The cardano network has completed an upgrade that will allow it to incorporate more advanced smart contracts and decentralized finance applications to its blockchain.
The Swiss company’s developer Input Output HK, a research and blockchain engineering firm, made the announcement in a tweet on Wednesday.
“Delighted to report around 19.44 UTC today we successfully forked the alonzo testnet to the new alonzo white node. The new network is happily making blocks already,” the company tweeted.
Smart contracts are effectively contracts that execute automatically once a series of conditions have been met. They also allow engineers to use the blockchain to perform a range of functions like send information, or documents. DeFi applications allow two counterparties to exchange capital, or assets, without an intermediary.
The network’s native ada token briefly climbed up to a session high of $1.29 on Thursday after the news, before slipping back to around $1.2203, marking a 3.4% daily drop, based on Coinbase data. Ada is the fifth largest cryptocurrency by market capitalization, according to Coinmarketcap.
Input Output HK said it would monitor the network over the course of Thursday.
“We expect a number of updates as we add features to alonzo white,” the company added on Twitter.
This was the first in cardano’s “alonzo” series of upgrades that is scheduled to finish in September.
Cardano’s alonzo plans should help the company compete with the likes of the ethereum network, whose blockchain underpins the majority of existing DeFi applications and smart contracts.
The recent plunge in cryptocurrencies has sent investors searching elsewhere in the digital universe for sky-high returns.
Many of them are getting into the fast-growing sector of crypto lending, which can net investors returns far above the measly 0.05% or so that banks offer on deposits.
Retail investors can get crypto “savings” accounts that typically offer annualized returns of between 5% and 12%. Braver braver souls can lend to decentralized finance projects in the wilder corners of the market and earn several thousand percent.
One beneficiary of the crypto lending boom has been Amber Group, a Hong Kong-based startup that has become worth $1 billion after a June fundraising round – and after just four years in existence.
Amber offers high-frequency and algorithmic trading, derivatives and various other fancy products. But, like many crypto lenders, its core business model is simple. It takes crypto from “savers” who want to lend, and lends crypto to institutions or people that want to borrow it, for example hedge funds shorting bitcoin.
Its products offer returns ranging from 3% and 40% or above. Focused on Asia, it mainly serves institutions, but is expanding its offering to retail customers.
“What we are doing essentially is similar to a bank,” Amber’s chief executive officer Michal Wu told Insider this week. “Of course, we do take a bit of interest margin on that ourselves.”
That interest margin accounts for 70% to 80% of Amber’s revenues, which could be around $500 million in 2021. The business, which has about $1.5 billion under management, has attracted investment from the likes of crypto exchange Coinbase and hedge fund Tiger Global Management.
Coinbase is itself getting in on the lending game. The biggest US crypto exchange announced at the end of June that it’s launching a crypto savings account that offers 4% annualized interest. Gemini, Bitfinex and BlockFi are among the numerous other companies offering similar products.
So what’s the catch? Well, if a return is much higher than on a standard savings account, it must be a much riskier investment.
The chief danger for retail investors is that these savings products have no federal deposit insurance. Investors are handing over control of their crypto to relatively new companies, who could run off with it or go bust.
David Grider of research house Fundstrat said in a recent note: “If the lender’s assets become impaired somehow during a sell-off, where liquidated collateral doesn’t cover loans issued, or during a hack lose funds… or due to improper management of the business – users can lose a substantial portion of their funds.”
Coinbase has sought to calm investors’ nerves by assuring them that it doesn’t lend to unauthorized third parties. And Wu says Amber Group only lends to institutions on an over-collateralized basis, meaning borrowers have to stump up more of one asset than they’re borrowing of another.
Wu says crypto finance’s promise of steady returns is drawing in large numbers of new investors, including retail traders and the uber-wealthy – and even traditionally conservative family investment offices.
Like many more financially minded crypto advocates, Wu says he welcomes tougher regulation. “There are a lot of bad actors in this industry, let’s be honest,” he says. “It’s actually better for the regulators to be more involved early on… the [companies] that can both innovate and also be compliant and really deal with global regulation will prevail.”
The Securities and Exchange Commission and the Commodities Futures Trading Commission met with representatives from leading decentralized finance companies as crypto comes under fire from regulators worldwide, the Financial Times reported over the weekend.
Hosted by a finance trade body, the virtual meeting consisted of presentations from automated crypto exchanges like Uniswap and other players in the fast-growing DeFi sector, according to the FT.
The conference comes as regulators’ eyes are fixed on the potential harms of an unregulated crypto sector. The crackdown on centralized crypto exchanges has already begun, with financial authorities in the UK and Japan taking tough lines on Binance, the largest exchange by volume.
Decentralized crypto exchanges have so far avoided such harsh treatment, but regulators are circling. CFTC commissioner Dan Berkovitz laid into DeFi in a speech this month, arguing that automated exchanges in their current form are a “bad idea” and potentially run afoul of the Commodity Exchange Act.
“The CEA requires any facility that provides for the trading or processing of swaps to be registered [with the CFTC]. DeFi markets, platforms, or websites are not registered,” he said. “The CEA does not contain any exception from registration for digital currencies, blockchains, or ‘smart contracts.'”
DeFi insiders have complained that regulators often do not understand the industry, creating bad fixes for misconceived problems that smother innovation.
“There have been regulatory proposals that misunderstand DeFi – both the role of different actors and of the technology – and that would impose liability and burdens far beyond current law, and on largely uninvolved software developers,” wrote Marvin Ammori, chief legal officer at Uniswap Labs, in a blog post.
“These proposals are akin to trying to hold the inventor of SMTP responsible for every spam email ever sent, or holding the inventor of HTTP responsible for every illegal website.”
Mark Cuban made the majority of his fortune selling Broadcast.com to Yahoo! for $5.7 billion in stock near the height of the dot com bubble. Now, the billionaire owner of the Dallas Mavericks says he is earning money another way – through yield farming.
Cuban has become a liquidity provider on DeFi (Decentralized Finance) exchanges, where he earns rewards for enabling users to swap between tokens. The “Shark Tank” star said he is seeing annualized returns of over 200% from the tactic in some cases.
DeFi is an umbrella term that refers to blockchain-run, decentralized financial applications that are seeking looking to muscle into territory held by traditional financial intermediaries like banks.
Cuban broke down his entrance into DeFi in a new blog, highlighting the advantages of what he calls “a model for future technology businesses and possibly all businesses.”
Here are the billionaire’s eight best quotes from the blog, lightly edited and condensed for clarity.
“In a money exchange business, or even a banking business, you have to have the financial depth to be able to offer the range of needed currencies and services. You need to be able to afford to hedge the risk of pricing volatility between currencies. If you want to do this business with scale, across the world, it can be very expensive and risky. Not for DeFi Exchanges. What makes running a DeFi exchange so much better than a traditional centralized financial business of this and ANY kind is that rather than the owners of the business, investors, and their creditors putting up capital for all the transactions to take place, Liquidity Providers (LPs) do it for them.”
“I’m a small LP [liquidity provider] for QuickSwap. I provide 2 different tokens (DAI/TITAN) that enable QuikSwap to offer swaps between these two tokens. As you can see here, this pair is one of many, and you can also see that based on the .25 pct of volume in this swap that Quickswap pays, my return on my initial $75k investment(based on fees only) as of this writing, is an annualized return of about 206%.”
“So in exchange for providing the Liquidity both TITAN and Quickswap need for their businesses, I get .25 of the transaction volume for swaps between these two tokens. As long as I keep making a good return, I will keep my money invested (Volatility can create mark to market losses). If not, I can immediately withdraw it (some platforms have a hold period or penalties). Have enough LPs, and the exchange is far more capital efficient than a similar traditional exchange business, and I get to make some money!”
“Consider Dave & Buster’s tokens. When you buy their tokens, you can only use them in their arcades. You can’t use them at others. One of the foundational businesses of DeFi is the ability to exchange the tokens of one project for those of another. That is why they call them Exchanges. And if the exchange is Decentralized, they call it a…DEX.”
“Every business or financial software service or application business has cloud computing and operating costs that very often grow faster than their revenues. This is not a surprise, it is exactly why software companies raise significant amounts of capital in order for their “software to eat the world.” Companies like Polygon’s capital needs are very different. Why? Because rather than building their business exclusively on a cloud computing platform like AWS, their businesses are decentralized. The foundation of decentralization is built upon an independent party…putting up their own capital to provide computing resources in order to support the network platform.”
“Any other business you have to raise a s–t load of money in order to host your own servers, or more likely pay for cloud computing costs which can be insanely expensive for compute-intensive applications and just as expensive for scaling heavy use applications. Plus, you have to hire all the people, have the CapEx to support them, etc. In the decentralized crypto world, these 3rd parties (minors, validators, etc.) provide the computing power that effectively runs the platform in exchange for rewards in the token of that network.”
“If Polygon, or any of their competitors, took a traditional, centralized business path where they controlled and owned everything, they would have had to raise not just millions but potentially much, much more. Instead, they create a near-zero cost token that they distribute in accordance with the tokenomics they defined to their community.”
“That is not to say that every crypto blockchain or DeFi project will work. They won’t. These facts are not a secret in the crypto world. There is an incredible amount of competition. So much, in fact, many, if not most, will not work. They will not get enough users or generate enough fees to succeed. Crypto is brutally competitive. But in crypto vs. traditional, centralized businesses, all other things being equal, I’m taking crypto every time.”
Below, Insider breaks down how cryptocurrencies’ wild few weeks have affected the industry.
From miners to the DeFi companies, the crypto community has been forced, once again, to navigate price swings. Here’s a look at how they made out according to the experts.
Traders and Investors
Some short-term traders and long-term investors were greatly impacted by bitcoin’s recent price swing, but for others, it was business as usual.
The majority of the pain dished out by falling prices in cryptocurrencies was felt by new entrants to the space looking to make a quick buck by trading but ended up sellig coins at a loss.
According to data from Glassnode, “there is no question that a large portion of the recent spending activity was driven by short-term holders, those owning coins purchased within the last 6-months.”
Insider spoke with Todd Jones, the chief investment officer of the wealth management firm Gratus Capital, to confirm Glassnode’s findings.
Jones said that none of his long-term focused clients have been selling their cryptocurrency and noted that much of the sell-off in bitcoin’s price was a result of traders’ “leverage unwinding.”
On-chain margin traders raced to exit their leveraged positions when cryptocurrencies faced their most recent bout of volatility, according to a May 19 Daily Gwei newsletter.
Ethereum gas fees (the fee required to successfully conduct a transaction on ethereum) surged to record highs as a result driving “gas wars amongst liquidators and arbitrageurs,” according to Delphi Digital.
“The price was falling so fast that people were getting scared for their on-chain leveraged positions and were willing to pay anything to get their transaction included in the next Ethereum block (presumably to close their positions),” ethereum developer Anthony Sassano speculated, per Coin Telegraph.
Bitcoin traders using up to 100-to-1 leverage also rushed to sell, furthering volatility in the asset.
This leverage unwinding added to cryptocurrencies’ woes. However, for long-term holders of ether and bitcoin, the price drop and rising gas fees weren’t relevant.
Essentially, the most recent bout of volatility hurt traders far more than long-term investors, who still believe their holdings will appreciate moving forward.
“Recent price volatility should not be very impactful to a long-term holder of BTC. It comes with the territory. Any asset that can go up 800% in a year also has the potential to collapse 90% (similar to the early days of AMZN). Price volatility goes hand in hand with speculative assets,” Todd Jones of Gratus Capital said.
In Jones’ view, now is a “good time to add” to cryptocurrency holdings as a part of a diversified portfolio.
However, like all mining operations, the value of the end product is a critical component to securing profitability.
Insider spoke with Phil McPherson, Riot Blockchain’s vice president of capital markets, to delve into how cryptocurrency price swings can affect miners.
McPherson said that when bitcoin’s price falls, miners could be forced to sell coins in order to continue their operations. The key is the mining cost per coin, which varies greatly depending on the company.
“Smaller miners with higher fixed costs and costs of goods would probably be hurt more,” McPherson said.
The VP added that his company is in a “unique position” due to its strong balance sheet. Riot ended the first quarter with $241 million of cash on hand and an average cost per coin mined of around $15,000, enabling them to keep all the bitcoin they mine and continue operations even in a down market for the digital asset.
“On a daily basis, we’re mining call it six or seven bitcoin a day, sometimes it’s higher, sometimes it’s lower, but we’re not selling that bitcoin, we’re stacking it,” McPherson said. “So the fact that we’re bullish long term, the price volatility hasn’t affected our business from a financial standpoint because we’re not selling it into this depressed market.”
McPherson noted that when bitcoin’s price falls, the global hash rate (the difficulty of mining the currency) falls as well, which is actually a benefit for miners who can remain in operation.
“From our perspective, the volatility in some ways has been good for market leaders like us,” McPherson added.
Decentralized Finance, or DeFi, is a system that allows users access to financial products on a public, decentralized blockchain network.
Most DeFi companies use the ethereum blockchain to run their operations, and the total value locked on the DeFi network is now over $62 billion, according to data from Defipulse.com.
DeFi applications include stablecoins, lending platforms, prediction markets, and much more, and the industry allows traders to profit from tactics like yield farming and liquidity mining.
Jeff Dorman, CFA, the chief investment officer of the digital asset management firm Arca, told Insider the recent volatility in cryptocurrencies was a “real stress test” for the DeFi space.
According to the CIO, DeFi companies passed this latest test without issue, but in the past, that wasn’t always the case.
Dorman pointed to differences in the DeFi system amid recent price swings compared to volatile periods from the past.
The CIO gave an example of MakerDao, a popular DeFi lending and borrowing platform, that “basically broke” in March of last year when the crypto market saw a steep drop in pricing and was forced to take $4.5 million in socialized losses from the event.
“There was price feed issues with regard to their API connectivity, and as a result, borrowers were being liquidated even though they shouldn’t have been because of a price issue. MakerDao had to socialize those losses and raise new money and pay back all the victims over time,” Dorman said.
This time was very different, however, according to the CIO.
“This time around, it was the exact opposite. I can’t give you an example because nothing happened. Every price oracle worked, every decentralized exchange worked, every decentralized lending and borrowing platform worked, every decentralized insurance company worked. I mean, it was unbelievable to see,” Dorman said.
The CIO pointed out that centralized entities in the crypto world like Coinbase and Binance “were all having problems” with price volatility this time around. DeFi companies, on the other hand, were able to navigate the price swings without issue.
DeFi liquidations did rise 14-fold during the broad crypto sell-off, Debank data shows, as traders in the space looked to protect themselves from losses.
However, at the end of the day, the crypto community was able to whether recent price drops and volatility fairly impressively.
Some traders, especially those using excessive leverage, were hurt, but overall, the industry kept on trucking in what will likely be thought of as a positive sign for the future of the space.
Billionaire “Shark Tank” investor Mark Cuban has added Ethereum-backed platform Polygon to his investment portfolio. Polygon, which is designed to scale tEhereum chains and develop the blockchain’s infrastructure, announced the investment on Twitter late on Tuesday.
Polygon originated from the Matic network, which created the Matic token but has since developed its scope and now describes itself as “Ethereum’s internet of blockchains”.
“Polygon is the first well-structured, easy-to-use platform for Ethereum scaling and infrastructure development. ” its developers wrote on Medium when announcing the expansion. It is based on Polygon SDK, a framework that effectively expands the ethereum network to include a wider variety of chain types and therefore adds functionalities to ethereum.
“Polygon effectively transforms Ethereum into a full-fledged multi-chain system (aka Internet of Blockchains). This multi-chain system is akin to other ones such as Polkadot, Cosmos, Avalanche etc”, the Medium post continues. Compared to the named systems, Polygon says it offers improved security, the ability to make use of the already existing, larger ethereum network and is more open and powerful.
Matic is the 12th largest crypto coin based on market capitalization and was last up 35.2% in the 24 hours to 05:51 am E.T. at $2.27, according to Coingecko data. Matic was among the coins affected by the high levels of volatility in the cryptocurrency market over the past weeks, reaching its highest ever valuation of $2.62 on May 18, but has fallen by almost 14% since then.
By investing in Polygon, Cuban has expanded the crypto-based companies in his investment portfolio and reaffirmed his bullish stance on crypto. He has previously invested into various platforms like OpenSea, Lazy and Mintable that allow users to showcase and trade NFTs and other digital assets, as well as DeFi protocols.
Kevin O’Leary revealed on Anthony Pompliano’s podcast that he’s a major shareholder of a new decentralized-finance (DeFi) company, which aims to help investors profit from DeFi. The “Shark Tank” star and O’Leary Funds boss also predicted DeFi will play a key role in crypto’s future, and said he’s deeply interested in the space.
“What interests me the most right now is DeFi. I think it’s where the puck is going,” O’Leary said.
O’Leary said that DeFi enables him to wrap up crypto assets into Ethereum chains to make a profit, whereas storing capital in crypto investments does not allow that.
“There must be millions of people who have a little bit of coin who want to make some 4%, 5%, 6% on it,” was the thought that led him to ask his team to find experts on the matter, which they did in the Canadian startup DeFi Ventures.
The company is working to find a commercial solution to DeFi investing, enabling anyone who has a wallet to wrap their assets and utilise DeFi’s benefits automatically and in a compliant way.
O’Leary said he led a $20 million fundraising round for the company, which has yet to go live. “I am going to rename it to WonderFi because it is going to be my vehicle and I think it’s just the beginning of some great things to come,” said the investor, whose nickname is Mr. Wonderful.
The investor also said that bitcoin’s recent volatility has boosted his DeFi investments and driven up profits. “We’ve had tremendous volatility on bitcoin these last ten days. That actually enhances DeFi, it makes it better. I’m making way more on my contracts now,” he continued.
Higher returns are also making him consider shifting his asset allocation. While he currently still holds 5% gold and 3% crypto, this might change as gold does not provide him with returns, O’Leary said.
Talking about his start in the crypto industry, O’Leary spoke about the ESG concerns linked to cryptocurrencies and how they were raised by many of his institutional and sovereign fund clients. However, that didn’t deter him from going long on bitcoin, he said on the podcast.
Billionaire crypto investor Mike Novogratz has predicted bitcoin will be stuck somewhere between $40,000 and $50,000 for four to six weeks after Elon Musk halted Tesla payments in the token and criticized its energy use.
Novogratz called a $40,000 to $50,000 bitcoin price range fair and said: “I think we are going to consolidate for a while, four to six weeks.” He added bitcoin may be stuck between $40,000 and $55,000 for the “next chapter” before ending the year much higher.
The former hedge fund executive said his crypto investment firm Galaxy Digital was buying bitcoin because it thinks it shouldn’t dip below $42,000, the level that was tested on Monday.
Bitcoin was up around 1% to $45,097 on Tuesday. But it’s still down 30% from the record high of near $65,000 hit in April, after a hint from Musk that Tesla may sell its bitcoin holdings caused a further sharp fall on Monday. Musk later clarified Tesla had not sold any bitcoin, which it bought for $1.5 billion in January.
Although Musk’s actions have angered many figures in the bitcoin community, Novogratz said the Tesla boss’s concerns should be taken at face value.
“We use electricity for things that we think provide a tremendous amount of value. And so I think you’re going to see a response from this industry, like you should see a response from every industry, to say… we should do something to offset our footprints,” he said.
Novogratz said the traditional financial world was become increasingly excited about ether, the token on the Ethereum network.
“ETH is certainly having a moment, and it’s having a moment for good reason,” he told Bloomberg TV.
“Right now, it’s got the triple whammy. It’s got payment coins, i.e. stablecoins, being built on top of it. It’s got DeFi [decentralized finance] being built on top of it, and it has NFTs [non-fungible tokens] being built on top of it. So the three major thrusts of the crypto revolution are being built on top of Ethereum.”
Yet Novogratz would not say whether he thought ether could climb higher, after having risen by around 370% year-to-date to $3,500 on Tuesday. He said it would be “healthy” if ether consolidated where it was.
Banks must adapt to the new world of decentralized finance in which contracts will be created through crypto technology or risk becoming irrelevant, according to the Société Générale banker who was a driving force behind a recent high-profile digital bond launch.
Jean-Marc Stenger, the head of SocGen’s blockchain technology unit Forge, told Insider that banks face a “Kodak moment” if they do not adapt to decentralized finance or DeFi, referring to the failure of the famous camera company to transition to the digital era.
DeFi is the use of blockchain technology – the same tech that underlies cryptocurrencies – to create financial products.
It replaces the usual middlemen like banks and brokerages and instead lets pieces of digital code called “smart contracts” automatically execute, or control, financial products, taking care of things like interest payments, for example.
Stenger told Insider that SocGen – Europe’s sixth-biggest bank – sees DeFi as a big opportunity for the sector that brings the ability to do things “quicker, cheaper, [and] with more security or transparency for the regulators.”
Although some are skeptical the technology can truly disrupt the giant industry, DeFi’s advocates argue that it will revolutionize finance. DeFi’s fans say it will eliminate the need for intermediaries and central overseers such as clearing houses, and the fees they charge. Instead, a decentralized computer network would keep the contracts and transactions secure.
Stenger acknowledged the DeFi model might pose a threat to some of the ways banks traditionally make money. But he said: “When there is a shift like this in an industry, the financial industry as we speak, obviously it also means that you have to adapt and to change.
“Decentralized finance is certainly a threat to these financial institutions, which will not adapt and embrace this change, that’s for sure. There might be kind of a ‘Kodak effect’, if I may use that term, for some banks or financial institutions which again will not adapt quickly.”
He said banks would still generate returns from providing customers the services they want, which he argues will increasingly be DeFi contracts. “In today’s world, clients are paying for services where they see value-added.”
Internet Computer, a cryptocurrency launched Monday by blockchain non-profit Dfinity, is already the eight-largest digital asset with a market capitalization of $45 billion, data from CoinMarketCap showed on Wednesday.
The project, developed by founder Dominic Williams, is a result of five years of research. The token’s promoters claim it can provide the core basis of a new, decentralized internet.
The first day of trading saw its price swing wildly as it hit an intraday high of $700 before declining to around $250. It is currently trading around the $340-range.
“The Internet Computer is an open platform that frees the world from a dependence on centralized server farms, making it possible to host software and data directly in cyberspace without the need for legacy IT such as proprietary cloud services, server machines, software stacks, databases, and firewalls,” Dfinity said in a statement.
A research report from crypto-insight platform Messari details the idea behind IC and what it aims to overcome. IC’s founder Williams has said the internet has become more monopolistic by controlling tech monoliths like Facebook or Amazon, whose users get affected by any changes made to its platform parameters, the report said.
He recently told Insider mainstream venture capital firms are sitting on “billions and billions of dollars” that they’re ready to invest in crypto and so-called “open internet” startups.
To that end, the digital token’s objective is to offer “a public compute platform so that developers, enterprises, and government agencies can deploy software and services directly to the public internet.”
Another development by Dfinity allows the Internet Computer protocol to securely manage user identities on certain apps without usernames, passwords, or cryptographic keys.
“I want you to imagine a world where you can securely authenticate yourself to online services without ever touching a username and password, or touching cryptographic key material, using just your devices,” Williams said.
“I want you to imagine a world where you can log into internet services without ever being tracked across internet services. And I want you to imagine a world where this is happening at a far greater degree of convenience than any kind of authentication service that you use today.”
The total market value of cryptocurrencies currently stands at about $2.5 trillion, up from around $1 trillion at the start of the year.