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6 Questions for Eden Dhaliwal of Conflux Network – Cointelegraph Magazine



Cointelegraph By Editorial Staff

We ask the buidlers in the blockchain and cryptocurrency sector for their thoughts on the industry… and we throw in a few random zingers to keep them on their toes!


This week, our 6 Questions go to Eden Dhaliwal, the global managing director at Conflux Network.

With 14 years of experience in emerging tech, Dhaliwal specializes in identifying Web 3.0 opportunities and assessing the viability of decentralized business models and crypto assets. Currently, he is spearheading global expansion at Conflux Network, a high-performance, PoW-based, the first state-endorsed public blockchain project in China. 

He also supports blockchain startups as a mentor at programs, such as Basecamp, Creative Destruction Lab and Gitcoin Kernel. Moreover, he serves as an LP and executive advisor (previously partner) of Outlier Ventures, where he built the firm’s crypto economics practice. In 2019, Dhaliwal received the Blockchain Research Institute’s Award for New Frontier in Enterprise Blockchain Research. Prior to a career in blockchain, he received an MBA from the Rotman School of Management at the University of Toronto.


1 — What is the single most innovative use case for blockchain you’ve ever seen? It may not be the most likely to succeed!

Although the self-sovereign identity is a difficult and complex goal to achieve, it’s still an area of incredible potential for business and human impact. Using self-sovereign identity as a means of facilitating social accountability across the internet would be a game-changing breakthrough. I’ve seen SSI projects work through the mechanics of attaching an online reputation system to DIDs that could be ported into and across many applications. It would allow communities and networks to identify bad actors ahead of time and whether they are actual people or bots. Such SSI advancement would help make for a better internet and better address online social issues like cyberbullying and fake news.


2 — From smart contracts to DApps, to NFTs, to DeFi, we have seen so many of the next “killer apps” for crypto, but none have really taken off quite yet. What will stick?

When it comes to mainstream adoption of crypto, we either need a bridged introduction and/or a magical user experience. Things like CBDCs and Libra can introduce digital currencies to large numbers of people to help them get a step closer and more comfortable with cryptocurrency. However, we also need the type of compelling user experience that evokes a level of irrationality that leads to the type of online behavior where users don’t care what they have to do to sign up and use the product. Similar to how users seamlessly sign up for apps today without thinking a lot about privacy, security or compensation for their data. I’m sensing something special happening with NFTs at the moment. NFTs have the ability to leverage our emotional connections with music and art. I also think that the digital scarcity that NFTs offer can facilitate unique marketplaces, new gaming experiences and “exclusive” digital brand opportunities. Despite the hype with DeFi right now, I think NFTs offer the type of breakthrough human experiences that can capture the hearts of mainstream users.


3 — Which movie alternate universe would you most like to live in, and why?

For me, Interstellar was a fascinating journey through time and space. I’d love to have been one of the astronauts exploring new worlds. I’ll have to settle on crypto as my brave new world for exploration, for now.


4 — List your favorite sports teams and choose the single most memorable moment from watching them. If you aren’t a sports fan, choose a few movies and a moment!

My favorite sports teams are the Los Angeles Lakers and New York Giants. As thrilling as it was to watch Kobe compete (RIP Mamba), my single most memorable sports moment was Eli’s TD pass to Plaxico to finish off Brady and the Patriots in SB 42.


5 — What has been the toughest challenge you’ve faced in our industry so far?

Looking back over my time in the crypto-blockchain space, I think back to when I first joined Outlier Ventures. We had a number of portfolio companies that were exploring token models but were struggling with how to proceed. It’s a very complex process – and still a relatively new one –  to develop decentralized network economics, so it didn’t come as a huge surprise. 

Traditional product development takes on a very bottom-up approach, typically in the form of a lean startup. At the time, this didn’t work well mainly because this process couldn’t account for the complexity involved in creating tokenized systems. These systems need to integrate game theoretics, monetary policy, market design, governance, cryptography, and so on, into a viable crypto network. And after getting the cryptoeconomics in place, there is another challenge in figuring out how to validate the design principles and optimize the network economics to deliver a safe and secure working network.

Over the course of many months working alongside great minds from Imperial College London and BlockScience, we were able to develop an approach that combined cryptoeconomics and token engineering that provided an order of operations, tools, and methods to create token ecosystems. This framework continues to serve Outlier Ventures projects well to this day.


6 — What do your parents/significant other/friends/kids tell you off for? 

Well, right now, it’s my Bad Bunny obsession — and playing reggaeton way too loudly. Some types of music are meant to be enjoyed with the volume cranked, and I respect the new sound, fashion, and branding that Bad Bunny brings to the table. I was possibly a rapper in another life, but that’s a much longer conversation.



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Transparent stablecoins? Conclusion of Tether vs. NYAG raises new questions



Cointelegraph By Shiraz Jagati

A long-standing legal drama finally found resolution on Feb. 23, with the New York Attorney General’s office announcing that it had come to a settlement with cryptocurrency exchange Bitfinex after a 22-month inquiry into whether the company had been trying to cover up its losses — touted to be worth $850 million — by misrepresenting the degree to which its Tether (USDT) reserves were backed by fiat collateral.

According to the terms of the announced settlement, which now marks an end to the inquiry that was initiated by the NYAG back in Q1 2019, Bitfinex and Tether will pay the government body a fixed sum of $18.5 million but will not be required to admit to any wrongdoing. That being said, the settlement clearly states that henceforth, Bitfinex and Tether can no longer service customers in the state of New York.

Furthermore, over the course of the next 24 months, Bitfinex and Tether will be required to provide the NYAG with quarterly reports of their current reserve status and duly account for any transactions taking place between the two companies. Not only that, but the firms will also be required to provide public reports for the specific composition of their cash and non-cash reserves.

On the subject, NY Attorney General Letitia James said that both Bitfinex and Tether had covered up their losses and deceived their customers by overstating their reserves. When asked about this most recent development, Stuart Hoegner, general counsel at Tether, replied to Cointelegraph with a non-committal answer, stating:

“We are pleased to have reached a settlement of legal proceedings with the New York Attorney General’s Office and to have put this matter behind us. We look forward to continuing to lead our industry and serve our customers.”

Does a New York exclusive ban even make sense?

To gain a better legal perspective of the situation, Cointelegraph spoke with Josh Lawler, partner at Zuber Lawler — a law firm with expertise in crypto and blockchain technology. In his view, the lawsuit, and particularly the nature of the settlement in which Tether and Bitfinex agreed to cease actions, underscore the confusion inherent in the regulation of digital assets in the United States.

Additionally, the agreement by Bitfinex and Tether to prohibit the use of its products and services by New York persons and entities seems on paper to be nearly impossible to accomplish, with Lawler opining:

“Are they saying that no one with a New York nexus can own or trade Tether? Tether is traded on virtually every cryptocurrency exchange in existence. Even if Tether could restrict the use of Tether tokens by New Yorkers, is that really a good idea? Do we now have a world in which every state can pick off particular distributed ledger projects from functioning within their jurisdiction?”

Lastly, even though the deal between Bitfinex/Tether and the NYAG has come in the form of a settlement — i.e., it is not subject to an appeal or federal scrutiny under the commerce clause — state-centric bans may further add to the existing regulatory uncertainty.

Added transparency is always a good thing

With regulators now asking Tether and Bitfinex to be more forthcoming about their monetary dealings and issuing an arguably small fine on them, it seems as though an increasing number of firms dealing with USDT will now have to pull up their socks and get their account books in order. Joel Edgerton, chief operating officer for cryptocurrency exchange bitFlyer USA, told Cointelegraph:

“The key point in this settlement is not the elimination of the lawsuit, but the increased commitment to transparency. The risk from USDT still exists, but increased transparency should cement its lead in transaction volumes.”

In a somewhat similar vein, Tim Byun, global government relations officer at OK Group — the parent company behind cryptocurrency exchange OKCoin — believes that the settlement can be looked at as a win-win scenario not only for NY OAG and Tether/Bitfinex but also for the cryptocurrency industry as a whole, alluding to the fact that that the 17-page settlement revealed no mention of Bitcoin (BTC) being manipulated via the use of USDT.

Lastly, Sam Bankman-Fried, chief executive officer for cryptocurrency exchange FTX, also believes that the settlement, by and large, has been a good development for the industry, especially from a transparency perspective, adding:

“Like many settlements, this one had a messy outcome, but the high-level takeaway here is that they found no evidence to support the heaviest accusations against Tether — no evidence of market manipulation or unbounded unbacked printing.”

Will scrutiny of stablecoins increase?

Even though stablecoins have been under the regulatory scanner for some time now — since they claimed to be pegged to various fiat assets in a 1-1 ratio — it stands to reason that added pressure from government agencies may be present when it comes to the transparency side of things from here on out.

Another line of thinking may be that governments all over the world will now look to curtail the use of stablecoins, such as USDT, especially as a number of central banks are coming around to the idea of creating their very own fiat-backed digital currencies. As a result, governments may want to push their citizens to use their centralized offerings instead of stablecoins.

Related: Many pieces of the Diem puzzle still missing as launch gets delayed

On the subject, Byun noted: “Stablecoin is just one type of cryptocurrency or ‘convertible virtual currency,’ and therefore, stablecoins and the stablecoin market will continue to attract scrutiny and mandated examinations from regulators.” That said, Byun believes that whether it’s Bitcoin, Ether (ETH) or Tether, crypto investors generally understand that investing in crypto remains a high-risk activity and that they “must practice caveat emptor” at all times.

Does Tether impact institutional adoption?

Another pertinent question worth exploring is whether or not the settlement may have an adverse impact on the institutional investment currently coming into this space. In Lawler’s opinion, the decision is not going to slow down adoption even in the slightest. “Institutions are not principally focused on Tether. There are other stable coins, and Bitfinex is all but irrelevant to them,” he added.

Similarly, it could even happen that the ongoing reporting requirements set by the NYAG for Bitfinex and Tether may end up bolstering institutional confidence in Tether — a sentiment that some of Tether’s most vocal and consistent critics also seem to agree with.

That being said, a lot of speculation around Tether’s fiat reserves continues to linger on; for example, Tether Ltd.’s finances are handled by Bahamas-based Deltec bank. In this regard, one anonymous report claimed that “from January 2020 to September 2020, the amount of all foreign currencies held by all domestic banks in the Bahamas increased by only $600 million,” up to $5.3 billion. Meanwhile, the total volume of issued USDT soared by a whopping $5.4 billion, up to around $10 billion.

As Tether states on its website USDT is covered by fiat and other assets, so such investigations cannot be conclusive. However, what both NYAG and the anonymous authors of the report agree upon is that Tether needs to be more forthcoming about its financial status. With that in mind, Tether’s commitment toward transparency and revealing its reserves to a regulator seems like a step in the right direction.

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Professional traders need a global crypto sea, not hundreds of lakes



Cointelegraph By Haohan Xu

Coinbase’s IPO announcement has been hailed as “a milestone for the crypto industry” by Fortune Magazine. Similar to the Netscape IPO announcement that signaled the legitimacy of the internet, Coinbase’s impending public offering signals to the public at large that cryptocurrency trading is legitimate, legal and secure in the eyes of the Securities and Exchange Commission. And now, investors have an opportunity to own stock on the largest crypto trading platform in the United States.

As a result, many see an investment in Coinbase as an investment in the future of crypto trading. It is the highest volume U.S. crypto exchange, with three times the volume of its next closest U.S. competitor. The largest of anything in the U.S. must be the world leader. Except, it’s not. And conventional wisdom and current market realities are very far apart.

In order to understand the nuances of the crypto trading platform market, one must understand some important facts.

These are important implications that shape current market maturity and the problems institutional crypto traders face today. There is no single exchange that enables traders to access global trading markets, cross-border price discovery, global best prices, global liquidity or decentralized trading markets.

The crypto trading market is still highly fragmented with no dominant player

Together, the top five crypto exchanges represent only 41% of the total global trading volume. Coinbase, the largest exchange in the U.S., generates only 2.1% of global volume. The number one ranked exchange in the U.S. ranks only 19th globally. In the global market, there is no dominant player as we’d expect to see in a more mature market.

According to the data above, the New York Stock Exchange’s share of global equity trading is more than 12 times higher than Coinbase’s, and the top two U.S. equity exchanges account for over 50% of global daily trading volume, while the top two U.S. crypto exchanges represent only 3% of the global trading volume.

Compared to traditional stocks, the crypto market is also highly fragmented. The top two stock exchanges represent 51% of daily trading volume, while the top three crypto exchanges represent only 27% of daily trading volume.

No unified global trading market exists

The crypto trading market is still in its infancy. Based on my conversations with institutional traders and independent professional traders, I’ve learned that institutions are still clamoring for institutional-grade capabilities that are not yet available on a single platform, such as:

  • Global price discovery — e.g., prices from global markets normalized for local currency.
  • Global Best Bid and Offer — global order book, normalized for foreign exchange and fees in local currency.
  • Global liquidity access — access to global liquidity, not just that of one exchange.

Each exchange is its own trading “lake” with no “canal” connecting them. In the U.S., a trader can only trade with 2.1% of global users, with an order book that is completely separate and distinct from other U.S. trading markets — e.g., Coinbase and Kraken.

Global trading volume, liquidity and price discovery are available only to those who are able to manage multiple accounts across multiple exchanges in multiple countries and continents. It’s a tall order that ties up both legal and technical resources.

Clearly, traders would benefit from a single, global order book normalized in a single currency to discover the best global prices along with the liquidity required to execute large block trades. The industry sorely needs crypto’s equivalent of traditional securities’ National Best Bid and Offer.

Centralized exchanges are only part of the trading picture

Binance and Coinbase are centralized exchanges that match buyers’ orders with sellers’ orders, executing trades and settling accounts. Customers’ crypto assets are held in custody by an exchange, and users only trade with other users on the same exchange. Even in aggregate, centralized exchanges don’t capture the entirety of digital asset trading volume.

This is because decentralized exchanges are on the rise, enabling peer-to-peer trades (or swaps), in which assets are exchanged directly between traders, typically without Know Your Customer. At one point during 2020, Uniswap’s trading volume exceeded that of Coinbase’s. It’s possible that DEXs will gain an even footing with CEXs, so one cannot gain a full picture of the crypto trading market without taking DEXs into account.

The CEXs that figure out how to incorporate DEX price discovery and liquidity into their trading will have an important advantage.

Decentralized exchanges are growing but lack infrastructure to scale

Decentralized exchanges generate approximately 15% of the total crypto trading volume (based on CoinMarketCap data on Feb. 16, 2021). DEX trading has been growing fast, with Uniswap’s trading volume surpassing Coinbase’s in 2020 — a feat achieved with only 20 employees. Today, Venus is trending alongside Binance, which leads the market in 24-hour trading volume at the time of writing.

Professional traders may value DEXs for the security of wallet-to-wallet, or peer-to-peer, trades. However, there are two issues. First, without counterparty KYC, institutional traders cannot trade on DEXs. Second, the public chain technology supporting DEXs is slower and more expensive than exchange trading.

Institutional investors will need DEXs that are faster, with lower fees and robust KYC procedures. A DEX must be built on a faster, less expensive blockchain in order to attract institutional traders.

There are no true centralized exchanges — only brokers

Confusing matters even more, today’s crypto exchanges are more like regional brokers than true, global exchanges. For example, compare and contrast trading Apple (AAPL) on E-Trade versus trading Bitcoin (BTC) on Coinbase.

A professional trader in the U.S. seeking to trade BTC accesses only a small portion of the global market via Coinbase. Price discovery and liquidity are only by Coinbase’s BTC/USD order book. Over 97% of the world’s world’s supply, demand, price discovery and liquidity are only accessible via hundreds of other exchanges.

To sum up, selling Apple on E-Trade compared to selling Bitcoin on Coinbase:

  • E-Trade places orders on Nasdaq, which captures nearly 100% of AAPL spot trades.
  • Coinbase places orders on its own order book, which captures 2.1% of all global trades.

There is no truly global crypto trading market but rather hundreds of smaller, local markets. Imagine AAPL selling on 300+ different exchanges, each with its own buyers and sellers. This is the current state of the global crypto market.

The problems with this are twofold. First, trading on a CEX strips away many of the benefits of decentralized assets. Second, crypto trading is segregated into hundreds of discrete trading “lakes” — each with its own local fiat/crypto supply and demand.

Decentralization ensures no single entity can fully control a cryptocurrency. Users cede significant control when depositing in centralized exchanges that manage token listing privileges, custodianship, order matching and execution, and brokerage services.

This centralized power presents security and compliance hazards, which has led to market criticisms. In fact, Asia–Pacific traders have launched several coin withdrawal campaigns to show their resistance to CEX trading. The younger generation is averse to centralized power and daring to challenge it, as evidenced by the recent retail shorting war in the United States.

Centralized exchanges are also limited in their access to the global market and are severely limited. Why? Exchanges, such as Coinbase and Gemini, accept users from limited regions (the U.S. only) with limited fiat currency trading pairs (the United States dollar only) unlike E-Trade, which opens the doors for its traders to a multitude of exchanges, equities, exchange-traded funds and more. In contrast, CEXs close the doors to all others, severely limiting price discovery and liquidity, which leads to higher spreads, lower fill rates, higher slippage and, generally, inefficient markets. The concept of Best Bid and Offer does not yet exist in the crypto world, as the BBO on Coinbase is not the same as Gemini’s, Binance’s or Huobi’s.

Professional traders are underserved

From the perspective of professional traders, the market maturity and global trading capabilities required are not yet available. Cryptocurrency trading market segmentation is in its infancy, and the needs of professional traders are far from being met because: (1) they cannot efficiently access a global market; (2) they cannot access the best prices in a global market, and they cannot access institutional-grade liquidity.

Furthermore, DEX trading is not yet viable for institutional traders due to the lack of KYC during onboarding. Yet, the average Uniswap trader is far more active. Uniswap users are completely on-chain, open and transparent, and its 300,000 users trade more than Coinbase’s, which claims to have 35 million users. Therefore, an entire market of whales is trading outside of centralized exchanges, completely overturning the market misperception that Uniswap and DEX users are mainly retail investors.

No trading market exists that provides true global coverage, and retail and institutional traders cannot access a truly global market. And no trading market exists that provides institutional-grade DEX trading.

Asset digitization will drive growth

Industry consensus is that the continued digitization of assets is inevitable. Bitcoin and Ether (ETH) are blockchain-native tokens that constitute the main trading volume of the current cryptocurrency trading market. Yet the cryptocurrency market cap is less than half of Apple’s.

The stock market is almost negligible compared to the untapped digitized asset market. While the opportunity is large, it is also too early to predict the outcome.

Many exchanges expose traders to compliance risks

Some of the world’s leading exchanges allow trading in a large number of controversial tokens. Many exchanges’ Anti-Money Laundering regulations are not robust enough. Despite claiming to have licenses in some countries, it is hard to imagine the legitimate compliance of offering derivatives trading to users all over the world by using an exchange license in a single country. These compliance risks pose a serious challenge to the stability of the position of some exchanges, and not long ago, the market landscape for derivatives changed rapidly after BitMEX was indicted, resulting in a loss of users and a decline in trading volume.

Innovation in institutional-grade exchange technologies is not yet widely available. Volume rankings tell today’s story. Tomorrow’s story will be told by the trading markets that provide a true, global Best Bid and Offer price discovery, institutional access to DEX pricing and liquidity, and the ability to execute global trading strategies on a single platform.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Haohan Xu is CEO of Apifiny, a global liquidity and financial value transfer network. Prior to Apifiny, Haohan was an active investor in equities markets and a trader in digital asset markets. Haohan holds a Bachelor of Science in operations research with a minor in computer science from Columbia University.