CoinDesk Crypto

It was $10,000 or bust as bitcoin traded unremarkably for much of Monday.  

Bitcoin (BTC) was trading around $9,706 as of 20:00 UTC (4 p.m. ET), slipping by less than a percent over the previous 24 hours. 

At 00:00 UTC on Monday (8:00 p.m. Sunday ET), bitcoin was changing hands ataround $9,760 on spot exchanges including Coinbase. The price has stayed more or less in a range between $9,600 and 9,700, keeping bitcoin above its 50-day and 10-day moving averages, a bullish technical indicator. This sentiment was helped by large volumes of trading Sunday, when prices rallied from below $9,400 to as high as $9,800.

Related: Bitcoin News Roundup for June 9, 2020

Read More: Returns for Bitcoin’s Forks Have Trounced Bitcoin This Year

On a relatively quiet Monday, many traders continue to view a break above $10,000 as the make-or-break signal on bitcoin’s continued strength.

“The market looks calm and the volume in the top-tier spot exchange volume is pretty low,” said Sasha Goldberg, a senior trading specialist for crypto firm Efficient Frontier. “We are close to the $10,000 limit,” he added. “If bitcoin is not able to go above that level and stay there, it’s possible that we’ll see a pullback to the $8,000 level.”

Read More: Bitcoin Remains on Hunt for $10K as Holding Sentiment Gains Strength

Related: Bitcoin Price Volatility Hits 3-Month Low

Despite the lack of action, the world’s largest cryptocurrency by market capitalization has made very positive gains overall in 2020, said Josh Rager, a cryptocurrency trader and founder of educational platform BlockRoots. “Bitcoin is still near $10,000. Just because it’s not pumping, it’s still performing well,” he said. 

Since the start of 2020, bitcoin has appreciated over 35%, while gold is up 11% and the S&P 500 index of U.S. stocks is flat, back to where it was at the start of the year.  

“Friday’s incredibly positive U.S. nonfarm payrolls number has led to the largest divergence between Gold and S&P 500 prices since the March lows,” said Singapore-based QCP Capital in an investor note.

Read More: Bitcoin Flat as Stocks Swell on Positive Jobs Report

Rager, the crypto trader, sees stocks being in the green as a temporary condition. “I wouldn’t be surprised if we see more pumps on stocks and then another major pullback,” he added.

Other markets

Digital assets on CoinDesk’s big board are mixed Monday.

Ether (ETH), the second-largest cryptocurrency by market capitalization, is trading around $242 and is flat, up less than a percent in 24 hours as of 20:00 UTC (4:00 p.m. ET). It’s performing similar to bitcoin Monday, but can that last? Jack Tan, managing partner of Taiwan-based trading firm Kronos Research, thinks ether could do better in the long term. “At this point, we feel that ether is more or less correlated with bitcoin. However, ether might slightly outperform bitcoin going forth,” he said.

Cryptocurrency winners on the day include monero (XMR) up 2.6%, qtum (QTUM) climbing 2% and decred (DCR) in the green 1%. Losers include litecoin (LTC) down 1.4%. dogecoin (DOGE) in the doghouse 1.3%. and bitcoin sv (BSV) in the red 1.1%. All price changes were as of 20:00 UTC (4:00 p.m. ET).

Read More: CoinMarketCap Metric Overhaul Keeps Owner Binance at the Top

In commodities, oil is taking a dip, down 2% as a barrel of crude is priced at $38 at press time. 

Gold is up 1% Monday, trading around $1,699 for the day. 

In the U.S., the S&P 500 index of companies ended trading up 1.2%, wiping away all of its losses this year on positive news amid the easing of coronavirus-related lockdowns.

In Europe, the FTSE 100 index of top companies ended trading flat, down less than a percent as the market lost some steam following the past week’s optimism. 

The Nikkei 225 of top companies in Japan closed trading in the green 1.3% as the index returned to a level not seen since the coronavirus pandemic shocked the global economy. 

U.S. Treasury bonds all slipped Monday. Yields, which move in the opposite direction as price, fell most on the 10-year, in the red 3%.

Related Stories

• Bitcoin Options Growth Outpaces Futures, Swaps
• Bitcoin’s Forks Have Trounced Bitcoin This Year

Bitcoin options trading is growing faster than the futures and swaps market, according to data from Skew. 

Measured by the ratio of aggregate open interest in the bitcoin options market to open interest for bitcoin futures and swaps, a clear upward trend is observable from January 2020 to date. 

A historical trend of a higher ratio signals a rate of growth in options open interest that exceeds growth in that of bitcoin futures and swaps. Open interest is defined as the outstanding contracts, measured here in dollars. 

Related: Number of Institutions Buying Crypto Futures Doubled in 2020: Fidelity Report

Although the open interest in bitcoin options is growing and is now roughly 35% that of futures and swaps, it still has a long way to go compared to traditional financial markets where options open interest and trading volumes are “generally a multiple of futures,” said Su Zhu, co-founder of cryptocurrency hedge fund Three Arrows Capital.

“It makes sense for bitcoin to go a similar route as liquidity improves and institutional players come in,” he added.

Likewise, the dollar value of options trading volume is a tiny fraction of futures even as March saw volumes for bitcoin options and futures hit yearly highs, according to Skew. Aggregate options volume reached $294 million, while futures volume passed $45.5 billion. Options volume was about $220 million in May. 

Growth in options trading has been helped by OKEx and CME Group launching bitcoin options in December 2019 and January 2020, respectively. Still, Panama-based exchange Deribit still supports roughly 85% of daily volume, according to Skew. 

Related: Bitcoin News Roundup for June 9, 2020

A healthy market for options and other products designed for volatility-based trading adds “a lot of things that you just fundamentally can’t get without nonlinear derivatives,” said Sam Bankman-Fried, CEO at cryptocurrency derivatives exchange FTX. 

For example, some of the new, exotic volatility trading products launched by FTX will likely benefit from options market growth as more traders contribute to volatility-based price discovery. In short, growth in options trading “adds a lot to the space,” Bankman-Fried said.

Related Stories

• Bitcoin Price Volatility Hits 3-Month Low
• Market Wrap: $10,000 Remains Bitcoin’s Price to Beat

While bitcoin has outperformed gold and the S&P 500 index in 2020, data shows even better returns among leading bitcoin “fork” cryptocurrencies.

These cryptocurrencies are created by copying the Bitcoin source code repository through a process called “forking.” Developers then adjust certain parameters and features in the copied code to create a similar but distinct protocol. According to data from Messari, the three largest bitcoin (BTC) forks by market capitalization are bitcoin cash (BCH), bitcoin sv (BSV), and bitcoin gold (BTG). 

Using an equal-weighted index of the four cryptocurrencies the returns are almost 3.5 times greater than bitcoin alone for the year to date, based on TradingView data. Since the beginning of 2019, moreover, this index outperformed bitcoin by a total of 435 percentage points. An equal-weighted index of just the top three bitcoin forks returned gains 3.1 times greater than bitcoin, year to date.

Related: Bitcoin News Roundup for June 9, 2020

Individually, bitcoin sv and bitcoin gold have outperformed bitcoin by 61 and 37 percentage points, respectively, since the start of 2020. Bitcoin cash outperformed bitcoin until May. Year to date, the largest bitcoin fork has underperformed bitcoin by 11 percentage points, according to TradingView data. 

Some analysts aren’t surprised by these returns. Cryptocurrencies with low and middle market capitalizations like these bitcoin forks “tend to outperform bitcoin during marketwide bull runs,” said Aditya Das, market analyst at research firm Brave New Coin. Similar trends were observed during the 2017 bullish market cycle, he explained. The miner subsidy for bitcoin and its forks also halved this year, an event that occurs once every four years and is a bullish catalyst for some investors.

These returns are mostly attributable to a strong positive correlation with bitcoin’s price inflation combined with higher volatility, according to Louis Liu, founder and CIO at Mimesis Capital. Nonetheless, there is “definitely alpha” in bitcoin forks, he said, referring to the excess returns. However, he says they were not the result of fundamental value added by improving on bitcoin.  

As is usually the case, greater returns come with increased risk. Liquidity is one such concern, Das explained. 

Related: First Mover: Crypto Broker Voyager’s Stock Has Doubled This Year, Beating Bitcoin

See also: Bitcoin Remains on Hunt for $10K as Holding Sentiment Gains Strength

Only two of the industry’s largest exchanges by traded volume, Binance and Bitfinex, support markets for all three top bitcoin forks, according to Nomics. Moreover, the largest bitcoin cash spot market, supported by Binance, is only one-tenth the size of the largest bitcoin market, also on Binance. 

Forks such as bitcoin cash and bitcoin sv are “likely being used purely as speculative instruments,” said Kevin Kelly, former equity analyst at Bloomberg and co-founder of digital asset research firm Delphi Digital.

What’s more, he added, “the liquidity profile and long-term value proposition” of bitcoin forks is “drastically different, if even existent, when compared to bitcoin.” 

UPDATE (June 9, 2020 14:46 UTC): This piece has been updated to reflect the returns of an equal-weighted index of bitcoin and its top three forks as 3.5 times greater than bitcoin returns, not 14 times greater as originally stated. Also added are returns of an equal-weighted index comprised of only the top three forks.

Related Stories

• Bitcoin Price Volatility Hits 3-Month Low
• Market Wrap: $10,000 Remains Bitcoin’s Price to Beat

The global COVID-19 crunch appears to be driving interest in cryptocurrencies in developing nations.

Meanwhile, Coinbase has initiated federal-level procurement deals for an analytics tool and Chinese police have frozen potentially thousands of crypto accounts. Here’s the story:

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

Related: Blockchain Bites: ‘Bitcoin Billionaires’ and Buying a Coke With Crypto

Emerging Markets
Lebanon’s financial crisis has banks looking for alternative monetary policy and citizens scrambling for alternative banking services. Approximately $54,916 worth of bitcoins have traded in the country over the past year on Paxful and LocalBitcoins, a small sum compared to the monthly upwards estimate of $5 million transacted through informal networks. Many see bitcoin and other cryptos as playing an increasingly important role in the nation’s financial ecosystem. This is part of a greater trend, driven by a U.S. dollar shortage worldwide, of developing nations turning to bitcoin, stablecoins and other cryptocurrencies. The latest Money Reimagined newsletter examines the dynamics causing people across Latin America, the Middle East and Africa to experiment with novel payment and value preserving technologies.

National Security?

• Coinbase has initiated procurement deals with the Drug Enforcement Administration (DEA) and the Internal Revenue Service (IRS) for a cryptocurrency investigations tool called “Coinbase Analytics,” after buying blockchain intelligence firm Neutrino last year. 
• The Saudi Arabian Monetary Authority (SAMA) reportedly used blockchain to distribute an unknown proportion of the 50 billion Saudi riyals, approximately $13.35 billion, in stimulus funding given to banks. (The Block)
• A state-owned power grid company in Russia claims crypto miners have stolen almost $6.6 million in energy from local providers over the past three years, by building underground mining farms and tampering with electrical systems.
• Thousands of cryptocurrency users and over-the-counter merchants may have had their accounts frozen last week. A police probe in China’s Guangdong province appears to be targeting transactions that may be linked to telecommunication frauds, Ponzi schemes and casino businesses.

Gamifying Crypto
The U.S. military has created a war game to think through a response to a “Zbellion,” or a cyberattack led by Generation Z who steal money from “the establishment” and funnel it through bitcoin. Meanwhile, AstroCanvas, a game built by two developers at the Cross-Chain Hackathon, is a demonstration meant to increase network participation in proof-of-stake blockchains and reduce the control that massive players like Coinbase exert on a network.

Development?
Coinbase said it’s working on technical changes to prevent exchange outages during periods of increased usage. Last week a traffic spike caused severe disruption of services. Separately, the Algorand Foundation launched an accelerator program offering up to $265,000 in support for Asia-focused projects building on its network. (The Block) Finally, CoinMarketCap has rolled out a new way of ranking exchanges that keeps owner Binance at the top of the exchange table. The data aggregator received criticism last month when its new corporate owner received a perfect score in a new ranking metric. 

Related: First Mover: Crypto Broker Voyager’s Stock Has Doubled This Year, Beating Bitcoin

Crypto Long & Short
CoinDesk Head of Research Noelle Acheson looks at the role technologies play in creating and mending economic inequality in the latest Crypto Long & Short newsletter. “[Technology] has widened the chasm between those that can harness it and those that as yet cannot. It has enthralled populations, who are now captive to its influence. It has sped up flows of capital, while further concentrating its distribution,” she said. With the growing adoption of crypto and blockchain technology, the process looks set to reverse, albeit slowly, through practical application. 

Market intel

Price Consolidation 
Investors remain confident in bitcoin’s long-term prospects despite the cryptocurrency’s struggle to pass $10,000, according to the amount of bitcoin moved out of exchanges. Historically, investors have moved cryptocurrency from their wallets to exchanges to be able to more quickly liquidate holdings during a price crash. Over the last four months, however, exchange balances have declined by nearly 13%, signaling that investors expect the ongoing price consolidation to pave the way for a stronger bull run.

First Mover
Many crypto investors believe trillions of dollars of money injections by global central banks will usher in an era of inflation, helping to send prices for bitcoin, seen as a hedge against inflation, to the moon. This thesis is at ends with Wall Street investors, who are pumping capital into bond markets at a rate that signals consumer-price increases over the next five years will average levels below the Federal Reserve’s 2% inflation target. The First Mover team digs into the dichotomy. 

Post-Halving Fees
Bitcoin’s average transaction fees have fallen by 83% to $1.083, the lowest level since the network’s post-halving high. (Decrypt)

CoinDesk Podcast Network

Let’s Talk Bitcoin!
Crypto luminaries Andreas M. Antonopoulos, Jonathan Mohan and Stephanie Murphy join the latest episode of Let’s Talk Bitcoin to discuss prospects of being your own bank. “The powerful idea and meme at the core of Bitcoin self-sovereignty is incredibly empowering but has an unspoken element that requires persistent competence and at least for some makes it more trouble than it’s worth,” CoinDesk’s Adam B. Levine writes by way of introduction. 

Who won #CryptoTwitter? Related Stories

• Blockchain Bites: Why UN and Federal Reserve Experts Think CBDCs Could Kill Commercial Banking
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As bitcoin traders struggle to bust through $10,000, there’s a new claimant to the title of Satoshi Nakamoto. CoinDesk’s Markets Daily Podcast is back with your bitcoin news roundup.

For early access before our regular noon Eastern time releases, subscribe with Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica or RSS.

This episode is sponsored by Bitstamp and Ciphertrace

Related: Bitcoin News Roundup for June 9, 2020

Today’s bitcoin news:

As Bitcoiners Eye Inflation Boost, Wall Street Sees Barely Any for Five Years

Bitcoin’s Quiet Progress Is Pointing Toward a Better Future

Courtesy of CoinTelegraph: The Escobars Believe They’ve Found the Real Satoshi

Related: Why War Reporting Is the Right Mental Model for Today’s Media, Feat. Jake Hanrahan

See also: The Power and Peril of the ‘Bitcoin Fixes This’ Meme

For early access before our regular noon Eastern time releases, subscribe with Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica or RSS.

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The comedian Dennis Miller once joked about computer viruses, “When you link up to another computer, you’re linking up to every computer that that computer has ever linked up to.” If so, CoinKite, maker of the Coldcard hardware wallet, has invented an extra-strength prophylactic for bitcoin investors. 

The startup just released Coldpower, which allows users to charge their hardware wallets by connecting the USB plug to a 9-volt battery, rather than, say, plugging it into a laptop. Comparing it to a popular gizmo that prevents accidental data exchange when one device is plugged into another to charge, CoinKite says Coldpower is “like a ‘USB condom,’ but self-powered.”

“We want to help protect people from ‘bad USB’ attacks by facilitating air-gap use of their Coldcard,” CoinKite CEO Rodolfo Novak said. “Air-gapped” use means not connecting a device to the internet.

Related: ‘Decentralized ID at All Costs’: Adviser Quits ID2020 Over Blockchain Fixation

Simultaneously, CoinKite rolled out Seedplate, a metal plate for engraving a recovery seed, which is like an emergency password for accessing bitcoin. Since the phrase is carved in metal, there’s less risk of it being lost or damaged than if written on a piece of paper. Novak called it a “backup of last resort.” 

Taken together, these products underscore the idiosyncratic risks of cryptocurrency, which, although digital, is arguably a bearer asset like physical cash. Once a private key for cryptocurrency is stolen, the coins are likely gone for good. The holder of the private key is responsible for keeping it secure, and the required precautionary mindset often borders on paranoia.

Read More: How to Store Your Bitcoin

Hardware wallets like Coldcard, Opendime, Ledger, or Trezor are considered one of the most secure ways of storing bitcoin private keys since they are devices that are stored offline and are less susceptible to hacks. But even when using them, there are obscure ways bitcoins can be hacked or lost.

Related: Zoom Seeks to Deflect Privacy, Security Concerns With Keybase Buy

“Our ultimate goal at Coinkite is to make all aspects of HODLing safer,” Novak said, referencing the “hodl” meme, a misspelling of “hold,” used as a shorthand for the act of storing bitcoin and waiting to see how the novel digital currency fares over the years.

In April, Novak gave a talk spotlighting his “disdain” for the USB standard for connections between hardware jacks at a virtual reality meetup. The standard is centralized, he said, and thousands of pages long, so “no one can get through them.” He listed many attacks that can be used with the connection tool. 

Not even a simple power adapter can be trusted, according to Novak. “There are many USB hacks and someone could make an evil power adapter/bank or an evil cable,” he said. 

Coldpower, on the other hand, is “a verifiable ‘dumb,’ no-smart-electronics-to-be-hacked power supply.” The next best thing to abstinence, perhaps.

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Bitcoin has entered the seasonally bullish month of June on a positive note, but its recent gains look pale compared to that of ether (ETH), as the Ethereum blockchain approaches a key new iteration. 

Bitcoin, the top cryptocurrency by market value, rose by over 8% last week and ended May with a 9.5% gain. That came after bitcoin jumped by nearly 35% in April, according to CoinDesk’s Bitcoin Price Index. 

Meanwhile, ether’s price rose by 16% last week and 12% for the month of May. Growth in ether’s non-price metrics, too, has been impressive compared to those for bitcoin.

Related: Crypto Influencers Are Following the Beauty Playbook – Even if They Don’t Know It

For instance, the seven-day moving average of active ether addresses stood at 12-month high of 337,986 on Sunday, according to data provided by blockchain intelligence firm Glassnode. While ether’s active addresses have risen by more than 10% over the last two weeks, active bitcoin addresses declined by nearly 5%. 

On a more positive note, bitcoin outshone major traditional assets in May. Gold, a traditional safe-haven asset, rallied by 2% over the month. Meanwhile, the dollar index, which tracks the value of the greenback against major currencies, fell by over 0.5% and the S&P 500 index rose by 4.5%.

Analysts expect both bitcoin and ether to maintain their bullish momentum over the near-term. While seasonality is positive for bitcoin in June, supporting the case for an extension of its two-month winning streak,  ether is likely to benefit from Ethereum’s upcoming switch to the proof-of-stake mechanism.

Looking forward

Bitcoin has put in a positive June performance in six out of the last eight years. Moreover, the cryptocurrency has printed gains in the second quarter also in six out of the last eight years, as discussed previously. 

Related: Bug in ‘Timelocked’ Bitcoin Contracts Could Spur Miners to Steal From Each Other

Macro factors, too, are supportive of continued gains in bitcoin, according to analysts.

“Global tensions and uncertainties that have intensified over the past week  and further support the Bitcoin narrative as an alternative investment to protect downside risks,” said Matthew Dibb, co-founder of Stack, a provider of cryptocurrency trackers and index funds.

President Trump, on Friday, announced new, targeted sanctions against Chinese officials and directed his administration to revoke special trade exemptions for Hong Kong. The move came in retaliation to Beijing’s decision to curb Hong Kong’s autonomy by imposing a new security law on the city. The tensions could further escalate, as China is now considering plans to halt imports of soy from the U.S. 

Dibb also expects the weakness in China’s yuan and the possible introduction of negative interest rates in the U.S. to bode well for bitcoin and precious metals like gold. 

“Technically, we are expecting a break of $10,000 over the next two weeks and a further push to $11,000 by July,” Dibb added. Meanwhile, Su Zhu, CEO of Three Arrows Capital, said that, “BTC’s moment will be a clean break of the key round figure of $10,000.”

Indeed, bitcoin has failed multiple times in the last three weeks or so to shake off selling pressure in the range of $9,900 to $10,000. So, a convincing break above the psychological resistance could cause more buyers to join the market, leading to stronger gains. 

At press time, the cryptocurrency is trapped in a narrowing price range. The direction in which the range is breached will likely set the tone for the next big move. 

A bullish breakout could be seen, as investor sentiment is at its most bullish in years, according to on-chain data. For instance, nearly 60% of bitcoin’s supply hasn’t changed hands in over 12 months, a likely sign investors are holding in expectation of gains, according to Glassnode. 

A similar percentage of supply was lying dormant for over a year at the start of the mega bull run in 2016. 

Ethereum upgrade may boost price

Ethereum’s impending transition from a proof-of-work (PoW) mechanism to proof-of-stake (PoS) in a major upgrade dubbed Ethereum 2.0 likely boded well for ether in May. Buying pressure for the cryptocurrency may remain strong in the near term, with the launch of Eth 2.0 due in Q3,  2020.

“It’s hard to be bearish with Ethereum staking coming soon. I suspect there will be a lot more ether staked than the projected 10-30 million. Perhaps even 50 million-plus if a lot of people select to stake through exchanges/rocket pool,” tweeted David Schwartz, a senior software engineer at Nash, a decentralized exchange. 

Staking rewards network participants for holding coins, in a similar way to earning interest on savings.

The sharp rise in the number of addresses holding 32 ETH or more, an amount a holder is required to maintain as a balance to become a validator on Eth 2.0 (and hence earn staking rewards), suggests investors are accumulating coins in preparation for the upgrade. 

Technical charts suggest that ether could continue to outperform bitcoin, too. The MACD histogram, an indicator used to identify trend changes and trend reversals, has crossed above zero on the ether-bitcoin monthly chart for the first time on record, as noted by popular analyst and engineer @IamCryptoWolf on Twitter.

The MACD’s move above zero indicates a bearish-to-bullish trend change in the ETH/BTC exchange rate. Put simply, the market expects ether to fare better than bitcoin. 

Lennix Lai, director of financial markets at cryptocurrency exchange OKEx, expects bitcoin and the broader cryptocurrency market to benefit from the increased investor interest in ether. “The upcoming ETH 2.0 [upgrade] shall encourage more people to stake ETH and ultimately benefit the sentiments of the crypto market as a whole,” said Lai.

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

Related Stories

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• Bitcoin News Roundup for May 29, 2020

The ZRX token from 0x, a developer at the forefront of the fast-evolving landscape for decentralized exchanges, surged 67% in May to become the month’s top-performing digital asset. 

Basic Attention Token (BAT) had the second-best performance, with an 18% return in May, according to CoinDesk Research. 

Bitcoin ranked third with an 11% gain for the month. The largest cryptocurrency by market value traded in a range between about $8,500 and $10,000 for most of May, ending at about $9,500.

Related: First Mover: Bitcoin Rally Shows Traders Don’t Care That Goldman Hates Their Asset Class

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

Among the worst-performing tokens was XRP from Ripple, which slid 5.6% on the month to 20 cents. Bitcoin SV (BSV) lost 7.4%, falling to $192. 

ZRX’s May surge took the token’s price to the highest in almost a year, though the current price of about 32 cents is still down some 87% from the all-time-high of $2.50 reached in January 2018, according to data provider Messari.

The 0x project, which is led by co-founder and CEO Will Warren and raised the equivalent of $24 million in a token sale in 2017, specializes in software that can be used to create decentralized exchanges – essentially automated trading systems that can be maintained and operated with distributed computing networks. 

Related: First Mover: Chainlink ‘Marines’ Are HODLing and Here’s Why You Should Care

0x upgraded its protocol in December of last year to aggregate liquidity from on-chain sources like Uniswap, Oasis and Kyber. At the time, analysis firm Delphi Digital described the change in a report as a “step in the right direction.”  

In a March follow-up report, Delphi noted that the protocol had seen steady trade-volume growth since the upgrade took effect, mostly driven by non-fungible tokens (which can be given different attributes and are used for crypto collectibles) trading on TokenTrove. 

Last month, 0x announced a second-quarter beta launch of a new trading platform, Matcha, that the company says has been “built to feel natural, intuitive, and highlight the convenience of peer-to-peer crypto trading.” 

Denis Vinokourov, head of research for the crypto prime broker Bequant, said in emailed comments that the token may be getting some support from its weekly staking payouts – which are rewards for holding tokens, akin to interest.

According to Bitcoin Insider, the 0x community voted May 7 in favor of a proposal that would cut the time period between staking payouts from 10 days to seven. 

And the ZRX token enjoyed a steep one-day pop earlier this month when Ethereum founder Vitalik Buterin remarked that 0x was “one of the projects he wants to try out,” according to the publication. 

Tweet of the day Bitcoin watch

BTC: Price: $9,544 (BPI) | 24-Hr High: $9,635 | 24-Hr Low: $9,394

Trend: Bitcoin jumped over 8% last week, erasing a major portion of the double-digit price drop seen in the preceding week. 

The outlook, however, remains neutral with the cryptocurrency still trapped in a 3.5-week-long narrowing price range, or contracting triangle, as seen on the daily chart. 

A UTC close above the triangle resistance at $9,835 would indicate a resumption of the rally from the March low of $3,867 and open the doors to re-test of the February high of $10,500. Alternatively, a move under the lower end of the triangle at $8,890 would confirm a bearish reversal and potentially allow a test of the 200-day average at $8,070. 

Some chart analysts argue that the longer duration charts (monthly and weekly) have turned bullish. “Great month for Bitcoin, as it broke above previous resistance,” tweetedpopular analyst Josh Rager after the cryptocurrency ended Sunday at $9,446. 

Meanwhile, on the weekly chart, the cryptocurrency has cleared the resistance of the trendline falling from June 2019 and February 2020 highs. Add to that a golden crossoveron the daily chart and the path of least resistance appears to be to the higher side. As such, the cryptocurrency may end the 3.5-week-long contracting triangle with a bullish breakout. 

Rager, however, warned that the bullish May close could turn out to be a trap for buyers and stronger evidence of a bull revival would be a weekly close above $10,713. 

Further, the cryptocurrency fell 2.5% on Sunday, forming a bearish “inside day” candle and aborting the upward move from last Monday’s low of $8,630.

Technical traders usually wait for confirmation of a trend change in the form of a negative follow-through to the inside day candle, meaning, a stronger selling pressure could emerge if prices drop below Sunday’s low of $9,370 over the next 24 hours. 

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Beauty mogul Michelle Phan isn’t the only woman to notice similarities between makeup startups and crypto communities. 

Both are dominated by influencer marketing with products sold through direct-to-consumer (DTC) models and aggregated retail platforms like Amazon, Etsy or Shopify. 

In emerging markets without direct access to Amazon, Lebanese bitcoiner Michel Haber said grassroots traders often fill the role of educating clients and helping them procure their first wallets. Social media accounts and chat groups become ad hoc retail networks. 

Related: Ether Leads Bitcoin on Price as Investors Prepare for Staking Arrival

Read more: Michelle Phan: The Beauty of Bitcoin

When it comes to grassroots distribution strategies, few mainstream industries offer a better precedent for the nascent cryptocurrency space than small beauty businesses, according to decentralized finance (DeFi) user and skincare aficionado María Paula Fernandez.

In both startup sectors, users are encouraged to do their own research rather than trust traditional tastemakers like magazines. 

“I think DeFi and indie/new beauty [entrepreneurs] are very similar in this regard … bringing power to the people, generating opportunities,” she said. “There is no harm in learning about what’s in your beauty products. … It benefited consumers as well, as some of them can become influencers and broadcast their knowledge for compensation.”

Related: Chase Bank to Refund 95% of $2.5M It Allegedly Overcharged Crypto Buyers

Likewise, Fernandez said, she now looks for beauty products and crypto tools in similar ways. She builds up her own expertise, learning together with loved ones who work in the skincare industry, while also following influencers with professional experience in the field. So far, in the crypto industry, hardware wallet sellers predominantly rely on digital word-of-mouth. Much like the beauty marketing strategies on YouTube, Instagram and TikTok, this includes sending products to crypto influencers to review and make instructional guides.

This typically matures into a referral marketing strategy that leverages these same fan groups. 

For example, Iva Fiserova, head of communications at the Trezor wallet-maker SatoshiLabs, said the startup collaborates with social media influencers on “affiliate marketing activities” rather than paying influencers to advertise. 

A few exchanges, like Binance and Gemini, have already proved successful with the referral model, which has worked for decades for multilevel marketing companies like Avon and Mary Kay cosmetics. As such, the Instagram micro-influencer Chjango Unchained, who works at Cosmos developer Tendermint during the day, said she’s been earning pocket money through the Gemini referral link in her Instagram bio for a few months. 

If her fans use that link to sign up and buy more than $100 in crypto, she receives $10 in bitcoin. 

“I just see people on Instagram doing it,” she said of promoting brands through her Instagram, where she started featuring professional portraits with brand tags in 2019. “I wanted people who ask me about crypto to use Gemini instead of Coinbase because Coinbase’s fees are insane.”

It remains to be seen how these marketing strategies will scale during the coronavirus recession. 

YouTube giveaways

“We sometimes get in touch with [users] to help them engage their followers by doing giveaways and joining campaigns,” Fiserova said of SatoshiLabs’ influencer strategy.

Unlike beauty brands, which look for experienced influencers with established followings, crypto brands are more likely to help users become influencers. 

Fiserova said her company has sold hundreds of thousands of Trezor wallets this way, working with “the community” to create a brand that users love so much the hardware seller “does not need to pay for advertising.”

“We have seen a growing demand for our products in the past three months,” Fiserova said. “There were some shipment issues in some markets, which we managed to resolve, so our customers would get their devices on time.”  

Rodolfo Novak, co-founder of the hardware seller Coinkite, said he’s also seen an uptick in demand since the coronavirus crisis began. 

“Our sales are increasing week by week,” Novak said, declining to specify how many devices other than to say it is now comparable to the French wallet startup Ledger, which sold more than 1.8 million wallets to date, according to a Ledger spokesperson. Novak added his company sent more than 50 hardware products to YouTube reviewers over the past three years. In terms of community, the company’s Telegram group has roughly 773 members. This is their primary marketing strategy. 

“We find our users help other users,” Novak said. “If we added the cost of education [marketing] that would make our product more expensive.”

Even this small niche has proved profitable for Coinkite, which operates its own factory and DTC distribution. In the beauty industry, DTC startups are often acquired by larger brands or start more traditional ad campaigns as they grow. When it comes to crypto, so far it appears larger companies rely on sponsoring niche content creators. Because, after all, free products don’t pay the bills. 

Sponsorships and referrals

The most successful crypto influencers generally seek to spin their star power into media startups. 

This may someday be the case for bitcoin podcaster Marty Bent, whose show is sponsored by Unchained Capital and Square’s Cash App. For now, Bent described his podcast and newsletter as an educational “passion project,” in addition to working at the bitcoin company Great American Mining. Bent said he rejects several prospective advertisers a month because he’s not in a rush to build a sustainable podcast business. 

“I wouldn’t be against advertising for a company that isn’t a bitcoin company, as long as I like and believe in the product,” Bent said. “I think content creators, especially if they’re successful in developing an engaged audience, should realize they can be selective and wait for advertisers they and their audiences align with.”   

A spokesperson for Cash App declined to comment on the company’s sponsorship strategy, including deals with podcaster Joe Rogan and the Twitter-savvy rapper Lil B. Large companies, like Cash App and the Kraken crypto exchange, focus on sponsoring content creators that monetize their personal brands.

Kraken sponsors two such startups that emerged over the past year, including Reckless VR in April 2020, founded by virtual reality meetup organizer Udi Wertheimer, and podcaster Peter McCormack, who launched his media brand Defiance in 2019. McCormack is one of the few influencers who turned his hobby into a day job, reportedly earning $1 million in revenue last year. 

Read more: I Attended a Bitcoin Conference in VR and Still Got Sick

Still, micro-influencers make money through referrals rather than sponsorships. Bent is an unusual case, snagging a mainstream sponsor so early on. 

For a more typical example, Michael Gu, who created a Telegram group with more than 3,602 members and a YouTube channel with 203,000 subscribers, said he offers Ledger wallet affiliate links although the hardware company doesn’t sponsor his videos. Since Gu started creating crypto content in 2012 under the Boxmining moniker, he primarily monetizes his social media channels through affiliate links, viewer donations and, until recently, monthly YouTube memberships.   

Read more: YouTube Temporarily Bans Two Popular Crypto Channels Claiming Policy Breach

“I don’t view Boxmining as a business that demands monthly profits etc.,” Gu said of his crypto content brand. “We had an increase in donations after coronavirus, especially after the community found out that YouTube demonetized all videos covering the subject.”

Growth strategies

The first lesson crypto brands are learning from their beauty industry predecessors is that influencers must be hyper-specific to drive sales, yet evolve as the audience grows in order to remain relevant. 

Companies like the payments startup and debit card provider Crypto.com may leverage their influencer strategies to spin out regional communities, such as Turkish or Russian Telegram groups. 

Crypto.com CEO Kris Marszalek said his company already started this process during the demand surge of early 2020, and is now looking for local partners “from universities, to influencers, to payment partners.” Meanwhile, he said the startup’s user base doubled to 2 million people over the past six months. 

When it comes to what the company looks for in an influencer, Marszalek said people willing to broadcast themselves “using our product and testing it, introducing it to their audiences.”

“We get more return on investment on that [giveaways and referral bonuses] than Facebook ads,” Marszalek said. “The drop-offs are huge once you ask for know-your-customer information, so it’s an expensive thing to advertise if you don’t have an attractive product with a strong word-of-mouth [reputation].”

It’s clear how crypto companies benefit from focusing their marketing budgets on influencers and community management instead of ads and traditional media coverage. It remains to be seen how this plays into the broader influencer economy. 

In the beauty industry, the most successful influencers eventually launch their own product lines. This is much closer to the type of personality cult and product pairing seen with token issuers like Justin Sun of Tron or Binance founder Changpeng Zhao, creator of BNB tokens, than influencer media startups like theSkimm. Much like Sun, other types of influencers also occasionally do cash giveaways for fans on social media. This isn’t unique to crypto. 

Will we someday live in a world where fans speculate on a celebrity’s earning potential, like NBA player Spencer Dinwiddie is doing with security tokens? 

It’s still exceedingly rare for influencer clout to build a broader media or education business, in any sector, rather than advertise consumable products. The YouTube Queen herself, Michelle Phan, is looking to launch a podcast in 2020 and become an exception to this rule. 

In a space where most people get information about financial products through sponsored content, it’s up to consumers to determine whether the influencer is offering unbiased education or propaganda. 

Sometimes, marketing can be both. Tron founder Justin Sun sponsored a college campus tour by podcaster Ben Armstrong, aka BitBoy Crypto, in 2019, along with partners at the Blockchain Education Alliance. As for Bent, he’s not aiming to make “a ton of money,” any time soon, nor expand like McCormack.

Since Bent has traditional syndicate experience, from the podcast network Barstool Sports, he isn’t betting on that rare transition from sponsored educator to sustainable outlet. 

“My goal is to get quality information about bitcoin into as many minds as possible,” Bent said, referring to his podcast and newsletter as advocacy. “The fact that they are profitable is an added bonus. … Some people may call me an influencer, but that’s not my goal.” 

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Chase Bank has agreed to repay most of $2.5 million in fees customers say it unfairly charged for cryptocurrency transactions.

A subsidiary of JP Morgan Chase, the bank has agreed to settle a class-action lawsuit resulting from the bank’s decision in 2018 to charge higher fees on Chase credit cards that had classified the crypto purchases as “cash advances.”

In March, lead plaintiffs Brady Tucker, Ryan Hilton and Stanton Smith notified the U.S. Southern District Court in New York that they had agreed to a settlement with the defendant, Chase Bank. An order signed by Judge Katherine Polk Failla at the time resulted in court proceedings being discontinued and allowed settlement to proceed.

Related: Crypto Influencers Are Following the Beauty Playbook – Even if They Don’t Know It

As reported by Reuters on May 28, in a motion was filed to the Manhattan federal court on May 26, plaintiffs said the settlement will result in class members of the lawsuit receiving about 95% of the fees they allege they were unlawfully charged.

Chase, in turn, will not admit to any wrongdoing to the 62,000 class members as part of the settlement deal, according to the motion.

See also: Telegram Quits Court Fight With SEC Over TON Blockchain Project

“Chase has agreed to enter into this Agreement to avoid the further expense, inconvenience, and distraction of burdensome and protracted litigation, and to be completely free of any further claims that were asserted or could have been asserted in the Action,” the motion stated.

Related: BitClave Search Engine Agrees to Pay Back $25M ICO in Settlement With SEC

The class action was first brought forward in April 2018, when Tucker alleged Chase had charged him more than $160 in fees and interest for regularly purchasing cryptocurrencies from Coinbase using his credit card.

Executive director of pricing processes, strategy, competitive intelligence and customer experience at JPMorgan Chase Prashant Singh testified that “between April 10, 2015 and the date of this declaration (May 21), Chase credit card account holders were assessed $2,567,252 in cash-advance fees, after netting for reversals, in connection with credit card transactions with merchants that Chase has identified as potential cryptocurrency merchants.”

The amount to be refunded will come to around $2.4 million.

See the details of the settlement agreement and release in full below:

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A widespread bug has compromised a special type of bitcoin transaction that is supposed to discourage miners from cheating, new research shows.

In a report released in late April, pseudonymous engineer 0xb10c found more than a million of these “timelocked” transactions made between September 2019 and March 2020 were not accurately enforced by the network. This increases the risk of a hypothetical form of attack in which miners could essentially steal bitcoin from other miners. The bug affects 10% of timelocked transactions, or 2% of bitcoin transactions overall. 

The findings highlight a key area of bitcoin research that aims to stop miners from growing too powerful or cheating in various ways so the world’s largest cryptocurrency, with a market capitalization worth around $173 billion, works as designed. 0xb10c is one of a global network of developers and researchers battle-testing the network, to guard against even theoretical attacks that so far haven’t been much of an issue.

Related: Crypto Influencers Are Following the Beauty Playbook – Even if They Don’t Know It

A timelocked transaction prevents the recipient of bitcoin from accessing it right away. Instead, the person must wait until the network has added a certain number of blocks to the ledger. Since each new block takes about 10 minutes to record, a timelock can be programmed to expire at an approximate point in the future by setting a corresponding block height. 

Read more: Crypto Researcher Hasu Flags Attack That Could Bring ‘Purge’-Style Mayhem to Bitcoin

One use case for this feature is as a form of vesting — startup Blockstream has paid employees in timelocked bitcoin, for instance, which theoretically gives them an incentive to do what’s best for the network’s long-term value. 

But the faulty timelocks 0xb10c detected had a more immediate purpose. Set for the current block (so they are not valid until one block later) they are designed to make “a potentially disruptive mining strategy, called fee-sniping, less profitable,” 0xb10c said.

Related: Market Wrap: Bitcoin Slides, Stocks Tread Water on Trump China Comments

With fee-sniping, a malicious miner tries to replace a block someone else just mined with their own, including the same transactions plus potentially other transactions that are still pending. The timelock prevents them from including the latter, limiting the spoils from the attack so it’s not worth the bother.

A long-term risk

The likelihood of such an attack might increase as transaction fees, which users pay to prioritize their payments, become a more important source of income for miners. Right now, miners mostly rely on block rewards of newly minted bitcoin to cover their costs. But this revenue stream decreases over time, as the Bitcoin network’s recent halving shows.

“Currently, not enforcing a timelock to an absolute block height does not have consequences for the majority of transactions. In a few years, when the block reward consists mainly of transaction fees, it might make fee-sniping more profitable,” 0xb10c told CoinDesk.

Hence, the bug could be harmful to the wider network. But right now, it’s most likely a “low-priority” problem to fix for most wallet services because it doesn’t result in users losing money or affect timelocks set further into the future, 0xb10c said.

Read more: BitMEX Is Making Bitcoin Network More Expensive for Everyone, Researcher Finds

Plus, the bug is a privacy leak for users. The oddly formed timelock is different from all the other timelocks on the network, so it’s easy for blockchain voyeurs to see that the transaction is coming from a particular wallet. 

Many of the faulty transactions 0xb10c detected were made by a single large entity, which he did not name. The engineer said he reached out to the entity producing the buggy software, who responded “professionally,” he said, coming up with a solution to the problem. It might take time for the solution to roll out, however.

“A fix for this has been released in early 2020. However, it will take a while before all instances of the currently deployed software are upgraded,” he said.

0xb10c hopes his research will raise awareness of the risk of fee-sniping attacks so wallets that haven’t set the time locked transactions correctly can make the fix, making the Bitcoin network a little more robust.

He was able to pinpoint and contact the largest entity producing these flubbed transactions, but there are others out there making the same mistake. 

“It’s hard to find the respective implementations creating these transactions,” 0xb10c said. “Some of them might not be open source, making it even harder.”

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Bitcoin declined for the first time in three days as traders in digital-asset markets and more traditional stocks considered the implications of U.S. President Donald Trump’s latest broadsides against China on the coronavirus and Hong Kong. 

Bitcoin (BTC) was changing hands around $9,400 as of 20:00 UTC (4 p.m. ET), slipping less than a percent over the previous 24 hours after a two-day rally when it rose to $9,600 on Thursday from $8,800 early Wednesday. 

Some analysts had warned Trump’s White House press conference might include announcement of draconian actions against China that could lead to a deeper rift (giving traders the jitters earlier Friday). That didn’t happen, however. While he announced new, targeted sanctions against Chinese officials and directed his administration to revoke special trade exemptions for Hong Kong, he said he would keep a “phase one” trade deal with China intact.

Related: Bitcoin News Roundup for May 29, 2020

Stocks fell as Trump started speaking Friday afternoon and recovered as he wrapped up his comments and stepped away from the microphone.  

Read more: Slipping Chinese Yuan May Boost Bitcoin Price, Past Data Suggests

“The U.S. has plenty to lose from a severing of economic ties with Hong Kong given that [the U.S.] $297 billion trade surplus during 2009-2018 was the biggest among all trading partners,” Joshua Mahony, senior market analyst at investment platform IG, wrote in a market update Friday. 

In the United States, the S&P 500 index was up by less than a percent. 

Related: Bitcoin Rally Falters as Stocks Drop Ahead of Trump’s China Speech

Bitcoin’s price is holding above its 10-day and 50-day moving averages. Traders studying price charts saw the resilience as bullish, but the anemic trading action could ultimately damp sentiment.  

In Europe, the FTSE Eurotop 100 index of the largest stocks by market capitalization ended down 1.7%. In Japan, the Nikkei 225 index was little changed.

Henrik Kugelberg, an independent Swedish crypto trader, said heightened U.S.-China tensions might not be all bad for bitcoin because some Chinese investors might look to shift some of their local currency into alternatives, which could provide a boost for the cryptocurrency.  

“The Chinese are buying gold and bitcoin,” Kugelberg noted.

Other markets

Digital assets on CoinDesk’s big board are mostly in the green Friday. The second-largest cryptocurrency by market capitalization, ether (ETH), gained 2% in 24 hours as of 20:30 UTC (4:30 p.m. ET). 

Cryptocurrency winners on the day include ethereum classic (ETC) climbing 6%, cardano (ADA) up 3% and nem (XEM) in the green 1%. All price changes were as of 20:30 UTC (4:30 p.m. ET) Friday.

Read More: Coinbase Extends Tezos Staking Rewards to 4 European Countries

In the commodities sector, oil is making big gains, climbing 5% with a barrel of crude at $35.29 as of press time. 

Gold is in the green on the day, with the yellow metal gaining 1% and closing at $1,731 at the end of New York trading. 

U.S. Treasury bonds all slipped Friday. Yields, which move in the opposite direction as price, were down most on the two-year bond, in the red 11%.

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Amazon, a kingmaker of e-commerce and shipping, has patented a distributed ledger-based (DLT) system for proving the authenticity of consumer goods.

The U.S. Patent and Trademark Office approved the Seattle tech giant’s nearly three-year-old “Distributed ledger certification” filing on Tuesday. The patent describes using DLT to infuse “digital trust from the first mile of an item’s supply chain” to the last.

Amazon’s system compiles data from distributors, manufacturers and shippers on an “open framework” that builds a product provenance across information silos. This data could be neatly packaged for the consumer, as shown in the patent drawings.

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In a brief that waxed unusually philosophical for dry patent filings, Amazon derided the “proliferation” of “systems and databases that can often lack transparency, coherency, referential integrity or security” – all potential eroders of trust.

These “patchwork” technologies also fail to encompass the global supply chain, Amazon wrote. Amazon is growing ever more critical to that chain: Its own couriers delivered 3.5 billion packages last year, 46% of the total.

Against those existing tech deficiencies, Amazon argued distributed systems offer a compelling solution. It said DLT can protect data from alteration, remove single points of failure and avoid the managerial problems of centralized authority, like bottlenecks.

See also: Big Tech Signs Rare Open Source Pledge to Boost Supplies During COVID-19

Related: DTCC Considers DLT Use in Securities Trading With 2 New Studies

Amazon said in the patent that Hyperledger could be one form of DLT used.

Patent filings do not necessarily indicate that a company is using a technology. 

Earning trust

“Trust is earned,” wrote Amazon, whose gargantuan e-marketplace is awash in counterfeits, according to the U.S. government. “Once trust is lost, it can often be difficult to regain.”

Last year, Amazon launched a counterfeit detection initiative called “Project Zero” that attempts to intercept phony goods. Amazon officials told the Wall Street Journal in 2018 the company would spend billions of dollars fighting fakes. It was unclear at press time Friday if DLT has played a role in either effort.

U.S. lawmakers remain wary of Amazon’s counterfeit product problem. The buying public is decidedly more trusting. Nearly 39% of respondents to a Morning Consult poll said they trusted Amazon “a lot.” Only the United States Postal Service, which delivers 30% of Amazon’s packages, ranked higher.

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It’s probably no coincidence that three major crypto firms – Coinbase, Genesis Trading and BitGo – have almost simultaneously announced plans to become prime brokers, a kind of fixer when it comes to financing and facilitating trades for institutional investors.

This type of vertical integration happens in every business, whether that’s Amazon running the internet or Coinbase trying to own the crypto space. Given the long road of the last couple of years, it’s maybe surprising there hasn’t been more M&A activity in the blockchain world.  

The big news this week was Coinbase’s acquisition of trading technology and execution platform Tagomi. BitGo Prime also launched with its recently announced lending business and bolted on tax-reporting company Lumina. Last week, Genesis Trading (a subsidiary of CoinDesk parent firm Digital Currency Group) bought crypto custody provider Vo1t and spun up “Genesis Prime.” 

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Read more: Coinbase Buys Tagomi as ‘Foundation’ of Institutional Trading Arm

From starting out as a retail-focused cryptocurrency exchange, or a wallet provider, or an OTC desk, the ambitions of these firms (and others) to become crypto’s prime brokers is aspirational at this stage, as observers like BlockWorks Group co-founder Jason Yanowitz have noted. Indeed, the term “prime broker” is suddenly the latest buzzword in crypto, observed Max Boonen, CEO of cryptocurrency liquidity provider B2C2.

“What puzzles me a little bit is that some people are getting into prime brokerage, not based on a vision, but really because they are looking for the next big thing – and they don’t know what it is. So they are going after the buzzword,” said Boonen. 

In traditional capital markets, the term “prime broker” refers to a set of three or four features or components that are normally provided by investment banks to their hedge funds clients. 

Related: Genesis Hires Ex-Galaxy Digital Staffer to Run New Derivatives Trading Desk

Top of the list is the financing that prime brokers supply to hedge funds to get leverage into their positions, and lending where people running a long/short fund are able to borrow the shorts. Operational efficiency in the traditional world is perhaps overshadowed by the importance of custody in the crypto space, and the final component is providing “best execution,” achieved by tapping a range of liquidity providers and exchanges.

Before Coinbase’s acquisition of Tagomi, there were “precisely zero” firms that had all of the above components, said Dave Weisberger, co-founder and CEO of CoinRoutes, a trading technology and execution provider in the same vein as Tagomi.

“If I were in [Kraken CEO] Jesse Powell’s shoes, or if I were Bitstamp or the Winklevoss twins, I would look at the Coinbase-Tagomi deal and say, ‘Hmm, this is the technology we need,’” said Weisberger. 

An obvious question is why now? 

“There is sort of a coincidental element that all of this happened to land in the same week or two,” Genesis CEO Michael Moro, “but from an industry trend and directional perspective, I think it makes all the sense in the world.”

Deep pockets

No doubt there are gaps in Coinbase’s growing institutional franchise that have yet to be cinched together, noted Weisberger. 

“But when it comes to trade execution, Tagomi has that and also the tech to facilitate lending,” he said. “Coinbase has deep pockets, and with custody, the ability to have lendable coins. So they just have to combine all that intelligently.”

Boonen of B2C2, which is listed at the top liquidity provider on the Tagomi platform, pointed to the financing and leverage as the crucial piece of the puzzle still missing from Coinbase’s plans. 

“One of the things that a lot of participants say is missing from Tagomi is the provision of credit and it’s also something that Coinbase doesn’t do,” said Boonen. “It’s a friction at Coinbase because of their regulatory setup, which obviously has benefits in one sense, but on the other hand, it limits them in terms of providing leverage.”

In order to be a fully-fledged prime broker, this obvious gap has to be plugged.

“One of the core drawbacks with Tagomi is also not a strength of Coinbase, I do feel at the moment it’s aspirational in terms of being a prime broker,” Boonen said.

Read more: Crypto and the Latency Arms Race: Market Microstructures

Genesis Trading, which has loaned digital assets valued at $1.53 billion to institutional borrowers since launching its lending business in March 2018, said the availability of credit is more important than smarts, especially for firms that are used to trading on margin.

“We are building all of those fancy trading systems in-house; there’s no question that we are,” said Moro. “But that’s secondary to what we do and certainly not the reason somebody would use Genesis.” 

Crypto conflicts

Tagomi’s management has informed its clients it will not deviate from the overarching business plan, including routing orders to multiple liquidity sources, Boonen said. Tagomi aggregates exchanges such as Bitstamp, Gemini and Binance US, as well as a handful of OTC market makers, to scout out the best prices for its clientele of traders. 

It’s possible to run a best-execution agency as a separate entity, but prime brokers have a privileged position with their customers, including access to their trading strategies and material, non-public information about them.

Technically, a conflict of interest can be avoided, said Boonen. The question is, will it be done in practice.

“It’s also about whether other exchanges being aggregated still want to do that,” Boonen said. “Obviously, you are happy to work with Tagomi because they are an independent business, but what does it mean when they belong to Coinbase, which is a direct competitor to you?”

Weisberger of CoinRoutes said there are information barriers and procedures that can be put in place to remove any conflict of interest but it remains “a very interesting discussion,” which speaks to a broader disparity between crypto and traditional markets trading. 

Read more: Crypto Long & Short: Innovation Cycles, Crypto Venture Funds and Institutional Investors

“If I were Binance US, I would have no qualms about Tagomi providing liquidity and accessing liquidy on Binance US; if I were Bitstamp I’d have no qualms,” said Weisberger. “I would, moreover, expect that they would then go over to Coinbase Pro and say, ‘OK, guys, we want to have a unit that can access liquidity on your platforms.’”

The growth of exchange groups like Intercontinental Exchange (ICE) or Nasdaq in the equities markets was because these firms had to allow their competitors to access their quotes and had to allow their competitors to route business to them, Weisberger pointed out, and in the end, the whole market benefits as a result.

“Wall Street and the City of London are thought of as the most bare-knuckle capitalists out there,” said Weisberger. “But there are areas where people work with their competitors to make the overall business better, and areas where they compete like hell. Silicon Valley has a different mentality where you have to simply out-compete everyone, and the crypto industry may be the same right now.” 

Binance and Bitstamp did not reply to requests for comment.

Last man standing

Technical and regulatory challenges around the safe storage of crypto assets have seen numerous custody providers spring up with various solutions and services on offer. It’s probably going to be the case that more of these highly specialized firms will be snapped up by bigger players, similar to the Vo1t acquisition.

“I think standalone custody businesses are going to be difficult to sustain,” said Moro of Genesis. “Custodial fees are shrinking; it’s a race to zero. So I think standalone custodians are going to partner up with companies that have other business lines, or they will look to start other business lines.” 

Nick Carmi, BitGo’s head of financial services, agreed consolidation is well underway. 

“This is exactly what happened in the financial markets as well, where custody is provided by few very large custodians,” he said.

Read more: BitGo Cements Hold on Institutional Market With Lumina Acquisition

As far as broadening out, Carmi said BitGo Prime was always part of the vision, driven by optimism in crypto as much as anything else. Taking a jab at Coinbase’s Tagomi deal, Carmi emphasized the importance of not being an exchange when it comes to offering brokerage services. 

“We are not an exchange, we enable connections to multiple exchanges and market makers on a full non-disclosed basis. It is important to partition certain functions in order to have a secure and efficient financial infrastructure for digital assets,” said Carmi.

BitGo acquired some trading capabilities from last month’s purchase of Lumina, Carmi said, without disclosing any trading or lending volumes.  

Meanwhile, some firms are still operating on the premise this is the Wild West and they will make a lot of money, said Boonen, but as the crypto market tightens and becomes more efficient, it will be the professionals that are left standing.

“There are firms hoping to charge five basis points per trade through some sort of intermediary they are calling a prime broker,” said Boonen. “No one is going to pay that. The problem is, you can charge half a basis point on $100 billion a year in volume, but until you get there it will seem like a very long road.”

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The case for decentralized platforms has never been clearer, as President Donald Trump goes on the offensive against big tech platforms like Twitter and Facebook, said lawyers and technologists surveyed by CoinDesk.

Meanwhile, decentralized identity service Magic has raised $4 million from heavy-weight investors including Naval Ravikant, SV Angel and Placeholder, and the Digital Dollar Project is making its case for updating the U.S. dollar with its first white paper. Here’s the story:

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

Related: First Mover: Bitcoin Rally Shows Traders Don’t Care That Goldman Hates Their Asset Class

Big Tech
U.S. President Donald Trump signed an executive order Thursday targeting Twitter and other social media platforms after Twitter fact-checked two of the President’s tweets, which seeks to amend Section 230 of the Communications Decency Act. Lawyers and technologists think the order is likely to fail, though it could have positive effects for the emerging decentralized web. Meanwhile, Twetch’s Twitter account was suspended Thursday without warning, according to Twetch co-founder Josh Petty, and has since been reinstated without a follower count. Twetch offers alternative microblogging platform and actively markets itself against the San Francisco firm run by bitcoin enthusiast Jack Dorsey. 

Digital Identities
Magic raised a $4 million seed round from investors including Naval Ravikant, SV Angel, Placeholder, Lightspeed Venture Partners and Volt Capital to build a decentralized online identity and log-in service. Nuggets, a digital identity and payments platform, has developed a way to accept deliveries without needing a physical signature, using biom

Regulatory Matters
The Digital Dollar Project is proposing a framework for the creation of a U.S. central bank digital currency (CBDC). The group published its first white paper detailing how a digital dollar could help the U.S. maintain the dollar’s status as the world’s reserve currency. Around a dozen companies have a Gibraltar distributed ledger technology license, though the process is difficult, ZUBR, a crypto exchange, said. ZUBR’s approval is conditioned on addressing some of the regulator’s feedback by the time it gets its license. Meanwhile, Gibraltar Stock Exchange (GSX) Group’s digital securities platform has tokenized the shares of a client for the first time.

Open Finance
Users of the Compound lending platform will begin earning COMP tokens in mid-June, pending the public review of the decentralized finance firm’s distribution plan. Roughly 42% of the total supply of the governance COMP tokens will move into a reservoir pool and begin daily distributions to users of the protocol for the next four years. Coinbase Pro is adding support for MakerDAO’s native MKR (Decrypt) and expanding its Tezos staking service to the U.K., Spain, France and the Netherlands.

Related: Blockchain Bites: BlockTower’s Returns, Minecraft Goes Blockchain, ID2020 Shakeup

Crime Doesn’t Pay
BitClave, a California startup whose Ethereum-based search engine raised $25.5 million in a 2017 token sale, will pay back its 9,500 investors in a settlement with the SEC. A New York City man has been indicted for allegedly stealing and selling reams of payment card data, the proceeds of which he laundered in bitcoin.

Funded Through Crypto
Telegram messenger founder and CEO Pavel Durov reportedly donated about 10 bitcoin, approximately $90,000, to help alleviate the financial burden of the COVID-19 pandemic in Russia. A new series about blockchain project Dragonchain is premiering on Discovery, and it’s been fully financed with $1 million in crypto. Production house Vision Tree Media said Friday that its new “Open Source Money” documentary series, which will track crypto project Dragonchain, would debut on Discovery Science, a U.S. TV channel run by Discovery Inc., who also owns the Discovery Channel.

Opposite Editorial

How Contact Tracing Can Be Effective While Guarding Privacy
Vipin Bharathan, chair of the Hyperledger Identity Working Group, looks to decentralized technology as a solution for contact tracing’s divisive debate between public safety and privacy. “To preserve the privacy of users and to be useful at the same time is a challenge. Privacy is enhanced by decentralization, by key schedule design and minimal collection of data,” he said. 

What Goldman Gets Wrong About Bitcoin (From Someone Who Used to Work There)
Jill Carlson, a CoinDesk columnis and co-founder of the Open Money Initiative, examines all the ways Goldman Sachs abandons reason when denouncing bitcoin as a suitable investment. “It’s not worth detailing every misconception or failed bit of logic in the report. But a few are worth mentioning. Goldman’s argument that cryptocurrencies are not a scarce resource due to the ability to fork into “nearly identical clones” represents a shocking failure of research into the immense technical and cultural differentiations between the three examples that they offer (bitcoin, bitcoin cash and bitcoin sv),” she said. 

Market Intel

Consolidating Gains
Bitcoin’s bulls are taking a breather amid jitters in the traditional markets over rising tensions between the U.S. and China. The world’s biggest cryptocurrency is trading near $9,400 at press time, having posted an eight-day high of $9,620 on Thursday. Prices have gained 8% so far this week. While bitcoin looks to be consolidating on recent gains, major European stock markets are flashing red for the first time this week. Leading the way lower is Germany’s DAX, down 1.5% on the day, followed by France’s CAC, which is reporting a 1% decline. Across the pond, futures tied to Wall Street’s equity index S&P 500 are down 0.5%.

Exchange Exodus 
The total number of bitcoins held in cryptocurrency exchanges wallets dropped to an 18-month low just above 2.3 million on Monday. The decline marks an 11% year-to-date reduction in the number of bitcoins held by exchanges. “People are accumulating aggressively, and the market participants seem to have a higher time preference these days,” said Avi Felman, head of trading at BlockTower Capital.

COVID Relief

Crypto vs COVID Charity Poker Tournament
Hold ‘Em for a cause on May 31, when crypto figureheads come together to play poker for charity. Buy in with fiat or crypto for a chance to play against Ryan Selkis, Brock Pierce, Hailey Lennon, Ran NeuNer, Charlie Lee and more for a chance to win 2 bitcoin. 

Ante up at least one hour before first bet. 

CoinDesk Podcast Network

Too-Strong Dollar?
Brent Johnson has argued the big economic issue of our time isn’t inflation of the U.S. dollar due to excess money printing, but the havoc caused by a global system where the dollar keeps getting stronger and sucks up liquidity from the rest of the world. He joins The Breakdown to discuss the dollar’s role in a post-COVID world.

The Breakdown: Money Reimagined
As clarity emerges amid the COVID-19 crisis, what have we learned about the battle for the future of money? Does the dollar reign supreme, are the euro or China’s digital yuan gaining ground, or does an alternative like bitcoin stand a chance? 

The fourth and final episode of The Breakdown: Money Reimagined poses the big questions this podcast microseries has explored with speakers and panelists from Consensus: Distributed, CoinDesk’s virtual summit held May 11-15. 

These voices include former Treasury Secretary Lawrence Summers, the Winklevoss brothers, former CFTC Chair Christopher Giancarlo, Binance CEO Changpeng Zhao, YouTube influencer and beauty mogul Michelle Fan, The Chainsmokers, esteemed economist Calota Perez and more. Subscribe here.

Who Won #CryptoTwitter?

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Russia’s crypto industry is pushing back against a set of bills that would make it more difficult to operate in the Eurasian country.

Russian lawmakers introduced a set of draft bills regulating digital assets earlier this month, which would effectively ban any transactions using crypto within the country’s borders. In response, the crypto community has filed a number of protest letters.

If the proposed regulation is passed, the Russian economy could lose up to $10 billion in taxes annually, which the crypto industry would otherwise be able to pay if it could operate legally, says a letter by crypto lobbying group RAKIB to the bills’ sponsor, Anatoly Aksakov. A copy of the letter was also sent to Maxim Reshetnikov, head of the Ministry of Economic Development. 

Related: It’s Tough Getting Approved in Gibraltar, Says Green-Lighted Crypto Derivatives Exchange

Aksakov, a member of the Russian parliament (the State Duma), previously told news agency Interfax that Russians would be able to purchase cryptocurrencies on exchanges registered abroad but not in Russia, and they will have to report their crypto for tax purposes at home.

RAKIB’s letter says one of the bills introduced prohibits the issuance of cryptocurrencies using servers located in Russia and web domains registered in the country, which means local crypto businesses will have to leave for other jurisdictions. 

In addition, Russia will lose the opportunity to maintain technological leadership and “build a new Iron Curtain” cutting it off from the global tech infrastructure and force young tech talent to work abroad. 

Read more: Russia Considering Draconian Rules for Illegal Crypto Operations

Related: Bank of Russia Wants to Put Mortgage Issuance on a Blockchain

The Chamber of Commerce and Industry, an advocacy group for companies in various industries in Russia, sent its own letter to the parliament. This letter was referenced in the Telegram channel of Elina Sidorenko, the head of the Working Group on Estimated Risk of Cryptocurrency Turnover in the Duma. 

The letter points out the ban on any economic activities with crypto contradicts Russia’s policy on the digitization of the economy, which was announced by President Vladimir Putin in 2017. Plus, the suggested regulation “contradicts the main international rules for regulating the digital assets,” the letter says. 

The Duma’s own expert council for digital economy and blockchain, in turn, sent a letter to Putin’s counsel for protecting the rights of entrepreneurs, Boris Titov. The group warned the new regulation would endanger the constitutional rights of Russians and provoke abuse of power by law enforcement agencies. This letter has been also shared by Sidorenko.

The draconian sanctions for merely facilitating crypto transactions and providing information about them, including in the mass media, will freeze digital economy growth in Russia and scare away potential foreign investors, this letter says.

“In the crisis time in particular, such measures are inappropriate,” the document reads. 

Another crypto advocacy group, the International Digital Economy Organization, sent a letter to the parliament suggesting that instead of a ban, crypto-related enterprises should be recognized as a legitimate kind of business and the government should only ban transactions related to money laundering and the financing of crimes, with the threshold for suspicious transactions above 200 million rubles (about $283,000). Mining and exchanging crypto for fiat should be taxed at a 4% rate, the letter says. 

Read more: Bank of Russia Wants to Put Mortgage Issuance on a Blockchain

Sidorenko believes the reactions reflect thinking in the industry at the moment the proposed regulation is not yet ready to be adopted. One of the issues with the draft package is the ban on crypto has been introduced to the parliament as an addition to an earlier bill on digital securities, which has already passed through a first hearing in Duma.

This means all the new bills will go straight to a second hearing, speeding up the legislative process. If the lawmakers agree with the feedback provided by the Russian crypto community, they will have to push the entire legislative package back a step to a first hearing, Sidorenko said. In that event, the new regulation would not be considered before autumn because the Duma is about to break for the summer.

Another government official, Dmitry Marinichev, the president’s counsel for the protection of entrepreneurs’ rights in the Internet, believes the draft should simply be rejected.

“The state should not be afraid of the future and prohibit the innovation, it should be ready to change and help people feel comfortable in the new digital world,” he wrote on his Facebook page.

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U.S. President Donald Trump signed an executive order Thursday, seeking to amend Section 230 of the Communications Decency Act. Section 230 prevents social media companies from civil liability for the content posted on them. The order targets Twitter and Facebook after Twitter fact-checked two of the President’s tweets. 

The text emphasizes Trump’s “commitment to free and open debate on the internet.” Trump said that “we are here today to defend free speech against one of the gravest dangers it has faced in American history” before going on to identify that threat as a “small handful of social media monopolies.” 

Lawyers who reviewed the order say it’s unlikely to accomplish Trump’s goals. Trump was misunderstanding the law, they said, and had little chance of achieving genuine reform of Section 230 without Congressional help.

Related: Twetch Gets Suspended From Twitter in Wake of Trump ‘Fact-Check’ Storm

Campaigners for a repeal of Section 230 said Trump’s intervention might derail their cause. But it also might offer an opening for decentralized technology, allowing innovation to substitute for government action on issues around misinformation, censorship and the power of social media (see below). 

Misunderstanding 230

“Trump neither understands nor cares about the law, whether it’s the First Amendment or Section 230,” said Mary Anne Franks, a law professor at Miami Law School, author of “The Cult of the Constitution” and who has written about Section 230 extensively. “All he cares about is power, and he knows that the only way to disguise this is to pretend he is being persecuted.”

Robert Corn-Revere, partner at Davis Wright and Tremaine LLP, who focuses on first amendment issues, said the executive order is not well informed about how Section 230 works – or even what it says – much less how it has been interpreted by courts over the past two decades.

“It is a novel concept, to say the least, to suggest that the President, by executive order, can amend or modify an act of Congress, override hundreds of judicial rulings and instruct independent federal agencies to take actions that exceed their jurisdictional mandates,” said Corn-Revere in an email.

Related: After Coronavirus ‘War,’ Bretton Woods-Style Shakeup Could Dethrone the Dollar

“And these problems arise even before getting to the obvious First Amendment issues raised by seeking to punish or regulate social media platforms for their editorial decisions.” [Disclosure: Davis Wright and Tremaine carries out legal work for CoinDesk.]

See also: Handshake Exchange Sees $10M in Token Trades as Race for Censorship-Resistant Websites Heats Up

Twitter responded to the order, saying the executive order was a reactionary and politicized approach to a landmark law. “#Section230 protects American innovation and freedom of expression, and it’s underpinned by democratic values. Attempts to unilaterally erode it threaten the future of online speech and Internet freedoms,” it said.

Friday morning, the company flagged another of Trump’s tweets for “glorifying violence” after he suggested protesters in Minneapolis, Minn., could be shot. 

One casualty of this tantrum is any serious consideration of longstanding and legitimate critiques of Section 230

Public debate around 230 centers around whether these platforms are publishers. To some, a decision to add a fact-check counts as editorializing, making such a platform a publisher. But this is a misreading of the powerful and unilateral immunity Section 230 offers, says Preston Byrne, a prominent crypto law partner (and CoinDesk columnist).

In a blog he said Section 230 does two things only: 1) ensures platforms and users are not liable for content and 2) that, if you complain about a platform moderating your content, don’t expect much legal recourse.

Good faith

Trump’s order goes after the “good faith” requirement for removing “objectionable content” which could encompass whatever the platform chooses to amend. 

There’s no “good faith” requirement the platform (termed interactive computer service in the section) or user of that platform be treated as the publisher or speaker of any information provided by another user. If someone says something defamatory about you, you can’t sue me or Twitter over it, you sue the person that said it. 

“You can’t treat an online intermediary like a publisher,” said Franks, even if it acts like a publisher.

She’s critical of latitude to exercise “good faith” in taking down any content the intermediary finds “objectionable” and makes pretty much any parsing of “good faith” a moot point. It’s all up to the company. In any event, Twitter didn’t take down any content in relation to Trump, she said, they merely added to it. 

Section 230 has allowed platforms to flourish, and those same platforms to share disinformation, profit from the eyeballs that come with each cycle of outrage and deeply affect public discourse. 

See also: YouTube Temporarily Bans Two Popular Crypto Channels Claiming Policy Breach

The order calls on the Federal Communications Commission (FCC) and Federal Trade Commission (FTC) to re-evaluate the “good faith” requirement. In a statement Thursday Commissioner Jessica Rosenworcel (one of two Democrats on the committee) said turning the FCC into the President’s “free speech police” was not the answer. 

The process of putting the order together was hastily conducted, and included adapting an old order that had been floating around the White House for years, according to Protocol. 

“One casualty of this tantrum is any serious consideration of longstanding and legitimate critiques of Section 230,” said Franks. “It’s an intentional hijacking of the principled calls for reform.”

However, Gigi Sohn, a former counselor at the FCC, said Section 230 is not “inviolable,” meaning Congress could choose to address criticisms of the law. Amending this rule could improve online accountability, she argues, but also put upstart networks at a disadvantage. If moderation is now required, Twitter and Facebook are more likely to have the resources to do it properly.

“The little guys are already behind, and they will be even further behind if you keep carving out protections granted by Section 230,” Sohn said. “This points out the incredible power of a handful of companies. The power to determine what people see, what people think and what people believe. That should not be.”

Decentralization

Whatever the fate of Section 230, technology offers a potential way forward without the need for new laws. 

Sohn supports major internet platforms “opening” their services to competitors and making themselves interoperable. 

Denouncing ongoing efforts to break up big tech platforms, which are toothless due to decades of antitrust law attrition, Sohn said. “I’d rather see something like making them interoperable.”

“That’s the way you quote-unquote break up Twitter and Facebook. You make them open up their APIs [application programming interface] and policies to competitors to make use of,” she said. “I’d like to see it become mandatory.” 

Forcing companies to decentralize or move to open standards would spur the creation of new businesses. “The way you handle the power of a company like Twitter is by making sure it can be competed against,” she said. 

A mandate to decentralize has some historic precedence, too. It’s akin to what the Telecommunications Act of 1996 did for telephone companies, Sohn said, referring to a bill that required communications operators to open their networks for competitive use. 

“Unbundling” online networks, and distributing the influence that one microblogging platform holds over the public conversation, would likely “get them out of this constant criticism,” she said.

If platforms want to make the error of enforcing their political biases on their users, let the free market provide competitors

Twitter is working on a decentralized standard called Blue Sky, though not much has been revealed about the project since announced in late 2019. Twitter did not respond to a request for comment. 

Other networks, sometimes appended to a blockchain, already exist and are thriving. “[W]ith the recent politicization of [F]acebook, [G]oogle, and other bigtech social media giants, the web3 thesis for crypto has never been as underrated as it is now,” Su Zhu, CEO of hedge fund and cryptocurrency investor Three Arrows Capital, tweeted.

See also: InterPlanetary File System Is Uncensorable During Coronavirus News Fog

LBRY, for one, cites the wanton power to censor and deplatform that centralized platforms like Twitter wield as one of its motivations for existing. LBRY’s neutral protocol enables anyone to post content without reprisal, and stores this information on an immutable blockchain. The company’s CEO, Jeremy Kauffman, said LBRY has seen three million active users in May, nearly doubling the count from preceding months. It also receives a number of new users anytime a crypto personality is banished from a big tech platform. 

“The President is right to be concerned about the neutrality of companies like Facebook, Twitter and YouTube,” Kauffman said. But he doesn’t agree with making the government – as Trump just attempted – “the arbiter of truth.” 

“If platforms want to make the error of enforcing their political biases on their users, let the free market provide competitors like LBRY that make this problem obsolete. Innovations like LBRY make it so that the interference of Twitter and YouTube is technologically impossible,” he said. 

To be sure, there are issues with decentralization. Crypto Beadles, a prominent crypto YouTuber, tried the platform and found it wanting. 

“There are currently no fully decentralized social media platforms I know of that work even remotely as well as the first version of YouTube,” he said. He painted the picture of a platform with the network effects of Twitter, guided by the principles of LBRY. 

For his part, Kauffman said if Twitter were to decentralize, “the biggest effect this would have on LBRY is the potential to slow our growth…if it forces these companies to behave more responsibly. But they misbehave in so many other ways, I doubt this will happen.”

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A new series about blockchain project Dragonchain is premiering on Discovery, and it’s been fully financed with $1 million in crypto.

Production house Vision Tree Media said Friday its new “Open Source Money” documentary series, which will track crypto project Dragonchain, would debut on Discovery Science, a U.S. TV channel run by Discovery Inc., which also owns the Discovery Channel.

While the five-part series, scheduled to start July 4, will center around Dragonchain, Vision Tree added it will do so against the backdrop of the broader cryptocurrency industry. The firm name-dropped former Overstock CEO Patrick Byrne, crypto entrepreneur Brock Pierce and companies including Facebook and Disney as the big names interviewed for the series.

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On its website, Vision Tree says the “successful launch of the Open Source Money series is critical because it will help put cryptocurrency and blockchain technology on the map, as well as in the hands of more people passionate to make a change in the world.”

See also: This Bitcoin Documentary From Africa Is Streaming on Amazon Prime

When CoinDesk asked how the series was funded, Vision Tree said the million-dollar budget came from its own “Coiin” cryptocurrency.

The DRGN token has been languishing not far above record lows for over a year, following an early post-ICO spike to nearly $5 in 2018. Prices at press time were just below 10 cents per token.

Related: New ‘Simpsons’ Episode Features Jim Parsons Giving a Crypto Explainer for the Masses

“The limited documentary series features the untold, heroic story of Dragonchain,” gushes the press release. A spinout from Disney, Dragonchain allows enterprise users to securely store data on a blockchain. It raised more than $13.7 million in a sale of its DRGN token in late 2017.

A trailer for the new series shows one of the documentary’s main themes is the darkening regulatory environment toward crypto projects in the U.S. Back in 2018, Dragonchain forced one of its affiliate projects to return investor funds – but didn’t say why.

A Vision Tree spokesperson didn’t say why the series focused specifically on Dragonchain.

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The blockchain industry desperately needs password solutions that aren’t such a royal pain in the neck.

That’s why the San Francisco-based startup Magic just raised a $4 million seed round from investors like Naval Ravikant, SV Angel, Placeholder, Lightspeed Venture Partners and Volt Capital, just to name a few. SV Angel in particular has a complementary portfolio, including Coinbase, Stripe, Airbnb and Doordash. 

“Magic points the way towards a world in which user identity and authentication is decentralized and not subject to control by the tech giants,” Ravikant said in a press statement. 

Related: Blockchain ID Solution Aims to Tackle Spike in Delivery Fraud Amid Coronavirus Measures

Plus, Magic CEO Sean Li said his startup already works with some decentralized exchanges (DEXs) like Uniswap and RadarRelay. As such, Chicago DeFi Alliance member Volt Capital also represents a strategic pairing. After all, DeFi’s biggest onboarding challenge is the user experience, not any lack of demand for low-barrier loans and global currencies. 

Read more: Chicago’s Trading Firms Look to DeFi With New ‘Alliance’

Volt Capital partner Imran Khan said Magic’s delegated key management service lets app developers create custom sign-on experiences without touching the user’s private keys.   

“I think the recession will increase their business,” Khan said. “Startups are going to look to be more efficient. They’ll use platforms like Magic to cut costs.”

Related: Handshake Exchange Sees $10M in Token Trades as Race for Censorship-Resistant Websites Heats Up

Most importantly, Khan added, Magic serves clientele beyond the crypto industry because it can authenticate based on whatever protocol the platform is using. Placeholder Capital co-founder Joel Monegro agreed, adding that enterprises are also looking for secure ways to grant employees remote access to permissioned networks. 

“That might be a way we see more adoption in an enterprise context,” Monegro said. “It’s bridging the gap between the traditional web authentication paradigms and the crypto authentication paradigms.”

Any company with a login and a website could use Magic as a door without needing to rebuild a customized onboarding solution in front of the house, so to speak. Monegro said, at the end of the day, authentication is all about making “key management” approachable. 

“This is a way for users to not have to give up their data,” Khan added. “Magic is using blockchain as a backend infrastructure, in a way that any platform can easily integrate.”  

Simplifying keys

Stepping back, private keys are basically really long and complicated passwords that users can’t reset.

Most internet users opt to trust platforms like Facebook in exchange for the convenience of a simplified username and password, plus the option of recourse if the password is forgotten, rather than retain full control over the asset or profile information. 

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

“The key represents the singular piece of identity. You can use it in conjunction with 3Box to manage the data associated with that identity,” Li said, referring to the ConsenSys-backed startup 3Box. “We’re going to be working together on this authentication product.”

Magic is also aiming to serve developers, especially decentralized application (dapp) makers from the ethereum community. Li estimated 5,000 developers and teams are currently using the tool, including Democracy Earth and TokenSets. 

“We can manage keys within the browser without having to rely on Chrome extensions,” Li said, offering the example of a shopper. “The private key never passes through the Magic backend and goes straight to Amazon.”

He said this early-stage startup is still on track to make more than $500,000 in revenue this year, despite the recession. And with the customer-facing sector of the industry saturated in wallets, service providers and apps, Li is betting instead on selling to the businesses that already have users rather than needing to attract a massive audience to turn a profit. 

“I think only a few niche things will eventually explode,” Li said. “The majority of [crypto] adoption will happen with mainstream companies gaining access to crypto applications.”

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The Digital Dollar Project is proposing a framework for the creation of a U.S. central bank digital currency (CBDC).

The group published its first white paper Friday, detailing the need for a tokenized version of the U.S. dollar and some potential avenues for building this system. A digital dollar could help the U.S. maintain the dollar’s status as the world’s reserve currency while serving a broader array of individuals and entities than the current financial system, the paper says.

The group is helmed by former U.S. Commodity Futures Trading Commission (CFTC) Chairman Chris Giancarlo, Gattaca Horizons CEO and former CFTC Chief Innovation Officer Daniel Gorfine, Accenture Senior Managing Director David Treat and Pure Storage CEO Charles Giancarlo, with contributions from a number of Accenture analysts and directors. The Digital Dollar Foundation, which is working with Accenture on the project, was launched earlier this year.

Related: First Mover: Bitcoin Could Get a Boost From Central Bank Digital Currencies

“What we’re hoping to be is a catalyst for a discussion here in the United States about what role the U.S. will play in this ongoing and accelerating global debate over the future of money in a new digital age,” Chris Giancarlo, now senior counsel at Willkie Farr & Gallagher LLP, told CoinDesk.

Read more: Chris Giancarlo’s Digital Dollar Project Names Ex-Treasury, CFTC Officials to New Board

As such, the paper explores the current U.S. financial system and advocates for a digital dollar that utilizes a “two-tiered distribution architecture,” with commercial banks and other regulated entities acting as intermediaries between the Federal Reserve (the U.S. central bank) and end users. 

These commercial banks would distribute the funds much the way ATMs distribute cash to customers, the paper said. 

Related: Ex-CFTC Chair Chris Giancarlo Joins Swiss Effort to Fund COVID-19 Relief Projects

The digital dollar envisioned by the paper could even operate alongside private stablecoins, the paper said.

“When we do big things in the United States as we did with the space program, as we did with the internet, it’s almost always a very healthy partnership with the private sector and the public sector, with each learning from each other, with the private sector … bringing innovation to bear and the government looking out for core principles of privacy and individual rights and liberties and getting that balance,” Giancarlo said. 

Two-tiered system

Any U.S. CBDC should maintain the existing two-tier banking system, the paper said. 

“A two-tiered banking system preserves the current distribution architecture and its related economic and legal advantages, while inviting innovation and accessibility,” it explained. 

Under this model, the Fed would issue digital dollars to banks, while users could either store funds in their accounts or hold onto these tokenized dollars in their own digital wallets. 

The bank would be able to lend against the funds held in accounts, the paper said.

“Unless the digital dollar is put into a safe deposit-like storage or custodial solution, once exchanged for balances in a bank account it is fungible with other monies as it is on a banks’ balance sheet,” the paper said.

Read more: How the COVID-19 Crisis Revived the Digital Dollar Debate

This type of system will ensure that individuals and entities store funds at commercial banks, the paper said. 

“These deposits underpin the U.S. entire economy by enabling banks to lend funds to borrowers for activities such as buying a home, building a new factory and everything in between,” the paper said. 

Treat told CoinDesk that part of the Digital Dollar Project’s work would be helping stakeholders understand this proposed system – basically understanding where the tokens are moving within the ecosystem. 

The two-tiered system would also need to be able to satisfy both individual privacy concerns and regulations around financial transactions, including anti-money laundering and know-your-customer (AML/KYC) rules, he said.

“To have the end points of where the tokens can move be a regulated wallet infrastructure we think is likely the best answer, and part of what we’ll test,” he said. 

Accounts vs. tokens

The paper also contrasted the concept of a token-based digital dollar with an account-based digital dollar, with a preference for a tokenized system. 

A tokenized dollar would be more broadly applicable, Giancarlo said. In reference to a series of bills introduced earlier this year by U.S. lawmakers that proposed account-based digital dollars, he said a tokenized version would be more broadly applicable. 

While the digital dollar proposals laid out before Congress refer specifically to stimulus payments meant to benefit American taxpayers impacted by the COVID-19 pandemic, the group’s view is the digital dollar should be more broadly applicable.

Read more: How a Flurry of ‘Digital Dollar’ Proposals Made It to Congress

“We think a true U.S. CBDC addresses that problem but then so much more, including building a new architecture for money for generations to come that will serve not just under-banked populations here in the United States during a crisis … abroad and [spur] financial inclusion globally,” Giancarlo said.

The tokenized dollar should be faster, more efficient, less costly and able to extend the dollar’s utility, he said.

Here, too, it’s important to firmly define what’s being discussed, Treat said. 

“One thing that we’re trying to do with the paper and in our talks is introduce a set of language to just be crystal clear or make the conversation more clear,” he said. “Part of what the paper is doing is working on definitions and that lexicon for everyone. The basic notion of the interplay [of] an accounts-based system and a token and a token-based system, I think, is incredibly important.”

Pilot programs

The next step for the project is to develop a series of pilot programs and tests for a number of potential use cases outlined in the paper. The use cases are broadly categorized as being either part of domestic payments, international payments or government benefits, and range from direct peer-to-peer payments to issuing government aid in response to disasters. 

Giancarlo said the pilot programs may be evaluated based on a number of factors including the proposed token’s impact on the money supply, technological choices, privacy from both government intrusion and commercial exploitation, impact or use in sanctions and compliance with AML/KYC laws, among other concerns.

“What about the ledger itself? How permissioned or permissionless, or is it a distributed ledger at all?” Giancarlo said. “All of these issues need to be worked out so that we can come to the table with a lot of events.” 

Read more: To See Libra’s Potential, Look at the Philippines, Not the US

Even after all of the theoretical planning, the proposed tokens would still need to be tested in real-world scenarios, he added. 

Past the planning stage, it’ll require lawmakers and policymakers to actually execute any potential digital dollar solution, Treat said. 

“We’re here to get the conversation going, to provide thinking, experience and expertise, and we will leave it to the policymakers to set the pace,” he said. “So our ability to comment on what’s possible, the value of it, where it’s headed and the importance in the long term is the most important part.”

This process will all take time, Giancarlo said. He projected that the process of building a digital dollar could take five to 10 years, but added, “we’ve got to start now.” 

“We very much say the dollar is way too important to try to be done overnight or something over the weekend,” Giancarlo said.

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