CoinDesk Crypto

First there were Tendies and YFI. Then came (and went) YAM. And, as of yesterday, we have Based Money.

Meet today’s decentralized finance (DeFi), in what amounts to a crossover between massive multiplayer online (MMO) games, like World of Warcraft, and crypto pump-and-dump schemes.

These aren’t the same DeFi projects launched earlier this summer, said Amentum Capital co-founder Steven McKie. They’re projects are about leveraging Ethereum’s tech for unintended uses. They’re about making crypto fun again.

Related: Doctor Who to Enter the Cryptoverse as BBC Plans Trading Card Game on Ethereum Blockchain

They’re about making money.

Yam Finance launched Tuesday. By the following day, YAM shot upwards of $160 per token and had some $700 million in no-loss collateral obligations under contract (aka yield farming). Early Thursday morning, YAM entered Github Valhalla when a bug locked the project’s governance and $750,000 treasury. The token’s market cap swiftly lost $60 million in 35 minutes. 

Read more: DeFi Meme Coin YAM Succumbs to Fatal ‘Rebase’ Bug, Makes Plans for ‘YAM 2.0’

Playing the game

From first heartbeat to last breath in less than 48 hours. But those are the rules of DeFi’s newest toy, “minimally viable monetary experiments,” as Yam Finance dubbed itself. 

Related: Market Wrap: Stuck at $11.5K, Bitcoin Surpasses 25K Locked in DeFi

“The longer it takes you to do due diligence in this cycle, the lower your alpha,” McKie told CoinDesk in a phone interview. “If you are clued in to play the game, play it. If not, sit out to the next one.”

McKie was an early liquidity provider for Base.Money, another DeFi MMO game (as he likened it to). The project’s anonymous “Ghouls” founding team welcomed its users warmly via Tor:

WE ARE LIVE
GET THE FUCK IN YOU DEGENERATES

Play by the rules (even if you don’t know them)

Does the project have a governance structure? Where can I stake collateral to farm? What pool has the best returns? 

These are the questions DeFi “degenerates” (or “degens”) shoot back and forth ad nauseam in various community Telegram and Discord channels.

For YAM, the central rule was “Know thy rebase,” the algorithmic supply dump issued every 12 hours to push the token’s value back toward one dollar. The token was bid up to as high as $167, according to CoinGecko. Traders rushed to take profits before the rebase. After, they pumped the token’s value back up.

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

Based Money isn’t much different, minus a few rule changes: Farm the BASED token, push the token price up and storm out the door before the algorithm changes the rules.

“The BASED Protocol is a DeFi game of chicken designed to shake out weak hands and yield the highest gains for those who understand the rules,” the website reads.

BASED is trading hands at $128 at time of writing, according to CoinCecko.

DeFi MMO is all possible because of Ethereum’s composable nature, said Aave CEO and founder Stani Kulechov said in a recent Chainlink blog. Often analogized to Lego bricks, Ethereum applications can be snapped together to create novel financial projects.

Yield farming makes liquidity just another plastic brick in the box, he said.

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

“If that product is good, it will get network effects quickly since liquidity moves in an interoperable fashion as well,” Kulechov said.

DeFi composability

Yet, composability does not translate to product safety, OpenZeppelin security researcher Austin Williams told CoinDesk in an email. Just ask YAM investors.

“It is important to understand, however, that just because a project is composed of code that comes from several other audited projects does not mean that the new amalgamation is safe,” Williams said.

That said, yield farming stands as a better alternative to initial coin offerings (ICOs). Yield farmers are rewarded with a project’s native token for lending liquidity to its market. In other words, you don’t get burnt for swapping fiat for an unproven token. 

Read more: Compound’s Approach to DeFi Governance Starts With Giving Away COMP Tokens

It’s not like these projects have not warned users beforehand about the risks, either. Both Yam Finance and Base Money publicly broadcasted that the code banks were unaudited.

In it for the memes (and the money)

This doesn’t make it a smart play, or even a good look, for an industry egg-faced with scams. Those who bought YAM or BASED tokens at retail prices paid for every farmer’s ticket into the arena, crypto blogger Lefteris Karapetsas said Thursday.

“The bad side of farming is the ‘DeFi Chad’ or ‘Defi Degen.’ The kind of meme-driven farmer who jumps from protocol to protocol without any thought on contract safety, chasing the biggest yield, dumping their tokens to the new guys and then moving on,” he wrote.

But it is lucrative for interest-hungry farmers. It’s also really fun.

Read more: DeFi Traders Are Gaming Ethereum for Higher Profits, Researchers Say

“A community that didn’t exist 30 hours ago, through the power of memes and financial incentive alignment, is about to get a higher voter turnout than the U.S. presidential election usually does,” Yam Finance Telegram owner Eric Meltzer said early Thursday morning, referring to a governance vote to save the project.

A shower of “when rebase?” memes and emojis greeted Meltzer’s comment. Within hours the whole project was all but bricked. But don’t worry, a YAM 2.0 is already in the works.

Related Stories

• Blockchain Bites: Coinbase’s Loans, Ethereum’s Fees, YAM’s Bug
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The U.S. Federal Reserve is actively investigating distributed ledger technologies and how they might be used for digitizing the dollar.

Federal Reserve Board Governor Lael Brainard said the U.S. central bank has been testing DLT over the past several years to study what a digital currency might do to the existing payments ecosystem, monetary policy, financial stability and the banking sector.

“With these important issues in mind, the Federal Reserve is active in conducting research and experimentation related to distributed ledger technologies and the potential use cases for digital currencies,” Brainard said Thursday at the Federal Reserve Bank of San Francisco’s Innovation Office Hours.

Related: 4 Myths About CBDCs Debunked

Read more: Senate Banking Committee Remains Open to Idea of Digital Dollar in Tuesday’s Hearing

Brainard cited the ongoing COVID-19 pandemic as one issue that reinforced the need for “immediate and trusted access to funds,” noting that recipients of emergency stimulus funds spent them quickly, indicating they urgently needed access.

“The COVID-19 crisis is a dramatic reminder of the importance of a resilient and trusted payments infrastructure that is accessible to all Americans,” she said. “It was notable that after a sharp reduction in spending early in the COVID-19 crisis, many households increased their spending starting on the day they received emergency relief payments.”

The idea of a digital dollar as a tool to distribute emergency stimulus funds is not new. Congress has been kicking the idea around since at least March. However, no concrete public efforts have been made to create a blockchain-based central bank digital currency in the U.S.

Experimentation

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

U.S. lawmakers have asked Federal Reserve Chairman Jerome Powell about the potential benefits to a digital dollar in the past. The regulator said last November that the central bank is “carefully analyzing” the potential benefits as well as the costs.

At the time, Powell said the Fed was not actively developing a digital dollar, that it might not offer the same benefits to U.S. consumers that other nations’ central bank digital currencies would offer their citizens and that there are questions about privacy and consumer protection.

Brainard echoed these questions in her speech Thursday, but her remarks indicate the Fed is further along in its experimentation than has previously been confirmed.

Read more: US Fed Chair Says Private Entities Should Not Help Design Central Bank Digital Currencies

“To enhance the Federal Reserve’s understanding of digital currencies, the Federal Reserve Bank of Boston is collaborating with researchers at the Massachusetts Institute of Technology in a multiyear effort to build and test a hypothetical digital currency oriented to central bank uses,” Brainard said.

The code from these experiments will be published under an open-source license for the general public to experiment with it.

International efforts

Brainard said the existence of other CBDCs and private cryptocurrencies, like bitcoin and libra, underscore the need for the U.S. to evaluate cryptocurrencies. 

“Digital currencies, including central bank digital currencies (CBDCs), present opportunities but also risks associated with privacy, illicit activity, and financial stability,” she said. “This prospect has intensified calls for CBDCs to maintain the sovereign currency as the anchor of the nation’s payment systems.”

She also singled out one country in particular, noting “China has moved ahead rapidly on its version of a CBDC.”

The Fed needs to “remain on the frontier of research and policy development” given the dollar’s role in the world, she said. 

Read more: Senate Hearing Sees Digital Dollar as a Tool for Economic Supremacy

Her views have been echoed in the past by former Commodity Futures Trading Commission (CFTC) Chairman Chris Giancarlo, who is now a director with the Digital Dollar Project, which has called for tokenizing the dollar. Giancarlo has appeared before Congress three times this summer to advocate this approach.

Like Brainard, Giancarlo has said a digital dollar would benefit the U.S. both in terms of quickly distributing or transferring funds when needed, as well as continue to maintain the dollar’s dominance in the global economy.

Many questions remain before the U.S. can even consider a CBDC, Brainard said Thursday. They include whether a CBDC issued by the Fed would be legal tender under the law.

“A significant policy process would be required to consider the issuance of a CBDC, along with extensive deliberations and engagement with other parts of the federal government and a broad set of other stakeholders,” she said. 

“… The Federal Reserve has not made a decision whether to undertake such a significant policy process, as we are taking the time and effort to understand the significant implications of digital currencies and CBDCs around the globe.”

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Band Protocol (BAND) started trading on Coinbase on Thursday less than two weeks after first appearing on the exchange’s exploratory list.

• BAND is the native token of the Band Protocol oracle platform, a Sequoia Capital- and Binance-financed project building links between real-world data and smart contracts.
• The token hit new 24-hour highs and was trading around $15.17 less than an hour after news of the listing broke, according to CoinGecko.
• BAND has surged around 180% since Coinbase announced on Aug. 5 that it would list the token on Coinbase Pro.
• Trading is available across the U.S. with the exception of New York State, according to Coinbase.

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Crypto custodian Anchorage will provide direct custodial support for two Tokensoft-issued security tokens under a new partnership announced Thursday.

• Investors in Arca’s ArCoin U.S. Treasury Fund token and the upcoming INX token from digital asset exchange INX Limited can custody their tokens directly with Anchorage.
• Both tokens use the ERC-1404 standard that Tokensoft developed for SEC registered assets on the Ethereum blockchain.
• The tokens will now flow through Tokensoft’s affiliated transfer agent directly into Anchorage, a qualified custodian, according to Tokensoft.
• As reported by Forbes, the direct integration hopes to replicate Wall Street’s seamless purchase-to-custody experience for the blockchain securities space.

Read more: 605 Days Later: How ArCoins Got the SEC Go-Ahead as an Ethereum-Traded Treasuries Fund

Related Stories

• Sequoia-Backed Band Protocol Token Starts Trading on Coinbase
• New Jersey Man Accused of Paying $20K in Bitcoin to Have Sex Crimes Victim Killed
• Crypto Data Site CoinMarketCap Has Gone Offline
• Elliptic Teams With Fireblocks to Automate Security and Compliance in Crypto Industry

Ethereum users are paying through the nose while miners profit. Coinbase is offering bitcoin-backed loans and nearly a quarter of the Tor Network may be compromised by a crypto-loving scammer. 

You’re reading Blockchain Bites, the daily roundup of the most pivotal stories in blockchain and crypto news, and why they’re significant. You can subscribe to this and all of CoinDesk’s newsletters here. 

At stake

Has YAM been mashed? 

Related: First Mover: Ethereum Faces Inflation Problem as Gas Fees Soar

The memetic token project which launched on Tuesday and crashed on Wednesday – erasing nearly $60 million in value – announced itself to the world as an “experimental protocol mashing up some of the most exciting innovations in programmable money and governance,” in a Medium post. 

Liquidity providers piled into YAM tokens, developed by Yam Finance, in an attempt to make a quick profit before catching the hot potato. 

Profits would be derived from YAM’s elastic supply schedule, which was programmed to keep the token close to the value of U.S. dollars by creating or destroying tokens at set intervals, called a rebase. 

It was this very mechanism that contained a bug that destroyed the harvest, disabling the project’s on-chain governance feature. 

Related: YAM’s Market Cap Falls From $60M to Zero in 35 Minutes

The first version of YAM launched as the “second purely decentralized DeFi project after Yearn Finance,” according to Cointelegraph’s Joseph Young. And this position has led to varying opinions about the value of the dead project. 

Compound’s Jake Chervinsky tweeted, “This was an extraordinary governance experiment.” 

But Avalanche’s Emin Gun Sirer thinks purely speculative projects – “YOLO coins” – detract from DeFi’s attempt to “accomplish things not possible in the traditional finance world.”

Top shelf

Record Fees
Transaction fees and miner’s profits are soaring on the Ethereum blockchain. Yesterday evening the average fee per ether transaction reached $6.04, according to Blockchair, the highest level since 2015. Median transaction fees sit near historic highs of $3. The increase in fees and ether’s jump in price has driven the daily profitability of Ethereum miners to levels not seen in 27 months – increasing profit margins for most mining equipment above 90%. Data from BitInfoCharts shows that the daily profitability for Ethereum miner operators is at $5.8 per 100 megahashes second (MH/s) of computing power – a level not seen since early May 2018.

Crypto Credit Line
Coinbase will allow U.S. retail customers to borrow fiat loans against as much as 30% of their bitcoin holdings, without filling out an application or going through a credit check. The exchange is setting conservative parameters on the product, according to CoinDesk’s Nathan DiCamillo, capping credit lines at $20,000 per customer and offering an interest rate of 8% for bitcoin-backed loans with terms that are a year or less. Coinbase claims it will keep the bitcoin at the exchange without reinvesting it.

Tokens, Take Two
Token sales are back, reports CoinDesk’s Leigh Cuen. Ava Labs, Polkadot and NEAR protocol – all potential alternatives to Ethereum – are among the most prominent crypto projects to raise tens of millions of dollars within the last month. But this isn’t a play-by-play of 2017. Token founders now prefer ongoing sales with controlled distribution conducted over exchanges like CoinList, Gate.io and Binance. Still, not all Layer 1s are interested in token sales. Bram Cohen’s Chia Network recently raised $5 million in an equity round led by Slow Ventures, ahead of an IPO.

Torn Network?
A single malicious entity controls 23% of all exit nodes used on the anonymous internet provider Tor Network and is using its position to steal bitcoin and other cryptocurrencies, according to pseudonymous cybersecurity analyst “nusenu.” The Tor Network is a popular way to anonymize web traffic by shielding user’s IP addresses. The hacker is using a position as a major exit relay host to decrypt websites, giving them unrestricted access to traffic passing through their servers. It’s unclear how much cryptocurrency has been stolen and whether the malicious agent is engaged in other attacks.

Bitcoin for Business
Nigerians are turning to bitcoin to bypass hurdles imposed on trade with China. Business owners and laymen, restricted by banking limitations and sanctions, are using bitcoin for frictionless trade, reports CoinDesk contributor Alyssa Hertig. All this trade with bitcoin is happening behind the scenes. “Businessmen and women on the ground aren’t exactly eager to publicize that they’re using bitcoin for international trade. For one, the legality of cryptocurrency is fuzzy in the region,” she writes.

Quick bites

• Sirin Labs founder was sued for over $6 million in unpaid factory bills related to the Finney Blockchain Phone (CoinDesk)
• The Stacks Foundation is dipping into 100 million Stacks tokens reserve to pay grants (CoinDesk)
• Kazakhstan wants to put a 15% tax on Bitcoin miners (Decrypt)
• Mexico is a booming crypto market you may not have considered (CoinDesk)
• First Mover: Ethereum faces inflation problem as gas fees soar (First Mover/CoinDesk)

Market intel

Volumes Up
Uniswap trading volume notched its fourth consecutive record monthly high two weeks into August, surpassing $1.76 billion in volumes. The record-setting volume comes amid a continued speculative frenzy over new and experimental decentralized financial applications, causing volumes across all decentralized platforms to soar. In the past 24 hours, Uniswap reported $213 million in volume, accounting for more than 60% of all decentralized exchange volume, according to Dune Analytics. 

Link Cap
Chainlink (LINK) is now the fifth largest crypto by market capitalization, surpassing bitcoin cash (BCH). At press time, LINK stands at $5.76 billion compared to BCH’s $5.30 billion in total market value with a 24-hour volume clocking in at $1.05 billion versus BCH’s $83.7 million. Market capitalization is a tenuous indicator, found by multiplying the total number of coins or tokens in circulation multiplied by its spot price, but has become the go-to metric to rank crypto projects.

Op-ed

Myths Debunked
Marcelo M. Prates, a lawyer at the Central Bank of Brazil, writes that central bank digital currencies (CBDCs) are “a conceptual type of money that hasn’t yet been created, except for some limited prototypes. But myths surrounding CBDCs are already piling up.” He debunks four of the most common misunderstandings.

Podcast corner

How Much?
Supplygate, the debate that sprung up this weekend, was about more than Ethereum’s total supply of coins. It’s one more front in the battle over narratives between the communities behind the two largest blockchains, according to NLW.

Who won #CryptoTwitter?

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• DeFi Meme Coin YAM Succumbs to Fatal ‘Rebase’ Bug, Makes Plans for ‘YAM 2.0’
• Blockchain Bites: Avanti’s New Money, DeFi Deepens and ‘How Much Ether?’

Canadian bitcoin miner Hut 8 announced its Q2 2020 earnings Thursday, reporting a sharp drop in revenue. However, the rising value of the firm’s bitcoin holdings helped Hut 8 finish the quarter in the black.

The publicly traded company mined 795 bitcoin (BTC) last quarter, a 29% decrease from the 1,116 BTC mined during the prior quarter. As a result, revenue declined 28% to C$9.2 million (US$7 million).

Management mainly attributed this to the bitcoin halving that took place on May 11, writing:

Related: Wealthsimple, Robinhood of the North, Jumps Into Canada’s Crypto Sandbox

“The network difficulty decreased subsequent to the halving by 15%, but quickly returned back to levels prior to the halving. This posed a difficult challenge to many bitcoin miners as they saw the bitcoin block reward drop by 50% with similar network difficulty rates meaning that revenue dropped by nearly 50% for all bitcoin miners, including Hut 8.”

Despite a C$6.4 million gross loss for Q2, Hut 8 reported C$2.8 million in net income – thanks to a C$9.4 million gain on the re-measurement of its bitcoin holdings. Hut 8 has 2,954 BTC on its balance sheet as of the end of Q2 2020.

The company also noted it had successfully raised C$8.3 million in gross proceeds from its public offering, which closed near the end of the quarter. According to management, the additional capital has already been committed to upgrading its existing mining equipment.

“This upgrade is a big step towards modernizing Hut 8’s equipment and increasing the overall efficiency of its bitcoin mining fleet,” the company said in a statement.

Related: Riot Blockchain Mined 227 Bitcoin in Q2

As of press time, Hut 8 shares have declined 2% following the earnings release.

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The U.S. Department of Justice (DOJ) announced the “largest ever seizure of terrorist organizations’ cryptocurrency accounts” on Thursday, including “millions of dollars” and 300 crypto accounts.

In a press release Thursday, the DOJ announced it had investigated and dismantled “three terrorist financing cyber-enabled campaigns” involving al-Qaeda, Hamas and the Islamic State of Iraq and the Levant (ISIS).

Legal documents filed Thursday show the DOJ is trying to seize bitcoin from 155 addresses it alleges were used by Al Qaeda to fund terrorism and arrest two individuals allegedly involved with facilitating crypto transfers for Hamas.

Related: Interactive Brokers to Pay $38M in Settlement Over AML Lapses

In a complaint for forfeiture, the FBI, Homeland Security Investigations (HSI) and Internal Revenue Service cyber-crimes unit claim that Al Qaeda created a sophisticated money-laundering operation through a network of Telegram channels, which they used to solicit bitcoin donations intended to fund acts of terror.

“Al-Qaeda and affiliated terrorist groups have been operating a BTC money laundering network using Telegram channels and other social media platforms to solicit BTC donations to further their terrorist goals,” the complaint read. “As described below, al-Qaeda and affiliated terrorist groups operate a number of Telegram channels and purport to act as charities when, in fact, they are soliciting funds for the mujahadeen.”

The complaint starts with donations sent to a Telegram group called “Tawheed & Jihad Media,” which began soliciting bitcoin donations in April 2019.

Overall, the investigators found 155 different crypto addresses they claim are tied to Al Qaeda and various other organizations allegedly supporting the terrorist group.

Related: Missouri Man Pleads Guilty to Trying to Buy Chemical Weapons With Bitcoin

Funds were sent to gift card exchanges and other platforms, according to the filing.

“The Defendant Properties are subject to forfeiture to the United States … as assets of a foreign terrorist organization engaged in planning or perpetrating any federal crime of terrorism,” the complaint said.

Crypto services

A separate affidavit in support of an arrest warrant detailed how Mehmet Akti and Hüsamettı̇n Karataş allegedly stored and transferred cryptocurrencies, including bitcoin, ether, XRP and EOS on behalf of al-Qassam, Hamas’ military wing.

The affidavit alleges the two violated money services business regulations and the Bank Secrecy Act.

Investigators used Chainalysis and Excygent to track bitcoin transfers from these organizations over the last 18 months.

In a blog post, Chainalysis said authorities seized more than $1 million from terror campaigns. The blog post went on to describe how the company tracked the funds, noting that many of the addresses “are hosted at various exchanges.”

According to the Middle East Media Research Institute, Telegram groups were soliciting bitcoin for terrorist groups as recently as July 2020.

Leigh Cuen contributed reporting.

Read the full complaint below:

UPDATE (Aug. 13, 2020, 16:55 UTC): This article has been updated with additional information.

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The U.S. Department of Justice is trying to seize bitcoin from 155 addresses it alleges were used by Al Qaeda to fund terrorism.

In a complaint for forfeiture filed Thursday, the FBI, Homeland Security Investigations (HSI) and Internal Revenue Service cyber-crimes unit claim that Al Qaeda created a sophisticated money-laundering operation through a network of Telegram channels, which they used to solicit bitcoin donations intended to fund acts of terror.

“Al-Qaeda and affiliated terrorist groups have been operating a BTC money laundering network using Telegram channels and other social media platforms to solicit BTC donations to further their terrorist goals,” the complaint read. “As described below, al-Qaeda and affiliated terrorist groups operate a number of Telegram channels and purport to act as charities when, in fact, they are soliciting funds for the mujahadeen.”

Related: Interactive Brokers to Pay $38M in Settlement Over AML Lapses

The complaint starts with donations sent to a Telegram group called “Tawheed & Jihad Media,” which began soliciting bitcoin donations in April 2019. Investigators used Chainalysis and Excygent to track bitcoin transfers from these organizations over the last 18 months.

Overall, the investigators found 155 different crypto addresses they claim are tied to Al Qaeda and various other organizations allegedly supporting the terrorist group.

The total amount of crypto stored on the addresses was not shared.

“The Defendant Properties are subject to forfeiture to the United States … as assets of a foreign terrorist organization engaged in planning or perpetrating any federal crime of terrorism,” the complaint said.

Related: Missouri Man Pleads Guilty to Trying to Buy Chemical Weapons With Bitcoin

According to the Middle East Media Research Institute, Telegram groups were soliciting bitcoin for terrorist groups as recently as July 2020.

Leigh Cuen contributed reporting.

Read the full complaint below:

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A New Jersey resident who pleaded guilty in 2017 to child sex crime charges is now accused of paying a hitman $20,000 in bitcoin to murder his then 14-year old victim.

• John Michael Musbach faces federal murder-for-hire charges and interstate commerce violations in U.S. District Court for the District of New Jersey, according to an Aug. 10 criminal complaint unsealed Thursday.
• Musbach, 31, allegedly attempted to pay a dark web hitman 40 BTC (worth $20,000 at the time) to kill a 14-year-old in May 2016.
• Just two months before, Musbach admitted to New Jersey law enforcement that he and that same victim had exchanged sexually explicit material online in September 2015. He would later plead guilty to state-level sex crime violations.
• The arranged May 2016 hit never went through. According to chat logs submitted in the complaint, the murder-for-hire service duped the user alleged to be Musbach into paying more bitcoin before ultimately claiming the site was a “scam” to expose criminals.
• Agents said they linked Musbach to the attempted hit by tracing the bitcoin to his Coinbase account and by cross-listing his dark market screen name with other internet accounts.
• Musbach faces a maximum 10-year sentence and $250,000 fine if convicted, according to a press release.

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Popular crypto data site CoinMarketCap is suffering some sort of outage.

• Users started reporting problems at around 14:30 UTC – the entire site, including price and exchange data feeds as well as its news aggregator service, appear to be offline.
• CoinMarketCap released data showing the website’s response time has slowed significantly in the past hour. The site said it is currently investigating an issue that has made the site “unstable.”
• CoinMarketCap told CoinDesk the site outage doesn’t appear to be a malicious attack.
• The spokesperson said it was likely a technical hiccup from the newly-launched CoinMarketCap Earn – a platform for users to earn cryptocurrencies while reading about them on the website.
• CoinMarketCap was sold to Binance for a reported $400 million earlier this year; it is one of the most visited websites in the world according to SimilarWeb.
• Possibly coincidentally, the website for cryptocurrency exchange HOTBIT has also temporarily shut down – although a message on the site says this is for server maintenance.

See also: CoinMarketCap Metric Overhaul Keeps Owner Binance at the Top

UPDATE (Aug 13, 15:30 UTC): This article has been updated with comment from CoinMarketCap.

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Everyone in crypto has been talking about decentralized finance (DeFi) since bankless lending started to boom in June. But, looked at another way, it’s really a governance boom.

Into this environment has stepped Greenfield One, an early-stage venture capital firm that just published a comprehensive new resource on the topic of blockchain governance.

Take, for example, COMP. DeFi has been hot ever since Compound started distributing its COMP governance token on June 15. COMP didn’t introduce new features to the product, it just gave users a means to voice how the $777 million lending protocol should evolve. 

Related: YAM’s Market Cap Falls From $60M to Zero in 35 Minutes

The report from the Berlin-based Greenfield One looks at this and every notable spin on blockchain governance leading up to the birth of yield farming following COMP’s debut.

“The [Compound] community uses a variant of liquid democracy,” the report states.

But despite crypto founders’ best intentions, the Greenfield One team found blockchain governance schemes tend to get put together fast and then treated with reverence. At times that faith is misplaced. 

“I’m not saying that teams aren’t taking governance seriously, but it always feels like something that they build on the side,” Jascha Samadi, a Greenfield One partner, told CoinDesk in a phone call.

Related: DeFi Meme Coin YAM Succumbs to Fatal ‘Rebase’ Bug, Makes Plans for ‘YAM 2.0’

The venture firm often starts working with portfolio companies well before mainnet launch, Samadi said, coaxing them to consider various governance models as early as possible. 

Therefore, Greenfield One thought it would be helpful to have an overview of what different groups have tried so far. Since such a guide didn’t already exist, the group decided to make one.

“This is such an important topic that we really just need to raise awareness,” Samadi said.

The report covers Bitcoin, Ethereum, Decred, Tezos, Cosmos, Polkadot, several DAO frameworks, MakerDAO, Nexus Mutual and Compound.

It also deals with describing the roles of stakeholders seen across blockchains such as miners, validators, users, full-node operators and companies. It deals with strategies for off-chain governance as well as the various questions that can be dealt with on-chain.

Also read: How a DeFi Trader Made an 89% Profit in Minutes Slinging Stablecoins

Larger story

The cryptocurrency industry has a tendency to function as if the world began on Halloween 2008, when Satoshi Nakamoto released the Bitcoin white paper, but Greenfield One realized there is a larger literature of organizational theory that applies to cryptocurrencies. 

“Traditionally, scholars have been focused on the firm as the unit of analysis in organizational design, which has become less and less congruent with the emerging patterns of organizing in peer-to-peer networks and on platforms,” they write.

The report opens its discussion by grounding decentralized technology in a larger conversation about how humans get things done together, such as through firms or nations.

“From an institutional perspective, blockchains can be viewed as a new coordination technology competing with firms, markets and national economies as institutional alternatives organizing the economic actions of groups of people,” the report states.

This alternative first manifested with Bitcoin.

But not everything Bitcoin and other cryptocurrency networks need can be sorted out on-chain. “By far not all activities are reliably traceable and automatically verifiable on public blockchains (especially human labor, where some subjectivity in quality is involved),” the authors write. Thus the need for “residual control,” that is human-powered governance.

Also read: Token Sales Are Back in 2020

“The deeper we dug we realized that it’s such a broad and vast topic,” Samadi told CoinDesk. “Before we dive into how to best or most effectively govern we need to understand what blockchains are in a broader sense of organizational theory.”

Cryptocurrency may be moving Earth toward the singularity, but humans are still key to the project for the foreseeable future. As the writers note in their conclusion:

“In the end, social consensus is what defines a cryptonetwork.”

Read the full report below:

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Bitcoin has shrugged off a drop to $11,300 for the third day running.

• The cryptocurrency dipped to $11,287 at 09:10 UTC Thursday, only to chart a quick recovery to levels around $11,500, according to CoinDesk’s Bitcoin Price Index.
• Bitcoin is possibly being buoyed by the uptick in gold prices.
• At press time, the precious metal is trading at $1,935 per ounce, having risen back above $1,900 on Wednesday.
• The one-month positive correlation between bitcoin and gold recently reached record highs, supporting the store-of-value narrative surrounding the cryptocurrency.
• As such, the cryptocurrency may be less affected by losses in the European stock markets.
• Major European equity indices like Germany’s DAX and U.K.’s FTSE are down 0.30% and 1%, respectively., and the pan-European Stoxx 600 index has shed 0.4%, according to data source Investing.com.
• Seemingly, the appetite for risk has weakened over fears that the current stalemate between the U.S. Republicans and Democrats over additional fiscal stimulus could drag on for weeks.
• Bitcoin still remains vulnerable to a pullback in equities, according to Joel Kruger, a currency strategist at LMAX Digital. 

Daily chart

• While the repeated rebound from sub-$11,300 levels is encouraging, the cryptocurrency is still trapped in an ascending triangle.
• A breakout would imply a continuation of the rally from lows near $9,000 observed in July. 
• A move below the lower end would confirm a short-term bearish reversal.
• “Bitcoin has to break $12,000 and then $14,000 to get to new highs,” Alex Mashinsky, CEO and founder of crypto lender Celsius, told CoinDesk.
• Upside has recently been capped by short-sellers and hedging by profitable miners, Mashinisky added.

Whale population rises

• While bitcoin is consolidating below $12,000, the number of entities (clusters of addresses controlled by the same network entity) holding at least $1,000 BTC continues to grow.

• The metrics jumped to 1,874 earlier this week, the highest since August 2017, according to data source Glassnode. 
• The continued rise in the so-called whale entities could be taken as a sign of investor confidence in bitcoin’s long-term price prospects.

Also read: What Bitcoin Can Learn From Gold About Staying ‘Clean’

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Blockchain analysis firm Elliptic has joined forces with crypto transaction and storage platform Fireblocks to automate anti-money laundering compliance for their shared institutional clients.

• The partnership, announced Thursday, will see Elliptic’s solutions for the screening of transactions and wallets incorporated into the Fidelity-backed Fireblocks platform.
• The move means customers of both platforms will be able to check the identity as well as verify potentially risky transactions in order to reduce costs often associated with compliance procedures.
• Elliptic’s chief scientist and co-founder Tom Robinson told CoinDesk the integration would facilitate the “screening of tens of billions of dollars worth of crypto transactions per month” by year-end.
• With crypto and associated products continuing to draw the interest of large financial institutions, anti-money laundering (AML), countering finance of terrorism (CFT) and cybersecurity regulations have become hot topics in 2020.
• Vice president of product at Elliptic Andrea Ramoino said the crypto markets were garnering the attention from institutional and retail investors alike as a “vehicle for value transfer and creation.”
• Attaching Fireblocks to Elliptic’s partner network means institutional clients would be better protected from financial crime via enhanced crypto risk monitoring, Romoino added.
• Fireblocks is looking to position itself at the fore of crypto asset storage and security solutions having recently integrated blockchain analytics firm Chainalysis to its platform in June.
• The tools and services associated with cybersecurity in crypto are going to be key if the market is to gain trust from investors and grow, both companies said in a press statement.

See also: Fireblocks Adds Crypto-Tracing Tool to Guard Against Money Laundering

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• Fed Reserve Analysts Say Common Digital Currency Distinction ‘Problematic’

Congestion is building on the Ethereum blockchain, the second-largest blockchain, thanks to the recent popularity of dollar-linked “stablecoins” and “decentralized finance” applications like Compound. 

And now fees to process transactions, which escalate when congestion is high as some users pay up for faster execution speeds, are soaring to levels not seen since the initial coin offering craze of 2017. 

Hello readers, you may notice some differences in today’s edition of First Mover. We’re trying out a few new things with our daily markets newsletter, front-loading the biggest price jumps, refining our big story, and adding two new sections: Token Watch, with the latest developments in altcoins, and Analogs, which highlights how traditional markets are interacting with crypto. We’re excited to experiment and iterate on First Mover to make it the best crypto markets newsletter it can be. You can sign up here.

Related: Bitcoin Recovers From $11.3K Despite Losses in European Stocks

The fees are known as “gas” and people are starting to complain about Ethereum gas prices, just like motorists whinge about gasoline costs at the pump. One casualty of the spike could be a slowdown in the pace of development of new projects using the Ethereum blockchain. 

“We’ve officially priced out experimentation,” Messari’s Ryan Watkins tweeted on Wednesday. 

It doesn’t help that gas prices are denominated in prices for ether (ETC), the native token of the Ethereum blockchain – ether’s price, as denominated in dollars, has tripled this year to about $390. Some options traders are even betting ether could hit $1,000 by December.  

So the double-whammy of congestion and speculation has driven median gas prices to about 0.008798 ether, which works out to about $3.30, according to data aggregator Blockchair. 

Related: Daily Profitability for Ethereum Miners Hits Over 2-Year High

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

Tweet of the day Price Point

Bitcoin has erased the dip to $11,300 seen early on Thursday, possibly tracking a continued recovery in gold.

The leading cryptocurrency is trading up slightly on the day near $11,480 at press time. Meanwhile, gold is trading at $1,935 per ounce – up 1.10%. Both assets have recently developed a relatively strong negative correlation.

Bitcoin’s drop came after fresh evidence of uptick in inflation in the U.S., even though many investors argue the cryptocurrency should work as a hedge against rising prices.

A U.S. government report released Wednesday showed core consumer prices in the world’s largest economy rose last month at their fastest pace in 29 years.   

Token Watch

Chainlink (LINK) keeps impressing – The DeFi oracle provider “hasn’t disappointed” when it comes to turning announcements of new partnerships into tangible results, according to Messari, a crypto data provider. “Over 30 projects have fully integrated Chainlink data feeds, most of which went live within the past month,” Messari wrote Wednesday in a daily newsletter. Prices for LINK have jumped eight-fold this year, by far the best performance among digital assets with a market capitalization of at least $1 billion. It’s fueled by this year’s rampant speculation over the potential for DeFi (and maybe some marketing help from the so-called LINK Marines),

Yam (YAM) is officially a DeFi meme – In yet another example of just how chaotic the fast-growing (and wildly experimental) realm of DeFi has become, a two-day-old project called Yam quickly built up a market capitalization above $60 million before crashing to $0 early Thursday. Prices for the YAM token had peaked at $167 late Wednesday before spiraling down. The project apparently suffered a bug that led to the loss of $750,000 Curve tokens stored in its treasury. It’s not for the faint of heart.   

Bitcoin Watch

Bitcoin’s options market is skewed bullish despite bearish developments on the short-term technical charts. 

Call options (bullish bets) are drawing higher prices than puts (bearish bets) on the one, three, and six-month time frames, according to data source Skew. Investors may be selling puts and buying calls, causing calls to trade at relatively higher prices. 

Put sellers should note that short-term technical studies are now painting a negative picture. The daily chart moving average convergence divergence (MACD) histogram has crossed below zero, indicating a short-term bullish-to-bearish trend change. The indicator is printing deeper bars below the zero line, suggesting potential for a stronger move to the downside. 

Further, the five- and 10-day simple moving averages (SMAs) are charting a bearish crossover and the long upper wicks attached to the recent three-day candles are indicating exhaustion of the broader uptrend.

As such, the path of least resistance appears to be on the downside. The immediate support is located at $11,137 (Tuesday’s low), which, if breached, would open the doors to $10,659, a low reached on Aug. 2. 

On the higher side, an hourly chart descending trendline, currently placed at $11,600, may offer resistance, which, if violated, would shift the focus to $12,000. 

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Goldman Sachs has sold more than $6 million worth of shares in MoneyGram, the remittance company that provides liquidity for Ripple’s XRP settlement layer.

• The U.S. investment bank and its subsidiaries this week informed the Securities and Exchange Commission (SEC) it had sold over 14,000 shares of Series D Preferred Stock in MoneyGram between August 5 and August 10.
• This is convertible into nearly 1.8 million units of common stock, worth a total of $6.5 million on the Nasdaq at press time.
• Based in Texas, MoneyGram has collaborated with Ripple since it started testing XRP for its international payments rails in January 2018.
• Since H2 2019, the remittance company has received more than $40 million in “market development fees” from Ripple Labs in return for providing liquidity to its On-Demand Liquidity (ODL) network.
• Ripple completed the purchase of a $50 million equity stake in MoneyGram last November.
• Despite the sell-off, Goldman Sachs still owns well over 18 million units of common stock – a larger stake than Ripple Labs – at a total of $65 million worth.
• It’s unclear why Goldman decided to sell approximately 9% of its position in MoneyGram.

See also: Goldman Sachs Eyes Own Token as Bank Appoints New Head of Digital Assets

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Goldman Sachs has sold more than $6 million worth of shares in MoneyGram, the remittance company that provides liquidity for Ripple’s XRP settlement layer.

• The U.S. investment bank and its subsidiaries this week informed the Securities and Exchange Commission (SEC) it had sold over 14,000 shares of Series D Preferred Stock in MoneyGram between August 5 and August 10.
• This is convertible into nearly 1.8 million units of common stock – worth a total of $6.5 million on the Nasdaq at press time.
• Based in Texas, MoneyGram has collaborated with Ripple since it started testing XRP for its international payments rails in January 2018.
• Since H2 2019, the remittance company has received more than $40 million in “market development fees” from Ripple Labs in return for providing liquidity to its On-Demand Liquidity (ODL) network.
• Ripple completed the purchase of a $50 million equity stake in MoneyGram last November.
• Despite the sell-off, Goldman Sachs still owns well over 18 million units of common stock – a larger stake than Ripple Labs – at a total of $65 million worth.
• It’s unclear why Goldman decided to sell approximately 9% of its position in MoneyGram.

See also: Goldman Sachs Eyes Own Token as Bank Appoints New Head of Digital Assets

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With Ethereum transaction fees soaring, the daily profit that can be achieved by miners on the network is now at its highest point in 27 months.

• Data from BitInfoCharts shows that the daily profitability for Ethereum miner operators is at $5.8 per 100 megahashes second (MH/s) of computing power – a level not seen since early May 2018.
• The increasing profitability is a result of the recent price rise of the ether (ETH) cryptocurrency and a surge in transaction fees brought on by increasing levels of decentralized finance (DeFi) activities on Ethereum.
• As a result, most of Ethereum mining equipment is now able to operate with a profit margin above 90% even at an electricity cost of $0.05 per kilowatt-hour.
• Some more state-of-art equipment can mine with a profit margin of as high as 97%, according to data tracked by mining pool F2Pool.
• In July alone, the profitability metric soared by over 60%, as reported by CoinDesk.
• At the time, ETH was changing hands at around $320 and daily mining profitability was about $3.27 per 100 MH/s.
• In the past two weeks, ETH prices have been closer to $400 per token.
• It’s worth noting that data from Glassnode shows that the total daily revenue for Ethereum miners in dollar terms have not yet exceeded the level seen in May 2018.
• However, the total hash rate securing Ethereum on average is now around 200 petahashes per second (PH/s), while it was over 270 PH/s more than 2 years ago, network data shows.
• That means mining is now less competitive and the achievable profitability per 1 megahash power is higher, even though total mining revenue is not.

Read more: Decentralized Finance Frenzy Drives Ethereum Transaction Fees to All-Time Highs

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• Fed Reserve Analysts Say Common Digital Currency Distinction ‘Problematic’

Two-day-old DeFi project YAM has seen its market cap evaporate in under an hour as a desperate last-minute attempt to fix a bug in the code ultimately failed.

• Data from price site CoinGecko shows the total value of YAM collapsed from roughly $60 million at 07:40 UTC to $0 by 08:15 – barely 35 minutes later.
• The price of YAM tokens, which peaked at roughly $167 at 17:30 UTC, had spiraled down to barely $14 at just before 08:00.

• Having only launched Tuesday, YAM was a yield farming protocol where tokens were intended to keep parity with the U.S. dollar through loosening or contracting supply.
• It’s relative newness though meant the code hadn’t been properly audited; a bug was soon discovered that effectively meant the protocol would keep printing “dud” YAM tokens that would prevent token holders from making any governance decisions.
• A last-minute attempt to save the protocol ultimately failed and co-founder Brock Elmore pronounced the project dead at 08:01 UTC.
• Yam’s market cap went to zero moments later.
• The project announced a plan to migrate to YAM 2.0 just before press time.
• Crypto exchange Gate.io announced it will reinstate deposits, withdrawals for YAM, with trading set to resume at 14:30 UTC.

See also: Deposits in ‘Monetary Experiment’ Meme Token YAM Break $460M

UPDATE (Aug. 13, 10:45 UTC): This article has been updated to include the Gate.io announcement.

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

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

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

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

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

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

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

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

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• Decentralized Finance Frenzy Drives Ethereum Transaction Fees to All-Time Highs
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• Token Sales Are Back in 2020