Cointelegraph By Tegan Kline
Decentralized finance has exploded over the past 12 months. The swapping, staking and yield farming successes have been well touted. The DeFi market cap has reached $45 billion, and there’s over $28 billion total value locked in DeFi today. That’s up from $600 million in January 2020 — a 4,300% increase.
As with all nascent technology, new money flowing into a sector attracts talent, innovation and the best entrepreneurs. Whether we like it or not, the record-high token prices will also attract the attention of mainstream media and Wall Street. This cocktail of factors, coupled with the glitz and glam of DeFi, is the result of the true, silent hero that is enabling this tsunami of capital to flow around. Without this, DeFi would not be possible — I am of course talking about the infrastructure that underpins the decentralized internet, or Web 3.0.
At the time of writing, loans outstanding in DeFi are up 22x from $150 million last year to almost $4.5 billion today. Monthly decentralized exchange volume is up to $30 billion. And there are now over 230 decentralized applications, with innovative new projects announced on a daily basis. The largest projects in the DeFi space all boast impressive stats: The MakerDAO project has issued over $1.5 billion in Dai; Compound currently has $5.8 billion of assets earning interest across nine markets; and Uniswap has processed a lifetime volume of $51.7 billion.
Related: Was 2020 a ‘DeFi year,’ and what is expected from the sector in 2021? Experts answer
The numbers are impressive and ever-increasing. DeFi is on the brink of breaking into the mainstream as we see more institutional investors getting involved in the space. This will only continue to happen as we see more and more centralized finance flip onto blockchains.
For example, Uniswap and Curve are quickly rivaling the volume on top exchanges. These automated market makers are empowering individuals by allowing them to trade without the overhead of centralized exchanges and by allowing them to participate in liquidity pools. Users can now become market makers, cutting out intermediaries and giving centralized exchanges a run for their money. DeFi is eating their lunch, a prime example of what crypto was designed to do, cut out the intermediary, and the conditions are ripe for innovation.
Decentralized infrastructure and DeFi
DeFi would not have been possible with the internet as we knew it. Zooming in on the legacy internet, we see Web 2.0’s centralization, surveillance and intrusion giving power to a small minority. We are seeing this play out in fintech, with trading apps coming under scrutiny over the GameStop trading story. The adoption of DeFi signals a shift away from traditional institutions as large communities flock to build on something different: the decentralized infrastructure of Web 3.0.
Related: GameStop saga reveals legacy finance is rigged, and DeFi is the answer
We are witnessing not only the formation of a new financial center but also the formation of a new economy, new careers and new enterprises. This being said, there is still a long way to go. We have yet to see the Bloomberg or Robinhood of crypto emerge. I am excited to see more and more Web 2.0 developers flow into Web 3.0 from companies where they previously worked on centralized systems, selling data or pushing ads to their users. The infrastructure of Web 3.0 brought to you by Ethereum, IPFS and others gives developers an opportunity to build on decentralized infrastructure that they know will always be there, focusing on the user experience and user interface of their applications.
Web 3.0 is the future
I believe that blockchains are an integral part of the future of the internet. It is the foundation upon which these new ideas will be built. We have only scraped the surface with what is possible. Business models that can exist only on blockchains will emerge, giving opportunities to people who may have never had a chance of making a good living otherwise. In this decentralized, blockchain-backed future, there will be no single point of failure.
Ethereum has clearly been a leading DeFi enabler that is at the forefront of the Web 3.0 evolution. An Electric Capital report claims “Ethereum has 4x more developers than any other crypto ecosystem,” and roughly half of all functioning decentralized applications on the market are based on the Ethereum network. I believe Ethereum will remain the largest ecosystem through scaling solutions as well as other layer twos. Composability will continue to live on Ethereum, making it difficult for others to compete, and ERC-20 tokens will likely remain the standard within the ecosystem.
Related: Second layers will save the day in 2021, bolstering Ethereum and DeFi
This being said, we will live in a multi-blockchain future. There will not be one chain to rule them all; blockchain interoperability will be key to supporting the next web. This multi-blockchain future will inspire the next generation of apps. There will be more wrapped assets, nonfungible tokens, gaming and privacy apps that are not tied to a single chain.
Related: It’s time to put the dukes down and work together for blockchain’s future
The surge in DeFi has proven that blockchains are a great tool for price discovery. That is where cross-blockchain compatibility is important. Without the layers that link blockchains, true price discovery would not be possible, and there would be an insurmountable arbitrage issue.
Related: The future of crypto trading will be omni-chain
The underlying infrastructure that was implemented in 2020 is critical for blockchain interoperability. Moving applications toward verifiable decentralized data and away from proprietary APIs as the primary vector for interoperability reduces the platform risk for apps looking to integrate with one another.
The decentralized web is flipping the idea of a Fortune 500 firm on its head. Protocols will allow people to work for ideas, not only companies. The foundational layers are being built for a new web and how humans interact online. This new web will reward creativity and inspire entrepreneurs. Decentralization gives everyone the opportunity to make a difference in the world. We will see an era of innovation as we have never seen before, and it is all down to a white paper published in 2008 by an anonymous author.
We have not fully grasped how much room for growth there is with Web 3.0. Web 2.0 developers now have decentralized infrastructure to build on and create new business models — models that put the user first, respect privacy, and promote entrepreneurship.
DeFi is just the start, and the DeFi snowball is going to turn into a Web 3.0 avalanche.
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.
Tegan Kline is the business lead for The Graph, an indexing and query protocol organizing the world’s open blockchain data and making open data a public good. Tegan is the former international business development manager and OXT relations lead for Orchid, an A16z and Sequoia-backed blockchain. Tegan started her career in traditional finance before discovering blockchain.
French utility giant pursues carbon neutrality as Hedera node operator
Cointelegraph By Greg Thomson
French utility giant Électricité de France has joined the Hedera Governing Council as a node operator. EDF, which is among the top five global utility firms, represents the first from its industry to join the council and will use the technology as part of its aim to achieve carbon neutrality by 2050.
The Hedera network is a public, enterprise-grade blockchain that is owned and governed by private entities. EDF joins the likes of IBM, Google, Boeing as node operators, with each having an equal vote in the future direction of the software. Each member can serve for a maximum three-year term, with the possibility of serving for two consecutive terms. The creator and proprietor of Hedera’s Hashgraph algorithm, Swirlds, retains a permanent seat on the council.
EDF’s wholly-owned subsidiary, Exaion, which already runs a Tezos (XTZ) node in France, will leverage the Hedera network as part of its blockchain-as-a-service offerings. Hedera’s proof-of-stake network is expected to form the energy-efficient basis of EDF’s exploration into becoming carbon neutral.
Gilles Deleuze, principal researcher in systems risk assessment at EDF R&D, said distributed ledger technology would spur the development of greenhouse gas certificates, decentralized electricity systems, and more:
“In the near future, distributed computing will support increasingly decentralized electrical systems, complex supply chains and exchanges of digital assets, energy certificates, GHG credits, and more. Multiple pieces of the distributed ledger technology ecosystem will form the puzzle pieces that make this vision a reality.”
Deleuze said EDF would leverage tokenization on Hedera (the Hedera Token Service) to create a “carbon offset and credit system” in line with the company’s goal of cutting CO2 emissions.
“We believe in partnering with industry leaders like Hedera Hashgraph to explore innovative technologies and organizational modes, build value-creating ecosystems, develop use cases for the energy domain and EDF’s operations, and develop Exaion’s potential to deliver blockchain/DLT and high-performance computing services,” Deleuze said.
Lionel Chocron, chief product officer at Hedera Hashgraph, said that the maturation of distributed ledger technologies was pushing companies to explore decentralized solutions, stating:
“Today’s most forward-thinking organizations recognize that the maturation of distributed computing requires the use of multiple technologies and efforts to deliver on the services their customers want.”
The proprietary nature of Hedera lays the foundation for its “no hardfork guarantee,” promising long-term stability for businesses and enterprises which use its technology. In January, Australian payment giant Eftpos became a Hedera node operator. More recently, Hedera made inroads to Africa after the continent’s largest bank joined the governing council.
Banksy art burned and tokenized
Cointelegraph By Greg Thomson
An original artwork by anonymous British street artist Banksy has been burned and turned into a nonfungible token. The NFT will be auctioned next week on the blockchain-based Rarible platform, where users can create and purchase rare tokenized artworks.
The original Banksy in question is a satirical piece entitled “Morons,” which depicts buyers at an art auction bidding on a piece emblazoned with the words “I can’t believe you morons actually buy this shit.” The piece received certification from Pest Control — the only body authorized to authenticate original Banksy artworks.
“Morons” was sold at Christie’s auction house in London in late 2019, where it fetched $32,500 from an anonymous, independent buyer.
The burning of the piece took place at an unknown location in Brooklyn, New York, and was livestreamed via the recently created Twitter account BurntBanksy. The burning was reportedly carried out by a group of cryptocurrency enthusiasts in association with executives from the blockchain project Injective Labs.
The tokenization of the authenticated piece took place without input from the pseudonymous Banksy. However, other prominent artists have seen fit to dip their toes into the crypto world of late, as witnessed recently when famed British artist Damien Hirst announced he would accept bids for his work in Bitcoin (BTC) and Ether (ETH).
The NFT market became an industry unto itself toward the end of 2020, as almost $9 million in token sales was recorded in December 2020 alone. But that was just a sign of things to come, as NFT sales exploded moving into 2021, helped by the validation of several high-profile celebrities such as YouTuber Logan Paul and entrepreneur Mark Cuban.
On Sunday, acclaimed Canadian musician and artist Grimes launched an NFT collection titled “WarNymph”, which went on to sell for a collective $5.8 million. The NBA recently embarked on a joint venture with CryptoKitties creator Dapper Labs to launch NBA Top Shot — an NBA-themed digital token marketplace that has reportedly generated $230 million in sales since launch.
The “Morons” piece is not the first Banksy to be destroyed on purpose. In 2018, Banksy’s “Girl With Balloon” automatically self-destructed shortly after selling for $1.4 million at Sotheby’s. The artist later revealed that he had installed an automatic shredder in the painting’s frame in case it ever went to auction. In an ironic twist of fate, the destroyed Banksy is now thought to be more valuable than the original piece ever was.
The “Morons” NFT will be auctioned on Rarible on Tuesday next week. All proceeds from the auction will be donated to charity. The successful bidder will be entitled to receive the certificate of authentication from Pest Control; however, this too will be burned if it is not claimed within two weeks of the sale.
In an art industry fraught with fakes and forgeries, “Morons” may now be the most authentic, most secure Banksy piece in the world. Once logged on the blockchain, the possibility of it being forged, altered or manipulated in any way is close to zero.
Given Banksy’s rejection of the bloated, materialistic art world, what would he think of the current mania surrounding NFTs? Keep an eye on your local graffiti spots. The answer may be forthcoming.
How crypto fraud and security breaches are investigated
Cointelegraph By Connor Sephton
It’s every exchange’s worst nightmare: Falling victim to a security breach. An incident can disrupt a trading platform’s operations for weeks, affect customer confidence and damage a carefully cultivated reputation — even causing crypto markets to fall in some cases.
Crypto companies have been ramping up their security measures in recent years, determined to ensure that malicious actors don’t get an opportunity to infiltrate their systems. This has prompted hackers, scammers and fraudsters to rely on more sophisticated techniques.
One crucial weapon has emerged that helps trading platforms take speedy action in the event that their infrastructure is compromised: Analytics software. But how do these companies go about their investigations whenever a breach is reported? What are the tools that can be relied upon to follow a thief’s tracks?
This is a step-by-step guide to investigating crypto fraud, security breaches and ransomware.
Hunting the hackers
Irrespective of whether cryptocurrencies are stolen through fraudulent activities or scams — with ransomware becoming an increasingly popular method for swindling victims — investigation techniques often follow a similar pattern.
The first step is to identify a criminal’s crypto address as soon as possible. This information can then be passed on to analytics software companies, which can immediately tag the address as high risk. Doing this quickly can ensure that the entity is easier to track. There can be times when there’s little information about an address hash, but this doesn’t mean that there’s a dead end. That’s because transaction and date filtering can be used instead.
Next, it’s a race against time to start tracking bad actors who may begin to obfuscate the funds that they have misappropriated. They may start sending transactions to other exchanges or use mixing services and darknet entities. Although this commonly happens immediately after crypto has been taken, it can sometimes take months or years for obfuscation to commence — when a criminal may think no one is looking. Analytics providers can offer transaction alerts to ensure that victims can be immediately notified when funds flow to or from an address.
These transaction alerts need to be acted upon as a matter of urgency, as work begins to follow the trail. A crucial step involves notifying exchanges that might end up receiving some of this crypto to ensure they are able to block stolen funds that flow into their accounts. Visualization tools can play a role in illustrating how misappropriated assets are distributed — and show the addresses that may be directly or indirectly connected to the criminal.
An investigation in action
Crystal Blockchain has shared an example of how investigations work in practice. The analytics software provider recently played an instrumental role in examining the aftermath of a hot wallet security breach that affected Eterbase in September 2020, which Cointelegraph reported on at the time.
Immediately after the theft took place, Eterbase sprang to action by publicly announcing the address that was used by the Bitcoin thief. This enabled Crystal to immediately tag this wallet as a high-risk entity.
Quickly, it became possible to piece together information about this address — including statistics on further transactions and connections. It soon emerged that this suspicious wallet had connections to 16 other addresses.
Through Crystal’s All Connections tool, it was revealed that this address had indeed received funds from Eterbase, as well as other exchanges, which had been sent on to a plethora of unnamed entities.
The company said it was able to look further than a one-hop distance — and include indirect connections in its results. From here, it was established that 80% of the total funds that were stolen had been sent to a mixing service.
Eterbase went live once again on Jan. 15 — with its team asking exchange users to stop using old crypto deposit addresses that belonged to their accounts. In an update at the end of January, the company said that an official investigation is still ongoing — and it stressed that affected users who are eligible for a refund will receive one as soon as possible.
Crystal Blockchain says crypto crime is growing in parallel with the crypto markets. The company recently released a map of security breaches and fraud within the digital assets sector over the past 10 years.
The interactive timeline tracks the number of incidents in every year since 2011, and also provides a total figure for the funds that were stolen. Its data suggests that $1.48 billion was taken across 28 incidents in 2020.
Users who visit this article can also use a spinning globe to find out the total volume of funds that have been stolen in countries around the world — with the hardest-hit nations colored in the darkest shade of red.
According to Crystal, the most common locations for exchange breaches include the U.S., the U.K., South Korea, Japan and China. The largest-ever crypto security breach remains the incident involving the Japanese exchange Coincheck in 2018, overtaking the Mt. Gox incident back in 2014.
Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.
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