Blockchain technology is claimed to be according to blockchain proponents to be one of the most impactfull discoveries in the recent history. It is promised to have a massive potential to change how we handle online transactions. Despite some skeptics, the majority of experts agree that blockchain has the potential to disrupt the banking and financial industry, and many other ones! To put it simply, blockchain enables decentralized transactions across a P2P network. There are applications where those propertied can be very useful, but there are many cases where blockchain migh not be the best solution even though it is hyped to be solution for very many application (remember to ask Do you need a blockchain? often).
This 16 Blockchain Disruptions (Infographic) by bitfortune.net tries to help you understand how the blockchain technology can and will improve 16 different industries, from music to government.
Infographic by bitfortune.net
1,206 Comments
Tomi Engdahl says:
Packy McCormick / Not Boring:
Interview with Shopify’s Alex Danco, who heads its blockchain team, on how Web3, crypto, and NFTs can reshape commerce, making Shopify “wallet-aware”, and more
Tokengated Commerce
Alex Danco Joins to Explain NFTs and How Shopify is Becoming Wallet-Aware
https://www.notboring.co/p/tokengated-commerce?s=r
Timmy Fisher says:
And we, as active traders, have to trade where it is most convenient and safest. That is, until Binance is displaced from its leadership position, then it is up to us to “adapt” to the new realities in order to get our piece of the pie. No matter how it sounds and no matter how you hashtag the new changes.
Timmy Fisher says:
And we, as active traders, have to trade where it is most convenient and safest. That is, until Binance is displaced from its leadership position, then it is up to us to “adapt” to the new realities in order to get our piece of the pie. No matter how it sounds and no matter how you hashtag the new changes.
Tomi Engdahl says:
https://www.reuters.com/world/us/worlds-first-nft-museum-seattle-aims-pull-back-curtain-blockchain-art-2022-04-29/
Tomi Engdahl says:
Top NFT collections are bringing in millions of dollars weekly, but which will survive?
https://techcrunch.com/2022/04/20/top-nft-collections-are-bringing-in-millions-of-dollars-weekly-but-which-will-survive/
Tomi Engdahl says:
LedgerX co-founder Paul Chou is building on the sale of the company he created by raising capital for a new kind of cryptocurrency that can be spent on Earth, the Moon, Mars and beyond.
Bitcoin Trailblazer Raises Capital To Create Interplanetary Cryptocurrency
https://www.forbes.com/sites/michaeldelcastillo/2022/05/04/bitcoin-trailblazer-raises-capital-to-create-interplanetary-cryptocurrency/?sh=7905e9285026&utm_medium=social&utm_campaign=socialflowForbesMainFB&utm_source=ForbesMainFacebook
Tomi Engdahl says:
The same day Yuga Labs raised $285 million selling 10,000 Bored Ape NFTs the broader market bottomed out at 90% below its all-time high.
https://www.forbes.com/sites/michaeldelcastillo/2022/05/03/nft-growing-pains-blue-chip-success-exposes-ethereum-weaknesses-and-market-strengths/?utm_campaign=socialflowForbesMainFB&utm_source=ForbesMainFacebook&utm_medium=social&sh=395e1e20675f
Tomi Engdahl says:
Olga Kharif / Bloomberg:
As decentralized crypto bridges prove susceptible to hacks, with ~$1B stolen in February and March, centralized exchanges are rushing out bridge-like features
Crypto Bridge Heists Swiping $1 Billion Spur Race for Alternatives
https://www.bloomberg.com/news/articles/2022-05-07/crypto-bridge-heists-swiping-1-billion-spur-race-for-options
Centralized exchanges, apps are adding bridge-like features
Value locked in Ethereum bridges is down 17% in the past month
High-profile hacks on crypto “bridges” — which let users swap digital tokens across blockchains — are creating opportunities for exchanges and other businesses to offer more secure alternatives.
Tomi Engdahl says:
Danny Nelson / CoinDesk:
Sources: Instagram to launch an NFT pilot, with ETH, Polygon, Solana, and Flow integrations, on Monday in the US, will not charge users for sharing their NFTs — NFTs from some of the most popular blockchain networks for crypto art are coming to Instagram with the announcement of a pilot …
Meta’s Instagram to Support NFTs From Ethereum, Polygon, Solana, Flow
The social media powerhouse won’t charge users for showcasing their crypto art.
https://www.coindesk.com/business/2022/05/08/metas-instagram-to-support-nfts-from-ethereum-polygon-solana-flow/
NFTs from some of the most popular blockchain networks for crypto art are coming to Instagram with the announcement of a pilot as soon as Monday.
The social media powerhouse owned by Meta is planning non-fungible token (NFT) integrations for Ethereum, Polygon, Solana and Flow, CoinDesk has learned. Those networks host the vast majority of trading in digital collectibles, with Ethereum and its Bored Apes leading the way by market cap.
The pilot will feature a small group of NFT aficionados based in the U.S. It wasn’t immediately clear whether Instagram would support NFTs from all four chains at launch.
Tomi Engdahl says:
More proof that fake primates, fake boats, and real money don’t mix
NFT fans lose millions in video game real estate sales
https://www.techspot.com/news/94501-nft-fans-lose-millions-video-game-real-estate.html
Some users were charged thousands in transaction fees, others were scammed for far more
Why it matters: The creator of the most recognizable NFTs available is again in the news for the wrong reasons. Bored Ape Yacht Club creator Yuga Labs recently made its Otherdeed collection available for purchase. It advertised the NFTs as a way to provide users with the ability to obtain land in its upcoming crypto-based MMORPG. Unfortunately, many fans instead walked away with nothing but disappointment, high transaction fees, and stolen funds.
Yuga Labs sold Otherdeed NFTs via Opensea. The collection sold (or at least tried to sell) tokens to claim real estate and resources in Yuga’s upcoming metaverse game, Otherside. The NFT drop netted approximately $310 million in just a few short hours
Unfortunately for Yuga Labs, the sale generated far more traffic than expected on the Ethereum blockchain. This increase in traffic resulted in Ethereum gas fees of up to $14,000 for some users and failed transactions for others. Gas fees are charges passed on to users to compensate for the computing energy of processing Ethereum transactions.
To make matters worse, some who experienced failed purchases were still charged for the energy costs. According to Crypto Briefing, users paid $165 million in gas fees during the sale due to Otherside’s poorly developed smart contract code.
The contracts are small programs stored on the Ethereum blockchain that execute automatically at a specified time. The contracts require no input or action from a third party. Instead, they initiate action between two entities when all pre-defined criteria are met and the transaction has been validated across the Ethereum network. In this case, the poorly developed smart contracts and their ill-defined execution criteria resulted in massive congestion and high transaction fees across the Ethereum network.
https://otherside.xyz/
Tomi Engdahl says:
Tim Copeland / The Block:
Luna and the UST stablecoin continue to plummet; Luna drops as low as $1, a 97% slide in 24 hours, while UST drops as low as $0.27, a ~60% drop in 24 hours — Quick Take — The price of Luna has dropped 82% in the last 24 hours. — Its related stablecoin UST has retreated even further …
Luna price collapses below $5 as UST slides further from dollar peg
https://www.theblockcrypto.com/post/146225/luna-price-collapses-below-5-as-ust-slides-further-from-dollar-peg
Quick Take
The price of Luna has dropped 82% in the last 24 hours.
Its related stablecoin UST has retreated even further from its dollar peg, falling to just $0.27.
The prices of Luna (LUNA) and its related stablecoin TerraUSD (UST) are in freefall at the moment, as the entire project appears to be unwinding.
UST is an algorithmic stablecoin that’s supposed to be pegged to the US dollar. A combination of burn mechanics involving related token Luna are supposed to keep it to its peg.
Yet over the last few days the mechanism has broken down, with investors rushing to the exit. Even though the Luna Foundation Guard (FLG), a non-profit set up to support the Terra ecosystem, deployed $1.5 billion in assets on Monday to help the stablecoin return to its peg, it has not been enough. The Block reported on Tuesday that LFG is seeking more than $1 billion to support the project.
Part of the reason Luna is being hit so hard is its role in providing stability for UST.
At the same time, UST has completely lost its peg. It’s now down to $0.27, meaning stablecoin owners have lost around two thirds of their value. While the stablecoin has rebounded at various points during its fall, it is now at its lowest point yet.
Korean crypto exchanges issue warnings about trading Luna
https://www.theblockcrypto.com/post/146253/korean-crypto-exchanges-issue-warnings-about-trading-luna
Quick Take
Major Korean exchange Coinone has suspended trading of Luna.
Korbit and Bithumb have also issued investment warnings.
South Korea’s major exchanges have issued warnings about trading of Luna (LUNA) following the crypto’s current price downturn.
The price of Luna is down 87% in the last 24-trading period and has fallen 96% from its all-time high of $119 in April.
Coinone, one of the “big four” crypto exchanges in South Korea, has suspended trading of Luna, citing its abrupt price slump. Korbit and Bithumb have issued “designated investment warnings” on the coin citing similar concerns as well.
For Bithumb and Korbit, these warnings do not necessarily mean that Luna will be suspended. These designated investment warnings usually last for 72 hours after which the exchanges will decide whether to halt or continue trading.
Luna’s downward spiral comes amid the ecosystem’s major algorithmic stablecoin TerraUSD (UST) losing its peg.
Tomi Engdahl says:
Tim Copeland / The Block:
As Luna crashes, Terra Analytics says ~152M LUNA tokens, or 30% of the circulating supply, are being staked, meaning many can’t exit their position for weeks
As Luna holders watch the token slide, many won’t be able to cash out for weeks
https://www.theblockcrypto.com/post/146279/as-luna-holders-watch-the-token-slide-many-wont-be-able-to-cash-out-for-weeks
Quick Take
The price of Luna has dropped 93% in the last 24 hours.
Those who have their Luna tokens staked are watching the value of their tokens plummet — and can’t do anything.
After the stablecoin TerraUSD (UST) lost its peg to the US dollar this week, many investors in the related token Luna (LUNA) have been left unable to sell.
According to Terra Analytics, around 152 million LUNA is being staked on the network — excluding liquid staking through Lido, where tokens aren’t as tied up . That represents 30% of the circulating supply of LUNA.
When coins are staked, they are locked up indefinitely and the holder receives tokens as rewards. When the holder chooses to unstake them, they are able to get their tokens back after a period of time and then no longer receive rewards. Staking periods can range between different cryptocurrencies, but for Luna, it’s 21 days that you have to wait to get your tokens back.
Normally this isn’t a big problem. While crypto prices are volatile, stakers typically accept this and are used to day-to-day fluctuations. If the market starts declining, worried holders can unstake their tokens and cash out within a few weeks.
Yet the collapse of Luna and UST has happened incredibly quickly and with painful results. As UST has lost its peg to the dollar, a lot of investors have tried to cash out in case the stablecoin’s price drops even further. While some have sold on the open market, others have swapped 1 UST for $1 of Luna (the key mechanism designed to keep the stablecoin, well, stable).
Yet this process mints a lot of Luna. In the last two days, more than 145 million LUNA has been minted to enable stablecoin holders to cash out. This has worsened the price drop of Luna as more tokens have flooded the market, alongside normal traders selling the token based on the current negative sentiment.
Today alone, the price of Luna has dropped from $31 to $2 — down 93%. The token has lost 97% of its value in the past week. This price crash has happened faster than Luna stakers have been able to blink, let alone unstake their coins and cash out.
Sinyakin added that he was disappointed this collapse might cause people to leave crypto and dissuade other people from getting involved with it. He also said it puts stablecoins under the light for regulators — something we saw yesterday with US Treasury Secretary Janet Yellen using UST as an example to ask for greater stablecoin regulation.
Tomi Engdahl says:
Stacy-Marie Ishmael / Bloomberg:
A look at Do Kwon’s algorithmic stablecoin UST, designed to trade at $1 but which has been in freefall; CoinMarketCap says there are 17.8B UST in circulation
Crypto’s Audacious Algorithmic Stablecoin Experiment Crumbles
https://www.bloomberg.com/news/articles/2022-05-10/crypto-s-audacious-algorithmic-stablecoin-experiment-crumbles
TerraUSD aimed to offer a 1-to-1 peg with the U.S. dollar
Token backed by Do Kwon hit low of 60 cents in broad selloff
Tomi Engdahl says:
Bloomberg:
In an interview, Gary Gensler says crypto exchanges are “commingling” services to the detriment of customers and highlights their ties with popular stablecoins — Gary Gensler is ratcheting up his criticism of digital-asset exchanges, arguing that some platforms are shirking rules …
SEC’s Gensler Says Crypto Exchanges Trading Against Clients
https://www.bloomberg.com/news/articles/2022-05-10/sec-chief-questions-whether-crypto-exchanges-bet-against-clients
Gensler concerned about ‘commingling’ of platforms’ services
Stablecoins also pose risks for anti-money laundering efforts
Tomi Engdahl says:
Paul Kiernan / Wall Street Journal:
US Treasury Secretary Janet Yellen: passing legislation in 2022 to create a stablecoin regulatory framework “would be highly appropriate”, after UST’s stumble — Treasury secretary expresses hope that Congress will pass legislation this year to create regulatory framework for stablecoins
Yellen Renews Call for Stablecoin Regulation After TerraUSD Stumble
https://www.wsj.com/articles/yellen-renews-call-for-stablecoin-regulation-after-terrausd-stumble-11652208165?mod=djemalertNEWS
Treasury secretary expresses hope that Congress will pass legislation this year to create regulatory framework for stablecoins
WASHINGTON—A decline this week in the price of a major cryptocurrency that was purportedly pegged to the dollar prompted Treasury Secretary Janet Yellen on Tuesday to reiterate calls for Congress to authorize regulation of so-called stablecoins.
TerraUSD, the fourth-largest stablecoin and 10th-largest cryptocurrency by market value according to CoinMarketCap, saw its price fall as low as 69 cents Monday after a series of large withdrawals over the weekend. Like other stablecoins, TerraUSD is intended to be a haven of sorts for cryptocurrency investors, with its price designed to remain fixed at $1.
“I think that simply illustrates that this is a rapidly growing product and that there are risks to financial stability,” Ms. Yellen said at a hearing Tuesday before the Senate Banking Committee, noting The Wall Street Journal’s reporting on TerraUSD. “We really need a consistent federal framework.”
A Treasury-led panel of regulators recommended last year that Congress write legislation that would regulate stablecoin issuers similarly to banks. Current laws don’t provide comprehensive standards for the new assets, Ms. Yellen said Tuesday.
TerraUSD is structured differently from other major stablecoins, such as Tether, USD Coin and Binance USD. The issuers of those tokens say they are backed by cash or liquid assets that can be sold quickly to pay any investors who want out.
TerraUSD, by contrast, is known as an algorithmic stablecoin that relies on financial engineering, rather than hard assets, to maintain its peg to the dollar. Critics of the model say that makes it riskier because traders might not always respond as expected to its built-in incentives.
Cutting-Edge Crypto Coins Tout Stability. Critics Call Them Dangerous.
https://www.wsj.com/articles/cutting-edge-crypto-coins-tout-stability-critics-call-them-dangerous-11650226597?mod=article_inline
Algorithmic stablecoins that use financial engineering to link their value to the dollar have surged in popularity
A new breed of cryptocurrencies is seeking to replicate the stability of the dollar. But critics say they are a disaster waiting to happen.
So-called “algorithmic stablecoins” have surged in popularity
Tomi Engdahl says:
MacKenzie Sigalos / CNBC:
Coinbase drops 24%+ after reporting $1.2B net revenue in Q1, down from $1.6B YoY, 9.2M MTUs, up from 6.1M YoY, and $309B trading volume, down from $335B YoY — – Coinbase reported first-quarter earnings after the bell on Tuesday. — The earnings come amid a major sell-off across the crypto market.
Coinbase revenue drops 27% from a year ago, stock slides
https://www.cnbc.com/2022/05/10/coinbase-coin-earnings-q1-2022.html
Coinbase reported first-quarter earnings after the bell on Tuesday.
The earnings come amid a major sell-off across the crypto market.
Coinbase earnings missed analyst estimates and shares fell as much as 19% in extended trading.
Coinbase reported first-quarter results that missed analysts’ revenue estimates after the bell on Tuesday. Shares fell more than 15% in after-hours trading, building on a drop of 12.6% during regular trading hours before the results dropped.
The stock has lost more than 70% of its value since late March, as a broader slide in tech stocks and the value of cryptocurrencies hit Coinbase particularly hard. Bitcoin, the most popular cryptocurrency, briefly dropped below the symbolic price threshold of $30,000 on Monday, and is down more than 30% this year.
But Coinbase doesn’t appear to be worried about its long-term prospects. The company doubled down on an argument that it has made before, reminding shareholders that its stock should be thought of as a long-term investment due to the volatile nature of cryptocurrency price moves.
Tomi Engdahl says:
Olga Kharif / Bloomberg:
BAYC, whose average sales price dropped 29% over the past week, and other bluechip NFT collections, have been hit harder than bitcoin amid the crypto rout — Blue-chip NFT collections like Bored Ape Yacht Club, which for a while outperformed the rest of the crypto market …
Blue-Chip NFT Collections Hit Harder Than Bitcoin in Crypto Rout
https://www.bloomberg.com/news/articles/2022-05-10/blue-chip-nft-collections-hit-harder-by-crypto-rout-than-bitcoin
Sales prices of Bored Ape Yacht Club NFTs and others crumble
The entire crypto market has fallen into a deep rout recently
Blue-chip NFT collections like Bored Ape Yacht Club, which for a while outperformed the rest of the crypto market, are being hit harder than cryptocurrencies by a deep rout that is souring sentiment across the sector.
BAYC’s average sales price plummeted 29% over the last seven days in US dollar terms, while transactions have tanked by 21% and user numbers are down 27%, according to NFT watchers Price Floor a
Tomi Engdahl says:
Hannah Miller / Bloomberg:
Moralis, which makes tools to build blockchain-based web apps, raises a $40M Series A from Coinbase Ventures and others, sources say at a $215M valuation — Despite slumping crypto prices, funding rounds for blockchain startups are still getting done. Moralis, a platform offering developer tools …
Crypto Startup Moralis Raises $40 Million in Fresh Funding
https://www.bloomberg.com/news/articles/2022-05-11/crypto-startup-moralis-raises-40-million-in-fresh-funding
Founded last year, the company has notched a valuation of more than $200 million, even as cryptocurrency prices nosedive.
Despite slumping crypto prices, funding rounds for blockchain startups are still getting done. Moralis, a platform offering developer tools for web applications built on top of blockchains, has raised $40 million, the startup plans to announce on Wednesday.
Moralis, which launched its platform last June, is now valued at $215 million, according to people familiar with the details who asked not to be identified because the information is private.
Tomi Engdahl says:
Coinbase earnings were bad. Worse still, the crypto exchange is now warning that bankruptcy could wipe out user funds
https://fortune.com/2022/05/11/coinbase-bankruptcy-crypto-assets-safe-private-key-earnings-stock/?xid=soc_socialflow_facebook_FORTUNE&utm_source=facebook.com&utm_campaign=fortunemagazine&utm_medium=social
Hidden away in Coinbase Global’s disappointing first-quarter earnings report—in which the U.S.’s largest cryptocurrency exchange reported a quarterly loss of $430 million and a 19% drop in monthly users—is an update on the risks of using Coinbase’s service that may come as a surprise to its millions of users.
In the event the crypto exchange goes bankrupt, Coinbase says, its users might lose all the cryptocurrency stored in their accounts too.
Coinbase said in its earnings report Tuesday that it holds $256 billion in both fiat currencies and cryptocurrencies on behalf of its customers. Yet the exchange noted that in the event it ever declared bankruptcy, “the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings.” Coinbase users would become “general unsecured creditors,” meaning they have no right to claim any specific property from the exchange in proceedings. Their funds would become inaccessible.
That shouldn’t happen.
An individual’s ownership of cryptocurrency is supposed to be immutable and absolute; that’s one of the key selling points touted by blockchain evangelists everywhere. But when a user creates a Coinbase account, they often end up storing their cryptocurrency in a wallet controlled by Coinbase, which means the individual is giving away at least part of their control over their own funds.
Access to a crypto wallet is governed by a private key, which is a long string of characters that effectively acts as a password. Without the key, the cryptocurrency in the wallet can’t be accessed. On Coinbase, the exchange holds the private key and lets users access the funds within the wallet using a more conventional password. The setup makes it easier for users to enter their accounts, by remembering an easier password.
Yet it means that when push comes to shove, Coinbase ultimately governs whether a user gets access to those assets.
In comments shared on Twitter, Coinbase CEO and founder Brian Armstrong said the exchange had “no risk of bankruptcy,” and that the disclosure was made due to new rules set by the U.S. Securities and Exchange Commission regarding public companies that hold crypto assets on behalf of others.
“This disclosure makes sense in that these legal protections have not been tested in court for crypto assets specifically
Coinbase does offer a self-custody wallet, titled “Coinbase Wallet,” in which users know their private key, and a Coinbase Wallet—or any crypto wallet—is not required to trade crypto on Coinbase. But by admitting that crypto assets aren’t secure in the event of a bankruptcy, Coinbase is also highlighting a major difference between storing your funds with blockchain exchanges, versus keeping cash with traditional banks.
Bank accounts in the U.S. are protected by deposit insurance offered by the Federal Deposit Insurance Corporation.
Crypto exchanges don’t offer that same protection—which is the primary reason why crypto enthusiasts advise investors to hold their cryptocurrency in a personal wallet, rather than on an exchange.
Coinbase shares fell 15.6% in after-hours trading after the exchange released its earnings, dragging the crypto exchange’s stock price down to 80% below its Nasdaq debut in April 2021.
Tomi Engdahl says:
Bitcoin and cryptocurrencies have crashed further overnight, dropping to levels not seen since the crypto market began surging in late 2020…
$1 Trillion Crypto Meltdown—Huge Crash Wipes Out The Price Of Bitcoin, Ethereum, BNB, XRP, Cardano, Solana, Terra’s Luna And Avalanche
https://www.forbes.com/sites/billybambrough/2022/05/12/1-trillion-crypto-meltdown-huge-crash-wipes-out-the-price-of-bitcoin-ethereum-bnb-xrp-cardano-solana-terras-luna-and-avalanche/?utm_campaign=forbes&utm_source=facebook&utm_medium=social&utm_term=Valerie
Tomi Engdahl says:
Joanna Ossinger / Bloomberg:
After UST’s collapse, most rival algorithmic stablecoins are below the dollar peg; Tether and USDC, the two largest, are largely holding their dollar peg — Stablecoins besides TerraUSD are failing to live up to their billing as the collapse of the algorithmic token has investors pondering …
Terra Crunch Shakes Foundations of Crypto Stablecoin Complex
https://www.bloomberg.com/news/articles/2022-05-12/terra-implosion-shakes-foundations-of-crypto-stablecoin-complex
MakerDAO, Dai and Fei stablecoins also decline in value
Tether calls algo coins ‘entirely different types of assets’
Andrew Rummer / The Block:
Tether, the largest stablecoin, briefly drops to a 24-hour low of $0.96; Finance USD and USDC are trading at $1.08 and $1.09, respectively — Quick Take — Tether dropped below $0.96 on Thursday morning. — The stablecoin is designed to keep a constant peg with the dollar.
Tether’s market price slips below dollar parity amid ongoing stablecoin woes
https://www.theblockcrypto.com/post/146490/tethers-market-price-slips-below-dollar-parity-amid-ongoing-stablecoin-woes
Quick Take
Tether dropped below $0.96 on Thursday morning.
The stablecoin is designed to keep a constant peg with the dollar.
Tether (USDT), the largest stablecoin, slipped below $0.96 early Thursday in a further sign of stress in the crypto market.
The token dropped to a 24-hour low of $0.956 on FTX as of 3:15 a.m. ET. On Bitfinex, USDT is trading at $0.998. Bitfinex and the stablecoin Tether are subsidiaries of the same parent company.
Over the past few days, TerraUSD (UST) — an algorithmic stablecoin native to Terra that is supposed to track the price of the US dollar — has drastically de-pegged.
It’s unclear at this time what’s driving the market event, though broad fears around continued market turbulence, spurred on by the market collapse of both UST as well as Terra’s native asset, LUNA, have affected crypto prices in recent days. Bitcoin is currently trading at roughly $25,800 on Coinbase, according to TradingView data.
Other stablecoins in the market are trading at a premium against USDT as of press time. Binance USD (BUSD) and USD Coin (USDC) are trading at $1.08 and $1.09, respectively, via trading pairs on Binance.
Unlike UST, USDT is backed by a pool of invested assets and investors are supposed to be able to redeem one USDT for $1 at any time.
Paolo Ardoino, Tether’s CTO, had tweeted his confidence earlier in the day, saying that the stablecoin operator is “honouring USDt redemptions at 1$” and that more than $300 million had been redeemed in the last 24 hours “without a sweat drop.”
Paolo Ardoino, Tether’s CTO, had tweeted his confidence earlier in the day, saying that the stablecoin operator is “honouring USDt redemptions at 1$” and that more than $300 million had been redeemed in the last 24 hours “without a sweat drop.”
When contacted by The Block for further comment on Thursday, Ardoino elaborated in a statement:
“Tether continues to process redemptions normally amid some expected market panic following yesterday’s market. In spite of that, Tether has not and will not refuse redemptions to any of its verified customers, which has always been its practise. In the last 24 hours alone, Tether has honoured over 300m USDt redemptions and is already processing another 1bn so far today without issue.”
Tomi Engdahl says:
CoinDesk:
Sources: Terraform Labs CEO Do Kwon pseudonymously co-founded Basis Cash, a failed algorithmic stablecoin set up in 2020 that peaked at $174M total value locked — Basis Cash, an algorithmic stablecoin project founded by the anonymous “Rick” and “Morty” in 2020, was actually the work of Terraform Labs employees.
UST’s Do Kwon Was Behind Earlier Failed Stablecoin, Ex-Terra Colleagues Say
https://www.coindesk.com/tech/2022/05/11/usts-do-kwon-was-behind-earlier-failed-stablecoin-ex-terra-colleagues-say/
Basis Cash, an algorithmic stablecoin project founded by the anonymous “Rick” and “Morty” in 2020, was actually the work of Terraform Labs employees.
Do Kwon, the CEO of Terra creator Terraform Labs, was one of the pseudonymous co-founders behind the failed algorithmic stablecoin Basis Cash, CoinDesk has learned.
Basis Cash (BAC) was a closely watched revival in decentralized finance (DeFi) circles when it launched on Ethereum in late 2020, just before the launch of terraUSD (UST), Terra’s flagship stablecoin. Like UST, BAC sought to maintain a $1 peg through code, not collateral.
But it failed: The token of this long-abandoned project never achieved its target of dollar parity, sank below $1 in early 2021 and was trading well below 1 cent on Wednesday. Now history appears to be repeating: Over the last three days, UST sank precipitously below its peg, going as low as 27 cents in early morning U.S. hours Wednesday.
UST’s depegging has shocked crypto markets and regulators alike as the once-$15 billion stablecoin has continued its downward spiral. While BAC’s $54.5 million footprint was far smaller in impact, it offers a historical data point for observers grappling with the feasibility of algorithmic stablecoins.
Hyungsuk Kang, a former engineer at Terraform Labs (TFL), said Basis Cash was, in fact, a side project from some of Terra’s early creators, including himself and Kwon. Kang ultimately left TFL to build a Terra competitor called Standard Protocol.
“Basis Cash wasn’t tested at the moment, and we weren’t even sure” it would work, Kang said. Kwon “wanted to just test it out. He said that this was a pilot project for doing that.”
Another Basis Cash builder who spoke to CoinDesk on condition of anonymity confirmed that Do Kwon and TFL employees were behind the project.
Both Kang and the anonymous employee tell CoinDesk Kwon was “Rick Sanchez,” the pseudonymous co-founder. CoinDesk also reviewed internal “Basis Cash Korea (BCK)” chat logs in which Kwon alludes to himself as “Rick.”
An allusion to an alias? (Screenshot/BCK Telegram group)
(Kwon and his Basis Cash co-founder “Morty” borrowed their pseudonyms from the popular animated TV show “Rick and Morty.”)
Kwon did not respond to CoinDesk’s requests for comment.
Basis Cash never reached the heights of other Kwon-linked crypto projects. Its total value locked (TVL) briefly peaked at $174 million in February 2021, two orders of magnitude below Terra’s $30 billion TVL before this week’s historic sell-off.
Revealing the real name behind an online pseudonym (even a long-discarded one) is not a decision CoinDesk takes lightly. Our default position is to respect the privacy of pseudonymous actors with established reputations under their well-known handles unless there is an overwhelming public interest in revealing their real-world identities.
In this case, there is such public interest as Kwon’s UST stablecoin death spirals, wreaking havoc across the broader cryptocurrency market. Amid this precarious situation, investors deserve to know that UST was not Kwon’s sole attempt at making an algorithmic stablecoin work.
What was Basis Cash?
Basis Cash and its promise of an algorithmic stablecoin predated crypto Rick and Morty.
An anonymous team of builders – mostly employees of Terraform Labs, according to chat logs reviewed by CoinDesk – modeled Basis Cash after an earlier project called Basis (formerly known as Basecoin).
Basis, an erstwhile venture capital darling, raised $133 million before shutting its doors in 2018 over regulatory concerns. Founder Nader Al-Naji then said that “there would be no way” for Basis’s peg maintenance tokens to avoid securities designations; he shuttered the project rather than fight it out in court.
(Al-Naji would later launch a controversial crypto startup under a pseudonym before ultimately doxxing himself under pressure.)
Read more: ‘Basis Cash’ Launch Brings Defunct Stablecoin Into the DeFi Era
But Basis’s algorithmic ideals continued to float around stablecoin circles right on through to the heat of DeFi summer 2020, when Rick and Morty stepped in. Kwon and other algorithmic stablecoin adherents have long argued that the decentralized finance space needs a decentralized stable currency without censorship risk or central points of failure. Such an approach contrasts with that of market-leading stablecoins like Tether’s USDT and Circle’s USDC, which maintain their $1 peg by (in theory) backing every digital dollar with their centralized treasuries.
“Yo degens, anyone remember what Basis was? It was one of the early ‘DeFi’ algorithmic stablecoins with high ambitions, but it was shut down due to SEC-related risks,” said Rick’s since-deleted Telegram account in the Basis Cash Telegram channel on Aug. 20, 2020. “Today we’re bringing Basis back from the grave.”
Apparently intrigued by the early ideas behind Basis, Do Kwon directed a select group of TFL employees to resurrect what eventually became Basis Cash, Kang and another early TFL engineer say. The Korea-based project was envisioned as a way to test out the core concepts of the original Basis without falling prey to U.S. regulatory pitfalls.
CoinDesk’s sources say Kwon deliberately distanced himself from the day-to-day operations of the project, though he proposed most of the core ideas behind Basis Cash and its underlying token model. Analogous to UST, which relies on a token-burn mechanic involving its sister coin LUNA, BAC relies on a bonding mechanism to maintain its $1 peg.
Kwon also appeared to serve as a spokesperson for the project on Twitter and other forums under his “Rick” pseudonym (CoinDesk cannot confirm whether others ever filled in as “Rick,” but Kang, the other Basis Cash builder, and chat logs suggest the moniker primarily belonged to Kwon).
On its website, Basis Cash describes itself as a “Decentralized Stablecoin with an Algorithmic Central Bank,” and in a November 2020 interview with CoinDesk, “Rick” shared a vision for Basis Cash similar to that for UST.
“In the long term, we look forward to seeing Basis Cash be used widely as a base layer primitive such that there is organic demand for the asset in many DeFi and commercial settings,” he said over Telegram at the time.
Lessons for UST?
One of the first examples of an algorithmic stablecoin to be tested in the wild, Basis Cash never found its footing. Game theory and smart contracts were supposed to regulate BAC’s supply to keep it trading at the price of $1, but the token never managed to hold on to its dollar peg.
By all outward appearances, Kwon had nothing to do the Basis Cash project. He has even made statements suggesting he was a critic:
But even amid Basis Cash’s struggles, Kwon’s main account could be spotted from time to time in the project’s Telegram, sans pseudonym.
Tomi Engdahl says:
Ryan Browne / CNBC:
Bitcoin dropped below $27,000 for the first time since December 2020, down 15% in 24 hours; Ether drops to as low as $1,750, its lowest level since July 2021
Bitcoin plunges below $27,000, erases 2021 gains as crypto sell-off intensifies
https://www.cnbc.com/2022/05/12/bitcoin-btc-price-falls-below-27000-as-crypto-sell-off-intensifies.html
The price of bitcoin plunged as low as $26,595.52 Thursday morning, hitting its lowest level in over 16 months.
Ether, the second-biggest digital currency, tanked as low as $1,789 per coin.
Bitcoin slumped below $27,000 Thursday for the first time in over 16 months, as cryptocurrency markets extended their losses amid fears over rising inflation and the collapse of a controversial stablecoin project.
Ether, the second-biggest digital currency, tanked to as low as $1,789 per coin. It’s the first time the token has fallen beneath the $2,000 mark since July 2021.
nvestors are fleeing from cryptocurrencies at a time when stock markets have plunged from the highs of the coronavirus pandemic on fears over soaring prices and a deteriorating economic outlook.
U.S. inflation data out Wednesday showed prices for goods and services jumping 8.3% in April, higher than expected by analysts and close to the highest level in 40 years.
TerraUSD, or UST, is supposed to mirror the value of the dollar, but it plummeted to less than 30 cents Wednesday, shaking investors’ confidence in the so-called decentralized finance space.
Stablecoins are like the bank accounts of the barely regulated crypto world. Digital currency investors often turn to them for safety in times of volatility in the markets.
But UST, an “algorithmic” stablecoin that’s underpinned by code rather than cash held in a reserve, has struggled to maintain a stable value as holders have bolted for the exit en masse.
Luna, another Terra token that has a floating price and is meant to absorb UST price shocks, erased 97% of its value in 24 hours and was last worth just 30 cents — even less than UST.
Investors are scared about the implications for bitcoin. Luna Foundation Guard — a fund set up by Terra creator Do Kwon — had amassed a multibillion-dollar pile of bitcoin to help support UST in times of crisis.
The fear is that Luna Foundation Guard will sell a large portion of its bitcoin holdings to shore up its ailing stablecoin. That’s a risky gamble, not least because bitcoin is itself an incredibly volatile asset.
Adding to investors’ fears Thursday was a drop in the value of tether, the world’s biggest stablecoin. The token at one point slipped below 99 cents
Tomi Engdahl says:
Financial Times:
Brian Armstrong says there’s “no risk of bankruptcy” after Coinbase said in its filing that its users might lose all their crypto if the exchange goes bankrupt — Shares in crypto exchange fall 23% after bleak results and new risk disclosure — Shares in cryptocurrency exchange …
Coinbase chief says ‘no risk of bankruptcy’ after regulatory filing sparks alarm
https://www.ft.com/content/50c1e24d-4b28-42fe-bb29-e9d13aa01909
Tomi Engdahl says:
David Yaffe-Bellany / New York Times:
Bitcoin price fluctuations increasingly mirror the broader tech stock market, as the recent downturn shows, belying its goal of hedging against inflation
Bitcoin Is Increasingly Acting Like Just Another Tech Stock
https://www.nytimes.com/2022/05/11/technology/bitcoin-price-crashing-stocks.html
Tomi Engdahl says:
Kryptovaluuttojen romahdus. Monien arvosta suli pois yli 80 % viikossa. Bitcoin tippui vain 21 %. Luna -99 %!
Tomi Engdahl says:
The price of Terra’s luna token collapsed to less than a penny on Thursday after trading at about $80 one week ago.
https://www.forbes.com/sites/jonathanponciano/2022/05/12/terra-blockchain-halted-to-prevent-attacks-after-luna-token-crashes-nearly-100-overnight/?utm_campaign=forbes&utm_source=facebook&utm_medium=social&utm_term=Gordie&sh=6af08dbf248f
Tomi Engdahl says:
Bitcoin ja Ethereum ovat maailman suurimmat kryptovaluutat, mutta ne eroavat kuitenkin toisistaan usein eri tavoin – lue kattava artikkeli sivuiltamme ja opi lisää aiheesta
Blogi: Bitcoinin ja Ethereumin erot
https://www.northcrypto.com/announcement/bitcoin-ethereum-erot?utm_source=facebook&utm_medium=paid_social&utm_campaign=Northcrypto+-+Prospecting+%2F+Sijoittaminen+-+Verified+Registration&utm_content=Prospecting+%2F+Sijoittaminen+-+Traffic+-+btc_eth_erot+%E2%80%93+kopio&fbclid=IwAR0LqynrAlpFhLQ5RZ-7WPcfA3gWjHvWAHQFfn63GbD941KTJliolwr_9Rs
Bitcoin ja Ethereum ovat tällä hetkellä maailman suurimpia ja merkittävimpiä kryptovaluuttoja. Bitcoin ja Ethereum eroavat toisistaan usein eri tavoin. Näiden eroavaisuuksien tietäminen on erittäin tärkeää, mikäli haluaa saavuttaa laajemman ymmärryksen kryptovaluutoista ja niiden toiminnasta. Tämän kirjoituksen tavoitteena on kertoa Bitcoinin ja Ethereumin perusteet, sekä miten nämä kaksi kryptovaluuttamaailman jättiläistä eroavat toisistaan.
Palkkioksi tekemästään työstä louhijat saavat louhintapalkkion sekä kyseisten transaktioiden transaktiomaksut.
Bitcoinin lohkoketjun louhinta on tänä päivänä tehokkaiden ASIC-koneiden vastuulla. Nämä koneet kuluttavat erittäin paljon sähköä ja laitteita on myös päivitettävä säännöllisin väliajoin. Bitcoinin louhinta on tänä päivänä ammattimaista liiketoimintaa ja se on suurten louhintaan keskittyneiden yritysten hallinnassa. Louhinta on keskittynyt viime vuosien aikana myös yhä enemmän maihin, joissa on saatavilla halpaa sähköä.
Bitcoin on maailman suurin hajautetun laskennan projekti. Bitcoinin lohkoketju on louhijoiden suuren laskentatehon ansiosta erittäin turvallinen. Bitcoinin lohkoketjussa olevaa dataa on mahdoton muokata ja se sijaitsee hajautettuna ympäri maailmaa.
Ethereum on tällä hetkellä markkina-arvoltaan Bitcoinin jälkeen maailman toiseksi suurin kryptovaluutta. Ethereum julkaistiin vuonna 2015 ja sen pääkehittäjänä toimii Vitalik Buterin niminen ohjelmoija. Ethereumin toimintaperiaate eroaa hyvin paljon Bitcoinin vastaavasta. Ethereum on kokonainen ekosysteemi ja ohjelmointialusta, kun taas bitcoin voidaan nähdä digitaalisena vaihdannan välineenä ja arvon säilyttäjänä.
Ethereumin päälle on mahdollista ohjelmoida erilaisia hajautettuja sovelluksia (dApp), hajautetun talouden sovelluksia (DeFi), älysopimuksia ja jopa omia kryptovaluuttoja. Ethereumin päälle rakennettavien sovellusten tavoitteena on usein kolmansien osapuolten ja erilaisten välikäsien poistaminen. Ethereumin lohkoketjun päällä julkaistaan jatkuvasti uusia ja innovatiivisia sovelluksia.
Ethereumiin sijoittavat ostavat todellisuudessa Ethereumin omaa kryptovaluuttaa etheriä (ETH). Ether toimii Ethereumin alustan virtuaalisena polttoaineena. Etherin avulla maksetaan esimerkiksi Ethereumin lohkoketjussa suoritettavat transaktiot sekä älysopimusten käyttö. Etherien kokonaismäärä on tällä hetkellä yli 130 miljoonaa, eikä sitä ole rajoitettu. Uusia ethereitä saapuu maailmaan Ethereumin lohkoketjun ylläpitopalkkioina.
Bitcoin ja Ethereum ovat tällä hetkellä ylivoimaisesti maailman suurimmat ja merkittävimmät kryptovaluutat. Kryptovaluuttoina ne ovat kuitenkin täysin erilaisia. Bitcoin on digitaalinen maksujärjestelmä ja digitaalinen vaihdannan väline, josta käytetään myös usein nimitystä digitaalinen kulta. Ethereum puolestaan on kokonainen ekosysteemi ja ohjelmointialusta, jota kehittäjät voivat käyttää erilaisten uudentyyppisten sovellusten rakentamiseen.
Bitcoinien maksimimäärä on rajattu ja kyseessä onkin äärimmäisen niukka digitaalinen valuutta. Ethereumin tapauksessa etherien määrällä ei ole ylärajaa, eikä Ethereum kykene kilpailemaan niukkuudessa Bitcoinin kanssa, joka puolestaan jäljittelee läheisesti perinteisestä kullasta tuttuja ominaisuuksia. Suurin syy etherien maksimimäärän puuttumiselle ja Bitcoinia suuremmalle inflaatiolle on se, että Ethereumin käyttötarkoitus poikkeaa hyvin paljon Bitcoinin vastaavasta. Ethereum tarjoaa Bitcoinia enemmän mahdollisuuksia sovelluskehittäjille, ja sovellusten kehittäminen ja käyttäminen kuluttavat luonnollisesti ethereitä. Bitcoinin kultaakin niukempi tarjonta ja tiukkaan rajattu maksimimäärä eivät sovi yhteen Ethereumin intressien kanssa.
Bitcoinin ja Ethereumin suurimmat erot löytyvät niiden käyttötarkoituksista ja teknisistä ominaisuuksista. Poikkeavista ominaisuuksistaan huolimatta Bitcoin ja Ethereum ovat omissa kategorioissaan ehdottomasti maailman suurimpia ja merkittävimpiä kryptovaluuttoja. Bitcoin ja Ethereum eivät kuitenkaan missään nimessä ole toistensa kilpailijoita. Niiden molempien menestyminen on äärimmäisen tärkeää koko kryptovaluuttamarkkinalle.
Tomi Engdahl says:
Why Blockchain’s Ethical Stakes Are So High
by
Reid Blackman
May 10, 2022
https://hbr.org/2022/05/why-blockchains-ethical-stakes-are-so-high?ab=seriesnav-bigidea
If I send you bitcoin, that transaction is simultaneously recorded on the more than 12,000 computers, servers, and other devices that Bitcoin runs on. Everyone on the chain can see the transaction, and no one can alter or delete it. Or you can send me a non-fungible token (NFT) on the Ethereum blockchain, and that transaction is simultaneously recorded across all the computers (also known as “nodes”) that Ethereum runs on. These two examples explain, roughly, what blockchain technology is: a way to keep unalterable records of transactions on multiple computers such that a new transaction cannot be recorded on one computer without simultaneously recording it on all the others. The applications of blockchain have grown well beyond cryptocurrency and NFTs, as governments and industries from health care to agriculture to supply-chain operations leverage the technology to improve efficiency, security, and trust.
The core features of blockchain are tremendously appealing, but they are a double-edged sword, opening novel pathways to significant ethical, reputational, legal, and economic risks for organizations and their stakeholders. In this article, I identify four of these risks: a lack of third-party protections, privacy violations, the zero-state problem, and bad governance. For each, I outline the responsibilities of two actors that play crucial roles in managing blockchain decisions and norms: developers (those who design and develop blockchain technologies and the apps that run on them) and users (the organizations that use blockchain solutions or advise clients who use them).
Lack of Third-Party Protection
Third-party intermediaries, like banks, are often seen as a cost of doing business at best and predatory at worst, but they do play a crucial role in safeguarding customers’ interests. For instance, banks have sophisticated ways of detecting activity by malicious actors, and consumers can challenge fraudulent transactions and scams on their credit cards.
When transactions take place without a third party, customers have no one to whom they can appeal for help. This is often the case with blockchain applications.
What developers must consider.
Developers need to think about the kinds of services third parties provide that protect stakeholders and then devise a decentralized way to offer those protections. If that is impossible, developers must inform stakeholders that the technology lacks the protections they are accustomed to. A developer may even decide not to develop the app because the risks to users are too high. What users must consider.
Users need to understand the risk of not having those safeguards, for themselves and for those they represent (clients they advise, patients for whom they care, citizens whose rights they are meant to protect). They must be transparent about the risks and get meaningful informed consent from those they serve. They should also explore nonblockchain solutions that can fill in the gaps.
The Lack of Privacy
The most popular blockchains, Bitcoin and Ethereum, are public. Known for their transparency and accessibility, anyone can view, add to, and audit the entirety of the chain. But if transparency constitutes a serious threat to users’ privacy, a private blockchain may be necessary. Nebula Genomics, for instance, uses private blockchain technology to give patients “full control” of their genomic data.
A blockchain may contain information that some users should see but not others; in that case, a hybrid approach may be warranted, in which private and public blockchains interact with each other. For example, electronic health records contain both highly sensitive data that must be kept private and information that should be shared with entities such as the Centers for Disease Control and Prevention (CDC) and health insurance providers. Hashed Health, Equideum Health, and BurstIQ are all hybrid blockchains that collect and share biometric information while giving patients more control over their data.
What developers must consider.
Developers need to carefully consider their ethical duty to balance transparency and privacy and then decide whether a public, private, or hybrid blockchain is appropriate for the use case at hand. One factor that should loom large is the likelihood that a member of the chain could be identified and what the ethical ramifications of that would be. Other crucial decisions include determining who should have access to what data, under what conditions, and for how long. What users must consider.
Users need to understand the implications of transparency on their own businesses and the people they serve. They must understand and address the risk that wallet holders could be identified (including by their accidentally revealing their own identity).
The Zero-State Problem
The zero-state problem occurs when the accuracy of the data contained in the first, or “genesis block,” of a blockchain is in question. This happens if due diligence is not properly performed on the data or if those entering it make a mistake or alter the information for malicious reasons. In the case of a blockchain used to track goods in a supply chain, for example, the first block may erroneously indicate that a particular truck is filled with copper from a certain mine when, in fact, the material came from a different one. Someone involved with the contents of the truck may have been tricked or bribed along the way, unbeknownst to the person creating the genesis block.
The ethical stakes are raised if we’re talking about blood diamonds or property. If a government creates a blockchain as the database of record for a land registry, and the person entering information into the first block assigns parcels of land to the wrong owners, a serious injustice (land effectively being stolen) occurs. Some organizations, like Zcash, which created a highly secure privacy-preserving cryptocurrency, have (justifiably) gone to great lengths to ensure the trustworthiness of its genesis block.
What developers must consider.
Developers must carefully verify all data that will be contained in the genesis block and use best practices to ensure that it is accurately entered. They must also alert users to the zero-state problem and disclose the ways in which a blockchain may contain false information so that users can assess their potential risks and conduct their own due diligence. What users must consider.
Users of a blockchain should vet how the genesis block was created and where the data was sourced from. They should be particularly diligent if the items recorded in the blockchain have historically been a target for fraud, bribery, and hacking. They should ask themselves, Is the organization that created the first block trustworthy? Has the block been audited by a reliable third party?
Users also need to understand that even if data in the genesis block and subsequent ones is accurate and legitimate, mischief can still occur. For instance, ethically sourced diamonds may be put in a truck, and its journey across multiple transfers may be accurately recorded on the blockchain, but that does not stop clever thieves from swapping out the real diamonds with fake ones mid-transit. Users must also inform those they serve about the zero-state problem, disclose the due diligence they conducted on the genesis block, and identify protections that are in place (if any) to prevent fraud.
Blockchain Governance
Blockchain technology is described by a host of terms — “decentralized,” “permissionless,” “self-governed” — that may cause users to make assumptions about governance. They might assume that it’s a wonderland for libertarians and anarchists, for example, or that all members have an equal say in how the blockchain operates. In reality, blockchain governance is a very, very complicated affair with significant ethical, reputational, legal, and financial ramifications. The creators of the blockchain determine who has power; how they acquire it; what, if any, oversight there is; and how decisions will be made and operationalized. A quick look at two cases, one infamous and one ongoing, is instructive.
The first decentralized autonomous organization (DAO), a sort of hedge fund originally called “The DAO,” ran on the Ethereum network. Members had differing amounts of voting power based on how much money (specifically, ether) they put into the joint venture. When the DAO was hacked in 2016, draining some $60 million worth of ether from the fund, members took very different ideological positions on what to do — and whether the hack even constituted a “theft.” One camp felt that the ill-gotten gains of the bad actor, who had taken advantage of a software bug, should be restored to the rightful owners. Another camp thought The DAO should abstain from undoing the fraudulent transactions and simply fix the bug and let the chain carry on. This group held that “code is law” and “the blockchain is immutable,” and thus the hacker, acting in accordance with the code, did nothing ethically unacceptable. The former camp ultimately won, and a “hard fork” was instituted, directing the funds to a recovery address where users could reclaim their investments, essentially rewriting history on the blockchain.
The second example is the dispute about the governance of Juno, another DAO. In February 2021, Juno conducted an “airdrop” (in which free tokens are sent to community members to boost engagement) across its network. One wallet holder figured out how to game the system and received a huge portion of the tokens, worth more than $117 million at the time. In March 2022, a proposal was put forth to draw down the majority of the “whale’s” tokens to an amount considered a fair share of the airdrop. A month later, the proposal officially passed, with 72% of the vote, resulting in the revoking of all but 50,000 of the whale’s tokens.
Those events demonstrate just how important it is to structure the governance of blockchains and the apps that run on blockchains with great care and due diligence.
What developers must consider.
Developers must establish what constitutes good governance, with a special eye toward how governance structures can give rise to hacks or bad actors. This is not merely a mechanistic issue. The values of the developers need to be clearly articulated and then operationalized in the blockchain. Consider, for instance, the philosophical differences that emerged as Ethereum developers weighed whether to alter their blockchain when the DAO was hacked or fix the bug and move on, and the similar disagreements between the Juno token holders who voted in favor of confiscation and those who voted against it. To avoid such ethical issues, developers should institute a North Star that guides governance from the start.
Disagreements arise when rules are not carefully thought through about how power and money are allocated or earned on the system. The DAO hacker exploited a bug in the software, which led to internal turmoil about whether code — even flawed code — truly was law. In the case of Juno, the upheaval stemmed, in part, from not being sufficiently thoughtful about how tokens were distributed in the first place.
What users must consider.
Users must ask themselves whether the values of the blockchain’s creators cohere with those of their organization and of their clients. They must determine how much volatility, risk, and lack of control they and those they serve can stomach. They must articulate their standards for what constitutes good and responsible governance and work only with blockchains that meet those standards. Users may be using a distributed network with no single authority, but they are most certainly engaging with a political entity.
Toward an Ethical-Risk Framework for Blockchain
The ethical risks of any technology are as varied as the applications for it. An AI-powered self-driving car, for example, carries the risk of killing pedestrians. A social media app comes with the risk of spreading disinformation. The ethical and reputational risks associated with virtually all data-driven technology also apply to blockchain. In implementing blockchain, senior leaders must implement a framework for mitigating these risks. They should carefully consider a range of scenarios: What are the ethical nightmares our organization must avoid? How do we think about the edge cases? They should anticipate that ethical questions will arise, and ask themselves: What governance structures do we have in place? What kind of oversight is needed? Is blockchain technology likely to undermine any of our organizational and ethical values, and if so, how do we minimize those impacts? What protections should be put in place to safeguard our stakeholders and our brand? Thankfully, many of these issues have been addressed in the adjacent AI ethical risk literature, including a guide I authored on implementing an AI ethics program. This material is a good starting point for any blockchain project.
Tomi Engdahl says:
Yueqi Yang / Bloomberg:
Coinbase’s market cap falls to $12.98B from a $75B+ peak in 2021 as its stock closes at $58.50, far below its first day closing price of $328.28 in April 2021 — Coinbase Global Inc. has declined precipitously this year, largely mimicking the drop in Bitcoin prices and taking its market value …
Coinbase Melts Down Even as Wall Street Is Bullish on Prospects
https://www.bloomberg.com/news/articles/2022-05-12/coinbase-melts-down-even-as-wall-street-is-bullish-on-prospects
The crypto exchange’s shares are down 77% so far this year
From a November peak, its market value is down more than 80%
Tomi Engdahl says:
Anushree Dave / The Block:
New York-based Solidus Labs, a crypto risk monitoring startup that also protects from DeFi threats, raises a $45M Series B led by Liberty City Ventures — Quick Take — Solidus Labs has raised $45 million in funding, adding to a previous Series A of $20 million.
Risk monitoring firm Solidus Labs raises $45 million in Series B funding
https://www.theblockcrypto.com/post/146650/risk-monitoring-firm-solidus-labs-raises-45-million-in-series-b-funding
Quick Take
Solidus Labs has raised $45 million in funding, adding to a previous Series A of $20 million.
Solidus was formed in 2017 with the aim of helping companies spot and report market manipulation.
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Solidus Labs, a New York-based risk monitoring firm for crypto assets, has raised $45 million in funding to grow its network of financial partners and invest more money into research and development.
Tomi Engdahl says:
Yogita Khatri / The Block:
MicroStrategy’s massive bitcoin bet has become a $330M paper loss as bitcoin trades around $28K; MicroStrategy holds 129,218 BTC, bought for $30,700 on average — Quick Take — Bitcoin’s price fall has led to unrealized losses for MicroStrategy. — The Nasdaq-listed company …
MicroStrategy’s bitcoin bet turns negative, triggering $330 million paper loss
https://www.theblockcrypto.com/post/146544/microstrategy-bitcoin-bet-turns-negative-paper-loss
Quick Take
Bitcoin’s price fall has led to unrealized losses for MicroStrategy.
The Nasdaq-listed company is currently sitting on a paper loss of $330 million.
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MicroStrategy’s massive bet on bitcoin is in the red after the cryptocurrency’s price fell below the software company’s average purchase price.
Amid broader market fallout, MicroStrategy’s stock price has also declined sharply over the past few days. It closed at $168 on Wednesday, bringing the decline this week to 45%.
Microstrategy and its CEO Michael Saylor have become poster children for bitcoin enthusiasm after going all in on the cryptocurrency. MicroStrategy first purchased bitcoin on its balance sheet in August 2020, when Saylor told The Block that bitcoin is a superior asset for a treasury given it is deflationary by design.
“Gold is defective in the 21st century,” he said at the time. “It boils down to a very simple principle. It’s going to debase between 2% and 4% a year, certainly over the next hundred years.” As for the dollar, Saylor said, the problem is monetary policy expansion and inflation — which comes at the cost of purchasing power.
Bitcoin bull
Saylor has since maintained his bullish stance on bitcoin. For instance, he recently tweeted: “One thing matters more than the rest. #Bitcoin.”
MicroStrategy has also often said that it will continue to buy bitcoin irrespective of its price moves since it has a long-term bet on the cryptocurrency. Saylor told The Block in an interview late last year that the company has two strategies: the first is to grow its business software business and the second is to “invest our excess cash flows in bitcoin, and we hold it for the long term.”
Backed by debt
Notably, MicroStrategy’s bitcoin bets have been funded by more than $2 billion of debt. The company has taken several convertible and secured loans to buy the cryptocurrency.
Most recently, MicroStrategy’s subsidiary MacroStrategy, which holds most of its bitcoins, took a bitcoin-collateralized term loan of $205 million from Silvergate Bank for purposes including buying bitcoin.
Tomi Engdahl says:
Näinkin voi käydä jopa valtiotasolla, jos ei ymmärrä mihin sijoittaa!
Bitcoin-seikkailu uhkaa ajaa El Salvadorin maksukyvyttömäksi https://www.is.fi/taloussanomat/art-2000008815572.html
Tomi Engdahl says:
Nimeään myöten vakaiksi luvatut kryptovaluutat romahtivat, mikä horjuttaa koko markkinaa – bitcoinin arvosta sulanut puolet huippulukemista
https://yle.fi/uutiset/3-12444390?origin=rss
Kryptovaluuttojen puolestapuhujat ovat mainostaneet kryptovaluuttoja suojautumiskeinoksi inflaatiota vastaan. Nyt lupaukset ovat osoittautuneet “täydeksi hölynpölyksi”, sanoo analyytikko.
Bitcoin ja useimmat muut kryptovaluutat ovat viime viikkoina syöksyneet – jälleen – jyrkästi miinukselle.
Samalla on käynyt selväksi, että yksi kryptovaluuttaintoilijoiden keskeisimmistä lupauksista on osoittautunut tyhjäksi.
Luottamus koko kryptovaluuttojen markkinaan horjuu, koska kurssiromahdus on yltänyt myös niin sanottuihin stablecoineihin eli “vakaavaluttoihin”.
Vielä yksi lukema, joka kuvaa bitcoinin arvon valtavaa laskua: marraskuun huippukurssiin verrattuna bitcoinin arvosta on hävinnyt noin 50 prosenttia.
Lähes koko kryptovaluuttamarkkina on painunut syvästi miinukselle runsaan viikon kuluessa. Esimerkiksi Bitcoinin jälkeen toiseksi suurin kryptovaluutta Ethereum on pudonnut noin 20 prosenttia ja moni muu kryptovaluutta vielä enemmän.
“Vakaavaluutat” menettivät vakautensa, mikä horjuttaa koko kryptovaluuttamarkkinaa
Suurimmat kryptovaluutat ovat laskeneet voimakkaasti koko kevään ajan.
Viime päivien romahdusten taustalla vaikuttaa se, että nimeään myöten vakaahintaiksi luvatut vakaavaluutat ovat menettäneet tasaisen hintansa ja syöksyneet.
Vakaavaluuttojen arvon on tarkoitus pysyä sidottuna esimerkiksi Yhdysvaltain dollarin kurssiin.
Nyt yksi tärkeimmistä vakaavaluutoista, Terra, on jyrkässä pudotuksessa. Tavallisesti sen hintana on aina yksi dollari, mutta tänään perjantaina se on laskenut alle 0,2 dollariin. Terra-kryptovaluutan vakauttamiseen käytetty sisarvaluutta Luna taas on pudonnut viikossa useista kymmenistä euroista käytännössä täysin arvottomaksi.
Keskeisen vakaavaluutan romahdus voi jatkossakin johtaa muiden kryptovaluuttojen entistä rajumpiin kurssipudotuksiin.
Inderesin analyytikko Olli Koponen toteaa, että laskevat kurssit johtuvat ennen kaikkea talousnäkymien muutoksesta.
– Talouskasvun odotukset ovat hiipuneet, inflaatio on kohonnut ja keskuspankit nostavat korkoja.
Pudotusta syventää se, että vielä loppusyksystä kryptovaluutat nousivat kovaa vauhtia. Intoilu yltyi esimerkiksi NFT-kolikoiden ympärillä. Ne ovat eräänlaisia digitaalisia omistustodistuksia esimerkiksi verkossa kaikkien nähtävillä olevista meemikuvista tai taideteoksista. NFT:illä käydään kauppaa tyypillisesti esimerkiksi bitcoineilla tai ethereumeilla.
– Jälkikäteen on helppoa sanoa, että kryptovaluutoissa oli selkeästi kuplan tuntua. Digitaalisia kuvia apinoista ja kivistä myytiin valtavilla summilla, Koponen sanoo.
Tomi Engdahl says:
Binance’s Changpeng Zhao went from zero to $65 billion in under five years, leaving Michael Dell, Charles Koch and 2,645 other world billionaires in the dust.
The Wealthiest Person In Crypto Climbs Into World’s 20 Richest
https://www.forbes.com/sites/johnhyatt/2022/04/05/the-wealthiest-person-in-crypto-climbs-into-worlds-20-richest/?utm_campaign=socialflowForbesMainFB&utm_medium=social&utm_source=ForbesMainFacebook&sh=31fac7fdd197
Among the hundreds of crypto exchanges that exist globally [See Forbes’ Global Crypto Exchanges Ranking] Binance has a novel business model that involves issuing its own tokens, known as Binance coin (BNB), to customers and using them as an incentive for trading and recruiting other new customers. In this multi-level marketing structure, the more BNB coins you hold and the more people you attract to the trading platform, the greater commissions and discounts you earn. Initially BNB was used mostly for trading discounts, but its use has expanded to a full-fledged cryptocurrency with an array of payment uses on platforms including rival exchanges like Crypto.com.
Tomi Engdahl says:
El Salvador’s bitcoin experiment is looking like a disaster
By Ted Litchfield published 1 day ago
https://www.pcgamer.com/el-salvadors-bitcoin-experiment-is-looking-like-a-disaster/?utm_campaign=socialflow&utm_source=facebook.com&utm_medium=social
The country adopted bitcoin as legal tender in September, and now may default on its national debt.
The country of El Salvador, which adopted bitcoin as legal tender late last year, is in serious danger of defaulting on its debt to international financiers within the next several years due to the ongoing collapse of the cryptocurrency market, as reported by El País and Bloomberg.
While Bukele has a strong personal stake in cryptocurrency and the crypto scene, El Salvador has genuinely struggled with what currency it should use over the past twenty years. The country abandoned its own currency, and thus control over monetary policy, in 2001 in favor of the US dollar, seeking financial stability that the colón failed to provide.
Now that the crypto market is crashing, it’s looking less and less likely that El Salvador will be able to make its next bond payment, defaulting on its national debt. This would prove disastrous for the country’s economy and the government’s ability to fulfil basic functions.
For his part, Bukele continues to double down on crypto, having bought 500 bitcoin (about $15.5 million at the time, now $14.1 million) on May 9. On the same day, the president tweeted about plans for a “Bitcoin City” to be built in the shadow of a volcano, with pictures of him admiring its gold-painted scale model.
The comical absurdity of Bukele showing off these plans for a sci-fi future city as he stares down an economic catastrophe of his own creation belies how hard this default will hit average Salvadorans. As with other areas of the crypto crash, it’s going to be regular people who got suckered in, or were brought along against their will, who will be left holding the bag.
Tomi Engdahl says:
El Salvador Loses $38M in Bitcoin Crash, Faces Potential Default
https://www.newsweek.com/bitcoin-crash-el-salvador-faces-potential-default-crytocurrency-1706098
El Salvador’s president Nayib Bukele is a big Bitcoin enthusiast. However, his push into the cryptocurrency has left his country facing the spectre of default, a situation made worse by the famous digital currency’s recent crash.
Bitcoin has plummeted from a high of over $68,000 in November to around $28,000, and other crypto assets have also seen dramatic falls.
The current price of Bitcoin at $28,404 puts El Salvador’s Bitcoin value at just over $65 million, but the country paid over $103 million for it in a series of purchases.
The drop of over $38 million is a fall of 37 percent.
The problem is compounded by the International Monetary Fund (IMF) looking to provide El Salvador with financing to help it repay a government bond due in January 2023. The bond is worth $800 million, and the country has other debt repayment obligations on top of that.
The IMF was blunt in its assessment on El Salvador in January.
In a consultation document, the IMF said regarding Bitcoin: “Efforts to improve financial inclusion are welcome, but Bitcoin use carries significant risks and Bitcoin should not be used as an official currency with legal tender status.”
The IMF executive board urged El Salvador to reverse track and remove Bitcoin’s legal tender status, and expressed doubts about the plan for Bitcoin-backed bonds.
In response, in February credit rating agency Fitch downgraded El Salvador’s long-term debt rating from ‘B-’ to ‘CCC,’ putting it in the category where “default is a real possibility.”
Tomi Engdahl says:
Crypto Crash Explained—Why Bitcoin, Luna, Ethereum Prices Plummeting
https://www.newsweek.com/crypto-crash-why-bitcoin-luna-ethereum-price-plummeting-1706014
Tomi Engdahl says:
https://www.digitaltrends.com/computing/nvidias-crypto-mining-limiter-has-just-been-fully-cracked/
Tomi Engdahl says:
COINBASE FOUNDER’S WEALTH SHRINKS FROM $13.7 BILLION TO $2.2 BILLION
https://futurism.com/the-byte/coinbase-founder-wealth-shrinks
Tomi Engdahl says:
NFTs are coming to Instagram this week
Meta CEO Mark Zuckerberg says they’re on the way to Facebook as well.
https://www.engadget.com/instagram-nft-test-meta-mark-zuckerberg-143326085.html
Tomi Engdahl says:
Hannah Miller / Bloomberg:
Knock-on effects of the TerraUSD/Luna collapse will be felt across the crypto industry and may chill VCs’ enthusiasm for investing in crypto startups
Terra $45 Billion Face Plant Creates Crowd of Crypto Losers
https://www.bloomberg.com/news/articles/2022-05-14/terra-s-45-billion-face-plant-creates-a-crowd-of-crypto-losers
VC firms, investors and startups are among the casualties
The market downturn could chill white-hot valuations in crypto
Edward Ongweso Jr / VICE:
Retail traders after Terra’s crash: some say they lost their life savings, others shared suicidal ideation on forums, and some now realize it’s a Ponzi scheme — It took less than a week for the third largest stablecoin and its ecosystem to become virtually worthless, wiping out countless traders’ savings.
‘The Guilt Is Unbearable’: UST-Luna Investors Discuss the 99.99% Crypto Crash
https://www.vice.com/en/article/4awjd9/the-guilt-is-unbearable-ust-luna-investors-discuss-the-9999-crypto-crash
It took less than a week for the third largest stablecoin and its ecosystem to become virtually worthless, wiping out countless traders’ savings.
The cryptocurrency market is in the middle of a widespread crash, causing investors serious financial pain with no clear way out.
The most dramatic fall yet has been the collapse of the $30 billion Terra ecosystem: its token Luna, its algorithmic stablecoin TerraUSD (UST)—which is supposed to remain pegged 1:1 to the dollar—and associated lending protocol Anchor. The implosion has caused an unimaginable amount of pain for would-be investors and has exacerbated an ongoing sell-off across crypto markets more generally. UST is currently trading at $0.15, and Luna has fallen from over $100 in April to $0.0001 today, effectively “going to zero,” in crypto-speak. Luna’s most dramatic fall has happened in the last week, with the token falling 99.99 percent from its $80 price a week ago. The price of Anchor’s token also fell dramatically, from $2 to $0.09.
The founder of the South Korea-based firm behind Terra-Luna, Terraform Labs, is Do Kwon, a normally prodigiously loud Twitter poster who regularly dismissed critics as “poor” in replies and said in one interview that “95 percent [of coins] are going to die, but there’s also entertainment in watching companies die too.” Now, he hasn’t posted on Twitter in days and seems to have requested emergency personal protection from police.
Terra isn’t just another random crypto project: It was propped up by venture capitalists who pumped $150 million into the ecosystem last year, potentially giving investors confidence in the project. Investors included major players such as Pantera Capital, Arrington Capital, Coinbase Ventures, and Galaxy Digital.
Now, amid the collapse, most people have found themselves drowning in a bloodbath, with some investors saying they have lost their life savings, taking to online forums to share their despair or suicidal ideation.
Motherboard spoke to several investors in Terra-Luna, some of whom describe financial pain and a loss of faith in a project they once believed in without realizing its true nature. Motherboard could not independently verify their losses.
“To be a trader is important to keep the mind still and act ‘robotically’ but on the last two days I’ve let my emotions flow and have tried to accept them and let them be,” one trader from Colombia who lost their savings told Motherboard. “As you read in my text, the frustration and guilt are unbearable. I’ve had several big drawdowns before, that’s part of it, but this time I’m zero, nothing.”
Another investor who posted that they lost $20,000 in the Terra-Luna said they now acknowledge the project’s “Ponzinomics” and warned risk-takers away from seeking huge gains on the now-cratered price of Luna.
“So I invest across multiple ecosystems and the main reason I liked Terra was that it paid staking rewards in a stablecoin. Truth be told, I should of done more research and realised it was Ponzinomics,” they said.
“The main reason I told people not to buy is that they think the risk reward is great because the price is so low. I had one guy message me thinking he was gonna retire if the price came back. It’s simply not possible Luna is now a dead project that is unsaveable.”
“$LUNA is by far the only investment I’ve ever made that has lost 99 percent in less than 24 hours,” another investor tweeted. “I’ve never lost money so quickly before.”
“I only lost a small amount on $LUNA because I believe there is a high risk of further decline,”
How did this all happen? UST is what’s known as an “algorithmic stablecoin,” a relatively recent invention in cryptocurrency that seeks to leverage financial incentives to generate a stable $1 peg, rather than holding actual U.S. dollars and other assets in 1:1 reserves. The scheme was essentially that 1 UST could always be destroyed to mint $1 worth of Luna, and Luna (whatever its price is) can always be destroyed to mint an equivalent amount in UST. This delicate balance of supply-and-demand worked for a while, but has now resulted in a “death spiral” as UST exits to Luna and balloons the circulating supply into the billions, cratering its price completely.
Another part of the equation is Anchor, a Terra-based lending protocol that incentivizes users to “stake” their UST for a reward of nearly 20 percent interest. All these pieces came together on Saturday when Anchor’s total deposits fell from $14 billion to $11.2 billion, and sparked panicky sell-offs of UST.
Terra founder Do Kwon was undisturbed by this at the time and posted a strange poem to assure fellow “LUNAtics” that all was well
Tragically, many people saw this exact situation coming. For years, high-profile Bitcoiners have warned about the dangers of fragile so-called algorithmic stablecoins. In January, we got a taste of all this: DeFi protocol Abracadabra began to unwind its substantial Anchor position and not only temporarily depegged UST but crashed Luna. One Reddit user in late January even anticipated a doomsday scenario where lost confidence in Anchor could lead to deposits dropping, that UST being converted into Luna and massively expanding the supply, and massive downward pressure killing both cryptocurrencies. This, they reasoned, would spell doom for the ecosystem as a depeg would quickly be followed by a death spiral.
After January’s scare, Terraform Labs created the Luna Foundation Guard, which would sit on a reserve of Bitcoin ($3.5 billion worth) that could be deployed to help stabilize UST if it depegged again. And sure enough, when it depegged over the weekend, LFG announced it would lend $1.5 billion worth of Bitcoin and UST to re-peg the stablecoin.
While UST did climb back to $1 in value, it did not restore confidence in the ecosystem and investors began to flee. Anchor’s deposits plunged to $8.7 billion, the platform’s token fell 35 percent, and soon enough UST cratered and Luna collapsed even further, from north of $100 to $1 to a fraction of a fraction of a fraction of a penny.
Many commentators, such as crypto critic David Gerard and American University law professor Hilary J. Allen, have pointed out that this all resembles the 2008 financial crisis.
For the most part, it seems unlikely that much of anything will be done for those wiped out because of the collapse of the third-largest stablecoin. So far, all talk of bailouts has largely been limited to just that: talk.
Bloomberg reported that the backers were having trouble finding funding for a bailout, even after offering investors Luna tokens at a steep discount.
“It’s a shame about Luna but the reality of that project is they were not as innovative as everyone said and at the end of the day people heard 20 percent yield and stable coin and people went in big,” one Redditor who only put $100 into the project told Motherboard. “But investing in crypto is the best opportunity I’ve come across in my 35 years. I expect to probably be in the red at some point, which is fine. I’ll keep buying Bitcoin at least and I’ll keep my eye out for new projects and new Ponzis.”
“Of course, I think for most people that aren’t the top 0.1 percent, that’s a big hit,” said the investor who lost $20,000.
Regardless, enthusiasts who were told that UST and Luna were the future are in the hole. Trading of the coins has been halted on multiple exchanges, meaning what little some had left is likely inaccessible for the foreseeable future.
DeFi—and crypto generally—is littered with the graves of projects that have crashed and burned. Kwon himself was just revealed by Coindesk to have run a failed algorithmic stablecoin before kicking off UST known as Basis Cash. Its total value briefly peaked at $174 million in February 2021, while Terra’s sat at $30 billion before its spectacular demise.
Regular people caught up in Terra-Luna are unlikely to see a bailout. Instead, things will move on as they always have: The backers and financiers will do what they can, while the regular people who invested will suffer what they must and scrabble for some kind of fix.
“I had one guy message me thinking he was gonna retire if the price came back. It’s simply not possible Luna is now a dead project that is unsaveable,”
On Friday afternoon, Kwon broke his silence and posted to the Terra forum a short proposal that essentially leaves it up to the community of developers and investors to wind back the blockchain clock and rescue the Terra ecosystem. The post admits that the project is all but dead.
“While a decentralized economy does need decentralized money, UST has lost too much trust with its users to play the role.”
Kwon’s post pitches a plan to “reconstitute the chain to preserve the community and the developer ecosystem” that resets Luna’s token supply from 6.5 trillion tokens to 1 billion tokens and distributes it amongst Luna holders, UST holders, and the community holders. It’s not really clear how any of this would actually happen.
Tomi Engdahl says:
Yogita Khatri / The Block:
Over $1.2B of Luna Foundation Guard’s bitcoin reserves remain unaccounted for; LFG had $2B+ in bitcoin reserves and loaned $750M to OTC firms and market makers
Over $1.2 billion in bitcoin reserves remains unaccounted for by Luna Foundation Guard
https://www.theblockcrypto.com/post/146840/luna-foundation-guard-lfg-bitcoin-reserves-unaccounted
Quick Take
Luna Foundation Guard accumulated over $2 billion in bitcoin reserves and provided a loan of $750 million in bitcoin.
The rest of the amount, over $1.2 billion in bitcoin, remains unaccounted for by LFG.
Luna Foundation Guard (LFG), a non-profit organization formed to support the growth of the Terra ecosystem, has yet to answer a crucial question about its bitcoin reserves after Terra’s collapse.
LFG accumulated a total of 70,736 bitcoins (worth over $2 billion) as “forex reserve” for Terra’s algorithmic stablecoin UST, which has recently severely depegged and created havoc in the crypto market.
While LFG acquired those bitcoins to save UST, it couldn’t. UST, supposed to be worth $1 at all times being a stablecoin, has lost almost all of its value. It is currently worth roughly $0.12.
In the end, LFG’s bitcoin reserves failed to shore up UST’s peg against the dollar.
“It is strange that there’s no clear accounting on what happened to those funds,” said Mika Honkasalo, a former research analyst at The Block and now an independent crypto researcher. “$750 million was given to market makers and the rest has been moved from the treasury address — but there’s no indication what has been done with them. This should be a matter that is easy to clear up.”
Amid the UST chaos, LFG was said to be seeking even more funds, an additional amount of over $1 billion, to defend the stablecoin’s peg, but those efforts seem to have stalled since LFG hasn’t made any announcements in that regard.
Tomi Engdahl says:
Joshua Oliver / Financial Times:
An interview with Sam Bankman-Fried on crypto hype, blockchain’s potential to build a fairer financial system, bitcoin as an asset, philanthropy, and more
https://www.ft.com/content/83bc681a-a0f9-43bb-b627-c6dacae4a0a3
Tomi Engdahl says:
Benjamin Pimentel / Protocol:
A Q&A with SEC Commissioner Hester Peirce, on her criticisms of the SEC’s approach to crypto, chair Gary Gensler’s leadership, being called “Crypto Mom”, more
She’s not your ‘Crypto Mom’: Hester Peirce’s fight with the SEC
https://www.protocol.com/fintech/hester-peirce-sec-crypto
The commissioner, who often finds herself at odds with her own agency under Gary Gensler, wants the SEC to break its “unhealthy dynamic” with the crypto industry.
SEC Commissioner Hester Peirce is celebrated in memes as “Crypto Mom.” She’s considered crypto’s staunchest ally on a regulatory body that’s become the industry’s nemesis.
It’s an off-target moniker and a flawed portrait, Peirce said.
“It’s kind of funny because I don’t have children,” she told Protocol in a wide-ranging interview. She denies being an advocate for the crypto industry and thinks it’s a bad idea for people to think of the government “in parental terms.”
But Peirce is sympathetic to the crypto industry’s key complaint about the SEC: that under Chair Gary Gensler the agency has failed to offer adequate guidance to the industry on the regulations that apply to cryptocurrencies and digital assets.
“A lot of people say to me, ‘Just tell us what the rules are. We’ll figure out a way to comply with them,’” she said.
The SEC’s heavy emphasis on enforcement, she argues, is a mistake. When the agency announced last week that it would nearly double the size of its enforcement team, a plan that entails hiring more supervisors, investigative staff attorneys, trial counsels and fraud analysts, she asked in a tweet: “Why are we leading with enforcement in crypto?”
Why are you critical of the move to expand the SEC’s enforcement team?
The number of lawyers you have looking at cyber issues and crypto issues in itself is not the issue. The issue is that we have a dearth of work being done at the agency on the regulatory framework for crypto assets.
So why don’t we think about spending more of our resources to try to work on a framework that makes sense and address some of the real questions that are out there?
We can do work on the enforcement side. There’s a lot of fraud to go after in this space. There’s certainly a lot of cyber issues. My question is: Why not provide guidance on all of those subject matter areas?
So it’s that lack of balance. We sometimes tend to fall into the trap of thinking about ourselves as an enforcement agency. But we really are an agency that has a lot of tools to build a good framework within which our capital markets operate. One of those tools is enforcement. But it should never be the leading tool that we use unless you’re dealing again with something like fraud.
“I think no matter what you’re doing with your money as an individual, you need to be using your own brain, first and foremost. You need to be looking out for red flags.”
“Sometimes we talk about responsible innovation. I think we should talk about responsible regulation, too.”
What is your main criticism of Chair Gensler’s approach to crypto?
My main criticism of the approach this agency has taken is that it is leading with enforcement. It’s failing to sit down with people and provide them a productive path to compliance. It’s failing to use the tools that Congress gave us to use for just this kind of situation.
Of course, Congress didn’t foresee crypto or any of the technological developments. But what they did foresee is that things would change and so they built this framework and they said, “All right, SEC, you have broad exemptive power. So when a rule or a principle needs to be adjusted to allow for this new thing to happen, you can make that adjustment and put appropriate conditions around it.”
One area the SEC has focused on is lending. Coinbase announced that it was shelving its lending product and recently BlockFi announced that it has to pay a $100 million fine for a lending product the SEC said is illegal. Can you talk about these developments?
I think lending is a good example. Here’s a product that retail people were using and were liking and we looked at it and we said, “Okay, looks like there’s some securities laws implications here.” Well, we should have gotten in early to say that and then we should have said, “Okay, what are we trying to achieve here? We’re trying to make sure that the companies that are doing this are being forthright with their customers, that they’re telling them what the risks are around what they’re doing and that there’s real clarity there.”
Maybe we decide the securities law framework is the right way to go. Let’s figure out a way that they can make the disclosures they need to make, that the product can move forward. Let’s focus on getting good disclosure, because that’s what we want.
Doing it through the context of an enforcement action is just not my preferred way of doing things. BlockFi is a big player in this space. There are a lot of other players in this space.
There’s also the view of some in the crypto industry that it’s better to just follow the rules to the best of your ability in doing whatever you want to do, instead of going to the SEC and saying this is what we want to do, and waiting for the permission to proceed.
People can come up with their own strategies to deal with the haziness. Here’s the problem with the approach we’ve taken. We do put people in a very bad position because one, they spend way more time thinking about regulation [than] is productive. A lot of people say to me, “Just tell us what the rules are. We’ll figure out a way to comply with them.” And two, it puts people in the position of taking legal risks. There’s no benefit to anyone from that.
Three, it makes it easier for the people who don’t care about the law — who are lawless in a negative sense of trying to hurt other people — much easier to do their bad stuff. Because there’s no way to distinguish the good actors from the bad actors.
And then fourth, it’s really hard for a lawyer to give good advice to a client if the only guideposts she has are a few random enforcement actions.
I just think we’ve created a very inefficient environment and that means that either people decide, “You know what, I’m just going to not involve U.S. people at all so that I don’t have to deal with that.” And that is happening a lot.
They also complain about the cost.
It is expensive. It’s very expensive. The financial world is heavily regulated. So it’s going to be expensive.
But it’s nice if you’re going to spend a lot of money on lawyers to know that the advice you get is going to be solidly rooted in something the SEC has said, instead of this game of trying to connect the dots based on random enforcement actions that come out several years later.
In any event, during this exploratory period where we’re really trying to figure out where the rules should be, it seems to make a lot of sense to sit down together.
A big worry is that crypto is growing so fast that it could lead to financial instability that led to something like the crisis we saw about a decade ago.
I think it makes sense for people to be paying attention to crypto because there are a lot of aspects that are growing very quickly, whether it’s stablecoins, NFTs, DeFi. There’s a lot happening in the space and I think it certainly makes a lot of sense for regulators to pay attention to it.
But we should be doing that in a clear-eyed way. We shouldn’t look at it just from a risk perspective. Decentralized finance can actually spread out risk across more people, which tends to be good for resilience.
The fact that the code is open source means that there’s a lot more transparency into some of this stuff then there was into balance sheets in 2008.
There are different challenges with this technology. There are different opportunities with it, and I think we should be paying attention to all of it.
The fact that the president puts out an executive order and says, “Hey, this is something we’re going to look at,” the fact that the president’s working group says, “We’re gonna look at stablecoins,” the fact that we’re talking with our international colleagues and regulatory colleagues about these developments, all of that makes a lot of sense.
You have to try to stay ahead of things. The fact that there are warnings going out from regulators to people, “Pay attention to what you’re doing and understand that there are risks here,” those are all good things. It’s understandable and expected that government will be paying attention.
“I think people are very capable of making their own decisions about how to spend the money that they work very hard to earn. And so I don’t need to stand in the way of them doing that.”
Is there a way that the industry or crypto is evolving that worries you?
I, like everyone else, worry a lot when there’s a lot of money flowing into something. I want people to be careful. So I worry that people get drawn in just by the desire to see numbers go up without anything else.
But again, I think people are very capable of making their own decisions about how to spend the money that they work very hard to earn. And so I don’t need to stand in the way of them doing that. But I can serve a role in saying, “Okay, let’s figure out ways to make sure that we can get them as much information as possible to make sure that they are aware of the risks they’re taking.”
If they want to use DeFi, for example, that’s fine, but they need to know that when something goes wrong, they can’t come to the SEC and get redress for that.
As long as people are eyes wide open, that’s fine. Sometimes there’s going to be failure in crypto as there is in any other facet of human life. And that’s fine too. Because often, out of failure comes the steps that you need to take to get to something successful. Someone learns a lesson from a failure and goes on to build something that addresses the thing that caused that failure.
I think we’re seeing that [in] a lot of the recent events in crypto where money has been taken from a protocol or stolen from a protocol. People then take a look at that and say, “Okay, what was the point of failure there?”
So there’s a lot of self-criticism in crypto that I think is very healthy. It can be really brutal the way different groups of people within crypto attack each other. But that’s also healthy in bringing to fore the problems and exposing the problems and then figuring out ways to solve them.
What’s your biggest worry with crypto?
I worry about us not just sitting down and doing the hard work to create a framework that makes sense, that kind of framework [that] would be good for protection of investors and consumers. It would be good for financial stability. It would be good for market integrity. That’s my biggest concern that we’re missing an opportunity to do the right thing.
Do you own crypto, commissioner?
I do not. For the reasons that we talked about before, I don’t feel comfortable owning it. I want to be able to work on these issues and I wouldn’t feel comfortable working on it if I owned it myself.
So Crypto Mom does not own crypto.
No. But a lot of her kids do — the people in the crypto world.
Tomi Engdahl says:
Crypto’s big crash
Is the tech superbubble about to burst?
https://www.protocol.com/crypto-crash-podcast
This week, we’re diving into the crypto crash. What led luna to fall off a cliff? Are we seeing the dot-com bust, part two? Protocol fintech editor Owen Thomas explains it all to us. Then entertainment reporter Janko Roettgers joins us to share the inside scoop on his exclusive interview with Mark Zuckerberg. We learn why Meta is betting it all on the metaverse and Brian finally gets to ask the most pressing question on his mind this week: What does Mark smell like?
Tomi Engdahl says:
New York Times:
Abortion rights activists and nonprofits are considering crypto for fundraising, but the complexity and traceability of blockchain transactions hamper efforts
Crypto Joins the Abortion Conversation
https://www.nytimes.com/2022/05/14/style/abortion-crypto-donations.html
Tomi Engdahl says:
Quartz:
MiamiCoin is down ~95% in value from its September peak, after the city promoted it to Miami residents and made millions of dollars through its CityCoins deal
Miami’s mayor backed MiamiCoin crypto—then its price dropped 95%
https://qz.com/2165639/miamis-mayor-backed-miamicoin-then-its-price-dropped-95-percent/
On Feb. 2, the city of Miami cashed out its cryptocurrency MiamiCoin for the first time, depositing $5.25 million into city coffers. Miami mayor Francis Suarez hailed it as a “historic moment” and predicted the cryptocurrency could one day even replace municipal taxes as the government’s primary source of funding.
MiamiCoin’s creator, an organization called CityCoins, has been no less enthusiastic, portraying the coin as a financial experiment that will empower citizens with a “community-driven revenue stream” while spurring new digital city services.
Miami is not the only city with big cryptocurrency dreams. CityCoins announced a similar cryptocurrency for New York in November 2021, and plans to release a coin for Austin, Texas, soon. Other cities have launched their own crypto ventures: Fort Worth, Texas, for example, will soon be running bitcoin mining rigs in city hall.
But only Miami’s mayor has thrown his full endorsement behind a CityCoin-branded cryptocurrency so far. After promoting MiamiCoin to residents and investors since its launch in August, the city of Miami received millions of dollars through its agreement with CityCoins.
Over the last nine months, however, MiamiCoin has lost nearly all of its value, falling about 95% from its September peak to just $0.0032 as of May 13. Its rapid descent has burned investors on the way down, muting the dreams of Miami’s city leaders, and possibly raising red flags for regulators now investigating cryptocurrency transactions.
Miami’s mayor is CityCoins’ biggest booster
MiamiCoin is the first in what CityCoins, a Delaware-based company with a mailing address in a Los Angeles strip mall, has promised will be a series of US city-branded cryptocurrencies. New York City mayor Eric Adams tweeted his approval of NYCCoin on Nov. 8, shortly after his election, welcoming CityCoins to “the global home of Web3” (Web3 is a crypto-optimist idea of a decentralized internet built on blockchains and cryptocurrencies). But Adams hasn’t spoken of NYCCoin since taking office on Jan. 1 of this year, and the coin has fallen 68% since then. Meanwhile, Philadelphia’s government has explored the CityCoins idea, but announced in April it would not proceed.
Tomi Engdahl says:
Ryan Weeks / The Block:
Coinbase says it will “slow hiring and reassess our headcount needs” during the market downturn, after initially planning to triple its workforce in 2022
https://www.theblockcrypto.com/linked/147266/coinbase-slows-hiring-to-help-weather-market-downturn
Cryptocurrency exchange Coinbase has reined in a plan to triple its headcount this year in response to turbulent market conditions.
Emilie Choi, Coinbase’s president and chief operating officer, said in a blog post on Tuesday that the firm would be slowing hiring to “reprioritize our hiring needs against our highest-priority business goals.” The note had been circulated among staff earlier.
“Heading into this year, we planned to triple the size of the company. Given current market conditions, we feel it’s prudent to slow hiring and reassess our headcount needs against our highest-priority business goals,” she said. “Headcount growth is a key input to our financial model, and this is an important action to ensure we manage our business to the scenarios we planned for, specifically the potential adjusted Ebitda we are aiming to manage to.”
The news comes with crypto markets in turmoil following last week’s spectacular collapse of TerraUSD (UST), the crypto industry’s third-largest stablecoin. Major cryptocurrencies across the board are down, with bitcoin dropping below $30,000 last week for the first time this year.
Shares in Coinbase — which went public via a direct listing last year — have also taken a beating, dropping to new lows last week after its earnings report for the first quarter underwhelmed.
Employee note: An update on hiring plans
https://blog.coinbase.com/employee-note-an-update-on-hiring-plans-507ea4e2b6cf
Tomi Engdahl says:
The recent sudden trend change in the longer duration Treasury yield and the Japanese yen suggest recession in the US, a risk-off economic condition. That could be bad for bitcoin.
https://www.forbes.com/sites/omkargodbole/2022/05/19/bitcoins-near-term-prospects-look-bleak-as-treasury-yields-and-japanese-yen-signal-us-recession/?utm_source=ForbesMainFacebook&utm_medium=social&utm_campaign=socialflowForbesMainFB&sh=7680c85623a1