Monday, October 5, 2020

Amid the Craze of 'Vegetable' Tokens...

KuCoin hackers found, Coinbase employees walk and more
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October 5, 2020
By Daniel Kuhn
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Making consensus 

CoinDesk is preparing for the invest: ethereum economy  virtual event on. Oct. 14 with a special series of newsletters focused on Ethereum's past, present and future. Every day until the event the team behind Blockchain Bites will dive into an aspect of Ethereum that excites or confuses us.

The Top Shelf news you subscribed to is down below. 

Now a few words from CoinDesk’s Managing Director of Events Aaron Stanley:

The meaning of development 

The exploding popularity of decentralized finance, be it “Weird DeFi” or otherwise, has brought a surge of new interest to Ethereum-based applications while highlighting the scalability issues with the platform’s current infrastructure. 

Network congestion, a result of increased usage and more complex smart contracts being run on the platform, has helped to create an intense FOMO within the ecosystem while simultaneously erecting an enormous barrier to entry in the form of gas fees for non-power users and whales. 

This isn’t exactly a new problem for Ethereum. This same scalability argument has reared its head plenty of times before (see December 2017 and CryptoKitties), prompting a plethora of “Eth Killer” chains to sprout up in 2018-19 with the goal of beating Ethereum at its own game. 

Those chains haven’t been much of a threat to Ethereum’s volume, but this time the heat is on. Competing smart contract platforms like Polkadot, Cosmos, Solana and Near are queued up to welcome traders and application builders who have grown tired of waiting for an Ethereum scaling solution to emerge. 

Amid the craze of vegetable tokens, meme coins, skyrocketing gas fees and all the other crazy DeFi stuff we witnessed in recent months emerged encouraging news about Ethereum 2.0 – the impending transition to proof-of-stake and implementation of sharding. It’s in the final stages of testing and is poised to launch its Phase 0 sometime this fall. 

This migration holds significant impacts for the Ethereum-native DeFi economy and the “Money Legos” that have powered it. A fully scaled blockchain could pave the way for that elusive mass adoption that crypto people talk about so much. 

But then again, Ethereans have been waiting since 2015 for this transition to take place, and to many it’s simply a fantasy. The full roadmap for Eth 2.0 implementation is years long, and skeptics will find plenty of reasons to cast doubt on the likelihood of its completion. 

So what do traders, investors and DeFiers need to know about this transition and how it will affect their bags? This Eth 2.0 migration and its second and third-order implications are the focus of CoinDesk’s upcoming virtual event Invest: Ethereum Economy on Oct. 14, where we’ll be tackling all of these questions surrounding what could well be the most important news development in crypto this year. 

- Aaron Stanley 

Featured panel

Fireside chat with CFTC Chairman Heath Tarbert
Last November, incoming CFTC Chairman Heath Tarbert sat down with CoinDesk Chief Content Officer Michael Casey to lay out his thinking around ethereum futures and the regulatory implications of Ethereum's move to proof-of-stake. One year on, and with Ethereum on the cusp of transition, Tarbert and Casey discuss the issues once again.

Tune in Oct. 14 from 12:30-12:50 p.m. ET.



CoinDesk U
Universities are often key to getting new industries off the ground, providing the infrastructure to take paradigm-shifting ideas to the next level. But in blockchain and digital finance technology, how do they measure up?

Introducing CoinDesk U, a ranking of the top 20 schools identified in our research.

During a special CoinDesk Live episode on Oct. 6, we will release the results of the first CoinDesk U ranking. We are inviting students from around the U.S. as well as representatives from student club networks, the crypto industry and leading institutions to discuss traditional academia’s relevance and support for the financial technology poised to fuel Web 3.0.

Watch CoinDesk Live: Can Old Schools Teach New Tech on CoinDesk.com, Twitter and YouTube. Learn more.

At stake

Camila Russo is the founder of The Defiant and author of “The Infinite Machine,” the first book on the history of Ethereum. Here she examines how Ethereum went from concept to a functioning system and economy over the past half decade. 

This excerpted post was originally published in July.

Seeing success

Almost five years ago, on July 30, 2015, part of the Ethereum team had gathered in Berlin to see the network they helped build go live. A big screen overhanging their worktables served as the countdown clock for when the test network reached block 1,028,201. That’s the palindrome and prime number they picked as the key which would launch the mainnet. Others were waiting for the launch in Ethereum hubs in Amsterdam, Toronto, New York and Zug, Switzerland. 

It was the culmination of months of work, where core developers did the heavy lifting on the technical side, but which also included designers, marketers, and community managers. Ethereans knew a distributed network with no community would fail. 

Early Ethereum team members had also spent endless hours with lawyers leading up to the ether sale, some co-founders had gone through bitter fights, while many others had ravaged their savings working with no salaries towards one goal: Making the vision Vitalik Buterin laid out on a white paper in November 2013 a reality.  

It’s happening

When the test network hit the predetermined block at 4:26 p.m. in Berlin, a meme of Ron Paul, jubilant, with his arms up and surrounded in green laser beams and white block letters that read IT’S HAPPENING, popped up on the monitor. The Ethereum team opened a bottle of champagne while rocket emojis filled chat rooms.

The Ethereum network quickly left other blockchain upstarts behind and has since grown to become the second-largest cryptocurrency after bitcoin, with ether’s market capitalization (as of writing) at just shy of $40 billion. 

Minecraft of crypto-finance

But a better measure of success is to examine whether Ethereum builders achieved what they set out to do. Ethereum aims to be a “fully-fledged, Turing-complete (but heavily fee-regulated) cryptographic ledger,” which allows developers to build any application they can dream of on top, Vitalik wrote in the white paper, which inspired early team members to drop everything and join him in building it. 

“Rather than being limited to a specific set of transaction types, users will be able to use Ethereum as a sort of ‘Minecraft of crypto-finance’ – that is to say, one will be able to implement any feature that one desires simply by coding it in the protocol’s internal scripting language,” he wrote. Minecraft is a sandbox-style video game, which gives players flexibility to explore and build whatever they want in the game’s virtual world. 

Vitalik, who was 19 years old at the time, listed on the Ethereum white paper the applications he envisioned could be built on top of this generalized platform: 

Sub-currencies “representing assets such as USD or gold to company stocks and even currencies with only one unit issued to represent collectibles or smart property.”

Financial derivatives, such as “hedging contracts.” He notes that “financial contracts of any form do need to be fully collateralized; the Ethereum network controls no enforcement agency and cannot collect debt.”

Identity and reputation systems where “users can register their names in a public database alongside other data,” for example, for domain-name systems.

Decentralized Autonomous Organizations, which replicate traditional companies but use blockchain technology for enforcement. The entity would have shareholders who collect dividends and decide how the corporation automatically allocates its funds, “using either bounties, salaries or even more exotic mechanisms such as an internal currency to reward work.” 

Also listed were crop and generic insurance, decentralized data feeds, gambling and prediction markets, a full-scale on-chain stock market and an on-chain decentralized marketplace.

Five years later, all of the use cases envisioned by Vitalik have become a reality, though some with more success than others.

A good problem to have

The question isn’t whether there’s demand for Ethereum, but whether the network will continue developing fast enough to meet that demand. The wait for ETH 2.0, which would allow Ethereum to scale, has been a constant in Ethereum’s history. A barebones proof-of-stake chain, which was slated to launch early this year, has been delayed and now it’s unclear whether it will launch this year at all. 

The next five years will be about strengthening these scaling solutions and making these financial applications more robust and secure. It will also be necessary to create better crypto onramps and building apps in the less developed areas of Ethereum, like identity and insurance. The result will be this Minecraft of finance stops being an insiders’ secret and more players can join.

- Cami Russo



invest: ethereum economy
The move to ETH 2.0 will bring the Ethereum network ever closer to fulfilling its original vision: that of a "world computer" that plays host to a parallel, decentralized financial system. Will it be the rocket fuel that takes Ethereum's financial engine mainstream?  

CoinDesk's invest: ethereum economy virtual event Oct. 14 will address the ramifications for investors of the sweeping changes underway within the Ethereum ecosystem. 

Keynote speakers and panelists including Ethereum founder Vitalik Buterin and Commodity Futures Trading Commission Chairman and CEO Heath P. Tarbert will offer deep dives into Ethereum’s adoption of a proof-of-stake consensus mechanism, sharding and other elements of its impending 2.0 upgrade, as well how the new framework impacts the rapidly advancing business of DeFi, stablecoins and decentralized exchanges.

Register to join invest: ethereum economy on Oct. 14. 

Ethereum 101

So what is Ethereum and how does it work? CoinDesk contributor Alyssa Hertig explains what "the world computer" is looking to achieve.

The 'World Computer'

Before you can understand Ethereum, it helps to first understand the internet.

Today, our personal data, passwords and financial information are all largely stored on other people’s computers – in clouds and servers owned by companies like Amazon, Facebook or Google. Even this CoinDesk article is stored on a server controlled by a company that charges to hold this data should it be called upon.

With this convenience, there is also vulnerability. As we’ve learned, a hacker or a government can gain unwelcome access to your files without your knowledge, by influencing or attacking a third-party service – meaning they can steal, leak or change important information.

While Bitcoin aims to disrupt PayPal and online banking, Ethereum has the goal of using a blockchain to replace internet third parties – those that store data, transfer mortgages and keep track of complex financial instruments.

In short, Ethereum wants to be a ‘World Computer’ that would decentralize – and some would argue, democratize – the existing client-server model.

With Ethereum, servers and clouds are replaced by thousands of so-called “nodes” run by volunteers from across the globe (thus forming a “world computer”).

The vision is Ethereum would enable this same functionality to people anywhere around the world, enabling them to compete to offer services on top of this infrastructure.

- Alyssa Hertig



Valuing bitcoin
Join CoinDesk Research for the fourth and final episode of How to Value Bitcoin, our live webinar series covering Bitcoin fundamentals.

On Oct. 6, Delphi Digital head of research Yan Liberman will dive into collective profit and loss taking (CPLT), hodlwaves and the ins and outs of the money analysis.

Register to join How to Value Bitcoin: UTXO-Based Fundamentals (Part 2).

Top shelf

Employees walk
Coinbase employees are beginning to take severance packages, CoinDesk’s Nathan DiCamillo reports. Days after the corporate exchange giant offered non-aligned employees an exit from the exchange’s “apolitical” mission, at least three employees have decided to walk. Coinbase has been the center of a media storm since its CEO Brian Armstrong published a blog post discouraging politics in the office. At least one of the employees said Armstrong could have avoided controversy if he had communicated the company’s new direction only internally. 

Crypto for Congress
The Chamber of Digital Commerce’s Political Action Committee (PAC) is contributing $50 worth of bitcoin to each congressional campaign. According to the group’s founder, Perianne Boring, this is an attempt to raise awareness and give incumbents a chance to interact with blockchain technology and digital assets. In addition to the contribution, the Chamber’s PAC will also provide online training and a toolkit to help members of Congress engage with cryptocurrencies. According to the group, once informed about the contribution, the campaign can either accept it, pass it on to a charity that accepts bitcoin (BTC) or just opt out. 

CBDC test
Eesti Pank, the central bank of Estonia, is undertaking a “multi-year” research project that will investigate the suitability of a blockchain-based digital currency to work alongside cash. The hypothetical CBDC will run on KSI Blockchain, already "a core" part of the infrastructure of Estonia's e-government system. Guardtime, a corporate developer of KSI, and The SW7 Group, a business development and investment firm will assist the study. Estonia's experience running a digital form of government "gives us good grounds for launching a project to explore the technological frontiers of digital money," said Rainer Olt, head of the central bank's Payment and Settlement Systems Department.

Hackers found?
KuCoin CEO Johnny Lyu tweeted Saturday the South Korean crypto exchange has found what he described as the “suspects” of last month’s $281 million hack. "After a thorough investigation, we have found the suspects of the 9.26 #KuCoin Security Incident with substantial proof at hand," Lyu said in the tweet. "Law enforcement officials and police are officially involved to take action." In addition, Lyu said another $64 million of stolen assets have been recovered from "suspicious addresses," bringing the total value of recovered assets to $204 million since Oct. 1.

Tokenized ETF
Securities and Exchange Commission (SEC) Chairman Jay Clayton said the regulatory body is open to the idea of a tokenized exchange-traded fund (ETF). "We're willing to try that. Our door is wide open," the report quoted Clayton as saying in a webinar yesterday with the Chamber of Digital Commerce. While Clayton's statements expressed a willingness to explore the idea of tokenized stocks, the report also noted recent actions by the regulatory body that would seem to indicate the day those ideas becoming reality is still a ways off.

Quick bites



The Thesis
It seems like every investor has a thesis about how to best play the cryptocurrency opportunity, but who’s right? 

CoinDesk has launched The Thesis, a weekly podcast with Senior Markets Reporter Daniel Cawrey that looks at the most important stories and trends for traders and unique interviews with top fund managers digging deeply into their viewpoint - their thesis.

Tune into The Thesis at 9 a.m. ET on the first and third Saturday of each month. Listen to the first episode featuring Jake Brukhman of CoinFund.

Who won #CryptoTwitter?

ATTENTION: Scammers have been sending fraudulent emails with links to sites disguised to look like coindesk.com. If you are in doubt about a link, type https://www.coindesk.com directly into your browser; do not copy and paste. Remember, if something seems too good to be true, it probably is.
Blockchain Bites
A newsletter from CoinDesk
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Find out what these latest moves mean for your bags - EOS, XRP and XLM take the stage 💸

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October 5, 2020
By Noelle Acheson
If you were forwarded this newsletter and would like to receive it, sign up here. 

Top shelf
The Australian government is investing big in modern technology.

Elsewhere, rewards are coming in for XRP and XLM holders, the forced EOS redistribution makes everyone happy except Block.One, and Venezuela built a national stock exchange on Ethereum.

Australia modernizes
Australia will commit A$800 million (US$575 million) to invest in digital technologies as part of its coronavirus recovery plan, Prime Minister Scott Morrison announced Tuesday. The federal plan will see US$256.6 million for a digital identity solution, $419.9 million to fully implement the Modernising Business Registers (MBR) program, $22.2 million for small businesses training to utilize digital technologies and two blockchain pilot programs totalling $6.9 million. "The Plan supports Australia's economic recovery by removing out-dated regulatory barriers, boosting the capability of small businesses and backs the uptake of technology across the economy," Morrison said in the announcement.

Ripple's Community Comes Together
Taking the number one spot, as the fastest to respond to their member's needs and requests, is Ripple, for pushing forward with its quantitative easing project, right when it was needed the most. In order to fight back the price decline and the world's recent unfortunate series of events, XRP holders are being compensated for their consistency and loyalty to the network, in the most generous community program ever developed by Ripple.

Support for Staking
Back in 2018, the Stellar community proposed a reward program through the Stellar Community Staking Marathon, when the cryptocurrency market was witnessing a downfall, and now, here it is. While this initiative was recommended with the vision of attracting more users, it is an incentive payout program for both new and old users. Under this payout, users can claim up to 25% of the XLM balance as a bonus through a time-based staking algorithm that estimates a reward percentage and allots the additional Lumens automatically. You can claim the Lumens via Account Viewer.

The Rise and Fall
EOS has been one of the darlings of the blockchain industry, especially in Asia, ever since it has been launched - but not lately. The company raised over $4 billion in its year-long ICO, making it one of the most lucrative blockchain offerings. However, it has always had an off relationship with the SEC. In 2018 Block.one was charged for violations of the SEC's security offering regulations, but the story didn't end there. This time around, the probe is related to manipulation of its token prices. However, instead of paying off its outstanding tax liabilities and mounting penalties, the company has chosen to forfeit its digital assets. All EOS holders can qualify for redistribution. Check out the full story. 

National and decentralized
Venezuela has launched a "decentralized" national stock exchange built atop the Ethereum blockchain. Enabled under a new law listed in the country's Official Gazette on Tuesday, the exchange comes as part of new measures announced by Pres. Nicolas Maduro in a bid to sidestep tough U.S. sanctions. A draft of a wider "Anti-blockade Law for National Development and the Guarantee of Human Rights," aimed to give the government tools to "defeat all mechanisms of persecution and international blockade," was also announced Tuesday in a speech to the country's National Assembly. The news comes soon after Venezuela legalized the cryptocurrency mining industry.



CoinDeskU
Universities are often key to getting new industries off the ground, providing the infrastructure to take paradigm-shifting ideas to the next level. But in blockchain and digital finance technology, how do they measure up?

Introducing CoinDesk U, a ranking of the top 20 schools identified in our research in collaboration with Mousebelt.

During a special CoinDesk Live episode on Oct. 6, we will release the results of the first CoinDesk U ranking. We are inviting students from around the U.S. as well as representatives from student club networks, the crypto industry and leading institutions to discuss traditional academia's relevance and support for the financial technology poised to fuel Web 3.0.

Watch CoinDesk Live: Can Old Schools Teach New Tech on CoinDesk.com, Twitter and YouTube. Learn more.

Quick bites

At stake
Are DEXs better off?
The sudden takedown of BitMEX, an institutional part of centralized crypto trading, raises questions about the viability of decentralized exchanges (DEXs).

CoinDesk's Will Foxley reports the value proposition of decentralized platforms is that they are – at least in theory – wholly owned by their communities, rather than their investors or a C-suite of executives.

However, they are founded by real, live humans who are subject to the whims of law enforcement agencies. Are they next?

It seems like BitMEX's takedown was wholly its own doing, by allegedly serving U.S. customers without proper authorization from the CFTC, and eschewing proper know-your-customer (KYC) requirements up until earlier this year.

But without a figurehead like Chief Executive Arthur Hayes, can the same accusations be leveled against platforms like Uniswap – which create open markets without regulatory oversight that anyone can enter?

“For DeFi builders it might be relevant to have from the start a clear path towards decentralized governance similarly what Ethereum and Bitcoin is today, where there is no centrally controlled entity governing these protocols by design. In the end also remember who you are building for and make safe products for all stakeholders,” Stani Kulechov, co-founder of the Aave DeFi money market, told CoinDesk.

Others, like Robert Leshner, founder of DeFi lending platform Compound, even suggested regulators might find virtue in DeFi. Though time will tell.

For now, there could be apparent security in the limited size of the DEX subsector. The $11 billion DeFi market pales in comparison to the larger centralized exchange (CEX) market, Foxley notes. But the gap is closing.

CoinDesk's Zack Voell reports September volume on DEXs recorded its third consecutive month of doubling. Aggregate trading volume on decentralized exchanges reached $23.6 billion in September up from $11.6 billion in August.



Join CoinDesk Research for the fourth and final episode of How to Value Bitcoin, our live webinar series covering Bitcoin fundamentals.

On Oct. 6, Delphi Digital head of research Yan Liberman will dive into collective profit and loss taking (CPLT), hodlwaves and the ins and outs of the money analysis. Register to join How to Value Bitcoin: UTXO-Based Fundamentals (Part 2).

Market intel
Coronavirus scare
The cryptocurrency and Asian stock markets sold off early Friday after U.S. Pres. Donald Trump announced he and his wife had tested positive to COVID-19. In a tweet on Friday, Trump said he and First Lady Melania Trump had begun their quarantine process. Bitcoin is also down by 1.9%, having fallen from $10,678 to around $10,400, at press time. The Australia ASX All Ordinaries fell 1.35%, while the S&P 500 futures fell about 2% on the news. "We will get through this TOGETHER!," Trump tweeted.



invest: etheruem economy
The move to ETH 2.0 will bring the Ethereum network ever closer to fulfilling its original vision: that of a "world computer" that plays host to a parallel, decentralized financial system. Will it be the rocket fuel that takes Ethereum's financial engine mainstream?

CoinDesk's invest: ethereum economy virtual event Oct. 14 will address the ramifications for investors of the sweeping changes underway within the Ethereum ecosystem.

Keynote speakers and panelists including Ethereum founder Vitalik Buterin and Commodity Futures Trading Commission Chairman and CEO Heath P. Tarbert will offer deep dives into Ethereum's adoption of a proof-of-stake consensus mechanism, sharding and other elements of its impending 2.0 upgrade, as well how the new framework impacts the rapidly advancing business of DeFi, stablecoins and decentralized exchanges.

Register to join invest: ethereum economy on Oct. 14.

Internet 2030
This excerpted article is part of CoinDesk's "Internet 2030" series. Read the full report here.

Self sovereign identity
In today's internet, most of us have made the Faustian bargain of trading agency for convenience. We trust Facebook with our log-in credentials to countless other sites, the photos of our family, the contents of our private messages, and troves of personal details that can be repackaged, exploited, and weaponized – in just one tiny example, arguably tipping the 2016 election to Donald Trump.

But most of us make that Faustian bargain. We hold our nose and click. We feel that unless we want to be an online hermit, there really is no choice.

But what if we "owned our data," meaning that instead of trusting the Googles and Facebooks with our precious data – a resource more valuable than oil – we are the custodians of our data, and we only share it when we choose, in certain contexts, and perhaps we can sell it or license it?

"You're re-democratizing the internet," says Drummond Reed, chief trust officer of Evernym, one of the organizations trying to make SSI a reality. "You're pushing the power, literally, out to the peers." Reed is no Pollyanna, and he doesn't expect the Facebooks to vanish in the next decade, but he predicts that "we will see a pretty dramatic reshaping of the power distribution."

Okay, but what would that actually mean from a user experience? SSI can be an abstract concept, making even Bitcoin look simple and easy to explain. It's tough to visualize or appreciate. So for this scenario, we'll envision some ways that SSI – and ownership of your data – would change your (online) life.

Welcome to a better internet.

Have an idea for what the future of the internet will look like, reach out to daniel@coindesk.com.

Who won #CryptoTwitter?
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