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GSR is building out a space for itself at the intersection of traditional and decentralized finance worlds, according to its newly-minted head of DeFi, Jake Dwyer. 

During the latest episode of The Scoop podcast, Dwyer explained that the firm is building out the capacity to both create new trading products as well as provide liquidity to DeFi protocols in a way that’s more familiar to the traditional finance players who want to become more closely involved. 

With these plans in hand, GSR expects to contribute more than $1 billion in total value locked over the next year — fueled in no small part by the increase in interest from traditional finance sources. 

“People are sitting on pretty substantial positions just by being early users in these protocols,” said Dwyer. “There’s still this big position that people are accruing and they want to be able to manage those things while holding on to those positions.”

DeFi vs CeFi

In the last six months, GSR has expanded its venture investment activity in DeFi as a more central component of the business, with an eye on fixed income protocols and credit.

“You’ve got things like Aave and Compound and others on other chains for borrow and lend. But we’ve seen numerous innovations around the second-order derivatives of Swivel and Tempest on the fixed and floating rate interest side of things,” Dwyer explained.

Dwyer is excited about the collateral and interest rate segment of the market, which he sees as innovating at a fast pace. “I think that a lot of these different sorts of fixed income derivatives protocols that are out there are going to evolve in really exciting ways over the next the next couple of months.”

He believes that DeFi will eventually match more centralized activities as the market will see increased innovation.

“What DeFi offers is in some instances, just sort of a new set of venues that look a lot like the centralized exchange venues that we’re accustomed to trading on.” He cited GSR’s recent investments into Dydx and HashFlow, the latter of which Dwyer said recently reported a billion dollars worth of trading volume.

Eyeing a multi-chain future

Looking to the future, Dwyer said he believes that it will be one marked by a variety of networks that serve different purposes — and in the background, in some cases.

“We believe that in the future you’re not going to know what chain you’re interacting with necessarily or care,” he said.

These different chains will have varying kinds of specialization, such as high speed, high settlement, and the ability to create a central limit order book, according to Dwyer.

As he put it: “It’s almost like if you wanted to use Uber and Lyft, you had to have two different phones, and that doesn’t seem like a sustainable way of the future.”

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

This episode is sponsored by NYDIG.

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New statistics show a 6.2% rise in the consumer price index (CPI) year over year for October. On today’s episode, NLW breaks down the news, discussing:

• How the 2020 inflation debate set up the current bitcoin bull run
• The debate around “transitory” inflation in 2021
• How the inflation debate is impacting U.S. politics
• Why bitcoin is achieving new all-time highs

See also: Bitcoin Jumps to New All-Time High as Inflation Spikes to 6.2% in October

“The Breakdown” is written, produced by and features Nathaniel Whittemore aka NLW, with editing by Rob Mitchell, research by Scott Hill and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Dark Crazed Cap” by Isaac Joel. Image credit: sbayram/E+/Getty Images, modified by CoinDesk.

Polkadot decentralized finance (DeFi) platform Acala has got the crowd behind it.

The much-anticipated auctions to win places building on the Polkadot blockchain system start on Thursday, and so far Acala has already gathered some $608 million worth of DOT tokens – or more than 12 million DOT – at the time of writing, or about 1.1% of total DOT in circulation.

In the spirit of decentralization, it’s the community of DOT token holders who decide which projects will be able to lease a parachain slot. Token holders do this is by lending their DOT to a project – hence the term “crowdloan” – for a two-year lease period, for which participants are rewarded with tokens pertaining to each project.

Acala will most likely be the winner of the first slot when the seven-day auction concludes on Nov. 18. And the number of tokens being loaned to Acala is expected to keep increasing, according to the project’s chief growth officer, Dan Reecer. That’s because many DOT holders, who were previously staking their coins on Polkadot, are currently completing a 28-day “unbonding” process – basically, the un-staking of DOT from the Polkadot protocol to then contribute those tokens to a crowdloan for a given project.

“There’s still a lot of people waiting on their DOT to unbond, so there’s still plenty of DOT to come,” said Reecer in an interview with CoinDesk. “It’s going to be an exciting week and we’ll just have to see where we end up. But, yeah, we’re most likely to win the first slot.”

Acala’s DeFi plans include the release of a stablecoin on Polkadot and buildout of a decentralized exchange (DEX). Acala’s sister DeFi project Karura secured a parachain slot in this year’s auctions for Kusama, sometimes called Polkadot’s “canary network.” Reecer said having already rolled out services on Kusama will help a lot with the timeline on development work on Polkadot, which he said will be done by the first quarter of next year.

Participants in the Acala crowdloan will be rewarded with a native Acala (ACA) token to be used for network fees, staking, governance and so on, as well as a liquid crowdloan token (lcDOT) that can be used on the network as collateral while users’ DOT is locked up.

“The main complaint we were getting from people was that two years is a long time to lock up their DOT,” said Reecer. “So we built what is basically a crowdloan derivative of that. So now when people contribute through Acala they get ACA, of course, but then they also get this lcDOT, which allows them to have a liquid form of the DOT they contributed.”

The steadily increasing dollar amounts are dizzying, but the number of participants joining the Acala crowdloan – which currently stands at 61,744 – is another important number for Reecer.

“We had 20,000 unique participants for the Kusama auction, when we won the first slot by a long margin,” Reecer said. “We thought at the time that was a lot. But we have now crossed 60,000 and the auction hasn’t even started yet. So I wouldn’t be surprised if this gets over 100,000.”

MakerDAO founder Rune Christensen seems to have changed his mind about the future of stablecoin regulation in the United States after the Biden administration’s recent report on the topic.

In an interview with CoinDesk TV on Wednesday, the Denmark native said that the report, which was released by the President’s Working Group on Financial Markets last week, “turned me very positive on the outlook in the U.S.”

MakerDAO issues the dai stablecoin.

Previously, Christensen was pessimistic about U.S. stablecoin regulation, warning that “we should be ready for the worst,” in a live session on Reddit last month.

The biggest fear decentralized finance (DeFi) projects faced was that regulators would fail to see the advantages of such an innovation and follow China’s example by cracking down, Christensen said, but he noted that the report makes it clear that that’s not the case.

“The potential value of decentralized technology has been recognized … It’s not just being lumped into the same box without really caring about how that could squash innovation,” Christensen said. “The report very clearly shows a recognition that there’s a difference between centralized and decentralized stablecoins.”

In regards to MakerDAO’s future in the U.S., Christensen also sounded optimistic, saying that the report “could result in MakerDAO feeling more comfortable allocating more collateral towards the U.S. economy.”

MakerDAO took a major step toward decentralizing itself in July after it reached a stage where independent core units of contributors could take over most of the tasks that were previously handled by the Maker Foundation.

MakerDAO ranks No. 2 among DeFi projects in total value locked (TVL), with $20 billion tied up in its smart contracts, according to data site DeFi Llama. DAI, the project’s U.S. dollar-pegged stablecoin, ranks fourth among such tokens, with an $8.5 billion market capitalization, according to CoinGecko.

DeFi is an umbrella term for lending, trading and other financial services conducted on public blockchains, without traditional intermediaries such as banks. Stablecoins, a type of cryptocurrency designed to hold their value against a mainstream asset such as the U.S. dollar, play a critical role in DeFi as a popular form of collateral and loan proceeds.

Bitcoin (BTC) spiked toward an all-time high around $68,950 after a stronger-than-expected U.S. inflation report on Wednesday. The cryptocurrency is now slightly lower, trading around $67,700 at press time, although buyers could hold support above $65,000 into Asian trading hours.

Intraday charts are showing initial signs of upside exhaustion, which typically lead to a brief pullback in BTC’s price. For example, the relative strength index (RSI) on the four-hour chart continues to hover near short-term overbought levels.

Still, upside momentum signals are improving on the daily price chart for the first time since Oct. 1, which preceded a price rally from $44,000. This suggests that buyers could remain active on pullbacks.

Two consecutive daily closes above an all-time price high would yield further upside targets, initially toward $86,000.

The social media firm Twitter is building out a new crypto team to add crypto, blockchain and decentralized technology into the popular social media platform. 

The Financial Times reported Wednesday that Twitter has hired Tess Rinearson to be its crypto engineering lead.

Rinearson also took to Twitter to reveal plans for what the crypto team will focus on in the near future. First, they’ll grow decentralized apps (DApps) for creators to manage virtual goods, currencies and ways for their fans to support their community.

Farther down the road, Rinearson hinted that her team will look to crypto tech to augment identity, community and ownership on Twitter. 

In addition, Rinearson notes that her team will collaborate with Blue Sky, Twitter’s decentralized social networking project to “help shape the future of decentralized social media.” 

The addition of the crypto team comes more than a month after Twitter implemented a method to tip creators with bitcoin via the Lightning network on September 23 and evidence that they’re experimenting with ways to verify NFT used as profile pictures on September 29. 

Twitter isn’t the only social media giant looking at blockchain-based technology. Reddit co-founder Alexis Ohanian looks to Solana-based social media and Facebook is doubling down on the metaverse.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The Securities and Exchange Commission (SEC) is taking action against a Wyoming-based decentralized autonomous organization (DAO) and its planned tokens.

The securities regulator announced today it had instituted proceedings against American CryptoFed DAO LLC, which touts itself as the first DAO out of Wyoming, resulting in a freeze on the registration of its tokens. The state passed a heavily debated law earlier this year allowing DAOs to seek state charter and official recognition as limited liability companies. 

CryptoFed filed an S-1 with the SEC in September of this year, formally requesting recognition from the federal agency. In its registration, it attempted to register its two tokens, Locke and Ducat. The group registered to use these tokens in a secondary market and refundable auctions at sales higher than initial value. In terms of function, the Locke token was supposedly for governance decisions, while the Ducat token was typical transactions.

In its announcement of the proceedings, the SEC said the action halts, “the effectiveness of the company’s registration of two digital tokens as securities.”

At the time of the S-1 filing, the DAO’s organizers claimed the tokens were not securities and sought registration with the agency as utility tokens. Until the filing became effective, CryptoFed intended to distribute the tokens but restrict their trading and transferring. 

The registrations were made in line with guidelines laid out in crypto-friendly Commissioner Hester Peirce’s most recent draft of the Token Safe Harbor proposal. However, the SEC has not formally recognized that path, and it remains a proposal rather than guidance. 

Still, CryptoFed filed a Form 10 related to the tokens, which is a general form for registration of securities, on Sept. 16. The SEC alleges that CryptoFed’s Form 10 registration was “materially deficient and misleading.” 

“The Enforcement Division alleges that the Form 10 failed to contain certain required information about the two tokens as well as about American CryptoFed’s business, management, and financial condition, including audited financial statements,” said the statement.

The Form 10 also contained what the SEC deemed “inconsistent statements” about whether Ducat and Locke were securities. It also claims that statements related to the DAO’s intention to distribute made in a separate form, Form S-8, which is used to register securities offered through employee benefit plans, were misleading, since the DAO failed to disclose that its Locke tokens cannot be legally distributed despite filing this form.

Administrative proceedings will now take place to determine whether to deny CryptoFed’s registrations suspend their effective date of the token registrations. 

“American CryptoFed’s registration of the two tokens is stayed pending a determination by an administrative law judge whether to deny or suspend the registration of the tokens,” said the SEC.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The Terra community on Tuesday night passed a popular proposal to burn about 88.7 million terra (LUNA) tokens, worth roughly $4.5 billion at current prices, and mint about 4 million to 5 million terraUSD (UST) stablecoins, a decision that should further boost the Terra project, according to analysts.

The “burning,” or permanent removal of the tokens from circulation, will be executed over the next two weeks, with an initial burn of 520,000 LUNA that already took place Tuesday night. At press time, LUNA was changing hands at $53.74, up 7.03% in the past 24 hours, according to TradingView and Binance. Its price set a new record high $54.95 at around 11 a.m. ET (16:00 UTC) Wednesday.

Initiated by Terra’s co-founder Do Kwon, the measure aims to fund new services in the Terra ecosystem, including Ozone, an insurance protocol that “facilitates levered coverage of technical failure risks” in any decentralized finance (DeFi) protocol built on Terra, according to a community post by Kwon. It also marks one of the largest burns of a major layer 1 token in crypto history, according to Terra’s official Twitter account.

“A large portion of the burn – $1 million and more – will go towards capitalizing a new insurance protocol for the Terra ecosystem called Ozone,” Ryan Watkins, research analyst at Messari, said. “This is an important piece of the ecosystem that should promote more safety for users.”

The decentralized finance (DeFi) sector has been facing a growing number of hacks of late. Data from Rekt shows that DeFi protocols have suffered more than 50 hacks worth over $1 million in the past two years.

Terra blockchain is the fourth largest smart contract platform by total value locked (TVL) at $11.36 billion, according to data from DeFi Llama. TVL is the total value of the cryptocurrency committed to DeFi protocols that are built on a layer 1 blockchain.

LUNA is part of an algorithmic balancing system that helps stablecoins running on the Terra blockchain maintain parity with fiat currencies.

There were some initial doubts among those in the Terra community around the burning proposal, as shown in the proposal’s page. Some users asked whether burning nearly 89 million LUNA was too much.

Terra’s Kwon told CoinDesk that the burning proposal was also intended to reduce the amount of wealth in Terra’s community pool.

“At the [fully diluted market value] of the network at almost $40 billion, I think having a community pool that is too large is actually a systemic risk,” Kwon said in a Twitter message to CoinDesk. “I believe community funds should be just large enough to pay for public services. … But a DAO [decentralized autonomous organization] doesn’t need billions of dollars to operate.”

Before Terra’s Columbus-5 upgrade at the end of September, the community pool was set to receive $1 worth of LUNA from users when UST traded above $1. In return, users would receive 1 UST. The Columbus-5 upgrade also shifts the design to burning LUNA: Whenever UST is minted, LUNA with the same amount of value is burned instead of going to the community pool.

The burning will also ultimately benefit LUNA stakers, said Jeremy Ong, vice president of business operations at crypto research boutique firm Delphi Digital.

“LUNA stakers have less competition as [they] don’t have to compete against the community pool,” Ong said.

Twitter is launching a dedicated cryptocurrency team as it continues to support the adoption of digital assets and decentralized apps.

• Twitter has tapped Tess Rinearson to lead its new cryptocurrency team. Prior to joining Twitter, Rinearson worked at Tendermint on the consensus engine Tendermint Core, and previously worked at the software payments firm Interstellar.
• In her Twitter thread announcing the move, Rinearson wrote that “First, we’ll be exploring how we can support the growing interest among creators to use decentralized apps to manage virtual goods and currencies, and to support their work and communities.”
• “Looking farther ahead, we’ll be exploring how ideas from crypto communities can help us push the boundaries of what’s possible with identity, community, ownership and more,” Rinearson continued.
• She also said that the group will be working to “help shape the future of decentralized social media.”
• Currently, Twitter allows users to send and receive bitcoin-denominated tips via third-party payment channels.

I’m thrilled to share that I’ve joined Twitter, to lead a new team focused on crypto, blockchains, and other decentralized technologies—including and going beyond cryptocurrencies.✨ pic.twitter.com/HaP0k5hUOq

— Tess Rinearson (@_tessr) November 10, 2021

Crypto trading firm QCP Capital is now trading around $1 billion a month in options on decentralized derivatives platforms.

That’s according to Simon Nursey, head of derivatives at Singapore-based QCP Capital, who spoke on Wednesday at an industry conference in Lisbon. 

“For us, we’ve been quite taken aback by the explosion in the DeFi options space. We’ve always felt it was a difficult problem to solve: getting derivatives on-chain. But now it’s not experimental, or a test, or anything like that, it’s a very significant part of our business,” Nursey said. “We’re turning over about $250 million a week of DeFi crypto options through the various vault projects that are out there. And this is up from zero just a matter of months ago,” he added.

Options are a common instrument on Wall Street that provide traders the option to buy or sell an underlying asset at a certain price before a set date. They can be useful as a mechanism to hedge or speculate on a given asset. In the DeFi world, a number of projects—including SIREN Markets and Hegic—have sprung up that allow traders to trade a similar type of contract that trades on a blockchain. Elsewhere, projects like dYdX and Perpetual Protocol offer trading in DeFi perpetual swaps. 

The market typically sees billions of dollars trade hands on a given day, according to data from The Block Research. 

Part of what is fuelling activity on these platforms are the arbitrage opportunities traders can capture. The lack of liquidity on certain platforms leads to differences between funding rates on decentralized and centralized trading platforms, according to CMS Holding’s Joe DeTommaso.

He noted that, “I think as we see liquidity get into this space, that’ll start to dry up.”

Jacob Palmstierna, head of business development at GSR, agreed but pointed out that these platforms tend to offer higher yields, which could attract more capital. He said that we’re “going to see tons more liquidity moving that way and even faster rises in decentralized derivatives and options.”

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.