CoinDesk Crypto

Within a week of going online, DeFi project SushiSwap’s total value locked (TVL) surpassed $1.5 billion. At its peak, it made up almost 70% of liquidity on the decentralized exchange Uniswap. SushiSwap only took seven days to launch. This article was originally published by CoinDesk China on Tuesday.

SushiSwap co-founder 0xMaki (later referred to as Maki) once proudly said, “It took Uniswap two years to get to where it is today, it only took us 7 days.” 

SushiSwap’s founding team is extremely small, with only three people: Chef Nomi (later referred to as Chef), sushiswap and 0xMaki. The first two are responsible for code and product development, while the latter is responsible for growth and operations. 

Related: Bitcoin News Roundup for Sept. 10, 2020

Last Saturday, SushisSwap co-founder Chef suddenly sold all the tokens that were supposed to be used for a development fund without notifying the community. This move sparked dissatisfaction and doubt in the community, and SUSHI’s price plummeted. 

As doubts in the community continued to grow, Chef decided to transfer the Admin Keys to FTX CEO Sam Bankman-Fried (later referred to as Sam), and left a message saying “I am a good person.”

After Sam took over the management key, he and Maki organized the code migration and multi-signature validator voting.

SushiSwap has since completed migrating its users’ funds from Uniswap and turned control over to nine well respected users who can approve changes and expenditures as a group.

Related: Uniswap September Volume Tops August’s $6.7B Record in 10 Days on Dizzying DeFi Demand

Earlier this week, CoinDesk China published an exclusive interview with Maki, the only remaining SushiSwap founding team member. The interview, which is slightly edited, covers Maki’s opinions on Chef’s sale of the development funds and Sam’s management authority, as well as SushiSwap’s development plan after Chef’s departure.

CoinDesk China: Let’s start with a self-introduction. Who are you, and what do you do in SushiSwap? 

Maki: I’m a full-stack engineer, but in SushiSwap I’m responsible for growth and operations. For the time being, I don’t want to disclose too much about my real identity. If it becomes necessary later, I will disclose it, now it is too early.

CoinDesk China: In your opinion, why did SushiSwap explode online?

Maki: On the first day we went online, we had the Quantstamp audit report, which contained no major defects. The security audit report is very helpful to the growth of our TVL.

CoinDesk China: What are your short-term goals?

Maki: Our short term goal is to successfully complete the migration, this is very important. [Note: The migration was completed on Wednesday].

Later we will discuss governance with the community, in order to make the project develop smoothly and not fail. 

We will also optimize the user interface (UI) of SushiSwap, such as launching a Chinese UI, introducing more traders, and adding features that UniSwap does not have.

More important, we will start integrating with other DeFi protocols. For example, the integration with renBTC’s native system, which would allow users to directly convert BTC to renBTC on SushiSwap. Another example is that if we integrate with 1inch, they can route more transactions to us because we have better liquidity.

I am a believer in Ethereum, but I am open-minded about other public chains as well, I also hope to launch SushiSwap on public chains like Polkadot and Solana. 

We want to create the best, most user-friendly DEX.

CoinDesk China: When did you first start learning about cryptocurrency and blockchain?

Maki: As early as 2013, someone introduced me to Bitcoin. 

CoinDesk China: Why did you decide to join SushiSwap?

Maki: After reading a SushiSwap article on Medium, I felt that “Community Uniswap” is an indispensable part of the DEX ecosystem, so I contacted Chef and expressed my willingness to join.

When I joined, staking, migration and governance contracts were all ready. Chef did not give me Github permissions, so I started directly preparing to work on market and operations.

My work at SushiSwap is completely voluntary. Now I only hold ETH and YFI, I don’t have SUSHI tokens, nor participate in SUSHI liquidity mining. I value the success or failure of SushiSwap more than personal gains and losses.

I have participated in YAM and YFI mining. Although I have not yet reached financial freedom, I’m not short on money.

CoinDesk China: What is your personal opinion of Uniswap? 

Maki: I think Uniswap is very good. Its founder Hayden Adams is a person I really admire. 

I think we will coexist with Uniswap. There definitely will be multiple players on this track. In addition to Uniswap and SushiSwap, there will be other DEXes as well. 

CoinDesk China: Do you personally know Chef? Are Chef and sushiswap the same person? 

Maki: I saw SushiSwap’s introduction article on Medium, and after finding it very interesting I joined its Discord group. I was the third person to join, after Chef and sushiswap. I don’t think they are the same person, but they are probably two people who know each other in real life. 

CoinDesk China: Many people on the Internet are saying, Chef is actually FTX CEO Sam, is that true?

Maki: No, Sam joined later. I don’t believe Chef and Sam are the same person. 

CoinDesk China: Are you disappointed by what Chef did?

Maki: Chef sold all the tokens that were supposed to be used for a development fund, which is very surprising. At the beginning, Chef said that he didn’t come to make fast money, he was thinking about the community … I now think he’s all talk, and I am not sure of his original intention…

In the end he cashed out, but he also transferred the administrator authority to Sam, but his behavior caused the price of the SUSHI token to plummet.

CoinDesk China: Do you think Chef and sushiswap contributed to the project?

Maki: They just copied Uniswap and YAM’s code, I don’t think they invested a lot in this project. They were more thinking about how to make fast money, without a long-term vision.

But I still thank them for giving me an opportunity to participate in this project, though it is forked out of other projects. 

I think SushiSwap could be made into a great project, so I’m willing to continue to support it. In the Ethereum community, I’ve also met a lot of great people, they have always encouraged me and we will continue to build this project together. 

CoinDesk China: After Sam took over management authority, what was the division of labor between you and Sam?

Maki: Later I will “guide” the development of the entire project…It is up to the community to make decisions, I only make suggestions .

CoinDesk China: What is your opinion of Sam’s management authority?

Maki: I am satisfied with the result. At the very beginning, Chef said he wanted to give management authority to me, but I wasn’t very confident in my own technical strength. I wasn’t sure that I would be able to make SushiSwap’s migration a success. 

Later, I suggested that Chef consider giving management authority to Andrew Kang or Sam, they both have a better understanding of technology, and are also very interested in this project. Sam also holds a lot of SUSHI, so he is financially motivated to do a good job in operating and managing this project. 

After the migration is completed and the multi-signature board of directors is determined, I think he will transition from the role of administrator to an ordinary community member. After that, I will mainly be responsible for leading this project to the next stage. Slowly, I will also fade out and gradually decentralize this project.

Related Stories

• First Mover: DeFi ‘Vampire’ SushiSwap Sucks $800M from Uniswap; BitMEX Basis Lags
• SushiSwap Migration Ushers in Era of ‘Protocol Politicians’

Bitcoin was trending upward before losing momentum; ether holders are moving their cryptocurrency off exchanges.

• Bitcoin (BTC) trading around $10,284 as of 20:00 UTC (4 p.m. ET). Slipping 0.12% over the previous 24 hours.
• Bitcoin’s 24-hour range: $10,174-$10,488
• BTC below its 10-day but above 50-day moving averages, a sideway signal for market technicians.

Bitcoin continued its upward momentum from Wednesday, with the world’s oldest cryptocurrency rising as high as $10,488 on spot exchanges such as Coinbase before losing some steam and now moving in a sideways pattern. 

Constantin Kogan, partner at crypto fund of funds BitBull Capital, points to bitcoin’s relative strength index, or RSI, as an indicator of where the market might be headed. RSI measures price changes to indicate market conditions, such as “overbought” when there has been too much buying or “oversold” when there is too much selling. 

Related: Privacy Startup Nym Will Pay You in Bitcoin to Run Its Mixnet

Read More: Structural Issues May Be Causing BitMEX’s Low Bitcoin ‘Cash and Carry’ 

“The relative strength index has shifted in favor of growth after the price climbed to $10,355,” said Kogan. “There is a chance to return to the pivotal area of $10,756, but not everything is as rosy as we would like to see.”

Kogan said bitcoin price action will depend on the global economy’s performance for the balance of 2020. 

“Many analysts predict that BTC will continue to rise in price in the long term,” Kogan added. “However, this year a breakthrough is unlikely. It is expected next year if we won’t see a global recession escalation.” 

Related: Binance’s New Platform Will Connect CeFi and DeFi With $100M Fund

Read More: Pandemic Will Speed Bitcoin Adoption, Says DBS Bank Economist

In bitcoin futures, open interest has been hanging around the $3.7 billion mark for the past week. 

“This represents a lot of indecision in the BTC market,” said Daniel Koehler, liquidity manager for cryptocurrency exchange OKCoin, regarding the stasis in bitcoin futures. “I think many larger players hedged at these high price levels and are waiting for momentum to clearly go in one direction.”

Read More: YouTube Ignored Warnings About XRP ‘Giveaway’ Scams, Ripple Says

Henrik Kugelberg, a Swedish over-the-counter crypto trader, points to the longer-term outlook of bitcoin versus fiat’s performance. “The macro perspective is of course that all currencies will lose value and the only hedge in the currency market the coming months is bitcoin.” 

Indeed, the U.S. Dollar Index, a measure of the American currency against a basket of other fiat, is still in the doldrums, down 0.30% Thursday. 

Italy-based over-the-counter crypto trader Alessandro Andreotti said he isn’t sure the bitcoin price can keep heading upward but he remains bullish. “Opinion seems split on whether this is just a ‘bear trap’ or the beginning of a new bull market,” he told CoinDesk. “I’m buying either way. Personally, I’m optimistic for the short term.” 

Ether balances on exchanges dropping

Ether (ETH), the second-largest cryptocurrency by market capitalization, was up Thursday, trading around $364 and climbing 2% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Read More: Ether Traders May Be Hedging Against DeFi Slowdown: Analyst

The balances of ether on centralized exchanges is at a seven-month low. On Wednesday, 17,158,739 ETH sat on exchanges, the lowest it had been since Feb. 9, according to data from aggregator Glassnode. 

“My immediate thought is that many people have moved their ETH off exchanges to be able to participate in yield farming,” said Andrew Tu, an executive at quant trading firm Efficient Frontier. “A load of other traders likely moved their ETH to be able to provide liquidity to Uniswap pools. SushiSwap is a prime example of this.” 

Read More: DeFi ‘Vampire’ SushiSwap Sucks $800M from Uniswap

Other markets

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

• nem (NEM) + 5.2%
• qtum (QTUM) + 3.4%
• cardano (ADA) + 3.2%

Read More: 1,000 New Token Pairs Added to Uniswap in One Week; Buyers Beware

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

• tron (TRX) – 5.3%
• bitcoin sv (BSV) – 3.7%
• orchid (OXT) – 1.2%

Read More: SushiSwap Migration Ushers in Era of ‘Protocol Politicians’

Equities: 

• Asia’s Nikkei 225 ended the day in the green 0.88% as positive Japanese manufacturing numbers gave uplifted investor sentiment.
• Europe’s FTSE 100 closed in the red 0.16% as tensions between the European Union and the United Kingdom rose over Brexit negotiations.
• In the United States, the S&P 500 slipped 1.9% as tech stocks experienced a sell-off on a volatile day, with Apple gaining as much as 2.7% intraday before closing down 3.9%.

Read More: How to Watch INX’s IPO in Real Time on the Ethereum Blockchain

Commodities:

• Oil is down 1.8%. Price per barrel of West Texas Intermediate crude: $37.06.
• Gold is flat Thursday, in the red 0.10% and at $1,944 as of press time.

Read More: Uniswap September Volume Tops August’s $6.7B Record in 10 Days 

Treasurys:

• U.S. Treasury bond yields all slipped Thursday. Yields, which move in the opposite direction as price, were down most on the two-year, in the red 5.3%.

Read More: Why Crypto Investments Are Less Vulnerable to US-China Tensions

Related Stories

• First Mover: DeFi ‘Vampire’ SushiSwap Sucks $800M from Uniswap; BitMEX Basis Lags
• Ether Traders May Be Hedging Against DeFi Slowdown: Analyst

Nym now allows bitcoin transactions and has an incentive program for people running its nodes. It is also enabling plugins that will allow users to plug in wallets and applications to run their traffic through its mixnet. 

What is a mixnet?

Nym is a start-up software project working to obscure metadata tracking at a network level via the mixnet it enables. The mixnet itself is hosted by a decentralized network of volunteers.

On a normal internet network, most traffic can be tracked. Browsers like Tor offer a degree of protection against network surveillance by running traffic through a number of relays to obscure a user’s location and usage. Such networks are still susceptible to metadata observation, however, meaning highly capable adversaries like the National Security Agency in the U.S. are able to see the timing of data packages being sent across a network to get an idea of what’s going on, even if they can’t see the actual contents of the packages. 

Related: Market Wrap: Bitcoin Hits $10.4K; Ether Balances on Exchanges Fall to 7-Month Low

It’s like when the NSA was tracking alleged terrorists’ phone calls in the U.S. While they weren’t eavesdropping on the calls themselves, they were looking at those involved in the calls as well as the duration of the calls and other details. 

See also: Road to Consensus: Harry Halpin Talks Holistic Privacy, Mixnets and COVID-19 (of Course)

A mix network or “mixnet,” on the other hand, (taking its name from the proxy servers it employs, called “mixes”) obscures the metadata left behind when data passes through a network. 

“In a mixnet all the data packets get shuffled around, and then it’s emitted in a different order than [how] they came in, with a small delay,” said Dave Hrycyszyn, CTO of Nym. “Basically a mixnet acts like a game of Yahtzee, where the dice are data packs, they get shaken around on the mixnet and come out in an entirely different manner than they went in.” 

Related: Binance’s New Platform Will Connect CeFi and DeFi With $100M Fund

Doing that multiple times, said Hrycyszyn, makes it impossible for an attacker monitoring all the network traffic on the internet to see who’s communicating with whom.

Incentives paid in bitcoin

Nym has largely been focusing on its testnet, with node operators hosting them as a labor of love. Now, Nym will compensate operators using bitcoin rather than tokens. One way it offers rewards is through L-BTC on the Liquid sidechain using the Blockstream Green wallet. Liquid offers on-chain privacy using confidential transactions, which obscure the amounts being paid. For those who don’t have or want a Blockstream Green wallet, Nym will reward operators with standard bitcoin because Nym doesn’t want to force anyone to adopt a particular wallet. It will also be launching an incentivized bounty program to test the network’s strength. 

Nym is also launching its own reputation system, NYMPH, which lets it and node operators keep track of which mixnodes are online and mixing data packs, even across multiple chains. 

The company is also adding greater functionality for running transactions and web traffic over its mixnet. 

Read more: Europe Debates COVID-19 Contact Tracing That Respects Privacy

“Nym is plug-and-play replacement for Tor for any wallet that supports SOCKS5, or any application that supports SOCKS5,” said Nym CEO Harry Halpin.

For example, the Nym team has streamed video through Firefox on the network, though Halpin says that is still experimental at this point. 

SOCKS is a protocol that exchanges network packets between device and server via a proxy. 

“What Nym does is, just like Tor, start a SOCKS5 client up on your local machine. You send all your traffic from the app there. It transforms it into Sphinx packets (the same format Lightning uses, but invented for mixnets) and sends the traffic through the Nym mixnet,” he said. 

‘A step forward’ for privacy

Adam Back, CEO of Blockstream, said in a statement that Nym’s mixnet technology looks promising as a modern upgrade to Tor and is a step forward in terms of privacy. 

“Network privacy is a crucial component to ensuring the financial privacy of Bitcoin users, so we were very happy to collaborate with Nym on its integration with Liquid,” he said. 

“Nym’s SOCKS5 architecture made adding Blockstream Green wallet support easy, and we’ll keep an eye on the project with a view to adding standalone support in the future.”

Read more: New Malware Spotted in the Wild That Puts Cryptocurrency Wallets at Risk

These are important steps for mixnets, which aren’t in regular use right now and are traditionally fairly slow and clunky. The slowness is in part due to disrupting the timing of data packet delivery to foil network-level observers.

Nym recognizes that while this is important progress, it’s not a privacy panacea.  At least, not yet. 

“We do not recommend depending on the Nym mixnet for strong privacy yet,” said Hrycyszyn in a post announcing the updates. “We are working to get sender and receiver anonymity coded up, after which a full audit will be needed. But we are making very steady progress, and we invite you to try the mixnet today and give us feedback about how things go.”

Related Stories

• First Mover: DeFi ‘Vampire’ SushiSwap Sucks $800M from Uniswap; BitMEX Basis Lags
• Structural Issues May Be Causing BitMEX’s Low Bitcoin ‘Cash and Carry’ Returns

Binance continues to chase after decentralized finance (DeFi) by giving its new decentralized Binance Smart Chain (BSC) access to its centralized exchange (CeFi). The global cryptocurrency exchange giant is putting up $100 million to support DeFi projects on BSC.

• Binance CEO Changpeng Zhao announced the plan during the company’s World of DeFi summit on Thursday. It’s a “bridge” between DeFi and CeFi, an integration between Binance, the exchange, and BSC, the Binance-owned public chain.
• Binance’s users can benefit from elements of CeFi – futures, margins, savings, DeFi staking and DeFi pooling – and DeFi – lending, automated market makers, liquidity mining, yield farming – according to the company’s news release Thursday.
• This new plan targets Binance users who want to participate in DeFi without leaving the centralized platform.
• Under the new platform, holders of Binance’s native token, BNB, can have more rights to the decentralized governance of the BSC, which uses a Proof-of-Stake Authority (PoSA) consensus mechanism, when they participate in staking on the BSC.
• Since the popular crypto exchange first ventured into DeFi with its decentralized exchange in April 2019, Binance has continued expanding its footprint in this space.
• Earlier this month, Binance introduced a product called Launchpool to provide users a way to make income by staking tokens for yield farming – the trendy strategy to make profits in DeFi.
• It also launched a Uniswap-like DeFi platform allowing trades on an automated market maker (AMM).

Read more: For DeFi to Grow, CeFi Must Embrace It

Related Stories

• The Revolution You’ve Been Awaiting: Fintech + DeFi
• First Mover: DeFi ‘Vampire’ SushiSwap Sucks $800M from Uniswap; BitMEX Basis Lags
• Ether Traders May Be Hedging Against DeFi Slowdown: Analyst
• Structural Issues May Be Causing BitMEX’s Low Bitcoin ‘Cash and Carry’ Returns

The U.S. Treasury Department’s Office of Foreign Asset Control (OFAC) has added three Russian nationals and a host of cryptocurrency addresses to its sanctions list on allegations of election interference.

OFAC alleges that the three individuals, Artem Lifshits, Anton Andreyev and Darya Aslanova, are employees of the Internet Research Agency (IRA), a Russian company and “troll farm” that tries to influence events. The IRA attempted to influence the 2018 midterm elections in the U.S., and OFAC alleged Thursday that this work continued.

“The IRA uses cryptocurrency to fund activities in furtherance of their ongoing malign influence operations around the world,” a press release said.

Related: US Congressman Darren Soto to Accept Cryptocurrency Donations for 2020 Election

A separate release listed 23 crypto addresses as being added to OFAC’s sanctions list, meaning any U.S. person who tries to send or receive money from these accounts might be subject to criminal proceedings. The wallets contained a slew of cryptocurrencies, including bitcoin, ether, zcash, dash, bitcoin SV and litecoin, according to the OFAC press statement.

The U.S. Department of Justice (DOJ) separately charged Lifshits with wire fraud, alling he is part of “Project Lakhta,” an election interference effort based in Russia. According to the DOJ, Lifshits opened “fraudulent accounts” at banks and cryptocurrency exchanges by stealing U.S. citizens’ identities. The Secret Service assisted in the investigation as well.

This is not the first time government agencies have alleged that Russian operatives used cryptocurrency to interfere with U.S. elections: a group of military intelligence officers were indicted in 2018 for efforts to influence the 2016 presidential election, including by hacking networks and email accounts used by Democratic candidate Hillary Clinton.

Read more: US Treasury Department Blacklists 20 Bitcoin Addresses Tied to Alleged North Korean Hackers

Related: Prediction Markets’ Time Has Come, but They Aren’t Ready for It

At the time, then-deputy U.S. Attorney General Rod Rosenstein said the 12 indicted individuals used cryptocurrency to launder funds and pay for their activities.

OFAC has previously listed bitcoin, ether and litecoin addresses as part of its sanctions list, tied to individuals accused of running drugs and participating in ransomware attacks.

UPDATE (Sept. 10, 2020, 18:55 UTC): This article has been updated with a separate DOJ statement, which was published after OFAC’s releases.

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• US Congressman Tom Emmer Will Accept Crypto Donations for Reelection Campaign

Rep. Darren Soto (D-Fla.) – sponsor of a number of legislative proposals around blockchain technology – is accepting cryptocurrency donations for his reelection campaign.

• Soto made the announcement during the U.S. Blockchain Debate on Wednesday, hosted by Soto’s campaign and the Chamber of Digital Commerce PAC.
• Donations will be processed by payments processor BitPay, with eight different cryptocurrency options supported for conversion into U.S. dollars.
• Those include bitcoin (BTC), bitcoin cash (BCH), ether (ETH), Gemini dollar (GUSD), USD Coin (USDC), Paxos standard (PAX), Binance USD (BUSD) and XRP.
• Soto has long been an advocate of blockchain technology, saying the government should support its use for business and consumers, according to a press release.
• Soto, who is also a co-chair of the Congressional Blockchain Caucus, said he was “excited” to host a crypto debate on the same day as a vote to pass parts of the Digital Taxonomy Act.
• The proposal was ultimately passed and added to the wider Consumer Safety Technology Act.
• This will now be debated in the House of Representatives.
• The blockchain portion of the act would require the Federal Trade Commission to submit a report and recommendations to Congress on unfair or deceptive acts relating to digital assets, Soto’s spokesperson told CoinDesk.

See also: Pro-Bitcoin Senate Candidate Wins Primary Race in Wyoming

Related Stories

• US Treasury Sanctions Russians Using Crypto for Election Interference
• Square Forms Group to Stop Patent Hoarding From Stifling Crypto Innovation
• Blockchain Proposals Move to US House in Consumer Tech Bill
• YouTube Ignored Warnings About XRP ‘Giveaway’ Scams, Ripple Says

Cryptocurrency exchange Kraken said Thursday that Jeremy Welch, the co-founder and former CEO of crypto wallet firm Casa, has joined Kraken as vice president of product. 

According to the announcement on Kraken’s website, Welch will work toward making it easier to trade crypto on the exchange. 

• The announcement said Welch will also continue to work with Casa in an advisory capacity, helping the firm grow its non-custodial wallet services. 
  
• Formerly a product specialist at Google, Welch co-founded Casa in 2016 but left the firm earlier this year, citing personal matters. Nick Neuman, the firm’s product head at the time, replaced Welch as Casa CEO. 
  
• On Tuesday, Kraken announced it plans to resume services in Japan by mid-September now that its local subsidiary, Payward Asia Ltd., has completed the required regulatory registration process. 

Related Stories

• Crypto Exchange Kraken Returns to Japan After Two-Year Hiatus
• Digital Rights Advocacy Group Calls On Coinbase for Greater Transparency
• Bison Trails Hires Ex-Goldman Sachs VP as Legal Head
• The DOJ Wants to Hire a Crypto Crime Attorney Adviser

A DBS Bank economist thinks the coronavirus pandemic will accelerate digital asset adoption, Mastercard announced a CBDC testing ground and SushiSwap has a temporary governance structure in place.

Top shelf

Digital adoption
Singapore-based DBS Bank thinks the coronavirus pandemic may speed adoption of digital assets, according to a quarterly report filed in August. “Post-pandemic [investing] is beyond speculative. It’s more about, ‘This thing has fixed circulation, it will not be debased.’ People are worried about dollar outflow and wondering if they should hold crypto in addition to gold as a safe-haven currency,” DBS Chief Economist Taimur Baig told CoinDesk. Baig also noted how cryptocurrencies can help to understand the dynamics of dollar-pegged currencies, while blockchain-tied CBDCs are another front in the politicized battle between the U.S. and China, CoinDesk’s Ian Allison reports. 

Ripple scams
Ripple has contested YouTube’s claims that it knew nothing about the XRP “giveaway” scams, in an attempt to keep its ongoing court case against the platform on the docket. In a motion filed Tuesday, responding to YouTube’s attempt to dismiss the suit, Ripple said it sent 350 takedown notices to YouTube regarding XRP scams using its logo and likeness of CEO Brad Garlinghouse to extort millions from unsuspecting investors. YouTube is accused of “willful blindness,” with Ripple alleging it disregarded or ignored explicit warnings about the scams happening on its platform,” CoinDesk report Paddy Baker said. 

Related: First Mover: DeFi ‘Vampire’ SushiSwap Sucks $800M from Uniswap; BitMEX Basis Lags

Trade war?
Crypto firms and investors may avoid the brunt of the trade war between China and the U.S. In recent months sanctions employed by both countries have interrupted the flow of capital between the nations’ tech industries – affecting non-crypto startups. Decentralized ownership structure and unique fundraising models makes crypto projects immune to geopolitical risks, said Sharlyn Wu, chief investment officer at Huobi. Jump Trading, Paradigm and Pantera are among the U.S.-based firms that successfully invested in Hong Kong crypto startups, while Hashkey participated in BlockFi’s Series C. 

Web3
Swisscom Blockchain, a distributed ledger technology startup owned by telco giant Swisscom, has been awarded a grant from the Web3 Foundation to build a cloud-based protection layer for stakers on the Ethereum-based Polkadot network. Announced Thursday, the grant will help build Swisscom Blockchain’s Kubernetes Operator for Polkadot, a way of protecting participants involved in proof-of-stake processes on Polkadot and the Kusama testnet against losing their staked tokens if the network is attacked or compromised. 

CBDC playground
Payments giant Mastercard has released a platform that allows central banks to test how proposed central bank digital currencies (CBDCs) would work in real life. Mastercard announced Wednesday it had launched a virtual testing environment that can simulate issuance, distribution and exchange of CBDCs between banks and financial service providers, as well as end-consumers purchasing everyday goods and services. Raj Dhamodharan, Mastercard’s executive VP, told Forbes his firm is already working with some central banks and that other entities, such as banks or tech firms, are being invited to use the platform.

Quick bites

• Australian University Finds Privacy Issues With Blockchain Technology (Sebastian Sinclair/CoinDesk)
• Overstock’s tZERO Wins FINRA Approval to Launch Retail Broker-Dealer Subsidiary (Jaspreet Kalra/CoinDesk)
• Belarus Nonprofit Helps Protestors With Bitcoin Grants (Anna Baydakova/CoinDesk)
• The IRS Is Offering You $625,000 to Crack Monero (Shaurya Malwa/Decrypt)
• How a DeFi Trader Made $290,000 With Just $200 (Robert Stevens/Decrypt)

At stake

What’s cooking?
SushiSwap, the vampire clone of Uniswap, successfully began porting over $800 million worth of tokens from its rival platform and instituting a temporary governance structure yesterday.

Related: Blockchain Bites: Bitmain Denied, Coinbase Blocked and a Potential EOS Exit Scam

Nine signers of a multisig wallet controlling Sushi’s funds have been elected to govern SushiSwap through full decentralization, though it’s unclear if all the nominees will accept their position. 

These signatories will act like a board of directors in the analog world, CoinDesk’s Brady Dale reported, requiring six signees to approve changes to the SushiSwap code or to spend its development funds.

It’s a move that reflects Sushi’s original promise to create a community-run alternative to the most successful automated market maker (AMM), Uniswap. Functionally similar to the protocol it forked from, Sushi’s advantage was its decision to include a governance token, which is required for decentralized decision making.

While the results of this successful fork are still playing out, some assume there will be pressure for all DeFi projects to launch or implement a governance token, lest another vampire protocol emerge. Though it’s unclear if Sushi’s success will lead to Uniswap’s demise.

“Maybe the most fascinating observation of the Unisawp/Sushiswap saga so far is, that now BOTH platforms have more liquidity than Uniswap had before Sushi appeared,” Martin Köppelmann, founder of decentralized prediction market Gnosis, tweeted. 

While SushiSwap is taking liquidity currently held by Uniswap, the majority of this capital was placed on Uniswap for the sole purpose of earning Sushi’s incentive program. 

This morning, Uniswap is up $117 million in liquidity, or 46%, over where it was when SushiSwap was announced, Dale tweeted. Or, as author of “The Infinite Machine” Cami Russo said last night: Sushi is “growing the pie.” 

Apart from the flood of liquidity ultimately destined for SushiSwap, Uniswap has been undergoing a spat of user interest.

CoinDesk’s Zack Voell reported the decentralized exchange has added 1,000 new token pairs in the past week. That equates to 150 pairs added per day. 

Exponential growth in the number of tokens and pairs on Uniswap is “a good thing,” according to Jack Purdy, decentralized finance analyst at Messari, as it “shows the power of a completely open, permissionless financial primitives.”

Market intel

Ether puts
Ether (ETH) options traders are turning bearish, placing more than twice as many puts (bearish bets) than calls (bullish bets). Ether’s put-call volume ratio – a measure of activity in put options relative to calls – rose to 2.45 on Wednesday, the highest level since Oct. 31, 2019, according to data source Skew. “The message between the lines is likely that traders want a hedge [via put options] against the activity in DeFi, which has been the primary driver of ether prices,” Vishal Shah, an options trader and founder of Polychain Capital-backed derivatives exchange Alpha5, told CoinDesk.

Cash and carry
BitMEX may be one of the largest crypto derivatives platforms, but it offers the lowest return on bitcoin “cash and carry” trades. Currently, the return offered by Seychelles-based BitMEX on a three-month basis is 2.71% annualized, half of what rival exchanges like Binance, FTX and Deribit are offering, according to data source Skew. Cash and carry arbitrage involves buying an asset in the spot market against a sell position in the futures market when the latter is trading at a premium to the spot price. Essentially, carry strategies profit from futures basis – the spread between prices in futures and spot markets – which evaporates on the day of the expiry.  

Tech pod

Bitcoin bug
A previously undisclosed vulnerability in the Bitcoin Core software could have allowed attackers to steal funds, delay settlements or split the largest blockchain network into conflicting versions had it not been quietly patched two years ago. Braydon Fuller, a protocol engineer at Purse, and Javed Khan, a core developer of the Handshake protocol, discovered the bug in June 2018, finding it affected Layer 2 (L2) solutions such as the Lightning Network but not Bitcoin full nodes. “While the vulnerability was fixed, its disclosure highlights the difficulties of building a global money standard on programming languages created by humans, not to mention the high technical barriers to engaging in development of the top cryptocurrency,” CoinDesk’s Will Foxley reports.

Frog’s vision?
Twetch, a micropayment-based social network that runs on the Bitcoin SV blockchain, has introduced an encrypted direct-messaging function that lets users send each other money in the chat. Released Wednesday, Twetch Chat adds a layer of privacy and security to the Twitter alternative and is in line with a trend toward more private communications that have been a focus of companies in recent years. The service relies on Moneybutton or Relayx BSV wallets, and connects to the PayMail protocol, which creates an email-like ID – instead of the string of numbers and characters typically associated with a wallet.

How to

INX IPO
How’s the first registered offering of security tokens in the U.S. going? CoinDesk’s Nathan DiCamillo shows you how to figure it out for yourself.

In the two weeks since INX Ltd. commenced its long-awaited initial public offering (IPO), more than 350 investors’ Ethereum addresses have been added to the “white list” of approved buyers. You don’t need to take the company’s word for it, it’s all on the blockchain, viewable through block explorer sites like Etherscan. 

The public data doesn’t show who these registered investors are or how many of the tokens, priced at $0.90 each, any of them has agreed to buy. (INX is seeking to raise $117 million through the sale, which is expected to take several weeks to complete.)

But doing an IPO on-chain gives the public, and INX itself, a novel vista on the process, which traditionally has been a back-room affair. 

Podcast corner

‘Absolute Raging Mania’
Hedge Fund legend Stan Druckenmiller joins on the latest edition of The Breakdown to discuss how the Federal Reserve’s policies have created a massive asset bubble while making both inflation and deflation more likely.

Who won #CryptoTwitter? Related Stories

• Blockchain Bites: Is DeFi an Inside Deal?
• First Mover: SushiSwap’s Billion-Dollar ‘Rug Pull’ Is Thriller to Crypto Geeks

Jack Dorsey’s payment company is inviting other cryptocurrency firms to join its “alliance” to pool patents and preserve the industry’s open-source spirit.

• Square said Thursday it has launched what it calls the Cryptocurrency Open Patent Alliance (COPA), a non-profit that wants to stop companies from locking up useful technologies in patents, a practice Square says hamstrings innovation.
• “Locking up foundational cryptocurrency technologies in patents stifles innovation and adoption; and offensive use of patents by bad actors threatens the growth of cryptocurrency technologies,” Square said in a statement.
• In addition to companies jealously guarding their own work in crypto, some firms go further, filing what are called “pre-emptive patents” for ideas they have no plans of developing but which act to hinder the research of competitors.
• To become part of COPA, members must pledge to make their patents freely available to all other members using a shared library.
• This library will act as a “collective shield” protecting members from “patent aggressors,” said Square – which ventured into crypto in 2018 and has already committed to putting its own crypto patents into the new library.
• The only exception will be those filed to preserve existing patent applications.
• The number of cryptocurrency and blockchain-related patents in the U.S. doubled between 2016 and 2017; in the past year, Microsoft filed a patent for a mining system powered by physical exertion and IBM for a token that is a "self-aware."
• Assuming the patent library grows and gathers momentum, the idea is that more and more companies will look to join COPA to access tech innovations – creating a more equitable patent environment.
• Any company that works in crypto, regardless of whether it has patents or not, will be eligible to join COPA.
• COPA will be an entirely separate entity from Square, with its own independent board of directors, a spokesperson confirmed.

See also: Jack Dorsey’s Square Wins Patent for Fiat-to-Crypto Payments Network

Related Stories

• US Congressman Darren Soto to Accept Cryptocurrency Donations for 2020 Election
• Blockchain Proposals Move to US House in Consumer Tech Bill
• YouTube Ignored Warnings About XRP ‘Giveaway’ Scams, Ripple Says
• Australian University Finds Privacy Issues With Blockchain Technology

Uniswap topped August’s record high trading volume in the first 10 days of September, reaching $6,729,691,041 mid-morning on Thursday, leaving almost three weeks to push further into record territory.

• Last month’s $6.7 billion in traded volume was the leading decentralized exchange’s fourth consecutive all-time monthly high, as CoinDesk previously reported.
• Curve, the second-largest decentralized exchange by traded volume, also surpassed August’s record of $1.87 billion Thursday, reaching $1.9 billion, according to Dune Analytics.
• Liquidity on Uniswap, however, has dropped by over 60% to $619 million since Tuesday as the popular SushiSwap project successfully migrated from Uniswap to FTX’s decentralized exchange, Serum.
• Coinciding with Uniswap’s exponential volume growth, market sentiment analysis by cryptocurrency research firm Markets Science shows similar increases in excitement over Ethereum and decentralized finance (DeFi).

• For example, both the quantity of tweets referencing Ethereum and the percentage of those tweets coming from unique Twitter users have steadily increased over the past three months, reaching yearly highs toward the beginning of September, the Markets Science analysis shows.
• Even as decentralized exchange volumes continue to grow, Ethereum transaction fees have dropped 75% from their record highs of $15.21 on Sept. 2.
• The average transaction fee was $3.86 Thursday, according to Blockchair.
• Notably, Uniswap is one of the few decentralized trading platforms without its own token. Still, funding shouldn’t be a problem as on Aug. 6 founder Hayden Adams announced the completion of an $11 million Series A round led by Andreessen Horowitz.

Related Stories

• First Mover: DeFi ‘Vampire’ SushiSwap Sucks $800M from Uniswap; BitMEX Basis Lags
• SushiSwap Migration Ushers in Era of ‘Protocol Politicians’
• 1,000 New Token Pairs Added to Uniswap in One Week; Buyers Beware
• SushiSwap Will Withdraw Up to $830M From Uniswap Today: Why It Matters for DeFi

Two blockchain proposals have been added to a wider piece of legislation on consumer protection after being passed by a U.S. congressional committee Wednesday.

• The House Committee on Energy and Commerce passed a motion Wednesday to incorporate the Blockchain Innovation Act and part of the Digital Taxonomy Act into a broader Consumer Safety Technology Act.
• This adds blockchain technology onto a list of emerging technologies, such as artificial intelligence (AI), that the Department of Commerce (DoC) and Federal Trade Commission (FTC) will be mandated to closely examine so as to identify any potential consumer risks.
• The FTC would be required to file a report with recommendations to Congress on how best to address deceptive practices relating to digital tokens.
• It would also call for a government study to be conducted to determine how technologies, such as blockchain, can combat fraud and other unfair or deceptive practices.
• A statement from Representative Darren Soto (D-Fla.), the bills’ sponsor, said the ultimate aim was to establish a Blockchain Center for Excellence within the DoC.
• “I believe our government needs to support that growth, establish light-touch regulations to ensure certainty, protect innovation, stop fraud and enable its appropriate use for government, business and consumers,” Soto said.
• This is believed to the furthest that a bill on blockchain has ever come in the U.S. Congress.
• The new bill reflects similar comments made by the government’s antitrust chief last week, who said blockchain technology deserves to be protected by law as it could help stop the formation of market monopolies.
• The Consumer Safety Technology Act will now be debated in the House of Representatives.

See also: How a Flurry of ‘Digital Dollar’ Proposals Made It to Congress

Related Stories

• YouTube Ignored Warnings About XRP ‘Giveaway’ Scams, Ripple Says
• Australian University Finds Privacy Issues With Blockchain Technology
• Argo’s H1 Revenue Soars but Profits Drop as Bitcoin’s Halving Boosts Mining Costs
• Judge Dismisses $200M Damages Claim in AT&T Crypto Hack Lawsuit

Bitcoin was rising for a second straight day, to about $10,281, after a rapid sell-off earlier in the week.

“In a flash, investors have gone from running for the hills to buying the dip,” Mati Greenspan, founder of the cryptocurrency and foreign-exchange analysis firm Quantum Economics, told clients in an email. The crypto investment firm Stack Funds wrote in a weekly report that prices appear to have found a temporary floor around $10,000.

Taimur Baig, chief economist for Singapore’s DBS bank, told CoinDesk that the pandemic and the associated central-bank money-printing have strengthened the case for bitcoin. “People are worried about dollar outflow and wondering if they should hold crypto in addition to gold as a safe-haven currency,” he said.

Related: The Revolution You’ve Been Awaiting: Fintech + DeFi

The European Central Bank said early Thursday it would keep monetary policy unchanged for now. European stocks were flat, and U.S. stock futures were lower.

Market Moves

The phenomenon of decentralized finance, known as DeFi, rose to a new level of surreal Wednesday as the semi-automated cryptocurrency trading platform SushiSwap used a technique known as “vampire mining” to suck liquidity away from its industry-leading rival. 

As reported by CoinDesk’s Brady Dale, the SushiSwap project appears to have extracted more than $800 million from Uniswap, which had recently risen to the top of the standings among DeFi projects.  

Sam Bankman-Fried, CEO of the FTX exchange, who took control over the SushiSwap project after its founder apparently cashed out some $13 million of tokens and exited, said the “migration” was complete. That’s polite-speak for what really happened, namely that the project’s design to siphon away liquidity from Uniswap appeared to have succeeded. 

Related: Uniswap September Volume Tops August’s $6.7B Record in 10 Days on Dizzying DeFi Demand

Prices for the SUSHI token, which started trading just two weeks ago, were up 11% to $2.69, for a total market value of about $260 million, according to the website CoinMarketCap.

Uniswap doesn’t have its own tokens, but the website DeFi Pulse showed the protocol’s collateral value plunging by about 74% to $388 million. It has dropped to ninth place in the DeFi rankings. SushiSwap isn’t tracked by DeFi Pulse. 

DeFi, the fast-growing industry of using cryptocurrencies and blockchain technology to build semi-automated lending and trading platforms that might someday replace banks, has seen its total collateral assets climb 10-fold this year to about $7 billion. It has moved so fast that even pros can barely keep up. 

Eric Ervin, CEO of the cryptocurrency-focused hedge fund Blockforce Capital, wrote Thursday that the safest way to bet on the trend might just be to buy ether, the native token of the Ethereum blockchain, where many of the DeFi projects are being developed. 

“We are believers in the long-term potential that DeFi offers for society,” Ervin wrote. “The genie is out of the bottle now. It will be difficult to imagine innovation stepping backward from here.”

Read More: SushiSwap Migration Ushers in Era of ‘Protocol Politicians’

BitMEX bitcoin-only margin requirements appear to be distorting the futures market

Among cryptocurrency exchanges, Seychelles-based BitMEX pioneered now-commonplace bitcoin derivatives like perpetual swaps and 100x leverage. 

But apparently traders are shy about bidding up futures prices on BitMEX, partly due to the exchange’s practice of requiring initial collateral postings in bitcoin.

As reported Thursday by CoinDesk’s Omkar Godbole, the practice exacerbates the rush to margin calls during a price decline and leads to faster liquidations.   

One consequence of all this, according to Godbole, is that BitMEX’s futures basis – the difference between spot prices and where futures are trading – is about 2.7%, about half the level observed on rival exchanges like Deribit, Binance and FTX. So returns will be lower for traders using arbitrage strategies to profit from the spread. 

“There is a residual risk market makers have if they get ‘too long’ on BitMEX,” Patrick Heusser, senior cryptocurrency trader at Zurich-based crypto broker AG, told CoinDesk in a Twitter chat. “Therefore, the general pricing of those futures is slightly lower compared to the multi collateral platforms.”

Bitcoin Watch

Both bitcoin and ether were consolidating in a narrow range, having found a strong support near $10,000 and $320, respectively, over the past few days. 

“Bitcoin fundamentals remain positive as hashrates are at all-time highs,” analysts at Stack, cryptocurrency trackers, and index funds provider, said in their weekly research note. “As such, the cryptocurrency’s technical price floor will shift upwards.”

Meanwhile, ether’s fortunes remain tied to the developments in the decentralized finance space. Ether’s put-call volume ratio jumped to multi-month highs on Wednesday, indicating increased demand for put options or bearish bets. 

“It shows traders want a hedge [via put options] against the activity in DeFi, which has been the primary driver of ether prices,” Vishal Shah, an options trader and founder of Polychain Capital-backed derivatives exchange Alpha5, told CoinDesk.

Read More: Ether Traders May Be Hedging Against DeFi Slowdown

– Omkar Godbole

Token Watch

Tether (USDT), Solana (SOL), Ethereum (ETH): Tether says it has launched on Solana blockchain to help users exchange dollar-linked stablecoin USDT at speeds greater than 50,000 transactions per second.

What’s Hot

How to watch INX’s IPO in real time on the Ethereum blockchain (CoinDesk) 

Kraken exchange returns to Japan two years after exiting market (CoinDesk)

Euro will be overtaken by China’s digital yuan if Europe has no central-bank digital currency by 2025 (dGen)

Mastercard releases “virtual testing environment” to help central banks simulate distribution and use of digital currencies (CoinDesk)

Huobi exchange now offering “savings product” paying annualized yield of 3.5% on bitcoin deposits (CoinDesk)

Argo, publicly traded blockchain firm, takes profit hit as costs rise faster than crypto-mining revenue (CoinDesk)

Avoiding regulation is counterproductive for bitcoin adoption, says a former Visa exec (Forbes)

Analogs The latest on the economy and traditional finance

Hedge fund legend Druckenmiller says inflation could hit 10% due to “the merging of the Fed and the Treasury” (CNBC)

Trump policies added $3.9T to U.S. budget deficits pre-Covid, $2.7T since (Committee for a Responsible Federal Budget)

Money printing “will probably go `more brrr’ even after the election” (CoinShares)

Leftist Mexican President Lopez Obrador proves deficit hawk, aims for budget surplus despite uncertain recovery (Bloomberg)  ​

Second round of $1,200 stimulus checks in U.S. had bipartisan support. Now they could be a longshot​​​​​​​ (CNBC)

China Up Close: Five things Xi pledged never to allow the U.S. to do​​​​​​​ (Nikkei Asian Review)

Tweet of the Day Related Stories

• Ether Traders May Be Hedging Against DeFi Slowdown: Analyst
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Security token platform tZERO announced Thursday the Financial Industry Regulatory Authority (FINRA) has approved its application to launch a retail broker-dealer subsidiary, tZERO Markets. 

A majority-owned subsidiary of U.S. online retailer Overstock, tZERO also runs a non-custodial crypto exchange app that supports bitcoin, ethereum and ravencoin. 

• In a press statement emailed to CoinDesk, tZERO said the broker-dealer subsidiary will also offer investment banking and placement agent services to token issuers for capital raising activities.
• Because the subsidiary is registered with the SEC and has now been granted FINRA’s blessing, tZERO CEO Saum Noursalehi said the firm expects tZERO Markets to launch its services in the coming months.
• The statement added that depending on regulatory review, the platform’s launch would be web-based and later expanded to include Android and iOS devices.

Read more: tZERO Slashes Jobs, Salaries as It Gears Up for Another Funding Round

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• tZero

With U.S.-China tensions continuing to burn, some investors are feeling the heat. 

Friction between the world’s two largest economies has taken a toll on venture funds investing in non-crypto startups. Investment in the blockchain industry, however, may be less affected. Crypto companies’ unique fundraising processes and decentralized nature provide some protection from geopolitical risks, according to China-focused crypto and blockchain investors. 

The Trump administration recently sanctioned Chinese officials because of Hong Kong’s new security law. Separately, the U.S. warned the global community against using Chinese technology and tried to force Chinese companies to sell parts of their business. Other western countries are beginning to follow suit. China has kicked out major American media outlets and closed the U.S. Consulate in Chengdu. 

Related: Tech Mahindra to Offer Blockchain Solutions on AWS

China-focused venture funds have seen low capital inflow due to investment restrictions on U.S. pension funds, while Chinese companies will have to go through a more rigorous vetting process if they wish to go public on Nasdaq or New York Stock Exchange in the U.S. This tightening comes on top of the COVID-19 pandemic, which has already taken a toll on cross-border investment. 

Six U.S.-dollar funds with investments in China have looked to raise capital this year compared to 21 last year. The State Department has asked U.S. universities and colleges to divest their Chinese holdings due to stricter scrutiny from the Trump administration and potential delisting of all Chinese companies on U.S. exchanges. The warning came on the heels of a ban on Chinese short-video platform Tik Tok and Tencent’s messaging app WeChat.

While it is difficult to obtain comprehensive data on the scope of U.S.-China crypto investment, there have recently been a few notable deals. Jump Trading, a U.S.-based security and cryptocurrency market maker for Robinhood, announced Thursday it would invest in decentralized exchange Serum, which has a large presence in Hong Kong. California-based funds Paradigm and Pantera led a $28 million Series A round in Hong Kong crypto startup Amber Group in February. Meanwhile, Hong Kong-based blockchain investment firm Hashkey participated in crypto lender Blockfi’s $50 million Series C in August. 

Due to more lenient regulations on crypto trading and financial convenience in Hong Kong, some Chinese crypto and blockchain funds and crypto firms are based there rather than in mainland China.  Companies might headquarter themselves in Hong Kong to take advantage of its regulatory regime and status in the financial world, when they are actually from, or subsidiaries of companies in, mainland China.

Decentralization

Related: US Antitrust Chief Says Protecting Blockchain From Competitive Abuses Is Top Priority

The White House recently directed a retirement savings fund to stop investing in Chinese companies, citing threats to national security. But these restrictions don’t necessarily pose a threat to crypto startups.  

“A pension fund might find a hard time in allocating assets but it is a broad phenomenon that those funds do not invest in crypto regardless of the U.S.-China relations,” says Haseeb Qureshi, managing partner at Dragonfly Capital Partners, an Asia-focused crypto venture capital based in San Francisco. 

Typical institutional investors for crypto and blockchain funds are crypto exchanges and the investment firms that don’t receive capital for large pension funds or endowments, Qureshi said. 

Read more: China Aims to Be the World’s Dominant Blockchain Power – With Help From Google, Amazon and Microsoft

Decentralized ownership structure makes crypto projects immune to geopolitical risks, said Sharlyn Wu, chief investment officer at Huobi, one of the largest crypto exchanges by volume in the world. 

“Community-driven projects, especially the decentralized fiance protocols such as YFI, have a tendency to [avoid] venture capital firms,” Wu said. 

Venture funds normally take a stake in a firm and help it grow its business, something not possible with decentralized projects, Wu said.

“However, crypto is about the decentralized network and you can’t really track down a particular group of people in a country,” she said.  

National pride

Western crypto projects often appeal to Chinese investors. 

“Historically, there are relatively more innovative crypto projects from the West in general and these projects would attract investment from the East where they tend to have more liquidity,”  said Omer Ozden, CEO of RockTree Capital, an investment firm with a focus on blockchain technology in Asia. 

“Chinese crypto investors are very enthusiastic and active, reflecting the FOMO (Fear of Missing Out ) phenomenon.” 

But in China, political tensions occasionally bleed into the business sphere. If Chinese investors start favoring homegrown projects, that could spell trouble for U.S. crypto projects.

“The tension in some way increases the viability of the Chinese crypto teams,” Qureshi said. “In part it means there would be more willingness within China to support some of the homegrown Chinese projects.” 

Read more: A WeChat Ban Should Be the Moment for Decentralized Tech. But It’s Not.

There have been a slew of incidents where foreign companies have faced Chinese nationalist wrath because of political events. 

In 2008, Chinese consumers protested French supermarket chain Carrefour when pro-Tibet Independence protestors snatched the torch during the Olympic relay in France. Last October, the National Basketball Association (NBA) took heat from China because of a tweet from Daryl Morey, the general manager of the Houston Rockets, who posted an image that supported protesters in Hong Kong. 

While crypto is not fully shielded from political controversy, it helps that startups are not necessarily associated with one particular country. The crypto community is decentralized and global from the get-go and it is unlikely that it will be affected for geopolitical reasons, Wu said. 

“If your project is genuinely innovative, it will transcend beyond culture and languages,” she said. 

Strategic technology

One of the reasons why the U.S. wants to ban TikTok and WeChat is because they have so much data from American users. Permissionless blockchains, by contrast, aim to avoid the problem of honeypots of personal data. 

“The Committee on Foreign Investment in the United States (CFIUS) has not touched crypto,”  Qureshi said. “On a broader level, the U.S. just doesn’t see crypto or blockchain in particular as a strategic threat and we have pretty much shielded from any of that nonsense.” 

Even if there is a massive amount of data on a decentralized public blockchain, such projects decrease the reliance on one company, such as Facebook or Tik Tok. 

Read more: China’s Digital Currency May Come With Hardware Wallets as Well

“You don’t need to trust anyone and you can just trust the code,” Wu said. “The code is open-source and on-chain. Everyone can check it out.” 

However, there are limitations on this decentralization, even for public blockchains. Some of the platforms will need to store their users’ data through centralized cloud service providers such as Google Cloud, Amazon Web Services and Alibaba Cloud, which are subject to potential government surveillance. A government could also shut down a blockchain-based platform by cutting its Internet services in the country.

Enterprise blockchain

Compared to public decentralized blockchains, enterprise blockchains led by particular entities are more vulnerable to geopolitical tensions. 

Any centralized businesses, including those that develop enterprise blockchain, are subject to local regulatory and legal requirements as much as any other regular tech firms, Wu said. 

Enterprise blockchain, which is also called permissioned or private blockchain, has been widely used for data management such as record tracking, and comes with smart contracts that enable automated financial services transactions. They are typically governed by a small group of companies and only a handful of people have access to the data stored on-chain. 

See also: The Latest on the Global Economy’s Most Contentious Relationship

Various tech conglomerates have developed their own enterprise blockchains, including IBM-backed Hyperledger, Ablibaba’s Ant Chain and Baidu’s XuperChain. The Chinese government is a major supporter of permissioned blockchain technology, and the Beijing municipal government recently launched a blockchain-based platform. Supported by Huawei Cloud, it will be able to manage data ranging from medical records to property registration. 

Although Chinese enterprise blockchain technology has not yet met with any political resistance for U.S. legislators, experts warned those projects will face higher policy risks if they achieve mass adoption and gather more user data in the future. 

For example, the state-sanctioned blockchain infrastructure project Blockchain-Based Service Network (BSN), uses American cloud services providers such as Amazon Web Services and Google Cloud to store data for the global version of its network. It smoothly rolled out operation in August.

Related Stories

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Swisscom Blockchain, a distributed ledger technology startup owned by telco giant Swisscom, has been awarded a grant from the Web3 Foundation to build a cloud-based protection layer for stakers on the Ethereum-based Polkadot network.

Announced Thursday, the grant will help build Swisscom Blockchain’s Kubernetes Operator for Polkadot, a way of protecting participants involved in proof-of-stake processes on Polkadot and the Kusama testnet against losing their staked tokens if the network is attacked or compromised. 

Something like a distributed denial of service attack (DDoS), for instance, leads to downtime and can mean a validator blockchain node can have its stake slashed. Preventing this is tricky – hence the need for a system of cloud-based “containers” and “sentry nodes,” which can isolate validators while maintaining node connections. 

Related: Polkadot-Based Acala Raises $7M as DeFi Grabs Land on Another Blockchain

The size of the grant was not disclosed. A spokesman for Web3 said that grant teams are allowed to apply in private via a General Grants Program. 

“The Web3 grant was awarded to contribute to the Polkadot ecosystem by submitting an open-source repository that other startups and enterprises can use to setup/manage their own infrastructure in an automated way while providing security best practices for resources hosted in the enterprise,” said Jorge Alvarado, head of technology, Swisscom Blockchain, via email.

“This source code is supposed to be run on the infrastructure of choice of the user, not necessarily Swisscom or any other cloud provider,” Alvarado added.

“Providing Kusama and Polkadot with a Kubernetes Operator contributes to a more robust network,” said Dieter Fishbein, head of ecosystem development at the Web3 Foundation, in a statement. It will help validators “ensure high availability in their operations, and reduce the chances of validators getting slashed for unresponsiveness.” 

Related: Developers Eye Mid-September for Ethereum, Polkadot Bridge Proof-of-Concept

The Ethereum-based Polkadot blockchain is the flagship project of the Web3 Foundation, established in Zug, Switzerland by Ethereum co-founder Gavin Wood. 

“The project Swisscom Blockchain developed is a set of tools to deploy validators and ensure their high availability,” said Fishbein. “This work ultimately makes it easier for enterprises to engage with the Polkadot ecosystem.”

The project has been tested and deployed on the Azure Cloud platform, he added, but it “aims to be platform agnostic.”

Also read: Developers Eye Mid-September for Ethereum, Polkadot Bridge Proof-of-Concept

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Options market data shows increased activity in ether (ETH) puts, or bearish bets. According to one trader, that reflects fears of a drop in prices led by a slump in decentralized finance (DeFi).

• Ether’s put-call volume ratio – a measure of activity in put options relative to calls (bullish bets) – rose to 2.45 on Wednesday.
• That’s the highest level since Oct. 31, 2019, according to data source Skew.
• In other words, more than two put options were traded against every call option – a sign of bearish market sentiment.

• “The message between the lines is likely that traders want a hedge [via put options] against the activity in DeFi, which has been the primary driver of ether prices,” Vishal Shah, an options trader and founder of Polychain Capital-backed derivatives exchange Alpha5, told CoinDesk.
• Indeed, some commentators believe DeFi’s staggering growth has become a price bubble and is unsustainable.
• “DeFi is a rerun of the 2008 asset-backed finance bubble on speed,” blockchain consultant Maya Zehavi tweeted on Wednesday.
• The space faces other issues too, such as congestion and soaring "gas" fees on Ethereum resulting from heavy network usage by DeFi projects and stablecoins.
• In August, miners made over $110 million from fees, according to data source Glassnode.
• Alongside a general crypto market downturn, the total value locked in the DeFi applications has declined sharply from $9.6 billion to $6.11 billion in the past eight days, according to DeFi Pulse.
• Ether’s price fell from $480 to $320 last week.
• However, investors expect deeper price drops, if any, to be short-lived because call options expiring in three and six months are still drawing higher prices than puts.

• The one-month put-call skew, which measures the cost of puts relative to calls, is currently seen at 6.8%, indicating an increased demand for bearish put options.
• But the three- and six-month skews remain well below zero, implying long-term bullish expectations.
• At press time, ether is trading near $365.

Also read: Market Wrap: Bitcoin Makes Headway to $10.3K; Ether Volatility Highest Since May

Related Stories

• First Mover: DeFI ‘Vampire’ SushiSwap Sucks $800M from Uniswap; BitMEX Basis Lags
• SushiSwap Migration Ushers in Era of ‘Protocol Politicians’
• Market Wrap: Bitcoin Makes Headway to $10.3K; Ether Volatility Highest Since May
• 1,000 New Token Pairs Added to Uniswap in One Week; Buyers Beware

Ripple has disputed YouTube’s claims that it knew nothing about the XRP “giveaway” scams, accusing the platform of “willful blindness” after being alerted hundreds of times.

• Ripple took action against YouTube in April, holding the platform responsible for the multiple videos that used its logo and the likeness of CEO Brad Garlinghouse to promote scams that ask victims to send XRP in order to be eligible for a larger amount that, of course, never arrives.
• YouTube filed a motion to dismiss the suit in July, arguing it didn’t knowingly engage in any scams and that, as an online platform, it can’t be held liable for third-party content.
• But in a response to YouTube’s motion, filed Tuesday, Ripple contested this claim.
• The blockchain payments firm argued that the 350 takedown notices it sent to Youtube mean it knew all about the scams, but opted not to act, or only did so weeks or months later.
• YouTube is accused of “willful blindness,” with Ripple alleging it disregarded or ignored explicit warnings about the scams happening on its platform.
• At its worst, multiple giveaway scams were uploaded to Youtube every day, some receiving tens of thousands of views in a matter of hours.
• Ripple claims that users were defrauded of millions of XRP, worth hundreds of thousands of dollars, and the company suffered serious reputational damage as a result of YouTube’s failure to act.
• The filing also alleges that YouTube profited from earning ad revenue from the scam videos and “materially contributed” to the situation by giving a verified “tick” to one of the giveaway channels.
• Ripple isn’t the only company accusing YouTube of not doing enough to stop such scams.
• Apple founder Steve Wozniak, along with 18 other plaintiffs, is also seeking punitive damages from the platform for bitcoin scam videos that also used his likeness.

See also: Ripple Says XRP Lawsuit Based on ‘Unsupported Leaps of Logic’

Read Ripple’s response in full below:

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BitMEX may be one of the largest crypto derivatives platforms, but it offers the lowest return on bitcoin “cash and carry” trades.

Currently, the return offered by Seychelles-based BitMEX on a three-month basis is 2.71% annualized, half of what rival exchanges like Binance, FTX and Deribit are offering, according to data source Skew.

Cash and carry arbitrage involves buying an asset in the spot market against a sell position in the futures market when the latter is trading at a premium to the spot price. Essentially, carry strategies profit from futures basis – the spread between prices in futures and spot markets – which evaporates on the day of the expiry.  

Bitcoin as BitMEX’s sole collateral

Related: Pandemic Will Speed Bitcoin Adoption, Says DBS Bank Economist

BItMEX’s policies and recent history appear to have affected traders’ behavior, thus keeping rates low on BitMEX relative to other platforms. 

“We believe that the difference in the BitMEX premium relates to their single collateral offering,” Patrick Heusser, senior cryptocurrency trader at Zurich-based Crypto Broker AG, told CoinDesk in a Twitter chat. 

BitMEX only accepts bitcoin as collateral, meaning traders can pay or receive margin, profit and loss solely in bitcoin. As such, when the market drops, the collateral loses value, forcing longs to exit by taking offsetting positions. That, in turn, leads to bigger price decline and more “long liquidations,” a forced unwinding of buy positions akin to what can happen in a margin call on traditional futures exchanges. 

“During the March selloff, the network was clogged up, and the liquidation cascade drove prices lower at a faster pace. Assuming it was a closed ecosystem, the danger was that bitcoin’s price on the BitMEX platform could have gone to zero, resulting in a complete wipeout of collateral value and all open positions,” Heusser said. 

Related: Market Wrap: Bitcoin Makes Headway to $10.3K; Ether Volatility Highest Since May

On March 12, bitcoin fell by nearly 40% to levels below $4,000. The sudden decline, which began from around $7,800, triggered record buy-sell liquidations worth $876 million on BitMEX. These forced closures likely aggravated the price drop. 

Hence, traders are less aggressive in building long on BitMEX as compared to other exchanges like FTX, where they can pledge stablecoins and cryptocurrencies as collateral. That helps mitigate risk arising from sudden price collapse. 

“There is a residual risk market makers have if they get ‘too long’ on BitMEX. Therefore, the general pricing of those futures is slightly lower compared to the multi-collateral platforms,” said Heusser. 

Other platforms

Binance, the leading global cryptocurrency exchange by trading volume, launched a cross-collateral program on its futures platform earlier this year. The feature allows users to trade futures using crypto assets from their Binance Exchange Wallet as collateral, without having to sell any coins. 

Deribit, the biggest exchange by options volume, also offers a single collateral mechanism like BitMEX. Even so, the futures’ basis on Deribit is significantly higher compared to BitMEX. 

That’s possibly due to differences in liquidation mechanisms.

On Deribit, positions are liquidated incrementally. “The position will be liquidated in fractional steps to avoid unnecessary reductions, on condition that partial liquidation ensures the margin balance is above the required maintenance margin level,” according to the official blog. A full liquidation occurs as the trader’s margin balance is below the maintenance margin. 

That incremental liquidation allows traders to express their bullish view more aggressively, causing futures premium to widen. BitMEX does not offer a partial or incremental liquidation mechanism. 

BitMEX’s large market share

Further, BitMEX’s high trading volume and order book depth could be responsible for the low basis compared to Deribit. 

As of Tuesday, BitMEX accounted for 14% of the global bitcoin futures trading volume of $16 billion, while Deribit contributed just 2%, according to data source Skew. Further, at BitMEX, the average daily spread between buy and sell orders on bitcoin futures for $10 million quote size is currently 0.4% versus 2.94% on Deribit. 

That said, the low basis on BitMEX does not represent low credit risk. If anything, it indicates the opposite due to the single-collateral structure. 

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A research paper from the University of South Australia suggests blockchain technology needs to be refined so it can better protect privacy.

• Described in a university blog post on Thursday, the research findings show the very features that make blockchain secure are also problematic for personal privacy, particularly under European standards.
• The work was conducted by emerging technologies researcher Dr. Kirsten Wahlstrom in collaboration with Dr. Anwaar Ulhaq and Prof. Oliver Burmeister of Charles Sturt University, also in Australia.
• The team found emerging technologies such as blockchain and the internet of things possess the potential to compromise people’s privacy in the way they immutably store data.
• That’s because blockchains use details of previous transactions, including data that can be used to identify participants, to verify future transactions.
• “Once someone’s details are embedded in a blockchain, the system never forgets,” Wahlstrom said. “Yes, those details might be encrypted, but they are also part of an irreversible ledger, and one that’s on the cloud.”
• The paper references recent legal developments in the EU meaning citizens possess the “right to be forgotten” in relation to their internet-hosted data.
• So, as long as a blockchain exists, it conflicts with the European ruling that people have the right to retract their data, Wahlstrom said.   
• In August, digital rights group the Electronic Frontier Foundation raised similar concerns over a proposed California law allowing medical records to be stored on a blockchain.
• Standards need to be cemented now in order develop a clear distinction on what privacy is, as well as what governments and organizations are trying to protect and why, Wahlstrom noted.
• “The main problem is, we’re still struggling to understand what ‘privacy’ actually means in an online world,” she added.
• The research cited Holochain as an example of technology that might address the privacy issue.
• The project uses distributed hash tables, a form of a distributed database that can record data associated with a key on a network of peer nodes, and avoids the all-encompassing “ledger” of a blockchain.
• “This allows individuals to verify data without disclosing all its details or permanently storing it in the cloud,” Wahlstrom said, “but there are also still a lot of questions to answer about how this affects the long-term viability of the chain and how it obtains verifications.”

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“A pandemic-led acceleration of adoption.” 

That’s how Singapore-based DBS Bank describes the current state of digital assets in its quarterly report on cryptocurrencies published in August.

It’s interesting to hear such an observation from a respected multinational bank and its chief economist, Taimur Baig. However, there have lately been murmurings about certain large financial institutions – particularly in places like Singapore, Switzerland and Germany – fielding a new wave of demand for crypto, filtering through from smaller private banks and wealthy clients.

Related: Market Wrap: Bitcoin Makes Headway to $10.3K; Ether Volatility Highest Since May

On the subject of cryptocurrencies like bitcoin (BTC), Baig identified two distinct phases of demand: pre-pandemic and post-pandemic.

“Pre-pandemic demand was largely speculative. People saw bitcoin had a spectacular run and wanted to be part of that game, so what’s wrong with putting in 1% of assets under management [into BTC],” Baig said in an interview. “But I think post-pandemic is beyond speculative. It’s more about, ‘This thing has fixed circulation, it will not be debased.’ People are worried about dollar outflow and wondering if they should hold crypto in addition to gold as a safe-haven currency.”

Read more: Bitcoin’s Correlation With Gold Hits Record High

DBS isn’t the only bank to notice this trend. Singapore-based digital asset bank Sygnum, which holds a banking license from the Swiss Financial Market Supervisory Authority, echoed this view.

Related: Bitcoin News Roundup for Sept. 9, 2020

“Since the outbreak of COVID-19 there has been increased interest from family offices and private individuals who see digital assets as an alternative and a way to protect against a worrying inflation risk,” said Martin Burgherr, co-head of clients at Sygnum Bank. “Now that banks are awakening from the lockdown, we have had a significant uptick in national and international banks asking us to help in a B2B setup, to enable their clients to invest in digital assets.”

Digital gold

Baig – who has previously held senior economist roles at the Monetary Authority of Singapore, Deutsche Bank and the International Monetary Fund – likes to zoom out and take a macro view of digital currencies and the potential play of central bank digital currencies (CBDC).

There has been a steady rise in gold, while fixed-income yields are heading towards zero, Baig said, and such conditions have also caused “bitcoin to come back quite convincingly.”

Read more: PTJ on BTC: Bitcoin Is Now the Macro Big Bet

It’s tempting to look at bitcoin through the lens of foreign exchange (FX), as yet another currency with an exchange rate against the U.S. dollar. But this is mistaken, Baig said, since a regular sovereign currency has accepted economic means of evaluation that determine productivity and long-term growth.

“You can’t value cryptocurrencies like that,” Baig said. “While they can have this credibility with a system-based circulation, they’re still not attached to a country’s fortune. So, of course, they will not go and up and down the way the U.S. economy goes up and down. From that perspective, it’s more akin to gold than an FX in my view.”

Dollar pegging

For countries experiencing a currency crisis or episode of hyperinflation, pegging to the U.S. dollar may bring some short-term credibility, but it doesn’t work out well for a lot of currencies, Baig noted, adding:

“If you look at Venezuela or even Lebanon, which is in the middle of a massive financial crisis, could you, at some point going forward, conceive that instead of linking your currency to the U.S. dollar, you link it to a cryptocurrency?” 

Provided that transactions can be viewed on the blockchain there are possibilities, said Baig. “As long as it’s tied to a limited-circulation currency, I see some similarities between that sort of anchoring versus anchoring against the US. dollar,” he said.

Digitizing the redback

The topic of CBDCs is also highly politicized, particularly between the U.S. and China.

There are two dimensions to think about when it comes to China and its CBDC efforts at “digitizing the redback,” said Baig. Firstly, a digital renminbi (e-RMB) is a way that China’s central bank, the People’s Bank of China (PBoC), can exercise some control over the country’s sprawling fintech ecosystem. 

“There’s so much going on at the Alipay, Tencent level,” Baig said. “Deposits are being made by those fintechs, they are extending credit, so it doesn’t really matter what PBoC does with respect to interest rates. It’s like a whole parallel universe.”

Read more: China’s Digital Currency May Come With Hardware Wallets as Well

The other dimension concerns the potential for an e-RMB to become a way for certain countries to bypass the U.S. dollar settlement mechanism, which makes them “somehow answerable to the Southern District [Court] in New York” or the Securities and Exchange Commission,” said Baig. 

“The U.S. dollar has been used repeatedly as a weapon against Iran against other countries and also against China,” he said. “I think now with U.S.-China tensions so high the case for e-RMB becomes even more compelling.”

Read the full report:

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