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CoinDesk Crypto

Blockchain Bites: CZ’s Exclusive Interview, California’s Souped-Up Regulator, Alt Season’s End?

CoinDesk Crypto
6 years ago

California beefed up its financial regulator, Bitpanda closed a notable raise and some investors say “alt-season” is over. 

Top shelf

Brokerage raise
European crypto brokerage Bitpanda has raised a $52 million Series A led by Peter Thiel’s Valar Ventures, to be put to use expanding the company’s payroll and adding a variety of products. Next year the Vienna-based firm intends to expand to “all kinds of asset classes” including stocks. In an interview, the firm’s co-founders told CoinDesk’s Leigh Cuen France, Spain and Turkey were among the fastest-growing crypto markets out of the roughly 34 countries the platform serves.

Regulator reprised
California Gov. Gavin Newsom signed a bill on Friday that increases the scope of the state’s financial regulator. Renamed the Department of Financial Protection and Innovation, the agency is now equipped with “new tools to shape the regulation of virtual currency” and enhanced abilities to crack down on unlicensed or deceptive financial services and products. The new law will also create an Office of Financial Technology Innovation to engage with emerging financial products such as cryptocurrencies and a division to oversee markets. 

Related: First Mover: Binance CEO Sees Future in DeFi While Bitcoin Volatility Turns Minuscule

Hard fork
Artificial intelligence and data service Ocean Protocol has suspended its old contract on the Ethereum blockchain and hard-forked its project, following the $150 million KuCoin hack. On Sunday at 22:00 UTC, Ocean Protocol announced it had migrated from its old token address to a new one to thwart the KuCoin hacker’s attempts to offload 21 million OCEAN tokens worth some $8.6 million. “Moving contract addresses has effectively blacklisted the hacker’s stash of OCEAN tokens. But it also raises questions of the project’s true immutability if the protocol can be effectively hard-forked in one weekend,” CoinDesk’s Will Foxley reports.

Corporate statement 
Coinbase CEO Brian Armstrong published a blog Sunday calling the company “mission focused,” with the underlying message that it won’t engage on political or social topics outside its domain of open finance. That said, employees are expected to pursue social activism in their own time. CoinDesk’s Paddy Baker reports the blog has “split the crypto industry straight down the middle,” with many commending the public stance while others deem it regressive. For instance, Boost VC’s Adam Draper said focusing on a “unified mission” was the only way to achieve its goals. Others in the Twitterverse have called the message out-of-touch, and a way to downplay issues that directly affect employees’ lives.

Maker doubts?
A class-action lawsuit alleging the Maker Foundation and others knowingly misrepresented the risks of investment has been sent to arbitration. The case centers around plaintiffs who claim to have incurred six-figure losses during the “Black Thursday” crash in mid-March and allegations that Maker’s stewards misrepresented the security and collateralization of the platform. The DAI stablecoin is over-collateralized, they argue. In an order last Friday, Judge Maxine Chesney granted a motion by the Maker Foundation to refer the case to the American Arbitration Association as specified in a clause in the foundation’s terms of service.

Quick bites At stake

DeFi v. CeFi
In an exclusive CoinDesk interview, Binance CEO Changpeng “CZ” Zhao said he fully expects decentralized finance (DeFi) to cannibalize his own crypto exchange. 

Related: Blockchain Bites: DeFi Meets NFTs, TSLA Beats Bitcoin in Volatility, Uniswap Breaks $2B

“Our mission is not to build a CeFi exchange,” Zhao said in an interview with CoinDesk’s Muyao Shen, using a shorthand term for centralized finance. “Right now it is one of our larger businesses that support our growth. But over the long term, we want to push decentralization.”

Zhao’s comments reflect the growing competition between centralized exchanges and their more community-driven alternatives. Faced with quick-moving projects that can iterate week to week, Zhao is tasked with evolving the world’s largest crypto exchange (by volume) to something that can meet the moment. 

At a micro-scale this battle played out between Uniswap, a venture-backed automated market maker (AMM), and its upstart clone Sushiswap, which features a governance token. As reported, Uniswap responded to the challenger by integrating its own governance token – a means to spreading the wealth among its community members. 

Uniswap is part of the DeFi ecosystem currently threatening exchanges like Binance, Huobi and Coinbase. In recent months, Binance has been targeting the DeFi ecosystem as a growth sector. 

“The company’s new foray into DeFi, Binance Smart Chain, attempts to replicate some of the features of the Ethereum blockchain that have proven fertile for developers building decentralized, blockchain-based trading and lending applications that theoretically could one day challenge traditional lenders and Wall Street trading firms,” Shen reported. 

But building decentralized systems is difficult. The Binance Smart Chain is run by only 21 nodes and the majority stakeholder of its native BNB tokens remains Binance.

Zhao said this comparatively centralized structure was to better compete with Ethereum. 

“So in my mind, I’m never worried about the business model,” Zhao said. “I’m always much more worried about if we have users using the product. There’s always multiple options for business models, so the key is to build something that’s useful.”

Market intel

Alt-season?
Some digital asset traders say they’ve been rotating funds out of alternate cryptocurrencies (altcoins) into bitcoin (BTC) in anticipation of the leading cryptocurrency significantly outperforming the entire crypto market for at least the next several months. CoinDesk’s Zack Voell reports bitcoin is down so far in September, dropping more than 10%. Still, bitcoin became “under owned” during the DeFi craze, according to Kyle Davies, a prominent DeFi investor and co-founder of Three Arrows Capital, and likely correction is due to follow. Kevin Zhou, co-founder of San Francisco-based Galois Capital, outlined a similar theory. 

Tech pod

Latest testnet
Ethereum 2.0 developers have launched yet another testnet, this time to give on-boarding stakers a dry run before the launch of Eth 2.0 sometime this fall. The testnet, called Spadina, follows the official Ethereum Foundation’s Medalla testnet which launched in early August and will only be in use for the next three days while Eth 2.0 stakers practice joining the network with the testnet. “The main objective is to give us all another chance to go through one of the more difficult and risky parts of the process – deposits and genesis – before we reach mainnet,” Ethereum Foundation researcher Danny Ryan blogged.

Op-ed

Rethink
CoinDesk Executive Editor, Operations & Strategy Pete Pachal penned a response to Coinbase CEO Brian Armstrong’s recent public statement and the division his “mission-focused” stance has stirred. “Armstrong’s position isn’t a message to Silicon Valley heavyweights to turn back the clock on employee “wokeness” – it’s an open letter to every other corporate leader, urging them to connect the dots between the political positions they might be taking and the central mission of their companies. And if the result is a picture they don’t like, rethink,” Pachal writes. 

Stability?
Shiv Malik, author and head of growth at Streamr, thinks crypto needs a euro-pegged stablecoin. The U.S.’ recent social and political upheavals are placing serious strain on the dollar’s future hegemony. “And if America is so precariously balanced between further prosperity and potential disaster, so, too, rests the fate of the U.S. dollar for the rest of the world. Just the issue of U.S. Treasury debt issuance alone has had professional money managers warning this month that the U.S.’s reserve currency status is under threat,” he writes. 

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Permission.io Has Quietly Raised $50M to Make Advertising Personal and Data Private

CoinDesk Crypto
6 years ago

Permission.io is a platform that pays users in ASK tokens for engaging with, or even looking at, ads. Built on a fork of the Ethereum blockchain, the Permission platform incentivizes users to grant advertisers and other merchant participants access to their time and data in a peer-to-peer way. 

Over the past 12 months, the startup has raised $5 million through a token pre-sale, and recently closed another round of funding that put the company at $47 million raised through equity financing. And since the platform came out of beta a few weeks ago, it has over 450,000 users, according to the company. 

“Our model is all about advertisers being able to pay individuals directly through crypto, where advertisers’ return on their investment will go up dramatically,” said Permission CEO Charlie Silver. “Everybody’s happy and everybody wins. The user is now being compensated for what typically, today, companies like Google and Facebook are being compensated for.”

Related: Regulated US Exchange Gemini Now Offers Confidential Zcash Withdrawals

See also: Twetch Launches Encrypted Messaging, In-Chat Payments on BSV Blockchain

Data ownership: How users give Permission

The idea of shifting the benefits of ads back toward users and advertisers rather than middle men isn’t necessarily new. The Brave browser, for example, has let its users choose whether or not to turn on their rewards token system in exchange for viewing ads since its official launch in 2019. 

Silver, while complimenting Brave’s leadership in the area, is quick to point out how Permission is different. He said Brave is purely a browser that collects no data, contending the ads people are served are random.

Permission, on the other hand, allows people to be served ads through their “behavioral data.” Behavioral data means ads are served based on activities such as brand interactions and content consumption. 

Related: New Blockchain Program Aims to Counter Fake Viewer Data, Scam Ads

“By the end of the year, users will have access to a feature called ‘MyData,’ which will allow them to input specific data points around preferences that will create even more precise ad targeting, and also restrict the ability of brands to reach users that aren’t interested in their products,” said Silver. 

Silver said this tool will allow users to directly revoke or manage their data, with Permission acting as an agent for this data rather than a middle man.

All data generated through Permission, regardless of source, is anonymized on the advertiser end, according to SIlver. While Permission will know which data is tied to a person (for the purpose of awarding ASK Coins) advertisers won’t be able to link it to an individual. 

See also: Tor Project Launches Membership Program to Boost Agility, Funds

The startup has integrated with the payments provider CoinPayments, which is accepted by over 3,000 merchants and retailers, to enable people to use various cryptocurrencies like ASK for online purchases. 

When you sign up for Permission, you earn some ASK for doing so. You’re then free to go throughout the platform and “shop and discover product videos that would be of interest to you,” according to Silver. 

Tailored advertising: How merchants get Permission

There are two ways that merchants can connect with customers through Permission. First, Permission hosts its own Shopify store where it lists all the participating merchants in its program. 

Second, Permission enables merchants to install its plugin on their own Shopify store sites.

“We’ve built plugins for Shopify and Magento, so e-commerce merchants can simply install a plugin, which will allow them to offer ASK on their site and reward their customers,” said Silver. “So on Permission we’re working to show the efficacy of this kind of permission-based ad delivery.”

For example, a shoe store on Shopify could plug into Permission and display its ads in the Permission marketplace, reward people with ASK for viewing tailored advertising, and then let people purchase their goods in the Permission.io marketplace, using ASK. 

To test this, I logged onto Permission.io (I earned 100 ASK for doing so), and was taken to the marketplace dashboard, where a number of ads were displayed to me. One was for a pair of steel-toed sneakers, and I clicked on it.

After watching a 30-second video of someone jumping around in the sneakers and having their steel toe-protected foot rolled over by a car, I earned 100 ASK.

At this point I only had 200 ASK in my wallet, but if I were to complete enough tasks and earn enough ASK, I could spend it on these sneakers, foregoing U.S. dollars. 

See also: Social Engineering: A Plague on Crypto and Twitter, Unlikely to Stop

“While we will promote those stores on our platform, ultimately we’re looking to help eCommerce merchants drive traffic and conversion to their own stores,” said Permission CTO Hunter Jensen. “By installing our plugin, users will interact with the merchant’s store but will be able to earn ASK along the buying journey.”

Silver said he thinks the Permission model is a key part of data ownership and sovereignty, based around the user, rather than companies like Google and Facebook. 

“Our goal is to really build what we call the permission economy, where millions of websites are offering their users ASK to engage with them on various levels,” said Silver.

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Bitcoin May Return to Center Stage After Ethereum’s White-Hot Summer

CoinDesk Crypto
6 years ago

With the U.S. elections just five weeks away, the crypto market’s focus looks to be shifting back to bitcoin and away from ether and the Ethereum ecosystem.

  • The spread between the six-month implied volatility (IV) for ether (ETH) and bitcoin (BTC), a measure of expected relative volatility between the two, fell to a 2.5-month low of 4% over the weekend, according to data source Skew. 
  • The metric has declined from 21% over the past four weeks.
  • The spread’s reduction indicates that the market doesn’t expect a lot of dispersion between the two coins and foresees ether trading in line with bitcoin in the near term.
  • Implied volatility is the market’s expectation of how risky or volatile an asset would be over a specific period and is driven by net buying pressure for options and historical price volatility.
  • “The decline could signal a change in market leadership back to bitcoin after a couple of months focus on the Ethereum complex,” Skew’s CEO Emmanuel Goh told CoinDesk.
  • Bitcoin has matured as a macro asset since the beginning of the coronavirus crisis in March.
  • As such, it could lead the price action in crypto markets in the run-up to and following the Nov. 3 U.S. presidential election, which could be the most contentious in recent decades and have a significant impact on traditional markets.
  • The six-month ether-bitcoin IV spread rose sharply from 0.9% to 15% in July and reached a high of 21% in mid-August, as the decentralized finance (DeFi) boom boosted interest in ether.
  • The total value locked in the DeFi platforms, most of which are based on Ethereum’s blockchain, quadrupled to over $8 billion in July-August and recently rose to record highs above $11 billion, according to DeFi Pulse.com.
  • As such, ether options drew greater demand than bitcoin, leading to a rise in volatility spread. Options are hedging instruments that give holders the right to buy or sell an asset at a predetermined price.
  • “ETH volatility had gone to a premium due to increased demand for options at higher prices. That demand is now subduing a bit, and leading to a mean reversion in the ETH-BTC volatility spread,” Vishal Shah, an options trader and founder of Polychain Capital-backed derivatives exchange Alpha5, told CoinDesk in a Telegram chat.
  • The ether-bitcoin one-month realized correlation coefficient has also risen back to 0.80, having declined from 0.90 to 0.57 in July-August, as per data provided by Skew. A coefficient of 1.0 means two assets are perfectly correlated while 0.0 means they are not correlated at all.
  • At press time, bitcoin is trading at $10,750, having faced rejection near $11,000 on Monday, according to CoinDesk’s Bitcoin Price Index.
  • While ether has rallied by 58% this quarter, bitcoin has gained just 18%.

Also read: Bitcoin Has Been Less Volatile Than Tesla Stock for Months

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KuCoin Maintains Wallet Freeze as Hackers Begin Laundering Stolen Crypto

CoinDesk Crypto
6 years ago

KuCoin left its customers’ accounts on lockdown Tuesday as the exchange’s weekend hackers continued to slosh around millions of dollars in stolen cryptocurrency.

  • Transaction tracing twitter account Whale Alert flagged 18.4 million XRP tokens ($4.5 million) flowing into a “hack wallet” on Tuesday morning eastern time.
  • Hackers routed 17 million of that haul into a sub-wallet less than an hour later. Shortly after that, four batches of roughly four million tokens apiece flowed into yet more sub-wallets, where they appeared to sit at press time.
  • The XRP is only a drop of the $281 million in cryptocurrencies (especially bitcoin, Tron tokens, Stellar tokens and Ethereum tokens) that tracing firm Elliptic estimated was stolen from KuCoin over the weekend.
  • Ethereum-based tokens in particular dominate the haul. Hackers made off with $150 million total in tether, chainlink and other Ethereum-based tokens, Elliptic said.
  • The hackers have largely failed to sell those tokens on closely guarded centralized exchanges which quickly flag and often block hacked funds.
  • Still, by Monday, Elliptic said that hackers had already flipped millions of stolen tokens for $7.5 million in ethereum (ETH) on decentralized exchanges (DEX) Kyber Network and Uniswap.
  • Elliptic, which is now eyeing that ETH, said in its Monday blog post that the laundering will likely continue on DEXs.
  • KuCoin maintained its post-hack deposit and withdrawal freeze well into Tuesday. It began cancelling previously scheduled programming (including a trading competition) as a result.
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Regulated US Exchange Gemini Now Offers Confidential Zcash Withdrawals

CoinDesk Crypto
6 years ago

Gemini, one of a handful cryptocurrency exchanges regulated in New York, has said users can now withdraw privacy coin zcash confidentially.

  • The New York-based exchange said in a blog post Tuesday it had added “shielded” zcash withdrawals – meaning users can take assets off the platform without disclosing their identities or the size of their transactions.
  • The addition comes after Gemini received approval from the New York Department of Financial Services.
  • The exchange claims it’s the first time shielded zcash transactions have ever been supported on a regulated exchange.
  • “[W]ith the right controls in place and the proper education, regulators can get comfortable with privacy-enabling cryptos,” the blog post reads.
  • “This announcement demonstrates that zcash is compatible with a robust AML/CFT regulatory regime,” Jack Gavigan, head of regulatory relations at the cryptocurrency’s lead developer, Electric Coin Company, said in a statement, referring to anti-money laundering/combating the financing of terrorism.
  • Gemini, which only supports 24 digital assets, first listed zcash back in 2018. It has been registered under a Limited Purpose Trust Charter – which authorizes it to perform certain bank-like functions – since 2015.
  • Although users have been able to deposit zcash into Gemini with the shield feature, they have previously been forced to turn off privacy settings in order to withdraw assets from the platform.
  • A Gemini spokesperson declined to provide further comment, pointing CoinDesk instead back to its blog post.
  • Last year, several exchanges dropped zcash and other privacy coins, citing regulatory compliance and concerns over money laundering.

See also: Gemini Exchange Launches in UK After Being Awarded EMI License

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CoinDesk

Investors Flock to India’s DeFi Scene Months After Central Bank Ban Overturned

CoinDesk Crypto
6 years ago

Six months after India’s highest court overturned a banking ban on crypto companies, investors have jumped at the chance to back decentralized finance (DeFi) projects hailing from the subcontinent.

  • DeFi protocols UniLend Finance and PlotX announced Tuesday they had both successfully completed their seed rounds.
  • UniLend, a lending protocol, raised $3.1 million in a round led by Woodstock Fund, which includes data oracle provider, Band Protocol, in its portfolio.
  • (Disclosure: The author of this article has previously worked for one of the investors in UniLend, but has no current relationship.)
  • Meanwhile, DeFi prediction market platform PlotX raised $2.4 million in seed, including a commit from NGC, whose portfolio ranges from Algorand and Zilliqa.
  • The appeal of DeFi for investors has rapidly grown, as total value locked (TVL) increased more than tenfold over the summer, according to DeFi Pulse.
  • Just in the past couple of weeks, Linear Finance has finalized a $1.8 million seed round, and Dune Analytics, which specializes in providing data on the DeFi space, raised $2 million.
  • The raises for UniLend and PlotX come as the local cryptocurrency industry is finding its feet again after the Supreme Court of India overturned a two-year ban, imposed by the Reserve Bank of India (RBI), that prevented cryptocurrency companies from accessing mainstream financial services.
  • Speaking to CoinDesk, a UniLend spokesperson said the lifting of the ban had been part of a broader thaw, as India’s government becomes “increasingly progressive” on the question of cryptocurrencies and blockchain.
  • The spokesperson added that investors are turning to India as the hub for promising new blockchain projects.
  • “With such a strong base of developer talent and a rapidly growing community of crypto enthusiasts, India is poised to become a leading hub of blockchain innovation and people are increasingly recognizing this,” they said.

See also: India May Be Starting Its Biggest Bitcoin Bull Run Yet

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CoinDesk

First Mover: Binance CEO Sees Future in DeFi While Bitcoin Volatility Turns Minuscule

CoinDesk Crypto
6 years ago

It might be part of every job in crypto to anticipate and react to fast-moving developments that seemingly change the industry’s direction overnight. 

And apparently not even Changpeng “CZ” Zhao, the high-profile leader of Binance, the world’s largest cryptocurrency exchange, is immune to the industry’s capricious shifts. 

In a video interview with CoinDesk’s Muyao Shen, Zhao acknowledged that the emerging blockchain sector of decentralized finance, known as DeFi, could eventually upend the business that Binance has grown to dominate: running a centralized cryptocurrency exchange.

Related: Investors Flock to India’s DeFi Scene Months After Central Bank Ban Overturned

“Our mission is not to build a CeFi exchange,” Zhao said in the interview, using a shorthand term for centralized finance. “Right now it is one of our larger businesses that support our growth. But over the long term, we want to push decentralization.”

The company’s new foray into DeFi, Binance Smart Chain, attempts to replicate some of the features of the Ethereum blockchain that have proven fertile for developers building decentralized, blockchain-based trading and lending applications that theoretically could one day challenge traditional lenders and Wall Street trading firms. 

Like rival cryptocurrency exchanges OKEx, Huobi and Coinbase, Binance is trying to hold on to its central role in digital-asset markets as upstart DeFi projects like Uniswap, Curve, Balancer and SushiSwap attract a bigger share of industry trading volumes. Zhao says he’s open to the idea that Binance may have to adapt its business model to stay relevant, especially with total collateral locked into DeFi protocols surging 16-fold this year to $11 billion.

In designing Binance Smart Chain, the company had to sacrifice elements of decentralization to compete against Ethereum and protect the company’s brand. Binance Smart Chain is controlled by 21 node operators, which are elected by Binance Coin (BNB) holders. But because the company is one of the largest holders of the BNB tokens, it retains significant control over the project’s direction. 

Related: Ethereum 2.0 Developers Launch Spadina, a Three-Day Practice Testnet

“There is a trade-off between more decentralization versus speed, so we thought that 21 nodes run by the community is probably enough,” Zhao said in the interview.

Read More: Binance CEO Says He Fully Expects DeFi to Cannibalize His Crypto Exchange

Bitcoin Watch

With the U.S. elections just five weeks away, the market focus looks to be shifting back to bitcoin from ether. 

The spread between the six-month implied volatility (IV) for ether (ETH) and bitcoin (BTC), a measure of expected relative volatility between the two, fell to a 2.5-month low of 4% over the weekend, according to data source Skew. 

The IV spread peaked at 21% in mid-August and has been declining ever since. 

“The decline could signal a change in market leadership back to bitcoin after a couple of months focus on the Ethereum complex,” Skew’s CEO Emmanuel Goh told CoinDesk. 

The impending U.S. elections could be the most contentious in modern history and have a significant impact on traditional markets. As such, bitcoin, which some investors argue has evolved into a macro asset over the past six months, could lead the price action in the crypto markets in the near term. 

– Omkar Godbole

Token Watch

Filecoin IOU (FIL): Three years after $257 million initial coin offering, blockchain-based data-storage provider says main network is set to launch around mid-October. 

Ocean Protocol (OCEAN): Artificial intelligence and data service suspends old contract on Ethereum blockchain and hard-forks project to help thwart $150 million KuCoin hack. 

What’s Hot

Coinbase CEO Brian Armstrong’s we-don’t-engage-societal-issues stance draws Twitter jeers alongside the cheers (CoinDesk)

California enacts new consumer financial protection law with new rules and research efforts for cryptocurrencies (CoinDesk)

European crypto brokerage Bitpanda gets $52M Series A funding led by Peter Thiel’s Valar Ventures (CoinDesk)

CFTC charges firm with illegally providing leveraged trading of crypto, gold (CoinDesk)

Publicly traded crypto mining equipment maker Ebang blames coronavirus for 51% 1H 2020 revenue plunge (CoinDesk)

Crypto’s dependence on U.S. dollar could prove its undoing, Shiv Malik writes (CoinDesk)

Silvergate Bank’s deposits stagnate despite utility of SEN instant payment network (CoinDesk Research)

Analogs The latest on the economy and traditional finance

U.S. House Democrats release new $2.2T stimulus proposal (Bloomberg)

Consumers expect stimulus to remain in place with continued government support, surveys from the Federal Reserve Bank of New York’s Center for Microeconomic Data show (New York Fed)

Low interest rates are worsening retirement prospects worldwide (Bloomberg)

Just as Fed-fueled stocks rally fades, giant public pension systems decide maybe they’re missing out and should allocate more money into equities (WSJ) 

Amnesty International is suspending operations in India after New Delhi froze its bank accounts in response to criticism of Prime Minister Modi’s government (FT)

Global equities rally cools ahead of U.S. election debate (FT)

The U.S. economic response to coronavirus crisis “sparked a massive stock-market rally that left the rest of the world in the dust” (CNBC)

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CoinDesk

Coda Protocol Changes Name After Trademark Dispute With R3

CoinDesk Crypto
6 years ago

O(1) Labs-led lightweight blockchain project Coda Protocol is being relaunched under a new name: “Mina.” 

The name change follows a confidential settlement reached between O(1) Labs and R3, a software and blockchain development firm. A trademark infringement lawsuit filed by R3 in October last year alleged that the name Coda was similar enough to R3’s Corda blockchain, and could possibly confuse prospective clients. 

  • Although court documents show the lawsuit was dropped by R3 in December 2019, O(1) labs is now renaming the blockchain and phasing out its usage of Coda. 
  • While O(1) labs said that settlement reached in the trademark dispute was confidential, a letter undersigned by the newly minted Mina community seemed to express some dissatisfaction. “Yes, you’re bigger and have more money than us – but we’ve got more important things to do. So today, we’re saying goodbye to Coda,” read the letter addressed to R3.
  • The lightweight blockchain, which claims that it will always stay the same size – 22 kilobytes – is currently in its testnet phase. 

Also read: Coda Protocol Hoping to Expand User Base by Teaching People How to Run Nodes for Free

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CoinDesk

SEC Won’t Take Action Against Compliance-Focused Digital Security Exchanges

CoinDesk Crypto
6 years ago

The Securities and Exchange Commission (SEC) has said digital security exchanges that ensure assets on their books are legitimate in origin can continue to operate unhindered.

  • In a letter to a senior executive at the Financial Industry Regulatory Authority (FINRA), Wall Street’s self-regulatory body, the SEC’s trading and markets division said exchanges that go to lengths to comply with existing regulation will not face sanctions.
  • As well as conforming to federal securities law, the SEC, which has jurisdiction over FINRA, said such entities will need to introduce procedures that assess if listed digital securities have been sold legitimately throughout their lifetimes.
  • This includes checking the initial offering was either properly registered or came under a valid exemption, as well as ensuring secondary market transactions are also compliant.
  • The SEC’s clampdown on initial coin offerings (ICOs) means it is often characterized as the industry’s boogeyman.
  • But as the tokenized version of an already heavily regulated asset class, digital security offerings already largely comply with federal law.
  • Thus, issuers have already used some of the exemptions allowing them to host a sale without first registering as a public company.
  • Indeed, in recent months, the SEC has made steps to better accommodate these sorts of offerings. It published a proposal in March to increase the amount startups can raise under an SEC exemption.
  • In the summer, an SEC-registered broker-dealer unveiled plans to launch the first security token platform that can also be used to host compliant offerings.
  • FINRA itself has made tentative moves to move forward with the security token industry and just this month approved tZERO’s plans to launch a retail-focused broker-dealer.
  • As the crusade against unregulated ICOs fades, U.S. regulators, the SEC in particular, may well be preparing the ground for a host of compliant digital security offerings.

See also: SEC Seeking ‘Smart Contract’ Tracing Tool That Can Spot Security Vulnerabilities

Read the letter in full here:

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CoinDesk

Traders Rotate to Bitcoin Expecting a Quiet Q4 for Altcoins

CoinDesk Crypto
6 years ago

Some digital asset traders say they’ve been rotating funds out of alternate cryptocurrencies (altcoins) into bitcoin (BTC) in anticipation of the leading cryptocurrency significantly outperforming the entire crypto market for at least the next several months. 

Kevin Zhou, co-founder of San Francisco-based Galois Capital, told CoinDesk his firm is now bullish on bitcoin and expects the upward altcoin trend of the last few months to revert into several months of downward price action. 

During months of sustained excitement over new decentralized finance (DeFi) protocols and various altcoins, bitcoin became “under owned,” according to Kyle Davies, a prominent DeFi investor and co-founder of Three Arrows Capital. 

Related: CFTC Charges Firm With Illegally Providing Leveraged Trading of Crypto, Gold

Bitcoin is down so far in September, dropping more than 10%. But with a subsiding of the DeFi craze and yields “collapsing,” Davies said he expects investor interest to pivot from altcoins toward bitcoin.

Two futures indices recently launched by FTX reflect the recent cooling off in the altcoin market. After consistent double-digit percentage gains since April, the exchange’s Decentralized Finance and S**tcoin indexes have both dropped by double digits this month. 

In 2020, altcoins with lower market capitalizations significantly outperformed BTC and ether ETH thanks in part to global financial markets recovering and stabilizing “a bit,” said Ryan Watkins, bitcoin analyst at Messari.

Also aided by the DeFi and yield farming frenzies, most of the significant altcoin returns started in the second half of the year as tokens like COMP and YFI came onto the market.

Related: First Mover: Bitcoin Low Exchange Balance Looks Bullish but Chart Looks Bearish as $11K Nears

As Q4 approaches and returns for altcoins have started to cool off, some professional cryptocurrency traders are betting on significant upside for bitcoin amid continued downside for altcoins. 

“The market owns too much stablecoin and non-bitcoin,” Davies told CoinDesk, betting that cryptocurrency investors will rebalance toward bitcoin and away from altcoins for now.

September’s moderate altcoin sell-off could extend beyond Q4, however, according to Zhou who told CoinDesk that, although he’s not a fan of making predictions, this month’s downward trend for altcoins could last for “at least a year.”

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CoinDesk

Ethereum 2.0 Developers Launch Spadina, a Three-Day Practice Testnet

CoinDesk Crypto
6 years ago

Ethereum 2.0 developers have launched yet another testnet, this time to give on-boarding stakers a dry run before the launch of Eth 2.0 sometime this autumn.

Called Spadina after a subway stop in Toronto, the testnet follows the official Ethereum Foundation’s Medalla testnet, which launched in early August. 

Developers will only be supporting Spadina for the next three days while Eth 2.0 stakers practice joining the network with the testnet, said Ethereum Foundation researcher Danny Ryan in a Sept. 14 blog.

Related: First Mover: Binance CEO Sees Future in DeFi While Bitcoin Volatility Turns Minuscule

“The main objective is to give us all another chance to go through one of the more difficult and risky parts of the process – deposits and genesis – before we reach mainnet. If all goes well, it should give us greater peace of mind before we jump into the real deal later this year,” Ryan said.

Read more: Everything You Need to Know About Ethereum 2.0

The release of Eth 2.0 – a fully functional Proof-of-Stake (PoS) blockchain to replace the current Proof-of-Work (PoW) Ethereum mainchain – has been years in coming. An official launch date has not yet been given, but is expected before the end of 2020.

Testnets

Testnets practicing different parts of Eth 2.0’s launch began rolling out in 2019.

Related: Binance CEO Says He Fully Expects DeFi to Cannibalize His Crypto Exchange

The Eth 2.0 software is maintained by five separate teams that have programmed the same central specification in different computer languages. Writing and developing those languages has been the main hurdle to deploying the project in a timely manner.

Medalla is the first Ethereum Foundation–backed testnet of Eth 2.0 phase 0. That testnet was preceded by a slew of others such as Goerli and Schlesi. The PoS version of Ethereum will deploy in at least three phases, according to current schematics. 

Read more: Ethereum 2.0 Testnet Medalla Goes Live With 20,000 Validators

Structurally, phase 0 is comprised of the Beacon chain, a central coordinator of the future multi-chained Eth 2.0 network. Once enough Ethereum investors have deposited ether (ETH) into the new blockchain’s deposit contract, the Beacon chain can begin validating transactions.

Those ether holdings work as skin in the game for those participating on the new blockchain. Stakers validate transactions and receive staking rewards in return. Ether deposits are slashable in the case that multiple investors try to collude against the blockchain by validating invalid transactions.

Yet, the process of moving ETH from one blockchain to another can be difficult for investors, particularly for those new to the space. In that vein, Eth 2.0 developers opted to have yet another testnet to practice moving funds over to the Beacon chain.

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CoinDesk

$28M MakerDAO ‘Black Thursday’ Lawsuit Moves to Arbitration

CoinDesk Crypto
6 years ago

A class-action lawsuit alleging the Maker Foundation and others associated with lending platform MakerDAO knowingly misrepresented the risks of investment has been stayed and the case sent to arbitration.

  • In an order last Friday, Judge Maxine Chesney granted a motion by the Maker Foundation to refer the case to the American Arbitration Association as specified in a clause in the foundation’s terms of service.
  • In the lawsuit filed in April, plaintiff Peter Johnson claimed the Maker Foundation, the Maker Ecosystem Growth Foundation and the Dai Foundation knowingly deceived investors, describing it as being a more secure investment than other assets because its DAI stablecoin is over-collateralized.
  • The plaintiff claimed he and other investors each endured six-figure losses when the price of DAI’s primary collateral, ether (ETH), dropped sharply in the March 12 “Black Thursday” crash, liquidating thousands of collateralized debt positions (CDPs) held by investors.
  • That was despite being assured that the over-collateralization policy would safeguard against large drops in the value of ether and result in a maximum 13% loss, Johnson claimed.
  • According to the project’s white paper, the 13% figure is not a hard cap but may vary dependent on internal conditions in the Maker ecosystem, though the plaintiff claimed that various Maker products state the figure is the maximum strike.
  • Johnson claimed to have lost more than $200,000-worth of ether during the crash.
  • By bringing the matter to court, Maker has argued that Johnson acted in defiance of the arbitration clause he agreed to when signing the terms of service in 2018.
  • Johnson attempted to counter in August, claiming Maker’s 2018 agreement was based on an outdated and “now abandoned product,” but the court rejected that claim on Friday.
  • Legal proceedings have now been halted until the arbitration proceedings have been settled, vacating a previously scheduled court hearing on Oct. 2.
  • The plaintiff had been expecting to have up to 1,000 members join the lawsuit seeking damages equivalent to the total claimed losses of around $8.325 million, plus punitive damages of $20 million.
  • It’s not clear how many investors had joined the class action.

See also: MakerDAO Users Hosed by March Flash Crash Won’t Get MKR Payouts, Say MKR Whales

Read the court document in full below:

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CoinDesk

Silvergate Bank: How Deep Is the Moat?

CoinDesk Crypto
6 years ago

While not often in the limelight, Silvergate Bank serves as an integral part of the cryptocurrency ecosystem.

It’s often claimed by crypto-enthusiasts that bitcoin will eventually displace the financial system as we know it. As it stands today, however, banks still play the pivotal role of fiat on/off ramps for exchanges and investors.

CoinDesk Research presents an in-depth look into San Diego-based Silvergate Bank, a leading bank serving the cryptocurrency industry. With over 880 digital asset clients with an aggregate balance of $1.5 billion in deposits, Silvergate is one of the market leaders within this niche market.

Related: Around the Crypto World in 15 Charts: CoinDesk Research’s August Review

Some takeaways:

  • Due to increased levels of risk and higher compliance requirements, there exist only a handful of U.S. banks, including Silvergate, who provide banking services to cryptocurrency customers.
  • Silvergate sets itself apart through its deep list of industry connections as well is its unique products that cater to the digital asset industry such as its instant payment network, SEN.
  • The total amount of customers continues to increase, but Silvergate’s deposits have failed to grow over the past two years. Despite the utility of SEN, management notes that they have experienced deposit outflows to competitors offering yield on deposits unlike Silvergate whose deposit base is almost exclusively non-interest bearing.
  • As the space matures, it’s likely more banks will feel compelled to service the crypto market, just as JPMorgan recently announced its acceptance of Coinbase and Gemini as its first digital asset customers. This type of development could be a major cause for concern for Silvergate as it competes with much larger financial institutions with more access to capital. Should this become the case, it will become crucial for Silvergate to deepen its competitive moat by boosting SEN’s utility.

Read the full report here.

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CoinDesk

Relief and Regret: Crypto Twitter Reacts as Coinbase Says ‘No’ to Corporate Activism

CoinDesk Crypto
6 years ago

Coinbase’s Brian Armstrong dropped a bombshell on corporate America and the culture wars when he told employees, firmly, to keep activism out of the workplace.

In a blog post on Monday, Armstrong said Coinbase employees should be “laser-focused” on the company’s mission: to create an open financial system for the world. The message is clear: Coinbase won’t touch topics unrelated to its business and it expects employees to pursue social activism on their own time.

Armstrong predicted his blog might stir up some controversy. He was right. Twelve hours after publication, the post has split the crypto industry straight down the middle. Some have come out in praise of Armstrong’s public stance; others have criticized it as regressive and out of touch with the times.

Related: First Mover: Binance CEO Sees Future in DeFi While Bitcoin Volatility Turns Minuscule

Some supporters responding to Armstrong’s tweet picked up on the theme that business leaders should remove unnecessary distractions from the workplace. Building a business is hard enough, said Messari’s Ryan Selkis, “without feeling the need to build a pitch-perfect political platform.” Boost VC’s Adam Draper said focusing on a “unified mission” was the only way companies get things done.

Similarly, former Coinbase Vice President Dan Romero, who left last year, tweeted that “resolutely pursuing” the corporate mission of building an accessible finance system would do more social good for countries outside the U.S.

See also: Coinbase Has Drawn a Line in the Sand for Its Activist Employees

But not everyone saw it that way. Likely anticipating the negative reaction to his blog, Armstrong restricted comments to the Twitter accounts he followed. The only critical one, on his thread anyway, came from Reuben Bramanathan, a lawyer and former product manager at Coinbase, who said the exchange shouldn’t use its mission statement to ignore problems of inequality and injustice.

Related: Coinbase Has Drawn a Line in the Sand for Its Activist Employees

Others on a separate thread – where replies weren’t restricted – accused Coinbase of trying to bury its head in the sand. Coinbase and its employees are part of American society and can’t close the blinds on issues that directly affect their lives, both in and outside of work, said one.

Some highlighted that such a narrow focus on the mission might harm Coinbase’s business in the long run. One said the stance could inadvertently shrink the pool of talent willing to work at the exchange. Another, that screening for just the mission could likely lead to the wrong sort of people – those unable to handle and manage different objectives and perspectives – working at the company.

See also: Activists Document Police Misconduct Using Decentralized Protocol

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CoinDesk

Relief and Regret: Crypto Twitter Reacts as Coinbase Says No to Corporate Activism

CoinDesk Crypto
6 years ago

Coinbase’s Brian Armstrong dropped a bombshell on corporate America and the culture wars when he told employees, firmly, to keep activism out of the workplace.

In a blog post on Monday, Armstrong said Coinbase employees should be “laser focused” on the company’s mission: to create an open financial system for the world. The message is clear: Coinbase won’t touch topics unrelated to its business and it expects employees to pursue social activism in their own time.

Armstrong predicted his blog might stir up some controversy. He was right. Twelve hours after publication, the post has split the crypto industry straight down the middle. Some have come out in praise of Armstrong’s public stance; others have criticized it as regressive and out of touch with the times.

Related: Coinbase Has Drawn a Line in the Sand for Its Activist Employees

Some supporters responding to Armstrong’s tweet picked up on the theme that business leaders should remove unnecessary distractions from the workplace. Building a business is hard enough, said Messari’s Ryan Selkis, “without feeling the need to build a pitch-perfect political platform.” Boost VC’s Adam Draper said focusing on a “unified mission” was the only way companies get things done.

Similarly, former Coinbase vice president Dan Romero, who left last year, tweeted that “resolutely pursuing” the corporate mission of building an accessible finance system would do more social good for countries outside the U.S.

See also: Coinbase Has Drawn a Line in the Sand for Its Activist Employees

But not everyone saw it that way. Likely anticipating the negative reaction to his blog, Armstrong restricted comments to the Twitter accounts he followed. The only critical one, on his thread anyway, came from Reuben Bramanathan, a lawyer and former product manager at Coinbase, who said the exchange shouldn’t use its mission statement to ignore problems of inequality and injustice.

Related: Why Bitcoin’s Longest Run Above $10,000 Matters

Others on a separate thread – where replies weren’t restricted – accused Coinbase of trying to bury its head in the sand. Coinbase and its employees are part of American society and can’t close the blinds on issues that directly affect their lives, both in and outside of work, said one.

Some highlighted that such a narrow focus on the mission might harm Coinbase’s business in the long run. One said the stance could inadvertently shrink the pool of talent willing to work at the exchange. Another, that screening for just the mission could likely lead to the wrong sort of people – those unable to handle and manage different objectives and perspectives – working at the company.

See also: Activists Document Police Misconduct Using Decentralized Protocol

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CoinDesk

CoinDesk Live: Can Old Schools Teach New Tech?

CoinDesk Crypto
6 years ago

Watch live on CoinDesk.com, Twitter and YouTube.

Tuesday, Oct. 6, 2020 | 4 p.m. ET

Related: Help Us Find the Best University for Blockchain

Speakers:
Reuben Youngblom, Stanford

1st panel
Whitney Griffiths, Microsoft and Howard
Adam Patel, Loyola, TokenDaily and Midwest Blockchain Consortium
Arshdeep Singh, UT Dallas Blockchain Club
Rob Klages, Gator Blockchain Club, University of Florida

2nd panel
Ashlie Meredith, Mousebelt
Erick Pinos, Blockchain Education Network
Tyler Wellener, BlockVenture Coalition
Cameron Dennis, Blockchain Acceleration Foundation

The episode concludes with an interview with the winning school.

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CoinDesk

Binance CEO Says He Fully Expects DeFi to Cannibalize His Crypto Exchange

CoinDesk Crypto
6 years ago

Binance CEO Changpeng “CZ” Zhao acknowledges the contradictions inherent in trying to tap into the fast-growing business of decentralized finance, or DeFi, while trying to defend his company’s reign as the world’s largest cryptocurrency exchange.

The company’s new foray into DeFi, Binance Smart Chain, attempts to replicate some of the features of the Ethereum blockchain that have proven fertile for developers building decentralized, blockchain-based trading and lending applications that theoretically could one day challenge traditional lenders and Wall Street trading firms. But DeFi could also threaten big cryptocurrency exchanges like his own.  

Like rival cryptocurrency exchanges OKEx, Huobi and Coinbase, Binance is trying to hold on to its central role in digital-asset markets as upstart DeFi projects like Uniswap, Curve, Balancer and SushiSwap attract a bigger share of industry trading volumes. Zhao says he’s open to the idea that Binance may have to adapt its business model to stay relevant, especially with total collateral locked into DeFi protocols surging 16-fold this year to $11 billion.

Related: Ethereum 2.0 Developers Launch Spadina, a Three-Day Practice Testnet

“Our mission is not to build a CeFi exchange,” Zhao said in an interview with CoinDesk, using a shorthand term for centralized finance. “Right now it is one of our larger businesses that support our growth. But over the long term, we want to push decentralization.”

In designing Binance Smart Chain, the company had to sacrifice elements of decentralization to compete against Ethereum and protect the company’s brand. Binance Smart Chain is controlled by 21 node operators, which are elected by Binance Coin (BNB) holders. But because the company is one of the largest holders of the BNB tokens, it retains significant control over the project’s direction. 

“There is a tradeoff between more decentralization versus speed, so we thought that 21 nodes run by the community is probably enough,” Zhao said in the interview.

Binance Smart Chain’s goal is not to be “the Ethereum Killer,” Zhao says, but to provide an alternative to users and developers frustrated with Ethereum’s soaring transactions fees.

Related: Market Wrap: Bitcoin Hits $10.9K; Ether Options Signal Short-Term Volatility

“There are people who are really more into more decentralization,” Zhao said. “They will probably stick with Ethereum.” 

An anything-goes culture thrives in DeFi, with ridiculously named projects from Yam to SushiSwap exploding in popularity seemingly overnight, only to quickly flame out. But Binance can’t afford to release the reins entirely on its DeFi project; there are reputational concerns, a brand to protect.

BakerySwap Falls Flat

After Binance Smart Chain launched earlier this month, anonymous developers used it to create BakerySwap, a type of decentralized trading network known as an automated market maker, similar to Uniswap. 

Zhao tweeted that he was “Introducing BakerySwap” and that his message was “not endorsement and SUPER HIGH RISK” but that the project was “causing quite a stir on the street.”

Within an hour of BakerySwap’s launch, the protocol collapsed. And Zhao deleted his earlier tweet.

“There are probably more projects that failed on Ethereum, but nobody complains to Vitalik,” Zhao said, referring to Ethereum founder Vitalik Buterin. “So I think it just takes time for people to realize that, ‘Look, the projects on Binance Smart Chain are not run by Binance.’”

Zhao sees DeFi becoming more popular in the Asian markets of China, Thailand and Singapore.

“We just experiment with a bunch of different things, that something will stick,” he said. “And when something sticks, we want to push ourselves and also push our innovation in the same space.”

Zhao has said that if decentralization wins out as the dominant business model for trading venues in digital-asset markets, Binance could still profit from its holdings of the BNB tokens. In the interview, he said the company could also profit by shifting its focus to building decentralized applications.

“So in my mind, I’m never worried about the business model,” CZ said. “I’m always much more worried about if we have users using the product. There’s always multiple options for business models, so the key is to build something that’s useful.”

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CoinDesk

California Governor Signs Law Bringing State ‘New Tools’ to Regulate Crypto

CoinDesk Crypto
6 years ago

The California department responsible for the regulation of financial services will soon have more powers to supervise the cryptocurrency industry.

  • California Governor Gavin Newsom signed a bill into state law on Friday that will see the California Department of Business Oversight renamed as the Department of Financial Protection and Innovation.
  • The bill (AB 1864), introduced by lead author Assemblywoman Monique Limón (D-Santa Barbara) on Jan. 7, will go into effect on Jan. 1, 2021.
  • The changes will equip the regulator with “new tools to shape the regulation of virtual currency,” the department’s commissioner, Manuel P. Alvarez, told CoinDesk via email.
  • The new California Consumer Financial Protection Law will, among other things, provide the department with greater enforcement powers designed to protect Californians from “pandemic-inspired scams,” per a Friday press release.
  • The move means the department will have new regulatory authority to begin cracking down on deceptive or abusive practices undertaken by unlicensed financial services or products.
  • But the new law will also see the creation of an Office of Financial Technology Innovation designed to engage with new industries and consumer advocates to encourage consumer-friendly innovation and job creation within the state.
  • In addition, a new Division of Consumer Financial Protection will be created to monitor markets, with a research arm that will keep up with emerging financial products such as cryptocurrencies.
  • With the expansion of the department, 90 additional employees will be added to the government payroll representing a 13% increase in staffing.
  • The legislation would allow his department to increase consumer protections without hamstringing “honest and fair operations,” Alvarez said.

See also: California Assembly Considers Exempting Some Digital Assets From State Securities Law

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