Michael Saylor’s MicroStrategy is gearing up to invest nearly half a billion dollars in bitcoin following the close of its offering as it pertains to the sales of senior secured notes. Earlier this month, the company announced plans to sell with a view to funding additional investment in Bitcoin. The press release revealing as much […]
DeFi gets a bad rap for being complex, technology makes it simple enough to cut out middlemen in non-finance industries ranging from energy to e-commerce.
Decentralized finance is far and away the hottest topic in crypto, touted as a way to make a fortune by backing the right token, but also a tool for taking the crypto you were hodling in a cold wallet and set it to work earning interest at extraordinary rates.
There’s a reason DeFi has grown so large so quickly that it has slowed the Ethereum blockchain where most of the projects live to a crawl, and sent gas prices for transactions soaring to $10, $50, even $100 at times.
DeFi is mostly talked about in terms of taking over the banking and brokerage functions that big finance thrives on, but the technology can be used to revolutionize many other businesses, from energy to e-commerce.
That reason is simple: At its core, decentralized finance is about eliminating the middleman.
Why give a bank your money — for a paltry fraction of 1% interest — for it to loan out, when you can loan it out for orders of magnitude more through a crypto lending site?
Or invest it in a liquidity pool that uses an automated market maker to create a shared pot of tokens that cryptocurrency traders can sell to or buy from, rather than waiting to find a trader who wants to buy what they’re selling at the price they want. The way liquidity pools work is that liquidity providers lock funds into pools in exchange for fees paid on each transaction — which are usually paid in an exchange’s native token.
All you’re doing, really, is replacing the institutions facilitating those transactions —the man in the middle of taking it from Jane and giving it to John — with smart contracts that automate both the introduction and the exchange of currency. In other words, it turns a peer-to-business-to-peer transaction into a peer-to-peer transaction.
The difference is blockchain’s immutable nature, which makes it impossible for either side to cheat. Because it is trustless, you don’t need to pay a trusted intermediary to do that for you.
Financial transactions are the low-hanging fruit for DeFi, as they are very frequent and the value of the currency being traded is so large. That said, DeFi in its trading, staking and yield farming formats can get pretty complex. But, that’s mostly because people are willing to do very risky things like betting on margin with borrowed money.
However, DeFi works for pretty much any data you need to transfer from one party to another. That can be e-commerce, insurance, digital identity, and even electric power — the possibilities are endless. And in most cases, they are fairly simple.
Decentralized energy is raising enough interest that it’s been given its own nickname — DeEn instead of DeFi — even though it also uses DApps and smart contracts, and generally lives on the Ethereum blockchain. Other than removing the middlemen — brokers and utilities — the only real difference is kilowatts instead of kilobytes.
A year ago, German sustainable energy firm Lition launched its blockchain-based, decentralized peer-to-peer Energy Exchange, which lets individual consumers choose exactly which source to buy their energy from inexpensive or green or local power producers — whatever they choose.
It’s up and running, and according to a power industry publication consumers are saving an average of 20% on utilities while power producers are seeing revenue go up 30%.
E-commerce is another field ripe for disruption by DeFi, and one of the companies doing it is Uquid, which is aiming to build a bridge between DeFi and e-commerce.
One way it is doing this is through its Defito Finance arm, which concentrates on shopper loyalty programs using tokens earned with every sale or purchase.
The site pulls in three techniques commonly used in DeFi trading, loaning and mining operations and adapts them to the needs of an e-commerce site.
Shopping mining is a loyalty program that creates and awards newly mined tokens with every purchase from Uquids many online stores, which offer everything from video games and music to subscriptions for streaming services like Spotify and Xbox Live. This uses one of Defito’s native tokens, the DeFi Shopping Stake (DSS). Once mined, these tokens are loaded into a smart contract that lets them be used for future purchases from the Uquid sites, or for staking in the liquidity pools.
Defito’s other token is the DTO, a governance token which can be earned by contributing liquidity to the shopping liquidity pool. Instead of making it possible for cryptocurrency traders to buy and sell tokens, the Defito pools represent digital goods on Uquid’s ecommerce sites ranging from games and business software to gift cards and mobile top-up cards. An automated shopping maker connects pools of goods from different suppliers, allowing token holders to search for and track the best prices for the amount of those goods they wish to buy. These sites accept cryptocurrency in payment.
Both DTO and DSS can be used for staking and payment, but DTO brings governance voting rights, including on whether DSS tokens should be burned to increase their value or used to develop the rewards system.
Another DeFi token is Uquid (UQC), a decentralized ERC-20 token that can be used for a variety of more traditional DeFi services including staking, lending, borrowing and token swaps, as well as goods including utility, grocery, and pharmacy vouchers from chains around the world.
Finally, Uquid has recently added a fourth token for its new NFT marketplace, NFTD. The non-fungible tokens are at the heart of a digital products marketplace where they can be used to provide buyers of digital goods clear ownership rights. It’s a Binance Smart Chain utility token aimed at things like social media content from TikTok and YouTube videos to photographs and music, as well as Uquid’s other digital content.
Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.
Bware Labs, a decentralized infrastructure that provides an interface between Blockchain APIs consumers and node providers, has released the MVP for its platform. According to the announcement, Bware labs has finally shared the MVP with the public or otherwise referred to as a functional prototype. This new development will allow users to set up a […]
BTC price reached a high of $39,847 on Coinbase.
Bitcoin price has jumped over 12% to hit a two-week high of $39,847 on US-based crypto exchange Coinbase. The cryptocurrency’s upside towards the recently elusive $40,000 comes as the market continues to react positively to news.
Buyers are looking to hold the gains above support as shown in morning deals on Monday. Bitcoin currently trades at $39,286 on Coinbase.
Bitcoin price broke major resistance at $37k
After finding it difficult to break above $37k due to FUD related to a heightened crackdown on mining in China, BTC added more than $3,400 to its daily candle on Sunday to trade at the highest price level since 26 May.
While the broader recovery could align with other factors across the market, BTC’s value soared just after Tesla CEO Elon Musk revealed that the electric car maker was ready to resume Bitcoin transactions. It follows negative comments from Musk regarding Bitcoin’s energy consumption and impact on the environment.
“When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions,” the Tesla chief said.
Bitcoin price jumped nearly 10% following Musk’s tweet and traded higher to establish support above the 20-day simple moving average line ($36,756).
Bitcoin’s upside also comes after miners indicated support for the Taproot upgrade slated for November 2021. The upgrade seeks to revamp the network’s privacy and scripting capabilities.
From a technical point of view, analyst Rekt Capital says the upside might have helped push a potential death cross by a couple of weeks.
The death cross happens when the 50-day moving average cuts below the 200-day moving average. It is a bearish signal that usually suggests further price correction, and as seen on the price chart above, BTC/USD was likely to make the cross if the 50 DMA continued to slope towards increasing 200 DMA.
“Fantastic upside movement from #BTC lately. The $BTC breakout has pushed back the potential Death Cross by two weeks. Price increases from here would further postpone it,” the analyst pointed out.
“And if $BTC is able to rally above $55K-$60K soon, then BTC could avoid the cross altogether.”
The post Bitcoin Jumps 12% to Eye $40K on Positive Tesla and Taproot News appeared first on Coin Journal.
from Latest News – Coin Journal
Stringent regulatory policies in South Korea could force many small- and medium-sized crypto exchanges out of the country.
Authorities in South Korea are continuing to propose and enact measures aimed at maintaining strict oversight over the nation’s crypto exchange market. These come amid a significant uptick in cryptocurrency trading volume, especially for altcoins.
In May, South Korea’s Financial Services Commission (FSC) announced that the government is planning to enforce stricter regulatory policies on cryptocurrencies in general. This move comes as virtual asset service providers (VASPs) have been given until September to register with the appropriate state authorities.
Crypto exchanges in South Korea were already under pressure even before this new set of stricter regulatory policies. The requirement for real-name trading accounts has seen smaller- and medium-sized exchanges scramble to secure licenses from commercial banks to no avail, at least as of the time of writing.
Recently, reports have emerged of another policy move from South Korean authorities that could have far-reaching ramifications, even for the “Big Four” crypto exchanges in the country — Bithumb, Coinone, Korbit and Upbit.
FSC shines spotlight on cross trading practice
As previously reported by Cointelegraph, the FSC is planning to ban cross trading on crypto exchanges in the country as part of a raft of stricter regulatory measures for trading platforms. Cross trading is a method used by trading desks to offset buy and sell orders for the same asset without recording the transactions on their order book.
Cross trading, while illegal in many countries, is in some ways a necessary practice for crypto exchanges in South Korea. For one, crypto trading in the country is denominated in Korean won, but fees are collected in cryptocurrencies.
Cross trading offers a solution for South Korean crypto exchanges, allowing them to convert trading fees to Korean won by performing the conversion right on their platform. With the FSC banning the practice, these exchanges may now have a hard time realizing the significant revenue stream that comes from collecting trading fees.
Indeed, the initial responses from some industry commentators to the planned move are that a cross trading ban would serve as a revenue chokepoint for South Korean crypto exchanges. The FSC’s ban, if passed, would mean mandatory zero-commission trading by platforms in the country.
South Korean crypto exchanges charge 0.05% on average as trading fees. This means that in the first quarter of 2021, Upbit raked in almost $9 million in fees daily from a 24-hour turnover of about $17.9 billion. Indeed, the sizable surge in South Korea’s crypto trading volume in 2021 has meant greater fee revenue for platforms.
As early as February, Bitcoin (BTC) turnover for both Bithumb and Upbit was already upward of 11 times greater than the figures recorded for the same period in 2020. Earlier in June, Cointelegraph reported that bank account flows for exchanges in the country were up 40% over the past year.
The revenue growth for South Korean crypto exchanges has even had a trickle-down effect on banking partners and investors. Upbit’s primary banker, K Bank, enjoyed a sharp turnaround in its financial performance and is reportedly targeting 2022 for an initial public offering.
While Bitcoin fever characterized the early crypto trading mania of 2021, the trend pivoted to altcoins as the year progressed. With token prices surging parabolically up until May, South Korean crypto traders seemed to favor smaller-cap altcoins.
Such was the extent of the altcoin trading mania that the Korea Federation of Banks warned of the trend’s potential risks. At the time, the order books of even the Big Four showed BTC trading activity accounting for less than 5% of their 24-hour trading activity, which was significantly lower than the global average for Bitcoin on other platforms.
None of our business, says the FSC
As is often the case with regulatory measures in South Korea, the smaller exchanges might face significantly greater operating difficulties if the FSC’s cross trading ban becomes law. Assuming that platforms will be loath to forgo the revenue from trading fees, South Korea’s cryptocurrency exchanges will have to come up with an alternative.
The most probable alternative would be to create a separate trading desk dedicated to converting crypto trading fees to Korean won. However, any new crypto trading-related venture in South Korea must be registered with FSC’s Financial Intelligence Unit and adhere to strict Anti-Money Laundering (AML) laws.
This registration comes with a significant cost burden that might be too much for the smaller platforms still struggling to meet the September licensing deadline. Another possible option for exchanges would be to partner with loan providers open to accepting crypto as collateral.
Regardless of the route chosen, exchanges can ill afford to avoid coming up with a solution to the problem if cross trading is banned by the FSC. Apart from the obvious revenue implications, crypto trading fees also attract withholding tax levies.
For the FSC, this particular problem is one the exchanges will have to solve by themselves. Supporting its decision to pursue a cross trading ban, the commission stated that allowing exchange operators to trade against their customers constitutes a conflict of interest with significant price manipulation risks.
As to the issue of finding alternative means of repatriating trading fees to Korean won, the FSC said: “Whether you want to change cryptocurrency to another asset (other than won) or to keep cryptocurrency, you need to find a solution yourself.”
Is this it for smaller exchanges?
Responding to Cointelegraph’s request for comments, a foreign-media relations spokesperson for the FSC stated:
“As the authorities are currently working on amendments to the relevant law, it would be inappropriate to comment on your questions right now with specific measures still being drawn up. When specific measures are ready for announcement, we will put them up on our website.”
For Lee Chul-ie, CEO of South Korean cryptocurrency exchange platform Foblgate, the proposed cross trading ban is simply another blow for smaller exchanges in the country. Speaking to the Financial Times, Chul-ie remarked: “We are facing an existential crisis. We want to legitimise our business but banks are reluctant to offer us real-name accounts.”
According to the exchange operator, additional problems like cross trading bans could push smaller platforms outside the country or to seek “grey areas” to circumvent stringent regulatory measures.
However, Jeff Kang, South Korea country manager at blockchain security outfit CoolBitX, is of the opinion that some smaller exchanges will be able to manage the situation. In a conversation with Cointelegraph, Kang opined:
“While it appears that increased oversight from the South Korea FSC might be daunting news for the local cryptocurrency industry, the situation is not as dire as it seems. The Korean government’s stance on cryptocurrencies is not to totally stamp out its use, but to account for consumer protection and to eradicate financial terrorism and money laundering.”
According to Kang, the FSC’s goal is not to force exchanges out of the country but to ensure robust AML compliance protocols, adding: “In light of this, cryptocurrency exchanges will have to signal their committed stance to double down on compliance efforts in order to achieve licenses by the September deadline.”
Kang also said that as many as six other exchanges are close to receiving real-name trading account licenses, to bring the total number to 10. However, even if that happens, there will still be over 50 exchanges in South Korea with uncertain regulatory status that will probably be forced to shut down their operations come the September deadline.
For banks, their reticence in dealing with exchanges comes from the fact that financial institutions in South Korea can be held liable for the misdeeds of their cryptocurrency exchange partners.
This situation might be due for a change, with discussions underway between banks and the FSC to limit the liability of commercial banks in the event of any misdeeds committed by their crypto exchange clients. These discussions are also part of a larger agenda that will see banks classify crypto exchanges as high-risk clients.
There is the saying that – the higher the risk, the more profitable the output. The saying can be true, however, there should … Read more
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