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Three birds, one stone: Enhancing DeFi with political parties

Political parties on the blockchain could soon become a reality for the DeFi space.

Republished by Plato

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Meta-DeFi protocols are becoming increasingly popular following the success of Yearn.finance. The project is essentially a yield farming hedge fund that lets people participate in complex strategies to farm the governance tokens, or GTs, of other protocols.

Yearn is just about business — it sells any tokens it obtains through its activity. But a new project wants to reverse that concept to focus completely on the governance power offered by these tokens. PowerPool is a meta-governance protocol project that seeks to concentrate governance tokens of all platforms under one roof. Developed by a group of anonymous developers, it is quickly gathering support in the business ecosystem, with firms like Delphi Digital entering a position.

Additionally, OKEx exchange announced that it would list PowerPool’s CVP token among other new tokens like Sushi and YFV, with primarily China-focused exchanges following suit. Jay Hao, CEO of OKEx, told Cointelegraph that the decision was motivated by the exchange’s “commitment to furthering the development of the DeFi space,” which includes supporting “up-and-coming high-potential DeFi protocols.” He emphasized that OKEx is not an investor in the project, however.

Cointelegraph also spoke to one of the protocol’s anonymous developers, who goes by the pseudonym “Leeroy,” to learn more about why high-profile investors are showing interest in the project. Indeed, the protocol was designed to attract both major ecosystem players and minor token holders alike.

How does PowerPool work?

The protocol works in a similar way to existing lending protocols like Compound or Aave. Users who are uninterested in governance can stake the governance tokens they own, like COMP, LEND, YFI or MKR, which can then be borrowed by other people — for example major stakeholders. To do so, they will need to pay interest, which can be interpreted as essentially trading votes for money. Leeroy, however, did not agree with that categorization, saying:

“Not exactly that. People can ‘delegate’ or ‘pool’ their votes in order to get interest rate or a loan. At the moment we have two use cases for GTs in our protocol: To lend or pool GTs to earn interest rate via a money market model, or to use GTs as a collateral to get a loan in other tokens — for example, stablecoins.

“So, by adding GTs in PowerPool users can expand the utility of their GTs by adding cashflows to their token holdings in the former case or getting a loan in the latter. In both cases they also earn CVP via a liquidity mining mechanism.

“So, they do not ‘trade’ their votes for money, they add tokens into the pool to earn interest rate — or a possibility to get a loan using their GT holdings as a collateral; and as they became CVP holders, they also ‘trade’ their votes for possibility to influence in votings in other protocols by owning CVP.”

Why the need to create a new project?

In many ways, the description matches what platforms like Aave and Compound are doing right now. This raises the question as to why PowerPool should exist as a separate entity when something similar can be done elsewhere. Leeroy highlighted the potential conflict of interest:

“For example, now Aave offers lending markets for GTs. They also decided to use the idea to use pooled GTs for voting. LEND holders decide how pooled GTs will vote. Let’s consider the case when the GT is COMP. So it looks like COMP holders will delegate their voting power to LEND holders — a competitor protocol!

“It is the same if JPMorgan delegates the board votes to Citibank. Weird and unsustainable. In our opinion, we need a separate project for that as it has to be a neutral platform, unrelated to any other protocol.”

What’s the purpose of delegating governance tokens?

The solution adopted by PowerPool seems similar to other protocols, but the purpose of the project goes far beyond simple lending, according to Leeroy:

“The ultimate goal of PowerPool is to form the meta-governance layer in Web3.0. If enough tokens are pooled, a wide community of Majority, Minority, and Protocol Politicians will participate in governance with CVP.”

“I mean, at least they’ll have a significant share of voting power during votes or be a ‘loud voice’ that is heard across the industry. They can influence the development of the whole industry, establish certain standards, for example, for collateral types, etc.

The goal is solving voters’ apathy, providing additional value to GT holdings and increasing capitalization of votes, as the more tokens are voting — the more secure is the voting system.”

How does this solve voters’ apathy?

On the face of it, pooling tokens just to earn interest is the opposite of solving apathy. But the project has another important feature that deals with this issue, Leeroy explained:

“Minority token holders aggregate their votes via pooling and de-facto delegate them to the community of CVP holders. They don’t delegate their tokens to the specific person — they delegate them to the community of CVP holders, to which they belong themselves, if they participated in the liquidity mining.

“Voters’ Apathy is solved as a lot of ‘passive’ token holders will convert their tokens to ‘actively participating’ by delegating their tokens to the pool. It will increase the vote capitalization, which is how many tokens participated.

“It is clearly a solution for Voters’ Apathy once a significant share of minority token holders supplied them to the PowerPool.”

How to deal with the plutocracy in blockchain governance?

Governance in blockchain is a complex topic, but existing experiments suggest that rich token holders drive the majority of the decision-making process. Proposals on protocols like Compound or Yearn.finance are often issued and voted on by major token holders. The system of “one token equals one vote” is in general a manifestation of plutocracy — a system where wealth defines power.

One possible concern of a system like PowerPool’s is that it could further exacerbate these issues — rich entities could gain an even larger slice of the voting rights by borrowing them. But Leeroy believes that the representation mechanism will have the opposite effect:

“Talking about plutocracy in blockchain governance, it exists in any of them — the majority of votes occurring in blockchain protocols are owned or manipulated by whales. We try to do the opposite and engage minority holders — whose tokens often aren’t participating in voting at all now — as well as whales and Protocol Politicians to establish social consensus around voting using pooled tokens.

“In our protocol people cannot ‘vote just using money’ — you need to buy a lot of CVP to really influence PowerPool voting. Here I mean the late stage of the protocol, when it matures, tokens will be mined by LPs, and capitalization will be high.”

“We named it the ‘Social consensus,’ as from some point of view it looks like consensus in blockchain. So we are not trying to trade votes for money, but to avoid that and create consensus around it.

Can one-party dominance be avoided?

The allure of capturing all tokens supplied to the protocol may incentivize protocol takeover attempts, meaning that users would still have little choice in how to delegate their tokens. The representation, delegation and borrowing features of PowerPool would be made useless if one particular faction took over the protocol. One possible solution is to fork a new protocol for each faction, but Leeroy believes this won’t be necessary:

“We think that specific factions in crypto will create unions on PowerPool, but we are already developing tools for that. It will work like small DAOs of CVP holders which vote together and can delegate their CVPs to DAO representatives.

“Regarding forks, we will make sure that our protocol will satisfy all requirements of different communities of GTs, but also we are aware that people will make at least several forks. The protocol is open-source, the idea is fresh and there are a lot of people in the DeFi space who want to make something based on forked code. The main point is community size, trust, liquidity and presence on the market, and it is not easy to achieve just by forking code.”

Governance is still nascent

The yield farming boom was mostly about existing protocols releasing their own governance token into the wild. The focus has been primarily on making money so far, but as the dust settles, the question of who controls the protocols is likely to become ever more prevalent.

Related: Uniswap and automated market makers, explained

DeFi is currently a very top-heavy ecosystem in which the average user commits tens of thousands of dollars to the protocols. PowerPool could effectively stimulate minority holders into making their voices heard and reduce the ecosystem’s wealth and power gap. But the playbook of governance representatives it adopted is hardly utopic — DeFi is unlikely to change the fact that most people are apathetic to direct governance.

Hao said that OKEx will be “watching keenly to see how the platform evolves and how this solution to governance turns out.” Not all of the many innovations introduced in DeFi will stick, he added, but the situation is promising: “The emergence of protocols tackling the issue of blockchain governance is a sign that the industry is reaching a new level of maturity.”

Source: https://cointelegraph.com/news/three-birds-one-stone-enhancing-defi-with-political-parties

Blockchain

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

Republished by Plato

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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

Republished by Plato

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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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