You may not have thought about Akon since his song 'Lonely' became an earworm a decade ago, but the musician has moved from conquering the charts to building what has been dubbed his very own 'Wakanda.

'Between setting up his own cryptocurrency AKoin and vowing to bring electricity to 600 million people in Africa, Akon is making strides on the building of his very own 'futuristic' city in Senegal - named after himself.

Speaking to TMZ on Tuesday, the musician-turned-energy entrepreneur went into more detail on "phase one" plans for Akon City, including a "billion-dollar" hospital with 5000 beds, a private airstrip, hotels, homes and schools.

A press release on Akon City released last year referenced Wakanda - the fictional African country from the movie Black Panther - as its inspiration, something Akon said played a part in helping to secure investment.

"What Wakanda did for Africa itself from a branding standpoint," he said, "But this movie literally made an idea of what Africa could really be - it's just ironic that I was already working on this before the movie came out, but it's something that helped me a lot when I was trying to explain to explain to people what I was trying to do."

He previously revealed that he was working on creating a “100% crypto-based city,” and in November 2019, shared on Nick Cannon’s radio show Power 106 Los Angeles that building was already under way.

Just finalized the agreement for AKON CITY in Senegal. Looking forward to hosting you there in the future pic.twitter.com/dsoYpmjnpf— AKON (@Akon)January 13, 2020

In January the rapper (and Akon City founder) shared via Twitter that his city in Senegal is official. "Looking forward to hosting you there in the future," he told his followers, alongside news that he had "finalized the agreement."




© Provided by Evening Standard (Getty Images)While it sounds like something out of a movie playbook, Akon plans for the city to be “renewable” with a focus on solar energy (a statement claims that his charity project Akon Lighting Africa has provided "scaled solar power solutions throughout 18 countries to date in Africa").



© Provided by Evening Standard (Hussein Bakri/BAD Consultant/Semer Group)The same statement also revealed Akon City is intended to be a “100% crypto-based city with AKoin at the center of transactional life”, described as a “real-life Wakanda”.

The singer, who has previously said he would consider running for President of the United States, told Cannon: “It’s Akon City. It’s all renewable, the Akon-tainment solar city. A real physical place, it’s going to have a real airport.

”“It’s a 10-year building block so we’re doing it in stages.

We started construction in March and stage two is going to be 2025,” Akon continued.The city is based in Senegal and after Cannon hinted it would take a billionaire to build an entire city, Akon criticised the term.

The singer, who also owns two record labels on top of running his charity Akon Lighting Africa, said, “I always felt like if you have to label yourself a billionaire, I don’t think billionaires even label themselves billionaires. You know, you have no idea. But the crazy part about it though, when I hear stuff like that it makes me sad.”



© Provided by Evening Standard (Hussein Bakri/BAD Consultant/Semer Group)“When I travel, I see so many things that happen - so many people that need assistance and so many things that just need to be resolved - and if you can have a billion dollars sitting in the bank while you have all these people suffering and struggling? Man, it’s just crazy,” he said.



© Provided by Evening Standard (Getty Images)“It’s like a waste of a billion dollars sitting there, literally,” Akon continued.Akon told Cannon that he was in the “impact business” and added that he wanted to “build a legacy." According to a statement about AKoin, the city will be built on “2,000 acres of land gifted to Akon from the President of Senegal” and will be a five minute drive to the airport, plus nearby Dakar.



© Provided by Evening Standard (Hussein Bakri/BAD Consultant/Semer Group)He also said he hoped that AKoin would take off on an international level, saying that it was the project he was “most excited about personally” rather than his namesake city.

He said, “You might just go to vacation and when you transfer your American dollars into their money, you might just be transferring it into AKoins. That’s the goal.”



© Provided by Evening Standard Akon speaking at the Lisbon Web Summit in 2019 (Getty Images)Page Six reported that at an appearance last June, Akon talked further about cryptocurrency and AKoin.

Saying that blockchain and crypto “could be the saviour for Africa in many ways”, he responded to technical questions about the blockchain with, “I come with the concepts and let the geeks figure it out.

”According to Arabian Business, Akon also appeared at the Sharjah Entrepreneurship Festival and criticised other celebrities for what he perceived as badly thought out moves into cryptocurrency.



© Provided by Evening Standard (Getty Images)He said: “I think a lot of the entertainers went with the wave and also the hype of cryptocurrency, not understanding what it was or what it is and I think a lot of them got caught up into the companies that got eventually folded or were scams.”



© Provided by Evening Standard (Hussein Bakri/BAD Consultant/Semer Group) 

“That’s just a lack of education in getting into certain things because as an entertainer you find yourself endorsing a lot of products that you don’t do due diligence on,” he finished.

The beginning of 2020 saw a sharp increase in the trading of cryptocurrency such as Bitcoin and Ethereum among others. It jumped to a new high in February and plateaued there as Coronavirus crisis soared from March.

Who is investing in Bitcoins?

Cornerstone Advisors in a new study found that 15 percent of American adults currently own some form of cryptocurrency and more than half of these investors are first-timers who invested during the initial six months of this year.

On average, these new investors spent roughly $4000 per person in cryptocurrencies which adds up to approximately $67.5 billion.

American investors who invested in cryptocurrencies prior to 2020  have self-reported that their assets have an estimate of $111 billion, or approximately $7000 per person.

Bitcoin Buyers Demographics

Who is causing the sharp increase in the Bitcoin investments in this time of crisis?

Well educated, high-income men

It has been observed that 8 out of 10 cryptocurrency buyers in 2020 have been men who have an average income of around $130,000. Four out of ten hold a Master’s degree and 70% of them have a Bachelor’s.

Millennials and Gen Xers

Study shows that 57% of the buyers of cryptocurrencies in 2020 to be millennials (26-40 years old) and 30% of them are Gen Xers (41-55 years old). Overall, 21% of Gen Xers and 27% of Millenials have assets in the form of cryptocurrencies in comparison to 3% Baby Boomers and 7% Gen Zers.

BoA Customers

Bank of America is the primary bank for roughly 21% cryptocurrency buyers. It has been observed that 47% of the consumers that went on this Bitcoin binge in the time of the Coronavirus crisis are customers of BoA. One would believe that Bitcoin investors would be customers of digital banks, but a paltry 6% of them call digital banks their primary bank.

The Benefit of Bitcoin

It has been noted that 44% of the American population has already invested in cryptocurrencies such as Bitcoin. Others have reported better financial health conditions since the beginning of the Coronavirus crisis, though there might be other variables that may affect the equation.

First Time Investors

Demographically, though there is a similarity between the first time investors and the groups that invested before this period, the significant difference is that they are bringing about a change in the financial institutions they do business with.Half of the first-timers of 2020 shifted their primary banking in the past 6 months – one-third of whom did so in the last 3 months alone.

The Apple effect

It is interesting to note that even though Apple Card holders comprise only 5% of all the credit card holders, 47% of them have invested in some form of cryptocurrency – two-thirds of whom have invested in 2020.

The next wave of investors

From a demographic perspective, the next wave of investors in Bitcoin comprising 11% of Americans are different from the current set of consumers. They are :

Women

Currently, only 22% of the consumers of cryptocurrency are women. The change in investors will see this figure rise to 35% of the total.

Minorities

Hispanic and African-American consumers comprise 28% of all Americans and 23% of current consumers come from these minority backgrounds. It is anticipated that the next 12 months will see an increase in investment from these ethnics groups to raise the percentage to 37%.

Younger and older

Currently, 6% of Gen Zers and Baby Boomers are cryptocurrency investors. In the next few months, the figures are predicted to increase to 17% Gen Zers and 11% Baby Boomers.

Less-educated 

Only 18% of the current crypto investors do not hold an Associate’s college degree. This number is expected to rise to 36% with the next wave of investments.

One area of concern about the next wave of crypto investors is that just 30% consider themselves to be well educated in handling finances in comparison to 54% of investors already owning these assets.

Banks and Crypto opportunity

The spike in the cryptocurrency investment has been a boon for Square. Revenue generated from Bitcoin for its Cash App for the first quarter of 2020 was $306 million in comparison to $65million generated in the first quarter of 2019.

Quite predictably, reports show that Paypal plans to use Venmo and PayPal apps to offer consumers to purchase cryptocurrencies.

While many banks do not allow their customers to buy cryptocurrencies using their cards, the rise in the crypto investments leads to the question of whether or not the banks should provide more crypto-related services altogether.




While some banks are still in the decision making phase, a few have taken a head start over others. A “crypto friendliness” score is provided by Moon Banking for banks and USAA and Ally Bank have taken the lead. 

All banks, especially credit unions and community banks should consider providing Bitcoin wallets and other crypto trading services as a way to offer better services to their customers.

CoinMarketCap (CMC)—a website that tracks the performance of different digital assets, announced a program that will see learners in select jurisdictions earn cryptocurrencies by completing educational tasks.

For a limited period, CMC users will learn about the oracle problem and how solutions presented by the Band Protocol helps power the open finance, or DeFi, ecosystem, and earn BAND tokens.

CMC and Band Protocol Launching the Earn Program

The collaborative campaign between the crypto tracker and the oracle provider will last eight days during which users stand a chance of winning BAND tokens worth $160,000 evenly distributed to those who answer a question only after watching educational videos. 

The Band Protocol is backed by Binance and is Chainlink’s competitor. It is a cross-chain data oracle platform that aggregates and connects vetted real-world data to smart contracts.

Their role is instrumental, coming at a time when the DeFi scene continues to draw attention, ballooning to multi-billion valuation. By connecting DeFi dApps with tamper-proof and verified data, the burgeoning ecosystem becomes more resilient, and end-users become more confident.

Driving Adoption and Awareness of DeFi

According to Soravis Srinawakoon, the CEO and Co-founder of the Band Protocol, the goal of the campaign is to drive crypto adoption and improve awareness of relevant blockchain products. 

Through their aggressive drive, Band Protocol will help users have “have hands-on experience in utilizing crypto-assets like BAND to secure DeFi and smart contract applications.”In his words:

“Education is key to accelerating the use of crypto assets and we are thrilled to be part of CoinMarketCap’s efforts to help users to learn more about their underlying technology and have hands-on experience in utilizing crypto assets like BAND to secure DeFi and smart contract applications.”

The decision to launch this education program on CMC is strategic. A property of Binance, CMC is used as a portal where users have access to high quality, unbiased, and reliable information.

Armed with accurate information, retail traders and DeFi enthusiasts can proceed to make informed decisions.

Coinbase Earn Program, Probable Listing of Band

Coinbase has a similar educational program. Expanded to over 100 countries in May 2019, users of the U.S.-based exchange can earn cryptocurrency rewards for learning about the underlying technology. 

As reported earlier by BTCManager, Coinbase is exploring the addition of several digital assets including BAND. Support is subject to the coin’s project meeting the often stringent technical requirement and compliance with applicable laws.

• The Serum protocol token SRM has attracted the attention of Ethereum DeFi investors by registering a 1,700% pump after its introduction.
• YAM of the Yam.Finance protocol is approaching 50% gain in less than 24 hours after launching.

Although the crypto market has suffered a setback after Bitcoin was rejected at the $12,000 mark, the DeFi sector of Ethereum seems to be unimpressed.

Almost daily, new DeFi tokens are currently generating large returns that are almost astronomical. Just yesterday, the SRM token of the Serum protocol and the YAM token of the Yam.

Finance protocol have written extreme returns.Both tokens were released yesterday, August 11. The first, SRM, belongs to Serum, a decentralized exchange for derivatives.

Following the latest trend in the DeFi sector, started by more established protocols such as Compound (COMP) and Aave (LEND), SRM is a token that will be part of Serum’s new more decentralized governance model.

As in the cases mentioned for other protocols, Serum seeks to incentivize its users and give them more control by decentralizing the governance model. SRM has been listed by exchanges like FTX, Binance, BitMax, HBTC, Uniswap, Balancer, among others. Within an hour of its launch, the token registered gains of more than 1,000%.

Thus, the value of the token went from $0.11 to about $1.50 within hours. At the time of publication, SRM price stood at $1.84.Data of Etherscan shows that SRM has a supply of about 160 million tokens and a market capitalization of $280 million.

Thus, SRM has even outpaced tokens such as YFI (year.finance) and AMPL (Ampleforth) in terms of growth and in terms of speed of growth within the first hours of the launch.

The token has apparently managed to attract investors through its incentives. In addition to the 4% annual returns on delegating SRM, the platform behind SRM offers its investors 60% discounts on trading fees. These fees are burned to maintain the stability of the SRM offering.

Finally, the team behind Serum, FTX, announced  the distribution of a “MegaSerum” (MSRM) which equals 1 million SRM to one randomly selected user on August 14.

Following the launch of the token, FTX and Sam Bankman-Fried, CEO of Alameda Research, revealed that the exchange has achieved a historically high load:

Today was all-time high FTX load and it wasn’t close. We took a lot of preemptive steps to mitigate this, and it mostly kept things online, though there were pain points (e.g. we broke through the number of rows in our KYC table). Time to double FTX’s servers again.

YAM tests sustainability of Ethereum’s DeFi sector

The second of the tokens launched on August 11th, YAM, has taken the Ethereum DeFi sector by storm. Also conceived as a governance token, YAM offers its holders attractive incentives and the promise of “returning decentralization and democracy” to the DeFi sector.Unlike SRM, YAM doesn’t have a specific supply.

Instead, it will have a flexible supply that will be changed in relation to “market conditions”.

The ultimate goal of the token is to act as a kind of stablecoin whose value is anchored to the USD.Investors who have COMP, MKR, YFI, LINK, LEND, SNX, wBTC can use their assets as collateral to obtain YAM.

Initially, YAM has a supply of 5 million tokens, 2 million of which are distributed in 8 staking pools. As reported by Larry Cermak there is already $343 million of assets staked in YAM, as shown in the chart below.

Cermak has been one of the critics of the emergence of governance tokens such as YAM, SRM and YFI.

The researcher believes that these tokens create a “vicious cycle” that encourages the creation of untested and unaudited protocols with a high risk of collapse. In that sense, ShapeShift CEO Erik Voorhees stated the following:

YAM looks like a scam… or to be more charitable, fairly transparent pump and dump nonsense. Projects like this are not going to be good for defi… What am I missing? Are the buyers willing participants in a silly game, or are people alleging actual value?

REYNALDOReynaldo Marquez has closely followed the growth of Bitcoin and blockchain technology since 2016. He has since worked as a columnist on crypto coins covering advances, falls and rises in the market, bifurcations and developments. He believes that crypto coins and blockchain technology will have a great positive impact on people's lives.

The cryptocurrency market has been seeing decentralized finance [DeFi] driving growth in the crypto-verse. Recently, on 9 August, the total market cap peaked at $11 billion, however, at press time was back to $9.275 billion, as per data provider DeFi Market Cap.

As the market cap moves higher, the total value locked in DeFi was also just a few steps away from reaching $5 billion.




Source: Arcane

Most of this growth was contributed by the yield farming frenzy and the launch of Compound’s governance token in June. While yield farming was channeling a huge amount of cash into the DeFi ecosystem, the launch of COMP token resulted in a growth of 326% since 16 June, from $1.1 billion to $4.7 billion.

DeFi’s lending market noted the largest growth accounting for a total of $2.9 billion in TVL, while Maker was responsible for $1.5 billion of this value. As DeFi witnessed growth, more and more protocols were entering the market launching their own tokens.

This has been, in turn, driving more value into other protocols. According to data provided by Arcane, the governance tokens have been posting strong returns with an impressive 82.6% return in 14 days.Whereas, decentralized oracle network, Chainlink, used in DeFi apps like Synthetix has been gaining a lot of attention.

As LINK’s trading volume surpassed that of Bitcoin’s on Coinbase, over $20 million worth of LINK short positions were liquidated on Aave over the weekend.

LINK’s exploding price moved above $14, wherein the net worth was indicated to be 299.66.

As per reports, a trader noted that there was a $16 million LINK position, along with a series of “$1m+” positions, that was liquidated on the crypto futures platform.

The Chief Strategy Officer at CoinShares, Meltem Demirors, called it an “elaborate marketing plot” to rally support and drive the price of the digital asset higher. However, there have been speculations of the DeFi itself being a bubble waiting to explode.

Chainlink (LINK) has experienced a meteoric rise this year, becoming a top five crypto asset by market capitalization. We took a look at the data from the decentralized finance space (DeFi) as well as Google to help explain this phenomenon.





The battle for number five 2020 edition. Source: CoinMarketCap.The battle for the number five spot in 2020 has been waged between Bitcoin Cash (BCH), Bitcoin SV (BSV), Litecoin (LTC), Cardano (ADA) and LINK.

The latter entered the year well behind the other competitors. However, LINK kept on rising throughout the year, finally, climbing to the fifth spot as of the time of this writing. 

Chainlink has been making partnership and integration announcements nonstop throughout the year.

However, its path was not without adversity. There was a dubious report penned by Zeus Capital that called Chainlink a scam and crypto’s version of Wirecard. Zeus also claimed that it was building a short position in LINK with a 99% profit target.

The success of the oracle project has also prompted additional competition. Earlier today, it was announced that a major crypto exchange OKEx is getting into the oracle game. Despite competition and critics, the token price continues to rise. Why?





Total Ethereum (ETH) value locked in DeFi. Source: DEFI Pulse.The decentralized finance space has been all the rage in the crypto world this year, with some comparing it to the ICO bubble.

The total Ether value locked in DeFi has exploded from just over $1 billion in mid-June to over $4.5 billion by early August. Most, if not all, of the DeFi applications require some sort of price data feeds.

A robust, preferably decentralized feed is essential to the prosperity and security of most DeFi apps. The lack of such feeds has led to a number of well-documented debacles.

Since Chainlink is the best-known player in this space, it stands to win the most from the growth of the DeFi space.





Google searches and LINK price. Source: IntoTheBlockPopular interest in Chainlink is at all-time high in the U.S. and globally, according to data from Google Trends.

The overall market sentiment plays an important role in crypto price dynamics. Interest in Bitcoin (BTC) peaked in late 2017 when its price reached an all-time high of $20,000, as captured by the same source.

Thus two disparate data sources seem, to at least, partially explain LINK’s rise. When Framework Ventures co-founder and an early Chainlink investor, Michael Anderson told Cointelegraph in April that he expected LINK to rise above $25 in the near future, his prediction seemed detached from reality.

The price of LINK at the time was hovering below $4. Today, it is closer to the forecasted value of $25 than to the price at the time when the forecast was made.

The latest craze in the DeFi sector is a new yield farming protocol called Yam which promises ‘equal opportunity’ staking with no premine, no founder shares, and a zero value token at launch.

The experimental Yam Protocol is the talk of Crypto Twitter right now — with many excited about the big potential returns, while others worry about the risks.

The recently launched project offers an elastic supply token, similar to Ampleforth, that can expand and contract depending on market conditions, with the aim of seeking eventual price stability and a peg to the USD.

Yam will reallocate a ten percent portion of each supply expansion to buy a high-yield dollar denominated stablecoin called yCRV in what it terms a ‘rebase’.

The tokens will be added to the treasury which is controlled via Yam community governance.Similar to Yearn Finance when it launched its native YFI token, the official blog post claims that the tokens will have no value at launch.

“We have built Yam to be a minimally viable monetary experiment, and at launch there will be zero value in the YAM token.”

Reasons to tread carefully

Following the monumental gains made by YFI, which surged thousands of percent into four figure prices, some in the crypto community are skeptical of similar tokens cashing in on the hype. Shapeshift CEO, Erik Voorhees — who admits he doesn’t understand how Yam works — wondered if it was a pump and dump scam. 

Messari researcher, Ryan Watkins, echoed the sentiment. “YAMs = Ponzinomics of AMPL + Chad launch of YFI + Meme math of Tendies,” he wrote.

With no premine and no token sale, YAM tokens are distributed evenly across eight staking pools on the top DeFi protocols including COMP, MKR, LEND, YFI, LINK, ETH/AMPL, SNX, and wBTC. Holders of any of these assets can stake them on Yam’s platform to start earning YAM tokens for the first week.

Distribution

With a total supply of 5 million tokens, the initial launch occurred on August 11 at 19:00 UTC when 2 million tokens were divided equally among the eight staking pools. Following this, a further 3 million tokens enter the YAM/yCRV Uniswap v2 liquidity pool with 1.5 million distributed in the first week, decreasing by 50% each week after, the blog post added.

Staking to earn will only be available for seven days, and following the completion of this distribution users will be able to deposit their YAM tokens into Uniswap as liquidity to participate in the longer term ecosystem.

The next week could be interesting for Yam Finance, if it generates the same frenzy that Yearn Finance did with its YFI token. But history suggests that sooner or later speculators on hyped-up new projects are likely to get burnt, as many did during the ICO bubble of 2017.

As American borrowers face an upcoming credit crunch, with average debt levels higher than 2008, many crypto investors are seeking to cash out their digital currency holdings in exchange for a dollar-denominated loan.

But as crypto loans grow, the loosely regulated industry is also drawing increasing government scrutiny.Despite being outside mainstream financial markets, these new lending products are catching a lot of investor attention. 

In 2019, crypto loans grew 700% from the year before, from $1 billion in loans originated globally to $8 billion, according to Credmark, a crypto credit research and data firm based in Singapore. Over the same time, total collateral deposited grew from $1.5 billion to $13.5 billion, roughly equivalent to the nominal GDP of Mongolia. 

See related article: Are US regulators finally warming to crypto and digital assets?

Even the coronavirus has not been able to keep the crypto loan industry down. While cryptocurrencies and exchanges convulsed with the rest of the Covid-ravaged global economy earlier this year, the crypto loan industry kept growing.

 According to Credmark, active crypto debt in the first three months this year grew by 44%, while assets under management grew by 75%.

Private crypto credit firms “continue to demonstrate impressive stability in an industry built upon inherently volatile assets,” Credmark concluded, in its 2020 Q1 report. Private firms are especially optimistic for 2020, the report added, “maintaining a bullish outlook for the rest of the year.”  

Crypto loans have grown in popularity along with the rise of decentralized finance (DeFi) as they offer several advantages to consumers. They allow the leverage of dollar-denominated loans with the arbitrage of future crypto gains.

For some borrowers, they can provide reduced tax penalties. They can also potentially earn more money for consumers with their higher return on investment (ROI). Compared to traditional finance, crypto loans have much more relaxed barriers to entry for lenders and especially borrowers.

Even subprime borrowers with poor credit can qualify for crypto loan products so long as they put up enough collateral, which is typically 150% of the loan amount. 

Most crypto loans, especially those sponsored by European crypto loan companies, offer loans that average around US$20,000, with some HODLrs taking out loans in the hundreds of thousands, according to BlockFi and YouHODLer.

American companies tend to deal with smaller loan amounts, usually averaging around $10,000. “We’re really where lending is when it comes to small businesses,” said Saher Zoabi, operations director of German crypto loan provider Bitbond. Unlike many crypto loan services, which offer loans in-house, Bitbond provides peer-to-peer lending with corporate support, Zoabi said.

“Bitbond connected global lenders to those unserved by banks, whether they can’t get to one or are high risk borrowers, especially in terms of credit.”Crypto loans are booming, industry insiders say, because of growing interest in alternative currencies as well as greater crypto adoption.




The SEC and CFTC have cracked down on Abra, a DeFi platform. Image: Shutterstock, Decrypt


“More people are getting into the market — and [the market is] active enough to maintain short positions,” Ilya Volkov, founder and CEO of YouHODLR, told Forkast.News. He also credits bitcoin halving — which some investors believed would cause a rise in BTC value.

“The recent discussion brought new people along for the market.”Crypto loan borrowers are typically long-time crypto users who are seeking liquidity in USD, having accumulated tens of thousands worth of cryptocurrency through mining or investment.

Borrower creditworthiness requirements vary between companies, with most operating similarly to a pawn shop — using only the transferred crypto collateral to secure a loan. But regulatory storm clouds may be gathering over this nascent industry.

The IRS is placing cryptocurrency users, including lenders and borrowers, under increasing scrutiny, tax experts say.

The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) — are also sending a public message to the industry by targeting Abra, the crypto app, in a coordinated manner.

The DeFi platform, which allows users to trade tokenized equities, also offers peer-to-peer lending as a potential use case.

The SEC charged Abra with offering and selling security-based swaps without registration, and CFTC accused the company of entering into illegal off-exchange swaps in digital assets and foreign currency.

On the same day last month, the regulators announced that the DeFi company settled the charges with each agency by agreeing to cease-and-desist orders and pay $150,000 in penalties. 

Regulators’ ire over users being able to purchase equities with “synthetic exposure to price movements of stocks and exchange-traded fund (ETF) shares” through a blockchain service may offer a clue as to where government scrutiny could go next, considering the international markets and tax issues involved with crypto loans.

Are crypto loans “helicopter money”?

Other than possible tax savings (or avoidance), what are borrowers doing with their crypto loans?While the phrase “free money” has been used by economists to describe the purchasing price of capital at near zero interest rates, crypto loans may tell a different story. 

According to David Olsson, Global Managing Partner of Europe and APAC at Consensys-backed BlockFi, crypto loan borrowers have been using their borrowed fiat currency to invest in other asset classes.

BlockFi has more than 90 institutional clients, including international financiers and private hedge funds, and has raised more than $100 million in capital funding. 

“With rates where they are, we may see a turn in the cycle — where right now is an uncertain time to invest,” Olsson told Forkast.News.

“However, people may want to take out loans through BTC to invest in other asset classes. That’s the most probable use case.

” While that may be the case for many BlockFi users, YouHODLR CEO Volkov says the Cyprus-based firm’s user base tend to use their loans to finance mining expenses or engage in arbitrage trading against the market. 

“We have two main borrower types. The first is a traditional HODLR — a crypto enthusiast. They are open minded and have decided to invest in [cryptocurrency], but they need cash for expenses,” Volkov said.

“The second type is a crypto trader who uses loan collateral to buy more crypto, someone of an active investor profile.

”The inherent risk in doing so, in taking out a crypto loan is, of course, the volatility of cryptocurrency prices. In case of default, if the borrower doesn’t pay back the loan, the lender gets to keep — or would be stuck with the cryptocurrency collateral.

But with no unified exchange, no defined regulatory framework and no physical asset base, how can submitted collateral match to a USD loan if a cryptocurrency’s price were to drop dramatically?

The risks may be magnified in the current coronavirus recession. According to Olsson, addressing this concern was a strong priority for the BlockFi ecosystem, especially in light of emerging cryptocurrencies and the recent BTC halving. 

“We have continuous risk systems [for distributed loans] running 24/7 to react as quickly as possible,” Olsson said. 




The trend of borrowing USD against crypto holdings is growing. Photo: Alexander Mils


Another factor driving crypto loans’ increasing popularity may be the interest rates, which are much higher than those on traditional loans. Compared to the estimated up to 8 to 9% ROI on a crypto loan, you would be lucky to have half that on a traditional investment account, which also carries risks.

With a 2% ROI on a Treasury index and the uncertain outlook for the stock market in the pandemic economy, the case for crypto loans may be highly persuasive to some lenders. Corporations also promote themselves as groups that merely link lenders to borrowers — largely avoiding the question of taxes or other regulations. 

Faced with the threat of near-zero interest rates in interbank lending, YouHODLR’s Volkov believes that crypto loan companies should integrate with traditional Wall Street financiers.

If many are seeking a way to earn interest on financial capital, why not provide one through crypto — and give them an incentive to further integrate into the blockchain ecosystem?

“I see good synergy between crypto and the traditional banking industry,” Volkov said. “On one hand, we have banks who are really tired from zero or near-zero interest rates. They face significant losses in their revenues, but they have really good financing infrastructure.

On the other hand, we have crypto companies with high interest rates, but little infrastructure.

”Others disagree. After all, cryptocurrency is not embraced in every financial circle.

While crypto is gaining a solid foothold in fintech, it’s still not adopted at a marketable rate for some consumer-focused financial institutions. Widespread acceptance may still be a long way away. 

“The opportunity for BlockFi is still in the asset class that needs widespread acceptance,” Olsson said. “I don’t see major banks coming in to provide these loans.”

Great Crypto Recession

While the crypto loan market continues to grow and shows no sign of leveling off, the next frontier, industry insiders say, may be the securitization of crypto loans. 

SALT Lending, a Denver-based crypto loan company, announced plans to securitize crypto loans in 2018, packaging crypto loans to sell to institutional investors.

Through a proprietary interface for loans, the company has expanded its user base and now accepts collateral in a variety of forms, including Dogecoin and PAX Gold. Recently, the company partnered with Cadence, a leader in digital asset securitization.

SALT Lending’s planned offering is now outside the public sphere — raising questions whether the offering is ongoing or even cancelled. And with that comes the nightmares of how mortgage-backed securities caused the Great Recession. 

SALT Lending did not respond to inquiries regarding securitization of crypto loans at the time of writing.What happens when these loans go into default? If crypto prices crash, will DeFi lenders, too — like banks did during the 2008 housing bust?

In these pandemic times as bitcoin and other alt currencies are riding high, crypto loan companies don’t seem much concerned.BlockFi, for example, says it has a zero percent loss rate.

“BlockFi has a proprietary risk model that is equipped to handle market volatility, which has enabled them to maintain a strong balance sheet and zero loss record for [lending and borrowing clients],” Alexi Foster, a BlockFi media relations contractor, told Forkast.News. 

Is the IRS on the move

A further benefit to crypto loans is reduced tax burdens. But that could also be changing soon.




The IRS is cracking down on underreporting of crypto taxes. Photo: meddygarnet, CCBY

David Kemmerer, Co-Founder and CEO of CryptoTrader.Tax, believes there has been increased demand for crypto loans due to the IRS’s crackdown on those underreporting their crypto taxes.

People are trying to hop on the crypto loan train while they still can. “People use crypto loans for a number of reasons — one of them is the tax advantage,” Kemmerer said. “If I borrow USD against my crypto holding, I don’t have to pay capital gains taxes. These loans could give them some liquidity, and that’s very sustainable.

”But the Internal Revenue Service is now also showing signs it is not pleased with the crypto industry.

“In 2019, we saw the IRS send out over 10,000 warning and action letters to those who they suspected of underreporting with the Coinbase subpoena,” Kemmerer said.

“That’s either from capital gains from long-time investors or those who didn’t report the interest from another crypto account.” Even as CryptoTrader.Tax’s user base has increased, Kemmerer estimates that more than half of crypto users out there are still not reporting their capital gains when it comes to crypto.

That’s concerning to the IRS, not only as an issue of underreporting, but of understanding currency flows of USD outside the United States. “They’re really focused on making sure that [crypto] doesn’t just become a safe haven for tax evasion,” Kemmerer said.

“As more and more pressure [against crypto] gets applied by governments around the world, tax tools like ours become more in-demand.

” Sharon Yip, the founder of Crypto Tax Advisors, a Washington D.C.-based crypto accounting firm, noted that cracking down on crypto tax delinquency, especially in those not reporting interest on crypto loans, is becoming a top priority for the IRS.

“Although I’m limited in what I can say, the IRS has gone after clients with full force regarding people who have underreported on their taxes,” said Yip, in an interview with Forkast.News.

“They’ve filed subpoenas, sent out demands and, yeah, made arrests.”Atomic Loans, a Toronto-based crypto loan firm promising a way for borrowers to control their crypto assets while receiving an instant loan, recently received $2.5 million in funding from Initialized Capital and ConsenSys.

Their loan management system is designed to give users access to a loan through their personal Atomic account. “Atomic Loans seems to be doing it in a legal way -— but that sort of tax loophole can’t last forever,” Yip said.

“Eventually, you have to pay capital gains taxes on whatever happens.

If you take out a loan in USD against your crypto, that may be beneficial in getting instant liquidity, but eventually, you’re going to buy/sell crypto — and that’s an additional taxable event.

”Others don’t see a need for the increasing regulation of cryptocurrency, contending that crypto-based financial products are not only more transparent but also more publicly accessible than traditional forms of investment. 

“No one can have inside information on Bitcoin, Ethereum, Litecoin or Ripple,” said Olsson, of BlockFi. “It’s a store of value. It’s a method of monetary transfer and payment.

It doesn’t give you a right to own anything else.

”While that may be the case, Yip’s recent experiences has led her to the conclusion that the IRS isn’t messing around when it comes to crypto tax underreporting. 

“Due to the growth in crypto loan demand, they’re really concerned about how the industry is growing from now,” Yip said.

“That’s one of their top priorities in the coming months. I wouldn’t be surprised if the [federal government] moves forward with cracking down more after this pandemic subsides.”

Reports suggest that PayPal (NASDAQ:PYPL) is finally jumping into the cryptocurrency pool with both feet. That news broke shortly before Square (NYSE:SQ) reported massive revenue growth driven primarily by bitcoin.

Proponents of cryptocurrency (crypto) believe this transaction medium will eventually supplant cash and card transactions. PayPal hopes adding crypto to its offerings will allow it to garner even more wallet share. Given PayPal's much larger user base and superior financials, this development should be a major worry for Square investors.

Why crypto?

Before we get into why crypto could be a big deal for PayPal, let's quickly define how it works. Crypto is a term representing any virtual currency that can be transferred directly from one owner to another through blockchain technology.

The transaction is decentralized, transparent, secure, and reliable.In the banking system, when you make a debit card purchase, your information moves from the retailer, to the merchant processor, to a payment network, then to the bank that settles the transaction.

A crypto transaction would directly transfer your crypto to the person or business you are paying.

Crypto holders use different versions of software and hardware wallets and a growing number of exchanges to deposit, withdraw, and exchange crypto at any time, day or night.




IMAGE SOURCE: GETTY IMAGES. 


Two quick comparisons make the crypto concept easier to understand:Debit cards have largely supplanted cash transactions, allowing each payment to be recorded electronically.Stocks used to be bought and sold using a certificate. Individuals had to hold on to these certificates and sign them over to sell the shares. Today, most stocks are bought, sold, and held electronically.
Cryptocurrency is seen as the next evolution of money, allowing users to buy, sell, and pay each other directly without the need for multiple intermediaries.

 When it comes to the size of the market, a recent Forbes article reported the cryptocurrency market is estimated to be worth $270 billion.

Fortune Business Insights projects the crypto market will grow by just over 11% annually between 2020 and 2027.It seems that crypto is largely being bought and sold by individuals, as Binance Research found just 7% of crypto assets are held by institutional investors.

Financial advisors seem to be picking up on the idea of crypto as a potential investment.

A Bitwise survey suggested that only 6% of advisors were recommending crypto for their clients last year, yet this figure is expected to reach 13% during 2020.

PayPal and its subsidiary Venmo have significant name recognition among individual users. Given the size and growth potential of the crypto market, it makes sense for the company to begin offering cryptocurrencies.

Who are the competitors?

The initial information about what crypto PayPal will support is limited. However, looking at what some other companies offer gives us a good idea of what PayPal is up against.

It bears mentioning that PayPal's Venmo system ended 2019 with over 52 million users and the pandemic has driven significant user growth among its peers.

In addition, PayPal's total active users last quarter approached 350 million. In order for PayPal to effectively compete against Square and others, it will need to offer the ability to buy and sell crypto, and it should allow deposits and withdrawals to and from external wallets.

When the company releases more details, these are key factors for investors to look for.

What's in it for PayPal?

The simplest explanation for why PayPal would offer crypto is the company is looking to be a one-stop shop for personal finance needs. Venmo is so well-known that to "Venmo" someone has become synonymous with making a payment.

In PayPal's Q2 2020 conference call, CEO Dan Schulman said in the U.S. alone, there were 150 million to 175 million people using a digital wallet from either PayPal or Venmo.PayPal is also leaning into the trend of touchless payments during the pandemic. 

Cryptocurrencies fit perfectly, since a crypto payment requires neither card, cash, or physical contact. Square's Cash App reported that bitcoin revenue jumped 600% annually in its last quarterly results.

PayPal likely believes its brand awareness, and larger user base, will allow the company to attract significant interest in its crypto offerings.

The one negative surrounding Square's bitcoin business is its razor-thin margins. Last quarter, Square generated a measly $17 million in gross profits on $875 million of bitcoin revenue. However, Square is seeing attachment gains from users who came to the Cash App because of bitcoin.

Some of these users have expanded their relationship into more profitable options like direct deposit, the Cash Card, and more. The key difference between PayPal and Square is that PayPal seems to be able to afford bitcoin's thin margins.

PayPal generated over $2 billion in free cash flow in the last three months, whereas Square burned through more than $200 million in cash over the last six months. In addition, PayPal is sitting on $7.3 billion in net cash and investments, whereas Square has a little over $1 billion. 

In short, PayPal has more users, better free cash flow, and more net cash on the balance sheet. If PayPal puts its marketing muscle behind its upcoming crypto offering, it looks like Square investors should be worried.

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Cryptocurrency trading has firmly taken its place in the financial market, and has been generating profits for professionals for many years. Of course, successful digital asset trading, like any other type of trading, requires a lot of knowledge and experience.

What to do for those who, for a number of reasons, cannot devote time to studying technical and fundamental analysis, as well as trading strategies and market principles?

Especially for crypto enthusiasts who are not ready to devote their lives to new science, the Crypto Accelerator project can help.

Passive earning technology involves storing WEC tokens on your wallet, during which new coins are mined. The average investor income is 50 per cent per year.Crypto Accelerator offers an option thanks to which income can be increased several times.

ACC standard unit of capacity allows to accelerate WAC production by 100-300 per cent. The mining accelerator ACC can be obtained in two ways: purchase on the exchange and for inviting referrals.

ACCs are freely traded on the exchange in a pair with USD, and their price depends on the volume of ACC sold and the supply/demand balance in the platform's internal market.

The number of ACC accelerators available to each user depends on the selected investment package and the amount of the deposit.The following license types are available on the Crypto Accelerator platform:         

               

If you have decided on the amount that you are ready to invest in the system of long-term passive earnings, you should follow 3 simple steps: register for crypto-accelerator.io; purchase a license;and replenish the deposit and block the tokens on the account.

You can transfer money to your personal account both in WEC and in USD. A dollar account can also be replenished with cryptocurrencies BTC, ETH, USDT, which are automatically converted to fiat at the current rate.

Do not worry that your money will be blocked on the platform account under the terms of the agreement.

Each investor can withdraw funds from the account at any time along with all the interest earned.In addition, as mentioned above, Crypto Accelerator provides the opportunity to earn WEC mining accelerators and bonuses in USD for inviting referrals.

The affiliate program has 4 levels, and depends on the investor's license:       


 

In order to build your strong financial future now, follow the link and register on the new cryptocurrency platform.

MOST PEOPLE USE either an app, an online platform, or a small hardware device as a wallet to store their cryptocurrency safely.

The exchanges through which cryptocurrency changes hands, though, and other high stakes operations need something more like a massive digital bank vault.

At the Black Hat security conference on Thursday, researchers detailed potential weaknesses in these specially secured wallet schemes, including some that affected real exchanges that have now been fixed.

The attacks aren't the digital equivalent of jackhammering a weak point on a safe or blowing up a lock.

They're more like opening an old-timey bank vault with six keys that all have to turn at the same time. Breaking cryptocurrency private keys into smaller chunks similarly means an attacker has to cobble them together first to steal funds.

But unlike distributing physical keys, the cryptographic mechanisms that underly multiparty key management are complex and difficult to implement correctly. Mistakes could be costly.

"These organizations are managing a lot of money, so they have quite high privacy and security requirements," says Jean-Philippe Aumasson, cofounder of the cryptocurrency exchange technology firm Taurus Group and vice president at Kudelski Security.

"They need a way to split the cryptocurrency private keys into different components, different shares, so no party ever knows the full key and there isn't a single point of failure. But we found some flaws in how these schemes are set up that are not just theoretical. They could really have been carried out by a malicious party."

For the work, Aumasson, a cryptographer, validated and refined vulnerability discoveries made by Omer Shlomovits, cofounder of the mobile wallet maker ZenGo. The findings break down into three categories of attacks.

The first would require an insider at a cryptocurrency exchange or other financial institution exploiting a vulnerability in an open-source library produced by a prominent cryptocurrency exchange that the researchers declined to name.

The attack takes advantage of a flaw in the library's mechanism for refreshing, or rotating, keys. In distributed key schemes, you don't want the secret key or its components to stay the same forever, because over time an attacker could slowly compromise each part and eventually reassemble it.

But in the vulnerable library, the refresh mechanism allowed one of the key holders to initiate a refresh and then manipulate the process so some components of the key actually changed and others stayed the same.

While you couldn't merge chunks of an old and new key, an attacker could essentially cause a denial of service, permanently locking the exchange out of its own funds.

Most distributed key schemes are set up so only a predetermined majority of the chunks of a key need to be present to authorize transactions. That way the key isn't lost entirely if one portion is accidentally eliminated or destroyed.

The researchers point out that an attacker could use this fact to extort money from a target, letting enough portions of the key refresh—including the one they control—that they can contribute their portion and restore access only if the victim pays a price.

The researchers disclosed the flaw to the library developer a week after the code went live, so it's unlikely that any exchanges had time to incorporate the library into their systems.

But because it was in an open-source library, it could have found its way into numerous financial institutions.In the second scenario, an attacker would focus on the relationship between an exchange and its customers.

Another flaw in the key rotation process, in which it fails to validate all of the statements the two parties make to each other, could allow an exchange with malicious motivations to slowly extract the private keys of its users over multiple key refreshes.

From there a rogue exchange could initiate transactions to steal cryptocurrency from its customers. This could also be carried out quietly by an attacker who first compromises an exchange.

The flaw is another open-source library, this time from an unnamed key management firm. The firm does not use the library in its own offerings, but the vulnerability could have been incorporated elsewhere.

The third attack begins when all the trusted parties originally derive their portions of the key.

As part of this process, each party must generate a couple of random numbers that will be publicly verified and tested for use later in "zero knowledge proofs," when the different key holders verify that they have the right key information without revealing the content.

This time, the researchers found that a protocol in an open-source library developed by the cryptocurrency exchange Binance didn't actually check these random values.

As a result, a malicious party in the key generation could send specially constructed messages to everyone else that would essentially choose and assign all of these values, allowing the attacker to later use this unvalidated information to extract everyone's portion of the secret key.

"This is the one that is instantly fatal," says KZen Networks' Shlomovits. "For the attack here you would craft a specific message, send it at the time of key generation, wait until the first signature, and then you're done. You would have enough information to learn all the other keys.

"Binance fixed the vulnerability in March and pointed out that it's only present during initial key generation. It does not introduce a lasting vulnerability—unless, of course, your organization's initial key generation included a malicious party from the start.

"We recommend that users upgrade to this new version of 'tss-lib' as soon as possible," the company said in a March security bulletin.

"Signing groups should only be re-created if any parties were untrusted or potentially malicious at the time of keygen.

"The attacks Shlomovits and Aumasson identified would not be trivial for an attacker to carry out.

They all involve a somewhat privileged position within an exchange, whether taking control altogether or controlling one portion of a distributed key.

Beyond identifying individual vulnerabilities, though, the two say that the goal of the research was to call attention to how easy it is to make mistakes while implementing multiparty distributed keys for cryptocurrency exchanges.

And how impactful those mistakes can be when they're in open-source libraries that can proliferate widely.

Using distributed key schemes is an important defense against takeover, but the cryptography is complicated enough that the development process can't be taken lightly.

"It takes a lot of time, a lot of expertise, and everyone makes mistakes," Shlomovits says.

"Literally everyone, because it’s really hard to do this translation from paper to an actual production system that holds funds."

Recent developments indicate major shifts may be ahead in the cryptocurrency market, with the importance of stablecoin growing, PayPal rumored to announce a partnership with Paxos to offer crypto trading, and Mastercard expanding its own cryptocurrency program. 

In an economy still reeling from the impact of the COVID-19 pandemic, replete with lockdowns, shifts to telecommuting and business closures, cryptocurrency trading is becoming an attractive alternative to many businesses and investors alike. 

With recent moves to introduce or expand crypto-based services by more established and commonly-used payment providers, a mainstream adoption of digital currencies may not be far off. Here is what you need to know about it. 

The Drift towards Stability on the Cryptocurrency Market: StablecoinsRecently, stability has increased as a factor of importance in the cryptocurrency market.

After the massive value growth of cryptocurrencies throughout 2017 and the subsequent bursting of the bubble in early 2018, the market see-sawed until the beginning of 2020.

Just when it seemed another growth spike was taking off, the pandemic stock market crash sent it tumbling again. Since April, crypto values have roughly returned to February levels.

Throughout this period, one sector of the cryptocurrency market has outpaced the others in terms of growth - stablecoins. Unlike currencies whose value is volatile and driven by supply and demand, stablecoins are typically bound to a fiat currency, although some are pegged against other cryptocurrencies.

Prominent examples of stablecoins include Tether (USDT), USD Coin (USDC), or Binance USD (BUSD), all equivalent to $1.Stablecoins have been on the rise, measured by market cap and transaction volume, since the 2018 crash.

This indicates their buyers value both their innate crypto advantages and the much lower volatility of fiat currency. It also suggests the use of cryptocurrency as a vehicle for speculation is now giving way to actual use for transfers and longer-term holding.

In the tailwind of the crisis, many of these stablecoins have been doing well. 

For example, immediately after the stock crash in March, Tether's daily transaction volume shot up from around $50 billion to nearly $100 billion.

This spike was fueled by buyers converting both from USD and other cryptocurrencies, leading the currency issuers to make several billion new USDT available, for a total market cap now exceeding $10 billion.

Now, as the volatile currencies are approaching pre-crisis values, USDT transaction volumes are sinking again.Breaking into the Cryptocurrency Market - PayPal partnering with Paxos Though official confirmation is still lacking, it has emerged that payment processor PayPal (NASDAQ: PYPL), with its mobile payments division Venmo, is now set on breaking into the cryptocurrency market. 

A letter from PayPal to the European Commission, leaked earlier this week, shows that the payment provider was working on crypto capabilities even before March.

Now, it seems, the process is coming to fruition, with an announcement by PayPal expected as early as the end of this week.

Reportedly, it has picked the Paxos Trust Company, a regulated financial institution that digitizes and mobilizes assets, as its partner in offering the service, over principal rival Coinbase.

Less than a week ago, Paxos introduced Paxos Crypto Brokerage, a new API-based solution that allows companies to integrate cryptocurrency buying, selling, holding, and sending capabilities into their own applications.

Paxos takes care of the underlying regulatory and technological complexity.

Paxos had previously struck up partnerships with fintech leaders such as Square (NYSE: SQ), Robinhood, and Revolut.

Some of these have been highly profitable, with Square reporting its first-quarter revenue from Bitcoin-based services at $528 million, surpassing its mainstream financial services. 

A PayPal partnership is a step up for both Paxos and the cryptocurrency market as a whole.

With over 300 million users globally, PayPal is among the largest payment facilitators - and now set to become a key gateway into the cryptocurrency market for millions of its clients.

Goldman Sachs is considering creating its own cryptocurrency. Having recently appointed a new head of digital assets, the company indicated a possible collaboration with other companies, including JPMorgan and Facebook. JPMorgan has created the JPM coin and Facebook has proposed the Libra cryptocurrency project.

Goldman Sachs’ Cryptocurrency Plan

Global investment bank Goldman Sachs has recently appointed a new head of digital assets, Mathew McDermott, a managing director who ran the investment bank’s internal funding operations. He has now revealed that Goldman is exploring creating its own cryptocurrency, CNBC reported on Thursday, quoting the new digital assets chief as saying:

We are exploring the commercial viability of creating our own fiat digital token.

However, McDermott added that “it’s early days as we continue to work through the potential use cases.” He is expanding his team at Goldman Sachs, reportedly hiring Oli Harris, JPMorgan Chase’s head of digital assets strategy.

Harris was involved in JP Morgan’s cryptocurrency, the JPM coin, and was also a vice president in charge of Quorum, the ethereum-based blockchain platform that underpins the JPM coin.

The coin, pegged to the U.S. dollar, enables the instantaneous transfer of payments between institutional clients, JPMorgan explained on its website.The new digital assets head said that it is crucial to build “consensus with other banks, institutional investors and regulators,” the publication noted.

He believes that “The technology will only take off when it gains a critical mass of users across the world of finance” and “industry consortiums are the best way forward.”

McDermott further explained that he “spends a lot of time talking to other companies, including JPMorgan and Facebook.” The social media giant has proposed a cryptocurrency project called Libra, which recently updated its plans to better comply with regulatory requirements. According to CNBC, he indicated:

One Goldman project involves collaboration with JPMorgan, potentially regarding how the two banks’ nascent technology efforts could work together.

“In the next five to 10 years, you could see a financial system where all assets and liabilities are native to a blockchain, with all transactions natively happening on chain,” the new digital assets head opined.

He believes that “Since the boom days of bitcoin a few years ago, interest has shifted from retail and rich investors to large institutions,” the publication conveyed.

“We’ve definitely seen an uptick in interest across some of our institutional clients who are exploring how they can participate in this space … It definitely feels like there is a resurgence of interest in cryptocurrencies,” McDermott was quoted as saying.Goldman Sachs has not been pro-cryptocurrency in the past.

In May, the investment bank told its clients that “cryptocurrencies including bitcoin are not an asset class.”What do you think about Goldman Sachs’ cryptocurrency plan? Let us know in the comments section below.

The idea of an average investor being able to afford a luxury car, fine art or even a Class A real estate property has previously been thought to be unattainable.

However, tokenization is revolutionizing the investment process by offering fractional ownership of assets via security token offerings, and creating more opportunities for small investors to get involved.

Tokenization would not be possible without the adaptation of blockchain technology, which offers new layers of transparency, security and liquidity to investors.

Tokens are a newer way to invest in many types of assets, and many believe that security tokens will ultimately replace traditional stock ownership in the future, while also offering a way to invest in asset classes that were previously unavailable to all but the largest investors. Examples of the latter include the tokenization of high-end vintage cars, which have generated an average 330% ROI to UHNW investors in the past decade, according to Knight Frank, a global Real Estate consulting firm that created a luxury investment index for a variety of assets.

 Two companies, CurioInvest and MERJ, recently partnered with plans to offer 500 vintage cars, worth over $200 million, through a security token offering. Although token holders will not be able to use the vintage cars, the expected ROI on their investment would theoretically provide sufficient incentive to invest.

Tokenization has also created the opportunity to offer fractionalized real estate property ownership via security tokens, rather than through a traditional REIT offering. In 2018, 19% of the St. Regis Aspen Resort was sold for $18 million via a security token sale. Investors participated at $1 per token with a minimum required investment of 10,000 tokens or $10,000.

The property manager received necessary capital for the ongoing development and operations, and investors received the ability to invest in a very unique property with anticipated long-term appreciation.Ultimately, tokenizing real estate presents the opportunity for investors to invest in high end properties via a unique investment mechanism.

Houston-based digital investment bank Entoro Capital is currently collaborating with Red Swan CRE Marketplace, a business-to-business CRE tokenization system, with plans to offer a $2.2 billion portfolio of Class A commercial properties in Houston, Brooklyn, Austin, Oakland and San Jose. 

Tokenization of these high-end properties will enable investors to participate in ownership of Class A real estate property via security token offerings.  According to the firm’s website, this will provide investors “a substantially easier and more efficient process for acquiring commercial real estate investments (and enable) global investors to grow their portfolio of high-quality assets in a decentralized manner.

”As more people invest in token offerings around previously unattainable assets such as Class A real estate, fine cars, and more, the potential exists for smaller investors, previously shut out from these types of investment instruments, to realize ROIs previously only available to the UHNW and institutional investors.Patrick Doyle is an intern at Entoro Capital.

This past June, Neufund, one of the first European platforms to issue security tokens, announced its intent to move away from digital securities. The Berlin, Germany based Fintech issued the following surprising statement:

“We’ve been active participants of the discussions held at the Bundestag, engaged BaFin in a dialogue about our platform and blockchain’s solutions since 2016. We’ve been patient to their months [of] delayed decisions, last-minute requests, and announcements that harm the businesses.

But the last months showed that financial authorities are not just slow, they are paralyzed with the fear of new technologies and avoid any dialogues or decisions hoping that someone else, like global corporations or other countries, would deal with it.

Together with our investors, we agreed that there is no reason to wait for the institutional changes. Today we have announced the freezing of all upcoming fundraising campaigns and start working on the new product, which will let us continue bringing value to our investors and community.

In November of 2018, Neufund announced the first digital security issuer – its parent company Fifth Force GmbH. The following month, Neufund announced that it had raised almost €3 million in the offering. Just before the offering went live on the platform, Neufund was asked by BaFin to set a fairly steep minimum of €100,000 – something that most certainly dimmed participation from a wider audience.

Regardless, soon Neufund distributed the digital securities to its investors.A second security token offering took place late in 2019 when e-Bike startup Greyp raised €1.4 million (a sister company of Rimac) backed by over a thousand investors from 34 different countries.

Things appeared to be going well on the surface but apparently the regulator must of had a different opinion. Following several successful offerings and the announcement of future issuers, Neufund announced a change of direction. So what went wrong?Crowdfund Insider contacted Zoe Adamovicz, founder and CEO of Neufund, to learn more about her struggles as the first German STO primary issuance platform. Our conversation is below.

So what happened with Neufund in the end? Was there an issue with BaFin that was insurmountable?

Zoe Adamovicz: Since the beginning, we’ve built the platform in a transparent and compliant way, and we are convinced it’s fundamentally correct that securities are regulated.

We know that innovations are anything but easy, and it has been our business practice to actively engage the financial authorities in a dialogue about the opportunities of new technologies, the way how they work and how we can create better companies and finance.

But we’ve faced inactivity and silence. It appeared to be worse than any resistance: we were neither allowed nor banned, there was never any quorum to debate or discuss.

This situation made us freeze all upcoming fundraising campaigns and start working on the new product to continue bringing value to our investors and community.

The platform is maintained, investors have full ownership of their wallets, tokens, they can claim payouts or withdraw nEUR anytime. New post-investment activities and features are progressing, but all upcoming fundraisings are paused.

At one point, Neufund had indicated it would operate via the Liechtenstein regulatory environment. Was this not a viable path?

Zoe Adamovicz: The first retail offering hosted on the Neufund was conducted under the laws of Liechtenstein. Greyp’s campaign collected 1.4M EUR in funding from over 1000 investors from 34 countries around the world. It demonstrated the power of turning a community into shareholders and proved that blockchain makes the future of finance possible today.

Together we made history, but it can not be a general solution, we may not push every company to fundraise in Liechtenstein.

Neufund has indicated that it will continue to service existing issuers. Do you anticipate spinning this vertical off?

Zoe Adamovicz: As we’ve promised, the platform is maintained. A lot of thoughts and work were put there, not to mention thousands of investors who already participated in the previous fundraisings. Investors have full ownership of their wallets and tokens, they will be able to use the tokens to collect payouts and to act on their token holder rights.

We keep working on new post-investment features and instruments, which would be available for our community and investors.

Neufund is in the midst of pivoting, can you share the direction you are heading?

Zoe Adamovicz: Our pivoting project is in progress, but we will keep the details in secret and will announce them later.Besides that, we work on several projects: maintain the investing and fundraising platform, support our current portfolio of products (like ESOP Manager, Light wallet, and others), and create new solutions, which would ease the access to blockchain-based products for a broader audience, especially non-tech-savvy users.

For example, one of the nearest releases – Neufund’s mobile app – considers all pains and fears of onboarding, will propose login with Face ID and the easiest way of storing the recovering phrases. The app will let you manage your Wallet and Portfolio, as well as signing and approving of changes and transactions using your mobile device, just like you do it every day.

How has COVID impacted things?

Zoe Adamovicz: The pandemic did not make anybody’s life easier: it has influenced all the markets, slowed the economy.  I think that we will see the consequences in the nearest future.At the same time, we may see how the process of digitalization has accelerated: personal meetings are replaced with video calls, sports clubs had to create online training programs, years of talks and discussions about remote work became our reality in several weeks.

Due to COVID 19, startups and investors had to rethink their strategies and adapt quickly to the new world. However, we still have a record high uncalled capital on the private equity market, and investors are craving for better instruments that would help them act rapidly.

Any thoughts or comments on the future of digital assets and tokenization?

Zoe Adamovicz: We may see many successful cases on the market, and there are more to come. Today all kinds of ownership claims might be digitised.

It’s a long-term game, there is still a lot of work to be done, and there are obstacles to overcome: fear of the new technology, development of Legaltech and Regtech, and implementation of user-friendly products and interfaces, which would open the technology to a broader audience.

Mainstream adoption is yet to come, but digital assets are here to stay. 

Jeff Dorman, a CoinDesk columnist, is chief investment officer at Arca where he leads the investment committee and is responsible for portfolio sizing and risk management. He has more than 17 years of trading and asset management experience at firms including Merrill Lynch and Citadel Securities.

Decentralized money is important, but tokenized ownership is perhaps an even bigger and more important concept, as it stands today. The idea an ownable asset can be both a utility and an investment at the same time could change the course of investing, and company formation as we know it. And based on recent actions from the government and corporations, we may be closer than ever to achieving this. 

A capitalist society means private property rights and the free market serve as the basis of trade, distribution of goods, and development, whereby private ownership and production is operated for profit. But society is now beginning to recognize that “shareholder capitalism” is also rife with negative externalities.

You need only look at the pressure companies felt (and the greediness and misaligned incentives of management teams) to increase stock prices by spending billions of dollars of idle cash on stock buybacks, only to be left with no rainy day funds during a three-month pandemic. 

See also: Jeff Dorman – What I Learned the First Time I Lost a Million DollarsThis, of course, led to trillions of dollars in bailouts at society’s expense; a negative externality that will affect multiple generations for decades. Joe Biden recently said, “It’s way past time to put an end to the era of shareholder capitalism – the idea that the only responsibility a corporation has is to its shareholders. That’s simply not true and it’s an absolute farce.

They have a responsibility to their workers, to their country. That isn’t a new or radical notion.”

Independent of political leanings, companies are feeling this pressure more than ever. Not just from Washington, but from society. Is there a way to cater to shareholders while also catering to society and your customers? As usual, we can look at Amazon as an example.

More than 150 million people have an Amazon Prime membership, and everyone pays the same price for it. However, a much smaller percentage of people own AMZN shares.

You might argue that most AMZN shareholders probably have a Prime membership, but it is certainly not the case that most Prime members own AMZN stock. The Venn diagram might look like this:





This chart is illustrative, not based on actual dataSource: Jeff Dorman

When you buy AMZN stock, you know exactly what you are getting – a share of the company’s profits and a “claim on future cash flows.”  However, when you buy a Prime membership, you have no idea what you are getting. At first, purchasing an Amazon Prime membership only gave you faster and cheaper delivery.

But over 10-plus years, Prime membership has been rewarded with additional benefits like music, movies and now discounts at Whole Foods. 

As a Prime member, you have reaped the benefits of good management and network growth, but it made no difference whether you were the first Prime member or the last to join because you pay exactly the same price as everyone else and receive the same rewards.

The same cannot be said for AMZN shareholders, where the price you pay depends on when you purchase.

THIS IS THE ONLY PATH WHERE CAPITALISM AND SOCIALISM CAN CONVERGE, AND WE’RE SEEING IT HAPPEN IN REAL TIME.

Had Prime membership been tokenized, this Venn diagram of ownership would have overlapped much faster. As an early adopter, you would have gained both financially from the increased demand for Prime membership (driving token price higher) and still gained utility as Prime membership benefits were enhanced. 

Further, you would have become a strong evangelist for the brand, as you would be financially incentivized to get others to join Prime faster.

Both Amazon shareholders and Amazon Prime members have been rewarded, but one could argue both would have done even better had the incentive structure been tweaked through tokenization.



Source: FactSet, Statista, Arca estimates

As Arca sees it, this is the only path where capitalism and socialism can converge, and we’re seeing it happen in real time. Debt, equity and tokenized digital assets will all have a place in an investor’s portfolio, and more importantly, in customers’ portfolios.

The lines are likely to blur as investors become active participants in the bootstrapped growth of the companies they love. 

The best example of this to date is Binance and its BNB token. At first, owning the BNB token simply gave you discounts when you used Binance’s services. Today, BNB’s use cases have expanded to:

Referral program staking – If a person holds 500 BNB or more, they receive double the referral bonus, as well as a portion of the trading
See also: Jeff Dorman – If Crypto Is Anything Like Fixed-Income, It’s Going to Need a Fatter Textbook

IEO staking – The number of tickets you can claim depends on the amount of BNB you hold.

Discounted Trading fees – Binance discounts transaction fees by 25% (decreasing to 12.5% in July) whenever a transaction fee is paid for in BNB. Assist network transactions using BNB on Binance DEX.

Voting power – The more BNB you own, the more votes you have regarding which coin should list on Binance.

Like Amazon, Binance’s business lines and revenues have exploded.  Unlike Amazon, Binance’s customers have benefited financially, in addition to benefiting from enhanced services.

 As a result, Binance’s Venn Diagram might look much closer to this:





This chart is for illustration purposes; it's not based on actual data

Source: Jeff Dorman

It may sound terrifying to invest in something like a digital asset without knowing exactly what rights you are receiving for your investment. That token designs can change, and features can be added or subtracted, may give you pause as you wonder what your rights are as a token holder.  

But when you dissect this, it’s no different than what you do as a shareholder. Those who bought AMZN stock in the early days of the company thought they were investing in an online bookstore.

When you back good management teams, it doesn’t really matter what your rights as a shareholder or a token holder are, what matters is that you and management saw the potential before others did. The flexibility of a token’s use cases is just as exhilarating as it is terrifying.

The best token designs will, therefore, be those that incentivize customers to take a risk in adopting a new platform before it is clear that it is worth it, and they will be rewarded via increased token prices that will have future value based on how much token holders contribute to the company’s growth.

As communities form around these network effects, token holders may be incentivized even further to evangelize on the company’s behalf, thanks to “ownership” rights and a sense of community involvement. 

Tokenized ownership may be an effective way to reduce monopolies while still encouraging development and innovation. While companies and politicians fight, the solution may already be here.

The pandemic shut down major Hollywood productions in March and five months later it’s still unclear when most TV and film projects will start back up.In Chicago, the summer is typically when the three NBC shows from Dick Wolf (“Chicago Fire,” “Chicago Med” and “Chicago P.D.”) begin work on the new season. That’s obviously been delayed.

There’s also the fourth season of FX’s “Fargo,” starring Chris Rock, which was nearing the end of its shoot here in town when the shutdown hit; producers are hoping to find a way to finish work on that quickly.

There have been ongoing conversations about possible starting dates in the next month or two for all of these shows. But nothing is official yet, according to Bradley Matthys, president of the local IATSE Studio Mechanics union, which represents the majority of crew people who work on TV and film.

“The producers and unions continue to negotiate,” he said, “and while there have been many things agreed to, there are still many issues undecided.” Everyone is hopeful; everything is in flux.

We know concerns about health and safety will affect how TV and film gets made and it’s possible we’ll see significant changes — changes that were already in the works, but might be adopted much more rapidly thanks to the challenges posed by COVID-19.

What might the near future look like?

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Think digital and virtual.

The more a production can control its environment — and who enters it — the better. That could mean fewer scenes shot on location. Instead, everything (or almost everything) could be done on sound stages using high-resolution, three-dimensional photorealistic video backdrops projected onto massive walls of the set itself.

Instead of using green screens, the idea is to create a virtual reality that the actors can see and inhabit — interiors, landscapes, whatever.This kind of sophisticated technology already exists for video games and it’s how “The Mandalorian” was shot for Disney+.

Richard Janes is an entertainment analyst and the founder of the influencer studio Fanology. He recently wrote about what kind of changes he sees coming.

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“The future was definitely moving this way anyway,” he said by phone. “The technology coming out of the gaming world has just been improving so much, but with the streaming wars and COVID happening at the same time, everything has been fast-tracked.”


A scene from the Disney+ series “The Mandalorian." (Lucasfilm/Disney/IMDb/TNS)

Here’s why: With so many streaming platforms in need of content, studios are looking for faster and cheaper ways to make that happen. And a crew moving from one real-world location to another is more time-consuming and expensive than shooting on a soundstage.

“Also, we’re in a situation where insurance is difficult for film production at the moment,” Janes said.

“A lot of insurance is not covering COVID-related illness for any new productions. If you’re a multi-million dollar project and suddenly one of your lead cast members tests positive and has to go into quarantine for two weeks, the economic impact on the project can be absolutely massive. So they have to work out better ways to control those environments.”

What does this mean for a city like Chicago?

Locations and landmarks are a big part of the city’s sales pitch to showrunners and filmmakers. “I think going forward that sales pitch is going to be less about the actual location and more about if soundstages and experienced crew are available,” Janes said.

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 So if a filmmaker in France is going to shoot a movie and half of it is set in Chicago but they never leave the studio in France but they show all this Chicago stuff virtually, that’s actually still a good thing for Chicago. Is it as good as having them come and film in Chicago?

No. But by the same token, you’ll find that all kinds of weird and wonderful shows and films can shoot in Chicago and look as if they’re set someplace else — so the city’s opportunity also grows.”

This can only work on a large scale if there are digital libraries sourcing a huge number of different environments.

“That’s going to be key,” Janes said, “and a big opportunity for people to go and capture these cities as 3D environments. Especially interiors.”

Visual effects tend to drive up costs (the budget for Universal’s adaptation of “Cats” was reportedly anywhere from $100 million to $297 million) but Janes thinks that’s going to come way down, partly because these virtual environments will be captured by the camera and won’t require as much labor-intensive frame-by-frame CGI after the fact.

“Also, as with any technology, the more people use it, the cheaper it becomes,” he said. “Seeing the two worlds of gaming and film combine in this particular area, the cost implications will come down in a very quick way. Pre-COVID, I think this would have been five to eight years off, but now I think we’re going to see it in the next two years.”

Taylor Swift in "Cats." (Universal Pictures/AP)

If the technology does become affordable even to indie filmmakers at lower budgets, Janes sees big potential:

A small film will be able to create the look of an expansive world in ways that would never be possible otherwise.

Digital libraries for more than just environments

As it stands, film and TV rely on casting companies to provide background extras. And production designers and set dressers rely on prop houses – warehouses filled with all sorts of ephemera — to build out the visual world of their project. Janes thinks much of this will go digital as well, and that filmmakers will simply license virtual props and virtual people.

“The prop houses that 3D scan all their props the soonest are going to have the brand positioning in the marketplace.” And they will be able to make a good deal of money without the hassle of physical storage.

“And yes,” Janes said, “you’re going to see a smaller number of background actors on set, because you can’t really quarantine them for two weeks to ensure it’s safe for them to be there for one day and be close to the cast.

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Janes also sees this technology extending to hair, makeup and costumes.

What are the downsides?

Whenever we’re talking about how humans are presented on screen, it’s worth considering if existing biases — about skin tone, body shape, hair texture, gender, disability — might get ported over simply because not enough thought was given to these concerns ahead of time.

Sydette Harry is a writer and research fellow at the USC Annenberg Innovation Lab and her first question about digital background actors was: “Which people? And how are you sourcing those?

“One of the things I was going to look at before the pandemic was: Who gets to be presented?” she said. “If you look at things like I Need Diverse Games (a non-profit based out of Chicago that advocates for diversity in all aspects of gaming), these technologies that are already in place do not feature a full spectrum of humanity.

At all. In most video games if you want non-white hairstyles you have to download them after, they’re not part of the standard package.”

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There’s good reason to think these same concerns would exist in digital libraries for TV and film, unless people in Hollywood — from executives on down — are proactive about addressing them.

Harry pointed out yet another drawback if filmmaking becomes even more of a digital experience: Losing the serendipity that happens when actors are on location.



Donald Glover said he was scanned for his role as Lando Calrissian in “Solo: A Star Wars Story.” (Lucasfilm)

“Film sets are closed, but the energy you get from people who are not trying to be part of Hollywood or cinema or who haven’t learned to stand and deliver, that would all go away,” she said.

If everything is shot on a soundstage, cast and crew will never have to interact in real-world spaces, walling themselves off even more than they are already. Populating a scene with digital extras means everything is less messy. Less human. “And I don’t trust (creatives in Hollywood) to interrogate that going forward,” Harry said.

There are more downsides. Projects may start asking cast members to have their likeness scanned for possible future use someway, somehow. This has already happened on big titles, including the “Star Wars” franchise (and some actors are choosing to do this on their own, with an eye to licensing their digitized likeness in the future) but Janes wonders if this might become standard practice on projects of any size.

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“You can envision it as an insurance requirement,” he said. “Personally I don’t believe we’re at a stage where we have the ability to do that cost-effectively and have it look natural, but I don’t think it will be too long until that happens.

 There’s risk associated with it, because what happens to that asset after you’re done filming? On the other hand, the actor doesn’t have to be on set as much but they’re still earning the same money. It’s basically the extension of the idea of stunt doubles.”

One wonders what the ripple effects might be if this comes to fruition.Will awards organizations feel compelled to create new requirements about “real actor” screen time in order for that person to be nominated?Janes thinks we’ll find out sooner than later.

We may not be regularly watching digitized versions of actors just yet. But he estimates that “within the next three years 50% of the content we watch will have been shot on stages with virtual backgrounds.”



What does the near future of filmmaking look like? Think digital and virtual. (krisanapong detraphiphat / Getty Images)[email protected]

Nina Metz

CONTACT  

Nina Metz covers TV and film for the Chicago Tribune, including a weekly column called Chicago Close-Up. Before joining the Tribune she was a freelance writer and theater critic. She also worked as a news radio producer in Chicago and New Orleans.

DeFi Dad is a DeFi super user sharing his money experiments and tutorials on Twitter and YouTube. He is an organizing member of the Ethereal Summit and Sessions, host of The Ethereal Podcast and a weekly contributor to The Defiant and Bankless.

Ethereum has always been difficult to explain. Even the founders of Ethereum have sometimes struggled to communicate the project’s transformative potential in layperson’s terms.

Metaphors such as “world computer” and “gas” tried to translate Ethereum to the world, but looking back it’s clear how little we understood about the platform’s true capabilities. 

By 2017, big promises were being made that Ethereum would “bank the unbanked.” But that promise seemed to go largely unfulfilled in the wake of the initial coin offering (ICO) craze. Nevertheless, the oft-repeated slogan represented the first attempt to describe Ethereum’s potential to transform personal finance. 

See also: Ethereum History in 5 Charts

While the ICO mania showed Ethereum’s potential as a distributive technology that could emulate, improve upon and democratize the initial stock offering, what was missing then was a simple personal financial use case that could be demonstrated to a friend, such as a mobile app. In those early days, there were many white papers, promises and signs of progress by a few teams (some of which have led to the top DeFi projects such as ChainLink, Kyber, and Set), but most of the benefits had yet to be delivered.

Meanwhile, there were lots of inspiring speakers from the Ethereum community who drew us into believing Ethereum would change the world. It just required a patient newcomer willing to wade through new ideas, intricate foreign concepts and a firehose of new information daily. Nothing was a simple elevator pitch.

When I saw Joe Lubin speak at Ethereal SF 2017, there was an inspiring message to take home. A lot of detail flew over my head at the time, but if you listened carefully it was impossible to not buy the idea that Ethereum could change the world for the better.

It’s worth noting that in 2017, ConsenSys and other early adopters and builders were also educating institutional players and enterprise software companies on how they could benefit from many blockchain use cases on Ethereum. Partnerships with Microsoft, IBM and Hyperledger helped cement Ethereum’s credibility in the enterprise blockchain race.

See also: How the EEA Made Ethereum Palatable to Big BusinessFast forward to July 2018, when I started full-time work in Ethereum. We were all recovering from the hangover of 2017, thinking the bull run might return sooner before watching markets unravel and get even bloodier.

We were emerging from an era without a coherent elevator pitch to be easily understood, including language that sounded like it had come from a “Big Bang Theory” script.

I recognized that Ethereum had to find any small group of fanatical users. For better or worse, I began drawing on my experience in SaaS, which taught me that startups need loyal users who find so much utility in an application that, if it were taken away, they wouldn’t have an alternative.

DeFi days

By spring 2019, I am working full time on the Ethereal Summit, a series of events celebrating the founders and builders of the decentralized web on Ethereum. It was around then that Ethereum’s narrative began to change. I heard about Compound, where you can lend and borrow – similar to MakerDAO, but with better loan-to-value (LTV) ratios. 

I was astonished – $50 MILLION in an app built on Ethereum! It was exhilarating to learn a second finance application had been built, launched and had been running on Ethereum for more than six months. 

All this activity came to be known as decentralized finance, or DeFi. The term was coined in 2018 by members of the 0x team, but the industry was just getting going. I couldn’t stop thinking about it.

I began researching every project we were hosting at Ethereal – PoolTogether, Kyber Argent and Zerion. And I did something even more radical: I began testing and using the damn products! 

See also: Why DeFi on Ethereum Is Like Algorithmic Trading in the ‘90sI needed to see my investment make money to realize the power of these DeFi applications. I started lending dai on Compound for over 10% APY and it just clicked. I’m lending dai and others borrow that money, but there’s no bank to collect the middleman fees. So, in turn, I earn better lending interest and borrowers pay smaller fees, and without know your customer (KYC) or anyone’s permission.

WHAT STOOD IN THE WAY OF DEFI MASS ADOPTION WAS BETTER STORYTELLING AND MORE VISUAL DEMONSTRATION OF HOW DEFI CAN WORK FOR ANYONE

It had long been a talking point in crypto the user experience (UX) had to improve for Ethereum to see adoption, but I found those same people espousing such criticisms often had zero experience with DeFi applications. It seemed like a lie that had stuck around long enough to become a truth, even though I was finding some DeFi UX better than my experience with legacy banking. 

For me, what stood in the way of DeFi mass adoption was better storytelling and more visual demonstration of how DeFi can work for anyone. 

EthHub.io and Cami Russo’s The Defiant were already doing lots of legwork in this space but there was clearly more to build upon.In late 2019, the DeFi community was still small compared to today, only a few thousand or possibly even a few hundred users, but it felt like we were on a bustling rocket ship of excitement.

We rallied around this term DeFi, the simplest term to describe any peer-to-peer finance app built on Ethereum, requiring a Web 3 wallet like MetaMask, that doesn’t need KYC and has no single point of failure. If ETH is money, DeFi is your bank. 

What started as a concept is now an economy of interlinked applications with more than $4 billion in value invested. But it’s more than just money. DeFi has changed the way people think about Ethereum itself and given rise to new narratives and memes.

A meme is born

Shortly after this spark was really gaining momentum in the fall 2019, DeFi users naturally found a second totem to rally around. That was the concept of Total Value Locked (TLV), coined by the team at DeFi Pulse. 

TVL refers to the sum of all value deposited into a DeFi app’s smart contracts, whether that’s measured in U.S. dollars (USD) or in ETH. TVL reflected a new, un-gameable metric for adoption. It was a way to compare how much trust DeFi users put into an application. It has its flaws, but those flaws are no worse than reducing Bitcoin to its price. 

See also: Nathaniel Whittemore – ‘Stacking Sats’ vs. ‘ETH Is Money’ – The Memes That Shaped 2019

DeFi also helped solidify the “ETH is money” meme. As co-host of the Bankless Podcast David Hoffman said, ETH is a triple-point asset, because it acts as a store-of-value, a capital asset, and a consumable asset.

“ETH is Money” is an intentional pivot from “ETH is gas,” and updates the world on how ETH is actually used on Ethereum.  

Plain and simple: ETH is money. It always has been money and to label it otherwise was a product marketing mistake in the early days of Ethereum.Yield farming is the latest viral meme in Ethereum.

DeFi is a larger all-encompassing category of p2p, self-custody, KYC-less, finance apps built on Ethereum, but yield farming describes a popular incentives program where you often provide liquidity to a DeFi application in exchange for a combination of rewards. 

As Dan Elitzer of IDEO CoLab Ventures put it, yield farming is like aquaponics because it creates a symbiotic relationship between DeFi protocols, meaning DeFi participants can earn three or more forms of yield such as interest, market-making fees and pooled rewards such as a governance token like BAL or COMP.

Because of the most composable incentive designs in DeFi, yield farming (aka “liquidity mining”) is like passive income on steroids, with programs delivering anywhere from 10-200% daily APY on average. 

Universal appeal

Five years ago, you could argue Ethereum was attempting to do too much. Even two to three years ago, that was still a valid hypothesis, with stagnant adoption.

Today, the bold experiment of Ethereum is working. Alongside the $4 billion in assets deposited into DeFi, we’ve seen a 227% year-on-year increase in ETH locked in DeFi, and a 20X increase in tokenized BTC on Ethereum (equivalent to ~$220 million) since January 1. 

See also: One Billion, Two Billion, Three Billion, Four? DeFi’s Knocking on TradFi’s Door

What was a drawback – doing “too much” – is now a strength and a reason why Ethereum’s daily transaction volume and daily network fees have eclipsed Bitcoin’s.

Although Ethereum is less than half Bitcoin’s age, it has accomplished more in the last five years, building the most advanced permissionless p2p finance system in the world while Bitcoin has continued to champion the narrower digital gold meme.

It’s getting easier every day to point to DeFi apps that clearly demonstrate value and utility you cannot find elsewhere. If you’ve managed to ignore these developments, now is as good a time as ever to catch yourself up. The story of DeFi and Ethereum is just getting started.

Ethereum’s biggest-ever upgrade is supposed to make the blockchain network faster and more efficient. But the new “staking” system could lock up so many of the network’s native ether tokens that investors who want to trade them may have to rely on derivatives markets. 

The blockchain, the world’s second-biggest, currently uses a validating mechanism similar to larger Bitcoin’s known as “proof-of-work,” where new data blocks and transactions are confirmed via power-hungry computers solving complex cryptographic puzzles.

Under Ethereum’s multi-year upgrade now underway, the network would shift to a “proof-of-stake” model, where investors validate transactions by staking ether on the blockchain in exchange for token rewards. It’s a bit like depositing dollars into a bank account for interest, paid out in dollars. 

Related: DeFi Traders Are Gaming Ethereum for Higher Profits, Researchers Say

A possible consequence, though, is the new staking system could soak up as much as 30% of the ether tokens in circulation, based on estimates from Adam Cochran, a partner at MetaCartel Ventures, a decentralized investment firm.

An address needs to stake at least 32 ether tokens, worth about $12,400 at the current price, to become a validator in the proof-of-stake model. “It’s possible to see a future scenario where the incentive to keep assets locked up on-chain is so great as to remove some liquidity from the market,” says Diogo Monica, co-founder and president of the digital-asset custodian Anchorage, told CoinDesk in an email. 

Lost liquidity

In May, a survey by the Ethereum developer Consensys found that 65% of ether investors were planning to stake the cryptocurrency under the new system, known as Ethereum 2.0, and half of those wanted to run validator nodes. Most staking mechanisms have a lock-up period.

Rocket Pool Staking, an Ethereum 2.0 staking service, offers staking terms ranging from three months to a year. 

Related: Blockchain Bites: Square's Revenue Surge, Eth 2's Final Testnet, c-Lightning's Latest Update

Some ether tokens might get locked in staking as the network upgrade proceeds. Ethereum 2.0 is being rolled out in three phases of what could end up being a multiyear process, with the original proof-of-work blockchain running in parallel until the two networks are merged at “Phase 1.5.” Wilson Withiam, a research analyst at the cryptocurrency data firm Messari, told CoinDesk that “ethers sent to the deposit contract will likely remain locked up” until Phase 1.5, and “that could cause a decline in the amount of ether readily available.”

Staking derivatives market?

Cryptocurrency analysts say ether-staking yields of 3% to 5% would be so tantalizing – at a time when government bonds carry near-zero or even negative yields – that few investors would opt to leave their tokens in Uniswap or other decentralized trading systems where they could be accessed by traders. 

“In that case, people will have an incentive to create ways to buy and sell ether shares that abstract whether the underlying asset is currently being staked,” Monica said. Derivatives might be a solution.  

Fixed income from staking could even be packaged as a distinct product. Holders who stake their coins could create voucher tokens representing a claim on the stake.

Then they could trade the tokens for ether or other cryptocurrencies. So buyers could capture the yield without having to own the underlying asset. As an alternative to selling voucher tokens, holders could deposit ether as collateral on decentralized lending and borrowing platforms. 

Messari’s Withiam says he thinks staking derivatives are inevitable.“It will give traders access to tradable assets so that they can continue to do what they do best,” Withiam said. “Exchanges will be able to offer new markets around these assets and potentially lock customers within their product suite if the synthetic assets aren’t transferable outside of the exchange.

” For now, all this really just amounts to speculation over how speculators will want to speculate on ether. But there’s no lack of motivation: Plenty of cryptocurrency analysts say it’s possible ether’s price could jump as demand increases for tokens to stake.

Ether’s price has tripled this year to about $390. Such returns far exceed bitcoin’s 56% gain on the year.  

Dapper Labs – the company behind CryptoKitties – has a simple mission. They want to introduce a billion people to blockchain.“The reason we decided to go for entertainment — specifically games — is because we felt that it’s just a much easier way to introduce folks to decentralization,” explains co-founder Mik Naayem.

“Gamers are the perfect target market as they already understand virtual currencies and virtual worlds.”In November 2017 CryptoKitties was Dapper Labs’ Trojan Cat, and the game introduced the revolutionary concept of NFTs (Non Fungible Tokens) to hundreds of thousands of people who had never used the word “fungible” in their lives.

It is widely believed, at least by those in the blockchain industry, that these unique or scarce digital objects have the potential to transform the internet and underpin new virtual economies.

Dapper is now leveraging the power of major sports, entertainment and music brands — including the National Basketball Association and Warner Music — to help draw their passionate fans into blockchain too.

The NBA isn’t the only major organization excited about NFTs. Some of the biggest brands on the planet are developing blockchain based games, collectibles and virtual worlds including Formula 1, MotoGP, Atari, Ultimate Fighting Championship, Nike, and even Shaun The Sheep.It’s a massive opportunity with the potential to bring about adoption by mainstream users. 
 

Between them Fortnite and Minecraft alone have 300 million users per month — a user base that dwarfs the 16 million blockchain wallet users per month. Formula 1 reached 471 million unique viewers in 2019. And the NBA claims to reach over a billion people.

Games generated revenue of $150 billion last year and if blockchain is adopted by the gaming and collectibles industries — and marketed by global brands — in the way believers think it will be, then NFTs may well be blockchain’s killer app. 

The revolution will be gamified

Galaxy Interactive is a $325 million investment fund that’s helping fuel this revolution. Its investment thesis is based on the conviction that the billions of people who spend their lives glued to screens want more meaningful ways to connect and engage with each other.

“The virtual goods that we buy, trade and sell will imbue status and define our identity just like their physical counterparts,” a Galaxy Interactive pamphlet explains.

“The value we create inside of our virtual worlds will become indistinguishable from the value we’ve historically created outside of them.”Sam Englebardt, who co-founded Galaxy Digital with Mike Novogratz, heads up the Interactive division.“I think where brands are concerned, I just think adoption is going to happen in games and in content,” he says.

“If you’re thinking about digital worlds and a technology that enables you to do really interesting things with digital objects, and to create scarcity of these objects, it just feels to me like that’s the sort of environment where this (blockchain) tech is likely to scale first.

“That’s where the people are and where the eyeballs are. That’s where the brands go.”A story that culminates in the creation of The Metaverse, starts with CryptoKitties in November 2017.

Cool cats of the blockchain

Naayem explains the whole idea behind CryptoKitties was to teach new users about blockchain.

“When we created CryptoKitties, what we were trying to do was test whether we could get people who’ve never used a blockchain before to use it… and understand why it’s different and why it’s valuable.”

Until now everything in virtual worlds has been endlessly reproducible and consequently of little value. But NFTs ushered in the revolutionary concept of real and persistent ownership of unique objects.

Three million people visited the website to buy a virtual cat, but only about 100,000 succeeded — thanks in part to the game clogging up the Ethereum network, and in part the hoops users need to jump through to obtain cryptocurrency.

But it proved that the ownership of cute NFTs appealed to people who didn’t care less about Bitcoin.“With Crypto Kitties, a little over 40% of our audience had never owned a cryptocurrency before and through analyzing their user behaviors we can see they’re behaving differently in this game than they would in regular mobile games,” he says. “And so we got convinced around that.

”The game enables users to ‘breed’ their NFTs with others and sell the offspring, which helped encourage the creation of a virtual economy (a couple of million cats have now been bred).

The value-accretion deck was heavily tilted in favor of users who made $20 million in the first year, while Dapper Labs only took $7 million. Users also created an ecosystem of DApps, building everything from racing games to Tinder and Facebook for cats.“In terms of user behavior they didn’t see it as spending, so much as value transfer,” he says.

“People were spending a lot more because they felt this was more akin to a digital stamp or a piece of art that I can liquidate at a certain time, rather than spending virtual currency in a game.” 

 Naayem says that once users have experienced uniqueness, scarcity and ownership in a virtual world, handing over cash in ordinary games completely loses its appeal.

“When someone has had that experience, it’s hard for them to go back and spend in virtual worlds where they don’t have those promises. A big part of the way I’ve been thinking about it recently is that it’s almost akin to giving users digital rights in their virtual lives.

”Blockchain in gaming is still a fledgling industry at the moment. My Crypto Heroes made $1.5 million in its first year and players took home $118,000. Gods Unchained made $4.2m with the company pocketing the lot. But the success of CryptoKitties saw some of the biggest brands in the world sit up and take notice.

“A lot of great IPs were reaching out to have these conversations,” Naayem says. “And we thought that was a really great way to tap into their vibrant communities.”

Sports fans: the perfect score

Sports fans are some of the most devoted on the planet and sports brands make a significant proportion of their revenue from video games, merchandising and memorabilia. Combining all of these things using blockchain makes a lot of sense.

The numbers involved are huge: in two decades the NBA 2K game sold 86 million units and last year the NBA signed a seven-year deal to extend the license for a cool $1.1 billion.With that sort of money on the table, it’s not that surprising that the NBA had already set up a working group on blockchain to think about ways the brand could benefit from the technology.

They approached Dapper Labs and the result, NBA Top Shot is in beta and due for release soon.The platform allows fans to ‘own’ their favorite sporting moments. That time your hero hit a three-point buzzer beater to win the game? You can now own a limited edition NFT commemorating the occasion.

The idea evolved through discussion with the NBA’s fan panel.“We gained an understanding that one of the reasons people like sports a lot is because of what I call ‘moments of greatness’,” Nayaam says.

“That’s where you create that really strong emotional attachment with that player, with that team, with a moment that essentially brought you, your family, your city a lot of joy.“We realized that could be turned into a digitally native piece of memorabilia.

”The moments will also be game pieces too, and players will be able to compete with them, trade them and use them in online tournaments and leagues.

The mixed martial arts Ultimate Fighting Championship has also partnered with Dapper to release a range of UFC branded digital collectibles on its Flow blockchain and Warner Music is exploring how its artists can leverage their technology too. 

“A big part of it is these brands, whether it’s the NBA or UFC, allowing us to tap into very passionate fan bases which then allows us to hopefully bring those communities to blockchain,” he says.

The opportunity is not just limited to sports and music — passionate fans of anything from comic book heroes to cult TV shows are obvious contenders. “We think it makes a lot of sense around characters — I’d love to work with the Batman brand, or Marvel and create digital worlds for those characters.

But it can also be things like sneaker brands. You can imagine making digital shoes for Nike or Adidas. Eventually we’ll have augmented reality. And in that case digital fashion may make a lot of sense there.”

Virtual fashion and sneakers

As it happens, Dapper Labs has already auctioned off a virtual fashion garment for $9,500 at the Ethereal Summit in New York. The owner bought the token for the opportunity to ‘wear’ the garment virtually.

And in December last year Nike patented shoes as NFTs called CryptoKicks. The concept pays homage to CryptoKitties by essentially stealing the idea outright: you can ‘breed’ different pairs of shoes to create new custom sneakers that can be made in the real world.

Englebardt expects this will be a growing trend.“Sneaker brands are going to be a very big and important leader in this space because the sneaker culture overlaps so heavily with gaming culture and you’re already seeing a whole culture around the creation of custom sneakers,” he says.

Yat Siu, the CEO of Animoca Brands, believes that a pair of virtual Nikes may end up transferable between different worlds – enabling you to take them from one game and use them in another, or on social media.

“In the real world you don’t buy Nike shoes so that you can only use them in a Nike Basketball court,” he says.

“If suddenly millions of people end up owning Nike virtual shoes, how many game companies out there might actually say, let’s make use of those Nike shoes inside our virtual games?”

While NFTs allow for objects to exist outside of the games, interoperability is probably a little way off yet. Englebardt believes it is more likely that NFTs will first become usable across multiple games owned by the same publisher.

So a Formula 1 car NFT from Animoca Brand’s F1 Delta Time game (out in July) may end up being able to drive around The Sandbox, which the company also owns.

Driving change with Formula 1   

The company made headlines in May last year when it auctioned off the first F1 car NFT for the game. Theoretically made of ‘black carbon’, the ultra-fast 1-1-1 was sold for 415.9 Ether – $106,000 at the time. Two other F1 cars sold for around 100 ETH each, demonstrating that designing collectibles that appeal to the sport’s cashed up fanbase was a clever strategy. 

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Subscribe for thoughtful explorations and leisurely reads from Magazine. “We did not expect that the 1-1-1 would sell for 415 ETH, which by any measure is an astounding amount of money,” Siu says. “It set a bar for the price of these cars which consequently also informed us of how we need to work on that scarcity model because now the cars have a certain price point.

And we now have to be mindful about how we keep issuing these NFTs.

”They’ve also auctioned off 2000 ‘crates’ of in-game NFTs conferring various advantages for players for $360,000 in total. Just like CryptoKitties, a secondary market sprung up with users buying crates simply to resell various items.

In August they’ll be reverse auctioning off three Star Trek vessels to rabid Trekkers to be used in the forthcoming CSC game, with bids starting at the ETH equivalent of $200,000 when the Enterprise NCC-1701 goes under the hammer.

Animoca is also developing another blockchain game using collectibles for MotoGP — the motorcycle racing world championship.While most purchasers of NFTs so far have mostly been crypto natives, Sui expects that to change after the games are released. 

That’s what happened with an experimental sale in May of 100 in-game NFT items for Crazy Defense Heroes “The top buyers are not crypto guys and that taught us something about adoption. They were players that played a lot and they wanted these collectibles because they were fans and because it had a benefit inside the game,” he says. 

325 new brands onboard

As the name suggests, Animoca Brand’s entire game plan is to leverage the power of existing brands in gaming — everything from Garfield to Snoopy and Thomas and Friends.

As part of this strategy it teamed up with blockchain network Harmony to jointly acquire the digital collectible startup Quidd last year, which has sold more than 2.1 billion digital collectibles since 2017. Quidd has license agreements with 325 brands including Marvel, Game of Thrones and Rick and Morty, and Sui says they are in negotiations with the IP holders to begin releasing collectibles at NFTs.

As a first step, they’ll start recording ownership on blockchain.Siu says that speaking to brands about NFTs currently requires a lot of education. “We do have to go out and tell people about the opportunity,” he says. “It’s not yet at the point where IP holders are coming to us and saying ‘Hey I heard you guys do crypto and NFTs, let’s see how we can work together’.

We’re not there yet.”“But I think this is where Animoca Brands has an advantage because we’ve already talked to them on non-blockchain games in the past, we’ve had a long history with them.

Playing in The Sandbox

Some brands have seized the opportunity — among them Atari and Shaun the Sheep (of Wallace and Gromit fame), two brands that are building their own virtual theme parks inside the blockchain powered virtual world The Sandbox.

First released in 2012, mobile game The Sandbox gave users the freedom to create whatever they wished, and it’s since been downloaded more than 40 million times.

The new version uses blockchain to power the creation of an immersive ‘metaverse’, much of which will be built by the users themselves. They’re targeting one million monthly active users.

“It’s a 3D decentralized virtual world where the players can make 3D assets and monetize them through the use of blockchain technology, essentially NFTs and our own cryptocurrency,” explains co-founder Sebastien Borget who is also President of the Blockchain Game Alliance.

Competitor Decentraland has created a similar, but more realistic looking blockchain world.The Sandbox has held three major pre-sales of ‘land’ inside the game map: the most recent of which sold out in five hours and netted 3,400 ETH ($760,000).

“What’s amazing is this strategy has been working really well,” he says. “We have already sold over $1 million of virtual land even though we are not yet launched, and we have over 1,500 land owners who are either artists, game developers, creators, crypto users and investors who believe in that vision.”