CoinDesk Crypto

Signature Bank extended dozens more loans under the federal Paycheck Protection Program (PPP) to cryptocurrency businesses than was previously reported. 

Around $20 million of the $1.9 billion in PPP loans the bank extended was given to roughly 40 firms in the digital asset space, said CEO Joseph DePaolo. The executive would not name the firms it gave PPP loans to or give an exact number of firms who took out a loan through the relief program. (Signature’s $1.9 billion in loans accounts for roughly .55% of the entire $350 billion that was disbursed through the U.S. Small Business Administration.)

Public records show that Signature issued loans to a number of prominent firms in the space, including Ethereum venture studio ConsenSys, VC firm Polychain Capital and crypto lender Celsius Network.

Related: The OCC’s Crypto Custody Letter Was Years in the Making

DePaolo said the bank’s crypto PPP loan volume was due to other banks serving crypto not having the resources to offer the same kind of program. Previously, CoinDesk reported that at least $30 million had been extended to crypto companies by several banks including JPMorgan Chase, Silicon Valley Bank, Cross River Bank and others. (CoinDesk also reported Signature had extended only nine PPP loans to crypto firms.)

Not PPP-proof

The news further reveals a deeper need in the crypto industry for relief in the wake of the global economic crisis caused by the COVID-19 pandemic. Likewise, Signature’s program proves the bank’s commitment to the digital asset space. 

Read more: Blockchain Startups Got $30M+ in US ‘PPP’ Bailout Loans

While Signature’s business is primarily focused on serving high-net-worth individuals and it does not call itself a crypto bank or refer to its digital asset team as a crypto banking division, the bank did rake in $1 billion in deposits from the sector in the second quarter 2020 alone. 

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

“I believe I said it about a year and a half ago, that if you weren’t into blockchain technology and the digital world in five years, you would have a problem as a bank. There’s three and a half years left, and it may be sooner,” DePaolo told CoinDesk in a recent interview. “I think the situation we have right now with this pandemic and the quagmire, it’s going to make the public look at digital currencies.”

Signature Bank’s crypto awakening

In January 2018, the bank hired Joseph Seibert as the senior vice president for its digital asset banking team. Seibert started with three employees and has grown the team to 12 as of August 2020. He was previously a vice president at similarly crypto-friendly Metropolitan Commercial Bank.

The bank’s Signet payments platform is a proprietary blockchain based on the Ethereum protocol which allows for fee-less instant fiat settlement. While it’s popular within the digital asset space, firms outside of the space, such as renewable energy companies, use Signet to settle thousands of transactions a day without dealing with the payment friction between suppliers and wholesale distributors. 

Read more: Signature Bank’s Crypto Deposits Grew $1B in Q2

Seibert added that Signet has the same capabilities as the Silvergate Exchange Network but is built on blockchain versus the bank’s internal systems. 

“We have the same ecosystem they have and did it in under three years,” he said. 

‘Octopus’ approach

The bank started out by serving exchanges, which Seibert calls “the octopus” because of how many firms that need banking services in crypto are tied directly to the exchanges. The bank now serves proprietary traders, hedge funds, custody firms, mining farms and other verticals in the space, he said. 

Signature does treat firms in the digital asset space carefully, to offset transactional costs for traditional payment rails (wires and ACH payments). For instance, digital asset exchanges on Signet have to keep 30% of their balance in a non-interest bearing account. 

Read more: Institutional Trading House ErisX Joins Silvergate Exchange Network

Signature’s PPP program and recent growth in deposits from crypto customers makes it confident as a leader in the cryptocurrency banking space, Seibert said. 

“There’s more bank competition overseas, but they are always going to need the U.S. dollar on-ramp,” he said. 

The bank is now looking to expand its Signet offering beyond U.S. dollars with the launch of a foreign currency exchange wallet sometime in the near future. A number of the bank’s clients are FX liquidity providers, and Seibert believes foreign exchange is a large component of the crypto space, with some FX trades still taking weeks to settle if a bank is not crypto-friendly. 

“Ideally we would like to launch that sooner rather than later, hopefully next year,” Seibert said of the new forex service.

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The Bank of Korea is moving to a more technical phase of its accelerated push to develop a central bank digital currency, or CBDC.

• The Korea Times reported Monday that the Bank of Korea (BoK) is now seeking a consulting partnership to bring the second phase of its CBDC plan to fruition.
• Once through the application process, the successful local company would assist the central bank in building the architecture for the CBDC, which is being prepared in the face of China’s drive to be the first major nation to launch a digital version of its fiat currency.
• China’s “DC/EP” digital yuan system is now in testing at banks and commercial enterprises in a number of regions.
• The first review phase of the BoK’s work on a CBDC was completed last month, per the report, and the findings will feed the next stage of the work.
• The architecture would set out aspects of the planned system such as security, how data is handled and possible applications.
• The Times said a pilot is planned for late 2021.
• “The BOK will team up with a consulting partner to map out the overall work process and architecture to operate the digital currency system,” a BoK official was quoted as saying.
• They would also arrive at “specific action plans” to deliver the pilot in time, they added.
• Will the development has been hastened this year, the central bank doesn’t plan to launch a CBDC soon, but is rather preparing the ground for a time when other national currencies go digital.

Also read: Chinese Bank Disables Digital Yuan Wallet After Soft Launch Draws Wide Attention

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You’re reading First Mover, CoinDesk’s daily markets newsletter. Assembled by the CoinDesk Markets Team and edited by Bradley Keoun, 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.

Market moves

Cryptocurrency exchange Huobi is taking aim at competitor OKEx in the business of trading bitcoin futures and other derivatives contracts, opening up a new front in a longstanding rivalry between the Chinese-led exchanges. 

OKEx, which is led by Chinese executives and based in Malta, is the world’s biggest crypto derivatives exchange, with outstanding contracts valued at $1.26 billion, according to the data site CoinGecko. Huobi, also led by Chinese brass but based in Singapore, is close behind, tied for second place with another exchange, BitMEX, at $1.25 billion. 

Related: US Stocks Closing on Bigger August Gain Than Bitcoin

In a report this month, Huobi said it has “managed to push new boundaries against other well-established exchanges when it comes to futures trading volume.” Huobi is already beating OKEx in a few market segments, according to the report, including “coin-margined futures” – where traders can post their initial down payment, known as margin, using cryptocurrencies. Huobi claims to also regularly beat OKEx in weekly and quarterly bitcoin futures contracts.

“Before Huobi launched its futures contract in December 2018, OKEx had the largest market share of the world,” Ciara Sun, vice president of Huobi Global Markets, told CoinDesk in a Telegram message. “Huobi Futures always looks up to the best of the market.” 

The battle for supremacy in cryptocurrency futures – and China – adds to the tension between the two exchanges, which have been at loggerheads at least since 2018, when then-OKEx CEO Chris Lee defected to Huobi to become vice president of global business development.

OKEx CEO Jay Hao, in a company update in March, called Huobi “our doppelgänger,” insisted “imitation was the sincerest form of flattery” and said he “would like to think that Huobi was able to withstand this market volatility by following our footsteps.”

Related: Someone Just Lost $16M in Bitcoin by Using a Malicious Install of the Electrum Wallet

Experts on China’s often-murky cryptocurrency markets say the rivalry between the two exchanges likely stems from the fight for customers in the world’s second-largest economy. 

“There’s a natural friction between OKEx and Huobi,” Matthew Graham, chief executive officer of Beijing-based crypto consultancy Sino Global Capital, told CoinDesk in an email. “While they have both pushed to enlarge their international footprints, they still prioritize their Chinese user base.” 

Read more: Huobi and OKEx Battle for Supremacy in China

– Muyao Shen

Bitcoin watch

While bitcoin is eyeing an August gain for the first time in three years, the cryptocurrency is lagging U.S. stocks over the month. 

• Bitcoin is trading near $11,610 at press time, up 2.3% on the month, according to CoinDesk’s Bitcoin Price Index.
• It was the first time the cryptocurrency gained in August since 2017, when prices rallied by 66%. 
• As of Friday, the S&P 500, Wall Street’s benchmark stocks index, was eyeing a 7.25% gain for August, as per data provided by TradingView.
• Bitcoin faced rejection at highs above 12,400 on Aug. 17 and has been restricted largely to a range of $11,100 to $11,800 ever since.
• The rally from July lows below $9,000 has stalled with the weakening of demand from institutions and macro traders, as indicated by the recent 30% decline in open positions in futures listed on the Chicago Mercantile Exchange.

Click here for the full story: U.S. Stocks Closing on Bigger August Gain Than Bitcoin

– Omkar Godbole

Token watch

SushiSwap (SUSHI): Alternative to Uniswap is poised to become next DeFi meme with new liquidity incentive.

YearnFinance (YFI): Delta Exchange launches perpetual swaps for YFI tokens, with 20x leverage and margined and settled in bitcoin, as Forbes calls YFI ” the altcoin star.”

Chainlink (LINK): DeFI oracle provider buys Cornell University’s privacy oracle solution DECO for undisclosed sum, as Oasis Network announces integration. 

Ethereum Classic (ETC): Frequently-attacked blockchain gets hit by third 51% attack in a month. 

What’s hot

Japan’s SBI Holdings launches short-term crypto derivatives (CoinDesk)

Inflation will outstrip both bond yields and corporate earnings for the foreseeable future (CoinDesk)

Bitcoin locked in DeFi rises to record 55,000 as HODLers hit with FOMO (CoinDesk)

Chinese bank disables digital yuan wallet after soft launch drawing widespread attention (CoinDesk)

Mr. Powell, if you want higher inflation, give people money (CoinDesk)

Analogs The latest on the economy and traditional finance

Tens of thousands of furloughed U.S. jobs at risk of becoming permanent (WSJ)

Worries persist over whether ratings firms are accurately assessing the risks in CLOs (WSJ)

American households and businesses are too indebted to cope with sustained deflation (CoinDesk)

Wall Street’s fear gauge is rising again, even as stocks keep pushing higher (Reuters)

Australia’s reserve bank says home prices could fall as much as 40% (News.com.au)

Inflation needs to average 3.2% over next five years to average 2% over decade through 2025 (WSJ) 

The Fed is basically “green lighting” consumer prices, and inflation expectations are rising in the bond market (Bank of the West)

Tweet of the day Related Stories

• Huobi and OKEx Battle for Supremacy in China
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People may like the idea of blockchains and web 3.0, but they tend to hit an immediate obstacle in the form of private cryptographic keys and mnemonic seed phrases that cannot be lost, forgotten or divulged at any cost. 

Private key management specialist Torus replaces that jarring user experience with what appears to be a familiar single login, but one that’s reinforced behind the scenes by a clever distributed architecture built for web 3.0.

Announced Monday, the Singapore-based startup has released a one-click Chrome browser extension for its Torus wallet and added a new product called tKey, a custom version of two-factor authentication (2FA). The extension will also work in Brave.

Related: Someone Just Lost $16M in Bitcoin by Using a Malicious Install of the Electrum Wallet

Read more: Torus Goes Blockchain-Agnostic With New DirectAuth Dapp Login Tool

When information is exchanged online, users don’t want to know about the underlying public key infrastructure (PKI) – and so it should be with blockchains and the next generation of the internet, or “Web3,” said Torus Labs CEO Zhen Ju Yong.

But while people don’t want that tricky user interface, they do, of course, want to control the process in a decentralized manner, Zhen added.

“Our goal is to make key management convenient to the mainstream user – my parents, for example – to be able to use crypto, while still retaining the level of security and non-custodiality which is needed for decentralized applications,” Zhen said in an interview. “We’ve always seen ourselves more as a key management company rather than a wallet. We are kind of a step up for wallets, more like an infrastructure layer.”

How Torus works

Related: LINE Launches Digital Asset Wallet and Blockchain Development Platform

At a high level, Torus splits and distributes sensitive data needed to construct a user’s private key between the user and nodes on the Torus network, which includes Binance, Ethereum Name Service (ENS), Etherscan, Matic Network, Ontology, Skale, Tendermint Core and Zilliqa. 

Distributed key generation is generally divided into three parts, or “secret shares” (Shamir’s Secret Sharing, or SSS, for the technically conversant), with two held by the user and the third further split across the Torus network. 

Read more: Torus Launches to Bring One-Click Login to Web 3.0

The new tKey release allows users to easily add and control incremental layers of security, a kind of customizable 2FA that works like a smart contract, said Zhen. An obvious extra security layer to add would be a mobile phone, which could store a user’s additional secret share in its secure enclave, protected by a biometric passcode. If the user has more than one mobile device, they could add as many layers of security as they want. 

Similar to other 2FA systems, as long as the user has access to two out of three of their secret shares, they will be able to retrieve their private keys and login.

‘On the shoulders of giants’

For many users, logging into dapps is done by authenticating with MetaMask, the kind of default Ethereum browser wallet. Torus has built on top of MetaMask (although it should be mentioned that the ConsenSys-backed plugin recently changed its licensing) to create its new Chrome extension.

“We greatly appreciate the MetaMask team’s hard work and development,” Torus wrote in a press statement. “However, due to Torus’ necessity of being open source, Torus Extension (forked from 22 June 2020) continues to use its older MIT license.”

Zhen described the arrangement as “building on the shoulders of giants” and stressed that Torus is not seeking an edge over MetaMask. 

“By no means do we feel like we want to compete with MetaMask. We’re actually in talks with MetaMask with regards to their licensing changes, and about potentially integrating,” he said.

Read more: Multicoin, Binance, Coinbase Invest in Startup Keeping Private Keys Secure

In July of last year, Torus raised a $2 million seed round led by Multicoin Capital including Coinbase Ventures and Binance Labs, while testing the first version of hassle-free login using Gmail, akin to OAuth protocol on the internet. 

Torus has always had a close relationship with Binance, which invested $500,000 in the seed round, and the largest exchange by volume is now playing a central role in the new Torus product releases. 

“We’re super-excited that Binance actually co-developed tKey with us, and it’s going to be an open-source SDK,” said Zhen. “We are launching this together. Along with this SDK, Binance itself and the Chrome extension for Binance DEX and Smart Chain is going to have both Torus and tKey integrated into it as one of the core key management flows.”

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While bitcoin is eyeing an August gain for the first time in three years, the cryptocurrency is still lagging U.S. stocks for the month.

• Bitcoin is trading near $11,610 at press time, representing a 2.27% gain on a month-to-date basis, according to CoinDesk’s Bitcoin Price Index.
• The cryptocurrency last printed gains in August in 2017, when prices rallied by 66%.
• As of Friday, the S&P 500, Wall Street’s benchmark stocks index, was eyeing a 7.25% gain for August, as per data provided by TradingView.

• Bitcoin faced rejection at highs above 12,400 on Aug. 17 and has been restricted largely to a range of $11,100 to $11,800 ever since.
• The rally from July lows below $9,000 has stalled with the weakening of demand from institutions and macro traders, as indicated by the recent 30% decline in open positions in futures listed on the Chicago Mercantile Exchange.

• On Friday, CME-listed open interest was $653 million, down from the record high of $948 million reached on Aug. 17, according to data source Skew.
• Bitcoin’s rally from $9,000 to $12,400 observed in the four weeks to Aug. 17 was accompanied by a 150% surge in open interest.
• It’s possible investors have been rotating money out of bitcoin and into cryptocurrencies linked to the white-hot decentralized finance (DeFi) space.
• The Lend token from decentralized lending platform Aave has gained 150% this month.
• Other DeFi names like oracle provider Chainlink’s LINK token and lending project Compound’s COMP token have added 108% and 55%, respectively.
• Ethereum’s ether cryptocurrency is also outshining bitcoin on a monthly basis with over 20% gains.
• Looking ahead, however, negative-yielding government bonds are expected to continue powering gains in both bitcoin and stocks.
• And bitcoin, a perceived store of value, may draw stronger buying interest than stocks, with expectations for U.S. inflation beginning to accelerate in response to the Federal Reserve’s recent decision to signal tolerance for higher prices.
• Bitcoin is still down 40% from its record high of $20,000 and looks relatively undervalued compared to U.S. stocks, which are trading at record highs even amid the ongoing coronavirus epidemic.
• A potential correction in stocks still poses downside risks to bitcoin, according to Joel Kruger, a currency strategist at LMAX Digital.
• “Bitcoin is still an emerging asset and therefore still somewhat exposed in periods of risk-off,” Kruger told CoinDesk in a Telegram chat.

Also read: Winklevoss Brothers Say Bitcoin Could Reach $500K as the ‘Only’ Long-Term Inflation Hedge

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An Electrum wallet user claims to have lost a fortune in bitcoin after installing an older version of the software from a malicious source.

• In a Sunday post on GitHub, the individual described the loss of more than 1,400 bitcoin (worth around $16.2 million at press time) as a result of “foolishly” installing an old version of the lightweight wallet.
• Going by the username “1400BitcoinStolen,” they described how a pop-up message asked to update their security prior to being allowed to transfer any funds.
• Upon installing a purported “security update” for the wallet, it immediately triggered a transfer of the user’s entire balance to an address in the possession of a hacker.
• Binance’s CEO Changpeng “CZ” Zhao has moved to blacklist the stolen funds from his exchange, stating users should “beware of this Electrum official update.”
• 1400BitcoinStolen said they had contacted blockchain analytics company Coinfirm for assistance in tracking the bitcoin and were awaiting a response.
• Electrum has been around since 2011 and has gone through multiple updates while also being unable to stop bad actors exploiting previous versions by Sybil attacks using malicious servers.
• Another member on the GutHub thread, “gits7r” – who seems to be associated with Electrum – said the problem comes from the decision by the team early on to allow users to “run their own servers or use servers that they trust.”
• If users download a version from a different source than electrum.org and don’t check signatures, they may “install a backdoored Electrum,” gits7r said.
• In 2018, the Electrum network suffered such an attack from a bad actor who created multiple fake servers on the Electrum network that saw 245 bitcoin siphoned from unsuspecting victims.

See also: Crypto Wallet Maker Ledger Loses 1M Email Addresses in Data Theft

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• Meet Torus, the One-Click Blockchain Wallet Trying to Make Web3 as Easy as Chrome
• US Stocks Closing on Bigger August Gain Than Bitcoin
• DeFi Is a ‘Complete Scam,’ Says Controversial Entrepreneur Craig Wright

An Electrum wallet user claims to have lost a fortune in bitcoin after installing an older version of the software from a malicious source.

• In a Sunday post on GitHub, the individual described the loss of more than 1,400 bitcoin (worth around $16.2 million at press time) as a result of “foolishly” installing an old version of the lightweight wallet.
• Going by the username “1400BitcoinStolen,” they described how a pop-up message asked to update their security prior to being allowed to transfer any funds.
• Upon installing a purported “security update” for the wallet, it immediately triggered a transfer of the user’s entire balance to an address in the possession of a hacker.
• Binance’s CEO Changpeng “CZ” Zhao has moved to blacklist the stolen funds from his exchange, stating users should “beware of this Electrum official update.”
• 1400BitcoinStolen said they had contacted blockchain analytics company Coinfirm for assistance in tracking the bitcoin and were awaiting a response.
• Electrum has been around since 2011 and has gone through multiple updates while also being unable to stop bad actors exploiting previous versions by Sybil attacks using malicious servers.
• Another member on the GutHub thread, “gits7r” – who seems to be associated with Electrum – said the problem comes from the decision by the team early on to allow users to “run their own servers or use servers that they trust.”
• If users download a version from a different source than electrum.org and don’t check signatures, they may “install a backdoored Electrum,” gits7r said.
• In 2018, the Electrum network suffered such an attack from a bad actor who created multiple fake servers on the Electrum network that saw 245 bitcoin siphoned from unsuspecting victims.

See also: Crypto Wallet Maker Ledger Loses 1M Email Addresses in Data Theft

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• US Stocks Closing on Bigger August Gain Than Bitcoin
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• Cryptocurrency Earned From Carrying Out Microtasks Is Taxable, Says IRS Memo

Cryptocurrency exchange Huobi is taking aim at competitor OKEx in China, specifically the business of trading bitcoin futures and other derivatives contracts. The fight opens a new front in a longstanding rivalry. 

OKEx, which is led by Chinese executives and based in Malta, is the world’s biggest crypto derivatives exchange, with outstanding contracts valued at $1.26 billion, according to the data site CoinGecko. Huobi, also led by Chinese brass but based in Singapore, is close behind, tied for second place with another exchange, BitMEX, at $1.25 billion. 

In a report this month, Huobi said it has “managed to push new boundaries against other well-established exchanges when it comes to futures trading volume.” Huobi is already beating OKEx in a few market segments, according to the report, including “coin-margined futures” – where traders can post their initial down payment, known as margin, using cryptocurrencies. Huobi claims to also regularly beat OKEx in weekly and quarterly bitcoin futures contracts.

Related: Bitmain, Ebang Among 21 Bitcoin Mining Farms Stripped of Energy Perks in Inner Mongolia

“Before Huobi launched its futures contract in December 2018, OKEx had the largest market share of the world,” Ciara Sun, vice president of Huobi Global Markets, told CoinDesk in a Telegram message. “Huobi Futures always looks up to the best of the market.” 

The battle for supremacy in cryptocurrency futures – and China – adds to the tension between the two exchanges, which have been at loggerheads at least since 2018, when then-OKEx CEO Chris Lee defected to Huobi to become vice president of global business development.

OKEx CEO Jay Hao, in a company update in March, called Huobi “our doppelgänger,” insisted “imitation was the sincerest form of flattery” and said he “would like to think that Huobi was able to withstand this market volatility by following our footsteps.”

Last week, Hao told CoinDesk in a Telegram chat: “At OKEx, we seldom judge or compare our performance with our peers” because the competition is not easily “defined simply with data or certain metrics.”

Chinese crypto markets are big, lucrative and up for grabs

Related: Bitstamp to Move Clients’ Accounts From London to Luxembourg

Experts on China’s often-murky cryptocurrency markets say the rivalry between the two exchanges likely stems from the fight for customers in the world’s second-largest economy. 

“There’s a natural friction between OKEx and Huobi,” Matthew Graham, chief executive officer of Beijing-based crypto consultancy Sino Global Capital, told CoinDesk in an email. “While they have both pushed to enlarge their international footprints, they still prioritize their Chinese user base.” 

China has been pushing to become a global leader in blockchain, in what some observers say could become a hotspot in an emerging cold war between the country and the U.S. for technological supremacy. Chinese banks are already testing a digital version of its national currency, the yuan, while American officials have said they’re merely studying a digital dollar.

Read more: More Than 95% of Crypto Futures Volume Is in Asia: Report

Under the current rules, Chinese exchanges can’t technically sell cryptocurrencies for yuan, and there has been a crackdown from authorities. But many residents in the country buy bitcoin (BTC) or dollar-linked stablecoins like tether (USDT) from over-the-counter brokers, then use those tokens for trading, according to an Aug. 20 report from Chainalysis. The report called the East Asia region the world’s biggest cryptocurrency market, accounting for 31% of all transactions in the past 12 months. 

“By using tether as a fiat stand-in instead of, say, bitcoin, traders can lock in gains without off-ramping into fiat by simply converting other currencies into tether and leaving the tether in their wallet or exchange account,” Chainalysis wrote. 

According to Graham, the friction between the two exchanges has only intensified as they fight to obtain a more favored position with the Chinese government.

On that count, Huobi might be one move ahead of OKEx: The Chinese branch of Huobi has joined the Blockchain-Based Service Network (BSN) Development Alliance, which aims to be one of the most influential infrastructure services providers in the country.

“Is there room for two crypto-focused exchanges at the table?” Graham said. “We aren’t certain. But if there’s only one position, that position is highly coveted by both OKEx and Huobi.”

Officially, Huobi doesn’t even acknowledge the Chinese cryptocurrency market exists: “There is not a market in China. That is not legal,” Sun said. 

According to the website tracker, Huobi appears to be getting nearly a third of its website traffic from Chinese visitors, versus 14% for OKEx.  

“We don’t know the exact trading volume being done in China, unfortunately, but we can see bitcoin flow changes when the Chinese government announces something,” says Ki Young Ju, CEO of the Korean blockchain data tracker CryptQuant. 

The regional turf war between Huobi and OKEx now serves as a backdrop in their competition for more futures-trading business. 

“Huobi has managed to push new boundaries against other well-established exchanges when it comes to futures trading volume,” according to the company’s Aug. 14 report. 

The exchange says it’s also beating OKEx on “market depth,” a gauge of how many buy and sell orders are waiting at any given price point. 

Tom Wang, chief operating officer of Huobi Futures, told CoinDesk the company’s newly launched perpetual-swap product, which functions similar to futures but without expiry dates, also contributed to the second-quarter growth.

“Huobi’s perpetual swap’s 24-hour trading volume was at $5.37 billion, surpassing BitMEX’s $5.22 billion on May 12, 2020,” he said. “On this particular product, OKEx remains less competitive to us.”

Customers are seeing at least one benefit from the feud: more choices. Huobi announced in July it will launch bitcoin option trading in the third quarter, while OKEx said around the same time it has added three more expiration dates – daily, two-day and monthly – to its options-trading suite.

“We appreciate a healthy competition,” Lennix Lai, director of financial markets at OKEx, told CoinDesk.

Dovey Wan, a partner at crypto asset investment fund Primitive Ventures, told CoinDesk in a Twitter direct message the squabble reminds her of the way Chinese tech giants vie for dominance in the domestic market. 

“It’s like Alibaba and Tencent never fight Google and Facebook,” said Wan, who also serves as a member of CoinDesk’s advisory board. “But they fight bitterly in China.”

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nChain chief scientist Craig Wright has delivered an obscenity-laden interview discussing decentralized finance (DeFi) and stablecoins, calling such projects a “complete scam” and “illegal.”

• Taking part in the virtual conference Reimagine 2020 published Saturday, the controversial figure told host Patrick MacLain that both DeFi schemes offering lending and borrowing, and stablecoins, are “illegal, unregistered and unlicensed.”
• Creators of DeFi projects are “conmen … criminal a**holes taking money, full stop,” he told MacLain, adding an inflammatory take on oracle networks such as Chainlink.
• “‘We’ve got a decentralized oracle.’ Bullshit you do! Sue me!” Wright said, making an obscene gesture to the camera.
• “Where is the damn backing?” Wright asked, when discussing his thoughts on stablecoins.
• Wright appeared to conflate all stablecoins – cryptocurrencies that aim to hold a stable value with backing from an asset such as the U.S. dollar or gold – with tether, a widely used USD-linked crypto that has never released a comprehensive audit of all its reserves.
• Other stablecoins, such as USD Coin, have done so.
• When MacLain asked Wright for his view on decentralized exchanges, Wright claimed there was “no such thing, full stop. … [T]he exchanges are still run by a person.”
• Wright has said he is the creator of bitcoin, but has yet to provide convincing evidence to back up his claim and has faced allegations of fraud, which he contests vigorously through lawsuits.
• “I fight in court, I’m not a cowardly you-know-what who runs away,” Wright told MacLain, taking a swipe at bitcoin investor Roger Ver, who he is suing for libel over such fraud accusations.
• Wright is also fighting an ongoing court case involving the estate of his deceased former business partner, David Kleiman, that relates to the ownership of a 1.1 million ($12.8 billion) bitcoin fortune.
• Wright’s credibility as the supposed inventor of bitcoin has suffered somewhat during the process, with a judge saying he has at times argued in bad faith, perjured himself and admitted false evidence.
• In May, a message also alleging Wright is a fraud was cryptographically signed with over 100 bitcoin addresses he has claimed to own in Kleiman case evidence.
• Cryptography experts have described his subsequent claims about how bitcoin signing works as “nonsense.”
• Wright is a proponent of a bitcoin alternative cryptocurrency called Bitcoin SV (for Satoshi’s Vision).
• He further took the chance to knock bitcoin in his interview, saying that it “isn’t a decentralized network of every node running things.”
• “Your node doesn’t help the network unless you’re a miner,” he claimed.

See also: Craig Wright Called ‘Fraud’ in Message Signed With Bitcoin Addresses He Claims to Own

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• Cryptocurrency Earned From Carrying Out Microtasks Is Taxable, Says IRS Memo
• Market Wrap: Bitcoin Climbs to $11.5K With Record Amount in DeFi
• Japanese Financial Giant SBI Holdings Launches Short-Term Crypto Derivatives

Cryptocurrency earned from carrying out small tasks valued as low as $1 is taxable, the U.S. Internal Revenue Service (IRS) said in a memo Friday.

• In a memorandum first reported by The Block, the IRS’s Office of Chief Counsel published a response to a June 29 request for clarification from the tax agent’s own Small Business/Self Employed Division.
• The question centered around whether crypto earned by an individual for performing a microtask through a crowdsourcing or similar platform was a taxable income.
• “Yes,” IRS senior technician reviewer and memo author Ronald Goldstein said, “the convertible virtual currency received is taxable as ordinary income.”
• Goldstein added that cryptocurrency “acts as a substitute for real currency” and is therefore considered property for federal income tax purposes pertaining to section 61(a) of the IRS tax code.
• An example of microtasking included a company offering to pay workers in bitcoin for processing data or reviewing images.
• The value of crypto paid in exchange for microtasks are often small amounts that could be less than $1.
• Other examples included downloading an app and leaving a positive review; downloading games and reaching particular milestones; completing online quizzes; or registering accounts with various online services.
• According to the memo, these types of microtasks “may provide individuals with rewards” in the form of cryptocurrency and are thereby subject to the same regulations as regular money.
• The guidance comes at a time when the tax agency has been in crackdown mode to end suspected crypto tax avoidance, seemingly contradicting the advice of its own watchdog.

See also: Bitwage Rolls Out Tax Calculator Tool as IRS Ramps Up Crypto Pressure

Related Stories

• Japanese Financial Giant SBI Holdings Launches Short-Term Crypto Derivatives
• DeFi Studio Framework Labs Leaves Stealth Mode With $8M in Seed Funding
• Prosecutors Detail ‘Shadow Bank’ Accounts in Fowler Crypto Case
• US Files Suit Against Crypto Accounts Tied to North Korea

The Ethereum Classic blockchain suffered a 51% attack Saturday evening, its third such attack this month, noticed by mining company Bitfly, which also spotted the first attack on Aug. 1.

• The attack reorganized over 7,000 blocks, or two days’ worth of mining, according to a tweet shared by Bitfly. The first two attacks reorganized 3,693 and 4,000 blocks respectively.
• Notably, a leading organization behind the Ethereum Classic network, ETC Labs, announced its strategy to protect the network from additional attacks last week, including defensive mining that is intended to stabilize the network’s plummeting hashrate and resist future 51% attacks.
• Stevan Lohja, technology coordinator at ETC Labs, in a private message with CoinDesk, said he finds the timing of the attack “very suspicious” as it came just a day after a meeting of Ethereum Core developers regarding “aggressive innovation” in the blockchain’s proof of work.
• ETC Cooperative, another prominent foundation supporting the network’s development, took to Twitter following Saturday’s attack saying, “We are aware of today’s attack and are working with others to test and evaluate proposed solutions as quickly as possible.”
• After the first two attacks, exchange OKEx responded by saying it will consider delisting the asset due to the network’s severe lack of security. Coinbase also took drastic measures by extending deposit and withdrawal confirmation times for ETC to roughly two weeks.
• Following the latest attack, leading cryptocurrency derivatives exchange FTX will reconsider its ETC perpetual futures contracts, according to CEO Sam Bankman-Fried in a private message to CoinDesk. He said this is so even though FTX doesn’t support spot trading and the cryptocurrency network’s insecurity has less of a direct effect on the risk of offering futures trading.
• The cryptocurrency seems largely unaffected by the series of attacks, trading at $6.86 at last check, less than 4% below its price during the second attack. The coin has traded hands between $6 and $8 for nearly the entire month of August.

UPDATE (Aug. 29, 23:03 UTC): Adding comment from ETC Cooperative.
UPDATE (Aug. 30, 01:05 UTC): Adding comment from ETC Labs’ technology coordinator.

Related Stories

• Ethereum Classic Labs Plans ‘Defensive Mining’ Strategy as Hashrate Plummets
• ETC Labs Rolls Out Fixes to Thwart Further 51% Attacks on Ethereum Classic
• First Mover: Bitcoin Passes $12K, Dollar Worries Grow, OMG Jumps, Portnoy’s Orchid #Pump
• OKEx Mulls ETC Delisting After Losses From Two 51% Attacks

The Ethereum Classic blockchain suffered a 51% attack Saturday evening, its third 51% attack this month, noticed by mining company Bitfly, which also spotted the first attack on Aug. 1.

• The attack reorganized over 7,000 blocks, or two days’ worth of mining, according to a tweet shared by Bitfly. The first two attacks reorganized 3,693 and 4,000 blocks respectively.
• Notably, a leading organization behind the Ethereum Classic network, ETC Labs, announced its strategy to protect the network from additional attacks last week, including defensive mining that is intended to stabilize the network’s plummeting hashrate and resist future 51% attacks.
• ETC Cooperative, another prominent foundation supporting the network’s development, took to Twitter following Saturday’s attack saying, “We are aware of today’s attack and are working with others to test and evaluate proposed solutions as quickly as possible.”
• After the first two attacks, exchange OKEx responded by saying it will consider delisting the asset due to the network’s severe lack of security. Coinbase also took drastic measures by extending deposit and withdrawal confirmation times for ETC to roughly two weeks.
• Following the latest attack, leading cryptocurrency derivatives exchange FTX will reconsider its ETC perpetual futures contracts, according to CEO Sam Bankman-Fried in a private message to CoinDesk. He said this is so even though FTX doesn’t support spot trading and the cryptocurrency network’s insecurity has less of a direct effect on the risk of offering futures trading.
• The cryptocurrency seems largely unaffected by the series of attacks, trading at $6.86 at last check, less than 4% below its price during the second attack. The coin has traded hands between $6 and $8 for nearly the entire month of August.
• An email to ETC Labs seeking comment wasn’t immediately returned.

(UPDATE 23:03 UTC): Adding comment from ETC Cooperative in third bullet point.

Related Stories

• Ethereum Classic Labs Plans ‘Defensive Mining’ Strategy as Hashrate Plummets
• ETC Labs Rolls Out Fixes to Thwart Further 51% Attacks on Ethereum Classic
• First Mover: Bitcoin Passes $12K, Dollar Worries Grow, OMG Jumps, Portnoy’s Orchid #Pump
• OKEx Mulls ETC Delisting After Losses From Two 51% Attacks

Oasis Network, a privacy-centric data-sharing network, said it will integrate Chainlink’s price feeds into its network. 

• According to a press statement emailed to CoinDesk, Oasis will initially use Chainlink’s price reference data to provide valuation to supported tokens used in Oasis’ decentralized finance (DeFi) applications. 
• The statement adds that the integration of this data will also allow Oasis Network to maintain the integrity of off-chain information used to augment smart-contract applications built on its network.
• In a recent announcement, cryptocurrency exchange Binance had said it was launching the CryptoSafe Alliance, a platform to prevent and analyze cryptocurrency fraud in partnership with Oasis Labs, a data privacy company and one of the firms developing the Oasis Network.

Read more: Binance and Oasis Labs Launch Alliance to Combat Crypto Fraud and Hacks

Related Stories

• Chainlink Acquires Blockchain Oracle Solution From Cornell University
• Binance and Oasis Labs Launch Alliance to Combat Crypto Fraud and Hacks
• Market Wrap: Bitcoin Braces for $700M in Options to Expire; Record $7B Value Locked in DeFi
• Market Wrap: Bitcoin Dips to $11.6K, ETH Options Predict Price Below $400 by End of Year

A major bank quietly opened up a wallet service for China’s central bank digital currency to public users – but quickly disabled it after the feature gained widespread attention.

Around noon on Saturday local time, users of China Construction Bank (CCB), one of the big-four state-owned commercial banks, started to notice that a central bank digital currency wallet feature was available inside the bank’s mobile app.

By searching “digital currency” in Chinese, users of the app could navigate to the digital yuan wallet service and further activate it by registering with a mobile phone number associated with their bank accounts at CCB.

Related: Chinese Ex-Banker Says Digital Currency Should Replace Fiat Money

It is unclear when CCB quietly opened up this service to public users for testing but the feature had quickly gained wide attention on Saturday among the Chinese cryptocurrency community as well as local crypto media. Some users also made small amount of transactions by linking their CCB bank accounts with the wallet.

However, the banking giant has now disabled the feature from public users. Searching for the same term inside CCB’s mobile app now leads to a message that says: “This function is not yet officially available to the public. Please wait patiently.”

Nonetheless, the brief availability of the wallet shows the Chinese commercial bank has been working towards a wider adoption for the Digital Yuan initiative, also known as DCEP, which is led by the People’s Bank of China (PBoC).

The wallet’s interface seen by CoinDesk showed each user that had activated the service via CCB was assigned to a specific wallet ID, which could be used to make transactions between the wallet and users’ CCB bank accounts.

Related: Starbucks, McDonald’s Among 19 Firms to Test China’s Digital Yuan: Report

In addition, users could also send and receive digital yuan to each other by putting in either their unique wallet ID addresses or an associated mobile phone number.

Under the direction of the PBoC, the big-four Chinese state-owned commercial banks have been developing their respective digital yuan wallets and running internal tests with selected users and merchants in the country.

It remains to be seen when these banks will officially open up the services to the public and whether the wallets will enable more applications that can use China’s digital yuan.

The PBoC is also working with DiDi Chuxing and other internet-based services to apply digital yuan into more payment scenarios.

Read more: Ride-Hailing Giant DiDi to Trial China’s Central Bank Digital Currency

Related Stories

• Libra vs. DCEP? The Battle for the Future of Money Heats Up
• Chinese State-Owned Bank Offers Test Interface for PBoC Central Bank Digital Currency

Chainlink has acquired Cornell University’s privacy oracle solution DECO for an undisclosed amount. This is Chainlink’s second acquisition to date, according to an announcement made by the firm on Saturday.

DECO was co-created by Ari Juel, former chief scientist at digital security firm RSA, who will also join Chainlink Labs as part of the deal under the same title.

Moreover, Chainlink CEO Sergey Nazarov and Juels have begun drafting a second Chainlink white paper, according to a phone interview with the pair. The duo authored the original Chainlink white paper in 2017.

Related: Market Wrap: Bitcoin Braces for $700M in Options to Expire; Record $7B Value Locked in DeFi

Chainlink’s oracle solution ports data from off-chain locations into blockchain smart contracts. For example, Chainlink provides data information for most decentralized finance (DeFi) applications, such as dYdX’s crypto derivative products. 

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

DECO claims to leverage how HTTPS/TLS information is transmitted for more secure web practices, according to a release from the firm.

“DECO is also useful for users who want to monetize their own data (and therefore prove that they are indeed providing correct data) without giving away anything but the data that they are selling,” DECO’s website reads.

Decentralized credit

Related: Market Wrap: Bitcoin Dips to $11.6K, ETH Options Predict Price Below $400 by End of Year

Nazarov said DECO can be used as a foundation for a few crypto wish list items, such as permissionless credit or decentralized identification.

For example, he said DECO can prove a person is over 18 by pulling data from a DMV while hiding the individual’s birth date.

This could be further applied to the golden apple of decentralized finance, permissionless credit systems. Nazarov said an oracle like DECO could one day allow a smart contract to query off-chain credit information such as banking records without overreaching into personal data.

Read more: Chainlink to Provide Data for Farming Insurance Startup Arbol

“DECO is the way a lot of collateral will make its way to DeFi,” Nazarov said.

Juels told CoinDesk this privacy is possible through DECO’s incorporation of zero-knowledge proofs, popularized in cryptocurrency circles by the privacy coin zcash (ZEC).

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Bitcoin bounced back from Thursday’s drop at a time when more of the cryptocurrency is locked in DeFi than ever before.

• Bitcoin (BTC) trading around $11,511 as of 20:00 UTC (4 p.m. ET). Gaining 2.2% over the previous 24 hours.
• Bitcoin’s 24-hour range: $11,231-$11,552
• BTC above its 10-day and 50-day moving averages, a bullish signal for market technicians.

Bitcoin’s price trended upward Friday, going as high as $11,552 on spot exchanges such as Coinbase. “Bitcoin has rotated around the most traded price at $11,500,” said Daniel Koehler, liquidity manager at cryptocurrency exchange OKCoin. “Looking down, the next significant support levels are $10,800 and $10,550.”

Read More: Bitcoin, Gold Recover After Jerome Powell Speech Shakes Markets

Related: Fed Chair Powell’s Flexible Inflation Views Were Already Priced In

Jean Baptiste Pavageau, partner at quant trading firm ExoAlpha, says bitcoin’s recovery after gyrating $450 on Federal Reserve Chair Jerome Powell’s comments Thursday continues a larger bullish cycle started earlier in the summer. 

“After its recent fake breakout above the $12,000 resistance level, bitcoin saw a short-term trend reversal in its broader bullish trend started in June,” said Pavageau. “On the long term the Fed’s comments are very positive for bitcoin and the crypto markets as a safe heaven because of their limited supply.” 

For 2020, bitcoin is up 60% while gold is up almost 30%. Investors often refer to both as safe haven assets. 

On the derivatives side, the market saw lots of expirations Friday, with over $740 million in bitcoin options expired on the Deribit platform alone. The expirations were expected to induce some volatility; instead, bitcoin’s price steadily trended upward during the day.

Related: First Mover: Binance’s Shrinking Trading Spreads and Bitcoin’s Jackson Hole Fizzle

“There’s still an element of absorbing what has happened recently in the DeFi markets and the situation after Powell’s statement,” said Chris Thomas, head of digital assets for Swissquote Bank, referring to decentralized finance. He was “surprised there wasn’t a more aggressive move in the last few days, but it’s also good to have some calm for a while.”

Read More: Winklevoss Brothers Say Bitcoin Could Reach $500K

OkCoin’s Koehler told CoinDesk bitcoin’s price could run higher to cap off the week, given where option strikes currently lie. “To me, we probably pin near $11,675 – sell a call and a put at $12,000,” Koehler said, describing a “short straddle” options strategy, which bets that volatility will fall. “This is due to the high level of open interest around that strike rate, which means a lot of premium will need to be reinvested,” he added. 

Yet more bitcoin in DeFi

Ether (ETH), the second largest cryptocurrency by market capitalization, was up Friday, trading around $397 and climbing 4.8% in 24 hours as of 20:00 UTC (4:00 p.m. ET). 

Read More: DeFi Studio Framework Labs Leaves Stealth Mode With $8M in Seed Funding

The amount of bitcoin locked in DeFi, has hit a new high. Over 55,500 BTC is now “locked” in DeFi, which means it is being used for liquidity, gaining a percentage return or yield. This locked amount is the highest yet.

Jean-Marc Bonnefous, managing partner for Tellurian Capital, which has been investing in crypto projects since 2014, says “fear of missing out,” or FOMO, is one reason so many “hodlers” are locking their bitcoin in DeFi. 

“I assume the BTC holders want to participate in the DeFi opportunities so they will need to wrap their bitcoin into those applications to get some yield,” he said. “Too tempting I guess.”

Other markets

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

• nem (XEM) + 12.7%
• lisk (LSK) + 9.9%
• monero (XMR) + 6.4%

Read More: 21 Bitcoin Mining Farms Stripped of Energy Perks in Inner Mongolia

Equities:

• Asia’s Nikkei 225 closed down 1.4% on reports Japanese Prime Minister Shunzo Abe planned to step down for health reasons. The official announcement came after the close.
• Europe’s FTSE 100 ended the day in the red 0.61% as traders took profits ahead of a long holiday weekend.
• The United States’ S&P 500 gained 0.60% as tech and energy stocks led the index higher.

Read More: Binance’s Shrinking Trading Spreads and Bitcoin’s Jackson Hole Fizzle

Commodities:

• Oil is flat, down 0.10%. Price per barrel of West Texas Intermediate crude: $42.95.
• Gold was in the green 1.8% and at $1,964 as of press time.

Read More: Fed Chair Powell’s Flexible Inflation Views Were Already Priced In

Treasurys:

• U.S. Treasury bond yields were mixed Friday. Yields, which move in the opposite direction as price, were down most on the two-year, in the red 14.6%.

Read More: US Files Suit Against Crypto Accounts Tied to North Korea

Related Stories

• Bitcoin, Gold Recover After Jerome Powell Speech Shakes Markets
• Winklevoss Brothers Say Bitcoin Could Reach $500K as the ‘Only’ Long-Term Inflation Hedge

Mongolian authorities have put the kibosh on cheap electricity for crypto miners, Venezuela is seeing healthy crypto use outside government-approved exchanges and a “critical bug” has left 13% of Ethereum nodes useless.

You’re reading Blockchain Bites, the daily roundup of the most pivotal stories in blockchain and crypto news, and why they’re significant. You can subscribe to this and all of CoinDesk’s newsletters here. 

Top shelf

Bakkt’s back?
Growing institutional interest is helping to drive a recent spike in volume on Bakkt, according to its president, Adam White. Trading volumes for physically settled bitcoin futures on Bakkt rose to $134 million on Tuesday from a previous high of $132 million on July 28, Muyao Shen reports. Physically settled means buyers receive tokens at expiration instead of cash. “It’s not a bet on the price of bitcoin,” White said. “It doesn’t rely on an index price created from unregulated spot markets that are self-reporting their data.” Despite the recent surge, Bakkt still lags behind CME Group, a bigger, U.S.-regulated exchange. Data shows the aggregated daily volumes of bitcoin futures on Bakkt and the CME were at $279 million and $1.5 billion, respectively, on Monday.

Related: Money Reimagined: From COVID Generation to Crypto Generation

Mongolian mining moratorium?
Over 20 bitcoin mining farms in China’s Inner Mongolia have been stripped of electricity perks after a clampdown by the local government. A document issued by the Department of Industrial and Information Technology of the Inner Mongolia Autonomous Region on Aug. 24, shows the government agency suspended electricity discounts provided by the state-owned regional energy trading firm, following onsite inspections that found many supposed data centers were actually bitcoin mining facilities. With the policy change, electricity costs could reach 0.38 yuan per kWh ($0.054), up from 0.26–0.28 yuan per kWh ($0.037 to $0.040), CoinDesk’s Wolfie Zhou reports.

Venezuela’s crypto economy
A new Chainalysis report focused on Latin America found Venezuela ranks third in the world for crypto adoption, behind Ukraine and Russia. Venezuela has adopted a crypto-friendly attitude amid crippling sanctions and hyperinflation, though most retail usage is happening through peer-to-peer marketplaces, not government-approved exchanges. State-owned Criptolago, one of only seven exchanges with government approval, saw $380,000 in dollar-adjusted volume over the last year compared to LocalBitcoins’ $242 million over the same period. 

Client centralization
A “critical bug” has left 13% of Ethereum nodes useless, and it could take weeks or months to fix. Parity-Ethereum and OpenEthereum versions 2.7 and later contain a bug that stops nodes from syncing with the $43 billion network’s latest block. Clients are  different programming language implementations of blockchain software, a  way to strengthen the network by having concurrent yet separate systems running. This bug has highlighted the issue of client centralization, as Ethereum Foundation-backed Geth client now supports some 80% of the Ethereum network, CoinDesk’s Will Foxley reports. 

Wild predictions
Tyler and Cameron Winklevoss, early crypto investors and founders of Gemini, believe weakness in the U.S. financial system and other factors mean bitcoin could one day reach $500,000 per coin. In a post on the Winklevoss Capital blog Thursday, the two set out outlined “fundamental problems” with gold, oil, and the U.S. dollar as stores of value. “Even before COVID-19, and despite the longest bull run in U.S. economic history, the government was spending money like a drunken sailor, cutting taxes like Crazy Eddie, and printing money like a banana republic,” the brothers write. They recently met with prominent day-trader Dave Portnoy and told him gold could be devalued if figures like Elon Musk begin gold mining asteroids. 

Quick bites

• Whistleblower Kidnapped in Ukraine After Accusing Crypto Firm of Exit Scam (Anna Baydakova/CoinDesk)
• YouTube’s Whac-a-Mole Approach to Crypto Scam Ads Remains a Problem (Ben Powers/CoinDesk)
• US Files Suit Against Crypto Accounts Tied to North Korea (Danny Nelson/CoinDesk)
• Tesla’s Gigafactory hit by Failed Hack Wanting Bitcoin Ransom (Shaurya Malwa/Decrypt)
• When ETF? A new bitcoin fund tied to Fidelity could be the next best thing (Frank Chaparro/The Block)

At stake

Related: Blockchain Bites: What Rising Inflation Could Mean for Bitcoin and the US Dollar

Mined hordes
Bitcoin miners are holding more bitcoins than at any point in the past two years.

This could signal increased bullishness about future gains, CoinDesk’s Zack Voell said. 

Miners are holding more than 1.82 million bitcoins, an increase of roughly 2% in the last year, according to data from Glassnode. In fact, this is part of a larger trend, where the percentage of all inactive bitcoin (meaning it hasn’t been traded or cashed in) hit a four-year high last spring.

Thomas Heller, former director at leading mining pool F2Pool, said this was a bullish indicator, as it appears holders may be anticipating a higher price. 

To be sure, no one is clairvoyant, but we’re talking about market sentiment. But there is another technical reason miners, in particular, may be holding: mining factories are in a cycle of deploying newer mining machines. 

This phase in the “hardware cycle” means operation expenses have decreased, and therefore, so has the number of bitcoin sold to cover those expenses,  Harry Sudock, vice president of strategy at GRIID, said. Presumably, costs would have spiked months ago, when miners were ordering the machines now being deployed.

As miners deploy new machines, they also enjoyed a 7% monthly revenue increase in July, according to network data analyzed by CoinDesk, thanks to recent price appreciation and increased transaction fees.

Live Webinar: What to Expect When Phase 0 Launches
Ethereum, the world’s second-largest cryptocurrency by market capitalization, is expected to undergo a radical system-wide upgrade to improve network scalability and efficiency this by early next year. Join CoinDesk Research on Sept. 10 at 1:30 p.m. ET for a live discussion as we examine the potential market impacts of the launch of what’s known as Ethereum 2.0. 

Due to its sheer complexity, Ethereum 2.0 will be rolled out in several phases starting with Phase 0. Don’t miss the opportunity to understand the risks, benefits and predictions for the next phase of this technology.

Market intel

Hedges grow
Bitcoin and gold are reversing losses seen on Thursday after the Federal Reserve’s announcement of a more relaxed approach to tackling inflation sent a tremor across the markets. Bitcoin rebounded back above $11,450 on Friday, erasing nearly 70% of the decline from $11,594 to $11,141 yesterday. Gold, too, has risen back to $1,960, having dropped to $1,910 after the event. “Powell’s speech suggests that there is no end in sight [for the Fed’s easy money policy],” John Kramer, trader at GSR, said. Put simply, Powell’s speech looks to have strengthened bitcoin’s long-term bullish case, CoinDesk’s Omkar Godbole reports.

Tech pod

WabiSabi lobby
Privacy-focused Bitcoin software wallet Wasabi is working on a new protocol design, dubbed WabiSabi, to improve the user experience and privacy of the wallet’s CoinJoin transactions, CoinDesk tech reporter Colin Harper reports. The major design change would allow users to coinjoin with different values than their peers, a first for the technology, reduce the role of a centralized coordinator and potentially enable CoinJoin sends to other users. This process would operate in the background if it runs the way Wasabi envisions it, opening up the possibility to make “every spend a CoinJoin.” 

Fee-less
USD Coin (USDC) has integrated “meta transactions” to the stablecoin platform to eliminate fees paid to the Ethereum blockchain when sending money around. “This enables people to fund their non-custodial wallets with USDC and start using DeFi/dapps without also having to own ETH,” Coinbase developer Peter Jihoon Kim said. Adopted as part of a protocol update, USDC 2.0, the Centre Consortium also announced a new on-chain signature system, CoinDesk’s Will Foxley reports. Founded by Coinbase and Circle, USDC is the second-largest stablecoin by market cap at $1.4 billion.

Op-ed

Tech over laws
Shiv Malik, co-founder of the Intergenerational Foundation think tank and head of growth at Streamr, thinks policies like Europe’s GDPR or Andrew Yang’s “data dividend” are inadequate for putting users back in control of their data. “[T]here is a way of fighting tech with tech that might also result in changing the underlying economic structures,” he writes, namely through open-source, decentralized protocols. “We shouldn’t demand a tithe, we should take back control of our data.”

Podcast corner

The Breakdown
The Breakdown presents everything you need to know about Jerome Powell’s Jackson Hole address. 

Who won #CryptoTwitter? Related Stories

• First Mover: Monetary Challenges Aren’t Just Virtual as Fed’s Powell Returns to Jackson Hole
• Blockchain Bites: Major Acquisitions, Bitcoin Futures Liquidations and the SEC’s New Rules

Trading platform Robinhood announced on Thursday it hired two executives to lead compliance work on its financial and securities teams.

• According to an announcement posted on Robinhood’s website, Norm Askensas, formerly head of compliance for Fidelity Institutional, will lead compliance for the company’s financial team. 
  
• In addition, Kelly Zigatis, former head of oversight and control at Wells Fargo Advisors, shall do so for Robinhood’s securities team. 
  
• Both of the new compliance executives are expected to join the firm in September, Robinhood said. Earlier this month, Robinhood had also announced the completion of a Series G funding round which raised $200 million for the firm, taking its overall valuation to $11.2 billion. 
  
• In December 2019, the Financial Industrial Regulatory Authority (FINRA) had imposed a $1.25 million fine on Robinhood because it found the trading platform, which is known for offering zero-commission trades, had failed to ensure its customers were receiving the best deal on their orders. 

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• Why the Robinhood Revolution Is the Future of Finance, Feat. Jill Carlson

Federal Reserve Chair Jerome Powell did not raise many eyebrows Thursday morning when he announced the U.S. central bank would encourage some periods of inflation above its 2% target in certain circumstances to boost the long-term economy. 

In remarks before a virtual version of the annual Jackson Hole symposium, Powell said the Fed was looking to bolster the labor market, though this is largely an issue Congress would have to deal with amid the ongoing COVID-19 pandemic. The current recession differs from most previous financial downturns because of its underlying cause; namely, lockdowns rather than the after-effects of an overheated economy, he said. 

“If inflation runs below 2% following economic downturns but never moves above 2% even when the economy is strong, then, over time, inflation will average less than 2%,” he said. “Households and businesses will come to expect this result, meaning that inflation expectations would tend to move below our inflation goal and pull realized inflation down.”

Related: First Mover: Binance’s Shrinking Trading Spreads and Bitcoin’s Jackson Hole Fizzle

Powell added:

“To prevent this outcome and the adverse dynamics that could ensue, our new statement indicates that we will seek to achieve inflation that averages 2% over time. Therefore, following periods when inflation has been running below 2%, appropriate monetary policy will likely aim to achieve inflation moderately above 2% for some time.”

Thursday’s new approach to monetary policy comes after a year-long review of the Fed’s previous strategy, Powell said.

Read more: Commentary: Fed Chair Jerome Powell Details Inflation Target Changes

Related: Bitcoin, Gold Recover After Jerome Powell Speech Shakes Markets

Ben Emons, managing director at macro research firm Medley Global Advisors, told CoinDesk the speech and the Fed’s new framework “basically matched market expectations.” 

“For some time now the discussion has been moving to a more flexible framework targeting inflation,” he said. 

Market stability

Both traditional financial instruments and hedge assets ended Thursday’s trading sessions generally stable, despite some price fluctuation earlier.

While bitcoin saw a price spike during the first half of Powell’s comments, it returned to the low $11,000s by its conclusion, and was trading around $11,300 as of press time, down less than 2% over the past 24 hours.

Bitcoin’s price rose to the mid-$11,000s on Friday, up just slightly over a 24-hour period.

Traditional financial markets also experienced some slight volatility, but closed their trading sessions less than 1% away from their starting points.

Employment concerns

Powell noted that Congress would have to target the unemployment rate, Emons said.

“So the message here today is really that if the economy recovers we’re going to see more inflation, and if employment improves we’re going to allow this to continue as long as possible,” he said. “The Fed’s not going to lean against it.”

During his speech, Powell said the labor market would be “strongly influenced by non-monetary factors” such as the path of the coronavirus and any lasting changes in the business landscape. 

For crypto traders, the big question will be how inflation impacts upon the prices of cryptocurrencies such as bitcoin and ether. Should the dollar weaken, the price of these cryptocurrencies should climb. 

However, Powell also addressed the trust factor when it comes to major centralized institutions like central banks.

“Public faith in large institutions around the world is under pressure,” he said. “I think institutions like the Fed have to aggressively seek transparency and accountability to preserve our democratic legitimacy.”

Related Stories

• Winklevoss Brothers Say Bitcoin Could Reach $500K as the ‘Only’ Long-Term Inflation Hedge
• Binance’s Bitcoin ‘Bid-Ask Spreads’ Tighten as Cryptocurrency Markets Mature

Publicly traded petroleum multinational Equinor is moving to significantly reduce natural gas flaring by mining cryptocurrency, according to screenshots from Equinor’s intranet received by Arcane Research Friday.

• A new strategic partnership will see the firm implement Denver, Colo.-based Crusoe Energy Systems’ digital flare mitigation technology.
• This converts waste natural gas that would be otherwise released into the atmosphere into electricity at the well site.
• The operation will harness outflow at Equinor’s operations on the Bakken oilfield in North Dakota.
• “Historically, industry’s options for reducing flaring have been limited to costly measures like new infrastructure development or shutting in production,” reads the memo shared internally at Equinor.
• Crusoe’s digital flare mitigation “offers a win-win alternative for producers and investors alike,” it continued.
• “Mining cryptocurrency requires a lot of electricity to power computers, while a valuable commodity is wasted, and carbon emissions are created when we flare,” said Lionel Ribeiro, manager sustainability at Global Unconventionals at Equinor. “By connecting these inverse pains, we can satisfy both needs with no cost to market expense.”
• In December 2019, the originally bootstrapped Crusoe announced $70 million in funding for expansion of its innovative flaring solutions.
• The round was led by Bain Capital and joined by Founders Fund, Winklevoss Capital and Polychain Capital.
• Before partnering with Equinor, Crusoe already operated flaring systems in Colorado, Wyoming and Montana.
• Equinor is a state-owned multinational based in Norway and ranked as the 11th largest oil and gas firm globally.

Also read: Bitmain, Ebang Among 21 Bitcoin Mining Farms Stripped of Energy Perks in Inner Mongolia

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