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US Treasury Bulking Up Crypto Policy Advisers as Wallet Reg Rumors Swirl

5 years 10 months ago

The Financial Crimes Enforcement Network (FinCEN), the top financial crimes watchdog within the U.S. Treasury Department, is hiring two policy officers to help draft regulations for the cryptocurrency space.

Disclosed in Dec. 11 job postings, these Strategic Policy Officers will “assist in the development of policy responses” to “threats” posed by cryptocurrency, issue advisories to financial institutions and collaborate across government and the private sector on crypto policy.

The timing of the listings is notable. Just two weeks prior, Coinbase CEO Brian Armstrong stoked rumors that Treasury Secretary Steven Mnuchin would rush out self-hosted wallet regulations that Armstrong speculated could cripple the industry.

Related: Seychelles, Longtime Home of BitMEX, Is Bending to US Pressure on KYC

The Block further illustrated what those regulations might look like late Thursday night. As soon as Friday, Mnuchin could mandate that crypto companies file a so-called “currency transaction report” with FinCEN on individuals moving $10,000+ in cryptocurrency to or from a self-hosted crypto wallet in a single day.

Whether those regulations will actually arrive, what they would actually look like and if they’d survive after President-elect Joe Biden and his designated Treasury Secretary nominee Janet Yellen take office is yet to be determined.

But the minutiae of the Dec. 11 listings indicate that FinCEN is eager to boost its crypto base chops regardless of who runs Treasury. Both top secret-clearance level jobs are permanent, full-time positions. Given the requirements that candidates have experience drafting, strategizing and researching crypto policy, it’s safe to say FinCEN is only interested in subject-matter experts.

Read more: Why FinCEN Wants Details on All Cross-Border Transactions Over $250

That could be the difference between crafting effective cryptocurrency regulations and the type of knee-jerk crackdowns Armstrong warned against. Crypto industry lobbying group the Blockchain Association told CoinDesk at the time of Armstrong’s tweet that it was “actively educating” policymakers to fix “misconceptions” around self-hosted wallets.

Related: Blockchain Bites: Google Goes Down, Nexus CEO and US Treasury Get Hacked

“To properly regulate emerging industries, especially the crypto economy, in the most nimble and responsive way requires officials in government to have true 21st-century expertise and experience,” Executive Director Kristin Smith told CoinDesk Thursday. “We’ve been encouraged by the type of talent FinCEN has attracted over the past several years and it’s encouraging that they’re looking to add even more relevant expertise with this new hire.”

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CoinDesk

Warp Finance Suffers Possible $8M Flash Loan Attack

5 years 10 months ago

Decentralized Finance (DeFi) platform Warp Finance was exploited for $8 million Thursday evening, possibly due to a flash loan attack, according to analysis portal DeFi Prime.

  • The exploit appears to be a flash loan attack, DeFi Prime said, citing data from Etherscan. The scheme has become common in the fast-growing DeFi sector.
  • Flash loans allow users to borrow funds without collateralization because the lender expects the funds would be returned instantly.
  • Warp Finance, which enables users to deposit crypto tokens in exchange for stablecoin loans, said in a tweet it was experiencing problems.
  • “We are investigating irregular stablecoin loans taken out in the last hour, we recommend that you do not deposit anymore stablecoins until we have clarity on the irregularities,” the platform tweeted.
CoinDesk

Sure, Bitcoin’s Price Is Cool, but Bitcoin’s Technology Is Hot

5 years 10 months ago

Bitcoin is back in the news.

As a wave of institutional liquidity pours into Bitcoin’s markets, even some of its staunchest critics are finding it hard to dismiss the 12-year-old asset as its price surges to new all-time highs. 

At the very least, these past three years have proven that Bitcoin is certainly not dead. At the most, it gives credence to the investment thesis of its most bullish proponents: that it is one of the most revolutionary technologies of its time.

Related: Market Wrap: Bitcoin Pushes Past $23.7K While Crypto Locked in DeFi at All-Time High

But what makes bitcoin so unlike any other investment (or cryptocurrency) that blue-chip insurance funds, hedge funds and asset managers are now comfortable with buying it? 

Read more: Over $20K? Why Is Bitcoin Worth Anything at All?

Bitcoin is a synthesis of decades of cryptographic technology and research with numerous precursors and false starts that predate it. For all of its predecessors, Bitcoin was the first attempt at digital cash that laid out a (more or less) completely decentralized system. 

For those of you who are new, here’s what that means and the technical features that make bitcoin such a standout. 

Fact #1: Bitcoin is cryptographic money

Related: The CIO of $230B AUM Guggenheim Just Called for $400,000 BTC

Contrary to common misconception, Bitcoin transactions aren’t kept secret or encrypted – in fact, they’re quite public.

But Bitcoin’s system is built on public-key cryptography, a branch of computer science that uses complex math (via a system of digital keys) to encode data and keep it hidden from those who don’t have the right key to decode it.

Read more: What Is Bitcoin?

With Bitcoin, users have a public key (from which they can create public addresses to receive bitcoin) and a private key; as their names suggest, the former is meant to be shared while the latter must be kept secret (if revealed, your bitcoin can be stolen, but more on that later).

The private key is what gives you a claim to the bitcoin you own. Technically speaking, wallets store private keys and not “bitcoin.” Every bitcoin exists on the blockchain – wallets just hold the keys that give users access to them. 

You need your private key to approve transactions, and you need someone else’s public address to send a transaction. 

If you’re familiar with PGP encryption, you may see how Bitcoin transactions are similar. The same principles that make encrypted communications so secure are baked into Bitcoin’s code, except instead of messages, Bitcoin’s design secures the bitcoin currency.

Factoid: Bitcoin with a capital “B” refers to the Bitcoin technology or protocol. We use bitcoin with a lowercase “b” when we are referring to the digital currency.

Like sending an encrypted message, Bitcoin transactions are peer-to-peer and (because of the mining process, which we’ll cover later) they can’t be obstructed by anyone.

Fact #2: Bitcoin is permissionless and censorship resistant

Because bitcoin can be sent as freely as a message, Bitcoin is inclusive.

When Satoshi Nakamoto, Bitcoin’s creator, designed the system, he made it “permissionless,” meaning anyone can use Bitcoin to hold and transfer value. He also designed it to be “censorship resistant,” meaning no one can block you from joining the network and making transactions. Nobody can freeze the funds in your wallet, and no one can stop you from making a transaction with Bitcoin.

Because of the way bitcoin transactions are processed, no central party has control over your payments. Unlike PayPal, Venmo, or any other electronic transfer, bitcoin payments are made directly between the payer and recipient, thanks to the cryptography we touched on above.

The foundation of this system, Bitcoin Core, is an open source software which is an all-in-one wallet and server for the Bitcoin network. Anyone with the proper hardware can download and run Bitcoin’s software; it keeps a copy of the Bitcoin blockchain’s transaction ledger and broadcasts transactions to other servers in the network. 

“Running a full node,” as this is called, is the ultimate exercise in Bitcoin control because you can fully audit the Bitcoin ledger yourself and broadcast your own transactions.

Even without running a full node, Bitcoin users can use the network at their will when they use a wallet that lets them control their own private keys, though this means that they are trusting someone else’s network node to broadcast their transactions for them.

Fact #3: Bitcoin transactions are forever

The Bitcoin blockchain – the digital ledger which stores a record of all the network’s transactions – is immutable. It cannot be altered by a central party, and nobody can cheat the network to spend coins they don’t own.

Bitcoin transactions are processed into the ledger by a global network of “miners,” individuals and collectives who run machines to “mine” (maintain) the Bitcoin blockchain. Miners receive bitcoin as a reward for mining in the form of a “block reward,” a payout that goes to the miner(s) who finds the next block in the blockchain’s sequence and records the latest pending transactions in it. 

Read more: How Do Bitcoin Transactions Work?

If you’ve know anything about mining, you probably know that it requires *a lot* of energy because mining competition is fierce. When you take bitcoin’s price into account, this makes sense – they’re not giving these things away for free!

This competition and energy expenditure helps secure the network. Miners are incentivized to process transactions and not interfere with the transaction ledger – otherwise, they risk their payday and, in the case of the big mining firms, tens of millions of dollars in hardware and operational expenses. 

If a miner did want to cheat, the only way to alter Bitcoin transactions that have been recorded in the blockchain is to perform more work than roughly half of all other miners in the network – and the older the transaction, the longer you will have to work. To give you an idea of how much energy you’d need to attack Bitcoin, the network annually consumes, on average, as much electricity as a nation the size of Austria or Switzerland.

Read more: How Bitcoin Mining Works

So altering a transaction from, say, three years ago would require several hundreds of millions of dollars. Rollbacks are not theoretically impossible, but when you factor in the cost to mine with Bitcoin mining’s decentralization, they’re highly improbable (and have never happened in Bitcoin’s existence).

Fact #4: Bitcoin is (practically) unconfiscatible

Of course, bitcoin can be stolen or seized if you’re not careful. 

But if you take the right precautions, you can make your coins practically impervious to seizure, because so long as you keep your private key (or, the password that controls your bitcoin) in your custody and away from the eyes of others,your coins are in your complete control.

Read more: Unconfiscatable? Using Bitcoin to Resist Police Extortion in Nigeria

For increased security, you can set up “multi-signature” wallets that distribute access to your funds across multiple devices. Some wallets even include safety features like dummy passwords you can enter to show a blank account if you are at risk of being extorted, for example.

You can even memorize your private key in the form of a 12-to-24 word seed phrase, destroy the wallet associated with it, and store your bitcoin in your brain. When you want to access them again, you can download just about any Bitcoin wallet (all the good ones support these “seed phrases”), plug your seed phrase in, and you can access the bitcoin in your “brainwallet.” 

You can also store your seed phrase on a piece of paper or (more to the taste of hardcore Bitcoiners) on metal sheets to protect them from the elements, or you can encrypt it on a USB drive and store it in an airgapped laptop –  a computer that is never connected to the internet. 

It’s even possible to send a bitcoin transaction without being connected to the internet via satellites and mesh networks.

Read more: GoTenna Partners With Blockstream Satellite to Make Using Bitcoin Without an Internet Connection Simpler

Fact #5: Bitcoin is a decentralized, digital monetary system

Bitcoin is both a peer-to-peer payment network and a personal digital bank. Its economy is driven by consumers who purchase bitcoin, miners who process transactions and mint new bitcoin for circulation, node operators who audit the network and broadcast transactions, businesses who build on bitcoin and everyone in between. 

This economy is also self-regulated. Every four years, a self-executing mechanism cuts the number of bitcoin that is minted via mining in half. This reward will eventually dwindle until the last bitcoin is mined over one hundred years from now. This “halving cycle” ensures that Bitcoin’s supply will never exceed 21 million and makes its inflation rate predictable. 

Satoshi Nakamoto titled the Bitcoin white paper “Bitcoin: A Peer-to-Peer Electronic Cash System.” In the strictest since, Bitcoin *is* digital cash that you can spend as freely as physical cash, but some have taken this branding by Bitcoin’s creator as a signal that bitcoin is primarily meant to be used as a currency.

Bitcoin can be used this way, and new scaling technologies like the Lightning Network are providing infrastructure to process these transactions in faster, cheaper ways. 

Read more: What Is Bitcoin’s Lightning Network?

But Bitcoin doesn’t care what you use it for, ultimately. Companies including Square and MicroStrategy are using it as a treasury for their company’s savings. At the same time, everything that makes Bitcoin censorship resistant and permissionless makes it an attractive donation source for dissidents protesting abusive governments, or a financial lifeline for citizens living in financially sanctioned (and economically battered) countries.

Yes, Bitcoin’s technology makes it attractive for criminals, but that’s only a small fraction of the network’s real users. (Criminals use cash, too, after all!) And since all bitcoin transactions are public, sometimes it’s easier than not to pin illicit transactions on their transactors. Of course, there are also privacy-preserving technologies to make your blockchain footprint less traceable.

Bitcoin’s core technology is rooted in principles of user freedom and financial liberty. Branching from this is a plethora of softwares, wallets, protocols and other dodads that developers are working on to make bitcoin more functional and sustainable for the long haul.

The rabbit hole is deep. If you’re ready to dive in and learn more, we’ve got you covered.

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CoinDesk

Market Wrap: Bitcoin Pushes Past $23.7K While Crypto Locked in DeFi at All-Time High

5 years 10 months ago

Bitcoin hits a new high at $23,770 on higher-than normal volume; DeFi’s total value locked has also hit a record on the strength of ether.

  • Bitcoin (BTC) trading around $22,818 as of 21:00 UTC (4 p.m. ET). Gaining 9% over the previous 24 hours.
  • Bitcoin’s 24-hour range: $20,756-$23,770 (CoinDesk 20)
  • BTC below its 10-hour moving average but well above the 50-hour on the hourly chart, a bullish-to-sideways signal for market technicians.

The price of bitcoin continued its rise to all-time highs, going up to $23,770 as of press time in a highly bullish run that had lots of volume-fueled momentum. 

Read More: Bitcoin Drops Nearly 7% After Setting New Record High of $23,770

Related: Sure, Bitcoin’s Price Is Cool, but Bitcoin’s Technology Is Hot

The $23,800 level may be a spot of exhaustion for the world’s oldest cryptocurrency, according to Constantin Kogan, partner at financial firm Wave Financial. “There’s some strong selling resistance at $23,800. Let’s see if bitcoin can break it,” Kogan told CoinDesk.

Volumes on Thursday were higher than on Wednesday, with the eight major exchanges tracked by the CoinDesk 20 seeing over $3.5 billion in volume so far as of press time versus $2.9 billion the day previous.

“Breaking the $20,000 psychological barrier was a strong bullish signal allowing bitcoin to set a new record high,” said Elie Le Rest, partner at crypto quant trading firm ExoAlpha. However, Le Rest cautioned about crypto’s classic gyrations possibly affecting the market. “Volatility is very high and small pullbacks have been witnessed along the way.” 

Indeed, bitcoin’s 30-day volatility has been picking up and will be something to watch over the balance of December.

Related: The CIO of $230B AUM Guggenheim Just Called for $400,000 BTC

“Traders should be careful and on the lookout for stronger pullbacks, especially with year-end approaching and traders looking to close their 2020 profit-and-loss,” added LeRest. 

Chris Thomas, head of digital assets Swissquote Bank concurred, saying the most recent move feels too strong for his taste. “I’m just waiting for a few big sellers to come back to the market and take profits,” Thomas said. “Let’s look ahead to the next few weeks. Institutional volumes will drop significantly through Christmas so the market will be driven by retail until early January.”

“This should cause us to keep the high volatility, but we’ve got to also be aware there may be a chance of testing $20,000 to the downside,” added Thomas. 

Read More: Coinbase Files With SEC in Preparation for Landmark Public Offering

Henrik Kugelberg, a crypto over-the-counter trader, noted “fear of missing out” or FOMO as a factor playing into the market’s fervor. “There is of course an element of FOMO in this but the fundamentals are stable as pyramids,” Kugelberg said. “I have said $30,000 before summer but by the looks of this, that might be a very low bid.”

Ethereum network locked value at all-time high

The second-largest cryptocurrency by market capitalization, ether (ETH) was up Thursday trading around $640 and climbing 2.7% in 24 hours as of 21:00 UTC (4:00 p.m. ET).

The amount of crypto “locked” in decentralized finance, or DeFi, is at $16 billion as of press time, increasing over 2,200% from the $690 million locked at the start of 2020.

Meanwhile, the amount of ether locked in DeFi is going up, over 7.1 million ETH total.

Yet the amount of bitcoin locked in DeFi has actually fallen during the market’s price run, down to 142,652 BTC.

Nicholas Pelecanos, head of trading for blockchain ecosystem provider NEM, told CoinDesk many investors continue to overlook the Ethereum network and its alternative assets, also known as altcoins. 

“While bitcoin has largely dominated the narrative, I believe investors should look to altcoins that have tremendous amounts of development in both the core technology and usership, yet are still a fair way off their all-time highs,” said Pelecanos. “I am expecting to see the price of these altcoins, such as ETH and XEM, rally hard when the BTC price inevitably slows down.”

Other markets

Digital assets on the CoinDesk 20 are mostly green Thursday. Notable winners as of 21:00 UTC (4:00 p.m. ET):

In addition, prices for COMP, the governance token for the Ethereum-based lending protocol Compound, jumped on the news that Compound Labs will build a new blockchain to provide money market services across multiple networks.

As CoinDesk reported, the new blockchain could be significant because those new supported assets won’t be limited to blockchains – it is designed to also support the forthcoming and rumored central bank digital currencies. Like Compound v1, the new blockchain will also be governed by the COMP token. Once it goes live, it will add more value to COMP holders. At the time of writing, prices for COMP were traded at $167.14, up 9.43% in the past 24 hours, according to Messari.

Notable losers:

Equities:

Read More: Robinhood Pays SEC $65M to Settle Allegations It Misled Customers

Commodities:

  • Oil was up 1.1%. Price per barrel of West Texas Intermediate crude: $48.40.
  • Gold was in the green 1.1% and at $1,884 as of press time.

Treasurys:

  • The 10-year U.S. Treasury bond yield climbed Thursday jumping to 0.933 and in the green 1.2%.
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CoinDesk

FCA Registration U-Turn Still Leaves Costs for UK Startups

5 years 10 months ago

The U.K. financial services regulator admitted defeat this week in its effort to register all of the country’s crypto-asset firms by Jan. 10, too late for firms that already racked up costs preparing for that deadline while they awaited registration.

Back in January 2020, the Financial Conduct Authority (FCA) announced that no firm would be allowed to engage in “crypto-asset activity” in the U.K. after Jan. 10, 2021, unless it was registered. But with less than a month until that date, the FCA’s website only lists four registered firms, of which two are subsidiaries of Gemini. Zero new registrations have been processed in the last three months.

On Dec. 16, the FCA backed down by emailing more than 100 unregistered applicants that it “may not be able to complete the assessment by 9 January.” Those firms have been granted temporary registration until July 9, 2021. In the email, the FCA emphasized their applications had still not been processed and they had not been assessed as “fit and proper.” 

Related: The UK Bans Crypto Derivatives

By leaving it so late to back down, the FCA raised the fear that a large number of firms would have to stop trading temporarily in January. That forced firms to accept now-unnecessary expenses to prepare to protect themselves from that outcome. 

“We would lose all of our client base,” said the boss of an over-the-counter crypto trading desk based in Mayfair, London, who asked to remain anonymous, “something which we probably couldn’t recover from.” 

For the sole purpose of preparing for this possibility, he “had a parallel offshore structure set-up and was arranging an appointed agent for the U.K.” The costs of these measures stretched into six figures.

By leaving it so late to back down, the FCA raised the fear that a large number of firms would have to stop trading temporarily in January.

Related: Doctor Who to Enter the Cryptoverse as BBC Plans Trading Card Game on Ethereum Blockchain

As late as Dec. 1, the FCA still actively stood by its January deadline. It refused to respond to any questions for this article except to comment: “We are working hard to process applications before the 10 January 2021 deadline and continue to review our progress as this date approaches.”

Even though digital asset custody service Copper, also based in London’s Mayfair, submitted its application more than nine months ago, marketing director Tyler Kenyon says the company is still involved in a slow dialogue with the FCA. There have been long periods of “radio silence” in the meantime, punctuated by occasional fresh questions. 

Cryptocurrency brokerage BC Bitcoin also applied promptly and diligently. It, too, has made sure to meet the FCA’s requirements, according to sales manager Tyler Smith, but has received no verdict on its application.

Kenyon says he feels some sympathy for the FCA because his understanding is the Treasury – the U.K.’s finance ministry – was responsible for setting the January deadline. The coronavirus pandemic might have caused certain delays. On top of that, he suspects FCA staff has had to learn about the crypto asset sector on the job and on the clock. This could be why some applicants are being asked for up to 80 documents and three-hour interviews, to the surprise of seasoned compliance consultants.

The FCA has kept some interested groups in the loop about its slow progress. According to people with access to that communication, the regulator received 160 applications. It admits it does not know how many firms should have applied except that the number might be several hundred. That implies it does not know how many firms could be flouting its rules by continuing to trade after July next year. It also refused to say what would happen to firms that did so.

FCA blamed its slow progress on the poor standard of applications. Less-experienced firms may have underestimated the complexity of regulatory requirements. London-based financial services regulatory consultancy Bovill comments that these cover “the business plan, organizational charts, IT arrangements … policies and procedures as well as governance provisions.” Copper’s Kenyon says that some probably thought it would be a tick-box exercise, but they were wrong.

Firms and regulators alike are having to contend with a real and major threat of money laundering and other illicit activity. “It is safe to say that there is a relatively high inherent risk of money laundering in the virtual asset space,” according to Bovill. Rapid growth has brought its own risks, too. Firms that expand quickly can find themselves facing compliance responsibilities for which they were not prepared. 

See also: UK FCA Grants Crypto Firms Temporary Registration as It Deals With Applications Backlog

But if this explains the FCA’s failure to approve more than four of the robust applications, it only means that conscientious firms were forced to take costly precautions as the deadline loomed just because of the shortcomings of their peers. 

The FCA finally granted the temporary registrations and effectively extended the deadline because of the magnitude of the damage it would do by forcing legitimate crypto-asset businesses to suspend trading. Copper’s Kenyon speculates about the impact of a temporary stop: “The knock-on effects would be substantial, because a lot of firms rely on our infrastructure.”

The boss of the Mayfair over-the-counter (OTC) desk explains a temporary halt would have necessitated redundancies in the short term followed by expensive recruiting later on. The impact on client relationships would probably have ended the business.

That company is keeping its costly precautions in place in case of “any more speed bumps” with the registration process going forward. 

Unless the FCA accelerates its progress significantly in the coming months, the U.K.’s crypto-asset firms could face another tense countdown next summer – or another regulatory U-turn.

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CoinDesk

Compound’s New Blockchain Readies DeFi for Central Bank Digital Currencies

5 years 10 months ago

Compound Labs released a white paper Thursday detailing its plans to create Compound Chain, an application-specific blockchain that can provide money market services across multiple networks.

“We want to announce the designs for a blockchain that can scale Compound over the next century,” Compound founder Robert Leshner told CoinDesk on a phone call. The decentralized finance (DeFi) firm isn’t committing to a timeline yet but it is at work on a testnet now.

The new white paper, a draft of which was shared with CoinDesk in advance, authored by Leshner and Compound Labs staffers Geoffrey Hayes, Jared Flatow and Max Wolff, cites three limitations of the current version of Compound on Ethereum: gas costs, inability to serve assets on other chains and the fact that all supported assets aggregate the risk of each supported asset.

Related: CFTC’s Latest Crypto Primer Highlights DeFi, Governance

Those new supported assets aren’t envisioned to be limited to blockchains of the trustless, permissionless variety either. The new project is meant to support the forthcoming and rumored digital assets from central banks and investment banks.

The white paper states: 

“Compound Chain is a reimagination of the Compound Protocol as a stand-alone distributed ledger, capable of solving these limitations and proactively preparing for the rapid adoption & growth of digital assets on a variety of new blockchains, including Eth2 and central bank digital currency ledgers.”

Compound Chain joins the chorus of blockchain interoperability efforts, but it’s somewhat unique in that it’s attempting to do so in an application-specific way. Not many similar attempts have preceded it, though Leshner did credit the stablecoin and payments chain, Terra (which just added synthetic equities), as one of them.

Related: DeFi Startup Brings Corporate Lending Terms to Miners, Traders and Market Makers

While this is an entirely new and standalone blockchain, it will be governed by the same Ethereum-based system that runs Compound v1 – the COMP token. Once the Compound Chain goes live, this will be a considerable new set of powers accruing to COMP owners. 

Within an hour of the product’s announcement, COMP surged by as much as 10% in price, according to Messari data.

CASH

While the Compound Chain will be governed by COMP – the token that spurred the yield farming craze over the summer – it also introduces a new cryptocurrency called CASH.

Compound Chain’s native CASH token will be used to pay for transactions on the network. CASH will be minted in much the same way as DAI, as a debt against locked collateral held on the Compound Chain.

Like DAI, CASH will start arbitrarily pegged to the U.S. dollar, but its peg can be changed by governance decisions. Unlike DAI, all CASH will earn some kind of yield from a portion of interest paid against loans originated on the blockchain. The precise amount will be one of many parameters determined by COMP holders who participate in governance votes.

The whole purpose of the chain is to function like Compound but in a cross-blockchain fashion. 

A new interoperability play

As soon as an asset is uploaded to Compound Chain, it’s available for lending to others. It’s up to users if they want to borrow against their assets or not.

As on Compound, they will be able to borrow any supported asset but they will also be able to borrow assets, starting with CASH, that are unique to the Compound Chain.

Compound Chain should ship ready to support Ethereum. As for the next chains to be integrated, “This is really up to the community,” Leshner said. “I suspect the first additional chains would be things like Solana and Polkadot and Tezos.” 

The only real prerequisite is the blockchain needs to be able to support smart contracts. The smart contracts for moving assets between Compound and smart contract chains are referred to as “starports.”

While this might be seen as a major break from Ethereum to some, the chain that kicked off DeFi will continue to maintain control of the new chain, at least for now. 

As the white paper explains, “The Compound Governance system on Ethereum established a distributed decision-making process, and is capable of streaming governance actions to the Ethereum starport, which Compound Chain validators receive instructions from.”

Further, Leshner expects those who are long Ethereum will see an advantage to incorporating other chains, because it will enable Ethereum to port value created on other chains into the world computer’s DeFi applications, in the form of CASH.

The chain can also mint new assets, but early users’ ability to upload assets from other blockchains will likely be seen as more important. Assets will be uploaded by moving the asset into a smart contract on layer-one chains (such as Ethereum or Cosmos), which the Compound Chain validators will witness and then mint on the corresponding Compound Chain wallet.

Details pending

Compound Labs has not indicated what technology it will be built on at this point, only that it will use a proof-of-authority architecture. All the parameters will be set through governance decisions of the participating COMP holders.

Proof-of-authority is similar to proof-of-stake in some ways, but it’s important to point out that all validators are selected by COMP holders. “If you can appoint malicious validators, it’s the same as being able to steal all the funds in Compound,” Leshner said.

Proof-of-authority is just the launch setup. “Governance can remove itself and switch to a fully open proof-of-stake system,” Leshner said, though he doesn’t expect it will for some time.

The main intent appears to be to broaden DeFi into all parts of the crypto ecosystem. 

“The Compound Chain is designed from the ground up to enable bridging value between its connected ‘peer’ chains,” the white paper states.

Some of those peer chains may be more cumberbund classical (see: CBDCs) than punk rock, but therein lies the opportunity for a company like Compound Labs.

The team there is already looking at new business lines that could be enabled by the new chain. For example, certain centralized digital currencies, such as jpm coin, may require known liquidators who have been through compliance checks. This could be a role the team behind Compound could play,for certain more-restricted assets.

“At launch, the goal is to replicate the user experience of Compound but with a really clear path to be able to support every blockchain and every asset,” Leshner said.

Update (Dec. 17, 20:50 UTC): Adds information on COMP price activity following the Compound Chain announcement.

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Coinbase, With Bitcoin Soaring, Files in Preparation for Landmark Public Offering

5 years 10 months ago

Coinbase is getting ready to go public. On Thursday, the major cryptocurrency exchange filed preliminary documents with the U.S. Securities and Exchange Commission (SEC).

Coinbase has been the subject of IPO speculation for months. But the timing, coming just one day after bitcoin broke $20,000 for the first time ever, cannot be ignored. The major exchange is positioning itself as Wall Street’s most accessible bet yet on cryptocurrency.

In October 2018, Coinbase was valued at $8 billion. Given the stratospheric increase in the price of bitcoin since then and the recent demand for initial public offerings, it’s expected Coinbase’s current valuation will be significantly higher.

“The Form S-1 is expected to become effective after the SEC completes its review process, subject to market and other conditions,” the firm wrote in a sparse blog post.

Related: Coinbase CEO Pens Words of Caution to Crypto Newcomers

Coinbase said it filed confidentially with the Securities and Exchange Commission. That’s the first formal step on the long road to a public offering. The document, which likely includes target raise, was not available at press time.

A Coinbase spokesman declined to comment further.

The company’s influence touches all corners of the cryptocurrency industry. It is a major hub for retail bitcoin trading and a gateway for alternative cryptocurrencies. Its institutional business is growing faster than MicroStrategy’s sats pile. It has an analytics team, a stablecoin in partnership with Circle, a ventures wing and a commerce department.

All of that could appeal to a Wall Street class eager for exposure to the cryptocurrency markets.

Related: Marc Andreessen, Kelly Kramer Named Directors on Coinbase Board

It’s unclear whether Coinbase is looking to go public via an IPO or a direct listing. Coinbase was first rumored to be exploring a stock market listing in July 2020, when Reuters reported it had begun the process of taking its shares public. Unnamed sources told the wire service at the time that Coinbase was looking at a direct listing, rather than an initial public offering.

Both IPOs and direct listings require form S-1s, according to a blog post from Andreessen Horowitz, a key Coinbase investor.

The form Coinbase filed is confidential, meaning its contents won’t be made public until three weeks prior to the exchange’s roadshow, when the firm tries to woo potential investors.

This story will be updated.

Zack Seward and Nikhilesh De contributed reporting.

Read more: Coinbase Plans First-Ever Investor Day Amid Talk It May Go Public Related Stories
CoinDesk

More Than $1B Ether Staked on Ethereum 2.0

5 years 10 months ago

The total amount of ether locked in Ethereum 2.0 has surpassed $1 billion since it was launched in the beginning of this month, according to data from Etherscan.

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FBI Needs a Dark Web, Crypto Strategy, DOJ’s Inspector General Says

5 years 10 months ago

The Federal Bureau of Investigation (FBI) has a dark web-sized hole in its cyber crime strategy, according to the Department of Justice’s chief watchdog.

  • The DOJ Office of Inspector General (OIG) told the FBI Thursday to develop a “dark web strategy” to better coordinate investigations of child and sex trafficking, drug, cyber crimes and weapons of mass destruction that intersect with the internet’s unindexable shadow layer.
  • FBI should also implement a “cryptocurrency support strategy,” OIG said. Bitcoin cyber crimes are rising annually ($100 million in bitcoin seized last year), so agents need better, broader, more accessible training on cryptocurrency.
  • Agents told the OIG they’re fearful the rising cost of analytics tools will outpace their shoestring crypto investigative budgets. They got just $1.5 million in direct funding for tracing tools in 2019 for products and training estimated at $4.2 million.
  • “The dwindling resources also shed light on FBI concerns that it had no comprehensive strategy for addressing the cryptocurrency threat in the future,” OIG wrote.
  • FBI is “in the process” of requesting up to $2 million to fund the consolidation of its crypto efforts, according to the redacted report. 
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CoinDesk

Uncharted Territory: How Technical Analysts Are Trading Bitcoin at All-Time Highs

5 years 10 months ago

Bitcoin’s bull run appears to be in full swing amid a broader consensus that 2021 could bring more significant gains. The question now for market participants is how high the cryptocurrency could go and, conversely, which levels could act as support levels or potential entry points for investors looking to buy. 

For long-term investors, continuing to “HODL” coins and trusting forecasts for a bitcoin price rally to over $100,000 by prominent observers is a fairly straightforward way to play the market. Yet, short-term speculators and leverage traders, who rely more on technical analysis to identify price targets, resistance and support levels, may find it difficult to keep doing what they’ve been doing without previous price levels to provide obvious guideposts. 

That’s because bitcoin’s latest move above $20,000 has pushed the cryptocurrency into uncharted territory. As the top cryptocurrency has never been traded above $20,000 before, there are no “higher price lows” or “lower price highs” that could be considered potential bull/bear targets or support/resistance levels. 

Related: First Mover: Geek-Fest Turns Relevant as Bitcoin Passes $21K, $22K, $23K

In such a situation, Fibonacci extensions and retracements can help identify key price levels, according to William Noble, a chief market technician at Token Metrics.

Fib extensions reveal $26,000 as the next target

The $26,000 level “is the 38.2% extension of the move from the March bottom to November highs around $19,000,” Noble told CoinDesk during a Zoom interview on Wednesday. “That’s the first target for bitcoin.”

If prices break above $26,000, the focus would shift to the 61.8% extension at $29,822. According to Noble, the 76% extension at $32,000 could act as resistance or serve as a potential price target. 

The Fibonacci extension for an uptrend is drawn by joining three points – the lowest price or the point of origin of the bull trend, a major price high, and the low of subsequent pullback bounce. That will generate Fibonacci extension levels of 23.6%; 38.2%, 50.0%, 61.8%. 

Related: Bitcoin Drops Nearly 7% After Setting New Record High of $23,770

Meanwhile, the Fibonacci retracement on an uptrend is drawn by connecting the low and high points to get 23.6%, 38.2%, and 61.8% retracement levels. 

These percentages are based on the Fibonacci sequence – a series of numbers beginning from 0 and arranged so that any particular number of the series is simply the summation of the previous two numbers. For instance, 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377 and so on.

A closer look at the sequence tells us that every number gets closer and closer to 61.8% of the following number. Further, every number gets closer to the 38.2% of the number two positions to its right and 23.6% of the number three positions to the right of it.

That’s how retracements are calculated. Meanwhile, working the sequence in the reverse order gives extension levels. Traders don’t need to know the formula or make calculations, as a charting software or platform like TradingView will do it for them. 

The challenge lies in picking the most relevant price points while drawing Fibonacci extension and retracement levels. “It’s more of an art than science,” Noble said. 

Fib extensions in 2017

Fibonacci tools served the purpose in 2017 when bitcoin traded in uncharted territory for 10 months. 

The cryptocurrency rose to fresh record highs above $1,200 in February and peaked at $19,783 – just above the 161.8% Fibonacci extension (extreme extension) of the move higher from January lows to November highs. 

“I’ve never seen anything extend that much, but it did extend 1.618 all the way up to near $20,000,” quipped Noble, adding that “Fibonacci extensions would have been helpful if you were buying breakouts in 2017.”

Many analysts are expecting bitcoin to chart a 2017-like meteoric rally in 2021. However, Noble believes it could play out in the coins associated with decentralized finance (DeFi). 

When asked about the level to watch for during potential pullbacks, Noble said the 61.8% retracement “might serve well in the alternative cryptocurrencies and DeFi universe coin.” 

Ignore the RSI

“The widely tracked relative strength index (RSI) and other momentum indicators like Stochastic are useful in a range trade and not necessarily in a trend,” Noble said.

Newbies and amateur traders often misread the above-70 or overbought reading on the 14-day RSI as a sign of bearish reversal. In reality, the indicator can and does stay overbought longer than sellers can stay solvent, to paraphrase economist John Maynard Keynes. 

For instance, bitcoin rallied from $11,900 to $19,000 in the four weeks leading up to Nov. 24 despite RSI signaling overbought conditions. A similar pattern was observed on the daily and weekly charts during the 2017 bull run. 

“I don’t know if RSI is going to come into play until you get to one of these [Fibonacci] targets,” Noble said. “People are having a hard time with bitcoin’s current rally because it’s behaving like equities. It goes up, it sits and goes up again.”

Other tools

Traders can also use Gann fans, which are based on the idea the market is geometric and cyclical, and there are pivot points to mark support and resistance levels. 

Keeping a close track of changes in the options open interest could also help identify price targets. 

At press time, options at $20,000, $24,500, and $36,000 strikes show significant buildup of open interest or open positions. Bitcoin is currently trading near $23,450, having hit a new lifetime high of $23,77 during the European trading hours.

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CoinDesk

Blockchain Bites: Bitcoin Moons, Crypto Orbits, Celebrities Struck by NFTs

5 years 10 months ago

Bitcoin is on a tear, bring the rest of the crypto market with it. Years of heads down building during the bear market is beginning to pay off – and not just because bitcoin’s price is charting new territory – with tons of funding announcements and business expansion. Here’s the story …

Top shelf

Serious Series C
Paxos brought in $142 million in its latest funding round. The crypto service provider with big-name clients including PayPal, Credit Suisse, Societe Generale and Revolut now looks to double its workforce and expand its suite of products. “We are not a unicorn,” CEO Charles Cascarilla said, but it is a big fish going after a OCC-granted national bank license.

Amex invests…
In the white-hot institutional trading platform FalconX. Announced Wednesday, American Express Ventures pumped an undisclosed amount into the trading solution with $3 billion in monthly transactions volumes. “Amex Ventures invests in startups as a way to better understand emerging areas of the payments ecosystem,” Harshul Sanghi, global head of Amex Ventures, said.

Related: First Mover: Geek-Fest Turns Relevant as Bitcoin Passes $21K, $22K, $23K

Massive buy
Core Scientific has purchased over 59,000 state-of-the-art crypto miners, tripling its mining set-up in three southern states. The blockchain and AI infrastructure provider now commands the largest fleet of Bitmain Antminer S19 rigs outside of China. With bitcoin prices moving into uncharted territory, it’s likely many mining groups, companies and factories are in profit. Just today, mining marketplace NiceHash has finally reimbursed those affected by a 4,640 bitcoin heist in 2017.

Quick bites
  • BIG BANKS: Few financial institutions have been supportive of crypto but some forward-looking banks are positioned to ride bitcoin’s rally. (CoinDesk)
  • RIPPLE NABS: Sandie O’Connor, a JPMorgan vet with ties to the Federal Deposit Insurance Corp. and the Office of Financial Research, for its board. (CoinDesk)
  • COINBASE DIDN’T: Crash during bitcoin’s surge, but CEO Brian Armstrong did allude to the exchange’s multiple outages this year in a letter warning newbies to play it safe. (CoinDesk)
  • $1B ETH: That’s the value of all the ether staked on Ethereum 2.0 right now. (The Block)
Market intel

Driving bitcoin?
Exchange data shows signs of pent-up demand for bitcoin as the cryptocurrency rallies to new highs. According to data provided by CryptoQuant, there was an unusual spike in the number of stablecoin inflow addresses for all exchanges, an indicator of “extreme buying power,” between 13:30-13:40 UTC yesterday. “Looking forward to 2021, we should expect the outsized bids of institutions to have a much greater determining influence on the price of bitcoin and other cryptocurrencies,” Artur Sapek, founder of CryptoWatch, said. 

Small caps
Litecoin’s price reached three figures for the first time in 16 months earlier on Thursday. The seventh-largest cryptocurrency by market value soared to $103.19, its highest since Aug. 5, 2019, rallying more than 20% in 24 hours on bitcoin’s coattails. It’s now up nearly 150% year to date. The rest of the crypto market is likewise in the green. 

At stake

Next fun trend (NFTs)
Last year when I was helping to put together CoinDesk’s Year in Review series I kept hearing about the nascent world of decentralized finance, more popularly referred to as DeFi. Just a melange of decentralized apps (dapps), automated protocols and novel financial tools, DeFi exists to disintermediate traditional financial systems – like insurance and trading pools – from third parties.

Related: Blockchain Bites: Bitcoin Crushes All-Time High, Surges Above $20K; ‘Free Ross’ Movement Gains Trump’s Ear

At the time DeFi was a billion dollars or so in crypto, a sub-economy of the larger Ethereum-verse. But it exploded into the public consciousness this year. With some $16.2 billion in total value locked (TVL – the amount of crypto pledged to various smart contracts), DeFi drove some of the biggest stories in crypto this year. There were protocols that launched and quickly became unicorns, no shortage of hacks and exploits and now even mergers, acquisitions and copycats. It was big enough for the Financial Times to write an explainer.

This year, as I again assist my indefatigable editor Ben Schiller in putting together CoinDesk’s Year in Review 2020, I’ve tuned my ear to the rumbling of what could be the next big trend in crypto. Unfortunately, it doesn’t have a sexy name like DeFi, nor is it a novel field, but non-fungible tokens (NFTs) are the crypto tools the cool kids are talking about.

NFTs are blockchain-based tokens that can represent real-world or purely digital objects. Like bitcoin, they derive their value from cryptographically ensured scarcity, meaning each token is one of a kind and cannot be copy and pasted like, say, a .jpeg. So far, NFTs have mostly been associated with a strange digital art scene, but the technology can be applied anywhere that a digital object can find value in being irreproducible, I’m told

This past year several notable artists have become interested in NFT technology. Sean Ono Lennon, John and Yoko’s son, sold an original artwork this week. House musician Guy J sold the rights to one of his songs – for 40 ETH – on the NFT platform Rocki. Meanwhile, rapper Lil Yachty has sold a digital collectible for $16,050. Renowned digital artist Beeple sold a collection of NFTs on Nifty Gateway for a whopping $3.5 million.

It’s a wild scene, and if the rumor mill is working it’s just getting started.

Who won #CryptoTwitter? Related Stories
CoinDesk

Web 3.0 Infrastructure Blockchain ‘The Graph’ Now Live on Ethereum

5 years 10 months ago

Analytics blockchain The Graph is now live on the Ethereum mainnet, according to the developer team. The project’s Thursday launch follows three years of work including a testnet and centralized mainnet.

The Graph seeks to create usable decentralized indexes and API feeds for blockchain-based projects through its own blockchain and native token GRT, project lead and co-founder Yaniv Tal said in a Zoom interview. The project is seeking to be a key infrastructural piece of Web 3.0.

Put simply, The Graph is a middle layer between decentralized applications (dapps) and various blockchains, enabling them to interact more fluidly; It’s the PB&J in between the blockchain and dapp bread.

Related: The Graph Raises $12M in GRT Token Sale; Teases Mainnet Launch in 30-60 Days

Top decentralized finance (DeFi) projects Synthetix, Uniswap and Balancer, among others, currently operate on a hosted version of The Graph.

“The funny thing about blockchain data is that even though in theory everything is transparent and accessible, in practice it has historically been very opaque,” Uniswap founder Hayden Adams said in a statement. “The Graph has done great work so far in making smart contract data easy to monitor and use. Once we know more, we can build better.” 

Big data, decentralized

While running an Ethereum node may only take up a few hundred gigabytes of data on a node, smart contracts nestled in Ethereum hold untold thousands more, necessitating aggressive API management, DeFi startup advisor Ric Burton told CoinDesk in a phone interview. (Burton holds an allocation of GRT tokens and is an adviser to the project).

Querying these smart contracts often requires proprietary software which translates to higher costs and more man hours for blockchain startups, he said. Indeed, his former startup wallet, Balance, ran into numerous issues due to reliance on an unreliable third party.

Related: Three Trends Killing Web Privacy and Decentralization

The need for such a middleware platform is to account-balance styled blockchains such as Ethereum. Burton said it can be difficult for blockchain-based applications to run cleanly because smart contracts can create arbitrary amounts of information in a variety of manners. For example, Ethereum has dozens of ERC token styles each requiring custom setups on a dapp-by-dapp basis.

The Graph’s overarching purpose is to create not only an alternative for projects, but to decentralize the API middle-layer, Tal said. The Graph proposes a tri-part solution to the centralized data conundrum: indexers who run nodes and process queries, delegators who stake GRT and secure the network and curators who appraise feeds and signal to indexers which queries to run. 

Indexers, delegators and curators are incentivized to build better APIs through the network’s native token, which is paid out depending on the performance of indexes called subgraphs.

The Graph saw traction on its self-hosted version, Tal said, with some 10 billion queries last month alone, up tenfold since June.

The project closed two token sales in 2020 including a $5 million “simple agreement for future tokens” (SAFT) involving Coinbase Ventures and a $12 million sale from some 4,500 individual investors.

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CoinDesk

CFTC’s Latest Crypto Primer Highlights DeFi, Governance

5 years 10 months ago

Decentralized finance (DeFi) and crypto governance are among a growing list of topics the Commodity Futures Trading Commission (CFTC) is watching in the digital asset space, the CFTC said in a new primer. 

The regulatory agency published the primer Thursday as part of an ongoing effort to understand and explain the crypto industry. The primer isn’t intended to create policy, but to inform or educate interested parties on digital asset derivatives and other financial technologies. 

Melissa Netram, director of LabCFTC and the Commission’s Chief Innovation Officer, told CoinDesk: 

Related: DeFi Startup Brings Corporate Lending Terms to Miners, Traders and Market Makers

“Digital assets are still very complex and one of the key points to mention is that there are so many regulators here in the U.S. that [oversee] digital assets,” she said. “It’s important for regulatory coordination.”

The space is still evolving rapidly, said Brian Trackman, senior counsel at LabCFTC. The division’s task is to track that evolution and ensure other groups within the CFTC are up to speed.

The 36-page document mentions decentralized finance, governance and markets as issues that warrant further study.

“It’s not meant to be an exclusive list, [but] some of the topics we hope there will be further conversation about,” said Trackman, the primer’s chief author. “Decentralized finance applications seem to multiply exponentially, [and] there’s the issue of governance whether in terms of DeFi or just bitcoin and ether and how they’ll evolve.”

Related: OKCoin Debuts CeFi-DeFi Mashup With Portal for Stablecoin Deposits

The agency’s last primer was published two years ago, and noted that smart contracts would be subject to financial laws within the U.S. The newest one is fairly broad, detailing derivatives products that fall within the agency’s purview and listing how the CFTC or other agencies can interact with the crypto industry.

LabCFTC met with industry participants ranging from “individuals with an idea to established large financial institutions” as it prepared the document, Trackman said. 

“In the scheme of things it’s small, comparatively,” Netram said of the CFTC’s studies of the digital asset space.“That being said, I think what our role is, is to continue to highlight the ever-growing and ever-changing market so that we’re ahead of the curve and we’re constantly addressing new technologies and new innovations,” Netram said.

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CoinDesk

DeFi Startup Brings Corporate Lending Terms to Miners, Traders and Market Makers

5 years 10 months ago

Loan terms are about to get a lot better in decentralized finance (DeFi), at least for some.

“What we’re allowing is top institutions with solid balance sheets, sound reputations and strong cash flows soon being able to access capital-efficient finance, which enables further growth and adoption of crypto globally,” Sidney Powell, co-founder and CEO of Maple Finance, told CoinDesk in a phone call.

Maple Finance is a new firm out of Australia releasing a token-governed platform for institutional lending at extremely competitive collateralization terms and fixed rates that won’t change for borrowers in good standing. 

Related: CFTC’s Latest Crypto Primer Highlights DeFi, Governance

The firm has closed a $1.3 million seed round for its MPL governance token with Framework Ventures, FTX, Aave founder Stani Kulechov, Synthetix founder Kain Warwick, FBG, The LAO and others.

With over $15 billion in total value locked in DeFi as of this writing, it’s either time for fixed-rate, under-collateralized lending or it’s overdue. Maple is targeting the companies with a track record in the space such as funds that engage in trading, market makers and crypto-mining firms looking to expand operations.

The typical loan in DeFi requires significant over-collateralization, with users needing to constantly check to make sure their collateralization is topped up as market conditions change.

On Maple, a good firm would pay one rate for the life of the loan, could collateralize with as little as 40% of the loan’s value and the initial collateral deposit would not need to be revisited. 

Related: OKCoin Debuts CeFi-DeFi Mashup With Portal for Stablecoin Deposits

“With ours, it’s a set-it-and-forget-it solution,” Joe Flanagan, Maple’s other co-founder, said. “As long as you remain a paying borrower and meeting your obligations there will be no further calls on your collateral.”

First pool

Maple is able to offer better terms based on the reputation of borrowers. It will make offers only to institutional customers.

That said, Flannagan noted, as this market matures and evolves, Maple would definitely be interested in serving crypto-native organizations, such as decentralized autonomous organizations (DAOs) that don’t have traditional legal structures. That “expands the addressable market for Maple,” he said.

Maple intends to be everywhere the industry goes. “We’re building a capital market in the crypto space,” Powell said.

Maple will be organized by pools, with each pool managed by a “Pool Delegate” who will make decisions about loans in that pool. Pools will specialize in certain areas where the delegate has expertise, such as a region of the world, a category of borrower or a risk profile.

Its first pool will be small, to demonstrate the model. It will have between $10 million and $15 million in funds available for lending, with loans in the $1 million to 2 million range. Maple will initially aim for a pool with a diverse array of borrowers, but all well-established and carefully selected.

One or two pools will be co-managed by Maple Finance and its first Pool Delegate, Orthogonal Trading, a crypto firm, also out of Australia, starting in the first quarter of 2021.

Liquidity mining

Maple Finance will be a DeFi platform like others, governed by its MPL token and offering opportunities for yield from anyone on Ethereum.

While it will be more cautious than other DeFi projects about to whom it makes loans, providing liquidity to Maple will be open to anyone who wants to get in. 

Once the first pool opens, it will be open to participation from across Ethereum up to the maximum amount that a pool ultimately sets. That capital will then be deployed to make the loans.

“We assume it will be a combination of both individuals and degens and institutions and corporates,” Flanagan said.

Additionally, those liquidity providers will earn MPL tokens under a liquidity mining scheme whose precise terms have not yet been worked out.

The total supply of MPL tokens will be fixed at 10 million, with approximately 30% going to liquidity mining.

MPL governs the network and earns a modest return from its fees. MPL holders have the opportunity to increase their returns by staking but will also bear the brunt of losses in the pool if a borrower defaults. 

“Our intent is not for the token to be considered a security,” Powell said, noting Maple is taking advice on legal matters. There are no plans currently to shut out U.S. residents from holding the MPL token.

While Maple’s offering is likely to be attractive to traders in the space, it will be particularly interesting to see if bitcoin miners take advantage of it. “We would be interested in financing miners for their capital expenditures to expand their operations,” Powell said.

If that happens, that will be an early example of value moving about in blockchain-verified bits that has funded the acquisition of equipment built out of atoms in the analog world, which seems like a milestone on the way to somewhere.

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CoinDesk

Binance Labs Leads $12M Funding Round for Multi-Asset Wallet Developer MATH

5 years 10 months ago

MATH, the company behind MathWallet, has raised $12 million in a Series B funding round led by Binance Labs, the investment arm of the popular crypto exchange.

  • NGC Ventures, Capital6 Eagle and Amber Group co-led the round.
  • According to a blog post Thursday, the investment will enable MATH to accelerate product updates for its wallet, grow its ecosystem of decentralized apps (dapps) and connect more widely in the global market
  • With over 54 cryptocurrencies supported, Eric Yu, co-founder and CTO of MathWallet, claimed the product “is currently the crypto wallet supporting the most public chains.”
  • MathWallet secured a $7.8 million series A+ funding round led by Alameda Research and Multicoin Capital in November.
  • Binance Labs said MathWallet is one of the first crypto wallets to support Binance Smart Chain, the company’s alternative to Ethereum.
  • MATH’s “comprehensive coverage of public blockchains and their early support for and cooperation with the Binance Smart Chain were instrumental in our investment decision,” said Wei Zhou, head of Binance Labs.

See also: Binance Expects to Earn From $800M to $1B This Year, CEO Says: Report

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CoinDesk

Bitcoin Chatter on Twitter Nears Highest Level in 3 Years Amid Price Surge

5 years 10 months ago

The number of tweets about bitcoin reached its highest level since mid-January 2018 on Wednesday, according to social media data collected by The TIE, with over 92,000 tweets posted.

The recent surge in bitcoin-related Twitter content comes as the leading cryptocurrency surged past $23,000 yesterday, reaching an intra-day high just below the $24,000 mark.

Jan. 17, 2018, was the last time this many bitcoin tweets were sent in a single day, after bitcoin’s price started crashing from its then-all-time high just below $20,000.

Related: Guggenheim CIO Says Bitcoin ‘Should Be Worth’ $400,000

Throughout much of 2020, the bitcoin rally has been dominated by a narrative focused on institutional investors allocating large amounts of capital to the cryptocurrency, including Stanley Druckenmiller and Guggenheim’s Scott Minerd.

But near-record levels of Twitter activity is one signal that retail bitcoin investors are not being left behind.

“There has been a lot of talk that bitcoin’s latest bull run is fueled by Wall Street jumping on board, but if yesterday is any indication it’s the everyman who is fueling the conversation, specifically on Twitter,” according to Aubrey Strobel, communications director for bitcoin rewards startup Lolli.

Tweetstorm

According to data from The TIE, it wasn’t just high-volume tweeters driving the uptick. The number of unique Twitter accounts tweeting about bitcoin also surged, with roughly 50,000 users engaging in the bitcoin conversation Wednesday, the most since before Christmas 2017.

Related: Bitcoin Mining Stocks Soar as BTC Blows Past $20K

Strobel’s company runs one of the most popular corporate bitcoin Twitter accounts, and she told CoinDesk Lolli is seeing a surge in interaction with its content as “retail investors are finding every opportunity to own bitcoin.”

Other indications of strong retail participation come from the use of consumer-focused bitcoin products, like record buying volume on Square’s (SQ) Cash App along with strong demand for new services like PayPal’s (PYPL) cryptocurrency features. 

Commenting on the surge in social media activity, Messari bitcoin analyst Ryan Watkins told CoinDesk, “Institutions may be leading the charge this time around, but retail is definitely not sitting on the sidelines.”

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CoinDesk

Robinhood Pays SEC $65M to Settle Allegations It Misled Customers

5 years 10 months ago

The U.S. Securities and Exchange Commission (SEC) Thursday charged stock trading app Robinhood Financial with misleading customers on the source of its revenue and failing to secure them the best possible trades.

  • Robinhood, which offers commission-free trading, could afford to do so because its “largest revenue stream” came from the trading firms paying Robinhood to handle execution.
  • This “payment for order flow” partnership was not disclosed to customers, SEC alleged. And it came at the cost of best execution.
  • “The order finds that Robinhood provided inferior trade prices that in aggregate deprived customers of $34.1 million even after taking into account the savings from not paying a commission,” the SEC said.
  • Robinhood settled the SEC charges with a $65 million penalty.
  • In a separate action Wednesday, Massachusetts state regulators hit Robinhood with allegations of “aggressive marketing” tactics.
Read more: Robinhood Faces Legal Action from US Regulator Over ‘Aggressive Marketing’: WSJ Related Stories
CoinDesk

First Mover: Geek-Fest Turns Relevant as Bitcoin Passes $21K, $22K, $23K

5 years 10 months ago

Bitcoin (BTC) was higher for a sixth straight day, carrying through after surging 9.9% Wednesday to surpass $20,000 for the first time in the cryptocurrency’s 11-year history. 

“We are expecting this inertia to generate ripple effects going into the end of the year as momentum continues to skew bitcoin to the upside,” Lennard Neo, head of research for the digital-asset products issuer Stack Funds, wrote Thursday in a report.  

Here’s a brief recap of CoinDesk’s coverage of the rally past $20K:

Related: Bitcoin Drops Nearly 7% After Setting New Record High of $23,770

In traditional markets, European stocks gained on vaccine hopes and the British pound climbed as officials predicted a Brexit deal soon. U.S. stock futures pointed to a higher open as Congressional leaders hashed out a $900 billion stimulus bill. The dollar slumped after Wednesday’s Federal Reserve meeting disappointed some investors who were expecting a more dovish outcome. Gold strengthened 0.7% to $1,878 an ounce. 

For those keeping track, bitcoin is now up 217% in 2020, roughly 14 times this year’s gains in the Standard & Poor’s 500 Index of U.S. stocks. Gold is up 24%.  

Market Moves

(Editor’s note: This is the fourth installment of First Mover’s recap of how the bitcoin market evolved over the course of 2020 and what it means for the future. Today we cover the month of May, when the Bitcoin blockchain underwent its once-every-four-years “halving.” Outlandishly high price predictions for the cryptocurrency failed to materialize, but the network’s programmed reduction in the pace of new bitcoin issuance set up a stark contrast with Federal Reserve money-printing, measured in the trillions of dollars.) 

In early 2020, before the devastating economic toll of the coronavirus became clear to investors, the main narrative in the bitcoin market was the upcoming “halving” – an arcane, once-every-four years occurrence that takes place on the underlying blockchain network. 

Related: Bitcoin Sailing in Uncharted Waters as Price Crosses $22K for First Time

Since the Bitcoin blockchain was invented only 11 years ago, it would just be the third halving in history. It was very technical, but the whole process was hard-coded into the network’s underlying programming, and the basics went something like this: At a certain point in May, the pace of new issuance of bitcoin by the blockchain would get cut in half, to about 6.25 bitcoins every 10 minutes or so from the 12.5-bitcoin average clip that had prevailed over the recent four-year period.

Generally speaking, few surprises were expected, with all the details stipulated in advance. But that was sort of the point: Under the cryptocurrency’s design, things were supposed to run like clockwork, giving humans little leeway to intervene based on subjectivity or politics.

These were no ordinary times. In the prior months, the deep economic toll of the coronavirus had sent global markets reeling, dragging down bitcoin prices from a high of about $10,500 in February to as low as $3,850 by mid-March. Then, as the Federal Reserve and other global authorities started pumping trillions of dollars into the financial system, asset prices shot back up, and by April bitcoin traded as high as $9,485.    

Cryptocurrency market analysts talked up the halving as a potential catalyst for a price rally; one German bank went so far as to predict that bitcoin could shoot to $90,000 or higher. 

“Look for prices to attempt the $10,000 level on speculative buzz leading into the halving,” Jehan Chu, co-founder and managing partner at Hong Kong-based blockchain investment and trading firm Kenetic Capital, told CoinDesk in late April. 

CoinDesk even built its own “Bitcoin Block Reward Halving Countdown” to mark the estimated time and date of the big event. With everything going on in the world, the halving took on the feel of a geek-fest for crypto insiders. The suspense came mainly from watching the price charts: Would the halving drive bitcoin prices to the moon?

As it turned out, the halving came on May 11 and proved anticlimactic by pretty much all accounts. Industry executives on a CoinDesk halving-countdown talk show, held via Zoom, had to pass the time with technical discussions of the future potential of bitcoin mining computers and how much the network’s speed might accelerate over the next four years.  

When the blockchain network finally reached block number 630,000, the moment everyone was waiting for, someone posted a snippet of code on Twitter showing that the halving had indeed happened. There were some huzzahs all around, and everyone dropped out of the Zoom room.

“This is more of a holiday for the crypto community than anything else,” Mati Greenspan, of the foreign-exchange and cryptocurrency research firm Quantum Economics, wrote in a note to clients. 

Over the course of the month, prices never climbed much above $9,000. 

“We are seeing buy-the-rumor, sell-the-fact at work,” Russell Shor, a senior market specialist at the foreign-exchange and cryptocurrency-trading firm FXCM, said in emailed comments.

Underneath the deflating buzz, though, was an epiphany: The blockchain network was working exactly as designed, and not even the worst economic crisis since the Great Depression had thrown it off course. 

What’s more, the reduction in the pace of bitcoin issuance provided a sharp contrast with the monetary policies pursued by the Federal Reserve and other major central banks. 

The human central bankers, to their credit, were doing all they could to keep the world’s financial system from collapsing. But the dynamic meant that bitcoin, with its hard-coded and ever-diminishing supply curve, might serve investors as a bulwark against debasement of the U.S. dollar and other currencies. 

To underscore the point, the Chinese bitcoin-mining pool f2pool embedded a message into the blockchain record for data block No. 629,999: “NYTimes 09/Apr/2020 With $2.3T Injection, Fed’s Plan Far Exceeds 2008 Rescue.” It was a headline for a news article from the prior month, detailing a massive money-printing episode by the U.S. central bank. 

Coin Metrics, a cryptocurrency analysis firm, revisited the theme in a report earlier this week, illustrating how the blockchain’s quadrennial halvings might provide confidence to investors looking for an asset that isn’t subject to human discretion and qualitative judgments.

“Halvings will keep occurring every four years until the supply cap of 21 million bitcoin has been reached,” the analysts wrote. “This means we can project well into the future, and have clarity about what Bitcoin’s inflation rate will look like one, five or 10 years from now.” 

That might be easier, even, than trying to predict what Federal Reserve Chair Jerome Powell and his colleagues might do at their next meeting in January.  

– Bradley Keoun

Bitcoin Watch

Bitcoin surged to new record highs above $23,000 earlier on Thursday, before quickly falling back by over $1,500.

The cryptocurrency dropped from the all-time high of $23,770 to $22,185 in the roughly 30 minutes to 09:45 coordinated universal time (UTC), representing a 6.7% drop, according to the CoinDesk 20. 

The sudden pullback was backed by the highest hourly sell volume since Nov. 26 and suggests uptrend fatigue. The cryptocurrency could consolidate in the broad range of $20,000 to $24,000 in the short-term.  The derivatives market and on-chain activity suggest scope for a continuation of the rally.

While the average level of funding rate on bitcoin perpetual futures across major exchanges has risen from 0.005% to 0.036%, it remains well below the high of 0.093% seen before the Nov. 24 price drop. Calculated every eight hours, the funding rate reflects the cost of holding long positions. It is positive (or longs pay shorts) when perpetuals trade at a premium to the spot price. As such, a very high funding rate is widely considered a sign of leverage being excessively skewed to the bullish side, or overbought conditions.

In other words, leverage isn’t skewed too bullish, which could mean the cryptocurrency has scope to rally further. 

Further, there are few signs of large investors looking to book profits, with prices easily rallying to record highs above $23,000. At press time, there were roughly 2,400,000 coins held on exchanges. That’s the lowest since August 2018, according to data source Glassnode, and suggests investors aren’t preparing for a sell-off. 

– Omkar Godbole

Read More: Bitcoin Drops Nearly 7% After Setting New Record High of $23,770

What’s Hot

CME announces plans to launch ether futures in February (CoinDesk) 

Ruffer Investment confirms massive bitcoin buy of $744M (CoinDesk) 

Paxos raises $142M Series C funding following PayPal deal, OCC bank charter application (CoinDesk) 

San Francisco-based cryptocurrency exchange OKCoin now allows users to invest in decentralized finance (DeFi) applications without paying gas fees (CoinDesk)  

Kraken exchange plans to integrate bitcoin’s Lightning Network in 2021 (CoinDesk) 

American Express VC unit invests in FalconX cryptocurrency trading platform (CoinDesk) 

Austrian cryptocurrency trading platform Bitpanda sets up new tech hub in Poland, allocates €10M ($12.2M) to fund the center, with goal of creating 300 jobs (CoinDesk) 

Hedge fund One River, backed by Alan Howard’s Brevan Howard Asset Management, emerges as bitcoin buyer with $1B goal, Bloomberg says (CoinDesk)   

Analogs The latest on the economy and traditional finance

Federal Reserve keeps interest rates unchanged, adds qualitative guidance on pace of money-printing (CoinDesk) 

U.S. Congressional leaders near agreement to add new round of $1,200 stimulus checks to proposed $900B relief package (Washington Post) 

Fifty years of tax cuts for rich didn’t trick down, study says (Bloomberg) 

Switzerland, Vietnam labeled as currency manipulators by U.S. Treasury (Washington Post) 

Some members of U.S. Treasury advisory group advocate allowing big asset managers to buy government bonds directly from the Federal Reserve Bank of New York, to add trillions of dollars more in liquidity to the market (Reuters) 

Goldman Sachs analysts see 10-year U.S. Treasury yields rising to 1.5% by mid-2021, from about 0.9% now (Reuters) 

“Nothing is more reassuring to an investor than the knowledge that central banks, with much deeper pockets, will buy the securities they own,” Allianz’s Mohamed El-Erian writes in op-ed (FT) 

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CoinDesk

Global Stablecoins Could Eventually Become Reserve Currencies: IMF Paper

5 years 10 months ago

Private stablecoins such as Libra (now rebranded as Diem) could emerge as international reserve currencies, according to an International Monetary Fund (IMF) report.

  • Titled “Reserve Currencies in an Evolving International Monetary System,” the departmental paper looks at shifts in the global monetary system and factors that might influence the U.S. dollar’s role as the dominant reserve currency, including new payments systems and digital currency.
  • While their study concluded overall that the dollar is safe for now, the authors said the reserve currency landscape would likely shift.
  • They posited that private digital currencies could “emerge as important international currencies,” with Libra/Diem possibly becoming the first example of a global stablecoin.
  • Global stablecoins (or GSCs) could also increase the demand for reserve fiat currencies they’re backed by, according to the paper.
  • “But GSCs do not need to be backed by existing fiat reserve currencies and could themselves attain reserve currency status,” the authors write. “It is also conceivable that more than one global stablecoin could become a reserve asset.”
  • The paper theorizes that rather than be differentiated by macroeconomic factors, digital currency competition would differentiate along network lines and by users.
  • And while digital currency “may cut across borders in ways that existing currencies do not,” different regulatory frameworks might lead to increased fragmentation, said the IMF.

See also: IMF, World Bank, G20 Countries to Create Central Bank Digital Currency Rules

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CoinDesk

US Bitcoin Mining Firm Core Scientific to Triple Capacity With Massive 59,000-Machine Order

5 years 10 months ago

U.S. blockchain and AI infrastructure provider Core Scientific has expanded its fleet of state-of-the-art crypto miners to over 77,000, comprising the largest-ever grouping of Bitmain Antminer S19 rigs outside of China.

Core Scientific, which offers a mix of hosted crypto-mining and data-science computation, ordered the miners earlier this year. The company announced Thursday it has now procured an additional 59,000 S19 and S19 Pro Antminers. 

The new order will bring the total computational power hosted with Core Scientific to 7.26 exahash per second (EH/s) while using approximately 250mW of electricity, said Taras Kulyk, the firm’s senior VP of blockchain development.

Related: What Is Proof-of-Work?

“We are truly a global player with this order, which is a magnitude of scale larger than anything that’s been done in North America today” said Kulyk.

One of Core scientific’s closest U.S. rivals, Nasdaq-listed Marathon, recently announced it was buying some 10,000 Antminers, which will bring the firm’s total hashrate to 2.56 EH/s.

The new units will be spread across Core Scientific’s existing facilities in North Carolina, Georgia and Kentucky, Kulyk said. A large chunk of the energy consumed by the miners will be renewable power. Core Scientific’s facilities cover over 100 acres and the firm is now looking for more space to house the new rigs.

Core Scientific’s bullish news comes as the price of bitcoin hits all-time highs and the stocks of listed crypto mining companies surge upward. (Core Scientific remains privately held.)

Read more: Bitcoin Mining Stocks Soar as BTC Blows Past $20K

Related: WEF, Mining Giants Develop Blockchain Platform for Tracking Carbon Emissions

While the U.S. hashrate is certainly on the increase, China far and away dominates crypto mining with around 65% of global hashpower. According to Cambridge Centre for Alternative Finance, U.S. and Canada combined account for just 8.5% of the pie. But North America has more publicly traded mining companies than anywhere else and a muscular reach towards institutional investors. 

Recently, Core Scientific announced a deal with Digital Currency Group mining subsidiary Foundry to receive some $23 million in financing to build out mining equipment for Core and its clients. (Digital Currency Group is also the owner of CoinDesk.)

That said, today’s blockbuster order of Antminers is separate from the Foundry financing deal, Kulyk said. “The Foundry deal was actually done in the second quarter of 2020,” he added.

A further coup for Core Scientific happened back in September when it became Bitmain’s “cooperative repair center” for mining equipment in North America. That’s a big deal because it saves having to box up tons of computers and ship them to China. 

“When you have 77,000 units, to have to unpack and ship them somewhere else for repair is a direct impact to your bottom line,” said Kulyk.

Bitmain is experiencing a spike in demand for the latest Antminers, which are sold out until July 2021.

“There’s absolutely a massive supply crunch right now,“ Kulyk said. “We are oversubscribed, even with this order.”

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