CoinDesk Crypto

A former employee of an Australian federal agency has avoided prison after he was caught using government supercomputers to mine for cryptocurrency.

• According to a report by The Sydney Morning Herald on Friday, Jonathan Khoo, 34, worked as a contractor for the Commonwealth Scientific and Industrial Research Organisation (CSIRO).
• Between January and February 2018, Khoo implemented code in two supercomputers for the purpose of mining cryptocurrency for his own personal financial gain.
• Khoo was able to mine ether and monero worth a reported A$9,420 (US$6,897), which he deposited into his own personal wallets.
• The CSIRO estimated Khoo’s illegal mining pursuits cost the agency A$76,668 (US$56,133) worth of computing power and other resources.
• Magistrate Erin Kennedy handed Khoo a 15-month intensive correction order on Friday; he will serve out his sentence via 300 hours of community service plus counseling.
• After being discovered in February 2018, Australian federal police issued a search warrant and arrested Khoo later that month, the report said.
• His actions “diverted” valuable computing power resources away from “significant scientific research,” federal police cybercrime operations commander Chris Goldsmid said, including “data array analysis, medical research and climate modeling work.”
• The disgraced employee’s lawyer told the local court that Khoo had no prior offenses and was remorseful for his actions.
• Magistrate Kennedy on handing down the sentence acknowledged Khoo’s guilty plea, but noted it was significant the CSIRO had been targeted and said Khoo’s sentence had to act as a general deterrent.
• In Australia, the maximum penalty for the crime – unauthorized modification of data to cause impairment – carries a sentence of 10 years imprisonment.

See also: Australian Conman Extradited Over Alleged Fraud Involving $1.2M in Bitcoin

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The number of monthly users who earned T-Points, or loyalty points, for bitcoin (BTC) payments on the bitFlyer exchange in Japan reached a record high in August. The two companies partnered to offer rewards to customers last year. 

• According to a bitFlyer report featured in a CoinDesk Japan article Thursday, the exchange did not specify the number of users of the service. But BTC was trading at 1.3 million Japanese yen ($12,400) in August for the first time in a year
• Midori Kanemitsu, a market analyst at bitFlyer, indicated that this reflects a larger trend: against the backdrop of COVID-19 and global monetary easing, bitcoin is shifting from a speculative investment for individuals to an institutional hedge against inflation. 
• Kanemitsu also expects institutional investors to enter the Japanese bitcoin market.
• A bitFlyer survey conducted earlier this year revealed that 30% of new visitors to the exchange are in their 20s, and that number had doubled since a previous survey conducted in 2018.
• The rewards system, launched in August 2019, allows users who have a bitFlyer account to exchange T-points for BTC.
• Users can also earn 1 T-point for every 500 yen (~$4.80) spent in BTC at participating member stores. 

Read more: Most New Customers at Japanese Exchange BitFlyer Are in Their 20s

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“I think that Uniswap is one of the premier DeFi [decentralized finance] protocols, and its token is as well,” Sam Bankman-Fried, CEO at Alameda Research, told CoinDesk via email. “It has been the largest decentralized trading venue for a long time.”

The praise is noteworthy as Bankman-Fried is credited with saving SushiSwap, Uniswap’s chief competitor.

Last night, the top automated decentralized exchange, Uniswap, dropped a share of its new governance token to everyone that had ever used it, even those whose transactions had failed.

Related: Market Wrap: Bitcoin Slumps to $10.7K; Ethereum Fees Rise Again

“In a time when people are being greedy and malicious, they did something generous and benevolent, and the fact that it was unexpected was really special,” Meltem Demirors, strategy officer at CoinShares, told CoinDesk via text message.

With Uniswap competitors, like SushiSwap, hoovering up all the attention in crypto for the first part of September, Uniswap was widely expected to release a governance token. This was not surprising, but the fact that it went beyond rich liquidity providers (LPs) and rewarded regular users, that is what really got crypto talking last night. 

Read more: SushiSwap Will Withdraw Up to $830M From Uniswap Today: Why It Matters for DeFi

It gave something like $1,400 (400 UNI) to all its past traders. Even more went to anyone who had supplied liquidity or who held its SOCKS token.

UNI party

Related: Uniswap Recaptures DeFi Buzz With UNI Token’s Airdropped Debut

Goodwill aside, UNI’s distribution is no doubt also about securing the protocol’s spot as a leader in DeFi.

The token is likely to kick off a fresh new boom in liquidity mining, the practice of rewarding crypto denizens who supply a protocol with funds it can use with a new token on top of whatever transaction fees they earn. Liquidity mining on Uniswap kicks in Sept. 18 at midnight UTC (the DEX has already added over $200 million in liquidity since last night, according to DeFi Pulse).

Everyone agrees that the current mania for liquidity mining, a uniquely lucrative category of yield farming, kicked off in June when DeFi money market Compound began distributing its governance token, COMP.

But the progenitor of this new era on Ethereum told CoinDesk that Uniswap’s distribution moved the ball for everyone. 

“I think it’s genius in every way,” Robert Leshner, Compound’s founder, told CoinDesk in a phone call. “They were the number one DeFi app by users if I’m not mistaken. It brought a huge number of users into the fold.”

According to Uniswap, since launching, over 250,000 unique Ethereum addresses have made trades on it, and now all those folks will have some say over the future direction of the product. That said, they can also use Uniswap itself to instantly liquidate their holdings into whichever ERC-20 they prefer.

Read more: Some Numbers That Show Why Yield Farming COMP Is So Seductive

“With their new token and broad distribution model, I believe it will significantly help them grow and retain their liquidity while building trust,” Paul Veradittakit, partner at Pantera Capital, told CoinDesk in an email.

Emphasis on “grow”: The real excitement is likely to kick in tomorrow – when rewards begin for liquidity providers (LPs), and so while this and tokens like it are usually called “governance tokens,” it’s looking more and more like another term might be warranted, at least in this early era: growth tokens.

The real boom will run for a mere two months, through Nov. 17, with 83,333.33 UNI per day distributed proportionally to LPs across the ETH/USDT, ETH/USDC, ETH/DAI and ETH/WBTC pools.

In fact, total wrapped Bitcoin shot up on Ethereum following the announcement that ETH/WBTC would be one of the four key pools.

Read more: Bitcoins Are Being Tokenized Faster Than They’re Mined as DeFi Craze Continues

It was a great night for a variety of leading DeFi applications that have been using Uniswap. Alex Svanevik, the CEO of blockchain data company Nansen, was able to identify some of the biggest UNI token claimers.

Svanevik told CoinDesk he was able to identify several wallets in the top 50 UNI claimer list, including those controlled by Aave, the money market; Kleros, a dispute resolution project; UMA, a synthetic token platform; and, notably, the SushiSwap MasterChef contract.The second highest UNI claimed by any smart contract was one owned by the payment service for adult performers, SpankChain, which first started experimenting with Uniswap in November 2018.

Deeper meanings

But boom times aside, those interested in fundamental progress in the space might look and see another clue. It’s an open secret that Uniswap is working on a third version of its smart contracts, after only releasing its second version in May.

Ethereum insiders suggest mid-November might not only mark the end of the first phase of liquidity mining but the beginning of the next step in the underlying software, potentially kicking off a very merry holiday season on the world computer.

It could have been that Uniswap had intended to release UNI with its next major code release, but it’s unlikely that SushiSwap and its later imitations forced the firm to drop a growth token it didn’t want to drop, as some have suggested.

“I think Uniswap was always planning to launch a token, and I think this was fortuitous timing,” Leshner said.

Uniswap did not reply to a request for comment from CoinDesk.

Read more: A David vs. Goliath Battle Is Brewing in Ethereum Decentralized Exchange Race

It should be noted that while so far LPs have earned $56 million, according to the UNI blog post, in those 0.3% transaction fees, supporting trades on the protocol, none of those returns have gone to the company itself. As a venture-backed company it needed a way to repay its investors, and a token seems like the natural avenue for a leader in the blockchain industry.

“You can make some good return in the near term and have a shot at a 10x,” one Silicon Valley investor said of those who participated in Uniswap’s $11 million Series A earlier this year.

If anything, SushiSwap might have bumped up the timeline, but it’s unlikely that this was an idea that Uniswap didn’t have already. And UNI is likely also important, though, as a way of keeping itself in the good graces of financial authorities.

Rapid decentralization

The innovation in its distribution is in the fact that it went to real users rather than only to speculators, according to William Mougayar, a leading token investor. 

“This makes it very difficult for regulators to touch them (as Uniswap was very sensitive about that),” he told CoinDesk in an email. “So now we have gradual and proven decentralization first, followed by a sudden token, which is a perfect playbook that legitimizes the token model, while it maneuvers around potential SEC scrutiny.”

And notably, this distribution to actual users is something that only Uniswap can do and its several forks cannot – because they haven’t waited to build a user base before beginning liquidity mining. Uniswap has been running since before DeFi was a term much of anyone cared about, building a user base that it just sent a big “thank you” to, and that could have dividends for a long time.

“Community is currency – without a strong community, you don’t have a currency,” Demirors wrote. “I think Uniswap gets that, and what they did definitely gained them a lot of loyalty.”

But of course, what everyone’s going to be watching in the immediate term is the price of UNI and the value being committed to the leading automated market maker (if not quite the first).

As Bankman-Fried of Alameda Research put it: 

“For what it’s worth I think that the valuation implied by its current price is roughly in line with what I would have guessed compared to many other DeFi projects, and a bit higher than I would have guessed it would ultimately end up [being] compared to centralized exchange tokens.”

Disclosure: This reporter was able to claim 400 UNI tokens but immediately liquidated them.

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Travala.com has begun courting tourists in China, one of the few regions in this pandemic-restricted world where travel is rebounding to pre-crisis levels. 

• The Binance-backed online travel agency has launched a Chinese language website, rolled out a regional customer support team and began marketing to travelers in the country on Thursday.
• CEO Juan Otero told CoinDesk the move positions Travala.com to capitalize on domestic jet-setters and hotel guests in one of the world’s only stabilized travel economies.
• “Europe, the U.S. and our other strong markets will potentially take a good three to four months to recover, whereas in China, the recovery is happening now and very fast,” Otero said.
• China’s beating everyone in travel recovery: Domestic flight bookings are back to pre-COVID-19 levels and hotels are filling up for the upcoming Golden Week holiday – at least in Macau.
• “China is one of the largest domestic travel markets in the world, together with the U.S. and one of the fastest growing as well,” Otero said.
• Travala.com will also soon begin accepting WeChat pay in addition to its current lineup of cryptocurrencies, Otero said.

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Bitcoin lost momentum Thursday while DeFi delirium pushes fees on Ethereum back up.

• Bitcoin (BTC) trading around $10,920 as of 20:00 UTC (4 p.m. ET). Slipping 0.73% over the previous 24 hours.
• Bitcoin’s 24-hour range: $10,735-$11,052
• BTC above its 10-day and 50-day moving averages, a bullish signal for market technicians.

Bitcoin headed downward Thursday, going as low as $10,735 on spot exchanges such as Coinbase, but recovering to $10,920 as of press time. 

Andrew Tu, an executive at quant trading firm Efficient Frontier, sees $11,000 as a key bitcoin price point. ”$11,000 has served as both support and resistance over the last two months,” Tu told CoinDesk. “If we properly break $11,000, we may head up towards $12,000 again while if we fail to break through, then we may go back towards $10,700 and then to $10,000.” 

Related: Uniswap Recaptures DeFi Buzz With UNI Token’s Airdropped Debut

Thus far in September, bitcoin has been over the $11,000 mark twice, most recently on Wednesday prior to the U.S. Federal Reserve announcement of unchanged interest rates and allowing inflation to run over 2% in the near term. 

Read More: Bitcoin Back Below $11K as Markets Doubt Fed’s Ability to Boost Inflation

Katie Stockton, analyst for Fairlead Strategies, sees a lack of momentum in the bitcoin market Thursday. “Today is an ‘inside-day’ for bitcoin, when the day’s high-low range is encompassed by the previous day’s range, so the action is not impacting the chart in a meaningful way.” Indeed, Wednesday’s bitcoin price range was wider, at $10,662-$11,099 per bitcoin. 

In the options market, implied volatility, a measure of bitcoin’s forecasted price movement, is much higher than realized volatility, which is based on historical price changes.

Related: First Mover: Federal Reserve Does What It Wants to Do as Bitcoin Hits $11K

This phenomenon has been occurring since July as options traders are increasingly hedging their bitcoin bets, said William Purdy, an options trader and founder of PurdyAlerts, an analysis firm. 

“The historical realized volatility has significantly declined while implied volatility has increased as investors are increasingly willing to pay for more price protection,” said Purdy. 

This is also happening in the ether options market, though not as pronounced as in bitcoin. Investors still expect an additional price boost from May’s halving, which reduced the new supply of bitcoin coming to market, according to Purdy.  

“As we get later and later into the post-halvening cycle, traders are likely increasingly expecting a major price change and therefore expecting their already expensive premiums to still net positive ROI as they expect an even larger change in price,” Purdy told CoinDesk.

Ether fees rise again

The second-largest cryptocurrency by market capitalization, ether (ETH), was up Thursday, trading around $388 and climbing 6.1% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Read More: Uniswap Launches Governance Token to Keep Up With Rival SushiSwap

The average transaction fee on the Ethereum network is shooting up once again, at 0.030806 ETH per transaction at press time. According to data aggregator Blockchair, that translates to $11.97 at current ether prices. 

Jean-Marc Bonnefous, managing partner of Tellurian Capital, which invests in the decentralized finance, or DeFi, ecosystem, says Uniswap’s surprise token launch is not helping the fee situation. 

“There has been a fair amount of congestion for some time already and we now have the very popular one-off airdrop of the much awaited Uniswap token UNI that is the talk of the town,” said Bonnefous. “More tokens like YAM are going live this week also. DeFi definitely sets the agenda in the digital assets markets this month,” he added. 

Other markets

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

• neo (NEO) + 16.4%
• monero (XMR) + 6.3%
• qtum (QTUM) + 6.1%

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

• orchid (OXT) – 6.1%
• nem (XEM) – 5.3%
• ethereum classic (ETC) – 1.4%

Read More: Ethereum’s Pending Transactions Jump 30% After Uniswap’s Token Claim 

Equities:

• In Asia the Nikkei 225 closed in the red 0.67% as the Bank of Japan kept interest rates unchanged and the yen hit a seven-week high.
• In Europe the FTSE 100 ended the day down 0.47% as the pound went on a roller-coaster ride amid the Bank of England’s hint at negative rates.
• In the United States the S&P 500 fell 0.80% as uncertainty about further economic stimulus and mixed information on a coronavirus vaccine dragged down the index.

Commodities:

• Oil is up 2.1%. Price per barrel of West Texas Intermediate crude: $41.01.
• Gold was in the red 0.56% and at $1,947 as of press time.

Treasurys:

• U.S. Treasury bond yields slipped Thursday. Yields, which move in the opposite direction as price, were down most on the two-year bond, in the red 7%.

Related Stories

• Bitcoin Falls Back Below $11K as Markets Doubt Fed’s Ability to Boost Inflation
• Coinbase Pro Lists Uniswap’s New Token Just Hours After Launch

Uniswap’s governance token, UNI, which was launched Wednesday night, has been on a roller-coaster ride in the past 24 hours, but despite the price volatility the total market cap of UNI could make the automated market maker (AMM) one of the most valuable decentralized finance (DeFi) projects in the coming years.

Based on 1 billion tokens outstanding and a current market price of $3.50, the project has an implied market value of $3.7 billion on a fully diluted basis, according to data compiled by CoinGecko. There is currently $829.7 million worth of crypto assets committed to Uniswap, according to DeFi Pulse.

Since its launch, UNI’s prices reached a high of $4.08 before going back down to around $3 as past users of Uniswap claimed their airdropped UNI tokens.

Related: Market Wrap: Bitcoin Slumps to $10.7K; Ethereum Fees Rise Again

As a venture capital-backed project, Uniswap raised $11 million in a Series A funding led by Andreessen Horowitz, along with Union Square Ventures, Paradigm and a few other prominent funds in early August, and sold shares of Universal Navigation Inc., the company behind the protocol, to its investors.

Some 178 million UNI (about 17.8% of the total supply) will be allocated to investors with a four-year vesting cycle which, at the current price, is worth approximately $600 million.

When the exchange did its Series A round, there was speculation investors could potentially receive returns through a protocol fee of 0.05%, which was introduced to the second version of Uniswap. However, the fee function is currently turned off.

More than 50,000 addresses were holding UNI at press time, including the creator of its competitor SushiSwap, Chef Nomi. Uniswap’s token came just a week after SushiSwap migrated over $800 million in crypto assets from the former to jump-start its competing AMM.

UNI reactions

Related: First Mover: Federal Reserve Does What It Wants to Do as Bitcoin Hits $11K

Andre Cronje, the developer of DeFi protocol Yearn.Finance, said he was “meh” at the surprising launch of UNI token. According to Cronje, it looked more like Uniswap was defensively responding to SushiSwap’s threat. Cronje’s project’s governance token, YFI, was traded at $32,038 at the press time, up a staggering amount from its initial trading price at around $32, giving his project a valuation of estimated $961.7 million. 

Unlike UNI, there were no allocations of YFI to the project’s team members or investors, meaning it is governed completely by the users.

The total value locked in Uniswap went up 7.22% over the past 24 hours, while the figures for SushiSwap and Yearn.Finance were both down 14.28% and 14.48% to $631.9 million and $661.7 million, respectively, according to DeFi Pulse.

Many took to social media to praise UNI’s initial airdrop. A minimum of 400 UNI was airdropped to everyone who used Uniswap prior to September. Some called it “stimulus for Ethereum users.”

Major centralized exchanges, including Binance and Coinbase Pro, listed UNI within just a few hours since its launch. OKEx even went as far as offering a full set of trading tools for hedging UNI including spot trading, margin, swap trading and coin-marginated perpetual swap. Coinbase is among the project’s investors.

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Bitfinex and Tether must turn over documents detailing their financial relationship and history to the New York Attorney General’s office (NYAG), a New York Supreme Court justice ruled again on Thursday.

Judge Joel M. Cohen, the judge who has been overseeing the NYAG’s inquiry into Bitfinex and Tether, made the ruling after a charged, hour-long hearing on Thursday. Counsel for the crypto companies argued the document production order is too broad while the NYAG’s office argued the order is reasonable, saying Bitfinex has not submitted anywhere near the sufficient documents despite the amount of time that has elapsed since the case began.

Cohen didn’t set a firm deadline for when Bitfinex and Tether would have to produce these documents, leaving that decision to a special referee, but said a deadline would need to be set. As part of his order, he extended an injunction that would have ended in the next few weeks barring Tether from loaning funds to Bitfinex by 90 days.  

Related: Delta Exchange Claims First With Crypto Options Settled in Tether Stablecoin

Cohen opened the hearing by noting that the First Department – the appeals court that rejected Bitfinex’s last effort to dismiss the case – had specifically limited the role he could play in the ongoing investigation. Through the hearing, he refused to make specific rulings limiting the scope of the document production request.

The parties are expected to report the schedule back to the judge after the special referee makes that decision.

‘Literally impossible’

“We ought to be allowed to push back,” said Charles Michael, an attorney with Steptoe and Johnson, representing Bitfinex in an ongoing case against the New York Attorney General’s office.

Michael was referring to Bitfinex’s effort to reduce the scope of a document production order the NYAG secured in April 2019, asking for details about the crypto exchange’s financial history and transactions with Tether, the stablecoin issuer with which it shares corporate owners and key executives.

Related: First Mover: Bitcoin Investors the Sane Ones as Federal Reserve Cheers Inflation, Price Nears $11K

Read more: NY AG Asks Court for New Order to Make Bitfinex Turn Over Tether Loan Documents

Michael went so far as to say it was “literally impossible to comply with” all of the document demands, because the NYAG’s office has asked for “all documents” around USDT. 

John Castiglione, senior enforcement counsel at the NYAG, pushed back against the idea that the office is looking for all documents about USDT transactions, saying the department has specifically requested order and trade information, documents about evidencing purchases, tax returns and bank account statements – what he referred to as “core business documents.”

“If there are documents that don’t exist or systems that are no longer maintained, respondents should tell us,” he said.

Extended injunction

Cohen also examined the injunction he put in place to prevent Tether loaning funds to Bitfinex, asking Castiglione to justify extending it.

The government attorney said the respondents have yet to explain what happened to the first $600 million Tether loaned to Bitfinex, and he advocated keeping the injunction in place at least until more information was shared. 

Specifically, the NYAG wants to know where the funds went, whether any of the funds went to company executives and why transfers from Tether to Bitfinex were necessary. Castiglione also said that keeping the injunction in place shouldn’t hurt Bitfinex financially, assuming all is well.

“Now what we have heard is, [Tether] started as a $2 billion tether reserve, [and is now] a $14 billion tether reserve. So it seems unlikely that $150 million staying on one side of the business would be catastrophic,” Castiglione said.

Michael said the conditions which may have justified the injunction in early 2019 – namely, that Bitfinex needed Tether’s funds to fulfill withdrawal requests by its customers – have been dissipated, pointing to Bitfinex and Tether’s profits over the past year and a half.

Read more: Bitfinex Doesn’t Have to Compile Documents During Appeal, Judge Says

“I think it’s very difficult to justify an ongoing injunction,” Michael said. “We’ve now had 17 additional months of disclosure. All the dirty laundry about Crypto Capital has been aired … Whatever risk there may have been 17 months ago is gone.”

Crypto Capital is the payment processor on which Bitfinex apparently stored its customers’ funds, without securing any guarantees about the funds’ safety. The operators of Crypto Capital were indicted last year, and Bitfinex has filed for a number of subpoenas to try and recover the nearly $1 billion it lost.

Michael also said the market has shown confidence in Bitfinex and Tether, evidenced by the fact that $15 billion tokens are in circulation as of Thursday. 

“No one is at risk, there’s not any allegation someone has tried to redeem and had any trouble,” he said. “There’s no risk, whatever risk there may have been 17 months ago is gone.”

Cohen ultimately extended the injunction, but left instructions for the NYAG to advise by the end of that 90-day period whether it has sufficient information to determine next steps.

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Over $1 billion worth of bitcoin has been tokenized on Ethereum as the total supply of tokenized bitcoin (BTC) passed 92,600 on Thursday, or 0.42% of the total BTC supply. In January, less than 1,200 BTC were tokenized worth less than $7 million.

• Wrapped bitcoin (WBTC), the largest tokenized bitcoin project, has minted over 60,500 tokenized BTC since its launch in early 2019, representing over 65% of the total tokenized BTC supply.
• “Huge buying demand” over the counter is one reason for the rapid increase in supply of tokenized BTC, according to Sam Bankman-Fried, CEO of FTX and co-founder of Alameda Research, the exchange’s sister company.
• OTC demand for WBTC started at FTX with the advent of decentralized finance’s yield farming craze, said Bankman-Fried. Demand continued to grow as the total value held in DeFi protocols increased.
• Nearly 70% of all WBTC minted in August were claimed by Alameda Research, as CoinDesk previously reported.
• RenBTC, the second largest tokenized bitcoin project, has issued 22,000 tokenized bitcoins since May, according to data queried on Dune Analytics.

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U.S. Homeland Security’s moonshots division, the Science and Technology Directorate (S&T), is trying to crowdsource a digital wallet.

• Directorate officials are putting $25,000 up for grabs in their new digital wallet challenge, a user interface design competition to pair with DHS’s work in the blockchain and decentralized identity space.
• Finalist wallets must demonstrate “ease of use and visual consistency, while supporting interoperability, security, and privacy,” said Anil John, technical director of S&T’s Silicon Valley Innovation Program (SVIP).
• Winning wallets could find a home inside DHS’ growing blockchain project portfolio. John mentioned how one DHS customer is implementing a decentralized credentialing system for issuing digital Green Cards. 
• Though S&T has been finding and funding blockchain companies through SVIP for years, it has never taken a design challenge to the public like it’s doing now, Kathleen Kenyon, S&T prize program manager told CoinDesk. 
• “We’re trying to reach that freelance designer,” Kenyon said. She noted that while S&T has plenty of contacts within software development, it has less of a foothold in the graphic design community. 
• For a freelance target audience, S&T is offering a freelancer’s stipend: $5,000 to the three finalists and an additional $10,000 to the competition winner.
• Kenyon said the rather low trove is sort of the point; it will appeal more to the community-level designers than it might to big corporations, and it also will let S&T run these kinds of competitions more often, she said.
• Applications are open through Oct. 15 and the stage one finalists will be announced at a virtual SVIP event on Oct. 27. Judges will announce the winner sometime in December.

Read also: US Homeland Security’s Tech Scouts Reissue Call for Blockchain Startups

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The two Russians who were sanctioned earlier this week by the U.S. Treasury Department on accusations of being crypto thieves allegedly got their millions through market manipulation and phishing. 

Prosecutors detailed Danil Potekhin and Dimitrii Karasavidi’s alleged heists, victims and target exchanges in a 30-page forfeiture complaint filed Wednesday against the pair’s previously seized crypto funds.

• Karasavidi and Potekhin allegedly “deployed” a series of bogus Poloniex, Gemini and Binance lookalike sites that duped unwitting users into sharing their login credentials, giving the hackers control of wallets. 
• They then “drained” $20 million worth of bitcoin (BTC), ether (ETH) and NEO from victims’ accounts, according to the complaint. Prosecutors said the lion’s share ended up in Karasavidi’s Bitfinex account.
• Other funds were frozen by Poloniex and quickly seized by authorities, who filed the lawsuit to take control of 15,602 ETH, 199.8 BTC, $6.1 million in cash and 1,199 NEO, a total worth $14.2 million at press time.
• That ETH haul was actually the product of a separate hacker scheme: market manipulation, authorities say. 

In late October 2017, hackers pumped $5 million of one victim’s crypto into NEO’s Gas market, skyrocketing the usually sleepy token’s value 13,000% before ordering their personal gas-holding Poloniex accounts to cash out into ETH. The victim “lost virtually all of his $5 million in cryptocurrency,” prosecutors alleged.

• Prosecutors also claimed the hackers attempted to cover up the stolen crypto’s origin by “layering” funds – a classic money-laundering technique. 
• Treasury officials said they used “blockchain tracing analysis” to follow the ETH from the Poloniex manipulation and the Poloniex, Binance and Gemini phishing schemes into Karasavidi’s Bitfinex account.
• They further claimed to have identified Potekhin as the owner of multiple misspelled Poloniex domain names linked to the phishing scheme.
• Similar tactics were used against Binance and Gemini customers, the regulator said in the lawsuit.

Related: US Homeland Security Challenges Freelancers to Design It a Digital Wallet

Karasavidi and Potekhin face a mounting lineup of legal troubles. This week, they’ve been added to the Treasury Department’s OFAC blacklist and also face federal wire fraud, hacking and money laundering charges.

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• Alibaba on Track to Be the Largest Blockchain Patent Holder by End of 2020: Study
• Delta Exchange Claims First With Crypto Options Settled in Tether Stablecoin

This isn’t the CryptoKitties craze of 2017.

“The situation is different now,” Stefan George of Gnosis told CoinDesk. Lots of dapps are clawing for Ethereum’s compute power. If activity calms on one decentralized finance (DeFi) platform, it’s likely to perk up on another.

“Ethereum is on the way to becoming a whale chain,” George lamented, one where only people transferring large values can stomach its steep transaction fees. So now Gnosis is voting with its feet.

Related: First Mover: Federal Reserve Does What It Wants to Do as Bitcoin Hits $11K

The prediction market technology firm is copying all its smart contracts over to Ethereum sidechain xDai. The move will include DXdao’s Omen, an app for prediction markets, and SAFE, Gnosis’ decentralized exchange (DEX) and multisig wallet.

Gnosis is a ConsenSys spoke that has built a number of different applications on the world computer. It’s had time to do so after securing $12 million in an April 2017 initial coin offering (ICO) and then finding itself stymied in deploying its chief product as it attempted to secure regulatory approval for the technology.

Since turning its prediction market application (a way to gamble on the outcomes of future events) over to a decentralized organization, DXDao, and providing tech support for its implementation, Omen, Gnosis found that users balk at making bets with their friends when it costs so much to do so because of gas costs.

Read more: Prediction Markets’ Time Has Come, but They Aren’t Ready for It

Related: The $55M Hack That Almost Brought Ethereum Down

“Prediction markets are mostly seen as an entertainment product,” George said. “You just want to have really low costs, ideally no costs.”

Lately, Ethereum has been miserable in that regard.

xDai’s moment

A sister chain of Ethereum in operation for the last two years, xDai is a proof-of-stake chain that enables fast and stable transactions for fractions of a penny each. It’s been used at crypto conferences, for example, as a quick and easy way for attendees to pay for concessions using an Ethereum wallet, for example. 

Since its core currency is dai (DAI), these transactions are made at predictable and understandable values for users.

Read more: Ethereum’s Pending Transactions Jump 30% After Uniswap’s Token Claim Begins

Any crypto asset can be staked on the xDai bridge and used on xDai, though George noted it’s important for users to understand they are entrusting their assets to the xDai bridge, which is controlled by a multi-sig. 

In its roadmap, xDai also plans to get fiat-to-crypto onboarding going in the next quarter, meaning users wouldn’t ever need to touch ether (ETH) itself directly.

“Adoption has really increased with gas prices, which are squeezing so many projects on Ethereum. It’s a very dev-friendly, EVM-compatible chain so few code changes are needed to deploy to xDai,” Andrew Gross of the xDai team told CoinDesk in an email.

While other layer 2 options are under development now (such as Optimism and zk-Rollups), in George’s judgment, xDai is the only one that’s ready to go, with adequate tooling (such as block explorers) for developers to work effectively.

Both George and the xDAI team say it’s also becoming an attractive place for decentralized autonomous organizations (DAOs) because they can run their votes there without incurring much cost.

Preview of Ethereum 2.0

All of Gnosis’ products will remain on Ethereum for anyone that wants to use them there.

George argues that xDai is a good place for smart contracts to experiment with lower stakes. In fact, he contends the whole Ethereum community should use xDai as a place to experiment.

In a lot of ways, he believes xDai could also be a preview of Ethereum after sharding gets deployed and gas fees go down. In that future, dapps will need to create an asynchronous logic in order to communicate with applications on other shards.

Read more: Everything You Need to Know About Ethereum 2.0

Gnosis expects it will operate on the shard favored by DeFi applications, which will probably still have some of the highest gas costs in Ethereum, even after the new version kicks in. Using xDai, it will need to asynchronously communicate with its oracle network, which will remain on Ethereum.

And the risk is low. Gnosis remains long on Ethereum, but the whole point of this move is to make it easier for people to use Ethereum without a lot of money at risk, such as betting 10 DAI with a friend over an election outcome.

“Prediction markets have not gone mainstream yet, many are still focused on topics mostly relevant to an insulated community,” Gross said. “With easier onboarding and lower costs, we can remove a lot of the barriers to entry for these types of applications and open them up to a much broader audience.”

Related Stories

• How Normies Are Getting Crypto-Rich With DeFi
• Ethereum’s Pending Transactions Jump 30% After Uniswap’s Token Claim Begins

Uniswap issued a governance token, Kraken is the world’s first crypto bank and there are more “newbie” bitcoin investors than any time in the past two years.

Top shelf

Crypto’s bank
Kraken Financial, a newly formed division of the popular crypto exchange, has become the first firm to receive a special type of charter making it a bank. On Wednesday, the Wyoming Banking Board approved the exchange’s application for a special purpose depository institution (SPDI) charter – making it a licensed bank in the state, replete with access to federal payments infrastructure and opening the doors to issuing digital-asset debit cards and savings accounts as well as securities and commodities services. Kraken Financial beat out Wyoming blockchain pioneer Caitlin Long’s application for Avanti Financial, and is the first bank established in Wyoming since 2006.

Non-public information
The China state-sponsored Blockchain-Based Service Network (BSN), a standardized internet services provider for decentralized applications (dapp) developers, plans to make 24 public chains available in its network for Chinese users beginning in November. These public chains will look quite different after being “localized” for the Chinese market, CoinDesk’s David Pan reports, who gained access to a leaked memo. Inspired by Ant Financial’s permission blockchain, these chains will replace their native tokens with the renminbi, be renamed after the 24 Chinese solar terms and will be supervised by the Public Permissioned Blockchain consortium – ensuring the state reaps the benefits of blockchain tech’s traceability and efficiency, without the decentralization embraced by public chains like Bitcoin and Ethereum. “BSN strictly follows related laws and regulations and will remove any chain that violates them from the network,” the memo reads. 

Related: First Mover: Federal Reserve Does What It Wants to Do as Bitcoin Hits $11K

Welcome newbies
New investors are entering the bitcoin market at a faster pace and possibly creating upward pressure on prices, on-chain data shows. The number of “young investment” wallets (those that are one to three months old and rarely send bitcoins) has jumped to 2,254,667 this month, the highest level since February 2018, according to data provided by the blockchain analysts firm Chainalysis. That’s double from 1,162,632 six months ago. “It looks like new people are entering the market, buying bitcoin and putting it in wallets for long-term investment,” Chainalysis’ economist Philip Gradwell told CoinDesk. Investors took advantage of the 40% price drop to levels below $4,000 observed on March 12 and have continued to pour money into the top cryptocurrency ever since.

Beefing up
Wyoming’s chief banking regulator says he’s “beefing up” his division’s monitoring capabilities on illicit cryptocurrency with Chainalysis. Under a one-year deal, Chainalysis will train senior examiners on crypto tracing practices and grant two monitoring software licenses – plus investigatory support – to the Division of Banking as it eases into its new, crypto-facing compliance duties, according to Commissioner Albert Forkner. Those rules are no different than the ones governing traditional American banks: Watch out for signs of money laundering, don’t transact with sanctioned individuals, keep tabs on customer identities and uphold the minutiae of the Bank Secrecy Act. 

Patent game
Alibaba is on track to supersede U.S. computer giant IBM by becoming the single-largest holder of blockchain-related patents, according to a new study. Consultancy KISSPatent found the Chinese tech conglomerate has published ten times more blockchain patents than IBM, its nearest rival. Should Alibaba continue at its current pace, the study predicted it would become the biggest patent holder in blockchain by the end of 2020. The firm also found the majority of patents were filed by traditional Fortune 500 companies, rather than companies that exist wholly within the blockchain space.

Quick bites

• How Normies Are Getting Crypto-Rich With DeFi (Leigh Cuen/CoinDesk)
• Libra Association Hires Former HSBC CEO (Daniel Palmer/CoinDesk)
• The $55M Hack That Almost Brought Ethereum Down (Matthew Leising/Wiley)
• You Can Now Get Ethereum NFTs Inspired by The Godfather (Scott Chipolina/Decrypt)
• Based.Money: DeFi’s ‘Game of Chicken’ (Robert Stevens/Decrypt)

At stake

Unified?
After surviving the “vampire attack” fomented by its forked rival SushiSwap, decentralized trading platform Uniswap launched its own governance token, UNI, on Wednesday.

Related: Blockchain Bites: The SEC’s Chilling Effect on Crypto Development

The platform has minted 1 billion coins to be distributed to founders, early users and future community members over the next four years. The token will be used to power on-chain governance decisions.

“UNI officially enshrines Uniswap as publicly owned and self-sustainable infrastructure while continuing to carefully protect its indestructible and autonomous qualities,” the firm wrote. 

SushiSwap, a genetic twin to Uniswap, appeared on the scene as a real competitive threat – offering an incentive to participants to siphon liquidity from the dominant automated market maker (AMM). SushiSwap migrated over $800 million in crypto assets from Uniswap last week, with promises to be a fully decentralized rival to the “VC-backed” Uniswap. 

Observers of the battle expected Uniswap to respond by issuing its own governance token. Though some may be surprised at the speed at which this was executed. 

Following the announcement, the number of pending transactions on the Ethereum network spiked, and within three hours after the claim started, over 18,000 transactions were sent to the smart contract address of the UNI governance token.

Binance, Huobi, OKEx, FTX (which is led by Sam Bankman-Fried, who has played a pivotal role in the SushiSwap saga) and Coinbase Pro have all added trading support for the new token.

Both Sushi and Uni distinguish themselves from centralized exchanges like Coinbase by allowing users (called liquidity providers, or LPs) to deposit any digital asset onto the platform, receive interest and a cut of transaction fees in return.

Coinbase, on the other hand, uses the more traditional order book format – where a user’s trade is matched up against a list, or book, of buys and sells, and executed at the best available price.

Market intel

Doubt prevails
CoinDesk data shows bitcoin’s price fell to just under $10,900 in the Asian trading hours – not long after it had climbed to near $11,100. The drop is bitcoin’s latest failure around the key psychological hurdle and could be the result of prevailing doubts over the Federal Reserve’s ability to hit the 2% inflation target. Prevailing doubts over whether the Fed has what it takes to hit its 2% inflation target hit traditional markets and may have contributed to a bitcoin price drop early on Thursday. On average, officials don’t expect 2% inflation until 2023.

Found funds

• PowerTrade, a mobile bitcoin options trading platform, raised $4.7 million via token sales in a round led by Pantera Capital and joined by Framework Ventures, CMS Holdings and QCP Capital among others.
• ParaSwap, a decentralized exchange (DEX) aggregator, has completed a $2.7 million seed funding round joined by 32 investors including Blockchain Capital, Alameda Research, Arrington XRP Capital, Coinfund, CoinGecko, Aave founder Stani Kulechov and others.

Tech pod

Polemics and dots
A token minting system – Polimec – is coming to the Polkadot blockchain ecosystem, promising to be a leaner, meaner version of Ethereum’s ERC-20 standard, the mechanism that launched a thousand token sales, CoinDesk’s Ian Allison reports. Launched by the team behind blockchain identity protocol KILT, the token issuance and transfer framework is thought to eventually spur development on the Ethereum-competing layer 1. “If you look at what ERC-20 actually did to the Ethereum ecosystem, then you can imagine what will possibly happen with Polimec,” Ingo Ruebe, CEO of BOTLabs and project lead for KILT Protocol said. “It’s an absolutely essential part of the ecosystem, I would say.” The KILT mainnet, an identity solution expected to launch in 11 months, will be the first project to mint tokens using Polimec. 

Cascading blockchains
Ava Labs is launching its Avalanche blockchain next Monday, Sept. 21, with aspirations of creating a new front for the development of decentralized finance applications. “Avalanche aims to enable new systems defined by velocity, efficient use of capital, and innovation in new products and services that aren’t possible with the current wait times to finalize transactions,” Ava Labs CEO Emin Gün Sirer told CoinDesk. “DeFi is certainly part of our motivation in the short term, with our long-term sights set on traditional finance.” The upcoming launch comes on the back of $60 million in funding, $45 million of which came from a July 2020 public token sale and private sale led by Mike Novogratz’s Galaxy Digital, Bitmain and Initialized Capital, CoinDesk’s Colin Harper reports. 

Internet 2030

Vinay Gupta is CEO of Mattereum, an Ethereum-based physical asset management platform. He coordinated the Ethereum launch process and first worked in cryptocurrencies in the 1990s. The essay excerpted below is part of CoinDesk’s “Internet 2030” series exploring the ongoing digital revolution.

Ecological Sanity Is Compatible With Human Freedom
In the early days, Bitcoin proposed a simple model of how the world could be transformed: The free market was going to produce inflation-proof money with strong privacy features, which could be used to avoid taxes. Over time, people would sell their dollars, replace them with cryptocurrency and the State would wither away to be replaced with an anarchic paradise.

That was one Bitcoin theory of change. It seems improbable now, as it did before, despite the current risk of game-changing inflation in America. The ship may be going down, and Bitcoin may be a life-raft for some (as it is in Venezuela), but the collapse was not caused by Bitcoin. It was caused by good old-fashioned mismanagement over decades. 

Still, given the waste and excess in society, it’s never been clearer how much the world needs cryptographic transparency. So what is our theory of change? How are we really going to get a better world out of all this exquisite technology?

Our freedom rests on our ability to use technology to dig our way out of this hole: to increase our options by creating and deploying new supply-side technologies to create clean energy, and by radically re-engineering the demand side to hit our necessary consumption limits.

The creativity of the market economy works, but instead of mere “price signaling” we need high-quality, multidimensional data so we can run a multidimensional market: money, carbon, other forms of impact, all inside of a single global budget, with infinite room for human creativity to prove we met our targets and live as well as we are able.

Neither utopian nor dystopian, this is reality: You have markets, or you have authoritarianism. Carbon is a new constraint, and we either handle it like money and instruments well enough for creative response or face a future of blundering mandates.

Ecological sanity is compatible with human freedom, but only if we deploy cryptography to manage the resource allocation. My hope is that, by 2030, these systems will be ready in  enough countries that they’ll become standardized across the world, and we can go on together. Read the full story here.

CoinDesk’s “Internet 2030” series examines the future of the medium and what role blockchain and crypto will play in it with content and conversations on the future of the decentralized web. If you are interested in submitting an op-ed for the series, please reach out directly to daniel@coindesk.com. 

Podcast corner

Governance battles
In this episode of The Breakdown, NLW looks at the power competition between governments on the one hand and the decentralized network-driven finance alternatives that would reshape that power. Interestingly, in this competition corporations may play a role that benefits both sides at different times and in different ways.

Who won #CryptoTwitter? Related Stories

• First Mover: Binance’s CZ Doesn’t Even Dispute That DeFi Might Be Inevitable
• Blockchain Bites: MicroStrategy’s BTC Buy, Bitmain’s Power Struggle, Paxful’s Goodbye

The tech arm of Societe Generale has confirmed plans to use up to five different blockchains to test digital securities and a central bank digital currency (CBDC).

• Earlier this week, Forge, a tech-focused subsidiary of the French investment bank, announced it was experimenting with the Tezos blockchain to gauge how useful it would be for capital market activities.
• But speaking to CoinDesk, Jean-Marc Stenger, the CEO of Forge, said it is considering running trials on a handful of blockchains, although he declined to disclose which ones.
• He added Societe Generale hopes to ultimately support up to five separate blockchains.
• Tezos is the second blockchain tested by Societe Generale. Last year, the bank completed a $100 million bond issuance on Ethereum.
• Tezos’ protocol and consensus proof-of-stake algorithm as well as its on-chain governance and smart contract language will be utilized to test the use of blockchains for “high-value financial applications,” per a press release Tuesday.
• Forge Chief Technology Officer Stephane Duzan said Forge chose Tezos because it provides the company with the freedom to develop features that would be much harder to do on older protocols.
• Being able to work across multiple blockchains would also improve interoperability and liquidity for clients, he said.
• The tech arm will also use Tezos for a central bank digital currency (CBDC) experiment primarily for interbank settlements – it has run in concert with the French central bank and financial regulators since the summer.

See also: French Central Bank Chief Eyes Public-Private Partnership for Possible Digital Euro

Related Stories

• Alibaba on Track to Be the Largest Blockchain Patent Holder by End of 2020: Study
• Delta Exchange Claims First With Crypto Options Settled in Tether Stablecoin
• Libra Association Hires Former HSBC CEO
• New Bitcoin Options App Raises $4.7M in Round Led by Pantera Capital

Every time the Federal Reserve meets, it’s important to remember the only real monetary policy tradition at the 107-year-old institution is that a bunch of people will get together and talk about markets and the economy and decide what to do next.

There’s never really any right or wrong answer for how to go about it; there’s only the decisions the top Fed officials end up making. The officials are broadly guided, of course, by economic theory and history, ostensibly a desire to provide stability and long-term growth, and perhaps a bit of politics from time to time. But the ad hoc-ness of it all is underscored by the reality that the officials are constantly changing their own rules.

In terms of the market reaction, this week’s Fed meeting was as ho-hum as they come. The Standard & Poor’s 500 Index of large U.S. stocks slipped 0.5% on Wednesday as the central bank announced its latest incarnation of monetary policy. Gold was little changed. Bitcoin gained 2.2%. 

Related: The $55M Hack That Almost Brought Ethereum Down

That’s partly because Chair Jerome Powell had used a speech last month to telegraph his plans for a newly hatched technique known as “average inflation targeting.” Essentially, the Fed is now promising to keep U.S. interest rates close to zero until inflation climbs above a 2% target and stays there “for some time.” On Wednesday, the only real news was the officials formalized the practice.

Average inflation targeting hasn’t really ever been tried before, but Fed officials are now mostly in agreement it is the right thing to do at this point in time. The message they are sending is that investors, businesspeople and banks can count on the central bank to keep borrowing costs low until the economy heals.

“This could all go wrong under some future circumstances, at which point ‘Trust us, we’re the Fed’ might not be enough for the markets,” Ian Shepherdson, chief economist at the forecasting firm Pantheon Macroeconomics, wrote in a note to clients. 

Just like the $1.2 trillion of Fed emergency-lending programs rolled out during the 2008 financial crisis, average inflation targeting is a brand-new tool that investors until recent times weren’t aware that the central bank might ever choose to use. And just like former Fed Chair Ben Bernanke’s “quantitative easing” programs in the years after the financial crisis, under which tens of billions of Treasury and mortgage bonds were purchased every month, the new policy is really just a way of trying to engineer an economic recovery. 

Related: How Normies Are Getting Crypto-Rich With DeFi

“The creativity of monetary policy will remain high, there’s no question,” says Ben Emons, a former portfolio manager for the bond-fund giant Pimco who now serves as managing director of macro strategy for the analysis firm Medley Global Advisors.  

What gets a little ridiculous is any attempt to drill down into the supporting materials provided by the Fed as the premise for the decision. A “summary of economic projections” posted online Wednesday shows top officials on average expect inflation to stay below 2% for the next couple years before hitting the mark in 2023. They expect the economy to shrink by 3.7% this year before expanding 4% next year, 3% the following year and 2.5% in 2023.

It’s the sort of picture one might expect from a perfectly managed economy. 

But, of course, Fed officials have little more of a clue than anyone else what the future holds, even in the near term. One of the most contentious presidential elections in U.S. history looms in November. Racial tensions are on the rise. The course of the pandemic is far from settled. Lawmakers are at odds. The national debt has fast grown to nearly $27 trillion, up about $23 trillion at the start of the year, and there’s no realistic expectation that the federal budget will be balanced anytime soon. 

The economic outlook, and the trajectory of markets, can change quickly. Unexpected things happen. In late 2019, Fed officials were predicting the economy would grow at an anemic but steady 2% clip in 2020. That didn’t happen. Fed officials really have no idea how the economy will fare through 2023, let alone what the next few months might bring. 

Markets have been stable recently, if even a little frothy, and there’s no reason for the Fed to mount any particularly heroic effort right now to change that dynamic.

“They’re driving through the fog and they cannot see,” Emons said in a phone interview. “We’re coming a bit out of the fog now, but there’s still a lot of fog.”

A plausible scenario is the Fed does as little as possible for the next several months unless markets take a fresh downturn, in which case it’s possible the Fed would intervene. When markets convulsed in March, the Fed in a matter of weeks expanded its balance sheet from about $4 trillion to $7 trillion; the increase represented about three-quarters of all the money the central bank had ever previously created. Until it happened, it seemed unthinkable. 

On Wednesday, Powell was clear the Fed could act forcefully if needed. He noted the central bank is already buying $120 billion of Treasurys and mortgage bonds a month, which extrapolates to $1.44 trillion a year.  

“I certainly would not say that we’re out of ammo, not at all,” Powell told reporters during a press conference on Wednesday. “There’s still plenty more that we can do.” 

The lesson for bitcoin traders or gold traders or bond traders or any other investors trying to gauge the potential for rapid inflation or currency debasement, is that if Fed officials decide to print more money, they can and they will. 

– Bradley Keoun

Bitcoin Watch

• CoinDesk shows the bitcoin price corrected from a high of just under $11,100 to just under $10,900 in the Asia trading day.
• While the fall below such a key psychological hurdle is a blow to the bulls, bitcoin currently shows no signs of falling back to the $10,300-$10,400 range it traded at the start of the week.
• The correction in the bitcoin price might be a result of growing doubts over the Fed’s ability to hit the 2% inflation target.
• While the prospect of high inflation is generally considered to be good for bitcoin, some market observers have expressed concern over whether the Fed has what it takes to meet its target.
• Speaking to the Financial Times, John O’Connell, a portfolio manager at Garda Capital, said the Fed still had much to prove because it hadn’t been able to create inflation consistently for a very long time.
• Indeed, the Fed announcement was met with general uneasiness across the market. The S&P 500 slumped 0.46% and the Nasdaq fell a further 1%, while both bond yields and the U.S. dollar strengthened slightly.
• Similarly, an announcement from the Bank of Japan to keep rates unchanged this morning led to the Nikkei dropping 0.67% in the Asia trading day.
• While there’s a case for bitcoin benefiting in a deflationary market, it would certainly harm the prevailing narrative that the original cryptocurrency’s hard-capped supply makes it a perfect hedge against a runaway money supply.
• Bitcoin traded at $10,885 at press time. It may drop further as the Bank of England was also expected to keep rates unchanged later Wednesday.

– Paddy Baker

Token Watch

Uniswap (UNI), SushiSwap (SUSHI), Ether (ETH): DeFi leader Uniswap mints 1 billion “governance tokens” to be released over next four years, a week after ” vampire mining” attack by copycat rival SushiSwap. The deal immediately started adding to congestionon the already-stressed Ethereum blockchain network, and the cryptocurrency exchange Coinbase has already listed the new UNI tokens on its pro platform. So has Binance. 

Ether (ETH): Only 22% of options bets see ether over $400 next week at the Sept. 25 expiration.

Polkadot (DOT): Token-minting system Polimec could drive more people and projects onto Polkadot’s parachains. 

What’s Hot

Number of “young investment” wallets, or those created fewer than three months ago, has doubled in the past six months to more than 2 million (CoinDesk)

A tool that gauges intraday volatility suggests that bitcoin has flashed its first buy signal in months (Bloomberg)

Ava Labs is joining the ring of decentralized finance (DeFi) platforms sparring to win market share from the Ethereum ecosystem (CoinDesk)

The Wyoming Banking Board has voted to approve the crypto exchange Kraken’s application for a special purpose depository institution charter, making it the first cryptocurrency firm to become a bank (CoinDesk)

UBS, a global banking giant, is doubtful bitcoin is a safe-haven asset (Decrypt)

Pantera Capital joins $4.7M token sale for bitcoin options-trading platform PowerTrade (CoinDesk)

Analogs The latest on the economy and traditional finance

Retail spending stagnates in August with monthly increase of 0.6%, as pandemic aid expires and economic recovery slows (WSJ)

Low mortgage rates have jump started a boom in home refinancing, which in turn has egged on a boom in the issuance of mortgage-backed securities (WSJ)

U.S. President Donald Trump has urged Senate Republicans to increase the size of their stimulus proposal (FT)

Banking stocks pulled down Indian shares on Thursday as China tensions loom (Reuters)

Tweet of the Day Related Stories

• Bitcoin Falls Back Below $11K as Markets Doubt Fed’s Ability to Boost Inflation
• Coinbase Pro Lists Uniswap’s New Token Just Hours After Launch

Alibaba is on track to supersede U.S. computer giant IBM as the single-largest holder of blockchain-related patents, according to a new study.

• A report from intellectual property consultancy KISSPatent Thursday found the Chinese tech conglomerate was “definitely running the show,” having already published ten times more blockchain patents than IBM, its nearest rival.
• Should Alibaba continue at its current pace, the study predicted it would become the biggest patent holder in blockchain by the end of 2020.

• KISSPatent said this was part of a broader surge in the number of blockchain-related patents published. The first half of 2020 had more patents than the whole of 2019. In turn, 2019 had triple the number of blockchain patents compared to 2018.
• Another key point was that most of the patents were filed by traditional Fortune 500 companies rather than companies that exist wholly within the blockchain space.
• That might be down to blockchain’s prevailing open-source culture, which is at odds with the practice of patent filing, KISSPatent said.
• Indeed, Jack Dorsey’s Square last week set up a non-profit group for blockchain companies to pool patents and preserve the industry’s open-source spirit.
• Just in the past few months, Alibaba has patented a cross-chain system that it claims is better than Cosmos, as well as a blockchain that protects music copyright.

See also: Alibaba Patents Would Secure, Accelerate Its Consortium Blockchain

Related Stories

• Societe Generale to Use as Many as Five Blockchains in Capital Markets Trials
• Delta Exchange Claims First With Crypto Options Settled in Tether Stablecoin
• Libra Association Hires Former HSBC CEO
• New Bitcoin Options App Raises $4.7M in Round Led by Pantera Capital

Cryptocurrency derivatives platform Delta Exchange now offers put and call options contracts settled in the stablecoin tether (USDT).

• Calling the news an industry first, the Singapore-based firm also said Thursday it’s one of just four crypto exchanges to offer a full order book for puts and calls.
• The options contracts will be offered for trading on bitcoin (BTC) ether (ETH), Chainlink (LINK) and Binance coin (BNB) with daily, weekly and monthly maturities.
• Options contracts give holders the right to buy or sell the underlying asset at a set price on a set date in the future.
• Unlike futures, a holder of an options contract is not required to buy or sell the asset if they choose not to do so – hence the name.
• Delta Exchange CEO Pankaj Balani said the options market is an “integral part” of the derivatives ecosystem and he expects daily turnover on his platform to surpass futures demand in the next six to nine months.
• The new call and put options, which are expected to attract retail and institutional traders alike, are available from today.

See also: Delta Exchange Predicts $40 Price for COMP Ahead of Governance Token Deluge

Related Stories

• Societe Generale to Use as Many as Five Blockchains in Capital Markets Trials
• Alibaba on Track to Be the Largest Blockchain Patent Holder by End of 2020: Study
• Bitcoin Falls Back Below $11K as Markets Doubt Fed’s Ability to Boost Inflation
• Libra Association Hires Former HSBC CEO

Wyoming’s chief banking regulator has turned to Chainalysis for “beefing up” his division’s monitoring capabilities of illicit cryptocurrency activities. 

Under a one-year deal disclosed to CoinDesk Thursday, Chainalysis will train senior examiners on crypto tracing practices and grant two monitoring software licenses – plus investigatory support – to the Division of Banking as it eases into its new, crypto-facing compliance duties, according to Commissioner Albert Forkner.

Unveiled just one day after Wyoming awarded its first special purpose depository institution (SPDI) bank charter to Kraken, the novel partnership, among the earliest pair-ups featuring a U.S. banking regulator and a blockchain intelligence firm, illustrates how even America’s fast-moving financial watchdogs are cautiously approaching oversight of an asset class that Forkner said still gives some folks the spooks. 

Related: Kraken Becomes First Crypto Exchange to Charter a US Bank

“Just the nature of digital assets and the pseudonymity of them have a lot of people concerned about illicit activity,” Forkner said. “When you introduce a new dynamic like this,” he said, regulators have to ensure the newcomers are playing by the rules. 

Those rules are no different than the ones governing traditional American banks: Watch out for signs of money laundering, don’t transact with sanctioned individuals, keep tabs on customer identities and uphold the minutiae of the Bank Secrecy Act. As is for cash, so too for crypto.

But blockchains give Wyoming’s banking regulators a powerful upside that cash cannot match: an immutable, public paper trail built into its code. And while anyone with an internet connection can manually hop between Bitcoin addresses, it’s only with visualization and tracing tools (like those sold by Chainalysis) that regulators have long sought to unscramble illicit chains.

Chainalysis is among a handful of tracers supporting governments, companies and regulators with cryptocurrency monitoring software. It has particularly deep ties to federal law enforcement. The New York-based firm has banked millions in contracts with the Federal Bureau of Investigation, Drug Enforcement Agency, Internal Revenue Service and other federal agencies in need of crypto support. (Chainalysis and Forkner declined to state this deal’s dollar value).

Related: Eastern Europe Actively Using Crypto for Illicit Purposes: Chainalysis

Read more: Inside Chainalysis’ Multimillion-Dollar Relationship With the US Government

If, say, a bank allows its customers to send crypto to a blacklisted wallet address, then “we’ve got proof of those activities” that Forkner said has held up in court. It will also make working with law enforcement easier, Forkner said.

He hopes it won’t come to that. Once Kraken’s banking business gets rolling in early 2021 and perhaps other SPDIs (and even non crypto-specific banks) start dealing in crypto, too, he said the Division of Banking will start back-tracing transaction blocks to ensure the institutions are self-monitoring effectively.

“We’ll be running our own analysis on that, and verifying that the red flags that we see are the same ones that” the SPDIs see, Forkner said.

Jesse Spiro, Chainalysis’ global head of policy, told CoinDesk the move is a “first step” in providing oversight of the crypto space within Wyoming.

“I’ve told our applicants and potential applicants: ‘My job is not to run your business and I don’t want to have government overreach. But there is an appropriate level of oversight and monitoring and this is just one more of those,'” Forkner said.

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Ethereum whales undoubtedly drive the decentralized finance (DeFi) movement, but many people making money on DeFi trends are just regular Joes, so to speak. 

One such trader, who asked to go only by Joe, is a math student at a Canadian university. Just by playing with Ethereum software and his own calculations, he managed to make hundreds of thousands of dollars in 2020. This wasn’t his first rodeo, however; he’s been trading on decentralized exchanges (DEXs) for more than a year.

“I’m not a whale in the crypto world but I’m one of the top users of the DeFi protocol I use,” he said. “Before, when DeFi was smaller, there was a lot less competition.” 

Related: First Mover: Federal Reserve Does What It Wants to Do as Bitcoin Hits $11K

Since Weird DeFi’s food craze began, Joe said “high yields” are now available to newcomers “without a lot of technical knowledge.” 

It’s impossible to say just how many rookie traders raked in unusually high profits during the YAM debacle in August, when an unaudited crypto experiment garnered $465 million in crypto then imploded within 72 hours. 

Read more: Yearn, YAM and the Rise of Crypto’s ‘Weird DeFi’ Moment

One such anonymous YAM user, who said he rarely trades on exchanges, said he found the YAM trading game fun and relatively easy. He participated in the community vote to “save” YAM, then said he promptly “dumped” his tokens when he realized the software experiment was not sustainable. All things considered, he said he earned $15,000 from participating in YAM, having spent up to $800 on transaction fees. 

Related: The $55M Hack That Almost Brought Ethereum Down

For both of the above-mentioned DeFi fans, this is a life-changing amount of money. These users often rely on service providers to access the DeFi ecosystem. As such, traders weren’t the only winners of the Yam gambling game. Companies that run the Ethereum network also accrued traffic and transaction fees during the rise of Yam and Sushi, CREAM and now Pickle.

“I access farming and do most one-time things with MetaMask,” Joe said. “The only other [service] I use is the Web3 provider Infura.” 

DeFi infrastructure

The DeFi mentality emphasizes open-source access to tools, services with low barriers to entry and distributed teams. Sometimes, this includes low barriers to entry for high-risk games. 

According to Uniswap founder Hayden Adams in June 2020, most of the Uniswap ecosystem relies on ConsenSys infrastructure services, like Infura. This has also proven to be the common pattern for copycat DeFi projects like SushiSwap. ConsenSys spokesperson James Beck said the Ethereum conglomerate restructured to make infrastructure and wallet services, like Infura and the DeFi-friendly wallet MetaMask, pillars of the company’s “core software business.” 

ConsenSys’s head of product for Infura, Michael Godsey, said his team handled the “increased usage” from the food-themed yield farming spike, watching closely to understand “these new usage patterns.” Such DeFi experiments provide inspiration and research data for Ethereum startups, not chagrin. 

Read more: SushiSwap Migration Ushers in Era of ‘Protocol Politicians’

In reference to the DEX tools people use to access these trading games, Godsey added, “Uniswap and MetaMask are two of our amazing customers and many yield farmers are utilizing their platform to participate in this new activity.”

As for Joe, the Canadian college student, he said he plans to keep stacking tokens because the broader DeFi movement is “sustainable and has been growing at a relatively slow pace for years.” 

On the other hand, he said the trends over the past few months were heavily influenced by Compound’s token model. Joe reasoned these DeFi experiments might end in a “big crash” or slow fizzle.   

“As long as risk-adjusted yield is higher than for other opportunities, I will keep using them,” he said.

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Prevailing doubts over whether the Fed has what it takes to hit its 2% inflation target hit traditional markets and may have contributed to a bitcoin price drop early on Thursday.

• CoinDesk data shows bitcoin’s price fell to just under $10,900 in the Asian trading hours – not long after it had climbed to near $11,100.
• The drop is bitcoin’s latest failure around the key psychological hurdle and could be the result of prevailing doubts over the Fed’s ability to hit the 2% inflation target.
• At the Federal Open Market Committee (FOMC) Wednesday, Fed chair Jay Powell said the U.S. central bank would keep interest rates at rock bottom until 2023 when it expects to hit its 2% inflation target.
• It follows Powell’s announcement last month that the Fed would tolerate inflation above the 2% target to compensate for the drop in consumer prices earlier in the year.
• The prospect of high inflation is generally considered good for bitcoin and the price instantly ticked up above the $11,000 mark following the FOMC announcement.

• But some market observers are now concerned whether the Fed has what it takes to reach 2% inflation.
• Speaking to the Financial Times, John O’Connell, a portfolio manager at Garda Capital, said the Fed hadn’t been able to create inflation consistently for a very long time and still had much to prove.
• Indeed, the Fed announcement was met with general uneasiness across the market. The S&P 500 slumped 0.46% and the Nasdaq fell a further 1%, while both bond yields and the U.S. dollar strengthened slightly.
• Similarly, an announcement from the Bank of Japan to keep rates unchanged this morning led to the Nikkei dropping 0.67% in the Asia trading day.
• The Bank of England has also just announced that it will keep rates unchanged at 0.1%.
• While there’s a case for bitcoin benefiting in a deflationary environment, it nonetheless goes against the prevailing narrative that the original cryptocurrency’s fixed supply makes it an ideal hedge against the deleterious effects of a runaway money supply.
• Analysts have previously warned that bitcoin prices remain vulnerable to sell-offs in stocks.
• Bitcoin was trading at $10,890 at press time, little changed over 24 hours.

See also: First Mover: As Central Banks Print $1.4B an Hour, Bitcoiners Bet on Federal Reserve ‘Capture’

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ParaSwap, a decentralized exchange (DEX) aggregator, has completed a $2.7 million seed funding round joined by some of the industry’s top investors.

• France-based ParaSwap hopes its API will become the connective tissue between various decentralized finance (DeFi) applications, founder Mounir Benchemled told CoinDesk via email.
• “The API does not only allow access to DEXs but also to other DeFi services such as Aave and Compound,” Benchemled said.
• According to a press release Thursday, ParaSwap raised the seed funding from a total of 32 investors including Blockchain Capital, Alameda Research, Arrington XRP Capital, Coinfund, CoinGecko, Aave founder Stani Kulechov and others.
• While ParaSwap was started as DEX aggregator, Benchemled said the firm shifted focus in late 2019 to fine-tuning its API and making the platform an easy-to-use entry point for DeFi applications, traders and wallets.
• “Our next steps are growing the team and scaling ParaSwap’s infrastructure so that we can support our next business challenges,” he said in the release.

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

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