The Disrupt Weekend

In the legacy financial world, yield has dried up. Yields on U.S. Treasury bonds have never been lower. The 10-year Treasury bond now offers you a less than 0.9% return. At around 2.1%-2.3%, AAA corporate bonds aren’t doing a whole lot better.

On Ethereum it’s difficult to avoid yield. Yield is the default incentive for successful decentralized finance (DeFi) applications to attract capital.

At the most basic level, borrowing and lending applications like Compound and Aave are offering 4.6% and 6.2% interest, respectively, on deposited USDC. More sophisticated yield aggregators like Yearn are generating 7.8% in their basic yield strategies, and up to 16% in more aggressive strategies.

Uniswap, averaging over $1 billion in trading volume per week, is putting its 0.3% trading fees into the hands of those that have supplied liquidity to the protocol. Those that have supplied ETH and USDC to Uniswap have received a staggering 35% APY on a hybrid 50-50 USD/ETH position in the last 30 days.

The DeFi economy is constructed fundamentally differently than its legacy counterpart. In order for DeFi to work, it requires over-collateralization. No one can borrow more than they have deposited, and so far this simple safety net has been the foundation on which DeFi has been able to stand.

It is also the reason why Ethereum and DeFi will become synonymous with “yield” in 2021. In DeFi, rates can’t go negative. There is no room for fractional-reserve lending in DeFi, because it would break the trust model that makes these applications function. In order to remove trust (and therefore centralization), you must over-collateralize.

In addition to its native store-of-value qualities, the launch of ETH staking turns ETH into a capital asset that produces cash-flow for its owner. We have seen other protocols offer proof-of-stake style returns on alternative assets, but ETH is uniquely compelling because it is also backed by the native economy of Ethereum.

When the size of the Ethereum economy increases, staking yields are designed to reflect this growth. The relationship between the Ethereum economy and ETH should be familiar to the typical bond investor: Healthy economies are highly valued, therefore the native bond typically has a premium associated with it.

Ethereum cannot default on its ETH payments to ETH bond-holders. ETH is dependably issued to ETH bond-holders for compensation for providing security to Ethereum. Ethereum doesn’t need to collect taxes or generate revenue to compensate those who are looking for ETH-denominated yield. Removing this requirement is a boon to the valuation of ETH bonds because there is no risk of default. Ethereum has no debts to pay, it is solvent by design.

In 2021, Ethereum is positioned to become the Schelling Point for yield. As bitcoin blasts the doors open on the investability of digital assets, it exposes a yield-rich world behind it in Ethereum.”

“As the threat of quantum machines looms over modern computers, the need for newer and stronger forms of cryptography has never been greater.

Finding a replacement for existing encryption methods isn’t a trivial task. For the past three years, the National Institute of Standards and Technology (NIST) has worked to research and advance alternative algorithms, or the backbone of any cryptographic system. This July, it announced a shortlist of 15 proposals in an ongoing project looking for quantum-resistant encryption standards.

Once an alternative is defined, there’s a much bigger job in ensuring that all existing applications get updated to the new standard. The scope of this is massive, covering virtually every use case on the entire internet, across all of finance and in blockchains. Given the scale of the task, plans and measures to migrate existing data must be in place long before the quantum threat becomes a reality.

The concept of blockchains is not in itself threatened by quantum computers. Blockchains are, first of all, used to securely register data (or digests of data) and we know already now how to secure the basic functionality of blockchains (immutability of registered data) with cryptographic primitives that are secure in the quantum era (hash functions and digital signature schemes).

But more work is required to handle more advanced protocols in an efficient way and more work is needed to continuously improve the security and efficiency of cryptographic primitives to make the blockchain more and more efficient.”

This week, the federal banking regulator published an interpretive letter saying that national banks and federal savings associations can use public blockchains to store and validate payments. It effectively awards blockchains the status of “payment network.”

Do you see the picture emerging? It’s not just about expanding the range of products banks can offer clients. It’s not just about offering better payment services. It’s about the convergence between traditional and crypto markets. It’s also about the role of the dollar in the economies of tomorrow.

While there are many hurdles yet to overcome, and many more pieces of legislation and regulatory guidance needed, we are getting a glimpse of what the finance of tomorrow could look like. And blockchains and crypto assets play a meaningful role in the emerging picture, which depicts so much more than rising prices and portfolio allocations – it sketches a new way of transacting, something that eventually will affect all of us.”

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Bitcoin, the US Dollar, and the Money Supply

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Milestone 1: January 15 — Mainnet Soft Launch. A trial run of the full mainnet experience with Synthetix. Goals: Battle-test in production with training wheels — upgrade key, withdrawal monitoring.

Milestone 2: March 15 — Community Release. A public testnet open to all, replete with documentation and tooling for projects to start integrating. Goals: Give teams the ability to deploy onto L2 as a shared staging ground for mainnet.”

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“Larimer, who co-founded the company and had served as its chief technical officer since April 2017, announced the move on’s social network He said he left as of Dec. 31, 2020. confirmed the departure, saying Larimer “left to pursue new personal projects.” The price of EOS fell on the news of Larimer’s departure, dropping to as low as $3.01.

Larimer founded BitShares alongside Charles Hoskinson (a co-founder of Ethereum) in 2013. Larimer later founded the Steem blockchain in 2016.”

“SkyBridge Capital, the hedge fund run by former White House Communications Director, Anthony Scaramucci, which on Monday opened a Bitcoin fund, was on Thursday overrun by prospective customers.

Over 6,000 people attempted to join, overwhelming their system and prompting them to schedule a second launch call for Tuesday, January 12. The fund promises to be a secure middleman between high-stakes investors and a Bitcoin market that, to Skybridge, is primed to take off this year.

Bitcoin is digital gold. It is better at being gold than gold.”

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“From a casual glance, it can look like DeFi is stronger than it’s ever been. Judged by the sector’s favorite metric, total value locked (TVL), the sector has been adding about a billion dollars worth of additional value per day since the new year started – from $15.67 billion to $22.35 billion as of this writing; however, a lot of that growth has been driven by the simple fact of asset prices going up across the board.

TVL isn’t the best indicator when ETH and all other crypto is green for weeks.

A good way to baseline DeFi upticks is by checking action specifically in stablecoins, since they don’t tend to get skewed wildly by price volatility.

Tether’s stablecoin has risen from a mere $91.5 million on Jan. 1 to $146 million today. Meanwhile, DAI has basically hovered a bit above $1 billion and USDC has in the area of $800 million that whole time. Nothing very exciting happening there, which probably stands as something of a bellwether for the real action in the space.”

“While a bitcoin exchange-traded fund (ETF) would be a long-term positive, in the short term it could hurt the price of the leading cryptocurrency as it would draw institutional money from the Grayscale Bitcoin Trust (GBTC), currently the only way for some on Wall Street to gain exposure to bitcoin.

A shrinking GBTC premium would also diminish the allure of a popular trade, the analysts wrote. Right now, some institutional investors buy GBTC at net asset value with the intent of selling after the mandatory six-month lockup period expires to capitalize on that premium. Should the premium drop due to the coming introduction of an ETF, it would diminish the popularity of buying GBTC at NAV for that purpose.

The JPMorgan analysts estimate the GBTC premium monetization trade could account for around 15% of outstanding GBTC stock.”

“Today Musk ended his ambivalence about Bitcoin in response to a tweet written yesterday by author Ben Mezrich that said he’s ‘never turning down getting paid in Bitcoin again.’ Musk replied: ‘me neither.’

Another major revelation came to light from Musk’s Twitter feed. When asked if he actually owns any Dogecoin, he replied ‘No, but maybe one day.'”

“So far, algorithmic assets such as algorithmic stablecoins have proven to be great ways for savvy game theoreticians to enrich themselves, but inefficient when it comes to keeping their intended pegs.

To this end, Spadafora and the rest of the team have taken inspiration from previous rebasing experiments such as Ampleforth.

We think the secret sauce is learning from what AMPL did around liquidity, and then adding the automated vaults on top.

Effectively, a DIGG vault would automatically and programmatically play the tokeneconomic ‘games’ other algorithmic asset projects expect users to play with bonds or coupons. Currently Badger’s vaults are worth $700 million — a massive pool of automated yield-generating liquidity that could be brought to bear to keep DIGG’s price tied to BTC.”

“Apple has suspended Parler, a conservative social media service, from its App Store, saying the app’s owner hasn’t done enough to deal with threats of violence on the platform. Meanwhile, Amazon dealt the service a potential death blow by kicking it off its web hosting service, citing the same reason.

Amazon’s action means that if the service can’t find another host, Parler will go offline Sunday.”

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