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Regulation, Uniswap controversy and how many use crypto worldwide

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Coming every Sunday, Hodler’s Digest tracks every important crypto news story from the previous week. Essential reading for all Hodlers!

 

Top Stories This Week

 

European Commission unveils digital finance package for crypto and blockchain

The days of murky legal waters and uncertainty for the crypto industry could be coming to an end if the European Commission is to be believed.

A new digital finance package has been unveiled that proposes new legislation on crypto assets in Europe, including “stringent requirements” on companies that issue stablecoins with a circulating value above $5.8 million.

Firms will also have to publish a white paper with mandatory disclosure requirements unless they’re a small project issuing stablecoins with a total value under $1.1 million.

The European Commission says it’s aiming to boost innovation while protecting consumers. But the International Association for Trusted Blockchain Applications has concerns. It fears the proposals could “overburden a young and innovative industry with costly and complex compliance and legal requirements that are disproportionate to the policy objectives it pursues.”

Overall, Europe’s approach is best described as a cautious one. The European Central Bank says there is a real risk of stablecoin runs that could “trigger negative contagion effects on the entire global ecosystem.” And the ECB’s president, Christine Lagarde, has said any digital euro that’s released would only serve as “a complement to, not a substitute for, cash.”

 

Glassnode: Uniswap team may have misled community over team token vesting 

Uniswap’s decentralization has been called into question, with a recent post from Glassnode insinuating that the platform’s developers might have intentionally misled the community over how the team’s allocation of UNI tokens will vest over time.

The platform’s team, investors and advisors have been allocated 40% of all UNI tokens, and although these are meant to be distributed over four years, there’s a lack of a public schedule, and some of these tokens may not be locked.

There’s also concern that the only entity with enough UNI tokens to submit a governance proposal is, er, Binance, “a centralized exchange in direct competition with Uniswap.”

In an interview with Cointelegraph this week, Binance CEO Changpeng Zhao said: “I’m seeing a lot of bubbles in the DeFi space. There are a lot of projects with empty promises and with nothing going on. And many DeFi projects are only hot for two weeks and then they die.

Meanwhile, concerns about congestion on Ethereum are refusing to subside, with leading DeFi protocols racing to implement layer-two scaling solutions as ETH gas fees skyrocket and the network struggles under the demand.

 

MicroStrategy CEO could “liquidate $200 million in Bitcoin on a Saturday”

Michael Saylor caused alarm bells this week when he said the $400 million held in Bitcoin by his business intelligence firm MicroStrategy could be liquidated at any time.

He told Bloomberg that he wouldn’t hesitate to dump MicroStrategy’s 38,250 BTC at a moment’s notice if an alternative asset’s yields were to jump.

“We can liquidate it any day of the week, any hour of the day,” Saylor said. “If I needed to liquidate $200 million of Bitcoin, I believe I could do it on a Saturday.”

That isn’t to suggest that such a whale movement — which would undoubtedly affect Bitcoin’s price — is imminent. “We feel pretty confident that Bitcoin is less risky than holding cash, less risky than holding gold,” he said.

In other Bitcoin news this week, a pseudonymous Bitcoin trader outlined 23 key technical and fundamental factors that could buoy BTC’s medium-term bull case. The data points shared by “Byzantine General” fall into four major themes: a less overheated market, a neutralizing futures market, less leveraged traders and strengthening fundamentals.

Could holding 0.28 BTC put you in the top 1% wealth bracket someday? 

One Bitcoin evangelist caused a stir this week when he said owning a small portion of BTC could lead to significant wealth… if mass global adoption occurs.

The Twitter personality Davincij wrote: “There is only 0.0027 BTC for the current 7 billion people. If you HODL 0.28 BTC, and Bitcoin is the world reserve currency you will be the top 1%. Thus HODLing 1 BTC means you may have 400x more than the average person (worst case).”

It’s worth noting that a lot of things have to go right for this to be possible. Bitcoin’s market cap is currently $197 billion — while gold’s stands at $9 trillion. Meanwhile, the U.S. dollar — the world’s reserve currency — has a circulating supply of $2 trillion.

Then there’s the issue of altcoins. If people invest in other crypto assets, money is diverted away from BTC — making it harder for the asset to reach top billing as the world’s go-to option.

100 million worldwide now use crypto-based assets, Cambridge study says

This next story helps illustrate the Everestian challenge that Bitcoin faces.

A new study by the Cambridge Centre for Alternative Finance recently revealed that 100 million people around the world currently hold Bitcoin and other blockchain-based assets.

This is a 189% increase from 2018 when there were estimated to be 35 million identity-verified crypto users worldwide.

Figures from the third quarter of 2020 also showed there are up to 191 million accounts at crypto exchanges — a number that doesn’t include self-hosted wallets.

Winners and Losers

 

 

At the end of the week, Bitcoin is at $10,747.42, Ether at $355.96 and XRP at $0.24. The total market cap is at $343,405,160,002.

Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are THETA, Hyperion and The Midas Touch Gold. The top three altcoin losers of the week are UMA, Quant and SushiSwap.

For more info on crypto prices, make sure to read Cointelegraph’s market analysis.

 

Most Memorable Quotations

 

“Banning crypto trading would cause India to fall behind other nations that allow it. By lobbying the Indian authorities, industry participants can implement the much-needed crypto regulations in the country.”

Charles Boviard, Quantum Economics VP

 

“You get in, and you just have to not be the one left holding the bag.”

Dave Portnoy, Barstool Sports founder

 

“I have really high hopes for Ethereum 2.0. For Ethereum 1.0, I underestimated Vitalik. When he was talking to me about the project in 2015, I said, He took too big of a bite to chew. But to my surprise, he proved me wrong. He delivered Ethereum. I think Vitalik’s team and the community are capable of delivering on some really hard technical challenges. And they’re strong innovators.”

Changpeng Zhao, Binance CEO

 

“The longer Bitcoin stays above $10,000, the more bullish Bitcoin is.”

Tone Vays, veteran trader

 

“I’m a believer. I think it’s happening – [adoption] it’s coming. It’s so important for the world, and I want the world to know it, and I want other people in the world to get on board.”

Tim Draper, tech billionaire

 

“8 percent of those with low financial literacy reported they own cryptocurrencies compared with 4 percent of Canadians with high financial literacy.”

Bank of Canada

 

“Bitcoin is better at being gold than gold — and not just incrementally, but by an order of magnitude or 10X better.”

Tyler Winklevoss, Gemini co-founder

Prediction of the Week

 

Bitcoin’s “worst-case scenario” is now $7,000, trader Tone Vays says

Bitcoin hitting $7,000 is now the “worst-case scenario,” Tone Vays believes.

On his podcast, the veteran trader said $9,000 would serve as a very good “buy-the-dip” opportunity.

Vays added that he thinks $9,000 is the “most realistic” outcome should a bearish trend take hold of the Bitcoin markets.

“The longer Bitcoin stays above $10,000, the more bullish Bitcoin is,” he continued. “Consistency on the way up is bullish; consistency on the way down is bearish.”

BTC/USD has maintained $10,000 support this week but has so far failed to reclaim higher levels after its fall from $11,000 several days ago. 

According to Vays, “the sky’s the limit” if Bitcoin reclaims $12,000.

FUD of the Week

 

Most Americans are against a CBDC, survey reveals

A new study suggests that the majority of American citizens are against the introduction of a central bank digital currency.

Of the 400 people who responded to Genesis Mining’s questions, more than 50% were opposed to the proposition that the government should abandon paper money in favor of a digital dollar.

There were some proposing signs in this year’s survey. Close to 25% said they agreed cash should be replaced by a CBDC — twice as many as last year.

The survey was published the same week that Cleveland Federal Reserve President Loretta Mester revealed that the Fed has been undertaking extensive research into the risks and benefits of CBDCs throughout the COVID-19 pandemic.

Major Indian exchange proposes new regulatory framework to avoid crypto ban

One of India’s biggest trading platforms says it has developed a framework to regulate cryptocurrency in the country.

BuyUcoin, which has more than 350,000 users, described the framework as a draft set of community-driven rules, propositions and implementation methods.

The exchange also said that it has the support of “all Indian cryptocurrency stakeholders.”

BuyUcoin CEO and co-founder Shivam Thakral described the framework, which will be presented to the Indian government, as “the first milestone of a long journey for making cryptocurrency accessible to the masses.”

 

Are we dumb? Financial illiterates “twice as likely to own crypto”

People who are more financially literate are likelier to be aware of cryptocurrencies but less likely to own them, according to a report from the Bank of Canada.

While 4% of Canadians with high financial literacy said they possess cryptocurrencies, 8% of those with low financial literacy own digital currencies like Bitcoin.

This report backs up a February 2020 report by the ING’s Think Forward Initiative, which warned:

“A large part of the cryptocurrency market [is compromised] of unsophisticated investors with lower financial literacy skills. These investors are likely to overestimate the reward prospects in cryptocurrencies and underestimate the risk involved in related investment.”

That said, an eToro survey in 2018 suggested that 44% of online investors avoided trading crypto because they felt they lacked the proper education.

 

Best Cointelegraph Features

 

WTF happened in 1971 (and why the f**k it matters so much right now)

In economic terms, 1971 was a big year, and a popular Twitter account has been going viral by explaining why. Cointelegraph Magazine’s Andrew Fenton explores how this has relevance to us all in 2020.

 

The Yearn.finance factor: Key use cases to explain YFI’s high value

YFI has pumped to amazing price heights, totaling at least 4,400% gains inside a two-month span. Is this price action warranted, and does the token have actual value? Two exchanges weigh in in this article written by Benjamin Pirus.

 

Rise of DeFi wars? Uniswap’s UNI token airdrop starts a crypto rivalry

Uniswap’s response to SushiSwap’s vampire mining attack is one of the most important moves in the DeFi space, Anirudh Tiwari says.



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Monero

DOJ says use of privacy coins is ‘indicative of possible criminal conduct’

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A new report from the U.S. Department of Justice alleges that crypto traders dealing with coins like Monero, Dash, and Zcash are inherently engaging in “high-risk activities.”

According to the “Report of the Attorney General’s Cyber Digital Task Force” released by the DOJ on Oct. 8, anonymity enhanced cryptocurrencies, or AECs, undermine and even facilitate existing anti-money laundering, or AML, and combating the financing of terrorism, or CFT, regulations put in place by businesses dealing in fiat. The task force cited coins including Monero (XMR), Dash (DASH), and Zcash (ZEC).

“The Department considers the use of AECs to be a high-risk activity that is indicative of possible criminal conduct,” the report stated. “AECs are often exchanged for other virtual assets like Bitcoin, which may indicate a cross-virtual-asset layering technique for users attempting to conceal criminal behavior.”

This is a developing story and will be updated.



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Dash should not be considered a privacy coin, Dash team says

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Once viewed as one of the crypto industry’s top privacy-focused assets, Dash (DASH) no longer operates under that classification, according to the Dash Core Group, the body overseeing the asset and its development. 

When asked if Dash should remain under the category of a privacy asset, Fernando Gutierrez, CMO for the Dash Core Group, told Cointelegraph: 

“No, Dash is a payments cryptocurrency, with a strong focus on usability, which includes speed, cost, ease of use, and user protection through optional privacy.”

Dash launched as a fork of Bitcoin in 2014. Originally called XCoin, before changing its name to Darkcoin, and then finally Dash, the asset positioned itself as a privacy-focused asset. “Dash is the first privacy-­centric cryptographic currency based on the work of Satoshi Nakamoto [Bitcoin’s pseudonymous creator],” the project’s white paper said.

In addition to Dash, two of the market’s other main anonymity-focused assets, Monero (XMR) and Zcash (ZEC), came to life in 2014 and 2016 respectively.  

Evident in Gutierrez’s comment, Dash no longer focuses mainly on privacy, although the asset does still have a feature called PrivateSend, giving users the option of greater anonymity. “The technology that Dash utilizes in our PrivateSend function is CoinJoin, which is a technique for complicating transactions to the point that they’re more difficult for analytics firms to analyze those,” he explained. 

The CoinJoin approach came on the scene in 2013, essentially letting Bitcoin users mix their transactions into a group to make tracking difficult. Dash essentially took this exact same approach and made it a more convenient built-in option for Dash senders, Gutierrez explained. 

In recent days, privacy assets have faced significant scrutiny from governing bodies, as seen by the IRS’ $625,000 bounty for cracking Monero. “Dash Core Group has no stance on the IRS’s offer,” Gutierrez said, adding:

“It doesn’t apply or threaten Dash in any way. Dash’s blockchain is public. There is nothing to break because Dash’s approach to privacy is probabilistic, not based on encryption. In that, it is not different from the Bitcoin blockchain.”

Two blockchain analytics companies, Chainalysis and Integra FEC, recently won the IRS bounty. 



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Will ‘cracking’ Monero reveal treasure or fool’s gold?

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Recently, the United States Internal Revenue Service caused a stir in the crypto community when it put a bounty on the head of anonymity-focused crypto-asset Monero (XMR), offering $625,000 to anyone who could effectively track the purportedly untraceable asset. As the crypto and blockchain industry values anonymity and privacy, questions arise on the result of the effort, not to mention its plausibility.

“As of the current stage of cryptography science today, the Monero protocol is almost impossible to break with necessary certainty,” Pawel Kuskowski, CEO of Coinfirm — a blockchain analytics company — told Cointelegraph. “However, it does not mean that Monero assets tracing is impossible in an effective way,” he said, clarifying:

“Some initiatives can be beneficial to investigating cryptocurrency crime for authorities such as: running a large network of their own Monero nodes, analyzing any data seized by shuttering non-compliant service providers that involve Monero and utilizing spy software and wallets — the latter of which is particularly useful for investigations.”

Monero serves as one of the crypto industry’s most well-known anonymity-focused assets. Cryptocurrencies such as Bitcoin (BTC) post all transactions to a public ledger visible to anyone online. Although BTC transaction addresses remain pseudonymous, various tools and efforts can sometimes link transactions and addresses back to personal identities. Since its inception in 2014, Monero has had the ability to hide transaction values and sender addresses. The asset’s blockchain also conceals transactions and their sums from uninvolved third parties.

A firm alleges XMR-tracking powers

Blockchain analysis firm CipherTrace came forward on Aug. 31 touting supposed XMR-tracking technology, reportedly the first of its kind. “We recently added monero tracing capabilities to our investigative suite,” Dave Jevans, CEO of CipherTrace, told Cointelegraph in a follow-up conversation, adding:

“Our tools do not reveal the identities of the users sending or receiving monero transactions. It is up to law enforcement to find that information from mapping data from addresses, wallets, payment IDs, etc.”

The IRS steps in

The motivation for decoding XMR became more interesting on Sept. 11, however, when the governing tax authority of the U.S., the IRS, publicized its search for anyone capable of breaching Monero’s transaction-hiding technology, offering $625,000 as a reward for such intel. In an industry valuing privacy, helping a government agency with this type of endeavor appears antithetical to the space, in some ways.

“The IRS is offering this money for research and development, which is not as controversial or surprising as many in the media are making it sound,” Jevans explained, adding that the governing body is targeting involvement from a number of entities for the endeavor, only budgeting $1 million toward the effort. Therefore, the IRS publicized a $500,000 payment upfront, with a further performance-based $125,000 paid eight months later. Jevans declined to comment on whether or not CipherTrace plans to work with the IRS.

Kuskowski described the IRS reward as predictable, given the timing of the bounty, which was announced approximately five days after CipherTrace publicized its XMR-tracking tool. Kuskowski, however, did not mention CipherTrace by name, only hinting at the firm by noting the timing of events, as well as the firm’s probabilistic approach, which he described as: “Totally useless for investigations owing to authorities being unable to display clear evidence. In cryptography something either is or isn’t, it is not probable.”

The IRS unveiled two Monero-cracking champions on Sept. 30. Surprisingly, CipherTrace was not one of the two, although the race to beat crypto privacy also involved the government agency’s desire to defeat the privacy held within layer-two blockchain solutions, such as Bitcoin’s Lightning Network. Chainalysis and Integra FEC stood as the victors, beating 22 other applicants.

Doubt regarding Monero-tracking efforts

CipherTrace claims it wields Monero-tracking power, and the IRS, apparently, saw something promising from Chainalysis and Integra FEC, but the effectiveness and depth of such tracking remains up for discussion. “I am highly suspicious of any claims that corporations can trace Monero transactions,” a representative from Monero Outreach told Cointelegraph. As an independent workgroup, Monero Outreach teaches the public about the privacy-focused asset.

“While it may be possible to learn user information from network level metadata that is not concealed with Tor or a similar privacy network layer, they likely cannot trace the wallets or amounts for any transaction,” the representative explained. A common software, Tor facilitates anonymous interactions online. The representative added:

“If this were the case we would have already found out from the handful of research teams who work tirelessly studying Monero and looking for these type of vulnerabilities.”

If the three firms did indeed uncover methods for tracking Monero, the crypto space might actually benefit. XMR boasts a large number of involved developers laboring toward the code’s advancement while fixing any weaknesses that surface, according to the representative. Therefore, the asset improves following any uncovered weaknesses, the representative posited.

XMR loses value if cracked?

As of the time of publication, Monero is the 16th-largest cryptocurrency, based on CoinMarketCap data, sitting at a price of $102.41 per coin — but what happens to the asset’s value if it loses its privacy capabilities? Kuskowski opined:

“We believe that XMR’s value is almost close to zero if its anonymity aspect is removed as currently the majority of businesses that use it or offer it to clients (with the exception of some derivatives products) are on the edge of being legal.”

CipherTrace’s Jevans holds a slightly alternate view. “Monero’s construction is quite different from Bitcoin’s, so most likely, tracing Monero will always be more predictive than completely deterministic; however, a big break-through in reducing Monero’s anonymity would likely cause the price to go down initially,” he said, adding that privacy-seeking owners of the asset might quickly head for the exits, offloading the asset onto the market.

Even if its privacy is cracked, however, Jevans expects XMR will rebound in price once it sees listing on additional crypto exchanges, labeling significantly higher trading volume as the driver. “It’s also worth noting that bitcoin has never been anonymous and it’s always been valued more highly than monero,” he added.

Monero already trades on a vast number of crypto exchanges, providing a potential counterpoint to Jevan’s expectation. Additionally, Monero is known for its privacy-focus, which becomes null if its privacy is broken. In contrast though, delisting Monero has also become a recent trend, decreasing available volume. A number of platforms have delisted the asset for various reasons over the past two years, including Huobi and Bithumb.

Although Chainalysis declined to weigh in on the IRS’ effort to break Monero, the firm did offer up its perspective on XMR’s value if its privacy were broken. Maddie Kennedy, senior communications director for Chainalysis, told Cointelegraph:

“Cryptocurrency users, including bad actors, often have to choose between using a cryptocurrency like Monero for its enhanced privacy and Bitcoin for its convenience, availability and liquidity. Bitcoin already usually wins, especially as exchanges increasingly delist privacy coins in light of regulations.”

It’s also important to note that nefarious characters are not the only parties who value privacy technologies such as Monero. The coin offers a way for the everyday person to take back their privacy in an age filled with digital snooping and data selling. Governments and people in power treat privacy in digital spending as a foreign concept, when in reality, government-printed cash is the most anonymous option available and is used daily for illegal activities.



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