Skip to main content

CoinDesk Crypto

Compound Tops $1B in Crypto Loans as DeFi Farmers Keep Digging for Yield

6 years 2 months ago

Compound, the leading lending protocol on Ethereum, has broken a billion dollars in total assets borrowed, according to the tracker on its website.

This is the latest milestone for a project that has led the yield farming craze in decentralized finance (DeFi), where both large and small investors search for the best place to park their assets in order to earn the strongest returns. 

The platform reached $933 million on July 10 before surging by an additional $70 million in loans over the weekend. Prior to the current rush to mine fresh COMP, the loans were typically understood to be taken out to facilitate further crypto trading.

Related: First Mover: Twelve-Fold Gains for Aave’s LEND Token Might Be More Than DeFi Hype

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

The loans are generated permissionlessly, with users only having to provide collateral in one of several different approved crypto assets. That is, every borrower is also a depositor, though it is also possible to deposit funds without lending, in order to increase the pool from which others can borrow. 

Since June 15, both borrowers and depositors have been earning the Compound governance token, COMP. This has led to a spike in activity on the site.

Other DeFi projects have since followed suit, either releasing or announcing their own governance-token-mining schemes (see crypto-index protocol Balancer, flash-loan purveyor bZx and automated market maker Curve for examples).

Dizzy numbers

Related: Market Wrap: Traders Buy the Dip and Bitcoin Holds at $9,200

COMP’s debut has also yielded some strange situations, such as in the case of DAI. As of now, nearly $800 million in DAI have been borrowed on Compound, this despite the fact the total market cap of DAI is only $195 million, according to CoinGecko.

This is because users want to maximize their COMP returns, so they increase their leverage by using various strategies to borrow DAI, deposit what they borrowed and then borrow more.

Right now, dai is by far the most popular token to borrow, with USDC and ETH following as a distant second and third.

Read more: There Are More DAI on Compound Now Than There Are DAI in the World

Close followers of the DeFi boom may be somewhat confused by the $1 billion number here, as DeFi Pulse reports Compound as having $699 million in total value locked (TVL), as of this writing. This confusion is caused by the fact that the site reports Compound’s deposits minus the loans it has made. Setting loans aside, Compound currently has $1.7 billion in total deposits, according to its own tracker.

Compound interest

To illustrate how dramatic the release of this token has been: DeFi Pulse shows Compound as having just under $100 million in total deposits on June 14, the day before COMP mining began.

Compound was first announced in September 2018, with funding from Bain Capital Ventures, Andreessen Horowitz and Polychain. It announced a subsequent $25 million round last November, led by Andreessen Horowitz.

As of this writing, the COMP token is trading at $173, down from an all-time high of $373 on June 21, according to CoinGecko.

Compound Labs was not available for comment at press time.

Related Stories
CoinDesk

Drop in Bitcoin ‘Whale’ Addresses Suggests Market May Be Decentralizing

6 years 2 months ago

The number of whale addresses, or those holding a large number of bitcoins, has declined to a 14-month low.

However, the drop isn’t necessarily a price-bearish development and may instead indicate the distribution of bitcoin ownership is shifting. 

As of Sunday, there were 103 addresses holding at least 10,000 BTC – the lowest since May 2019, according to blockchain analytics firm Glassnode. The number has declined by 8% over that 2.5-month period. 

Related: Bitcoin Mining Difficulty Sets New Record High 2 Months After Halving

Ten thousand bitcoin is worth close to $93 million at press time.

Some may see the decline in the whale addresses as a sign of weaker buying pressure and anticipate a price drop as a result. However, Richard Rosenblum, co-founder, and co-head of trading at crypto liquidity provider GSR, suggests otherwise. 

“It’s bearish to see the biggest holders reducing their stakes, but bullish to see the market becoming more decentralized,” Rosenblum told CoinDesk in a Telegram chat. 

Market shift?

Validating Rosenblum’s comments is the growth seen in the number of lower-value bitcoin addresses over the past couple of months. 

Related: Market Wrap: Traders Buy the Dip and Bitcoin Holds at $9,200

For instance, there were 2,155 addresses holding at least 1,000 coins on Sunday, up nearly 3% from a low of 2,097 observed in April. 

Meanwhile, the number of addresses holding at least 1 BTC continues to reach new record highs. So do addresses holding 0.1 BTC and 0.01 BTC. 

As such, one could argue bitcoin ownership is being transferred from relatively few whales to a large number of smaller investors. 

“Over time, you would expect [bitcoin] to naturally dissipate to more hands,” said Rosenblum.

Data limits

Blockchains are transparent and allow every single transaction to be viewed and analyzed. Even so, drawing definite conclusions from metrics such as address growth can be challenging because a single user or an exchange can own multiple addresses.  

“Whales may not be having all of their holdings in a single address and moving crypto for risk management purposes,” said Simon Peters, a crypto market analyst at investment platform eToro. 

As such, an increase or decrease in the number of bitcoin addresses may not fully represent the entry or exit of investors. 

Disclosure: The author holds no cryptocurrency assets at the time of writing.

Related Stories
CoinDesk

First Mover: Twelve-Fold Gains for Aave’s LEND Token Might Be More Than DeFi Hype

6 years 2 months ago

There’s one thing that all investors like: doubling, tripling or even quadrupling their money. How about a 12-fold increase? 

That’s what traders have reaped this year from the decentralized lender Aave’s LEND token, up about 1,200% on a year-to-date basis.

You’re reading First Mover, CoinDesk’s daily markets newsletter. Assembled by the CoinDesk Markets Team, First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more. We follow the money so you don’t have to. You can subscribe here.

Related: Compound Tops $1B in Crypto Loans as DeFi Farmers Keep Digging for Yield

Other tokens from the realm of decentralized finance, known as DeFi, are up by triple-digit percentages, including Synthetix’s SNX, Thorchain’s RUNE and Kyber’s KNC. Bitcoin, the biggest cryptocurrency by market capitalization, is up just 28%. 

It would be easy to write off such outsize gains as just another example of the speculative hype of cryptocurrency markets, where big price swings are common. But in the case of the LEND token, the price rise may have been fueled by an increase in actual usage. 

Some $158 million of value have been deposited as collateral in Aave’s lending protocol just six months after the project went live in January. By comparison, Compound, another decentralized lender, had just $27 million in its protocol at its six-month mark in March 2019. Compound has since gone on to increase the figure, known as total value locked, by 25-fold to $684 million, to become the largest lending protocol, according to DeFi Pulse, which tracks the industry.  

“The main reason I suspect LEND has received so much attention is simply because, after launching the mainnet early this year, usage on Aave has grown incredibly fast,” Jack Purdy, an analyst with digital-asset research firm Messari, told First Mover in an email. 

Related: Crypto Long & Short: Dogecoin, Market Manipulation and the Downside of a Coinbase IPO

Last week, Aave rolled out a new feature, “credit delegation,” which effectively allows users to set up credit lines that could then be drawn down by other users in a form of peer-to-peer lending. Under the program, investors can deposit stablecoins – digital tokens backed by U.S. dollars or other government currencies – and then delegate the right to borrow against that collateral to another user. 

The delegator can set terms of the loans, such as interest rates and amount of capital that can be drawn. Since the ultimate borrower isn’t posting collateral via the platform, the delegator is bearing most of the risk and might be able to charge higher interest rates. 

“Aave’s introduction of credit delegation is groundbreaking,” Su Zhu, CEO of the Singapore-based digital-asset fund Three Arrows Capital, told First Mover in a Telegram message.  

Aave CEO Stani Kulechov told First Mover in a Discord chat the “market capitalization of LEND has been following mostly our protocol growth.”

“Most of the traction comes due to our wide asset selection that you can use as collateral and the ability to borrow flash loans without collateral, which has become a popular tool,” Kulechov wrote. 

In a Tweet last week, Kulechov wrote that credit delegation could help push DeFi into “financial debt markets worldwide,” making it a “liquidity backbone.” Borrowers could be cryptocurrency exchanges, market makers, lenders, institutions, businesses, non-governmental organizations or governments, he wrote.

Not that LEND isn’t benefiting from speculation at all: Some traders might be extrapolating how Aave’s usage might increase going forward, giving the token’s price an additional lift. 

Aave is positioned squarely within the fast-growing DeFi industry, and some industry executives that these autonomous or semi-autonomous systems could ultimately challenge or displace banks, brokerage firms, insurance companies and money managers.   

“Overcollateralized lending is capital inefficient, and uncollateralized lending has been one of key missing pieces to DeFi lending,” Messari analysts noted in a July 7 blog post. “Assuming it works, it has the potential to significantly scale DeFi lending.”

Tweet of the day Bitcoin watch

BTC: Price: $9,280 (BPI) | 24-Hr High: $9,349 | 24-Hr Low: $9,170

Trend: Bitcoin jumped 2.53% in the seven days to July 12, snapping a four-week losing streak, which was the longest since November 2019. 

The weekly gain confirmed a bullish breakout from a period of indecision signaled by the preceding week’s doji candle. As such, one may expect the cryptocurrency to challenge resistance at $9,920. That level is currently housing a trendline connecting the December 2017 and June 2019 highs. 

The daily chart MACD histogram, an indicator used to gauge trend strength and trend changes, is supporting the bullish case with an above-zero reading. 

Options traders, too, are anticipating a bullish move, and look to be buying call options or bullish bets, as suggested by the negative one-month put-call skew. The three-month and six-month skews are also hovering below zero, according to Skew, a crypto derivatives research firm. The metrics indicate that calls are in greater demand that puts, or bearish bets. 

The bullish case, however, would weaken if the cryptocurrency finds acceptance below $8,905, the low seen in the first week of July. Acceptance under that level would shift the focus to the 50-week moving average at $8,599.

At press time, bitcoin is trading largely unchanged on the day at $9,280.

Related Stories
CoinDesk

Bitcoin Mining Difficulty Sets New Record High 2 Months After Halving

6 years 2 months ago

Two months after the network’s halving event, it’s harder than ever to mine bitcoin.

Bitcoin mining difficulty, a measure of how hard it is to compete for block rewards on the network, just set a new record high of 17.35 trillion around 12:00 UTC on Monday. This marks a 9.89% jump from the previous record of 15.78 trillion posted on July 1, Bitcoin.com’s blockchain explorer shows.

The new record comes a little over two months after bitcoin’s halving on May 11, which reduced the block subsidy from 12.5 bitcoin per block to the current 6.25 bitcoin, per the network’s design. The latest figure also surpasses the pre-halving high seen in early March.

Related: Drop in Bitcoin ‘Whale’ Addresses Suggests Market May Be Decentralizing

The increase in difficulty reflects increasing computing power being applied to mining bitcoin. The record hashrate also seen Monday signals investment in state-of-the-art mining machines continues to grow after the halving, even though the price of bitcoin has remained stuck in a range between $9,100 and $9,500 since early July.

Bitcoin mining difficulty is designed to adjust every 2016 blocks, roughly every 14 days, and is based on the hashing power competing for rewards on the network over the period. If more miners have plugged into the network in any one cycle, pushing the average 14-day hashrate up, difficulty will subsequently rise in the next cycle.

See also: Bitcoin Halving, Explained

“The increase in the network difficulty during the rainy season in Sichuan has happened every year for a few years now,” said Dmitrii Ushakov, chief commercial officer at BitRiver, the largest bitcoin mining hosting provider in central Asia.

Related: Market Wrap: Traders Buy the Dip and Bitcoin Holds at $9,200

Ushakov said with the supply chain and business disruption resulting from the coronavirus pandemic completely resolved in China – estimated to have around 65% of the Bitcoin network’s mining power – “this has resulted in a surge in the number of miners that were shipped and delivered in the past two months and these miners are now online.”

But there’s another force driving the Bitcoin hashrate’s recent rebound. While many had expected prior to the halving that older-generation mining machines like Bitmain’s AntMiner S9 would soon be phased out as they became unprofitable to operate, the reality may be more complicated.

Jiang Zhuo’er, CEO of BTC.TOP, a bitcoin mining pool based in China that also operates bitcoin miners, said by turning these older-generation devices to a low-voltage mode, one could improve the profit margin to keep them up and running.

With a low average electricity cost of around $0.03 in China’s Southwestern region during the summer rainy season, a standard AntMiner S9 would be operating at loss with bitcoin’s current price and record high difficulty. But available firmware updates could be applied to bring down its electricity consumption to improve the overall profit margin by 20%, a process called “under-clocking.”

Also read: Inside the Craze for Filecoin Crypto Mining in China

While 20% may seem a significant margin increase, in terms of the actual profit, an under-clocked AntMiner S9 can only generate an almost negligible profit of less than $0.5 in 24 hours, even at an electricity rate of $0.03.

Part of why many still choose to operate older models, even without much profit, may be due to a surplus of newly built mining facilities since last year. Typically, bitcoin mining farm operators in China’s southwestern region would sign agreements with hydro-power plants for a certain amount of electricity over a specified period.

“So mining farms would lower down the offerings to below $0.03, even below $0.02 just so that they’d have enough machines to fill in the capacity,” said Jiang, or even some would just mine themselves because they must pay the agreed electricity to the power plants whether or not they could use up the said amount.

Also read: China’s Rainy Season Is Coming. This Time Bitcoin Miners Aren’t Investing

“Although it may look as if some old models are not profitable enough, in reality, they are not shutting down now,” he said. Still, Jiang expects these older machines to be phased out after the end of the rainy season in China (around October) but throughout the summer the hash rate won’t change too much if bitcoin’s price remains static.

“After that, the difficulty could go down because the hash rate coming from newly delivered, more powerful machines may not be able to offset the decline resulting from the shutdown of older-generation equipment like the S9,” he added.

Related Stories
CoinDesk

Singapore’s Central Bank Eyes Commercial Role for Its Blockchain Payments Tech

6 years 2 months ago

A blockchain project from the Monetary Authority of Singapore (MAS) and state investor Temasek has completed its final development phase and is now being considered as the basis for commercial payments ventures.

  • Singapore’s central banking authority and Temasek said Monday that with the fifth research cycle for project Ubin now complete, “the next leap will be in implementing live commercial solutions to solve realworld challenges.”
  • Ubin has been running as a multi-currency payments platform and is leveraged work on a blockchain and digital currency at U.S. investment bank J.P. Morgan.
  • Beginning in 2016 as a clearing and settlements initiative, Ubin’s fifth phase (launched in November 2019), branched out to other areas, like capital markets, supply chain finance and insurance.
  • The research found Ubin made complex financial transactions more efficient: lowering fees on foreign currency trading and cross border payments, as well as using smart contracts as a secure alternative to traditional escrow accounts.
  • The report says banks are now exploring whether Ubin can become the template for a commercial multi-currency platform for users to transact directly with one another.
  • If successful, it could even go on to form the basis for a global payments platform for central banks, the report added.
  • This was the last experimental phase to see MAS involvement, with Temasek saying it will support efforts to use Ubin for commercial ventures.
  • CoinDesk reached out to MAS for more details on the future of the platform, but hadn’t received a response by press time.

See also: Singapore Begins Crackdown on Unlicensed Bitcoin Sellers

Related Stories
CoinDesk

CoinSwap and the Ongoing Effort to Make Bitcoin Privacy ‘Invisible’

6 years 2 months ago

A developer known for working on enhancing Bitcoin privacy has set his sights on a new project he hopes will “massively improve” how we keep our transactions private.

Chris Belcher, who also created the technical privacy market JoinMarket, is currently working on putting to the test CoinSwap, an idea first proposed by legendary Bitcoin developer Greg Maxwell in 2013. Belcher has been focusing on CoinSwap rather than JoinMarket because he thinks it will give users better privacy, he told CoinDesk. 

Belcher recently received not just one, but two grants for his efforts, showing just how excited Bitcoiners are about the potential of the project.

Related: Listen: What a Bitcoin Researcher Says About Lightning

Though the Bitcoin network arose from a privacy-minded movement, its privacy is actually pretty thin. Just take a look at any block explorer for a glimpse of how easy it is to pull up any transaction that’s ever happened in Bitcoin’s history – as well as the transaction’s associated history. 

Read more: Human Rights Foundation Funds Bitcoin Privacy Tools Despite ‘Coin Mixing’ Legal Stigma

“Right now, Bitcoin privacy is not very good at all. Anyone in the world can analyze the blockchain and then can find all sorts of information about users – their balance, their history, who they transact with and in what amounts, when – everything they spend,” Belcher told CoinDesk in an interview. 

Belcher argues that this is, in some ways, worse than the financial privacy we have in legacy systems today. “The banking system, they know your transactions, but the general public doesn’t. With Bitcoin it is the general public — it is everyone that can see exactly what the user does,” Belcher added.

Related: Bitcoin App Bottlepay Is Back From the Dead With a New Lightning App

He added it’s important to most people that this type of information isn’t exposed to the whole world.

“Financial privacy is good for human dignity, [for example], if you don’t want your neighbors to see what charities you donate to or that type of thing, or if you’re paid in bitcoin you don’t want your employers to know what charities you donate to or what other activities you’re involved in,” Belcher added.

CoinJoins: today’s Bitcoin privacy

“CoinJoins” (distinctive from “CoinSwaps,” which Belcher is putting to the test) are the privacy transactions that are most popular on Bitcoin today. CoinJoins give users good privacy and are becoming more popular. Thus far, they have been adopted in the Wasabi wallet, Samourai Wallet and JoinMarket. 

A CoinJoin takes all inputs from several transactions by different users and mixes them into one big, collaborative transaction. This one big transaction then sends the bitcoins mixed from different addresses out to different addresses. Because no one can tell where the spent bitcoins originally came from, the scent of the trail is obfuscated and the participants in the CoinJoin gain better privacy. 

Read more: What an Uptick in ‘Coinjoins’ Says About Bitcoin’s Value Proposition

But it’s not perfect. There are still ways for people analyzing the Bitcoin blockchain (namely blockchain analysis companies) to detect when and where bitcoins are being mixed. 

For one thing, the transaction sizes of mixed coins are much bigger than normal transactions because they contain so many different inputs.

Also telling is the fact they have outputs that are all the same size. “Equal output CoinJoins are very obvious. If someone sees them on the blockchain they can see that this kind of privacy protocol is happening,” Belcher said. 

Why are outputs the same size? If Bob sends 0.8 BTC into the CoinJoin transaction and Alice sends 0.187 BTC and Mary sends 1.2222 BTC, and the resulting outputs are exactly 0.8 BTC, 0.187 BTC and 1.2222 BTC respectively, that coincidence is pretty obvious to anyone who is looking.

In order to preserve privacy, a CoinJoin transaction usually splits the amount of bitcoin dispensed into even pieces, say 0.1 bitcoin. So, if Alice put in 0.3 bitcoin, she will receive three 0.1 pieces sent to three separate addresses that she controls.

Most transactions don’t have a bunch of equal outputs like this. That’s why CoinJoins are easy to detect. 

Indeed, there have been a few instances of cryptocurrency exchanges banning users who have evidently sent their bitcoin through such privacy services.

“They’ll be suspicious. If there’s someone analyzing the blockchain, they’ll see this is a CoinJoin, so they know this person did that. And if they see another transaction, [by comparison] they can see that it’s not a CoinJoin,” Belcher said. 

CoinSwap: an invisibility cloak for transactions

“CoinJoin” and “CoinSwap” have similar names and they both help to preserve privacy, so it’s easy to confuse them. But they’re different, and Belcher argues CoinSwaps “fixes many of the problems of some kinds of CoinJoins” and “is the next step for on-chain bitcoin privacy.”

CoinSwaps can be made to look invisible, Belcher said. If done correctly, a CoinSwap transaction can look just like a vanilla bitcoin transaction. 

In a CoinSwap, it looks like two separate people are sending completely separate transactions. But under the hood, something else completely is happening.

Two parties, say Alice and Bob, execute such a swap. In short, Alice sends some bitcoin to a CoinSwap address. Bob sends the same amount of bitcoin to a separate CoinSwap address. 

If both send the right amount of money over, the coins are “swapped.” The coins Alice sent to the CoinSwap address are sent to a new address owned by Bob, and the coins Bob sent to his own CoinSwap address are sent to a new address owned by Alice. 

‘Teleporting’ Coins

Under the hood, the CoinSwap address, which is responsible for this swapping, is much fancier than a normal bitcoin transaction. It’s a multi-signature transaction, meaning it requires more than one person to sign off on it in order to send the transaction. Usually, these types of transactions stand out on the blockchain since they look different from normal bitcoin transactions. But by including ECDSA-2P cryptography, these multi-signature transactions can be made to look just like normal bitcoin transactions. This is very much Belcher’s plan. 

With ECDSA-2P in place, “Alice sends a CoinSwap to Bob and it just looks like just a normal transaction. But actually the coins have ended up somewhere else completely,” Belcher said. 

This component is important. If all of these transactions look the same, people who aren’t even using CoinSwaps are getting more privacy too. There’s no way to tell if any transaction is a CoinSwap transaction or a normal one, turning bitcoin chain analysis on its head. 

Read more: ‘Financial Surveillance’ or ‘Blockchain Analysis’? Human Rights Foundation Debates Elliptic

Similar technology will expand to the Lightning Network as well, so blockchain watchers can’t tell if any single transaction is a CoinSwap, a Lightning Network transaction or just a normal bitcoin transaction.

“CoinSwap could be said to allow bitcoins to teleport undetectably to anywhere else on the blockchain,” as a description of the technology on the Bitcoin Wiki puts it. For a deeper explanation, check out this post from JoinMarket developer Adam Gibson.

That’s not to say that CoinSwap is perfect, though. The problem with CoinSwap is that it is a much more complicated process to implement than CoinJoin. 

‘As decentralized as possible’

In his mountain of a post, Belcher describes how to turn the idea of CoinSwap into reality.

A key reason CoinSwaps haven’t taken off since Maxwell described them seven years ago is that they’re not as straightforward as CoinJoins. So, Belcher has his work cut out for him in implementing the complexity for the first time. 

His first step was just thinking about the best way to do it, outlining a number of different design considerations in the article making up his plan of attack. For one, he plans to use the Rust programming language, since it’s potentially more secure than other languages.

“I want to make it as decentralized as possible, so there’s no central point of failure that can be switched off or censored,” Belcher said. To meet this goal, he wants the “whole thing” to run over the privacy network Tor, which helps to shield IP addresses, which are kind of like a mailing address for a computer exposing where it is located.

“I think that’s quite necessary for privacy,” he said.

Read more: BTCPay Looks to Anonymize Bitcoin Transactions With PayJoin Integration

Belcher outlines this and various other considerations in his proposal, such as routing and using PayJoin, yet another bitcoin privacy technology, alongside it. Now that his ideas are out in the public, people can comment and make suggestions.

The next step is actually implementing it. Belcher told CoinDesk he hopes to release a minimum viable product in the next six months.

Image: “BallesStrob-4” by MathGoulet is licensed under CC BY-ND 2.0.

Related Stories
CoinDesk

Inside the Craze for Filecoin Crypto Mining in China

6 years 2 months ago

As Filecoin inches closer to a blockchain mainnet launch – after several delays since its $200 million raise in 2017 – investors in China are again speculating heavily on the network’s mining hardware and its token prices. 

Since Protocol Labs, the foundation behind Filecoin, released a “Testnet Incentives” program on June 9 that was scheduled to start in a week, more than a dozen Chinese companies have started selling cloud mining contracts and physical hardware – even though important details like the mining incentive economics on the mainnet are still not finalized.

The sales volume so far on each of these companies can range from half a million to tens of millions of dollars, according to self-reported data on these platforms seen by CoinDesk and interviews with several mining hardware manufacturers.

Related: Ferrari, McLaren and $15M in Crypto Seized as Chinese Police Bust Arbitrage Scam

Protocol Labs rolled out Filecoin’s testnet in December 2019. But tokens mined on the testnet so far do not represent the real Filecoin that can circulate when the mainnet goes live. Further, the mining incentive economics on the testnet also do not represent how the final block rewards will be available on the mainnet.

Still, data from Filecoin’s testnet blockchain explorers show that currently eight out of the top 10 miners with the largest effective mining power on the testnet are Chinese miners. 

These eight miners have around 15 petabytes (PB) of effective storage mining power, accounting for more than 85% of the testnet’s total of 17.86 PB. For context, 1 petabyte of hard drive storage = 1,000 terabytes (TB) = 1 million gigabytes (GB).

The Filecoin craze in China may be largely related to the long-standing popularity of crypto mining in the country in general, which is home to around 65% of the computing power on Bitcoin by estimation. Plus, there has been much hype in China about Filecoin mining since 2018, with companies touting all sorts of hardware when the network was still in a development mode.

Related: Hong Kong’s National Security Law Could Threaten Local Crypto Brokerages

Read more: Bitcoin Miners Saw 23% Revenue Drop in June

“Crypto mining has always been a popular thing in China,” said Andy Tian, co-founder of 1475, one of the many Filecoin mining hardware manufacturers that’s backed by notable Chinese VCs such as Fenbushi and Hashkey Capital. 

“Even though Filecoin’s mining process is much more complex technologically, the idea of mining with hard drives instead of specialized machines like a Bitcoin ASIC miner may actually be much easier for retail people to understand,” he said.

Meanwhile, according to Feixiaohao, a Chinese service that is comparable to CoinMarketCap or CoinGecko, nearly 50 Chinese crypto exchanges – mostly little-known ones along with some more notable ones including Gate.io and Biki – have listed trading pairs for Filecoin futures against USDT.

Since Filecoin’s mainnet is not yet live, the token traded on these exchanges is merely a future promise, with no clear visibility on how or when they can be settled when the network goes live.

Nevertheless, the total self-reported 24-hour trading volume on these exchanges on July 8 reached around $100 million, Feixiaohao data shows. And the prices for Filecoin futures have jumped up from around $11 in early June to around $28 on July 8 and are now down to $18 at press time.

Uncertain returns

In an Ask Me Anything hosted on June 25, Juan Benet, co-founder and CEO of Protocol Labs, confirmed the Testnet Incentives program will start on July 20 now that the testnet has been running for months, although it’s still unclear how exactly the economic incentives for Filecoin would work. But that could be delayed.

Asked when miners should expect to “get the detailed parameters for Filecoin’s crypto economic constructions,” Benet said Protocol Labs is finalizing the parameters, which will continue to evolve. 

“We are looking to solidify more final parameters in late July. Let us know if you have more questions on the structural mechanisms themselves,” he told community members.

The incentive program invites miners to compete for 4 million Filecoin tokens that would be mined on the testnet, but would only be distributed after the mainnet goes live. The goal is to do a stress test for the network’s infrastructure ahead of its expected mainnet launch in August if there’s no further delay.

However, since July 11, the team have started gauging feedback from the community within its official Slack channel in terms of postponing the Testnet Incentives as well as the mainnet by potentially another one to two weeks.

Simply owning more hard drive storage does not necessarily equal more effective mining power on the network.

Although Filecoin testnet explorers currently show information about the total mined Filecoin at the testnet as well as each block’s reward, these numbers are at most a reference point as the finalized parameters are yet to be determined on the mainnet.

Therefore, as of this stage, investors buying either future-promised cloud mining contracts or physical hardware can’t be certain about the payback period for their investment with no clear equation to calculate a corresponding mining result on the mainnet.

“For now, [Filecoin] cloud mining is still a pseudo-proposition before all the incentive economics are finalized,” Tian said.

He said 1475 sells mining solutions and physical hardware as a whole but these machines could cost more than $30,000 per set in order to gain effective mining power. Partners who bought from them further sell computing power for around $300 per TB to retailers in the form of cloud mining contracts.

Mars Finance, a Chinese crypto media company invested in by Binance, for example, rolled out a cloud mining sales platform dubbed Mcloud.io. Apart from bitcoin mining contracts, it advertises several types of Filecoin cloud contracts, which tout an annualized rate of return of as much as 300% but do not indicate how much Filecoin can be mined with each TB of bought storage.

Buying in

Nevertheless, it appears these looming questions have not held back speculation in China, especially during a time when the bitcoin and cryptocurrency market have remained relatively static.

6block, one mining pool based in China, told CoinDesk it estimates multiple Filecoin mining pools have accumulated at least several hundred million yuan (over $15 million) worth of hardware and software for self-mining and selling to investors. 

Some larger bitcoin mining farms in China, like RRMine, also started buying hardware to prepare for Filecoin mining and selling cloud computing contracts based on these hardware. The firm said it sold out more than $15 million worth of contracts within minutes in two of the four sale phases that started in June.

Even some Chinese crypto exchanges, such as BKEX and ZB, also partnered with Filecoin miner makers and claimed on their website that Filecoin cloud mining contracts worth over $1 million in USDT were sold out within minutes last month.

But there’s another nuance: Simply owning more hard drive storage does not necessarily equal more effective mining power on the network. This logic is different from bitcoin mining.

In bitcoin mining, at the current difficulty level, one terahash per second (TH/s) of hash rate is expected to generate roughly 0.000008 BTC in 24 hours. The more TH/s there is, the more bitcoin a miner should be able to produce proportionally.

Read more: Filecoin Is Mailing Out Hard Drives of Climate Data to Kick-Start Its File-Storage Network

But in Filecoin, a miner’s effective mining power depends on the volume of sealed data on a hard drive, not the total volume of a hard drive.

To seal data into a hard drive, a Filecoin miner still needs processing power, i.e. a CPU or GPU as well as ram. More powerful processors with more optimized software can seal data into a hard drive more quickly, so a miner can consolidate more effective mining power faster in a given day. 

That resembles the idea of a customized personal computer with no exact specification standard, although Protocol Labs has a recommended specification for a starter.

“A huge volume of hard drive storage alone is not the point,” Tian of 1475 said. “What matters is the combination of hardware, i.e. core processors, ram, storage, and software optimization to determine the acceleration speed for you to accumulate effective mining power as time goes on.”

But as of this stage, there appears to be no transparent way at the network level for retail investors to see how much of their purchased storage hard drive is actually effective mining power. 

Delays

Protocol Labs, which is headquartered in the U.S., was behind Filecoin’s 2017 initial coin offering, which raised a staggering $200 million. 

That was in addition to a $50 million private investment raise backed by notable VCs including Sequoia, Andreessen Horowitz and Union Square Ventures. CoinDesk’s parent company Digital Currency Group also invested in Protocol Labs.

The goal for Filecoin is to build a distributed storage network with token rewards to incentivize hosting storage as a way to push for a wider adoption.

Colin Wang at The Force Partners, which has been mining Bitcoin for three years and followed Filecoin developments since 2018, also said that the idea of mining with a hard drive is more intuitive for ordinary investors to understand, although in reality the mining hardware is more than just a hard drive.

“Since 2018, there has been some Filecoin-related media coverage in China and so many machine sales companies have also been established,” he said.

But back then, Protocol Labs was still far away from rolling out the testnet – so there was a great level of uncertainty regarding a suitable mining hardware specification. 

As the mainnet launch kept investors waiting, Wang said some Chinese companies had taken advantage of this information gap and used misleading claims to sell substandard machines to unwitting investors in China. 

Wang went so far as to estimate that “uncodified mining machines may have sold for more than 30 billions yuan [$4 billion] in China” over the past two years.  

Though an actual number may be hard to verify, such activities went rampant to the point that Protocol Labs issued an anti-fraud statement in December 2018, warning its Hong Kong and mainland China communities that it had no affiliation with any such miner sales and that investors should be wary of potential risks.

In one instance, local Chinese media reported in March 2019 that one self-claimed Filecoin hardware manufacturer allegedly exploited more than hundreds of people by an estimated $300 million for their fake Filecoin miners through an alleged multi-layer marketing scheme.

After rounds of delay, Protocol Labs said in September 2019 that the testnet launch would be live around December 2019 and the mainnet will be rolled out around Q1 2020. 

The testnet did go live as promised, but the mainnet was once again delayed and is now expected to launch in August 2020.

Jaspreet Kalra contributed to reporting

Related Stories
CoinDesk

Attempted 51% Attack on Bitcoin Gold Was Thwarted, Developers Say

6 years 2 months ago

Bitcoin gold’s developer team announced Friday night that it foiled a 51 percent attack that it had known was coming for over a week.

  • Bitcoin gold alerted exchanges and mining pools of the attack on July 2, and posted a notice to the community on July 10 noting that it was time for “everyone else to upgrade their nodes.”
  • The team only revealed the attempted network takeover to the public after the unknown attacker, which had been mining blocks since July 1, released 1300 blocks late Friday night.
  • Developers had circulated an update that featured a checkpoint at block 640650 on July 2. That checkpoint prevented the attacker’s chain from taking over the honest chain, they said Friday.
  • “The majority of honest pool hashpower continues to mine on the honest chain,” website maintainer CryptoDJ said in the post. 
  • According to the cryptocurrency’s official website, there are only 108 bitcoin gold nodes which are in the world. Nearly 30% of them are in Germany. Bitcoin Gold communications director Edward Iskra told CoinDesk that these only represent immediately responsive nodes, and not ones that don’t allow incoming connections.
  • The price seems to have been unaffected by the attempted attack, trading between $9 and $10 since Tuesday, according to Bitfinex

UPDATE (July 11, 2020, 04:23 UTC): This article has been updated with additional information.

Related Stories
CoinDesk

Attempted 51% Attack on Bitcoin Gold Was Thwarted, Developers Say

6 years 2 months ago

Bitcoin gold’s developer team announced Friday night that it foiled a 51 percent attack that it had known was coming for over a week.

  • Bitcoin gold alerted exchanges and mining pools of the attack on July 2, and posted a notice to the community on July 10 noting that it was time for “everyone else to upgrade their nodes.”
  • The team only revealed the attempted network takeover to the public after the unknown attacker, which had been mining blocks since July 1, released 1300 blocks late Friday night.
  • Developers had circulated an update that featured a checkpoint at block 640650 on July 2. That checkpoint prevented the attacker’s chain from taking over the honest chain, they said Friday.
  • “The majority of honest pool hashpower continues to mine on the honest chain,” website maintainer CryptoDJ said in the post. 
  • According to the cryptocurrency’s official website, there are only 108 bitcoin gold nodes which are in the world. Nearly 30% of them are in Germany. Bitcoin Gold communications director Edward Iskra told CoinDesk that these only represent immediately responsive nodes, and not ones that don’t allow incoming connections.
  • The price seems to have been unaffected by the attempted attack, trading between $9 and $10 since Tuesday, according to Bitfinex

UPDATE (July 11, 2020, 04:23 UTC): This article has been updated with additional information.

Related Stories
CoinDesk

Telegram’s Defeat Isn’t ‘Binding’ in Kik Case, Judge Tells SEC

6 years 2 months ago

Kik’s proverbial day in court may last a lot longer than Telegram’s.

That’s the takeaway from a federal judge’s response to the U.S. Securities and Exchange Commission during a hearing in its case against messaging platform Kik over the company’s 2017 initial coin offering, which raised $100 million. 

Judge Alvin K. Hellerstein, senior judge of the United States District Court for the Southern District of New York, rejected the SEC’s argument that the token sale was similar to that of Telegram, another messaging company which raised money for a blockchain project, and should face a similar outcome. The SEC won a preliminary injunction against Telegram this year, ordering the company to halt the issuance of its gram tokens, and the firm later discontinued the TON project. 

Related: Telegram Agrees to Pay $18.5M Penalty in SEC Settlement Over Failed TON Offering

“I think that there is no binding precedent one way or another,” Hellerstein said.

Nearly 200 people dialed in to listen to Thursday’s hearing, which took place just over a year after the SEC filed suit. Both the SEC and Kik have filed for summary judgment, meaning they hope to end the lawsuit before it reaches a jury trial, either by a ruling that Kik violated securities laws (the SEC’s argument) or that it didn’t (Kik’s argument). It is now up to the judge to either grant a judgment or let the trial proceed, unless the parties settle.

When SEC counsel Stephan Schlegelmilch invoked the Telegram case as a very similar token offering to Kik’s, Judge Hellerstein interrupted. He noted that Judge P. Kevin Castel, who presided over the Telegram case, only found that there was a “likelihood of success” in the preliminary injunction ruling. 

“Now with you, it’s different,” he told Schlegelmilch. “You’re asking for summary judgment. I understand that Judge Castel’s decision has a lot of reasoning that is comfortable to you. [It’s a] very well-reasoned decision characteristic of Judge Castel, but I think our issue is different.”

Related: Alleged Shopin ICO Fraudster Pays $450K Fine in Ether

See also: Telegram Responds to SEC: Gram Tokens Are Not Securities

Common enterprise

The hearing quickly turned into a two-hour-long debate on the application of the Howey Test, a U.S. Supreme Court case used as a precedent to determine if a financial instrument is a security. 

Schlegelmilch said the case against Kik rested on a single claim: that the entirety of Kik’s offering of 1 trillion kin was an unregistered securities sale that violated Section 5 of the Securities Act. The token sale, the SEC said, was an investment contract where the investor expected to profit off the efforts of others – in this case, Kik’s promise to build an ecosystem for the use of its kin token. 

“Here, the economic reality is that Kik engaged in an old-fashioned capital raise using a new-fangled device, the blockchain,” Schlegelmilch said. 

Shlegelmilch went on to allege that Kik continually promised it would give the kin token value, referencing Kik’s 2017 white paper, which laid out its plans for kin. Kik allegedly told investors it would “build fundamental value for the new currency by integrating kin into its chat app,” Schlegelmilch said. 

“This was a thing that had no value whatsoever. What it had was Kik’s promises to give it value. And that is a quintessential security, that is a quintessential investment contract and why this matters, Your Honor,” Schlegelmich said. 

One element of Kik’s defense is similar to that of Telegram, which insisted its gram token offering for the TON project was a currency and not a security. 

Despite his disagreement with the SEC over the supposed similarities with the Telegram case, Judge Hellerstein sounded unconvinced by Kik’s argument the initial coin offering (ICO) did not violate securities laws because its token, known as kin, is used as a currency by its app users. 

“I can’t see the difference between that and a stock,” Judge Hellerstein said, responding to Kik’s defense that under the Howey Test the kin offering did not qualify as a common enterprise where the purchaser was led to expect profits from the efforts of the promoter or a third party.  

Kik’s defense

Kik, represented by Patrick Gibbs of Cooley LLP, argued there were no contractual obligations between Kik and kin purchasers, and that if one owner sold his kin for profit, that profit is not shared with other owners. 

Judge Hellerstein pushed back on that statement. Any shareholder in a given company can “sell that share at a price and keep the profit for themselves,” he said. “That’s not what determines whether there’s a common enterprise.”

Gibbs said there were a slew of cases that showed “where the buyer has control over the resale and doesn’t share profits for resale with anyone else, there is not a common enterprise,” and that the SEC had not cited cases that applied to the current situation.

“The SEC has not cited a single case, not one where the alleged profit was going to come from capital appreciation only, resale of an asset at a higher price,” Gibbs said. “They’ve cited to you a bunch of cases … where the profits take the form of a share of a stream of profits or dividends that are paid out over time for an ongoing business.”

See also: A ‘Howey Test’ for Blockchain? Why the SEC’s ICO Guidance Isn’t Enough

Gibbs also reiterated Kik’s position that it could not have known at the time of sale that kin would become a security. 

“One of the cases that we think lays out a very useful framework for thinking about when the sale of an asset becomes an investment contract, and therefore security, is one that cited all of our papers,” he said, referring to Rodriguez vs. Banco Central Corporation, heard almost three decades ago, where swamp land was sold to unsuspecting investors on the alleged promise that the area was ripe for future development. The land sales were not deemed securities. 

Kik General Counsel Eileen Lyon told CoinDesk the legal team presented its arguments well, and the company is awaiting the judge’s decision. 

“Judging by the numbers of people who dialed in for the hearing, this continues to be an important case for our industry,” Lyon said.

Related Stories
CoinDesk

Telegram’s Defeat Isn’t ‘Binding’ in Kik Case, Judge Tells SEC

6 years 2 months ago

Kik’s proverbial day in court may last a lot longer than Telegram’s.

That’s the takeaway from a federal judge’s response to the U.S. Securities and Exchange Commission during a hearing in its case against messaging platform Kik over the company’s 2017 initial coin offering, which raised $100 million. 

Judge Alvin K. Hellerstein, senior judge of the United States District Court for the Southern District of New York, rejected the SEC’s argument that the token sale was similar to that of Telegram, another messaging company which raised money for a blockchain project, and should face a similar outcome. The SEC won a preliminary injunction against Telegram this year, ordering the company to halt the issuance of its gram tokens, and the firm later discontinued the TON project. 

Related: Telegram Agrees to Pay $18.5M Penalty in SEC Settlement Over Failed TON Offering

“I think that there is no binding precedent one way or another,” Hellerstein said.

Nearly 200 people dialed in to listen to Thursday’s hearing, which took place just over a year after the SEC filed suit. Both the SEC and Kik have filed for summary judgment, meaning they hope to end the lawsuit before it reaches a jury trial, either by a ruling that Kik violated securities laws (the SEC’s argument) or that it didn’t (Kik’s argument). It is now up to the judge to either grant a judgment or let the trial proceed, unless the parties settle.

When SEC counsel Stephan Schlegelmilch invoked the Telegram case as a very similar token offering to Kik’s, Judge Hellerstein interrupted. He noted that Judge P. Kevin Castel, who presided over the Telegram case, only found that there was a “likelihood of success” in the preliminary injunction ruling. 

“Now with you, it’s different,” he told Schlegelmilch. “You’re asking for summary judgment. I understand that Judge Castel’s decision has a lot of reasoning that is comfortable to you. [It’s a] very well-reasoned decision characteristic of Judge Castel, but I think our issue is different.”

Related: Alleged Shopin ICO Fraudster Pays $450K Fine in Ether

See also: Telegram Responds to SEC: Gram Tokens Are Not Securities

Common enterprise

The hearing quickly turned into a two-hour-long debate on the application of the Howey Test, a U.S. Supreme Court case used as a precedent to determine if a financial instrument is a security. 

Schlegelmilch said the case against Kik rested on a single claim: that the entirety of Kik’s offering of 1 trillion kin was an unregistered securities sale that violated Section 5 of the Securities Act. The token sale, the SEC said, was an investment contract where the investor expected to profit off the efforts of others – in this case, Kik’s promise to build an ecosystem for the use of its kin token. 

“Here, the economic reality is that Kik engaged in an old-fashioned capital raise using a new-fangled device, the blockchain,” Schlegelmilch said. 

Shlegelmilch went on to allege that Kik continually promised it would give the kin token value, referencing Kik’s 2017 white paper, which laid out its plans for kin. Kik allegedly told investors it would “build fundamental value for the new currency by integrating kin into its chat app,” Schlegelmilch said. 

“This was a thing that had no value whatsoever. What it had was Kik’s promises to give it value. And that is a quintessential security, that is a quintessential investment contract and why this matters, Your Honor,” Schlegelmich said. 

One element of Kik’s defense is similar to that of Telegram, which insisted its gram token offering for the TON project was a currency and not a security. 

Despite his disagreement with the SEC over the supposed similarities with the Telegram case, Judge Hellerstein sounded unconvinced by Kik’s argument the initial coin offering (ICO) did not violate securities laws because its token, known as kin, is used as a currency by its app users. 

“I can’t see the difference between that and a stock,” Judge Hellerstein said, responding to Kik’s defense that under the Howey Test the kin offering did not qualify as a common enterprise where the purchaser was led to expect profits from the efforts of the promoter or a third party.  

Kik’s defense

Kik, represented by Patrick Gibbs of Cooley LLP, argued there were no contractual obligations between Kik and kin purchasers, and that if one owner sold his kin for profit, that profit is not shared with other owners. 

Judge Hellerstein pushed back on that statement. Any shareholder in a given company can “sell that share at a price and keep the profit for themselves,” he said. “That’s not what determines whether there’s a common enterprise.”

Gibbs said there were a slew of cases that showed “where the buyer has control over the resale and doesn’t share profits for resale with anyone else, there is not a common enterprise,” and that the SEC had not cited cases that applied to the current situation.

“The SEC has not cited a single case, not one where the alleged profit was going to come from capital appreciation only, resale of an asset at a higher price,” Gibbs said. “They’ve cited to you a bunch of cases … where the profits take the form of a share of a stream of profits or dividends that are paid out over time for an ongoing business.”

See also: A ‘Howey Test’ for Blockchain? Why the SEC’s ICO Guidance Isn’t Enough

Gibbs also reiterated Kik’s position that it could not have known at the time of sale that kin would become a security. 

“One of the cases that we think lays out a very useful framework for thinking about when the sale of an asset becomes an investment contract, and therefore security, is one that cited all of our papers,” he said, referring to Rodriguez vs. Banco Central Corporation, heard almost three decades ago, where swamp land was sold to unsuspecting investors on the alleged promise that the area was ripe for future development. The land sales were not deemed securities. 

Kik General Counsel Eileen Lyon told CoinDesk the legal team presented its arguments well, and the company is awaiting the judge’s decision. 

“Judging by the numbers of people who dialed in for the hearing, this continues to be an important case for our industry,” Lyon said..

Related Stories
CoinDesk

Market Wrap: Traders Buy the Dip and Bitcoin Holds at $9,200

6 years 2 months ago

A small bitcoin dip down to $9,100 recovered, but traders are unsure about further price appreciation.

  • Bitcoin (BTC) trading around $9,240 as of 20:00 UTC (4 p.m. ET), gaining 0.25% over the previous 24 hours.
  • Bitcoin’s 24-hour range: $9,118-$9,245
  • BTC below 10-day and 50-day moving average, a bearish signal for market technicians.

The market at $9,200 per bitcoin erased gains earlier in the week when the world’s oldest cryptocurrency popped to $9,400 Wednesday. “Two days ago, bitcoin rallied 1.9% then dropped 2.1% and is now flat. Just another failed breakout,” said Elie Le Rest, partner at quantitative trading firm ExoAlpha. Still, traders buying when prices dip isn’t providing enough momentum to significantly move the market higher, Le Rest added. “There’s less and less amplitude to move, so we should see in the next couple of days how this resolves.”

Several traders pointed to $9,400, where momentum might turn into a bullish market. “The price of bitcoin again returned to the range of $9,000-$9,200 after the asset again failed to pass a key level at $9,392,” said Constatin Kogan, a partner at cryptocurrency fund BitBull Capital. Indeed, since the start of July bitcoin has struggled to break out of $9,000-$9,200 territory. 

Related: Bitcoin App Bottlepay Is Back From the Dead With a New Lightning App

Josh Rager, a trader and adviser of crypto brokerage LevelInvest, says it will be hard to get back to Wednesday’s $9,400 price range for the time being. “I think bitcoin drops short of $9,400 to make another lower high on the trend,” he said.

However, bets in the options market overwhelmingly favor bitcoin higher than $9,200, with options on $11,250 per BTC especially popular.

Nonetheless, options volumes continued to trend down, changing the trader profile, noted Vishal Shah, founder of Alpha5. “This is only traders that play options on the high-end of the risk spectrum,” Shah said. 

Read More: Exchanges See Drop in Volumes as Bitcoin Volatility Approaches 2020 Low

Related: Bitcoin Reaches Record High Correlation to S&P 500

ExoAlpha’s Le Rest predicted a wide range where price might head into the weekend and beyond. “We’re pretty neutral as it could really go both ways – up to $9,450 on way to tackle $10,000 once again, or down to $8,200,” he said. 

Bitcoin locked in DeFi up 200%

The second-largest cryptocurrency by market capitalization, ether (ETH), was flat Friday, trading around $239 and in the red 0.10% in 24 hours as of 20:00 UTC (4:00 p.m. ET). Ether is up 84% in 2020, outperforming bitcoin’s 28% year-to-date gains. 

The amount of bitcoin on DeFi, which mostly runs on the Ethereum network, has risen from 5,000 to 15,000 BTC in the past month. That is a 200% increase, according to data aggregator DeFi Pulse. 

By locking bitcoin in DeFi, investors are able to earn a reward, or “yield,” without having to trade into another asset such as ether. In July’s low spot exchange volume environment, traders might be increasingly locking crypto rather than trading it. 

Read more: Nearly $60M in Bitcoin Moved to Ethereum in June

Other markets

Digital assets on the CoinDesk 20 are mixed Friday. Notable winners as of 20:00 UTC (4:00 p.m. ET): 

Read More: Kyber Token’s Eightfold Increase Reveals Bet on Future

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

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

Equities:

Read More: Coinbase Plans First-Ever Investor Day Amid Talk It May Go Public

Commodities: 

  • Oil is up 2.2%. Price per barrel of West Texas Intermediate crude: $40.49.
  • Gold is still around $1,800 Friday, flat in the red 0.10% at $1,799 per ounce.

Read More: A Rare Glimpse Into How Crypto Is Really Used in Venezuela

Treasurys:

  • U.S. Treasury bonds were mixed Friday. Yields, which move in the opposite direction as price, were up most on the two-year, in the green 2.9%.

Read More: The Fed’s Declining Balance Sheet Is Bearish for Bitcoin. Or Is It?

Related Stories
CoinDesk

Market Wrap: Traders Buy the Dip and Bitcoin Holds at $9,200

6 years 2 months ago

A small bitcoin dip down to $9,100 recovered, but traders are unsure about further price appreciation.

  • Bitcoin (BTC) trading around $9,240 as of 20:00 UTC (4 p.m. ET), gaining 0.25% over the previous 24 hours.
  • Bitcoin’s 24-hour range: $9,118-$9,245
  • BTC below 10-day and 50-day moving average, a bearish signal for market technicians.

The market at $9,200 per bitcoin erased gains earlier in the week when the world’s oldest cryptocurrency popped to $9,400 Wednesday. “Two days ago, bitcoin rallied 1.9% then dropped 2.1% and is now flat. Just another failed breakout,” said Elie Le Rest, partner at quantitative trading firm ExoAlpha. Still, traders buying when prices dip isn’t providing enough momentum to significantly move the market higher, Le Rest added. “There’s less and less amplitude to move, so we should see in the next couple of days how this resolves.”

Several traders pointed to $9,400, where momentum might turn into a bullish market. “The price of bitcoin again returned to the range of $9,000-$9,200 after the asset again failed to pass a key level at $9,392,” said Constatin Kogan, a partner at cryptocurrency fund BitBull Capital. Indeed, since the start of July bitcoin has struggled to break out of $9,000-$9,200 territory. 

Related: Bitcoin App Bottlepay Is Back From the Dead With a New Lightning App

Josh Rager, a trader and adviser of crypto brokerage LevelInvest, says it will be hard to get back to Wednesday’s $9,400 price range for the time being. “I think bitcoin drops short of $9,400 to make another lower high on the trend,” he said.

However, bets in the options market overwhelmingly favor bitcoin higher than $9,200, with options on $11,250 per BTC especially popular.

Nonetheless, options volumes continued to trend down, changing the trader profile, noted Vishal Shah, founder of Alpha5. “This is only traders that play options on the high-end of the risk spectrum,” Shah said. 

Read More: Exchanges See Drop in Volumes as Bitcoin Volatility Approaches 2020 Low

Related: Bitcoin Reaches Record High Correlation to S&P 500

ExoAlpha’s Le Rest predicted a wide range where price might head into the weekend and beyond. “We’re pretty neutral as it could really go both ways – up to $9,450 on way to tackle $10,000 once again, or down to $8,200,” he said. 

Bitcoin locked in DeFi up 200%

The second-largest cryptocurrency by market capitalization, ether (ETH), was flat Friday, trading around $239 and in the red 0.10% in 24 hours as of 20:00 UTC (4:00 p.m. ET). Ether is up 84% in 2020, outperforming bitcoin’s 28% year-to-date gains. 

The amount of bitcoin on DeFi, which mostly runs on the Ethereum network, has risen from 5,000 to 15,000 BTC in the past month. That is a 200% increase, according to data aggregator DeFi Pulse. 

By locking bitcoin in DeFi, investors are able to earn a reward, or “yield,” without having to trade into another asset such as ether. In July’s low spot exchange volume environment, traders might be increasingly locking crypto rather than trading it. 

Read more: Nearly $60M in Bitcoin Moved to Ethereum in June

Other markets

Digital assets on the CoinDesk 20 are mixed Friday. Notable winners as of 20:00 UTC (4:00 p.m. ET): 

Read More: Kyber Token’s Eightfold Increase Reveals Bet on Future

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

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

Equities:

Read More: Coinbase Plans First-Ever Investor Day Amid Talk It May Go Public

Commodities: 

  • Oil is up 2.2%. Price per barrel of West Texas Intermediate crude: $40.49.
  • Gold is still around $1,800 Friday, flat in the red 0.10% at $1,799 per ounce.

Read More: A Rare Glimpse Into How Crypto Is Really Used in Venezuela

Treasurys:

  • U.S. Treasury bonds were mixed Friday. Yields, which move in the opposite direction as price, were up most on the two-year, in the green 2.9%.

Read More: The Fed’s Declining Balance Sheet Is Bearish for Bitcoin. Or Is It?

Related Stories
CoinDesk

You Can’t Fight Outrage Culture With More Outrage, Feat. Michael Krieger

6 years 2 months ago

For a decade, Michael Krieger’s Liberty Blitzkrieg has been an essential alternative financial and cultural voice. As outrage culture ramps up, here’s why it’s ending.

For more episodes and free early access before our regular 3 p.m. Eastern time releases, subscribe with Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, iHeartRadio or RSS.

This episode is sponsored by Bitstamp and Crypto.com.

Related: The Mixed Signals Economy: The Breakdown Weekly Recap

For more episodes and free early access before our regular 3 p.m. Eastern time releases, subscribe with Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, iHeartRadio or RSS.

Today on the Brief:
  • Hong Kong re-closes schools based on COVID-19 growth
  • Coinbase explores direct U.S. exchange listing
  • China starts selling stock, easing massive rally

See also: Why the Robinhood Revolution Is the Future of Finance, Feat. Jill Carlson

Today’s Interview: Michael Krieger

Our main conversation is with Liberty Blitzkrieg creator and editor Michael Krieger. Michael announced just before recording that he is done publishing on the LB site. He and NLW discuss:

  • How Michael became disaffected while working on Wall Street during the Great Financial Crisis
  • How Zero Hedge amplified Liberty Blitzkrieg and sent Michael on a decade-long writing path
  • How Michael discovered bitcoin and the bitcoin community in 2012
  • Why social media platforms need to be regulated with the principles of the First Amendment 
  • How all political parties use division to stay in power 
  • How outrage culture has become endemic, commodified and co-opted by existing power 
  • Why the only option to fight outrage culture is to opt out

Find our guest online:

Related: Bitcoin News Roundup for July 10, 2020

Website: libertyblitzkrieg.com

Twitter: @LibertyBlitz

For more episodes and free early access before our regular 3 p.m. Eastern time releases, subscribe with Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, iHeartRadio or RSS.

Related Stories
CoinDesk

You Can’t Fight Outrage Culture With More Outrage, Feat. Michael Krieger

6 years 2 months ago

For a decade, Michael Krieger’s Liberty Blitzkrieg has been an essential alternative financial and cultural voice. As outrage culture ramps up, here’s why it’s ending.

For more episodes and free early access before our regular 3 p.m. Eastern time releases, subscribe with Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, iHeartRadio or RSS.

This episode is sponsored by Bitstamp and Crypto.com.

Related: Bitcoin News Roundup for July 10, 2020

For more episodes and free early access before our regular 3 p.m. Eastern time releases, subscribe with Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, iHeartRadio or RSS.

Today on the Brief:
  • Hong Kong re-closes schools based on COVID-19 growth
  • Coinbase explores direct U.S. exchange listing
  • China starts selling stock, easing massive rally

See also: Why the Robinhood Revolution Is the Future of Finance, Feat. Jill Carlson

Today’s Interview: Michael Krieger

Our main conversation is with Liberty Blitzkrieg creator and editor Michael Krieger. Michael announced just before recording that he is done publishing on the LB site. He and NLW discuss:

  • How Michael became disaffected while working on Wall Street during the Great Financial Crisis
  • How Zero Hedge amplified Liberty Blitzkrieg and sent Michael on a decade-long writing path
  • How Michael discovered bitcoin and the bitcoin community in 2012
  • Why social media platforms need to be regulated with the principles of the First Amendment 
  • How all political parties use division to stay in power 
  • How outrage culture has become endemic, commodified and co-opted by existing power 
  • Why the only option to fight outrage culture is to opt out

Find our guest online:

Related: Inequality, Social Chaos, Bankruptcy Rallies: The Best Insights From FinTwit June 2020

Website: libertyblitzkrieg.com

Twitter: @LibertyBlitz

For more episodes and free early access before our regular 3 p.m. Eastern time releases, subscribe with Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, iHeartRadio or RSS.

Related Stories
CoinDesk

Bitcoin App Bottlepay Is Back From the Dead With a New Lightning App

6 years 2 months ago

The social payments app Bottlepay (née Bottle Pay) aims to relaunch in the next few weeks, after shuttering due to regulations in December 2019. 

After restructuring the bitcoin wallet product to fit Europe’s anti-money laundering directive (AMLD5), the British startup is offering an exchange wallet with social features on Reddit, Twitter and Discord. Bottlepay co-founder Pete Cheyne said there are over 1,000 people on the waitlist for the closed beta relaunch in August. 

“Because we’re moving to an app-native product there’s a lot more we can do,” Cheyne said. “We’re also adding in the ability to have scheduled payments to buy more bitcoin.”

Related: Market Wrap: Traders Buy the Dip and Bitcoin Holds at $9,200

Read more: Bitcoin App Bottle Pay Shuts Down Over Impending EU Money-Laundering Laws

Square’s Cash App and others already offer this feature in the United States, but in Europe, where Bottlepay is focused, there’s even an added feature that forwards the bitcoin to another wallet address if desired. This means users may choose custodial or non-custodial services. 

“Lightning works in the background, without users having to manage channels,” Cheyne added. “There will be a small fee for exchanging between fiat and bitcoin, and vice versa. … There will also be tiers because people are interested in our app for different use cases.”

Bottlepay CEO Mark Webster said his team of 11 employees has “constant funding” from their angel investors, who previously traded equity for $2 million in 2019. Webster added the company won’t support tokens in the near future, although it might someday. This year it is all about bitcoin. 

Related: Bitcoin Reaches Record High Correlation to S&P 500

“I think Lightning is at the core of the strategy,” Webster said, referring to the bitcoin scaling solution. “As consumer demand increases we can open more channels.”

Read more: WikiLeaks Shop Now Accepts Bitcoin Lightning Payments

As part of this shift, Webster said he is hiring, not tightening his belt for the recession, hoping to grow the team to roughly 35 people by 2021. Cheyne said several of the hires so far have been for the marketing and legal teams, which did a vast restructuring of the product. The added hassle of know-your-customer requirements also created an opportunity for wallet features.

“You can store a fiat balance,” Cheyne said. “Scan a Lightning code and pay that from your pound or euro balance.”

For now, Bottlepay will only open the beta program to users in Europe. But Webster said the company hopes to open the beta to Americans and reactivate Telegram options by 2021. When it does, it may be one of the few fiat-friendly wallets that leverages Lightning without any hassle for the user. In some ways, this is comparable to the American Lightning-powered consumer app Strike. 

“This time away has been valuable for the company to refine our strategy,” Webster said. “We’re still extremely focused on Lightning.” 

Related Stories
CoinDesk

Bitcoin App Bottlepay Is Back From the Dead With a New Lightning App

6 years 2 months ago

The social payments app Bottlepay (née Bottle Pay) aims to relaunch in the next few weeks, after shuttering due to regulations in December 2019. 

After restructuring the bitcoin wallet product to fit Europe’s anti-money laundering directive (AMLD5), the British startup is offering an exchange wallet with social features on Reddit, Twitter and Discord. Bottlepay co-founder Pete Cheyne said there are over 1,000 people on the waitlist for the closed beta relaunch in August. 

“Because we’re moving to an app-native product there’s a lot more we can do,” Cheyne said. “We’re also adding in the ability to have scheduled payments to buy more bitcoin.”

Related: Market Wrap: Traders Buy the Dip and Bitcoin Holds at $9,200

Read more: Bitcoin App Bottle Pay Shuts Down Over Impending EU Money-Laundering Laws

Square’s Cash App and others already offer this feature in the United States, but in Europe, where Bottlepay is focused, there’s even an added feature that forwards the bitcoin to another wallet address if desired. This means users may choose custodial or non-custodial services. 

“Lightning works in the background, without users having to manage channels,” Cheyne added. “There will be a small fee for exchanging between fiat and bitcoin, and vice versa. … There will also be tiers because people are interested in our app for different use cases.”

Bottlepay CEO Mark Webster said his team of 11 employees has “constant funding” from their angel investors, who previously traded equity for $2 million in 2019. Webster added the company won’t support tokens in the near future, although it might someday. This year it is all about bitcoin. 

Related: Bitcoin Reaches Record High Correlation to S&P 500

“I think Lightning is at the core of the strategy,” Webster said, referring to the bitcoin scaling solution. “As consumer demand increases we can open more channels.”

Read more: WikiLeaks Shop Now Accepts Bitcoin Lightning Payments

As part of this shift, Webster said he is hiring, not tightening his belt for the recession, hoping to grow the team to roughly 35 people by 2021. Cheyne said several of the hires so far have been for the marketing and legal teams, which did a vast restructuring of the product. The added hassle of know-your-customer requirements also created an opportunity for wallet features.

“You can store a fiat balance,” Cheyne said. “Scan a Lightning code and pay that from your pound or euro balance.”

For now, Bottlepay will only open the beta program to users in Europe. But Webster said the company hopes to open the beta to Americans and reactivate Telegram options by 2021. When it does, it may be one of the few fiat-friendly wallets that leverages Lightning without any hassle for the user. In some ways, this is comparable to the American Lightning-powered consumer app Strike. 

“This time away has been valuable for the company to refine our strategy,” Webster said. “We’re still extremely focused on Lightning.” 

Related Stories
CoinDesk

Bitcoin Reaches Record High Correlation to S&P 500

6 years 2 months ago

Bitcoin’s one-year correlation to the Standard & Poor’s 500 index hit record highs as the leading cryptocurrency continues to trade in lockstep with traditional financial markets.

The realized correlation, which measures the relationship between two assets, reached 0.367 on Thursday, up from -0.06 on January 1, according to data from Coin Metrics. Bitcoin’s correlation to the benchmark index of U.S. stocks has made new all-time highs for the past three consecutive trading days. Before this, the previous high was on July 5, which lasted for one day. 

It’s worth noting that a coefficient of 0.367 is not overwhelmingly strong, but correlations on shorter-term bases are significantly higher. The closer a correlation coefficient is to 1.0, the more likely two things are to move in the same direction.

Related: Market Wrap: Traders Buy the Dip and Bitcoin Holds at $9,200

Bitcoin’s one-month correlation to the S&P, for example, reached a multi-year high of 0.79 on Wednesday, according to data from Skew, indicating a much stronger short-term correlation trend as levels of investor uncertainty and expected volatility remain high. Analysts expect the trend to continue and even strengthen.

Bitcoin’s strong performance from March lows has fueled demand to buy and trade bitcoin, even with the coronavirus pandemic battering the economy. Investors are increasingly looking for inflation hedges like gold or bitcoin amid aggressive expansionary monetary policy, which has also pushed equity prices higher at the same time. 

See also: The Federal Reserve’s Declining Balance Sheet Is Bearish for Bitcoin. Or Is It?

Bitcoin has historically exhibited little to no correlation to traditional asset classes. But more consistent correlations are likely as the cryptocurrency space matures, according to Kevin Kelly, former equity analyst at Bloomberg and co-founder of cryptocurrency research firm Delphi Digital.

Related: Bitcoin App Bottlepay Is Back From the Dead With a New Lightning App

“One of the biggest reasons we haven’t seen these develop already is the average investor profile is unlike traditional markets, where large institutional players dominate,” Kelly said in a letter to clients.

Related Stories
CoinDesk

Bitcoin Reaches Record High Correlation to S&P 500

6 years 2 months ago

Bitcoin’s one-year correlation to the Standard & Poor’s 500 index hit record highs as the leading cryptocurrency continues to trade in lockstep with traditional financial markets.

The realized correlation, which measures the relationship between two assets, reached 0.367 on Thursday, up from -0.06 on January 1, according to data from Coin Metrics. Bitcoin’s correlation to the benchmark index of U.S. stocks has made new all-time highs for the past three consecutive trading days. Before this, the previous high was on July 5, which lasted for one day. 

It’s worth noting that a coefficient of 0.367 is not overwhelmingly strong, but correlations on shorter-term bases are significantly higher. The closer a correlation coefficient is to 1.0, the more likely two things are to move in the same direction.

Related: Market Wrap: Traders Buy the Dip and Bitcoin Holds at $9,200

Bitcoin’s one-month correlation to the S&P, for example, reached a multi-year high of 0.79 on Wednesday, according to data from Skew, indicating a much stronger short-term correlation trend as levels of investor uncertainty and expected volatility remain high. Analysts expect the trend to continue and even strengthen.

Bitcoin’s strong performance from March lows has fueled demand to buy and trade bitcoin, even with the coronavirus pandemic battering the economy. Investors are increasingly looking for inflation hedges like gold or bitcoin amid aggressive expansionary monetary policy, which has also pushed equity prices higher at the same time. 

See also: The Federal Reserve’s Declining Balance Sheet Is Bearish for Bitcoin. Or Is It?

Bitcoin has historically exhibited little to no correlation to traditional asset classes. But more consistent correlations are likely as the cryptocurrency space matures, according to Kevin Kelly, former equity analyst at Bloomberg and co-founder of cryptocurrency research firm Delphi Digital.

Related: Bitcoin App Bottlepay Is Back From the Dead With a New Lightning App

“One of the biggest reasons we haven’t seen these develop already is the average investor profile is unlike traditional markets, where large institutional players dominate,” Kelly said in a letter to clients.

Related Stories
CoinDesk

Bitcoin Wallet Electrum Now Supports Lightning, Watchtowers and Submarine Swaps

6 years 2 months ago

One of the most popular Bitcoin wallets, Electrum, now supports Lightning Network payments.

The latest swathe of major changes was released in version 4.0, one of its biggest upgrades since the Bitcoin wallet launched in 2011. (Note: Since the 4.0 release, some bug fixes have been added.) Lightning payments are seen as the future of Bitcoin because they’re cheaper and would allow many more users to make bitcoin cryptocurrency transactions at once. 

This makes Electrum the oldest wallet to have adopted Lightning payments so far.

Related: Bitcoin App Bottlepay Is Back From the Dead With a New Lightning App

Lightning support in Electrum is a long time coming. Electrum founder Thomas Voegtlin first told CoinDesk last summer that Lightning would make it into the next release.

“[We] decided to adopt Lightning because we see it as the way forward for Bitcoin. Lightning is quite complicated and not without its issues but ultimately it is the most promising currently known way of scaling Bitcoin. It also allows fast, cheap and more private payments,” pseudonymous Electrum developer SomberNight told CoinDesk in an email.

Read more: What is Bitcoin’s Lightning Network?

In order to support Lightning transactions, the developers actually wrote an entirely new implementation of the Lightning protocol “from scratch,” SomberNight said, instead of using a popular implementation, such as Lightning Labs’ LND or Blockstream’s c-lightning. That’s one reason the release took so long.

An Electrum watchtower

Related: WikiLeaks Shop Now Accepts Bitcoin Lightning Payments

In addition to support for Lightning payments, Electrum 4.0.2 now supports a number of other innovations with this new release that could make using Lightning more secure and less bumpy for users.

For one, Electrum has implemented its own Lightning watchtower, an important component of the Lightning Network, which scans the Bitcoin blockchain in order to detect and prevent fraud.

Read more: Bitcoin Lightning Fraud? Laolu Is Building a ‘Watchtower’ to Fight It

Though there are a few watchtower implementations out there now, they still aren’t commonly used yet across the Lightning Network, despite being an important piece. In this way, Electrum’s watchtower support is a step toward a better Lightning Network. 

Submarine swaps

Then, there are “submarine swaps.” Accepting payments is still a tricky part of the Lightning Network because users need what’s called “incoming capacity” to receive payments, which means funds need to be placed in a certain part of a person’s Lightning “channel,” which is sort of like an account . 

The irony is users “will not be able to receive payments until they spend some money,” as SomberNight put it.

“To solve this, we implemented ‘submarine swaps,’ which are atomic exchanges of on-chain and Lightning bitcoins,” SomberNight told CoinDesk. In other words, submarine swaps makes it possible to send normal bitcoin to a Lightning channel, offering one way for users to fill up their incoming capacity.

“Electrum Technologies runs a central server that facilitates these swaps, for a fee. This allows users to buy incoming capacity to be able to receive Lightning payments,” the developer added.

Hardware support for Lightning

Electrum also integrated Lightning with hardware support. Because hardware wallets store bitcoin offline beyond the reach of hackers they are considered one of the best ways of securing bitcoin.

“You can [now] use Lightning directly with your hardware wallet: Channel-opens and channel-closes can directly pay from and to addresses backed by a hardware device. Your Lightning balance, while in channels, will not be secured by the hardware but all your on-chain balance will be, and it’s very convenient to have a shared single wallet that you can use to pay both on-chain and Lightning,” SomberNight told CoinDesk.

The Electrum team has been working on other features too. Electrum wallet users can view the full release notes here.

Related Stories
CoinDesk
Checked
7 minutes 33 seconds ago
CoinDesk Crypto
Leader in cryptocurrency, Bitcoin, Ethereum, XRP, blockchain, DeFi, digital finance and Web 3.0 news with analysis, video and live price updates.
Subscribe to CoinDesk Crypto feed