1. Market Wrap: Bitcoin Expected to Hold Support Above $45K
Analysts expect bitcoin to remain above its 200-day moving average.
Bitcoin is holding above $45,000 at press time and is attempting to break out from a slight downtrend over the past week. Cryptocurrencies have been consolidating near highs as a slew of negative headlines have kept buyers on the sidelines.
On Wednesday, minutes from the Federal Open Market Committee (FOMC) showed the Federal Reserve is considering slowing its pace of asset purchases later this year. Concerns about fading stimulus triggered a pullback in equities and commodities, and also weighed on cryptocurrencies.
News about a hack at Japan’s Liquid Global exchange on Thursday also weakened bullish sentiment in the crypto market. While the total amount stolen has yet to be determined, the value taken in bitcoin, ether, ripple, tron and other coins could be upward of $90 million.
Latest prices
Cryptocurrencies:
Bitcoin (BTC) $46582, +4.18%
Ether (ETH) $3150.5, +4.12%
Traditional markets:
S&P 500: 4405.8, +0.13%
Gold: $1781.3, -0.3%
10-year Treasury yield closed at 1.248%, compared with 1.272% on Wednesday
For now, analysts are closely monitoring bitcoin’s 200-day moving average.
2. Gary Gensler Isn’t Buying Your Decentralization Theater
The SEC chief has a point: DeFi is often not as decentralized as its proponents like to claim.
In an interview published this morning in The Wall Street Journal, Securities and Exchange Commission head Gary Gensler declared that decentralized finance (DeFi) systems, which facilitate token trading on Ethereum and other smart contract blockchain platforms, could be subject to securities regulation. We’re definitely going to see thousands of anon plebs on Twitter and Telegram bloviating about how “you can’t regulate DeFi, it’s decentralized” and slamming Gensler as some sort of malicious know-nothing.
But the truth is that he’s saying out loud what most crypto insiders know all too well: the “De” in DeFi is, quite frequently, utter nonsense.
Close observers have warned for years that many crypto systems (not just in DeFi) are engaged in so-called “decentralization theater.” In principle, DeFi should share the uncensorability and irreversibility of a pure cryptocurrency like bitcoin, but this is rarely true.
Centralized administrators of systems can often be seen stepping in to mitigate or reverse hacks, for instance. The aftermath of the recent Poly Network hack has involved frequent and direct intervention from a centralized team, including the decision to offer the hacker amnesty and a $500,000 bounty for return of the funds.
Another classic example of decentralization theater is the practice of establishing nonprofit “foundations” to manage a system. The implication of that structure was that a network like Tezos was just sort of discovered in the wild and the Foundation is a disinterested third party that came along to nurture it. This is basically never what’s actually happening.
Another example, cited in the Journal piece but not by Gensler himself, is the issuance of “governance tokens” to the users of DeFi systems. These tokens nominally grant users the right to vote on decisions about how the system is administered. But in some cases, such as Blockchain Credit Partners, this is a pure ruse: The SEC alleges BCC issued governance tokens but was actually run by two men. In other cases, which would be more complex to adjudicate, governance rights may be genuinely distributed but not exercised, leaving power in the hands of a few by default.
The intent of decentralization theater has been, often and obviously, to blow dust into regulators’ faces, confusing them and slowing enforcement long enough to let a system grow — or, more cynically, long enough to fill some bags.
Gensler, as the kids say, sees what you did there. He told WSJ that the term “DeFi” is “a bit of a misnomer,” because “There’s still a core group of folks that are not only writing the software, like the open-source software, but they often have governance and fees,” Gensler said. “There’s some incentive structure for those promoters and sponsors in the middle of this.”
In theory, enforcement actions against DeFi systems would vary depending on these specific circumstances. A truly and solely code-based, open-source platform run by a community rather than a committee would have no central figures to prosecute, nor any “off switch” that could shut it down.
Gensler does actually seem to understand the distinction, which could be a huge boon for genuinely decentralized DeFi systems. But the hard truth is that the incentives in play suggest such instances are probably rare. Designing and maintaining DeFi systems is labor intensive and risky, but funneling system profits back to developers doing the work would very likely in itself undermine claims to decentralization.
As a result, DeFi in its current form wasn’t launched by a bunch of would-be Satoshi Nakamotos who gifted the world with their creations and then left them to fend for themselves. For the most part, they’re still around reaping profits and fixing bugs, and that chicken was always going to come home to roost eventually.
3. Cardano Nears All-Time High as Investors Await Smart Contracts
Expectations are rising for the blockchain to implement smart contract functionality by next month.
The cardano (ADA) price neared an all-time high Thursday, rising to $2.44 in digital-asset markets, as investors await a September release for the planned “Alonzo” upgrade — a move that would usher in smart-contract functionality and thus address what critics have described as one of the network’s most glaring deficiencies.
As of press time, ADA has been trading at $2.35, up 14% during the past 24 hours.
ADA reached an all-time-high price of $2.47 in May.
Lead Cardano developer Input Output recently announced a timeline for the “Alonzo” upgrade, targeting Sept. 12 for the final release date.
Smart-contract functionality would allow Cardano to incorporate more applications including so-called decentralized finance (DeFi) platforms that allow for automated cryptocurrency lending and trading.
The improvement could put the network in a better position to challenge Ethereum, currently the leader among blockchains with smart-contract functionality.
In a prediction market started in July that allows participants to bet on whether Cardano can release smart contract functionality by Oct. 1, the betting contract was trading at 79 cents as of press time.
It is up from 30 cents on July 18 when the market was first launched but down from its all-time high of 85 cents on Aug 12 and Aug 15. The betting contract pays out $1 of the stablecoin USDC if Cardano succeeds in meeting the timeline.
Correction (21:43 UTC, Aug. 19, 2021): An earlier version of this story erroneously stated that Cardano had hit an all-time price. This story has been corrected to show that the price rose close to an all-time high.
4. Compass Mining Says Chase Shut Down Bank Accounts Without Warning
The accounts held approximately 7% of the company’s cash, which Compass has now been able to access.
Bitcoin mining firm Compass Mining’s bank accounts with Chase Bank, the retail banking arm of financial services colossus JPMorgan, were terminated without warning earlier this week, according to Compass CEO Whit Gibbs.
Gibbs took to Twitter on Wednesday to announce the shutdown, writing: “Shoutout to Chase for shutting down Compass Mining accounts for doing our part to replace the old guard with self-sovereign, future-focused supporters of hard money.”
According to Gibbs, Compass learned about the account closures when its COO, Jameson Nunney, visited a local branch in Ohio to make a transaction and was told by an employee that the company’s accounts had been frozen the day before, and that Chase would be holding the money until August 27. The accounts held approximately 7% of the company’s cash.
5. Solana’s Luna Yield Goes Dark With Some Fearing a ‘Rug Pull’
It is unclear how much has been taken. A spokesperson for Solana declined to comment.
Decentralized finance protocol Luna Yield has gone offline.
Luna’s website and all of its social media accounts have been taken down, according to SolPad, an initial digital offering (IDO) platform for Solana.
Some are attributing the move offline to a rug pull. A rug pull occurs when the creators of a project take off with investors’ funds. While no official confirmation has yet been given, the move would mark the first rug pull of its kind on Solana.
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