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Betting on DeFi? Crypto Insurance Products May be Worth Looking into

The decentralized finance (DeFi) space has been steadily growing, going form less than $500 million worth of cryptocurrencies locked a year ago to over $9 billion at press time. Data shows that the space’s exponential growth took off after DeFi lending protocol Compound started distributing its COMP governance token. A yield farming trend was started […]

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The decentralized finance (DeFi) space has been steadily growing, going form less than $500 million worth of cryptocurrencies locked a year ago to over $9 billion at press time.

Data shows that the space’s exponential growth took off after DeFi lending protocol Compound started distributing its COMP governance token. A yield farming trend was started with the COMP token launch, with users lending and borrowing from protocols that issued their own governance tokens in a bid to maximize yields with the token rewards.

Since then, new protocols helping users maximize their earnings across different protocols were launched as well. Currently,DeFi Pulse data shows four decentralized finance applications – Uniswap, Maker, Aave, and Curve Finance – have over $1 billion locked in them. A total of 30 dApps have over $1 million locked in them.

The Defi trend has gotten to the point where a new yield farming project saw users lock in over $500 million worth of cryptoassets on it before a bug was discovered. Theproject, Yam.Finance, made it clear its code was unaudited and that caution was strongly urged before engaging with its smart contracts. It reads:

While the initial creators of the Yam protocol have made reasonable efforts to attempt to ensure the security of the contracts, including forking much of the codebase from existing well-audited projects and soliciting review from friends, nothing approaching the rigor of a formal audit has been conducted at this time.

Things went wrong for the project, as a bug in the smart contract was affecting the rebasing contract. This meant the smart contract would mint more YAM than intended to sell on the YAM/yCRV pool on the decentralized exchange Uniswap, making it impossible for the community to reach quorum as far too many tokens were attributed to the reserve.

The price of the YAM token soon plunged, withUniswap data showing that after hitting a $200 high it crashed down to $0.9 that same day. At press time, YAM tokens are worth a little over $0.01.

Users are throwing in rather large amounts of funds into the DeFi space in a bid to maximize their earnings, and while some are being very successful others are failing because of problems that are to be expected in such a nascent ecosystem. Various DeFi protocols have so far been exploited, mainly through the use of so-called flash loans.

A flash loan is a loan that, using DeFi lending services, is both taken and repaid in the same transaction.  In a well-known case, an attacker used a 7,500 ETH flash loan to manipulate the price of a stablecoin and earn over $630,000 in the process.

Even projects that had their smart contracts audited by major firms havebeen exploited in the past. There are billions at stake in DeFi, and there could be huge payouts for hackers who put in the time to find ways to exploit smart contracts.

The solution for users trying to maximize their yields and sleep well at night could be crypto-insurance options.

Crypto-Specific Insurance Protects Users

Insurance has always been a way to mitigate risk and in the cryptocurrency space, several projects who got insured gained confidence from users. Decentralized finance projects aren’t just risky because of the lack of insurance, but also because they are based on smart contracts that could contain bugs in them.

A solution to this risk would be crypto-specific insurance options. One of these protections is offered by Nexus Mutual, which gives DeFi investors cover for smart contract bugs. Nexus Mutual is a mutual like any other, owned by its policyholders.

Its current applications are currently limited, as it does not protect users against natural disasters, but only covers smart contract failure. Its so-called “Smart Contract Cover” would have provided users an extra level of safety during the DAO hack In 2016.

Nexus Mutual’s payouts aren’t triggered by phishing attacks or network congestion issues, and are rather specific. As such, users should review the conditions of the coverage offered before purchasing it. Nevertheless, its coverage has already helped some recover lost funds.

The first successful DeFi insurance claim was with Nexus Mutual, as it agreed to honor two claims which totaled around $31,000. These claims were related to the bZx exploited mentioned above.

Members of the mutual have the final word on whether a payout should be triggered. Its members areNXM token holders, who must have to go through know-your-customer (KYC) and anti-money laundering (AML) checks to buy NXM.

Members are responsible for arbitrating governance proposals, as well as claims and risk assessments. Essentially when a claim is made, NXM holders can vote on whether the claim is legitimate or not.

The token can only be purchased through the Nexus Mutual platform, but there are ways to gain exposure to it. Even if you are not interested in the crypto-specific insurance, you may be interested in gaining exposure to the project’s token, which has already appreciated 300% year-to-date.

While NXM isn’t trading on centralized exchanges or even decentralized exchanges like Uniswap, it is possible to gain exposure to it and other DeFi-related tokens without having to deal with smart contracts.

Gain Exposure to DeFi Using Centralized Exchanges

Most top centralized exchanges have over the last few months been helping users gain access to the decentralized finance space, with most initially just listing Compound’s COMP governance token so users could trade the token that started the yield farming trend.

One exchange that has been standing out isOKEx as it has so far listed a total of 35 DeFi-related projects on its platform. The spot and derivatives exchange has been listing the tokens over time, and at one point added atotal of eight DeFi tokens in a single day.

The number of listings is essentially allowing the exchange’s users to access the advantages of the decentralized finance space without having to worry about getting a Web 3 compatible wallet and trusting a smart contract.

Responding to the recent controversy surrounding SushiSwap, OKEx CEO Jay Hao revealed he believes the development of DeFi is a “big event to the entire crypto industry.”

OKEx has launched a  “DeFi category” on its website which helps traders quickly find information on decentralized finance tokens. In previous announcements, the exchange has said its listings reinforce its commitment to the potential of the decentralized finance economy.

As reported, OKEx was the first centralized exchange to list Curve’s CRV token, and boosted the Dai Savings Rate’s rewards for its users if they deposited via its Earn program.

Featured image via Pixabay.

Source: https://www.cryptoglobe.com/latest/2020/09/betting-on-defi-crypto-insurance-products-may-be-worth-looking-into/

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Opimas estimates that over US$190 billion worth of Bitcoin is currently at risk due to subpar safekeeping

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May 2021. Safekeeping of cryptocurrencies presents a challenge for institutions holding cryptocurrencies on their clients’ behalf. Cryptocurrency transactions are irreversible and anyone with full access to a wallet’s private key controls the cryptocurrencies that reside within it. Frighteningly, a number of institutional participants and even some large cryptocurrency exchanges rely on subpar custody approaches, leading Opimas to estimate that over US$190 billion worth of Bitcoin is currently at risk due to subpar safekeeping.

Luckily, a number of companies have emerged to address this problem. A new research report from Opimas—Crypto Custody: No More Excuses, authored by analysts Suzannah Balluffi and Anne-Laure Foubert—looks at the landscape of cryptocurrency custody-enabling technology providers and institutional-grade cryptocurrency custodians as well as the size of the market for cryptocurrency custody and brokerage services.

Some key findings in the report include:

Many of even the largest holders of Bitcoin and other digital assets continue to rely on storage devices meant for individual investors. Although some of these self-custody devices and wallets are secure and reputable, the operational risk posed by this approach is significant for institutional investors. Furthermore, a chunk of institutionals’ cryptocurrency holdings sit in hot wallets on exchanges. In total, about 22% of institutional cryptocurrency holdings are safeguarded in these relatively risky manners (Figure 1).

Figure 1. CUSTODY METHODS UTILIZED BY INSTITUTIONAL INVESTORS 

 

Source: Opimas analysis.

There are no more excuses for lackadaisical safekeeping – institutions can now choose from several reputable cryptocurrency custody-enabling technology providers and institutional-grade cryptocurrency custodians. Yet no custody solution is equal – there is still no best practice when it comes to security and governance relating to private keys. For example, some providers may rely on time-tested Hardware Security Modules (HSMs), while others use a newer technology known as Multi-Party Computation (MPC) – see Figure 2.

Figure 2. A COMPARISON OF HSM AND MPC TECHNOLOGY PROVIDERS

Source: Ledger, Fireblocks, Opimas analysis.

Some cryptocurrency custodians have followed in the footsteps of traditional capital markets by adding prime brokerage services to their offerings, including trading and settlement, lending, margin finance, staking, reporting, and capital introduction services. Opimas estimates that the current annual revenues generated by the institutional crypto brokerage and custody market are roughly US$2 billion and will grow to nearly US$8 billion by 2026 – a sizeable portion of this coming from brokerage services (Figure 3).

FIGURE 3. THE MARKET FOR CRYPTO CUSTODY & PRIME BROKERAGE SERVICES IS GROWING 

Source:  Opimas analysis. 

  • Regulations surrounding institutions’ ability to store cryptocurrency have become clearer (and in some cases more favorable) in numerous jurisdictions. Notably, the Office of the Comptroller of the Currency (OCC) ruling in the US has allowed banks to store cryptocurrencies for their customers. This regulatory clarity has led a number of financial institutions around the world to provide trading and custody for digital assets. With the advances in brokerage and custody solutions, Opimas expects institutional cryptocurrency holdings to grow from 20% of the cryptocurrency market cap to over 50% by 2026 (Figure 4).

FIGURE 4. INstitutional cryptocurrency holdings over time 

Source:  Opimas analysis.

Source: PlatoData Intelligence

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Bitcoin (BTC) Price Prediction: BTC/USD Faces Rejection Thrice at the $60,000 Resistance Zone, Resumes Downward Correction

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Bitcoin (BTC) Price Prediction – May 9, 2021
Bitcoin bulls have broken above the $58,000 resistance but the bullish momentum could not be sustained. Today, BTC/USD traded as price reached the high of $59,450. The king coin is likely to retrace to $57,000 low if the bulls fail to break the $60,000 psychological price level.

Resistance Levels: $65,000, $70,000, $75,000
Support Levels: $50,000, $45,000, $40,000

BTC/USD – Daily Chart

Bitcoin price was rejected thrice at the $60,000 resistance level. Buyers made frantic efforts to sustain the bullish momentum above the recent high but were repelled by overwhelming selling pressure. Consequently, Bitcoin has resumed a downward move as a result of a strong rejection at the resistance of $59,200. The current retracement will extend to the low of $57,000. Nevertheless, if price breaks below the $57,000 support, the market will continue the downward move. That is, the selling pressure will extend to the low of $53,000. On the upside, if price retraces and finds support above $58,000, the upside momentum will resume.

Bank of England Governor Warns on Crypto Investment
Andrew Bailey is the governor of the Bank of England who has warned crypto investors of the inherent dangers of cryptocurrency investment. The governor argued that cryptocurrencies lacked intrinsic value. According to him, “I would only emphasize what I’ve said quite a few times in recent years, [and] I’m afraid they have no intrinsic value. I’m sorry; I’m going to say this very bluntly again: Buy them only if you’re prepared to lose all your money.” Bailey’s comments are coming at a time when crypto markets are characterized by a huge spike in crypto prices. Major altcoins such as Polkadot, Chainlink, and XRP have also seen vertical price actions.

BTC/USD – 4 Hour Chart

Bitcoin risks another downward correction as the king coin faces stiff rejection at the $59,450 resistance. The Fibonacci tool has already indicated a marginal upward move of Bitcoin and a possible reversal. On May 1 uptrend; a retraced candle body tested the 78.6% Fibonacci retracement level. The retracement indicates that Bitcoin will rise to level 1. 272 Fibonacci extension or the high of $59,819.90. From the price action, BTC price has reached a high of $59,450 and has commenced a downward move.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://insidebitcoins.com/news/bitcoin-btc-price-prediction-btc-usd-faces-rejection-thrice-at-the-60000-resistance-zone-resumes-downward-correction

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Dogecoin dumps following mention from Elon Musk on Saturday Night Live

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Meme cryptocurrency Dogecoin finally got its long-awaited shoutout on Saturday Night Live — but despite hodler hopes, the immediate result has been a violent dump.

First teased by entrepreneur and DOGE cheerleader Elon Musk in late April, the Tesla CEO finally mentioned the digital asset on live television tonight in his opening monologue of the sketch comedy show. The reference was a throwaway line from Musk’s mother, who joined him onstage and asked if her Mother’s Day gift would be Dogecoin; Musk replied that it would be. 

In the minutes afterwards, $DOGE dumped upwards of 25%, falling as low as $.50 from $.66 highs at the start of the show. It has since partially recovered, trading at $.52 at the time of publication.

An hour before the episode began, the price of DOGE sat at $.66, down from an all-time high of $.72. A pair of bearish headwinds may have shared responsibility for the pullback: Musk himself seemed to try and get ahead of the hype, urging followers in a Tweet to “invest with caution,” and a host of new data indicates that many investors may be rolling their DOGE profits into other, largecap digital assets

Additionally, Barry Silbert — the founder and CEO of Digital Currency Group, the parent company of crypto investment vehicle company Grayscale — announced a public short on DOGE via the FTX exchange. In a series of follow-up Tweets, he revealed that the position was $1 million in size, and that any proceeds or remaining funds after closing the short would be donated to charity. 

(It’s unclear if Silbert was is using “we” in reference to Digital Currency Group, one of its portfolio companies, or is simply and bizarrely using a plural pronoun in reference to himself). 

Many DOGE investors were nonetheless holding out hope for a high-profile shoutout on what looked to be a major pop culture event. NBC, the studio behind SNL, chose for the first time ever to live-stream the episode on Youtube, per the Wall Street Journal.

Even a mention could have significant impact on the price of DOGE as well: the meme currency has proven to be susceptible to price movements based on positive social media volume, and multiple studies have shown that Tweets from Musk often lead to price appreciation. A mention on an even bigger platform was thought to potentially lead to even greater gains. 

Leading into the premier of the episode, Alameda Research trader Sam Trabucco (who said in a previous Tweet that he was “studying the typical SNL episode structure to try and understand when a DOGE mention would be the most natural”) speculated that if a joke or mention didn’t come in Musk’s opening monologue, it would be “all over.”

Despite arriving during the monologue, traders nonetheless responded negatively. It remains to be seen if a DOGE-centric skit later in the show can perhaps turn the speculative asset’s fortunes around.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://cointelegraph.com/news/dogecoin-dumps-following-mention-from-elon-musk-on-saturday-night-live

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