As we have learned from the collapse of FTX, the crypto space is not shy of company bankruptcies and criminal activities. But what exactly happens to crypto seized by the government? As smart investors, it is helpful to know how crypto forfeiture laws work, as crypto regulations are on the rise.
What are Forefeited Crypto Assets?
The term “frozen, seized or forfeited” in the legal field refers to the state of an asset, including cryptocurrencies. When law enforcement seizes these assets, they are frozen at a specific address. If the government claims ownership of the seized cryptocurrencies, they are considered forfeited.
The process of “crypto asset realization and legal forfeiture” enables the government to confiscate digital assets for law enforcement purposes by identifying, separating and seizing virtual currencies. With numerous reports of seized assets as well as warnings from leading regulators about digital assets, it is becoming increasingly evident that regulation of cryptocurrency is necessary, but currently in a state of uncertainty.
How Crypto Exchanges Approach Suspicious Transactions
Most crypto exchanges have compliance tools to monitor transactions and meet regulatory requirements. Suspicious activity may be detected based on the structure of the transactions, movement of value, or if the source or destination of funds is illegal.
When a user engages in suspicious activity, the exchange will first request an explanation from the user, and temporarily limit their ability to transfer funds. Since crypto exchanges are centralized entities, they have the power to freeze the user’s funds or ban the user from the platform if they do not meet legal requirements.
The actions taken will depend on the level of risk posed by the transaction, the user’s response, the user’s previous behavior, and the exchange’s regulatory obligations. Using KYC/AML procedures in place, the exchange will then file a report to law enforcement agencies or financial authorities — in the case of U.S., that would be the Financial Crimes Enforecement Network (FinCEN).
What Happens to Crypto Seized in Criminal Investigations?
Once a strong case has been built against a suspect, financial authorities and law enforcement agencies may work with the crypto exchange holding the suspect’s digital assets to either transfer them to a government-controlled wallet or freeze them indefinitely. Sometimes, the assets stay in the suspect’s personal wallet and they may surrender the funds in exchange for a reduced sentence.
The seized cryptocurrencies are usually kept in this manner until a court decision is made. If the defendant is found not guilty, the assets are returned, but if they are convicted, the forfeiture of the assets is part of their sentence. If a conviction occurs, another process is initiated to determine any third-party ownership of the assets that the government aims to seize.
Once all ownership interests have been addressed, the remaining funds are sold for fiat currency and distributed among the agencies involved in the case. The funds are usually used for compensating identified victims or going to government treasuries. This process altogether may lead to a dump on the market, depending on the size of the assets being sold.
Our #1 priority is to serve our clients and preserve their assets. Therefore, in consultation with our professional financial advisors and counsel, we have taken the difficult decision to temporarily suspend redemptions and new loan originations in the lending business.
Genesis stated that the withdrawal requests have exceeded its current liquidity, which raised concerns about the firm going insolvent. Because Genesis is directly affiliated with some of the largest crypto institutions, its fall could start another domino effect that is even more devastating than the FTX contagion.
In case you are out of the loop, we have covered the entire timeline of the FTX contagion in chronological order listed down below:
Genesis was the biggest creditor to 3AC, lending $2.4 billion. After 3AC went bankrupt, Genesis filed a $1.2 billion claim against them. When 3AC failed to provide the required collateral, the parent company of Genesis, Digital Currency Group (DCG), stepped in and assumed the $1.2 billion claim, leaving Genesis with no outstanding liabilities to 3AC.
By Q3 2022, their market activity drastically fell, with loan originations falling from $50 billion in Q4 2021 to a mere $8.4 billion. Despite the situation, institutional investors still believe they were crypto’s safest counter-party.
Gemini’s Exposure to Genesis Trading
Gemini, one of the top crypto exchanges regulated in the U.S., announced that there would be withdrawal delays with its Earn product, in which Genesis is a lending partner. If you do not know how Genesis ties into Gemini Earn, here’s how it basically works:
After the lenders give their crypto to Gemini, it will be given to Genesis for them to lend out to a fund. The borrowing party will pay fees for this, which will be shared between Gemini and the lenders. The problem now is that Genesis is having liquidity issues, thus they are unable to give Gemini back their crypto. This means that lenders on Gemini Earn cannot get their crypto back.
Although Gemini assures this does not impact any other products and services, Gemini customers are rushing to get their funds out fearing the exchange is next to go down as the FTX contagion spreads. Over the past 24 hours at the time of writing, Gemini has seen $570 million in withdrawals and ETH withdrawals reached an all-time high on the exchange.
Genesis Trading’s Impact on the Crypto Market
It is not just Gemini but also many other CeFi platforms and major hedge funds use Genesis for their yield product. Moreover, many crypto whales opt to give their funds directly to Genesis to earn yields as well as custodial services. If Genesis is unable to give them back their crypto, many lenders worldwide could potentially lose their asset.
Genesis is also a sister company of Grayscale, the world’s largest Bitcoin fund (GBTC) and one of the largest Bitcoin holders worth $11 billion at the time of writing. If Grayscale is affected by this, there is a possibility that Grayscale will dissolve GBTC to pay back lenders. This impact of this could be huge.
2.
Today, @AutismCapital said Genesis may have solvency issues and there is a possibility that Grayscale will dissolve GBTC.@GenesisTrading is indeed facing a liquidity crisis due to FTX and 3AC, but @Grayscale said that the normal operation of GBTC will not be affected. pic.twitter.com/Fpdw3Es6SK
However, Grayscale assured users that Genesis is not a counterparty or service provider for any Grayscale product, which means they will not be affected by Genesis suspending withdrawals. But in light of recent situations where FTX and Alameda claimed that they are two independent entities, sceptics are demanding a full audit to prove customer funds are safe.
Genesis Trading Lays Off 30% of Workforce
On 5th January 2023, Genesis Trading announced a large-scale layoff in order to reduce cost. According to sources close to the matter quoted by Coindesk, 30% of its workforce were cut, which especially affected the sales and business development departments. In addition to Genesis previously slashing 20% of its workforce in August, the company now has around 145 employees.
The layoff follows shortly after Genesis Interim CEO Derar Islim sent a letter to clients on January 4, addressing the fact that the firm needs more time to sort out its financial issues. However, time is not something Genesis can afford as it faces increasing pressure from creditors.
Genesis currently owes $900 million to Gemini, and is due to come up with a solution by 8th January 2023. Gemini co-founder Cameron Winklevoss believes that DCG is to blame and should be held responsible for its subsidiary company’s situation. In an open letter to DCG CEO Barry Silbert, Winklevoss accused him of “bad faith stall tactics” and claimed that a $1.675 billion loan from Genesis to DCG is the reason why Genesis is facing liquidity issues.
Genesis Trading Considers Bankruptcy
According to Wall Street Journal, Genesis hired investment bank Moelis & Company to review Chapter 11 bankruptcy filings. A Genesis spokesperson explained that it is to “preserve customer assets and drive the business forward.”
As of 19th January 2023, Genesis is laying the groundwork for a bankruptcy filing, according to Bloomberg. Reports indicated that Genesis is in confidential negotiations with various creditor groups in an attempt to raise cash. However, if Genesis fails to raise capital, it is highly likely they will file for bankruptcy.
Digital Currency Group (DCG) Under Severe Pressure Amid Genesis Crisis
On 17th January 2023, DCG halted dividend payments to preserve cash. According to a letter to DCG shareholders reported by Bloomberg, DCG is focusing on strengthening their balance sheet by reducing operating expenses and preserving liquidity. As the parent company of Genesis, this move is most likely the result of the financial crisis Genesis is facing.
Moreover, CoinDesk, whose parent company is DCG, is hiring advisors at investment bank Lazard to explore options for a potential sale, including a partial or full sale of the company. According to Wall Street Journal, CoinDesk has actually been privately seeking a deal for months, and has received numerous offers. Whether this is related to the Genesis and DCG crisis, no parties have responded to requests for comment.
CONFIRMED: Genesis Trading Filed for Chapter 11 Bankruptcy Protection
According to latest news by CNBC, Genesis Trading filed for Chapter 11 bankruptcy protection late Thursday night in Manhattan federal court. Over 100,000 creditors were listed in the company’s bankruptcy filing, with aggregate liabilities ranging from a whopping $1.2 billion to $11 billion.
In its filing, Genesis stated that it anticipates that after the restructuring process, there will be funds available to pay off unsecured creditors – a group that can be completely eliminated in bankruptcy cases if the circumstances are particularly dire. They also noted the bankruptcy only affects its lending business, and that its derivatives and spot trading business will continue unhindered.
Coinbase Data Sharing Policy Takes Effect on 22nd January 2023
On 23rd December 2022, Coinbase publicly announced that they would be sharing and selling customer data for marketing purposes as well as other business related purposes. According to their notice, this includes both active and former customers:
“If you are a new customer, we can begin sharing your information 30 days from the date we sent this notice. When you are no longer our customer, we continue to share your information as described in this notice. However, you can contact us at any time to limit our sharing.”
Reddit User Claims Coinbase Ignores Opt Out Requests for Data Sharing
This is in accordance with U.S. financial law allowing users to opt out of financial and personal data sharing for marketing purposes under the Gramm-Leach-Bliley Act (GLBA). However, according to Reddit user u/durg0n, they had repeatedly request to opt out of data sharing with Coinbase over the past month, but Coinbase did not respond to their request.
Despite the Reddit user filing a complaint with the Consumer Financial Protection Bureau (CFPB) and even closing their account in protest, Coinbase still did not agree to limit data sharing with marketers and affiliates.
How to Opt Out of Coinbase Data Sharing?
Based on feedback from other Reddit users, Coinbase customers can try the following methods to opt out of Coinbase’s data sharing.
If you have a current/active account, there is an opt-out setting on the website/app people are reporting success with:
Website: Settings > Privacy > Share my Personal Info
App: The 9 dots in the corner > Profile and Settings > Privacy > Share my Personal Info
Note — You should double-check it is properly set as it seems to be defaulting to sharing enabled, even in Europe.
Not all locations appear to have the opt-out setting available (ex: Argentina). If you live in such a country, try contacting Coinbase Support to opt-out manually.
If you have a closed/former account, the only option is to contact Coinbase support. Reddit user u/durg0n has tried this method, but mentions it is still worth a try.
If you have an old open account, you may be forced to agree to the new Terms of Service (ToS) in order to access the privacy settings. Please note that the newer ToS’s include other forms of data sharing and arbitration. Accepting it may open you up to data being used in other ways and limit your legal rights. According to Reddit comments, it is probably better to deal with Coinbase Support and send in a written request. But you could accept the new TOS and use the website to opt-out if you don’t care about the TOS.
If you have already ‘deleted’ your data, you should write in and opt-out anyway. Coinbase retains some ‘deleted’ data of former customers (ostensibly required for regulatory purposes), and this may be subject to the data sale. u/durg0n suggests writing in to Coinbase Support that you wish to limit data sharing to be safe, and carefully read the reply to see if they actually did it or not.
2023 started off with the explosive rise of Bonk ($BONK), a Solana-based meme coin. In the process, some people made a lot of money, and some did not even have to invest a dime as they were eligible for $BONK airdrops as Solana users. It is important to remember that meme coins are purely speculative and extremely volatile, but smart traders are able to recognize patterns and trends, allowing them to capitalize on these opportunities.
What are Meme Coins?
Meme coins are cryptocurrencies that are created for the purpose of entertainment and humor. They are often based on popular internet memes. Dogecoin is the most famous example, a dog-themed token based on the viral Doge meme in 2013.
What started as a joke quickly became a driving force in the crypto market. Thanks to Dogecoin’s success in 2021, the meme coin market rapidly expanded, and is now valued over $17 billion in total market capitalization.
Why are Meme Coins So Popular?
Investing in meme coins present a low-entry barrier. Since meme coins are typically valued at pennies per token, investors can acquire large amounts of tokens for a relatively small price. As a result, investors can gain significant profits if these tokens spike up in price. Many investors view meme coins as a way to make a quick profit, as they are often volatile and can be traded for a profit.
In contrast to actual blockchain projects such as Ethereum or Aptos, meme coins have no utilities at all. They are less about technology and solutions, and more about fun and community engagement. Additionally, meme coins are often seen as a way to show support for a particular meme or cause, which can be a powerful motivator for investors. Instead of complex blockchain terminologies, meme coin communities focus on building on their biggest facility — humor. Because of this, meme coins are a good at exposing newcomers to the crypto space.
The Psychology Behind Investing in Meme Coins
The originator of the term “meme” is Richard Dawkins. In his book “The Selfish Gene”, he explains that when a cultural meme becomes viral and is attached to an exchangeable value, it can theoretically become an actual currency. With blockchain technology, memes can literally become cryptocurrencies.
As such, they have become increasingly popular in the cryptocurrency space due to their ability to post rapid gains and reach incredible market capitalization and popularity levels in a very short period. This phenomenon can be attributed to two main factors: Social Media Hype and Fear of Missing Out (FOMO).
Social Media Hype
We are currently living in the Internet age, where our average attention span is short. As such, memes could prove to be a powerful marketing tool because they are simple, entertaining, and engaging. When used properly, memes are a low-effort marketing strategy that can drive organic engagement.
Generating hype via social media channels has been a successful strategy for many meme coin projects. By creating shills and utilizing prominent influencers and mainstream celebrities, projects can generate excitement and attract potential investors, even if there is limited information available about the project. This growth, although organic, is based on “unverified beliefs” and inflated utility. Meme coins have been particularly successful in leveraging this strategy, leading to a surge in their token prices.
Fear of Missing Out (FOMO)
The volatile nature of the crypto market is often driven by ambitious investors who jump into new projects with the hope of making a profit or not missing out on the project’s potential success. This fear of missing out on further profits has been a major factor in the success of meme coins.
The price growth that follows the hype marketing is further augmented by FOMO and widespread hype. This trend has enabled meme coins to gain hundreds of thousands of followers, mainly due to their meme culture, before they adopted a reasonable utility. Additionally, as meme coins generally appeal to less experienced retail investors, they tend to jump on the bandwagon in hopes of making profit and being part of a large community.
The Risk of Investing in Meme Coins
While meme coins can be a great way to make a quick profit, they also come with a certain amount of risk. As with any investment, there is always the potential for losses. Additionally, because meme coins have no utilities, they are purely speculative assets. Therefore, they are often highly volatile, meaning that prices can change quickly and without warning. As such, it is important to do your research and understand the risks before investing in meme coins.
Key Takeaway
At its core, meme coins are purely speculative, and investing in them is somewhat of a gamble. However, smart traders are able to identify trends before they break out. Because meme coins typically rely on hype, they monitor activities on the niche market via social media channels or word-of-mouth. Because these tokens are usually valued at pennies per token, they are able to secure a position before any price surge or drop. But from that point on, it is really just a bet.
U.S. Government Launches Website for Victims of FTX Collapse
The U.S. government has launched a website for victims of the FTX collapse to communicate with law enforcement in regards to former FTX CEO Sam Bankman-Fried’s “alleged” fraud. In an order late Friday night, U.S. District Judge Lewis Kaplan in Manhattan authorized federal prosecutors to use the website to speed up the process given the massive scale of the FTX collapse.
FTX owes money to at least 1 million people including creditors and customers. This would help prosecutors with their case immensely as it is ‘”impractical” to contact each victim individually and get their testimony, the prosecutors remarked in the court filing.
Federal Law Requires Prosecutors to Contact FTX Victims
Federal law requires prosecutors to contact possible crime victims to inform them of their rights, including the rights to obtain restitution, be heard in court and be protected from defendants. “If you believe that you may have been a victim of fraud by Samuel Bankman-Fried, A/K/A/ ‘SBF,’ please contact the victim/witness coordinator at the United States Attorney’s office using the email address listed below for assistance in verifying whether you are a victim in this case,” stated in the website.
In criminal cases, prosecutors are required to notify victims ahead of plea or sentencing proceedings and allow them enough time to give testimony if they want to be heard. Based on the number of victims who provide such notice, the court will rule on the manner in which victims will be heard at such proceedings,” Kaplan wrote in his court order.
FTX Victim Testimonies Strengthen Arguments
Recently, Bankman-Fried has pleaded not guilty to eight counts of wire fraud and conspiracy over the FTX collapse. Prosecutors have said he stole billions in customer deposits to pay debts for his hedge fund, Alameda Research, and lied to investors about the exchange’s financial condition.
Though Bankman-Fried has acknowledged risk management shortcomings, he did not consider himself criminally liable. In such a case, the direct evidence regarding the case may not be enough, hence testimonies of the victims can greatly strengthen arguments. Moreover, for the many other victims who did not come forward to cite legal trouble or other factors, this website could help them take the first step to recover their funds, and build a stronger and more compelling case with their testimonies, given the massive scale of damage Bankman-Fried has done.
FTX Owes Money to Over 1 Million People
The US Attorney suggests more indictments to follow. According to FTX’s bankruptcy filing on November 11, it owes money to more than 100,000 creditors and at least 1 million affected FTX and FTX US users.
John Ray, currently CEO of FTX, testified at the U.S. House Financial Services Committee in December, asserting that his team is implementing a restructuring plan that will potentially help customers and creditors get their money back.
One of the core objectives is asset protection and recovery. It involves extensive tracing of money flows and asset transfers from the time of FTX’s founding. Ray said that they are in the process of “collecting and reviewing dozens of terabytes of documents and data, including records of billions of individual transactions.”
U.S. Customers Accounted for 2% of All FTX Traffic
In an analysis of monthly active user data by CoinGecko, customers in the U.S. accounted for 2% of all traffic. Ray mentioned in his testimony that there were 2.7 million users in FTX US and 7.6 million users in FTX. But since “a small number of U.S. customers” were also among the FTX users, he overstates the actual customer relationships due to the possibility a customer may have more than one account.
Therefore, Ray aims to get to the bottom of the actual customer numbers. And the website for FTX victims can help speed up the process by providing information and clarity, since it is unlikely that most customers will not be able to appear at the Manhattan court in person.
The crypto industry had a tumultuous year in 2022, with coins tanking at the start of Q2 and never rallying, signalling the beginning of a crypto winter. To make matters worse, the collapse of Terra Luna and FTX led to a devastating contagion across the industry. Despite the challenges, we shouldn’t forget about the progress and achievements the industry has made. Here’s a brief recap of some of the biggest news in 2022.
Crypto’s Role in the Russia-Ukraine War (February)
During the Russia-Ukraine war, cryptocurrencies have been immensely valuable to Ukrainian refugees. Russian attacks have destroyed critical infrastructure, rendering many Ukrainians inaccessible to withdrawing money from ATM machines. Therefore, many Ukrainian refugees relied on digital currencies sent from relatives or donors abroad to purchase goods and services.
All that is needed for them to access their cryptocurrency wallets is a mobile phone and internet access, which was being provided by the thousands of Starlink satellite internet dishes provided by Elon Musk’s SpaceX at the time.
Feds Interest Rate Hike (March)
Despite Bitcoin reaching an all-time high of $69000+ in November 2021, what follows is a series of market decline. This is in part due to the U.S. Federal Reserve announcing its first interest rate hike in March to fight increasing inflation. As a result, the macro backdrop began to worsen, not only affecting crypto assets but also every other investment asset class. This also called into question Bitcoin’s reputation as an inflation hedge as Bitcoin itself started to trade in tandem with Nasdaq tech stocks, according to the New York Times.
Collapse of Terra Luna (May-July)
The collapse of the Terra Luna ecosystem in May 2022 was one of the most devastating black swan events in crypto history, wiping at least $60 billion off the market which triggered a dangerous domino effect across the industry such as the fall of several high-profile crypto firms, namely Three Arrows Capital, Voyager Digital, and Celsius Network.
Amid the crash, the UST algorithmic stablecoin, which was supposed to maintain a $1 peg via on-chain mechanisms with Terra’s native token LUNA, depegged, bottoming out at $0.006. This was caused by a massive continuous selloff on both UST and LUNA, resulting in a death spiral. Terraform Labs (TFL) developers and founder Do Kwon are facing multiple investigations as well as lawsuits into its collapse. (Canadian Pharmacy) As of now, South Korean authorities and Interpol have issued a warrant for the search and arrest of Do Kwon and his accomplices.
Recovery Plan of Terra Luna Classic (August)
As of now, the Luna Classic blockchain is managed and governed by the community after Terraform Labs (TFL) developers abandoned the chain in support of Luna 2.0. On August 26th 2022, governance was restored as citizens of Luna Classic could delegate, stake, and vote for the future of the ecosystem. Proposals and the associated implementations are being passed by the Terra Classic Decentralized Autonomous Organization (DAO).
Feds Sanction Tornado Cash (August)
On 8th August 2022, the U.S. Treasury Department imposed sanctions against Tornado Cash, a privacy-focused Ethereum mixing service that obscures the trail back to the fund’s original source. They claimed that Lazarus Group, a cybercrime group run by the North Korean government, has been using Tornado Cash to launder illicit funds.
Moreover, one of the developers for Tornado Cash was arrested in the Netherlands. The crypto community and privacy advocates bashed Netherlands authorities as the developer was simply writing code and had nothing to do with illicit activities. Ethereum co-founder Vitalik Buterin also criticized the move as he himself used Tornado Cash to make donations to Ukraine’s cause.
Ethereum Merge (September)
On 15th September 2022 at 06:42:42 UTC at block 15537393, the Ethereum Merge was completed. This meant a merger of the Ethereum mainnet execution layer and the Beacon Chain’s consensus layer, transitioning from the proof-of-work consensus mechanism to proof-of-stake. This landmark update brings major changes to the network, including a 99.95% reduction in energy consumption and a 90% cut in ETH issuance.
This is a significant achievement in the history of blockchain, allowing the Ethereum network to scale effectively as demand for Web3 and DeFi increase. Since Ethereum is the mother of all smart contract platforms, this could put Ethereum in a position to rival Bitcoin in adoption and even value.
Downfall of FTX and Sam Bankman-Fried (November)
On 11th November 2022, former FTX CEO Sam Bankman-Fried (SBF) filed FTX, FTX US, and Alameda Research for bankruptcy in the U.S. Once hailed as one of the top crypto exchanges, the sudden collapse of FTX came as a shocking blow to the entire crypto industry, setting off yet another contagion across the space. This affected 130 affiliated companies including several high-profile firms such as BlockFi, Genesis Trading, Grayscale, KuCoin, Gemini, Coinbase, Crypto.com, Sequoia Capital, and Galaxy Digital.
Apparently, SBF was misappropriating customer funds for his own benefits without customers’ consent and knowledge, conducting unethical flywheel schemes with Alameda Research. As a result, SBF had been arrested in the Bahamas, facing many criminal charges including securities fraud, money laundering, and campaign finance law violations. However, on 22nd Decemeber 2022, the disgraced FTX founder was released on a $250 million bail.
Staking on Ethereum 2.0 is finally live. However, the process of connecting your Ethereum (ETH) coins can be a bit tricky. It’s not all about sending 32 ETH to the contract. Doing so would end up with you losing your funds. In this tutorial, we will cover how to connect to the ETH staking contract through a validator node. Furthermore, we shall be using Allnodes, a non-custodial platform for hosting nodes.
How To Set up an ETH 2.0 Validator?
First, your Ethereum wallet should have the 32 ETH coins needed by the contract. Note that interacting with the Ethereum blockchain is done through MetaMask. Therefore, you need to fund your MetaMask through a hardware or a software wallet.
The journey starts on Allnodes. The platform takes care of the technical bit of hosting nodes for a relatively low fee, although it depends on the hosting package chosen. The platform supports multiple payment methods, including Bitcoin and other cryptocurrencies.
Click on Ethereum staking on the upper right corner, and on the new window that opens, select “Host ETH 2.0.”
If you’re new to Allnodes, create an account; otherwise, login to your account.
Select you’re your plan.
Connect to MetaMask.
ETH 2.0 Launchpad
Click on “Open ETH 2.0 Launchpad” then “Get started.”
There are subsections on the left pane of the welcome screen, such as introducing eth2 phase 0, signing up, and responsibilities, among others. In addition, it holds information on the expected income. On the responsibilities section, for example, it states that a validator node only earns rewards when it’s actively participating in the network. Unfortunately, the effects of a node being offline are equal to the profits of it being online.
Other critical sections:
Risks of slashing – If a node gets compromised or it misbehaves, its stake is slashed, consequently reducing its staking power.
Backup Mnemonic – They are special words that are used for recovering deposited ETH. For maximum security, the mnemonic should be written on paper instead of saving on a computer.
Transfer delay – For now, interacting with the deposit address is one way. As such, you can only deposit and not withdraw or transfer the coins.
Long term committed – Ethereum has a commitment statement noting that validator nodes are in it for the long haul and they can’t go back to previous versions such as ETH 1.0.
On the client selection pane, there’s the option to run ETH 1.0 client. While this is possible, it’s costly and needs some technical knowledge.
Generating Key Phrases for ETH 2.0
The next window is for generating key pairs. First, select the number of ETH 2.0 validator nodes you need. Note that each node requires depositing 32 ETH into the Ethereum staking contract.
Next, select between Linux, Windows, and Mac operating systems.
For this example, we’ll be setting up an ETH 2.0 validator node on a Windows-powered computer.
The intimidating part about this part is that it uses a command-line interface (CLI) instead of a graphical user interface (GUI), which is what non-devs are used to.
Downloading and Using CLI
Download the CLI from Github by clicking on the link “get it from developers.” When on the download page, select the release that coincides with your computer’s operating system.
Extract the zipped folder to reveal the file called “Deposits.”
The “Deposits” file is a CLI interface.
To get it to run as required, hold the SHIFT key and right-click on the file to bring up the option “Open PowerShell window here.”
On the previous download page, below the list of available downloads, copy the command code and paste it on the open CLI window. Note that this window should have a blue background color.
CLI window
Follow the instructions on the screen for the command to run successfully.
Choose language and select a password. PLEASE remember this password; we shall need it later.
The CLI will generate a unique mnemonic. The mnemonic helps you unlock your staked ETH when transfers finally go live. Therefore, put it on paper for safety and press “Enter.” Input the phrase.
In the folder with your CLI download, a new folder named “validator keys” will be created. Inside this folder, we have two files; Deposit data and Key store.
Depositing The Files on Launchpad
On the “Upload Deposit File” section, hit “add file” and drag and drop the deposit data file (Deposit.in).
Click “Continue” and connect to your MetaMask wallet, which should have 32 ETH.
Read the summary, “Initiate the transaction,” and double-check the Ethereum deposit address.
Confirm the transaction on MetaMask. You can view the transaction status on Etherscan after it’s successful.
Back To Allnodes
Let’s pick up from where we left on Allnodes. Confirm that you’ve generated ETH 2.0 phrases, deposit data, and have put in 32 ETH to the contract.
The next step is to choose the hosting plan.
Drag the files in the specified order. That is, the deposit data file, key store file, and provide the password we generated earlier on the CLI interface.
The next window on Allnodes shows the status of your node.
Note that you can use Allnodes to run multiple ETH 2.0 validator nodes.
And, that’s it.
Note that you can view the status of the deposit on the Beacon Chain by using the same address that you used to deposit your coins to the ETH 2.0 staking contract.
Manage your Allnodes account
To keep up ETH 2.0 node, you need to top up the node which requires a payment of around US$5 per month until the release of ETH 2.0. ETH 2.0 is expected to be launched in around 2 years. In return, at every epoch you would be able to earn a bit of ETH in return.
Update: Returns on my Allnodes node?
As of June 2022, my validator node balance is at 35.45202. This means I have earned a total of around 3.45 ETH since I set it up 2 years ago in 2020. Note that results may vary and those who set up their node earlier (as was in my case) were able to enjoy a 16% APY.
Conclusion
Ethereum 2.0 is being continuously developed by the Ethereum Foundation to be able to run on a wide range of computing devices. The above tutorial on how to set up an ETH 2.0 validator node using Allnodes covers every corner of the process. However, critical details such as mnemonics and passwords should be kept secure since they determine access to the deposited coins.
In addition, it’s worth noting that the process happens on three platforms, Allnodes, ETH 2.0 Launchpad, and CLI. Therefore, the three systems must harmoniously work together to get the desired outcome.
FAQs:
What if You Don’t Have the Full Amount?
Good question. First, NO. a validator node needs the full amount.
Can the ETH 2.0 Staking Contract Take Less Than 32 ETH?
However, you can still stake a lower amount only that it will be through third parties such as participating cryptocurrency exchanges such as Binance and Coinbase.
Can I withdraw the rewards I earn from staking?
NO, not until ETH 2.0 reaches Phase 1, which is likely to be in 1 year or possibly more.
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.
Base Protocol ($BASE) created a token with a value pegged to the total market capitalization of every cryptocurrency available in the market. The purpose is to diversify a person’s investments and expand their exposure to a lot of cryptocurrencies that they would not have otherwise availed from existing traditional investment vehicles.
This has helped investors because trading on the cryptocurrency market has always been challenging. Especially when the performance of some coins varies a lot from each other. There are big gainers and big losers. In addition, choosing which digital currency to invest in can be truly difficult at times considering their inherent risks. Fortunately, Base Protocol’s token aims to solve this problem.
Learn more about Base Protocol and how rebasing works in our debate with Nick Ravanbakhsh, co-founder of Base Protocol.
EPIC Debate: Are “Rebases” Useful Financially? – With Base Protocol
Background
Nick Ravanbakhsh and Dylan Senter, founders of the Base Protocol, started the project to address the lack of a crypto index fund product for the cryptocurrency market. They came up with the idea to establish a basket of digital assets that track the market.
Both of them are also co-founders of Spectiv, a digital token designed as a rewards system for content creators, aiming to do away with the advertising intermediaries like YouTube or Facebook.
Base Protocol’s key team members also include Chris Peña (Head of Development), who has over 10 years of experience being a developer for systems that span multiple industries,and Based McGee (Head of Development — Solidity), who has 10 years of experience being a software engineer.
What is Base Protocol?
Base Protocol is an Ethereum-based synthetic token that has its price derived from the value of all digital assets in the cryptocurrency market. You can think of it like a stock index. It functions as a trading vehicle where the price is dependent on the movement of all other stocks held in its particular market.
Through Base, investors can participate in the cryptocurrency market with the Base Protocol index mitigating risk.
Rather than simply speculating on the numerous cryptocurrencies that pop up almost daily, investors can spread their risk by simply investing in Base Protocol. This means that they can have a stake in every successful coin, at the same time, have a more balanced risk exposure.
And for as long as the cryptocurrency market continues to grow, you cannot lose. Basically, this project is geared to those who believe in the nascent industry’s long-term potential.
Features of Base Protocol
Base Protocol as a Synthetic Asset
A synthetic asset in finance is a tool designed to produce the same effects as investing in another asset (called the underlying asset). However, it also alters the key characteristics of the underlying asset.
This is effectively the engineering mechanism behind the Base protocol, which is a synthetic asset that simulates the performance of the cryptocurrency market. To do this effectively, it is built with some important features in place.
Elastic supply
BASE’s value is designed to be the combined value of all cryptocurrencies in the market at a ratio of 1:1 trillion. Hence Base Protocol is built to always achieve equilibrium with the market cap of all cryptocurrencies (target price). This means that its supply could also change depending on the current state of the market. Through its rebasing method, BASE could ensure that it can reconcile the difference between the value of its coin and the total market cap for cryptocurrencies.
Rebasing- how does it work?
Rebasing is the term used for the process by which a synthetic asset’s price is restored in equilibrium to the underlying asset. BASE’s rebasing mechanism adjusts its total supply until the market price reaches the target price.
While this protocol functions to ensure that the market price of BASE always correlates with the target price – it often only manages to influence the corrections. It is left to market actors to respond to rebases to correct prices.
t0 — An investor buys 1 BASE with a market price $1
t1— The market price of BASE goes up to $2 – out of sync with the target price of $1
t2 — To restore the market price’s equilibrium to target price, BASE’s total supply is adjusted in proportion to the difference. This is a “rebase”, and the process is called a “rebase event”.
t3 — Regardless of the rebase event, the investor’s net $ balance and his percent ownership of the total supply are always constant.
BASE Token ($BASE)
Base’s token ($BASE) is the token associated with the Base Protocol index and is both itself a cryptocurrency and a measure of the cryptocurrency market as a whole. It serves as a trading instrument that enables individuals to make investments based on the whole cryptocurrency market, instead of just a single or few digital asset selections.
BASE’s value follows the ratio of 1:1 trillion, based on the whole market cap for cryptocurrencies. For example, if the market cap is at $800 billion, the value of one BASE is $0.80.
The protocol is based on the Ethereum blockchain and can be bought on Uniswap. The price feed uses Chainlink’s decentralized oracle network.
While BASE is becoming more popular as an investment instrument, it can serve other specific purposes too. Here are some of the other features that the $BASE token can be used for.
Uses for $BASE token
Price Reference
Traders trying to analyze the potential movement of a particular coin could track its price with the value of BASE to determine how they fare against the whole crypto market. This can even be better than just comparing altcoins with BTC because it shows an overview of the whole crypto economy.
Hence $BASE is intended to be a single token that allows an investor to speculate on all crypto assets simultaneously. This way, they don’t have to buy any specific coin or invest in a select few and can spread their stake across the entire industry.
As long as the investor is optimistic about the industry’s future, they can invest in the market as a whole.
Safe Haven
According to the Team, purchasing BASE allows holders to make safe investments, instead of just selecting a single digital asset.
This is because cherry-picking cryptocurrencies into a portfolio opens the investor to the risk of loss — seeing how volatile the market can be. People might also miss out on the emergence of the rapid rise of any new currency.
By investing in $BASE, however, the idea is that one can mitigate the risk of exposure of individual coins while enjoying the rest’s potential gains.
Price Reference
As a market tracker, BASE’s price is indicative of the total market cap of the crypto market. Crypto investors already track the performance of altcoins in relation to bitcoin instead of USD.
The performance of any altcoin in relation to bitcoin is more a more important measure for the decentralized economy. But even better would be to use $BASE as the price reference. Instead of just BTC, the trader can see how well any altcoin performs against the entire crypto market.
Lending Instrument
BASE can be utilized as a hedge for leveraged crypto trading. It can be considered an alternative to borrowing in BTC since it is less volatile. For example, if the value of BASE drops and they have to repay the loan they made, they can suffer less in terms of losses since it depends on the overall drop in the market.
Base Cascade
BASE Cascade is a program on the platform designed to reward BASE holders. This is because it also serves as their contribution to the liquidity of Uniswap’s pool. In order to take part in the Cascade program, users have to lock their BASE and ETH on the Uniswap liquidity pool. They get a percentage of the transaction fees based on the volume of trading in the pool as a reward.
After they have deposited their BASE and ETH on Uniswap, they are given LP tokens, which is the token that they can stake to claim their rewards on Cascade.
At first, the rewards multiplier for Cascade participants is at 1x. 30 days after they are staked, it increase to 2x. 60 days after, the multiplier becomes 3x. The increase in the multiplier happens everyday until it reaches the ceiling point, which is at 3x.
Participation in Cascade is merely optional. Only the user can decided how much liquidity they want to contribute. Furthermore, they can withdraw at any point in time.
Conclusion
Devising new ways to expand the investment opportunities for the cryptocurrency market serves the purposes of adoption and new use cases. Base Protocol’s initiative to create a product that expands the exposure of its users to the whole crypto market can be a convenient entry point for fresh investments.
Some of the factors affecting the arrival of new entrants to the crypto space include the volatility of some coins and the difficulty in selecting the best-performing coin. With Base as one of their options, not only are investors given a much safer alternative to investing in single digital assets, they are also given the opportunity to speculate on the crypto market as a whole. Given that this project could potentially bring new interest to the space, we can expect a more vibrant community if the project becomes successful.
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 has been a crazy year for everyone and just as much so with cryptocurrencies. Bitcoin was recently getting all the media attention after reaching a new all time highs for the first time since 2017. So we take a review and recap of the most important cryptocurrency, Bitcoin and Ethereum news in 2020!
Bitcoin smashes old ATH!
We have all been longing for it and now, finally, it has happened. After first resistance around previous 2017’s top, Bitcoin has finally found enough strength to establish new all time highs of over USD$26,000!!!
For the first time in three years all $BTC holders are now in profit, with new millionaires popping up at fast pace. Moreover, if we were to have a look at the best performing assets over the last 10 years, it would immediately be noticed as Bitcoin outperformed any other assets 8 times out of 10, with a stunning cumulative return in the order of magnitude of millions!
This is not a surprise for all crypto enthusiasts who have been accumulating for several months while prices were below USD$10,000 and are now ready to ride the roller-coaster towards new unexplored territory!
But with any hype, there are also traps! Here’s ONE THING you should avoid in crypto.
DO NOT do this in crypto
Publicly traded companies and institutional investors keep increasing their cryptocurrency exposure
2020 can be regarded as the year institutional investors came another step forward in publicly confirming their interest in crypto. While their cryptocurrency investments still usually amount to a small percentage of their portfolios, this is a clear signal that investors consider Bitcoin as a reserve currency to hedge against traditional fiat money and as an undeniable opportunity to diversify their overall exposure. These finance giants are smart investors, so they are certainly ones to watch.
At this very moment, the Grayscale Bitcoin Trust (GBTC) is setting the pace in the ranking of Bitcoin adoption with a stunning 2.60% of the total existing supply of Bitcoin.
Nevertheless, the company that has been most public about its crypto accumulation plan in the last months is certainly Microstrategy. Its CEO Michael Saylor has repeatedly tweeted news keeping his investors up to date. With more than USD$400 million worth bought solely during last summer, the company now owns more than 40000 Bitcoins in their portfolio.
Not only public investors are opening up to crypto. Recently Paypal has introduced crypto payments within their app. Users can now instantly convert their fiat assets to buy and sell items with cryptocurrencies. Although they don’t actually give ownership of the underlying coins (they can only be used inside Paypal) and cannot be transferred to other wallets, we are sure this is still the beginning phase of crypto adoption by traditional finance platforms.
Check out our full coverage of this in the 17th edition of our newsletter as news of big $BTC buys were announced!
Ethereum 2.0 ETH2 finally launched
The long wait has been rewarded and Ethereum 2 (in its Phase 0), is now a reality!
On 1st December 2020 and as planned, the mainnet was successfully launched on the first attempt. There were initially concerns that the required threshold to automatically trigger the launch could have not been achieved by the deadline. However the amount of Ethereum staked in the deposit contract suddenly surged in the final days leading up to the deadline, confirming that the hype around the launch was real and that there were enough supporters willing to lock their tokens for months (or possibly even years)!
One of Ethereum 2.0’s key features is known as “Sharding”. It will enable the simultaneous processing of transactions which will significantly improve the current speed of the network, something that has recently created not a few struggles to its users.
2020 has no doubt been the year of decentralised finance (DeFi). And while serious cryptocurrency enthusiasts were already quite familiar with it, in 2020 its adoption just went mainstream. It wouldn’t be much wrong saying that this year everything in crypto has revolved around decentralised finance!
Total Value Locked in Defi 2020 (Source: defipulse.com)
What is DeFi?
It could substantially be defined as an experimental form of finance with, as pivotal point, the absence of any form of intermediaries. This means banks, brokers and any other middle men are cut off because blockchain doesn’t need them to work. Everything is ruled by smart contracts, hence everything is decentralized. Not all the projects are 100% decentralized yet, but the way to achieve it has been paved.
DeFi has all kinds of platforms: lending, borrowing, coverages, prediction markets, trading, synthetics and so on.
Since smart contracts are needed, the blockchain most protocols are built on is Ethereum. Despite its weaknesses (scalability), it continues to be the steady central point of the DeFi “movement”. Other chains are growing fast behind it, in particular Binance Smart Chain (BSC), while other are trying to increase their adoption too, such as Polkadot (with the use of parachains), Ontology and more. Cross-chain platforms like Ramp are also hot: connecting different chains is another step forward in helping decentralized finance’s growth.
Within Defi, certainly Yield Farming was THE thing on everybody’s lips.
During what can be referred to as the “Defi Season” last summer, the bravest users were getting incredible Annual Percentage Yields (APY).
It all started in July 2020, with Compound Finance and Yearn Finance (which made Andre Cronje even more known) as main actors when they decided to distribute their governance tokens $COMP and $YFI to their platforms’ users. Governance tokens, supposedly worthless, started to gain more and more value representing the “strength” of the underlying project. The higher their value the bigger the APYs users could get. New strategies arose, where “farmers” would “fold” or leverage their returns by supplying and borrowing multiple times. This is possible using the borrowed assets each time as new collateral for the next loan. At that point, the Yield Farming “mania” was already out of hand and any upcoming project would offer the option to farm their proprietary tokens.
But as usual, with high rewards come high risks. The main ones farmers have to face are platforms’ exploits and Impermanent Loss, which can very often lead to permanent losses! See our video on what is impermanent loss and how to avoid it.
Calling someone a crypto “degenerate” is no longer an insult
With the rise of yield farming and DeFi, a new specialty has also arisen. People manage to find projects just before or very soon after they are listed on Uniswap, and throw everything they have into it. Short for “degenerate gamblers”, these people that “ape” into projects (without much thought into exactly what it is or what it does) try to catch the initial wave and accumulate as much of these tokens as possible before others do, and then sell when the project becomes more widely known and demand increases.
Whilst this is highly risky not just in terms of return on investment, there is also a risk of being “rug pulled”. So as with all gambling, some win big, but some also lose.
“Rug pulls” hurt our wallets and our appetite for DeFi
As much as 2020 has been about Defi, it has also been the year of “Rug Pulls”.
We have witnessed countless episodes of stolen funds in the last months, and the trend doesn’t seem to be going to stop anytime soon. Hackers are evolving with smart contracts and are getting more sophisticated each time.
Flash Loans have been the favorite way to deliver an exploit till now. Basically a flash loan is something “non malicious” per se. What it implies is that any user could theoretically take out a loan (without providing any collateral). The only condition is to pay it back within the same transaction. But before this last step, the user can do whatever he prefers with the borrowed funds. For example, try to make money out of it! In this case, he would end up profiting off this flashloan! Magic? No, just Ethereum (and Smart Contracts!).
This mechanism is possible because the blockchain itself doesn’t even have “time” to realize what is going on. As a matter of fact, if the loan is not paid back in time, the transaction is simply rejected.
All of this is of course easier said than done, and it is not something within just anyone’s reach: this is the way the most sophisticated arbitrages are done. Unfortunately, this is also the way sophisticated hackers profited off some Defi platforms’ vulnerabilities.
Examples of flashloan attacks have been the ones at the expenses of bZx (three times for a total of around $9M), Value Defi ($7.4M), Harvest Finance ($24M), Akro ($2M) and Origin Protocol ($7M), plus many other less known projects.
DEX- the new challenger in town
This year has seen lots of drama among centralised exchanges (CEX) but they also were met with a serious challenger, the decentralised exchange (DEX). Decentralised exchanges promised self-custody of funds (i.e. less risk of hacks) and opened up a whole new world of “crypto dumpster diving”.
Monthly Dex Volumes by project (Source: duneanalytics.com)
As Defi was exponentially growing in 2020, so was the use of DEXs. Decentralized Exchanges like Uniswap and Sushiswap mainly rely on the AMM (Automatic Market Making) system to provide traders with the necessary liquidity to operate. Funds are pooled together and an algorithm is in charge of controlling the price curve.
Unfortunately this system is not flawless, and problems such as high slippage are still real in most cases. A key difference with centralized exchanges is the non-existence of order books. This is mainly because Ethereum doesn’t really have the necessary capacity to handle it. There are platforms that allow limit orders (1Inch Exchange for example) but there still is work to do. This is the reason why we also see exchanges being built on other chains such as Project Serum. This DEX offers a CEX-simil experience on the Solana blockchain (able to handle far more transactions per second than Ethereum).
NFTs: bringing art collecting into the digital age
Non Fungible Tokens (NFTs) are another crypto segment that has seen increasing adoption throughout 2020, and many believe 2021 will mark its explosion. They became first popular in 2017 with CryptoKitties but now the market seems to be more mature to just not consider them as a “meme”.
Non Fungible Tokens are unique non-interchangeable tokens (usually compliant with the ECR-721 standard) and can have many different uses other than just collectible items. They can be used in games (think of the Enjin multiverse); players can build or just enhance their NFTs to make them more valuable and exchange them with other gamers. They can and are introducing Art into the crypto ecosystem. Artists can create their digital pieces of Art and sell them on the blockchain on the available markets. The most known are Rarible and Opensea, where users swap NFTs in a similar way to exchanging standard ERC-20 tokens. Some of the most expensive NFTs have been auctioned for hundreds of thousands of dollars.
They are also strictly related to the “tokenization” concept. Everything in the real world can theoretically be tokenized into a NFT and transferred on the blockchain. Think about real-estate. You could digitize your house and use it to ask for a loan against its value, or you could sell/lend your piece of land and manage it with the security granted by the blockchain!
Are Regulators coming after crypto?
While crypto adoption keeps increasing worldwide, Regulators from any country are slowly but steadily turning their interest to crypto. They want to keep track of how things are evolving and decide how to approach the matter. It’s no surprise that Institutions have been struggling just to decide whether it was the case to tax crypto earnings and how to do it. Most countries still don’t have a clear legislation about it and crypto adopters are often left wondering what they should do to avoid future problems.
In 2020 we have seen many legislation proposals with the purpose of filling up gaps in regulations that would otherwise leave Institutions too far behind on the subject. Something they can’t afford to do.
Only considering the first half of December, we saw the Stablecoin Tethering and Bank Licensing Enforcement (Stable) Act and read of rumors about FinCEN (Financial Crimes Enforcement Network) proposed requirements regarding the use of self-hosted wallets (like Metamask). While it is certainly true that a tiny minority of crypto users take advantage of the (partial) anonymity granted by the blockchain, the vast majority doesn’t have anything to hide and is worried about their privacy being exposed if all the regulations should find final approval. In November, Hong Kong has proposed strict regulations against cryptocurrency exchanges and even who can trade with them as well.
Meanwhile, we have witnessed examples of crypto companies seeking regulation and compliance with the law. In September, Kraken was granted approval to become “the first regulated, U.S. bank to provide comprehensive deposit-taking, custody and fiduciary services for digital assets”. A few days ago Coinbase officially confirmed that they have finalized their Initial Public Offering (IPO) request, now under the SEC (U.S. Securities and Exchange Commission) review process.
Digital currency race heats up
Digital currencies continue to be on top of many countries’ “To-Do list” when talking crypto and new payments technologies.
A digital currency directly issued by a State is something different from the current electronic versions of fiat money and would have the advantage of connecting Central Banks with final users in a more streamline way than now. Operations would be faster and cheaper. In Europe, for example, everything would be governed by the Central Bank itself. Christine Lagarde, president of the European Central Bank, is actively campaigning for the digital Euro, as shown in multiple occasions, and the work is proceeding.
While it is still not clear how the blockchain and the ledger will be structured, it is important that privacy remains at the center of the dispute, many believe.
In China, the DCEP (Digital Currency Electronic Payment, DC/EP) issued its state bank the People’s Bank of China (PBoC) is already in its testing phase, and ordinary citizens chosen for the testing were already people able to use it at designated shops and online retailers. We explain everything you need to know on DCEP.
Institutions are not the only entities working on digital currencies. $DIEM, the recently repackaged decentralized stablecoin powered by the Libra blockchain, should launch in January after years of tormented life!
Conclusion
2020 has been an eventful year for cryptocurrencies. However the technology itself is taking huge strides and challenging the way we see traditional finance (e.g. DeFi) and how we even view the currency we use on a daily basis.
Certainly what is most exciting of all is Bitcoin and Ethereum prices reaching all time highs. It is definitely making people confirmed in their beliefs that the winter is finally over, and the bulls are ready to come out.
With all these developments and positive price action, we think things can only get better. We are definitely excited to see what 2021 will bring!
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.
There is a lot to consider when it comes to cryptocurrency investment and trading, and crypto exchanges are a great way to start. It is a good platform for beginners to familiarize themselves with the market as well as for experienced traders to make use of the various products the exchanges offer.
There are hundreds of crypto exchanges, and everyone is asking. “which crypto exchange is the best?” Everyone wants to get the best bang for their buck, whether it be low trading fees or lucrative products. We will be comparing two of the top and most talked about crypto exchanges in the world: Binance and FTX Exchange.
FTX EXCHANGE (INCLUDING FTX INTERNATIONAL AND FTX.US) ARE NO LONGER IN OPERATION
Both exchanges have filed for bankruptcy. Subsequently, the exchange was “hacked” and more than US$600 million worth of cryptocurrencies drained. The hacker is strongly rumoured to be a former FTX employee. For more about how this story unfolded and the latest news, check out these articles:
Founded in 2019, FTX Exchange is a cryptocurrency trading platform that was built by Alameda Research, a quantitative trading firm that develops specialized algorithms for trading crypto. It has topped many trading charts by volume and is responsible for 30% of the market trading volume on major exchanges.
The strong trading background of FTX shows that they live up to their claim of being an exchange “built by traders, for traders.”
FTX is largely focused on the derivative and prediction market, offering a wide array of futures, options, and volatility products with competitive trading rates and discounts for specific users.
FTX Exchange has been growing significantly over the past year, exploding past the likes of KuCoin and Kraken. They even managed to take market share away from Coinbase as well, which is the number one crypto exchange in the U.S. This is in part thanks to huge venture capital funding that is backing FTX.
Check out FTX Exchange Guide for a full review and tutorial on how to use FTX Exchange.
What is Binance Exchange?
Binance was founded in 2017 by Chengpeng Zhao (CZ), former Chief Technology Officer of OKCoin who has years of experience developing high-frequency trading software.
Binance is, by a large margin, the world’s most popular cryptocurrency exchange. It has more than than $25 billion in organic trading volume per day and millions of users worldwide.
Binance is largely focused on the spot market and has one of the most cryptocurrencies available to trade. It also has powerful trading tools such as leveraged trading, options trading and lending platform.
For the longest time, the trading platform scene is dominated by Binance, and is held in high regard for being smart and proactive in their planning and actions, not only for themselves but also for developing the crypto industry as a whole.
This is a significant step since it enables both exchanges to function in accordance with international standards, and meet the criteria of major regulators like the Financial Action Task Force.
Binance vs FTX Exchange Overview
In this section, we will take a closer look at what Binance and FTX have to offer and compare them based on these features:
Products
Supported cryptocurrencies
Fees
Security
Products
Binance and FTX have quite a lot of similarities based on their general offering. But the major difference is that Binance is more focused on the spot market and has more cryptocurrencies to offer, whereas FTX is more focused on the derivative and prediction market and has more volatility products. Therefore, FTX is usually seen as the preferred choice for experienced traders who want a wider (and potentially higher risk/reward) range of products.
Both exchanges offer products that are exclusive to them. Binance offers Crypto Loans, a P2P market, and Binance Earn, while FTX offers volatility and prediction markets. The addition of FTX stocks makes it the first domestic crypto exchange to provide stocks on its platform, enabling trading of stocks and ETFs by U.S. users.
FTX’s crypto card is exclusively accessible to US residents via the FTX US platform, whereas Binance’s crypto debit card has gained enormous popularity. While FTX places a greater emphasis on specialized trading products, Binance has more to offer in terms of their Binance Earn, allowing users to earn passive income.
Both Binance and FTX offers a mobile app for iPhone and Android so users can trade cryptocurrencies on the go.
Supported cryptocurrencies
Binance has the highest number of cryptocurrencies that any exchange offers to its users. It currently has 1,300 cryptocurrencies including its own native crypto, Binance Coin (BNB).
Nevertheless, FTX offers a lot of cryptocurrencies for users to trade, though not as large as Binance’s. FTX supports over 460 cryptocurrencies including its own native crypto, FTX Token (FTT).
Both exchanges however, are consistently adding to their lists of supported cryptocurrencies, including newly launched tokens.
Fees
The rates on both exchanges’ spot trade markets are extremely low, and they continue to decline as volume rises. However, FTX wins out since it assesses 0.02% as a maker fee and 0.07% as a taker fee for tier one accounts.
This is significantly lower than Binance fees, i.e. 0.1% maker and taker fee. Even after using BNB for trading fees, the user will have to pay a 0.075% fee, which is higher than FTX.
We can see that FTX is better for trading, and is clearly a winner in this category.
Security
One of the most important considerations when choosing an exchange is security. It’s safe to say that Binance and FTX are two of the most secure exchanges in the world.
Both exchanges use two factor authentication, and they store account funds and data away from online platforms so that they cannot be hacked. They also insure their funds by putting a certain amount of fee away as an insurance fraud.
Both platforms also employ round-the-clock monitoring and analysis, and in the case of a theft, user funds are protected by the reserves that both firms have in their treasuries.
FTX is one of the few exchanges that have never been hacked, and while Binance has seen some hacking incidents in the past, both exchanges adhere to the strictest industry security guidelines, with the majority of funds being kept in cold storage. FTX also does third party transaction audits via Chainalysis, giving them a slight edge over Binance.
However, we must also consider the fact that Binance has been around longer and has a much larger trading volume than FTX, making them a more attractive target to hackers. But Binance has managed to hold their ground and plan for the worst, and is still one of the top performing exchanges despite the bear market.
Conclusion
Binance and FTX have quite a lot of similarities based on their general offering. But the major difference is that Binance is more focused on the spot market and has more cryptocurrencies to offer, whereas FTX is more focused on the derivative and prediction market and has more volatility products.
Binance offers the most cryptocurrencies to trade including new projects such as DeFi, NFT or metaverse gaming. If you are a beginner or looking for new tokens to trade, or even an experienced investor who prefers passive earnings, Binance would be a better option for you.
If you are an experienced trader who strictly does day trading or skilled at volatility products, FTX would be the go-to for you as it offers all the products traders need, with significantly low fees.
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.
