CoinDesk Crypto

Blockchain-based lending and trading systems known as “decentralized finance,” or DeFi, have dominated recent cryptocurrency-market headlines, with collateral locked into the semi-automated platforms surging 10-fold this year to more than $9 billion.

DeFi trading platforms like Uniswap, Curve and Balancer have appealed to cryptocurrency traders with their low cost and ease of use, and they’re now starting to steal a growing and no-longer-negligible share of market trading volumes from bigger, established exchanges like Binance, Coinbase, Huobi and OKEx.

These “centralized” exchanges – the term is sometimes tossed around with a sneer – are rolling out new business initiatives they describe as decentralized, in an apparent bid to cash in on the trend and stanch a further exodus of customers.

Related: Ava Labs Sets Avalanche Mainnet Launch for Sept. 21

Huobi, a Chinese-led cryptocurrency exchange based in Seychelles, announced Tuesday it is adding 10 new members to its DeFi initiative, described as “a consortium of centralized and decentralized financial services providers.”

The announcement came just a day after Huobi’s arch-rival, OKEx, which is also Chinese-led but based in Malta, said its OKxChain network was the most decentralized public blockchain powered by an exchange. 

And last week, Binance, the world’s biggest cryptocurrency exchange, announced an integration of its centralized trading platform with its decentralized public blockchain, Binance Smart Chain (BSC). 

Binance CEO Changpeng “CZ” Zhao even seemed to acknowledge the threat during his company’s recent “World of DeFi” summit, where he said, “It’s always better to disrupt yourself than having somebody else disrupt you first.” Running a decentralized exchange is cheaper, according to CZ. 

Related: Bakkt Bitcoin Futures Daily Trading Volume Hits Record High

And OKEx CEO Jay Hao told CoinDesk in an email that “it’s impossible to ignore the compelling promise of DeFi, and we are firm believers that it will succeed.”

Charts of bitcoin held at big exchanges show declining balances over the past several weeks, and Simon Chen of the Hong Kong-based crypto trading firm Babel Finance says one likely explanation is that some of the cryptocurrency is getting transferred to DeFi.

In August, DEXs accounted for a 5% share of total crypto exchange volumes, according to a Sept. 14 report by the cryptocurrency-analysis firm Messari. The business is dominated by the “automated market makers” Uniswap, Curve and Balancer.   

“The exchange business has proven itself to be incredibly lucrative for crypto and automated market makers are starting to receive their slice of the pie,” Messari analyst Jack Purdy wrote in the report. 

Binance’s CZ said he will be “really happy on the day when decentralized exchanges replace centralized exchanges,” at least partly because the company’s BNB digital tokens “will be worth much more.” 

Su Zhu, CEO of the cryptocurrency-focused investment fund Three Arrows Capital, told CoinDesk in a Telegram message that centralized exchanges could still be a “gateway to DeFi, but not where users ultimately spend their time.” 

“The centralized exchanges will end up acting like a white label,” Zhu said.  

– Muyao Shen

Read More: Binance, Huobi, OKEx Have FOMO for DeFi

Bitcoin Watch

Bitcoin’s dip remained well supported ahead of the Federal Reserve’s rate decision, due at 18:00 UTC. 

The cryptocurrency found buyers below $10,700 during the Asian trading hours, but so far has failed to cross Tuesday’s high of $10,940. 

The cryptocurrency may rise above the $11,000 mark if the Fed announces more stimulus measures, having cut rates to zero, launched asset purchase programs and signaled tolerance for high inflation earlier this year. 

Analysts, however, expect the Fed to maintain the status quo and reiterate willingness to do more if required. According to BK Asset Management’s Kathy Lien, the focus will be on the Fed’s inflation and growth forecasts. The dollar will likely draw bids, pushing gold and bitcoin lower, if the central bank raises growth forecasts. 

– Omkar Godbole

Read More: All Eyes on Fed Reserve Rate Announcement, as Bitcoin Fights for $11K

Token Watch

Filecoin (FIL): Futures on decentralized data-storage network’s forthcoming token, currently at $18.50 in tether (USDT) terms, are trading “well above our cost basis,” investment firm Pantera Capital says. 

What’s Hot

Bank regulators in 49 U.S. states, Washington, D.C., and Puerto Rico plan to make compliance for cryptocurrency companies simpler by consolidating supervisory exams (CoinDesk)

‘Crypto mom’ and Securities and Exchange Commissioner Hester Pierce says Unikrn fine of $6.1 million will have a chilling effect on innovation on the part of other firms (CoinDesk)

A significant amount of cryptocurrencies passes through dark web marketplaces in Eastern Europe, according to Chainalysis (CoinDesk)

Bitcoin CEO: MicroStrategy’s Michael Saylor Explains His $425M Bet on BTC (CoinDesk)

India reportedly moving to ban trading of cryptocurrencies, threatening blow to rapidly growing scene in world’s second-most-populous country (CoinDesk)

Circle’s Jeremy Allaire says Algorand will bring “over 1,000 tps and transaction fees of 1/20th cent to the USDC ecosystem” (Forbes)

Analogs The latest on the economy and traditional finance

More than a third of fund managers, strategists and economists in a new survey say it may take a month or more after U.S. presidential elections until results are known (CNBC)

Federal Reserve’s “commitment to stoking inflation could cause dramatic volatility in interest rates” (Reuters)

Nvidia’s $40 billion ‘Arm’ deal faces risks and industry pushback as China looks to remove US tech from its supply chain (Nikkei Asian Review)

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Blockstack’s former head of growth, Patrick Stanley, is launching a complementary crypto company of his own, Freehold. 

Much like the former Ripple CTO Stefan Thomas who founded Coil to build services related to XRP, Stanley now runs Freehold as an independent company within the token ecosystem related to Blockstack’s namesake cryptocurrency, STX.  

Freehold kicks off today by opening enrollment for the first cohort of Freehold evangelists. This program literally pays newbies – in bitcoin (BTC) – for studying and saving in their own wallets. Stanley compared it to the Mormon door-to-door missionary program, rather than crypto fans “talking to themselves on Twitter all day.” 

Related: Bakkt Bitcoin Futures Daily Trading Volume Hits Record High

“HODLing members will be incentivized to lead community-building initiatives, share educational resources, and participate in contests in exchange for rewards,” Stanley said. “I’m taking a hands-on approach to the initial onboarding. I’m paying them in bitcoin to monitor their bitcoin accounts and eventually moving on to STX.”

Former Earn.com Balaji Srinivasan, an unaffiliated fan of the project, said in a press statement that Freehold “gives direct utility to holding crypto.” 

Read more: Blockstack’s New Consensus Mechanism Creates New Use Case for Bitcoin

Stanley said his company hired a few part-time workers, starting with a rewards budget of under $250,000 to serve an initial cohort of less than 50 newbies. Program participants are selected based on need and given assignments customized for their interests or needs. 

Related: First Mover: Binance’s CZ Doesn’t Even Dispute That DeFi Might Be Inevitable

Basically, people apply on the website and Stanley offers personal consulting. If the candidate is a good fit, he helps them set up a bitcoin wallet and monitors the address, while they make social media content and invite friends to join. 

“Folks will learn about the STX ecosystem but be making outgroup arguments about the technology and why it’s great,” Stanley said, “starting at bitcoin and working their way up.”

He concluded by saying that once the program “validates it can have an impact” on the STX ecosystem, the company could offer community development services to other token issuers. 

“We might be able to command a fee if we verify the model,” Stanley said.

Related Stories

• All Eyes on Fed Reserve Rate Announcement, as Bitcoin Fights for $11K
• Market Wrap: Bitcoin Hits $10.9K; Total BTC Locked in DeFi Passes 100K

The Bank of International Settlements (BIS), the international body nicknamed the “central bank for central banks,” is on the lookout for a blockchain engineer.

• In a job posting Tuesday, BIS said it is looking for a “DLT/Blockchain expert” to be the point person on its digital asset initiatives.
• The successful applicant will have a computer science background, coding experience and a deep understanding of cryptography and distributed ledger technology.
• Hired on a three-year contract, the person will join BIS’ Innovation Hub in either Hong Kong or Switzerland to design, build and test initiatives up to proof-of-concept level.
• BIS doesn’t divulge what the new hire will be looking at, but the ad says this could include central bank digital currencies (CBDCs), digital securities and other token-based payment systems.
• Crypto-critic Agustin Carstens, BIS’ general manager, said last year that central banks were “not seeing the value” of issuing CBDCs, especially as they may affect financial stability and the monetary system.
• BIC is now already working on projects to do with the tokenization and digitalization of the trade process, the description says.
• The role will also include liaising and collaborating with central banks and other financial institutions on related initiatives.
• The head of BIS’ Innovation Hub, Benoit Coeure, a former European Central Bank (ECB) board member, has previously said blockchain is promising but cryptocurrencies such as bitcoin are too problematic to ever be considered for a mainstream payments method.

See also: BIS Plans New Central Banking Fintech Research Hubs in Europe, North America

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While bitcoin’s dips have found buyers, the cryptocurrency is struggling to clear the important psychological hurdle of $11,000 ahead of the U.S. Federal Reserve’s rate decision due later today.

• The cryptocurrency found bids near $10,675 during the early Asian trading hours, but faced rejection near $10,940 around 08:00 UTC, according to CoinDesk’s Bitcoin Price Index.
• Bitcoin has failed twice in the past 24 hours to absorb selling pressure just below $11,000.
• At press time, bitcoin is changing hands near $10,850, representing a 0.58% gain on the day.

• The slight pullback this morning has weakened the case for a move above $11,000 put forward by a bull flag breakout confirmed during early European hours.
• On the downside, the higher low of $10,675 created early Wednesday is the level to beat for the bears.
• Price volatility may pick up following the Federal Reserve’s rate decision, due at 18:00 UTC.
• The Fed is expected to keep interest rates unchanged and reiterate its willingness to tolerate high inflation.
• In other words, interest rates are likely to remain low for a prolonged period – a bullish development for scarce assets like bitcoin and gold.
• Markets, however, have already factored in this likelihood, according to Reuters.
• The focus, therefore, will be on the Fed’s growth and inflation forecasts.
• According to BK Asset Management’s Kathy Lien, the U.S. dollar may find buyers if the Fed is more positive on economic growth. In that case, bitcoin will likely face selling pressure.
• Investment banking giant Goldman Sachs has already upgraded the U.S. third quarter gross domestic product forecast to 35% from 30%.
• If the Fed announces more stimulus measures, the dollar would likely drop, potentially powering stronger gains in bitcoin.
• Bitcoin has become more sensitive to action in the U.S. dollar over the past 2.5 months.

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

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• Market Wrap: Bitcoin Hits $10.9K; Total BTC Locked in DeFi Passes 100K
• Discrete Log Contracts Are Bringing Private, ‘Scriptless’ Smart Contracts to Bitcoin
• Bitcoin CEO: MicroStrategy’s Michael Saylor Explains His $425M Bet on BTC
• MicroStrategy Buys $175M More in Bitcoin, Upping BTC Holdings to $425M

The Central Bank of the Bahamas has confirmed it is moving ahead with the nationwide launch of its digital currency sometime in October.

• The Caribbean nation of just under 400,000 people will roll-out its central bank digital currency (CBDC), dubbed the “Sand Dollar,” next month, Bloomberg reported Tuesday.
• That will make it probably the first CBDC to launch anywhere in the world – it’s been suggested China won’t launch its own digital yuan initiative until the Beijing Winter Olympics in 2022.
• Approximately $48,000-worth of the new CBDC will enter circulation initially and will be available via a mobile-based wallet app.
• The Sand Dollar is backed 1:1 to the Bahamian dollar (BSD) which, in turn, is pegged to the U.S. dollar.
• The central bank will mint more Sand Dollars as demanded, at the same time removing physical BSD out of circulation to prevent inflating the monetary supply.
• Speaking to Bloomberg, Chaozhen Chen, the central bank’s assistant manager of eSolutions, said the CBDC had been designed to provide people and businesses in some of the archipelago’s far-flung islands with better access to financial services.
• Today’s news comes more than a year after the central bank first engaged local tech provider NZIA to design and implement the CBDC.
• It has already been tested on the remote islands of Exuma and Abaco.

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

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Blockchain services firm Diginex is officially merging with publicly traded 8i Enterprises Acquisition Corp., a key part of its plan for a “backdoor” Nasdaq listing.

• Announced Wednesday, 8i shareholders overwhelmingly approved the proposed “business combination transaction” with Hong Kong-based Diginex at a special meeting, with 81% in favor.
• Diginex is the parent company of derivatives platform EQUOS.io which had been hoping to become the U.S.’s first publicly traded crypto exchange later this month.
• It was pipped to the post, though, with Gibraltar-based INX Ltd. recently launching its SEC-registered security token IPO, aiming to raise $117 million.
• Diginex’s ecosystem also includes digital asset trading technology platform Diginex Access and securitization advisory firm Diginex Capital, as well as a digital asset custody provider and an investment management business.
• The company received approval from the Securities and Exchange Commission for the merger with 8i back in February.
• The news marks “significant milestone” in that process, said Diginex’s CEO Richard Byworth, with both parties expecting a close of the transaction later in the month.
• Shareholder approval during unprecedented market conditions was a “testament” to the digital assets industry, Byworth noted.
• Following the deal’s closure, the exchange’s shares are expected to be traded on the New York-based Nasdaq stock exchange under the ticker symbol “EQOS.”
• The British Virgin Islands-based “blank check” company 8i is a special-purpose acquisition shell company that uses funds from their initial public offerings (IPOs) to acquire target companies.

See also: Diginex Going Public Is About More Than a Nasdaq Ticker Symbol

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Netherlands-based Blockdata, which provides qualitative insights into the range of large enterprises using blockchain technology, has been acquired by data provider CB Insights.

The financial terms of the deal were not disclosed. New York City’s CB Insights will be opening an office in Amsterdam, while Blockdata will remain a standalone product with its own team. Blockdata’s work will also be available to CB Insights clients, the companies said.

The acquisition demonstrates that large firms are still interested in deploying distributed ledger technology (DLT) within their firewalls, and are looking for fast and thorough insights into the complex ecosystem that has grown up around enterprise blockchain.

Related: DCG Enters Retail Crypto Market With Acquisition of Luno Wallet

Following the hype around DLT in 2017, the last eight months have seen large financial and enterprise clients repeatedly ask about data sources on the enterprise blockchain space, according to Anand Sanwal, CEO and co-founder of CB Insights.

“It’s become something that our clients are increasingly talking about as big and practical,” he said. “At the same time, our clients were overwhelmed with the number of companies and projects that were going on, and were struggling to identify what exactly was happening and the best use cases.”

Read more: VC Deals in Crypto Remained Steady but Amount Invested Fell in 2019: Report

As well as financial clients, Sanwal said there is interest from governments – with central banks exploring digital currencies included in that bucket – as well as hot spots like supply chain leading to interest from the likes of consumer packing firms, logistics providers and so on.

Related: FTX Exchange’s $150M Deal for Mobile-First Blockfolio Is a Retail Trading Play

There have been various reports stating that enterprise blockchain has been languishing in Gartner’s famous “trough of disillusionment.”

“I wouldn’t say there has been a dropoff; we just see interest growing,” said Jonathan Knegtel, co-founder of Blockdata. “We started out before the crypto winter [of 2018] came along. But we’ve always said it’s about the technology, not about making money in this space. It’s about shared sources of truth and what that can do for companies.”

Knetgtel pointed out that Blockdata drills into many areas of the blockchain world, not just enterprise DLT, but also custody providers, central bank digital currencies (CBDCs), stablecoins, DeFi and the like.

The Amsterdam-based five-man team, which is set to grow significantly now, has previously raised a total of roughly $504,000 in angel investments. 

This is CB Insights’ second acquisition following its July 2020 buy of the assets of Dow Jones’ VentureSource. 

“Blockdata’s DNA is very similar to ours,” said CB Insights’ Sanwal. “We will take unstructured documents, including news and other data sources, and build technology that will classify and extract structured data from them.”

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A leaked version of rules to be issued later this month by the European Commission proposes an all-encompassing set of regulations covering the trading or issuance of digital assets across the 27-nation bloc. 

Europe’s Markets in Crypto-Assets (MiCA) draft legislation provides legal certainty around crypto assets – cryptocurrencies, security tokens and stablecoins – along the same lines as Europe’s Markets in Financial Instruments Directive (MiFID), a legal framework for securities markets, investment intermediaries and trading venues. 

The takeaway is that Europe intends to treat crypto the same as any other regulated financial instrument, which will doubtless provide legal clarity. The unknown is whether that may stifle this nascent and fast-moving space.  

Related: User Profiling Can Help Regulators Identify Illegal Crypto Activity, Says FATF

The MiCA proposals begin with a broad definition of crypto assets and a base set of rules that apply to the issuers of those assets and service providers, the latter is more or less in line with the Financial Action Task Force (FATF) definition of a virtual asset service provider (VASP).

There is a particular focus on stablecoins in Europe, which are defined as either asset-referenced tokens or e-money tokens.

Read more: Inside the Standards Race for Implementing FATF’s Travel Rule

To illustrate the difference, Siân Jones, senior partner at XReg Consulting, referred to the revised second version of libra’s white paper that redefined the token as being denominated in individual currencies. This would likely bring it within the MiCA regulation’s definition of e-money, said Jones.

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

“Those stablecoins that rely on a basket of currencies or are based by reference to other assets, whether that’s another crypto or other kinds of assets, they will be classed as asset-reference tokens,” Jones said in an interview. “Essentially, the subgroup that behaves like e-money will be sucked into the existing e-money framework, while those that are asset-referenced have a load of extra rules on top of the base rules. So clearly, this is targeting stablecoins and particularly global stablecoins.”

Stablecoin angst?

The attention to stablecoins chimes with comments made last Friday at an informal meeting of five European finance ministers in Berlin, which featured calls for clear regulatory oversight of asset-backed coins like libra. 

In addition to providing legal certainty around all crypto-assets, another core tenet of the proposed regulation is apparently to support innovation. 

“There will be many who will question that,” said Jones, citing the recent explosion in decentralized finance (DeFi) as an example of innovation involving the issuance of blockchain tokens that could be curtailed in Europe.

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

Among the many regulatory obligations that will be imposed on crypto-asset issuers and service providers in the European Union (EU) is the need to be incorporated as a legal entity and for service providers to have their registered office in a Member State, Jones said.

“There can be little doubt MiCA will present significant challenges for those involved in DeFi projects,” said Jones.

The quid pro quo, Jones added, is the sort of regulatory clarity that will likely entice more institutional investment into the crypto space.

“By making crypto just like everything else in the traditional world, you make it easier for the traditional world to accept it,” said Jones. “I would probably say from the draft that it will favor the banks and traditional investment firms. The incumbents will have an advantage in a number of respects, which I’m sure is not the intention, but that will be the short- to medium-term impact.”

The 168-page set of draft rules, which Brussels said would come out in September, will not likely be transitioned into EU law until 2022 at the earliest. As an EU regulation, it will be directly applicable throughout the EEA without the need for national legislation.

Summing up, Jones said the new regulation will probably create something of a bifurcation of the crypto space.

“In a sense, crypto has benefited for much of the last decade from being largely in a grey area,” she said. “But now you have a very clear set of rules – and you are either in or outside it.”

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ShareRing, a blockchain-powered platform for the “sharing economy” pioneered by the likes of Uber and Lyft, was picked to join China’s state-backed blockchain initiative, the Blockchain Service Network (BSN). 

• According to a press release emailed to CoinDesk, ShareRing has developed a custom blockchain-enabled platform that can help integrate services such as travel, insurance, logistics and marketplaces into one shared platform. 
  
• The firm’s press release said in partnership with BSN, ShareRing will work to reduce barriers to entry in the blockchain services sector by helping businesses and developers deploy the firm’s enterprise-ready sharing ecosystem, which it claims can help lower the time and cost associated with integrating blockchain into traditional platforms. 
  
• ShareRing CEO Tim Bos said that the firm’s initial focus shall be to expand the ShareLedger testnet and mainnet nodes and validators to run within the BSN. “We already have some nodes running in the BSN, now we are focusing on making our technical documentation available so that developers and enterprises can leverage ShareLedger and our API’s for their projects,” he said.
  
• China’s Blockchain Service Network announced earlier in July it had integrated six public blockchains onto its network including Tezos, Ethereum, NEO and IRISnet, thereby enabling developers on these blockchains to build decentralized applications (dapps) and run nodes using data storage and bandwidth from BSN’s overseas data centers. 

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Noted cryptocurrency advocate and Securities and Exchange Commissioner Hester M. Peirce issued a public dissent after the SEC levied a $6.1 million fine on online gaming and gambling platform Unikrn for conducting an initial coin offering (ICO) in 2017, a penalty that effectively amounts to the size of the company’s current assets.

• Peirce said that not only did she disagree with the SEC’s finding that Unikrn committed a registration violation, imposing a penalty that large will have a chilling effect on innovation on the part of other firms.
• “We should strive to avoid enforcement actions and sanctions, however, that enervate innovation and stifle the economic growth that innovation brings,” the commissioner said. “I believe that this action and its accompanying sanctions will have such consequences.”
• Peirce used the opportunity to try to gain support for her “safe harbor” proposal that would allow companies like Unikrn a three-year window to experiment and perfect their platforms without fear of running afoul of regulators in this new area of finance.
• “Imagine if such a regulatory safe harbor had been available to Unikrn,” Peirce said. “Instead of permanently disabling its tokens as a result of today’s settled enforcement action, Unikrn, in concert with its tokenholders, might be devoting its time and resources to identifying new uses for the token and expanding its user base.”
• “By failing to challenge ourselves to experiment with new approaches to regulation, we, and those whose interests we are pledged to serve, risk surrendering the fruits of innovation.”

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Bitcoin is making gains not seen since early September; the amount of BTC locked in DeFi hits six figures.

• Bitcoin (BTC) trading around $10,778 as of 20:00 UTC (4 p.m. EDT). Gaining 0.70% over the previous 24 hours.
• Bitcoin’s 24-hour range: $10,252-$10,950
• BTC above its 10-day and 50-day moving averages, a bullish signal for market technicians.

Bitcoin was able to reach as high as $10,950 on spot exchanges such as Coinbase Tuesday before losing some steam, settling around $10,778 as of press time. 

Read More: Two Charged With Duping Investors of $5M With Bogus Bitcoin Brokerage

Related: Discrete Log Contracts Are Bringing Private, ‘Scriptless’ Smart Contracts to Bitcoin

“BTC is making a strong attempt to break out of the recent $10,100 to $10,500 range,” said David Lifchitz, chief investment officer of quant firm ExoAlpha. “We’re just above $10,600 and testing $10,600-$10,800 long enough would position the next target to $11,000.”

Lifchitz cited factors other than just price as reasons to be optimistic about the world’s oldest cryptocurrency. “From a fundamental point of view, bitcoin mining hashrate is hitting all-time highs,” Lifchitz added. Indeed, the daily average hashrate on the Bitcoin network reached a records 151 million terahashes per second on Monday.

The rise in hashrate means the next difficulty adjustment, scheduled for Sept. 19, will also likely set a record high. “Difficulty is looking to adjust upwards later this week to its highest ever,” added Lifchitz. 

Read More: US State Bank Regulators Agree to Rules for Fintech, Crypto Licensing

Related: Bitcoin CEO: MicroStrategy’s Michael Saylor Explains His $425M Bet on BTC

Denis Vinokourov, head of research for brokerage Bequant, also sees other fundamental trends fueling bitcoin’s bullish run. “The reports that MicroStrategy has completed yet another acquisition of 16,796 bitcoins at an aggregate purchase price of $175 million, together with a new wave of money flowing into DeFi as indicated by the total value locked, are all proving to be very supportive for the sentiment,” he said. 

Read More: MicroStrategy Buys $175M More in Bitcoin, Upping BTC Holdings to $425M

Guy Hirsch, U.S. managing director for multi-asset brokerage eToro, noted the amount of bitcoin inactive for at least three years is now over 31%, its highest point since late 2017. 

Hirsch attributes some of this bitcoin activity coming from decentralized finance, or DeFi, which can require movement of BTC on-chain. ”We have witnessed more capital going into DeFi projects despite some of them experiencing major issues, and also an increase in bitcoin locked on DeFi,” Hirsch told CoinDesk. “These developments suggest that there has been an increase in HODLing as people and institutions show an increasing willingness to allocate to crypto assets.” 

Read More: Japanese Crypto Exchange Accuses Binance of Helping Launder $9M

100K BTC locked in DeFi

The amount of bitcoin “locked,” or deployed, in DeFi has crossed the 100,000 mark for the first time, currently at 101,719 BTC, according to aggregator DeFi Pulse. 

The total is rebounding towards $10 billion in total value, helped by bitcoin’s continued upward trend in total value locked. 

“The massive and quick growth of the lock-in cannot be denied. It’s kind of mind-blowing,” said Henrik Kugelberg, a Sweden-based bitcoin over-the-counter trader. Kugelberg expects a lot more BTC on DeFi in the future. “While 100,000 BTC is a lot of money it is actually a small part of mined BTC locked in DeFi. I believe the floodgates have opened but it’s still just a stream of bitcoin flowing in.”

Read More: DeFi Lender bZx Reclaims $8M Stolen in Sunday’s Attack

Other markets

The second-largest cryptocurrency by market capitalization, ether (ETH), was down Tuesday, trading around $365 and slipping 2.9% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Read More: Galaxy Digital Leads $1.2M Raise for Automated Ethereum Services Startup

Digital assets on the CoinDesk 20 are mostly in the red Tuesday. Notable winners as of 20:00 UTC (4:00 p.m. ET): 

• ethereum classic (ETC) + 6.2%
• bitcoin cash (BCH) + 3.9%
• monero (XMR) + 0.50%

Read More: SKALE Completes $5M Token Sale on ConsenSys’ Anti-Speculation Platform

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

• lisk (LSK) – 7.6%
• qtum (QTUM) – 7%
• tron (TRX) – 6.5%

Read More: Filecoin: Understanding the Complex Crypto System Meant to Rival AWS

Equities:

• In Asia, the Nikkei 225 closed down 0.44% despite indicators pointing to an economic rebound in the region’s largest economy, China.
• In Europe, the FTSE 100 ended the day up 1.32% as China beat expectations on retail and manufacturing numbers.
• In the United States, the S&P 500 climbed 0.40% as moderate gains were made in the tech, materials, industrials and energy sectors.

Read More: New York Attorney General to Bitfinex and Tether: ‘Delays Must Stop’

Commodities:

• Oil is up 2.5%. Price per barrel of West Texas Intermediate crude: $38.25.
• Gold was in the red 0.21% and at $1,953 as of press time.

Read More: Paxful, Citing Its Own ‘Risk Tolerance,’ Exits Venezuela’s P2P Bitcoin Market

Treasurys:

• U.S. Treasury bond yields climbed Tuesday. Yields, which move in the opposite direction as price, were up most on the 30-year bond, in the green 1%.

Read More: Thai Central Bank’s Blockchain-Enabled Bond Infrastructure Passes Test

Related Stories

• MicroStrategy Buys $175M More in Bitcoin, Upping BTC Holdings to $425M
• First Mover: Bitcoin Investors the Sane Ones as Federal Reserve Cheers Inflation, Price Nears $11K

Tassat Derivatives plans to list a bitcoin swaps contract in late 2020 despite a bevy of delays that caused the swaps execution facility (SEF) to temporarily fall out of regulators’ good graces.

• The Commodity Futures Trading Commission (CFTC) on Tuesday reinstated Tassat’s no-action relief it had first acquired after last November's CFTC-approved SEF registration transfer with trueEX.
• Tassat lost that status on Aug. 1 due to dormancy regulations that require SEFs to trade at least once every 12 months, according to a CFTC letter.
• Since trueEX last traded on July 19, 2019, and Tassat did not list its product – or execute any trades – in the ensuing year, Tassat lost its no-action relief status and had to ask for it back.
• Tassat blamed the holdup on “internal and external delays” in its CFTC request. Among them: leadership changes at the regulator, an executive exodus at Tassat (the company’s then-CEO departed in March), COVID-19 onboarding troubles and other pandemic-related pains.
• “Tassat states, despite the delays, it has not stopped working on, and preparing for, the launch of its bitcoin swap contract,” the CFTC said in the letter reinstating the no-action.
• It was unclear whether the swaps launch is imminent. The CFTC letter stated Tassat anticipates a Q3 launch, but an accompanying press release slated the listing for Q4.

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“Republican_win”; “Democratic_win.” These are the parameters (and call functions) for the first smart contract escrowed bet placed on Bitcoin’s mainnet.

On Sept. 8, BTCPay Server founder Nicolas Dorier and Suredbits founder Chris Stewart entered the bet on the 2020 U.S. presidential election outcome using a discrete log contract (DSL), a form of smart contract that became feasible on Bitcoin just this year, thanks to independent Bitcoin developer Lloyd Fournier’s technical advancements in the realm of so-called “scriptless-scripts” on Bitcoin’s blockchain.

As for who took which side of the bet, Dorier and Stewart didn’t say. Even after Election Day when the votes are tallied we still won’t know who won the bet. And that’s very much the point.

Related: Market Wrap: Bitcoin Hits $10.9K; Total BTC Locked in DeFi Passes 100K

Otherwise, the contracts wouldn’t be discrete.

What are discrete log contracts?

Described by developer Gert-Jaap Glasbergen as “invisible smart contracts,” discrete log contracts are structured to look like standard multi-signature transactions on Bitcoin’s blockchain. If someone were searching for the transaction on the ledger, they would have no way of knowing it’s a smart contract or, in Dorier and Stewart’s case, the details of the bet.

These smart contracts have theoretically been feasible since Bitcoin’s inception, but groundbreaking work with ECDSA adapter signatures (a cryptographic signature scheme that enables “scriptless scripts” to execute smart contracts without relying on Bitcoin’s scripting language) in the past year has brought them from theory to application. 

Read more: RGB Continues Its Work to Bring Better Smart Contracts to Bitcoin

Related: Bitcoin CEO: MicroStrategy’s Michael Saylor Explains His $425M Bet on BTC

“Technically DLCs could have been done since the original release, but a lot of the building blocks weren’t known back then. For instance, for DLCs we use ECDSA adapter signatures, whose application for this use case wasn’t discovered until this year [by Lloyd Fournier],” Suredbits developer Ben Carman told CoinDesk.

Suredbits is one of the primary actors pioneering DLC development along with Crypto Garage, Atomic Loans, Square Crypto-funded independent developer Loyd Fornier, and Chaincode Labs developer Antoine Riard.

The structure of a DLC transaction is pretty straightforward. Building on the bet between Dorier and Stewart, two parties send funds to a multi-signature address. In order to settle the transaction, an oracle would sign the contract with a signature that corresponds to the hash of the winning outcome (in this case, either Republican_Win or Democrat_Win).

The person with the hash that corresponds with the oracle’s signature can then withdraw the funds from the contract.

In Carman’s words, “It’s fancy cryptography to show that your contract is based on the oracle signature and you can only spend the funds if you have that valid oracle signature.”

DLC development is young but promising

Carman said DLCs are “still super early,” so much so that the teams working on them are still creating libraries for coding specifications.

He added that DLCs could even find a home on the Lightning Network, but this would take some advancements considering that current implementations are not hard coded to accommodate ECDSA adapter signatures. 

Accommodating ECDSA on Lightning would require the addition of point-time-lock-contracts (PTLCs), an in-the-works upgraded version of the hash-time-lock-contracts that currently operate on Lightning.

Schnorr signatures would be an ideal base for implementing PTLCs. The long-awaited Schnorr/Taproot upgrade is essential still for DLCs in general, Carman said. Even though DLCs can be executed today, more advanced use cases will be much easier to implement if Bitcoin’s codebase receives a boost from the Schnorr/Taproot softfork. 

Read more: Bitcoin’s Future: Exactly How a Coming Upgrade Could Improve Privacy and Scaling

DLC use cases

“Betting will be the primary use-case in the beginning – so, elections, sports and what-have-you,” Carman told CoinDesk. “Once it’s more established and we have a market for defining counterparties for trades, there will be use-cases for hedging or synthetic assets.”

The hedging use case is outlined by Glasbergen in his “Invisible smart contracts on the Bitcoin blockchain” blog post. The “forward contracts” would entail two parties entering a DLC, with one party agreeing to purchase a certain amount of bitcoin (BTC) for an agreed-upon price, and the other party providing the liquidity for this purchase.

When the time comes for the contract to settle, the contract pays the buyer the amount of bitcoin per the price specified at the time the contract was formed, not per the current exchange rate. In essence, these forward contracts are a way to long or short bitcoin.

These same forward contracts could be used to settle synthetic commodities (DLC contracts that represent commodities like gold and/or silver, for example) in bitcoin-denominated terms, as well.

Related Stories

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Decentralized finance (DeFi) has been grabbing the headlines and capturing the imagination of traders in recent weeks and some of the biggest centralized cryptocurrency exchanges seem to be afraid they’re missing out.

That’s why they are now trying to reposition themselves as integral parts of this exploding sector, particularly as traders in China grow more interested in DeFi. 

Huobi announced Tuesday it was adding 10 more members to its DeFi initiative, described as “a consortium of centralized and decentralized financial services providers.”

Related: Galaxy Digital, IOSG Lead $1.2M Raise for Startup Creating Automated Ethereum Services

Archrival OKEx, which launched its OKxChain blockchain earlier this year, boasted Monday that with its latest upgrade the network is the most decentralized public chain powered by exchanges. 

Binance, the world’s largest cryptocurrency exchange by trading volume, last week announced a new integration of its centralized platform, Binance.com, and its decentralized public blockchain, Binance Smart Chain (BSC). There’s a $100 million fund to encourage developers to build DeFi projects on BSC after the company’s last take on DeFi, Binance Dex – a decentralized exchange launched a year and a half ago – generated little traction.

Centralized exchanges’ aggressive moves into the rapidly growing DeFi space suggest decentralization may be their inevitable path for survival in a crypto trading landscape where decentralized exchanges (DEX) are stealing greater market share.

CEXs vs. DEXs

Related: New Index From DeFi Pulse and Set Protocol Offers Easy Access to 10 DeFi Tokens in 1

Centralized exchanges (CEX) are connected to blockchain networks but use their own computers to match cryptocurrency traders’ buy or sell orders. When one buys and holds a cryptocurrency on a CEX, the coin is often in a centralized address by the exchange. All that happens is a ledger balance change at the exchange itself. “Not your keys, not your coins” is a refrain often used to warn that anyone buying from an exchange isn’t in control so long as he or she doesn’t also have the private keys. Those who traded on Mt. Gox in 2014 learned that lesson the hard way when the exchange collapsed and hundreds of thousands of bitcoins went missing from its hot wallet.  

Read more: New Index From DeFi Pulse and Set Protocol Offers Easy Access to 10 DeFi Tokens in 1

Compared to a centralized exchange, a DEX, in theory, gives more freedom to its users. Decentralized exchanges are usually constructed atop blockchain networks. Automated market makers (AMMs) enable trades to be executed automatically through smart contracts without relying on a third party such as a centralized exchange. Traders also have the full control of their funds and their crypto. They are not required to go through any know-your-customer (KYC) verifications.

While both decentralized and centralized exchanges have been around since the early days of bitcoin itself, centralized exchanges dominated trading and mostly competed against each other. With the sudden boom in DeFi, DEXs are growing faster than their centralized counterparts.

The recent phenomenon of “yield farming” – where users get token rewards for participating in DeFi systems – has made it easier for traders to maximize returns, as CoinDesk reported previously. 

When Uniswap, a semi-automated platform where traders can buy and sell cryptocurrencies and other digital assets, surpassed CEX Coinbase Pro to become the largest U.S.-based cryptocurrency exchange by daily trading volume at the beginning of September, the DEX platform also saw a more than ten-fold gain on its trading volume over the previous month.

In August alone, DEXs represented 5% of total crypto exchange volumes, as AMMs like Uniswap, Curve and Balancer accounted for over 90% of total DEX volume, according to a Sept. 14 report by the cryptocurrency-analysis firm Messari.

China in play?

Binance, OKEx, and Huobi, the three centralized exchanges making some of the biggest splashes in DeFi, are also among the most popular exchanges with Chinese users, with deep roots in China, where interest in DeFi has been on an upswing.

The first steps of the Huobi-backed Global DeFi Alliance, according to a press statement by Sharlyn Wu, chief investment officer at Huobi, will be to host a series of events that will help “educate Asian users of various DeFi protocols.”

“These will be opportunities for Alliance members to collaborate with other branches within the Huobi ecosystem to bootstrap use interest in Asia,” Wu said.

Huobi’s DeFi initiative has included some of the biggest DeFi players including Compound, Curve, Aave, Balancer, and Maker Foundation.

Read more: Chainlink to Start Supplying Data for Crypto.com’s DeFi Wallet 

There is also a so-called “withdrawal movement” in China, according to a tweet by Dovey Wan, a partner at crypto asset investment fund Primitive Ventures and an adviser to CoinDesk. She said users are withdrawing their crypto assets from centralized exchanges and transferring them to lucrative yield farming on DeFi.

According to Simons Chen, executive director of investment and trading crypto finance institution Babel Finance, based in Hong Kong, investors in China were cautious in the early boom of DeFi, during what he called its “first wave.” Many were burned in the initial coin offering (ICO) mania in 2017. But with the drama of SushiSwap ending DeFi’s first wave, investors recognize the potential of the space and are now rushing to join what they perceive as “the second wave” of DeFi, Chen told CoinDesk in a phone interview.

Other than the high returns from yield farming, Chen said Chinese investors also enjoy another advantage of DeFi: having control of their own funds, which reduces the risks of exchanges’ exit scams.

“It’s a lot of pressure for centralized exchanges,” Chen said, recognizing the recent withdrawal trend among cryptocurrency holders in China.

Chen explained that centralized exchanges have huge exposure to margin trading, which allows traders to leverage their positions with borrowed funds. Should more assets leave for DeFi, the centralized exchanges could be left in the lurch. 

CEX DeFi FOMO

DEXs have some advantages, even for the centralized exchanges trying to run one on the side. 

“It’s always better to disrupt yourself than having somebody else disrupt you first,” said Changpeng Zhao, CEO of Binance, during his company’s recent World of DeFi summit. 

He noted the cost of running a decentralized exchange is much cheaper for a company and, therefore, users usually pay less fee to trade on the decentralized platforms. He said he is anticipating Binance Smart Chain, the Ethereum-compatible DEX, will supplement the centralized exchange.

“On the Binance Smart Chain, there are already a number of really interesting projects leveraging automated market makers and DEXs. And on the smart chain, the DEXes, the AMMs will also provide liquidity for Binance’s orderbook,” he said.

While that may appear promising, some argue this is just Binance’s latest effort to keep up with DeFi after the exchange’s initial efforts failed to gain traction.

Jay Hao, CEO of OKEx, also acknowledged the success of DeFi and the eagerness of his exchange to be part of that success.

“One of OKEx’s core missions is to act as a bridge between high-quality DeFi products and the wider user group,” Jay Hao, CEO of OKEx said in an email response to CoinDesk. “It’s impossible to ignore the compelling promise of DeFi and we are firm believers that it will succeed.”

Read more: Uniswap Takes Lead Over SushiSwap Less Than 24 Hours After SUSHI Rewards Drop

The latest version of OKEx’s public chain is said to have higher transactions per second than the Ethereum network, according to the Malta-based exchange’s news release on Sept. 14. The chain is also designed to be compatible with Ethereum.

That could be a smart move, according to Three Arrows Capital CEO Su Zhu. With Ethereum’s soaring transaction fees and network congestion, potential demand for non-Ethereum DeFi could be the next big market trend, he said to CoinDesk via a Telegram message.

What CEXs can get

Centralized exchanges face a dilemma growing their own DEXs and getting involved with DeFi: They can cannibalize their own businesses or they can indirectly prove these DEXs at their core are not truly decentralized. After all, the exchanges are for-profit businesses and not philanthropic foundations.

“As DeFi continues to grow, the centralized exchanges will end up acting like a white label,” Three Arrows Capital’s Zhu said. “Centralized exchanges (would be) a gateway to DeFi, but not where users ultimately spend their time.”

When asked to describe the relationship between OKEx and DeFi and how they could work together despite fundamental differences, OKEx’s Hao said that even if DEXs eventually prove they are the future, CEXs will also be part of that future.

“It is our belief at OKEx that DeFi will help us achieve the goal of ‘FinanceAll,’” Hao said. “As we believe there will always be room for traditional financial services, there will always be a need for centralized exchanges like ours.”

Binance’s Zhao, meanwhile, offered an answer of how his company can survive in a truly decentralized business model: its native token BNB.

“I will be really happy on the day when decentralized exchanges replace centralized exchanges and I think that will push our overall mission forward,” he said during his company’s recent virtual summit. “When that happens, our centralized entity may not be worth much less but BNB will be worth much more. So we don’t lose that much.”

Yet, that will require these centralized exchanges to give over control of their operations to the token holders, according to Zhu, in order for their native tokens to become “fully DeFi.”

Read more: DeFi Is Hot but Retail Interest Nowhere Close to ICO Frenzy

Babel Finance’s Chen compared the CEXs’ take on DeFi with oil companies buying natural gas companies’ stocks when natural gas first challenged their dominance in the energy sector. The centralized exchanges are in the similar mindset as those oil giants: If DeFi and DEXes replace centralized exchanges, centralized exchanges would still be able to catch some part of that market share, Chen said.

Then again, that depends on whether DeFi survives the current high-risk and high-return craze. For the time being, if not longer, centralized exchanges will still likely dominate the crypto trading market.

“I know for sure most of the DeFi projects will fail. It’s just a matter of fact,” Zhao said. “(But) I don’t think DeFi will fail as an industry. A small number of projects will be hugely successful in the future.”

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The U.S. Securities and Exchange Commission (SEC) settled unregistered securities offering charges against online gaming and gambling platform Unikrn for conducting an initial coin offering (ICO) in 2017.

According to a press release Tuesday, the SEC alleged that between June and October 2017, Unikrn Inc. raised approximately $31 million through the UnikoinGold (UKG) token sale in violation of registration requirements. 

The SEC’s press release said that while the firm promised to use its funds to add more features to the platform and develop additional applications, it failed to register the sale of said tokens, which the SEC alleges were offered as investment contracts.

Related: Bitcoin News Roundup for Sept. 14, 2020

The statement adds that Unikrn has agreed to settle the charges, without admitting or denying them, by paying a $6.1 million penalty to be distributed among investors. The SEC said the $6.1 million accounts for “substantially all of the company’s assets.”

“This resolution allows us to return substantially all of Unikrn’s assets to already-harmed investors and includes measures to prevent future sales to retail investors,” Kristina Littman, chief of the SEC Enforcement Division’s Cyber Unit, said in a statement. 

In a statement shared with CoinDesk, Unikrn CEO Rahul Sood said his firm “spent months working with the SEC to come to a solution that was about moving the business forward,” adding:

“The common ground we found requires Unikrn to completely stop supporting UKG and help provide a fund for purchasers of UnikoinGold. This gives us clearance to focus on continuing to build our industry-leading business.”

Related: SEC Charges Rapper TI With Securities Violations for Promoting 2017 ICO

Unikrn’s statement in response to the SEC’s charges added the firm will continue to offer its services supported by major currencies, including fiat currencies, bitcoin (BTC), bitcoin cash (BCH), ether (ETH) and USDC, among others. 

In a related matter, the SEC said Seattle-based Unikrn has settled charges brought by the Washington State Department of Financial Institutions for violating state regulations on such offerings. 

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MicroStrategy is prepared to HODL its bitcoin for at least a century.

Or so said the business intelligence firm’s founder and CEO, Michael Saylor, in an interview with CoinDesk on Tuesday, shortly after he announced on Twitter that MicroStrategy was doubling down on the godfather cryptocurrency with the purchase of $175 million more BTC.

“I want something that I could put $425 million into for 100 years,” Saylor told CoinDesk.

Related: Discrete Log Contracts Are Bringing Private, ‘Scriptless’ Smart Contracts to Bitcoin

In the last two months Saylor has transformed his company’s once-sleepy cash surplus into a nearly half-billion-dollar bet on bitcoin, the “digital gold” Saylor is certain will outlast his tenure. 

“If [my successor is] staring at this thing, it’s still working,” he said.

“This thing” is a heaping pile of 38,250 bitcoins. The publicly traded firm bought $250 million worth on Aug. 11, days after telling shareholders that cash was no longer a safe place for its excess $500 million. Tuesday morning, it bought $175 million more. 

Read more: MicroStrategy Buys $175M More in Bitcoin, Upping BTC Holdings to $425M

Related: MicroStrategy Buys $175M More in Bitcoin, Upping BTC Holdings to $425M

Forget about parking the balance sheet surplus in inflation-prone cash or low-yield bonds or overextended tech stocks, Saylor said. In a market like this – and in the future he said is certain to come – there are only two good places to put excess cash to work: stock buybacks and bitcoin.

It’s a radical about-face for a man who seven years ago declared bitcoin’s days were numbered.

What sparked the change?

An unlikely revelation

“I went down the rabbit hole” during COVID-19, Saylor said, admitting he “was wrong” to have doubted bitcoin back in the $600 range.

“I wish I knew then what I know now,” he said.

The first step in his journey to conversion came from an unlikely source for a newly minted bitcoin maximalist: The sale of the “Voice.com” domain to EOS creator Block.one for $30 million in July 2019. 

Fast forward to 2020, and Saylor found himself reading up on bitcoin. He learned as much about crypto as fast as he could. Saylor said he pored over essays by “bitcoin luminaries,” listened to Nathaniel Whittemore’s and Anthony Pompliano’s crypto podcasts, scoured the internet for Peter Schiff’s bitcoin debates with Erik Voorhees and lost himself in Andreas Antonopoulos’ media empire.

COVID-19’s global business woes were actually a boon for MicroStrategy. Saylor said the firm soon realized it had far more cash on hand than it needed to operate in a newly streamlined virtual-first world.

Moving away from the dollar is now Saylor’s primary concern. He said he can’t stand the inflationary risk. 

In bitcoin, he and the firm’s decision-makers have found what they deem the obvious choice for the coming century of QE infinity. 

“I started to cheerfully assign homework” to MicroStrategy’s executives and directors, Saylor said. He staged “a series of learning exercises to bring everyone up to speed.” If MicroStrategy was really going to move millions into bitcoin, then everyone had to be on board.

How to go all-in

There was a lot of ground to cover, Saylor said. But in three months’ time, he and his executives had accrued the crypto education, and dealt with the myriad legal, custodial and security issues that he said stand in the way of publicly traded companies getting into crypto.

Then, in late July, executives unveiled the game plan on the firm’s Q2 earnings call: MicroStrategy would seek to invest up to $250 million in the next 12 months “in one or more alternative investments or assets which may include stocks, bonds, commodities such as gold, digital assets such as [b]itcoin, or other asset types,” MicroStrategy resident Phong Li said on July 28.

It was a declaration so clouded in corporate vagueness that nobody really noticed the news.

A week passed before Castle Island Ventures partner Matt Walsh resurfaced the earnings call transcript in a tweet. He noted how the Nasdaq-traded stock was “diversifying its cash holdings to include bitcoin.”

Walsh gave the news a double-eye emoji. Watch this, he was saying. 

Observers didn’t have to wait long. 

Six days later MicroStrategy poured all $250 million of its inflation-hedging surplus into bitcoin. Gone was the 12-month timeline and the promise to diversify across gold and other alternative assets. All bitcoin, all the time. 

Come September, its board of directors had recognized bitcoin as MicroStrategy’s primary treasury reserve and hinted in an SEC filing that more buying could be on the way. 

Read more: MicroStrategy Tells SEC It ‘May Increase’ $250M Bitcoin Reserves

It shattered the self-imposed $250 million bitcoin ceiling mere hours later.

As of press time, MicroStrategy has converted $425 million into bitcoin. The stock has surged 30% since its first bitcoin buy on Aug. 11. It was up 9% on Tuesday.

Other publicly traded tech firms – think Apple and Google – park billions of excess capital in cash and leave it there for years. But Saylor didn’t want to leave MicroStrategy’s millions in a bank account where the specter of inflation could slowly whittle it away.

“We just had the awful realization that we were sitting on top of a $500 million ice cube that’s melting,” Saylor said. MicroStrategy has settled on bitcoin as the treasury alternative.

“This is not a speculation, nor is it a hedge,” said Saylor. “This was a deliberate corporate strategy to adopt a bitcoin standard.”

Related Stories

• First Mover: Bitcoin Investors the Sane Ones as Federal Reserve Cheers Inflation, Price Nears $11K
• Analyst ‘Cautiously Bullish’ on Bitcoin but Says Equity Sell-Off Still a Threat

MicroStrategy has put even more of its treasury into bitcoin, Paxful is pulling out of Venezuela and the Bitmain power struggle appears to have found a short-term solution. 

Top shelf

Bitcoin buy
MicroStrategy, a business intelligence company, told the U.S. Securities and Exchange Commission on Monday it “may increase” its BTC holdings beyond the $250 million haul purchased in August. The morning after: it did. Microstrategy has acquired an additional $175 million worth of BTC in a single purchase. These blockbuster buys transformed much of MicroStrategy’s cash reserves into bitcoin, placing the Nasdaq-traded firm among Wall Street’s most notable bitcoin bulls. Future allocations would continue down the treasury allocation path. On Sept. 11, the board formally recognized bitcoin as MicroStrategy’s “primary treasury reserve asset on an ongoing basis.”

Binance abets?
Binance has been accused of “aiding and abetting” the theft of $60 million in cryptocurrency in 2018. Crypto exchange Zaif, now called Fisco, has said hackers transferred 1,451 bitcoin (~$9.4 million at the time) to an address belonging to Binance and used the exchange’s minimal know-your-customer and trading procedures to launder the money. The exchange is now seeking repayment for the allegedly laundered funds and other damages. Interestingly, Fisco is bringing the case in a California district court in part because “critical components” of Binance’s business, such as its AWS servers, are located in the U.S. state.

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

Power struggle
Has Bitmain’s power struggle come to an end? An updated Chinese business registration record shows co-founder Jihan Wu is once again legal representative and executive director of the bitcoin (BTC) miner maker giant, replacing rival co-founder Micree Zhan. CoinDesk’s Wolfie Zhou has reported Zhan was ousted from the company last October but regained control earlier this year. He remains a general manager of the firm, according to the business record. “Since 2020, the management’s feud has damaged Bitmain’s market shares and its brand image. We have lost customers and employees were forced to take sides,” Bitmain said in a post. While it seems things are settling down, the two co-founders are still engaged in a legal battle in the Cayman Island courts. 

Goodbye market
“Increasingly strict” regulations are to blame of Paxful’s decision to pull out of the Venezeulan crypto market, according to a video tweeted Monday. The P2P exchange has suspended account creation and has said existing users will have 30 days to withdraw their funds. Paxful was Venezuela’s second-largest P2P outlet, CoinDesk’ Danny Nelson reports, adding the nation’s crypto traders heavily favor P2P crypto exchanges like market leader LocalBitcoins over government-approved alternatives. Rampant inflation, unbanked population and high mobile phone usage have long appealed to the company, CEO Ray Youssef said, but ultimately local regulations and U.S. sanctions prevailed.

Testy about tether
The New York Attorney General’s office is losing patience with Bitfinex and Tether in a long-simmering legal battle. NYAG Senior Enforcement Counsel John Castiglione filed a letter Monday calling for the crypto firms to comply with a 17-month-old document production order detailing financial information within the next two months. The watchdog is looking for communications about Tether’s loans, loans to third parties and a list of U.S. or New York customers who had funds on Crypto Capital, a bank allegedly at the center of the investigation into the loss of  $1 billion in customer funds. Defendants responded saying the injunction was overly broad, saying asking for information about all tethers is like “asking GM for all documents about cars.”

Quick bites

• Nigeria’s SEC Says All Crypto Assets Are Securities by Default (Paddy Baker/CoinDesk)
• Brock Pierce Served Court Papers for Fraud Lawsuit at His Own Presidential Campaign Rally (Sebastian Sinclair/CoinDesk)
• Thai Central Bank’s New Blockchain-Enabled Bond Infrastructure Passes Test With $1.6B Bond Sale (Jaspreet Kalra/CoinDesk)
• Top Banks Lose $635 Billion in Market Cap During 2020 (Shaurya Malwa/Decrypt)
• Measuring Bitcoin’s Decentralization (Coin Metrics)

At stake

File away?
Filecoin, the much-anticipated distributed file sharing protocol, is nearing its mainnet launch. 

Related: Blockchain Bites: Big Bitcoin Bets, SushiSwap Drops, bZx Attacked

After years of development, funded by a $257 million initial coin offering in 2017, the project that looks to unseat the dominant cloud services business – Amazon, Microsoft and Google – and content delivery networks like Cloudflare is targeting mid-September for launch.

CoinDesk’s Brady Dale reports Filecoin is entering the fray as data hosting costs only continue to drop, potentially endangering the protocol’s business model. 

But Juan Benet, Filecoin’s creator, has a longer-term vision for the development of the internet. Specifically, the project is wagering there will be increasing demand for a new type of data storage: redundant, immutable and radically accessible. 

“Unlike centralized cloud storage services, which back up data in ways clients can’t change or verify, Filecoin allows clients to easily express their own preferences for reliability and cost,” a new document released ahead of the network launch, “Engineering Filecoin’s Economy,” explains. 

Dale breaks down the economic mechanics that might make Filecoin a real competitor. This includes paying rewards for miners that secure the network and host the distributed data, ensuring that everything on the network has an upfront cost and treating all data as unique bits (known as content addressing). 

“Mining on Filecoin is largely about providing storage space using traditional storage systems. This is commodity hardware. Almost anyone with an internet connection can participate,” Dale writes. 

While Filecoin has been beset by delays in the past, a growing enthusiasm in China and the success of its testnet may point to a successful launch. 

Market intel

Cautiously bullish
Bitcoin (BTC) has crossed into bullish territory, but prices remain vulnerable to a potential sell-off in stocks, CoinDesk’s Omkar Godbole reports. The leading cryptocurrency jumped above $10,700 on Monday, confirming an upside break of 10-day-long price consolidation. While the breakout has exposed resistances at $11,000–$11,200, Matthew Dibb, co-founder and COO of Stack Funds, said it’s too early to call an end of the price pullback from August highs above $12,400. “Previous sell-offs have been exacerbated by risk-off momentum in stocks, particularly the tech-heavy Nasdaq index,” Dibb told CoinDesk. “We remain cautiously bullish this week.”

DeFi index
Data company DeFi Pulse and investment-minded Set Protocol have created a permissionless index of top performing DeFi tokens, called the DeFiPulse Index. The weighted index, similar to the S&P 500, offers exposure to the booming DeFi field through one token, called DPI, which will track LEND, YFI, COMP, SNX, MKR, REN, KNC, LRC, BAL and REP. That order is arranged from the largest portion of the index (LEND at 18.3%) to the smallest (REP at 1.63%). The token is available on Uniswap, Set’s TokenSets, Zapper, Argent, Dharma and others. 

Tech pod

Bitcoin smart contracts
A new Bitcoin smart contract-enabling protocol developed by the Lightning Network Protocol and Bitcoin Protocol (LNP/BP) Standards Association is now in beta. Called RGB, the network could be used to issue tokenize securities and nonfungible tokens (NFT), and to offer a more private means of stablecoin issuance and transfer on the most popular blockchain. One of its architects, Giacomo Zucco, said it could also help outfit Bitcoin with the tokenizing capabilities that have made Ethereum the go-to blockchain for issuing tokenized assets like securities, collectibles, crypto dollars and more.

Op-ed

Oracles and enterprise
Paul Brody, a Principal and Global Blockchain Leader at EY, thinks oracles can become a real part of the traditional business practices, but enterprises need third-party – read: auditors – access first. “Oracles are of immense importance to the future of blockchain commerce ecosystems. We cannot develop large-scale commerce without trusted inputs. We will need, however, to accommodate multiple approaches to certifying information, including ones that lean on off-chain judgement and verification, not just clever algorithms,” he writes.

Podcast corner

Geopolitics
As Oracle wins a bid for TikTok U.S., The Breakdown cast explores how tech competition, culture competition and currency competition shape the business of geopolitics.

Who won #CryptoTwitter? Related Stories

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Gamemaker Dapper Labs is using Circle’s dollar-backed stablecoin, USDC, as a global settlement solution for its non-fungible tokens (NFTs).

The firms announced Tuesday the move allowed Dapper Labs to add fiat payment options to its website for the first time. The startup’s current flagship offering, NBA Top Shot, launched in June and has clocked $2 million in revenue and 58,081 transactions, according to data shared with CoinDesk.

The game relies on NFTs, a special type of cryptocurrency where every single token is unique and individual, making them ideal for collectible cards or digital art. The embrace of USDC on Dapper’s back-end is another bid by the firm to court mainstream users by reducing the friction associated with cryptocurrency payments.

Related: The Crypto Firms Collaborating on a Swiss Franc Stablecoin

Dapper Labs, which was behind the popular CryptoKitties game that choked the Ethereum blockchain in 2017, said supporting fiat currencies lets the company appeal to the broader collectibles market. Ethereum’s scaling issues drove Dapper Labs to launch its own Flow blockchain earlier this year.

“We’re proud to work with Circle in building an amazing payments experience for all our customers on Flow, starting with NBA Top Shot,” Dapper Labs CEO Roham Gharegozlou said a statement.

Read more: Circle Gets $25M From DCG to Drive USDC Mainstream

Circle released a suite of e-commerce services earlier this year for facilitating faster payments by using USDC for settlements.

Related: ‘No Other Option but More Collateral’: The Short- (and Long-) Term Fixes for Dai’s Broken Peg

Having launched in September 2018, USDC’s market cap has doubled by $1 billion in the past two months, surpassing $2 billion on Monday, according to CoinGecko.

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A significant amount of cryptocurrencies passes through dark web marketplaces in Eastern Europe, according to Chainalysis.

• Eastern Europe is actively using crypto for illicit purposes, the blockchain analytics firm said in a recent report. Out of $41 billion in total transaction volume, 1.4% was sent to various “illicit entities,” the second-highest share in the world after Latin America.
• “In fact, Eastern Europe accounts for more global darknet market activity than any other region,” Chainalysis said in its report, “Eastern Europe: High Grassroots Adoption, Outsized Darknet Market and Ransomware Activity.”
• Most of that activity occurs on the Hydra Marketplace, which, by Chainalysis’ estimate, is the sixth-largest service by cryptocurrency volume in the region – “no other region has a darknet market or other illicit service in its top ten services,” the firm said in a blog post.
• Hydra is a popular drug-selling marketplace that also provides other kinds of illicit goods and services such as fake IDs. Hydra famously announced an initial coin offering (ICO) in December 2019. In June, the ICO was postponed indefinitely due to the COVID-19 pandemic.
• Eastern Europe also leads the world in ransomware, Chainalysis said. More than 23% of funds received from ransomware addresses were linked to the region. The possible reason, according to the report, is the combination of lower economic opportunities, government sponsorship of hacking activities and high tech literacy among the youth.
• Eastern Europe include two countries that lead the world in crypto adoption: Ukraine and Russia, as CoinDesk previously reported. Although these countries don’t show the largest crypto trading volumes, the population there is actively using crypto and trading it peer-to-peer, Chainalysis said.
  
  Read more: Ukraine Leads Global Crypto Adoption, Chainalysis Says in New Report
  
• For example, user base of the p2p exchange Paxful reported its user base in Russia has grown 350% during the COVID-19 pandemic.
• During the past year, Russia has sent over $16.8 billion worth of cryptocurrency and received $16.6 billion while Ukraine has sent $8.2 billion and received $8 billion, Chainalysis estimated. This is much lower than China, the U.S. and some other countries show. However, relative to those countries’ economies and internet users numbers, these crypto volumes are significant, according to Chainalysis.
• Roughly 85% of all transaction volume in the region during the past year were “professional-sized transfers of over $10,000 worth of cryptocurrency,” Chainalysis said. This, again, is significantly less than in North America and northern and western Europe. However, there are large crypto investment enterprises in Eastern Europe, and Chainalysis names ITI Funds, one of the participants in Telegram's TON token sale in 2018.
• Chainalysis has been gradually releasing excerpts, including this newest one, from its “Geography of Cryptocurrency Report.”
  
  Read more: Chainalysis Report Shows Healthy Crypto Usage in Venezuela

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A Berlin-based startup creating a tech stack for automated Ethereum services, has raised $1.2 million in a seed round led by Polkadot backer IOSG Ventures and crypto merchant bank Galaxy Digital.

• Gelato Network announced Tuesday the funding would go towards developing its network infrastructure as well as launching an decentralized autonomous organization (DAO) that will one day take over governance.
• Founded late last year, Gelato is building a product that adds the next stage to smart contracts, allowing Ethereum developers to automate contract execution on their dapps.
• While smart contracts execute functions once pre-defined conditions are met, most still require users to manually send the transaction itself.
• That can either introduce bottlenecks into the system if the user isn’t online, or additional risk if a third party has to be trusted to execute the transaction when required.
• Having moved to a live mainnet offering in June, Gelato offers developers programmable bots – software that performs automated tasks online – that can be customized to execute specific transactions for selected smart contracts.
• While automated smart contract execution is already available, Gelato says this will be the first such product built entirely on a completely decentralized infrastructure.
• That means bots aren’t programmed by just one team of developers and are, therefore, less at risk to a single point of failure.
• One use case for Gelato could be automating repayments on DeFi lending platforms, which makes the loan process seamless and faster, saving borrowers from paying unnecessary interest when they’re not online.
• Seed round co-leader IOSG Ventures has invested in many of the industry’s household names, such as Vechain, Dfinity, Lisk, Cosmos and Polkadot.
• Meanwhile, Galaxy Digital was a major stakeholder in alternative blockchain platform EOS – which it moved out of last year.
• The seed round also included commits from Gnosis; two venture DAOs, MetaCartel Ventures and The LAO; and Christoph Jentzsch, who was part of the team that created the original Ethereum DAO back in 2015.
• Part of the role of the seed investors is to help with the long-term sustainability of the Gelato DAO, which will ultimately allow Ethereum projects to coordinate and identify what services and functions should be automated.
• The DAO is scheduled to launch sometime in Q1 2021, Gelato “Legendary Member” Hilmar Orth told CoinDesk.
• It’s unclear when Gelato anticipates launching its DAO. CoinDesk reached out to the team for comment but hadn’t received a response by press time.
• In a statement, ISOG founding partner Jocy Lin said Gelato was, among other things, providing some of the “critical infrastructure” for the still-nascent DeFi space.

See also: RGB Continues Its Work to Bring Better Smart Contracts to Bitcoin

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