CoinDesk Crypto

UPDATE (Aug. 13, 08:57 UTC): In the last few moments, the YAM project has said it is planning on launching a new version in a “post-rescue attempt.”

• DeFi meme coin ‘YAM’ has succumbed to a bug within its rebase function, meaning the coin has lost control of its on-chain governance feature.
• All of the roughly $750,000 Curve tokens stored in the project’s treasury are lost as well, according to a Medium blog from the team.
• Launched Tuesday, YAM had $585 million assets under lock as of 4:30 UTC. 
• YAM’s code contained a bug that issued “excess” rebase supply to the token’s treasury.
• The bug made the project’s on-chain governance feature unusable.
• A possible fix slipped through the cracks early Thursday morning. Yam Finance co-founder Brock Elmore voiced his regret in a tweet.

• In an ensuing blog post, YAM said they are drawing up plans to launch a new version of the yield farming protocol – presumably without the rebase bug in the codebase.
• The team will gauge community interest by setting up a funding goal; if reached the team will develop a migration contract porting the ecosystem onto a new protocol.
• A yield farming protocol, the project was supposed to use rebases to adjust supply in order for the token to maintain parity to the U.S. dollar.
• The project’s rapid surge in user numbers came from the fact it offered features DeFi yield farmers were hunting for, combined with an instantly recognizable symbol in the shape of the yam emoji.
• But its relative newness means the code had not yet been audited.
• In a post-mortem, the team said even though they thought they had enough votes to save the protocol the bug prevented the proposal from succeeding.

Read more: Deposits in ‘Monetary Experiment’ Meme Token YAM Break $460M

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DeFi meme coin ‘YAM’ has succumbed to a bug within its rebase function, meaning the coin has lost control of its on-chain governance feature.

• All of the roughly $750,000 Curve tokens stored in the project’s treasury are lost as well, according to a Medium blog from the team.
• Launched Tuesday, YAM had $585 million assets under lock as of 4:30 UTC. 
• YAM’s code contained a bug that issued “excess” rebase supply to the token’s treasury.
• The bug made the project’s on-chain governance feature unusable.
• A possible fix slipped through the cracks early Thursday morning. Yam Finance co-founder Brock Elmore voiced his regret in a tweet.

• A yield farming protocol, the project was supposed to use rebases to adjust supply in order for the token to maintain parity to the U.S. dollar.
• The project’s rapid surge in user numbers came from the fact it offered features DeFi yield farmers were hunting for, combined with an instantly recognizable symbol in the shape of the yam emoji.
• But its relative newness means the code had not yet been audited.

Read more: Deposits in ‘Monetary Experiment’ Meme Token YAM Break $460M

Related Stories

• YAM’s Market Cap Falls From $60M to Zero in 35 Minutes
• Decentralized Finance Frenzy Drives Ethereum Transaction Fees to All-Time Highs
• Market Wrap: Bitcoin Rebounds to $11.5K; Ethereum’s Gas Woes Worsen
• Token Sales Are Back in 2020

Financial experts at the New York Federal Reserve have taken a critical look the differences between a “common” distinction made between digital currency systems.

• In a Wednesday Fed blog post, economists Rod Garratt and Michael Lee, analyst Brendan Malone and research exec Antoine Martin outlined the characteristics of “account-based” and “token-based” digital currency systems.
• According to the post, an account-based system requires verification of the identity of a payer, while a token-based system needs to verify if the “object” (i.e., token) used to pay is valid or not.
• The trouble, they write, is that some cryptocurrencies possess characteristics of both.
• In fact, the classification method is “problematic,” as the systems are not mutually exclusive and can’t be broken down to provide “a taxonomic hierarchy of digital payment methods.”
• The authors cite bitcoin as a prime example of a payment method possessing characteristics of both systems.
• Due to the way cryptocurrencies like bitcoin are constructed, the account-based system for digital currencies can be applied because of the nature of private keys and the alphanumeric string of numbers and letters that make up a bitcoin address.
• That is, their identity is verified using the private key and address.
• Yet, when a person wants to spend their bitcoin, the protocol verifies the payment’s validity by tracking its transaction history, making the crypto a fit for the token-based method.
• The authors note the difference between bitcoin, dollar bills and gold coins is whether a recipient of a payment can ascertain the validity of the payment unit with “reasonably high confidence.”
• While dollar bills contain security features making them hard to counterfeit, a crypto user cannot “independently” ascertain if their tokens are valid, they write.
• It’s worth noting that blockchains like Bitcoin’s ensure the validity of transactions with multiple confirmations from miners using powerful computing hardware, removing the need for independent verification of each unit.
• In conclusion, the authors argue the distinctions between the two classifications have limited value.
• And while such classification systems can be a useful tool in organizing and communicating concepts, in this case they could impede understanding of the growing digital currency technology space.
• “Perhaps these terms should be retired to avoid further confusion,” they write.

See also: Federal Reserve Is Rushing to Get Its Instant Payments Offering Ready

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Chukwuemeka Ezike sends thousands of dollars worth of bitcoin a month in order to trade with Chinese exporting companies.

In return, he receives spare auto parts, construction equipment, and juices for a family business his father started more than 30 years ago. Ezike works full-time at Singapore-based crypto exchange Huobi as its community manager but helps with his family’s business on the side.

He says bitcoin is faster than exchanging currencies the old-fashioned way. And he can use it to leapfrog bank limits of $10,000 a day, which he often needs to do.

Related: Fed Reserve Analysts Say Common Digital Currency Distinction ‘Problematic’

Ezike doesn’t pay the manufacturer directly. Over WeChat, he works with a middleman named “Allen” who exchanges Ezike’s bitcoin for renminbi, China’s national currency, and then passes it on to the manufacturer. Ezike couldn’t divulge which companies he deals with, saying, “The Chinese are sensitive with the data that’s shared.” 

He’s one of several Nigerians using bitcoin for this purpose. Ezike even helps other Nigerian companies make similar cross-border transactions with bitcoin. 

Using bitcoin for global trade

In several ways, bitcoin makes sense for global trade. The currency jumps borders with ease, where other currencies encounter friction. If the counterparty is willing to receive bitcoin on the other end, it’s often faster and cheaper than legacy payments. But this can be a big “if,” since bitcoin is a newer way of transferring money and people aren’t exactly used to it quite yet. 

While bitcoin has these nimble properties, it hasn’t disrupted international trade and value transfer just yet, especially given the currency’s current limitations. If more people use bitcoin at once, the network becomes congested and payments slow down. 

Related: Coinbase to Offer Bitcoin-Backed Loans to US Customers

Behind the scenes, developers around the world are working on the Lightning Network to fix these problems, so that more people, maybe one day even millions, can all use bitcoin regularly without seeing a spike in fees and sluggish transactions. 

Read more: What Is Bitcoin’s Lightning Network?

All that said, some Nigerians are becoming reliant on using bitcoin as a way to trade internationally, and are finding bitcoin has significant benefits over legacy financial systems.

Foreign exchange woes

Nigerian bitcoin entrepreneur Chimezie Chuta has another theory for why some are using bitcoin for trade with China and beyond.

Like most other countries in an increasingly globalized world, Nigeria imports a significant percentage of the goods that it uses. As Chimezie Chuta put it: “Nigeria is a very import-heavy country. Food industry, drugs, you name it, construction equipment, cars.” Much of these goods are bought from Chinese manufacturers. “Nigeria’s economy is heavily import dependent and China is a major import partner to Nigeria,” Chuta adds.

Nigerians have to struggle with this process, though. “Access to [foreign exchange (FX)] for importation by Nigerian business owners is highly limited because the [Central Bank of Nigeria (CBN)] has limited liquidity to cater for everyone,” Chuta told CoinDesk.

Read more: Charlie Shrem TLDL: Ray Youssef and Crypto’s Role in Africa

If Nigerians want to reap the benefits of trade, they need to hunt down a way to exchange their naira (Nigeria’s national currency) for other currencies. In Nigeria, finding U.S. dollars or Chinese remnibi is not an easy task. “Importers typically rely on the black market for the additional FX needed and that comes at a very high price,” Chuta said. This phenomenon has been covered in Bloomberg, for instance.

This is one of the other reasons Ezike has turned to bitcoin as an alternative. “The hustle for [the] dollar and all that is quite a thing I love to avoid,” Ezike told CoinDesk. 

With bitcoin, he can “take out all international banking routing processes,” he said. 

Others are reaching the same conclusion.

“Chinese exporters have expressed willingness to accept bitcoin payments for their goods; hence, many business people in Nigeria find it more convenient to make such payments with bitcoin for obvious reasons,” Chuta said, adding that bitcoin is speedier, open and trustless.

More naira problems

Entrepreneur Monyei Chinazaekpele was able to buy clothes, COVID-19 masks and tests from House of Trippy in China, to resell to customers in Nigeria.

He decided to use bitcoin after experiencing mounting frustration with current banking limitations, especially their impact on global trade. “I was enlightened about the monetary policies on the ground. I was shocked to my nerve,” he told CoinDesk.

Chinazaekpele reiterated Chuta and Ezike’s point that foreign exchange is tough in Nigeria. “You can’t easily switch to other currencies,” he said, adding that he’s hopeful it’s just “a matter of time” before this situation improves.

“Basically, bitcoin is stress free to use and honestly, the naira is not a good store of value,” Chinazaekpele said, pointing to the naira’s 12% inflation rate, which means the value of the currency depreciates by that much value every year.

Bitcoin’s price fluctuates, and sometimes the price goes down. But Chinazaekpele argues that bitcoin generally doesn’t have this inflation problem, since over the long term the price has been going up. 

Chinazaekpele’s also looking to buy a cashew processor with bitcoin, but he’s still working out the details with the factory, which is also located in China.

Keeping it on the down-low

All this trade with bitcoin is happening behind the scenes. Businessmen and women on the ground aren’t exactly eager to publicize that they’re using bitcoin for international trade. For one, the legality of cryptocurrency is fuzzy in the region. 

The CBN has issued several warnings to banks. The latest in 2018 advised banks “not to use, hold or transact in any way with the technology.”

“In the bitcoin space we don’t know what reaction to expect, so we try to be a little bit discrete,” Ezike told CoinDesk. That’s why he doesn’t want to reveal the name of his father’s importing business. By only revealing his individual name, he’s less fearful that the Nigerian government will “attack” the business. 

Read more: Where FATF Crypto Compliance Gets Interesting: Africa

“We have had accounts frozen at some point due to bitcoin transactions,” Ezike said. “We had to appeal to re-open them.” 

He added that it’s the same situation in China, which is why the people he transacts with there “ensure they [keep] a low profile.” 

As for the relationship between the government in Nigeria and crypto, Ezike said that “they are really confused about what to do with it. But hopefully they will embrace it.”

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The native token of decentralized oracle network Chainlink (LINK) has just claimed a top-five spot in terms of market value.

• According to data provider Messari, LINK has overtaken bitcoin cash (BCH) to become the fifth-largest crypto asset by market capitalization in what is affectionately known in the community as a “flippening.”
• Market capitalization refers to the total number of coins or tokens in circulation multiplied by its spot price and is often used by the community to rank various assets.
• At press time LINK stands at $5.76 billion compared to BCH’s $5.30 billion in total market value with a 24-hour volume clocking in at $1.05 billion versus BCH’s $83.7 million.
• A flippening occurs when a top cryptocurrency project overtakes another to steal its spot in the upper ranks. This one was widely anticipated, as LINK is up 32% on a 24-hour basis.
• LINK has experienced an incredible rise year-to-date having climbed from $1.80 on Jan. 1 to $16.75 as of press time, according to Messari's data. The surge has been driven by the explosion in the popularity of decentralized finance (DeFi), in which Chainlink’s price feeds have become a major player.

See also: How DeFi Could Disrupt Traditional Finance, Feat. Sergey Nazarov

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The average fee per transaction on Ethereum reached $6.04 Wednesday night, according to Blockchair, the highest fees since 2015.

• Median transaction fees, which have stayed just below historic highs of $3.03, currently sit at $3.00.
• Fees hovered below $1 until mid July when transaction fees started to soar.
• Fee increases coincide with surging activity on popular decentralized financial protocols like Uniswap.
• At least three similar decentralized finance applications are included on a list of protocols with the highest levels of network utilization, curated by Etherscan.
• While Ethereum developers have toyed with numerous technical options to reduce fees by scaling the network’s transaction capacity, a possible fix remains months away.

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• Token Sales Are Back in 2020
• #SupplyGate and the Battle to Frame Crypto’s Next Bull Run
• Deposits in ‘Monetary Experiment’ Meme Token YAM Break $460M

Uniswap’s August trading volume beat July’s record high less than halfway into August, surpassing $1.76 billion, leaving more than two weeks to push further into record territory.

• Current monthly volume marks the fourth consecutive record high for the leading decentralized trading and automated market-making platform. 
• In the past 24 hours, Uniswap reported $213 million in volume, accounting for more than 60% of all decentralized exchange volume, according to Dune Analytics.
• The record-setting volume comes amid a continued speculative frenzy over new and experimental decentralized financial applications, causing volumes across all decentralized platforms to soar.
• The new high also comes less than three months after version 2.0 of the protocol launched with a plethora of new features.
• Notably, at the end of July, Coinbase-backed startup Dharma integrated Uniswap to its mobile trading app.
• As trading volume grows, Ethereum network fees are skyrocketing. Average transaction fees have spiked 600% to $5.27, according to Blockchair.
• Despite the fees, decentralized trading volume “doesn’t look like it will be slowing down anytime soon,” said Jack Purdy, decentralized finance analyst at Messari, provided the “money-making opportunities continue to outweigh the cost.”

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Coinbase will allow U.S. retail customers to borrow fiat loans against as much as 30% of their bitcoin holdings in the fall, the San Francisco-based exchange announced Wednesday. 

Coinbase is one of the largest and most regulated crypto exchanges to get into the lending business, and the exchange is setting conservative parameters on the product, capping credit lines at $20,000 per customer and offering an interest rate of 8% for bitcoin-backed loans with terms that are a year or less.

Customers will not need to fill out an application or go through a credit check, however, and borrowers will be able to receive their loans in two to three days. 

Related: Market Wrap: Bitcoin Rebounds to $11.5K; Ethereum’s Gas Woes Worsen

“Customers may use bitcoin-backed loans in different ways depending on their financial needs, including for large expenditures like home or car repairs, financing major occasions like a wedding, or helping to manage higher-interest personal loans or credit card debt,” Max Branzburg, head of product at Coinbase, said in an emailed statement. 

The product is available in only 17 states but Coinbase is pursuing licenses in other states and countries to be able to expand its lending service, he said. A waitlist opened Wednesday afternoon, including the tagline:

“Have you ever needed cash for something urgent, like a car or home repair? In the past, you might have sold Bitcoin to cover it and incurred a taxable gain or loss. Now you don’t have to.”

The exchange says it won’t reinvest the collateral elsewhere and will keep the bitcoin at the exchange, unlike some crypto lenders who rehypothecate collateral or invest deposits into perpetual swaps.

Related: Appeals Court Backs Coinbase in Bitcoin Gold Fork ‘Breach of Contract’ Lawsuit

Adding a lending product can be a way for exchanges to keep customer funds at the exchange instead of moving them elsewhere, said Joseph Kelly, CEO and co-founder of crypto lender Unchained Capital. Square’s bitcoin-friendly Cash App also announced this week that it is testing a lending product that will offer customers short term loans of between $2 and $20.

Coinbase’s low interest rate will also allow it to operate in many states that would otherwise require additional licensing to avoid usurious lending practices. 

“It’s a good bull-market product when customers have excess capital they’d like to do something with,” Kelly said. “We’ve almost never seen a monopoly lending market … I’d expect other exchanges to follow suit.”

The new Coinbase product is only available in the following states: Alaska, Arkansas, Connecticut, Florida, Georgia, Illinois, Massachusetts, New Hampshire, New Jersey, North Carolina, Oregon, Texas, Virginia, Nebraska, Utah, Wisconsin and Wyoming.

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The Stacks Foundation plans to soon begin awarding grants to Blockstack blockchain projects with its fresh reserve of 100 million Stacks tokens.

• Grants “will be awarded on a rolling basis,” to developers and researchers iterating on Stacks blockchain 2.0, according to a foundation spokesperson, who said more info on the program will be coming soon.
• Blockstack PBC committed to transferring its Stacks reserves, intellectual property and a low-interest $950,000 operational loan to the Stacks governance foundation, according to a Monday SEC filing.
• Such a massive value transfer – the 100 million tokens were worth over $26 million at press time – will have the secondary effect of decentralizing Blockstack’s network.
• Relinquishing control of 100 million STX could help Blockstack’s argument that Stacks is not a security and possibly lead to an eventual token listing on U.S. exchanges, according to Decrypt.
• Even so, Blockstack treats its Stacks token as a security by taking steps like filing updates with the SEC.

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Bitcoin is making up for lost gains after hitting a one-week low. Over on Ethereum, the fee situation continues to be problematic for traders.

• Bitcoin (BTC) trading around $11,595 as of 20:00 UTC (4 p.m. ET). Gaining 2.1% over the previous 24 hours.
• Bitcoin’s 24-hour range: $11,119-$11,624
• BTC above the 10-day and slightly above the 50-day moving averages, a sideways yet turning bullish signal for market technicians.

Bitcoin rebounded Wednesday, making gains from a 24-hour low of $11,119 on spot exchanges like Coinbase, a price point not seen since Aug. 5. 

Constantin Kogan, partner at crypto fund-of-funds BitBull Capital, sees a sideways market where the price of bitcoin could go either way. 

Related: Coinbase to Offer Bitcoin-Backed Loans to US Customers

“If sellers take control of the market, it is likely that BTC will be seen at $11,390 per coin. However, there is a chance the market will overcome resistance at $12,000 and retest the annual high at $12,300,” Kogan told CoinDesk. 

Read More: Asset Manager NYDIG Raises $5M for Third Bitcoin Fund in 2020

Where the market goes next may very well hinge on the largest players. Institutional interest has a huge role in the crypto market for 2020, added Kogan. “Bitcoin is in many ways repeating the movement noted in the fourth quarter of 2016, on the eve of the 2017 crypto boom,” he said. “But this time institutions also play an important role in the market.” 

One promising statistic: Bitcoin spot volumes are much higher this month than last month so far, with July Coinbase volumes averaging $100 million and August at $198 million so far per day, according to data aggregator Skew. 

Related: Token Sales Are Back in 2020

Increased volume in August has clearly led to a jump in volatility, added Rupert Douglas, head of institutional sales for crypto brokerage Koine. Traders like to take advantage and profit from higher volumes. “There’s a lot more upside to this market, but there will be sharp pullbacks along the way,” Douglas told CoinDesk. 

Read More: Some Traders Now Taking Bets Ether Will Break $1K by December

Ethereum’s gas pain

Ether (ETH), the second-largest cryptocurrency by market capitalization, was up Wednesday trading around $388 and climbing 2.7% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Read More: How Much Ether Is Out There? Developers Create Scripts for Self-Verification

The average fee on the Ethereum network required to conduct transactions, including in decentralized finance, or DeFi, applications, is as high as it has ever been. It is currently at 0.009255 ETH, which is over $3.60. In Ethereum’s five-year existence as a platform, fees are now literally off the charts, according to data aggregator Blockchair. 

These fees, also known as gas, are causing pain for traders. This is particularly true for market makers that have seen the price of gas double in just the past week and cannot predict just how much higher it might go in the near term due to the explosion of interest in DeFi overall. 

“It’s jamming up a lot of decentralized exchanges,” said Peter Chan, lead trader for crypto trading firm OneBit Quant. “We and a few other market makers have been forced to stop quoting since gas cost is so high.”

Other markets

Digital assets on the CoinDesk 20 are mixed Wednesday. Notable winners as of 20:00 UTC (4:00 p.m. ET): 

• chainlink (LINK) + 18.9%
• dogecoin (DOGE) + 4.4%
• tezos (XTZ) + 4.1%

Read More: How a DeFi Trader Made an 89% Profit in Minutes Slinging Stablecoins

Notable losers as of 20:00 UTC (4:00 p.m. ET):

• cardano (ADA) – 3.2%
• bitcoin sv (BSV) – 2.4%
• xrp (XRP) – 2.1%

Read More: Court Backs Coinbase in Bitcoin Gold Fork ‘Breach of Contract’ Lawsuit

Equities:

• Asia’s Nikkei 225 closed in the green 0.41% as industrial manufacturer Ebara’s 11.4% gain helped boost the index.
• Europe’s FTSE 100 ended the day up 2% on optimism the Bank of England might step up quantitative easing due to poor economic data.
• The United States’ S&P 500 gained 1.6% as tech stocks rallied, including Microsoft and Apple both gaining more than 3%.

Read More: Grayscale Tells SEC Its Bitcoin Trust Rose $1.6B Over Six Months

Commodities:

• Oil is up 2.2%. Price per barrel of West Texas Intermediate crude: $42.56
• Gold is flat, in the green 0.01% and at $1,911 as of press time.

Read More: Ex-NYSE Broker Accused of Running $33M Crypto Scam Pleads Not Guilty

Treasurys:

• U.S. Treasury bonds all climbed Wednesday. Yields, which move in the opposite direction as price, were up most on the two-year, in the green 5%.

Read More: Unpacking the Avit, Avanti Bank’s New Digital Asset

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As the price of bitcoin rises, token sales have become trendy once more.

“Ava, Dot,” tweeted ZenGo wallet CEO Ouriel Ohayon, “2017 is back. For better or worse.”

Ava Labs, the startup founded by Cornell professor Emin Gün Sirer, raised roughly $42 million in a public token sale for its Avalanche blockchain in late July.

Related: Market Wrap: Bitcoin Rebounds to $11.5K; Ethereum’s Gas Woes Worsen

Polkadot, the project spearheaded by Ethereum co-founder Gavin Wood, raised another $43 million in a private sale days later.

And in the weeks since, the momentum has only seemed to grow, as congestion on Ethereum has mounted.

By Tuesday, Aug. 11, the token sale for another base-layer competitor, NEAR, overwhelmed its host platform, CoinList, forcing a delay till Wednesday.

“We have seen an unprecedented amount of traffic hit CoinList servers, resulting in a site-wide outage,” according to a CoinList email obtained by CoinDesk. “We apologize for the inconvenience. The NEAR token sale has been postponed 24 hours from its original start time.”

Related: #SupplyGate and the Battle to Frame Crypto’s Next Bull Run

Wednesday’s attempt also caused multiple “errors.” 

Yet, the NEAR sale – which wrapped Wednesday afternoon after $30 million was committed from 1,500 participants – still highlights the general pattern for token sales in 2020. First, the company raises venture capital and conducts a private sale, then the token-funded startup sells to the public through a platform that manages know-your-customer information and compliance. 

Before the swamped CoinList offering, the NEAR protocol launched in April following a $21.6 million private token sale led by venture capital firm Andreessen Horowitz (a16z). This week’s sale was just one of many trendy-yet-compliant token sales the CoinList platform has conducted in 2020, after cLabs raised $10 million in 12 hours back in May.

“The numbers here are remarkable and are a testament to both the product and the community that the NEAR project has created,” CoinList president Andy Bromberg told CoinDesk in an email.

Read more: NEAR Protocol Launches Following $21M Token Sale Led by Andreessen Horowitz

By July 2020, token projects were once again raising money across the board. Generally speaking, contemporary token startups like Ava Labs, and even competing Layer 1 projects like Chia, aim to conquer Ethereum’s market share by scaling faster and with a more decentralized network. One of the primary ways they seek to outperform the second-most-popular blockchain network is by encouraging more users to run independent nodes.   

For comparison, only a small fraction of the roughly 6,000 ethereum nodes (removing the syncing nodes that are actually Ethereum Classic) are run on the user’s own hardware. According to a node operator from the German Ethereum startup Bitfly, roughly 68% of Ethereum nodes run on either Amazon Web Services or Google Cloud. 

This focus on nodes represents an area where Ava Labs’ Sirer intends to outperform Ethereum. Although the Avalanche mainnet isn’t scheduled to launch until later this year, Sirer said so far “thousands” of users around the world are already running Ava Labs testnet nodes.

“These are all organic, actual users … [like] students that have heard about this revolutionary protocol,” Sirer said. “We’re running five nodes ourselves.”

Similarly, Chia is working to build a community and currently appears to have more than 433 active nodes, down from a peak of roughly 1,430 earlier this year. Out of the above-mentioned startups, so far, Chia is the only example that isn’t running a token sale in 2020.

Token Boom, Part Deux

Unlike 2017, today the norm is for token sales to be conducted through an exchange, whether it’s CoinList, Gate.io or Binance. 

Not every token sale raises as much as Polkadot or Ava Labs, which attracted fanfare thanks, in part, to their celebrity founders. Smaller sales also abound despite, or perhaps due to, the COVID-19 economic crisis.

Read more: Polkadot Raises $43M in 72-Hour Private Sale: Source

Along those lines, the Binance Labs-backed project Sandbox is running a token sale in August with the aim of raising $3 million. Several other crypto exchanges, including Gate.io, are also following in Binance’s footsteps to launch their own Initial Exchange Offering (IEO) platforms for new token sales. According to a Gate.io press statement, these sales raised more than $46 million so far in 2020. 

As for Ava Labs, Sirer said there will be more sales to come, including a new token “targeting people that own Ethereum,” called Athereum. 

“We spoon Ethereum as it exists,” Sirer said, describing how his startup will make an Ethereum-compatible bridge to encourage ETH holders to switch blockchains. 

In a tale as old as pre-mines, startups still aim to become proverbial “Ethereum killers.” 

With regards to the aspirational business model, Ethereum co-founder Joe Lubin provided an example with ConsenSys that many upcoming founders want to emulate. 

ConsenSys started as a hybrid incubator. Then, after building up the Ethereum community, ConsenSys split into a dual infrastructure provider and separate investment arm. It owns a significant stake across every sector of the Ethereum ecosystem – something Sirer may someday achieve with Avalanche, fueled by avax tokens, through Ava Labs. 

“It’s a mothership that will do a bunch of spinouts,” Sirer said. “We expect to spin [projects] out to become independent efforts and have independent income models associated with them.”

New approach

Unlike the original ETH sale in 2015, and the 2017 copycats that followed, many token founders now prefer ongoing sales with controlled distribution – both for regulatory reasons and to inspire a sense of exclusivity. 

Such was the case with Ava Labs, which raised venture capital (before multiple sales) from investors like Andreessen Horowitz (a16z), Initialized Capital, Polychain Capital, Balaji Srinivasan and Naval Ravikant. Token sales now happen in waves, just like a Series B. 

Read more: Base Layer Wars Heat Up With Another $12M Committed to AVA Labs’ Avalanche Blockchain

Looking toward the second half of the year, Sirer said he plans to support efforts to make non-fungible tokens (NFTs) for the Ava community as well. Polyient Games CEO Brad Robertson, head of a gaming startup that plans to use Ava Labs’ technology, said his team chose Avalanche over Ethereum because the former can handle more volume. The Ethereum network was infamously crippled by collectibles trading with NFTs in 2017. 

Capacity hasn’t improved entirely since then. In fact, the congestion is so high these days that it’s not uncommon to pay dozens of dollars worth of crypto in transaction fees. 

“We explored all of the networks on the market and feel Avalanche is best positioned to solve the scaling and transaction finality issues that have caused significant challenges to the whole DeFi ecosystem – especially with NFTs,” Robertson said. 

Sirer said his startup will allow people to “issue new digital assets,” including but not limited to NFTs, and use avax tokens to “participate in the new services we’re offering.” 

This is the common strategy among 2020 token projects, including most of the above-mentioned newcomers. In short, startups such as Ava Labs and cLabs (the team building the Celo network) are betting other people will build the products or services to make their blockchain platforms useful. They’re selling picks, shovels and dynamite during an emerging gold rush.  

Read more: Libra Minus Facebook: Why Celo Is 2020’s Buzzy Token Project

This strategy is reminiscent of ConsenSys’ earlier token-issuance services and platforms, which dwindled when the company pivoted to infrastructure plays and equity investments. 

“There are tons of different use cases for Ethereum and we support nearly all of them,” said Infura’s Michael Godsey, the ConsenSys manager spearheading infrastructure services.

Yet, the fact that there are already blockchain-agnostic services doesn’t dampen the allure of building the next ConsenSys. It looks like many entrepreneurs are hoping to mimic the wealth creation, or redistribution, witnessed during the token boom in 2017.

Related Stories

• Some Traders Now Taking Bets Ether Will Break $1K by December
• How Much Ether Is Out There? Ethereum Developers Create New Scripts for Self-Verification

Wealthsimple, a Canadian investing app courting the country’s day-trading millennials, is checking off regulatory boxes ahead of its cryptocurrency trading debut. 

• The Toronto-based firm’s “Wealthsimple Crypto” bitcoin and ether service is the newest member of the CSA Regulatory Sandbox. It secured approval and two years of filing exemptions from provincial regulator the Ontario Securities Commission (OSC) on Aug. 7.
• “For the first time, Canadians will be able to use a crypto platform that’s carefully overseen by regulators,” Wealthsimple General Counsel Blair Wiley told CoinDesk, saying this oversight and transparency will provide investor protections.
• Those protections are only made possible by certain caveats, pledges and partnerships – all illustrated in the OSC’s Aug. 7 decision.
• For example, Wealthsimple, a Canadian peer of U.S.-based Robinhood, will restrict crypto deposits (no outside crypto comes in) and withdrawals (no inside crypto flows out) much like its southern counterpart.
• Keeping clients’ crypto in a “‘closed loop’ system” will tamp down on fraud, money laundering and faulty wallet transfers, even if it does introduce credit risk, Wealthsimple told OSC.
• Wealthsimple is farming out custodial duties to U.S.-based Gemini Trust, whose $200 million crypto asset insurance policy and U.S. licensures “benefit” the firm more than Canadian custodians could, Wealthsimple said.
• Wealthsimple Crypto is still in the pre-beta phase. 

Related Stories

• Tor Network Compromised by Single Hacker Stealing Users’ Bitcoin: Report
• Sirin Labs Founder Sued Over Unpaid $20M Factory Bill for Finney Blockchain Phone
• Ex-NYSE Broker Accused of Running $33M Crypto Scam Pleads Not Guilty
• Grayscale Tells SEC Its Bitcoin Trust Rose $1.6B Over Six Months

A single malicious entity controls nearly a quarter of all nodes used on the anonymous internet provider Tor Network and is using its position to steal bitcoin and other cryptocurrencies.

• A cybersecurity analyst, using the pseudonym “nusenu,” said in a report this week a hacker now controls approximately 23% of the Tor Network’s exit relay capacity.
• The Tor Network provides anonymous internet access with voluntarily run relays that route traffic in order to obfuscate users’ traceable and identifiable IP addresses.
• The exit relay is the final stage that connects users to their requested websites.
• Per the report, the hacker is using her/his position as a major exit relay host to stage sophisticated person-in-the-middle attacks, stripping websites of encryption and giving her/him full unrestricted access to traffic passing through her/his servers.
• The malicious agent primarily focused on bitcoin mixer services, replacing wallet addresses so the mixer returns “clean” funds to the hacker rather than the original user.
• A lack of enforcement on the Tor Network means the hacker has more than doubled her/his share of exit relays from under 10% last December, nusenu said.
• It’s unclear how much cryptocurrency has been stolen and whether the malicious agent is engaged in other attacks.
• At least one bitcoin mixer service has added an additional security layer preventing hackers from removing their website’s encryption.
• The identity of the hacker remains a mystery and it isn’t clear if there’s any added motivation is for the attack besides stealing cryptocurrencies.

See also: Binance Labs Leads $1M Seed Round in Crypto Tor Alternative HOPR

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• Wealthsimple, Robinhood of the North, Jumps Into Canada’s Crypto Sandbox
• Sirin Labs Founder Sued Over Unpaid $20M Factory Bill for Finney Blockchain Phone
• Ex-NYSE Broker Accused of Running $33M Crypto Scam Pleads Not Guilty
• Grayscale Tells SEC Its Bitcoin Trust Rose $1.6B Over Six Months

Caitlin Long has a new take on money. Russia wants to de-anonymize crypto. And Coinbase wins in court. Here’s the story.

‘Cash equivalent’
CoinDesk’s Nathan DiCamillo breaks down how Avanti Financial intends to issue its programmable cash equivalent called Avit. This blockchain-based “commercial bank money” can be exchanged for dollars but is not pegged to it like a stablecoin. It’s also not a security token, or a digital representation of an investment that’s expected to generate returns. Issued on Blockstream’s Liquid, Avanti CEO Caitlin Long said it will likely be treated as a “cash-equivalent” by accountants and as cash by the Internal Revenue Service. 

Open-source
The Linux Foundation Public Health Initiative (LFPHI), launched in July, will promote the use of open-source tech by public health authorities, during COVID-19 and post-pandemic crises. Tencent, Cisco and IBM are among the core members. The initiative is backing two pandemic-related apps – “COVID Shield” and “COVID Green” – that will bolster cross-jurisdictional coordination and privacy. General Manager Dan Kohn said, “It is totally possible to create an app that’s horrible for privacy that is open source, but what open source does is it stops you from just claiming that it respects privacy, because any expert could check on that.”

Related: First Mover: How a DeFi Trader Made an 89% Profit in Minutes Slinging Stablecoins

Precedent-setting
A California appeals court has ruled in favor of U.S. cryptocurrency exchange Coinbase over its decision not to support the Bitcoin Gold hard fork in 2017. Plaintiff Darrell Archer, who held 350 BTC on the exchange at the time, filed suit in 2018 alleging Coinbase had violated its contract agreement and effectively stole from clients by not supporting the fork. The court found there was no contractual agreement to support forks from third parties. Prominent industry lawyer Drew Hinkes tweeted the decision could set a precedent. 

Another vehicle
New York Digital Investments Group (NYDIG) raised nearly $5 million for another bitcoin investment vehicle, in what could become its third securities listing this year. The asset manager raised $190 million for the NYDIG Institutional Bitcoin Fund LP in July and $140 million for a Bitcoin Yield Enhancement Fund the month before. It’s first, the Bitcoin Fund, launched in July 2019 with six investors who invested a total of $1.45 million at the time.

Crypto monitoring
The Russian agency charged with collecting data to counter financial crimes may build its own software to track cryptocurrency transactions and link them to users. The agency is seeking to reduce anonymity in crypto transfers through an artificial intelligence-based system for blockchain analysis, according to a letter from Rosfinmonitoring to Russia’s Minister of Digital Development and Communications, cited by RBK. The project could cost more than $10 million to develop. A prototype for the project, dubbed “Transparent Blockchain,” has already been developed by the Lebedev Physical Institute based on the Bitcoin blockchain.

Top shelf

• VPN usage surges as Belarus remains offline, following a contentious election
• The dollar value of Grayscale’s flagship Bitcoin Trust (GBTC) increased 90% to $3.5 billion in the first two quarters
• Inflation fears might be overblown, according to The Block’s Frank Chaparro
• Personal tokens are booming on Uniswap
• Bitcoiners launched a cryptocurrency relief fund for Beirut

Market intel

One DeFi trader nearly doubled his assets in a few minutes by slinging stablecoins. “In digital-asset markets, stablecoins like tether and USDC are supposed to represent $1 of value. But their prices often fluctuate on the pubescent trading platforms of decentralized finance,” CoinDesk’s First Mover team writes. In one Aug. 10 transaction on the Ethereum blockchain, a trader appears to have used a series of transactions in tether and USDC on the decentralized cryptocurrency exchanges Uniswap, Curve and dYdX to net a tidy $40,000 profit off a $45,000 initial investment.

Op-ed

Related: Blockchain Bites: MicroStrategy’s $250M Bitcoin Bet, India Booms, Banks Open to Custody

Jill Carlson, co-founder of the Open Money Initiative, teases out the similarities between the latest Robinhood Rally and the last bitcoin bull market in her latest CoinDesk column. “Crypto markets in 2016 and 2017 have in many ways foreshadowed the stock market of today. There is inspiration there, but there are also lessons,” she writes. Perhaps the biggest of all: “Markets come and go, and when the bull turns to bear some – but not all – users will go with it.”

Tech pod

CoinDesk’s Will Foxley investigates ether’s supply after a debate between Ethereum and Bitcoin advocates sprung up last week. To cut the debate short: The total supply of ether is 111,562,994 as of publishing time, according to Messari. But the larger issue is the difficulty in verifying this. Ethereum full nodes are labor intensive and third-party scripts often miss important details.

Podcast corner

Former hedge fund manager Hugh Hendry joins the latest episode of The Breakdown to discuss why the Federal Reserve should be less conservative, the decade-long equities bull market and why Joe Rogan should chair the Fed. 

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• First Mover: After Falling 65% This Year in Bitcoin Terms, Do ‘Stablecoins’ Need a Rebranding?
• Blockchain Bites: Inside Cosmos, Bitcoin at $200B, DeFi Surges

Moshe Hogeg, the chief executive of the blockchain smartphone startup Sirin Labs, was sued by Hong Kong-based mobile phone manufacturer Foxconn International Holding (FIH) for unpaid bills used to manufacture the Finney blockchain phones, according to Israel-based technology news site CTech.

• FIH is asking for more than 20 million shekels ($5.9 million) in compensation from Hogeg and his associates Tzvika Landau and Guy Elhanini, after saying it received only one payment in November 2018.
• Sirin Labs co-CEO Landau told CTech the suit was a stunt to create “media pressure.”
• Hogeg’s Sirin Labs raised $157 million in an initial coin offering (ICO) in early 2018 to build an Android smartphone with special cryptocurrency features including an app store for distributed apps (dapps).
• Sales of this blockchain smartphone, however, were disappointing after a number of competing blockchain- and crypto- focused phones hit the market. As a result, Sirin Labs laid off 15 of its 60 employees in 2019.
• Hogeg, a well-known – and controversial – international crypto mogul, has been sued multiple times both in Israel and abroad. As reported by CoinDesk, he and his other blockchain firm, Stox, were reportedly being sued for allegedly misappropriating some of the crypto millions invested in the firm.

UPDATE (Aug. 12, 2020, 21:00 UTC): Moshe Hogeg is being used for 20 million shekels, not $20 million. The headline and article have been updated.

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• Wealthsimple, Robinhood of the North, Jumps Into Canada’s Crypto Sandbox
• Tor Network Compromised by Single Hacker Stealing Users’ Bitcoin: Report
• Ex-NYSE Broker Accused of Running $33M Crypto Scam Pleads Not Guilty

Moshe Hogeg, the chief executive of the blockchain smartphone startup Sirin Labs, was sued by Hong Kong-based mobile phone manufacturer Foxconn International Holding (FIH) for unpaid bills used to manufacture the Finney blockchain phones, according to Israel-based technology news site CTech.

• FIH is asking for more than $20 million in compensation from Hogeg and his associates Tzvika Landau and Guy Elhanini, after saying it received only one payment in November 2018.
• Sirin Labs co-CEO Landau told CTech the suit was a stunt to create “media pressure.”
• Hogeg’s Sirin Labs raised $157 million in an initial coin offering (ICO) in early 2018 to build an Android smartphone with special cryptocurrency features including an app store for distributed apps (dapps).
• Sales of this blockchain smartphone, however, were disappointing after a number of competing blockchain- and crypto- focused phones hit the market. As a result, Sirin Labs laid off 15 of its 60 employees in 2019.
• Hogeg, a well-known – and controversial – international crypto mogul, has been sued multiple times both in Israel and abroad. As reported by CoinDesk, he and his other blockchain firm, Stox, were reportedly being sued for allegedly misappropriating some of the crypto millions invested in the firm.

Related Stories

• Tor Network Compromised by Single Hacker Stealing Users’ Bitcoin: Report
• Ex-NYSE Broker Accused of Running $33M Crypto Scam Pleads Not Guilty
• Grayscale Tells SEC Its Bitcoin Trust Rose $1.6B Over Six Months
• Asset Manager NYDIG Raises $5M for Third Bitcoin Fund in 2020

YAM, decentralized finance’s (DeFi) latest farm-fresh product, has never had a code audit. Yet, that’s not holding back traders from pumping the token’s price from zero to $138 in the 20 or so hours since it launched. The token now is trading hands at $126, according to YAMalytics.

YAM by Yam Finance is a mishmash of DeFi products packaged in one humble tuber, generally meant to track the U.S. dollar. Or, as the founding team put it, YAM is a “minimally viable monetary experiment.” 

Which can be translated to say the project has no real purpose – it’s just for fun.

Related: Alchemy Goes Public With Developer Platform in Bid to Grow DeFi Ecosystem

That hasn’t stopped DeFi traders from piling in. YAM’s market capitalization sits at $13.5 million with some $29,361,386 in 24-hour trade volume, according to CoinGecko. 

DeFi summer

The experiment joins a cornucopia of other DeFi summer “meme” coins such as Tendies and YFI.

Read more: Troll Token? Why DeFi Yield Farmers Are Now All About YFI

Its codebase pulls from multiple other DeFi projects including Compound’s on-chain governance, Curv’s governed treasury and Uniswap’s pools for token distribution (not to mention a few others). 

Related: DEX Aggregator 1inch Raises $2.8M From Binance Labs, Galaxy Digital and More

Uniswap is where the magic is happening right now. Called yield farming, Uniswap gives token market liquidity providers a proportional amount of the platform’s native token, YAM, back for their trouble. Place a token pair like ETH/COMP in a pool and get YAMs in return, the logic runs.

Read more: What Is Yield Farming? The Rocket Fuel of DeFi, Explained

Farming has dragged these other tokens up alongside YAM. Six of the eight coins available for yield farming posted positive gains in 24 hours, with Compound’s COMP token up 49%, according to Messari (over a $300 million increase in market capitalization).

Harvesting YAMs

YAM most notably borrows from Ampleforth’s elastic supply schedule. Called a “rebase,” the project’s code will sprout new tokens at set intervals to push or pull YAM’s price back towards one dollar. Trader’s are rushing in to scoop up price gains before the rebase occurs.

Read more: First Mover: This DeFi-Ready Token Is Teaching Crypto Traders to Cherish Inflation

According to the blog, founders Brock Elmore, Trent Elmore, Clinton Bembry, Dan Elitzer and Will Price conducted no pre-mine, garnered no VC interest and took no founders’ share. The team could not be reached by press time.

The reckless speed at which the project has grown is not lost on the team – particularly because YAM has never passed a food inspection, so to speak.

The code base has never been audited, a fact the founders are quite upfront about.

“Nothing approaching the rigor of a formal audit has been conducted at this time,” the Medium article reads. “This was a 10-day project from start to launch.”

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A former New York Stock Exchange broker has pleaded not guilty to charges alleging involvement in a crypto trading scheme that defrauded over a hundred investors.

• Michael Ackerman was the chief trading officer at Q3 – an investment club that told investors it used a proprietary algorithm that guaranteed returns trading cryptocurrencies.
• Along with two other founders, Ackerman is accused of inducing around 150 investors, many of them physicians, to transfer a total of $33 million supposedly for trading crypto and making returns of up to 20% a month.
• Evidence from the Securities and Exchange Commission (SEC) shows Ackerman extracted a total of $7.5 million from Q3 between 2018 and 2019 – most of which was spent jewellery, cars, personal security, and an extensive house renovation.
• Per evidence submitted by the Department of Homeland Security, Ackerman assured investors Q3 had more than $315 million in assets when in reality it had just half a million left.
• The SEC, Commodity and Futures Trading Commission (CFTC), and the attorney for the Southern District of New York filed charges against Ackerman in February.
• He stands accused of one count of wire fraud and if found guilty he could be fined up to $250,000 and face up to 20 years in prison.
• Ackerman reportedly spent 16 years as an institutional broker at the New York Stock Exchange.
• He entered his not guilty plea at the U.S. Southern District Court of New York on August 4.

See also: ‘Crypto Instagram’ Is Becoming a Thing, Scams and All

Read the not guilty plea in full below:

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In digital-asset markets, stablecoins like tether and USDC are supposed to represent $1 of value. But their prices often fluctuate on the pubescent trading platforms of decentralized finance, or DeFi. 

So cryptocurrency traders are now apparently devising strategies to profit from slinging stablecoins in these fast-growing but often janky and thinly traded markets.

You’re reading First Mover, CoinDesk’s daily markets newsletter. Assembled by the CoinDesk Markets Team, First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more. We follow the money so you don’t have to. You can subscribe here. 

Related: Unpacking the Avit, Avanti Bank’s New Digital Asset Being Built With Blockstream

In one Aug. 10 transaction on the Ethereum blockchain, a trader appears to have used a series of transactions in tether and USDC on the decentralized cryptocurrency exchanges Uniswap, Curve and dYdX to net a tidy $40,000 profit off a $45,000 initial investment. That works out to an 89% gain in what was likely a matter of minutes. 

The whole transaction can be seen on the website Etherscan, used to access data recorded on the Ethereum blockchain. Here’s that looks like:

What happened was this:

1) Trader started with roughly $45,000 in USDC tokens and borrowed another $405,000 on dYdX, for a total of $450,000 in USDC. 
2) Exploiting temporary differences between the stablecoins’ face value of $1 and quoted prices, the trader was able to use Uniswap to exchange the $450,000 of USDC for $492,000 of USDT. 
3) Trader swapped $492,000 of USDT for $492,000 of USDC on Curve. 
4) Trader paid off the $405,000 loan from dYdX and had $87,000 USDC remaining. 
5) The transactions cost about $2,000 in fees. 
6) Trader netted $40,000 profit on $45,000 of initial capital.

Related: Bitcoin Rally Stalls as Increasingly Correlated Gold Drops Below $2K

The transaction drew eyeballs on Tuesday from flabbergasted (and perhaps admiring) Twitter users.

At first glance, the strategy appears similar to prior exploits of these largely untested DeFi systems, such as in June when a hacker drained $500,000 from the liquidity provider Balancer. 

But this week’s operation appears legal, merely a 2020 version of a classic arbitrage strategy used across Wall Street and cryptocurrency markets every day.

Not bad for a few minutes of work. But just imagine how long it took for someone to figure this out. 

Tweet of the day Bitcoin watch

BTC: Price: $11,462 (BPI) | 24-Hr High: $11,771 | 24-Hr Low: $11,138

Trend: Bitcoin’s bullish long-term trend looks to be on a summer holiday this week, with prices generally languishing well beneath the psychological price level of $12,000.

Tuesday’s 7.3% rejection from around $12,000 to a low of $11,137 hints at further downside risk on larger time frames backed by decreasing levels of weekly trade volume.

Bitcoin’s weekly chart reveals the possibility of a sell-off for September – historically a bearish month for the world’s largest cryptocurrency by market cap.

For example, based on data from the last three years, bitcoin has experienced losses between 20% and 36% in September after a peak in August. 

The recent rejection at overbought levels near 70.00 on the relative strength index (RSI), a tool used by traders to judge market exuberance, could lead to a deeper pullback.

Immediate support stands at the former resistance level near $10,500 with long-term support hanging at $8,650 along the 50-period moving average on the weekly chart.

A short-term push by opportunistic buyers could drive prices to retest $12,000 once more. However, failing to cement a new yearly high could result in a longer-term pullback as bitcoin heads into its historically poor month.

Related Stories

• First Mover: After Falling 65% This Year in Bitcoin Terms, Do ‘Stablecoins’ Need a Rebranding?
• First Mover: Bitcoin Hits $12K as Trump Orders Checks for Unemployed (Voters)

The Russian agency charged with collecting data to counter financial crimes has proposed building its own software to track cryptocurrency transactions and link them to users.

• Rosfinmonitoring, which has the power to block bank accounts within the nation, is seeking to effectively remove some of the anonymity from those making crypto transfers, the RBK news agency reported Tuesday.
• Its goal is to create an artificial intelligence-based system for blockchain analysis, according to a letter from Rosfinmonitoring to Maxim Parshin, Russia’s Minister of Digital Development and Communications, cited by RBK.
• Under the proposal, the tool would track transactions and identify cryptocurrency services providers and “partially” remove anonymity from people sending bitcoin, ether, dash, omni and monero.
• It would be used to investigate “illegal” deals with digital assets and find crypto fundraising campaigns related to money laundering and terrorism financing, the report says.
• A prototype for the project, dubbed “Transparent Blockchain,” has already been developed by the Lebedev Physical Institute based on the bitcoin blockchain.
• That has already piloted for drug trafficking investigations, says RBK, adding that Russian police have expressed interested in using the tool.
• Full development of the software would require $10.4 million of government funding, $6 million of which would be needed in 2021, according to the report.
• Rosfinmonitoring was created by President Vladimir Putin in 2001 to help prevent money laundering and terrorism financing.

Also read: Putin Signs Russian Crypto Bill Into Law

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• Russia’s Sberbank Launches Blockchain on Hyperledger, Mulls Stablecoin in 2021
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• Dark-Web Vendor and Pharmacist Charged With Trafficking Drugs Worth $270M in Bitcoin