Category: DeFi

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Banking Crypto News DeFi

Goldman Sachs Plots a Move into ‘DeFi’ with its ETF, Critics Speak Out

Following a July 26 filing with the Securities and Exchange Commission (SEC), Wall Street investment bank Goldman Sachs has taken its tentative first steps into the world of DeFi with the announcement of a DeFi exchange traded fund (ETF).

On closer inspection, however, it isn’t quite as it seems.

Goldman Sachs ‘DeFi ETF’

As per the filing:

The Goldman Sachs Innovate DeFi and Blockchain Equity ETF (the ‘Fund’) seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the Solactive Decentralized Finance and Blockchain Index (the ‘Index’).

Goldman Sachs SEC filing

Goldman Sachs considered “DeFi” to mean the “Digitalisation of Finance”, defined as “the digital transformation of traditional financial services, including the support and delivery of payments, transaction services, lending and insurance”.

In terms of the types of investments with the ETF, the filing noted:

The eligible universe of stocks is comprised of common equity securities, including depositary receipts, of companies located across developed and emerging markets worldwide, listed and traded on major exchanges in certain developed markets, including: Australia, Canada, France, Germany, Hong Kong, Japan, South Korea, Switzerland, the Netherlands, the United Kingdom and the United States.

Goldman Sachs SEC filing

According to the filing, the ETF will be tied to the performance of companies that are working on blockchain technology and the digitisation of finance.

The ‘DeFi ETF’ Is Anything But DeFi

While some were quick to praise the move, some sharp-eyed critics highlighted a glaring issue:

On a closer inspection of the index that the ETF would be tracking, it revealed only legacy companies with zero exposure to crypto-native businesses – hardly a ‘DeFi ETF’ as advertised.

Buzzwords Over Substance

Earlier this year, Goldman appeared to be making moves in the right direction. In May it recognised crypto as an investment asset, followed by the introduction of a crypto trading desk despite investors’ uncertainty. Following this latest move, however, the megabank’s reputation will undoubtedly suffer within crypto circles.

What drives such inaccurate labelling of financial products, and is it deliberate? Could it be the blockchain equivalent of environmental greenwashing? Given the track record of investment banks, it seems likely that the appearance of “keeping [up] with the times” (ie, blockchain) is more important than actually doing so.

Experienced members of the crypto community have long been suspicious of Wall Street’s moves into the industry, and perhaps they have a point.

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Binance Coin Crypto News DeFi Ethereum Hackers

THORChain Suffers Another Attack: $8 Million Held, Hacker Wants 10% Bounty

THORChain has been once again schooled by hackers who managed to take a further US$8 million in this latest attack, bringing the total losses to US$13 million for the month. The cross-chain crypto token exchange platform manages US$100 million in funds.

The “helpful” hackers were kind enough to leave a note explaining THORChain’s weaknesses and cautioned that the result could have been far more damaging had they gone for the vault (BTC, ETH and BNB). They added:

“Do Not Rush Code That Controls 9 Figures”

About the Exploit

THORChain stated that a hacker (or hackers) deployed a custom contract that was able to trick its Bifrost Protocol into receiving a deposit of fake assets, duping the network to mistakenly process refunds of real assets back to the hacker. The breach was a highly “sophisticated attack” and the hacker has requested a bounty of 10 percent of the funds stolen for services rendered.

The network has responsibly ceased operating until the code can be reviewed and deemed secure before launching again. A harsh and expensive lesson, perhaps, but events such as this are part and parcel of DeFi (decentralised finance) as the space is still in its infancy in the untamed wild west.

There were really only two options. Launch and accept the risk of issues, or not launch and stay in the 90 percent complete audit-review cycle for another six months. Both are difficult.

Thorchain spokesperson

Earlier this month, THORChain lost US$4.9 million in Ethereum drained in a previous attack. Daniel Kim, head of capital markets at Maple Finance, said: “There’s a constant battle for these smart contract securities firms to keep up with hackers. That said, the DeFi industry is still nascent … these issues lead to solutions.”

The price of $RUNE fell 17 percent on the day as a result. It had been trading as high as US$20 in May, though the current value is bouncing around the US$4 mark, down over 80 percent from its peak.

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Blockchain Crypto News DeFi Travel

Decentralised Accommodation Site Grows 120 Times Faster Than Airbnb

Dtravel, a new decentralised travel platform in the home-sharing economy, has already recorded massive growth. On July 21, the company announced it had signed on over 200,000 properties in more than 2000 cities since last month’s launch.

Dtravel’s goal is to have over one million listings within its first 12 months of operation. At the current rate of expansion it has acquired listings 120 times faster than Airbnb, which took two and a half years to acquire 50,000 listed properties.

The company combines efforts from former executives of Airbnb, Expedia, and Binance-backed Travala.com. The platform aims to enhance short- and long-term stays, which can be paid for in cryptocurrency and by traditional methods.

The platform will be governed by the Dtravel Decentralised Autonomous Organisation (DAO) and users who hold TRVL tokens. Tokens can be staked to qualify for rewards, book stays and participate in platform governance.

This is done by leveraging decentralised finance (DeFi) blockchain technology to facilitate smart contracts, which cuts out the middleman and acts as the backbone of the platform.

Recently, ShapeShift crypto exchange also decentralised the company and left operations to the DAO. Australian lawmakers are in the process of establishing DAOs as their own entity.

With travel starting to rebound and a record level of interest in blockchain technologies like cryptocurrencies, Dtravel gives eager people what has been missing to date: control and ownership over their own travel experiences. By allowing guests and hosts full participation in their experiences and in the economy they are creating, Dtravel fulfils the true mission of sharing economies.

Jochem Wijnands, founder, TRVL

Dtravel already has partnerships with large property managers Ministry of Villas and In Residence. More partnerships are being finalised and will be announced soon.

Home-Sharing Economy in the Hands of the People

Among current problems with the home-sharing economy are that a handful of centralised corporations dominate it, and that it is categorised by high fees, impersonal communication mediated by companies, and a lack of crypto payment options.

Dtravel wants to solve these problems by “putting ownership, control, and decision-making back into the hands of users through blockchain technology”. By doing this it has reduced fees – which can run as high as 20 percent – down to 7.5 percent, allowing hosts to earn more per booking.

Additionally, TRVL tokens can be used to align the company with the economic interests of its users, not just those of the organisation and its shareholders.

The next generation of hosts want a true sharing economy, not a shareholder economy. Dtravel is the opposite of a centralised company; decision-making power and value within the platform are shared by members of the community, meaning hosts and guests.

Luke Kim, marketing lead, Dtravel

The Dtravel main network launch, along with the booking platform, will be ready for use by both hosts and guests by Q3 2021.

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Crypto News DeFi Markets

$27 Billion Grayscale Launches DeFi Index for Institutional Investors

Grayscale Investments, the world’s largest digital currency asset manager, has announced the launch of its newest diversified investment product, the Grayscale Decentralised Finance Fund.

Grayscale Moves into DeFi

Grayscale is perhaps best known for its flagship product, the Grayscale Bitcoin Trust (GBTC) – the biggest buyer of bitcoin in 2020 and for years the only only viable way institutional investors could gain exposure to the asset without physical custody.

The GBTC grew incredibly quickly during Bitcoin’s run-up to its all-time high in April, and now is in the process of converting the trust into an exchange traded fund.

However, following strong institutional interest, Grayscale has partnered with CoinDesk to create the Grayscale DeFi Fund (Fund) which aims to provides investors with exposure to a selection of industry-leading DeFi protocols through a market-capitalisation weighted portfolio designed to track the CoinDesk DeFi Index (Index).

With increasing attention on the innovations within decentralised finance, it’s critical for the investment community to have tools that deliver calculated exposure to this exciting area of innovation. This collaboration offers investors the data and tools they need to gain exposure to decentralised finance into their portfolios.

Jodie Gunzberg, managing director, CoinDesk Indexes

The Fund is Grayscale’s 15th investment product, and its second diversified fund offering. 

This latest move into DeFi is evidence of growing institutional demand in the space.

Constituents of the Index

As of July 1, 2021, the Index consisted of the following assets and weightings:

  • Uniswap (UNI), 49.95%
  • Aave (AAVE), 10.25%
  • Compound (COMP), 8.38%
  • Curve (CRV), 7.44%
  • MakerDAO (MKR), 6.49%
  • SushiSwap (SUSHI), 4.83%
  • Synthetix (SNX), 4.43%
  • Yearn Finance (YFI), 3.31%
  • UMA Protocol (UMA), 2.93%
  • Bancor Network Token (BNT), 2.00
Categories
Crypto News DeFi Scams

Bondly Token Crashes 90% in Potential DeFi Rug Pull

Bondly Finance, a decentralised NFT platform, has suffered an alleged exploit from an unknown attacker.

The project claims that an “unknown party” minted 373 million $BONDLY tokens and sold them in the trading pools, causing a price drop of 90 percent in the following hours.

While the Bondly Finance team claims they were hacked and highlighted it on Twitter and Telegram, some in the crypto community are not fully convinced.

PeckShield, a blockchain security and data analytics company, said that only the owner could perform the minting, which suggests that developers were behind the attack.

According to Xuxian Jiang, founder of PeckShield, the owner pulled the trigger in transferring out 373 million tokens to sell through various exchanges. The attacker’s address used several decentralised exchanges to move the funds, which were worth about US$7.5 million at press time. 

Yet Another Exit Scam

Scams, exploitations and rug pulls (properly called exit scams) are becoming increasingly common in the DeFi space.

As Crypto News Australia reported in March, TurtleDex – a so-called DeFi storage platform – rug-pulled its investors by draining US$2.5 million in Binance Coin (BNB) from trading pools in the Binance Smart Chain (BSC). This exit scam, along with the Meerkat Finance example in the same month, caused a lot of controversy in the DeFi community, prompting other scammers to follow suit.

Earlier this month, the WhaleFarm token dropped almost 100 percent after developers drained liquidity pools filled with several coins, stealing over US$2.3 million.

Traders should be cautious when investing in a DeFi protocol and look for several red flags, such as exaggerated yield returns, a whitepaper that looks more like marketing instead of offering a solution to a problem, and anonymous developers.

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Crypto News DeFi Ethereum Hackers

DeFi Project Thorchain Attacked, Draining $4.9 Million Worth of Ethereum

Thorchain has suffered a second attack, draining millions in assets from the protocol. The attack was brought on by an unforeseen exploit in the ETH Bifrost allowing for an intuitive attack vector.

Initially it was thought that close to 13,000 Ethereum (ETH) had been stolen but according to an update posted by Runebase, it is now estimated at about 2,500 ETH. The update also stated that “the discrepancy may be due to additional loss from arbitrageurs taking advantage of the price manipulation”.

While the treasury has the funds to cover the stolen amount, we request the attacker get in contact with the team to discuss return of funds and a bounty commensurate with the discovery.

Thorchain Telegram administrator

Other protocols like Rari have also been able to reimburse their proponents after being hacked.

Decentralised Community Protecting the Network

When trying to attack an open-source decentralised protocol, you’re not just attacking the developers but the community as well. Communities and node administrators have various incentives to protect the network, not just for the value they have pumped in, but the value they get out from time and effort spent building and securing the network.

The issue was discovered by a community developer and when anonymous nodes started voluntarily using the “make halt” command to stop their nodes, the emergency was made clear. Once more than a third of the nodes had been halted, the network itself was halted. This was a decentralised action taken by node operators to protect the network.

DeFi Targeted by Attackers

As DeFi is one of the more recent innovations in blockchain and distributed ledger technology (DLT), much of what is happening in the space is innovative. In spaces such as these, there will always be room for improvement and considerations not yet made, but as the space matures so will the knowledge and experience of risks.

So far this year, millions have been stolen in DeFi hacks, in various ways ranging from coding errors to rug pulls. Thorchain was in good stead after its price dropped only 14 percent following the attack. Other tokens like FinNexus (FNX) had dropped 90 percent after being hacked.

As the space matures many lessons will be learnt, but as these exploits occur developers are documenting and fixing them, strengthening protocols and best practices. In the long run, this will work to the advantage of the crypto industry as a whole.

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Australia Blockchain DeFi

Aussie Lawyers Propose New Legal Entity for Decentralised Companies (DAOs)

Decentralised Autonomous Organisations (DAOs) in Australia are currently construed as partnerships or unincorporated associations. The Digital Law Association (DLA) and international law firm Herbert Smith Freehills want to change that.

DAO Operations. Source: Pngkey

DAOs as Recognised Legal Entities

Despite DAOs gaining traction in Australia, they are not yet formally recognised as they have been elsewhere. Venture capital firms in the US, however, remain eager to access the Australian DeFi market as they recognise its role as an international leader.

They are conscious this is a key innovation centre now for DeFi and want to back Aussie entrepreneurs.

Richard Galvin, CEO, Digital Asset Capital Management

Despite the enthusiasm of investors, the current Australian legal framework is somewhat grey and creates three main challenges:

  • The status of contracts entered into between DAOs and other entities in the real economy is murky.
  • Currently, all members of a DAO risk legal liability and potential losses for decisions made by a single member of the community.
  • Innovation is stifled as members of DAOs remain concerned that even if they try to do the right thing, the Australian Securities and Investments Commission (ASIC) might take action for something in the future.

DLA therefore suggests that Australia creates a new legal entity, say DAO Limited, which would enable it to contract with other entities in the real economy as well as offer limited liability for its members against potential claims. Rather than a board of directors making decisions, it would be an internet community.

DLA has put forward a number of suggestions including:

  • Establishing a new “authorisation class” that could operate within the current Australian Financial Services Licence (AFSL) regime.
  • Conducting a review of the impact of tax laws on DAOs to ensure technological neutrality happens in practice.
  • Require directors and senior executives of digital asset businesses to undertake annual training programs in “organisational cyber resilience”.
  • Updating ASIC’s Regulatory Guide 172 to give guidance on the licensing regime and obligations for DAO-run financial markets such as Uniswap.

DAOs Still In Their Infancy

DAOs are undoubtedly one of the most exciting developments within the blockchain industry. This week alone, leading exchange ShapeShift coverted its corporate structure into a DAO. However, given that it is a nascent space, there are numerous challenges that will inevitably need to be addressed if DAOs are to become widely integrated within existing regulatory frameworks. Issues such as know-your-client (KYC) and anti-money laundering (AML) provisions, tax, corporate governance, forks, scalability and security are likely to be of primary concern to the regulators.

As with all disruptive technology, one hopes that ultimately an appropriate balance is struck between regulation and innovation.

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Airdrop DeFi Shapeshift

Crypto Exchange ShapeShift Decentralises Entire Company in Largest Airdrop in History

ShapeShift, a non-custodial cryptocurrency exchange, is completing its long-awaited evolution into a “community-owned and governed crypto platform” by executing a historical airdrop to over 1 million ShapeShift customers and members of the broader DeFi community.

According to a post by ShapeShift, the exchange that prides itself on privacy and transparency is moving to become fully decentralised. This process begins by dismantling its corporate structure and putting power into the hands of users and FOX holders. In coming months, its entire codebase and technology will be open-sourced.

Although it currently employs 65 people, soon ShapeShift will have no employees, no bank accounts and no CEO in somewhere between four and 12 months’ time, according to founder and CEO Erik Voorhees.

A foundation will be established to oversee the decentralisation into a fully community-owned project, and as sufficient decentralisation is achieved this foundation has a mandate to dissolve away.

FOX to Become One of the Most Widely Distributed Tokens

This is one of the largest airdrops to ever take place, with over 60 percent (1,000,001,337 tokens) of the total FOX supply being allocated to over 1 million ShapeShift customers and members of the broader DeFi community, making FOX one of the most widely distributed tokens in history. This means that at the current price of FOX, $820,001,096 worth of value will be distributed to the community.

It has become clear to us that decentralisation is the only way to achieve borderless, immutable finance. Therefore, decentralising ShapeShift is how we choose to maintain fidelity to the principles first established by Satoshi and the Bitcoin whitepaper.

ShapeShift official statement

Every customer who has ever traded $1 or more of ETH or any ERC-20 token through ShapeShift prior to June 9, 2021 is eligible. Over 120,000 decentralised finance (DeFi) users from other platforms, including THORChain, Curve, Balancer and Uniswap, will also be eligible to collect FOX tokens through the airdrop.

Users who get the airdrop and want to earn more are also able to take part in liquidity mining from July 16. 

Reasons for Decentralising the Company

This process of moving from centralised shareholder or board member governance to a community-based governance is an unprecedented move by any company to this degree.

Through this transition, the intention is to build a powerful community around an open-source, self-custody, multi-chain crypto platform for the world.

ShapeShift statement

As the company open-sources and decentralises itself, FOX tokens will give holders the ability to direct the future of the project by voting, submitting proposals, and governing the ShapeShift DAO.

This means that holders will be able to decide:

  • which protocols and assets to integrate
  • how to spend or invest funds in the ShapeShift DAO (funding new initiatives, building new services or products)
  • adding or changing fees
  • any other ideas contributed by our customers and community

Inspired by the broader DeFi community, we’ll now help pioneer a new model of economic coordination for the 21st century. No corporate entity, no banks and no borders. The tools are ready. Our customers, and the broader crypto community, are now the primary stakeholders of a decentralised, open-source digital asset platform for the world.

Erik Voorhees, founder and CEO, ShapeShift
Categories
Australia Blockchain Crypto News DeFi

$100 Million Aussie Crypto Fund Manager Avoids DeFi But Still Makes 119% Returns

Melbourne-based crypto fund Apollo Capital has outperformed Bitcoin in its year-to-date profits, returning 119 percent compared to Bitcoin’s 19.96 percent YTD growth.

Apollo Capital manages more than A$100 million (US$75 million) and has a couple of key elements to its successful investment strategy:

1. Audited code is a must, and 2. Anonymous development teams are a no-no.

The fund focuses on established projects that have existed for over a year, with a preference for systems running on the well-established Ethereum blockchain. Apollo places importance on selecting only well vetted crypto projects where the code has been audited and deemed legit.

Trust and Traceability

These higher-calibre cryptos have earned their stripes on the blockchain and have a proven history of being trustworthy, whereas anonymous teams often cannot be traced or held accountable if and when it all goes wrong.

Taking these precautions ensures that any crypto Apollo puts its money into has a decent survival rate, lowering the risk of a project being rug-pulled, which is often seen in new crypto projects.

It’s all in the code. Recent DeFi failures such as WhaleFarm and Titanium are classic examples of what can happen with unaudited code. Both projects showed promise until they crashed quickly to zero.

Apollo prefers betting on reputable assets with strong utility such as Bitcoin and Ethereum, as well as newer kids on the block that show promising potential, such as Polkadot, Polygon and Solana.

Risk and Rewards of DeFi

DeFi is a high risk/high reward game, but if it seems too good to be true it probably is and noobs should beware. The most feared outcome for DeFi investors is that they will lose all their money.

The most common reason for a DeFi project going belly up is weaknesses in a contract’s code that leaves it open to exploitation by hackers. Sometimes these “hackers” are actually the project’s developers.

An all-too common scenario in DeFi is the dreaded “rug pull”, where the liquidity is essentially drained by the dodgy team (who remain conveniently anonymous). These faceless masterminds can make off with millions and there’s nothing you can do to get your money back.

The DeFi space is still very new and, as with all things in their infancy, there are always hiccups at the beginning. As we move forward, the demand for decentralised finance only grows stronger and it is coming to us faster.

Australia an International Leader in DeFi

Australian startups are leading the charge. The future of DeFi is perhaps one of the most exciting developments in the crypto space and once the crinkles are ironed out, these platforms could change the world and open up a fairer and more honest financial banking system.

If you are interested in DeFi investments, it is always advisable to be aware of the risks.

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Crypto News DeFi

DeFi Tokens Leading the Market as BTC Nears $35,000

Several DeFi tokens are seeing considerable surges in the market as Bitcoin nears US$35,000, pushing the total crypto market to over $1.5 trillion again.

Bitcoin fell to US$33,000 on the weekend, quickly bouncing to US$35,000 again this week. The altcoin market, despite marking some minor losses, has seen a strong surge by double digits – especially in the DeFi sector.

DeFi Market Grows 7% in 24 Hours

The DeFi market cap has surged over US$79 billion, representing 5.3 percent of the total market and locking US$96 billion in TVL (Total Value Locked), according to CoinGecko. 

DeFi tokens and altcoins are now taking the lead, including the Australia-founded Synthetix (SNX). At the time of writing:

  • Ethereum (ETH): 3.4% – US$ 2,319.23
  • Uniswap (UNI): 11% 24h – US$22.33 
  • Binance Coin (BNB): 6% 24h – US$318.59
  • Cardano (ADA): 2.59% 24h – US$1.41
  • Litecoin (LTC): -0.97% 24h – US$138.37
  • Chainlink (LINK): 7.69% 24h – US$20.04
  • Aave: 7.11% 24h – US$319.70
  • Synthetix (SNX): 10.76% 24h – US$11.77

Synthetix has been recovering from some minor losses last weekend, while Aave has surged in price after the protocol announced it would launch a permissioned version of its lending platform, following strong demand from financial institutions.

Bulls Regain Control of BTC

Bitcoin has been stagnating in price levels of US$32,000 – US$35,000 in the last weeks, followed by several tweets from Elon Musk and China’s constant crackdown on BTC miners across the country.

However, bulls are regaining control of the market and closing the gap. It seems the crypto community is ignoring Musk’s attempts to pump or dump cryptocurrencies like Doge – but if Tesla resumes BTC payments for its vehicles and if BTC mining becomes more eco-friendly, it could still give BTC a considerable boost and break the US$40,000 barrier.

As reported, more than 25 Bitcoin mining companies have joined forces to make BTC mining greener thanks to the Bitcoin Mining Council, which has gathered information from over 32 percent of the current global network. According to the results, the global mining sector is using electricity with a 67 percent sustainable power mix.