Author: Jody McDonald

Jody is a Brisbane-based freelance writer who specialises in writing about business, technology, and the future of work.

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Bitcoin DeFi Ethereum Wrapped Bitcoin

Wrapped BTC Inflows Stall Amid Slowdown in Ethereum-Based DeFi

In further evidence of a cooling crypto market, flows of wrapped Bitcoin (wBTC) into Ethereum have flatlined since December 2021. 

While wBTC circulation has grown rapidly since its launch in late 2018, it has stagnated so far this year due to weakened interest in DeFi.

Wrapped BTC Reflects HODLers’ Demand for DeFi

In essence, wBTC is an ERC-20 token used to represent BTC on the Ethereum network, which allows BTC holders to take advantage of decentralised finance (DeFi) opportunities on Ethereum without having to sell their BTC. Currently, 66 percent of all wBTC supply is held by smart contracts.

Similar to dollar-backed stablecoins like USDC, wBTC is backed 1:1 with actual BTC. The process of minting new wBTC involves real BTC being sent by the purchaser to a merchant, who in turn sends the BTC to a custodian (in this case, BitGo). The BTC is then held in a multi-sig by the custodian and a corresponding amount of wBTC is minted on the Ethereum network.

Calm After the Storm

Since its launch and until late last year, wBTC circulation grew rapidly, more than doubling between January and December 2021, eventually peaking at just over 260,000 tokens – approximately 1.4 percent of the total Bitcoin supply. 

wBTC supply. Source: Coin Metrics

In the months since though, wBTC circulation has stagnated at around the 260,000 mark, reflecting a general weakening trend across the DeFi space. This is reflected in data from DeFiLlama, which shows the total value locked in DeFi protocols has declined to below US$200 billion, having peaked at over US$250 billion in late December.

The flattening of DeFi markets partially reflects the state of the broader market, with the total crypto market cap down some 40 percent since it peaked at nearly US$3 trillion in November 2021. It may also reflect a flight to safety after a series of high profile DeFi hacks and rugpulls, such as the US$326 million Wormhole hack and the ‘polite’ rugpull on the Avalanche network.

Categories
Crypto News NFTs Solana

NFT Marketplace ‘Magic Eden’ to Airdrop Tokens for its Coming DAO

Magic Eden, the largest NFT marketplace on the Solana ecosystem, has begun an airdrop of its Magic Ticket NFTs in preparation for the launch of its new DAO.

The airdrop will provide recipients with access to the coming DAO, called MagicDAO. Magic Eden said the new DAO would help strengthen the wider Solana NFT ecosystem and allow its community to help guide future expansion:

Since its launch in September 2021, Magic Eden has rapidly grown to become the dominant NFT marketplace on the Solana network. In its first five months, Magic Eden has already attracted over 410,000 users and racked up over US$700 million in trading volume.

NFT Access-Based DAO

Unlike most DAOs, MagicDAO doesn’t have an associated token – rather, it’s being referred to as an NFT-gated DAO. This model uses NFTs, known as Magic Tickets, to grant membership to the DAO at one of three tiers based on when members made their first transaction: OGs, degens and normies. 

The various tiers will give members a range of rights in the DAO and access to different perks such as free merch, access to participate in hacker challenges, NFT collection whitelists, and entry to online founder AMAs.

Governance Remains With Team For Now

Initially, governance will remain largely centralised within the Magic Eden team with a view to increasing community participation in the future. Members of MagicDAO will be able to vote on less important issues – such as which collections to feature on the homepage – but important governance decisions will continue to be made by the team for the foreseeable future:

In the beginning, Magic Eden’s team will be more heavily involved in decision-making since we want to start slowly and make sure MagicDAO is successful. Over time, we hope the community will play a larger role. 

Magic Eden statement on MagicDAO

The seed funding for the DAO is 1000 SOL, sourced from Magic Eden fees; ongoing funding will come from a 5 percent levy on creator royalties and secondary sales, and 2 percent of trading fees on Magic Ticket.

The launch of MagicDAO follows the recent launch of OpenDAO, a DAO that aims to protect buyers and strengthen the NFT community on the Ethereum blockchain. This may be part of a larger trend, which sees the NFT market maturing and taking more seriously its responsibilities to investors.

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Blockchain NFTs

Hundreds of Salesforce Employees Protest Company’s NFT Plans

Salesforce’s recent announcement that it plans to enter into the NFT space has been met with anger and suspicion by some employees, according to internal company documents obtained by Thomson Reuters Foundation: 

More than 400 employees have signed an open letter addressed to the company’s co-CEOs, raising concerns about the high energy use of some blockchains and the significant risk of fraud and criminality in the NFT market.

The announcement that sparked this reaction outlined a plan by Salesforce to launch an NFT sales platform, called NFT Cloud, which would allow users to create and sell NFTs:

NFTs Undermine Company’s Core Values, Employees Claim

Coming just days after Salesforce aired a Super Bowl ad touting its commitment to sustainability, employees perceive this foray into NFTs as hypocritical and not in line with its stated values:

In the letter, the employees argue that the sale of NFTs conflicts with the company’s five core values of trust, customer success, innovation, equality and sustainability.

With Market Growth Comes Increased Scrutiny

It’s no surprise that large enterprises are starting to show interest in NFTs given the global market has exploded in the past 18 months, growing from US$95 million in 2020 to around US$25 billion in 2021, an approximate 250x increase.

This explosive growth brings with it increased scrutiny and pressure for the NFT space to clean up its act, especially with regard to fraud and energy use. 

Recently, several organisations have faced criticism over their intentions to sell NFTs: the WWF was forced to rethink its strategy to create and sell NFTs following supporter backlash; and video game companies Sega and Team 17 both recently abandoned plans to use NFTs in their games following player anger.

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Blockchain DeFi Ethereum

Morgan Stanley Report Claims ETH May Lose Dominance to Competitors

In a report issued by Morgan Stanley’s wealth management global investment office, the financial services giant warns that Ethereum could lose its position as the dominant smart-contract platform as more efficient competitors emerge.

The report, entitled “Cryptocurrency 201: What is Ethereum?”, provides an in-depth analysis of the Ethereum blockchain ecosystem and summarises its relative strengths and weaknesses compared to Bitcoin.

Dominance Challenged by Faster, Cheaper Alternatives

Several vulnerabilities were identified in the report, the most significant of which was the sheer number of competitors Ethereum now faces in the smart-contract space – many of which are currently cheaper and faster. The report found that:

Ethereum faces more competition in the smart-contract market than Bitcoin faces in the store-of-value market. Ethereum may lose smart-contract platform market share to faster or cheaper alternatives.

Morgan Stanley report

Some high-profile alternatives looking to wrest market share away from Ethereum include Solana (SOL), Cardano (ADA), Algorand (ALGO) and Hedera (HBAR).

Ethereum Scalability Questioned

The second major concern identified in the report was scalability, with concerns being raised that the Ethereum network may start to buckle under the weight of its own success. If it doesn’t find ways to use its resources more efficiently, the report warns, the demands on the network may outstrip its resources:

“Ethereum’s blockchain, measured in gigabytes, is growing faster than Bitcoin’s, and its memory requirements have surpassed Bitcoin’s in half the time. Over time, Ethereum’s storage demand, unless changed, will likely outstrip its resources.”

Coming Regulation, Centralisation Raise Concerns

Additional concerns included the potential for Ethereum to be hobbled by regulation as governments around the world look to police the smart-contract and DeFi sectors and Ethereum’s relative centralisation: the top 100 Ethereum addresses currently own 39 percent of Ether (for Bitcoin that figure is just 14 percent).

This report is by no means Morgan Stanley’s first foray into crypto, having last year started offering Bitcoin to some of its wealthier investors and encouraging investors to pay attention to the metaverse, declaring it the next big trend in investing.

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Australia Crypto News DeFi

New Aussie DeFi Startup Tiiik Aims to Bring Crypto to the Masses

Sydney-based DeFi startup Tiiik, which offers a digital wallet that enables investors to earn interest on DeFi products, has closed its first seed funding round for A$5.2 million:

The capital raise was led by a mix of well-known players in the Australian fintech scene, as well as some high-profile global venture capital funds. Currently Tiiik only accepts funds from Australian accredited investors, but with this new capital raise it plans to broaden its offerings and make products available to retail investors in 2023.

Simplifying DeFi for the Masses

Tiiik launched in 2021 as a one-stop digital wallet featuring saving, spending and earning capabilities all on the same single balance. The company’s stated mission is to bring the advantages of DeFi and other crypto products to Australian investors and consumers in a way that reduces the complexity of crypto behind an easy-to-use interface.

Tiiik wants to enable everyday people to access the benefits of DeFi, without the complexity that typically comes with innovative financial technology. There is a big gap in the market for a platform that can help non-tech savvy people access a new asset class that is revolutionising the way people think about money.

Erez Rachamim, Tiiik co-founder

Tiiik’s savings product will reportedly offer 10 percent yield per annum, which will accrue daily. Users will be able connect their Tiiik wallets directly to their bank accounts, which should make it seamless to deposit and withdraw funds.

Prioritising Regulatory Compliance

Unlike most other DeFi savings products, Tiiik is very keen to operate firmly within domestic regulation. It has applied to the Australian Securities and Investments Commission for a wholesale Australia Financial Services Licence, which it will need to secure before offering any products to its waitlist of eager retail investors, who already number around 30,000.

Because of its more conventional fintech approach to regulatory compliance and efforts to create a more familiar user experience, Tiiik has been referred to by some as an example of a ‘crypto-mullet’: an emerging class of companies that present as traditional fintech on the front-end but leverage crypto technologies on the back-end. 

Tiiik isn’t the first Australian-based example of a crypto-mullet – last year, fellow Aussie startup @Pay launched a buy-now pay-later platform which aimed to bridge the DeFi and e-commerce sectors.

On the back of ranking 12th of 154 countries last year on the Global DeFi Adoption Index, the launch of innovative homegrown DeFi products such as Tiiik further indicates the enthusiasm Australia has for the opportunities crypto presents.

Categories
Crypto News Ethereum Social media

Twitter Adds Feature Enabling Ethereum Tipping

Social media giant Twitter officially enabled Ethereum tipping this week, extending payment options for its “virtual tip jar” feature that enables users to support their favourite accounts and creators.

Twitter first launched its tipping feature in September 2021. At launch it allowed users to send tips to other Twitter users via a variety of payment methods including Venmo, CashApp and Bitcoin.

No Hacking Skills Required

In November, a Hong Kong-based ethical hacker discovered that Twitter had plans to support Ethereum tipping and described a way to access the then officially unsupported feature. But with this latest announcement, the feature is now available to all users and requires no hacking skills:

Ether Tips Available Only on Mobile App

The addition of Ethereum tipping allows mobile app users to send tips using Ether and ERC-20 tokens, including Ethereum-based stablecoins. The feature is only available via mobile apps and is not currently supported through the Twitter website.

This development indicates that since former CEO and famous Bitcoin maximalist Jack Dorsey left Twitter last year, the company has taken a more open-minded stance towards altcoins. The addition of Ethereum-based tips to Twitter marks a further milestone in the mainstream adoption of cryptocurrencies and suggests that Twitter may add support for further altcoins in the future.

Categories
Crypto News

Marshall Islands Officially Recognises DAOs, Aims to Become Global DAO Hub

The Marshall Islands has formally recognised decentralised autonomous organisations (DAOs) as legal entities in a bid to establish the small central Pacific island republic as a hub for blockchain innovation.

A DAO is a decentralised blockchain organisation which is represented by rules encoded in a public, transparent smart-contract. DAOs are member-based organisations that do not have centralised leadership: decisions are made through a democratic voting process. 

They’ve been used extensively in blockchain-based projects, including DAOs to crowdfund the purchase of a Caribbean island and the Blockbuster Video brand. Despite these examples, the legal status of many DAOs has remained murky, often requiring the parallel establishment of a limited liability corporation (LLC), which can undermine their decentralised nature.

The Marshall Islands has clarified the legal status of DAOs by modifying its Non-Profit Entity Act and essentially granting them the same legal status as LLCs, including corporate personhood and the ability to hold real estate.

Under the republic’s new legal framework, DAOs would no longer need to register seperate LLCs, and would therefore be fully decentralised, fully blockchain-based and fully regulatory-compliant organisations. 

This new legal clarity could set the stage for a boom in DAO activity in the small island nation and lead to innovative, large-scale use cases.

First DAO Anticipates Bright Future

The first DAO to take advantage of this new legal clarity in the Marshall Islands is registered to decentralised exchange software provider Shipyard Software:

Mark Lurie, CEO and co-founder of Shipyard Software, expects the regulatory clarity provided by these new laws to mark the start of a new phase of human organisation, stating:

DAOs are the next major iteration of human organisational structure. As mass adoption of blockchain technology takes off, it is critical that DAOs be explicitly recognised as a new corporate entity on the international stage. We are honoured to form the first DAO in the RMI and take the first step in legal formalisation of the DAO revolution.

Mark Lurie, CEO, Shipyard Software

With this new, well-defined legal framework, the future looks bright for blockchain innovation in the Marshall Islands – but we’ll have to wait and see if it leads to the kind of organisational revolution some are predicting.

Categories
Cosmos Cryptocurrencies DeFi Injective

DEX Token ‘Injective Protocol’ Soars 100% on Futures Listing Announcement

The utility and governance token for the DEX Injective Protocol (ticker symbol INJ) rallied more than 100 percent in a single day last week following the February 9 listing of Cosmos (ATOM) perpetual futures on the platform. 

Injective Protocol is a decentralised exchange that offers a variety of financial products usually associated with centralised exchanges, such as margin trading, derivatives trading and other exotic assets. The platform also features cross-chain trading, supporting assets across the Ethereum, BSC and Cosmos networks.

The price of INJ exploded from the upper US$3 range in early February to a high of US$10.08 on February 11 following the listing of ATOM perpetual futures. At the same time, its 24-hour trading volume spiked 1,756 percent to a high of US$306 million.

ATOM Listing a First for a DEX Platform

This listing by Injective Protocol is the first time ATOM perpetual futures have been listed on a  decentralised exchange, marking a significant milestone for the platform. 

It builds on a string of recent positive developments for Injective Protocol, including the listing of Cosmos-based project Chihuahua (HUAHUA) and the release of Injective Bridge V2 in January, which drastically improved users’ experience.

In the days since its rally, INJ has backtracked somewhat and is now trading in the low US$6 range.

The growth of more exotic financial products on DEXs is part of a larger trend in crypto as the industry seeks to expand into a more diverse range of investment classes, such as the tokenisation of real estate.

Categories
Crime Crypto News NFTs

UK Authorities Make First NFT Seizure, Worth $1.9 Million

In what is claimed to be the first haul of its kind in the UK, tax authorities have seized three NFTs valued at US$1.9 million as part of an investigation into an elaborate tax evasion scheme.

On February 14, Her Majesty’s Revenue and Customs (HMRC) arrested three people alleged to have conducted the fraud, which involved the use of false identities and a vast network of 250 fake ‘shell’ companies. In addition to the NFTs, other digital assets valued at approximately A$9,500 were also seized.

A Questionable Milestone? 

Many in the crypto community saw the seizure as something of a milestone and an official acknowledgment that NFTs can be genuinely valuable assets, similar to real estate or motor vehicles – even as they joked about it: 

One user joked about NFT asset seizures. Source: @3thirty3tv via Twitter

Seizure Signals Value of NFTs

It’s important to note that the NFTs were not actually used to commit the fraud, but seized as assets. It’s common practice for authorities to impound assets in tax-evasion cases to cover the cost of court proceedings and lost tax. What makes this case exceptional is that authorities have seized NFTs as assets for the first time.

This may be the first NFT seizure during a criminal investigation in the UK, but it’s not the first time crypto has been seized: last year London’s Metropolitan Police impounded US$160 million in cryptocurrency as part of a money-laundering investigation.

Categories
Bitcoin Crypto News Ethereum NFTs Polygon

Uber and WWF Show That ‘Environmental Concerns’ Hamper Crypto Adoption

Recent statements by the ride-sharing and delivery app Uber and wildlife conservation organisation World Wildlife Fund (WWF) have further highlighted the environmental hurdles crypto faces to achieve widespread mainstream adoption.

Speaking to Bloomberg last week, Uber CEO Dara Khosrowshahi was clear the company would  accept Bitcoin and other cryptos as payment at some stage, but that now was not the time:

Is Uber going to accept crypto in the future? Absolutely, at some point.

Dara Khosrowshahi, Uber CEO

Khosrowshahi said that as it currently stands, Bitcoin is too expensive to use and too energy-intensive to justify Uber adopting it for payments. “As the exchange mechanism becomes less expensive, becomes more environmentally friendly, I think you will see us lean into crypto a little bit more,” he explained.

WWF NFTs Stymied by Backlash

WWF has also shown it’s enthusiastic about using crypto, but is being held back by environmental concerns. 

WWF recently started selling NFTs minted on the proof-of-stake Polygon network. The organisation claimed to have chosen to use the Polygon network due to its low carbon emissions compared to proof-of-work blockchains such as Ethereum, tweeting that each of its NFTs would generate the same carbon emissions as a glass of tap water. Sounds great so far. 

However, WWF has since stopped sales of its NFTs due to widespread backlash after it was pointed out by Alex de Vries of Digiconomist that because Polygon relies on several Ethereum-based smart contracts to function, its actual energy use is significantly higher than WWF initially stated – roughly 2,100 times higher.

Crypto’s Low Energy Future 

Is it all bad news as far as crypto and the environment go? When heavyweight crypto influencers like Elon Musk and Michael Saylor can’t agree on this question, you could be forgiven for thinking there’s genuine cause for concern. 

However, given statements such as those from Uber and the work being done by both Bitcoin and Ethereum to bring about a lower energy future – not to mention the existence of extremely efficient, carbon-negative alternative layer 1s such as Hedera Hashgraph and Algorand – it looks like the industry as a whole may well overcome the issue of energy use.