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RenBTC Quietly Goes Live in Latest Bid to Bring Bitcoin to Ethereum

The latest implementation of bitcoin (BTC) on the Ethereum blockchain quietly went live this week.

There are 1.24 renBTC live on the Ethereum mainnet now, according to Etherscan. Three sources with knowledge of the project have confirmed this is the Ren smart contract, live ahead of its launch announcement.

Kain Warwick of Synthetix tweeted Wednesday that he was the first person to hold a full bitcoin in renBTC.

However, there’s no way yet for members of the public to mint additional renBTC, the CEO of the company behind the project told CoinDesk in an email.

“While the smart contracts have been deployed on Ethereum, RenVM itself is not actually on mainnet. This is because RenVM is a distinct network separate to Ethereum. The final mainnet subzero version of RenVM won’t be deployed until later,” Taiyang Zhang wrote. “The minted renBTC so far has been from our own internal testing [and] Kain from Synthetix testing the system. The public hasn’t been able to mint renBTC thus far.”

RenBTC becomes the latest in a rash of products built to expose bitcoin-backed assets to the benefits of Ethereum’s various decentralized finance (DeFi) platforms.

Here’s a succinct description of the system from a Medium post by the company’s CTO, Loong Wang:

“Any asset minted on Ethereum by RenVM is a 1:1 backed ERC-20. This means that if you have 1 renBTC (an ERC-20), you can always redeem it for 1 BTC. It’s a direct supply peg. renBTC isn’t a synthetic, it doesn’t rely on a liquidation mechanism, and it’s not the price of Bitcoin on Ethereum. It is a one to one representation of Bitcoin on Ethereum that can be redeemed for BTC at any time, in any amount.”

Ren is a project that grew out of the $30 million initial coin offering (ICO) for the Republic Protocol, originally envisioned as a way to run dark pools – privacy-preserving trading venues where the order book is kept secret. According to Crunchbase, its backers included Polychain Capital and FBG Capital.

But, in a recent issue of The Defiant newsletter, Wang explained his firm’s pivot away from dark pools. 

The big trades were on chains that weren’t Ethereum, he said. “ETH had a lot of liquidity, but it was predominantly Bitcoin and USDT. So we would had to leverage things like atomic swaps, and they’re just too painful,” Wang told The Defiant’s Cami Russo. “And so we kind of turned around to say, well, we need to solve this interoperability problem before large liquidity is actually truly accessible in this space.”

The RenVM is a way to hold a cryptocurrency in a multi-signature wallet controlled by nodes in the RenVM and mint a representation of that asset as an ERC-20 token for use on Ethereum. Unlike other projects, RenVM is bringing more than bitcoin to Ethereum (see bitcoin cash (BCH) and zcach (ZEC) above), with other assets to follow.

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Fed Up With Its Fork of Stellar, Kin Is Looking to Move Onto Solana

The kin cryptocurrency is exploring a move from its own fork of Stellar to the Solana blockchain. 

To recap, the mobile app company Kik ran a $98 million initial coin offering (ICO) for kin in 2017, which was made on the Ethereum blockchain. Then the company said that it would use Ethereum for security and Stellar for transactions. Then it forked Stellar and ran its own chain. Now that’s proving to be inadequate so the cryptocurrency will port over to Solana in a matter of months, pending adequate support from app developers in the Kin ecosystem.

“The fork of Stellar enabled Kin to reach millions of consumers, but we knew it would not be a long-term solution,” a draft Kin Improvement Proposal shared with CoinDesk reads. “Stellar has five-second block times, so irrespective of network load, a consumer could be seeing five-second latency on their transactions – not what we would deem a great consumer experience.”

Read more: Goodbye Ethereum: Kik Plans to Move Its ICO Tokens to Stellar

Solana is a high-throughput blockchain that relies on a concept called optimistic concurrency control, which assumes that transactions generally don’t conflict with each other. The project describes several other key features of its technology on Medium.

“Kin is one the best ways to show what Solana is capable of,” Anatoly Yakovenko of the Solana Foundation told CoinDesk. “We expect to see other projects looking for speed and raw horsepower to migrate to Solana as well.”

The Kin Improvement Proposal says the move would enable an 84% reduction in latency. “Solana is measured to have approximately 60,000 transactions per second, with 400ms block times,” it says. 

The Solana Foundation would actually pay the Kin Foundation for making this move, however, awarding it with up to 1% of the supply of SOL (roughly $6 million at today’s prices), with 0.1% unlocking for each new 1 million active users that join over a 24-month period. 

Next steps

The next step will be for Solana to make a presentation to kin developers about the process for switching chains. If enough developers agree to make the move, Solana staff will largely facilitate it and the process should be complete in a matter of months. 

“It is ultimately up to the developers in the Kin ecosystem to decide if they want to migrate to Solana; however, we know that speed and throughput are two key issues within this community, and those happen to be two areas where Solana shines brightest,” Yakovenko wrote. 

Read more: Solana Blockchain Adds Korean Stablecoin Terra for Better Payments

Based on the Kin Improvement Proposal, the Solana Foundation will start tracking progress on Jan. 7, 2021. 

“Few projects in the blockchain space have shown an ability to grow a user base as fast as Kin has,” Gokal wrote. “We expect to see a myriad of use cases that come out of the Kin ecosystem within the near future that perfectly exemplify Solana’s leading performance.”

Why now?

“What has happened over the last year, but mostly has been accelerated in the last six months, is the kin ecosystem has been growing like crazy,” Tanner Philp, head of corporate development at Kik, told CoinDesk.

Kin has seen a dramatic uptick in its core metric – monthly active spenders – over the course of the coronavirus quarantine period, Philp said.

In early March, there were approximately 1.5 million people who had spent kin in the prior 30 days. On April 20, the growth spike peaked at 4.4 million. The numbers have trended down somewhat since then but it’s still running at about 3.5 million, a significant gain over prior numbers.

Read more: Kin Foundation Publishes First Transparency Report Amid SEC Court Fight

Kin has been integrated into 57 different applications, but usage is dominated by a few popular ones, including apps for sharing media and making funny, shareable shorts. 

Kik, the company that still oversees kin, began investigating new blockchains to pursue eight months ago in anticipation of the need to get to something faster, Philp said. 

The key use for kin is payments, and that was what Solana was always designed to accelerate. 

“Solana is one of the solutions, if not the only solution, that scales transaction times down into sub-second territory – the type of experience you’d demand for any mainstream application, such as Kin,” Yakovenko wrote.

Kik believes its Stellar fork has room for several more months, though pending developments could shorten that runway.

“What we’re getting close to is rolling out the new wallet for kin that Kik Inc. is working on, to connect the ecosystem, and that’s where you’ll start to see some more vibrancy within the ecosystem,” Philp said. 

New features

The wallet will make it simple to move kin earned in one app over to others. The company isn’t committing to a timeline but that wallet could appear in late Q3, Philp said. 

When that happens, if users start moving tokens around between apps, it will become important to add metadata to transactions showing which application drove the spend. That data helps apps get properly credited by the Kin Rewards Engine. Stellar does not support a large enough amount of data to make its metadata features useful.

Read more: Blockchain Gaming, Messaging Apps See User Growth Amid Coronavirus Lockdowns

Kin was founded out of the company that formerly ran the Kik mobile app. The vision for the cryptocurrency was to create a way for people using mobile and web-based products to have a marketplace of value, but one where that value could be very tiny, for trade in items like digital stickers and access to small games.

Companies are rewarded for building out the kin ecosystem with daily emissions from the Kin Rewards Engine, which shares out its vast trove of undistributed kin to developers who are driving transactions. 

“Kin started out with getting a lot of users using it across a lot of different apps,” Philp said. “Now it’s about getting people to spend larger amounts, and by that we mean going from fractions of pennies to pennies spent.”

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UMA Project Creates Its First Synthetic Coin, Matching ETH Against BTC

Want to bet the price of ether (ETH) is rising relative to the price of bitcoin (BTC)? There’s now a token for precisely that.

On Tuesday night, the UMA Project community approved contracts that allowed creating its first token: ETHBTC. This is a synthetic token whose value tracks the relative value of ETH to BTC, so if ETH is worth $200 and BTC is worth $10,000, an ETHBTC should be worth $0.02. 

The intriguing thing about ETHBTC, though? No ETH or BTC is needed to make it.

This will be the first deployment of what UMA, a decentralized finance (DeFi) project, calls the priceless token model, one built from the start to minimize the need for oracles.

“ETHBTC was selected as the first test for UMA’s priceless synthetic design because it’s DeFi-centric but not too serious,” Hart Lambur, UMA’s co-founder, told CoinDesk in an email. “This first token is still experimental, so it felt wise to choose a product that appeals to hardcore DeFi natives – the type of people that might want to bet on this rate, and who best understand the risks of ‘new’ things.”

ETHBTC is available now on the new Uniswap, though the team is warning interested buyers: “The mechanisms behind this design have not been proven in the wild. Users should proceed with extreme caution.”

Representing BTC on Ethereum to prove its value as collateral has become a prominent theme for DeFi in 2020.

Priceless

Below is an explanation of how ETHBTC is created, and it should basically describe how any other synthetic tokens might be created on UMA, though some of the variables will likely change.

To generate ETHBTC, a user posts dai as collateral to the smart contract. Based on the collateralization rate of 120%, the contract will allow the user to generate a specific amount of ETHBTC. They can then sell the new ETHBTC on the open market or they can use it to add liquidity to the ETHBTC pool that will be created on Uniswap (most interested buyers will probably choose to just acquire it directly on Uniswap).

Read more: Trust No Dapp: Chainlink Launches Oracle for Provable Randomness

UMA’s synthetic tokens trade like any Ethereum-based token until their contract comes to an end. At that moment, the staked DAI will be split between token holders and stakers. If the value of ETH vs. BTC has gone up at the close of the contract, the token holder will get a profit on what they paid for it. If it hasn’t, the staker will earn a profit on that original sale as the contract releases more dai back to them.

So token holders are long and stakers are short ETHBTC. Lambur described it as “a sort of meta-bet on DeFi as a whole,” because the most likely explanation for growth in ETH uncorrelated to BTC would be more people using DeFi products. 

This is all quite new. The UMA team noted in their message that this is very much an alpha test in the real world. While it has been audited by OpenZeppelin, users should be very cautious about the amount of risk they take on. 

“We strongly encourage interested users to do their own research and proceed with caution in this experiment,” Lambur wrote.

Eliminating oracles

Under the priceless token model, UMA does not need an oracle to function on a day to day basis.

“What we’re saying is: Let’s not do any on-chain price ever,” Lambur told CoinDesk in an interview. “This is how you’re going to have to scale DeFi,” he added later.

The idea here is that everyone knows that the contract is going to have this defining moment when it comes to the end and the stakes get split up between stakers and coin holders. If the definition of the price is clear and transparent to everyone, the truth of the world should not be confusing at that moment. If so, then an oracle will never be necessary. People will just see what the truth was and accept that outcome.

“Minimizing the dependency you have on your oracles is just good system design,” Nik Kunkel, on the oracles team at MakerDAO, told CoinDesk. “This type of oracle’less design is very unique to their system and the characteristics of the UMA system. It can’t really be applied anywhere else.”

Read more: Uniswap V2 Launches With More Token-Swap Pairs, Oracle Service, Flash Loans

This was a point that Sergey Nazarov, creator of Chainlink, a network of oracles, also emphasized.

“If you say, ‘I’m not going to build data feeds to build financial products,’ the number of financial products you can build is very small,” Nazarov said. “I think what they are doing is essentially an interesting experiment.”

That said, Lambur compared UMA’s approach to paper contracts in the real world. Traditional contracts don’t have to be publicly posted to function and most of the time no one but the parties ever see them because every one honors their side of the deal.

“We are really trying to frame the oracle itself as being like taking someone to court,” Lambur said.

In order to backstop price throughout the life of the contract, UMA also has a liquidation model. If anyone spots an undercollateralized position, they can trigger a liquidation event. Again, if they initiated it accurately under the conditions, ostensibly there will be no need to turn to oracles.

If there’s a dispute, UMA token holders will settle it by coming together to vote. The holders who voted on the winning side will be rewarded in new token emissions. The economic model of UMA is designed so that it will always be unprofitable to buy up UMA tokens in order to vote through a false choice.

“The tokens themselves, the token holders, form this court system which ultimately is the security of the whole platform,” Lambur said. “The whole overall premise for our token economics is we need the cost of bribing the system to be greater than the value of the system.”

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Base Layer Blockchain Harmony Adds Staking to Open Up Validator Set

Harmony announced Tuesday that its mainnet has now incorporated staking, allowing users to earn ONE tokens for locking in their current holdings. Harmony is built to be a very fast base layer blockchain for transactions and smart contracts. 

“Staking is the mechanism that will allow us to trust participants in our network without knowing them. Now that staking is complete, we can take a huge step towards decentralization by opening the protocol to the public,” Nick White, a Harmony co-founder, told CoinDesk in an email. The blockchain is currently run by Harmony and trusted partners, but staking opens it up to broader participation.

Currently, roughly 5 billion ONE tokens exist. The protocol emits 441 million ONE per year, all of which will go to stakers. More details on Harmony’s token-economics can be found on its blog.

There are 16 staking partners who have committed to work with Harmony on running its validations including Staked, Stake.fish, Blockdaemon, Everstake, InfStones and others. 

Harmony believes that deploying staking is notable because it is doing so on a sharded blockchain.

“Staking itself is a frontier technology within the blockchain industry. Projects like Cosmos took years to design and build a secure staking protocol for a non-sharded chain. When sharding is added into the mix with staking, the complexity increases dramatically,” White wrote. “Ensuring that such a system runs securely requires enormous theoretical rigor and practical engineering.”

The easiest way to participate would be to join one of Harmony’s staking partners, however, the team encourages standalone staking. “We designed the protocol to require very little computing power and token stake to make staking accessible for more people and to encourage decentralization,” White wrote.

The minimum requirements to participate are:

However, because validators will initially be limited to a slate of 320 (actually 80 validators for each of their four shards), White expects the pragmatic minimum to run a validator will be something like $22,000 worth of ONE. 

Stakers can be slashed if they appear to be trying to create a malicious fork of the chain. They are not slashed for missing votes but they can lose their role as a validator. Eventually, there will be slots for 1,000 validators on Harmony.

Staked ONE takes about 10 days to become liquid again, once the holder initiates unstaking.

“The launch of staking on Harmony is about the transition from permissioned to permissionless and from centralized to decentralized,” White said.

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Uniswap V2 Launches With More Token-Swap Pairs, Oracle Service, Flash Loans

“Amulets” might be a better word than “tokens” for some of the crypto assets emerging on blockchains today.

Version 2.0 of Uniswap is now live and it is, among other things, an amulet-minting machine, though probably everyone’s still going to call them “tokens.” Tokens are little more than keys which let you access something, such as a game or a laundry machine. Amulets have surprises inside, they can generate something new from within, for anyone with the skill to unlock them.

“Version 1 was almost this like proof-of-concept,” Hayden Adams, Uniswap’s founder, told CoinDesk. “It was the first implementation of this protocol. It got a lot of things very right. And that’s proved by usage and traction.”

Uniswap is a system on Ethereum for trading any ERC-20 token for any other, using Ethereum’s core cryptocurrency, ETH, as the medium of trade. It currently has $43 million of liquidity (assets locked into the protocol) with $13 million in activity on the platform in the last 24 hours, according to Uniswap.info. It’s one of the key so-called “financial primitives” powering decentralized finance (DeFi).

But Adams believes the platform can be pushed a lot further. Uniswap v2 – which he described in a blog post in March – will work the same way as Uniswap v1, but it will take off its key limitation – running all token swaps through ETH. Plus it will add some new features, such as a new oracle system, that many other DeFi projects may find useful.

More amulets, stranger amulets

The headline feature of the new Uniswap will be the ability for anyone to create any pool pair they want, so long as it exists on Ethereum.

This is likely to lead to unexpected use cases, but the most obvious use out of the box is a new way to use stablecoins. Popular ERC-20s like MKR, ZRX, WBTC, OMG and others are very likely to be quickly paired up with stablecoins, such as USDT, USDC and dai.

Coinbase has already added liquidity to the ETH/USDC pair on Uniswap v1, after all. “Having stablecoin pairs on Uniswap is a pretty huge improvement. It’s probably the most requested thing since Uniswap launched,” Adams said.

Read more: Coinbase Pumps $1.1M USDC Into DeFi Sites Uniswap and PoolTogether

The top-line advantage of having a direct pair of any two tokens is that it should lower transaction fees for trades (v1 always requires two trades between any two ERC-20s). Another advantage: it allows liquidity providers to lower their volatility on one side of a pool. A MKR/ETH pool is volatile on both ends, but a MKR/USDT pool should only be volatile on the MKR side. “A lot of people don’t want the ETH exposure,” Adams said.

As mentioned above, these token pairs are created by users. If someone thinks WCK (wrapped CryptoKitties) and SOCKS (actual socks) should have a token pair, then they can set it up. Users pay a tiny fee to the liquidity pool for each trade (0.3%) and that ultimately goes back to liquidity providers (each gets it proportional to how much of the pool they have posted).

So returning to our amulet thesis: Any time someone contributes to a Uniswap pool, they get a token whose value grows as people use that pool. It’s a token that represents value in two other tokens. It’s like owning a deed to a piece of land that’s growing beneath your feet.

Adams said he expects these liquidity pool tokens to show up in other DeFi applications soon.

A crystal ball

Uniswap is also adding an oracle service, because the first job of any magician is to learn to see the unseen. 

Uniswap isn’t going to use these oracles, but it’s a way of improving the price signals the protocol already yields. 

“Uniswap basically is a price discovery mechanism at its core,” Adams said.

While the company behind the protocol has never recommended Uniswap as a price oracle, projects do use it that way. Uniswap does a good job tracking the market; however, if a project needed the price at every block to really be on point, it’s not safe right now.

“There is this huge demand for oracles, and it’s a very valuable thing to have an on-chain price feed, especially a decentralized one,” Adams said.

Uniswap is adding a time-weighted oracle service (time-weighting makes shenanigans expensive) that can flexibly deliver average prices over any length of time. Adams expects many oracle-reliant projects will at least incorporate this feed into their data streams, if not relying on it entirely.

“This is a service that Uniswap v2 provides to the world, and I think will indirectly benefit the Uniswap protocol,” Adams said.

Flash loans

Uniswap is also adding flash loan functionality. Flash loans have been controversial, but they really enable composability. Additionally, they have the benefit of only going through if everything works.

Flash loans permit a user to borrow any amount up to the total liquidity available, so long as the whole sum gets returned in the same transaction. A talented software developer can code up a bot to watch specific places in the market where prices get out of sync and take advantage of arbitrage opportunities, earning quick profit but also helping to restore equilibrium. With flash loans, traders don’t even have to front the cost of running those trades.

Read more: The DeFi ‘Flash Loan’ Attack That Changed Everything

Flash loans also allow Uniswap users to make fewer transactions, thereby reducing fees. However, by creating a whole new use case with lower upfront costs, it should increase the number of fees that liquidity providers earn.

Again, assets that can leave and return in effectively the same moment but somehow someone out there got richer along the way? Amulets.

Magic mountain

Uniswap makes no income off its protocol. All the revenue goes back to liquidity providers. But it’s a VC-backed project, with a seed round in April from Paradigm, so one would expect that there must be an intention to exit.

Uniswap v2 leaves an option open to redirect 0.05% of any trade to pay the protocol itself. Adams declined to say more about this than what he wrote in his original blog post: “The best version of Uniswap will be one that autonomously incentivizes contributions to its own growth and development as well as to the broader ecosystem in which it exists.”

“I’m a huge fan of automation first and governance absolutely last,” he said in an interview. “It’s easier to rely on and trust math.”

Uniswap has had an impressive run. Roughly 18 months in, it entered basically the same space as Bancor, a token-swapping project that raised $150 million in an initial coin offering (ICO). Uniswap simplified the design by using ETH instead of a new ERC-20. When we last made the comparison in February 2019, Uniswap and Bancor were closely matched. Today, DappRadar shows $213,000 in volume for Bancor over the last seven days and $38 million for Uniswap.

Read more: A David vs. Goliath Battle Is Brewing in Ethereum Decentralized Exchange Race

“Uniswap is doing $2 billion in trading, annualized, over the last 3 months,” Adams said, meaning it’s running $6 million in fees per year.

The genie is very much out of the bottle, and now it’s making moves.

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Bug Forces Shutdown of Bitcoin-Backed Ethereum Token tBTC

Blockchain venture studio Thesis has put a pause on deposits into tBTC, its new platform meant to put BTC on Ethereum so BTC can be used in decentralized finance.

The Thesis team cited a bug, but is not disclosing details until all funds have been safely withdrawn from this iteration of tBTC. Thesis is now helping early users withdraw any BTC that had been deposited.

The project lead behind the new system, Thesis CEO Matt Luongo, sent the following statement to CoinDesk via a spokesperson: “While the tBTC dapp was being tested over the weekend in its alpha version, a couple of community members put a few BTC into the contract before testing had concluded. Meanwhile, an issue in the dapp that was missed by our security audit was found by two of our contributors, and we decided to pause deposits for now to ensure the safety of funds. It is thanks to the strength and engagement of our community that this was identified quickly and all funds are safe.”

Luongo said the priority now was to further enhance the security of the system before announcing a timeline to re-deploy it. A new audit is being conducted by Trail of Bits; another auditor will also be enlisted and its bug bounty has been increased ten-fold.

Luongo first announced that tBTC had been paused at 5:58 UTC on Monday. It had been live for two days. He credited a member of the Thesis team for finding the flaw, and Summa’s James Prestwich for verifying it. 

Luongo wrote later in the Twitter thread, “Because the system is young and most minters are active community members, I think we can get this done in 1 to 2 days. Though we fixed the issue in code last night, we don’t want to expose it until all funds are drained.”

Prestwich was not immediately available for comment. Luongo wrote on Twitter that a full post-mortem is forthcoming. A Thesis spokesperson told CoinDesk this will likely be released tomorrow.

The security model for tBTC is described in its documentation. It delineates four things that Thesis can do with its key to the smart contract. Among those, it can pause new deposits one time for 10 days. This is how Thesis stopped deposits Monday, but the option can only be used once.

That documentation also says, “The first version of tBTC has been built without any ability to upgrade contracts.” The Thesis team has not confirmed that it will deploy a whole new smart contract.

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Trading Contest on Synthetix Aims to Showcase Speed of New DEX Tech

Synthetix is putting over $40,000 in crypto on the line to entice users to try out the faster beta of its decentralized exchange (DEX).

“While DEXs offer significant improvements over CEXs [centralized exchanges] in terms of safety of funds and transparency, there is typically a painful trade-off on transaction speed,” Synthetix CEO Kain Warwick told CoinDesk in an email.

It doesn’t cost anything more than a tweet to participate in the demo DEX, but users need to act fast because they only have till Tuesday to place in the top 20 and win a piece of the 50,000 SNX the company has put up in prizes. 

But the real reason traders might be interested over time is because this project could demo a world where DEXs become feasible at scale.

Everyone knows that the main use case for crypto is trading, which has led to a massive and glaring irony for crypto users. As much as they might like the decentralized nature of these assets, in order to trade efficiently they rely on centralized crypto exchanges, which tend to be vulnerable to cybercriminals. On a DEX, users trade straight from their own wallets.

A long-held dream for crypto has been to create DEX software that allows users to custody their own crypto until the moment of trade and then trade directly with counterparties. That’s why even one of the biggest CEXs, Binance, has built a DEX. But many DEXs have proven more centralized than they admit.

Synthetix’s beta relies on a deployment of the Optimistic Virtual Machine (OVM) from Optimism, the company behind the latest scaling and usability solution for Ethereum.

Read more: Plasma Became Optimism and It Might Just Save Ethereum

“I think optimistic rollup is the first Ethereum layer 2 solution that checks all the boxes for DeFi,” Hayden Adams of Uniswap told CoinDesk, explaining that effectively replicating the Ethereum virtual machine on the second layer takes a lot of headaches out of putting different applications together for developers, making the so-called “money legos” much more viable.

How Synthetix works

Synthetix is a platform for making synthetic assets. That is, users don’t trade ETH for USD, they trade sETH for sUSD, where the underlying asset is actually the SNX token, used to create synthetic versions of the asset.

This is ultimately much like how MakerDAO works. Users put up a crypto asset (ETH, BAT, USDC) and they are allowed to mint a new asset (the stabelcoin dai). For both MakerDAO and Synthetix, there is a pre-set collateralization ratio (150% and 800%, respectively). In both cases, those staking the crypto asset are creating a debt when they mint the new asset, one that can be repaid by returning it.

The synthetic asset holds its peg because that’s the value the smart contract enforces. Imagine a user putting in $8 in SNX to mint one sUSD. She couldn’t mint any more. But then imagine the value of SNX doubled. The smart contract would then allow her to mint one more sUSD, because the value of her staked SNX allowed it under the smart contract’s parameters.

Synthetix – currently the second-largest DeFi protocol, according to DeFi Pulse, with $119.3 million in locked-in value – already runs a DEX and it’s already able to add some efficiency to trading by removing the order book (where actual people post offers for trades they want to make). All trades made on Synthetix are effectively traded with the platform itself.

“The other side of the trade is just the pooled debt that is Synthetix,” Justin Moses, Synthetix CTO, told CoinDesk. SNX stakers collateralizing the system get rewarded by a 0.3% trading fee levied on every trade.

The five most popular tokens (or “synths”) held on the platform right now are sBTC, sETH, sLINK, iBTC and iTRX, in that order. The “i” in those last two stands for “inverse,” because they are short positions, going up in value when the synthesized asset goes down.

Synthetix teamed with Optimism to create a DEX that could be competitive in terms of speed with traditional crypto exchanges, and that’s what the two teams are testing now with this contest. As of 3:00 UTC on Monday, 1,156 wallets had been created and daily volume was listed at $11.3 million. 

The contest runs till 14:00 UTC on Tuesday, May 19. Right now, a user would have to break 32% in gains to break the top 20, but this is crypto and prices move fast.

The case for Optimism

“In Synthetix the thing for us is, if people can see the price of an asset in the real world, and they can tell it hasn’t gotten on-chain yet, they can try to take advantage of that,” Moses said. That’s the problem of front-running, which has always plagued DEX makers.

Read more: ‘Predatory’ Bots Exploiting Decentralized Crypto Exchanges: Report

Synthetix has a complicated set of smart contracts, all of which are very interrelated. “What’s important for us is not having different versions of things in different places,” Moses said.

The OVM allows a team to write smart contracts off Ethereum basically as if they are writing on Ethereum itself. “It supports theoretically any Ethereum smart contract,” Optimism CEO Jinglan Wang told CoinDesk.

The crux of the OVM’s speed improvement can be explained simply: It is designed so users don’t have to wait for transactions to get validated by nodes all over the network to keep doing new transactions.

“You don’t force everyone to do the computation in order to progress the state,” Wang said. “With optimistic rollup you assume all the transactions are valid.”

That’s why they call it “optimistic.”

It’s optimistic but it’s not gullible. Underlying the system is an anti-fraud measure. Each node entering transactions on the OVM has a bond. If it processes a fraudulent transaction its bond gets slashed. Not only that, though, but every node that adds a block to that fraudulent block also gets slashed. This gives everyone in the system an incentive to, first of all, not commit fraud and, second, to keep an eye on their peers (because the sooner fraud gets spotted, the less it costs the whole system).

The shorthand for this approach is a “rollup” and Optimism specializes in “optimistic rollups.” It’s a blockchain that works off Ethereum, while still relying on the mothership to provide security. If that sounds a lot like a “sidechain” to those who have followed this space for a while, you can be forgiven for struggling to see the difference.

Read more: Decentralized Exchanges Aren’t Living Up to Their Name – And Data Proves It

There is another iteration out there, zk-rollups, that offer additional security guarantees, but a developer familiar with Ethereum’s Solidity language might not be able to hop right into those, according to Wang.

“The superior thing in my mind is something you can use today,” she said. “I would also argue that the security of optimistic rollups is pretty good.”

Sidebar

As a minor aside, both Optimism and Synthetix are re-invented projects. Optimism was born out of the Plasma group, an Ethereum scaling project. Synthetix used to be a stablecoin, Havven, funded by a $30 million initial coin offering.

Similarly, some of tech’s greatest giants, like Twitter and Slack, were born out of pivots, and it will be interesting to see if two pivots combined can show crypto’s decentralized coins a path out of the centralized casinos that are today’s exchanges.

Because when a crypto user trusts someone else’s keys, they are betting on more than an investment thesis.

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The Brooklyn Nets’ Spencer Dinwiddie Makes the Bull Case for Tokenizing Entertainers

Brooklyn Nets guard Spencer Dinwiddie knows how to get to the point when he talks about using cryptocurrency to tokenize his basketball contract.

“When you democratize ownership of a contract, or cash flows, there’s two ways that an entertainer really derives his value, you know, he maximizes talent but also the fan engagement is another way,” he told CoinDesk during a session during CoinDesk’s Consensus: Distributed virtual conference. 

Since late 2019, Dinwiddie has been looking to offer a piece of his future cash flows via a crypto token. The deal he’s looking to set up is not finalized yet.

“It’s ongoing and it’s something I’m really excited about actually,” he said.

His peers in basketball are starting to ask him questions about his approach as well, especially now that COVID-19 has left them idle.

“I can’t speak for anyone specifically, especially not my teammates – don’t want them to kill me when I get in the locker room,” Dinwiddie said, but he did acknowledge that a lot of them are curious about what he’s doing.  

During the crisis, he said he sees athletes and other entertainers asking themselves “are there more exotic ways to maximize my earning potential especially while I’m sitting at home? You know the entrepreneurial mind of a lot of these guys is really starting to flourish during the crisis.”

Tokenize upon a star

It was not simple for Dinwiddie to get to the point where he could experiment with his contract in this way, he explained. The NBA itself was reluctant to let him. 

“I think when you’re dealing with legacy systems, they covet control, quite frankly,” Dinwiddie said, explaining the reluctance of the NBA to allow him to tokenize his contract, largely because they didn’t really understand it. “They’re kind of allowing me to do like this pilot, in a sense, and so that’s why some of the more fun things we wanted to do aren’t included.”

He filed his token sale as a U.S. Securities and Exchange Commission Regulation D offering to put his team “in a position of power” when others began looking into the sale.

“By going with accredited investors first it really lets us focus on the meet of the offering and not worry about if there’s a kid down the street who might get ripped off or, yada yada, big bad basketball player type of thing,” he said.

He sees a larger potential beyond sports.

“Anyone with semi-public to public cash flows and has a fan base can participate,” he said. 

For sports, he sees it potentially almost making fantasy sports real, but there’s no way it needs to stop there. He said, “I envision a world where a Kevin Hart token can trade for a LeBron James token can trade for a Serena Williams token, and because we are all our own business, each token will have its own perks attached to it. You know there might be a 5% dividend, there might be future value where it could have a truly asymmetrical yield curve. There could be a utility value, maybe Lebron James offering an exclusive camp only for his token holders.”

I envision a world where a Kevin Hart token can trade for a LeBron James token can trade for a Serena Williams token.

How he got here

With a Twitter bio now that reads, “Just a tech guy with a jumper,” Dinwiddie did not immediately convert to crypto enthusiasm when he first learned about it. 

“When I got into the NBA in 2014, one of my friends in finance told me to start looking at bitcoin and cryptocurrency. I was definitely too scared. I just got into the NBA I wasn’t going to be one of those horror stories,” he said. “Fast forward to 2017, I actually got a little more solidified in the league, had the very same conversation, he showed me the price difference, so naturally I was curious. I put in small amounts of money and I was fortunate to ride the 2017 wave, and also the crash in 2018. And that pretty much led to an education process.”

He started getting curious about how other technologies beyond bitcoin could lead to new and interesting business models.

“Now we’re here and I’ve been an evangelist for both sides of the tree ever since,” he said.

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The CoinDesk 50: Brave Browser Delivered and BAT’s a DeFi Darling

Crypto loves a troublemaker. When the Brave browser debuted in 2016, the Newspaper Association of America (NAA) sent it a cease and desist letter:

“You are hereby notified that Brave’s plan to replace our clients’ paid advertising content with its own advertising violates the law, and the undersigned publishers intend to fully enforce their rights.”

Brave’s founder, Brendan Eich, previously led Mozilla and watched what the surveillance economy was doing to the internet. As web users will tell you, looking at ads isn’t really the problem; it’s that the ads look back.

This post is part of the CoinDesk 50, an annual selection of the most innovative and consequential projects in the blockchain industry. See the full list here.

The plan for Brave was to break that model by delivering ads directly to internet users and then rewarding them for their attention when they chose to give it. Thus, the Basic Attention Token (BAT) was born amid the initial coin offering (ICO) boom of 2017. Brave’s modest (for the time) $35 million token sale sold out in seconds.

“Out of all ‘utility’ tokens on Ethereum, BAT is one of the few that backs a finished product – the Brave browser,” Lucas Nuzzi of Coin Metrics told CoinDesk in an email.

Delivering on its promise to launch a new ad platform in April 2019 seems to have made a difference. Shortly thereafter, venture capitalists gave Brave a fresh $30 million to keep going. But consumer opt-ins to the ad network have not exploded, perhaps because the returns are small and users have to go through Uphold to get paid. It’s a lot of friction.

“The number of addresses with a balance greater than 0, which is seen by many as a proxy for adoption, is still somewhat flat,” Nuzzi said. That figure has been hovering around 100,000 since the launch of Brave ads last April, with only a slow, gradual increase, according to Coin Metrics data.

Users may not think the rewards have proven to be worth the trouble. Still, the long-tail approach may be a winning, if unsexy, strategy for Brave’s long-term relevance.

Regardless, the ad blocking it launched with still works great.

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Filecoin Is Mailing Out Hard Drives of Climate Data to Kick-start Its File-Storage Network

Get a giant hard drive from the Filecoin team stuffed with data on climate, the world’s literature or the human genome and get ready to earn some crypto.

“I think people don’t fully appreciate the enormous logistics involved with moving data at a massive scale,” Ian Darrow, head of operations at Filecoin, told CoinDesk in an interview. 

The Filecoin Foundation is inviting anyone to join its “mission to improve the internet,” Darrow said in a press statement. The new program is called Filecoin Discover, and it is seeding the file storage network early with what Filecoin calls “verified datasets.” 

This data will be delivered to future miners physically, on eight-terabyte hard drives, with instructions on how to link the devices to the Filecoin system, which should go live this year. (In a post last month on the project’s cryptoeconomics, Filecoin explained why the physical delivery of data was more efficient.)

Each hard drive will cost $265 but presumably future Filecoin miners expect storing that much data will ultimately be worth the upfront cost in fiat.

There may be some advantage to being early on Filecoin, according to the recent cryptoeconomics post, but when the network is small, some block rewards will also be deferred, in order to align miner incentives with user needs. 

The datasets available through Discover are in the public interest, offered by the Filecoin Foundation as a way of advancing its mission to make humanity’s data robust and accessible. The company hopes the nature of the data and the support that comes with it will help attract new, smaller users to the network. 

That said, future miners will need to understand that mining for Filecoin is different than other kinds of mining. It’s not just putting in work but being continuously accessible. 

“As a Filecoin miner, you are storing specific pieces of real data for real people, so you do want that data to be reliably available,” Darrow said. 

At 8 terabyte, Darrow noted, this is feasible for someone to set up in their home. While it is a technical process, it comes with instructions and the team is optimistic that by following them users will be ready to run their first hard drive and become interested in expanding their participation. Having lots of smaller users helps make the network more decentralized. 

“This serves as an entry point to get people more involved,” Darrow said of the new program.

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Bitcoin Revenue in Square’s Cash App Tops Fiat Revenue for First Time in Q1

Bitcoin has flippened USD on Square’s Cash App, sort of.

As reported in the publicly traded fintech company’s first-quarter earnings Wednesday, Cash App brought in $222 million on all its other fiat-powered services in Q1. Meanwhile, revenue from bitcoin was $306 million, the first quarter in which bitcoin revenue surpassed all other revenue on the app. 

“In the first quarter, Cash App gross profit grew 115% year over year,” the shareholder letter reported. 

Gross profit on Cash App, however, remains to be found primarily outside of crypto. Of Square’s $222 million in non-bitcoin revenue, $178 million of that was profit. The Cash App saw one of its best quarters yet for new users in the first quarter of 2020, across its many different services.

Bitcoin profit through Square’s Cash App was $7 million in the first quarter of 2020. It earned $8 million in bitcoin profit through the whole of 2019.

Still, on the revenue side, the year-over-year growth in bitcoin sales was steep.

In a filing with the U.S. Securities and Exchange Commission, the company noted: 

“Bitcoin revenue for the three months ended March 31, 2020 increased by $240.6 million or 367%, compared to the three months ended March 31, 2019. The increase was due to growth in the number of active bitcoin customers, as well as growth in customer demand.”

Total revenue from bitcoin in the first quarter was $306 million, versus $65 million in the first quarter of 2019. Square earned $178 million in bitcoin revenue through the prior quarter, the last of 2019. 

Total revenue for Square this quarter was $1.38 billion, roughly 43% over what it earned in the first quarter of last year. Square had $535 million in gross profit for the quarter, but a $105 million net loss.

Zack Seward contributed reporting.

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The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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