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DeFi may be a bubble, but it’s making us stronger

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Programmers have found a way to replace the core service offerings of Wall Street and an army of corporate lawyers with 800 lines of smart contract code.

The “De” in DeFi stands for “decentralized,” meaning there are no intermediaries in the process. Despite the raw and unpolished user interface, billions of dollars in assets flow through new decentralized apps every day.

We’re only at the beginning of the growing DeFi bubble, and there are already tokens worth more than Bitcoin (BTC). Some of these tokens are nothing more than a name, code and smart marketing. There are shrimp, burger, spaghetti and sushi tokens that have reached sky-high values, and many of these meme tokens even have “sequels.” It is madness in excess of the ICO bubble of 2017.

Can it all be bad or can we use this technology for good?

Anything that can be tokenized can end up on a DeFi application. The pace of development is intense. Every day, new brilliant projects emerge — DeFi could end up being bigger than the internet one day. Anything is possible now.

Peer-to-peer finance has also been operating silently in the background. It offers financial services to people based on real use cases like payments, remittance, wealth preservation and commerce. The people of emerging markets such as Africa and India, for example, seem to benefit most. All DeFi trades are peer-to-peer in nature, as they happen on a blockchain.

Imagine a pure DeFi version where we can bridge fiat money like dollars and all the world’s currencies. Why does the world need this? Remember the frictionless onboarding part? It is actually a huge value add-on because over 40% of the emerging world that we serve cannot provide proper Know Your Customer services, as localized KYC solutions are not well integrated or developed. Furthermore, many people have no ID at all, which is another opportunity to provide financial inclusion to more people.

There are 1.7 billion people who don’t have access to traditional financial services. If Bitcoin is layer one, then DeFi is layer two, and the “people” layer provided by P2P networks is the third layer. This decentralized, people-powered marketplace for money transfers just needs the frictionless onboarding that decentralization brings.

Another huge benefit is the potential for decentralized price discovery. Current decentralized exchanges cannot do this, as they use a price “oracle” from centralized exchanges. However, decentralized people-powered marketplaces could offer a price based on P2P crypto to fiat trades. This can give us the true street price of Bitcoin to the dollar, which is something that would be of enormous value to people in hyperinflationary economies such as Zimbabwe or Venezuela, as people there often have to check many different sources.

Additional price discovery models can be built on top of auction model exchange rules. There is a hidden world-changing product to be found here; price discovery of this nature would become the new standard and potentially tip the scales of geopolitical power.

Remember that we’re in a bubble, but when it bursts, the next Bitcoin bull run will begin, so prepare yourself. As the world plunges into chaos, just remember that “it’s good to be into crypto,” as crypto is the hedge against the world of finance falling apart. Bitcoin and Ether are rock solid because they now serve as real use cases.

DeFi tokens are literally playing with fire, and you might get burned. Those who win this game buy, hold and check the price constantly. Bitcoin will always be the backbone of the crypto economy, and it will grow. And DeFi will finish the job that Bitcoin started.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, 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.

Ray Youssef is the co-founder and CEO of Paxful. Aside from making Bitcoin accessible, Ray also launched the #BuiltWithBitcoin charitable initiative that aims to show the humanitarian capabilities of Bitcoin. He’s a New York City native and has been a serial entrepreneur since 2001.



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With job listing, Canada’s central bank takes additional steps towards a CBDC

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The Bank of Canada is looking to hire an economist who has a deep knowledge of financial technology and digital currencies, potentially signaling the latest in a series of steps towards a Canadian Central Bank Digital Currency (CBDC). 

According to the bank’s official page, the economist’s duties will be to monitor and analyze the latest developments related to electronic funds and payments, implement research projects, prepare analytical notes, and work on the “potential development of a CBDC.”

The Bank has defined a set of requirements that the applicant must meet, among which are an in-depth knowledge of Bitcoin, Ethereum, and other major cryptocurrency platforms, as well as familiarity with traditional payments systems like card networks, merchant acquirers, and point of sale technologies. 

The applicant must also have experience in handling and analyzing public blockchain data and analyzing consumer survey data.

Oct. 25th, 2020 is the deadline for receiving applications.

The Deputy Governor of the Central Bank of Canada, Timothy Lane, has recently called on central banks worldwide to issue their own digital currencies, highlighting their importance for the economy in light of the Covid-19 pandemic. At the Central Bank Payments Conference Lane also said that Canada’s CBDC development was progressing at “a good pace.”

In laying the foundation for a CBDC, the Bank joins the Bank of England, the U.S. Federal Reserve and the Bank of Japan, among others, who have also begun conducting research into the viability of CBDCs. 



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Amid IRS bounty and competitor progress, Monero developers ship a major update

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First announced in September, Monero developers today went live with a network update featuring a new version of its node software, codenamed ‘Oxygen Orion.’ The product of 30 contributors, the update promises significant improvement across nearly all aspects of the privacy-focused cryptocurrency’s performance. 

The highlight of the new update is the compact linkable spontaneous anonymous group (CLSAG) feature. According to the Monero blog, CLSAG will reduce transaction sizes by 25% and improve transaction times by 10% while maintaining transactional privacy.

The developers wrote: 

“CLSAG enables smaller and faster transactions with rigorous security.” 

In addition to CLSAG, the new update brings security improvements to the network especially with regard to Dandelion ++, which is responsible for hiding user IP addresses.

Technically speaking, Monero updates are hard forks so it is imperative that network participants make sure that their software is up to date. Users who store their XMR in a hardware wallet will need to stay updated with the latest firmware, the blog noted. 

This latest update comes amidst an uncertain outlook for the cryptocurrency due to pressures on multiple fronts. 

In September the U.S Internal Revenue Service (IRS) offer a bounty of up to $ 625,000 to anyone who can crack Monero’s privacy. Additionally, the Department of Homeland Security claimed to have acquired software that can track Monero transactions, though some researchers question the veracity of those claims. 

Meanwhile, rival privacy cryptocurrency Zcash is heading into a halving event sometime this November, which some analysts believe will lead to bullish price action for the competing asset. 

In spite of these headwinds, positive social media sentiment for XMR is up roughly 4% in the past week, according to analytics provided by TheTIE. 



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Germany’s blockchain solution hopes to remedy energy sector limitations

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Distributed energy resources, or DERs, have the potential to disrupt traditional electricity markets. Therefore, it shouldn’t come as a surprise that innovative countries are looking toward emerging technologies that will allow DERs to transform entire energy economies.

Germany in particular is interested in using DERs to drive its digital energy economy while also complying with the European Green Deal. As such, the Deutsche Energie-Agentur, also known as DENA — the main governmental group responsible for energy innovation in Germany — announced plans to trial a blockchain-based solution to construct a digital registry for DERs.

Sara Mamel, senior export in digitalization at DENA, told Cointelegprah that DENA unveiled a pilot project six weeks ago called the “Blockchain Machine Identity Ledger,” or BMIL. According to Mamel, BMIL is being implemented together with Energy Web, a blockchain-focused nonprofit, along with 20 other partners in the energy and blockchain sectors:

“This is a highly ambitious project with the goal of testing an infrastructure layer for the german digital energy system of the future. We want this project to have the biggest impact possible for the energy sector as a whole, which is why we have a highly innovative set-up.”

Blockchain for DER automation

Jesse Morris, the chief customer officer for Energy Web, told Cointelegraph that BMIL will construct a digital registry for DERs in Germany. Examples of DERs include rooftop solar photovoltaic power stations, battery energy storage like the Tesla Powerwall, smart thermostats and electric car charging stations. Morris added:

“For power grids around the world, this represents a massive shift in investment and infrastructure. From a centralized system with a relatively small number of very large power plants to a decentralized system with hundreds of millions of small assets working as part of a larger whole.”

According to Morris, a blockchain-based digital registry for DERs leverages decentralized identifiers that enable assets to self-register in the directory. This allows third parties like DER installers to easily verify claims about certain DERs. This solution should also help grid operators bring DERs into various market applications to provide grid services, which would serve as the basis for streamlined settlements after energy services are delivered.

This is extremely important, especially for a country like Germany, which ranks as the fourth-largest economy worldwide. It’s also interesting to point out that a European Parliament document on DERs suggests that by 2024, global deployment of DERs will have overcome the deployment of centralized energy generation. The document further states that in Germany, renewables produced from DERs hold a significant market share, paving the way for more decentralized energy production.

Pushing blockchain interoperability to its limits

If successfully executed, Morris explained that BMIL could serve as the basis for a wide range of DERs supporting both Germany’s wholesale and retail electricity markets: “This will make it easy, efficient and low cost for any DER in Germany to participate in the energy market. Grid operators and utility providers will also gain access to an untapped decarbonized Germany energy system.”

However, technical challenges remain. Mamel from DENA noted that BMIL is a project built around the premise of interoperability — one of blockchain’s greatest challenges to date. While DENA is technology agnostic, Mamel explained that DENA aims to test a solution that will be applicable to the German energy sector, which already consists of a decentralized framework with many industry players using different standards.

As such, DENA decided to take an interoperability approach to drive Germany’s energy economy, testing two blockchain development environments in BMIL. Both Ethereum and Substrate, the blockchain-building framework for Polkadot, will be applied, along with different concepts regarding decentralized identity protocols. “The results of this experiment remain to be seen, but we are highly confident that we might be setting a new standard for the energy industry as a whole,” said Mamel.

If interoperability challenges are met, the BMIL project could benefit the entire blockchain sector. For instance, Jonathan Waldenfels, a blockchain engineer at Energy Web, told Cointelegraph that one problem in the blockchain space is that there are many use cases running on various different chains. According to Waldenfels, BMIL tries to reflect just this in the pilot project:

“Energy Web looks to innovate in the blockchain space and wants to see how our tech stack, EW-DOS, can integrate with new technologies. For EW, this pilot is a great opportunity to explore how EW-DOS can be utilized across base use cases running on different chains on a shared identity registry. Secondly, it shows how EW-DOS can integrate into new blockchain technologies like Substrate and Polkadot.”

Waldenfels expects this use case to be a likely business architecture moving forward and hopes the energy sector can help the entire crypto industry see what’s possible by combining multiple chains and ecosystems under one umbrella with this project.

What about regulations?

Technical challenges aside, regulatory standards could also prove to be an issue for such solutions. Mamel explained that the German energy sector is among the most complicated and regulated ones in the world. As such, BMIL claims to be fully compliant with all regulations in the German energy sector. “It was of great importance for DENA to work hand in hand with existing regulatory guidelines, trying to enhance and boost existing regulation to the next level by providing interesting use cases to build a bridge between theory and practice,” said Mamel.

However, Mamel noted that important questions remain, such as how to ensure that the BMIL blockchain solution is compatible with the General Data Protection Regulation, along with understanding the regulatory challenges that might come up when DENA attempts a “full roll out” of the Blockchain Machine Identity Ledger in the German energy system.

Although concerns remain, using a blockchain solution for DERs is highly promising. Paul Brody, global innovation lead for blockchain at big four firm Ernst & Young, told Cointelegraph that this is an area of significant opportunity for blockchain technology because the nature of the power grid is changing in a way that elegantly matches the nature of blockchain software: It is becoming decentralized. Brody further noted that every industrial revolution has been closely linked with major developments in information technology:

“If we are going to have an industrial revolution that decentralizes power production and manufacturing with solar panels, batteries, and 3D printers, then it will probably be accompanied by an information technology revolution that is also decentralized.”



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