Mar. 6th: SXSW Cancelled And Bitcoin 2020 Postponed Due To Coronavirus

This Week in Crypto

Quick Take

  • SXSW, Bitcoin 2020, and DC Blockchain Summit cancelled over concerns of coronavirus spreading.

  • Minnesota lawmakers are seeking to outlaw campaign contributions in the form of cryptocurrency.

  • This week in crypto funding: GrainChain ($8.2 million), Arweave ($8.3 million), Zabo ($2.5 million), and AlphaPoint ($5.6 million).

Events Cancelled Due To Coronavirus

South by Southwest, the annual tech, film and music conference scheduled to run March 13-22 in Austin, Texas, has been cancelled by City Mayor Steve Adler over concerns of the event contributing to the spread of coronavirus. In a statement on its website, SXSW said it would “faithfully follow the City’s directions.” In recent days, Facebook, Intel, Twitter and TikTok had pulled out of the conference as large corporations limited travel for employees amid the virus outbreak. 

Bitcoin 2020 has also been postponed to Q3 this year. BTC Inc. CEO and organizer of the conference David Bailey stated “Following this week’s State of Emergency declaration by Governor Newsom and yesterday’s announcement by Mayor Breed regarding community transmission in the city, our commitment to delivering the best experience and protecting the safety of our community necessitated this shift.” The DC Blockchain Summit, scheduled to take place next week in Washington, D.C., has also been postponed. It is unclear whether SXSW or DC Blockchain Summit attendees will receive a full refund.

Lawmakers Push Ban On Political Donations

Minnesota lawmakers are seeking to outlaw campaign contributions in the form of cryptocurrency. Minnesota’s House of Representatives first proposed a bill in May of 2019 that would ban any source of contribution in the form of digital currency. Last month, a group of five members of the Minnesota Senate filed a similar legislation. The bill has since been referred to the Senate State Government Finance and Policy and Elections Committee.

If either bill were to pass, those who knowingly solicit digital currencies would face a civil penalty of up to $3,000 and those who knowingly accept crypto donations would be guilty of a felony. 

This Week in Funding

GrainChain, a blockchain-based agricultural startup, has raised $8.2 million in a funding round led by Overstock subsidiary Medici Ventures, which previously invested $2.5 million in December 2018. GrainChain runs a platform that tracks commodities on a distributed ledger and verifies inventories to help farmers trade and settle with buyers. 

Arweave, a blockchain startup focused on internet storage, has raised $8.3 million from Andreessen Horowitz, Union Square Ventures, and Coinbase Ventures. Arweave went through Techstars Berlin’s mentorship program in 2018 and went live in June of that year. The protocol now has more than one million pieces of data stored on its permaweb and is used by nearly 200 applications.

Zabo, a software-as-a-service startup that connects financial services companies to customers’ cryptocurrency accounts, has raised $2.5 million from Moonshots Capital, Blockchange Ventures, Digital Currency Group, CoinShares, and the Tezos Foundation among others. Zabo plans to double its engineering team to 8 over the next year.

Lastly, crypto infrastructure provider AlphaPoint raised $5.6M from private investors including Galaxy Digital Ventures. AlphaPoint took in over $10 million in revenues last year from its white-label exchange software.

Mar. 5th: Crypto Fund Hack Results In Massive Data Leak

This Week in Crypto

Quick Take

  • South Korean lawmakers amend the Financial Information Act in alignment with FATF guidelines.

  • The U.K. Financial Conduct Authority (FCA) warns BitMex it is not authorized to operate in the U.K. 

  • Lending startup Babel Finance reaches a record of $380 million in outstanding loans.

  • Trident Crypto Fund hack results in data leak of about 266,000 users registered.

  • Square Crypto awards grants to bitcoin developers.

South Korea Amends Crypto Regulations

South Korean lawmakers have amended the Financial Information Act, requiring local exchanges to comply with FATF guidelines and receive approval from regulators to operate in the country. If signed into law, local exchanges will need to obtain an information security management system (ISMS) license from the Korea Internet & Security Agency (KISA). 

To date, only six exchanges in the country have obtained an ISMS license from KISA, including the “big four” – UPbit, Bithumb, Coinone, and Korbit. Crypto industry executives believe the law will help to legitimize the sector as it will likely wash out low-quality and questionable cryptocurrency projects.

The legislation was voted on March 5th following a delay caused by the coronavirus outbreak. If approved by the president, the law will take effect next March and all cryptocurrency operators will need to be in full compliance by September 2021.

BitMex Not Authorized To Operate In UK

The U.K. Financial Conduct Authority (FCA) has issued a warning to cryptocurrency exchange BitMex claiming it is “not authorized” to operate in the U.K. The FCA has stated that almost all firms and individuals offering, promoting or selling financial services or products in the UK have to be authorized by them. The FCA is also planning a limited ban on selling crypto derivatives like exchange-traded notes which the regulator believes such products are “ill-suited” to retail investors “who cannot reliably assess the value and risks of derivatives or ETNs that reference certain crypto assets.”

BitMex said they are working closely with their advisors to assess the situation. The warning follows reports from Kraken having received a warning from the FCA that was later removed. Kraken’s compliance team said they are looking into the matter with the FCA. Warning notices against Deribit, CoinFLEX, and Bybit could follow.

Babel Finance Reaches $380m In Loans

Chinese cryptocurrency lending startup Babel Finance has reached a record of $380 million in outstanding loans as of February. Flex Yang, co-founder of Babel Finance, said the firm’s outstanding loans have grown from $52 million in Q1 2019 to $289 million as of the end of last year. The demand reflects the increased interest in crypto lending during bitcoin’s price surge.

According to Yang, 70 percent of the capital Babel used to originate its loans has come from crypto-interbank lenders including Genesis Capital and BlockFi. The firm has also had about $40 million as outstanding loans made to other crypto lending institutions. Initially, miners accounted for nearly 60% of loans, but demand has shifted towards institutional investors and hedge funds.

Investment Fund Hack Leaks User Data

Malta-based Trident Crypto Fund has suffered a major data leak resulting in the personal data of about 266k users posted on a number of file-sharing websites. The stolen database, including email addresses, cell phone numbers, encrypted passwords and IP addresses, was posted online around Feb. 20, along with the description of the website vulnerability that made the breach possible. On March 3, the unknown hackers decrypted and published a dataset of 120,000 passwords.

Trident is yet to post any official announcement on their website or Telegram community.

Square Crypto Bitcoin Grants

Square Crypto has awarded bitcoin developers Jon Atack and Tankred Hase grants for bitcoin development. Jon Atack has been doing bitcoin core development work for almost a year and Tankred Hase is a UX-focused bitcoin developer, whose plans include simplifying self-custody of smaller amounts of bitcoin and creating a public key server that makes it possible to text sats. Previously, Square Crypto has provided grants to a pseudonymous bitcoin Lightning Network developer and a $100,000 grant to the BTCPay Foundation.

Mar. 4th: India Lifts Ban On Cryptocurrency Trading

This Week in Crypto

Quick Take

  • The Supreme Court of India lifts a cryptocurrency ban, enabling crypto firms to access baking services.

  • Decrypt to launch its own token that rewards readers for interacting with brands.

  • ConsenSys and EY launch enterprise-targeted Baseline Protocol.

  • HTC announces the EXODUS 5G Hub blockchain router for running a full bitcoin node.

  • BitGo launches institutional lending services to its custody clients.

India Lifts Ban On Cryptocurrency Trading

The Supreme Court of India has lifted a cryptocurrency ban issued by the Reserve Bank of India (RBI), which prohibited banks and financial institutions from facilitating any service in relation to virtual currency. The Reserve Bank of India had imposed the ban back in April 2018, forcing many Indian crypto exchanges to either shut down, move abroad, or shift their services from fiat-to-crypto gateways to crypto-to-crypto and OTC trading.

A group of petitioners including the Internet and the Mobile Association of India had challenged the central bank’s advisory, arguing that India should look at most other nations that are not only allowing cryptocurrency trading but also plan to launch their own virtual currencies.

Today, the higher court ruled the 2018 ban as unconstitutional. Crypto exchanges in the country will now have access to banking services. Nischal Shetty, founder, and CEO of Binance-backed WazirX says that “thousands of dormant accounts are getting activated” as a result of the ruling.

Decrypt Reader Reward Token

In partnership with token infrastructure platform Ost, Decrypt has announced the launch of its own token that rewards readers for interacting with brands. The token will be used as a way to monetize relationships with advertisers without compromising the readers user experience.

Users will earn tokens by reading and sharing articles and can cash out their rewards for gift cards. Tokens will be made available in waves sponsored by advertisers. The new model breaks away from traditional advertising and rewards readers for their attention. Decrypt expects to launch in Q2 2020 with an initial launch partner and cash-out options to be confirmed. 

Base Protocol

ConsenSys and EY have announced the launch of Baseline Protocol, an enterprise solution that enables the compartmentalization of information among collaborators without having to publicize their private records. 

The protocol makes use of messaging, digital signatures, and a zero-knowledge algorithm to create a common frame of reference to keep teams in sync. EY’s global blockchain lead Paul Brody gave a use case example of a volume discount table where a smart contract will tell a subcontractor the correct volume price for a product without compromising what the entire volume discount table looks like. The project is supported by 12 companies including Microsoft, AMD, ChainLink, and MakerDAO.

HTC 5G Blockchain Router

HTC is working to launch a new blockchain router that enables users to run a full bitcoin node. The so called EXODUS 5G Hub is set to launch in Q2 and will enable users to relay transactions independent of any third party. Users hold on to their own keys through Zion vault, HTC’s hardware-backed key management platform. 

HTC decentralized chief officer Phil Chen says big tech smart home devices leave users’ private data vulnerable, even with end-to-end encryption. In an effort to bring privacy to the home space, the EXODUS 5G Hub has integrated with privacy apps ProtonMail, Brave, and Incognito as well as ecosystem players Binance, Compound, and Uniswap.

BitGo Institutional Lending

BitGo has announced the launch of its lending services to institutional clients. BitGo started testing the service a few months ago and has already attained nearly $150 million in open loans. Existing custody clients can begin to lend bitcoin, ether, litecoin and stablecoins. BitGo  also plans to lend out government-issued currencies including the U.S. dollar to investors who stake their cryptocurrency as collateral.

BitGo’s head of financial services Nick Carmi says there’s no difference between BitGo lending and the way banks do it. New York-based Genesis Trading said in January that its lending pool increased by 21 percent in the fourth quarter alone to $545 million. The majority of BitGo’s loans are denominated in bitcoin.

Aave Flash Loans And Lending Protocol

100% Under Collateralized Loans

Aave is an open-source and non-custodial protocol to earn interest on deposits and borrow assets with a variable or stable interest rate. According to DeFi Pulse, Aave holds $16 million in total locked value. Founder Stani Kulechov joins us to discuss flash loans, stable interest, and protocol composability.

Aave Lending

In 2017, Aave launched ETHLend, a peer-to-peer order matching lending platform. In January of this year, the Aave platform went live, allowing lenders to earn interest on 15+ listed ethereum tokens. 

aTokens represent underlying assets under management on Aave. When a lender deposits funds, they receive an equivalent amount of aTokens. Interest is also paid in aTokens directly to the lender’s address and in real-time. Once a lender withdraws their funds, aTokens are converted back to the underlying asset. aTokens make it easier to asses the amount of interest earned by holding a stable value.

Aave Borrowing

Aave users can borrow crypto-backed loans. Aave also offers a stable interest rate and allows borrowers to swap their rates between variable or stable on a per-block basis. A stable rate reduces the risk of liquidation by locking borrowers into a predefined rate. Only two conditions can change the stable rate including when (1) the borrowing rate is lower than the deposit rate and (2) the new stable rate is cheaper than the current stable rate.

A loan-to-value (LTV) ratio is the percentage of funds that can be borrowed against collateral. Ethereum currently has an LTV of 80%. If ethereum is worth $100, users can borrow up to 80 DAI for every 1 ETH. The most important factors in determining the LTV are liquidity and volatility. Listed tokens must have enough volume to liquidate. Volatile tokens are at higher risk of liquidation. Aave recently dropped the LTV of MKR due to fear of a governance attack on flash loans. 

Flash Loans

The current state of DeFi has been driven by total locked value, a benchmark for assets under management. However, it’s not efficient to store assets on smart contracts. In an attempt to reuse staked collateral and provide additional products for borrowers, Aave introduced flash loans. With flash loans, borrowers can take advantage of 100% undercollateralized loans with interest rates as low as 0.09% per flash. The only caveat is that flash loans must be returned by the next ethereum block, which is roughly 13 seconds. If it’s determined that a flash loan won’t be returned by the next block, the loan will be reverted. However, borrowers can make multiple transactions within a single block. The recent bZx exploit showed what’s possible with flash loans. Kulechov explained that even more is possible, including:

  1. Arbitrage – borrowers can execute market arbitrage across multiple exchanges.

  2. Collateral Swap – borrowers can swap the underlying collateral on their Maker CDP.

  3. Refinancing – borrowers can close out a high-interest loan on one protocol and open a lower interest loan on another protocol.

Flash loans provide diversified income streams for depositors and attract more yield to other protocols. Developers can use Aave’s simple APIs and open-source code to implement flash loans into their applications.

Gasless Ethereum Transactions With Biconomy Relayer Network

Biconomy “Gasless” Transactions

Biconomy is a relayer infrastructure network and transaction platform that enables developers to build applications easily and reduce friction between applications built on the blockchain and end-users. Ahmed Al-Balaghi is the co-founder of Biconomy, is an advisor to the Matic network, and is the host of Encrypted, the largest blockchain podcast in the Middle East and North Africa (MENA).

Meta Transactions

In a relayer infrastructure network, developers can apply meta or “gasless” transactions. In a meta transaction, the application developer or a third party will cover the gas fees to enable seamless UX. These transactions can also be activated on layer 2 solutions for even more scalability. Platforms like NEO, Dharma, Origin, and Unstoppable Domains have built an in-house relayer network to enable meta transactions. However, it is very time-consuming and resource-intensive to build out a relayer network.

Biconomy is providing relayer-as-a-service infrastructure for applications. A single relayer can relay transactions for multiple projects. Biconomy is also blockchain agnostic and plans to enable a trustless relayer model over time. A relayer is an address that signs and relays the transaction on behalf of the user. Unlike nodes, relayers are off-chain and only require enough ETH to cover transaction costs. Application developers can choose to absorb gas fees or have users pay gas in a different token.

  1. Dapp developers can remove gas fees from the user completely. Relayers would pay the gas fees in ETH and dapp developers would pay Biconomy.

  2. Users can pay gas fees in any ERC20 token such as DAI. Relayers would pay the gas fees in ETH. Dapp developers would receive the token fees from users but would pay Biconomy.

Native Meta Transactions

With meta transactions, a transaction is signed by the relayer and sent to the receiving contract via a proxy. However, creating a proxy contract for each and every user is an expensive process. Native Meta Transactions on Biconomy directly relay user signed transactions to the receiving contract and remove the need for a proxy contract. Native meta transactions only require the user account address, removing a dependency on contract wallets.

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