BitMEX Case Pushes Crypto to Actual Decentralization, Not DeFi Theatre
Also, RAC token and Nexus Mutual's Shield Mining.
|Oct 1, 2020||2|
Hello Defiers! Here’s what’s happening in decentralized finance,
BitMEX charges should push crypto further down the decentralization spectrum
RAC launches community token
Nexus Mutual adds insurance mining with Keep as first partner
DEXTF launches structured token which protects traders in case of ETH downside
and more :)
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BitMEX Charges Highlight Case for Real DeFi
CFTC charges against BitMEX are bound to push more cryptocurrency projects towards decentralization — but that means actual* decentralization.
The Commission today filed charges against BitMEX and its owners and operators including CEO Arthur Hayes for operating a trading platform without CFTC approval, and for failing to implement know-your-customer procedures, a customer information program, and anti-money laundering procedures.
At first glance this is concerning for DeFi, a financial system which hails open access —read: lack of KYC and AML— at its core.
But the key here is enforceability. For most DeFi protocols, the goal is to become decentralized enough that no entity or group of persons are solely responsible for the running of a financial application, and instead that power is distributed among many users. Another difference is that these protocols are non-custodial and as such, never touch users’ funds.
The problem lies when these goals are only met halfway, with teams still holding control over the project or custody over users’ private keys. One potential effect of the CFTC’s move will be to push blockchain-based finance to become increasingly and actually decentralized, in a quest to reduce regulatory risk.
The CFTC's complaint against BitMEX highlights some of the key elements of regulated futures commission merchants that generally don't apply in DeFi, said Jake Chervinsky, Compound Finance’s general counsel.
“Most governance token holders don't ‘operate’ a protocol in the way that owners of a centralized exchange company ‘operate’ a trading platform. DeFi protocols are autonomous, self-executing code.” Chervinsky told The Defiant, adding that exchange operators hold customers’ funds, which is also not the case in DeFi.
Test for DeFi
The BitMEX case will probably cause centralized projects which are not compliant with US regulators to consider moving down the decentralization spectrum and it will make existing DeFi projects “re-evaluate how insulated they think they are from issues like this,” said Anil Lulla, co-founder of Delphi Digital.
“In the long term, I think this is bullish for DeFi but it will still be interesting to see whether or not DeFi products can really dodge KYC/AML in the future,” Lulla told The Defiant. “They may be hard to shut down, but regulators could adapt with different types of penalties.”
It’s worth noting that another reason why regulators are coming after centralized exchanges is because “they do insider trading and market manipulation, which isn't possible on an open-source DEX,” said Lasse Clausen of crypto venture fund 1Kx. “To be more precise, there is no privileged positions for the operator to cheat.”
Clausen said DeFi projects are likely protected from regulators, but only if the projects are truly decentralized.
“That's another reason why real decentralization matters,” he said. “Not just decentralization theater.”
Grammy-Winning DJ Releases $RAC Community Token
One of DeFi’s favorite artists - RAC - has released a community token to bypass the music industry’s many intermediaries and create a direct link with fans.
The new token, called $RAC, can’t be bought and can only be earned. It will be distributed retroactively to the Grammy-winning musician’s most loyal fans: Bandcamp, Twitch and Patreon supporters, those who bought his merch, and holders of $TAPE and $EGO, which are other tokens issued by him, with the difference that they were linked to specific products.
Yield Farming to Incentive a Safer DeFi
Nexus Mutual wants to incentivize more coverage providers by allowing any project listed on the platform to reward providers with their native protocol token using a system they call Shield Mining.
DeFi Has a New Primitive; the Structured Token
DEXTF, a non-custodial asset management portfolio, this weekunveiled its first structured product, designed to allow buyers to protect against the downside while gaining with its upside of ETH.
Robert Leshner’s and Tarun Chitra’s Robot Ventures has secured $4 million in funding, led by Galaxy Digital with additional participation by Coinbase co-founder Fred Ehrsam’s Paradigm, CoinDesk reported. Robot Ventures will act as seed investors in DeFi projects, helping the larger entities get an early read on opportunities for later rounds.
Coinbase is offering a package for employees who want to leave the firm after CEO Brian Armstrong’s blog post outlining why the crypto exchange operator will take on an apolitical mission, The Block reported.