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The Lightning Network – a layer 2 payment product built on top of the Bitcoin blockchain that enables secure, private and near-instantaneous transactions at little to no cost – has surpassed 25,000 active nodes for the first time, an indication that the network is growing stronger with more nodes and more channels. 

During the past 30 days, the number of active nodes has risen 8% to 25,010. A node is essentially a “user” on the network who sets up their computer to interact with other nodes. That way, they can send, verify and receive information – in this case, bitcoins.

As a decentralized network, the Lightning Network has no central data server that stores all of the transactions or interactions between users. Instead, its decentralized network of distributed nodes keeps track of the data, or part of it. 

Related: How Much Energy Does Bitcoin Use?

In order to reduce congestion on the Bitcoin blockchain, the Lightning Network allows users to route their transactions through off-chain channels. All of the transactions that pass through a channel are rewritten into a single transaction and settled on the Bitcoin network, allowing for millions of transactions to be made in a matter of seconds. These channels run between the various nodes that have chosen to connect in this way.

Not every node, however, operates a channel. Currently, the number of nodes with channels is 14,419, or about 58% of all nodes. The remaining 42% are simply there, for the time being, at least. 

But for those who do choose to open and fund a Lightning Network channel, there is the potential to earn yield.

Earning yield on the Lightning Network

In order to open a channel, node operators have to “fund” it with a small amount of BTC. Right now that average funding amount is about 0.035 BTC. Whatever amount is in that channel represents the maximum value of any transaction that can be routed through that channel. In return for providing that channel liquidity, node operators collect a small fee when a transaction routes through one of their channels. 

Related: Bitcoin Holds Support Near $43K as Rally Pauses

In the Lightning Network, not every node is connected to every other node; that would require far too much storage per node. Usually a transaction has to “hop” through channels, from one node to the next in order to find a path to its final destination. To accomplish that, the Lightning Network uses onion routing from the Tor Network, a privacy-based network protected by encryption, which essentially allows a transaction to hop from node to node until it reaches a target. 

Each hop through a channel requires its own fee – so the fewer hops, the better. Currently, the average hop distance is 8.8 hops.

Since we last reported on July 15, the number of channels has increased to 65,739 and expanded their capacity by roughly 78%, from 1,800 to over 2,300 BTC, according to data from 1ml.

The increase in the number of channels means that there are more connections between the nodes. Since every single jump between nodes costs a fee, having more channels available increases the chances of finding a more efficient route for the transaction’s final destination. Thus, increased connectivity can greatly reduce the fees associated with sending transactions.

Greater connectivity and more channels also translates to more competition in facilitating transactions. Average fees have dropped below the base fee. Although the base fee for passing through a node’s channels is 1 sat, the median fee that is being charged is only 0.000006 SAT/SAT spent or $0.000000003018/SAT spent. (A “sat” is a satoshi, the smallest unit of a bitcoin.)

Furthermore, the network capacity signifies a more developed network because it means that cumulatively, users have “invested” in the network. In order for transactions to hop from node to node, each channel must be funded adequately. The higher the capacity, the more funds can be sent.

Driving forces

The growth is, in part, due to the increasing need for a solution to Bitcoin’s scalability problem, which states that Bitcoin is limited to only seven transactions per second on the base layer. Layered networks like Lightning and sidechains like Liquid have gotten the attention of big names in crypto like Twitter and Square CEO Jack Dorsey, whose Twitter user name now includes a Lightning bolt for the Lightning network.

Earlier this summer, the Lightning Network made headlines when Jack Mallers, CEO of payments company Strike, announced the adoption of bitcoin as legal tender in El Salvador. In partnership with the president of El Salvador, Nayib Bukele, Mallers’ Lightning-based payment app Strike was implemented throughout the country. 

Now, Mallers is taking an aggressive stance against big centralized exchanges like Coinbase by bringing on app bitcoin purchase fees to near zero. All of these big moves signify his dedication to fostering the growth of Bitcoin as well as bringing attention to Strike and Lightning.

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Boston-based financial services corporation Fidelity revealed this week that 90% of its clients are interested in investing in Bitcoin and other cryptocurrencies. Founded in the 1940s, the private firm has $10.4 trillion in assets under management as of 2021.

Blockchain identity company Civic is promoting current chief operating officer Chris Hart to CEO, current CEO Vinny Lingham announced in a post on Wednesday.

• Hart has served as the company’s COO since 2017.
• As part of the change, Lingham will become Civic’s Executive Chairman of the Board of Directors.
• Lingham wrote that last summer, Civic decided to move to an “ecosystem that can support a high volume B2B model,” given the impact of high Ethereum gas fees on its wallet product. That shift was one of the main reasons Civic  moved early to integrate with Solana. 

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Crypto rewards app Fold is trying out a new way to get its users excited about bitcoin: an augmented-reality crypto scavenger hunt in the style of “Pokémon GO.”

Fold’s AR feature allows users to explore their surroundings while searching for bitcoin and other rewards, including merchant deals and cashback prizes. The app’s wait list went live today with a full launch slated for later this month.

“One of the barriers to entry with bitcoin is that it’s money, but it’s not visible for everyday people,” Will Reeves, Fold’s CEO and co-founder, told CoinDesk. “This augmented reality experience allows people to see bitcoin, to pick it up, and essentially brings the world of bitcoin, which exists in zeros and ones, and makes it tangible.”

Related: Tron Foundation Launches $300M Fund to Invest in GameFi Projects

Fold is not the first to make a game out of bitcoin. In recent years, gamification in crypto – and finance in general – has been on the rise, from Robinhood adding game-like features to its investing platform to all-out crypto adventures like Satoshi’s Treasure, which used a bitcoin prize to promote tokens. 

Fold cardholders will be able to access the AR feature every hour, while users who only have the app will be able to access it once per day. Bitcoin prizes range from what Reeves describes as “a couple satoshis” to “a gold mine” of bitcoin. A satoshi is the smallest unit of bitcoin. 

During the current testing period, Fold will give away about $100,000 worth of bitcoin, but Reeves said the number would fluctuate in future months depending on sponsorship and user interaction levels.

The launch of Fold’s new AR feature coincides with the removal of all sign-up and activation fees associated with its Spin debit card, which offers rewards of up to 25% back in bitcoin on purchases.

Related: British Fashion Brand Burberry Releases First NFTs

Update (Aug. 18, 16:34 UTC): Corrects app launch date.

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Larry Dean Harmon, the jailed former chief of darknet bitcoin mixing service Helix, pleaded guilty to one count of conspiracy to launder monetary instruments on Wednesday in D.C. District Court.

Between July 2014 and December 2017, Helix processed a reported 354,468 BTC for drug vendors on Alphabay and other marketplaces. At the time of transaction, this sum was worth over $311 million. At today’s prices, Helix processed over $16 billion worth of bitcoin. 

Harmon was arrested in Ohio on Feb. 6, 2020, and charged with conspiracy to commit money laundering, operating an unlicensed money transmitter business and money transmission without a license. In October 2020, Harmon was ordered to pay a $60 million civil penalty. 

Related: What a Gory New Horror Film Teaches Us About Financial Censorship

The case against Harmon was the first time the Department of Justice (DOJ) and associated financial watchdogs like the Financial Crimes Enforcement Network (FinCEN) called bitcoin mixing services illegal.

In a press statement after Harmon’s arrest, Assistant Attorney General Brian Benczkowski wrote: “This indictment underscores that seeking to obscure virtual currency transactions in this way is a crime.”

Many in the crypto community have expressed concern that Harmon’s arrest set a precedent where creating a bitcoin mixer is considered unlawful, and any service that uses obfuscation tactics to conceal bitcoin’s publicly accessible path could face legal pushback. There are multiple technologies for “mixing” bitcoin payments, however, with some being less unlawful than others.

While pleading guilty, Harmon’s lawyer clarified that Helix’s double-blind nature meant that Harmon did not know the number or value of the transactions he processed.

Related: Brazilian Police Seize $33M in Crypto Money Laundering Probe

The prosecution described Harmon’s plea deal as “lenient” due to an unspecified “cooperation agreement.” 

However, Ari Redbord, head of legal and government affairs at TRM Labs, said Harmon is not getting off lightly.

“Quite the opposite. He plead guilty to the lead charge in the indictment – money laundering conspiracy – which carries a 20 year maximum sentence and his sentencing guideline range is life in prison,” Redbord said. “He now has to provide valuable information to the government in order for them to seek a downward departure from the Court. The result makes sense for both sides.”

Harmon, who remains on release pending sentencing, faces a maximum sentence of 20 years in federal prison as well as what his lawyer describes as “a large and lengthy forfeiture agreement.”

UPDATE (Aug. 18, 2021, 15:35 UTC): Adds additional comment.

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Impossible Finance, the decentralized finance (DeFi) incubator that raised $7 million in June, named OpenSwap as the first project to be featured on its DeFi launchpad.

• OpenSwap provides DeFi traders with a single location for accessing liquidity pools from multiple blockchains.
• Calvin Chu, Impossible Finance’s core builder, described the platform as a “godsend” thanks to its aggregation facilities.
• Impossible Finance’s seed funding round in June was led by institutional investors including CMS Holdings and Alameda Research.
• The protocol launched on Binance Smart Chain in May with the goals of building a network for staking, token swaps and access to liquidity pools as well as becoming an incubator for other projects.

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As new miners join the fray and the Bitcoin network continues to grow, so too does its energy usage.

It’s easy to read the headlines and assume that bitcoin, and indeed every other cryptocurrency, must be significantly contributing to climate change. In May, Tesla CEO Elon Musk tweeted his concerns that “cryptocurrency is a good idea on many levels … but this cannot come at great cost to the environment.” Shortly after, bitcoin’s value tumbled 15%. The growing global pressure on bitcoin miners to use more renewable energy has led to the creation of initiatives like the Bitcoin Mining Council and pushed mindful investors to seek out “greener” cryptocurrencies. 

As of mid-July, a single bitcoin transaction required 1719.51 kilowatt hours (kWh) – where a kWh is the amount of energy a 1,000-watt appliance uses in over an hour. To put that in perspective, that is about 59 days’ worth of power consumed by an average U.S. household. On an average day, 240,000 bitcoin transactions are sent over the network. 

How does bitcoin use power?

Related: Bitcoin Lightning Network Growth Passes New Milestones

Often referred to as the new gold rush, it can be hard to comprehend how something with no physical manifestation can be so resource-intensive. The Bitcoin network relies on thousands of miners running energy intensive machines 24/7 to verify and add transactions to the blockchain. This system is known as “proof-of-work.”

Bitcoin’s energy usage depends on how many miners are operating on its network at any given time. These miners must compete against each other to win the right to add the next block to the blockchain and earn rewards. The competitive structure results in a lot of wasted energy as only one miner can add a new block every 10 minutes. 

To maintain a competitive advantage over other miners, many larger operations are forced to scale up or upgrade their equipment. As a result, there are now dozens of mining facilities all over the world that have hundreds, if not thousands, of rigs running constantly. One of the byproducts of these industrial-scale operations is heat. Application-specific integrated circuit (ASIC) miners – the leading type of specialized computing equipment used for mining cryptocurrencies – produce a lot of heat when performing hashing functions and need to be kept cool to prevent them from becoming less efficient or burning out. Smaller operations might only need fans and a cool climate to keep temperatures in check, but large mining facilities require industrial-style cooling systems. That further increases the amount of energy consumed. 

Why is this energy consumption a problem?

While the mining industry’s steering toward cleaner energy, a large portion of the electricity consumed by the Bitcoin network is still generated from nonrenewable sources, like coal-burning power plants. It’s well understood that burning fossil fuels like coal releases huge amounts of carbon dioxide into the atmosphere – the main driver of climate change. That means that the more mining computers that join the network, the more demand there will be to create and consume energy.

Related: Bitcoin Holds Support Near $43K as Rally Pauses

Energy demands around bitcoin have long been a concern, especially now that we have seen the network quadruple since its last peak in 2017. And the network is still maturing. At its present level, Bitcoin consumes 81.51 terawatt hours (TWh) annually. If it were a country, it would rank as number 39 for annual electricity consumption, ahead of Austria and Venezuela. 

Understanding the environmental impact

It is important to note that there is a difference between electricity consumption and environmental/carbon footprint. There is no doubt that bitcoin’s miners require large amounts of electricity. But to understand the ecological impact, there needs to be information about where miners source their energy. Bitcoin itself does not inherently produce extra carbon emissions because any source of electricity can technically power the network. As of September 2020, researchers at the Cambridge Center of Alternative Finance (CCAF) found that 62% of global miners relied on hydropower, 38% used coal, and 39% used some combination of wind, solar or geothermal energy. But it is estimated that only 39% of bitcoin’s energy consumption is carbon neutral. 

While other industries need specific environments and conditions, bitcoin can capitalize on energy sources that are inaccessible to others. In the Chinese provinces of Yunnan and Sichuan, large quantities of excess hydropower were harvested to power the growing mining factories in China. During the rainy season, these provinces could be responsible for 50% of all mining operations worldwide. But in June, the Chinese government imposed restrictions on cryptocurrency mining. That has resulted in mining operations migrating to countries like Kazakhstan, which rely more heavily on fossil fuel-based electricity. 

How bitcoin compares to traditional banking

While Bitcoin’s electricity consumption may seem like a lot, it pales in comparison to the energy consumed by traditional banks. The entire bitcoin ecosystem is said to use less than half of the energy banking systems require. That is not too surprising when you take into account the sheer number of physical branches, printing facilities, ATMs, data centers, card machines and secure transport vehicles required to support the fiat currency system.

The future of bitcoin’s energy use

There’s been a notable push in 2021 to make bitcoin mining, and indeed other cryptocurrency mining, more sustainable and environmentally friendly. The Crypto Climate Accord advocates for the cryptocurrency industry to seek out new electricity sources and aims to provide crypto companies “an open-source toolbox of tech solutions” to help the industry achieve net-zero emissions by 2030. 

Finally, there may be less reason to worry than the alarming headlines proclaim. Bitcoin’s miners are unlikely to increase at the same scale as they did a few years back. That is in part due to bitcoin halving, which is built into the Bitcoin blockchain and reduces the block rewards miners get every four years. So unless bitcoin’s value continues to rise to compensate for the drop, miners will need to shift toward more efficient equipment and cheaper sources of energy in order to maintain margins and keep large-scale mining operations viable.

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Facebook said Wednesday that the global payments system is seriously flawed and that the social media giant can fix it.

• “Change is long overdue,” Facebook’s David Marcus wrote in a blog post.
• Marcus, the former PayPal chief hired in 2018 to lead Facebook’s blockchain efforts, said Novi, the digital wallet subsidiary he oversees, is “ready to come to market.”
• “We feel that it’s unreasonable to delay delivering the benefits of cheaper, interoperable, more accessible digital payments,” he wrote.
• The blog post follows reports of the increased obstacles that Facebook’s stablecoin project faces. After being introduced in June 2019, Libra ran into resistance from global regulators. The project, which was rebranded as Diem in December, has yet to launch.
• Only offering fiat currency within Novi would still provide value, Marcus wrote, though he added: “I strongly believe if there was ever a chance to create an open, interoperable protocol for money on the internet and truly change the game for people and businesses around the world, it is now.”
• Marcus noted that Facebook has secured licenses and approvals for Novi in nearly every state in the U.S., and said, “We will not launch anywhere we have not yet received such clearances.”

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The Dutch central bank joined the ranks of regulators issuing warnings about crypto exchange Binance operating without permission.

• De Nederlandsche Bank (DNB) said Wednesday that “Binance is providing crypto services in the Netherlands without the required legal registration.”
• Binance is not in compliance with the country’s anti-money laundering and anti-terror financing act, and is offering custodian wallets and services illegally, the DNB said.
• The warning pertains to Binance Holdings Ltd. as well as other Binance entities that offer crypto services in the Netherlands.
• DNB’s announcement follows similar warnings from financial overseers in a number of jurisdictions in recent months, including the U.K., Japan, Hong Kong and Malaysia.

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What if social interactions online – like bidding on non-fungible tokens (NFTs) or hosting an online auction – could earn you money? How do you make expressing yourself on the internet valuable?

Those are the questions the RARA.social app for is trying to answer.

RARA’s so-called “like-to-earn” model aims to reward active community members and participants with RARA’s native tokens in exchange for contributing to the platform, either through bidding on or curating NFT auctions. It comes as “play-to-earn” video games like “Axie Infinity” surge in popularity and decentralized projects experiment with ways to get people coming back for more.

Related: NFT Trading Surges 8X as Penguins, Apes Drive New Boom

For Lawson Baker, RARA’s founder, NFT auctions offer a way to build online crypto communities. 

“If you watch a hot NFT auction, you’ll see crypto influencers bidding early solely for the purpose of being seen bidding,” Baker told CoinDesk.

RARA is looking to add a decentralized curation element to the NFT sector that has so far been missing from marketplaces like OpenSea, Rarible and SuperRare.

“RA! tokens will be the initial tokens earned for being a high-quality curator,” Baker told CoinDesk in a Telegram message. “Do it well and you’ll earn more RA! tokens to have more influence tomorrow.”

Related: SuperRare Drops RARE Token to Decentralize NFT Marketplace

The idea is then to create a landing page that takes the pulse of what’s trending in the NFT market without relying on centralized approval.

RARA’s landing page will feature an infinite scroll of current and past auctions, sorted by the number of RA! tokens that were given by fans. Baker compared the resulting product to a Rotten Tomatoes – a movie review platform that aggregates critic and audience reviews – for NFTs. 

More than 40 online communities involving about 40,000 members now have access to RARA’s auction platform, including such groups as DAOrecords, MAiworld, TokenSmart and Skybravo.

Baker told CoinDesk that RARA expects to launch a protocol later this year.

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The desire to increase efficiency and create value is driving the move toward digitization across all industries. Distributed ledger technology (DLT) is among the technologies that support digitization.

Hyperithm, a Tokyo-based digital asset management firm, raised $11 million in a Series B funding round that was co-led by South Korea’s Hashed and Wemade Tree, a subsidiary of the gaming company behind the “Legend of Mir” series.

• Other participating investors in the round included Coinbase Ventures, Cocone, GS Futures and the Guardian Fund, Hyperithm said in an email.
• Founded in January 2018, Hyperithm operates in Tokyo and Seoul and specializes in automated trading and risk management through cryptographic algorithms.
• The firm said it is seeing growth in the institutional market for digital assets in East Asia.
• It serves institutional investors, publicly listed companies, family offices, venture capital companies, crypto exchanges and miners.
• Previous investors have included South Korea’s VIP Research & Management and the venture capital firms owned by South Korean internet companies Kakao and Naver.

Read more: South Korea’s Hashed Raises $120M Venture Fund for Crypto Deals

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Tomorrow, the first backward-incompatible upgrade for the Ethereum 2.0 Beacon Chain will be activated on the Pyrmont test network. The upgrade, dubbed “Altair,” will introduce a number of code changes, including increased penalties on validator misbehavior and improved functionality for lightweight versions of Eth 2.0 software. 

(More information about what to expect from Altair can be found in a previous issue of Valid Points.)

This article originally appeared in Valid Points, CoinDesk’s weekly newsletter breaking down Ethereum 2.0 and its sweeping impact on crypto markets. Subscribe to Valid Points here.

Related: UK Police Recover $22M in Stolen Crypto From Scammers

This week, in a guest post in New Frontiers, Alex Svanevik, the CEO of blockchain analytics firm Nansen, and Nansen’s Research team break down the data behind validator behavior and stake centralization on Eth 2.0 thus far. While Altair is expected to further improve network dynamics, the  authors highlight metrics suggesting that security and decentralization are already trending in a positive direction.  

Pulse check

The following is an overview of network activity on the Ethereum 2.0 Beacon Chain over the past week.

Disclaimer: All profits made from CoinDesk’s Eth 2.0 staking venture will be donated to a charity of the company’s choosing once transfers are enabled on the network.

New frontiers: Toward a decentralized Ethereum 2.0

Nansen is a blockchain analytics platform tracking over 90 million labeled Ethereum wallets and accounts. The following guest post authored by Nansen CEO Alex Svanevik and his team is an excerpt from a recently published blog post breaking down the data behind Ethereum 2.0. 

Related: Poly Network Hack Not Over as Attacker Prolongs Return of Funds

While centralized exchanges such as Kraken and Binance continue to command a significant share of total Ethereum 2.0 stake, they appear to be losing share to decentralized staking alternatives such as Lido Finance and Rocket Pool. 

The top four staking entities (Lido, Kraken, Binance, Staked.us) on Eth 2.0 make up 36.6% of total ETH deposits. Lido is the second largest by total ETH deposited next to Kraken, managing over 750,000 ETH on Eth 2.0 from 9,000 unique Ethereum accounts. 

Measuring decentralization

The Herfindahl–Hirschman Index (HHI) is a metric in traditional economics that measures market concentration and competition. It has been applied to blockchains to measure relative network decentralization. Nansen calculates HHI for Eth 2.0 by squaring the share of each source account that has staked on the network, and summing the resulting numbers.

Though it is clearly not the case that all deposit accounts are independent, the trend does indicate a gradual decrease of HHI over time. Still, it’s important to remind ourselves that centralization risks exist on every layer of the blockchain technology stack. According to data from Ethernodes, more than 21% of Ethereum nodes run on Amazon Web Services.

Profiling deposit activity

Deposit activity on Eth 2.0 is curiously irregular and does not correlate with ETH prices. 

The number of daily deposits to Eth 2.0 began falling from May 5 onward, just as Ethereum was inching toward its high of $4,000. The number of deposits then rose significantly from mid-May to mid-June as the value of Ethereum almost halved. 

Ethereum 2.0 represents a marked change in the security and economic model of Ethereum, with multiple ramifications including the transformation of ETH as an inherently yield-generating asset.

Validated takes

• Stani Kulechov, the founder of Aave, is working to create a decentralized alternative to Twitter. BACKGROUND: Top developers like Kulechov and co-founder of Ethereum Vitalik Buterin believe blockchain technology can be leveraged to create higher-quality social discourse.
• Ether is the most popular cryptocurrency in Singapore, according to a survey published Monday. BACKGROUND: The survey of over 4,000 adults, conducted June 29–July 9, also found that 67% of respondents with personal investments have crypto in their portfolio, and two-thirds of the crypto holders increased their digital asset holdings during the coronavirus pandemic.
• Aave Arc, the institutional arm of decentralized lending protocol Aave, will not offer tether (USDT) as an asset, even though it is the most utilized stablecoin on Aave. BACKGROUND: Regulatory concerns with the largest stablecoin by market capitalization have kept it from being listed on Aave’s institutional lending platform. Tether’s largest competitor, Circle, will have USDC listed as the stablecoin of choice in the new institutional lending pools.
• In efforts to develop zero-knowledge (ZK) blockchain scaling technology, Polygon, a layer two network on Ethereum, is merging with the Hermez Network. BACKGROUND: Hermez will be absorbed into the Polygon ecosystem under the name Polygon Hermez. The entire Hermez project – its employees, technology and native HEZ token (which holders will be able to exchange at a rate of 3.5 MATIC:1 HEZ) – will be integrated into Polygon’s platform.
• Ethereum data platform Dune Analytics raised $8 million in a Series A funding round led by Fred Wilson’s Union Square Ventures. BACKGROUND: Dune Analytics is best known for its do-it-yourself dashboarding functionality that allows anyone with a meager knowledge of blockchain metrics to easily piece together real-time data visualizations about on-chain activity and then share those creations with the world. The platform hosts at least 6,817 different user-built dashboards tracking everything from EIP 1559 burn rates to Uniswap trading pairs. 

Teddy Oosterbaan

Factoid of the week Open comms

Valid Points incorporates information and data about CoinDesk’s own Eth 2.0 validator in weekly analysis. All profits made from this staking venture will be donated to a charity of our choosing once transfers are enabled on the network. For a full overview of the project, check out our announcement post. 

You can verify the activity of the CoinDesk Eth 2.0 validator in real time through our public validator key, which is: 

0xad7fef3b2350d220de3ae360c70d7f488926b6117e5f785a8995487c46d323ddad0f574fdcc50eeefec34ed9d2039ecb. 

Search for it on any Eth 2.0 block explorer site.

New episodes of “Mapping Out Eth 2.0.” with Christine Kim and Consensys’ Ben Edgington air every Thursday. Listen and subscribe through the CoinDesk podcast feed on Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, IHeartRadio or RSS.

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Bitcoin (BTC) held initial support above $43,000 during Asian trading hours as intraday charts appear to be oversold. The cryptocurrency was trading at around $45,300 at press time and is down 3% over the past 24 hours. Buyers are taking a breather after a near 13% rally month to date and will likely defend breakout support near $42,000.

• The relative strength index (RSI) on the four-hour chart is almost oversold, which suggests the current pullback could stabilize around support levels.
• Initial support is seen at the 100-period moving average on the four-hour chart near $43,000 and then at the $42,000 breakout level.
• Buyers will need to make a decisive move above $50,000 resistance to resume the uptrend.  

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MobileCoin, a privacy-oriented and mobile-first cryptocurrency project, has raised $66 million in venture capital to build out its payments technology. 

Sam Bankman-Fried’s Alameda Research, Coinbase Ventures, BlockTower Capital and other investors participated in the oversubscribed Series B funding round, said MobileCoin founder and CEO Joshua Goldbard. 

Best known as the project advised by Signal founder Moxie Marlinspike, MobileCoin’s MOB token is already integrated in beta with the private messaging app. Another integration, with China’s Mixin Messenger, has yielded over 1 million MobileCoin transactions, Goldbard said.

Related: Top South Korean Money Transfer Firm Joins RippleNet to Further Remittances to Thailand

With the Facebook-initiated libra (now diem) sputtering since its 2019 reveal and Telegram’s TON project sunk (officially, at least) by U.S. regulators, MobileCoin represents perhaps the last best hope of a crop of mobile-native payments projects conceived during crypto’s last bull run.

Goldbard told CoinDesk that MobileCoin is developing a cryptocurrency chatbot system, called MOBot, that will enable ecommerce payments within messaging apps.

Notably, it’s also in the process of developing a stablecoin, Goldbard said, which will likely be called MobileUSD, to reduce the risk of volatility during transactions. MOB was trading around $15.80 early Wednesday UTC with an unknown market cap, according to CoinGecko. Bankman-Fried’s FTX is one of the few exchanges to list the token.

Goldbard declined to comment on the timeframe for MobileCoin’s stablecoin release.

Related: AMC to Accept Bitcoin for Tickets and Concessions Later This Year

Goldbard told CoinDesk that MobileCoin is dedicating the funding round to Toby Segaran, MobileCoin’s founding engineering manager and second employee, who passed away suddenly earlier this month.

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Bitcoin is up over $500 on a 4-hour basis after testing lower supports near $44,000 during Asia’s late morning trading hours.

The rebound from 24-hour lows of $44,248 follows a period of profit-taking, seen Tuesday, on the back of short-term fatigue, as CoinDesk reported. Bitcoin is currently changing hands for around $45,000 and is down 2.9% from a 24-hour high of $47,157, CoinDesk data shows.

Bitcoin continues to cool upon multiple attempts at the $50,000 price tag, evoking moments of price action gone by, though that may be less of a concern now given demand from bigger players, according to some.

Related: Market Wrap: Bitcoin Buyers Could Take Profits as Volume Declines

“In comparison to the bull runs in 2017 and 2018, the current movement takes a more mature trend,” said Cynthia Wu, head of sales at Singapore-based digital asset services firm Matrixport. “The market landscape has become much more institutionalized – where now you have proprietary traders in crypto hedge funds, crypto-offerings from foreign exchange brokers and institutions … that are transacting on an institutional scale.”

The ongoing price trend for bitcoin and the fusion of retail and institutional interest are a sign that the search for yield by investors, big or small, has extended into crypto and “will be around for good,” Wu added.

Bitcoin’s daily price action remains relatively flat with the weight of the previously discussed 200-day moving average bearing down on prices near $45,500, a sign a further sell pressure could be lurking around the corner.

Though the altcoin market continues to hold firm with most in the top 20 by market cap remaining in the green when viewing over a 7-day period.

Related: Bitcoin Rangebound Near $50K Resistance; Support at $40K

“Overall, the markets have seen a positive trend continue this week; altcoins are up while bitcoin has coasted flat, said Byron Goldberg, Australian country manager at crypto exchange Luno.” “Interestingly, we are seeing ether slightly outperform bitcoin week-on-week.”

Over a 30-day period, ether is up 67.6% compared to bitcoin’s 46.3% over the same period, Messari data shows.

Goldberg points to Ethereum’s London hard fork as the likely catalyst for driving prices higher on the world’s second-largest crypto by market capitalization.

Indeed, futures premium on ether stands at 7.36% to bitcoin’s meagre 2.8%, meaning the crypto markets are likely anticipating ether to rise further than bitcoin over the next three months with a shift in institutional interest, Goldberg added.

All major cryptos in the top 20 posted results in the red over a 24-hour period by press time, with dogecoin having shed the most while uniswap, and chainlink followed close behind.

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Galaxy Digital, a U.S. financial services firm, has posted second quarterly losses in the tens of millions, resulting from fluctuating and volatile cryptocurrency prices.

According to a press release on Monday, Galaxy witnessed a net comprehensive income loss of around $175.8 million. Q2 results for the year prior posted a net comprehensive gain of $35.3 million.

The bank, co-founded by former hedge fund manager and billionaire Michael Novogratz, is attributing its losses to a 34% decline in crypto prices as well as a 41% decline in the price of bitcoin over April, May, and June.

Related: Galaxy Digital Files for US Bitcoin Futures ETF

Losses are reflected by the volatile swings of the crypto markets which saw the price of bitcoin fall 54% from April through to July.

The bleeding was stemmed by its core operating activities, the firm said, including liquidity provision and execution services, counterparty trading volume growth and the addition of blue-chip partnerships to the firm.

“While the second quarter included significant volatility and macro-related headwinds to near-term results, our core operating activities … delivered another quarter of rapid growth consistent with the pace of adoption of the crypto economy,” said Novogratz.

The firm also said its trading division saw continued growth in volumes with a 90% increase from the first quarter, and an increase of over 560% year-on-year, despite volatile digital asset prices.

Related: Galaxy Digital Hires SIX’s Tim Grant to Lead Europe Expansion

Gross counterparty loan originations were up over 130% since March 31 to approximately $1.56 billion. As of July 31, Galaxy Digital reported preliminary assets under management of over $1.6 billion, per the report.

Galaxy Digital is a merchant bank providing cryptocurrency-focused services for institutional investors. In May, the firm bought crypto custodian BitGo for a staggering $1.2 billion.

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The Union Bank of the Philippines (UnionBank), one of the country’s largest by total assets, is leaning on Asia’s crypto custodian Hex Trust to pilot a digital asset custody service.

Hex Trust will begin by providing an internal service for the bank’s employees as a pilot run. The bank said it is looking to tap into a maturing digital asset space as institutional and customer interest grow.

The next stage will involve rolling out a fully commercialized custody service for the bank’s customers, according to a press release shared with CoinDesk on Wednesday. The move will allow the bank to safeguard customers’ digital assets on their behalf within a regulated environment, the bank said.

Related: Why US Government Yanked BitGo’s Contract and Gave It to Anchorage

UnionBank, one of the island nation’s top 10 banks by total assets, also said it is fully compliant in its latest offering with the Philippines’ Bangko Sentral ng Pilipinas (BSP).

“We are excited to be the first Philippine bank to pilot a custody service for digital assets for our own employees, overseen by the BSP so that we can prepare the groundwork for a safe and protected system for customers’ digital assets,” said Henry Aguda, the bank’s chief technology and operations officer.

Hong Kong-based Hex Trust provides what it calls “bank-grade” custodial services for digital assets and has built its solutions targeting banks, financial institutions, asset managers, exchanges and corporations.

Last year, Hex Trust teamed with enterprise blockchain company R3 to offer banking clients another option for issuing security tokens using R3’s Corda software development kit. It also claimed to be working with one of Asia’s largest banks.

Related: Gemini to Serve as Custodian for Filecoin Fund of Australian Equities Manager

Hex Trust has offices in Hong Kong as well as Singapore and said it is expanding to the European market throughout the remainder of this year.

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The Federal Reserve official who famously reassured the U.S. public last year that the central bank could inject unlimited money into the economy has voiced some well-worn, oft-rebutted criticisms of bitcoin and cryptocurrency in general.

“I was more optimistic about crypto and bitcoin five or six years ago,” Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said Tuesday. “So far what I’ve seen is … 95% fraud, hype, noise and confusion.”

During an appearance at the Pacific NorthWest Economic Region annual summit in Big Sky, Mont., Kashkari contrasted the open nature of the crypto field with the U.S. government’s monopoly on issuance of dollars.

Related: US July Consumer Price Index Rose Slightly Faster Than Expected

“There is no barrier to you creating your own bitcoin, or me creating my own … I’ll call it Neelcoin,” he said. Pointing to his on-stage interlocutor, Larry Simkins, CEO of conglomerate The Washington Companies, Kashkari added, “and then Larry can create Larrycoin.”

Other Fed officials have expressed more nuanced and favorable assessments of digital assets. Vice chairman Randal Quarles, for example, said in June that the U.S. should find ways to “say yes” to stablecoins.

While it is true that anyone can spin up a digital asset easily, Kashkari did not mention the power of network effects, which make bitcoin more secure and valuable in the market’s eyes than its many competitors.

“There are thousands of these garbage coins that have been created,” the central banker went on. “Some of them are complete fraud Ponzi schemes. They dupe people into investing money and then the founders rip them off.”

Related: July Jobs Report: US Added 943,000, Beating Expectations

This is indeed true very often. But Kashkari then made a sweeping generalization.

“I always ask people what problem are you trying to solve and no one can articulate what the actual problem is,” he asserted.

 Kashkari scoffed at the idea that bitcoin could serve as a safe haven from inflation, particularly the kind seen in some developing countries. “I don’t see any evidence that the U.S. government or the United States of America is on a path to Venezuela,” he said.

Some bitcoin users may find that line galling given Kashkari’s interview on television’s “60 Minutes” in 2020, early in the pandemic, in which he boasted that “there is no end to our ability” at the Fed to pump money into the economy.

The Venezuela comment also elided the fact that bitcoin and other cryptocurrencies are global, and have been adopted by residents of countries suffering from more severe inflation than the U.S.

While he stopped short of saying crypto could never be useful (“it’s certainly possible”), Kashkari indicated Tuesday he was skeptical of the prospects.

“I’ve not seen any use case other than funding illicit activities like drugs and prostitution,” he said, apparently unaware that bitcoin has been used by politically disfavored publishers and dissident voices to survive government blacklisting in countries like Russia.

“I have not seen any use case that is legitimate so far that bitcoin solves,” Kashkari said.

He closed his brief remarks on the subject by circling back to an audience member’s question about the city of Miami’s recent foray into crypto.

“If you want to launch Montana Coin, don’t let me stop you,” Kashkari quipped.

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A group of people in the crypto community, led by crypto investment firm Paradigm’s research partner Sam Sun, may have just prevented SushiSwap’s token fundraising platform Miso from losing more than $350 million worth of ether, after discovering and fixing a bug on the platform in under just five hours.

Because of the collective efforts, SushiSwap says no funds have been lost.

According to a post published by SushiSwap on Monday, Sam Sun, and his colleagues Georgios Konstantopoulos and Daniel Robinson – all from San Francisco-based crypto investment firm Paradigm – reached out to the team at Sushi to alert them to “a vulnerability” on the “Dutch auction” contract on the Miso platform.

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In a Dutch auction, investors place bids reflecting the maximum amount that they are willing to pay. Once the bids are collected, the highest bid is declared the winner. After the auction is finalized, unsuccessful bids are returned to their owners.

The vulnerability

The SushiSwap team and Paradigm’s Sun, in separate posts, both identified that, essentially, the vulnerability was centered around the ability to batch multiple calls to commitEth and reuse a single msg.value across every commitment, allowing an attacker to bid in the auction for free.

“Combining batch with commitEth (a function on Miso Dutch Auction) creates a two-pronged issue where a user can both put up a commitment higher than ‘msg.value’ thereby draining any unsold tokens and additionally drain the raised funds on the contract as refunds if the auction has reached max commitment,” SushiSwap’s team wrote in the post.

“The bug was created when a convenience function for wallet addresses interacted with the refund mechanism of the auction contract,” explained Duncan Townsend, CTO at Immunefi, a bug bounty platform for DeFi that was also recruited to help solve the issue.

Related: Market Wrap: Bitcoin Buyers Could Take Profits as Volume Declines

“Users could over-bid and get a refund of the difference between the current bid and the amount they submitted, but the refund could be repeated to drain the auction contract,” Townsend added.

“All future planned auctions utilizing the specific Dutch auction contracts with ETH commitments have been paused until an updated version is redeployed,” SushiSwap’s team wrote.

The takeaway: Smart contracts are hard

At the conclusion of his blog post, Sun reflected that one of the most important lessons to be learned from this discovery is that even “safe components can come together to make something unsafe.”

The smart contracts that underpin DeFi are complex, combining “composable” Lego blocks to create new contracts and protocols. But the manner in which these blocks are combined can have inadvertent, disastrous consequences, even when programmers are using inherently safe individual components.

“This incident shows that even safe contract-level components can be mixed in a way that produces unsafe contract-level behavior. There’s no catch-all advice to apply here like ‘check-effect-interaction,’ so you just need to be cognizant of what additional interactions new components are introducing,” Sun said.

The event took place just after the biggest DeFi exploit to date took place last week: Cross-chain DeFi site Poly Network was attacked, losing more than $600 million worth of cryptocurrencies, due to a bug.

In the case of the SushiSwap vulnerability, however, many in the crypto community have taken to social media to praise the five-hourlong collective rescue efforts led by the research arm at Paradigm.

“Chad af,” Twitter user @KadenZipfel wrote (a “chad” usually refers to an “alpha male” in the common parlance of internet slang).

“Absolute King,” another Twitter user, @BanhbaoCrypto, wrote. “The Defi super hero we all need but don’t deserve!”

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