“CFTC Chairman Rostin Behnam said Wednesday that CFTC-led regulation could have significant benefits for the crypto industry, including a potential boost to the price. A clear regulatory framework, Behnam argued, could pave the way for institutional investors to enter the market.
Growth might occur if we have a well-regulated space. Bitcoin might double in price if there’s a CFTC-regulated market.
A bipartisan bill introduced by the leaders of the Senate Agriculture Committee, which oversees the CFTC, would crown the CFTC the primary regulator for the crypto industry, expanding the agency’s authority to oversee crypto spot markets and requiring crypto trading firms to register with the CFTC. Behnam said on Thursday that he supports the bill.”
“Californians will have the option of a blockchain-based delivery of their vital records after a new law was approved establishing the technology as an integral part of state recordkeeping. The technology would be established in the distribution of birth, death and marriage records, allowing PDFs to be sent immediately rather than using a typical 10-day postal delivery.
This secure and highly convenient process will allow the average person to access their vital records.
Also, this week in the U.S. Senate a bill to set up a governmental task force on digital identity cleared the Senate Homeland Security committee.”
“Warner Music Group—the mega-record label conglomerate that counts Cardi B, Madonna, Dua Lipa and Ed Sheeran among its myriad signed artists—announced on Thursday that it would partner with NFT marketplace OpenSea to accelerate its artists’ expansion into Web3.
The collaboration will grant Warner Music artists early access to new OpenSea products, improved discoverability on the NFT marketplace, and dedicated and featured portions of the OpenSea site for upcoming NFT projects.
Our collaboration with OpenSea helps to facilitate these [fan] communities by unlocking Web3 tools and resources to build opportunities for artists to establish deeper engagement, access, and ownership.”
“Kazakhstan is ready to legalize a mechanism for converting cryptocurrencies to cash. President Kassym-Jomart Tokayev emphasized that Kazakhstan aims to become an international leader in the field of digital technology, cryptocurrency ecosystem and regulated mining.
We are ready to go further. If this financial instrument shows its further relevance and security, it will certainly receive full legal recognition.
The news comes as thousands of Russians enter Kazakhstan. On Sept. 21, Halyk Bank suspended the use of Russia’s Mir payment cards amid sanctions warnings by the United States Treasury Department.”
“The BOE on Wednesday morning said it will begin to buy long-dated gilts in unlimited quantities to stabilize the U.K.’s bond market, which has recently turned volatile on concerns that the government’s plan to cut taxes will put its finances on an unsustainable path. The bank also said it was suspending planned bond sales under its quantitative-tightening program.
The announcement raised hopes that central banks, including the U.S. Federal Reserve, are nearing their pain threshold concerning the market turmoil and might soon abandon the policy tightening that has roiled crypto and traditional assets this year.
Bond purchases are typically associated with quantitative easing (QE), whereby central banks freely conjure money out of thin air by creating reserves on their balance sheet and then use those new reserves to snap up securities from the open market, thereby injecting cash into the system.”
“SWIFT is working with Chainlink on a cross-chain interoperability protocol (CCIP) in an initial proof-of-concept. CCIP will enable SWIFT messages to instruct on-chain token transfers, helping the interbank network to be able to communicate across all blockchain environments.
This will help accelerate the adoption of distributed ledger technology (DLT) blockchains and benefit various institutions across capital markets, Chainlink co-founder Sergey Nazarov said at the SmartCon 2022 conference. The partnership between Chainlink and SWIFT in cross-chain interoperability will help bridge the gap between traditional and digital assets for TradFi institutions.
Interest from institutional investors moving into crypto has been “undeniable,” according to SWIFT’s Strategy Director. Traditional finance (TradFi) players want access to various digital and traditional assets on one network that can connect different types of asset classes.”
“At the Converge22 conference in San Francisco, Jeremy Allaire, CEO of stablecoin issuer Circle, said that the world is finally moving from the speculative value phase of crypto to the utility phase.
‘We need safe, scalable and energy-efficient public blockchains‘ just as we did with the internet, he stated, raising the example of new developments such as Ethereum’s recent move to proof-of-stake and the emergence of layer-2 scaling models. He said the step was ‘necessary for this [blockchain] to become something that is used by everyday society for mission-critical applications.’
Allaire believes that privacy and identity are two fundamental pillars of a new Web3. Allaire explained that for mass crypto adoption to happen, participants would need to be introduced to a much more simplified version of the underlying technology.
People don’t need to know what chain they’re on or even what stablecoin they’re using. They just need to know that it’s frictionless interaction with data and money.”
“Lightning Network infrastructure firm Lightning Labs has released a test version of the Taro daemon, a new piece of software that will allow Bitcoin developers to create, send and receive assets.
Taro is a Taproot-powered protocol that was introduced in April and that allows bitcoiners to issue assets such as stablecoins on the Bitcoin blockchain. Those assets can then be transferred over the Lightning Network for instant, high-volume and low-fee transactions.
With Taro we can build a world where users have [U.S. dollar]-denominated balances and BTC-denominated balances (or other assets) in the same wallet.”
“The new collaboration, called Project Icebreaker, involves the BIS Innovation Hub’s Nordic Centre, and it will test key functions and technical aspects of interlinking different domestic CBDC systems.
Project Icebreaker will test near-instant retail CBDC payments across borders at lower costs. A final report on the project is expected in the first quarter of 2023.”
“As the U.S. dollar runs rampant, its strength has come at the expense of trading partner currencies, notably the euro, pound and Japanese yen. The pound’s disintegration gathered pace this week as GBP/USD hit its lowest on record at nearly $1.03.
With the United Kingdom’s central bank, the Bank of England, avoiding interventions so far, nerves are showing as purchasing power takes a double hit from currency weakness and inflation at 4-year highs. Trade volume for the GBP/BTC pair on exchanges Bitstamp and Bitfinex, usually worth a combined $70 million per day, hit a giant $881 million on Sept. 26.
The United Kingdom will get orange-pilled very quickly given GBP volatility. When a fiat currency is threatened, investors start to favour Bitcoin.”
“The European Union (EU) recently agreed to new laws to enable innovative ways to trade stocks and bonds using the blockchain, by easing requirements to use brokers and use a separate securities depositary – and the trial is set to start in March 2023.
A significant number of market participants expressed interest in operating a DLT MI [market infrastructure] under the DLT Pilot.
ESMA cited interest from trading floors and settlement infrastructure, both new players and incumbents, from inside and outside the bloc. Proponents say the new systems, allowing trading of tokenized securities could prove more transparent and efficient, helping cut out the middleman from financial-market trading.“
“No-fee trading platform Robinhood (HOOD) is releasing the beta version of its Web3 wallet, allowing users to swap assets on its Polygon-based non-custodial wallet.
Robinhood has been steadily making advances in bolstering its crypto products and moving away from its original “walled garden” approach over the past year. The wallet will allow users to trade over 20 cryptocurrencies supported by decentralized exchange (DEX) aggregator 0x, without fees. The wallet will also allow users to connect to dapps and earn yield on assets.“
“Set to launch later this year, decentralized data platform Space and Time will integrate with Microsoft Azure. ‘We want to build a more mature, enterprise-secure data warehouse from the start.’
Space and Time combines on-chain and off-chain data in a trustless environment that supports enterprise-scale analytics. The startup is also developing a novel cryptographic protocol called proof of SQL that would allow blockchain applications to rapidly generate analytical insights in a decentralized, low-cost and secure way.
Holiday noted that Microsoft is also a major traditional gaming player through its Xbox business, which could help Space and Time build the gaming database for Web3.”
“A project involving multiple Asian central bank digital currencies (CBDC) has been badged a success, facilitating over $22 million in foreign-exchange transactions. The trial used a custom-built distributed-ledger technology platform, is supported by central banks from China, Hong Kong, Thailand and the United Arab Emirates.
A statement issued in November said that Goldman Sachs, HSBC, Societe Generale and China’s six biggest state-owned lenders are among the 20 commercial banks involved in the project, known as mBridge.”
“Luxury auction house Christie’s is launching an on-chain platform for non-fungible token (NFT) art, becoming the first global auction to facilitate fully on-chain sales.
The new platform, called Christie’s 3.0, was created in partnership with blockchain data firm Chainalysis, NFT minting platform Manifold and metaverse builder Spatial. The entire auction process, including all pre-and-post sale transactions, will be carried out on the Ethereum blockchain.
The platform’s inaugural sale will take place on September 28 and will include nine NFTs by artist Diana Sinclair in a collection titled Phases.”
“Despite turmoil in traditional financial markets, bitcoin is holding up relatively well on Monday. Its resilience is interesting given its tendency to trade in concert with the Nasdaq Composite, which is down 0.8%.
Traditional financial markets are trading lower Monday largely because of global recession fears. The British pound has declined to record lows following news that the Bank of England may raise its interest rates aggressively.”
“Apple’s decision to let NFTs be bought and sold on App Store apps hasn’t received the kind of reception one might expect from Web3 proponents. That’s because the iPhone maker has decided to charge its standard 30% commission on in-app NFT sales, which industry leaders say is “grotesquely overpriced.”
For context, the leading NFT marketplace OpenSea charges a 2.5% commission on NFT sales.
However, it is worth noting that the App Store can count on more than one billion iPhone users for reach. Even during the peak of the NFT hype at the start of the year, OpenSea saw just a little over a million monthly users. Some have also pointed out that mobile games especially will benefit from selling NFTs, while others said the move will significantly increase Web3 adoption worldwide.”
“The company is seeking legal counsel to help it navigate crypto, NFT and DeFi regulations as it expands its Web3 strategy.
The full-time position calls for an experienced corporate attorney to ‘work on transactions involving emerging technologies, including NFTs, blockchain, metaverse and decentralized finance.’ The position would provide guidance on “global NFT products.” The listing also mentions vetting NFT projects, blockchain networks, third-party marketplaces and cloud providers, as well as providing legal guidance on digital currency and blockchain technology.
Disney has in recent months accelerated its hiring of Web3-focused executives to integrate crypto elements into its many business branches. The pattern throughout is language stressing a merge of in-person and digital experiences, with blockchain at its core.”
“In the CFTC’s complaint, the agency argues that bZeroX and Ooki DAO are essentially the same organization, despite Ooki DAO’s language of decentralization. After operating from June 2019 to August 2021, bZeroX transferred control of its protocol to Ooki DAO.
The bZx Founders were wrong, however. DAOs are not immune from enforcement and may not violate the law with impunity.
The CFTC seems to take particular issue with Bean and Kistner’s repeated representations of the DAO-ification of their protocol as something that would put it beyond the reach of regulators.
What did surprise many crypto lawyers, however, is that the CFTC’s complaint indicates the regulator sees all voting governance token holders as potentially culpable members of a DAO. Such a crude method of determining involvement would also capture token holders who may have voted against potentially illegal actions, or who only voted on irrelevant things, like what to name the DAO. This issue was at the heart of a dissenting statement from CFTC Commissioner Summer Mersinger, who called the enforcement action “arbitrary and unfair.”
The Commission’s approach … affirmatively disincentivizes voting participation in DAO governance generally – and particularly those who may want to vote in a manner that effectuates change to comply with the law.
Though the enforcement action opens the door to who can be held responsible for a DAOs bad deeds, how to identify those participants – many of whom are pseudonymous even to fellow members – is another question. ‘It is [also] unclear how much of what the CFTC alleges will be accepted by the court.‘
As long as the DAO isn’t doing anything which violates any laws that would subject the members to personal liability, then it shouldn’t be an issue.”
“Today, the Hub’s primary role is to serve as a template for building blockchains into the Cosmos “interchain” – a web of individual blockchains that can easily share information and assets.
The Cosmos Hub 2.0 white paper outlines a revamped role for the Hub as the heart of interchain security – meaning other chains will be able to use the Hub to secure their own networks. With the launch of interchain security on the Cosmos Hub, other Cosmos chains will be able to borrow the Hub’s validators to secure their own networks rather than find their own.
The white paper also introduces mechanics aimed toward accruing value to ATOM, the Cosmos Hub’s native token. According to the new white paper, the investment narrative behind ATOM changes when the Cosmos Hub – with the ATOM token at its core – is used to secure a wider swath of the Cosmos ecosystem via interchain security.”
“Friedman LLP, a New York-based accounting firm that provided auditing services for the stablecoin issuer in 2017 is accused of “serial violations of the federal securities laws” and “improper professional conduct.” The auditor was found to have lied about conducting its audits in accordance with the standards of the Public Company Accounting Oversight Board.
The SEC’s order, issued Friday, details sloppy accounting practices that were common at Friedman LLP from 2015 to 2020, including its failure to “respond to fraud risks” and “exercise due professional care and professional skepticism,” among other things, the order said.
In its settlement agreement with the SEC, Friedman LLP has agreed to train its staff in proper auditing procedures.”
“Increasing numbers of employees are quitting 9–5 corporate jobs to work for DAOs. While the money’s great, DAOs fall into a legal gray area, and it can be tricky to get your foot in the door.
One in 5 workers reported an intent to quit their jobs in 2022. At the same time, the peak number of members of decentralized autonomous organizations at the start of August 2022 was 3.4 million, with over 140,000 new members joining in July 2022 alone.
DAOs are a new form of organizational structure offering an alternative to corporations. For workers, the critical difference is the horizontal structure, where there is little formal hierarchy and no bosses.
DAOs offer a revolutionary new type of employment: a hybrid of ownership, traditional employment, freelancing and volunteering. Every member is a boss and a worker (both paid and unpaid) and is free to contribute when and where they see fit. Each member is free to choose how much time they want to spend working, voting and participating in discussions. Moreover, one can be a member of multiple DAOs and choose how much time and effort they devote to each. In other words, employment in a DAO is flexible, discretionary, overlapping and deregulated.
Today, it is possible to earn a living working for a DAO or across multiple DAOs, with some earning as much as $300,000 a year in 2021. A survey of 422 DAO members conducted by Gitcoin and Bankless showed that half of the respondents were able to earn a living from working in one or more DAOs.
However, the remuneration rarely comes as a traditional salary and is commonly paid in tokens. Furthermore, the moment one starts working for a DAO and the moment they get paid can be two entirely different points in time.
Here is how the evolution of working for a DAO typically looks. The moment one joins a DAO (usually by purchasing a token), they can start contributing by participating in a community forum (often on Discord) and voting (using Snapshot or something similar). At this point, however, there is a slim chance of getting paid. As one’s reputation grows, the DAO community may reward them based on discussion and participation KPIs (usually via airdrops).
Once a member has familiarised themself with the DAO and proved their reputation, they might start contributing to the core DAO project. At this stage, this usually happens in the form of completing a bounty: a small, disconnected task. Bounties are paid and lead to further accumulation of reputation and DAO-specific skills.
The next step is to secure a part-time or full-time position within a DAO. While relatively rare and hard to get, these jobs are very well-paid. Longer-term or ongoing positions such as these are usually associated with the core operations of the DAO project: for example, a software developer role in a protocol DAO or a graphic designer role in an NFT art production DAO. If one does not want to have a fixed arrangement, they can continue contributing when convenient, and the peer review process will decide how to remunerate the value they add to the DAO.
Despite earning big bucks in their prior role, money didn’t come up in the Tracer DAO chat, and it rarely comes up as the main motivation for joining a DAO. Most say the appeal is in no longer working for a boss. The absence of a hierarchical structure promotes teamwork and the feeling of being part of a community. DAO contributors often mention the fairness and transparency of the organization.
The collaboration-maxi nature was a welcome breath of fresh air.
It is interesting in that you are connecting and collaborating with people that are also passionate about similar ideas and ideals. However, the challenge is creating coordination mechanisms and incentives so that everyone is working together in tandem to help solve these goals.”
“The DeFi sector’s largest decentralized exchange is embarking on a major expansion.
For context, Uniswap’s 24-hour trading volume over the past 24 hours was $1.12 billion just on the Ethereum mainnet (i.e., excluding Polygon and Arbitrum integrations). The next runner-up for DEX volume was PancakeSwap, with roughly $194 million. Of all volumes across all DEX platforms, Uniswap currently commands 60% of the market.
The game looks very different when compared to their centralized counterparts. Binance and Coinbase, for example, played host to $24 billion and $2.9 billion over the past 24 hours, respectively.
Thus, as Mary-Catherine Lader explained, siphoning off some of that money away from the centralized giants is a top priority for the Uniswap team. One way it has identified to help do so: NFTs. In June, Uniswap Labs bought NFT aggregator Genie.
Starting later this fall—I don’t want to say exactly when—you’ll be able to buy and sell NFTs on Uniswap from a number of different marketplaces. Our hope is that that brings your digital asset experience into one place, one stop.
Another notable update has been the vote and subsequent launch of the Uniswap Foundation, a project that funds open-source development in and around the Uniswap protocol. On Wednesday, the foundation executed its first wave of grants.
The lion’s share of this money went to one project in particular: Uniswap Diamond. Akin to Coinbase Pro, Uniswap Diamond will be built with pro traders and liquidity providers in mind, offering this demographic some of ‘the features and comforts of a more traditional centralized exchange.’
Between the Diamond project and the Genie acquisition, the vision becomes all the clearer: Uniswap is ready to take on the industry’s giants.”
“Bitpanda CEO, Eric Demuth, noted that the bear market had had no major impact on investor demand. He claims that more people are now looking for solutions that can bring the world of TradFi and decentralized finance (DeFi) together.
For example, while TradFi platforms can improve their accessibility and transparency mechanisms, DeFi ecosystems can learn a lot about risk mitigation from traditional finance entities. Furthermore, with statistical data showing that more than 300 million individuals now own some cryptocurrency, more and more players from the two worlds are beginning to arrive at a middle ground.
According to Victor Tran, CEO of Kyber Network, it is only logical that traditional finance players are turning toward crypto since they want to increase their market share within an exponentially growing industry. By the same token, he highlighted that DeFi, too, is experimenting with more use cases, those that can maximize market participation as well as help boost transaction volumes.
It’s all about giving users benefits. We believe that TradFi and DeFi can co-exist synergistically and provide users unparalleled access, control and choice. Greater institutional participation, security measures and use cases will create choice, excitement and confidence for users. Sustainable overall liquidity in the market with institutional participation will also help with the challenges of volatile liquidity during downturns.
The protective mechanisms of corporate governance can be combined with the populist, fast-paced, communal benefits of decentralized autonomous organizations to create a holistic finance system, one that is fair, transparent and inclusive in nature.
We’ll see market efficiencies increased as trad-fi systems are reimagined to import crypto values, and those market efficiencies can then generate additional societal value.
Stochyk said that for mass crypto adoption to happen in the near-to-mid-term, the two spaces need to coexist with one another.He also believes that regulation is right around the corner, with companies now needing to act accordingly to help introduce more confidence within this space.
As the world continues to gravitate toward an economic landscape that favors the ethos of decentralization/transparency, it will be interesting to see how players from the crypto and conventional finance ecosystems continue to synthesize their goals and create a new paradigm that allows users to enjoy the best of both worlds.”
“The MiCA framework limits the volume for stablecoin payments to $200 million per day. This is too low of a cap to gauge its success and is ultimately only helpful in stifling innovation and hindering what these assets can offer. Take the perspective from Belgium, where, as of July 1, 2022, all merchants must offer at least one digital payment solution. But, here’s the catch — cryptocurrency and stablecoins are not accepted as valid forms of digital payment under this provision.
MiCA’s limitations stand to hold back the potential of [Circle’s] EUROC and other digital assets. And, unless this barrier is overcome, the EU may not see the type of adoption required to lead crypto innovation on an international scale. And, it risks seeing the role of the Euro as an international currency severely diminished.
Ultimately, MiCA is likely a net positive and significant step forward for crypto asset regulation in the EU. However, it’s essential to ensure that regulation remains innovation-friendly and tech neutral. This must include eliminating the cap on stablecoin volumes and making provisions for digital currencies, especially stablecoins, to be recognized and encouraged as a form of payment in the EU. Anything less and issuers and innovators will seek other, more forward-thinking jurisdictions.”
“The Salvadoran government touted BTC as a tool to attract foreign investment, create new jobs and cut reliance on the United States dollar in the country’s economy at the time of adoption. Many BTC proponents and the libertarian community rallied behind the small nation despite mounting pressure from global organizations such as the World Bank and International Monetary Fund (IMF) to remove BTC as a legal tender. A lot has changed over the past year since El Salvador became the first “Bitcoin nation.”
Bukele has previously mentioned that the primary focus of recognizing BTC was to offer banking services to more than 80% of unbanked Salvodrans. Within six months of the law passing, the country’s national Bitcoin wallet managed to onboard four million users, ensuring that 70% of the unbanked population got access to payment and remittance services without having to go to a bank.
‘We should accept that the digital currency has helped the Central American nation of El Salvador rebuild its tourism industry.’ A near doubling of tourism is a significant boon for the country. Apart from tourism and offering financial services to the unbanked, BTC adoption has also proven beneficial in terms of cross-border remittances, cutting transaction costs significantly.
[However], El Salvador’s Bitcoin Volcanic bond, a project meant to raise $1 billion from investors to build a Bitcoin city, has already been delayed on numerous occasions now and skepticism is growing not just around the project but on the overall BTC adoption itself.
The country’s move toward Bitcoin has limited the country’s access to traditional financial markets, causing Bukele some real problems in financing the repayment of its bond obligations. Moody’s, earlier this year, credited disagreements about Bitcoin as a reason El Salvador was having difficulty coming to terms with the IMF.
Maybe in five years, Bukele’s decision won’t look that bad, but currently, it’s controversial.
For a country like El Salvador, access to funding through organizations like the IMF is vital. That makes Bukele’s Bitcoin gambit difficult to defend.”
“Newsom (D) vetoed a crypto licensing and regulation bill seen as a possible West Coast version of New York’s “BitLicense” on Friday.
A more flexible approach is needed to ensure regulatory oversight can keep up with rapidly evolving technology and use cases, and is tailored with the proper tools to address trends and mitigate consumer harm.”
“The CFTC on Thursday announced settled charges against the founders of bZeroX, the company behind the bZx protocol. The CFTC fined bZx founders Tom Bean and Kyle Kistner $250,000 for allegedly “illegally offering leveraged and margined retail commodity transactions in digital assets,” as well as failing to adopt customer identification requirements known as KYC.
But in a novel move, the CFTC also filed a lawsuit against an associated DAO. The CFTC alleges that the Ooki DAO, which Bean and Kistner purportedly founded as a way to decentralize control of the bZx protocol, likewise violated the same laws. Though Bean and Kistner settled charges against themselves and bZeroX, while neither admitting nor denying the charges, the CFTC is seeking penalties against the DAO, including disgorgement, fines, and potential trading and registration bans.
In an unprecedented action, the CFTC reasoned that Bean and Kistner are liable for the DAO’s allegedly illegal behavior because they held Ooki tokens and voted on governance proposals related to how the DAO operated.
The order finds the DAO was an unincorporated association of which Bean and Kistner were actively participating members and liable for the Ooki DAO’s violations of the [Commodity Exchange Act] and CFTC regulations.
In a dissenting statement, CFTC Commissioner Summer Mersinger called the action “blatant regulation by enforcement” and said it fails to “rely on the legal authority” of the Commission’s mandate. ‘I cannot agree with the Commission’s approach of determining liability for DAO token holders based on their participation in governance voting.’
The way in which the CFTC defined the Ooki DAO as an unincorporated association and determined the bZx founders’ liability could have far-reaching implications in the world of DeFi and DAOs—the latter of which becoming an increasingly popular way to quickly organize large groups of people toward a singular goal, including fundraising for a common cause, while decentralizing decision-making for the group.
The enforcement action is already having a chilling effect on certain DAOs, according to Delphi Labs General Counsel Gabriel Shapiro. ‘Already seeing DAO delegates talking about quitting their roles.’
If nothing else, the CFTC has made it clear that merely organizing as a “DAO” does not exempt participants from abiding by existing regulations.
Being a DAO in the U.S. is a dangerous business. Simply distributing a token and holding a few votes doesn’t absolve founders who are breaking the law from any legal responsibility.”
“One topic that often re-emerges in layer-2 scaling discussions is the concept of “layer 3s”. If we can build a layer 2 protocol that anchors into layer 1 for security and adds scalability on top, then surely we can scale even more by building a layer 3 protocol that anchors into layer 2 for security and adds even more scalability on top of that?
Unfortunately, such simple conceptions of layer 3s rarely quite work out that easily. There’s always something in the design that’s just not stackable, and can only give you a scalability boost once – limits to data availability, reliance on L1 bandwidth for emergency withdrawals, or many other issues.
Newer ideas around layer 3s, such as the framework proposed by Starkware, are more sophisticated: they aren’t just stacking the same thing on top of itself, they’re assigning the second layer and the third layer different purposes. Some form of this approach may well be a good idea – if it’s done in the right way. This post will get into some of the details of what might and might not make sense to do in a triple-layered architecture.
Let’s look at what Starkware, in their post on layer 3s, advocates:
L2 is for scaling, L3 is for customized functionality, for example privacy. In this vision there is no attempt to provide “scalability squared”; rather, there is one layer of the stack that helps applications scale, and then separate layers for customized functionality needs of different use cases.
L2 is for general-purpose scaling, L3 is for customized scaling. Customized scaling might come in different forms: specialized applications that use something other than the EVM to do their computation, rollups whose data compression is optimized around data formats for specific applications (including separating “data” from “proofs” and replacing proofs with a single SNARK per block entirely), etc.
L2 is for trustless scaling (rollups), L3 is for weakly-trusted scaling (validiums). Validiums are systems that use SNARKs to verify computation, but leave data availability up to a trusted third party or committee. Validiums are in my view highly underrated: in particular, many “enterprise blockchain” applications may well actually be best served by a centralized server that runs a validium prover and regularly commits hashes to chain. Validiums have a lower grade of security than rollups, but can be vastly cheaper.
What’s the point of validiums, and privacy systems, and customized environments, anchoring into layer 2 instead of just anchoring into layer 1? The answer to this question turns out to be quite complicated.
One possible argument for the three-layer model over the two-layer model is: a three-layer model allows an entire sub-ecosystem to exist within a single rollup, which allows cross-domain operations within that ecosystem to happen very cheaply, without needing to go through the expensive layer 1.
But as it turns out, you can do deposits and withdrawals cheaply even between two layer 2s (or even layer 3s) that commit to the same layer 1! The key realization is that tokens and other assets do not have to be issued in the root chain. That is, you can have an ERC20 token on Arbitrum, create a wrapper of it on Optimism, and move back and forth between the two without any L1 transactions!
A three-layer scaling architecture that consists of stacking the same scaling scheme on top of itself generally does not work well. Rollups on top of rollups, where the two layers of rollups use the same technology, certainly do not. A three-layer architecture where the second layer and third layer have different purposes, however, can work. Validiums on top of rollups do make sense, even if they’re not certain to be the long-term best way of doing things.“
“The economic landscape may seem dire at the moment, but it’s unlikely to affect blockchain development, according to Pantera Capital CEO Dan Morehead. During the first half of this year, Pantera Capital raised about $1.3 billion in capital for its blockchain fund.
Like any disruptive thing, like Apple or Amazon stock, there are short periods of time where it’s correlated with the S&P 500 or whatever risk metric you want to use. But over the last 20 years, it’s done its own thing. And that’s what I think will happen with blockchain over the next ten years or whatever, it’s going to do its own thing based on its own fundamentals.
We’ve been very focused on DeFi the last few years, it’s building a parallel financial system. Gaming is coming online now and we have a couple hundred million people using blockchain. There’s a lot of really cool gaming projects, and there still are a lot of opportunities in the scalability sector.”
“Inca will develop a crypto ecosystem mapping tool to analyze crypto financial data and risk. Its aim will be to help the U.S. government and the private sector understand how crypto may be linked to money laundering, terrorist financing and sanction evading, as well as identify how cryptocurrency may affect traditional financial systems and vice versa.
Given the increasing prevalence of digital assets, the Department of Defense and other federal agencies need to have better tools to understand how digital assets operate and how to leverage their jurisdictional authority over digital asset markets globally.”
“The Merge drastically lowered the barriers to entry for the average person to get involved in securing Ethereum. You don’t need to spend thousands (or millions) of dollars on hardware and energy costs, all you need is a laptop and some ETH.
While liquid staking protocols offer a more accessible solution for those that don’t meet the 32 ETH threshold, running your own validator helps preserve the decentralization & censorship-resistance of the network.
Today, you have three main options:
Plug & play solutions (dAppNode & Avado)
Solo staking (DIY hardware)
Rocket Pool Operators
All these have different trade-offs.
Interested in getting started and earning some rewards? Here’s how anyone can become an ETH validator.”
“Congress’ attempt to make the CFTC the primary U.S. cryptocurrency regulator took a procedural step forward on Thursday, with a House of Representatives lawmaker introducing a bill supporting a parallel effort in the Senate.
The Senate legislation is a relatively narrow effort to install the CFTC as a leading agency to oversee digital assets trading and to exercise new authority over crypto spot markets. Now, that effort has been joined in the House.
It is essential that we have robust oversight and regulation so that we may provide strong customer protections.
It’s unclear whether the Senate legislation will have enough runway in this dwindling congressional session to get to an overall floor vote, and Maloney’s bill would similarly need approval from the House Agriculture Committee and the overall House before the bills can unite and face White House consideration. The advantage of having matching bills in both chambers is that it could streamline the process and get to the president’s desk more quickly if they win support in the Senate and House.
While lawmakers debate their approach, CFTC Chair Rostin Behnam is already preparing his agency to become a top crypto regulator.”
“Ethereum’s (ETH) annual token supply change has dropped from 3.79% to 0.20% post-merge.
Following the merge, the network has created 4,581.26 new Ethereum, marking a massive 95% issuance reduction compared to the deprecated PoW chain. Under the PoW mechanism, Ethereum would’ve issued nearly 88,736.70 Ethereum.
Daily issuance refers to the total amount of new tokens created to reward a network’s block miners or validators. Post-merge the network’s daily issuance has dropped to ~772 tokens per day compared to ~12,500 before the upgrade.
Ethereum will be considered deflationary if the number of tokens issued per day is less than the amount burned; [where burn-rate increases with network activity]. The ultrasound money meme is taking life.”
“Code repositories for the Ethereum-based mixer Tornado Cash were relisted on GitHub on Thursday. The move by GitHub comes as Ethereum developers have called for platforms that host the mixer service to not ban Tornado Cash code.
Within hours of [last month’s] OFAC announcement, GitHub, along with other platforms, removed Tornado Cash from their sites in order to comply with the new U.S. regulation.”
“Arbitrum, a so-called “rollup” for the Ethereum blockchain, has the strongest user and transaction momentum among the leading blockchains, Bernstein said in a research report Wednesday. It increased its lead in both speed and costs with its recent Nitro upgrade, and has also launched a Web3 and gaming chain called Nova.
Ethereum’s large user and developer base will continue to act as a feeder to rollups. [We] expect a new growth cycle to emerge in crypto as rollups drive mainstream application building on Ethereum.
Bernstein said it expects a host of trading, gaming and non-fungible-token (NFT) projects to be released on the blockchain. The broker also noted speculation of a potential Arbitrum token launch in the near term, which could be used to reward early users.”
“With thousands of nonfungible tokens (NFTs) getting minted every single day, trying to find rare pieces can be a challenge for NFT collectors.
OpenSea announced the implementation of OpenRarity, a protocol that provides verifiable rarity calculations for NFTs within its platform. The protocol uses a transparent mathematical approach to calculating rarity. Rare NFTs will be awarded lower numbers like 1 or 2, while NFTs that have attributes similar to many other NFTs will have higher numbers.
The OpenRarity project was a collaborative effort between various NFT community entities, including Curio, icy.tools, OpenSea and Proof. The goal is to standardize the rarity methodology and provide consistent rarity rankings across all NFT platforms.”
“The exchange hired at least four Wall Street traders to form a group called Coinbase Risk Solutions to use the firm’s own cash to trade crypto, according to a report by the Wall Street Journal on Thursday.
Proprietary trading is when a firm engages in trading of stocks, bonds, currencies or commodities using its own money as opposed to that of its clients. Such activity is fraught with risk and the potential of conflicts of interest for the financial firm should its trades have an effect on the prices of those assets, which could in turn hurt its clients.
Coinbase executives said in December that it did not engage in proprietary trading when they appeared in Congress. However, with the price of digital assets encountering a downward trajectory throughout 2022, dragging Coinbase stock down in the process, Coinbase may have turned to trading on its platform as a means of creating new avenues for profit.
In response, Coinbase said the WSJ report had confused “client-driven activities” with proprietary trading.”
“Bitcoin traded lower on Tuesday as investors reacted to a widely expected 75 basis point (BPS) interest rate hike by the Federal Open Market Committee (FOMC).
The issues driving the Fed’s continued monetary hawkishness were more important than the size of the interest rate hike. [Notably], the federal funds rate is projected to increase to 4.4% by year’s end and close to 4.6% by the end of 2023, indicating equally aggressive rate hikes through the remainder of this year.
Estimates for higher, future interest rates and muted expectations for economic growth, are likely to present a hurdle for asset valuations. Thus, today’s report implies that bitcoin and other risk assets will continue to face challenges.”
“Leaders of the House Financial Services Committee continue to negotiate the terms of a proposed bill to regulate stablecoins, even as the window to act draws increasingly narrow heading into the midterm elections.
The latest draft legislation would ban algorithmic stablecoins like TerraUSD (UST) for two years, while regulatory agencies conduct a study of “endogenously collateralized” tokens. “Endogenously” means something produced or synthesized within the organism or system.
Prior versions of the bill required stablecoin issuers to maintain 1:1 liquid reserves for all stablecoins in circulation and would also limit the types of assets that could back them. The latest draft goes even further. The stablecoin bill now provides a path for banks and other financial institutions to issue stablecoins, working with their existing network of regulators.
The committee could bring the bill up for a vote as soon as next week.”
“Tether has been ordered by a U.S. judge in New York to produce financial records relating to the backing of USDT as part of a lawsuit that alleges Tether conspired to issue the stablecoin as part of a campaign to inflate the price of bitcoin (BTC).
The order requires Tether to produce “general ledgers, balance sheets, income statements, cash-flow statements, and profit and loss statements” as well as records of any trades or transfers of cryptocurrency or other stablecoins by Tether including information about the timing of the trades. It also orders Tether to share details about the accounts it holds at crypto exchanges Bitfinex, Poloniex and Bittrex.”
“The move by Societe Generale, which had over $1.6 trillion in assets as of 2021 and is among the largest banks in Europe, demonstrates the appetite by mainstream financial institutions to offer crypto-related services to their clients as demand increases.
The services will allow the asset managers to offer crypto funds in a “simple and adapted” way within a framework that is compliant with European regulations, the bank said Wednesday. The service has been adopted by French asset manager Arquant Capital SAS, which is opening a range of funds investing in crypto, starting with two products based on bitcoin (BTC), ether (ETH) and derivatives.”
“NFTs have become the biggest crypto on-ramp for countries in Central and Southern Asia, as well as Oceania, according to a report from Chainalysis on Wednesday.
The blockchain analytics firm noted that, in Q2 2022, 58% of web traffic from these countries to crypto services was NFT-related. Another 21% of traffic to crypto services was related to play-to-earn blockchain games, which reward players with cryptocurrencies and often integrate NFTs into their gameplay.
Besides NFTs and play-to-earn games, cryptocurrency is also growing popular as a remittance tool in these regions. Consistent with the popularity of remittance payments and NFTs, the two most actively traded crypto assets in these countries are stablecoins, Ethereum, and Wrapped Ethereum.”
“Nova Labs and T-Mobile have partnered to launch Helium Mobile, a 5G wireless service for smartphones. It will use Helium’s decentralized, crypto-powered 5G network as well as T-Mobile’s network, and switch between the two as needed.
Nova Labs says the service will offer two significant economic differentiators from traditional services: plans will start at just $5 per month, and users can also optionally earn crypto token rewards for sharing data.
Helium Mobile will allow users to opt into receiving the network’s MOBILE token rewards in exchange for providing anonymized data about their network usage. Renski said that the service will treat such users as contributors, as the data will be used to monitor network quality and availability as it scales
Set to launch in the first quarter of 2023, T-Mobile and Nova Labs have signed a five-year agreement to power the service.”
“In a bold and potentially unprecedented move buried in the lawsuit’s 69th paragraph, the SEC today claimed it had the right to sue Balina not only because his case concerns transactions made in the United States, but also because, essentially, the entire Ethereum network falls under the US government’s purview.
In its complaint, the regulator noted that the ETH sent to Balina was ‘validated by a network of nodes on the Ethereum blockchain, which are clustered more densely in the United States than in any other country. As a result, those transactions took place in the United States.’
The SEC appears to be suggesting that, because more of Ethereum’s validating nodes currently operate in the United States than in any other country, all Ethereum transactions globally should be considered of American origin. Currently, 45.85% of all Ethereum nodes operate from the United States, according to Etherscan.
Saying that enables [the SEC] to characterize doing business on the Ethereum blockchain, as doing business on a US securities exchange.
Such a development would constitute a major escalation in the SEC’s role in overseeing both Ethereum, specifically—where the vast majority of NFT and DeFi activity takes place—and crypto as a whole. Fyre noted that the language of today’s complaint bears no legal weight, and due to the nature of the SEC’s suit against Balina, the court in this case is unlikely to weigh in on this specific issue.
Under Gensler, the SEC has yet to take an official stance on Ethereum, despite leadership within the Commission under the previous administration suggesting that Ethereum was “sufficiently decentralized” and therefore not a security.”
“Nasdaq (NDAQ), the second-largest U.S. stock market operator, is starting a cryptocurrency custody service as it aims to cash in on the demand from institutional crypto investors, according to a press release on Tuesday.
Demand among institutional investors for engaging in digital assets has increased in recent years, and Nasdaq is well-positioned to accelerate broader adoption and drive sustainable growth.
Nasdaq’s move into crypto follows a wider trend across Wall Street. Last month, BlackRock, the world’s largest asset manager, said it will offer cryptocurrencies to its institutional clients, and Depository Trust & Clearing Corp., which processes almost all U.S. stock market trades, released its own blockchain as it looks to speed up the settlement of trades.
Nasdaq will compete with crypto exchange Coinbase and crypto custodians sAnchorage Digital and BitGo in holding bitcoin (BTC) and ether (ETH) for institutional clients in the U.S.”
“The Ethereum Merge has been completed and despite “high anticipation” around the transition, volatility remained subdued, Citi (C) said in a research report Friday. Ethereum is now 99.95% more energy efficient than when it used a proof-of-work (PoW) process, the report said.
Citi says ether has become a yield-bearing asset following the removal of mining, with current staking yield about 4.5%. This yield is higher than some traditional financial instruments, it said.
Following the transition, miners are no longer being issued rewards, the bank said, noting that these rewards equated to a supply of 4.9 million ether (ETH) a year. ETH issuance is estimated to drop 90% to around 600,000, and total supply on the first day of the Merge fell as the fees burnt were larger than rewards issued to validators, it added.
Meaningful scaling will likely come as a result of the Surge, the next planned upgrade, which could be introduced next year. Network activity has increased slightly as ETH now produces a yield for validators. However, fees have remained relatively low as activity is still modest versus historical levels, the note added.”
“Gaevoy said the company remains solvent, with “twice over” $160 million remaining in equity.
Founded in 2017, Wintermute trades billions of dollars across crypto market daily as it provides liquidity across multiple venues. The firm’s lending and over-the-counter (OTC) services have not been affected.”
“Colorado residents can now pay state taxes with cryptocurrencies using PayPal. The option allows residents to use crypto to pay for personal income tax, business income tax, severance tax and withholding tax.
While PayPal lets users deposit, withdraw and hold a variety of cryptocurrencies, the settlement of its crypto checkout service is in U.S. dollars. Several other U.S. states, including Florida and Ohio, have tested accepting crypto for tax payments.”
“OpenSea, the largest non-fungible token (NFT) marketplace by volume, said Tuesday it’s planning to support Arbitrum, allowing creators to list NFTs minted on the Ethereum roll-up. OpenSea currently offers NFTs minted on Ethereum, Polygon, Klaytn and Solana.
This is a first step in building our goal of a Web3 future where people have access to the NFTs they want on the chains they prefer.”
“A Russian Finance Ministry official has provided new details about a bill on digital currencies that is currently being drafted. The bill provides local infrastructure for settlements and regulation on mining, but will leave many details for businesses to work out on their own.
We give businesses the opportunity with this bill to pay with cryptocurrency, but in terms of what cryptocurrencies will be used, how to negotiate with counterparties, with which countries it will operate — all this we are leaving to entrepreneurs.
On Sept. 13, Russian Prime Minister Mikhail Mishustin ordered the Finance Ministry and the Central Bank of Russia to come to a consensus by Dec. 19 on legislation regulating the issuance, circulation, mining and the use of cryptocurrency in international settlements.”
“As directed by the President of the United States, Joe Biden, the Office of Science and Technology Policy (OSTP) submitted a report analyzing the design choices for 18 central bank digital currency (CBDC) systems for possible implementation in the US.
The technical analysis of the 18 CBDC design choices was made across six broad categories — participants, governance, security, transactions, data and adjustments. The OSTP foresees technical complexities and practical limitations when trying to build a permissionless system governed by a central bank, adding:
It is possible that the technology underpinning a permissionless approach will improve significantly over time, which might make it more suitable to be used in a CBDC system.
However, the analysis assumed there is a central authority and a permissioned CBDC system. The technical evaluation for a US CBDC system highlighted the report’s inclination toward an off-ledger, hardware-protected system.
Other important factors OSTP wants policymakers to consider include cryptography and secure hardware (for security), signatures, transaction privacy, offline transactions and transaction programmability (for transactions), data model and ledger history (for data) and fungibility, holding limits and adjustments on transactions and balances (for transactions).“
“The SEC and Ripple both filed motions for summary judgment in the Southern District of New York, asking District Judge Analisa Torres to make a ruling based on the arguments filed in accompanying documents.
The parties have filed various discovery motions over the past two years, without really litigating the actual underlying issue – whether Ripple violated securities law by selling XRP. The motions for summary judgment mean the parties are asking the court to actually decide whether either the SEC or Ripple has provided enough to prove one way or another whether there was a violation.”
“Australian politician Andrew Bragg wants to prepare the country for the widespread use of China’s central bank digital currency.China is currently running cross-border trials of a digital version of its sovereign currency. Lawmakers in major economies around the world are cautious of the implications of a widely used digital yuan.
Bragg’s draft “Digital Assets (Market Regulation) Bill 2022” identifies seven Chinese banks, including the Agricultural Bank of China and the Bank of China, that have branches in Australia and can potentially facilitate the use of a digital yuan in the country. The bill establishes disclosure requirements for those designated banks including reporting the number of Australian businesses that have accepted payments using digital yuan facilitated by the bank, and the total amount of digital yuan held in digital wallets by Australian customers of the designated banks.
Australia needs to be prepared for the widespread use of a digital yuan in the Pacific, or even within Australia, because it would give the Chinese state enormous power, economic and strategic power that it doesn’t have today.”
“The Ministry of Science and ICT (MSIT) of South Korea revealed plans to move away from imposing traditional video gaming laws on the Metaverse. The MSIT identified that imposing older regulations serve as a deterrent to the growth of new ecosystems.
We will not make the mistake of regulating a new service with existing law.
Previously, on Sept. 1, members of the National Assembly supported an official proposal for the enactment of the Metaverse Industry Promotion Act to support the Web3 industry.”
“The highlight of the economic calendar this week will be Wednesday’s Federal Open Market Committee (FOMC) meeting and its expected interest rate decision. Markets are ascribing an 80% chance that the Fed funds rate will increase by 75 basis points and a 20% chance that it will increase by 100 basis points, or 1%. Rates have not increased by 1% in over 40 years.
The Dow Jones Industrial Average (DJIA), tech-heavy Nasdaq composite and S&P 500 increased by 0.6%, 0.8%, and 0.7%, respectively.”
“A red notice is a request for law enforcement worldwide to locate and arrest the named individual and hold that person until extradition proceedings can begin. The notice is sent to police forces in 195 countries worldwide.
Last week, South Korean prosecutors issued an arrest warrant for Kwon on charges of fraud.”