First, we consider the number of bitcoin addresses that are holding ≥ $1. There was an uptick from 34,564,788 to 35,035,127 from Feb. 27 to March 1. Digging in further here, the number of Bitcoin addresses that were holding > 1,000 bitcoin also ticked up from 2,121 to 2,257 over the same period. While the general growth in addresses supports the idea that regular people are coming into Bitcoin, the growth in addresses with > 1,000 BTC (> $40 million) does not.
We ask the buidlers in the blockchain and cryptocurrency sector for their thoughts on the industry… and throw in a few random zingers to keep them on their toes!
This week, our 6 Questions go to Reeve Collins, co-founder of BLOCKv — a platform for creating, minting and distributing next-generation programmable NFTs.
I have always found myself at the forefront of new trends and technology developments. I started in 1997 at the first-ever online advertising agency when the internet was in its infancy. As the “dot-com boom” matured, I created one of the first ad networks in 2000 before shifting into the online branded entertainment space in 2007. By 2013, I was diving headfirst into the world of Bitcoin, and this exploration led me to invent the first-ever stablecoin, Tether, in 2014 and the first-ever NFT platform, BLOCKv, in an effort to bring crypto utility to the mainstream. Now, I’m dedicating my time and energy to BLOCKv’s ecosystem of companies and developing programmable NFTs and cutting-edge metaverses for leading global brands.
Of course, Bitcoin. While I’m not quite a Bitcoin maximalist, it’s the invention and concept that started this whole movement. I believe Bitcoin has the potential to revolutionize our financial system and free the world from the monopoly that governments have over the control of money.
After that, I have to say Tether. As my first venture in the space, I’m still blown away at how it has become the foundation and model of the entire ecosystem. Besides those, I’m following the L1s, DeFi and NFT protocols closely since each project introduces new and novel approaches to solve the numerous challenges blockchains face in order to achieve the decentralized future we are all striving for.
Documenting Bitcoin (@DocumentingBTC), Andreas Antonopoulos (@aantonop), Dan Held (@danheld), Erik Voorhees (@ErikVoorhees) and Elon Musk (@elonmusk).
Anyone even slightly interested in the crypto industry should follow these accounts. The folks on this list are experts in the industry’s history, latest news and developments and are some of the greatest dreamers and doers this industry has to offer. No matter your level of crypto knowledge, these accounts can show you the limitless possibilities that the crypto economy has to offer.
Have I ever bought one? We invented them! While that may sound a bit outlandish, we really were the first company ever to build out a platform that enables you to create a highly programmable digital object and write it to a blockchain. We started BLOCKv back in 2015, and we have spent the better part of the last decade refining, adjusting and perfecting the technology. Since our ICO in 2017, the platform has created more NFTs for large brands than anyone out there.
About Time. In the movie, the protagonist gains the power to go up to 24 hours back in time and redo those moments. My goal in life has always been to create as many “perfect” moments as I can — to truly live life to its fullest. The ability to “edit, redo and relive” certain moments would make that dream come true.
These days, there are more than a few to choose from, unfortunately. I’d have to say the one that really leaves me speechless is this flat Earth theory. It’s just a complete abandonment of objective fact. I mean, if Aristotle could land on the conclusion that the Earth is round in 350 BC, I think we’ve had plenty of time to check the math on this one.
There are some theories that always make me pause and consider them a little more deeply. Whether or not I fully buy in is a different story, but some of the conspiracy theories around the global financial system and who/what/how it is controlled make you want to dig a little deeper. It’s concepts like these that make cryptocurrencies so fascinating to me and, in my opinion, essential to the growth and development of the world’s financial future.
I hope for a brighter future for social media. Nobody truly understood its power and influence from the onset, so we’ve been left with the current toxicity that can foster hatred and anger, all bundled into a carefully curated echo chamber for your viewing enjoyment and ad dollars.
My hope is that we make a cultural correction here and social media takes a turn for the better. Social media still has all the capabilities to bring the world together, foster self-expression and lead to empowerment over disillusionment. It has the potential to be the Great Community Builder, and I hope we get to see it reach that potential.
Aside from its cultural impact, I see a future where it can have a very positive financial impact on the individuals who participate in it. Today, a small percentage of “influencers” can make a living from their involvement on different social media platforms. This monetary system is built on views, clicks and web traffic — other people’s data. Soon, there will be tools and structures in place that will enable a significant percentage of users to earn meaningful amounts from their participation. Most importantly, though, I think this development will parallel the developments in crypto that will lead to most of this new revenue coming from various forms of community currencies and NFTs, as opposed to the traditional advertising model.
A wish for the blockchain community:
To stay the course and to always remember this quote by Victor Hugo: “There is one thing stronger than all the armies in the world, and that is an idea whose time has come.”
The COVID-19 pandemic, along with other recent events, have revealed the need for a fully digital economy, giving rise to Metaverse ecosystems, Web3 platforms and the adoption of digital currencies.
For example, the Ukrainian government recently reached out to the crypto community on Twitter asking for donations in Bitcoin (BTC), Ether (ETH) and Tether (USDT). Nonfungible tokens, or NFTs, have also gained mainstream adoption as artists and creators across the globe have discovered new forms of monetization with these models. While innovative, these use cases also demonstrate the notion that blockchain-based concepts that emerged early on often take years to resonate with mainstream society.
This also appears to be the case with social tokens o tokens that are issued by individuals and communities to create engagement. While social tokens were predicted to be the next big trend within the crypto sector in 2020, they seem to be taking off this year due to increased interest from non-crypto natives.
Jan Baeriswyl, token design specialist at Outlier Ventures — a venture capital firm supporting the development of new technologies — told Cointelegraph that social tokens are fungible, ERC-20 tokens that can be used for instances other than financial purposes. “For example, social tokens can be used to gain access to specific communities, like on Discord. By being less financially focused, social tokens are more accessible to the mainstream, which is why we are seeing increased interest,” Baeriswyl explained. He added that social tokens can take different forms for various purposes, noting that these digital tokens can be used by creators to engage with fans, or by communities to increase awareness for certain causes.
In addition, social tokens are also being leveraged to help creators and communities gain access to Web3 platforms that offer decentralized models and incentives for community participation. Andrew Berkowitz, chief executive officer at Socialstack — a social token issuance platform built on the Ethereum, Polygon and Celo — told Cointelegraph that Socialstack caters to non-crypto native communities to help issue social tokens that allow for the development of a Web3 ecosystem. “At Socialstack, we realize that 99% of the world are not crypto-natives. We believe that individuals need a platform where they can simply use an email login to take advantage of Web3 capabilities,” he said.
To put this in perspective, Berkowitz explained that Socialstack recently helped Project Zero — a non-profit organization focused on protecting the ocean from climate change — launch a social token to create an “ecosystem of value that benefits both the planet and participants.” Michele Clarke, founder and CEO of Project Zero, told Cointelegraph that their social token, PZero, enables community members to earn rewards by taking specific actions.
For instance, Clarke remarked that Project Zero’s pre-existing user base consists of about 1 million people. Users can now be rewarded with PZero by helping raise awareness for certain issues. “This can be further amplified by an ambassador with a massive following, a brand partner or collectible artist or news piece that causes a spike into the millions or even hundreds of millions, and we have had a few activations reach over a billion,” she said. Clarke also explained that a primary focus Project Zero aims to achieve with its social token is to convert members’ brief attention spans (often seen during a major crisis) into long-term participation with the organization.
Jake Beaumont-Nesbitt, founder and chief community experience officer at Project Zero, further told Cointelegraph that Project Zero was created eight years ago and was decentralized by design, as the project is made up of a science-based community located across the globe. Given this, Beaumont-Nesbitt explained that Project Zero naturally aligned with the Web3 ethos, as the organization has always existed without centralized platforms or third-party intermediaries. By adopting a Web3 model through the incorporation of social tokens, Beaumont-Nesbitt pointed out that Project Zero is now able to better engage with its community. He said:
“Web3 engagement allows an organization to scale up massively by creating value going back to the contributors. Giving back to certain causes today isn’t just about dropping money in a jar and hoping it helps. Web3 enables transparency, allowing people to understand where their money is going, while also participating in a greater way.”
In terms of incentives, Clarke noted that Project Zero community members will be able to use their social tokens to redeem a variety of digital and real world offerings. “For example, members could buy an NFT on our platform and then be rewarded even more with social tokens to redeem for different incentives,” she said.
While Project Zero represents what Baeriswyl would refer to as a “community” social tokens, other projects are geared toward individuals — especially as the “creator economy” continues to gain traction. For example, Calaxy is a token-based app for creators founded by NBA star Spencer Dinwiddie and ex-financier Solo Ceesay. While Calaxy is still in its beta version, Ceesay told Cointelegraph that the mobile app will essentially allow creators to build their own social fan-tokens within a Web3 ecosystem: “Calaxy app allows influencers to build social tokens with an easy interface, while also having a marketplace in the application to engage with fans.”
Ceesay added that Calaxy is powered by Hedera Hashgraph’s distributed ledger technology, which allows the application to act in a decentralized manner to let users engage in different ways using social tokens. Like Project Zero, Ceesay shared that Calaxy is focused on non-crypto natives. “We cater to YouTubers, gamers, social media influencers, sports players and more. Our creator list is expansive,” he remarked.
Given this, Ceesay explained that Calaxy offers an Instagram or Twitter like user experience, where individuals have a discover page that also allows them to follow different influencers. Users can then visit an influencer’s homepage to buy their social tokens, where they will also be presented with a list of experiences offered, such as one-on-one video calls or access to exclusive events. While creator social tokens may sound similar to NFTs, Ceesay noted that nonfungible tokens are more about utility and artistic expression, whereas social tokens offer greater flexibility:
“We envision a world where a sports player, for instance, has a social token that portrays their image. They can then hold that token for eventual decentralized finance capabilities. This is an entirely new economy where creators can do whatever they want with their tokens.”
Yet while social tokens may be gaining traction, it’s also important to point out the regulatory concerns. The biggest issue to consider here would be a social token in the form of a security.
To ensure that social tokens are not viewed as securities, Ceesay explained that tokens created on Calaxy are stable coins that are collateralized one-to-one with USDC. “These are stable coins due to the regulatory gray area, but this also helps with onboarding,” he said. For instance, Ceesay pointed out that a Calaxy user could be an eight-year-old boy who is a fan of a specific sports player. “We don’t want these users to have a volatile asset,” explained Ceesay.
Berkowitz further remarked that Socialstack is an entirely closed ecosystem to ensure regulatory compliance. Berkowitz added that while there are still no clear regulations around social tokens, certain steps can be taken to ensure compliance:
“The best way to mitigate the risk of a security is to do things through an NFT and then have a Know Your Customer layer that identifies each person as an accredited investor. This is the best way to mitigate risk, but as of now we are making sure communities on our platform are not getting into risky situations.”
To Berkowitz’s point, Clarke commented that Project Zero is “not a get rich quick scheme,” but rather a social movement. “We are building a community. Web3 is creating great opportunities for exchanging value, not only through currency and smart contract projects, but also social tokens,” she explained. Clarke added that Project Zero’s PZero social tokens have no monetary value:
“That was deliberate. As such, it was tricky figuring out the initial values for earning and redeeming PZero social tokens. Our tokenomics need to be simple, but we also need to develop them without reference to a single fiat currency and with a view to creating scale.”
Although social tokens are being adopted more widely, use cases for these digital assets are still being developed. As such, the future of social tokens remains unclear. “There are different ways in which people can use these assets. The most exciting part is that we don’t know the best use cases yet,” said Ceesay.
Given this, some in the industry believe that social tokens will play a key role in decentralized autonomous organizations (DAOs), that typically leverage a token that can be spent to earn rewards. Stani Kulechov, founder and chief operating officer at Aave (AAVE) — an open-source DeFi protocol — told Cointelegraph that although social tokens are still extremely nascent, in the future the crypto sector may see creator social tokens underpinned by DAOs.
In addition, Baeriswyl expects to see combinations of NFTs and social tokens emerge. While this is just a hypothesis, he explained that the GameFi and play-to-earn spaces are already leveraging a combination of NFTs and forms of fungible tokens:
“With play-to-earn, you usually have NFT items and then a currency to exchange value. Therefore it may make sense to reward users with social tokens that are really NFTs.”
Predictions aside, it’s a safe bet to say that social tokens are here to stay since, for example, they are making it easier for creators and communities to launch these social tokens. “Social tokens may not have gained traction before due to complexities and not enough easy-to-use onboarding ramps. There are now apps and platforms that help with this,” said Ceesay.
Berkowitz further remarked that Socialstack is working with a number of different communities, which has resulted in 20 different use cases across podcasting, artists, festivals, conferences and more. “Our target audience is non-crypto native communities interested in bringing their community into Web3 through a social token. This will further advance as Web3 develops.”
2022 has not been a good start for cryptocurrencies. To date, the total market capitalization has dropped by 21% to $1.77 trillion. Solana‘s (SOL) correction has been even more brutal, presenting a 48.5% correction year-to-date.
Solana leads the staking charts with $35 billion in value locked, which is equivalent to 74% of the SOL tokens in circulation. Multiple reasons can be identified for the underperformance including four network outages in late 2021 and early 2022.
The latest incident on Jan. 7 was attributed to a distributed denial-of-service (DDoS) attack, causing Solana Lab developers to update the code and consequently reject these types of requests.
However, investors are more concerned about the centralization caused by the costs of being a Solana validator. To achieve 400 millisecond block times, the recommended hardware includes a 12 core 2.8GHz CPU, 256 GB memory, high-speed 1 TB SSD drives and a low-latency internet connection.
solana is cool for a centralized corporate state-sync machine… I just prefer real crypto and blockchain
— UltraXBT.eth (@UltraXBT) January 29, 2022
Solana‘s primary decentralized application (DApp) metric started to display weakness earlier in November after the network‘s total value locked (TVL) began to linger at $15 billion.
The chart above shows how Solana‘s DApp deposits saw a 50% decrease in three months as the indicator reached its lowest level since Sept. 8. As a comparison, Fantom‘s TVL currently stands at $9.5 billion after doubling in three months. Another DApp scaling solution competitor, Terra, saw an 87% TVL hike to $23.2 billion.
On the bright side, on Feb. 21, FTX.US, the American arm of the global crypto derivative and spot exchange FTX, announced a new blockchain gaming unit. It is also worth noting that Solana Ventures partnered with FTX and Lightspeed Venture on Nov. 5 to launch a $100 million fund dedicated to the sector.
To confirm whether this drop in TVL should be concerning, one should analyze DApp usage metrics. Some DApps are not financially intensive, so the value deposited is irrelevant.
As shown by DappRadar data, on Jan. 28 the number of Solana network addresses interacting with decentralized applications dropped by 18% on average. The only positive change was Solend, an algorithmic lending protocol.
The decreased interest in Solana DApps was also reflected in its futures open interest, which peaked at $2 billion on Nov. 6 and was recently hit with a steep correction.
Even though Solana has been hit the hardest compared to similar smart contract platforms, there is solid network use on nonfungible tokens (NFT) marketplaces, as measured by Magic Eden‘s 178,820 active addresses in the last 30 days.
Moreover, Solana Ventures‘ bet on the gaming sector could further showcase the network’s processing capacity. For instance, games represent half of the top 10 DApps across every blockchain covered by DappRadar. That includes Splinterlands which has 578,280 active addresses and Alien Worlds which has 544,900.
The above data suggest that Solana is losing ground versus competing chains, but holders are not concerned because 74% of the coins are still locked in staking. As long as Solana Labs‘ partnerships and investments continue to show potential, there is little reason to be bearish on SOL.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
In the press release, Visa Inc. Chairman and CEO Al Kelly said that the company “was compelled to act following Russia’s unprovoked invasion of Ukraine, and the unacceptable events that we have witnessed. We regret the impact this will have on our valued colleagues, and on the clients, partners, merchants and cardholders we serve in Russia. This war and the ongoing threat to peace and stability demand we respond in line with our values.”
Coming every Saturday, Hodler’s Digest will help you track every single important news story that happened this week. The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions and much more — a week on Cointelegraph in one link.
Cointelegraph compiled data this week for crypto donations sent to the Ukrainian government, military and charities amid the country’s ongoing conflict with Russia. By Monday, total crypto donations to the Ukrainian government and charities linked to it had reached $37 million.
The “Reserve fund of Ukraine” backed by local crypto exchange Kuna appeared to be the largest recipient, garnering roughly $13 million worth of BTC, ETH, USDT and other assets. Next in line was charity organization Come Back Alive, which pulled in $7.2 million. The group says it’s aiding the Ukrainian Armed Forces’ resistance efforts.
Notably, UkraineDAO also sold a tokenized Ukrainian flag for 2,174 ETH ($5.95 million) to support local civilian organizations.
The South Korean Ministry of Science and ICT put some serious weight behind the metaverse this week, allocating $186.7 million to create a virtual ecosystem to foster digital content and corporate growth within the country.
The metaverse ecosystem is called the “Expanded Virtual World,” and the funding will be used to expand the virtual industrial growth of cities, education and media. The ministry also said that it will host community-oriented creative activities to drive interest, such as a metaverse developer contest and a hackathon.
“It is important to create a world-class metaverse ecosystem as the starting point to intensively foster a new hyper-connected industry,” stated Park Yungyu, head of communication and policy at the ministry in the announcement.
On Tuesday, U.S.-based payment solutions provider Shift4 announced the acquisition of The Giving Block in a cash and stock deal worth $54 million. The deal includes provisions that could generate a total earnout of up to $246 million.
The Giving Block platform enables more than 1,300 nonprofit organizations and charities to accept crypto donations. According to the group’s annual report, it processed $69.64 million in crypto donations in 2021, with roughly $12.3 million coming from NFT projects.
“Shift4 will invest further in The Giving Block’s successful strategy while also pursuing a $45+ billion embedded cross-sell opportunity by bundling crypto donation capabilities with traditional card acceptance,” said Shift4 in a statement. “This represents just a small portion of the $470+ billion nonprofit addressable markets that Shift4 will uniquely be able to pursue as a result of this acquisition.”
Jamie Iannone, CEO of eBay, stated during a recent interview that the e-commerce giant could soon be looking to integrate crypto payments into its marketplace. The CEO also pointed to the growing popularity of NFT buying and selling on the platform, but did not divulge any specific plans to ramp up support for NFT technology.
Iannone said that eBay has been considering the idea for a long time as the company continues to explore new payment methods. He went on to hint that there could be a crypto-related announcement during eBay’s upcoming investor day on March 10.
If eBay were to support crypto, it would be a second attempt from the firm, as it initially tried integrating BTC payments back in 2014.
Top NFT marketplace OpenSea reportedly started barring Iranian users from its platform this week. The firm justified its decision by alluding to policy that prohibits people in U.S.-sanctioned territories from using its platform.
Iranian OpenSea users started posting on Twitter on Thursday that their accounts were being deactivated or deleted with no prior warning. An Iranian NFT artist who goes by “Bornosor” stated on Twitter: “NOT A gm AT ALL. Woke up to my @opensea trading account being deactivated/deleted without notice or any explanation.”
An OpenSea spokesperson spoke with Cointelegraph and noted that:
“We have a zero-tolerance policy for the use of our services by sanctioned individuals or entities and people located in sanctioned countries. If we find individuals to be in violation of our sanctions policy, we take swift action to ban the associated accounts.”
At the end of the week, Bitcoin (BTC) is at $40,617, Ether (ETH) at $2,667 and XRP at $0.73. The total market cap is at $1.79 trillion, according to CoinMarketCap.
Among the largest 100 cryptocurrencies, the top three altcoin gainers of the week are UMA (UMA) at 104.80%, Waves (WAVES) at 98.29% and THORChain (RUNE) at 64.14%.
The top three altcoin losers of the week are Convex Finance (CVX) at -14.72%, Secret (SCRT) at -9.37% and Amp (AMP) at -8.46%.
For more info on crypto prices, make sure to read Cointelegraph’s market analysis.
“The demand for Bitcoin is so large in Senegal that it doesn’t matter how many exchanges you make.”
Nourou, founder of Bitcoin Senegal
“Eventually, the bot concludes the best move is to buy as soon as possible and never sell!”
Tiago Vasconcelos, founder of Aceita Bitcoin, regarding the AI Bitcoin trading bot he coded
“Now is a pivotal point in #Bitcoin’s evolution — we’re on the verge of mass adoption, and I think that I can make it happen faster.”
Samson Mow, CEO of Pixelmatic and former chief strategy officer of Blockstream
“Investors are speculating that crypto will become increasingly important as apolitical and trustless money in a time of escalating geopolitical uncertainty, conflict, and capital controls.”
“Crypto has been one of the great stories in finance over the course of the last 15 years. And I’ll be clear, I’ve been in the naysayer camp over that period of time. But the crypto market today has a market capitalization of about $2 trillion in round numbers, which tells you that I haven’t been right on this call.”
Ken Griffin, founder of Citadel
“Everyone with a heartbeat and a telephone should be able to transact value all over the world.”
Didi Taihuttu, father of the Bitcoin Family
“Worldwide NFT search volume fell off a cliff. Reminds me A LOT of the crypto 2017 bull market and subsequent 2018 bear market. How long will the disinterest last until it starts to pick back up? Or will it?”
Andrew Steinwold, managing partner of Sfermion
“Ideally, there should be a threshold where people who earn below a certain level require zero compliance/verification, because really, if, for example, that threshold was at R5,000 / month [$330], what possible harm can a person do with that amount?”
Hermann Vivier, founder of Bitcoin Ekasi
Bitcoin once again showed no shortage of price movement this week. The asset bounced from around $38,000 on Sunday up to almost $45,500 on Wednesday before falling back below $41,000 on Friday, according to Cointelegraph’s BTC price index.
Crypto Ed, a pseudonymous trader on Twitter, concisely summed up the scene for BTC: “Bullish above 42, bearish below 40k.” Prior to his bullish/bearish conclusion, Crypto Ed explained his rationale via Bitcoin charts and technical analysis.
Bitcoin’s price appears to be mirroring global macro uncertainty as investors continue to assess monetary policy and the conflict in Ukraine.
The U.S. Securities and Exchange Commission (SEC), led by crypto-skeptic Gary Gensler, is reportedly investigating NFT creators and marketplaces for apparent securities violations.
According to anonymous sources who spoke to Bloomberg, the SEC is working to ascertain whether certain NFTs are being “utilized to raise money like traditional securities,” with the agency believed to have sent subpoenas demanding information on specific NFTs and other token offerings.
With billions of dollars flowing into NFTs over the past 18 months, it was only a matter of time before the SEC began taking a deeper dive into the sector’s compliance standards.
A group claiming to represent 35 former ConsenSys AG (CAG) employees requested an audit on Tuesday, under the Swiss Code of Obligations, to investigate “serious irregularities” they allege occurred at CAG during mid-2020.
The group alleged that “fundamental intellectual property and subsidiaries were illegally transferred” from CAG (also known as Mesh) to an entity called ConsenSys Software Incorporated. They also asserted that the deal was conducted unbeknownst to minority shareholders and was specifically made to benefit founder Joseph Lubin.
The company responded by issuing a statement suggesting that the complaint emanated from just one former employee:
“Mesh refutes the allegations underlying the legal action as well as those contained in the factually inaccurate press release that was self-authored by one of the former employees. […] Mesh looks forward to formally refuting the allegations and accusations in Swiss courts.”
The United Kingdom’s Financial Conduct Authority announced on Thursday that it is investigating 50 unauthorized crypto companies. The FCA also stated that it has pursued more than 300 cases on unregistered crypto firms in the last six months.
The move is part of a push to crack down on potentially dubious firms involved in scamming activities. According to the FCA, U.K. residents sent in 16,400 inquiries between April and September 2021, which included crypto-related scams.
The regulatory body outlined that it would be implementing tools, including “more assertive supervision and enforcement action,” to deter bad actors in the local crypto sector.
Decentralization of Web3 infrastructure is critical to its success as it gives us back the freedom that we are currently paying for using Web2.
Consolidation of law enforcement activity sends a clear message to the industry: It is time to comply.
What is a DAO, how do they work and are they the future or just a passing fad?
The layer-one (L1) ecosystem has received increased attention in recent months as users search for new investment opportunities in the Cosmos (ATOM), Fantom (FTM) and NEAR.
Following January’s market sell-off, where Bitcoin (BTC) price dropped to bottom below $34,000, much of the L1 field has struggled to regain its momentum.
According to data from Delphi Digital, since the BTC bottom on Jan. 24, the only L1 to experience a notable gain in price include Terra (LUNA), Avalanche (AVAX) and Ethereum (ETH).
The price growth seen in LUNA was in large part due to the announcement from the Luna Foundation Guard that it had raised $1 billion to form a Bitcoin reserve for the ecosystem’s Terra USD (UST) stablecoin.
Terra also saw the launch of its second lockdrop event and the Mars Protocol helped drive demand for LUNA token.
The $1 billion in reserves for UST was also a boon for Anchor Protocol (ANC), the Terra-based platform that is the main avenue for minting UST through pledging LUNA or Ether. Anchor also got an added boost to its price after announcing that developers are in the process of integrating AVAX as a collateral option for creating UST.
Data from Cointelegraph Markets Pro and TradingView shows that since hitting a low of $1.18 on Jan. 28, the price of ANC has catapulted 268% to hit a daily high at $4.35 on March 2 where it was halted at a major resistance level.
Aside from its integration with Anchor, Avalanche has had several notable developments that have helped drive its growth since late January, including an integration with Wirex and the announcement that DeFi Kingdoms will launch on the Avalanche network.
According to Delphi Digital, based on its recent price performance, “AVAX seems to move with a higher correlation to BTC relative to other L1s.”
Related: Which layer-one protocols will outperform in 2022? | Tune in now to The Market Report
Data from Delphi Digital shows that Osmosis, a decentralized exchange in the Cosmos ecosystem, has “outperformed other major peers over the last few months by a substantial margin.”
The strength shown by OSMO is in part due to the success of Cosmos, which had a strong close to 2021 as its “thesis of interoperable app-chains has finally started to come to fruition in recent months.
Osmosis is now the largest decentralized exchange in the Cosmos ecosystem and supports 37 separate IBC chains with $1.75 billion in total value locked according to data from Defi Llama.
Osmosis also got a boost to its price and trading volume following the release of interchain and superfluid staking on March 1, which allows liquidity providers (LP) on the Osmosis DEX to also earn staking rewards for the assets they have provided liquidity for, making this the first time users can do both staking and LP at the same time.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Impermanent loss is one of the most recognized risks that investors have to contend with when providing liquidity to an automated market maker (AMM) in the decentralized finance (DeFi) sector. Although it is not an actual loss incurred from the liquidity provider’s (LP) position — rather an opportunity cost that occurs when compared with simply buying and holding the same assets — the possibility of getting less value back at withdrawal is enough to keep many investors away from DeFi.
Impermanent loss is driven by the volatility between the two assets in the equal-ratio pool — the more one asset moves up or down relative to the other asset, the more impermanent loss is incurred. Providing liquidity to stablecoins, or simply avoiding volatile asset pairs, is an easy way to reduce impermanent loss. However, the yields from these strategies might not be as attractive.
So, the question is: Are there ways to participate in a high-yield LP pool and at the same time reduce as much impermanent loss as possible?
Fortunately for retail investors, the answer is yes, as new innovations continue to solve the existing problems in the DeFi world, providing many ways for traders to avoid impermanent loss.
When talking about impermanent loss, people often refer to the traditional 50%/50% equal-ratio two-asset pool — i.e., investors have to provide liquidity to two assets at the same value. As DeFi protocols evolve, uneven liquidity pools have come into the picture to help reduce impermanent loss.
As shown in the graph below, the downside magnitude from an equal-ratio pool is much larger than an uneven pool. Given the same relative price change — e.g., Ether (ETH) increases or decreases by 10% relative to USD Coin (USDC) — the more uneven the ratio of the two assets, the less the impermanent loss.
DeFi protocols such as Balancer have made uneven liquidity pools available since as early as the beginning of 2021. Investors can explore a variety of uneven pools to seek out the best option.
In addition to uneven liquidity pools, multi-asset liquidity pools can also help reduce impermanent loss. By simply adding more assets to the pool, the diversification effects come into play. For example, given the same price movement in Wrapped Bitcoin (WBTC), the USDC-WBTC-USDT equal-ratio tri-pool has a lower impermanent loss than the USDC-WBTC equal-ratio pool, as shown below.
Similar to the two-asset liquidity pool, the more correlated the assets are in the multi-asset pool, the more the impermanent loss, and vice versa. The 3D graphs below display the impermanent loss in a tri-pool given different levels of the price change of Token 1 and Token 2 relative to the stablecoin, assuming one stablecoin is in the pool.
When the relative price change of Token 1 to the stablecoin (294%) is very close to the relative price change of Token 2 (291%), the impermanent loss is also low (-4%).
When the relative price change of Token 1 to stablecoin (483%) is very different and far away from the relative price change of Token 2 to stablecoin (8%), the impermanent loss becomes noticeably larger (-50%).
Although the uneven liquidity pool and multi-asset pool both help reduce impermanent loss from the LP position, they do not eliminate it completely. If investors do not want to worry about impermanent loss at all, there are also other DeFi protocols that allow investors to provide only one side of the liquidity through a single-sided liquidity pool.
One might wonder where the risk of impermanent loss is transferred if investors do not bear the risk. One solution provided by Tokemak is to use the protocol’s native token, TOKE, to absorb this risk. Investors only need to supply liquidity such as Ether to one side, and TOKE holders will provide TOKE on the other side to pair up with Ether to create the ETH-TOKE pool. Any impermanent loss caused by the price movements in Ether relative to TOKE will be absorbed by the TOKE holder. In return, TOKE holders take all swap fees from the LP pool.
Since TOKE holders also have the power to vote for the next five pools the liquidity will be directed to, they also get bribed by protocols who want them to vote for their liquidity pools. In the end, TOKE holders bear the impermanent loss from the pool and are compensated by the swap fees and bribe rewards in TOKE.
Another solution is to separate risks into different tranches so that risk-averse investors are protected from impermanent loss and that risk-seeking investors who bear the risk will be compensated with a high-yield product. Protocols such as Ondo offer a senior fixed tranche where impermanent loss is mitigated and a variable tranche where impermanent loss is absorbed but higher yields are offered.
If all of the above seems too complicated, investors can still stick to the most common 50%/50% equal-ratio pool and use an automated LP manager to actively manage and dynamically rebalance the LP position. This is especially useful in Uniswap v3, where investors need to specify a range to which they want to provide concentrated liquidity.
Automated LP managers conduct rebalancing strategies to help investors maximize LP fees and minimize impermanent loss by charging a management fee. There are two main strategies: passive rebalancing and active rebalancing. The difference is that the active rebalancing method swaps tokens to achieve the amount required at the time of rebalancing, whereas passive rebalancing does not and only swaps gradually when the pre-set price of the token is hit (similar to a limit order).
In a volatile market where prices are constantly moving sideways, a passive rebalancing strategy works well because it doesn’t need to rebalance frequently and pay large amounts of swap fees. But in a trending market where price continues to move in one direction, active rebalancing works better because the passive rebalancing strategy could miss the boat and sit outside the LP range for a long time and fail to collect any LP fees.
To choose the right automated LP manager, investors need to find the one that suits their risk appetite. There are passive rebalancing strategies such as Charm Finance that aim to earn a stable return by using a wide LP range to reduce impermanent loss. There are also passive managers such as Visor Finance that use a very narrow LP range to earn high LP fees, but are also exposed to more potential impermanent loss. Investors need to select automated LP managers based on not only their risk appetite but also their long-term investment goals.
Although traditional equal-ratio LP profits could be eroded by impermanent loss when the underlying tokens move in very different directions, there are alternative products and strategies available for investors to reduce or completely avoid impermanent loss. Investors just need to find the right trade-off between risk and return to find the best-suited LP strategy.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Despite the ongoing volatility plaguing the digital asset sector, one niche that has undoubtedly continued to flourish is the nonfungible token (NFT) market. This is made evident by the fact that a growing number of mainstream mover and shakers including the likes of Coca-Cola, Adidas, the New York Stock Exchange (NYSE) and McDonalds, among many others, have made their way into the burgeoning Metaverse ecosystem in recent months.
Also, owing to the fact that over the course of 2021 alone, global NFT sales topped out at $40 billion, many analysts expect this trend to continue into the future. For example, American investment bank Jefferies recently raised its market-cap forecast for the NFT sector to over $35 billion for 2022 and to over $80 billion for 2025 — a projection that was also echoed by JP Morgan.
However, as with any market growing at such an exponential rate, issues related to security have to be expected as well. In this regard, prominent nonfungible token (NFT) marketplace OpenSea recently fell victim to a phishing attack that took place just hours after the platform announced its week-long planned upgrade to delist all inactive NFTs.
On Feb 18, OpenSea revealed that it was going to initiate a smart contract upgrade, requiring all of its users to transfer their listed NFTs from the Ethereum blockchain to a new smart contract. Owing to the upgrade, users who failed to facilitate the above said migration stood at a risk of losing their old and inactive listings.
That said, due to the small migration deadline provided by OpenSea, hackers were presented with a potent window of opportunity. Within hours of the announcement, it was revealed that nefarious third party individuals have initiated a sophisticated phishing campaign, stealing NFTs from many users that were stored on the platform before they could be migrated over to the new smart contract.
We are actively investigating rumors of an exploit associated with OpenSea related smart contracts. This appears to be a phishing attack originating outside of OpenSea’s website. Do not click links outside of https://t.co/3qvMZjxmDB.
— OpenSea (@opensea) February 20, 2022
Providing a technical breakdown of the matter, Neeraj Murarka, chief technical officer and cofounder of Bluezelle, a blockchain for GameFi ecosystem, told Cointelegraph that at the time of the incident, OpenSea was making use of a protocol called Wyvern, a standard tech module that most NFT web apps make use of since it allows for the management, storage, and transfer of these tokens within users’ wallets.
Because the smart contract with Wyvern allowed users to work with the NFTs stored in their “wallets,” the hacker was able to send out emails to Opensea clients masquerading as a representative for the platform, encouraging them to sign “blind” transactions. Murarka further added:
“Metaphorically, this was like signing a blank check. Normally, this is okay if the payee is the intended recipient. Keep in mind that an email can be sent by anyone, but be made to appear to be sent by someone else. In this case, the payee appears to be a single hacker who was able to use these signed transactions to transfer out and effectively steal the NFTs from these users.”
Also, in an interesting twist of events, following the incident the hacker apparently returned some of the stolen NFTs to their rightful owners, with further efforts being made to return other lost assets. Providing his take on the entire matter, Alexander Klus, founder of Creaton, a Web3 content creation platform, told Cointelegraph that the phishing email campaign used a malicious signing transaction to approve all holdings to be able to be drained at any time. “We need better signing standards (EIP-712) so people can actually see what they are doing when approving a transaction.”
Lastly, Lior Yaffe, cofounder and director of Jelurida, a blockchain software company, pointed out that the episode was a direct result of the confusion surrounding OpenSea’s poorly planned smart contract upgrade, as well as the platform’s transaction approval architecture.
In Murarka’s view, web apps making use of the Wyvern smart contract system should be augmented with usability improvements to ensure that users don’t fall for such phishing attacks time and time again, adding:
“Very clear warnings should be made to educate the user about phishing attacks and driving home the fact that emails will never be sent, soliciting the user to take any steps. Web apps like OpenSea should adopt a strict protocol to never communicate with users via email apart from maybe just registration data.”
That said, he did concede that even if OpenSea were to adopt the safest security/privacy protocols and standards, it is still up to its users to educate themselves about these risks. “Unfortunately, the web app itself is often held responsible, even though it was the user that was phished. Who is responsible? The answer is unclear,” he noted.
A similar sentiment is shared by Jessie Chan, chief of staff at ParallelChain Lab, a decentralized blockchain ecosystem, who told Cointelegraph that regardless of how the entire attack was orchestrated, the issue not entirely dependant on OpenSea’s existing security protocols but also on user awareness against phishing. The question remains whether the marketplace operator should have been able to provide sufficient information to its users to keep them informed of how to deal with such scenarios.
Another possibility to mitigate any potential phishing events is by having all interactions between users and their web apps being driven solely via the use of a dedicated mobile/desktop interface. “If all interactions required the use of a desktop app, such attacks could be bypassed completely.”
Providing his take on the subject, Yaffe noted that the main problem — which lies at the heart of this whole issue — is the basic architecture of most NFT marketplaces, enabling users to simply sign a carte blanche approval for a third-party contract to use their private wallet without setting a spending limit:
“Since the OpenSea team did not really figure out the source of the phishing operation, it might as well happen again next time they attempt to make a change to their architecture.”
Murarka noted that the best way to eliminate the possibility of these attacks is if people start making use of hardware wallets. This is because most software wallets as well as other custodial storage solutions are too vulnerable in their general design and operational outlook. He further elaborated: “Much like Bitcoin, Ethereum, etc, NFTs themselves should be moved to hardware wallet accounts instead of leaving them on a centralized platform,” adding:
“Users need to be super aware of the risks of responding to and acting upon emails they receive. Emails can be faked very easily, and users need to be proactive about the safety of their crypto assets.”
Another thing NFT owners need to remember is that they should only be visiting web apps that employ high-quality security protocols, checking that the accessed marketplaces utilize the HTTPS mechanism (at the very least) while being able to clearly see a lock symbol on the top left of their browser window — which correctly points to the intended company — while visiting any webpage.
Yaffe believes that users should be careful with contract approvals and keep an accurate track of the contracts they have greenlighted in the past. “Users should revoke unnecessary or unsafe approvals. If possible users should specify a reasonable spending limit for every contract approval,” he concludes.
Lastly, Chan believes that in an ideal scenario, users should keep their wallets on a dedicated platform that they don’t use to read email or browse the web, adding that any such avenues are subject to all manners of third party attacks. He further stated:
“This is inconvenient, but when dealing with assets of great value and where there is no recourse in the event of theft, extreme care is justified. And, as with all financial transactions, they should be very careful in deciding who to deal with, since the counterparties can also steal your assets and disappear.”
Therefore, while moving into a future driven by NFTs and other similar novel digital offerings, it remains to be seen how platforms operating within this space continue to evolve and mature, especially as a growing amount of capital keeps making its way into the NFT market.
The Senate of Virginia in the United States unanimously approved a bill amendment request that now allows traditional banks operating in the Commonwealth of Virginia to provide virtual currency custody services.
Delegate Christopher T. Head introduced the bill, House Bill No. 263, back in January 2022, seeking an amendment to allow eligible banks to offer crypto custody services:
“A bank may provide its customers with virtual currency custody services so long as the bank has 26 adequate protocols in place to effectively manage risks and comply with applicable laws.”
The bill passed Senate with a sweeping 39-0 vote and is waiting to be signed into law by Governor of Virginia Glenn Youngkin. Banks that intend to offer this service to clients will need to adhere to three specific requirements mentioned in the bill: implement effective risk management systems, possess adequate insurance coverage and launch an oversight program to address risks associated with cryptocurrencies.
However, the Senate will require the banks’ customers to retain direct control of their public and private keys associated with their virtual currency, adding:
“Acting in a fiduciary capacity, the bank shall require customers to transfer their virtual currencies to the control of the bank by creating new private keys to be held by the bank.”
Other states such as Wyoming have also recently seen an introduction of legislation for a state-issued stablecoin.
Related: US lawmaker pushes for state-level regulations on stablecoins at hearing on digital assets
Just last month, the House Committee on Financial Services had a discussion about whether regulations on stablecoins and digital assets should be addressed at the state or federal level.
In this regard, North Carolina Representative and ranking committee member Patrick McHenry asked the committee to consider state-level regulatory frameworks in lieu of a comprehensive federal law on stablecoins.
Quoting a report from the President’s Working Group on Financial Markets, Jean Nellie Liang, undersecretary for domestic finance at the Department of Treasury, said that U.S. dollar-pegged stablecoin issuers — both state and federally chartered banks — should be held to the same standards as insured depository institutions.