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DeFi Pulse unveils safety ratings to allow users to compare risk

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Decentralized finance (DeFi) analytics platform DeFi Pulse has launched new safety ratings in alpha to enable users to compare the risks of on-chain protocols. However, the ratings system is still in development and does not factor in all risks, such as smart contract risks. 

In partnership with digital asset modeling platform Gauntlet, the grading tool looks at key factors including user behaviour, collateral volatility, relative collateral liquidity, protocol parameters, and smart contract risk. Each project is then given a risk profile ranking them between 1-100.

DeFi Pulse and Gauntlet’s new project ranking scores. Source: Gauntlet

Decentralized lending protocols Aave and Compound are the first projects to be reviewed in the new Economic Safety Grade scheme, receiving scores of 95% and 91% respectively. MakerDAO is the next protocol scheduled to receive assessment.

DeFi Pulse stated, “In this initial alpha, these grades are formed by analyzing the historical liquidity and volatility data to find the collateral most likely to cause issues.” The team added that findings must be normalized before a rank can be given:

“The risk of the system for users borrowing stablecoins against this collateral is estimated and normalized to create the 1 to 100 grade you see on DeFi Pulse.”

The assessment tool does not aim to model smart contract risks, Gauntlet noted, asserting that “auditors and formal verification tools are best suited for assessing this form of risk.” 

Gauntlet highlighted that its safety assessment metric is still in the early stages, emphasizing that there are many potential risks associated with lending protocols not currently incorporated within its scoring system:

“An astute observer might have noticed we omit the case where the protocol is illiquid. We hope to model this as well as a few other things as we build towards a beta release.”

For now, Gauntlet’s system seeks to “determine the chance of insolvency in audited on-chain lending protocols.”

Earlier this year, severe price volatility resulted in DeFi platform Maker suffering from a mass liquidation event where $8.32 million disappeared in one day that was later called “Black Thursday”. Gauntlet hopes its tool can help prevent future Black Thursday-like crises within the crypto sector.

The growing popularity of DeFi has seen a corresponding increase in risk. It has given rise to an increasing number of fake tokens and scams. Last week, liquidity mining pool DeFi project Yfdexf.Finance completed an exit scam, taking $20 million in locked funds with it. Earlier this month, Uniswap’s rival SushiSwap caused a stir after the protocol founder Chef Nomi’s sudden departure. The new safety ratings tool won’t necessarily address all of these issues, but it’s a welcome start.





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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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