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Blockchain Bites: Is DeFi an Inside Deal?

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A Lightning-based derivatives platform took in pre-seed capital, a new blockchain analyst will try to track down missing funds from the defunct QuadrigaCX exchange and CoinDesk looks at how retail interest in DeFi compares to the infamous ICO bubble.

Top shelf

DeFi interest?
Retail interest in decentralized finance (DeFi) applications remains quite low compared to the initial coin offering (ICO) bubble, measured by Google search queries, CoinDesk’s Omkar Godbole reports. Indexed to the peak of searches for “ICO,” searches on Google Trends for the word “DeFi” currently return a value of 18, indicating the retail crowd is as interested in open-source finance as they were in ICOs during the latter’s boom. Put in context, these searches come amid a period when the total value locked into the DeFi ecosystem has increased 1,300% to above $9 billion this year, approximately 66% higher than the $5.4 billion raised by ICOs in 2017. This disparity between searches and capital may indicate that DeFi’s growth is being driven by savvy investors.

Quadriga update
In the latest legal update to the 18-month long QuadrigaCX saga, Canadian law firm Miller Thomson has hired a consultancy firm to perform blockchain analytics as it works to return $200 million in crypto customers are said to have lost, after the exchange’s chief executive died under mysterious circumstances. The firm, Kroll, will pair with its “strategic partner” Coinfirm to analyze a subset of transaction data, CoinDesk’s Nikhilesh De reports, for a $50,000 CAD ($38,000 U.S.) fee. Miller Thomson noted it could not begin the process of disbursing funds until Ernst & Young (EY) finalizes its record of who is owed what and the Canada Revenue Agency has completed its audit of the exchange. So far, about $46 million CAD (around $35 million U.S.) has been recovered.

Fraud accusations
Yaroslav Shtadchenko, former project manager at now defunct crypto fund Bitsonar, has formally accused his former employer of six criminal offenses including fraud. Filing a notice of criminal offence with the Federal Bureau of Investigation, Shtadchenko said he “became aware that Bitsonar was actually a financial pyramid” last spring, CoinDesk’s Anna Baydakova reports. Bitsonar was an investment firm that managed to raise up to $2.5 million in crypto from investors. The exchange froze withdrawals in February and the website went offline in August.

Lightning round
Bitfinex and other early-stage Bitcoin startup investors led a pre-seed funding round for the Lightning Network-based derivatives platform LN Markets. Launched in March 2020, LN Markets has reached nearly $10 million in aggregate traded volume and has over 100 channels connected to its exchange, CoinDesk’s Zack Voell reports. It’s designed to avoid slow and costly on-chain transactions by connecting traders to a bitcoin (BTC) derivatives market by “streaming” their funds through the Lightning Network. Bitfinex’s CTO Paolo Ardoino said, “This is one of our first public investments and underlines our support for the Lightning Network.”

AWS solutions
Indian tech giant Tech Mahindra announced it will offer blockchain solutions built to global customers using Amazon Web Services (AWS). The company will provide solutions for aviation, telecom, and health-care supply chains and is planning to roll out support for multiple industries, including oil and gas and manufacturing, over the next 12 months. Ensuring supply chain continuity has become the focal point with businesses struggling to facilitate continuity in the current COVID-19 world, according to Rajesh Dhuddu, blockchain and cybersecurity practice leader, Tech Mahindra.

Quick bites

  • Bithumb Exchange’s Offices Raided Again by Korean Authorities: Report (Paddy Baker/CoinDesk)
  • Bitcoin Banking App Mode Eyes £40M UK Listing (Paddy Baker/CoinDesk)
  • European Crypto Tax Companies Announce Merger to Power US Expansion (Paddy Baker/CoinDesk)
  • Chainlink nodes were targeted in an attack last weekend that cost them at least 700 ETH (Yogita Khatri/The Block)
  • SushiSwap Victims Urged to Lawyer up (Adriana Hamacher/Decrypt)

At stake

Sushi rolls
Over the weekend the creator of the breakout DeFi phenomenon SushiSwap cashed out, leaving trusting investors high and dry. 

SushiSwap, a fork of Uniswap, aimed to further decentralize the automated money market by sharing revenues through a liquidity provider token (LP), called sushi (SUSHI). 

The protocol leveraged a unique strategy of “zombie mining,” meant to draw liquidity and participants from Uniswap, by paying out extra LP tokens for users staking sushi on Uniswap. In just a week and a half, approximately $1.27 billion was raised, CoinDesk’s Will Foxley reports. 

On Saturday, Sushi’s pseudonymous founder Chef Nomi sold his share of LP tokens Saturday for 37,400 ether (ETH), worth approximately $13 million, in what David Hoffman of Bankless called a “sin of betrayal.”

“When the anonymous founder market-dumps all his SUSHI upon the rest of the community, it is a sin of the highest order because the person that was supposed to be a leader instead defected and took everyone else for chumps,” Hoffman wrote in a recent newsletter. 

“Again I did not intend to do any harm. I’m sorry if my decision did not follow what you expected,” Nomi tweeted.

Control of the project has since been transferred to FTX’s Sam Bankman-Fried, who plans to instantiate a multi-signature contract before  the project can be fully decentralized into the hands of SushiSwap LP token holders.

Market intel

Buying the dip
People are “buying the dip.” Bitcoin’s fall from $12,400 to $10,000 over the past three weeks has led to a 2% increase in the number of “accumulation addresses,” or addresses that have at least two incoming transfers and have never spent funds, according to data source Glassnode. The divergence between prices and accumulation addresses suggests that investors view the recent price drop as a typical bull market pullback and expect prices to rise once more. “Markets typically retrace one third or more in a bull market after local euphoria,” Su Zhu, CEO of Singapore-based Three Arrows Capital said, suggesting prices could drop to as low as $8,800 and still be a “healthy target.”

Bitcoin options
Bitcoin’s options traders are seemingly bullish in the long term but bearish for now. According to data source Skew, the six-month put-call skew, which measures the value of puts, or bearish bets, relative to that of calls, bullish bets, is currently seen at -10%. This negative number indicates that call options expiring six months from now are drawing higher prices or demand than puts. However, the one-month skew has crossed above zero, a sign of investors adding put options to position for a deeper short-term price decline, CoinDesk markets reporter Omkar Godbole reports. Meanwhile, new data shows crypto derivative volumes rose 54% to more than $710 billion in August, surpassing a previous all-time high of $602 billion monthly volumes reported in May.

Tech pod

Gas tokens
Ethereum developers are weighing ditching a smart contract feature that offers rebates amid a period of climbing Ethereum gas fees. At stake are gas tokens, a way to essentially “tokenize” gas by allowing Ethereum users to buy up transaction fees when they are low and then spend them when the fee price rises. Developer Alexey Akhunov proposed last June to get rid of these gas tokens, which made up 1.5% to 2% of Ethereum transactions over the summer. While the matter is still under discussion, some developers worry tokenized gas could one day act as a “price floor” for transaction fees and keep them permanently high, CoinDesk’s Will Foxley reports.

Op-ed

Volatility & risk
In the latest Crypto Long & Short newsletter, CoinDesk’s Head of Research Noelle Acheson looks at the relationship between volatility and risk, and why the two metrics are erroneously conflated. Often crypto’s volatility is seen as a barrier to entry, as Fidelity Digital Assets found in a recent survey. Yet, high volatility is not the same as risk. “Volatility is a metric, a number, a measurement. Risk is an ambiguous concept,” she writes. “If we equate volatility with risk, then we are implying that we can measure risk. We can’t. Risk is based on the unknown. Bad things can happen from any direction, at any time, at any speed, in an infinite array of forms and configurations.

Podcast corner

Eth 2.0 staking
Ethereum 2.0 is coming, eventually. But its latest, and largest, testnet is live today. Speaking with Paul Hauner, the lead developer of the Ethereum 2.0 Lighthouse client, and Tim Ogilvie, co-founder and CEO of Staked, CoinDesk’s Christine Kim breaks down the three things everyone should know before staking on Eth 2.0. 

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The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Source: https://www.coindesk.com/blockchain-bites-defi-bitcoin-quadriga

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CBDC is a tool to combat Bitcoin, says Bank of Indonesia exec

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Central bank digital currencies (CBDC), digital versions of national currencies introduced in response to growing cryptocurrency adoption, would be an essential tool for combating crypto, according to the Bank of Indonesia.

The central bank of Indonesia is considering launching a digital rupiah to “fight” against cryptocurrencies like Bitcoin (BTC), Bank of Indonesia’s assistant governor Juda Agung said at a recent parliamentary meeting.

“A CBDC would be one of the tools to fight crypto. We assume that people would find CBDC more credible than crypto. CBDC would be part of an effort to address the use of crypto in financial transactions,” Agung stated, according to a Nov. 30 Bloomberg report.

The official noted that cryptocurrencies like Bitcoin are currently traded alongside commodity futures and regulated by the trade ministry despite severe impacts on the financial system.

The news comes shortly after the National Ulema Council (MUI), Indonesia’s top Islamic scholarly body, reportedly found cryptocurrencies like Bitcoin to be haram, or forbidden, by the tenets of Islam. The East Java branch of one of MUI previously issued a statement deeming the use of the cryptocurrency haram in late October.

As previously reported, the Indonesian government has taken a mixed stance on crypto regulation. Despite banning cryptocurrency payments back in 2017, local authorities have opted to keep cryptocurrency trading legal. In April 2021, Indonesia’s Commodity Futures Trading Regulatory Agency (Bappebti) of the Ministry of Trading reportedly announced plans to launch a government-backed crypto exchange in the second half of 2021.

While maintaining a mixed stance on crypto, Indonesian regulators have been increasingly looking at a potential CBDC. In May, the Bank of Indonesia Governor Perry Warjiyo announced plans to launch a digital rupiah as a legal payment instrument in Indonesia.

Related: Retail-focused Singaporean CBDC to hedge against privately issued stablecoins

CBDCs like the Chinese digital yuan are apparently designed to curb cryptocurrency adoption as one of their key features. Indonesia is not alone in thinking that CBDCs can help governments combat crypto. In mid-November, Bank of Russia’s governor Elvira Nabiullina said that CBDCs should serve as a good option for governments to replace decentralized cryptocurrencies like Bitcoin.


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Source: https://cointelegraph.com/news/cbdc-is-a-tool-to-combat-bitcoin-says-bank-of-indonesia-exec

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Binance CEO reveals one key factor for token listings

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The CEO of Binance, the world’s largest cryptocurrency exchange by volume, has disclosed some information on how to get listed on the trading platform.

The most important criteria for listing a cryptocurrency on Binance is the number of users, CEO Changpeng Zhao, also known as “CZ,” said in a Forbes interview on Monday.

CZ went on to say that there are many other factors like the number of active addresses on blockchain, social media audience and code commits. However, the number of users is “the key metric,” he said, adding:

“If a coin has a large number of users, then we will list it. That’s the overwhelming significant attribute. Consider for example meme tokens, even though I personally don’t get it, if it’s used by a large number of users we list it. We go by the community, my opinion doesn’t matter.”

According to Binance’s listing tips from its CEO, the number of users is just one of many factors for listing a token on the crypto exchange. “If you have a large number of users, your product has value. That’s the easiest to measure. Do include the user statistics in the application form. It will help significantly,” the CEO’s statement on Binance listings reads.

According to Sergei Khitrov, founder of crypto listing-focused platform Listing.Help, major crypto exchanges like Binance don’t need to list minor tokens, as they earn mainly from trading volumes rather than listings.

“This is one of the main problems that many projects do not understand. They should start with building a community. And that means not 500 or 10,000 people in a Telegram channel, but a much larger audience,” Khitrov told Cointelegraph. He added that token creators are recommended to start from smaller exchanges.

At the time of writing, Binance supports a total of 346 cryptocurrencies, including major cryptocurrencies such as Bitcoin (BTC) and Ether (ETH), as well as popular meme tokens such as Dogecoin (DOGE) and Shiba Inu (SHIB), according to data from CoinGecko. Binance’s daily trading volume is estimated at $28 billion.

In comparison, OKEx, the second-largest crypto exchange by trading volumes, has listed 312 coins and has a trading volume of roughly $7 billion. United States-based crypto exchange Coinbase supports just 123 tokens with a daily trading volume of about $6 billion.

Some major centralized exchanges (CEX) have more tokens listed than Binance does, with Bittrex listing over 450 cryptocurrencies at the time of writing.

Related: Kraken exchange defies competitors’ regulatory concerns with SHIB listing

As opposed to a CEX, decentralized exchanges (DEX) are the world’s biggest platforms in terms of the number of listed cryptocurrencies, as DEXs like PancakeSwap do not require contacting an exchange or asking permission. As such, PancakeSwap, a DEX running on the Binance Smart Chain, has over 3,200 listed tokens, while Uniswap lists over 1,800 cryptocurrencies.

Last month, PancakeSwap listed the Squid Game (SQUID) token, a cryptocurrency scam inspired by the eponymous Netflix show, which posted over 45,000% growth in a few days after launch. The token is listed on Binance-owned crypto website CoinMarketCap, while competitors such as CoinGecko retracted from listing SQUID due to being “most likely a scam.”


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Source: https://cointelegraph.com/news/binance-ceo-reveals-one-key-factor-for-token-listings

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India misinterpreted private crypto ban, says crypto bill creator

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The creator of India’s crypto bill, former Finance Secretary Subhash Garg, dismissed the notion of banning “private cryptocurrencies” as a misinterpretation while highlighting the enormous potential of cryptocurrencies and blockchain technology.

The parliamentary discussions around a controversial crypto bill sparked fears around the ban on cryptocurrencies, with no clear indication about the ban’s scope. As Cointelegraph reported, an episode of panic selling among Indian investors followed the announcement. In an interview with local news channel News 18, Garg clarified:

“[The description of the crypto bill] was perhaps a mistake. It is misleading to say that private cryptocurrencies will be banned and to intimate the government about the same.”

He believes that the Indian government should formulate a bill after discussing it with stakeholders and crypto investors. Furthermore, the bill suggests banning private cryptocurrencies without clarifying what the word “private” stands for.

As a result, the crypto community in India self-interpreted two different versions of the bill’s agenda — one that considers banning all non-government issued cryptocurrencies and the other that excludes cryptocurrencies running on public blockchains such as Bitcoin (BTC) and Ether (ETH).

Garg also pointed out a flaw in classifying cryptocurrencies as assets after underscoring the vast ecosystem powered by disruptive technology. He also said that crypto exchanges have limited interests and do not represent the entire community:

“You don’t classify the wheat that you produce, you don’t classify the clothes you produce, as assets. That is too much of oversimplification to treat this as an asset.”

On an end note, Garg added that the central bank digital currency initiatives, especially in countries such as India, are complex. According to him, the government first needs to address challenges, including the unavailability of smartphones and digital wallet issuance.

Related: Singaporean crypto exchange enters India amid regulatory uncertainty

The Indian crypto market continues to attract international firms, with the latest being Coinstore, a Singaporean crypto exchange. As Cointelegraph reported, Coinstore has allocated a $20-million fund to set up three new offices in the region.

Speaking to Cointelegraph, a Coinstore spokesperson was hopeful for the development of a positive crypto regulatory framework:

“Strict KYC process, security requirement for exchanges, as well as gradual regulation of certain cryptocurrencies naturally protect the Indian users and would clarify the legality of certain cryptocurrencies.”


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Source: https://cointelegraph.com/news/india-misinterpreted-private-crypto-ban-says-crypto-bill-creator

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