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John Martin

John Martin

6 Articles

Crypto-enthusiast, philosopher, historian of anarchism.

XRP vs SEC: A Wild Ride

XRP vs SEC: A Wild Ride

John Martin 6 min read
On September 14, 2021, the U.S. Securities and Exchange Commission (SEC) published a document stating its meetings with representatives of SBI Holdings, FinHub, and CME Group. According to this document published by the SEC in the framework of the case against Ripple, representatives of SBI Holdings (Ripple's main partner) and other companies held meetings with employees of the regulator from 2017 to 2019, at which the XRP token was discussed. The document does not say what exactly the representatives of the companies talked about with civil servants. The SEC claims that the California blockchain company has been selling unregistered securities in the form of XRP tokens to retail investors for seven years. The SEC said that during this period Ripple raised $1.3 billion. What Happened In February 2022, the law firm Perkins Coie, which provided advice to Ripple on the launch of the XRP token, published documents on interaction with the issuer of the cryptocurrency from 2012. It follows from the documents that before the release of XRP, lawyers did not classify the token as a security. However, Perkins Coie warned Ripple that representatives of the Securities and Exchange Commission (SEC) may give a different assessment of the token status . The U.S. Securities and Exchange Commission filed charges against Ripple in late 2020. The regulator accused the company of selling unregistered securities under the guise of XRP tokens for 1.3 billion. XRP is an internal token of Ripple, which is used for cross—border payments. Amid the accusations, many crypto exchanges decided to suspend XRP trading. This brought its price down to $0.17. On September 15, the altcoin is trading at $1.1. In February, the parties were unable to settle the dispute in a pre-trial manner. The SEC insisted that Ripple's management was aware of the status of the XRP token even before its official launch. At the same time, the head of Ripple, Brad Garlinghouse, called the SEC's accusations "unsubstantiated" and stated that the regulator's actions are "a challenge to the entire US crypto industry." On July 13, 2022, Ripple managed to win a tactical victory over the SEC in court — the Commission was denied the opportunity to keep secret the data on the speech of the former head of the SEC's company finance department, Bill Hinman. In 2018, at the Fintech Week conference, Hinman said that the ETH cryptocurrency is not a security. And this is a direct contradiction to the regulator's accusations against Ripple. The XRP vs SEC lawsuit will be considered by the Federal Court of the Southern District of New York. The SEC accuses the defendants of violating the registration provisions of the Securities Act and demands an injunction against further sales, the return of all collected funds with compensation, and payment of civil fines. The price of XRP reacted to the news with a rapid drop. What They Say in Ripple Even before the actual filing, the company's top manager, Brad Garlinghouse, said that it was an attempt by outgoing SEC chairman Jay Clayton to "limit innovation in the bitcoin and Ethereum industry." In one of the documents, Ripple calls itself "the best alternative to bitcoin." In the same place, the company calls bitcoin and Ethereum "virtual currencies controlled by China." In his opinion, Trump administration officials are finally trying to harm the industry. He expects more understanding from the Biden government he was one of the sponsors of his campaign. Stuart Alderoti, Ripple's general counsel, again criticized the Securities and Exchange Commission (SEC) for its desire to control the entire cryptocurrency market. In response to the accusation that "even if some people buy a token for investment purposes, you are in the securities industry," Alderoti replied: "Does every jeweler now book a one-way ticket to the "land of securities" because "part" of their clients "invest" in the oldest the product is gold?!" Alderoti also said that the SEC is abusing its power: The Securities and Exchange Commission is trying to expand its jurisdiction beyond securities, "telling the judges with a straight face that we are the government, so we must be right," he said. "The SEC continues to relegate the CFTC to the kindergarten level. Their regulation with the help of a law enforcement strategy is to attack projects using various resources to expand their jurisdiction beyond the "securities", telling judges with a serious face that we are the government, so we are right." In conclusion, Ripple's general counsel urged cryptocurrency-related enthusiasts to join forces to "protect the abuse of SEC powers." What Will Happen to the XRP Token XRP is a real-time gross settlement, currency exchange, and money transfer system developed by XRP. The system is built on an open source distributed Internet protocol, a consensus registry, and its own token called XRP. The main objective of the XRP system, launched in 2012, is to provide secure, instant, and almost free global financial transactions of any size without chargebacks. XRP token has fallen heavily from the record $3.40 recorded on January 7, 2018. The cryptocurrency has fallen heavily ahead of the charges brought by the Securities and Exchange Commission against the blockchain company for conducting an unregistered securities offering in the United States. According to Coingecko, at the time of publication, XRP is changing hands at a price of about $ 0.40. The ongoing SEC investigation has had an impact on XRP token trading activity since its inception in December 2020. Several American crypto exchanges (for example, Coinbase) suspended trading in the coin, thereby limiting the growth of its price. XRP analysis shows that the coin usually follows broader trends in the cryptocurrency markets. But if Ripple manages to achieve acceptable conditions during the settlement of the lawsuit, then the XRP token rate can overcome the $3 mark. With a favorable settlement of the dispute with the regulator, global financial organizations will again reach out to Ripple, which may now be afraid to enter into partnerships with a team in such a difficult situation. Even with the most unsuccessful completion of the trial for Ripple, the coin is unlikely to sink below 0.6 in the long run, since by and large the negative effect of the SEC lawsuit has already been taken into account in the XRP rate. But the impact of a negative outcome on the value of the XRP token will depend on how tough the sanctions that can be imposed on Ripple will be. XRP Prediction A former official of the US Securities and Exchange Commission (SEC), Joseph Hall, predicted in the Thinking Crypto podcast that the trial with Ripple could drag on for more than one year. According to Hall, the completion of the trial should not be expected in 2022. He claims that the trial will not be completed soon, because the parties are firmly rooted in their positions and will not make a deal. Hall himself supports the issuer of the XRP token in the dispute between the regulator and Ripple. According to the ex-official, the situation looks strange, since the Ripple network worked for years before it was noticed by the SEC and filed a lawsuit. Summary The SEC's more aggressive approach, calling certain tokens securities, is alarming the crypto community, as it may cause problems for the industry. Such a label causes strict requirements for investor protection. Crypto enthusiasts say that many of these restrictions are incompatible with digital assets. Each such case of the SEC's collision with major players in the crypto market is indicative and allows us to understand what the regulation of this market will be in the next few years. Many experts note positive dynamics in the XRP case, but also say that the process is likely to be delayed.
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Promising DeFi Startups and Crypto Trends of 2022

Promising DeFi Startups and Crypto Trends of 2022

John Martin 10 min read
The popularization and development of DeFi projects will make the use of financial services more modern, democratic, and convenient. The structure of the industry contains a lot of important components: information management, insurance, lending, tokenization of assets, and the emergence of stable digital coins that are not subject to high volatility.  What are DeFi Projects and What are They Like? DeFi is an abbreviation of " Decentralized Finance ". The concept of decentralized finance is based on a progressive idea aimed at consolidating two vectors at once. The first one is the creation of a new financial industry that will replace the traditional areas: banking, insurance, credit, and many others. Secondly, everyone will have the right to independently control their money without regulators and intermediaries. Technically, DeFi is needed for maximum democratization of the asset management structure, as well as the creation of new financial trading, investing, lending, depositing, and many other services. Thanks to the blockchain, they will become completely seamless. The vast majority of DeFi applications are based on Ethereum . Although, as technology develops, competitive alternatives appear, for example, Binance Smart Chain. If we talk about the Ethereum platform, the main advantage of this blockchain is that it was originally created for the launch of an ecosystem based on which developers will launch their decentralized applications. It was dApps that became the key DeFi mechanism. As a result, the founders of startups were able to implement their ideas without attracting sponsors or institutional investors. Capitalization of DeFi Many companies from the field of DeFi occupy high places in the ranking by market capitalization of Coinmarketcap. Ethereum ranks second, following Bitcoin , which tops the list. The market capitalization of the decentralized finance industry is estimated at $56.99 billion as of the end of May 2022. Cryptocurrencies are very volatile, so at any moment there may be an impulse jump in this indicator. It is also worth considering that DeFi is a fairly young niche in the crypto market. The first DeFi projects began to appear in 2019. Over the next few years, there was a real boom. It is for this reason that hype around DeFi is often compared with the popularity of ICO times of 2017. TOP 10 projects by market capitalization according to Coinmarketcap: Wrapped Bitcoin; Avalanche ; DAI ; Uniswap ; Chainlink ; Tezos ; Frax ; Maker ; DeFiChain ; PancakeSwap . The capitalization of the leaders of this rating is around the $8.5 billion mark, however, it should be borne in mind that Coinmarketcap does not include such platforms as Ethereum, Binance, Solana , and Polkadot among the DeFi. This is since their scope of application is much wider than just decentralized finance. Web 3.0, DeFi and Blockchain Since Web 3.0 networks will work through decentralized protocols, the fundamental blocks of blockchain technology and cryptocurrencies, we can expect strong convergence and symbiotic relationships between these three technologies and other areas. They will be functionally compatible, easily integrated, automated using smart contracts and will be used to provide anything from microtransactions in Africa, censorship-resistant P2P data storage, as Filecoin suggests, to a complete change in the usual procedures for managing companies and doing business. The current set of DeFi protocols is just the tip of the iceberg. TOP 10 DeFi Projects Ethereum continues to be the undisputed flagship of DeFi. Vitalik Buterin's platform is actively used by startup founders to develop new decentralized applications and protocols. The ether continues to evolve. Progress is successful, the ETH cryptocurrency is strengthening in second place both in terms of value and market capitalization. Only Bitcoin is ahead. Solana The authors of many independent ratings believe that Solana plays an even more significant role in the DeFi industry than Binance. In many ways, this point of view is based on a unique consensus-building algorithm. The network uses history confirmation to verify transactions — this is an optimized version of Proof-of-Stake. The new algorithm made it possible to create a viable analog of mining and betting. In the Solana ecosystem, transaction confirmation is carried out by using timestamps in previous payments. Such an unusual algorithm for achieving consensus will significantly increase the speed of transaction processing. As for the SOL coin, it is a first-layer platform. No other platforms are required to carry out transactions. Solana has a great future in the field of DeFi, as the platform can solve current scalability problems. The innovative network architecture allows you to use the principle of horizontal scaling, which has a positive effect on network bandwidth. As of May 23, 2022, one SOL coin is valued at $53. Solana ranks 9th in the Coinmarketcap rating. Avalanche  Avalanche is a platform for launching smart contracts and creating DeFi applications. It can be used to deploy corporate blockchain networks. The AVAX service token is used as part of network management. Its owners can take part in voting on decision-making regarding the subsequent development of the ecosystem. The company's market capitalization is estimated at approximately $8.5 billion. Polkadot Another interesting startup that has enormous weight in the DeFi industry. The Polkadot platform allows independent blockchains to exchange information, including transactions. This goal is achieved through a relay chain. This feature significantly increases throughput when compared with the flagship of the market in the face of Ethereum. DOT is an internal network token required for workflow management. The Polkadot platform allows you to develop decentralized platforms and applications. Heterogeneous blockchain multicore is a promising direction, so buying DOT coins can be a successful investment. The platform has open-source code. Despite the crisis in the crypto industry, Polkadot retains its position and ranks 11th in the Coinmarketcap rating. Wrapped Bitcoin WBTC is an ERC-20 token that is supported by bitcoin. The main idea of the founders of the DeFi startup is to use the global liquidity of the BTC network and transform it into a more flexible Ethereum space. Issues related to the storage of coins are solved at the expense of BitGo. As for providing initial liquidity, Kyber and Ren are responsible for this. The WBTC coin is available on many popular centralized and decentralized crypto exchanges. Therefore, everyone will be able to purchase it. Each user can verify the real security of the WBTC. Information about reserves is public. The management structure is presented in the DAO format. All platforms involved in the implementation of this idea have the right to vote. In total, we are talking about 16 platforms, including Compound , Dharma, and Maker. The process is completely public. The control is carried out using smart contracts with multi-signature, all the participants of the DAO support it. Uniswap This is a DeFi protocol that was developed for the exchange of digital assets based on the Ethereum blockchain. The founders of Uniswap decided to replace the classic order books with liquidity pools. Therefore, absolutely every participant will be able to exchange ERC-20 tokens and ether. Users can earn money by supplying liquidity to the protocol. The profit is formed at the expense of exchange commissions — 0.3% for a trading operation. If desired, users will be able to create their own liquidity pools. To do this, it is necessary to add an equivalent amount in Ethereum coins to the liquidity protocol. You can also use any ERC-20 standard token. The exchange rate is determined by the automated market maker. Quotes are adjusted during trading. Balance is always maintained. The rate depends on which side has more assets. Aave This is a non-custodial protocol with open source code. It is designed for lending and processing loans in cryptocurrency. At the time of entering liquidity into the protocol, the user converts his digital coins into tokens that are compatible with ERC-20. Dividends in the interest format are automatically accrued on this amount. Users can not only lend cryptocurrency but also take loans. To do this, you need to provide a deposit in coins. Depending on the selected asset, additional parameters of the transaction will depend on the liquidation threshold , the amount of the fine, and the security coefficient. Interest rates vary depending on the supply and demand for a particular cryptocurrency. Fixed-rate offers are also available to Aave users. Maker This is a credit platform that was also created based on Ethereum. It supports the DAI dollar stablecoin . Each user has the opportunity to open a wallet. Cryptocurrency blocking is available in the vault as collateral. Based on it, you can generate an equivalent amount in DAI. Payment for stability is carried out in the format of infinite interest. Dividends are paid when the debt is repaid. With the help of the Maker platform, you can make loans to DAI in the amount of up to 68% of your collateral. The security ratio is approximately 150%. If the price falls below this level, you will have to pay a fine, besides there will be a liquidation of the collateral. The owners of the MKR internal token participate in the management of the platform, they vote for innovations. Compound The project is aimed at creating an algorithmic financial market on the Ethereum blockchain. This direction of DeFi will allow you to issue secured loans or receive passive income from an open deposit. Dividends are accrued instantly after freezing coins in a decentralized protocol. The rates are updated every 15 seconds under current market trends. The liquidity is delivered in the format of the token. Participants of the DeFi network can get up to 75% of the amount of their collateral on credit. You can top up your account or withdraw your assets at any time. The only condition is to maintain the necessary level of collateral to prevent the liquidation of the transaction. 10% of the number of dividends is allocated for the formation of reserves, and the rest is received by liquidity providers in COMP tokens. Chainlink It is a decentralized network of oracles. The Chainlink blockchain platform allows you to work with smart contracts, and connect to external information sources, including APIs, internal systems, and all kinds of data channels . Payment for the services of the service is carried out using the internal LINK token. It is created following the ERC-20 standard. It will become more expensive as the DeFi industry and the platform itself develop. One of the key advantages of Chainlink is the network functionality that allows you to initiate verification of information coming from several sources at once. The internal degree of reputation allows Chainlink to identify reliable sources with high accuracy. This feature allows you to achieve accurate results, protecting smart contracts from potential threats. Tezos The platform was created to host smart contracts and to work with decentralized applications. Internal XTZ coins cannot be mined, but they can be bought. You can also earn cryptocurrency by participating in transaction confirmation. The network uses an energy-efficient Proof-of-Stake consensus algorithm. Users of the network contribute to maintaining its operability and receive remuneration for their work. There are several key differences between Tezos and other DeFi. On the platform in question, there are so-called bakers who perform the same functions as miners — they provide transaction verification. Instead of expensive equipment, they use the freezing of their assets. This is the advantageous difference between PoS and PoW. Let's Summarize: Judging by the capitalization, the DeFi market continues to develop. There is a real public demand for the creation of a decentralized financial world for a new generation. Blockchain technologies are quite capable of coping with this task. Institutional investors also believed in this niche. They are ready to invest money in it, which will contribute to development. DeFi is a new, global, flexible, and transparent financial structure based on the principles of decentralization. You can earn money on classic investing, staking, lending, and profitable farming. The leaders of the decentralized finance industry are Binance and Ethereum. It is on these blockchains that most of the projects are launched.
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Vulnerabilities of Smart Contracts: DAO, DeFi, and Re-entry Attack

Vulnerabilities of Smart Contracts: DAO, DeFi, and Re-entry Attack

John Martin 7 min read
The decentralized finance space has shown exponential growth over the past year, increasing from a total of $540 million recorded in March last year to more than $47.6 billion at the time of this article's release. The growth of the DeFi sphere has opened up new opportunities for users, developers, and the industry as a whole, but also brought new risks that investors may not know about, but which, nevertheless, they have to deal with. Most DeFi protocols are built on the Ethereum blockchain. Ethereum is the second largest cryptocurrency by market capitalization, second only to Bitcoin itself. Thanks to Ethereum, in particular the use of Turing-complete smart contracts, blockchain projects have become more programmable. Smart contracts are, in fact, self-executing contracts. The code prescribed in these contracts allows you to automatically carry out predefined transactions and agreements between pseudonymous parties within certain parameters and without any risk to the counterparty. These self-executing contracts were first proposed in 1994 by Nick Szabo, the creator of Bitcoin's predecessor Bit Gold, and allowed the creation of many decentralized applications that opened up new opportunities for cryptocurrency users, whether it was the issuance of stablecoins built according to a given algorithm, the issuance of cryptocurrency loans , or loans with crypto collateral. And this is only a small part. Decentralized exchanges with decentralized management models became possible only thanks to such smart contracts, as a result of which a new digital world emerged, which resulted in products such as Binance Smart Chain , Polkadot , and Avalanche . Protocols such as Aave , Compound , Uniswap , and 1 Inch.exchange allows users to earn interest on their investments and trade crypto assets and even complex instruments such as decentralized derivatives. All these exciting new products have created the DeFi sector mentioned above, which is taking the financial world by storm and enabling traditional financial institutions to make money. This new territory of possibilities, as already mentioned, is controlled by code written by developers of smart contracts. Most DeFi projects have open source code and even undergo peer review and audit, while others, on the contrary, do not. Often, even in the tested code, vulnerabilities can be found that allow the use of unknown attack vectors, which leads to huge losses for companies and ordinary users. How Do Smart Contract Vulnerabilities Affect Users? To guarantee the security of smart contracts, you can only analyze all the options for its execution. When executing smart contracts in Turing-complete languages, you need to be sure that the computer program does not contain bugs, which is almost impossible. Therefore, when working or creating smart contracts, you will have to audit them. Vulnerabilities in Ethereum smart contracts can have catastrophic consequences. Even though protocols like Aave are managed by professionals and regularly checked, security vulnerabilities still pose the risk of a hacker attack with the loss of crypto assets for huge amounts, thereby negatively affecting investor confidence in the protocol and subsequently causing financial losses for users/companies and price volatility. These vulnerabilities stem from the complexity of Ethereum's native smart contract language and its accounting system, which, unlike Bitcoin's UTXO system, is much more flexible and thus more susceptible to additional vulnerabilities and attack vectors. Since Solidity and other smart contract languages are new and extremely complex, it would be incorrect to blame these vulnerabilities on developers. There are more than 80 DeFi platforms built on Ethereum, with new projects being launched every week. The smart contracts they use are bound to have vulnerabilities, especially if they are not properly written and tested. An investigation conducted by CyberNews revealed that almost 3,800 Ethereum smart contracts had vulnerabilities that would allow attackers to steal at least $1 million worth of crypto assets. The study also showed that there are a total of 13 different types of vulnerabilities, and four of them are highly likely to be exploited by hackers. The popular Avalanche platform discovered a vulnerability earlier this year. So, during the launch of the new decentralized Pangolin exchange and network overload, an error occurred that led to a failure of the issue, which caused widespread panic. Other well-known platforms, including Solana , Flow , Zilliqa , and Fantom , as it turned out, also had errors in their contracts. DAO and Re-Entry Attack Re-entry is a common vulnerability of smart contracts. Although it can exist in smart contracts on various blockchain platforms, it is most often associated with the Ethereum blockchain. Re-entry attacks are best known for the famous hacking of the DAO in 2016 on the Ethereum blockchain. The first and most catastrophic mistake in a smart contract occurred in 2016. The decentralized autonomous organization (DAO) worked on smart contracts and collected more than $150 million at that time. An unknown attacker managed to withdraw the ether (ETH) collected through crowdfunding. The amount of damage has amounted to more than $ 150 million. This case is the most famous example of a Re-entry attack. A repeat attack means that the attacker sends a transaction, as a result of which the contract is executed repeatedly until the resources of the contract account are exhausted. If the project that requested funding received sufficient support from the DAO community, the Ethereum address of this project could withdraw ether from the DAO. Unfortunately for the DAO, the transfer mechanism transferred the ether to an external address before updating its internal state and noting that the balance has already been transferred. This allowed the attackers to output more ether. In total, 3.6 million ETH were withdrawn from DAO wallets. Now, these tokens are worth more than $ 6.4 billion. The hack led to a hard fork that divided the network into two parts: Ethereum and Ethereum Classic . While some agreed that it was best to mitigate the damage and move funds to addresses that their original owners could access, others argued that the immutability of the blockchain should not be violated, otherwise it leads to a technological and ideological split within the community. The original Ethereum blockchain, now known as Ethereum Classic, left the tokens stolen from the DAO in the hands of a hacker, choosing immutability, while Ethereum allowed the community to vote and returned the funds to their original owners, putting the blockchain consensus first. Other Examples of Re-entry Attacks Except DAO However, these vulnerabilities have also been found in numerous hacks of smart contracts, including several DeFi protocols. Some examples of recent DeFi hacks involving re-entry vulnerabilities include: Fei Protocol: In April 2022, the Fei protocol fell victim to a ~$80 million hack made possible by using third-party code containing re-entry vulnerabilities. Paraluni: The hacking of the Paraluni smart contract in March 2022 used a re-entry vulnerability and poor verification of unreliable user data to steal tokens worth ~$1.7 million. Grim Finance: In December 2021, the vulnerability of re-entering the Grim Finance safeTransferFrom function was used to obtain tokens worth ~ $ 30 million. The SIREN Protocol: The vulnerability of re-entry into the smart contracts of the AMM pool of the SIREN protocol was used in September 2021 for tokens worth ~ $ 3.5 million. CREAM Finance : In August 2021, an attacker used a re-logging exploit to get into the AMP CREAM Finance token integration system to steal tokens worth about $18.8 million. These are far from the only examples of DeFi hacks that exploited vulnerabilities during re-entry. Although this is an old and widely advertised risk, re-entry vulnerabilities still appear in new smart contracts today. Let's Summarize The trust of both ordinary users and large investors in the very concept of DeFi will depend on how the crypto industry will cope with challenges of this kind. What is happening now is natural and will lead to an increase in the security level of blockchain projects soon, but periodically we will still see news about successful hacker attacks.
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The Collapse of the Crypto Lending Market: 3AC, Voyager, Celsius

The Collapse of the Crypto Lending Market: 3AC, Voyager, Celsius

John Martin 4 min read
Those people who have been closely following the crypto market for some time regularly see news about the collapse of a coin or token.  After the Terra Luna crash it became clear that many very large projects had big holes in them. While the whole crypto industry was doing well, they could promise their clients super profits and easily attract new capital, but now everything seems to have changed. During the crypto winter, the lending market is going through bad times. Several major players announced bankruptcies and restructurings one after another. Three Arrows Capital Three Arrows Capital is one of the most famous cryptocurrency hedge funds that has been investing in digital assets. Nevertheless, a large—scale drop in cryptocurrency prices dealt the company an irreparable blow - on June 29, 3AC was liquidated. 3AC has invested in various projects in the early stages of financing. Funds were usually collected in USDC/USDT. For their part, 3AC held a commitment of 8% per annum. It seemed to the projects to be a fairly safe action, simply because it is a large fund. But on June 27, Voyager Digital LLC notified 3AC of default after the fund failed to repay loan payments on time. Voyager provided 3AC with loans in the amount of 15.2 thousand BTC and 350 million USD. When it comes to such large funds, many people believe that since they are large and have been in the market for a long time, they are too big to fail. Many people thought that Terra was too good a project to get buried, and they also thought that funds like 3AC kept the situation under control, but they did not always make the right decisions. Following 3AC, the largest American crypto broker Voyager went bankrupt. They provided 3AC with loans in the amount of 15.2 thousand BTC and 350 million USD. A week after the collapse of 3AC, Voyager announced the suspension of trading, deposits, and withdrawals. Celsius Following Voyager and 3AC, on July 15, the Celsius crypto-lending platform declared bankruptcy. The New York company went bankrupt by the US insolvency law. The company's assets and liabilities are ranging from 1 to 10 billion US dollars. If in October 2021, according to CEO Alex Mashinsky, the company had $25 billion in assets under management, then in May, despite the collapse in cryptocurrency prices, there were about $11.8 billion in assets, according to the website, and another $8 billion were customer loans, which made the company is one of the world's largest crypto lenders. As of today, Celsius has $167 million of cash on hand, which, according to its CEO, will provide "sufficient liquidity" to support operations in the restructuring process. However, there is a "hole" in its balance sheet of about $1.2 billion. Some analysts compare the collapse of Celsius with the collapse of Lehman Brothers, only in the field of cryptocurrencies, implying a domino effect that began with the bankruptcy of a large bank on Wall Street, which eventually led to the mortgage debt crisis and the global financial crisis of 2008. Promises of great profitability of Celsius, which the company distributed to attract new customers, largely caused its final collapse. Regardless of whether the collapse of Celsius portends a larger-scale collapse of the entire cryptosystem, or not, the days when clients of such firms received double-digit annual revenues are numbered. But even 3 weeks after Celsius suspended any possibility of withdrawals by customers due to "extreme market conditions" and a few days before it eventually filed for bankruptcy protection, it was still advertising on its website an annual return of almost 19% that was being paid weekly. The company's bankruptcy filing shows that Celsius also has more than 100 thousand creditors. The firm said that most of the account transactions will be suspended until further notice and that there are currently no requests for permission for withdrawals by customers. At the same time, the accrual of remuneration is also suspended during the bankruptcy process, and currently, clients will not receive their remuneration. This means that customers trying to access their cryptocurrencies will not be able to do so yet. It is also unclear whether the bankruptcy procedure will eventually allow customers to recover losses. If there are any payments based on the results of, apparently, a multi-year process, then there is also the question of who will be first in line. Everything is complicated by the fact that in the absence of regulation in the crypto sphere and unlike the traditional banking system, where customer deposits are usually insured, there are simply no formal consumer protection measures to secure users' funds if something goes wrong. But even more important is what is written in the fine print in the terms and conditions of Celsius: the firm warns that in the event of bankruptcy, any permissible digital assets used for earnings or as collateral for loans cannot be returned and that customers will not have any legal remedies or rights in connection with the obligations of Celsius. It looks like an attempt to get absolute immunity from legal offenses if things go badly for the platform. We can say that by promising its customers high profitability, Celsius was able to get only a very small profit margin. As a result, Celsius did not have a buffer for a bad market situation. Possible bankruptcies of large crypto creditors may have a significant impact on crypto industry. If creditors will start going bankrupt, then this clearly does not bode well for investors. Plus, each such scandal is a "red rag" for regulators and leads to a tightening of the laws of different countries in the field of cryptocurrencies.
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New EU Crypto Regulation: What's Going On?

New EU Crypto Regulation: What's Going On?

John Martin 5 min read
On the last day of June 2022, the European Union agreed on the main provisions of the law that will regulate the crypto industry. The bill was called Markets in Crypto-Assets, or MiCA. In short, the EU authorities want to oblige all crypto exchanges to provide personal data of customers, including information about transactions. Of course, many users have already begun to express their dissatisfaction. But how terrible is this law in reality? And what will it change radically in general? Europe Crypto Regulation To begin with, MiCA is not a new development. The law first appeared back in 2020, and it took European politicians about two years to finalize it. At the same time, the fact that the EU has agreed on a number of issues does not mean the immediate introduction of Markets in Crypto-Assets into operation. The law will come into force only in 2024 (unless something else happens before then). But what was the catalyst for the process, why did European leaders decide to pay special attention to the crypt right now? Firstly, this is the worst quarter in a decade for bitcoin (minus 56% of the value in the equivalent of the US dollar); secondly, we observed the failure of stablecoins and LUNA from Terra. Against the background of these events, the European regulator intends to introduce additional directives regarding stablecoins. According to the law, now all stablecoins will have to have specific large enough reserves for payments to their citizens. By and large, the EU simply decided to legalize what was stated by the developers themselves. For ordinary buyers, this innovation has positive sides. It will become more difficult for some scam projects to exist on the market. At least in the legal field, not the shadow segment. However, the global correction in the cryptocurrency market may well be considered a good reason to tighten the screws. In the end, no one is going to introduce additional control on the stock market against the background of a correction either (yet). But cryptocurrency regulation is literally called a significant event, which, according to the French Economy Minister, "will put an end to the Wild West" in the crypto industry in Europe. On the other hand, the lack of significant competition in the industry will lead to the fact that the main suppliers of liquidity to the crypto will be literally just several major players who will pass all the requirements. Transactions Tracing The EU Council and the European Parliament have reached an agreement and are on the way to implementing the "travel rules" for the crypto exchange in Europe. AML's "travel rule" is based on the principle that crypto asset service providers must collect and provide access to key data about the sender and beneficiary of transfers, similar to what global banks are currently doing for electronic transfers. Regulators are also going to press exchanges and other crypto platforms. Now the European Securities Market Supervision Authority (ESMA) will be able to interfere and restrict the work of the sites if they do not provide "protection to investors", integration into the market, and financial stability. One of the most essential requirements is the disclosure of personal information to the authorities, including information about transactions. For example, now you will be required to report transfers from an exchange or a crypto wallet if their value in monetary terms exceeds 1,000 euros. By and large, the same thing is happening that happened to the stock market at the beginning of the XX century. The era of relatively free and profitable trade has sunk into oblivion after the state developed more and more laws to restrict this activity. As a result, it is more and more difficult to earn money - for exchanges, increased control carries additional costs. And for citizens, supervision is twofold. On the one hand, in theory, you can turn somewhere if you get caught by scammers. On the other hand, it completely contradicts the concept of the first cryptocurrency, which assumed anonymity and many other useful things. In addition, there are additional risks that your personal data will end up in the hands of intruders since they will be managed by third parties — representatives of state structures (ordinary people also work there, who are not always saints and sometimes use their position for selfish and illegal purposes). Some of the key problems, according to critics, are that EU exchanges can deal with foreign exchanges that do not need to collect such information. The law also requires mining companies to disclose information about the amount of energy consumed. Initially, by the way, they wanted to ban crypto mining in Europe altogether. There is an opinion that all this has nothing to do with ecology, perhaps such a restriction and attempts to ban (taking into account the imminent transition of Ethereum to PoS) are primarily aimed at bitcoin, which is still not the most convenient asset on the blockchain to control the movement of large capitals. NFT NFT was also on the agenda of politicians. Now acts of fraud with digital art objects have become more frequent. In this regard, the EU has been thinking about the limitations of OpenSea-type sites. For now, however, they decided to postpone further decisions on this issue. In the next year and a half, it will be decided whether a separate document regulating non-interchangeable tokens is needed or not. But since they have already thought about it, then obviously the NFT will be regulated — give it time. Let's Summarize The crypto industry is developing, and, of course, the state will try to regulate it. The new legislation will undoubtedly be a shock for a number of EU crypto companies, although major players like Binance or Coinbase are unlikely to be knocked out of the rut. But if you read the White Paper from Satoshi Nakamoto in 2022 with his goals, for which the decentralized electronic cash was created, it becomes clear that the interests of the financial regulator are diametrically opposed. Many consider the proposal to create a new pan-European anti-money laundering body, which is currently headed by the European Banking Authority (EBA), to be the central element of the package. However, the updates still need to be confirmed by the Council and Parliament before they can be officially adopted by the EU member states. The Parliament, the Council, and the European Commission are currently working on the technical aspects of the text. After that, the agreement must be approved by the Committees on Economic and Monetary Affairs, Civil Liberties and Justice, as well as the Parliament as a whole, before it enters into force.
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6 Crypto Trends of 2022 (And What's the Next Big Thing in Crypto)

6 Crypto Trends of 2022 (And What's the Next Big Thing in Crypto)

John Martin 8 min read
After a long lull in the cryptocurrency market, there is a revival. The era of Web 2 is gradually coming to an end, and it is being replaced by the era of Web 3. NFT , DeFi applications, GameFi , new crypto coins, and DAO are all harbingers of the beginning of this irreversible process. Thanks to the arrival of new players — from global corporations to ordinary gamers — big changes are expected in the cryptocurrency market in the coming months. They will also affect new developments. Let's look at 6 trends that experts today call the future of cryptocurrency. 1. Metaverse The metaverse is a hypothetical network of three-dimensional virtual worlds, where you can immerse yourself with the help of AR and VR technologies. Many companies consider it the next stage in the development of the Internet and the mobile ecosystem and offer exciting projects of virtual universes. It's no secret that at the end of 2021, against the background of Zuckerberg's statements and the renaming of Facebook to META , interest in the metaverse has grown noticeably. Human interaction is reaching a new level as social networks, payment systems, and augmented reality applications become part of the same ecosystem. Read more about META in our article. Experts are confident that buying digital real estate in virtual worlds will no longer be confusing. New crypto projects in the field of metaverse include De central, Sandbox, and Axis Infinity. Another striking example is the Cosmos project. New blockchains in the metaverse can become part of a separate infrastructure. Decentralized exchanges , stablecoins , and DeFi are already connected to the Cosmos ecosystem. Large companies, such as Google, may announce the creation of their virtual worlds after Facebook. 2. NFT and DeFi Many experts are confident that NFTs, which experienced a big boom in popularity in 2021, will remain more than in demand due to the development of metaverses. Non-interchangeable tokens will provide proof of ownership when purchasing virtual objects. Tokenization will continue to increase in volume — not only individual users but also entire companies are already resorting to it. A new industry for business relations was born out of a fleeting hobby. DeFi will be responsible for the convenience of economic relations in the metaverse. There is a "competition" going on in the wallet market right now: who will be the first to create a multi-chain wallet that will allow for cheap transactions between blockchains without using bridges and without overloading funds through additional layers of the network The market of NFT and decentralized finance will develop, as it has not reached its peak indicators, but a large percentage of the NFT segment will not be of particular value, the founder of Amir Capital Group Marat Mynbayev is sure. Nevertheless, developments in these areas allow the market to develop. 3. Legal Regulation In 2022, members of the crypto community may face increased activity related to the regulation of the digital asset market. The authorities can no longer ignore the growing interest of market participants in cryptocurrencies. The legal status of cryptocurrencies varies significantly in different countries. In some countries, transactions with cryptocurrencies are officially allowed: in Germany, bitcoin is recognized as a settlement currency, in Japan, Bitcoin is a legal property with a purchase tax. Currently, almost nowhere in the world is there a regulatory framework that establishes reference rules for conducting cryptocurrency ICOs. It follows from this that there are no legal protection mechanisms for both investors and persons issuing cryptocurrency tokens. Now in some countries, there are attempts to include crypto investment in the legal field and give cryptocurrencies an official status. The market is moving towards centralization, which will be marked by the emergence of services and control mechanisms. On the other hand, in 2022, market participants may expect new mechanisms for the legalization of a financial instrument and taxation. The first forecast of Messari CEO Ryan Selkis for 2022: the situation in the "real" world will worsen before it gets better. With a 70% probability, the US inflation rate will remain above 5% throughout the year. At the same time, an increase in interest rates will slow down the dynamics of the stock market and hurt rising stocks. For cryptocurrencies, this is good in the short term. But in the medium term, risks arise, as crypto companies will begin to be increasingly censored by Western technology and banking platforms in the face of the suppression of cryptocurrencies by the Joe Biden administration. However, not all experts believe that market participants should expect serious legal changes and stricter regulation in the new year. The authorities can only limit themselves to spreading rumors in the media to intimidate inexperienced investors. 4. Web3 and Blockchain Platforms Web3 is the concept of a new, third-generation Internet, decentralized and powered by blockchain and token economy. It is contrasted with the Web2 World Wide Web, which operates based on centralized platforms for social interaction between users. Large Internet companies, for example, Alphabet (Google), Meta (Facebook), Amazon, and Apple, consolidated most of the information. They occupy leading positions in online advertising, e-commerce, streaming, etc. In 2014, Ethereum co-founder Gavin Wood proposed a new concept, which includes decentralization. According to it, companies embed financial assets in the form of tokens into the inner workings of almost everything you do on the network. As part of the strategy, users interact without being tied to specific servers, data centers, and databases. Web3 will allow you to create platforms that no one controls, but that everyone can trust because of their underlying algorithms and protocols. It is proposed to achieve this with the help of advanced technologies such as blockchain, machine learning, big data, and artificial intelligence. Tokens and cryptocurrencies, independent of traditional financial systems, should become fuel for the third-generation Internet economy. Among the promising tokens of this sector, analysts call IOTA (MIOTA) and HNT ( Helium ); FIL ( Filecoin ) and BTT ( BitTorrent ); (OCEAN) Ocean Protocol — the fundamental token of Web 3.0; BAT ( Basic Attention Token) — a project that allows you to receive remuneration for viewing ads. In general, all projects are united by the fact that they solve the main tasks of the Internet of the future — the decentralization of the network, in which data and information fully belong to their owner, and in which the user and his rights have the main value. 5. P2E Games Play-to-Earn (P2E) is a new term for video games where gamers can earn cryptocurrencies and NFT tokens through their gaming activities. In the last few months, the Play-to-earn trend has gained great momentum. Gaming itself is a huge global market. There are more than 2.7 billion gamers in the world. At the same time, analysts expect that in the next few years the value of the industry will exceed $ 300 billion. Today there are two important problems in the industry: Players do not own their purchases in the full sense of the term. In-game items increase the player's productivity and enjoyment of the game but do not serve any other purpose. As a result, they fall into the category of entertainment expenses, not investments; However, as new business models for game developers become available (for example, commissions from secondary sales of NFT), new forms of gameplay will also appear. The number of games has already exceeded 200, while they occupy up to 45% of the traffic of all decentralized applications. As a result, the trend is even singled out in a separate direction of GameFi (Game Finance). The main idea of such games is still not the possibility of quick earnings, but the right to own digital property. With the development of the metaverse, such games will appear more and more often. Perhaps this will become one of the main ways to attract users to the new environment. Modern large companies in the field of gaming, such as Steam or Microsoft, will be able to apply new crypto technologies on their marketplaces or, conversely, suffer from the outflow of users to other sites where the commission is lower, the purchase is safer, there is the possibility of converting virtual items into real money and their subsequent withdrawal. 6. DAO DAO is a decentralized autonomous organization that is controlled by software code and does not depend on the human factor. There is no hierarchy in such systems, all decisions on changes in the protocol are made by all participants on an equal basis with each other. Each digital community is centered around a common cause: it can be the management of a library, a united workforce, a social club, an NFT collection, and so on. The most famous example of such a community is a crowdfunding organization, which is called The DAO. In 2016, the company attracted more than $150 million in investments, becoming the largest crowdfunding project in history. However, it was closed in the same year due to the theft of funds by hackers. But developers continue to learn from their mistakes and improve the technology. Now DAOs are popular in narrow circles of crypto specialists, but their potential is huge - automation of management will greatly reduce bureaucracy and the human factor in almost any company. Experts identify the key features of the DAO: The band members are independent parties; Availability of SmartContract — open source code on the blockchain; Open Membership; A token is used to manage the community, which distributes funds according to priorities, encourages participation, and punishes violations of the rules; The group has internal capital to automate the market, prevent collusion and stimulate the creation of upward communities. Of course, these are not all the trends of cryptocurrencies that we expect in 2022. The growth of investments in this segment is rightfully considered the main trend not only in 2022 but also in subsequent years. The emergence of new exchange-traded funds (ETFs) based on digital assets and the development of WebFree can also be attributed to developing areas.
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