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Category: Features

To really be an experienced trader, research is crucial. However, information and resources on cryptocurrency can be as decentralized as the coin or token itself.

Therefore, we have prepared in-depth guides based on specific cryptocurrencies and tokens, from information about its technologies, to its utilities and innovations. We provide a one stop location for all your burning questions such as “What is this coin used for?” and “What makes this token so special?” Having gone through numerous project whitepapers and websites, we find that many use a lot of technical jargon and hence make it difficult to understand for the average user. Therefore, we strive to make our guides simplified for everyday readers who do not have the technical knowledge that the projects do, so that they can use Boxmining.com as a trusted resource for cryptocurrency users to make informed and well-researched decisions.

  • Ethereum 2.0 – Here’s what you NEED to know

    Ethereum 2.0 – Here’s what you NEED to know

    Ethereum 2.0 (Formerly known as ETH2) is a series of upgrades to the Ethereum Blockchain which will improve its speed, efficiency, and scalability. This will allow Ethereum to handle significantly more transactions, improve smart contract stability and reduce network fees. Upon reaching the final phase of the upgrade, Ethereum will meet its goals of becoming a transparent and open network for Decentralized Finance (DeFi). This article breaks down the roadmap for this upgrade and key milestones of when they are released. The next big update coming in the second half of 2023 is the “Shanghai upgrade” which will have a significant economic impact.

    What is Ethereum 2.0?

    Ethereum 2.0 will involve sharding to drastically increase network bandwidth and reduce gas costs, making it cheaper to send cryptocurrencies and interact with smart contracts. There will be fundamental economic changes too, Ethereum 2.0 will allow support to stake nodes and to earn Ethereum as passive income. The Ethereum 2.0 upgrade will be done in 3 distinct phases starting with Phase 0 (after all, developers count from 0 instead of 1). Over the past few years, opponents of Ethereum have often criticized the network’s high transaction costs and fragility during peak usage. This guide will cover the timeline for the upgrade to ETH2.0 and the solutions proposed.

    Ethereum 2.0 Key features and what you need to know video

    Key Features of Ethereum 2.0

    • Efficiency – Ethereum will become 99.95% more energy efficient. It is estimated that after the upgrade, the network will no longer require an entire country’s worth of power.
    • Sharding – Ethereum will be broken into 18 “Shards” that operate simultaneously. This will drastically improve efficiency.
    • Staking – Ethereum will move to Proof-of-Stake Consensus, so everyone can stake and help secure the network.
    • Security – Compromising the network will become much more expensive under Proof-of-Stake. 51% of attackers will also be easily identifiable with validator addresses and can be forked away from the network.

    The 3 Phases of Ethereum 2.0

    Ethereum 2.0 will be launched in 3 phases:

    • Phase 0- Beacon Chain – Completed in 2020
    • Phase 1- The Merge – Completed September 2022
    • Phase 2- Sharding

    Phase 0: Beacon Chain

    Launched on 1st December 2020, the Beacon Chain introduced Proof-of-Stake to the Ethereum ecosystem. The purpose of the Beacon Chain is to coordinate the Ethereum network and serve as the consensus layer. This Beacon chain is necessary to generate the randomness that actual proof of stake uses. It also acts as a crucial precursor to upcoming phases such as sharding.

    Learn more with our Ethereum mining guide and learn how to stake Ethereum 2.0 on Allnodes.

    Phase 1: The Merge

    The Ethereum Merge was completed on the 15th of September 2022. This merged the Beacon chain from phase 0 into the original proof-of-work mainnet (i.e. the “execution layer”, formerly known as “Eth1”). After the Merge is completed, ETH1 and ETH2 become the same network that uses the same ETH coin. Why the merge is so important and such a difficult task because it involved switching consensus mechanisms. An analogy for this would be switching the engine of a car from a gas to an electric-powered engine – whilst the car is still moving.

    The Merge made the Ethereum network substantially more energy efficient as it no longer required cryptocurrency miners that consumed a huge amount of electrical power. It is calculated that there is an incredible 99.988% reduction in the energy necessary to run the network, meaning that current Ethereum Staking Nodes are incredibly energy efficient. It will also set the stage for future upgrades to the scalability of Ethereum such as sharding.

    Phase 2: Sharding

    By then, the Beacon Chain has already been launched and merged with the Ethereum Mainnet. The next stage will introduce sharding to the Ethereum Network.

    Sharding on Ethereum means the database would be split horizontally to spread the load. Sharding will work together with layer 2 rollups. This divides the burden of handling large amounts of data needed by rollups over the entire Ethereum network.

    Ethereum Sharding is realistically expected to be released in 2024.

    Main features of sharding:

    • Everyone can run a node: Validators will no longer need to store all the data themselves. This drastically reduces the cost of storing data on layer 1 by reducing the hardware requirements.
    • More network participation and security: With sharding, you will be able to run Ethereum on a laptop or phone. This means more participation, greater decentralization, and more security.

    What are layer 2 rollups?

    Layer 2 rollups are an existing “layer 2” technology. This allows decentralized applications (dApps) to “roll up” transactions into one off-chain for submission. The effect of this is that it reduces the data needed to execute a transaction.

    The combination of layer 2 rollups and sharding is what will achieve a transaction speed of 100,000 tps.

    Learn more: Understanding layer 2 & scaling solutions: Arbitrum, Boba, Optimism, Polygon, Ethereum 2.0

    What is the current state of Ethereum 2.0?

    3 upgrades have been introduced since the launch of the Beacon Chain on 1st December 2020: the Berlin upgrade, London upgrade, Altair upgrade and Shanghai upgrade.

    The Berlin upgrade was launched on 15th April 2021 and optimized gas costs for some EVM actions and increased support for several transaction types. The London upgrade was launched on 5th August 2021 and reformed the transaction fee market for the ETH 1.0 chain via EIP-1559 and removed or reduced gas fees for specific functions (Learn more about the London upgrade). The Altair upgrade was launched on 27th October 2021 and is the first scheduled upgrade for Ethereum’s Beacon Chain. It added support for “sync committees” which enabled light clients, brought validator inactivity, and slashed penalties up to their maximum values.

    The Ethereum network’s Shanghai upgrade (also known as Shapella) was successfully completed at 22:27 UTC on 12th April 2023. To celebrate this milestone, ConsenSys launched an NFT collection called “Ethereum, Evolved: Shanghai”. The NFT claim period begins on April 12, 2023, at 9pm EST and lasts for 72 hours. Find out how to claim this FREE NFT with our guide here.

    The next major Ethereum upgrade is titled Cancun, which will feature proto-dank sharding, a feature that aims to improve scalability by improving fees and transaction times. The details of the Cancun upgrade have not yet been finalized.

    Shanghai (Shapella) upgrade

    The Ethereum network’s Shanghai (also known as Shapella) upgrade took effect at 22:27 UTC on 12th April 2023 and was very successful. This upgrade combined changes to the execution layer (i.e. Shanghai), consensus layer (i.e. Capella), and engine API at epoch 194,048. The Shapella upgrade is important because it finally enabled withdrawals of ETH stakers/validators from the Beacon Chain, ahead of the implementation of the Ethereum Improvement Proposal (EIP)-4884 related to The Surge. This will improve the security of Ethereum’s post-Merge proof-of-stake protocol.

    Additionally, a set of EIPs that upgrade the Ethereum Virtual Machine (EVM) will be included in the Shanghai upgrade, such as EIP-3651: Warm Coinbase, EIP-3855: PUSH0 instruction, EIP-3860: Limit and meter initcode and EIP-4895: Beacon chain push withdrawals as operations. The EVM Object Format (EOF) may be removed from the Shanghai upgrade if it is not ready by the time of implementation. Once the Shanghai upgrade is complete, the network’s next major event is the Sharding upgrade, which is expected to take place between 2023 and 2024.

    Learn more about the Shanghai upgrade and how it is causing liquid staking derivative tokens to pump- Ethereum Shanghai Upgrade: Why Liquid Staking Derivatives are Pumping

    How much ETH has been withdrawn since the Shanghai (Shapella) upgrade?

    Since the Shanghai (Shapella) upgrade 228.82K $ETH has been withdrawn with 100.51K $ETH deposited (as of 10:00am HKT on 14th April 2023). At the same time, the current amount of $ETH being staked is 17.38M ($34.97B). And the pending withdrawal amount (including rewards) is 981K ($2.07B). Around 60.99K ($126.89M), is expected to be withdrawn in the next 11 hours.

    You can see how much ETH has been withdrawn, deposited or staked since the Shanghai (Shapella) upgrade here.

    Ethereum ETH prices since the Shanghai (Shapella) upgrade?

    The Ethereum Shanghai (Shapella) upgrade took effect at 22:27 UTC on 12th April 2023 (06:27 on 13th April 2023 HKT). Before the upgrade, ETH was only trading at around $1,920 and remained the same a few hours after. However, the full effect of the Shanghai upgrade on Ethereum prices was seen around half a day and particularly 24 hours after the Shanghai upgrade. As of 11:30am HKT on 14th April 2023 (nearly 1.5 days after the Shanghai upgrade), Ethereum is trading at $2,109.87.

    How to set up an Ethereum Validator Node

    Check out our LIVE demonstration on how to set up an Ethereum 2.0 Node

    How to set up an Ethereum 2.0 node

    I’ve also set up something called an Ethereum validator node for Ethereum 2.0. These nodes will be how Ethereum would run and how transactions are going to be validated in the future. So we’re going to explore all of these concepts as well in this guide.

    Currently you can test out Ethereum staking on the ETH 2.0 Testnet set up by Prysmatic labs (aka Topaz). Since it’s a test, Ethereum will not be used, instead, it will use Göerli ETH, a free testnet version of ETH.

    Time needed: 2 days

    How to set up an Ethereum (ETH) Validator Node
    This guide has been adapted from the Prysm ‘Topaz’ Testnet Guide

    1. Get some Göerli ETH

      Göerli ETH is free to obtain and will be used to stake the 32 ETH required for the node. The easiest way to obtain the Göerli ETH is to use the social faucet.

    2. Spin up a Server

      You’ll need to be familiar with running a VPS server (you can use AWS, Hetzner or Linode). Recommended specs include an Intel Core i7 processor with 100 GB of SSD storage

    3. Start your Beacon Node

      Easiest way we found to do this is via Docker
      docker run -it -v $HOME/prysm/beacon:/data -p 4000:4000 -p 13000:13000 \ gcr.io/prysmaticlabs/prysm/beacon-chain:latest \ –datadir=/data

    4. Generating a validator keypair

      docker run -it -v $HOME/prysm/validator:/data \ gcr.io/prysmaticlabs/prysm/validator:latest \ accounts create –keystore-path=/data

      Complete the steps here to stake the ETH

    5. Starting up the validator client

      docker run -it -v $HOME/prysm/validator:/data –network=”host” \ gcr.io/prysmaticlabs/prysm/validator:latest \ –beacon-rpc-provider=127.0.0.1:4000 \ –keymanager=keystore \ –keymanageropts='{“path”:”/data”,”passphrase”:”changeme”}’

    6. Finish the activation

      Wait (roughly 2 days) to get activated, and then you’re good to go!

    Staking Ethereum on a validator node

    Ethereum 2.0 migrated the network consensus to a proof of stake mechanism. The staked 32 ETH2 is used to validate the transactions and states on the network. It also acts as a guarantee that the validator node will be honest and operational. In return, stakers will be rewarded with Ethereum.

    This means that validators will generate Ethereum as passive income and receive ETH payouts slowly over time. Current calculations of Ethereum 2.0 staking show an annual 14.2% Return on Investment (ROI).

    This will be great for those who stake ETH. This is because they can enjoy the benefits of passive income whilst personally holding their funds on the validator node. Analysts predict greater demand for ETH once proof of stake is implemented. This is due to additional demand for ETH from staking and validator nodes. Whilst at the same time, reduced demand for GPUs as Ethereum mining will eventually be phased out.

    You can see the status of our Ethereum validator node in the image above. We had some initial downtime for the node, so we actually lost 0.01333 Ether. This was a penalty for missing our votes. So it is important to remember that votes are mandatory once a node is activated. An offline node will mean that votes are missed, resulting in a penalty of loss of ETH.

    Ethereum Staking: Deposit contract address release

    On 4th Nov 2020 the required specifications of ETH2 v1 and the Mainnet Deposit Contract Address for staking were released. This allowed ETH2 users to stake their ETH and become validators to help secure the network.

    It’s important to remember that it is not possible to simply send ETH to the contract. This will result in your transaction failing. You need to go through the launchpad and follow the guide. Moreover, as we stated previously, staking and running a validator requires effort, time and technical expertise. Failing to meet requirements can result in loss of part of, if not all, your ETH as penalties add up.

    Ethereum Staking Update: Yields?

    As of April 2023, I have earned around 4.373 ETH since setting it up 3 years ago. Note that results may vary. Those who set up their node earlier (as was in my case) were able to enjoy 16% APY. The current APR yield for staking ETH is around 5.16%. You can check the current APR, total ETH staked, and number of validators here.

    Ethereum staking since the Shanghai Upgrade

    The APR yield for staking ETH since the Shanghai Upgrade is still very good at around 5.16%. So I am planning to continue staking ETH so I don’t miss out on this opportunity to earn more yield.

    Progress of Ethereum 2.0 so far

    More than 17.3 million $ETH is currently staked. Since the Shanghai Upgrade on 12th April 2023, over 107K $ETH has been deposited in the contract address. There are currently 568,291 validators and a Participation Rate of over 99%. The Participation Rate is a measure of ETH2’s network health as it shows the number of validators actively participating in the consensus mechanism. A good rate would be always above 80-90% to ensure the security of the chain.

    Unlike before, Ethereum 2 proceeds in epochs (32 blocks), every 6.4 minutes (if no abnormalities are detected). You can always check this metric here: beaconscan.com/epochs.

    What’s next in the development of Ethereum 2.0?

    Phase 0 – Beacon Chain is already completed, and development would move onto building Phase 1- The Merge and Phase 2-Shard Chains.

    Ethereum 2.0 setup and architecture

    Currently, we are in Phase 1 of the roadmap the road towards Ethereum 2.0. The Ethereum network is now around 55% complete following the Merge of the Beacon Chain with the Ethereum mainnet in September 2022.

    After the Merge, Ethereum will have further upgrades which Vitalik calls the “surge”, “scourge”, “verge”,”purge” and “splurge”. This refers to Ethereum’s scaling, cleanup and evolution.

    What is the “surge”, “scourge”, “verge” “purge” and “splurge” in the development of Ethereum 2.0?

    After the Merge, Ethereum will undergo further upgrades known as the “surge”, “scourge”, “verge” “purge” and “splurge”.

    The “surge” in the development of Ethereum 2.0 refers to adding Ethereum sharding. The purpose of this is to enable more affordable layer-2 blockchains, reduce the cost of rollups, and make it easier for users to operate nodes to secure the network. Once the surge is completed, the Ethereum network is expected to be able to process transactions faster. Ethereum could process up to 100,000 transactions a second once sharding is completed. This is much faster than traditional payment systems such as Visa which can handle around 1,667 transactions per second.

    The “scourge” is a new phase announced by Vitalik on 5th November 2022. The purpose of this stage is to ensure reliable and credibly neutral transaction inclusion. Also, to avoid centralization and other protocol risks from MEV.

    The “verge” will introduce “stateless clients” and “Verkle trees”- which are a form of mathematical proof. This enables users to become network validators without storing lots of data on their machines. This is a further step in the move toward a Proof-of-Stake consensus model as any validator with staked ETH can confirm and verify transactions. This will be hugely beneficial for decentralization.

    The next stage, the “purge” will involve cleaning up old network history. This is to reduce the amount of space required on your hard drive and remove the requirement of nodes to store historical information.

    The “splurge” would be several smaller upgrades and fine-tuning in order to ensure that the network operates smoothly. Or as Vitalik calls it, “all the other fun stuff”.

    Updated Ethereum roadmap

    What will happen after ETH 2.0 is launched?

    Currently, the Ethereum network can only process around 12 to 25 tps with an average confirmation time of 6 minutes. The result is that the Ethereum network is heavily congested with people all vying to process transactions, resulting in high gas fees.

    Many “Ethereum killers” have therefore been launched. These are alternatives people can use for processing transactions. Some Ethereum alternatives include Solana, Avalanche, Polkadot, Algorand, and Cardano. They are a direct competitor to Ethereum as they offer similar features but at lower cost and higher speed.

    Eventually, the number of transactions per second will drastically increase to over 100,000 tps. So the question would be, what would happen to the competition i.e. the “Ethereum killers”? Find out more in our article: Ethereum Merge is coming, is this the end of Ethereum killers?

    Frequently Asked Questions (FAQ)

    Will Ethereum 2.0 replace Ethereum?

    Ethereum 2.0 will not replace Ethereum. Rather, Ethereum and Ethereum 2.0 will be merged together into 2 layers of the same blockchain. Ethereum as we know it will be the execution layer, whilst Ethereum 2.0 will be the consensus layer.

    Will there be any difference in using the ETH as I am used to?

    No, ETH1 will continue as it is with no differences. ETH2 is setting up on a parallel line and the two will merge in the future. The merge will happen without ETH users being able to notice it

    When will Ethereum mining end?

    Ethereum mining will not end for quite a few years. Ethereum will retain mining on the main chain until at least 2020. The main ETH1 chain will continue to use mining and run parallel to the ETH2.0 chain. This is to ensure stability during the migration

    Should I stake my ETH for ETH2?

    It does not cost any money to set up a validator node to stake ETH for ETH2. Staking ETH will allow you to generate passive income. However, you will need to stake at least 32 ETH, and if your node suffers downtime your ETH will be partially deducted as penalties. Also, your staked ETH cannot be unstaked until after the Ethereum Shanghai Upgrade.

    What are the minimum hardware requirements to become an ETH validator?

    Following this list on Prysm website to install the client:

    Minimum specifications

    Operating System: 64-bit Linux, Mac OS X 10.14+, Windows 64-bit
    Processor: Intel Core i5–760 or AMD FX-8100 or better
    Memory: 8GB RAM
    Storage: 20GB available space SSD
    Internet: Broadband connection

    Recommended specifications

    Processor: Intel Core i7–4770 or AMD FX-8310 or better
    Memory: 16GB RAM
    Storage: 100GB available space SSD
    Internet: Broadband connection







    Can I lose my ETH Deposit in the Node?

    Yes. The 32 ETH staked for the validator node is designed as an insurance that the validator node is operational and online at all times. Penalties will be given if the node is offline, and small amounts of ETH will be deducted over time.

    What is the expected APR yield for staking ETH?

    The current APR yield for staking ETH is 3.7%. Here you can have an idea of the APR (in ETH) as it varies with the number of ETH staked (source).

    Is staking ETH for ETH2 safe or risky?

    Staking ETH for ETH2 is safe and does not have any significant risks. However, stakers will not be able to withdraw their staked ETH until after the Shanghai hard fork in March 2023. Also, if your validator node goes offline, you will be penalised by a deduction of your staked ETH.

    Are there projects that will allow me to stake even if I have less than 32 ETH?

    If you want to participate in ETH2 staking but you don’t own the minimum amount required to become a validator, or you don’t want to stake an exact multiple of 32 ETH, don’t worry. There will be possibilities through Centralized Exchanges (like Binance and Coinbase) and not only. A big advantage in this case, is to receive liquidity for your staked ETH.
    RoocketPool ($RPL), now in beta, will correspond rETH (1:1 with ETH), a tokenized asset that you will be able to trade freely. Lido Finance will do a similar thing through their stETH. LiquidStake will instead let you borrow USDC for your staked ETH collateral. Many other solutions will arise as ETH2 will start its journey; for example, Cream Finance ($CREAM) has recently released an article explaining that user will receive the ETH2P token when joining ETH2 staking through them

    Can you withdraw ETH2 back to regular ETH?

    In Phase 0, ETH2 cannot be withdrawn back to regular ETH. Once converted, ETH2 will only be usable on the Staking Chain until Phase 3.

    What can I do with my ETH2?

    At the moment you cannot do anything with your ETH2. They are just “digital receipts”. Transactions or other features we have now on ETH won’t be available on ETH2 for probably years. There are rumors of a possible secondary market where to trade them though.

    When can I buy and sell ETH2?

    You cannot buy or sell ETH2 yet. ETH2 will only be available for trading or transfer until Phase 3 when the upgrade of the Ethereum protocol is complete.

    Should I buy ETH2 or ETH?

    ETH2 is not available for sale yet, so users should be careful of any places that offer ETH2 for sale. ETH on the other hand can be bought and traded at almost every cryptocurrency exchange.

    Is testnet ETH worth the same as ETH?

    ETH on testnets do not have any monetary value. They essentially allow developers to test and troubleshoot DApps and protocols before going live on the Ethereum mainnet. As a result, there are no markets for testnet ETHs.

    Will Ethereum gas fees be cheaper after The Merge?

    The Merge will not make Ethereum gas fees cheaper. This is because The Merge is only a change in the consensus mechanism from Proof-of-Work to Proof-of-Stake. Only an expansion of the Ethereum network capacity and throughput would lower the gas fees. However, this is still in development.

    Will I be able to withdraw my staked ETH after The Merge?

    There is currently locked staked ETH (stETH) on the Beacon Chain. stETH is backed 1:1 by Ether (ETH). However, developers have confirmed that users will not be able to withdraw their locked stETH after The Merge. Withdrawal of stETH will instead be possible after the Shanghai Upgrade which is expected to be in second half of 2023.

    Will Ethereum transactions be faster after The Merge?

    Ethereum developers believe that transitioning to Proof-of-Stake will result in a 10% increase in block production. However, users are unlikely to be able to notice this slight improvement.

    Will Ethereum ETH 2.0 be a new coin?

    No. There will not be a new ETH coin after the launch of Ethereum 2.0. Therefore, existing ETH holders, users of dApps, and traders do not have to do anything in anticipation of Ethereum 2.0.
    Therefore, users should be wary of websites or services claiming that they will allow users to trade, invest, mine, swap, or stake the ETH2 token. This is because the ETH2 token doesn’t actually exist.

    Will there be any tax implications resulting from The Merge?

    If The Merge does not result in a hard fork, then there are no tax implications because no new tokens would be created.

    However, if the Merge results in a hard fork, ETH holders would be sent duplicate tokens which may have tax implications. If the ETH is held in user-owned wallets, new proof-of-work ETH tokens would be considered as income, and its valuation calculated at the time the user comes into possession of the tokens. On the other hand, if the ETH is held in custodial wallets such as cryptocurrency exchanges, the implications would depend on the custodians’ stance on supporting the forked ETH chain.

    Will dApps or exchanges be affected by Ethereum 2.0?

    The launch of Ethereum 2.0 will not cause a huge impact on users’ interactions with blockchain dApps or cryptocurrency exchanges and services.

    Will exchanges be shut down during the ETH Merge?

    Ethereum developers have confirmed that during the Merge, there would not be any downtime.

    When was the Ethereum Merge?

    On 15th September 2022 at 06:42:42 UTC at block 15537393, the Ethereum Merge was completed.

    Will ETH holders be airdropped new tokens after Ethereum 2.0?

    There are currently no plans for an airdrop of new tokens for ETH holders after the launch of Ethereum 2.0. So far, Vitalik Buterin and the Ethereum Foundation have expressed that they are firmly against any forked ETH tokens.

    Therefore, any websites or social media accounts purporting to airdrop Ethereum tokens are most likely a scam.

    What is the ETHPOW or ETHW token?

    ETHPOW or ETHW is the token that will emerge if there is a fork of the Ethereum blockchain. During the Merge, some community members may disagree (e.g. want to stay with the Proof of Work mechanism) and fork ETH. What they may do, is “copy and paste” the Ethereum blockchain. The result of this is there would be 2 blockchains and 2 tokens. There would be the existing Ethereum blockchain that goes through the Merge with the ETH token. And then there would be the forked chain with a new token called ETHPOW or ETHW.

    How can I get the airdropped free ETHPOW/ETHW token?

    If you held Ethereum prior to the Ethereum Merge, you will be airdropped (via the fork) free ETHPOW tokens

    When can I stop staking my ETH?

    Those who have staked their ETH cannot stop staking until the Shanghai hard fork, which is expected in the second half of 2023.

    Where can I buy or trade the EthereumPoW ($ETHW) token?

    The EthereumPoW ($ETHW) token is not widely traded on cryptocurrency exchanges. However, you can buy or trade the EthereumPoW ($ETHW) on these exchanges: OKX, ByBit, Kraken, Huobi, MEXC Global, Gate.io, Bitfinex, Bittrex, Poloniex and Hotbit.

    What is the next upgrade to the Ethereum network

    The next upgrade to the Ethereum network is known as the Shanghai upgrade. A major anticipated feature of this upgrade is that withdrawals of ETH stakers/validators from the Beacon Chain will be enabled. The Ethereum network Shanghai upgrade is expected to be in March 2023.

    Will there be an Ethereum hard fork after the Merge?

    A hard fork is a backward-compatible and permanent split or fork of the blockchain. After a hard fork, a separate version of the blockchain will emerge, as well as a new cryptocurrency token. There is speculation that the Merge may result in a hard fork. This is because some want to take advantage and profit from the Merge. Alternatively, a hard fork may be formed by those who disagree with the direction of Ethereum’s development. A group known as ETHW Core announced they will launch a hard fork within 24 hours of the Merge. This is because they oppose the change to a proof-of-stake mechanism, which essentially puts an end to ETH mining.
    Several hours after the Merge, the ETHW mainnet and fork of the Ethereum blockchain was launched.

    Tax implications resulting from The Merge or Ethereum hard fork?

    If The Merge does not result in a hard fork, then there are no tax implications because no new tokens would be created.

    How has Ethereum 2.0 impacted its price

    If all the phases are completed successfully, Ethereum prices are expected to increase. This is because each phase of the upgrade gives significant upgrades that will improve the performance of the blockchain. This will further grow its utility and value.

    What will happen to Ethereum mining?

    Ethereum mining is the process of adding blocks of transactions to the Ethereum blockchain. This is to help secure the Ethereum network through a Proof-of-Work (PoW) mechanism. Miners are then rewarded with ether (ETH) which can be traded on cryptocurrency exchanges. Therefore, many people would run Ethereum miners for profit.
    However, the launch of ETH2.0 will fundamentally change the current economics. The existing Proof-of-Work (PoW) consensus mechanism will be replaced by Proof-of-Stake (PoS). The concept of mining will be retired once the Ethereum 2.0 update is fully completed.
    For more details check out our article: The end for Ethereum miners after ETH 2.0?

    What is the status of the Ethereum Shanghai upgrade?

    The Shanghai (Shapella) network upgrade took place at 22:27 UTC on 12th April 2023.

    Will Ethereum 2.0 replace Ethereum?

    No, but how transactions will be confirmed will change. Previously Ethereum uses Proof of Work (PoW) to confirm transactions. However, Ethereum 2.0 will transition to a Proof of Stake (PoS) consensus mechanism.

    What is the Shapella upgrade?

    The Shapella upgrade is another name for the Ethereum Shanghai upgrade. It is called the Shapella upgrade because it combines changes from the Shanghai (execution layer) and Capella (consensus layer). This upgrade took place at 22:27 UTC on 12th April 2023.

    How much ETH has been withdrawn since the Shanghai (Shapella) upgrade?

    Since the Shanghai (Shapella) upgrade, 228.82K $ETH has been withdrawn (as of 10:00am HKT on 14th April 2023). The pending withdrawal amount (including rewards) is 981K ($2.07B). Around 60.99K ($126.89M), is expected to be withdrawn in the next 11 hours.

    Where can I see how much ETH has been withdrawn or staked since the Shanghai (Shapella) upgrade?

    You can see how much ETH has been withdrawn, deposited or staked since the Shanghai (Shapella) upgrade here.

    Ethereum ETH prices since the Shanghai (Shapella) upgrade?

    Ethereum ETH prices eventually received a positive boost hours after the Shanghai (Shapella) upgrade. Before the upgrade, ETH was only trading at around $1,920. Nearly 1.5 days after the Shanghai upgrade, Ethereum is trading at $2,109.87.

    What is the current APR for staking Ethereum?

    The current APR yield for staking Ethereum is around 5.16%

    Updates:

    Update Nov 2022: Ethereum 2.0 has recently gone through some changes – it is now called the Ethereum Merge.
    Update Jan 2023: Added details about Ethereum Shanghai Upgrade
    Update Apr 2023: Added details about Ethereum Shanghai Upgrade and its effect on ETH prices.

    Resources:

    Ethereum Foundation: https://ethereum.org/en/upgrades

    Pyrsmatic Labs: https://medium.com/prysmatic-labs/how-to-scale-ethereum-sharding-explained-ba2e283b7fce

    Ethereum Wallet holders: https://bitinfocharts.com/comparison/activeaddresses-eth.html

    Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

  • 2020 cryptocurrency exchange news recap

    2020 cryptocurrency exchange news recap

    After our 2020 Roundup article where we reviewed this year’s biggest trends, let’s now dive deeper into what happened in the world of crypto exchanges.

    The surge of Defi and its DEXs (decentralized exchanges) has collapsed CEXs’ (centralized exchanges) volumes drastically. If Uniswap is the clear King of DEXs, the same we can probably say for Binance among CEXs, where it leads on both rankings for spot and derivatives. But the fight against decentralized exchanges has just started and new ideas and concepts are needed to keep up with the competition.

    As we shall see, the CEXs that managed to better keep up against Defi are the ones that tried and innovated the most, sometimes directly inspired by DEXs.

    Uniswap

    Uniswap is the clear winner among all kinds of exchanges in 2020.

    Uniswap TVL in 2020
    Uniswap TVL in 2020

    Its TVL (total value locked) has literally skyrocketed in the second half of the year, reaching more than $3 billion in November before dropping when $UNI pools ended giving rewards to Liquidity Providers.

    Uniswap has constantly been the most used Dex in crypto and has terribly helped Defi’s growth. It is “The” place where to find new listings and the deepest liquidity on Ethereum. If you are looking for an existing ERC-20 token, you can be sure it is there. Anyone can open a new pool, it is as simple as providing some tokens plus some Ethereum on the platform, and it’s done. 

    Uniswap doesn’t have a order book: the platform relies on an AMM (Automatic Market Maker) system to provide for trading liquidity. Although purists may miss order books, AMM has proven to be a new and successful way to swap tokens.

    In September, the platform distributed 150 million $UNI (their new governance token) to anyone who came in touch with the website, whether just swapping or pooling liquidity. A minimum of 400 tokens were sent to each user, for a value of around $1500 in the first hours of its existence (for patient holders, the value tripled in during the day).

    This airdrop attracted so much attention to the platform that other protocols did or are planning to do the same thing in the next future. With Uniswap V3 and all of its innovations expected to be released pretty soon, some can only wonder where $UNI can go!

    If any of you has been sleeping throughout the last months and still hasn’t claimed his tokens, you can follow our video guide here!

    How to claim free $UNI on Uniswap

    Binance 

    Binance succeded at remaining the biggest Cex for volumes, with a daily ATH of $15 billion in spot trading and of $37 billion in futures (up by 34 billion compared to 2019!). It retains the first position on both rankings. (Ativan)

    Part of their success is due to numerous initiatives that they introduced throughout 2020.

    In April, Binance presented their Card (later on Binance also acquired Swipe, a multi-asset digital wallet and Visa debit card platform), which is now supported in more than 180 countries.

    One of the most important innovation on the year is “Launchpool”, which lets users farm new tokens like in Defi. Stakers can accumulate rewards prior to a listing that will happen directly on Binance after a few weeks (usually). Moreover, Launchpool offers single-token staking so users don’t even have to be wary of Impermanent Loss. Projects like Bella Protocol ($BEL), Flamingo ($FLN) and $WING have were presented via Launchpool.

    September has been a great month for Binance. They firstly launched Binance Smart Chain, a blockchain created to run parallel to Binance Chain where devs can create Smart Contracts and Defi solutions. The exchange then immediately introduced “Liquid Swap”, a new trading platform that allows users to reap the benefits of Defi, with the first AMM product in any CEX ever. Users can pool their funds on Liquid Swap earning trading fees like on a AMM DEX. 

    Simultaneously Binance Labs, the venture arm of the exchange, has continued investing in new projects to empower crypto. They helped, among others, 1inch, Dodo and Math.

    On a side note, after the launch of Binance U.S. in 2019, the “.com” platform has now slowly been giving a 14 days notice to U.S. customers (both those who went through KYC and those who simply access the website from within the country) advising to withdraw funds before the account is blocked. It appears that customers who use VPNs are “safe” for the moment.

    FTX

    Ftx, the known derivatives exchange led by the omnipresent Sam Bankman–Fried, has surely been on the cutting edge among CEXs this year. The team worked very hard trying to anticipate trends and they seem really good at giving their customers what they have been hoping for.

    “Why should we trade crypto and stocks on separate exchanges?” That’s probably what Sam asked himself at a certain point. So, no sooner said than done, the answer arised: tokenized stocks. Two partnerships with CM-Equity (Germany) and Digital Assets AG, DAAG (Switzerland), were decisive for the accomplishment. Although trading stocks on FTX looks similar to trading crypto, it is important to notice the difference.

    “CM-Equity is fully regulated in Germany, and is a licensed financial institution permitted to offer these products. All FTX users who trade tokenized stocks may also have to become customers of CM-Equity, and pass through CM-Equity’s KYC and compliance. Furthermore, all trading activity may be monitored for compliance by CM-Equity. CM-Equity custodies the equities at a third party brokerage firm. CM-Equity (not FTX Trading LTD) provides the brokerage services”.

    Unlike in traditional markets, FTX’s Tokenized stocks will be tradable 24/7, and as of now they are more than 50, among which Netflix, Facebook, Apple and Amazon.

    FTX.US (the american arm) also put themselves (and the legitimacy of cryptocurrency) in the public eye as one of the top donors of the Biden’s Democratic Presidential Campaign. In particular, Sam donated $5,22M. While the real reasons remain probably unknown, we hope it will mark a step towards crypto recognition by authorities.

    Last but not least, we can’t forget to mention that the same team behind FTX is responsible for the creation of Project Serum, one of the most successful non-ETH order-book based Dex, running on the Solana chain (which handles around 50,000 tps).

    Get the latest insider dig on the happenings of the crypto world with Sam Bankman-Fried (FTX, Alameda, Serum)

    Sushiswap

    Sushiswap launched in August as a fork of Uniswap with added rewards by the anonymous founder Chef Nomi. We were then at the peak of the “Defi bull summer” and the success was sudden. Its TVL gained great traction but some drama was due to happen. A week after, the anonymous dev removed its liquidity and sold $14 million worth of $ETH, starting a 50%+ drop in price. At that point, an offer was made by Sam Bankman-Fried to step in and remove Chef Nomi from the project.

    Highs and lows have followed since then, but Sushiswap is still the second DEX for TVL (around 33% less than Uniswap) and one of the most successful. Many are the partnerships and its advisors are among the best that crypto can offer. Even though some will neve forget that Sushiswap literally “stole” liquidity from Uniswap, migrating pools to their platform and thus reducing Uniswap’s TVL dramatically, many are ready to bet that this project is here to stay.

    Mt.Gox

    December the 15th was the due date for Mt.Gox exchange creditors to finally receive part of their loss funds after years. The exchange repeatedly lost cryptocurrencies between 2011 and 2014, when it filed for bankruptcy. 140,000 $BTC (almost $4 billion dollar worth as of now) have since then been found and should be sent to users as partial refunds.

    As suspected by many, it looks like the deadline has not been respected and creditors are still waiting for their money. A few days ago, someone noted a transaction from a Mt.Gox wallet, something which led many believe that the distribution had actually started.

    Unfortunately that was not the Mt.Gox rehabilitation plan wallet, but the F2Pool cold wallet. There has been no confirmation that the creditors had received any fund yet.

    BTC Markets accidentally exposed their users’ names and email addresses 

    BTC Markets, an australian crypto exchange, has mistakenly send out a compromised marketing round of emails. During a routine operation, instead of individually sending out email to their customers, personal data was exposed in the “to” field. The emails were sent in batches so that each user data had been potentially seen by 999 other people.

    The mistake didn’t directly compromise sensible info such as passwords so funds remained safe, but this type of error is something that can definitely worry crypto adopters and possibly make them change platform. Users don’t want strangers to know they own crypto, and we hope that this kind of mistake won’t happen again.

    Kraken, the first to win Bank Charter Approval in the U.S.

    Kraken is the world’s first Cryptocurrency Exchange to get approved as Special Purpose Depository Institution (SPDI) by the State of Wyoming. “Kraken Financial”, this the name, is the “first digital asset company in U.S. history to receive a bank charter recognized under federal and state law, and will be the first regulated, U.S. bank to provide comprehensive deposit-taking, custody and fiduciary services for digital assets”.

    The exchange will enable its clients to bank seamlessly between digital assets and national currencies and will be regulated in similar manners to other U.S. banks. The SPDI is a “custody bank” but for digital assets (such as cryptocurrencies) and it’s required by law to always maintain 100% reserves of its FIAT deposits.

    Huobi exchange

    It all started with big $USDT (and other currencies) transactions spotted moving in and out of the exchange, the largest in China, on November the 2nd. At the same time, rumors of one of the Chairman being arrested increased the FUD which led to a sharp dump in price of $HT, the Huobi token, and to a rush in withdrawing $USD out of the platform. The exchange then denied all the allegations and the situation returned back to normal in the next days.

    More info can be found in this article.

    Okex

    We have extensively covered the Okex story in our developing article.

    On October the 16th, all the withdrawals were suddenly halted on the platform and the suspension has lasted until November the 27th when all operations were reopened without restrictions. As confirmed later on, the original cause was one of the exchange’s private key holders cooperating with the authorities. He was therefore unable to complete the authorization processes needed to allow external transactions.

    Star Xu, the person held in custody by the police, has been investigated for matters that have nothing to do with the exchange. Xu was allegedly assisting the authorities (he is now back to normal business activity) about funds he borrowed from a Shanxi-based underground bank in 2019.

    Kucoin

    Kucoin, one of the leading crypto exchanges based in Hong Kong, suffered a security breach on September the 26th. The total amount stolen, a whopping $281 million in $BTC,$BSV $LTC and other coins, is one of the largest in crypto history. The hacker (or hackers) was somehow able to take possession of the centralized exchange’s hot wallets private keys, achieving the ability to move funds around. He then withdrew and started dumping them on DEXs. Kucoin immediately transferred the rest of the funds to new wallets and suspended all deposits and withdrawals.

    It appears that Kucoin hot wallets’ private keys hadn’t been changed for over 3 years at the moment of the breach, which is another confirmation that the famous saying “not your keys, not your crypto!” is an evergreen.

    We must hope that all these attacks will be helpful in the long run, enabling stricter security procedures by exchanges and platforms, necessary if crypto final goal is mainstream adoption!

    Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

  • Duck Liquidity Pool (DLP) by DuckDAO ($DUCK)

    Duck Liquidity Pool (DLP) by DuckDAO ($DUCK)

    Duck Liquidity Pool ($DUCK) is a DeFi Market Maker protocol, developed by DuckDAO, one of the biggest cryptocurrency community that provides funding and marketing support to early-stage crypto projects.

    The boom of decentralized finance (DeFi) in recent months has ushered in a new profit-making strategy for crypto traders, beginners and advanced alike. Decentralized exchanges (DEX) rely on liquidity pools to help power their market-makers. While the Duck Liquidity Pool is a new entrant in DeFi, it has already captured the attention of many users in the space thanks to its high APY and token burning model.

    https://youtu.be/8MNKafDgW0o

    What is the Duck Liquidity Pool?

    The Duck Liquidity Pool (DLP) is DuckDAO’s own market maker. The funds that supply its pool came from the sale of pre-mined tokens and can be accessible in many other protocols and exchanges. In the meantime, projects that are supported by DuckDAO will be the first to be able to tap the pool. The ticker for the pool is $DUCK.

    The unique feature that distinguishes DLP from others is its “unilateral burn” strategy, or the one-sided token burn model. It is designed to burn 50% of all earned rewards (more on this later).

    The APY level for DLP is high and its suppliers can receive as much as 50% of the profits from market making, airdrop of incubated project tokens, as well as non-fungible token (NFT) campaigns. Such a feature enables yield farmers the ability to earn profit by just providing liquidity to DuckDAO’s market maker.

    To participate in the DLP, users have to lock their cryptocurrency holdings by depositing their funds in the pool. In return, they receive DUCK tokens as a reward for supplying funds to the pool.

    DuckDAO’s Native Token ($DUCK)

    DUCK token is the DuckDAO’s native utility token, which also powers the incentive model for the Duck Liquidity Pool. The token has the following use cases:

    • Yield farming on Uniswap pools – Staking tokens help contribute liquidity to DUCK and DDIM pools. For this, they earn profit through DLP.
    • Reward token for market-making profit – Half of the profit from the market maker is returned to the community who belong to the liquidity pool. If the performance of DLP is good, the profit for the yield farmers grows in proportion as well.
    • Project token airdrops
    • Non-fungible token as reward

    Deflationary Farming: “One-Side-Burn”

    This is touted by the team as “Yield Farming 2.0,” which is designed to support a deflationary, unilateral burning of tokens. To understand how this works, we must first look at how the current yield farming mechanism works.

    The Usual Scenario for Most Liquidity Pools

    Commonly, yield farming pools in the DeFi space look very advanced for the average trader. Not only does this create a psychological barrier to entry, but it also makes profit-making a little more difficult for someone new to yield farming.

    Another issue that traders face is the inflationary structure of the incentive mechanism in most liquidity pools. This is because, in order to provide rewards to yield farmers, mined tokens have to be released into the market. This model isn’t designed for long-term effectiveness since with more reward tokens in supply over time, we can expect its value to depreciate as well.

    Duck’s Unilateral Burn

    $DUCK, on the other hand, is designed to support long-term yield farming strategies. Even beginners on liquidity pools can just stake and earn a part of the profit that DuckDAO’s market maker gets.

    $DUCK One-Side-Burn Deflationary Model (Source: DuckDAO website)

    One-Side-Burn is a deflationary model that is designed to burn 50% of the carry pair as soon as the liquidity provider decides to cash in a portion of his stake.

    What happens in such a situation is that users lose one side of their liquidity as the tokens are burned. And when someone decides to exit the pool completely, his entire liquidity is also burned and further lowers the DUCK tokens in supply.

    While this model may seem counterintuitive for profit-earning at first, over-time, the value of the tokens is going to be greater than what it was when a user has staked in the pool. That is why DLP’s design appears to be much better in the long run.

    Duck Liquidity Pool Market-Maker Models

    Project Token Purchase

    DLP purchases tokens in order to facilitate buy and sell liquidity.

    Duck Liquidity Pool Business Model – Project Token Purchase (Source: Duck Liquidity Pool (DLP) Blackpaper)

    Project Token Borrow

    DLP loans tokens against collateral in order to facilitate buy and sell liquidity.

    Duck Liquidity Pool Business Model – Project Token Borrow (Source: Duck Liquidity Pool (DLP) Blackpaper)

    Fixed Fee Model

    The protocol can charge a fixed service fee for listings that have decided to provide buy and sell liquidity on their own.

    Duck Liquidity Pool Business Model – Fixed Fee Model (Source: Duck Liquidity Pool (DLP) Blackpaper)

    Conclusion

    DeFi has enabled the birth of new profit-making strategies for traders in the space. However, whether existing liquidity pools can support long-term yield farming models is another question altogether. DLP’s model, which is powered by the ‘unilateral burn’ design, appears to be more promising.

    To be fair, like many other pools, the profit it can generate for stakers is also influenced by the number of users joining the pool. This is why it is important to look into that as well before deciding to lock your tokens and supply liquidity to the pool.

    Decentralised Finance (DeFi) series: tutorials, guides and more

    With content for both beginners and more advanced users, check out our YouTube DeFi series containing tutorials on the ESSENTIAL TOOLS you need for trading in the DeFi space e.g. MetaMask and Uniswap. As well as a deep dive into popular DeFi topics such as decentralized exchanges, borrowing-lending platforms and NFT marketplaces

    The DeFi series on this website also covers topics not explored on YouTube. For an introduction on what is DeFi, check out Decentralized Finance (DeFi) Overview: A guide to the HOTTEST trend in cryptocurrency

    Tutorials and guides for the ESSENTIAL DEFI TOOLS:

    More videos and articles are coming soon as part of our DeFi series, so be sure to SUBSCRIBE to our Youtube channel so you can be notified as soon as they come out!

    Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

  • XFai ($XFIT): Can it resolve the liquidity and gas fee issues in DeFi?

    XFai ($XFIT): Can it resolve the liquidity and gas fee issues in DeFi?

    XFai is a decentralized oracle service provider that aims to address liquidity and gas issues in decentralised exchanges (DEXs) through a so-called DEX Liquidity Oracle which will revolutionise cryptocurrency trading whilst reducing gas fees.

    If you are a regular DEX trader, you might notice that there are times when you can’t complete trades. This happens often with small-cap tokens that do not have enough liquidity. In this case, traders have two options, either to wait it out until there’s enough liquidity or to increase price slippage tolerance. But either way, it can result in huge losses on the part of a small-cap token holder.

    XFai wants to address this problem by empowering DEXs with liquidity that can be supplied to small-cap tokens. This equalizes the playing field for every single trader, allowing them to execute their strategy without having to shoulder massive costs just because a DEX might not have enough liquidity on any particular trading pair.

    Check out our interview with XFai’s Chief Scientist, Taulant Ramabaja.

    Background

    The problem with many DEXs today is liquidity. While liquidity pools and profit-generating DeFi systems like yield farming have offered revolutionary solutions in the last year or so, DEXes still face this concern. This leaves many traders vulnerable to huge price slippages and losses. And if the issue persists, cryptocurrency traders might be discouraged and go back to trading mostly on centralized exchanges despite having less options.

    This is what XFai worked is trying to solve.

    XFai, which was co-founded by Geoffrey Khan, was developed in order to deal with the problems hounding DeFi markets today. It has gained a substantial amount of support, garnering investments from companies like AU21 Capital, LD Capital, and Roger Ver, one of the earliest adopters of blockchain technology and the CEO of Bitcoin.com. It is also worth mentioning that they were able to generate over $3.8 million within the first 12 hours of their private sale.

    What is XFai?

    XFai is a decentralized oracle service provider with the aim of addressing liquidity and gas issues in DEXs through a DEX Liquidity Oracle (DLO). This means that the protocol’s role is not only limited to supplying data to price feeds and engaging with smart contracts, but is also capable of actively providing and managing token liquidity in partner DEXs such as Uniswap.

    The primary goal of the project is to support small cap tokens and token holders by establishing a system that helps them earn better rewards. In other words, the project seeks to help them gain as much in incentives as they can, just like how a holder of a large cap token does.

    DEX Liquidity Oracle

    XFai’s DLO is powered by the XFai smart contract, which allows users to stake small cap tokens that can later be supplied to Uniswap pools according to corresponding price ranges and existing orders. The biggest trades facilitated on Uniswap exchanges will be provided with the liquidity collected from the DLO.

    This does not just benefit large volume trades for small cap tokens, but also those who supply liquidity on the same tokens. They receive rewards when they do so as well. The good thing about DLO is that it does not require liquidity providers to supply all the assets supported in a liquidity pool. They can choose to simply supply a single token in a pool, which also mitigates the risks of impermanent loss on their end.

    What supports this function further is its real-time price feed from centralized exchanges. Furthermore, the liquidity from the DLO is easily accessible to DEXs, addressing the issue on price slippage. This is exactly the goal of the XFai team, to support the current DEXs in the market and not to present itself as a competitor.

    How Does XFai Work?

    First, the user has to add tokens on the DLO liquidity vault/pool. The DLO is governed by a smart contract that also sends the tokens to partner DEXes when liquidity is needed. Note that users do not need to supply multiple assets at a time anymore, thereby reducing their exposure.

    Second, the DLO looks into the data from existing order books from other exchanges to determine existing prices and trading volume. Then, it comes up with a synthetic curve which they will use in order to pair DLO liquidity with partner DEXs.

    Then, there is a smart contract that governs how and when liquidity is supplied to a DEX using the synthetic curve. The goal of the contract is to ensure that enough liquidity is met by AMMs in order to avoid price slippage while allowing small cap token holders to supply liquidity without incurring impermanent loss.

    XFIT Token

    XFIT token is XFai’s native, utility token, which can be used as a medium of exchange, store of value, and means of payment for transaction fees. But more than that, it also has governance and reward functions. Liquidity farming is accessible in XFIT and all other DLO pairs.

    To start liquidity mining, holders can stake their tokens in select pools to earn proportional rewards. Each time the DLO profits from the trades conducted by its platform users, token holders earn additional XFIT. They can either redeem XFIT tokens to be later sold to the market, or they can decide to return their rewards back to liquidity pools in order to increase their stake position.

    In addition, XFIT token holders are also entitled to discounts on transaction fees if they use XFIT. They can also make direct swaps from XFIT to any other token in the protocol as long as they are supported by the DLO.

    XFai Liquidity Generation Event: How to stake XFIT

    The XFai liquidity generation event is a way to allow users to become involved with XFai’s XFIT token early, and stake them in the liquidity pool in order to earn increased, sustained yield throughout the launch period.

    To participate, users can go on the XFai website and click on “Farm”, then choose your preferred pool. Note that the APY is synced for all pools so they earn the same amount of APY as each other. Then click “Connect Wallet” to connect using MetaMask, once connected the dashboard will automatically calculate how much XFIT you can purchase with the amount in your wallet. Select the amount you want to stake and hit “Farm”.

    Whilst farming, you have the option to either Add to Farm, which allows you to increase your stake or Harvest, which allows you to claim your XIFT rewards.

    To claim your rewards, click “Harvest” and you would be presented with the option to Harvest XFIT or Harvest XFIT and unstake. Harvest XFIT allows you to claim the XFIT tokens gained into your wallet whilst keeping the staked amount in the liquidity pool to keep farming more XIFT rewards. On the other hand, Harvest XFIT and unstake means you can claim your XFIT rewards and unstake the staked amount (or any part of it) from the pool.

    The XFai LGE will be from 16th April to 7 May 2021.

    For a full guide on how to farm XFIT, click here.

    Conclusion

    Perhaps one of the largest factors that stop people from completely shifting their cryptocurrency trading activities to DEXs is the liquidity problem, apart from the fees. It is difficult to execute trades with low liquidity and even if they often do, sometimes, it takes multiple slippage tolerance adjustments before a trade gets to be completed.

    While this can look trivial for some people, this is something that can’t be neglected. If XFai takes off, the DeFi space might experience a better market situation. If traders do not have to be burdened by price slippages and if liquidity further improves through the same solutions the XFai team did, DEXs can be even more alluring to everyone, which would help speed up adoption.

    Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

  • Covalent ($CQT): unified blockchain data for the entire ecosystem?

    Covalent ($CQT): unified blockchain data for the entire ecosystem?

    Covalent is a multichain protocol that provides easy and quick access to deep, granular, and historical blockchain data.

    So far, the blockchain has had an irrevocable impact on modern technology. The spread of decentralized architectures and frameworks has given birth to numerous technological innovations. Despite the technological freedom the blockchain has brought, granular and historical blockchain data is almost impossible to access. Blockchain product users and developers often have no way to explore data on the blockchain; data that are highly unstructured and unstandardized in most cases.

    Through its special algorithm, Covalent resolves this issue and guarantees mass adoption for Decentralized ledger technologies (DLT), powered by a rich data infrastructure.


    Background

    Founded in 2018, Covalent prides itself as a new frontier of development for enterprises, consumers, and software developers. The very first version of the protocol was built at a distributed systems hackathon back in 2017.

    After winning the hackathon, co-founders Ganesh Swami and Levi Aul decided to turn the ambitious blockchain implementation into a highly secure, reliable, and easy-to-use decentralized solution. Covalent technology strives to resolve the huge infrastructure problems slowing down blockchain adoption and acceptance worldwide.

    The team behind Covalent is a diverse 30-persons group of financial, marketing, and blockchain experts and engineers all with rich experience in decentralized finance (DeFi).

    What Is Covalent?

    Covalent is a multichain API that provides easy and quick access to deep, granular, and historical blockchain data. This efficient blockchain protocol has managed to index the whole blockchain space to empower blockchain pioneers and leaders of the future. Additionally, the solution bridges the entrenched world of centralized databases with the new world of distributed blockchain technologies.

    Covalent’s unified API enables access to the richest and most secure data infrastructure within the decentralized ecosystem. Additionally,  through its immense data infrastructure,  The API allows users to scrutinize numerous well-known and specific blockchain protocols. This gives endless possibilities to participants in terms of transparency and total visibility throughout decentralized networks.

    The covalent network’s unique API implementation offers incredible access to historical transaction activity, positions, and token balances to many top Defi and NFT projects. Currently, the protocol is working with the likes of Ethereum, Polygon, Binance Smart Chain, and Avalanche to provide substantial, granular, and accessible data.

    Covalent Use Cases

    Overall, the full extent of the protocol’s use cases is relatively unknown. However, developers and partners within the platforms have come up with multiple ways to leverage data provided by the protocol.

    Wallets

    There are over 200,000 ERC-20 tokens on Ethereum and growing all thanks to the composability of DeFi Solutions. Under the Covalent algorithm, wallets are well structured, as they show real-time and historical balances, positions, and most importantly, portfolio value for all of their assets.

    Taxes

    All DeFi actions are taxable, and having easy access to such data facilitates blockchain transactions and makes firms compliant. Covalent is the only protocol in the market that provides this service for decentralized exchanges (DEXs).

    NFT Dashboards

    Mainstream blockchain products like Chainguardians and NFTX rely heavily on the platform’s Investor tools to show price trends, liquidity, and ROI of collectibles to educate their clients.

    What Makes Covalent Unique

    It is no doubt that Covalent is special in regards to other solutions within the market. The platform’s incredible algorithm is rooted in 4 main features, which allows Covalent to provide clients with the best transparency and visibility tool in the blockchain sphere. The features are:

    Data availability

    Covalent’s infrastructure is responsible for every transaction, contract, and wallet address under its ecosystem. Hence, this blockchain solution is accountable for billions of rows of data and terabytes of data, unlike most projects on the market that provide smaller or minuscule amounts only.

    Composability

    Composability is viewed as an important tool for DeFI implementations, as it grants users the ability to build financial solutions leveraging building blocks from a multitude of projects. Therefore, Covalent’s immense multichain API ultimately enables developers to instantly construct scalable and data-rich applications powered by a granular data infrastructure. (Xanax)

    Multi-blockchain Support

    One of the platform’s greatest strengths is its multichain support, as the covalent team is currently working with customers on 7 different well-known blockchain networks, with many more set to join and rely on the protocol soon.

    In general, the Covalent team works closely with technical and business teams of their customers across the blockchains networks to ideate, plan, and execute a turn-key solution for developers building on top of their blockchains.

    No code solution

    The multichain API firmly believes in no-code solutions for clients and participants. Therefore, no overpriced and complicated SQL queries, no subgraph development and maintenance, and no need to invest in highly-skilled developers to simply retrieve blockchain data, which can be a huge waste of engineering time. With one fast and secured API, customers are sure to be satisfied.

    Covalent Query Token (CQT)

    CQT is the platform utility token and is primarily a proof-of-stake governance token powering Covalent’s rich and robust network. Additionally, the token facilitates the democratization of the multichain solution and enables the creation of blockchain data apps in Covalent’s vast marketplace.

    CQT will primarily serve as a governance token, giving voting rights to holders concerning the system’s parameters such as new data sources, specific geolocations, and data modeling requirements. CQT will also be used as a staking asset within the multichain API.

    Conclusion

    The Multichain API aims to organize the world’s blockchain information, enabling more transparent blockchain actions and transactions. Covalent has successfully managed to resolve issues concerning transparency and visibility within the blockchain.

    The platform’s unified API has indexed billions of blockchain data points in the scope of empowering blockchain leaders of tomorrow. It is fair to conclude that Covalent is ahead of its competition, as more than 7 prominent blockchain networks rely on the services of this protocol.

    The team’s continuous drive to elevate and scale blockchain technologies is a testimony of the platform’s innovative ecosystem built to bring forward key attributes of decentralization in complete transparency and visibility. Overall, Covenant is set to impact the blockchain space positively, thereby contributing to the worldwide adoption of decentralized technologies.

    Decentralised Finance (DeFi) series: tutorials, guides and more

    With content for both beginners and more advanced users, check out our YouTube DeFi series containing tutorials on the ESSENTIAL TOOLS you need for trading in the DeFi space e.g. MetaMask and Uniswap. As well as a deep dive into popular DeFi topics such as decentralized exchanges, borrowing-lending platforms and NFT marketplaces

    The DeFi series on this website also covers topics not explored on YouTube. For an introduction on what is DeFi, check out Decentralized Finance (DeFi) Overview: A guide to the HOTTEST trend in cryptocurrency

    Tutorials and guides for the ESSENTIAL DEFI TOOLS:

    More videos and articles are coming soon as part of our DeFi series, so be sure to SUBSCRIBE to our Youtube channel so you can be notified as soon as they come out!

    Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

  • Ispolink ($ISP): A better LinkedIn?

    Ispolink ($ISP): A better LinkedIn?

    Ispolink is a blockchain-based matchmaking job platform combined with AI to enhance the experience of job seekers and employers.


    As the unemployment rate rises worldwide, individuals without jobs have to look for clever ways to impress potential employers. One of the ways is to craft an impressive curriculum vitae (CV) with false statements. While this may possibly get them a job, the quality of their work would be on the line and may lead to loss of business revenue.

    Apart from finding qualified professionals, businesses have to deal with a resource-consuming recruitment process, hefty agency fees, and manual processes. On the other hand, qualified candidates feel unappreciated when they don’t receive feedback on applied positions. To provide a lasting solution, Ispolink combines decentralized technology and artificial intelligence to minimize the time and cost it takes to fill a position and to get hired. 

    Background

    Emanuil Pavlov and Nikolay Pavlov head the Ispolink platform at the CEO and CTO level while also being co-founders. Emanuil has a strong educational background in business management. Before co-founding the protocol, he was a blockchain analyst at Industria Technology, a business development manager at Latoken, and a vendor manager at Manpower.

    On the other hand, prior to joining Ispolink, Nikolay worked in software-related departments in leading companies such as Industria Technology, Devision, and SAP.

    Apart from a reputable founding team, the platform is backed by top investment firms like Magnus Capital, Lotus Capital, Titans, Moon Whale, and AU21 Capital. Ispolink partners include DAO Maker, Polygon, Besco, Junior Enterprises Europe, and Iron Hack.

    What is Ispolink?

    Ispolink is a blockchain-based matchmaking job platform. It uses a combination of blockchain, AI, and other carefully selected ingredients to enhance the experience of job seekers and employers. The platform concentrates on serving the IT and blockchain industry.

    Automated CV Screening

    Instead of recruiters manually going through prospective employees’ resumes, the platform automatically screens a CV. Depending on the targeted vacancy, the protocol automatically calculates a match score that shows how qualified a candidate is for the position.

    Video Resumes

    A video resume goes past the regular text-based version to indicate qualities like communication skills.

    Referral System and Instant Feedback

    Ispolink rewards existing users for bringing qualified users to the platform. However, the disbursement of incentives happens when a referee is hired. The network provides instant feedback to candidates during the entire hiring process.

    ML-powered Matchmaking

    The protocol uses machine learning-driven algorithms to match candidates to open positions. Additionally, the project employs natural language processing (NLP) to extract and interpret information from the CV.

    The matching process considers a candidate’s work experience, technology stack, specific job-required, and soft skills.

    Blockchain-based Degree Verification

    Ispolink confirms degree authenticity for degrees stored on the blockchain to prevent candidates from intentionally providing misleading education qualifications. However, for this to have the desired impact, the protocol works with learning institutions to help them register the issuance of qualification documents on a decentralized network.

    Company Pages

    The protocol enables companies to create their pages and express intimate details such as core values and guiding culture. Additionally, it gives enough room for firms to showcase their accomplishments. In a nutshell, it’s a way for companies to portray their brand and attract the necessary talents.

    Revenue Streams

    Ispolink provides different revenue streams for users. For example, it supports liquidity mining and staking. Other ways users earn incentives include when they sign up and when they get verified.

    Cryptocurrency Payments

    The platform supports virtual currency payments for all hiring services. Although the blockchain payment system is complex, the platform simplifies it into logical steps. For instance, the payment process starts when a user chooses an action that requires payment.

    Next, it indicates the applicable price in both fiat and crypto. If the user wishes to pay through crypto, they must have supported tokens in their wallet. A successful payment procedure leads to a confirmation message from the platform.

    Fortunately, the platform will guide you on the entire process and indicate errors whenever they occur. Note that Ispolink gives users the ability to deposit and withdraw tokens from the platform wallet.

    Critical Technologies Used by Ispolink

    Ispolink runs on the Ethereum blockchain due to its highest number of users. However, due to the platform’s congestion concerns, Ispolink is shifting to layer two scaling solutions such as Polygon. Additionally, the protocol employs Matic Network’s scaling solution on an Ethereum base.

    While the second-largest decentralized network uses a proof of work (PoW) consensus mechanism, Matic uses the proof of stake (PoS) mechanism. As such, Matic can process up to 10,000 transactions per second. Apart from Ethereum, the platform also targets the Binance Smart Chain (BSC).

    Ispolink’s Token Economy

    ISP is the platform’s base assets. The token follows Ethereum’s ERC-20 token standards and powers different aspects to the protocol, such as purchasing hiring packages, paying referral bonuses, rewarding verified users, staking, and governance.

    The token’s total supply is 10,000,000,000 coins. The largest distributions of the tokens go to the ecosystem and marketing that account for 40 and 19 percent, respectively. Other ISP token allocations go to the team, advisors, liquidity, seed, strategic, private, and public sales.

    Note that tokens not sold during the four phases are burnt while the rest remains in active circulation.

    Ispolink recently conducted its triple token sale on DAO Maker, gate.io and Ignition.

    Ispolink Roadmap

    The platform has an extremely detailed roadmap giving a glimpse of what the future holds for its users. For example, it looks to provide a comprehensive mobile application for iOS and Android-powered mobile gadgets, activating ATS integration, and in-platform staking.

    Conclusion

    Ispolink is among very few blockchain-based platforms targeting job seekers and employers. In addition, integrating AI functionalities and in-built crypto payment options puts the project ahead of the line. Notably, the use of a decentralized protocol ensures its activities are immutable and verifiable.

    Placing and verifying educational qualifications on the blockchain captures the presence of falsified information on a CV. Consequently, it leads to quality hires. The use of scaling solutions built on top of Ethereum saves its users from the high transactional fees occasionally experienced on the Ethereum network.

    Additionally, instant feedback to candidates and a match score enhance the quality of job searches. On the other hand, company branding gives room for companies to express themselves and attract qualified candidates.

    Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

  • Collateral Pay ($COLL) ($COLLG): Payment gateway on Polkadot

    Collateral Pay ($COLL) ($COLLG): Payment gateway on Polkadot

    Collateral Pay is a decentralized payment system that merges decentralised finance (DeFi) with Traditional Finance (TradFi), enabling users to store, stake, loan, save, and pay with crypto.


    Since its inception, DeFi has aimed to give participants a better alternative to traditional financing. Reliance on centralized parties is being replaced with decentralized and transparent systems. This is achieved by building digital services in an open, secure, and permissionless manner.

    Additionally, the rise of  DeFi has been nothing less than tremendous. DeFi has grown exponentially and has open the world to new financial opportunities. A year ago, the monetary value locked in DeFi projects was $276 million. As of today, it is a whopping $43.6 billion in value.

    However, unlike fiat, it is a bit difficult to make use of crypto assets outside of their respective blockchains, as there is an absence of “gateways to the real world”. Collateral Pay is that gateway that facilitates this process by bridging DeFi and mainstream finance.

    Background

    Set to launch its marketplace this May 2021, Collateral Pay is an ambitious project supported by more than 12 well-known firms within the blockchain space. The team behind the project is composed of longtime veterans in marketing, blockchain technology, and finance. CEO and founder Chris Longden guarantees that the protocol offers users a much more tax-efficient opportunity.Collateral Pay is described as an ecosystem that works faster and better than any solutions in the market providing participants with an efficient implementation of blockchain.

    What is Collateral Pay?

    Collateral Pay is a Polkadot-powered decentralized payment method that merges DeFi with the traditional finance sector. The protocol enables users all around the world to store, stake, loan, save and pay. The crypto solution is a payment gateway accessed through an interoperable crypto wallet, granting access to spending power by using crypto as collateral at the point of sale.

    Furthermore, under Collateral’s unique algorithm, users are allowed to unlock and make use of their crypto assets without the need of selling them. Interestingly, crypto assets will be used as collateral against merchant payments by users for liquidity.

    Overall, Collateral’s secure ecosystem is supported by a P2P network of borrowers and lenders where all transactions are conducted on-chain. Here, lenders stake crypto assets in staking contracts and receive generous APYs in return. 

    This thorough process is quick and easy, giving users access to instant spending power where assets are used as collateral from the very first point of sale. Precisely, Collateral Pay automatically evaluates at the point of sale the specific amount of digital currency to be bound in a smart contract. This facilitates the payment, and once locked, the fiat equivalent is instantly sent to the seller, legitimizing the transaction.

    Ultimately, Collateral users will be able to leverage crypto assets autonomously, not needing loan drawdown facilities, saving time, and facilitating everyday crypto transactions. The platform is set to be a market leader through its efficient protocol that facilitates purchases in-store and online using crypto as collateral through its worldwide network of merchants. The platform aims to soon compete with prominent solutions like Worldpay, Visa, and Mastercard.

    By leveraging Polkadot’s cross-chain technology, Collateral is set to also seamlessly connect with Ethereum, Bitcoin, and Binance Smart Chain by Q3 2021, with the possibility of additional blockchain compatibility over time

    Decentralized Payment Gateway

    The platform offers clients several special tools, allowing users to enjoy their crypto experience in total security under Collateral’s ecosystem.

    Save

    Collateral Save provides clients with a continuous flow of passive income by staking digital assets in smart contracts that are lent to borrowers, where up to 60% of APY rewards are earned. Overcollateralized crypto assets are used to ensure the security of all staking contracts. Furthermore,  powered by chainlink, the platform’s oracles monitors all collateral crypto prices to ensure the collateral-to-value (CTV) level is maintained, protecting both borrowers and lenders.

    Pay

    Under Collateral pay, participants can pay for services by using the platform’s application or online. Users can simply scan a QR code and lock crypto as collateral. Then, merchants will receive funds directly from Collateral in fiat. The fiat will then be repaid at any given time to unlock the digital assets again.

    Loan

    Through loans, Collateral pay gives users the possibility to finance larger purchases, where sellers or merchants are not involved in the transaction. In general, these larger purchases tend to have the lowest CTV on the market. Hence, users simply have to select the amount they seek to borrow, then lock up the required cryptocurrency to receive funds in a native currency of their choice.

    Merchant

    The Polkadot-based protocol will provide merchants with a brand new market of crypto holders who once were unwilling to take the risk of losing potential upside. The platform will allow merchants to sell goods and services, and receive native currency payments safely within the Collateral pay ecosystem.

    Govern

    The blockchain platform will almost be entirely run by token holders who will have an active role in the protocol’s governance system and decision-making processes. 

    Collateral Pay Tokens ($COLL) and ($COLLG)

    COLL is the utility token for the Collateral protocol while COLLG is the platform’s governance token. Both tokens work hand in hand, as users can earn COLLG tokens by staking COLL tokens. This will allow them to participate in the platform’s governance and influence Collateral Pay’s future.

    Additionally, staking COLL also allows users to receive more COLL as token rewards from the product fees generated on the platform while liquid provider tokens can be staked to provide liquidity to the ecosystem and earn additional COLL.

    There is currently 2,800,000 COLL circulating in the market, with a total supply of 50,000,000 and an initial market cap of USD$1,120,000.

    Conclusion

    Collateral Pay is a unique payment method, that relies on the efficiency of the Polkadot ecosystem to successfully bridge DeFi and the traditional financing sector. Through this decentralized algorithm, users are sure to gain upon every crypto transaction, offering potentially 100% satisfaction to all customers. 

    Upon its imminent expansion, Collateral Pay is sure to disrupt the DeFi space and further blockchain adoption worldwide. The platform’s key features ensure a smooth and secure blockchain experience for all participants.

    Decentralised Finance (DeFi) series: tutorials, guides and more

    With content for both beginners and more advanced users, check out our YouTube DeFi series containing tutorials on the ESSENTIAL TOOLS you need for trading in the DeFi space e.g. MetaMask and Uniswap. As well as a deep dive into popular DeFi topics such as decentralized exchanges, borrowing-lending platforms and NFT marketplaces

    The DeFi series on this website also covers topics not explored on YouTube. For an introduction on what is DeFi, check out Decentralized Finance (DeFi) Overview: A guide to the HOTTEST trend in cryptocurrency

    Tutorials and guides for the ESSENTIAL DEFI TOOLS:

    More videos and articles are coming soon as part of our DeFi series, so be sure to SUBSCRIBE to our Youtube channel so you can be notified as soon as they come out!

    Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

  • DCEP: China’s National Digital Currency Overview

    DCEP: China’s National Digital Currency Overview

    What is DCEP?

    China’s national digital currency DCEP (Digital Currency Electronic Payment, DC/EP) will be built with Blockchain and Cryptographic technology. This revolutionary cryptocurrency could become the world’s first Central Bank Digital Currency (CBDC) as it is issued by the state bank People’s Bank of China (PBoC). The goal and objectives of the currency are to increase the circulation of the RMB and its international reach – with eventual hopes that the RMB will a global currency like the US Dollar. China has recently established an initiative to push forward Blockchain adoption, with the goal of beating competitors like Facebook Libra – a currency that Facebook CEO Mark Zuckerberg claims will become the next big FinTech innovation. China has made explicit that Facebook Libra poses a threat to the sovereignty of China, insisting that digital currencies should only be issued by governments and central banks. DCEP is not listed on cryptocurrency exchanges and will not be for speculation of value.

    DCEP: Will China DOMINATE digital currencies?
    Name:
    DCEP
    Creator:
    China
    Governance:
    Centralized
    Total Supply:
    Unlimited
    Backing Value:
    RMB
    Name:
    Libra
    Creator:
    Facebook
    Governance:
    Centralized
    Total Supply:
    Unlimited
    Backing Value:
    Currency Basket
    Name:
    Bitcoin
    Creator:
    Satoshi
    Governance:
    Decentralized
    Total Supply:
    21,000,000
    Backing Value:
    Energy

    To learn more about Bitcoin, cryptocurrencies and generally how to get started. Check out my course created in collaboration with Jeff Kirdeikis of Uptrennd- Bitcademy: Learn, Invest & Trade Bitcoin – In Under an Hour

    Why is China coming up with a digital currency?

    The significance of DCEP is that it’s designed as a replacement for the Reserve Money (M0) system, cutting back the cost and friction of bank transfers. It is suggested that DCEP will alleviate the risks of offline paper money transactions such as anonymous counterfeiting, money laundering and illegal financing. This is because regulators can better monitor digital currency transactions, which some consider will greatly improve financial and monetary supervision. DCEP can also reduce the costs involved in maintaining and recycling banknotes and coins.

    Basically, DCEP is poised to become a digital version of the RMB.

    Furthermore, the issuance of DCEP is conducive to promoting the internationalization of the RMB and reshaping the current cross-border payment system. This is because prior to the RMB Cross-Border Inter-Bank Payments System (CIPS) going live in early October 2015, RMB cross-border clearing and settlement was mainly done through CHIPS (Clearing House Interbank Payments System) or SWIFT (Society for Worldwide Interbank Financial Telecommunication). However, some consider that both the CHIPS and SWIFT systems have fatal flaws. Firstly, CHIPS is a US company. Whilst SWIFT, in particular, is seen as a cause for concern to the Chinese because due to its foothold in the international banking system, it is almost essential to use SWIFT for inter-bank transfers across countries. Thus whoever controls SWIFT’s data center will have access to information on almost every cross-border remittance, which some in China posit is the US. This is because whilst SWIFT claims to be a neutral international organization, 12 of the 25 directors are either from the US and her allies. Also, its transactional data were found to have been supplied to the US. Hence it is thought that China is being held back by the US via the SWIFT system, and so, in internationalizing the RMB- China requires its own worldwide banking system- i.e. DCEP.

    Hence the Chinese consider that it is a requirement to form a new currency clearing network.

    According to Chinese media, DCEP is seen as the “3rd Wave” aimed at the US.

    A mandate to adopt Blockchain

    China has established a countrywide initiative to push forward Blockchain Adoption. President Xi Jinping has mandated that the ‘country’s development of blockchain technology should be sped up ‘ on Oct 24th in front of the Political Bureau. This speech has also been echoed by Li Wei, head of the People’s Bank of China. In April of 2020, China launched the Blockchain Service Network to unify all the Blockchain related projects in the Nation.

    China has adopted the “Blockchain, not Cryptocurrency”, whereby the benefits of Blockchain is highlighted. On the other hand, cryptocurrencies that are native to Blockchain are suppressed as Cryptocurrency Exchanges and ICOs are banned in the country.

    History and development of DCEP

    Development of DCEP started in 2014 with the establishment of a research institute dedicated to digital currencies and looking at how to improve the Chinese Yuan system with blockchain technology. However during 2014 to 2018, the development process slowed down, probably because the decentralised nature of Bitcoin or blockchain is incompatible with the nature of the Renminbi as a legal national currency. Things rapidly picked up towards the end of 2019 however and this was directly attributable to Facebook preparing to launch Libra, particularly as partner members of the Libra Association and the currencies which Libra was to be backed by had consciously rejected China. Hence, feeling the heat of the competition, China’s central bank felt immense pressure to urgently speed up in the global competition towards a digital currency.

    Former Vice-chair of the PBoC’s National Council for Social Security Fund announced on 22nd June 2020 that China had already completed the backend infrastructure of DCEP.

    Uses for DCEP

    DCEP is a currency created and sanctioned by the Chinese Government. It is not a 3rd party stable coin such as Tether’s cryptocurrency token “CNHT” which is also pegged to the RMB in a 1:1 ratio. DCEP is the only legal digital currency in China (cryptocurrencies such as Bitcoin are not legal tender in China).

    Huang Qifan (Chairman of the China International Economic Exchange Center) said they have been working on DCEP for five to six years now and is fully confident it can be introduced as the country’s financial system. It’s currently being rolled out, with the People’s Bank of China issuing the currency. According to a speech by Huang at the China Finance 40 Forum, “DCEP can achieve real-time collection of data related to money creation, bookkeeping, etc, providing useful reference for the provision of money and the implementation of monetary policies.”

    DCEP is not for speculation

    China has made it explicitly clear that its National Digital Currency is not for speculation. Mu Changchun, Head of the People’s Bank of China digital currency institute made it as “a digital form of the yuan” and that “The currency is not for speculation. It is different to Bitcoin or stable tokens”. This is to the disappointment of the online community in China, where some netizens commented “So there will be no fun in it” on Sina.com.

    It is also not possible to mine DCEP or stake on the DCEP network.

    Cross-border payments with m-CBDC Bridge

    China has joined forces to explore cross-border payments for digital currencies alongside Hong Kong, Thailand, the United Arab Emirates (UAE), and the Bank of International Settlements (BIS). 

    According to a joint statement in February 2021, the People’s Bank of China and the UAE’s central bank are taking part in the Multiple Central Bank Digital Currency (m-CBDC) Bridge project initiated by the Hong Kong Monetary Authority and Bank of Thailand in 2019. 

    The m-CBDC Bridge project will explore the capabilities of distributed ledger technology, through the development of a proof-of-concept prototype. The project ultimately aims to facilitate cross-border, multi-currency, real-time transactions around the clock. 

    This move aligns with China’s long-term ambition to use DCEP to boost the use of RMB in international payments. While the project is currently an alliance between just Beijing, Hong Kong, Bangkok, and Abu Dhabi, it is strongly supported by the BIS, an organisation owned by 63 central banks.

    The announcement also comes mere weeks after China’s joint venture with SWIFT, the dominant network facilitating international payments between banks. The new entity, Finance Gateway Information Service, was registered in Beijing on January 16 with €10 million (US$12 million) as incorporation capital, according to the National Enterprise Credit Information Publicity System, the Chinese government’s enterprise credit information agency.

    Special features of DCEP

    DCEP is a Centralized Currency

    DCEP is a digital currency that is run on a centralized private network – the Central Bank of China has complete access and control of the currency. This is a huge contrast to Bitcoin, which has an open decentralized network where there is no centralized leader. In the case with DCEP, the Central bank of China has the ability to create or destroy DCEP.

    NFC Contact based payment

    According to Official Sina Blockchain, DCEP will have NFC based payment options that don’t require devices to be online during the transfer. This will be poised as a direct replacement of paper money, as DCEP will be usable in areas without internet coverage. In addition, DCEP doesn’t require the mobile device to be bound to a bank account – meaning the unbanked population will also have access to the digital currency.

    With DCEP’s tap payment feature people can transfer money simply by tapping two phones together, without the use of the Internet. So DCEP is not exactly like blockchain either, rather it is their own variant.

    China Construction Bank launches DCEP wallet

    On 29th August 2020, China Construction Bank (CCB) had a soft launch of the DCEP wallet. Users of one of China’s big four state-owned commercial banks found a DCEP wallet feature was available inside their mobile app. Users were even able to navigate to the digital yuan wallet and activate it through registering their mobile phone numbers.

    Finally, users can send/receive digital currency to others by inputting their unique wallet ID or the phone number associated with the bank account.

    CCB DCEP wallet
    CCB DCEP wallet

    However, CCB has disabled the DCEP wallet feature from public access, but not before it gained huge attention. Users searching for this wallet now will only get an error message saying that the function is not yet officially available to the public.

    Tencent to be a major partner of DCEP

    Tencent’s Meituan Dianping has been in talks with the research wing of the PBoC on real-world uses for DCEP. Meituan Dianping boasts billions of dollars in daily transactions on their mobile app platform offering services such as food delivery (similar to UberEats), B&B bookings (similar to AirBnb), ride hailing services, bike sharing, grocery shopping and more. Basically for those in China, all your daily necessities can be met on the Meituan ecosystem.

    The PBoC’s research wing is also in talks with another Tencent-backed company, Bilibili Inc. which provides video streaming services. So whilst the specifics of the partnership are yet to be finalised, it is likely that such cooperation is going to be huge for the mass use of DCEP in China.

    Meituan ecosystem
    Meituan ecosystem (Image credits: GGVCAPITAL)

    Deployment and Distribution

    According to Caijing magazine, the pilot institutions for DCEP will be the 4 major state-owned banks i.e. China Construction Bank, the Agricultural Bank of China, Bank of China and the Industrial and Commercial Bank of China. This initial deployment will serve as an official production test for the currency system, where the network and security will be validated. In the second phase, DCEP will be distributed to large fintech companies such as Tencent and Alibaba to be used in WeChat Pay and AliPay respectively.

    DCEP will operate on a two-tiered system

    The issuance and distribution of DCEP will be based on a two-tiered system.

    The first tier would be transactions between the PBoC and intermediaries. These intermediaries would be financial institutions (e.g. the 4 major state-owned banks i.e. China Construction Bank, the Agricultural Bank of China, Bank of China and the Industrial and Commercial Bank of China) and non-financial institutions such as Alibaba, Tencent and UnionPay. Here, the PBoC would issue DCEP to the intermediaries.

    The second tier would be between the above-mentioned intermediaries and participants in the retail market such as companies (e.g. retail stores) and individuals. In this tier, the intermediaries that have received DCEP will distribute it to retail participants so that it would circulate through the market e.g. through people purchasing items at stores etc.

    The main difference in the issuance and distribution of DCEP compared to traditional cash however is the fact that DCEP would be transferred through electronic wallets, rather than bank accounts.

    DCEP two-tiered system
    DCEP would operate on a two-tiered system (Image credit: https://www.rieti.go.jp/en/china/19122701.html)

    Merchants must accept DCEP

    The central government has mandated that all merchants who accepted digital payments (such as Apple Pay, AliPay and WeChat) pay must accept DCEP. This will give DCEP a large nationwide acceptance in China, with every merchant obligated to participate or face a potential loss of their business license. This will make DCEP the most accepted digital currency in the world.

    DCEP red packets to be launched for Chinese New Year

    China’s DCEP app has launched a red packet gifting feature in time for the Chinese New Year on 22nd January 2023. The app will allow users to send the red packets i.e. “hongbao” containing DCEP to others. This is based on the Chinese New Year tradition of gifting lucky money during the annual festival. In fact, WeChat Pay and Alipay already have this feature for gifting CNY. However, it is the first time that e-CNY will be gifted in such a way, with hopes that this will further pave the way for the mass adoption of DCEP.

    DCEP can be used to pay expressway tolls

    On 28th December 2022, Chongqing Expressway Group announced it has completed the installation of equipment to accept DCEP for expressway tolls. From 30th December 2022, DCEP can be accepted as payment for tolls on the Chongqing Expressway. Users will need to download the e-CNY app and then simply present the payment QR code at the toll booth.

    PBoC’s financial statistics reports now include DCEP/e-CNY

    On 10th January 2023, the PBoC released its annual Financial Statistics Report for 2022. What is worth noting is that for the first time, the PBoC included statistics on DCEP/e-CNY. The Report states that as of the end of December 2022, the amount of digital currency in circulation was 13.61 billion yuan. This equates to around 0.13% of the total balance of yuan (13.61 trillion yuan) in circulation at the end of 2022.

    Are people in China using DCEP?

    According to a report on 28th December 2022, there has been over US$14 billion worth of DCEP transactions since its launch in 2020. Meanwhile, 261 million users have already set up an e-CNY wallet. However, this is considered low adoption since around 903.6 million people use mobile payments in China, according to a 2021 UnionPay report.

    DCEP scams

    Mere hours after DCEP has been announced, various (potentially scam) Chinese exchanges have listed IOUs or knock-offs clones of DCEP. It’s important to know that DCEP is currently only distributed to banks working with the PBoC and will not be available for the public. If you want to find out what are reputable exchanges, check out our top cryptocurrency exchanges guide. It is strongly recommended NOT to trade DCEP until it is officially released as there is no guarantee exchanges have access to the digital currency.

    Knock-off clones of DCEP are already trading in (potentially) scam exchanges.

    How to buy DCEP?

    Currently, DCEP is only available to other banks working with the People’s Bank of China. This will eventually open up to the general public in 2020. There are currently no cryptocurrency exchanges that trade DCEP.

    Implications of DCEP?

    Is DCEP a challenge to the US monetary system?

    The overwhelming view appears to be yes, both from the Chinese and the US perspective. According to statistics from the World Bank, 1.7 billion adults around the world use cash because they don’t have bank accounts. However, two-thirds of this population own a mobile phone, which can be used to make monetary transactions. This is what’s been happening in China, where mobile payments such as Alipay or WeChat Pay have more than 1.7 billion customers across China. Currently, the two online payment companies handle more payments monthly than Paypal did in the whole of 2017 (i.e. USD $451 billion). It’s very common in China to see street vendors accepting Alipay or WeChat pay.

    Alipay and WeChat being accepted at an ATV rental shop

    With the mobile wallet payment infrastructure in place, their cooperation with the PBoC could be the answer to distributing DCEP overseas. This would fit China’s “Belt and Road Initiative”, the aim of which is to build a new trade route connecting Asia with Europe and Africa. The idea is that with DCEP being used by mobile wallets, populations along the Belt and Road can be connected, bypassing existing financial infrastructures completely and giving an opportunity for the unbanked to pay for online purchases and build their savings.

    In the US, the government does not see a demand for digital currencies. In a letter from the Chairman of the Federal Reserve, Jerome Powell, he took the view that many of the challenges a digital currency intends to solve do not apply to the US. In his view, the US payments landscape is already highly competitive and innovative, with plenty of digital payments options for consumers. Powell also commented, echoing the sentiments of those US lawmakers opposing Libra, that a digital payment where you would know and be able to track each and every payment would be unattractive for the US.

    Whilst the House Committee on Financial Services also sees Libra as potentially raising national security concerns, observers consider the challenge from China is not being taken seriously. Because on the other hand, China is worried that Libra will reinforce the dominance of the US Dollar and is therefore working on fast-tracking the launch of DCEP. And it is likely that China will outrun the threat from Libra.

    From a wider perspective, some take the view that DCEP can be used as a weapon against the US in an economic war. This is because as DCEP becomes accepted across the Belt and Road, China will have the power of total surveillance and control over the economic activity of potentially half the world’s population. DCEP will allow China to track everyone’s spending and transactions, and can seize or lock customers’ digital assets in their mobile wallets. We’ve already seen this in China, where together with its “social credit system”, millions of individuals have already been barred from purchasing airline tickets using their mobile wallets.

    Appearance on Chinese television debate show “Tiger Talk”

    On 29th August 2020, I appeared on China’s Phoenix Television show “Tiger Talk” (一虎一席談). Tiger Talk is one of Phoenix TV’s longest-running shows, each week they feature a debate on a major societal issue or event, and would invite experts, academics and guests to participate in the discussion. I was invited by Phoenix Television as an overseas analyst to discuss the topic of the week, namely, “DC/EP: China’s release of digital currency, will it shake the US Dollar’s hegemony?”. You can watch the episode here.

    Boxmining Tiger Talk
    Guest appearance on Tiger Talk

    Implications of DCEP on Bitcoin and cryptocurrencies

    In the first instance, it should always be borne in mind that DCEP and Bitcoin/cryptocurrencies are vastly different. Key differences are that DCEP does not necessarily use blockchain technology and that it is a centralised currency under the control of a centralised authority. Learn more about the differences between DCEP, Libra, Bitcoin and Cash.

    However, the large scale promotion of DCEP on national television in August 2020 is certainly bracing and preparing Chinese citizens for a digital version of the RMB. The gradual rollout of DCEP will also get the average citizen accustomed to the actual usage of digital currencies.

    As a result, many people are excitedly speculating on the possibility of a bridge between DCEP and various existing blockchain projects- with some projects proclaiming they will be the first project to launch on DCEP. However it must be borne in mind that we do not know the full technical details of DCEP, so we do not know how this bridge between blockchain and DCEP will work, if at all. Also, the fact is that China is currently very hostile towards cryptocurrencies, this is mostly due to a number of cryptocurrency scams- such as Plus Token. As a result, the Chinese government have closed several bank accounts found to be involved in cryptocurrency transfers and banned all ICOs, several major cryptocurrency exchanges such as Binance and OKEx and some Over the Counter desks. Hence a lot of cryptocurrency circles and discussions occur underground, such as in private WeChat groups.

    In a confusing twist, however, the CCP’s official media outlets 参考消息, Xinhua and CCTV have been pushing out headlines that crypto assets are the best-performing asset year to date. Dovey Wan, Founding Partner of Primitive Ventures has observed that the real intent behind this media push is difficult to interpret, but so far the Chinese cryptocurrency community see this as a signal that crypto has reached its top. Meanwhile, on the Western front on Twitter, people have been seeing this as a bull signal. Currently, without any further moves or news in China about DCEP or on the cryptocurrency front, we can only wait and see what China’s next move will be.

    Will DeFi push governments to finally adopt CBDCs?

    Decentralised Finance (DeFi) can be considered the cryptocurrency and blockchain star of 2020, having revived the cryptocurrency market and bringing some much-needed revival and positivity. But what is DeFi? In short, DeFi attempts to bring traditional banking to developing industries, but with a twist: it would be open-source, decentralised, cheap and will cut out the middlemen. (Xanax)

    So what can central banks and government do to maintain their dominant status quo whilst benefitting from the technology that DeFi can bring? An answer could be to create a CBDC. In a Forbes article, the author suggests that CBDC would be a positive move for governments since it tokenises money whilst allowing users to enjoy the advantages of cheaper, faster transactions.

    The article also touches upon our coverage of DCEP and discusses China’s progress in testing DCEP contrasted with the progress of introducing a CBDC in the US. It suggests that governments and institutions, however, will need to be quick to catch up as new DeFi solutions in payments, mortgage, insurance etc. are being created weekly, and this legion of fintech innovators are growing. These innovators challenge the status quo, and with the mounting advantages of DeFi, there may soon be a real contender vying for the attention of citizen-consumers.

    FAQs

    Is DCEP backed by Gold?

    The simple answer is u0022Nou0022. On a recent episode of Kitco News, journalist Max Kaiser claimed that China will launch a gold-backed cryptocurrency, with the intention of destroying the USD as a reserve currency. He added that China has already amassed as much as 20,000 tons of gold. However this is mere speculation – China has no plans to return to the Gold Standard nor issue gold-backed cryptocurrencies.

    Will DCEP be interoperable with other Cryptocurrencies

    There are many plans to build gateways that allow the swapping of DCEP to other cryptocurrencies. Projects such as Algorand have stated they want to support DCEP and build possible bridges to swap these currencies. However, as the technical details of DCEP have not been fully revealed, such bridges have not been built yet.

    Who can issue e-CNY?

    There are 7 Chinese commercial banks that can provide e-CNY. They are: ICBC, Agricultural Bank of China, Postal Savings Bank of China China Construction Bank, Bank of China, Bank of Communications, and China Merchant’s Bank. There are also 2 online banks that can provide e-CNY i.e. WeBank (WeChat Pay) and MyBank (Alipay).

    Which Chinese Cities can sign up and use the e-CNY app?

    Currently, there are 12 cities and areas in China which can sign up and use the e-CNY app. They are Shenzhen, Suzhou, Beijing Xiong’an, Chengdu, Shanghai, Hainan, Xi’an, Changsha, Dalian, Qingdao, and Zhangjiakou.

    Can tourists or non- Chinese locals use DCEP?

    No, DCEP is not fully rolled out yet and is only available in select cities in China.

    Is China using DCEP?

    According to a report on 28th December 2022, there have been over US$14 billion in transactions since the launch of DCEP in 2020 and October 2022. Meanwhile, 261 million users have already set up an e-CNY wallet. However, this is considered low adoption since, according to a 2021 UnionPay report, around 903.6 million people use mobile payments in China.

    When will China officially launch DCEP e-CNY?

    Whilst there is ongoing DCEP/e-CNY testing on in increasing scale, there is no official announcement as to when and how China will fully roll out DCEP/e-CNY.

    Sources:
    https://www.forbes.com/sites/lukefitzpatrick/2020/10/06/defi-may-push-governments-to-adopt-cbdcs/#2d2c1f6f3f5e
    https://www.asiacryptotoday.com/how-china-and-the-world-reacted-to-xi-jinpings-blockchain-comments
    https://venturebeat.com/2019/09/15/wake-up-us-federal-reserve-china-just-showed-how-digital-currency-is-done/
    https://www.reuters.com/article/us-china-blockchain-idUSKBN1X704A
    https://u.today/just-in-chinese-central-bank-to-launch-digital-currency-called-dcep
    https://beincrypto.com/chinas-dcep-to-be-worlds-first-national-digital-currency-says-ccie-vice-chairman/
    https://qz.com/1710850/chinas-central-bank-could-gain-from-a-digital-yuan-cbdc/
    https://www.asiacryptotoday.com/news/china-digital-yuan-dcep/
    https://news.bitcoin.com/over-3000-atms-in-beijing-offer-digital-yuan-withdrawals/
    https://www.coindesk.com/china-industrial-commerce-bank-digital-yuan-cash-convert
    https://www.theblockcrypto.com/post/95266/beijing-digital-yuan-cash-atm
    https://www.scmp.com/tech/policy/article/3122924/beijing-exploring-digital-yuan-cross-border-payments-joining-hong-kong
    https://www.coindesk.com/central-banks-of-china-uae-join-hong-kong-thailand-cbdc-payments-project
    https://www.scmp.com/economy/china-economy/article/3135886/china-digital-currency-when-will-e-yuan-be-launched-and-what
    https://www.scmp.com/economy/china-economy/article/3120582/chinas-swift-joint-venture-shows-beijing-eyeing-global
    https://www.scmp.com/economy/china-economy/article/3135650/china-digital-currency-hong-kong-shenzhen-proposed-expressway
    https://www.coindesk.com/china-cbdc-wage-pilot

    Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

  • What will happen to major cryptocurrency exchanges and traders? Hong Kong proposes strictest regulations against them yet.

    What will happen to major cryptocurrency exchanges and traders? Hong Kong proposes strictest regulations against them yet.

    On 3rd November 2020, Hong Kong’s Financial Services and Treasury Bureau (“FSTB”) issued a Public Consultation on Legislative Proposals to Enhance Anti-Money Laundering and Counter-Terrorist Financing Regulation in Hong Kong (“Legislative Proposals”). Specifically one of the proposals concerns cryptocurrency exchanges referred to in the Consultation Paper as virtual asset services providers (“VASPs”)

    These regulations are not yet enacted. The FSTB says it welcomes written comments from the public on the Legislative Proposals on or before 31st January 2021.

    Current state of regulation of VASPs and Virtual Assets (“VAs”) in Hong Kong

    Current regulatory requirements for VASPs and VAs in Hong Kong

    The FTSB notes that VAs are not considered as legal tender and are not generally accepted as a means of payment in Hong Kong. However, they are aware that there are some VA trading activities operating locally. In light of this, Hong Kong’s Securities and Futures Commission (“SFC”) issued a position paper in November 2019 (“SFC Position Paper”). The SFC Position Paper outlined some regulatory standards similar to those applicable to licensed securities brokers and automated trading venues, for licensing of VA trading platforms. Notably, this was only an opt-in and voluntary regime and ONLY applied to those platforms which enabled clients to trade VAs with securities feature. Those platforms which solely traded non-securities VAs are not covered.

    Hong Kong as a member jurisdiction of the Financial Action Task Force (“FATF”)

    The FATF comprises of 39 major worldwide economies and oversees the implementation of the FATF Standards, which are comprised of 40 Recommendations and 11 Immediate Outcomes (“Standards”). Member jurisdictions do mutual evaluations to see if they comply with these Standards which are updated from time to time. One of the more recent additions to the Standards was in February 2019, where jurisdictions were required to subject VASPs to the same range of anti-money laundering (“AML”)/counter-terrorist financing (“CTF”) obligations applicable to financial institutions and designated non-financial businesses and professions.

    Hong Kong was subject to a mutual evaluation and a Report on Hong Kong was published in September 2019, where the FATF will specify recommendations on areas for improvement. Hong Kong is scheduled to undergo a regular technical compliance assessment in February 2023 and an effectiveness assessment in June 2024. The Legislative Proposals are specific in that they “…will be expected to have introduced AML/CTF regulation for the VASP…sectors…” So it is quite apparent their intention that the Legislative Proposals will be passed into law in time for June 2024.

    The Legislative Proposals specifically notes that other FATF member economies have either set up or are setting up their own regulatory and supervisory regimes for VASPs.

    Proposals put forward in the Consultation Paper

    Specifically, the Legislative Proposals suggest amending the current Anti-Money Laundering and Counter-Terrorist Financing Ordinance (Cap. 615 of the Laws of Hong Kong) (“AMLO”). Here’s A summary of the Legislative Proposals:

    Expanding the scope of the AMLO to cover VASPs (currently VASPs are not included).

    Implement a licensing regime for VASPs where any person intending to conduct the regulated business of a virtual asset trading platform in Hong Kong will be required to apply for a licence from the SFC and also need to meet a “fit and proper test” similar to that required of other financial sectors. Licensed VASPs will then be subject to the AML/CTF requirements under Schedule 2 of the AMLO and “…other regulatory requirements for investor protection purposes”. Schedule 2 of the AMLO basically sets out requirements relating to customer due diligence and record-keeping, and special circumstances. Examples of this include identification checks and to continuously monitor business relationships.

    Give the SFC powers to supervise a VASPs’ compliance of the AMLO requirements.

    Then the question is, what are VASPs or VAs?

    Scope of the Legislative Proposals

    The Legislative Proposals specifically covers VASPs and VAs, so it is important to know their definition. This is set out in the Legislative Proposals.

    Virtual Asset Services Providers

    The Legislative Proposals takes the definition of VASPs from that of the FATF and is defined as, “…a VASP is a person who, as a business, engages in specified activities involving VAs. The specified activities cover (i) exchange between VAs and fiat currencies; (ii) exchange between one or more forms of VAs; (iii) transfer of VAs; (iv) safekeeping and/or administration of VAs or instruments enabling control over VAs; and (v) participation in and provision of financial services related to an issuer’s offer and/or sale of a VA.”

    Virtual asset exchanges

    The Legislative Proposals proposes to designate the business of operating a VA exchange as a “regulated VA activity” under the AMLO and require a VASP licence from the SFC and subject to passing the “fit and proper” person test and other regulatory requirements.

    Specifically a VA exchange is proposed to be defined as “…any trading platform which is operated for the purpose of allowing an offer or invitation to be made to buy or sell any VA in exchange for any money or any VA…”

    The Legislative Proposals, however mention that “peer-to-peer trading platforms” will not be considered as a VA exchange and thus not subject to the licensing requirements. According to the Legislative Proposals, peer-to-peer trading platforms are platforms that only provide a forum where buyers and sellers post their bids and offers, with or without automatic matching mechanisms, for the parties themselves to trade at an outside venue. However, the actual transaction must be conducted outside the platform, and the platform is not involved in the underlying transaction. If for example the platform comes into possession of any money or any VA at any point in time, they would still be considered a “VA exchange”.

    VA activities outside of exchanges (OTC desks etc): Are they covered?

    However there are other businesses dealing with VAs that aren’t exchanges. For example VA payment systems, VA custodian services and over the counter trading and crypto ATMs (Genesis Block Hong Kong comes to mind).

    According to the Legislative Proposals, they already have interface with financial institutions (e.g. when converting into fiat). This means that their money flow is already traceable for AML/CTF purposes and are already subject to the statutory obligations of reporting suspicious transactions etc. Hence the FSTB says they will nevertheless keep in mind the evolving landscape in relation to these activities and the licensing regime will be kept flexible so it may be expanded to cover other VA activities if the need arises in the future.

    Virtual Assets

    The FSTB also intends to adopt the definition of a VA as provided by the FATF but in more specific terms. The proposed definition is that a VA is, “…a digital representation of value that is expressed as a unit of account or a store of economic value; functions (or is intended to function) as a medium of exchange accepted by the public as payment for goods or services or for the discharge of a debt, or for investment purposes; and can be transferred, stored or traded electronically.”

    What is not covered under the scope of a VA would be central bank digital currencies (China’s DCEP comes to mind), financial assets (e.g. securities) which are already regulated by the SFO, and closed-loop limited purpose items that are non-transferable, non-exchangeable and non-fungible (e.g. gaming coins).

    However stablecoins (i.e. VAs purportedly backed by some form of asset to stabilise their value) are covered by the definition of VAs.

    Regulatory requirements: are retail investors banned from trading cryptocurrencies?

    If the VA business falls under the definition of a VASP and are not other VA activities which are excluded, they will be subject to the licensing regime. With reference to the existing opt-in regime, the Legislative Proposals proposes to empower the SFC to impose licensing conditions on licensed VASPs and regulatory requirements. One such requirement that is particularly concerning to cryptocurrency enthusiasts is the requirement that VASPs should only offer services to “professional investors”. However the Legislative Proposals suggest that this restriction should only be required at the “initial stage” and note that the SFC will continue to monitor the market and reconsider this position as the market matures in the future.

    Hong Kong’s crypto community reacts to the Legislative Proposals

    Sam Bankman-Fried, CEO of FTX Exchange gave his thoughts on the Legislative Proposals. He noted that it is still in the consultation stages and that whether or not an exchange “is” in Hong Kong so as to be covered by the Legislative Proposals are subtle and non-obvious.

    OSL, which is the only known recipient of “approval in principle” from the SFC under the current opt-in licensing regime appears more positive. On Twitter, OSL mentions that the Legislative Proposals significantly supports OSL’s strategic objective to be the first choice for regulated digital asset ventures and that it can balance market supervision and development, and provide investors with better protection.

    OKEx has not made any comments on this. We don’t see this as surprising considering they have more pressing issues to deal with, such as the fact that OKEx withdrawals are still suspended due to the arrest of Star Xu.

    Same can be said for Huobi, which is also dealing with rumours concerning the arrest of a Senior Executive by Chinese local officials.

    Bitmex of course is also in a bit of hot water, as civil and criminal proceedings have been respectively issued by the US DOJ and CFTC against BitMEX, its CEO Arthur Hayes, together with other key personnel and affiliates. Their CTO was also arrested in the US.

    Meanwhile, Leo Weese, Co-founder at The Bitcoin Association of Hong Kong gives his take in a blog post. He notes that whilst he is not opposed to regulation per se, the Legislative Proposals “…a massive overreach of the SFC’s mandate and a de facto ban of Bitcoin in Hong Kong”. In particular, Weese criticises the Legislative Proposals as confusing and unclear, noting also that it is the most restrictive proposal compared to any other FATF member economies. However, it can also be considered that it is merely the SFC’s initiative to implement FATF decisions rather a conspiracy to ban Bitcoin. Finally, Weese expects significant push back against the Legislative Proposals given previous resistance against previous initiatives aimed at money laundering.

    Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.

  • Cryptocurrency Exchange News (November 2020)

    Cryptocurrency Exchange News (November 2020)

    Cryptocurrency Exchanges are facing additional regulation and scrutiny around the world. Two key exchanges – OKEX and Huobi are under regulatory scrutiny in China. One of the reasons for the scrutiny is that both these exchanges had a huge footprint in China prior to the 2017 Exchange ban. To find out about top cryptocurrency exchanges, check out our Exchange Tier List. Here are the major changes to the exchange scene in November 2020.

    OKEx Exchange withdraws suspended

    It has been almost a month since Okex Exchange suspended all withdrawals from the platform. This was due to one of their private key holders (Star Xu) being detained for investigation by a “public security bureau”. OKEx has always claimed that Xu is not detained but only actively cooperating with the relevant authorities for something unrelated to the Exchange back in 2019.

    No withdrawal has happened since 16 October 2020; in OKEx’s last Twitter post, dated 9 November 2020, they claim that the function is not yet active but funds are safe and unaffected.

    Withdrawals reopened!

    After more than a month since their suspension announcement, Okex exchange has finally reopened unrestricted withdrawals on November 27. In addition, there will be rewards for active users. Read all the details in our developing article.

    KuCoin recovers around 84% of funds in hack

    As covered in our previous Newsletter, KuCoin had confirmed on 26th September 2020 that they had been hacked, resulting in around USD $236m worth of funds being lost.

    On 11th November 2020, CEO and Co-founder Johnny Lyu confirmed that around 84% of affected assets have been recovered. Several means were utilised to do this, for example on-chain tracking, contract upgrade and through the judicial system.

    Currently, 176 of their listed tokens have resumed full services, and it is expected that the remaining listed tokens will all be re-opened before 22nd November 2020.

    Update from CEO and Co-founder Johnny Lyu on the KuCoin hack situation

    Huobi Rumors go wild

    On 2 November 2020 a few big transactions worth hundreds of millions into Huobi Exchange have been spotted; although this could be routine for a big Exchange like this, users were worried since the issues with OKEx exchange were still ongoing.

    There were also rumours that, similar to OKEx, key executives of Huobi were detained for investigations.

    This created an escalated FUD that ended up with a massive drop in value for $HT (Huobi Token), as well as worried users quickly withdrawing their cryptocurrencies from the Exchange.

    Huobi official account subsequently tweeted denying all rumours and classifying them as false.

    For now, everything seems to be back to normal and no more news have emerged since.

    See our ongoing coverage of the Huobi rumours.

    Binance Exchanges news

    Binance Uganda merges with Binance.com

    A few weeks after Binance Jersey announced that the Exchange, launched in January 2019, will be fully closed by 30th November 2020 (no explanation was given but it’s presumed that it wasn’t necessary anymore, after deposits in EUR and GBP have been enabled directly on Binance.com), Binance Uganda will cease to exist as well.

    Binance Uganda was launched in June 2018 and has been the first fiat-to-crypto Binance platform, even though it had been stated more than once that it was a separate entity capable of independent decisions.

    An explanation was provided by the Chief Executive Officer (CEO) Changpeng Zhao:

    “All the features that Binance Uganda provides [are] now covered by Binance.com together with our fiat channel partners. There’s a very minimal number of users on there, so it doesn’t make sense for us to maintain two platforms”.

    The process will consist of three different phases: Closure of Deposits and New Registrations; Closure of all Trading Services, and final Hard Shutdown on the 28 November 2020.

    Users are strongly recommended to transfer their funds out of the Exchange before 00:00 UTC on 28/11/2020.

    Is Binance blocking US-based users?

    Reports are emerging that Binance has started to block users based in the US from accessing the Exchange. According to The Block, emails were circulated to US-based users who were told to withdraw their funds within 90 days.

    This is in any event in line with their announcement back in September 2019 that they will no longer serve customers from the US. They are also likely doing this now considering the ongoing legal actions against BitMEX and its key personnel.

    Binance.com is now giving a 14 days notice to US customers

    As a consequence to what we reported a few weeks ago, it appears that some US customers who are still using the “.com” version of the exchange are receiving a 14 days notice letter. In the email, as they reported, Binance is informing that due to their “periodic sweeps”, US residents are being asked to withdraw all their funds within 14 days or their funds will be blocked.

    It is not clear whether the identification process is only based on KYCs or on IP addresses as well; in the first case, it could be possible that US customers who skip the KYC process accepting lower deposits/withdrawals limits could still use the platform.

    Binance.com has been trying to remove its US customers for a while as the exchange doesn’t have any regulatory standing in America. US customers can use Binance.US, an exchange with far less pairs that is therefore not as attractive to traders as the classic “.com” version.

    Coinbase Pro is disabling Margin Trading

    In a blog post on Nov 24, the Chief Legal Officer Paul Grewal announced that customers wouldn’t have been able to place margin trades after November 25, 2PM PT time. The existing positions will remain effective until the last one will have expired; at that moment the product will go offline.

    The decision comes as a consequence to the finalized “Interpretive guidance on actual delivery of Digital Assets” by the CFTC (Commodity Futures Trading Commission) in March. You can read more here. In the letter we can read:

    “We believe clear, common sense regulations for margin lending products are needed to protect and provide peace of mind to U.S customers. We look forward to working closely with regulators to achieve this goal”.

    Australian Exchange BTC Markets exposed users’ data

    On December 1st during a routine marketing round of emails to their users, Australian exchange BTC Markets, one of the most famous in the continent, accidentally exposed their users’ data. Names and emails where all together displayed in the “to” field and sent in batches of 1000 at a time, exposing each personal user’s data to 99 other email addresses.

    Caroline Bowler, the CEO, immediately confirmed the data exposure adding that nothing more than names and emails were exposed, while funds and passwords remained safe. Nonetheless, we know this type of exposure can (and probably will) lead to unwanted campaigns or phishing emails, therefore users should always doublecheck the sender of the emails before clicking anything suspicious.

    The exchange is now working on additional measures and has advised their clients to change email passwords and set up 2 factor authentication on their accounts.

    Final reminder

    Centralised cryptocurrency exchanges do have custody of the cryptocurrencies in your account trading wallets. Therefore if anything happens to the exchanges, your funds can be affected!

    So don’t keep more funds in exchanges than you need for day to day use or trading! Keep your cryptocurrencies safe and under your OWN custody, ideally in a hardware wallet.

    We recommend the Ledger Nano X. Check out our review and set up and installation guide.

    Disclaimer: Cryptocurrency trading involves significant risks and may result in the loss of your capital. You should carefully consider whether trading cryptocurrencies is right for you in light of your financial condition and ability to bear financial risks. Cryptocurrency prices are highly volatile and can fluctuate widely in a short period of time. As such, trading cryptocurrencies may not be suitable for everyone. Additionally, storing cryptocurrencies on a centralized exchange carries inherent risks, including the potential for loss due to hacking, exchange collapse, or other security breaches. We strongly advise that you seek independent professional advice before engaging in any cryptocurrency trading activities and carefully consider the security measures in place when choosing or storing your cryptocurrencies on a cryptocurrency exchange.