CoinDesk Crypto

A slew of investors is backing bitcoin brokerage River Financial to the tune of $5.7 million.

Announced Wednesday, the San Francisco-based startup has closed a seed round joined by Polychain Capital, Slow Ventures, Castle Island Ventures, DG Lab Fund, Cygni, Pfeffer Capital and IDEO CoLab Ventures, according to a release from the firm. Several individual investors participated as well, said a River spokesman, including Steve Lee of Square Crypto.

Launched in 2019, River’s first funding round adds its name to a growing body of cryptocurrency asset managers, differentiated by focusing exclusively on the first and largest cryptocurrency by market capitalization.

Related: Crypto Long & Short: Innovation Cycles, Crypto Venture Funds and Institutional Investors

Bitcoin is the heart and soul of the operation, said River co-founder and CEO Alex Leishman in a phone interview with CoinDesk. Leishman, who left Polychain to start the venture, said his fund wants to go in a “different direction” than Coinbase or other exchanges, hinting at criticisms leveled at retail exchanges for propping up little-known alternative cryptocurrencies.

“We do bitcoin better than any other financial institution,” Leishman said.

The fresh capital will be used for scaling River, particularly as it seeks licensing across the United States. The firm currently offers a spot market, cold-storage solution and private client product intended for family offices or high-net-worth individuals in 15 states with 25 more planned for this summer, Leishman said.

“We see River Financial as bridging the gap between traditional finance and Bitcoin,” Polychain Capital founder Olaf Carlson-Wee said in a statement. “The evolution of finance is only happening faster in the wake of the current global economic crisis, which has illuminated holes within traditional financial systems that can potentially be filled by Bitcoin.”

Related: Pantera Capital Crypto Hedge Funds Are Losing Double Digits, but Bitcoin Fund Is Up 10,000% to Date

Given macroeconomic uncertainties, River – like many other bitcoin firms – entered into 2020 strongly. The firm’s volume has increased 80% month over month since January and its client count has doubled over the same time period, Leishman said. The startup is eyeing profitability by year’s end, he added. 

Read more: The ‘Great Lockdown’ Is Boosting Demand for Bitcoin Custody Solutions

Notably, River’s consumer composition consists of a demographic most would likely not suspect: baby boomers. That generation makes up 77% of the firm’s market to date, Leishman said. Investors over 55 years of age are looking for a hedge against inflation given erratic U.S. Federal Reserve monetary policy in response to the COVID-19 pandemic.

Just like boomers getting into the bitcoin game late, River’s entrance into the bitcoin asset-manager space has led to underrated pay-offs, too. 

Lightning Labs co-founder and CEO Elizabeth Stark – an adviser to the firm – told CoinDesk that River has embraced novel bitcoin tech that has helped the firm scale more quickly. 

Stark pointed to River’s integration with the Lightning Network as an example and said Leishman remains “at the forefront of bitcoin technology.” River also retains Blockstream co-founder Jonathan Wilkins as chief security officer (CSO), a January hire.

Read more: Blockstream Co-Founder Joins Bitcoin-Only Startup River Financial

“There’s still a lot of Bitcoin legacy tech [in the market]. River is Bitcoin future tech,” Stark said.

Stark said first movers in the cryptocurrency market such as exchanges have often failed to implement scaling techniques, such as segregated witness (SegWit) or batching. These technical upgrades keep the network healthy, but also aid in the average user’s purchase experience.

Not only that, but Stark said Leishman has a customer service habit you’d struggle to find elsewhere: Personal phone check-ins with normal users.

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The World Economic Forum (WEF) is working with the Colombian government to see if blockchain-based transparency can help prevent a hotspot for corruption, which happens in the process of bidding for high-value contracts to provide public goods and services.

WEF partnered with the Inter-American Development Bank (IDB) and the Office of the Inspector General of Colombia to develop a proof-of-concept (PoC) using the Ethereum public blockchain.

The aim of the project is to apply a high level of transparency to the procurement corruption use case in the context of the country’s system of government contracting. The PoC will be piloted in a live procurement auction for goods and services supplied to Colombia’s national university later this year.

Related: Ethereum Logged Its Busiest Week on Record

Public procurement invites corruption because it involves close, repeated interaction between government officials and the private sector, and vast sums of money. According to the Organization for Economic Co-operation and Development (OECD), governments collectively spend approximately $9.5 trillion on procurement contracts worldwide, and up to 30% of that is lost due to corruption.

“Originally, we were very open in terms of which division of the IG [Office of the Inspector General of Colombia] we would be working directly with,” said Sheila Warren, the WEF’s head of blockchain and data policy. “Most of the feedback we got from within the country after workshops that we ran there was that procurement would be the most conducive system to having a blockchain within it.”

These days, most countries operate e-procurement platforms, so the process of making tenders to build roads or schools, followed by the registration of vendors to bid for these contracts, is already digital. It also often involves some level of encryption so that the auction process is blinded to prevent collusion.  

So what does a blockchain bring to the table? 

Related: Mining Pools Distribute $2.4M Transaction Fee After Flood of Phoney Refund Claims [Updated]

The most conclusive advantage is the addition of a shared, immutable set of records that cannot be censored or altered, even by someone in the government, said Ashley Lannquist, the WEF’s project lead for blockchain and digital currency.

“I think the strongest value proposition is that you could have high confidence that no records are being deleted, no vendor bids are being denied. This came out as a key value-add and, of course, it comes the most from permissionless blockchains like Ethereum,” said Lannquist.

There were other blockchain benefits to be had, Lannquist said, such as automating and timestamping the periods for which bids would be evaluated and also the time slots for public comments to be made.

However, transparency of the full broadcast variety found on Ethereum can be a double-edged sword, at least when it comes to the majority of enterprise uses. For instance, the laws around procurement in Colombia require that vendors bidding on contracts must be anonymous, not pseudonymous.

“It’s a requirement of the law in Colombia that during the whole process there is anonymity,” said Ximena Lombana of the Office of the Inspector General of Colombia. “So companies are used to it and they know that it has to be this way. It depends on the law of the country; it could be different in other countries. But generally, it’s anonymous bidding in blind auctions.”

As such, WEF concluded the process of holding accounts on Ethereum, such that participants might have to repeatedly transact using crypto as gas, could possibly leak information relatable to the identity of participants. 

“The public, permissionless Ethereum blockchain, employed in the Transparency Project PoC, creates such challenges as vendors are required to send transaction fees with their bid offers,” the report states. “Because all system transactions are publicly viewable, steps must be taken so this transaction fee does not reveal the submitting vendor’s identity.”

This would not be the first time an enterprise user had a problem because they had to mess around with crypto to pay for gas on public Ethereum. Spanish bank BBVA ran into difficulties when it wanted to use the Ethereum mainnet like a public notary service for loans, but had to use a testnet in the end because European banks are forbidden to hold crypto.

The conclusion reached by the WEF is it might make more sense to use a “hybrid” blockchain. There are enterprise variations of Ethereum such as Hyperledger Besu that combine permissioning with access to the public mainnet. Another option could be Baseline Protocol, which uses the public chain to compare and verify purchase orders. 

“We thought of the pairing of public Ethereum with Hyperledger Fabric, for instance,” said Lannquist. “Some transactions happen on either one or the other, and you do want public [Ethereum] for the permanent record keeping.”

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Bitcoin’s price rally has stalled since the cryptocurrency underwent its third halving on May 11, but investor confidence in the cryptocurrency’s long-term prospects remains strong, data shows.

The halving event on May 11 saw the mining reward per block on bitcoin’s blockchain cut from 12.5 BTC to 6.25. The event was expected by many to accelerate the price uptrend from the low of $3,867 seen in March.

So far, though, the leading cryptocurrency by market value has failed to pick up a strong bid and continues to trade below $10,000 – a level seen two days ahead of the halving. Even so, larger investors, often called whales, continue to accumulate coins, as seen below.

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As of Tuesday, the number of bitcoin whales, as represented by the tally of unique entities holding at least 1,000 coins, was 1,840. That’s up nearly 2% from the level of 1,811 observed on May 1, according to data from blockchain analytics firm Glassnode. The metric clocked a recent high of 1,844 on Monday, a level last seen in November 2017. 

The steady accumulation since the halving suggests investor confidence in the long-term bullish narrative surrounding bitcoin. 

Most analysts expect the cryptocurrency to rise sharply over the next 12 months on the back of the unprecedented fiscal and monetary stimulus delivered by authorities across the globe in the past three months. Bloomberg analysts said they expect bitcoin to challenge the record high of $20,000 by the end of 2020 on increased institutional participation.

For the whale metric, an entity refers to a cluster of addresses that are controlled by the same network entity and are estimated through Glassnode’s proprietary clustering algorithms. 

Related: Market Wrap: Stocks Rally on Possible Stimulus but Bitcoin Is Flat at $9.5K

See also: Bitcoin Whale Addresses Hit Highest Number Since August 2019

Glassnode considers it a more reliable indicator of investor participation – the number of individuals or businesses using the network – compared to the traditional approach, which considers the number of addresses on the network as a proxy to the number of users/holders.

The latter method is weak because a single user can hold coins in multiple addresses, the firm says. The same is true for exchange addresses, which hold coins belonging to more than one individual. 

Bitcoin’s current period in the doldrums could end with a bullish breakout above $10,000, given the steady accumulation by investors and other factors. 

“We are bullish in the medium term with a target of $12,000, said Matthew Dibb, co-founder of Stack, a provider of cryptocurrency trackers and index funds. Dibb, however, believes the move to $12,000 would be preceded by a few weeks of erratic trading. 

That possibility shouldn’t be ruled out, as bitcoin’s correlation with the equity markets has strengthened over the past week. The cryptocurrency fell sharply twice in the last week as stocks slipped over renewed coronavirus concerns. 

“Bitcoin is currently trading as a ‘risk asset’ and will likely be subject to continued volatility as further US economic data is released in the coming days,” said Dibb. 

While the immediate bull target is the psychological level of $10,000, support is seen at $8,900 (Monday’s low). A violation there would expose the next support lined up at $8,000.

Disclosure: The author holds no cryptocurrency at the time of writing.

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This week’s debut of live trading in the autonomous lender Compound’s digital token has provided a new data point on just how frenzied the speculation has become over the future of decentralized finance (DeFi). 

Compound, started in 2017, is the second-biggest decentralized lender, with the equivalent of $163.1 million locked in the protocol, behind larger rival Maker’s $487 million, according to the data provider DeFi Pulse.

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Related: COMP’s Sudden Growth Has Swamped a DEX Dealing Only in Stablecoins

But a flurry of bullish trading in Compound’s new COMP tokens, released Monday, has given the project a fully diluted, implied market capitalization of nearly $785 million, well above Maker’s $546.2 million, according to another website, DeFi Market Cap.

Compound’s outsize market cap, relative to the total value locked in the protocol, “may signal the rally went too far,” The Defiant, a newsletter tracking the DeFi sector, wrote on Tuesday.  

The COMP digital coins are known as “governance tokens” because they give holders a right to vote on decisions affecting the management of the protocol, such as technical upgrades or whether to incorporate new assets onto the platform. Eventually, according to cryptocurrency research firm Messari, holders might also be able to get a share of fees paid into the system or vote to buy back tokens — similar to stock buybacks. 

Over the next four years, some 4.2 million of the tokens will be awarded to users, as part of a pool of 10 million tokens overall that also covers distributions to executives, employees and early investors such as the venture capital firm Andreesen Horowitz. 

Related: Ethereum Logged Its Busiest Week on Record

Trading in the tokens started Monday, when the project began distributing COMP to users of the system, and as of Tuesday they were changing hands at a price of $78.56 each, according to DeFi Market Cap. 

But so far, according to a Compound website, only 3,814 of the tokens have been distributed – worth about $300,000 at the current price. So the implied market cap of $785 million is based on trading in that limited set of tokens. 

Prices for the tokens had no preset value when they were released, and Compound Founder Robert Leshner, 35, said Tuesday in a phone interview that he really had no idea what to expect from the first few days of trading. 

A market in the COMP tokens has sprung up on Uniswap, an automated liquidity protocol, and on the digital-asset exchanges MXC, Hoo and Hotbit, according to Leshner. 

“We saw markets emerge for the COMP token and the price shoot up dramatically,” he said. “Because the asset was so new, there was a bit of a speculative fervor.”

CoinDesk’s Brady Dale reported Tuesday that Curve, an automated market maker, saw its 24-hour trading volume jump seven-fold, driven by demand for COMP tokens. 

There’s even an application on the website InstaDapp devoted to helping users “Maximize $COMP Mining.”

“This recipe is focused on maximizing your COMP token returns,” the site reads. 

The distribution of the governance tokens represents the next step in San Francisco-based Compound’s push to create a fully decentralized lending platform, which allows users to borrow assets contributed by other users, at a market-based interest rate. Leshner described it as a “money market for crypto assets.” 

“The distribution will be DeFi’s best case study of `progressive decentralization’ to date,” Messari wrote this week in a report on its website.

Over the past month, Compound (the company) relinquished control over the DeFi project to its 22,000 users, according to Leshner. The COMP tokens were put into a “reservoir contract” that will distribute them over the next four years to users, in proportion to their usage. 

“People have sort of watched this underlying protocol grow substantially over the years, and yesterday was day one that the public had a chance to participate,” Leshner said. “We were very deliberate about not setting expectations because we appreciate how uncertain crypto can be.”

The pricing of the tokens provides a glimpse of the potential payday for executives and investors in the project, who will retain tokens now worth hundreds of millions of dollars. 

Beyond the 4.2 million tokens allocated to users, some 2.4 million have been distributed to shareholders in Compound Labs Inc., which created the protocol, according to a Medium post. Investors include Andreesen Horowitz, Polychain Capital, Bain Capital Ventures, Coinbase and Paradigm Capital. 

Another 2.2 million are allocated to founders and team members, subject to a four-year vesting schedule, according to the Medium post. The remainder are reserved for community members and future hires.  

Compound Labs, the company, retains none of its COMP tokens, and currently has no revenue to speak of, said Leshner. It will now turn to other projects that could bring future revenue, he said, declining to describe them.    

Leshner said he isn’t worried that regulators might deem the token to be an improper securities sale since the company no longer has a role in building or managing the protocol. 

According to Leshner, the venture capital firms also are subject to a vesting period. That means they can’t immediately cash in on the bonanza.

But the point of the token distribution is that the project is no longer controlled by the founding company. 

“It’s sort of like this self-organizing anarchy,” he said. “There’s no centralized coordination of the token holders. It’s going to be left entirely to the community to figure out how to govern the protocol.”

In the meantime, traders in COMP tokens might need to put tighter controls on their own animal spirits.

BTC: Price: $9,488 (BPI) | 24-Hr High: $9,595 | 24-Hr Low: $9,421

Trend: Bitcoin’s ongoing sideways crawl may be nearing an end, with a key technical indicator reporting the lowest level of volatility in five months. 

The leading cryptocurrency has been restricted largely to a range of $9,000–$10,000 since May 28, except for Monday’s brief dip to $8,900, according to CoinDesk’s Bitcoin Price Index. 

As a result, the Bollinger bands width, a price volatility gauge, has declined to 0.09 – its lowest since Jan. 6. Bollinger bands are volatility bands placed two standard deviations above and below the 20-day moving average (MA) of price. Meanwhile, the Bollinger band width is calculated by dividing the spread between the volatility bands by the 20-day MA. 

In the past, bitcoin has witnessed big moves in either direction following a decline in the metric to or below 0.10.

For instance, Bollinger bandwidth dropped to 0.06 a week before BTC broke into a bull market with a high-volume move to $5,000 in April 2019. Similarly, bandwidth declined to 0.09 in early January, following which bitcoin rose from $7,500 to $9,000 in just two weeks. 

If history is guide, bitcoin could soon chart a notable upward or downward move, marking an end of the price consolidation.

Further, price action seen in the first two trading days of the week is signaling scope for a bullish move. Bitcoin rose by 1% on Tuesday, validating the strong dip demand, or seller exhaustion, signaled by a long lower wick attached to Monday’s chart candle and confirming a bullish revival. 

Put simply, the big move implied by the volatility squeeze could happen to the higher side. Key resistance levels are located at $10,000 (psychological hurdle) and $10,500 (February high).

Meanwhile, support is located at $8,900. A breach there would confirm a short-term bearish reversal and open the doors to the 200-day average at $8,219.

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Binance wants its new U.K. exchange platform to become a one-stop-shop for British and European institutions interested in investing in the digital asset class.

Per a report by Reuters on Wednesday, the firm said its new U.K. crypto exchange would offer a local fiat onramp into crypto, in both pound sterling and euros. Like its other fiat-to-crypto platforms, such as Binance Uganda, Binance Singapore, and Binance US, the new U.K. platform will launch with something like 65 digital assets listed.

But Binance U.K., which Reuters says will be regulated by the Financial Conduct Authority (FCA), the U.K.’s chief financial watchdog, will target a more traditional crowd. Binance U.K.’s new director, Teana Baker-Taylor, who only joined the exchange group last month, had previously worked as HSBC’s global strategy head.

Related: Custody Battle Pits Institutional Boomers Against Crypto Upstarts

As part of her role, Baker-Taylor is responsible for spearheading the exchange’s expansion across Europe. “Binance U.K. will also serve European customers,” a spokesperson told CoinDesk. “The platform caters to both the U.K. and European markets.”

The new U.K. platform is expected to launch sometime this summer.

See also: Number of Institutions Buying Crypto Futures Doubled in 2020: Fidelity Report

Like other crypto exchanges, Binance has experienced rising interest from institutional investors. The exchange told Decrypt in May, for instance, that the number of new institutional clients onboarded in Q1 2020 was nearly 50% higher than the preceding quarter.

Related: Bakkt, Galaxy Digital to Offer Bitcoin Trading, Custody Solution for Institutions

“As crypto services mature and evolve, we’re able to create new options to engage and capture interest from a wider audience with varying risk appetites, such as products that earn a yield for participation, like staking and passive savings,” Baker-Taylor said to Reuters.

Binance U.K. is under the FCA’s supervision as a cryptoasset exchange provider. A spokesperson said the platform will only do spot trades.

Binance has been operating a similar trading platform on the Channel island of Jersey, a British dependency, since January 2019. Like the U.K. platform, it allows users to buy and sell cryptocurrencies against the pound and the euro.

The spokesperson told CoinDesk that the Jersey platform will continue to operate independently of Binance U.K.

UPDATE (June 17, 12:50 UTC): This article has been updated with additional information from Binance over how their new U.K. entity would be regulated by the FCA.

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Binance wants its new U.K. trading platform to become a one-stop-shop for British and European institutions interested in investing in the digital asset class.

Per a report by Reuters on Wednesday, Binance said its new U.K. crypto exchange would offer a local fiat onramp into crypto, in both pound sterling and euros. Like Binance’s other fiat-to-crypto platforms, such as Binance Uganda, Binance Singapore, and Binance US, the new Binance U.K. platform will launch with something like 65 digital assets listed.

But the U.K. platform, which Reuters says will be regulated by the Financial Conduct Authority (FCA), the U.K.’s chief financial watchdog, will target a more traditional crowd. Binance U.K.’s new director, Teana Baker-Taylor, who only joined the exchange group last month, had previously worked as HSBC’s global strategy head.

Related: Custody Battle Pits Institutional Boomers Against Crypto Upstarts

As part of her role, Baker-Taylor is responsible for spearheading Binance’s expansion across Europe. “Binance U.K. will also serve European customers,” a spokesperson told CoinDesk. “The platform caters to both the U.K. and European markets.”

Binance U.K. is expected to launch sometime this summer.

See also: Number of Institutions Buying Crypto Futures Doubled in 2020: Fidelity Report

Like other crypto exchanges, Binance has experienced rising interest from institutional investors. The exchange told Decrypt in May, for instance, that the number of new institutional clients onboarded in Q1 2020 was nearly 50% higher than the preceding quarter.

Related: Bakkt, Galaxy Digital to Offer Bitcoin Trading, Custody Solution for Institutions

“As crypto services mature and evolve, we’re able to create new options to engage and capture interest from a wider audience with varying risk appetites, such as products that earn a yield for participation, like staking and passive savings,” Baker-Taylor said to Reuters.

Binance has been operating a similar trading platform on the Channel island of Jersey, a British dependency, since January 2019. Like the U.K. platform, it allows users to buy and sell cryptocurrencies against the pound and the euro.

The spokesperson told CoinDesk that the Jersey platform will continue to operate independently of Binance U.K.

• What the Stock Market’s ‘Robinhood Rally’ Means for Bitcoin
• Number of Institutions Buying Crypto Futures Doubled in 2020: Fidelity Report

The Public Debt Management Office (PDMO) within Thailand’s Ministry of Finance has announced it plans to sell 200 million baht ($6.42 million) in savings bonds using a blockchain-based e-wallet.  

In a statement released on its website Tuesday, the ministry said the bonds carry an extremely low face value of 1 baht ($0.032) each and would be sold through the state-owned Krung Thai Bank’s blockchain wallet. 

The statement said distributing the bonds through the blockchain e-wallet was a step towards increasing the efficiency of the government system and an investment in the true digital economy. According to a report by the local media outlet Bangkok Post, using blockchain technology allowed the debt office to reduce the face value of the bonds. 

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“With the blockchain system, PDMO can break up the amount of the savings bond face value to as low as 1 baht from the regular 1,000 baht,” said PDMO Director General Patricia Mongkhonvanit to the Bangkok Post. 

The Ministry of finance’s statement also noted that the 200 million baht bond issue was a pilot project to further financial inclusion by making it easier for people to subscribe to government issued bonds. The bonds carry an interest rate of 1.70% per annum and a maturity period of three years. 

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The Stellar community is gearing up to vote on a raft of new network updates that will give exchanges greater control over how digital assets are traded on-chain.

In a vote planned for later this week, anyone running a Stellar node will be able to decide on whether to pass a series of proposed updates – known collectively as “Protocol 13” – that will create a new authorization function for entities, such as exchanges, to enforce local regulations.

“Often, issuers of regulated assets want customers to be able to trade their assets, but they also need to exert a high level of control over who can hold them, how much they can hold and under what conditions they can sell or buy more,” reads a post from the Stellar Development Foundation (SDF), which developed and formally proposed the protocol update earlier this year.

Related: Mauritius Releases Guidance for Regulated Security Token Offerings

Known as “fine-grained control,” the new update means entities such as exchanges can set specific conditions for each and every digital asset traded on their order books. While Stellar already allows entities to prevent an account from purchasing a particular asset, the way it works presently is it also cancels any existing otherwise legitimate orders that account may have already made but haven’t been settled.

See also: Stellar Throws SatoshiPay a $550K Lifeline After Coronavirus Knocks Out Series A

“Protocol 13 introduces a new flag that allows you to revoke authorization while maintaining orders on the books, which makes it easier to tokenize regulated assets like securities,” reads the post:

“With fine-grained asset control, an issuer of a regulated asset can set the asset to require the new kind of authorization … and when a user wants to make a payment or new offer, the issuer can check to see if it’s allowed given regulation.”

Related: Tokensoft Teams With Signature Bank to Launch Real Estate Security Token Platform

The update might make it easier for security tokens to operate in the U.S.

Stellar-based exchanges can already block investors from prohibited countries, such as Iran or North Korea, but they could now fulfill other regulatory requirements. An exchange could prevent an investor from purchasing more than 5% of a company’s total stock until the investor filed a Schedule 13(D) Disclosure with the Securities and Exchange Commission (SEC).

Other aspects of Protocol 13 are designed to make operating an exchange easier and more flexible. A new “multiplexed account” will allow custodial services to create sub-accounts for their clients, allowing them to separate out and distinguish balances when all are held in a single address.

There will also be a new “fee bump” function, which is designed to enable businesses to quickly cover their user’s transaction fees as well as increase fees on low-value payments so they can settle during periods of high network activity.

See also: US Regulator Clears Security Token Trading System to Launch

The protocol upgrade comes a few months after SDF made an investment, then worth $715,000, into DSTOQ – a smartphone-based trading app. In April, a German company called Wevest, which focuses on providing financing for small businesses, announced it would use Stellar to build a platform for security token offerings (STOs).

Just this week, Mauritius released a regulatory framework for security tokens for businesses interested in setting up a legitimate STO platform or security token trading system on the island.

CoinDesk reached out to SDF for comment and had not received a response at press time.

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Kraken, one of the world’s largest exchanges by trade volume, is extending its services down under.

The California-headquartered firm announced on Wednesday that it would be opening operations in Sydney, Australia, with local clients able to fund their accounts in Australian dollars (AUD). The exchange said it would offer instant funding to those users who make deposits via Okso and PayID-enabled Australian bank accounts.

The new addition marks the seventh national currency in Kraken’s fiat on-ramps, joining the U.S. dollar (USD), Canadian dollar (CAD), Swiss franc (CHF), the euro (EUR), British pound (GBP) and Japanese yen (JPY).

Related: OKEx Taps Paxful to Provide New Fiat-to-Crypto On-Ramps

See also: ASX Accused of Trying to ‘Crush’ Rival Blockchain Trading System

“We’re thrilled to be launching Kraken Australia today at a time when Australian investors
increasingly turn toward cryptocurrencies to diversify their portfolios,” said Jonathon Miller, managing director of Kraken Australia.

Users of Kraken Australia will be able to execute trades in AUD against popular cryptocurrencies including bitcoin (BTC) ether (ETH), litecoin (LTC), XRP (XRP), bitcoin cash (BCH) and the tether (USDT) stablecoin. General users based outside the U.S. will also be able to trade AUD against USD, EUR and JPY.

Co-founded by Jesse Powell in 2011, Kraken established itself as one of the first major exchanges in the U.S. and currently offers the ability to trade in retail, spot, derivatives over-the-counter (OTC), margin and indices markets.

Related: India’s Rumored Crypto Ban May Be Overblown, Say Industry Pros

See also: Coca-Cola Distributor Offers Bitcoin Payment Options for Aussie Vending Machines

According to Miller, retail investment in crypto has been on the rise with a record number of signups at Kraken since March. This has led the company to ramp up its employee base with 200 new workers to meet client demand.

Kraken acquired one of Australia’s longest-running cryptocurrency exchanges, Bit Trade, in January 2020. Its CEO, Miller, was appointed to lead Kraken’s operations in the nation at the time.

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The chief financial watchdog of Mauritius, an island-state off the coast of Madagascar, has created a regulatory regime for a full-fledged security token ecosystem in the country.

On Monday, the Mauritian Financial Services Commission (FSC) announced a framework specifically for security tokens. Together with a 15-page guidance document, the regulator said this was the start of a new licensing regime to enable fully regulated security token trading systems in the country.

Essentially, the new regime allows a new security token trading systems to become eligible for an FSC license. So far, it effectively authorizes a business to put a security token up for sale in an offering, an “STO,” as well as operate a trading house in the jurisdiction.

Related: Stellar Proposes Changes Allowing Exchanges to Better Enforce Regulations

In the pipeline for 18 months, an FSC spokesperson said the guidance was the start of recognizing security tokens, and the broader cryptocurrency bucket, as an asset class in their own right.

“This was crafted with full collaboration between the industry and the regulator,” said FSC CEO Thakoor Dhanesswurnath. “We already have a growing interest in these specific licenses and are expecting to receive several applications in the upcoming months.”

The spokesperson said further regulation regarding security token exchanges would be released sometime later this year.

See also: Mauritius Central Banker Confirms Island’s Digital Currency Plans

Related: Tokensoft Teams With Signature Bank to Launch Real Estate Security Token Platform

But there are a handful of requirements. License holders will have to sign up to a strict strict anti-money laundering (AML) and countering the finance of terrorism (CFT) requirements. Like traditional exchanges, they will be obliged to publish trading data daily and submit it for review by FSC.

A licensed security token trading system will also have to keep a minimum of 35 million Mauritian rupees (~$880,000) in fiat currency ready. They will need to engage a registered custodian, both for digital assets and for any fiat currency taken as part of the business.

The spokesperson said the new licensing regime will turn Mauritius, which has long presented itself as a crypto-friendly jurisdiction, into a regional hub for security token trading in both Africa as well as in nearby India.

See also: US Regulator Clears Security Token Trading System to Launch

Without the same legacy systems that have pinned down similar technological innovation in the developed world, the country of just over 1.2 million people, hopes it can gain an edge on some of the larger, more lumbering jurisdictions.

• India’s Rumored Crypto Ban May Be Overblown, Say Industry Pros
• Tezos and Algorand Latest to Integrate Tech for Anti-Money Laundering Compliance

Former Bitcoin Core developer Peter Todd has settled his defamation lawsuit against fellow privacy-tech expert Isis Lovecruft, who tweeted in February 2019 that Todd was a “rapist.”

Lovecruft, who uses nonbinary pronouns, claimed in 2019 that Todd sexually harassed them and grabbed their arm, which he denied. After he sued Lovecruft for defamation, two anonymous women detailed accounts of sexual assault by Todd in court filings. On July 15, 2019, Lovecruft filed an anti-SLAPP motion, asking the court to dismiss Todd’s lawsuit as an attempt to curtail free speech.

On Tuesday, without deleting the original tweet, Lovecruft also tweeted, “Peter Todd never raped or sexually assaulted me.” Lovecruft’s GoFundMe page says this tweet was required as part of the settlement. Todd cited hefty legal fees as his primary reason for settling the case, which he initially filed in the U.S. District Court for the Northern District of California in Oakland, in April 2019. 

Related: Market Wrap: Stocks Rally on Possible Stimulus but Bitcoin Is Flat at $9.5K

“I settled because I ran out of money. I’d rather have kept the case. But the really important thing was to turn vague allegations – which were surprisingly harmful – into something I could actually respond to,” Todd told CoinDesk. “Isis has been making vague claims.”

Lovecruft used GoFundMe to crowdsource roughly $35,800 for legal fees. They also accepted cryptocurrency donations, including bitcoin, monero and several others. Lovecruft’s crowdfunding page offers an ambiguous statement: 

“The basic terms of the settlement are: Todd agreed to dismiss his lawsuit against Lovecruft, and walk away without any financial recovery, in exchange for a statement by Lovecruft clarifying that they do not assert (as they have never asserted) that Todd raped or sexually assaulted them personally.”

This would relate to the claim of arm-grabbing, not the sexual assault allegations by the two anonymous accusers, both identified in court papers as “Jane Doe.” In a statement to CoinDesk, Todd said Lovecruft and one male witness had a conflict of interest because both were involved in the Zcash project, which Todd often criticizes.

Related: If Crypto Is Anything Like Fixed-Income, It’s Going to Need a Fatter Textbook

The two Jane Does made filings in the case in support of Lovecruft. One claimed she was assaulted by Todd, the other alleged he raped her. Todd denied both charges and contended that neither woman was “involved in any Bitcoin projects,” which he argued undermined the credibility of their accounts. Both Jane Does, in interviews with CoinDesk, said they used to participate in the broader Bitcoin community but stopped after the alleged incidents. 

In previous communications with CoinDesk, both alleged victims indicated they wanted to move on with their lives and did not seek to press charges or otherwise publicly discuss the accusations. This legal conflict was entirely between Lovecruft and Todd, the latter of whom claimed the settlement represents a victory. Yet Lovecruft hasn’t deleted the original tweet, which sparked the lawsuit, and did not respond to requests for comment by press time.

• Bitcoin Rises to $9.6K as Stocks Cheer Additional US Stimulus Plans
• First Mover: Negative Rates or More Money Printing – Bitcoin May Benefit Either Way

WisdomTree Trust is seeking to launch an exchange-traded fund (ETF) that invests in part in the growing bitcoin futures market.

The New York City-based asset manager filed on Tuesday for an ETF that may invest up to 5% of its net assets in the Chicago Mercantile Exchange’s (CME) bitcoin futures contracts, as shown in documents published by the U.S. Securities and Exchange Commission.

Multiple attempts at launching a pure-bitcoin ETF by different companies in the past have met with failure, as have attempts at launching an ETF that invested in bitcoin and Treasury bonds. In various rejections, the SEC has taken issue with the size of the bitcoin market, the potential it is being manipulated, questions around ensuring custody of bitcoin and a lack of surveillance sharing agreements between a sizable bitcoin market and a regulated exchange.

Related: Market Wrap: Stocks Rally on Possible Stimulus but Bitcoin Is Flat at $9.5K

If approved, the “WisdomTree Enhanced Commodity Strategy Fund” would invest the rest of its net assets in energy, industrial metals, precious metals and agriculture commodities, meaning bitcoin would be only a tiny slice of the total pie.

But it is a telling sign. The market for CME’s cash-settled bitcoin futures contracts has been steadily growing over the last few months. May saw multiple record-setting days for open interest on CME, a spike that coincided with heightened interest in bitcoin futures from institutional investors like Paul Tudor Jones. WisdomTree spokespersons did not respond to CoinDesk requests by press time.

The move casts bitcoin as a perhaps normalized investment opportunity for a fund that more generally seeks exposure to commodity markets at large. Commodity market movements do not directly correlate with indices, though some argue that bitcoin, which is traded as a commodity, follows the market. 

WisdomTree is no stranger to cryptocurrencies. Corporate Strategy Director William Peck previously told CoinDesk that he views digital assets as a natural extension of the WisdomTree business model. The $63 billion asset manager has explored launching a regulated stablecoin on the U.S. market, and last year issued a bitcoin exchange-traded product on Switzerland’s SIX stock exchange.

Related: Number of Institutions Buying Crypto Futures Doubled in 2020: Fidelity Report

WisdomTree Enhanced Commodity Strategy Fund appears to be the firm’s first foray into bitcoin products in the U.S. 

• Bitcoin Options Growth Outpaces Futures, Swaps
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Researchers in Australia have identified a bug that caused that country’s contact tracing app to malfunction, it was announced Monday. 

Governments around the world have introduced contact tracing apps to track the spread of the coronavirus. But, as in Australia, so far it’s unclear how much of a benefit these systems are having. Critics complain about risks to privacy and centralization of sensitive data, and note that intrusive technologies rarely work as expected. 

COVIDSafe, Australia’s contact tracing app, was rolled out in April. But its latest version has not been working properly due to a bug, Richard Nelson, a software engineer, announced. 

Related: Crypto Long & Short: Cryptocurrency Markets May Be Decentralized but They’re Still Accountable

See also: Europe Debates COVID-19 Contact Tracing That Respects Privacy

The bug causes iPhones that are locked to stop creating a new temporary ID, which is a key feature of Bluetooth-based contact tracing. This method uses the Bluetooth signal of other phones to identify with whom you’ve been in close contact. If a person with a phone you’ve come into contact with contracts COVID-19, you will be alerted because your temporary IDs were communicated to each via Bluetooth when you were close. 

To protect user privacy, these temporary IDs regularly change. Without the ability to create a new temporary ID, though, a person’s phone will recognize and log other devices around it, but cannot be recognized by other devices, rendering it effectively invisible. 

“The bug has a material impact on the number of encounters logged, particularly at an event, say, where people will tend to not have their devices out and in use, for example at a concert or movie theater,” Nelson told CoinDesk. “This is exactly the type of scenario where you’d want the application to be working in an optimal manner.”

Related: ‘Radical Indifference’: How Surveillance Capitalism Conquered Our Lives

In the report, Nelson laid out a scenario in which a woman named Alice packed her bag, put her iPhone in it, and went out for the day to a football (soccer) game. “With her device in this state, nobody else will record her presence, and if anyone around her tested positive she would not be contacted,” he wrote. 

Contact tracing is the process by which countries and health departments track with whom an infected person has come into contact so they can let those people know they should quarantine. Apps have been proposed and implemented around the world to aid in this process. The results have been mixed at best.

For example, the state of Utah launched an app called HealthyTogether in an effort to help the state reopen from lockdown. As of late May, the only features available in the app were a symptom checker and testing center map, despite assurances there would also be tools to help human contact tracers, and a maps function that would allow users to determine which areas were at high or low risk in their communities, according to reporting by Buzzfeed News. Today, the New York Attorney General is calling on tech giants Google and Apple to crack down on shady contact tracing apps in their app stores that aren’t transparent about how they’re using or storing user data. 

Ironically, an effort to better protect users’ privacy is what caused this bug in the first place.

“As businesses open back up and Americans venture outdoors, technology can be an invaluable tool in helping us battle the coronavirus,” said Attorney General Letitia James in the announcement. “But some companies may seek to take advantage of consumers and use personal information to advertise, mine data and unethically profit off this pandemic.”

Meanwhile, Norway has suspended its contact tracing app after its own data protection agency said it was too invasive when it came to user privacy.

Back in Australia, nearly one month after the COVIDSafe app launched, the Guardian reported the app was barely used, and only one person had been reported to have been identified as positive for COVID-19 using data from it.

Ironically, an effort to better protect users’ privacy is what caused this bug in the first place, according to one cryptographer. 

“The Australian government had recently overhauled the cryptographic protocol for their app, adding encryption to the payload in a way which, when it worked, mostly improved users’ privacy,” said Vanessa Teague, a cryptographer with a focus on privacy and election security, and an associate professor at Australian National University.

She has also been researching the app. “Unfortunately, because they seem to have rushed it out without adequate testing or peer review, they seem to have completely broken its operation on iPhones in background mode.”

See also: For Contact Tracing That Preserves Privacy, Focus on Incentives

Steve Wilson, the managing director of Lockstep Group, a consulting firm that focuses on digital identity and privacy, saw the report and said the app has been terribly disappointing in terms of software quality.

“There are some surprising bugs, indicative of poor software processes,” said Wilson. “The app is turning out to be both pretty impotent and innocuous.” 

Wilson said he was sad because he’s sympathetic to contact tracing technology as a general proposition, and the app is well intentioned, if a bit clumsy. Wilson said some of the privacy criticisms are overblown when you compare it to the very real impact of the virus, and especially if you don’t consider the government an adversary in the privacy-safety trade-off the world is currently navigating. 

“COVIDSafe is nowhere near the worst thing a government has ever done to privacy,” said Wilson. 

In a statement to CoinDesk, the Data Transformation Agency (DTA) for Australia said it continues to welcome feedback on COVIDSafe from the developer community, with previous feedback helping us to improve the app.

“The DTA will continue to release updates to the COVIDSafe app to deliver a range of performance, security and accessibility improvements as required,” said a spokesperson for the DTA. “The Australian community can have confidence the app is working securely and effectively.”

Nelson said he had reported the issue to the DTA. 

“I’m sure they’ll fix it in a timely manner so, hopefully, going forward the issue is resolved,” said Nelson.

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One of the newer entrants to the decentralized finance (DeFi) space, Curve, is riding the wave of demand for the freshly issued Compound governance token, COMP, which has surged to a $774.3 million market cap since first being distributed on Monday.

Curve is an automated market maker devoted exclusively to stablecoins. On Sunday, it saw $3.5 million in daily trading volume, according to its self-reported stats. On Monday that shot up to $12.6 million; as of this writing on Tuesday, it’s at $23.3 million in trading volume over the last 24 hours, a roughly 7X gain.

According to Curve founder Michael Egorov (also a co-founder of encryption company NuCypher), this is largely driven by demand for COMP.

Related: In the Wildcat Era of Stablecoins, Commercial Banks Have New Rails to Ride

“People started putting USDC as collateral on Compound, taking USDT, swapping on Curve to USDC to put as collateral on Compound [and] doing that up to 30 times to earn COMP with leverage,” Egorov wrote CoinDesk in an email. 

That’s because Compound gives the most COMP each day to the markets with the most interest. Right now, among stablecoins, those are USDC and USDT. In other words, users put in USDC, borrow as much USDT as they can, switch it on Curve for more USDC, put that in Compound as well so they can borrow more, take out additional USDT and repeat until they have capped out their leverage. This allows them to absolutely maximize their activity on Compound as both a borrower and lender, which earns COMP on both sides.

Egorov said that many users can actually automate this operation on InstaDapp.

Compound announced its plans for COMP on CoinDesk. On June 10, the company announced that distribution would begin on June 15. 

Related: Ethereum Logged Its Busiest Week on Record

COMP is currently trading at $78.33 as of press time, according to Uniswap.Curve currently has $16.2 million in deposits, down from a high of $17.2 million reached this weekend. Deposits on Compound have gone from $97.7 million on Sunday to $159.5 million at press time, according to DeFi Pulse.

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Stocks are up on fresh government stimulus expectations but when it comes to bitcoin, things are uncertainty in the near term.

Bitcoin (BTC) was trading around $9,500 as of 20:00 UTC (4 p.m. ET), gaining less than a percent over the previous 24 hours. 

At 00:00 UTC on Tuesday (8:00 p.m. Monday ET), bitcoin was changing hands around $9,414 on spot exchanges such as Coinbase. It then climbed 2% to as high as $9,591 before sell volumes pushed bitcoin back down. The price is now above the 50-day moving averages but below the 10-day moving average. For technicians, this signals prices are expected to move sideways for a bit. 

Related: Ex-Bitcoin Dev Settles Defamation Suit Over Sex Assault Claims

Stocks were the real movers on Tuesday. The possibility of another fresh fiscal stimulus proposal in the United States, to the tune of $1 trillion for infrastructure projects like wireless networks and roads, helped fuel an equities rally. The U.S. S&P 500 index gained 1.9%. Since the start of June, bitcoin has underperformed the equities markets. 

Read More: Bitcoin Rises to $9.6K as Stocks Cheer Additional US Stimulus Plans

In Asia, the Nikkei 225 index of publicly traded companies in Japan ended trading up 4.8%, buoyant on stocks in the industrial and transportation sectors. In Europe, the FTSE 100 index closed in the green 2.9% as stocks in the travel sector surged. 

Traders in the crypto sector continue to talk about “weakness” in the market as spot exchanges like Coinbase see a dip in volume. “Our prop [proprietary trading] desk is seeing a significantly weaker flow in bitcoin pairs on centralized exchanges lately,” said Peter Chan, a trader at Hong Kong-based OneBit Quant.

Related: WisdomTree Proposes ETF With 5% Bitcoin Exposure Despite SEC’s Long-Standing Blockade

Over the past six months, average volumes on Coinbase have been $133 million. In the past week, the average has been $116 million, a 12% drop, according to data from aggregator Skew. 

“I think there’s a general loss of interest, mostly due to how volatile the external environment has become on the margin,” said Vishal Shah, an options trader and founder of derivatives exchange Alpha5. “The aggregate open interest across derivatives exchanges is now the same as it was at the beginning of June and implied volatility is hitting cyclical lows.”

Read More: Bitcoin Mining Difficulty Makes Biggest Jump in 29 Months

Indeed, after total bitcoin futures open interest on the 11 biggest exchanges spiked to almost $4 billion June 1, it has hovered around $3.5 billion for most of the month. 

Sell pressure on bitcoin is expected to continue in this lower-volume environment, according to Neil Van Huis, director of sales and institutional trading at liquidity provider Blockfills.

“The whole sector is really sitting watching mining, in my opinion,” Van Huis told CoinDesk Tuesday. “Miners may need to sell a bit to raise cash for new machines, unless they can secure financing from firms like ours – and we are not financing anyone in China.”

China dominates the bitcoin mining market with 65% of machines located there, according to data from the Cambridge Centre for Alternative Finance. 

Digital assets on CoinDesk’s big board are mostly in the green Tuesday. The second-largest cryptocurrency by market capitalization, ether (ETH), is trading around $233 and climbed less than a percent in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Read More: Ethereum Logged Its Busiest Week on Record

The decentralized exchange (DEX) Curve has taken over Uniswap for the top spot in terms of 24 hour volume on the Ethereum network. In the past day, Curve had over $21 million in volume compared to Uniswap’s $11 million, giving it over 40% of the DEX trading market. 

The biggest cryptocurrency winners on the day include lisk (LSK) climbing 2.4%, qtum (QTUM) up 2.1% and stellar (XLM) in the green 1.6%. The biggest loser on the day was iota (IOTA) in the red 1%. All price changes were as of 20:00 UTC (4:00 p.m. ET).

Read More: Coda Protocol Sets Aside $2.1M in Tokens for Development Grants

In commodities, oil is gaining 2.9% as a barrel of crude was priced at $38 as of press time. 

Gold is trading flat as the yellow metal climbed less than a percent, trading around $1,726 for the day. 

Read More: Negative Rates or More Money Printing – Bitcoin May Benefit Either Way

U.S. Treasury bonds all climbed Tuesday. Yields, which move in the opposite direction as price, were up most on the 30-year, in the green 4.8%.

• If Crypto Is Anything Like Fixed-Income, It’s Going to Need a Fatter Textbook
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The co-founder of the Centra Tech crypto project that at one time garnered A-list celebrity endorsements but was later called a scam in court, pleaded guilty Tuesday for conspiring to commit securities and wire fraud.

Robert Farkas, 33, admitted he and co-founders Sohrab Sharma and Raymond Trapani misrepresented Centra Tech’s true purpose as they worked to dupe investors out of more than $25 million, the Justice Department said in a press release. 

The three pitched investors on a “Centra Card” crypto debit card purportedly issued by Visa or Mastercard, claimed to have 38 state money transmitter licenses and concocted a CEO who they said attended Harvard to bolster their credibility. Prosecutors said that none of those claims were true. 

Related: Crypto Exchange Owner Admits Laundering $1.8M in Online Auctions Fraud

The three also got influential celebrities including boxer Floyd Mayweather and music producer DJ Khaled to promote Centra Tech’s initial coin offering (ICO) “Centra Tokens,” which ultimately raised $25 million from unwitting investors, prosecutors said.

(Mayweather and Khaled later settled with the U.S. Securities and Exchange Commission for failing to disclose their financial ties to Centra Tech. Neither admitted or denied guilt in that settlement and later evaded the civil suit.)

Farkas, Trapani and Sharma’s scheme ran from July through October 2017, but by December 2017 a project investor filed suit alleging that Centra Tech had violated securities laws when it raised over $30 million from the Centra Token ICO. 

The SEC followed with an April 2018 lawsuit arguing much the same. It ordered Centra Tech to cease its ICO and alleged in court that the project was a multi-million dollar unregistered securities pumped by celebrity endorsements. 

Related: Crypto Criminals Have Already Stolen $1.4B in 2020, Says CipherTrace

The founders of Centra Tech continued to face a mounting onslaught in the courts. In May 2018 they were indicted on federal charges of conspiracy and the commission of securities and wire fraud in the case that Farkas pleaded guilty to Tuesday.

In pleading guilty on two counts, Farkas could face a maximum of 10 years in prison.

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It’s costing more to use Ethereum and that may be because more users are flocking to the platform than ever before, according to one key on-chain metric. Analysts say the growth of both transactions and the cost to process them is being driven by an increase in stablecoin usage and DeFi applications. 

The seven-day moving average of the total amount of “gas” used in transactions on Ethereum’s blockchain rose to a record high of 61.12 billion on Monday, having surpassed the previous high of 60.07 billion reached in September 2019, according to data provided by the blockchain analytics firm CoinMetrics. 

Gas is a token that powers Ethereum’s blockchain. It is the unit used to calculate the amount of fees a user needs to pay in order to transfer smart contract data or payments on Ethereum’s blockchain. Meanwhile, ether is the reward paid to miners and is equivalent to the amount of gas needed to execute a transaction. 

Related: Business Is Booming for DeFi Insurer Nexus Mutual Ahead of Ethereum 2.0

Read more: Stablecoins Push Ethereum’s Transaction Count to Highest Since July 2019

“The increase in gas usage indicates a continuous growth in the use of Ethereum’s platform, as measured by the number of transactions, as well as demand for block space, as measured via gas per transaction,” said Wilson Withiam, research analyst at data provider Messari.

Ethereum’s transaction count recently hit a 27-month high of 938,265 and was up nearly 45% from lows seen in January as of Monday, according to Glassnode. 

“As both tether and Decentralized Finance (DeFi) on Ethereum have exhibited phenomenal growth, Ethereum gas usage has skyrocketed to all-time highs,” Kyle Davies, co-founder and chairman at Three Arrows Capital.

Related: Mining Pools Distribute $2.4M Transaction Fee After Flood of Phoney Refund Claims [Updated]

Indeed, the use of the U.S. dollar-backed stablecoin tether (USDT) on Ethereum has increased sharply this year. 

The number of daily USDT transactions on Ethereum have surged by 450% on a year-to-date basis, as per CoinMetrics.

Tether has been issued on Ethereum since November 2017 and the platform now holds 65% of tether’s total supply. “Almost $6 billion of USDT’s total supply is now on Ethereum, up from $1.5 billion in the beginning of 2020,” Bendik Norheim Schei, research analyst at Arcane Research, told CoinDesk.

Further, tether has 10 times more transactions on Ethereum than any other ERC-20 token. Meanwhile, as per Ether Gas Station, tether transactions have paid over $2.5 million worth of fees on Ethereum in the last 30 days. That makes USDT the largest “gas payer” on Ethereum.

Read more: First Mover: Cardano’s No Ethereum Killer Yet, but It’s Winning in Crypto Markets

Tether and stablecoins in general have witnessed phenomenal growth this year amid the coronavirus-induced volatility in traditional markets. Total supply of all stablecoins has surpassed the $11 billion mark this week, doubling its value since February, according to Messari data. 

Even so, the increase in the gas usage is not entirely due to tether. Ethereum-based Decentralized Exchanges (DEXs) such as Kyber, Uniswap and IDEX have all experienced solid growth in transaction volumes this year. 

Kyber Network registered a transaction volume of $609 million in the first five months of this year. That’s 1.5 times more than the volume of $388 million seen in 2019, according to the official blog.

“Another factor responsible for the increase in gas usage may be people gaming the network by paying more in gas fees in order to beat other transactions into a block to gain profit,” said Connor Abendschein, analyst at Digital Assets Data.

Miners prioritize transactions offering higher fees when the network faces congestion; that is, the number of transactions waiting to get confirmed by miners rises to high levels. That forces other users to offer higher fees. 

Ethereum’s network has been facing congestion since early March, possibly due to increased price volatility and the surge in tether transactions. As of June 8, there were 19,922,385 unconfirmed transactions – up 225% from the March 1 tally of 611,872, according to blockchain data company Amberdata. 

Validating the argument that network congestion could have led to increased gas usage is the fact that gas fees in general have been higher this year. “Gas per transaction recently reached its highest level since early 2018,” Messari’s Withiam noted. 

Read more: ConsenSys Spins Up Staking Service in Anticipation of Ethereum 2.0

Nonetheless, the seven-day average of the daily Ethereum transaction count stood at 886,882 on Monday – well short of the record high of 1,244,335 reached in January 2018. 

Also, more transactions could be coming from complex DeFi products, which involve higher computational expenses and therefore require bigger gas payments. “People are either paying more expensive computations or willingly paying more to beat other transactions,” said Abendschein. 

Looking forward, the usage is likely to continue rising ahead of Ethereum’s much-anticipated switch from the proof-of-work mechanism to the proof-of-stake protocol. “Scalability on Ethereum will continue to be tested as we head into Phase 0 Eth 2.0 and beyond,” said Three Arrow Capital’s Davis. 

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After years of research, the Bank of Canada is preparing to design its own central bank digital currency (CDBC).

Revealing its plans in a June 11 job posting, the central bank said it was “reinventing central banking” and radically rethinking the nature of Canada’s cash.

“The Bank of Canada is embarking on a program of major social significance to design a contingent system for a CBDC, which can be thought of as a banknote, but in digital form,” the bank wrote.

Related: In the Wildcat Era of Stablecoins, Commercial Banks Have New Rails to Ride

CoinDesk’s request for comment was not returned by press time.

Still, the job posting said as much about the new role – CBDC Project Manager – as it did about the project itself, going into detail on some of the features of a digital banknote.

According to the job posting, Canada’s CBDC should protect user privacy (though not to the degree that cash does), remain accessible to those without bank accounts or mobile phones, work when the power is out and rival banknotes in their security, so as to gain confidence among the cash-wielding public.

Read more: ‘Anonymity Vouchers’ Could Bring Limited Privacy to CBDCs: ECB Report

Related: S. Korea’s Central Bank Forms Legal Panel to Advise on Possible Digital Currency Launch

Further, the bank wants its CBDC to live on an architecture “with a potentially multi-decade evolving lifespan” that can grow in tandem with policy goals. 

Other technical details remain undetermined, however. The bank did not state what technology its CBDC might run on, whether it would follow a token-based or account-based model, or how it could create a digital currency that works where electricity does not. 

Those details will take shape over the project manager’s three-year tenure. During that time, the bank also wants to build out a “CBDC pilot system.”

The move casts Canada as a serious contender in the race to develop CBDCs. Many nations have begun mulling the issue of national digital currencies and some, including China, appear to be on the verge of issuing their own. But only a handful have actualized their findings to the extent that the Bank of Canada is doing now. 

To be clear, the bank has not committed to issuing a CBDC just yet. Officials downplayed the need for one as recently as February, arguing there was no ”compelling case” for a Canadian CBDC unless a private digital currency such as Libra took off.

“While the Bank is ramping up contingency planning for this eventuality, there is not a compelling case at this time to issue a CBDC,” a Bank of Canada spokesperson told CoinDesk after publication of this article. “While the use of cash at points of sale may have decreased during the pandemic, we have not seen a material change in demand for bank notes.”

Update (June 16, 19:15 UTC): Added comment from a Bank of Canada spokesperson.

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Bitcoin has just posted its biggest mining difficulty increase in nearly 2.5 years.

At around 17:00 UTC on Tuesday, the network adjusted its difficulty level – a measure of how hard it is for miners to compete for block rewards on the blockchain – to 15.78 trillion.

The 14.95% rise is the biggest difficulty jump since January 2018, which saw a larger spike on the back of the 2017 crypto market bull run, data compiled by BTC.com shows.

Related: Hut 8 Plans $7.5M Offering to Upgrade Bitcoin Mining Rigs

As a result, miners contributing hashing power to the network are now facing the fourth-most difficult two-week mining period in Bitcoin’s history.

The latest increase comes after two consecutive declines in difficulty following the network’s quadrennial halving event on May 11, 2020, which reduced block rewards from 12.5 bitcoin per block to the current 6.25 bitcoin.

The reduction in block rewards initially forced some miners with inefficient hardware and/or more costly electricity resources to halt operations. That led to a decline in Bitcoin’s total hashrate and difficulty until earlier this month.

The difficulty drops on May 20 and June 4, and the sudden reduction in competition, meant that those miners able to continue operating could receive a bigger slice of the pie.

Related: Why Miner Maker Ebang’s US IPO Raises More Questions Than Answers

Read more: Bitcoin Miner Maker Canaan’s Stock Hits Record Low 1 Month After Halving

However, the lower difficulty also meant that some who had shut down older mining equipment immediately after the halving could once more turn a profit in the past two weeks. Meanwhile, major miner manufacturers in China have been delivering new, top-of-the-line equipment since May.

These factors have pushed up the average 14-day hash rate on Bitcoin from 98 million terahashes per second (TH/s) earlier this month to now around 113 EH/s.

All that said, the fact that Bitcoin’s mining difficulty has quickly bounced back to the pre-halving levels may bring pain for some existing players.

Bitcoin adjusts its mining difficulty every 2,016 blocks, roughly every 14 days, to ensure an average block interval of 10 minutes. When more people choose to plug in during a two-week cycle, the network will see a hash rate increase that will shorten the block interval and will subsequently increase the difficulty for the next cycle.

The current difficulty level of 15.78 trillion follows closely behind the highest three figures ever of 16.55, 16.1 and 15.95 trillion, respectively – all recorded in the two months prior the halving. In other words, miners are facing competitiveness close to that seen prior to the halving, but the daily block subsidies are now down from 1,800 bitcoin to 900.

As a result, each TH/s of computing power is now generating around 0.000008 bitcoin in 24 hours, worth around $0.08 at bitcoin’s current price.

“With the value of hashrate set to decrease to $0.075 cents per TH/s, not many of the existing, old-gen equipment will turn back on,” said Ethan Vera, co-founder and CFO of the Luxor mining pool. “New hashrate coming onto the market will likely be driven by new-gen and high-efficiency machines.”

Kevin Zhang, director of blockchain strategies at New York-based bitcoin mining-power plant hybrid Greenidge Generation, offered a similar view, saying the firm’s strategy is to stay competitive by procuring and running the latest-generation equipment.

“Despite limited price action, we expect the hash rate to continue rising in the near term as more older generation miners go offline and newer generation ones come online,” he said.

As a comparison, the most recent mining devices, like Bitmain’s AntMiner S19, can deliver computing power that’s nearly 10 times that of an older model like the AntMiner S9, but only consumes two times more power.

Read more: Bitmain’s Power Struggle Takes Toll on Customers as Co-Founder Halts Shipments

An on-going power struggle at Bitmain, the world’s largest bitcoin miner maker, will most likely cause delays to delivery of new mining equipment, said Vera, though he thinks the network’s hashrate could still reach 140 million TH/s by the year’s end.

“This is roughly in line with what the market is pricing in for FTX’s Q4 2020 Difficulty Futures,” Vera said.

Crypto derivative exchange FTX rolled out a bitcoin difficulty quarterly futures trading pair last month. Currently, the 2020 Q3 and Q4 futures are trading at around $18, reflecting an expectation that the average hash rate and mining difficulty could further go up by another 20% in the second half of the year.

• Bitcoin Mining Difficulty Drops 9% to January Levels
• Iranian Lawmaker Says Bitcoin Should Be Central Bank’s Turf

Canaan Creative’s stock dipped below $2, its lowest price since the firm went public in November. Experts say demand for new mining equipment may have weakened after the Bitcoin network’s halving event in May.

Meanwhile, the U.S. Air Force is using a blockchain startup to monitor its supply chain logistics, and an IT professional released a Bitcoin and Lightning node tool kit to spread the technology throughout Africa. Here’s the story:

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Related: Blockchain Bites: JPMorgan on Bitcoin, South Korea on CBDCs and the Porn Industry on Crypto

Emerging Markets
BlockSpace Technologies Africa Inc., run by IT guru Chimezie Chuta, has released a kit for a Bitcoin and Lightning node, including all the hardware pieces for assembly, called SpaceBox, in the hopes of expanding the technology’s use across the continent. According to Lightning Network Explorer, there are eight nodes total in the second most populous continent. Meanwhile, WhatsApp rolled out a Facebook Pay feature in Brazil, two years after it beta tested the feature in India, which makes sending and receiving money “as easy as sharing photos.” It’s unknown how this will affect the development of Libra, the stablecoin also bolstered by Facebook. (TechCrunch)

Equities
Tokensoft, a digital securities platform for enterprises and financial institutions, has partnered with New York-based Signature Bank in a bid to make security tokens click for real estate investors. Most of Tokensoft’s customers are mid-sized funds, meaning the platform will be handling larger transactions with lower volumes. Meanwhile, shares of Canaan Creative, one of the few publicly traded crypto miner manufacturers, plummeted below $2, its lowest price since going public in November. The Nasdaq-listed stock has been steadily falling since the bitcoin halving on May 11, which likely softened demand for new bitcoin mining machines.

Crypto Trading
Revolut, a FinTech bank, said it will cede its status as the “legal owner” of the five cryptos it offers to clients who purchase them next month. There’s a catch: Users “can’t transfer cryptocurrency to anyone who is not a Revolut customer,” the updated terms and conditions read, detailing that while users “have complete control” of their crypto, they “will not be able to carry out transactions” themselves. Meanwhile, Capital One Services, a subsidiary of U.S banking group Capital One, said its newly patented artificial intelligence (AI) system would save human crypto traders from potential pitfalls by “analyzing [the] credibility of cryptocurrency-related information.”

Blockchain Services
SIMBA Chain, a blockchain-as-a-service company with ties to the Department of Defense, has two years and $1.5 million to research and develop a blockchain for supply chain logistics for the U.S. Air Force. The firm will stand up a Hyperledger Fabric node at Oklahoma’s Tinker Air Force Base as part of the agency’s risk management strategy. Separately, blockchain payments provider Bitpay has launched a prepaid debit card enabling U.S. customers to spend their crypto holdings as fiat currency. Elsewhere, Alex Masmej unveiled “control my life,” a way for holders of his personal cryptocurrency, $ALEX, to vote on what he does with his time. (Decrypt)

Related: First Mover: Cardano’s No Ethereum Killer Yet, but It’s Winning in Crypto Markets

Institutional Interest
Over a recent 30-day period, the total open interest for CME bitcoin options increased more than tenfold, from $35 million on May 11 to $373 million on June 10. Moreover, open interest made a new all-time high on six consecutive days from June 5-10. Significant growth in CME futures points to rapidly growing interest by institutional investors in trading regulated bitcoin derivatives products. Elsewhere, MakerDAO and Lightning Labs are in World Economic Forum’s list of tech pioneers for 2020 (The Block)

US Supreme Court’s Computer Fraud Ruling Has Big Implications for Crypto
Andrew Hinkes, attorney with Carlton Fields, spells out how the U.S. Supreme Court’s hearing this summer on a key interpretation of the 1986 Computer Fraud and Abuse Act will affect the crypto industry. This law bars “accessing a computer without authorization.” A broad or narrow interpretation could criminalize common conduct or lead to increased protections for crypto users in cases of insider theft. “The outcome could have big implications for the cryptocurrency industry, which increasingly relies on legally enforceable privacy rights and the power of the law to ensure that intermediaries properly secure their customer’s digital assets,” Hinkes said. 

Going Negative Could Be Positive 
Whether or not the Federal Reserve eventually cuts interest rates to negative levels, it might be a case of heads, bitcoin wins; tails, bitcoin wins. Cryptocurrency analysts have said negative rates are a form of ultra-loose monetary policy, which should push inflation higher, potentially catalyzing interest in bitcoin, seen as an inflation hedge. But bitcoin might trade higher even if the Fed rejects negative rates outright because the U.S. central bank would instead probably just inject trillions more of freshly-created dollars into the financial system. Get the full First Mover report in your inbox.

Tracking Stocks
Bitcoin clocked highs near $9,600 this morning, having trapped bears on the wrong side of the market with a brief dip below $9,000 on Monday. Analysts say a risk reset in the traditional markets fueled bitcoin’s rise from $8,900 to $9,580 in the last 24 hours, as traditional equities also turned green. “Bitcoin has regained poise, possibly tracking the recovery in global stock markets,” said Asim Ahmad, co-chief investment officer at London-based Eterna Capital.

Dormant Coins
In other news, more than 60% of all bitcoins have not moved in at least a year. This suggests bitcoin ownership is consolidating, and investors who bought at the cycle bottom in 2018 have been reluctant to take profits and relinquish their bitcoin holdings. It’s been over four years since a percentage of supply this large has been inactive. 

Sorry, Bloomberg: Here Are 6 Reasons Why 2020 Is a Great Year for Bitcoin
Yesterday, a Bloomberg senior editor examined the “six reasons why 2020 was bad for bitcoin.” NLW responds with his own reasons why a year that saw economic uncertainty and new industry entrants has proven bitcoin’s resilience. 

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