31 December

While Eisenberg’s arrest is likely to raise questions around the application of commodities manipulation and fraud laws to crypto, the more important issue raised by this case involves the work of individuals to uncover weaknesses in decentralized protocols, and the impact and utility of these operations for the future of crypto.

Eisenberg is far from the only person who has spent countless hours reviewing a crypto protocol’s code and structure and attempting to attack its weaknesses. These individuals, depending on their perceived and stated intentions, are often met with derision for exploiting these flaws for illicit gain, and celebration for pointing out shortcomings that can be fixed and improve protocol resilience. And while no user wants to lose money, if you are a crypto entity seeking to test the resilience of your protocol, your best option is probably to hope an enterprising hacker will take a deep look and attempt an exploit and return the money.

Many observers, and perhaps a jury, will say Eisenberg is a criminal and thief. And the fact pattern – all visible on the blockchain, detailed by Eisenberg’s own self-congratulatory tweets and described in SDNY’s criminal complaint – indicates he did indeed violate the letter of the law that prohibits market manipulation. However, it’s easy to imagine a scenario where without Eisenberg’s operation, the Mango protocol grows much larger and attracts more retail users, and it is North Korea, not Eisenberg, that exploits the protocol to drain user funds to pay for nuclear weapon development, not just a “highly profitable trading strategy.” In fact, as a result of Eisenberg’s successful Mango operation, other decentralized trading platforms implemented new risk mitigation measures, and when Eisenberg went after Aave a few weeks later, he failed.

What’s clear is that the crypto ecosystem will continue to rely on the ability of enterprising blockchain sleuths to find weaknesses in the system. What’s not clear is what framework makes sense to properly incentivize the time and skill required for such activity and protect user funds from being taken. ImmuneFi has a promising model of offering a bounty to hackers who pledge not to take user funds, similar to how the False Claims Act and various whistleblower statutes incentivize individuals to find wrongdoing in return for financial reward.

But it can be hard for a hacker to know a protocol weakness is real without an attempted exploit, and there is no indication these so-called “white-hat hackers” are immune from market manipulation laws, which they may violate even if user funds are fully returned.

Decentralized finance is poised to play an increasingly important role in the crypto ecosystem after the high profile failures of centralized entities and FTX and Celsius. Until a better model is found to pressure test these decentralized protocols, operations such as the one conducted by Eisenberg with Mango will remain a painful part of the journey to making the industry more resilient.”

See Also: False alarm: DOJ did not classify MNGO as a commodity

“In its proposal, Valkyrie said it wants to facilitate GBTC redemptions at net asset value (NAV) for investors through a Regulation M filing. It also proposes to lower the fees to 75 basis points as opposed to the current 200 basis points, and to offer redemptions in both bitcoin and cash.

Valkyrie, one of Grayscale’s rivals, previously launched a bitcoin trust and a bitcoin-related exchange-traded-fund (ETF) in 2021. As part of their plan to sponsor GBTC, the world’s largest bitcoin fund, the Tennessee-based company also announced the launch of a new fund, the Valkyrie Opportunistic Fund, LP that seeks to take advantage of GBTC’s discount.

Valkyrie’s plan would be a tall order, considering that GBTC alone has over $10 billion in assets and Valkyrie only handles roughly $180 million in total assets.

See Also: BlackRock Gives Bankrupt Bitcoin Miner Core Scientific New $17M Loan

As of Nov. 30, a Financial Times report noted that a traditional portfolio consisting of 60% stocks and 40% bonds will have seen its worst performance since 1932, when the U.S. was in the midst of the Great Depression.

Meanwhile, tech stocks, which some theorize have a correlation with cryptocurrency prices, haven’t had a great year either. An index tracking the performance of U.S. companies in the industry recorded a loss of 35.76% for the year. Household tech giants such as Netflix, Meta, Zoom, Spotify and Tesla have all had particularly difficult years as well with their share prices falling in the range of 51% and 70%.

According to a Dec. 30 tweet by investment analyst Andreas Steno, “every single asset class” is down significantly in 2022, and real estate is soon to follow. The “safe as houses” real estate sector has started to show signs of pain, with the most recent data from the Federal Housing Finance Agency showing that U.S. house prices were stagnant through September and October.”

The FTX founder and former CEO will reportedly enter a not guilty plea to eight charges of fraud from U.S. authorities in person in Manhattan on January 3, according to a report from the Wall Street Journal.

[Bankman-Fried] was charged with: conspiracy to commit wire fraud on customers; wire fraud on customers; conspiracy to commit wire fraud on lenders; wire fraud on lenders; conspiracy to commit commodities fraud; conspiracy to commit securities fraud; conspiracy to commit money laundering; and conspiracy to defraud the United States and violate the campaign finance laws.

The one-time crypto mogul also faces charges from the United States Securities and Exchange Commission (SEC) and a lawsuit from the Commodity Futures Trading Commission (CTFC).”

See Also: Prosecutors unlikely to offer Sam Bankman-Fried a favorable plea deal, says lawyer
See Also: Sam Bankman-Fried Denies Moving Alameda-Linked Funds: ‘None of These Are Me’

“Given media reports of a cyberattack on FTX, and possible looting of FTX-controlled wallets by former employees, the Commission said in its statement it ‘determined that there was a significant risk of imminent dissipation as to the digital assets under the custody or control of [FTX].’

The Commission said that FTX founders Sam Bankman-Fried and Gary Wang no longer had access to the $3.5 billion in tokens that were transferred. Assets will be held until the Bahamas Supreme Court directs the Commission to deliver them to the customers and creditors who own them, the statement says.

In the statement, the Commission reiterated that it didn’t direct FTX to prioritize the withdrawals of Bahamas-based customers.”

“Mr. Park Mo, the vice president of Vidente, the largest shareholder of South Korean Cryptocurrency exchange Bithumb,was reportedly found dead in front of his home at 4 am, on the morning of Dec. 30. Prior to his death, Mr. Mo had been named as a primary suspect in an investigation launched by South Korean prosecutors for his alleged involvement in the embezzling funds at Bithumb-related companies, as well as, manipulating stock prices.

According to Money Today, the vice president of Vidente, the largest shareholder of South Korean cryptocurrency exchange Bithumb, committed suicide by jumping off a building while being investigated by South Korean prosecutors, suspected of corruption and price manipulation.”

ETH Liquid Staking Projects

30 December

Although the world’s largest cryptocurrency by market value, bitcoin (BTC), saw a roughly 64% decline in value year-to-date, CoinDesk research shows that bitcoin and ether returns in 2022 per unit of risk were about the same as equities and significantly better than bonds.

Look at some of the darlings that people were really excited about 18 months ago in stocks, they’ve lost 80-90% of their value as well.

Bitcoin and ether appeared to be affected by the same forces that made stock investing a challenge over the past year, including high inflation and the looming threat of recession.”

“Pro-Bitcoin politician Sitiveni Rabuka recently took office as the new Prime Minister of the Pacific Islands of Fiji. Now, it seems the new PM is actively considering the adoption of bitcoin as legal tender there.

Let’s go 2 for 2 – BTC Legal Tender Bills for the Pacific in 2023,’ the tweet reads, hinting at Tonga’s own Bitcoin legal tender legislation that could reportedly go live as early as Q2 2023. [Tonga’s] Lord Fusitu’a told Cointelegraph that Fiji’s new Prime Minister ‘asked to meet with me which we did via zooms since last year to walk him through step by step, how he could adopt bitcoin legal tender. The new PM is definitely pro-Bitcoin.’

Both countries could benefit tremendously from bitcoin adoption in two specific areas; remittances and mining. Remittances sent to Fiji accounted for 11.3% of the country’s gross domestic product (GDP) in 2021, per World Bank data. Tonga’s situation is even more dramatic –– remittances were a whopping 45.5% of the nation’s GDP in 2021. When it comes to mining, both countries can take advantage of their geology.”

Together with the U.S., the two countries represent a 52% market share in terms of global blockchain enterprises. The CAICT also disclosed that around 48 post-secondary institutions across China have introduced “blockchain engineering” related degrees and certifications.

Major Chinese tech giants such as Tencent, Ant Financial, Huawei, and Alibaba, have all created “blockchain alliances” in the past years for their respective operations.

In the report, the institution detailed four types of blockchain technologies with high application potential. First, “settlement chains” would allow transparent publication of telecom fees for firms such as China Mobile and China Unicom. Second, the Zhejiang Cold Chains would enable consumers to verify the source of their food by scanning the products’ QR codes. Third, the Trusple cross-border payments platform can help buyers and sellers obtain due diligence info on their counterparties. Finally, blockchain monitoring platforms can help financial regulators spot order irregularities between different exchanges.

China currently allows ownership of cryptocurrencies and nonfungible tokens, or NFTs, with their legality protected in courts of law. However, the country has banned the issuance of initial coin offerings along with digital exchanges and cryptocurrency mining. Despite setbacks, the Government of China has included blockchain developments on its official national agenda.”

See Also: Chinese Communist Party official pleads guilty to helping Bitcoin miners

Stablecoins shouldn’t be the instruments that the public sells in a panic. They’re supposed to be the opposite; the life vest that people grab on to. Tether has become that stablecoin that everyone sells when panic hits. But this doesn’t have to be the case. Here are four things that Tether can do to ensure that the next time the crypto economy undergoes a shock, tether stays steady.

1. Tether needs to get rid of its corporate bonds, funds and “other investments.”

A stablecoin’s number one job is to be steady, and that demands holding safe assets like cash and Treasury bills. But some of the line items on Tether’s balance sheet – including commercial paper, corporate bonds and funds, secured loans and “other investments” – suggest that Tether operates more like a hedge fund or venture capital firm than a stablecoin.

To put an end to this pattern, Tether needs to sell all of its risky assets and move to a 100% safe-asset allocation.

2. Tether needs to cancel its 0.1% redemption/withdrawal fee.

The price at which any stablecoin trades on exchanges like Binance and Kraken is set by arbitrage. Competition among arbitrageurs to execute these trades at a profit is what locks the price of stablecoins on key exchanges at a price close to $1. Tether’s 0.1% fee adds to an arbitrageur’s costs of carrying out this trade.

Factoring in this cost, it only really becomes profitable to buy tether tokens when they’ve fallen to $0.999, and sell them when they’ve risen to $1.001. Tether’s price randomly floats within this relatively wide band. This lack of rigidity attracts bad press, rumors, innuendo and speculation.

3. Tether needs to open redemptions up to more people by removing its $100,000 floor.

This floor creates perverse trading patterns on exchanges like Binance and Kraken, which further exacerbate fears about Tether. In short, Tether’s $100,000 minimum pushes the majority of USDT users who want to sell en-masse on exchanges.

But it is precisely during broad crypto panics that this arbitrage mechanism breaks down: arbitrageurs back off out of fear of losing their capital, exchanges halt withdrawals as activity overwhelms them, and blockchains get congested. And so panicked on-exchange sales of tether overwhelm the mechanisms that are supposed to anchor tether, and its price falls below the lower end of its $0.999 band.

If Tether removed its $100,000 minimum and allowed everyone to redeem at source, then tether users wouldn’t have to flock en masse to exchanges in order to offload their tether. They could simply send their 100 tether directly to the company and get $100. This would relieve price pressure on exchanges and bring an end to Tether’s crazy on-exchange price movements.

4. Tether needs to be more transparent.

Tether falls short of the current standard for stablecoin transparency. This lack of transparency helps create a trust gap that leads to Tether selloffs during market panics. Its auditor is only testing the company’s investments four times per year. That’s not good enough.

By bringing its disclosure practices up to industry standard, Tether will grow trust and users will be less likely to dump Tether tokens come the next crypto panic.”

Stacks acts as a Bitcoin sidechain, powered by both sBTC and STX – Stacks’ native token. In the proposed sBTC peg system, users send regular bitcoin to a wallet controlled by stackers (a process referred to as “pegging in”). This action mints an equivalent number of sBTC that can be used in smart contracts on Stacks.

Bitcoin sidechains aren’t new. Blockstream, a Bitcoin infrastructure firm, published a whitepaper on sidechains as early as 2014, and currently has a fully functional sidechain federation called Liquid. Earlier this month, Layer 2 Labs raised a $3 million seed round from angel investors to develop “drivechains,” another flavor of Bitcoin sidechains.

So what new innovation does sBTC bring to the sidechains conversation? Ali claims the sBTC model is unique in that anyone can be a miner or stacker. He sees the use of STX to incentivize stackers to sign peg out requests as a distinct advantage, although alternative projects tend to avoid the use of altcoins such as STX like the plague.

The concept is still in the implementation phase and will be formalized under Stacks Improvement Proposal (SIP) 21. ‘My best guess is maybe eight to nine months from now.'”

‘Tether Cartel’ Next to Fall

29 December

China is launching its first state-backed non-fungible token (NFT) marketplace, the latest sign of embrace for a technology that’s occupied a legal gray area within the country’s notoriously strict regulations on cryptocurrency.

The marketplace, whose name translates to “China Digital Asset Trading Platform,” will also be used to trade digital copyrights and property rights along with collectibles. The platform will be run by a trio of state-owned and private entities. The platform’s underlying blockchain is called “China Cultural Protection Chain.”

NFTs have been popular amongst Chinese traders for much of the past two years, but not in the same ways as the rest of the world. NFTs in China cannot be purchased with cryptocurrency, according to the country’s laws, and they aren’t referred to as NFTs, but as digital collectibles. Digital artwork is also traded on closed, highly regulated platforms as opposed to open ones.”

See Also: NFTs Are Securities and It’s Great

“Avraham Eisenberg, the crypto investor whose “highly profitable trading strategy” drained DeFi trading platform Mango Markets of crypto worth $110 million, was arrested Monday in Puerto Rico. The self-described game theorist admitted his role in draining Mango Markets’ treasury shortly after the incident in mid-October, and may now be the first U.S. resident to face charges for his role in manipulating a decentralized-finance trading platform.

Eisenberg faces charges of commodities fraud and commodities manipulation. A deposition signed by FBI Special Agent Brandon Racz alleges Eisenberg “willfully and knowingly” manipulated the sale of a commodity – namely futures contracts on Mango Markets.

Eisenberg sold massive amounts of MNGO perpetuals contracts to himself, thus pumping the price of those contracts 1,300% in less than an hour. Up big time, Eisenberg then borrowed against the value of his position and ‘withdrew essentially all of the cryptocurrency deposits on the Mango Markets platform.’ The platform became “insolvent” as a result.

Eisenberg engaged in a scheme involving the intentional and artificial manipulation of the price of perpetual futures contracts on a cryptocurrency exchange called Mango Markets, and other manipulative and deceptive devices and contrivances.”

See Also: Anonymous Twitter User Leaks 3Commas API Database

“Several wallets associated with Sam Bankman-Fried’s trading firm Alameda Research came to life in the late hours on Tuesday evening, with various Ethereum-based tokens consolidated into two main wallets, which were later swapped for Ethereum (ETH) and Tether (USDT).

Research firm OXT noted that the way the funds have been swapped “rings some major alarm bells.” Commenting on suggestions that the transfers could have been initiated by FTX liquidators, ZachXBT sounded skeptical, saying it is unlikely that they would use services such as FixedFloat or ChangeNow.

Transactions seem odd to me. Consolidation makes sense, but after it’s being consolidated, the funds get sent to fresh wallets before it gets sent to ChangeNow /FixedFloat.

Though it’s unclear at the moment who is responsible for the transactions, the timing comes just a few days after FTX founder Bankman-Fried—also known as SBF— was released on bail under a $250 million bond agreement.”

See Also: Bankman-Fried may enter plea in NY federal court next week before Judge Lewis Kaplan

Crypto exchange Gemini is being sued by investors over the sale of its interest-earning crypto products. Picha and Hastings say Gemini’s Earn program – which offered interest of up to 7.4% to customers for lending their crypto assets – didn’t register those assets as securities in accordance with U.S. securities law.

The filing says Gemini abruptly halted the program around Nov. 16 after crypto exchange FTX filed for bankruptcy and contagion from its fall caused a liquidity crisis at Genesis Trading, which functioned as Gemini’s borrower.”

See Also: Crypto Exchange Kraken to End Japan Operations

28 December

“The U.S. Department of Justice has reportedly launched a criminal probe into the alleged hack that drained nearly $400 million out of FTX-controlled wallets the night the Bahamas-based exchange filed for bankruptcy. The criminal investigation is separate from the fraud case against disgraced former CEO Sam Bankman-Fried, according to the Bloomberg report, which also said authorities have been able to freeze a portion of the stolen funds.

Blockchain experts have pointed to several clues that the hacker was an FTX insider, including the simultaneous hacks of the FTX and FTX US websites, the suspect’s access to multiple cold wallets and the use of a personal Kraken account to withdraw gas fees for at least one transaction.”

See Also: North Korea-Linked Lazarus Group Poses as VC Firms to Spread Malware

“Russia’s largest bank Sber — formerly known as Sberbank — reported the first issue of gold-backed digital financial assets (DFAs). The bank considers DFAs to be a “great alternative” to investments amid dedollarization. A diversified metals seller and manufacturer, Solfer, became the first investor to obtain the issued assets.

We expect the number of corporate clients on our platform to grow rapidly and plan to expand the product line of digital financial assets.

In June, a subsidiary of another Russia’s state-owned bank, VTB Factoring, reported its first major deal with digital finance assets. As part of the deal, the bank subsidiary acquired a tokenized debt pool of the engineering company Metrowagonmash, issued via the fintech platform Lighthouse.”

“This past spring, the Midas DeFi portfolio lost $50 million, or 20% of its $250 million in assets under management (AUM), and that after the collapse of Celsius and FTX, its platform experienced over 60% of AUM being withdrawn. The company now aims to focus on a new project that “aligns with our vision for” centralized decentralized finance (CeDeFi).

The goal of the new project is to create a win-win situation by connecting competing protocols with liquidity and offering a simplified yield to a range of DeFi and CeFi audiences.”

“After months of speculation that DeGods and Y00ts, two of the top Solana non-fungible token (NFT) projects, would be leaving the Solana network, the team behind the projects confirmed the migration. DeGods will be moving to the Ethereum blockchain, and Y00ts will be moving to Polygon early next year, the team said.

In the week leading up to the announcement, sales of DeGods and Y00ts accounted for nearly 70% of all Solana NFT sale volume. Sales of DeGods rose following the news, with the collection’s floor price increasing 12%.”

See Also: Is Solana Doomed? (Video)

“The guilty pleas made by former Alameda Research CEO Caroline Ellison and FTX co-founder Gary Wang are ‘game changers for the case against Sam Bankman-Fried.’

Now you have two people – two insiders – who were with him, presumably during all of the pivotal moments at stake in the case saying ‘We conspired with others, presumably Sam Bankman-Fried, and we intentionally did something wrong.’

According to McGinley, that makes Bankman-Fried’s defense even more challenging, adding that it will be “very difficult” for Bankman-Fried’s counsel to “overcome” two cooperating witnesses. Bankman-Fried may not be able to bargain his way out, McGinley said. The prosecutor’s leniency relies on ‘evidence against someone else,’ and because Bankman-Fried was the head of FTX, ‘it’s very hard to see how he could cooperate at all.’

The options here are very limited. It remains to be seen, if the disgraced CEO has any information that could be of value to prosecutors.”

See Also: FTX’s Sam Bankman-Fried Borrowed From Alameda to Buy Robinhood Shares
See Also: Crypto Lender Nexo Canvasses Vauld Creditors Directly With Final Takeover Offer

Is Web3 the New Occupy Wall St?

The Disrupt Weekend

Real World Assets (RWAs) have always been the black sheep of DeFi. Not only are RWAs here to stay, they will come to dominate the crypto industry.

Deeds of ownership to any real property (from homes to cars to industrial manufacturing plants to livestock ranches in Montana) will be recorded on-chain. Just as stock ownership has progressed beyond a piece of paper, it will soon progress beyond the walled gardens of Wall Street brokerages. All financial instruments will be issued natively on-chain!

Companies will no longer be forced to seek the services of investment bankers to IPO. They will raise in hyper-competitive, open markets accessible to any KYC’d individual. Investors in Nigeria will have the same opportunities to invest in American tech companies as their peers around the globe, while companies in Nigeria will be able to IPO in the same markets and receive equal consideration to their American counterparts.

The solvency and financial standing of any entity can be audited in real time with zk-proof technology. Because ALL assets are issued on-chain and ALL liabilities are assumed on-chain, the solvency of any bank, exchange, pension, insurance plan, private fund, or individual borrower tied to a unique identifier is immediately known.

Transaction costs will be greatly reduced. Markets will have greater certainty in their counterparties.

How Do We Get There? We cannot onboard the world to the blockchain if we cannot get the institutional gatekeepers comfortable with our technology. Crypto must meet the market where it is and show it why we have the better system. Once we begin to port sizable real world liquidity on-chain, the disadvantages of remaining insulated in trad markets grow larger, incentivizing even greater blockchain adoption and setting off a flywheel of network effects.”

“Web2 social media today clearly has no shortage of issues. Arbitrary censorship. No interoperability of social capital. Lack of innovation. Misuse of data. Opaque algorithms. Asymmetric power in monetization. The list goes on. Thanks to improvements in blockchain technology, we’re starting to see a breakthrough in credible solutions being developed.

The first thing to know about decentralized social media is that efforts are around building protocols, not platforms. Just as Elon Musk cannot buy the SMTP email protocol or the HTTP internet protocol and change its rules unilaterally, the goals surrounding web3 social protocols are to create decentralized, uncensorable, open protocols that let developers build customizable apps on top of them.

Some of the biggest players at work in this space right now are Lens, Farcaster, and DeSo. They take vastly different architectural routes, but they’re all headed toward that same goal.

Lens is a decentralized social media protocol built on Polygon by the brain behind the DeFi giant Aave — Stani Kulechov. Launched in 2022 amid the mainstreaming of NFTs, Lens fully leverages the ERC-721 non-fungible token standard to build a truly decentralized ecosystem.

The use of NFTs pervades Lens Protocol. When you create a Lens profile, it is minted as an NFT in your Ethereum wallet. When you follow someone on Lenster, you mint a “Follower” NFT on-chain. And so on for any posts that you “collect”, make or share (called “mirroring”). It’s a decentralized social graph that exists on the blockchain, empowering users with full ownership over their social identities.

Consider the inflexibility with YouTube today. Creators have no choice but to use YouTube Studio to manage their monetization, analytics or arrange their playlists. Meanwhile, YouTube viewers are forced into one method of consumption.

Lens solves this by unbundling the tools of creation and tools of consumption. Users are free to consume videos on any consumption platform of their choice. If a Bankless video is uploaded on Lens, you’re free to watch it on any app that supports the protocol. Both devs and users are able to customize their building/user experience without being siloed.

As of December 2022, Lens has a total of ~98K total users with ~35K monthly active users. A total of 7.9 million relay transactions have been processed through Lens’ gasless API relay since June, making it ~4% of all Polygon’s transactions. 🤯”

“We identify Taiko as a decentralized Ethereum-equivalent ZK-Rollup. A decentralized rollup is one where any user can be sure that their transaction will be executed and one where multiple parties can participate in each network position – that is, as proposers, provers, and node runners.

We can decentralize a rollup by ensuring all roles can be performed by multiple parties – ideally a vast and geographically-diverse set. Those roles are:

  • Proposers – construct rollup blocks from users’ L2 transactions and propose them to L1. Sometimes these are referred to as Sequencers. Proposers decide which transactions to include in a block and how to order them. This is a powerful position as it can extract profit from transaction ordering and decide which transactions to exclude.
  • Provers – generate SNARK proofs asserting the validity of L2 transactions and blocks from the aforementioned proposed blocks. This position decides when a block can reach its on-chain verified state.
  • Node runners – execute transactions from on-chain (L1) data to stay in sync with the rollup state. Proposers and provers need to run full rollup nodes to fulfill their respective roles.

The current approach chosen by most in-production general-purpose rollups has been one of centralization at first, with a commitment to progressive decentralization over time. This has made some sense, as there are several moving pieces, assumptions to test, and it is early. Having a centralized proposer and prover (aka sequencer and validator in broader terms) has made it more simple to ensure the proper and efficient functioning of the rollup.

Taiko, on the other hand, aims to go live with a fully decentralized (and permissionless) proposer and prover set. The protocol will not enshrine or allowlist any parties; anyone will be able to perform those duties.”

Bull Case for Ethereum IV with Justin Drake, DCinvestor, & Anthony Sassano

“The Decentraland Foundation is thrilled to announce ‘Worlds’, personal 4 parcel-large spaces tied to Decentraland NAMEs that exist separately from Decentraland’s Genesis City and its system of LANDs. Worlds can best be thought of as your own personal 3D space in the metaverse. You can shape the space however you like, create a grassy meadow or maybe a neon-lit nightclub, and even invite people to visit.

While Worlds cannot be sold or traded in themselves, they are intended to serve as a place for Decentraland citizens to build, experiment, and host events and even interactive experiences without having to own LAND.”

“Leading decentralized finance (DeFi) aggregator 1inch Network announced a major upgrade — Fusion — around its 1inch Swap Engine. The Fusion mode in 1inch Swap Engine allows DeFi investors to place orders with a predecided price and time range without paying network fees.

Fusion makes swaps on 1inch dramatically more cost-efficient, as users won’t have to pay network fees, plus, an extra layer of security is added, protecting users from sandwich attacks.”

See Also: Japan to lift the ban on foreign stablecoins like USDT in 2023

“The US SEC has requested to seal the infamous Hinman Speech documents, claiming that they are not relevant to the court’s summary judgment decision. The SEC’s request has sparked criticism from the crypto community.

The Hinman Speech documents refer to the speech given by former SEC Corporation Finance Division Director William Hinman at the Yahoo Finance All Markets Summit in June 2018, where he reportedly stated that Ether (ETH), the native token of the Ethereum blockchain, is not a security. Ripple believes it is a vital piece of evidence to help them with its case against the U.S. regulator.

The SEC was previously denied by the courts to keep Hinman documents a secret, with the U.S. judge calling out the SEC’s hypocrisy for doing so.”

24 December

Systems using zero-knowledge (ZK) technologies are among the most promising – and their potential isn’t limited to scaling. ZK-powered technology is expected to revolutionize myriad sectors from gaming to payments, and from digital identity to enterprise solutions. Looking ahead, 2023 promises to be the year ZK tech truly starts to take off.

Zero-knowledge technology refers to tools that use cryptography to prove that something is true without revealing any additional information other than the fact that it is true. The application of ZK tech allows blockchain networks to prove the authenticity of their operations in the most efficient way, using the fewest possible steps. This has the power to be transformational for Web3 development by reducing costs, increasing throughput capacity, and expanding potential use cases far beyond what is currently possible.

There is little doubt among blockchain developers that ZK technology represents the ultimate solution to blockchain scaling. For many, it’s the most crucial development in ensuring a fair internet environment for the free exchange of value and digital ownership of assets and data, all without being subjugated to centralized control.

ZK rollups and zkEVMs are bringing Ethereum’s vision of a decentralized web into focus.”

See Also: Crypto Funding Plunged in 2022, but VC Head Sees Areas of Opportunity for 2023

Russia’s Congressional finance committee chairman, Anatoly Aksakov, said the country is moving to greenlight international trade in cryptocurrency within the next month. The chairman highlighted that although Russia is taking steps to allow bitcoin and cryptocurrency payments for imports, there are no plans to encourage similar usage of the burgeoning assets within the boundaries of the nation’s territory.

In January, we want to legalize cryptocurrencies to ensure foreign trade activities.

The circulation of cryptocurrencies as a means of payment on the territory of Russia will be prohibited. But to pay for foreign trade transactions, we still assume the possibility of using cryptocurrencies.

Russian officials have teased at this possibility for almost a year, following an intense package of Western sanctions deployed in the wake of the nation’s invasion of Ukraine.”

See Also: Brazil’s Securities Regulator Allows Investment Funds to Invest in Crypto

“The world’s largest crypto exchange, Binance, has been dealing with a torrent of FUD (fear, uncertainty, and doubt) since the downfall of FTX. The firm is now fighting back with its latest blog post.

It confirmed that “all users’ assets in Binance are supported 1:1,” and that its financial status was very healthy since it makes ample profit on transaction fees. On Dec. 16, CryptoQuant verified Binance’s reserves, reporting that there was no “FTX-like” behavior.

Binance will not embezzle users’ funds for any transactions or investments, nor does it have any debts, nor is it on the list of creditors of any company that has recently gone bankrupt.

Regarding Mazars and the “Big Four” auditing firms refusing to work with crypto companies, it said that encrypted on-chain verification was a new field that these companies may not have the capacity to carry out.

Regarding a Reuters report claiming that the U.S. Department of Justice was investigating the company, Binance stated that mainstream media has been targeting the company with salacious reporting for quite a while now. It added that it had the most compliance licenses in the world and spent the most fighting crypto crime.

Finally, the blog post reiterated CEO Changpeng Zhao’s comments that Binance did not destroy FTX; FTX did that itself.”

See Also: SEC Increases Scrutiny of Audits of Cryptocurrency Companies: WSJ

In a transcript of proceedings for her plea deal in the Southern District of New York released on Dec. 23, Ellison stated she and SBF signed off on “materially misleading financial statements” for Alameda lenders — knowing it was illegal. According to the former Alameda CEO, Alameda had access to a “borrowing facility” through FTX from 2019 to 2022.

I understood that FTX executives had implemented special settings on Alameda’s FTX.com account that permitted Alameda to maintain negative balances in various fiat currencies and crypto currencies. In practical terms, this arrangement permitted Alameda access to an unlimited line of credit without being required to post collateral.

If Alameda’s FTX accounts had significant negative balances in a particular currency, it meant that Alameda was borrowing funds that FTX’s customers had deposited onto the exchange.

“I am truly sorry for what I did,” said Ellison. “I knew that it was wrong.”

Ellison’s plea deal, released on Dec. 21, largely spared the former Alameda CEO of many of the charges Bankman-Fried currently faces including wire fraud and securities fraud. She may still be prosecuted for criminal tax violations, but the agreement set bail at $250,000 on the condition she surrendered all travel documents.”

See Also: Bankman-Fried’s Incredible Shrinking ‘$250 Million Bond’
See Also: FTX Asks Judge for Help in Fight Over Robinhood Shares Worth About $450M

In a Dec. 15 notice, the United States Federal Election Commission (FEC) said it was “permissible” for DataVault holdings to send nonfungible tokens, or NFTs, to political campaign contributors. DataVault will receive “reasonable compensation” for each NFT issued to contributors, as well as track all tokens issued for its own records.

In September, DataVault’s legal team proposed the firm be allowed to send NFTs as souvenirs — “in a manner akin to a campaign hat” — to individuals who contributed to political committees. The tokens would also give tokenholders the option to use them for promoting a campaign.

In a broader view, we believe, Blockchain technology represents the future for elections that seek to be trusted and transparent in their outcomes in the future.”

See Also: U.S. delays crypto tax reporting rules, as it still can’t define what a ‘broker’ is

“The report, titled “Developers of Bitcoin,” found that there are only 40 to 60 active developers. NYDIG estimates the number of monthly active developers in that wider community (developers working on Bitcoin related applications) to be anywhere from 600 to 1,000. Bitcoin developers can be found worldwide. Roughly 84% of its GitHub commits – or suggested software changes – come from 20 different countries.

What’s most mind-boggling, perhaps, is how the world’s most dominant cryptocurrency, currently worth about $320 billion, has been chugging along with no major hiccups for almost 14 years, under the care of a passionate – but small – group scattered across the globe.

When compared to competing networks, Bitcoin always seems to come out smaller, but exponentially more efficient. For example, previous estimates from venture firm, Electric Capital’s 2021 developer report, show Ethereum has over 4,000 monthly active developers in its broader ecosystem, yet Ethereum’s current market capitalization is less than half of Bitcoin’s.

Similarly, traditional payment firms such as Visa and Mastercard, with market capitalizations comparable to Bitcoin’s, are run by tens of thousands of full-time employees. (Bitcoin developers are all volunteers, many of whom are part time.) These numbers seem to not only illustrate the “ultra lean” nature of the Bitcoin machine, but also, the purpose-driven orientation of its contributors.

Do you want the missionaries or the mercenaries? Do you want hired guns to come build things and then they leave when the money’s gone, or do you want the missionaries who are here for a purpose?”

Crypto Thesis for 2023 | Ryan Selkis

23 December

“The crypto market has recently held steady, with bitcoin locked in the narrow range of $16,000 to $18,000 amid lingering macroeconomic uncertainty and FTX contagion fears. The perplexing tranquility may soon fade as bitcoin’s historical volatility hits levels last seen before the late 2020 bull run and investors with ample capital supply begin to accumulate coins.

Not counting the moment leading up to the FTX fallout, which had slightly higher volatility than what we have now, this is the lowest level for realized volatility since the third quarter of 2020, just before the last bull run. Prior to that instance, volatility was this low at the bottom of the 2018 bear market.

The renewed accumulation of BTC by whales, or investors with ample capital supply and the ability to move markets, is another reason to expect some action in the market. Large wallets have accumulated over 400,000 BTC ($6.73 billion) since the cryptocurrency fell below the June low of $18,000 on Nov. 9.

Over the past week, large or ‘whale-styled’ wallets have experienced an inflow of over 70,000 BTC. Around 120K BTC was accumulated at the $16,100 level, which offers potential support given the scale of buying.”

See Also: 5 cryptocurrencies to keep an eye on in 2023
See Also: Bitcoin Is Leading Indicator for S&P 500, Past Data Shows
See Also: The CFP Board’s Latest Report on Crypto Sets Standards for Advisors
See Also: Stablecoin settlements can surpass all major card networks in 2023: Data

“It’s no surprise that the SEC charged Ellison and Wang with securities fraud for manipulating the price of FTT, and for offering FTT as an unregistered security. That action follows a plethora of past moves taken by the securities regulator. But the complaint’s language regarding FTT went notably further.

Wednesday’s complaint labeled FTT “an illiquid crypto asset security,” making the subtle—but crucial—point that the SEC views FTT as a security in itself, regardless of the manner in which it was offered or sold.

If the SEC can get courts to agree that crypto tokens like FTT are securities regardless of how they are offered, the agency would be able to go after more than just the projects that create those tokens. The SEC could target any intermediary that sells those tokens in any context. In such a scenario, major crypto exchanges like Coinbase, Kraken, and Binance would be exposed to immense legal liability, and either permitted to participate in crypto-wary registered exchanges like the New York Stock Exchange, or shut down.

The SEC has changed gears. Instead of going after projects, they want to go after the marketplaces and intermediaries.”

See Also: SEC Calls FTT Exchange Token a Security

Two of Sam Bankman-Fried’s closest former allies have flipped on him. Attorneys with the Southern District of New York announced Wednesday night that it had filed charges against FTX co-founder Gary Wang and the ex-CEO of Alameda Research, Caroline Ellison, securing their cooperation in their investigation into the spectacular collapse of FTX.

Meanwhile, the Securities and Exchange Commission separately announced that it was also charging the pair “for their roles in a multiyear scheme to defraud equity investors in FTX,” and the Commodities Futures Trading Commission (FTC) announced that it had amended its fraud complaint, noting that Ellison and Wang “do not contest their liability” for engaging in fraud.

U.S. Attorney Damian Williams said both Ellison and Wang have pleaded guilty and are cooperating with the Southern District of New York. Wang, the commission said, created features in the code underlying the FTX trading platform that allowed Alameda to maintain an “essentially unlimited line of credit on FTX.”

Caroline Ellison and Sam Bankman-Fried schemed to manipulate the price of FTT, an exchange crypto security token that was integral to FTX, to prop up the value of their house of cards.

Williams did not mention former FTX Digital Chairman Ryan Salame. Days before FTX and Sam Bankman-Fried filed for Chapter 11 bankruptcy protection, Salame alerted authorities in the Bahamas about FTX using customer funds to cover losses at Alameda Research.”

See Also: Caroline Ellison Plea Agreement: $250,000 Bail, Surrender of Travel Documents, Forfeiture of Assets

“In his first court appearance since being extradited from the Bahamas, the former CEO was told he can live with his parents on $250 million bail secured by their Palo Alto house.

Bankman-Fried, who was brought to the U.S. overnight by the Federal Bureau of Investigation after his extradition from the Bahamas cleared on Wednesday, arrived at the courthouse in New York to face the U.S. felony charges for the first time. The case in the U.S. District Court for the Southern District of New York centers on accusations of fraud, money laundering and campaign-finance violations.

Bankman-Fried’s release was secured by equity in his parents’ Palo Alto, California, home, and a long list of requirements was included for him to remain free while he faces charges. He’s not allowed to make financial transactions for more than $1,000, can’t open new lines of credit, can’t leave the house except to exercise and must go through substance-abuse and mental-health treatment, according to the agreement. Bankman-Fried has already given up his passport, and he’ll be fitted with a tracking device.

Judge Gabriel Gorenstein argued that the monitoring device “would go very far to provide assurance” that he would stay put and that Bankman-Fried’s fame would make it difficult for him to flee into hiding.

The cooperation of Ellison and Wang – who admitted playing active roles in the company’s fraud – is likely to be key in the case against Bankman-Fried. They’ve admitted that the senior management was aware of lawbreaking in the movement of customer funds between the two firms.”

See Also: Who Will Pay Sam Bankman-Fried’s $250 Million Bond?
See Also: SBF received special treatment inside Bahamian jail: Report
See Also: FTX Investors’ Loss Is Wall Street Lawyers’ Gain

“The world is (appropriately) outraged by SBF and FTX’s fraud, but when Wells Fargo mismanages billions in customer funds as well, it’s barely a blip on the radar.

On Dec. 20, the United States Consumer Financial Protection Bureau (CFPB) ordered Wells Fargo to pay more than $2 billion in redress to consumers, as well as a $1.7 billion civil penalty. According to the CFPB, the bank’s conduct led to billions of dollars in financial harm to its customers and cost thousands of customers their vehicles and homes.

Over several years, Wells Fargo systematically charged its customers with ill-assessed fees and interest charges on auto and mortgage loans, unlawful surprise overdraft fees and incorrect charges to checking and savings account. There are 16 million affected customers in the case.”

The law recognizes decentralized autonomous organizations and enables legal entities registered in the country to formally adopt DAO structures and governance tools. The government hopes this latest move will encourage the growth of decentralized entities and their accompanying elements within the state.

The DAO Act of 2022 will allow DAOs to incorporate under Limited Liability Companies (LLCs), enabling them to identify as DAO LLCs. Additionally, the novel act allows for the creation of an investment fund for the government of the Marshall Islands to continue education and training around DAOs and their integration into the economy.

With this adoption of the DAO Act of 2022, The Marshall Islands commits its courts and its resources to the burgeoning world of decentralization, and recognizes the unique place that decentralized autonomous organizations can hold not just in the blockchain space, but in the broader economy as well.”

See Also: Brazil’s President Signs Crypto Regulations Into Law

Although the decentralized lending protocol’s data is inherently on-chain, introducing Chainlink’s PoR would help mitigate the risk of attacks on the Aave protocol.

Decentralized lending protocol Aave will implement a “proof of reserve” system to protect bridged assets on Avalanche. PoR smart contracts will give an extra layer of security to Aave’s Avalanche implementation, but can also help mitigate attacks on bridged assets on the network.

Leveraging Chainlink Proof of Reserve, Aave can verify that bridged assets accepted on the platform are fully collateralized before allowing users to borrow against them.”

Tron founder Justin Sun is one of the richest figures in crypto, and a good chunk of his bitcoin (BTC) is stored in one place: U.S.-based Valkyrie Investments. The altcoin kingpin had more than $580 million of BTC stashed with the crypto asset manager at one point in August, according to a private financial document that CoinDesk reviewed. That amounted to over 90% of money at Valkyrie’s largest division, Valkyrie Digital Assets LLC, the document shows.

In other words, Valkyrie Investments, a money manager that pitches crypto products to Wall Street investors, mostly relied on Justin Sun, a controversial Chinese crypto billionaire. (The current state of Valkyrie’s assets is unknown.) Sun has also said he’s one of Valkyrie’s biggest shareholders.

The financial lives of individuals are almost always nobody’s business. Sun’s previously undisclosed, outsized percentage of Valkyrie’s assets under management (AUM) is an exception. The depth of the relationship is a matter of public interest because it raises questions about Valkyrie’s reliance on a single client for growth.

Having one whale in an SMA doesn’t necessarily pose a threat to clients with money in other products. But it could become problematic for the asset manager’s fee revenue – and its ability to pay staff – if that client ever decided to leave.

Sun viewed Valkyrie as the Tron ecosystem’s access route to U.S. investors, according to his public statements. In September 2021 he said Tron would work with Valkyrie to list its Tron trust on over-the-counter markets and ultimately help it create a Tron ETF. Both steps would mainstream the cryptocurrency in the U.S. Neither event has come to pass.”

22 December

  • Ethereum momentum – In Ethereum we are witnessing the evolution of the substrate of humanity’s social, economic and political operating system. In 2023, Ethereum will continue to be the most widely adopted, widely developed and capital-heavy layer 1 blockchain. The Merge was the greatest event in the industry since Satoshi’s Bitcoin Genesis Block in 2009. More nuanced but equally important developments will launch on Ethereum in 2023, driving greater adoption and capital in a flywheel effect that will situate Ethereum as the leader in the next bull run.
  • Fed outlook – The Fed will turn dovish, setting the stage for the next crypto bull market in Q3 2023. By this time, I also predict sufficient regulatory progress will be made in the crypto industry, meaning that the risk-on environment will be accompanied by clearer policies. Altogether, this will engender the next bull run beginning in Q3 2023.
  • Regulations in D.C. – Consumer protection will be top of mind for policymakers in 2023. The majority of emerging policy will be around centralized exchanges and stablecoins. A regulatory ontology should be defined to help everyone in the space determine whether a specific token should be classified as a commodity, security, or other type of asset.
  • Chartered banks – Banks chartered by the Federal Reserve will offer crypto services.
  • More NFT utility – In 2023, the Web3 ecosystem will move past the “jpeg” era of non-fungible tokens that dominated the last two years. A variety of use cases will emerge, all using NFTs as the base technology.
  • Investment DAOs – Investment DAOs will grow in prominence as decentralized, secure and transparent alternatives to investing through GP/LP venture structures.
  • Filecoin future – Filecoin becomes a fully fledged layer 1 protocol in its own right, paving the way for the world’s largest decentralized data economy. The protocol is releasing smart contracts in Q1 2023 through the Filecoin Virtual Machine (FVM). The FVM will enhance the sophistication of Filecoin’s storage services while unlocking a whole new universe of use cases for the Web3 space.
  • Web3 reputation – In 2023, years of progress on the decentralized identity and reputation front will finally come to a head. These systems will start to become critical pieces of infrastructure underpinning most of our interactions and transactions, especially in Web3.
  • ZK everything – Zero-knowledge proofs rose to prominence in the past year, with one use case, ZK-Rollups, gaining visibility as the dominant tool for Ethereum scaling. In 2023, a much broader set of use cases will be unlocked by adoption of software development kits (SDK) that allow ZK smart contracts to be programmed into applications (“ZKApps”), executed off-chain, with verification and settlement back on-chain. Off-chain execution opens up a whole new world for data privacy and attestation, and efficiency. It will start to bridge the gap between Web2 and Web3, and will enable new identity use cases, social networking, voting, games and zkML. The zero-knowledge proving market will be larger than bitcoin’s proof-of-work (PoW) market by 2030.
  • Web3 gaming – The next wave of Web3 games will look nothing like the Axie-style games of the last two years, and will begin resembling mainstream gaming aesthetics.
  • Layer 2 – in 2023 we will see layer 2s come to the forefront of crypto adoption as they handle the wave of consumer applications coming to market.
  • Zombie chains – The remaining vaporware blockchains will finally lose their positions as “top” blockchains as even speculative money leaves their ecosystems. For years, vaporware blockchains like EOS and Cardano have remained among the “top” blockchains as measured by market cap. These projects are still riding off of hype from their earliest days, having undergone almost no ecosystem development despite the breakneck innovation happening across the rest of Web3. The death knell will toll for these vaporware blockchains as they finally lose the last remaining mainstream supporters under the undeniable lack of on-chain adoption.
  • Enterprise ethereum – In 2023, we will see the “Great Decoupling” and the consequent acceleration of enterprise adoption of Ethereum. As explained by Paul Brody, the Great Decoupling is when ‘the value proposition of Ethereum as a computing platform for enterprises finally gets separated from the focus on the price of Ethereum and financial speculation.'”

See Also: zkEVM could be the endgame for blockchain infrastructure
See Also: The 10 Biggest Developments in Bitcoin in 2022

A creditor committee that includes crypto exchange Gemini has presented a plan to Genesis and Digital Currency Group (DCG) to ‘provide a path for the recovery of assets.’

Earlier reports pegged the value of the total amount owed to Gemini at $900 million, from a total of $1.8 billion owed to the creditors’ group. The committee expects a response this week.”

See Also: Celsius amasses 30 potential bidders for its assets, withdrawal motion approved

“Sen. Pat Toomey introduced a bill in the final days of the congressional session that he said he hopes will act as a guide for stablecoin legislation next year.

I hope this framework lays the groundwork for my colleagues to pass legislation next year safeguarding customer funds without inhibiting innovation.

The retiring senator’s legislation, introduced Wednesday, would retain privacy for stablecoin transactions, set up the Office of the Comptroller of the Currency as a licenser of companies issuing payment stablecoins, let nonbank entities issue the tokens and clarify that stablecoin issuers that don’t offer interest wouldn’t have to worry about securities laws. It would also require the digital tokensbe fully backed by reserves.

His new legislation is pointedly meant to keep the Federal Reserve away from this sector, avoiding what he termed a potential conflict of interest if the Fed is authorized to create a digital dollar in the future.”

Core Scientific (CORZ), one of the largest bitcoin (BTC) miners by computing power, filed for bankruptcy protection on Wednesday and reached a deal with some of its lenders to restructure its debt. Shares of Core Scientific were down over 27% at $0.1519, during pre-market trading.

Core Scientific reached an agreement with some of its creditors, in what appears to be a prepackaged bankruptcy. Existing convertible note holders will “equitize their debt into a significant majority of the common stock of the reorganized company,” the mining firm said. This support will help it go through the bankruptcy process, which it intends to do “swiftly,” the press release said.

These funds, along with ongoing cash generated from operations, are anticipated to provide the necessary financing to effectuate the planned restructuring, facilitate the emergence from Chapter 11, and cover the fees and expenses of legal and financial advisors.

Core Scientific is one of several miners struggling to keep afloat as rising energy prices increase costs, while stubbornly low bitcoin prices slash revenue. The bankruptcy of Core Scientific, which accounts for about 10% of computing power on the bitcoin network, operating 143,000 mining rigs and hosting another 100,000 is the biggest yet. Compute North, another major firm in the space, filed for Chapter 11 bankruptcy in late September.

Core Scientific’s estimated liabilities are between $1 billion-$10 billion, according to the filing. It has around 1,000-5,000 creditors. The miner’s estimated assets are between $1 billion-$10 billion, according to the filing. At the end of the third quarter, Core Scientific’s assets stood at $1.4 billion, whereas its liabilities were about $1.3 billion.”

“The Bahamas has determined that the provisional arrest, and subsequent written consent by SBF to be extradited without formal extradition proceedings satisfies the requirements of the Treaty and our nation’s Extradition Act.

Bankman-Fried reportedly changed his mind about fighting extradition over the weekend.”

Credit institutions and payment service providers will manage services associated with a digital euro issued by the European Central Bank, according to the bank’s latest progress report on a retail digital currency. The ECB will supervise the intermediaries and handle the issuance and redemption of the CBDC.

Intermediaries supervised by the ECB will function as the direct counterparts for individuals, merchants and businesses, using the CBDC. Their responsibilities would include offering user-facing services, such as opening accounts or wallets, payment instruments and onboarding and offboarding, encompassing know-your-customer and anti-money laundering checks. They would also provide devices or interfaces to pay with a digital euro in physical stores, online or person-to-person.”

21 December

Bitcoin (BTC) traded higher early Tuesday, defying the Bank of Japan (BOJ)-inspired slump in stock markets. The BOJ unexpectedly lifted the cap on the 10-year Japanese government bond yield to 0.5% from the previous 0.25%, ending the long period of near-zero interest rates.

The central bank said the policy tweak would facilitate the transmission of monetary-easing effects, indicating that it didn’t want markets to read it as a sign the BOJ is finally pivoting away from liquidity easing. However, risk assets did just that.

The reaction in equities and bond yields is understandable, considering the BOJ’s policy of capping the 10-year yield near zero with unlimited liquidity-boosting open-ended bond purchases, also known as yield curve control (YCC), was a major source of downward pressure on borrowing costs in Asia and worldwide and supported risk-taking. The Yen was supposedly used to fund risk-taking activities elsewhere.

The BOJ funding was the cheapest source of liquidity. While the policy tweak is not a removal of YCC, the signaling will lead people to extrapolate that BOJ Governor Haruhiko Kuroda will seek to exit YCC by the end of this term in April.

Crypto services provider Matrixport’s head of strategy and research, Markus Thielen, said the BOJ’s move and the resulting yen strength could boost demand for other assets, including cryptocurrencies.

A stronger yen will make Japanese stocks less attractive to foreigners as well as to locals. This might increase the interest in alternative investments – such as BTC.”

See Also: Rotation Within CoinDesk Market Index Sectors Bears Similarities to Tradfi Trend

“Starting today, you can now purchase crypto on the Uniswap Web App using a credit/debit card or bank transfer at the best rates in Web3 thanks to our partnership with Moonpay!

The company shared that the decentralized finance (DeFi) onboarding experience has been a major hurdle to adoption, as CEXs are seen as more convenient by users despite associated risks. Uniswap hopes its latest rollout will improve the onboarding process.”

“Payments processor Visa recently proposed a system known as “account abstraction” that uses smart contracts to enable automated programmable payments on Ethereum. Such a move would allow recurring payments to be conducted entirely over blockchain networks.

Account Abstraction (AA) is a proposal that aims to combine user accounts and smart contracts into a single type of account on the Ethereum blockchain. One use case for AA is the creation of “delegable accounts,” which allow for the automation of payments. A user can delegate the ability to initiate a payment to a pre-approved smart contract, known as an auto payment contract.”

See Also: Polygon Founder Unveils Web3 Accelerator Beacon

“In a recent blog post, Coinbase CEO Brian Armstrong shared a “realistic blueprint” for regulating cryptocurrencies and restoring trust in the industry following the collapse of crypto exchange FTX. According to Amstrong, “regulation should be limited only to centralized actors” in the cryptocurrency industry, where transparency is limited.

For decentralized crypto products like decentralized finance (DeFi), decentralized autonomous organizations (DAOs), and self-custodial wallets, financial regulators shouldn’t play a role here, as “transparency is built in by default.” Specifically, self-custodial wallets should be treated as “software companies,” and decentralized protocols should be treated as equivalent to “open source code.”

Decentralized stablecoins are a “good place to start” in an attempt to regulate the industry, said the Coinbase CEO. Stablecoins issuers could be regulated under “standard financial services laws” by registering themselves as a state trust or OCC national trust charter. This would require these firms to hold assets 1:1 with exposure only to high-quality assets like treasuries.

After reigning in stablecoins, he also highlighted the need for more clarity around which assets in the crypto market are commodities and which are securities. The Coinbase chief also called on Congress to step in and pass legislation for classifying cryptocurrencies with a new version of the Howey test.

I’m optimistic that we can make significant progress on the above in 2023 and pass crypto legislation.”

See Also: 4 legislative predictions for crypto in 2023

  • Epic battles over regulation – 2023 could be the year where the clashes over regulation finally reach their climax.
  • Web3 platforms continue to grow – More meaningful Web3 social platforms and protocols, and growth in interoperable identity, on-chain social graphs, and crypto-abstracted social experiences.
  • Truly global bitcoin adoption – Global adoption is probably the number one story for next year.
  • Web3 gets fashionable – Further collaborations between Web3 personalities and consumer and luxury brands that want to explore new commerce models and customer touchpoints.
  • Don’t count out NFTs – The sustained high-risk appetite in NFT-funding in 2022 is a strong indicator that it will be one of the first sectors to recover next year. Brands will continue to flock to NFTs.
  • Gaming and DAOs continue to grow – Titles that have been in development for quite some time including Big Time, Star Atlas, Ember Sword, will finally see the light of day in 2023.
  • The big exchanges become “disaggregated” – We see custody, brokerage and exchange/price discovery get broken out into different players, just like in [traditional finance].”

See Also: Vitalik Buterin reveals 3 ‘huge’ opportunities for crypto in 2023
See Also: Shifting Crypto’s Center of Gravity

“Independent gaming developer Metaverse Game Studios, which boasts a host of developers that have worked on various AAA titles, has announced a partnership with Web3 development platform ImmutableX to continue building Angelic, a new Web3 MMORPG.

The upcoming title is powered by Unreal Engine 5 and is touted as a dark science fiction-themed narrative strategy RPG featuring turn-based combat. ImmutableX’s full-stack gaming platform will power Ethereum-based nonfungible tokens (NFTs) digital collectibles in the game that can be owned by players.

By leveraging ImmutableX, our users can tap into the benefits of fast, secure, and gas-free minting and an uninterrupted, quality gaming experience.

Angelic will roll out alpha testing with select community members and partners in January 2023 and a public launch in February.”

See Also: Game developers expect to work on Web3 games in the future: Survey

20 December

The bid represents the fair market value of Voyager’s cryptocurrency portfolio, which has a current market value of around $1.002 billion, and an additional consideration of $20 million in incremental value. Binance.US will make a good faith deposit of $10 million and will reimburse Voyager for certain expenses up to $15 million.

The Binance.US bid aims to return crypto to customers in kind, in accordance with court-approved disbursements and platform capabilities.”

See Also: Binance Losing Auditing Partner Mazars Leaves Crypto Questions Unanswered

Fireblocks has received the Cryptocurrency Security Standard (CCSS), a first-of-its-kind certification that was built as a security standard for crypto wallets and custody. The certification analyzes how a provider generates keys, the hardware it uses and how the policy and workflow engine works, as well as the cybersecurity controls used.

Fireblocks received a level three certification – the highest there is – and the one most suitable for enterprises. To win the level three standard, ‘multiple actors are required for the all-critical actions, advanced authentication mechanisms are employed to ensure authenticity of data, and assets are distributed geographically and organizationally.’

An in-depth and rigorous audit was conducted of Fireblocks’ people, processes, and technology components for compliance with the CCSS and found that Fireblocks went above and beyond the CCSS Level 3 requirements.

Fireblocks’ clients include Bank of New York Mellon, Robinhood and fintech company Revolut, among others.”

Grayscale Investments is exploring options to return a portion of capital of its flagship Grayscale Bitcoin (GBTC) product if the Securities and Exchange Commission (SEC) refuses to approve its spot bitcoin exchange-traded fund (ETF), the firm said in an investor letter.

One option is to offer tender for up to 20% of outstanding GBTC shares, which are currently trading at a 49% discount to net asset value (NAV). At least in the short term, the Grayscale announcement appears to be having its desired effect, with shares in GBTC up 4.1% early Monday morning.

In June, Grayscale sued the SEC hours after the U.S. regulator rejected its ETF application.”

Ethereum in 2023 with Vitalik Buterin

Democratic members from the United States Democratic National Committee (DNC), the Democratic Congressional Campaign Committee (DCCC) and Congressman Hakeem Jeffries were contacted by SBF prosecutors for information to aid their ongoing investigations, according to a New York Times report.

On Dec. 17, three prominent Democratic groups — the DNC, the Democratic Senatorial Campaign Committee and the DCCC — have reportedly decided to return SBF-linked donations to FTX investors, which together exceed $1 million.

Given the allegations around potential campaign finance violations by Bankman-Fried, we are setting aside funds in order to return the $815,000 in contributions since 2020.”

See Also: Sam Bankman-Fried has Agreed to be Extradited to the U.S.
See Also: FTX’s Bankman-Fried Gave Ex-Jane Street Traders Who Formed Modulo Capital $400M

“According to Chainalysis, 2022 is on track to be the worst year on record for funds stolen through hacks and exploits. Some $3 billion was stolen, at last count.

The Ronin hack is particularly notable. In March, North Korean-linked Lazarus Group expropriated about $620 million worth of ETH and USDC from the Ronin Network, a sidechain built for the popular Web3 game Axie Infinity. The list goes on and on.

Fortunately, there’s hope. Protocols can up their game when it comes to auditing code, monitoring network activity and setting clear attack response plans when an exploit does occur. If the industry takes note and implements these protections, it’s very plausible years like this will remain in the rear view mirror.

See Also: Bitcoin Addresses Tied to Defunct Canadian Crypto Exchange QuadrigaCX Wake Up

From using the bot for smart contract auditing to enhancing user interactions with AI, various executives gave their thoughts on how the new AI tool will have an impact on the Web3 industry.

This could potentially improve the efficiency and accuracy of the development process. It can be used positively within an enterprise’s security and development workflow, which increases the defense capabilities above the current security standards.”

“The U.K.’s wide-ranging Financial Services and Markets Bill (FSMB) has already been debated in the House of Commons and is set to have its second reading in Parliament’s upper house, the House of Lords, by Jan. 10. The FSMB is crucial because it will make way for crypto to be regulated in the U.K.

If the FSMB is passed as is, it will ensure crypto is treated as a regulated activity and give the Financial Conduct Authority (FCA) and Payments Systems Regulator power to regulate the sector and protect consumers.

This is of course an important milestone and will enable us to make substantial progress on the provisions within the Bill, including repealing and replacing burdensome pages of retained EU (European Union) law governing the sector, measures to embrace crypto asset technology, and measures to protect the consumer.”

See Also: Nigeria to Recognize Crypto as Investment Capital: Report
See Also: Bank of Canada emphasizes need for stablecoin regulation as legislation is tabled
See Also: Next House committee chair reintroduces bill on crypto innovation