a company that designs products based on a broader future, this investment is a step along the way."
Activity in bitcoin options listed on the Chicago Mercantile Exchange (CME) rose sharply on Wednesday as investors traded call options. According to data source Skew, the CME traded $ 48 million in options during the day, its highest daily volume value since July 28. The number represents a 300% increase from Tuesday's $ 12 million value. "The CME Options had a strong session and the increase in volume was mainly due to increased activity in call options," Emmanuel Goh, CEO of Skew, told CoinDesk on Telegram. The data suggests that some traders are anticipating a bitcoin rally but believe the uptrend will be capped at $ 16,000 by the end of December. Further, they expect prices to stay below $ 20,000 through the end of the first quarter of 2021.
BitMEX's founders are stepping down from their leadership positions at the parent company of the crypto derivatives exchange shortly after US authorities charged the company with allegedly illegal behavior. In a blog post on Thursday, 100x - the holding group of BitMEX operator HDR Holdings - announced that founders Arthur Hayes and Samuel Reed "have resigned from all management responsibilities for their respective CEO and CTO functions with immediate effect" . Vivien Khoo, the current Chief Operating Officer of 100x Group, will become Interim CEO, while Ben Radclyffe, Commercial Director, will play a support role in better managing customer relationships and overseeing financial products.
Google Cloud is taking steps to become an EOS validator, but not for the tokens. “Google Cloud doesn't deal with crypto mining. This really is an infrastructure game for us, ”Allen Day, Google Cloud Developer’s advocate, told CoinDesk’s Brady Dale. On Tuesday, Block.one, the company that operates the EOS blockchain, announced that Google Cloud is considering becoming one of the network's 21 block producers. Day said the company is determined to support the public blockchain infrastructure, as indicated by previous relationships with Hedera Hashgraph and Theta Labs, a video content relayer.
The Travel Rule Protocol (TRP), a working group preferred by banks and traditional financial institutions that focuses on bringing crypto in line with global anti-money laundering (AML) standards, has released the first version of its API. The 25-person TRP working group, which includes Standard Chartered, ING Bank and Fidelity Digital Assets, said the product should provide an easy way for companies to share identification information. This includes data from originators and beneficiaries of crypto transactions as required by the Financial Action Task Force (FATF) global AML watchdog.
KPMG Air's blockchain solution for offsetting CO2 emissions (Sebastian Sinclair / CoinDesk)
Riot to Buy 2,500 More Bitmain Miners in Latest Fleet Expansion (Danny Nelson / CoinDesk)
Bitcoin correlations depend on what phase they are in (Lyn Alden / CoinDesk)
Tim Draper leads targeted $ 5M Series A for India Crypto Exchange Unocoin (Daniel Palmer / CoinDesk)
Bitcoin worth over USD 26 million in connection with the 2016 Bitfinex hack is on the move (Jaspreet Kalra / CoinDesk)
Who won #CryptoTwitter?
Blockchain Bites: Square's $ 50 million BTC investment, MetaMask's 1 million users, BitMEX's new CEO
Blockchain Bites: Square's $ 50 million BTC investment, MetaMask's 1 million users, BitMEX's new CEO
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