CoinDesk Crypto

Price Point

Bitcoin traded slightly higher early Thursday at $11,772 after falling for two straight days. 

The largest cryptocurrency by market capitalization has declined 1.3% this week as the U.S. dollar strengthened in foreign exchange markets. The greenback gained support Wednesday as the Federal Reserve said it wasn’t immediately planning to implement a “yield curve control” program that probably would have brought an accelerated pace of money printing.

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Related: Bitcoin Risks Deeper Drop if Dollar Rebounds

“The corrective moves we witnessed are necessary for the market to cool down and catch a breath,” Joe DiPasquale, CEO of the cryptocurrency investment firm BitBull Capital, told CoinDesk in an email. “Moving forward, we can expect the market to lean on the support zone between $11,000 and $11,500 to consolidate and try another push above $12,000.”

Market Moves

Bitcoin’s mini sell-off this week has revealed a key feature of fast-evolving cryptocurrency markets: How dollar-linked “stablecoins” are being used to fund exotic futures trades, similar to the way money markets serve as a vital lifeblood on Wall Street.

As flagged earlier this week by the Norwegian cryptocurrency-analysis firm Arcane Research, prices for bitcoin futures contracts on the Chicago-based CME exchange have been trading well above “spot” prices for the underlying security. That premium rose last week to 20%, the highest in five months, seen as a sign of just how bullish big investors have become on bitcoin. 

This week’s retreat in prices below $12,000 has led to a squeeze for traders who were attempting a “cash and carry arbitrage,” as reported Wednesday by CoinDesk’s Omkar Godbole. It’s a strategy in which traders buy bitcoin and then short futures contracts on the cryptocurrency, betting the prices will eventually converge and the premium will be pocketed as a profit. 

Related: Market Wrap: Bitcoin Sinks to $11.6K as Ether’s Gas Keeps Rising

The annualized premium dropped to 14% in under 48 hours as prices slid, and some traders rushed to unwind their arbitrage trades. 

One lesson from the episode is that traders were apparently using stablecoins such as tether (USDT) to fund the trade, according to Godbole. 

“Stablecoins are widely used as funding currencies, and there has been a high demand for these dollar-backed cryptocurrencies from institutions,” Skew CEO Emmanuel Goh told Godbole in a Telegram chat.

Bitcoin Watch

Bitcoin’s recent price pullback may worsen as the U.S. dollar shows signs of life on the back of minutes released Wednesday from the Federal Reserve’s meeting in July. 

• The U.S. Dollar Index, which tracks the greenback’s value against that of other reserve currencies, has jumped 1% to 93 in the past 24 hours, the biggest single-day rise in two months.
• USD has picked up on the news the Fed is not planning on implementing controversial yield curve controls on bonds – something markets had been anticipating.
• The correlation between bitcoin and the dollar is historically weak. But in the past month there has been a growing inverse relationship between the two as more investors look for alternatives to the U.S. currency. Analysts with Goldman Sachs and some investors have warned the greenback's reserve-currency status might be at risk. 
• CoinDesk pricing data shows bitcoin rising from $9,000 to $12,400 in the four weeks through Aug. 17, just as the dollar index declined to 92 from 97.
• But in the face of a strengthening dollar, bitcoin has fallen to around $11,780, down 5% from a 2020 high reached earlier this week.
• Continued recovery in the dollar could yield further losses for bitcoin, but a sustained rebound in the U.S. currency still looks unlikely. Interest rates likely to remain close to zero to stimulate the economy, and inflation-adjusted yields are trading at negative levels; analysts at Deutsche Bank and elsewhere say the Fed might be forced to undertake more radical monetary measures.

– Omkar Godbole

Token Watch

Ren (REN) is benefiting from rising demand for tokenized bitcoin in DeFi: Prices for the Ren token have doubled in the past few days. Like other protcols designed to produce synthetic version of cryptocurrencies, RenVM takes bitcoins and produces an ERC-20 token called renBTC that can be used in Ethereum-based applications. More than 10,000 of the tokenized bitcoin, renBTC, were locked on Monday, according to DeFi Pulse. RenBTC currently represents about 21.7% of the tokenized bitcoin market, ranking it second behind wrapped bitcoin (WBTC).

Rates to borrow the Synthetix stablecoin sUSD monetarily spiked to almost 50% Wednesday on Aave’s decentralized lending platform. The cause? According to Stani Kulechov, chief executive of Aave, users were clamoring for the dollar-linked sUSD tokens to send to Curve, so they could participate win that protocol’s CRV tokens via “yield farming.” Prices for CRV were trading at $4.35 at the time of writing, up 14.8% in the past 24 hours, according to CoinGecko. As Arcane Research put it earlier this week, it’s a “summer of crazy returns” in ” exuberant DeFi.”  

Aave (LEND) is seeing a surge in transactions to go with its 2020 price jump: “Despite growing criticism  about the actual value locked being significantly smaller than reported in DeFi Pulse, on-chain activity for these protocols and their tokens demonstrate thriving activity,” according to a post Wednesday by the crypto-intelligence firm IntoTheBlock on CoinMarketCap.com’s blog . The decentralized lender’s token is up 29-fold this year, for a market valuation of $700 million, inspiring incredulity. The bull case is that “there is no denying that these innovations have the potential to redefine finance as we know it,” IntoTheBlock wrote. CoinDesk’s Will Foxley reported last week that Aave plans to work the firm RealT to tokenize home mortgages. 

-Muyao Shen

Analogs – on the economy and traditional finance

Federal Reserve officials saw need for more stimulus at last month’s meeting (Fed)

Asset bubble isn’t really bubble; it’s rational due to easy Fed monetary policy. (WSJ)

“Pandemic has ignited a Schumpeterian process of creative destruction.” (FT)

Deutsche Bank, Citi, Other Big Banks Sitting on $250B of Murky Assets (Bloomberg)

Bitcoin outperforming Apple in 2020 as computer maker hits $2T market cap.

Tweet of the Day What’s Hot

The Bitcoiners Who Live ‘Permanently Not There’ (CoinDesk)
Bitcoiners are no different than the old rich in that they want to look for the best place possible to avoid paying more tax. Here’s one company helping them do just that.

High Ethereum Fees Push Tether to Its Eighth Blockchain, OMG Network (CoinDesk)
Tether has adopted Ethereum scaling solution OMG Network amid record demand for settlement space on the “world computer.”

Eventus says crypto exchange Gemini to use its anti-market-manipulation system. (Bloomberg)
The Winklevoss twins have tappedEventus Systems Inc. to provide surveillance and anti-market manipulation tools for crypto.

– Sebastian Sinclair

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There’s a joke in the world of digital advertising: How many companies does it take to put an ad on a website? 

In fact, there can be as many as 15 intermediaries participating in this opaque process, sponging up around 30% of the advertising spend. To fix this broken system, the next generation of adtech specialists are again pinning their hopes on blockchain technology. 

Announced Thursday, MadNetwork, a permissioned layer running on top of Ethereum while using the public blockchain itself as its immutable system of record, emerges from stealth with a testnet coming next month. 

Related: OMG Price Doubles as DeFi and Record Ethereum Fees Create ‘Perfect Storm’

Adtech provider MadHive and advertising industry consortium AdLedger had previously piloted an entire system of data sharing and accounting on Ethereum, but over the past couple of years they decided a Layer 2 approach was needed in order to scale.

Blockchain is often used to help automate manual or paper-based processes, but in the case of advertising, it’s the system of automation itself that’s the problem. The first iteration of hastily-erected programmatic web advertising – a mish-mash of servers and accounting platforms – has led to a black box riddled with fees and inconsistencies.

‘Programmatic cesspool’

The time is right for blockchain transparency to cut through the Gordian Knot of programmatic advertising, particularly as traditional broadcast television makes the transition to the world of connected devices, said MadNetwork project lead Adam Helfgott.

“An NBC or a Fox can’t really afford to lose 30% of their television media revenue into this like programmatic cesspool,” said Helfgott. “These legacy media companies are used to having a very clean transaction, and not all this black-boxy programmatic stuff in the middle.”

Related: High Ethereum Fees Push Tether to Its Eighth Blockchain, OMG Network

The AdLedger blockchain consortium, of which MadHive is a member, includes some heavyweight media players such as Viacom, Publicis Media, Hearst Television, IPG Mediabrands, Hershey and also IBM. (Back in 2018, AdLedger did a pilot with IBM, which committed some advertising budget to a system running on Big Blue’s preferred blockchain, Hyperledger Fabric.)

Read more: IBM-Backed Blockchain Trial Takes Aim at Advertising’s Middlemen

As well as clarifying where intermediary systems impinge, MadNetwork’s blockchain also helps provide insights into the programmatic supply chain in the era of oncoming data privacy regulation, said Christiana Cacciapuoti, AdLedger’s executive director.

“We are seeing a greater demand for insights into which data is going to which players and from which consumers, and who got that consent and how it’s being passed around,” said Cacciapuoti. “Just as that [blockchain-based] system of accounting can track the transfer of dollars and the business-outcome angle, it can also track data transfer and take account of privacy angles.”

Touchpoint of truth

The revamped Layer 2 solution on Ethereum uses the public mainnet as a “touchpoint of truth,” said Helfgott, likening it to the Baseline Protocol built by John Wolpert of ConsenSys and Paul Brody of EY. The deployment of nodes is handled by “nodes as a service” provider Blockdaemon, a close partner of MadHive, Helfgott added. 

Read more: Microsoft, EY and ConsenSys Tout New Way for Big Biz to Use Public Ethereum

In terms of the roadmap, Cacciapuoti said: “We are looking at around Sept. 1 for publicly launching our testnet, and then mainnet in Q4.”

In the not too distant future, it’s inevitable that most people will be watching TV via IP-delivered video, said Helfgott. 

“Unless a company like MadHive and MadNetwork steps in, it’s inevitable that we’ll run over the mobile media infrastructure that exists today, that Google kind of owns,” he said. “Adtech paid for the internet to be built out by Google, and now we kind of see adtech paying for blockchain to be built out at scale.”

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Users of crypto exchange Binance can now stake dai and kava as the exchange’s decentralized finance (DeFi) staking platform goes live.

Binance’s DeFi staking program was first announced Wednesday with dai, the stablecoin generated by loans on MakerDAO. The Binance initiative aims to tap into this year’s booming DeFi market by offering the ability for users earn staking rewards (akin to interest) on select digital assets.

On Thursday, Binance added kava as the second asset to its staking product. Kava is a DeFi platform backed by Binance, Huobi and OKEx with a native token by the same name.

Related: It’s Now Cheaper to Buy One Bitcoin Than to Buy a Single DeFi Token YFI

In a statement to CoinDesk, Binance CEO Changpeng Zhao said:

“Our users have been requesting Binance.com giving them access to DeFi. Binance prioritizes user experience and in the spirit of the community, Binance.com now offers direct integration into these DeFi products allowing the products’ value to flow out to Binance.com users and that’s happening with KAVA and BNB to name a few.”

The move means Kava users no longer need to interface with the Kava app but instead can go directly through Binance’s DeFi staking portal.

Read more: Multi-Chain DeFi Protocol Raises $750K in Token Sale With Framework Ventures

Related: Algorand’s Move Into DeFi Gives ALGO Price a Boost

Kava’s CEO and co-founder, Brian Kerr, said today’s DeFi market would not resemble tomorrow’s, claiming the sector is just at the “tip of the iceberg” in terms of adoption.

Staking in DeFi means users can participate, utilizing smart contracts, on various issues via voting in a proof-of-stake model as well as earning passive rewards by locking up their crypto.

Read more: Chainlink Integration Brings Data Feeds to Binance’s DeFi Project

One of India’s largest exchanges and a subsidiary of Binance, WarzirX, recently announced it was developing a DeFi product known as an automated market maker in collaboration with Matic.

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CORRECTION (Aug. 20, 13:18 UTC): Adds context at the top of the story to make it clear it’s the price of a single YFI that’s more expensive than a single BTC and that the overall market value of bitcoin continues to be vastly greater. Also notes other tokens are priced above bitcoin, but YFI is the only one with notable trading volume.

Though the total market value of yEarn.finance’s governance token (YFI) is still little more than a rounding error compared with sector behemoth bitcoin’s (BTC), the explosive growth of decentralized finance (DeFi) along with the recent fallback in BTC have propelled the price of a single YFI past that of its much bigger crypto sibling.

• yEarn.finance’s governance token (YFI) has surged 35% in the past 24 hours and is currently trading at nearly $13,500, according to CoinGecko data.
• In comparison, after hitting a yearly-high earlier this week, bitcoin has now fallen back down to just under $11,800 – possibly in response to a strengthening dollar.
• Bitcoin’s exchange rate is also superseded by other obscure tokens, according to comprehensive pricing data from CoinGecko, but YFI represents the only token priced above BTC with any sort of notable 24-hour trading volume with roughly $107 million at last check.
• YFI only launched four weeks ago – initially trading at just $32; it surged $400 as CoinDesk went to press.

• Investors deposit select digital assets into YFI, which then automatically executes various DeFi trading strategies with ROIs of up to 95% – the platform takes 5% of the yield as commission.
• Total value locked (TVL) in yEarn stood at $9.3 million on July 18 but boomed to $600 million by Tuesday. At press time, TVL stood at $675 million, according to DeFi Pulse.
• As a governance token, YFI can be staked to give holders a vote on the protocol’s direction. It can also be farmed like many other DeFi tokens.
• But only 30,000 YFIs were created, meaning that despite the price surge its market cap currently sits at just under $400 million – a fraction of BTC’s $218 billion.

See also: $200M Staked in YAM-Inspired DeFi Protocol in Under 12 Hours

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After $50 million in fresh capital, crypto lender BlockFi has now raised nearly $100 million in the past 12 months.

Announced Thursday, the latest round, a Series C, was led by Anthony Pompliano’s Morgan Creek Digital. (It’s the second-largest round to be led by the VC firm, with Figure’s $103 million Series C topping the list.)

At the moment, BlockFi has $1.5 billion in crypto assets on its lending platform and is producing a little less than $10 million a month in revenue, CEO Zac Prince said in an interview. He said BlockFi is still trying to add personnel and keep equity capital stable in order to quickly expand geographically.

Related: Crypto Savings Accounts Are Coming to Fintech Firms That Use Wyre

Prince also expects to have the first bitcoin rewards cards in the market by year’s end and a more public rollout early next year.

“You have to work with quite a few partners to bring a credit card to market,” Prince said. “Some of them haven’t really handled the transition from being fully in-office to being fully remote as smoothly as companies like BlockFi have.” 

New investors

Other participants in the Series C include Peter Thiel’s Valar Ventures – the lead investor in BlockFi’s A and B rounds – CMT Digital, Castle Island Ventures, Winklevoss Capital, SCB 10X, Avon Ventures, Purple Arch Ventures, Kenetic Capital, HashKey, Michael Antonov, National Basketball Association player Matthew Dellavedova and two unnamed university endowments.

Read more: Bitcoin Lender BlockFi Raises $30M in Series B Led by Peter Thiel’s Valar Ventures

Related: NBA’s Spencer Dinwiddie, Andre Iguodala and More Join Dapper Labs $12M Funding Round

Dellavedova, who is a guard for the Cleveland Cavaliers, first learned about crypto in 2017 and was introduced to BlockFi by Morgan Creek’s Pompliano later on, he said in an interview. 

Dellavedova has been making angel investments for the past three to four years, but BlockFi is the basketball player’s first crypto play, aside from holding “a little” bitcoin and ether, he said.

“I would say I’m still a rookie in this space,” he said. “I think having an interest rate that you can have on your crypto is appealing.”

Repeat investor Sterling Witzke, a partner at Winklevoss Capital, said BlockFi’s ability to “resonate with both retail and institutional customers” has been a key selling point. “We look forward to supporting the BlockFi team as they launch their next iteration of products and continue to drive mainstream adoption, firmly cementing crypto at the core of the future of finance,” she said in a statement.

Profits during a crisis

Prince said BlockFi was able to continue its lending operation even after the March bitcoin crash while other lending firms took a short break.

Similar to Genesis and Celsius, BlockFi says March ended up being a good month for crypto lending because of the sector’s primary borrowers – proprietary traders and market makers. 

“The event in March, we didn’t like it because there were clients of ours who have borrowed dollars secured by their cryptocurrency holdings, where we had to issue margin calls,” Prince said. “The way that we handled that I believe was more fair and flexible than the way those things are handled on platforms where everything is very black and white.”

Read more: $100M+ in Margin Calls: Crypto Lenders Demand Collateral as Market Buckles

While interest rates on fiat-backed crypto loans have trended downward after March, demand for bitcoin-backed dollar loans remains high, he added.

“If you look at the futures curve today, it’s implying north of 15% cost of borrowing cash, which makes sense given the bullish position in the market,” Prince said. 

What’s next

BlockFi’s largest expense is people, Prince said, as the team has grown from just under 100 at the beginning of the year to 175 now, with engineering and security making up half of the staff.

Another major growth area is BlockFi’s risk-management team, including hires related to security infrastructure, compliance and financial risk, Prince said. The lender also has new sales and client-relationship teams in London and Singapore and one employee in Hong Kong. 

Part of the Series C will go toward building a larger balance sheet so BlockFi can remain a less risky institution in the eyes of its counterparties. As a general rule, the firm is aiming to have a loan leverage ratio that is more conservative than what you would find at a traditional bank, which typically holds a minimum 5% leverage ratio. 

Read more: Crypto Lender BlockFi Rolls Out Zero-Fee Trading for Bitcoin, Ether, GUSD

Nothing has changed about BlockFi’s collateral levels or its rehypothecation of loan collateral, Prince added. The CEO claims the firm’s loan and security agreement is more transparent than what customers would find at a securities lender in the traditional markets, where rehypothecation of loan collateral is also common. 

“It’s a scary word,” Prince said about rehypothecation. “It’s the folks who are cut from a similar cloth as the ‘not your keys, not your crypto’ crowd.”

Prince would not say whether BlockFi invests customer assets into perpetual swaps, Grayscale Bitcoin Trust shares or other investment vehicles. 

“We think about those and would consider them if it’s appropriate within the context of our risk-management function,” Prince said without going into detail.

Prince also admitted that BlockFi does uncollateralized lending to counterparties with “certain financial requirements” but would not say what percentage of the lender’s loan book was comprised of unsecured loans.

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Bitcoin’s price pullback may worsen as the U.S. dollar shows signs of life on the back of the newly released minutes from July’s Federal Reserve meeting.

• The dollar index, which tracks the greenback’s value against that of other reserve currencies, has jumped 1% to 93.000 in the past 24 hours – the biggest single-day rise in two months.
• The U.S. dollar (USD) has picked up on the news the Federal Reserve is not planning on implementing controversial yield curve controls on bonds – something markets had been anticipating.
• The correlation between bitcoin and the USD has been historically weak but has picked up in the past month as investors look for alternative safe-haven assets.

• CoinDesk data shows bitcoin rising from $9,000 to $12,400 in the four weeks up to Aug. 17 just as the dollar index declined from 97 to 92.
• But in the past week and in the face of a strengthening dollar, bitcoin has fallen to around 11,780 – down 5% from the recent high of $12,400 it reached earlier this week.
• Continued recovery in the U.S. dollar could yield further losses for bitcoin but a sustained dollar rebound still looks unlikely – interest rates will remain at rock bottom to stimulate the economy, increasing the chances that the Fed might be forced to more radical monetary measures.

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ALGO tokens are up as markets respond positively to Algorand’s newly announced plan to become an alternative venue for the white-hot decentralized finance (DeFi) space.

• CoinGecko data shows the price of ALGO tokens has increased from $0.53 to nearly $0.65, a jump of approximately 20% in the past 24 hours.
• That translates into an $80 million increase in ALGO’s market cap to $515 million.
• ALGO peaked at over $0.70 last Friday, the highest it’s been in over a year. The token has a way to go before it approaches its all-time high of $3.56, reached in June 2019.

• This comes after Algorand’s founder, Silvio Micali, unveiled a new set of smart contract capabilities that lowered transaction fees and ultimately make Algorand a faster and more efficient venue for DeFi-related activities – such as yield farming.
• The digital asset industry has become completely enthralled by the sudden rise in the DeFi space over the past year – some projects have been able to attract hundreds of millions of dollars in investment in as little as 12 hours.
• The total value locked in DeFi applications went past the $6 billion milestone at the week beginning, according to DeFi Pulse.

See also: Algorand and Blockstack Are Building a Multi-Chain Smart Contract Language

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• It’s Now Cheaper to Buy One Bitcoin Than to Buy a Single DeFi Token YFI
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• Algorand Readies On-Chain Smart Contracts as the Summer of DeFi Rolls On

ALGO tokens are up as markets respond positively to Algorand’s newly-announced plan to become an alternative venue for the white-hot decentralized finance (DeFi) space.

• CoinGecko data shows the price of ALGO tokens has increased from $0.53 to nearly $0.65 – a jump of approximately 20% in the past 24 hours.
• That translates into an $80 million increase in ALGO’s market cap to $515 million.
• ALGO peaked at over $0.70 last Friday – the highest it’s been in over a year. The token has a way to go before it approaches its all-time high of $3.56, reached in June 2019.

• This comes after Algorand’s founder, Silvio Micali, unveiled a new set of smart contract capabilities that lowered transaction fees and ultimately make Algorand a faster and more efficient venue for DeFi-related activities – such as yield farming.
• The digital asset industry has become completely enthralled by the sudden rise in the DeFi space over the past year – some projects have been able to attract hundreds of millions of dollars in investment in as little as 12 hours.
• The total value locked in DeFi applications went past the $6 billion milestone at the week beginning, according to DeFi Pulse.

See also: Algorand and Blockstack Are Building a Multi-Chain Smart Contract Language

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The native token for OMG Network has more than doubled in the past week as record Ethereum fees lead some investors to look to layer-2 solutions.

• CoinGecko data shows OMG tokens have increased 115% from $1.70 to $3.65 in the past seven days – with the price surging by 30% in the past 24 hours.
• The rally means OMG’s market cap has surged by approximately $275 million since this time last week.
• OMG’s price has increased by nearly 1,000% since it fell to its all-time low of $0.35 after the Black Thursday crash in March.

• Denis Vinokourov, research head at crypto exchange BeQuant, told CoinDesk OMG Network was benefitting from a “perfect storm” of industry-wide developments.
• The craze around DeFi – a subset that has exploded to well over $6 billion – has seen a surge in activity on Ethereum, leading to soaring fees.
• There are also reports that the testnet for Eth 2.0 – a new iteration that would make the blockchain platform much more scalable – crashed last week.
• As such, investors are beginning to look more closely at layer-2 solutions, he said.
• Ethereum’s average transaction fees rapidly shot up from under $0.10 in January to nearly $3.40 currently – the first time fees have stayed so consistently high.

• Stablecoin Tether – a notable "gas guzzler" – said Wednesday it was launching on OMG Network so it could take some of the pressure off the base layer.

See also: Decentralized Finance Frenzy Drives Ethereum Transaction Fees to All-Time Highs

Additional reporting by Omkar Godbole.

Related: Algorand’s Move into DeFi Gives ALGO Price a Boost

CORRECTION (Aug 20, 09:30 UTC): A previous version of this article referred to OMG Network by its old name OmiseGo, this has since been corrected.

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Algorand has unveiled a fresh set of smart contract capabilities aimed at luring decentralized finance (DeFi) projects away from its larger competitors.

• The main iteration appears to be Algorand’s addition of “stateful smart contracts” alongside features such as atomic transfers and Algorand Standard Assets that already run on the blockchain’s base layer.
• Simply put, these “stateful” smart contracts increase efficiency by storing certain information in user accounts, rather than its own code, according to a blog post by Algorand founder Silvio Micali.
• That efficiency allows Algorand to charge static network transaction fees at low cost and scale faster than other competing DeFi-friendly chains.
• “Until now, restrictions around scale, transaction speeds and high transaction fees have been barriers to mainstream blockchain adoption,” Algorand said, taking multiple pot-shots at the current DeFi leader, the Ethereum blockchain.
• Algorand clearly wants to woo its own batch of YAMs, yield farmers and the innumerable DeFi products that have sprouted up like mushrooms on Ethereum all summer. “DeFi gives the world access to an essentially unlimited number of financial products and services,” Micali said in the statement.

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Tether has adopted Ethereum scaling solution OMG Network amidst record demand for settlement space on the “world computer.”

“The integration [between Tether and OMG Network] will result in a reduction of confirmation times delivering faster payments while fees will be reduced without compromising on-chain security,” Tether Inc. said in a blog Wednesday.

OMG Network can handle thousands of transactions at a third of the cost of Ethereum as a Layer 2 solution for Ethereum that batches transactions before settlement, OMG Network CEO Vansa Chatikavanij said in a statement.

Related: Chainlink to Provide Data for Farming Insurance Startup Arbol

Tether – now the third largest cryptocurrency with a market capitalization of $13.1 billion – has become the token of choice for traders. It scores in the top three Ethereum “gas guzzlers” consistently, according to Ethgasstaion. 

Adjacently, the cost to transact on Ethereum has grown in near lockstep with the rise of decentralized finance (DeFi) applications (dapps) such as Uniswap and Compound. 

Ethereum fees on the rise

High growth in both stablecoins and DeFi usage has had adverse results for Ethereum, which settles transactions for both finance applications. 

Indeed, on Aug. 13, the average transaction fee on Ethereum broke all time-highs last set during the 2017 initial coin offering (ICO) boom. 

Related: Market Wrap: Bitcoin Slides to $11.8K; Uniswap at $7M in Monthly ETH Fees

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

“By migrating USDt value transfers to the OMG Network we save costs, drive performance improvements and relieve pressure on the root chain network,” Tether CTO Paolo Ardoino said in a statement. “This is good for Bitfinex and our customers, and the whole Ethereum ecosystem.”

Tether issuance can be found on other blockchains including, but not limited to, Omni, Liquid and Tron. 

OMG Network will also be used for withdrawals and deposits on Tether Inc. sister firm, Bitfinex, the blog states.

Batching Ethereum transactions on secondary layers, as OMG Network does, has become the preferred solution to scale the network. How to do so remains challenging from a technical perspective, however.

For example, Reddit announced a partnership with the Ethereum Foundation in June to white board possible solutions, such as batching transactions, for its native token.

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South Africa’s financial watchdog is investigating Mirror Trading International (MTI), a purportedly lucrative crypto trading network that Texas state regulators last month declared as a fraud.

• At the very least, the Financial Services Conduct Authority (FSCA) intoned in its Tuesday announcement that MTI is operating a financial service without a license.
• MTI told FSCA that its bots conduct high-frequency derivatives trades with client’s pooled bitcoin, consistently generating 10% monthly returns.
• But FSCA said it “has much greater concern” about the legitimacy of MTI’s purported business model. It said in a statement that such a consistent high yield “seems far-fetched and unrealistic.”
• Regulators are now parsing through statements made by a former platform broker for MTI that may contradict MTI’s self-descriptions.
• MTI has “partially-cooperated” in the inquiry, according to FSCA, and informed clients of the investigation. FSCA recommended that all clients jump ship posthaste: “We recommend that clients request refunds into their own accounts as soon as possible.”
• MTI CEO Johann Steynberg denied the trading club is a scam in a letter to investors obtained by the news site Bitcoin.com.
• FSCA’s inquiry comes just over a month after the Texas State Securities Board ordered MTI and its associates to “cease and desist” what it called a multi-level marketing scam.

Related Stories

• Algorand Readies On-Chain Smart Contracts as the Summer of DeFi Rolls On
• Hawaii Welcomes Crypto Exchanges Back With New Regulatory Sandbox
• Pro-Bitcoin Senate Candidate Wins Primary Race in Wyoming
• UK Regulator Grants License to Digital Security Exchange Archax

Prices for ren, the token for the RenVM DeFi network, surged by more than 100% over the past week. That’s because the total amount of renBTC, a tokenized bitcoin that is locked in RenVM, broke 10,000 on Monday, according to data collected by DeFi Pulse.

• The total value locked in RenVM jumped to more than $174 million on Monday from approximately $59.9 million a week earlier.
• There is a growing demand for having bitcoin (BTC) on the Ethereum blockchain as it is increasingly used in decentralized finance (DeFI).
• As reported by CoinDesk previously, RenVM holds a cryptocurrency and mints a representation of that crypto as an ERC-20 token (renBTC, for instance) for use on Ethereum.
• Data from Dune Analytics shows more than 40,000 bitcoin have been tokenized on Ethereum. About 21.7% of that amount was minted by renBTC, making it second behind wrapped bitcoin (WBTC) in the market.
• The recent popularity of tokenized bitcoin indicates a rising demand to use bitcoin in the white-hot Ethereum-based DeFi applications.
• “Bitcoin is now an undeniable part of DeFi, with $420 million of BTC on Ethereum in one form or another,” Loong Wang, chief technical officer of Ren, tweeted on Aug. 15.

Related Stories

• First Mover: Money Legos Turn ‘Exuberant’ as Chainlink Stripped of ‘DeFi’
• $200M Staked in YAM-Inspired DeFi Protocol in Under 12 Hours
• Binance-Owned WazirX Announces DeFi Project With Matic
• DeFi-Yield-Hunting Token YFI Explodes to $11K From $32 in One Month

Bitcoin traders are hitting the sell button. On Ethereum, DeFi is boosting fees again.

• Bitcoin (BTC) trading around $11,658 as of 20:00 UTC (4 p.m. ET). Slipping 2.6% over the previous 24 hours.
• Bitcoin’s 24-hour range: $11,613-$12,100
• BTC below its 10-day and 50-day moving averages, a bearish signal for market technicians.

Bitcoin traded as low as $11,613 Tuesday. Traders continued selling the world’s oldest cryptocurrency after it hit a 2020 high of $12,485 on Monday. For the time being, it may struggle to break much higher from that. 

Read More: Bitcoin’s Bull Run Is Slowing – Pullback Now Expected

Related: Stablecoin Demand May Drop if Traders Abandon Bitcoin ‘Cash and Carry’ Strategy

“Too much resistance at $12,000,” said over-the-counter crypto trader Alessandro Andreotti. “So it’s just going to go sideways for a while.” 

Katie Stockton, analyst for Fairlead Strategies, expects a weaker bitcoin market ahead. “There are signs of short-term upside exhaustion supporting continuation of today’s pullback over the next week or two,” said Stockton. Traders In the bitcoin options market don’t expect too drastic a pullback, however, as most strikes are well over $10,000. 

Many traders remain bullish despite the recent price drop, seeing the decline as a bit of a respite before rising. “Last year’s high was $13,852,” noted Rupert Douglas of institutional crypto broker Koine. “We are going to test that, but whether we have a significant pullback to around $10,000 first is a tough call,“ Douglas added.

First it must get over that $12,000 hurdle, and traders like Andreotti see that level as all that stands in the way of a return to bullish territory. “I believe that in the next attempt at breaking $12,000 we could have the next major support as high as $13,500,” added Andreotti.

Related: Chainlink to Provide Data for Farming Insurance Startup Arbol

Read More: SpaceChain Secured Transfer From International Space Station

Ethereum’s gas pain

The second-largest cryptocurrency by market capitalization, ether (ETH), was down Wednesday, trading around $398 and slipping 5.8% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Read More: $200M Staked in YAM-Inspired DeFi Protocol in Under 12 Hours

After jumping to an average all-time high of $6.68 on Aug. 13, Ethereum fees dropped briefly below $3. However, they are now rising again, currently at $3.59, according to data from aggregator Glassnode. The fees are required to make transactions on the network, including trading on decentralized exchanges, or DEXs. 

Peter Chan, a trader at firm OneBit Quant, says the network’s fee costs, also known as gas, are problematic for Ethereum’s DeFi market. “Everyone in DeFi was all over the place, including us, the last couple of days due to the insane gas cost,” he said. The bearish market trend, in addition to the fees, are problematic for the ecosystem’s cryptocurrencies, Chan told CoinDesk. “DeFi coins are going downhill now.” 

Read More: Blockchain Firm HOPR Releases Mixnet Hardware Node for Ethereum

Other markets

Digital assets on the CoinDesk 20 are mostly in the red Wednesday. One notable winner as of 20:00 UTC (4:00 p.m. ET): 

• chainlink (LINK) + 0.43%

Read More: Money Legos Turn ‘Exuberant’ as Chainlink Stripped of ‘DeFi’

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

• tron (TRX) – 10%
• litecoin (LTC) – 9.9%
• eos (EOS) – 9.6%

Read More: Barclays’ Former Russian Bank Has Issued a Token-Collateralized Loan

Equities:

• Asia’s Nikkei 225 ended the day in the green 0.26% as Japanese export numbers for July were better than expected.
• In Europe, the FTSE 100 climbed 0.60% as British Airways owner IAG stock gained 7.6% on attempts to speed up airport quarantine rules.
• The United States’ S&P 500 slipped 0.10% as the Federal Reserve remained cautious on the economic outlook amid the coronavirus pandemic.

Read More: UK Regulator Grants License to Digital Security Exchange Archax

Commodities: 

• Oil is up 0.66%. Price per barrel of West Texas Intermediate crude: $42.80.
• Gold was in the red 3% and at $1,940 as of press time.

Read More: Riot Supercharges Mining With 8,000 More Rigs as Bitcoin Price Soars

Treasurys:

• U.S. Treasury bonds were mixed Wednesday. Yields, which move in the opposite direction as price, were down most on the two-year, in the red 2.6%.

Read More: Binance-Owned WazirX Announces DeFi Project With Matic

Related Stories

• First Mover: Money Legos Turn ‘Exuberant’ as Chainlink Stripped of ‘DeFi’
• Bitcoin’s Bull Run Is Slowing – Pullback Now Expected

U.S. exchanges ErisX and bitFlyer are among 12 crypto firms selected to pilot Hawaii’s digital currency regulatory sandbox that will allow virtual asset service providers to do business in the state without obtaining a money transmitter license for a two-year period, the companies announced Wednesday.

• The pilot program, offered through the Digital Currency Innovation Lab, a partnership between Hawaii’s Department of Financial Institutions (DFI) and Hawaii Technology Development Corporation (HTDC), marks the return of crypto firms to the state and is the first regulatory sandbox of its kind in Hawaii, according to a statement from ErisX. 
• Although the DFI didn’t exactly ban crypto when the state implemented the “double-reserve requirement” in 2017 – which required companies to hold reserves in fiat currencies matching the amount of crypto held by their clients – exchanges like Coinbase said "aloha" to the state, leaving because they saw the requirement as a costly burden. 
• But in January 2020, Hawaii introduced a bill that would allow financial institutions to hold digital assets.
• In March, the state went a step further to potentially relax the stringent rules for virtual asset service providers by launching the Digital Currency Innovation Lab to address the heavy regulatory requirements and “create economic opportunities for Hawaii through early adoption of digital currency.”
• According to ErisX General Counsel Laurian Cristea, following the launch of the lab, Hawaii invited crypto firms to apply for participation in the pilot program. 
• With the addition of Hawaii, ErisX, which pioneered crypto futures trading in the U.S., is now operational in 49 out of 53 possible U.S. states and territories, according to the exchange.
• In a statement to the press, global crypto exchange bitFlyer, whose U.S. affiliate is headquartered in San Francisco, said the “sandbox initiative marks the return of crypto exchanges to Hawaii, with the ultimate goal of seeing exchanges such as bitFlyer promoted to full licensees in the future.”
• The full list of participants includes BlockFi, CEX.io, Apex Crypto, Cloud Nalu, Coinme, Flexa, Gemini, Novi, River Financial and Robinhood Crypto.

Related Stories

• Pro-Bitcoin Senate Candidate Wins Primary Race in Wyoming
• UK Regulator Grants License to Digital Security Exchange Archax
• $200M Staked in YAM-Inspired DeFi Protocol in Under 12 Hours
• Riot Supercharges Mining Ops With 8,000 More Bitmain Rigs as Bitcoin Price Soars

Institutional demand for stablecoins may cool because yield on “carry trades” has been cut in half since Monday.

The annualized rolling one-month futures basis shot as high as 28% at the start of the week on the Malta-based cryptocurrency exchange OKEx, the biggest in terms of open interest. That was the highest premium since February, according to data provided by the crypto derivatives research firm Skew.

That premium, however, dropped to 14% in under 48 hours. In other words, the carry strategy, if initiated now and held until next Friday, will yield an annualized return of 14%, down from 28% on Monday.

Related: Market Wrap: Bitcoin Sinks to $11.6K as Ether’s Gas Keeps Rising

Carry trading, or cash and carry arbitrage, is a market-neutral strategy, one that seeks to profit from both increasing and decreasing prices in one or more markets. It involves buying the asset in the spot market and simultaneously selling a futures contract against it when the futures contract is trading at a premium to the spot price.

See also: Bitcoin Price Holds Below $12K Even as Hashrate Hits All-Time High

The premium, however, evaporates as the futures contract nears expiration and on the day of the settlement, the futures price converges with the spot price. Should futures draw high premiums, savvy traders initiate a carry strategy and lock in fixed returns.

Futures markets usually trade at a premium to the spot market and the spread tends to widen during price rallies. The annualized premium rose roughly from 9% to 27% in the last two weeks of July as bitcoin’s price rose from $9,000 to $12,000 and it remained near that level going into August. 

Related: Bitcoin’s Bull Run Is Slowing – Pullback Now Expected

Traders could have locked in an annualized profit of 28% on Monday by buying bitcoin in the spot market and selling the front month futures contract on OKEx. Doing that trade now would still profit, but by only half as much.

The decline in the carry strategy yield could also mean a cut in  demand for dollar-backed stablecoins like tether (USDT).

“Stablecoins are widely used as funding currencies and there has been a high demand for these dollar-backed cryptocurrencies from institutions,” Skew CEO Emmanuel Goh told CoinDesk in a Telegram chat. Indeed, the carry trade has been one of the main reasons for the surge in stablecoin issuance seen this year.

On Monday, the annualized cost of borrowing tether on the decentralized finance protocol Compound was 6.94%. Assuming carry traders borrowed USDT from Compound on Monday, holding the carry strategy until the August expiry, due next Friday, would generate a net yield of about 21% in annualized terms. (return of 28% from cash and carry adjusted for tether’s borrowing cost of 6.94%).

See also: First Mover: Money Legos Turn ‘Exuberant’ as Chainlink Stripped of ‘DeFi’

If the same strategy were executed at press time by borrowing USDT, the net yield would be 6.3%. That’s because the cost of borrowing USDT is now 7.68% and the OKEx futures are trading at a premium of 14%. Put simply, carry trades have become far less attractive. As such, institutional demand for stablecoins could soften, as noted by Skew. 

The premium has declined sharply in the past 48 hours, possibly due to bitcoin’s failed breakout above $12,000 and resulting concern of deeper price pullbacks. The decline in premium may have been compounded by increased selling in futures as more traders piled into the cash and carry trade.

Whenever futures trade at discount to spot prices, traders execute reverse cash and carry trade by buying futures and taking a short position in the spot market. 

Related Stories

• Market Wrap: Bitcoin Slides to $11.8K; Uniswap at $7M in Monthly ETH Fees
• Dust Attacks Make a Mess in Bitcoin Wallets, but There Could Be a Fix

Investors in the 2017 Paragon Coin token sale want their money back, but they can’t find the celebrity couple behind the operation.

“The attorneys representing the defendants have withdrawn as counsel,” said attorney Donald Enright, who represents plaintiffs in this crypto-fueled legal dispute. Enright added the defendants “defaulted” by failing to appear in court and respond to the claims. 

The Northern District of California decided in the infamous initial token offering (ICO) case Davy v. Paragon Coin, Inc. that token buyers trying to sue the project’s founders may qualify as a class to pursue a collective case. The lawsuit claims the token sale was an illegal securities offering and that buyers are entitled to a refund of their investment or compensatory damages. The defendants’ former counsel, attorney Howard Schiffman, declined to comment other than to say his law firm hasn’t worked with or heard from the accused in “years.”

Related: Sirin Labs Founder Sued Over Unpaid $6M Factory Bill for Finney Blockchain Phone

His counterpart, Enright, said that doesn’t mean the case is over.

“Once we have the class certified we will then seek default judgment on behalf of the entire class for all of their damages,” he said, “for the full value of the Paragon ICO.”

Paragon raised roughly $12 million in digital assets during the token sale, according to litigation filings from the U.S. Securities and Exchange Commission (SEC).

The legal saga underscores the lasting hangover of 2017’s initial coin offering (ICO) craze, at a time when token sales are again surging in popularity.

Influencer game

Related: Appeals Court Backs Coinbase in Bitcoin Gold Fork ‘Breach of Contract’ Lawsuit

The project appears to have been helmed by Jessica VerSteeg, a former beauty queen from Iowa who went on to appear in reality TV, and her husband, Russian entrepreneur Egor Lavrov. 

But the defendants listed in court documents also include a hip-hop star.

Jayceon Terrell Taylor, aka “The Game,” who promoted the Paragon ICO on social media, was also named in the suit. Also named are technologists Eugene Bogorad, Alex Emelichev, Gareth Rhodes and Vadym Kurylovich. Most of the above-mentioned defendants could not be reached for comment by press time. 

“Paragon offers everything from a cryptocurrency (ParagonCoin, traded as PRG) to a blockchain solution (ParagonChain) designed to expedite and digitize the marijuana supply chain,” a Forbes contributor wrote in July 2018. “Now, VerSteeg’s latest venture is Paragon Space, Los Angeles’ first cannabis co-working space set to open on September 1.”

It’s unclear if any of the project’s stated plans would have materialized had it not been for legal action from the SEC in 2018.

One of Paragon’s early contributors, who spoke on condition of anonymity, said he’s not concerned about future lawsuits because the team already obeyed the SEC by paying a penalty fee. It’s unclear whether the full fee was paid because, as of November 2019, the Wall Street Journal reported the Paragon team missed some of the deadlines to pay these fines. 

Read more: SEC-Fined Crypto Project Abandons Cannabis Co-Working Venture

Both of the interviewed defendants from the Paragon case were not U.S.-based and said they weren’t concerned about being named in any ongoing lawsuit. As for American defendants and former legal counsel, aside from the above-mentioned Schiffman, their offices were closed due to COVID-19 or they did not otherwise respond to emails and voicemails by press time. In fact, VerSteeg and Lavrov haven’t been heard from since last year. 

“As far I know, Egor is not responding to any messages and that’s all I know,” Bogorad, the project’s former chief strategy officer said, having only heard about legal trouble through the press. “I went back to Moscow. October 2017 was the last time I saw him. We were actually asking him [in 2018] about our tokens.”

The couple was still promoting Paragon throughout 2018, although they were rarely responsive to their former colleagues. The SEC fined the entrepreneurs in early 2019. Most of the couple’s old websites and social media accounts haven’t been active since mid-2019, when they posted on Instagram in July from Kiev, Ukraine. 

“I think they’re together and disappeared together,” Bogorad said. “Last we heard from them they were visiting the development team near Kiev.” 

ICO aftermath

If the class-action lawsuit proceeds, it’s unclear how the courts will find VerSteeg and Lavrov. As for the early contributors who haven’t gone missing, Bogorad says they never intended on starting the Paragon company themselves.  

According to Bogorad, a long-time friend of Lavrov’s from Moscow, where they both worked in Russian political campaigns in 1999 and 2000, many of the people listed in the lawsuit don’t consider themselves Paragon Coin’s founding team. 

Read more: The Bitcoiners Who Live ‘Permanently Not There’

He said Lavrov invited a group of roughly five people, plus VerSteeg, to a hacker house in California in 2017. They were paid in fiat or bitcoin, with the promise of future tokens as well, but didn’t see themselves as running a company. He said he was merely helping Lavrov with marketing to launch his company. Another team would be hired to run the company after the sale, Bogorad said. 

“Once we finished the white paper and the ICO started I helped with the marketing, it was July to August 2017,” Bogorad said. “I wasn’t connected to the Facebook and Google advertising, which was the biggest cost-driver.”

The hacker-house team focused on marketing to bitcoin groups on Facebook, Bogorad said, while two guys focused on customer support and VerSteeg handled media outreach, including promotion with her friend The Game. 

In 2017, VerSteeg gave joint interviews with IOTA co-founder David Sonstebo, who said “the beautiful thing about the Paragon project is they are combining the technologies that actually make sense.” When asked about VerSteeg in February 2020, the press team that arranged the interviews said they hadn’t heard from VerSteeg in years and Sonstebo said the IOTA Foundation wasn’t really involved in the ICO project.

‘Paragon became toxic’

After the sale concluded, the California hacker house split up, mostly returning to Russian-speaking Europe. 

None of the responsive participants in the sale, neither sellers nor buyers, could say exactly how much was raised. Bogorad estimated it was less than $15 million. The sale’s Etherscan data suggests relevant wallets were last active a few times back in August 2019, weeks before Bogorad last heard from VerSteeg and Lavrov. 

Read more: After Friday’s SEC Actions, Experts Say ICO Party ‘Is Truly Over’

The anonymous ICO participant, who said Lavrov invited him to visit California for a short-term project in 2017, just like Bogorad, added that he didn’t enjoy working with these token founders and hopes to never see them again. 

“Paragon became toxic. I’ve avoided any relations for more than one year,” he said.

The anonymous participant said this lawsuit is “just lawyers trying to spam courts.” He declined to specify which crypto projects he might be using or participating in these days. Meanwhile, Bogorad is still (informally) involved with token projects like Free TON, a fork of the folded Telegram blockchain project that was nixed by U.S. regulators. But he added he’s not a founding member of Free TON, just “highly enthusiastic about the project.”

Related Stories

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Russian communications giant Rostelecom has finally published details about its blockchain-based voting system that will be deployed for by-elections in September.

There will be two blockchain voting pilots in different regions of the country next month. One will be run by Rostelecom, the state-owned major telecom provider, and the other by the Department of Information Technologies, a branch of the Moscow city hall that ran the previous blockchain voting pilots.

The platform by Rostelecom will be used for remote voting on Sept. 13 in two Russian regions, Kurskaya and Yaroslavskaya areas, where the residents will vote to fill the vacant seats at the Russian national parliament, the State Duma.

Related: Barclays’ Former Russian Bank Has Issued a Token-Collateralized Loan

The system will be based on the private enterprise version of the Waves blockchain. According to the press release circulated Wednesday by Rostelecom and Waves, the system will allow for “control by all authorized participants of the elections, including independent observers.”

Read more: Russian Voters’ Data on Sale After Blockchain Poll to Keep Putin in Power: Report

However, the nodes of the blockchain will be located on Rostelecom servers exclusively, and for security reasons there won’t be a way for independent observers to run their own nodes, Rostelecom’s press person Natalia Bakrenko told CoinDesk.

Waves CEO Sasha Ivanov said observers will still be able to watch what’s going on: “All information from the enterprise voting chain will be published on a special portal that can be accessed by anybody. Cryptographic instruments guarantee that the data cannot be tampered with.”

Related: Russia, With Bitcoin Playing Bit Part, Tried to Hack 2016 US Election, Senate Report Finds

Despite the rough experience of previous blockchain-based voting in Russia, it remains a good business for Waves, Ivanov told CoinDesk:

“Voting has always been one of the most low-hanging fruit for blockchain technology implementation. It is extremely important for us to participate in launching one of the first large scale projects implementing blockchain beyond monetary applications,” Ivanov said.

Rough history

Rostelecom announced the further expansion of the blockchain voting experiment in July, after the technology was used for voting on controversial constitution amendments.

The process did not go smoothly. Journalists in Russia reported finding a way to decrypt people’s votes and retrieve personal identification numbers out of a weakly protected service file. After the voting, dark web vendors offered personal data of the voters for sale, although public officials denied the authenticity of the data.

The system was built on Bitfury’s open-source Exonum blockchain with the help of Kaspersky Lab, according to CoinDesk’s sources, although the anti-virus company did not confirm that.

Read more: Hacker Attempts to Disrupt Russia’s Blockchain Voting System

The first blockchain voting experiment in Russia took place in the fall 2019 during local elections in Moscow. Residents could vote electronically using an Ethereum-based system, which was criticized for weak security.

Blockchain voting has been under the purview of Moscow city’s Department for Information Technology (DIT). Now, there will be two parallel pilots, one by DIT and one by Rostelecom.

DIT is not backing away from the blockchain voting project, the press person told CoinDesk. In November, it will provide the blockchain-based system for the municipal elections in two Moscow districts.

Related Stories

• US Postal Service Envisions Blockchain-Backed Mail-In Voting
• Russian Financial Crime Agency Plans AI Tool to Link Crypto Transfers to Users

The OCC is willing to work with banks interested in custodying crypto, a Russian bank approved a token-backed loan and bitcoin has been sent… from space!

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. 

Top shelf

Next steps?
The Office of the Comptroller of the Currency’s interpretative letter last month allows banks to provide services to crypto companies and custody cryptocurrencies directly – a sea change that could have been months in the making, writes CoinDesk regulatory reporter Nikhilesh De. It doesn’t appear banks have jumped at the news. However, the letter is just the beginning of a longer process. The OCC will interact with banks on their next steps if they do decide to pursue crypto services. These letters help banks interested in crypto determine if it makes sense for them to get involved in the space, the OCC’s Jonathan Gould said. 

Related: First Mover: Money Legos Turn ‘Exuberant’ as Chainlink Stripped of ‘DeFi’

BTC in space
SpaceChain’s International Space Station-hosted (ISS) hardware secured a bitcoin transfer while floating in Earth’s orbit. Using a multi-signature transaction hardware, the firm’s Chief Technology Officer Jeff Garzik authorized a 0.0099 BTC (about $92 at the time) transfer on June 26, the company disclosed Tuesday. Data can only reach the ISS via the craft’s encrypted ground station links. SpaceChain says this adds security and resilience to transaction authorizations.

Prime brokerage
Bequant is entering the prime brokerage space by building a crypto exchange, reports CoinDesk’s Nathan DiCamillo. “Prime brokers are facilitators for financing and trading for deep-pocketed institutional investors. While the digital asset space doesn’t have a lot of prime broker options currently, several crypto firms including Coinbase, BitGo and Genesis Trading have announced in recent months their intent to build prime brokerage wings,” he reports. 

Token loan
Expobank, a former Barclays subsidiary in Russia, has issued a loan using tokens as collateral. Terms were not disclosed, but the loan was made to tax consultant Mikhail Uspensky, who bought WAVES in 2018 for a planned initial coin offering (ICO). The tokens are being held by a third-party notary. Expobank’s dabbling in token collateralized loans comes after Silvergate said it had issued a total of $22.5 million worth of loans collateralized by bitcoin in July. The California bank only started offering such loans to clients in January.

Private nodes
Decentralized privacy startup HOPR has released its first “customized HOPR Hardware Node,” which the startup says removes any reliance on cloud servers predominantly controlled by Amazon and Alibaba. HOPR uses a token-incentivized mixnet solution, essentially doing the same for blockchain as Tor (the onion router) or a virtual private network (VPN) do on the internet. The mixnet node combines running an Ethereum node with next-level data privacy.

Quick bites

• Riot Blockchain is buying 8,000 more bitcoin miners (Danny Nelson/CoinDesk)
• A U.S. Senate report found, among other things, that bitcoin was a factor in Russia’s meddling in the 2016 U.S. presidential election. (Danny Nelson/CoinDesk)
• First Mover: Money Legos turn “exuberant” as Chainlink stripped of “DeFi” (First Mover/CoinDesk)
• Investor revolt and legal dispute delay Filecoin plans (Dan Primack, Kia Kokalitcheva/Axios)
• Steem vs. Tron: The rebellion against a cryptocurrency empire (Tim Copeland/Decrypt)

At stake

Related: Blockchain Bites: Hashrates Drop, Bitcoiners Hodl and an Open Letter to Bankers

What’s going on in the world of DeFi? The pace of development in this small corner of the crypto space can be difficult to follow. Since the end of May, total locked-in value exploded past $1 billion and now sits near $6.4 billion, according to DeFi Pulse.

A whole universe of meme-driven and meta-referential projects have launched, grabbed headlines and filled their coffers. Here’s a quick rundown on a few recent projects.

For instance, the governance token for yEarn.finance (YFI) has shot up over 32,000% in about a month, CoinDesk’s Paddy Baker reports. Investors have dropped $645 billion into the application. 

yEarn founder Andre Cronje said the price rise likely came from a combination of scarcity – there are only 30,000 YFI tokens – and the fact traders were using YFI in some of the other DeFi protocols.

While yEarn has delivered an actual product – an algorithm that identifies and executes various DeFi trading strategies – with up to 95% ROIs, many projects are to be taken less seriously. 

Spaghetti Money, less than a day old, has already attracted $200 million in its protocol, which features a meme coin (PASTA), no public figurehead or governance model – and which has yet to be audited. 

Gamblers on the decentralized betting site Prediqt think Spaghetti will attract a total of $500 million TVL within the first 36 hours.

Finally, Binance subsidiary WazirX, the Mumbai-based crypto exchange, announced it is developing a DeFi product with Matic Network, a blockchain scalability platform. 

The project promises an automated money market, similar to the popular Ethereum-based Uniswap, to run on Matics’ “high speed” blockchain. The decision to opt for Matic was influenced by high gas fees on Ethereum, fees which are in part being driven northward by DeFi. 

Market intel

Uptrend upturned?
Bitcoin’s uptrend since mid-March appears to be running out of steam. “Monday’s breakout of $12,000 was almost entirely short-squeeze driven, and the resultant failure just ahead of larger offers [sell orders] at $12,500 has solidified the price range of $12,000-$12,500 as a key resistance area for an extended period,” QCP Capital said. The cryptocurrency dropped below $12,000 Tuesday, and chart analysis shows signs of bullish exhaustion, according to CoinDesk markets reporter Omkar Godbole. 

Tech desk

Dust settles
“Dust” is the technical term given to trace amounts of bitcoin – usually no more than a few  hundred satoshis – that are considered too small to send in a transaction because the transaction fee would exceed the amount sent. The dust settles in a wallet, potentially allowing for nefarious actors or blockchain researchers to deanonymize the address. Dave Jevans, the CEO of blockchain analytics company CipherTrace, said that “hackers may use dusting as a strategy for identifying individuals who can then be phished or extorted.” Researchers and developers are working on solutions, including raising “dust limits” or consolidating unspent UTXOs, each with their own drawbacks. 

Op-ed

A new internet
Steven McKie, a founding partner and managing director at Amentum Capital, is developing, investing in and calling for others to build the “new internet.” The decentralized web’s development is made all the more necessary considering the privacy leaks, censorship and control centralized internet services exert. “Although the solutions to censorship resistance, lack of privacy and trust are right around the corner, further experimentation and development of the DWeb meme is necessary before the final barriers to the New Internet are sprung open,” he writes. 

Podcast corner

Cheap money
Race Capital’s Chris McCann joins the latest edition of The Breakdown for a conversation about fintech, low interest rates and how cheap capital changed the face of Silicon Valley. 

Who won #CryptoTwitter? Related Stories

• First Mover: Bitcoin Passes $12K, Dollar Worries Grow, OMG Jumps, Portnoy’s Orchid #Pump
• Blockchain Bites: Bitcoin on DeFi and DeFi on Bitcoin

Cynthia Lummis, a former U.S. Representative and current bitcoin advocate, has won her primary race to join the U.S. Senate representing Wyoming.

• Lummis beat nine other Republican candidates on Aug. 18, and has now advanced to the general election against Democrat Merav Ben-David. Lummis is favored to win in a “Solid Republican” district, according to the Cook Political Report.
• Lummis previously told CoinDesk she has been interested in bitcoin since at least 2013, seeing it as a stable source of value, unlike the U.S. dollar.
• Lummis served in the U.S. House of Representatives between 2009 and 2017.
• Should Lummis win, she may become one of the most crypto-friendly lawmakers in the legislative body.

Related Stories

• UK Regulator Grants License to Digital Security Exchange Archax
• $200M Staked in YAM-Inspired DeFi Protocol in Under 12 Hours
• Riot Supercharges Mining Ops With 8,000 More Bitmain Rigs as Bitcoin Price Soars
• Blockchain Privacy Firm HOPR Releases Mixnet Hardware Node for Ethereum