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NFT special! Beeple’s millions, Banksy profits, problems for Kings of Leon

Coming every Saturday, Hodlers 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.

Winners and Losers

At the end of the week, Bitcoin is at $60,539, Ether at $1,936 and XRP at $0.44. The total market cap is at $1.8 trillion.

Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Chiliz, Theta Fuel and Ankr. The top three altcoin losers of the week are NEM, Fantom and Voyager Token.

For more info on crypto prices, make sure to read Cointelegraphs market analysis.

Most Memorable Quotations

Golds ability to hedge against inflation has been somewhat exaggerated. While it is a reasonable store of value over the very long-term think centuries it is less reliable across most investment horizons.

Russ Koesterich, BlackRock portfolio manager

The fact that Oracle hasnt bought yet is very bullish and signalling how early it still is.

Jeff Booth, entrepreneur

Tesla in Rear View, About $80,000 Bitcoin Eyes Amazon Market Cap Once Bitcoins back-and-fill process around the $1 trillion market cap is complete, we see internet pioneer Amazon.com as a potential next threshold.

Mike McGlone, Bloomberg Intelligence analyst

Lets Make History together with the first ever NFT for REAL ESTATE!

Ivan Malpica, investor

Youd have over $10,000 if you bought #bitcoin with your stimulus check.

@BitcoinStimulus

DOGE does certainly already have a use case as a niche currency with avid fans, and adoption can certainly grow from here. But for it to genuinely be considered future money, the narrative of DOGE as a meme coin will have to erode.

Kadan Stadelmann, Komodo chief technology officer

Last year, @Ripple and I sued @YouTube for failing to enforce its own policies by allowing fake accounts (impersonating my/Ripples verified accounts) to conduct XRP giveaway scams. Weve now come to a resolution to work together to prevent, detect and take down these scams.

Brad Garlinghouse, Ripple CEO

Rollups are coming very soon. Were fully confident that by the time that we need any more scaling of that, sharding will have already been ready for a long time by then.

Vitalik Buterin, Ethereum co-founder

Gold will always have a place in jewelry and coin collections, but most indicators point to an accelerating pace of Bitcoin replacing the metal as a store of value in investor portfolios.

Mike McGlone, Bloomberg senior commodity strategist

Its so cool to see women and girls in the cryptocurrency space. Its important for us to have empowered financial futures.

Lily Knight, three-year-old Bitcoin educator

If blockchain designs and infrastructure get done at the enterprise level and there arent enough women, there wont be anything created by female thinking patterns. This is the biggest issue we face today.

Efi Pylarinou, blockchain and fintech adviser

Even if you dislike Bitcoin, you should still buy it just in case it pans out.

Dan Held, Kraken

Prediction of the Week

Mark Cuban sees $1 written in DOGEs tea leaves

Just three days after the Dallas Mavericks started accepting Dogecoin for merchandise, the basketball teams billionaire owner, Mark Cuban, was exceedingly bullish.

The Shark Tank star is predicting that DOGEs price will eventually hit $1 meaning Elon Musk isnt the only megarich entrepreneur whos in love with the joke coin.

Last weekend, he said customers had used more than 20,000 DOGE in transactions with the Dallas Mavericks, making it the largest Dogecoin merchant in the world.

The Mavericks were one of the first NBA franchises to recognize crypto as a form of payment for tickets and merchandise, having started accepting Bitcoin through wallet company BitPay two years ago.

Fans can also pay for gear and souvenirs with Bitcoin Cash, USD Coin, Gemini Dollar, Paxos Standard and Binance USD.

FUD of the Week

OpenSea collector pulls the rug on NFTs to highlight arbitrary value

Returning to NFTs now, and some are expressing fears that the market is overheated and engaging in daring stunts to prove their point.

A crypto artist known as Neitherconfirm listed 26 NFTs for sale on OpenSea, featuring people and animal faces in a stained glass style. But things took an unexpected turn on Tuesday when they changed the images associated with each token into photos of literal carpets.

Neitherconfirm said no one was hurt by the move, explaining: All discussions about the value of NFTs are meaningless as long as the token is not inseparable from the artwork itself. What is the meaning of creating an unforgeable token on a highly secured network if somebody can alter, relink or destroy your possession? As long as the value of your artwork is reliable on a central service you do not own anything.

Peter Schiffs son moves 100% of his portfolio into Bitcoin

Weve known for a long time that Peter Schiff is a crypto skeptic and a gold bug. But this week, his son made a powerful statement that shows he couldnt agree less with his father.

Spencer Schiff seems to have decided to move his portfolio investments into Bitcoin, with his dad expressing concern after he went all in. Peter wrote: If my own son is this brainwashed imagine how vulnerable most kids are. Hes HODLing to infinity or bust.

Snarky comments came in thick and fast, with Morgan Creek Digital co-founder Anthony Pompliano replying: At least someone in your family is growing their wealth this year.

Schiff went on to suggest that he needs to disinherit his son: Otherwise he will squander my hard earned wealth on more Bitcoin.

His criticisms of BTC have often proven to be well off the mark. Indeed, in 2019, he confidently declared that the worlds biggest cryptocurrency would never hit $50,000.

Ripple ends YouTube lawsuit over XRP giveaway scams, says CEO

As the SEC lawsuit over the sale of XRP tokens rumbles on, Ripple is dialing down its legal action elsewhere. This week, the company announced that it has ended its lawsuit against YouTube for the video-sharing sites alleged complicity in a spate of XRP giveaway scams.

Ripple CEO Brad Garlinghouse had taken YouTube to task for failing to enforce its own policies by allowing fake accounts to conduct XRP giveaway scams fraudulent profiles that often impersonated his official page or other verified Ripple channels. Both sides have now reached a resolution that will see them work together to prevent, detect and take down these scams.

On Twitter, he added: Social platforms are starting to acknowledge their role in allowing crypto scams to persist and recognize the need to be part of the solution.In other developments, Ripple and Moneygram have officially terminated their partnership, but both companies expressed hope that theyll get to work together again in the future.

Best Cointelegraph Features

Too little, too late? Ethereum losing DeFi ground to rival blockchains

Decentralized exchanges explore alternatives as Ethereum continues to be overloaded. Is this the beginning of the end for the blockchain?

Black Thursday anniversary: Can crypto markets see another huge crash?

The market may witness flash crashes in the near term, and another March 12 drop is not completely off the map.

True or false? A single NFT can power a European household for 1.5 months

NFTs are coming under scrutiny as more attention is drawn to the carbon footprint of PoW blockchains.

6 Questions for Harumi Urata-Thompson of Celsius –

We ask the buidlers in the blockchain and cryptocurrency sector for their thoughts on the industry… and we throw in a few random zingers to keep them on their toes!

This week, our 6 Questions go to Harumi Urata-Thompson, chief financial officer and chief investment officer of Celsius

Harumi Urata-Thompson is the chief financial officer and chief investment officer of Celsius. Additionally, she is the founder of Hut Consulting and the former chief operating officer for the CFA Society New York, for which she completed a successful turnaround during her tenure. Urata-Thompson held multiple senior-level positions at Thomson Reuters and worked at Morgan Stanley and CitiGroup in investment banking. Her expertise is leading and advising organizations on taking innovative paths to achieve strategic, operational and marketing success. Among her busy work schedule, Harumi manages to find to speak on various topics of interest, including blockchain technology, cryptocurrency, cybersecurity, artificial intelligence, Big Data, outer space, among others.

1 When you tell people youre in the blockchain industry, how do they react?

I get contrasting responses from two different groups of people. If they are already involved with blockchain in one way or another and especially if they already know the company I work for, I get thats so cool! every time. From the other group, and unfortunately more people are in this group, I either get a blank look, get a question of what is Bitcoin good for? or worse yet, oh, and you support the criminals. Regarding the first group, I agree with them I wake up excited every day still. For the second group, this can be addressed with education. Financial literacy, which includes cryptocurrency, is a big part of me; I am a career financial services professional and a CFA charter holder. I like sharing my knowledge and experience, so regardless of the venue, I am asked to come to present. I always enjoy doing that.

2 What do you think will be the biggest trend in blockchain for the next 12 months?

I am not sure if I can call this the biggest trend or even trend for that matter, and it certainly will not be limited to the next 12 months, but questioning the use case of blockchain, as we are past the initial excitement of what is blockchain. That or billions of dollars raised from ICOs came and went is definitely something that we absolutely have to take a hard look at as we move forward.

I have been involved in the startup and product management world for a while now, and there is always one question I have to ask myself: Whose problem am I (you) solving? The applicability of blockchain technology is endless. This is just an enabler, and it was developed into different needs of multiple industries. I do not believe that we have heard the it is definitively adopted by the masses statement yet. So, whose problem should we solve that provides us the mass adoption path? I like to address this question from the angle of if I were to invest in a blockchain-based business in the next 12 months, what I might look for in the solution. First, lets think through some of the problems that are blocking us from making these technology-based solutions to become mainstream. Regulations uncertainty. This is really a thing and without any bias, if I am investing in one business, I will try to see if I can find a solution that doesnt have to deal with as many regulations or on the side of being able to influence or work with the regulators to avoid this issue. Performance. It is not what it can be yet, and it probably will take a while, so I likely avoid solutions that require extremely fast transactions or requirements to settle millions of transactions at once. Blockchain not being the face of the solution. Unless we can find a way to use blockchain Intel Inside way, I will not pick a solution whose marketing point #1 is we are a blockchain company. When I combine these thoughts together, and again, if I am investing in only one business at the moment, then I would pick a solution that solves a government i.e., regulator side issue where we actually do have a known problem that can be solved by leveraging blockchain nature, such as immutability, transparency and security. How about we solve the problem where the government must send out massive checks like stimulus checks, social benefits, tax credit, so on? I would investigate this kind of solution provider business. I do not believe that it is a coincidence that we have begun to focus on central bank digital currency recently, and a lot of talk in the blockchain fintech [industries] is around this topic.

3 Whats the unlikeliest-to-happen thing on your bucket list?

500 places to see before you die kind of has become a thing. For me, the more places I go, the more places I add to the list, and I think my list might be 5,000, if not 50,000. I can take one or two vacations per year maybe? I try to knock out multiple places each time I go away, but my ever-expanding list makes it a bit of a challenge to make the visit every place I want to go to bucket list a very challenging one. But I always accept the challenge, and my glass is always half full, so I am sure I have not given up on the idea yet!

4 What is the single most innovative use case for blockchain youve ever seen? It may not be the one likeliest to succeed!

Diamond supply chain. For expensive goods like diamonds (or this can be leveraged into other gems, vintage wines or artwork by famous artists from centuries ago), putting the origin and authenticity is extremely tough, and diamond in particular, which even gem amateurs like myself do think about where the blood diamond might be circulating in the economy although I personally have no way of figuring it out on my own. This opaque supply chain, amongst other things, of course, has prohibited diamonds from becoming a major commodity in the financial services industry or having more derivatives beyond becoming someones necklace or ring. For the industry whose last innovation was to claim a diamond is forever (and thus your love should be, too, if you engage with it), I think this was an amazing innovation to adopt this technology to connect the whole supply chain from mining all the way to retail by creating a thumbprint of diamonds and a record and put that into the blockchain. While I have no strong opinion why the commodities market developed the way it did, there is no reason there is a market for palladium, weather, or but not for diamond. Gems are hard to have a solid price? None of these do. The regulators and financial professionals did not want to create a product out of conflicted products? Blockchain can now solve that. Although the use might be limited to jewelry, there is a fair amount of demand for this gem. While mass adoption of this technology remains to be seen, this is an interesting development Id love to address as we progress forward.

5 What do your parents/significant other/friends/kids tell you off for? Feel free to offer more than one answer.

I like working and I like getting things done. This means there are times when I might be disregarding some of the needs in life, and probably my significant other gets the worst end of that. He is the most patient on the planet, but at some point, he starts coming around trying to take away my laptop and things as I write this, I have put down dinner food on the table and still writing this!

6 Whats the silliest conspiracy theory out there… and which one makes you pause for a moment?

The earth is flat! If the science is not by my side telling me otherwise, it does feel flat, it looks flat it smells flat, so why not??? The one that makes me pause is things like Area 51. Do we really have something completely covered up in this society?

When privacy is a privilege: Ontology’s Jun Li on blockchain-based digital ID –

Everyone’s car generates a lot of data every day, points out Jun Li, founder of the open-source digital identity blockchain Ontology.

The automotive sector is one in which his companys ID solution has a clear use case, as each drivers data can be stored and used to calculate insurance premiums according to actual driving behavior.

Some insurance companies will put telemetry devices on the cars to collect your driving information. Every year, your insurance pricing will be based on your behavior data.

For Li, this is a positive development because good drivers will receive well-earned discounts on their insurance payments. But what if someone does not want an insurance company to access their driving records?

They can decide what kind of data they want to share with whom, Li explains, adding that This meets the legal requirements for privacy and data protection. So, privacy remains under the drivers control… but at what price?

If you want to protect your privacy, you can use this way: I don’t want to share data, I am willing to pay a higher price, so it’s everyone’s choice. Li proclaims, explaining that without a provable, established reputation, no discounts can be offered.

It seems as if privacy is becoming a premium good. Developments like these are scary to many, but Li anticipates most people being happy to part with all types of data if they can get benefits in return. A user will realize that data becomes a real asset. All data has value even direct monetary value.

In one sense, there is nothing quite new to this, as insurance companies have long based premiums on information such as age and gender, which are seen to predict driving behavior. At least this solution would base the premiums on actual behavior.

Lis larger vision is of a globally compatible digital ID that can connect an individual with all the data they generate and allow them to pass it on to whomever they choose. This is comparable to privacy settings on social media sites, minus the need to trust the social media company itself. In the new age, industries like decentralized finance, or DeFi, could operate with credit scores, and ID can be associated with educational achievements and even vaccination records. You can use blockchain to link to different data sources related to identity, he says.

Li is not working to end anonymity per se, rather to help align interests so that everyday reality can better integrate into a decentralized world where individuals have more control over their data.

I dont want to define us as a revolution. We want to change the link to the traditional world to make things better and better. Not just okay, break everything and rebuild everything.

Traditionalizing DeFi

The Wild West is a common characterization of the cryptocurrency environment a new territory where everyone is a newcomer without a previous reputation and people are thus considered untrustworthy by default. Here, the only currency is cold hard (crypto) cash. In the old world, reputation and trust are perhaps the greatest of currencies. The question is how these two worlds will interact going forward: Will they separate entirely or merge?

Li is betting on a merger of worlds, believing that real-world identities still hold value. While centralized finance and DeFi players like Celcius and Aave offer various solutions for borrowing, these remain reliant on the borrower putting up adequate security.

As the solutions offered by the DeFi industry mature and vie to attract more of the global masses, a shift toward services that are more familiar to the average person is perhaps inevitable. This could mean the end of repetitive Know Your Customer procedures.

Jun sees Ethereum as the dominant chain going forward but believes there’s a need for at least a couple of others, including a blockchain for digital ID, which is Ontology.

Opportunities await

When Li began his studies at the University of Shanghai in the mid-2000s, he chose computer science because The internet was just coming out in China and the degree offered the hard skills that made it easy to find a job in the country’s growing technology sector. He initially worked as a programmer with various Chinese firms but soon moved up to manage IT strategy on behalf of major enterprises, such as Infosys in 2010. He expanded his horizons by studying in Manchester, London and Hong Kong, adding master’s degrees in both science and business administration by 2014.

With a fresh MBA in hand, he took on a post with Chinas first futures exchange, the China Financial Futures Exchange, where he laid financial frameworks for the rising Chinese economy, including exchange products, sentiment products, design and architecture.

Six years ago, while leading an innovation team charged with researching new technologies like big data and artificial intelligence, he realized there was more to blockchain than meets the eye. Blockchain, he found, is incomparable to other IT-technologies.

I realized that blockchain is not only a kind of financial technology. It is a kind of mechanism that allows people to cooperate based on a no-trust mechanism, he explains.

I thought okay this is a very interesting technology, I should put then all my time to it, so I quit my job.

He promptly co-founded OnChain, a provider of open-source blockchain solutions for the Chinese market, in 2016.

The system architect determined that the virtual world being built by the global blockchain industry lacked interconnectivity due to its largely pseudonymous nature. We need to build a bridge from the traditional world into the world of decentralized identity, he concluded, explaining that a digital ID could link blockchain accounts to real people. Two years later, he founded Ontology to bring this vision to life.

The great balancing act

Data is often called the new oil. All manner of companies harvest various types of user data for profit without allowing the users themselves any method of benefiting directly from the data they give up. Much of this information collection takes place without the knowledge of the end-user, and the mere use of a product often implies the acceptance of a terms of service that makes it clear that the data in question never belonged to the user at all.

For a person who values privacy and anonymity, the modern reality of surveillance capitalism is a force to be reckoned with. Participation is effectively mandatory, lest one become a true hermit. Even if one is not opposed to sharing their personal information with companies, there is a constant risk that identity thieves will access the companies’ databases, as pointed out by Erik Voorhees, whose cryptocurrency exchange platform, ShapeShift, now allows users to trade without KYC.

Online, your Bitcoin address is kind of an identity, people maybe don’t know who are you in the real world, but the account is kind of identity. This is a kind of pseudonymity.

Lis desire for greater transparency brings up ideas of integrity a person should be who they say they are, and do as they say. With an ever-present self-sovereign digital ID, a sort of factuality or reality could be imposed on the online world. The projects name offers a major clue ontology is a branch of philosophy concerned with the ideas of existence, being, becoming and reality.

For Li, knowing who you are dealing with online is important, and he sees a future where centralized social media platforms give way to an environment in which users control their information directly and use the security of blockchain technology to control what they share and with whom they share it.

Most identity is managed by centralized organizations or even governments, so its difficult for people to control all the verification processes. I think a decentralized identity is quite necessary in the digital world.

Li believes that blockchain solutions such as Ontology provide balance between the two undesirable extremes of corporations controlling all the data and strictly anonymous interactions. I believe this kind of balances conflicts between internet services and between privacy and data protection, he says, referring to the present need for people to trust multinational companies with their private information and communications.

He envisions that digital identity solutions have a future in industries such as social media where users today must entrust their information with a centralized platform like Facebook and Twitter. Instead, social media could be a decentralized web of individuals who choose to connect certain information to their persona and make posts through open-source blockchain protocols. It would be easy to verify identity, and there would be less risk of information being used in unanticipated ways. Maybe in the future we needn’t any Facebook or Twitter, he says.

I believe real information with a real identity will become a mainstream social network.

Australias eSafety commissioner, Julie Inman Grant, recently suggested that a blockchain-based digital ID system could serve to prevent trolling and online abuse by users who hide behind the anonymity offered by various platforms. Such a system would still allow users to interact on the internet without revealing their real identity but would make it easier for law enforcement to detect abuse.

Digital IDs are not without precedent: A 2009 law in South Korea required real-name registration on websites, before being struck down as unconstitutional in 2012, and the 2017 Chinese Cybersecurity Law mandates that all users of Chinese websites provide their phone numbers in order to create an online environment that is “safe and real” according to state-run media. They have not, however, caught on in the Western world, with Germany forbidding unnecessary real-name requirements since 1997.

Li, who is based in Shanghai, places a high value on real people and reputation. While he does not have any problem with anonymous profiles, he figures that such users are less likely to provide information that is trustworthy or reliable. That is certainly the case for more traditional professionals, who seek to leverage their reputations by showing off their work.

I believe people still want to tell everyone: this is who I am, this is my opinion, these are my posts and articles. But that is a personal choice.

Sam Bankman-Fried: The crypto whale who wants to give billions away –

“The brutal or inspiring truth… is that the more you put in, the more you get out.”

Like many people in crypto, Sam Bankman-Fried is in it for the money. As the founder of quant trading firm Alameda Research, exchange FTX and DeFi protocol Serum, the curly haired 28-year-old has amassed a $10 billion fortune in just three years in the industry.

Unlike most people in crypto though, he’s building up a fortune in order to give half of it away. An effective altruist hes essentially robbing from the rich, via his preternatural crypto trading strategies, in order to give to the poor.

“Maybe without the robbing part,” he says. “In the end my goal is to have as much impact as I can, however that is. And right now, I think that’s flowing through donations, so figuring out how I can be able to make as much as I can and donate as much as I can.”

SBF, as hes sometimes referred to, has been walking the walk for some time now. He spent a couple of months as the director of development at the Centre for Effective Altruism in 2017 and before that, gave away half of his income during his stint on Wall Street. He plans on giving away around 50% of his crypto billions too but only after hes finished reinvesting in his ever-expanding empire.

He does donate to causes as they come up however. He was the second largest donor to President Joe Biden’s campaign, after former New York mayor Michael Bloomberg, tipping in $5.2 million.

“I was excited about the impact it might have. I basically thought that it mattered what happened in the election.”

Also, the FTX Foundation launched recently. Itll give away 1% of the platforms fees and match user donations dollar for dollar up to $10,000 a day. In its first couple of weeks the Foundation has raised more than $2M, mostly in user contributions, with users able to vote on the recipient charities from a carefully curated list.

The old bean bag

SBF’s growing public profile was given a shot in the arm when he was named on Forbes 30 Under 30 finance list for this year. “I’m honored, he says. I tend to be fairly forward looking instead of backward look and so it was cool for a bit but it sort of wore off pretty quickly.

He also came in at number three in the recent Cointelegraph Top 100.

Famous for sleeping on his bean bag at his Hong Kong office so he never misses a trade, and it seems a key reason SBF makes more money than anyone else is that hes barely ever off the clock.

“I’m at the office, well usually 24 hours a day. I’ll sometimes just nap on a beanbag here and obviously shoot the shit with coworkers and sometimes with people online, but mostly its work.”

He doesn’t have a girlfriend or even see many people outside of work, though he makes time to speak with his family back in the U.S. “a few times a week on the phone.” It’s safe to say SBF isnt the type of person desperate to strike the perfect work/life balance or who even accepts that productivity decreases after the first 11 hours or so at work.

“I think that sort of narrative is substantially oversold and the brutal or inspiring truth, depending on how you think about it, is that the more you put in, the more you get out,” he says. “It’s motivating for me and it’s fulfilling, but you know, another piece of it is that, it’s how I think I can have the most impact.

How did I get here?

The child of two Stanford Law professors, SBF discovered the Effective Altruism movement during his Physics degree at the Massachusetts Institute of Technology.

Popularized by philosophers and ethicists including Toby Ord and Peter Singer the movement is focused on pragmatic ways to help others using science and reason to ensure the benefits are maximized, rather than the good intentions and poor outcomes that characterize some charitable organizations. This practical approach also extends to a hard headed examination of the best way an individual can help.

“Imagine the amount of good that you could do working directly for some cause, versus the amount that you could do working on Wall Street and donating to it. In a lot of cases you could probably actually help them out more with the donations. And so basically I checked out Wall Street.”

Friends whod interned at quant trading firm Jane Street Capital gave him the pathway to Wall Street, and he began working there straight after college in 2014. Why did they hire a physics major with very little financial experience straight out of school you ask?

It turns out quant trading strategies are “super valuable trade secrets which means no one teaches the successful ones in Uni degrees. Instead, firms recruit people with raw talent: maths whizzes or people with strong backgrounds in physics or computer science.

“What you need to know about markets, they’ll teach,” he says. He traded a variety of ETFs, futures, currencies and equities and designed an automated OTC trading system. While there he became interested in the insanely profitable arbitrage opportunities in the inefficient crypto markets and set up crypto quant trading firm Alameda Research to profit from it in late 2017.

The whale to rule all whales

Alameda Research has now grown to become one of the biggest companies in crypto with around $2.5 billion in assets under management, although as with his own fortune, SBF qualifies this with some provisos around liquid and illiquid assets.

Alameda is the Moby Dick of crypto whales, responsible for up to 10% of the cryptocurrency moving around the markets at any one time. “I think at particular times it can get up to about that fraction of the volume,” he says. “I think it averages a bit lower. It’s solidly in the group of the five to ten larger trading firms in the space.”

That means any trade Alameda takes has the potential to move markets and cause liquidations. In October last year, Alameda was widely blamed for crashing the price of YFI by shorting, though SBF has downplayed any impact. He believes that with great power comes great responsibility.

“It’s absolutely a responsibility,” he says, adding that he tries to follow the approach of TradFi quant firms. “Their role is to find profitable trades, but it’s also to provide liquidity and promote healthy markets, he says. “The biggest duty is the duty to do no harm. And to make sure that what you do is, on the whole, promoting liquidity in healthy markets and efficient trading, as opposed to intervening in it.”

He adds that arbitrage trades, for example, can have positive impacts as it makes markets more efficient and brings down prices where there are premiums. Identifying and working out how to profit from arbitrage trades was the whole reason Alameda was founded. “One of the first big ones that we actually made some money on was Litecoin, he recalls.

There was a week in late 2017 when Litecoin was trading at a consistent 20% premium on Coinbase GDAX [now Coinbase Pro]. There’s sort of this idea like Oh that’s cool, you just make 10% every half hour I guess you make infinity dollars? And of course, that’s not the answer.”

It turns out that trying to exploit the opportunity was hideously complicated and required, getting around trade size limits, and withdrawal limits of a million a day. “Especially a few years ago in crypto an enormous piece of the problem was figuring out the logistical steps,” he says.

Another arbitrage trade saw SBF and friends move up to $25M a day through a series of intermediaries and rural banks in Japan to take advantage of the famous Kimchee premium, which saw Bitcoin trading for up to a third more in South Koreas hard to access financial system than the U.S.

But it was dealing with the legacy financial system that threw up the biggest challenges. “The single hardest part of the arbitrage, the piece that was slowest and hardest and most expensive and most frustrating was the fiat,” he says, noting difficulties getting accounts, which could then be shut at any moment, the archaic procedures and bureaucracy and insanely slow wire transfers.

“We spent five man hours per day in physical bank branches for a good solid five months, because that’s what it took to send the wire transfers,” he says, adding:

“Like got there at 10am and stayed till 1pm with multiple people there, to have all the meetings we had to have every single f–king day of the week, in order to send the same wire transfer we sent yesterday.”

This is one reason SBF is so passionate about DeFi his vision is for it to one day replace the lumbering existing financial system. “The current payment rails are not efficient at all,” he says. There’s trillions of dollars of companies, which are just built around trying to abstract that away and you end up with this incredibly complex web of shit to make it usable for most people. They’re running on systems that are old and not designed even with the internet in mind.”

Crypto influencer

For many people SBF sprang fully formed as a major crypto and DeFi personality during the mid-2020 DeFi boom, as he began to make an impact on Crypto Twitter. This was a deliberate move: hed been happy to fly under the radar in 2018 because Alameda’s quant trading focus had: “Very little need for publicity, its sort of mostly downside. But when he launched the innovative crypto exchange FTX in 2019 he needed to build a community around it and he stepped up to become its public face on social media.

“With FTX as a retail facing business the more customers the better. You can build the best product in the world but if no one knows about it it’s not worth anything, he says.

One of the hardest and most interesting pieces has been figuring out how to get users, and increasing awareness was a big part of that.”

He seems to have figured it out as FTX became the fifth largest derivatives exchange by volume, with a $3.5 billion valuation. It’s launched a range of innovative markets, including tokenized fractional stock offerings of companies like Tesla, Apple and Amazon, as well as pre-IPO trading in Coinbase.

He’s also using his wealth and influence to try and overcome what he sees as the biggest blocker preventing the wide scale adoption of DeFi. He believes that Ethereum, including Eth2 can’t scale enough to allow crypto and DeFi to replace the existing financial system. DeFi can currently handle about 10 transactions per second, with second layer solutions enabling a few thousand TPS.

“This is an absolute hard, immoveable barrier, in terms of growth, he says. DeFi just literally cannot grow as an ecosystem until that is addressed. And so no long-term plan that doesn’t address it is viable. [] That is just fatal.” Even Eth2s goal of 100,000 TPS isnt enough for what SBF has in mind.

“If your goal is to scale to 100 million or a billion users, [] if you want to have the upside of an application that might grow to the scale of the largest applications in the world, it needs to be able to scale up to about a million transactions a second. And so you can just sort of cross off the list permanently with no recourse and not even needing to consider any other factor, any scaling solution that doesn’t get there, if that’s your goal.”

Thats what led him to become one of the most vocal proponents for Solana, a blockchain that can currently process 65,000 TPS and whose team claim it can eventually scale up to astonishing levels: 710,000 TPS on a 1 gigabit link or 28.4 million TPS on a 40 gigabit link.

He founded the Serum DEX on Solana and launched the SRM cryptocurrency in August 2020. Bankman-Fried say you can see Solana’s benefits in Serums on chain order book matching engine and fees of “100th of a penny to send an order and trades happen in seconds.”

“So you get a lot of juice out of having the higher throughput. And that’s really helped scale up that product base quite a bit. To the point where I think that, you know, our best guess is that, probably Serum DEX in six months of operation has, has consumed more transactions than all of the Ethereum blockchain in history.”

Ethereums network effects mean he faces an uphill battle getting DeFi projects and users to migrate to Solana. Even after he was handed control of SushiSwap by Chef Nomi, he was unable to convince the community to port over. “It ended up being way harder than we thought to get the existing projects to port over and way easier to just have new projects built,” he explains, adding:

“We would still be super excited for them to have an outpost on Solana. I think they still may at some point. But I also think that Serums gonna march on either way. In the end, like, I sort of want to have the best products and users, you know, however it gets there.”

(Following our interview, a new proposal emerged to build a version of SushiSwap on Solana and Serum, potentially called Bonsai.)

Although SBF says the network effects of having so many interconnected applications built on Ethereum are substantial, he points out that eventually each project will have to migrate and break composability and tooling with the existing options in order to switch to layer-two, Eth2, or some other scaling solution. In terms of user numbers he says ETHs network effects are overstated.

“The other part is that while the current DeFi user base is super devoted, super important and powerful, its not that large. Daily active users, I think it’s in the tens of thousands. I think FTX probably has more daily active users than all of DeFi combined.”

SBFs plan appears to be to embed the Solana blockchain as infrastructure in apps where its invisible to most users, in order to onboard millions into DeFi. At the start of 2021, Alameda led a $50 million funding round to embed DeFi style tools in Maps.me, a European offline mapping application with 140 million users. It’ll have a multi-currency wallet with staking and swapping facilities built on Solana. FTXs purchase of Blockfolio may follow a somewhat similar strategy.

I think it’s gonna be a really cool product and powerful product suite for the app, he says of Maps.me. I’m super excited about it. I think it might really kickstart adoption.

Bitcoin breaks $40,000 and sets its sights on a new all-time high, ETH fees spike as a new price record is set, and Elon Musk really loves Dogecoin.

The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions and much more — one week on Cointelegraph in one link!

Winners and Losers

At the end of the week, Bitcoin is at $40,776.40, Ether at $1,676.86 and XRP at $0.44. The total market cap is at $1,218,786,711,013.

Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are UMA, 0x and PancakeSwap. The top three altcoin losers of the week are HedgeTrade, ThorChain and Fantom.

For more info on crypto prices, make sure to read Cointelegraphs market analysis.

Most Memorable Quotations

After a record-breaking year in 2020 that saw it jump more than 300%, Bitcoin looks to stay strong in 2021 as more retail and big-name institutional buyers enter the market.

Jesse Cohen, Investing.com senior financial analyst

While Musks behavior and communication can be deemed positive or funny in nature (and therefore arguably uncritical), similar research has already revealed that negative tweets can also have a negative impact on financial returns.

Lennart Ante, Blockchain Research Lab co-founder

If a single tweet can potentially lead to an increase of $111 billion in Bitcoins market capitalization, a different tweet could also wipe out a similar value.

Lennart Ante, Blockchain Research Lab co-founder

ur welcome

Elon Musk, Tesla CEO

We also saw an exceptional response from our crypto launch […] The volume of crypto traded on our platform greatly exceeded our expectations.

Dan Schulman, PayPal CEO

The economic environment for Bitcoin right now could not be better.

Duncan MacInnes, Ruffer co-manager

Even though the $XRP army get aggressive when you warn them about the escrow shaped elephant in the room, I still cant help but feel sorry for those that bought at 0.75c today. X R (I)P.

Keith Wareing, Cointelegraph Markets contributor

Prediction of the Week

BlockTower Capital CIO estimates another 922 months of bull run for crypto

With renewed optimism around how Bitcoin is performing, the inevitable question is this: How long will the bull run last?

Well, according to BlockTower Capitals chief information officer Ari Paul, weve got at least nine more months to look forward to.

He said: This is where we get ongoing, dizzying rotation. BTC up, then when BTC takes a breather, ETH and some large caps (and in this regime, DeFi blue chips), then small caps, rinse and repeat. Of course, throw in some 30-60% retracements for fun.

In terms of how Bitcoin will perform, Paul added: Price wise my guess is BTC ends the bull run between $100k-$400k and alts do better.

FUD of the Week

Guggenheim CIO under fire for the timing of his changing BTC sentiment

Scott Minerds apparent shift from bullish to bearish and back again on either side of an SEC filing related to a $500-million investment in BTC has been raising eyebrows on social media.

The Guggenheim CIO had hit the headlines after claiming that BTC would see a full retracement back towards the $20,000 level later adding there wasnt enough institutional support to warrant a price above $30,000.

Days later, Minerd claimed Bitcoin has the potential to reach $600,000 in the long run based on its scarcity and the value of gold.

Some on Twitter were not impressed. Economist Alex Krger wrote: Remember Guggenheim wants you to sell #bitcoin so they may buy lower. Been trying to scare the market into thinking price will crash to $20,000, even though they think its worth $400,000.

New class action against Robinhood alleges oligopoly manipulation

Its been quite a week from Robinhood, the stock trading app thats continuing to reel from the backlash it suffered after restricting trading in GameStop.

A class-action lawsuit has been filed that the drastic move denied customers a chance to profit from volatility in GME shares manipulating the course of the stocks.

Meanwhile, some reports suggested that Robinhood was planning on postponing its planned IPO as it tries to focus on tackling the PR disaster. Other outlets have cast doubt on this, saying a stock market debut is going ahead as intended.

Its also been claimed that Robinhoods CEO, Vlad Tenev, is going to testify before the U.S. House Financial Services Committee over the firms role in recent volatility.

Robinhood, the stock trading app formerly popular with millennials, is facing another class-action suit, following its recent temporary suspension of purchases of GameStop and other meme-stocks through its platform.

Polish crypto exchange employee in induced coma after armed attack

A member of staff at a Polish crypto and gold exchange has been placed into an induced coma after an armed attack.

The offices of FlyingAtom, in the city of Olsztyn, were targeted on Jan. 22. The masked attacker managed to escape with gold worth approximately $120,000.

A suspect was subsequently detained in connection with the incident, with the exchange thanking the police for their help.

Best Cointelegraph Features

Time to shine? Crypto should be given a chance after GameStop drama

The GameStop pump may lead a number of amateur investors to finally learn about DeFi and the advantages it puts forth.

Going feeless is the only way to enable blockchain adoption

Feeless transactions can play a role in enabling DeFi, allowing the sector to further develop and grow in importance.

r/Wallstreetbets vs. Wall Street: A prelude to DeFi bursting onto the scene?

Was stock trading app Robinhood the villain in the GameStop saga? In a decentralized trading market, no one would have that power.

GameStop mayhem, Robinhood scandal, Musk tweets, DOGE explodes: Hodler’s Digest

The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions and much more — one week on Cointelegraph in one link!

Winners and Losers

At the end of the week, Bitcoin is at $34,293.71, Ether at $1,365.72 and XRP at $0.38. The total market cap is at $1,012,676,711,938.

Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Fantom, Dogecoin and Voyager Token. The top three altcoin losers of the week are Enjin Coin, Decentraland and NXM.

For more info on crypto prices, make sure to read Cointelegraphs market analysis.

Most Memorable Quotations

With upcoming Chinese New Year holidays, we expect this [Bitcoin] selling pressure to continue in the short-term, providing good entry opportunities for market participants.

Lennard Neo, Stack Funds head of research

Has Doge ever been to a dollar?

MSB Chairman, parody Twitter account

Right now, the reality of the institutional demand that would support a $35,000 price or even a $30,000 price is just not there. I dont think the investor base is big enough and deep enough right now to support this kind of valuation.

Scott Minerd, Guggenheim CIO

If you are using a mobile crypto wallet on an iOS device, be sure to update iOS as soon as possible!

Pete Kim, Coinbase head engineer

If you dont like suits, buy $GME and $AMC. If you dont like the bankers, buy #Bitcoin.

Cameron Winklevoss, Gemini co-founder

People have maximum interest at $40,000 per #Bitcoin, but almost zero interest at $30,000 per #Bitcoin. Interesting.

Michal van de Poppe, Cointelegraph Markets analyst

Gamestonk!!

Elon Musk, Tesla CEO

Are cryptocurrencies here to stay? Digital innovation in payments yes. Have we landed on what I would call the design, governance and arrangements for a lasting digital currency? No, I dont think were there yet.

Andrew Bailey, Bank of England governor

If I were a regulator, I would be kind of hyperventilating at the success of [Bitcoin] at the moment, and I would be arming myself to deal with it.

Lloyd Blankfein, Goldman Sachs senior chairman

Prediction of the Week

Guggenheim says institutional demand not enough to keep BTC above $30,000

Guggenheims Scott Minerd has come out with another gloomy price outlook for Bitcoin, stating theres not enough institutional demand to keep the asset over $30,000.

Speaking to Bloomberg, the chief investment officer said: Right now, the reality of the institutional demand that would support a $35,000 price or even a $30,000 price is just not there. I dont think the investor base is big enough and deep enough right now to support this kind of valuation.

Minerd also believes that the downward pressure has a lot further to go, explaining that it is not uncommon to see squeezes like this.

On Jan. 20, Minerd told CNBC that he expects prices to retrace back to $20,000. The last time BTC fell by over half was in March 2020, when it dropped from just over $10,000 to below $5,000 in just three weeks.

FUD of the Week

Apple updates iOS to fix crypto wallet security vulnerabilities

Apple has issued new security updates for its mobile operating system after the iPhone maker discovered vulnerabilities that could compromise crypto wallets.

The security updates, which were released Tuesday, affect iOS 14.4 and iPadOS 14.4. The vulnerabilities reportedly allowed hackers to gain remote access to a target system, thereby exposing the users cryptocurrency wallet.

Pete Kim, Coinbases head engineer, issued this warning: If you are using a mobile crypto wallet on an iOS device, be sure to update iOS as soon as possible!

Crypto crime dropped 57% in 2020, but DeFi hacks surged, CipherTrace says

Crimes targeting the virtual currency sector decreased by more than half in 2020, according to blockchain security firm CipherTrace.

Overall losses from crypto theft, hacks and fraud fell 57% in 2020 to $1.9 billion, due mainly to improved security systems but it wasnt all good news.

Last year also saw a surge in crime related to decentralized finance, and the majority of incidents were rug pulls. This is where a token is artificially hyped and inflated, with the creators and early investors pulling the plug after the pump, leaving the latecomers out of pocket.

CipherTraces report warned that 50% of all crypto hacks were linked to DeFi protocols, with 99% of major fraud volume in the second half of 2020 stemming from rug pulls.

BoE Governor: Cryptocurrencies of today are destined to fail long term

The current generation of crypto assets lacks the design and structure needed to ensure long-term survival, Bank of England Governor Andrew Bailey has warned.

Speaking during a World Economic Forum panel, he said: Are cryptocurrencies here to stay? Digital innovation in payments yes. Have we landed on what I would call the design, governance and arrangements for a lasting digital currency? No, I dont think were there yet.

Bailey also indicated that the levels of transactional privacy afforded by crypto assets are a source of concern among regulators.

Best Cointelegraph Features

Risk it for the Bitcoin: Has BTC matured to be a safe investment play?

Institutional investors have arrived at the cryptocurrency table, but does that mean that Bitcoin has now become a safe investment?

DOGE price surge: The power of memes and social media on full display

Dogecoin, the quintessential meme crypto, is being pulled on a leash by yet another social media-driven hype.

Zombies not welcome: Original altcoins lose ground to DeFi newcomers

As DeFi takes over the cryptosphere, will the zombie projects remain dead after the great repricing?

Bitcoin in jeopardy, Ether briefly breaks records, Biden takes action: Hodler’s Digest

The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions and much more — one week on Cointelegraph in one link!

Winners and Losers

At the end of the week, Bitcoin is at $32,300.43, Ether at $1,250.90 and XRP at $0.27. The total market cap is at $944,648,313,957.

Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Enjin Coin, Curve DAO Token and Decentraland. The top three altcoin losers of the week are IOST, Zcash and Dash.

For more info on crypto prices, make sure to read Cointelegraphs market analysis.

Most Memorable Quotations

I think for the time being, we probably put in the top for Bitcoin for the next year or so. And were likely to see a full retracement back toward the 20,000 level.

Scott Minerd, Guggenheim CIO

Only by widening the playing field and facilitating more participation will crypto reach and maintain a market cap of $2 trillion and beyond.

Aite Group

Ethereum will continue to see demand outstrip supply as global adoption continues.

Danny Ryan, Ethereum Foundation researcher

We fought hard & earned the right to take a breath & reset. Janet Yellen isnt Steve Mnuchin. Im optimistic.

Jake Chervinsky, Compound Finance general counsel

Weve obviously seen the price of Bitcoin rise quite a bit; weve seen a lot of activity in the DeFi space, and I think all of these things will provide a nice framework against which a new chairman can take a fresh look at questions across the board in the crypto space.

Crypto Mom Hester Peirce, SEC commissioner

Im honestly loving how well $ETH is holding up in this climate.

Neko, cryptocurrency trader

There is an increasing amount of trader doubt that #Bitcoin will revisit $40,000. But according to address activity and trade volume, the long-term trend still looks plenty healthy. Keep a close eye on whether $BTCs usage rate stays propped up.

Santiment

Congrats to Gary Gensler! Were ready to work with SEC leadership and the broader Biden administration to chart a path forward for blockchain and crypto innovation in the U.S.

Brad Garlinghouse, Ripple CEO

Bitcoin is the best cryptocurrency suited for store of value. In terms of what the Bitcoin blockchain can currently handle from a latency and throughput point of view, Bitcoin is very strong.

Konstantin Richter, Blockdaemon founder and CEO

Grayscale were buying $251 million of #Bitcoin on avg per week in Q4 2020. Last week they did $700 million in one day… And today $590 million… Pay attention.

Danny Scott, CoinCorner CEO

The flow into the Grayscale Bitcoin Trust would likely need to sustain its US$100 million per day pace over the coming days and weeks for such a breakout to occur.

JPMorgan

Prediction of the Week

Hedge fund predicts $115,000 Bitcoin price and the fall of speculative altcoins

New data from Pantera Capital this week suggested that Bitcoins current price action is closely following the stock-to-flow models trajectory.

The firms analysts believe BTC will have reached $115,212 by Aug. 1 and that its price will gain an average of more than $10,000 a month, hitting six figures in the early summer.

Pantera believes that a significant difference between this rally and 2017 is linked to the overall market composition and where value is located with altcoins losing out.

Andy Yee, a public policy director for Visa in China, tweeted: This rally is different. Massive shift from high-speculative, non-functioning tokens in 2017 to #Bitcoin and #Ethereum today.

FUD of the Week

More institutions will warm up to crypto once market cap hits $2 trillion, eToro says

Barriers are still hindering institutional adoption of crypto, a new report commissioned by eToro suggests.

Researchers at Aite Group said the crypto market could reach a $2-trillion market cap if more institutional players were to get on board amid more favorable conditions. These firms would be more likely to adopt crypto if there was less regulatory uncertainty, a developed market infrastructure, and less risk surrounding security.

Tomer Niv, head of business development at eToro, said: Only by widening the playing field and facilitating more participation will crypto reach and maintain a market cap of $2 trillion and beyond.

The report also warned that technical complexity is an issue that needs to be addressed, with Niv adding: More needs to be done from a market infrastructure point of view to make this group of investors feel comfortable joining the crypto ecosystem.

83% of cryptocurrencies that peaked in 2018 are still down by 90%

More than 80% of crypto assets that hit all-time highs in January 2018 are still down by at least 90%, according to data from Messari.

The data set included 410 assets that posted record prices during 2017 or later, with 2018s 157 star coins performing the worst with an average of -90.71% since the previous ATH.

2017s top cryptos have since crashed by 82% on average, while 2019s crop is down 72%, and 2020s standouts have shed 53%.

CMT Digital analyst Matt Casto, who spotted the data, tweeted: Holding assets that hit high marks +3 years ago is proving to be a massive lost opportunity cost for deploying capital.

Armed robbers steal $450,000 from Hong Kong crypto trader

A manhunt is underway after robbers posing as crypto buyers stole $450,000 from a woman in Hong Kong.

One member of the gang completed multiple transactions with the victim to win their trust, and an investigation has uncovered there were three previous deals ranging between $77,000 and $90,000.

On the day of the robbery, the other members of the gang rushed to the scene as soon as their colleague received the Tether tokens in exchange for the $450,000 payment.

Armed with knives, they proceeded to lock the woman in the office where the deal took place but not before snatching her iPhone and the cash.

According to The South China Morning Post, the woman was able to use her second phone to inform her husband, who contacted the police. Detectives said that the womans uncle, who chaperoned her to the meeting place, reportedly saw four men fleeing the scene.

Luckily, the woman was unhurt in the attack, unlike other victims who have suffered physical injuries and even death at the hands of bandits looking to steal cryptocurrencies.

Best Cointelegraph Features

Believing, not seeing: Institutions still predict $100,000 Bitcoin price

Even though Bitcoin has struggled to reclaim its recent high of $42,000, Shiraz Jagati says projections of BTC reaching $100,000 still seem achievable to some.

Access denied: Banks seem prone to cryptophobia despite growing adoption

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Bitcoin as a last resort? Murmurs of crypto as a reserve currency abound

Could Bitcoin fulfill the key functions of a reserve currency? Andrew Singer talks to experts as he aims to find out whether BTC can find a new and unexpected role for itself.

DeFi lending and borrowing, explained

As DeFi protocols continue to garner mainstream traction, here’s an introduction to how lending and borrowing work on these platforms.

Are there any risks involved?

DeFi protocols feature certain risks, such as third-party smart contract tampering and the risk of borrow APYs rising dramatically within a short time period.

When compared with centralized finance, there are no practical dangers associated with DeFi lending. However, like anything else, DeFi, too, has risks associated with it. For example, there are certain smart contract risks that are present as well as the threat of APYs changing dramatically within a short time window.

For example, during the DeFi craze of 2020 where “yield farming” became a rage globally, borrow APYs on certain cryptocurrencies rose to 40% and over. This could have potentially caused unaware users who may not track their interest rates daily to repay more than what they might have initially expected.

Overall, while the entire process of lending and borrowing using DeFi platforms is not really complicated, there are certain small differences in terms of how each specific protocol operates, for example, the various wallets they support, applicable fees, etc.

Furthermore, users still have to be cautious and ensure that they have inserted the correct wallet numbers and address details so as not to end up losing their funds since there is no way to recover them in such a scenario.

What are the mechanics of how interest returns are doled out in DeFi?

One picks a coin that they want to lend as well as the smart contract using a DeFi app, then the interest amount is supplied directly to the associated wallet.

To cut a very long story short, the interest that lenders receive and what borrowers have to pay is calculated by using the ratio that exists between the supplied and borrowed tokens in a particular market. Also, it should be noted that the borrow annual percentage yield is higher than the supply APY in relation to a particular market.

On another technical note, interest APYs are determined per Ethereum block, which means that DeFi lending entails users being provided with variable interest rates that can change dramatically depending on the lending and borrowing demand for particular tokens. Also, some protocols, such as Aave, offer their users stable “borrow APYs” as well as flash loans, for which no upfront collateral is required.

Is there a cap on how much money one can borrow?

Yes, and there are primarily two factors that govern this. Does the platform have enough liquidity? What is the “collateral cofactor” of a person’s supplied assets?

There is indeed a limit, and there are two primary factors that govern how much money an individual can borrow. First, it depends on the total fund pool that is actually available to be borrowed from a particular market. And while this may not be a major issue, it could become a factor if someone actually tries to borrow a really large volume of a certain token.

Secondly, it’s largely dependent on the “collateral factor” of one’s supplied tokens. This term refers to the total amount of funds that can be borrowed based on the quality of the collateral provided. For example, Dai and Ether (ETH) possess a collateral factor of 75% on the DeFi lending platform Compound, which means that users can take a loan of up to 75% of the value of their supplied Dai or ETH.

On a more technical note, those who borrow funds must have the total value of their borrowed amount stay under the following limit — the value of one’s collateral multiplied by its collateral factor. As long as this condition stays valid, an individual can borrow as much money as they wants.

How does lending and borrowing work on DeFi platforms?

An individual sends the tokens they wish to lend into a “money market” using a smart contract, which then issues interest in the platform’s native token.

When making use of DeFi protocols such as Aave and Maker, users looking to become “lenders” need to supply their tokens into what is referred to as a “money market.” This is done so by an individual sending their assets to a smart contract — which serves as an automated digital intermediary — following which the coins become available to other users for borrowing.

The aforementioned smart contract issues interest tokens that are doled out automatically to the user and can be redeemed at a later stage in place for one’s underlying assets. The tokens that are minted are native to the platform, for example, in Aave the interest tokens are called aTokens, whereas on Maker they are referred to as Dai.

Almost all of the loans that are issued via the native tokens are over-collateralized, which basically means that users who want to borrow funds are required to provide a guarantee — in the form of crypto — that is worth more than the actual loan itself.

While on paper this may seem somewhat absurd since the person could potentially just sell their assets in the first place to get the money, there are many reasons why DeFi borrowing makes sense.

Firstly, users may need funds to cover any unforeseen expenses they may have incurred while not wanting to sell their holdings, as the assets may be primed to increase in value in the future. Similarly, by borrowing via DeFi protocols, individuals can potentially avoid or delay paying capital gains taxes on their digital tokens. Lastly, individuals can use funds borrowed via such platforms to increase their leverage on certain trading positions.

What is lending and borrowing in DeFi?

Lending and borrowing, within the realm of traditional as well as crypto finance, entails the act of one party providing monetary assets — be it fiat or digital currencies — to someone else in exchange for a steady income stream.

The concept of “lending and borrowing” has been around for ages and is one of the core aspects of any financial system, especially the “fractional banking” setup that is predominantly used across the globe today. The idea is extremely straightforward — i.e., lenders provide funds to borrowers in return for a regular interest rate, and that’s quite literally it. Also, traditionally, such deals are usually facilitated by a financial institution such as a bank or an independent entity such as a peer-to-peer lender.

In the context of cryptocurrencies, lending and borrowing can be facilitated via two primary routes — via a centralized finance institution, such as BlockFi, Celsius, etc., or through the use of decentralized finance protocols such as Aave, Maker and so on.

CeFi platforms, though decentralized to a certain extent, work in pretty much the same way as most banks, whereby they take custody of one’s deposited assets, eventually loaning them out to third parties — such as market makers, hedge funds or other users of their platform — while providing the original depositor with steady returns. And though on paper this model looks and works quite well, it could be prone to a number of issues, such as thefts, hacks, insider jobs, etc.

DeFi protocols, on the other hand, allow users to become lenders or borrowers in a completely decentralized fashion, such that an individual has complete control over their funds at all times. This is made possible via the use of smart contracts that operate on open blockchain solutions such as Ethereum. In contrast to CeFi, DeFi platforms can be used by anyone, anywhere without them having to hand over their personal data to a central authority.

DOT flip: Polkadot overtakes XRP to become the fourth largest cryptocurrency

DOT is on fire today as it surges up the market cap charts to fourth spot.

There have been some big movers as the crypto market rally resumes and Polkadot’s DOT token is among them.

According to figures from leading analytics portal Coingecko, DOT has flipped Ripple’s XRP in terms of market capitalization following a massive gain of 26% over the past 24 hours. This makes it the new fourth largest cryptocurrency by market cap.

The Polkadot token has surged from an intraday low of just below $11 to top out at an all-time high of $14.80 before retreating slightly to $14.45 at the time of writing. The big price move has pushed its market cap to $13.7 billion as reported by Coingecko.

XRP, conversely, has only managed a gain of 3.7% over the past 24 hours which has not been enough to take the cross-border transfer token above $0.30. Its market cap is currently just below DOT’s at $13.5 billion.

Stats from Polkadot’s own platform estimate it has an even higher market cap of $14.8 billion using a circulation figure of just over one billion tokens. Messari crypto stats are very similar to this and they also show DOT having flipped XRP with a $3 billion difference in market cap.

The Binance owned Coinmarketcap is the only site in disagreement as it reports the DOT supply as ten percent lower. CMC was late to list Polkadot, which is an Ethereum and Binance Smart Chain competitor.

Polkadot is essentially a multi-chain protocol which has a number of ‘parachains’ (called shards in Ethereum) and works on its own technology called ‘Substrate’, which is a blockchain framework. The platform is fully interoperable, allowing other blockchains to connect to the network as a sidechain and the blockchain protocol has the ability to process thousands of transactions per second, leading it to be dubbed the latest ‘Ethereum killer’.

The most recent update, which may be driving momentum, was the launch of its Rococo parachain testnet which went live in late December. It is now gaining more partners according to the Polkadot community;

Rococo V1 Update: 1:51 pm (UTC) Jan 14, 2021
4 parachains + 19 proposals

Include:@PhalaNetwork @ZenlinkPro @chainx_org @AcalaNetwork @CrustNetwork @Kiltprotocol @bifrost_finance @polkaBTC @encointer @LaminarProtocol @clover_finance @DarwiniaNetwork #PolkaWarriors #Polkadot pic.twitter.com/1OMPEKbnZJ

— Polka Warriors (@polkawarriors) January 14, 2021

Other factors driving momentum include the issues with DeFi on Ethereum as demand for scaling intensifies, along with a strong technical market structure.

Block.one’s Bitcoin reserves are now worth double the entire EOS market cap

Block.one holds a reported 140,000 BTC which is worth around double the EOS market cap. Does that make EOS a buy?

EOS has largely under performed during this crypto rally and has dropped out of the top ten by market cap, but one industry executive believes it could be one of the best risk/reward digital assets right now.

Chartered Financial Analyst and Arca CIO Jeff Dorman made the assertion based upon Block.one’s extensive Bitcoin holdings.

Before delving into that, Dorman observed that EOS is the only major crypto asset apart from XRP that has not made significant gains during this rally. Over the past twelve months, EOS prices have declined by 26%, with losses recently accelerating due to the resignation of CTO Dan Larimer.

But with plenty of “zombie projects” up 300% to 1,000%, he believes EOS provides a good risk/reward opportunity.

Block.one owns 140,000 BTC worthh an estimated $5.5 billion at current prices according to data compiled by a financial comparison platform Bankr.nl. The CFA compared the market capitalization of EOS with that of its Bitcoin holdings;

“At $2.77, the market cap of $EOS is $2.6 bn, which is only 47% of the value of their BTC holdings. That means by buying $EOS, you are actually buying $BTC at $18,771. Huge discount.”

Dorman stated that generating a Return On Investment, or ROI, from Book Value is essentially taking a gamble on what management will do with that capital. Block.one and the EOS teams have done very little to instill confidence, he added.

But Dorman suggested that at this point, EOS and Block.one CEO Brendan Blumer need to create value for token holders as soon as possible, or return the capital, or expect huge lawsuits.

He concluded that any one of these three options will unlock this value and close the gap between EOS’ market cap and the value of the Bitcoin on Block.one’s balance sheet, which currently stands at $1.5 billion more than the company raised in its May 2018 ICO.

Not all were in agreement with the CFA with one respondent pointing out that buying EOS is not the same as buying BTC;

“To be clear, you are NOT buying Bitcoin by buying EOS. Block One does own 10% of the EOS token supply. They update the eosio code. But EOS is a public blockchain. And B1 does not reward EOS token holders with their Bitcoin holdings.”

The enormous amount of Bitcoin on the Block.one books may lend weight to outspoken crypto podcaster Peter McCormack’s comment:

“EOS was nothing more than a Bitcoin heist.”

At the time of writing, EOS was trading at $2.80, flat on the day and down almost 13% over the past week.

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FUD of the Week

Best Cointelegraph Features

Are there any risks involved?

What are the mechanics of how interest returns are doled out in DeFi?

Is there a cap on how much money one can borrow?

How does lending and borrowing work on DeFi platforms?

What is lending and borrowing in DeFi?

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