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Quick Take

• Disclaimer: The Block Research team has, is, and will be experimenting with the various protocols, projects, and applications mentioned in this series. The projects mentioned in our reports are not recommendations from our team and should not be misconstrued as investment advice. Many projects that appear in this series are highly experimental and, as such, will come with risks. Readers should evaluate their own risk tolerance before experimenting with these projects.
• DeFi Digest is a weekly digest that summarizes recently launched projects and applications that our research team found interesting.
• This week’s digest looks at Fractional and Risk Harbor

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Quick Take

• Teen artists are converting their artwork into non-fungible tokens (NFTs) and selling their pieces for thousands of dollars. 
• 18-year-old artist FEWOCiOUS is one of the many young creatives that has garnered fame and recognition in the space, inspiring many to follow in his footsteps. 

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Major Chinese state-owned banks have opened the doors to applications from members of the public seeking access to digital yuan wallets in Shanghai and Beijing.

The development indicates that the multi-stage digital yuan tests occurring in different parts of China are in the process of widening in scope. Specifically, six state-owned commercial banks in Shanghai are now allowing public users to apply for wallet activations, according to a Tuesday report from the Chinese state media outlet Securities Times.

The six banks include the Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, Postal Savings Bank of China and Bank of Communications.

In addition, Beijing Business Times said on Wednesday that at least three of the aforementioned commercial banks are also opening up the application process in Beijing for public users.

The move is notable because, in previous tests, users were required to either win a lottery or be invited in order to activate a digital yuan wallet to participate. 

By changing the process from invite-only to one based on applications, the public could become more active participants, as they would be able to top-up their activated digital yuan wallets and pay with it in whichever shop that supports the payment method.

However, the reports added that not every application will be automatically approved and that acceptance is reviewed on a case-by-case basis by the Chinese central bank.

An applicant would receive an SMS within a day if their applications were successful, instructing them on how to download and activate the digital yuan wallet.

Per the reports, users would need to fill in real names, ID and mobile phone numbers, email and employee names after scanning the digital yuan wallet application QR code provided by a bank.

“Although the application criteria has not loosened up, we’ve opened it up to the public so the process is less restrictive than before,” an employee of a Beijing branch of the Postal Bank of China told the Beijing Business Times. “As the review process goes digital, the speed of getting applications approved will be much faster later on.”

Since October, four Chinese cities — Beijing, Shenzhen, Suzhou and Chengdu — have conducted city-wide digital yuan lottery giveaway events to test the central bank digital currency. 

Although Shanghai has not yet conducted any city-wide giveaway, various locations including shopping malls and hospitals have already rolled out support for the digital yuan as a payment method.

© 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.

Binance is continuing to add former regulators to its team of compliance advisors. The exchange appointed two former members of the Financial Action Task Force (FATF), according to an announcement Thursday.

Former executive secretary Rick McDonell has served in a variety of positions combatting illicit finance. In addition to his role with FATF, he also served as Executive Director to the Association of Certified Anti-Money Laundering Specialists (ACAMS) and the Chief of the United Nations Office On Drugs and Crime’s (UNODC) global program on AML.

With McDonell comes Joseé Nadeau, who previously served as Head of the Canadian delegation to FATF. Both have worked with the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD) and the World Trade Organization (WTO).

At Binance, they’ll provide guidance on how to comply with policies from various regulators and interface with policymakers on issues related to crypto growth.

These appointments come in the wake of new guidance from the FATF, which takes aim at more anonymous modes of transacting. It also recommends heightened transaction reporting rules for crypto, recommending originator and beneficiary know-your-customer information be reportable, even for peer-to-peer transactions.  

McDonell and Nadeau have a financial integrity consultancy firm together, McDonell-Nadeau. Both also serve as advisors to Shyft Network as of last year. The network is heavily focused on presenting solutions to data-sharing problems posed by FATF’s heightened standards.

In addition to McDonell and Nadeau, Binance added a longtime member of the U.S. Senate, Max Baucus, to its team of policy advisors earlier this month. Baucus also served as former President Barack Obama’s ambassador to China. 

© 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.

An auction for a non-fungible token tied to a New York Times column has sold for 350 ETH — an amount worth nearly $560,000 at current prices.

As previously reported, the column was put up for sale by NYT writer Kevin Roose. The auction, which ended Thursday afternoon, ultimately fell in favor of Foundation user @3fmusic, who goes by the moniker “Farzin.” 

According to Roose, the proceeds of the sale will go to Neediest Cases Fund, a fund established by The Times which supports social causes in New York and elsewhere. The buyer will also have the chance to be featured in a follow-up article, though they can choose to remain anonymous. 

The Times is the latest publication to experiment with NFTs, which are akin to digital certificates tied to content such as artwork or, in the case of this particular example, a newspaper article.

Yesterday, TIME Magazine sold three of its issue covers for 81 ETH (about $131,000). Quartz sold its first NFT news article for 1 ETH (about $1,800). 

© 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.

An Instagram influencer known as Jay Mazini has been accused of defrauding his followers in an alleged scheme that resulted in the theft of some $2.5 million in bitcoin, according to a release from the Department of Justice. 

Mazini, identified in court papers as Jebara Igbara, allegedly leveraged Instagram — and his more than one million followers — to solicit Bitcoin, promising 3.5-5% premiums for the transaction. Prosecutors say he never paid victims.

In all, Igbara allegedly amassed at least $2.5 million worth of bitcoin from his followers. The Department of Justice said the investigation is ongoing according to Wednesday’s press statement.

Bank records allegedly show that Igbara did not have enough funds in his account to pay at least one victim the promised amount, so he faked transaction confirmation receipts misrepresenting that he sent the promised wire transfer to victims. 

The affidavit for the arrest warrant states that for one of his victims, Igbara promised to pay $195,700 for 5.049 Bitcoin around January 7, 2021. The victim messaged Igbara on WhatsApp and asked: “U send me wire receipt and I send you coins?” Igbara responded, “Of course. Of course I will send the wire transfer receipt.” After this victim noted that they had not received the wire transfer, Igbara allegedly repeated reasons why the transfer was delayed. 

“The charge in the indictment is an allegations, and the defendant is presumed innocent unless and until proven guilty.  If convicted, Igbara faces up to 20 years’ imprisonment,” the DOJ said.

© 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.

A radical new framework for how to authenticate online identities just went live on the Bitcoin network.

Microsoft’s Decentralized Identity team has launched the ION Decentralized Identifier (DID) network on the Bitcoin mainnet. This network is a layer 2 technology similar to Lightning except that instead of focusing on payments it uses Bitcoin’s blockchain to create digital IDs for authenticating identity online.

An ID network like ION could be the key to unlocking a web where users no longer have to fumble with passwords, emails and cell phones for verification.

“We are excited to share that [version 1] of ION is complete and has been launched on Bitcoin mainnet. We have deployed an ION node to our production infrastructure and are working together with other companies and organizations to do so as well. ION does not rely on centralized entities, trusted validators or special protocol tokens. ION answers to no one but you, the community,” Microsoft’s Daniel Buchner writes in a blog post.

What is Microsoft’s ION?

As noted by Buchner, ION is open source, so anyone can download the code and run an ION node to use the service. It uses Sidetree, an open-source protocol for decentralized identifiers built by devs from Microsoft, ConsenSys, Mattr and Transmute.

Open to the public after being in closed beta since June 2020, ION uses the same logic as Bitcoin’s transaction layers to sign off on identity. A public key and its associated private key are used to verify that a user owns an ID.

For example, to log into your email or social media in a world that uses ION, you would verify you own your account by “signing” your DID with your ION account. Thanks to the cryptographic links that ION creates to Bitcoin, the ION network would verify for the service provider that you own the ID associated with your account.

Any personal data (name, age, etc) tied to that ID is stored off-chain, depending on the service. ION’s IDs are anchored to Bitcoin’s blockchain using the InterPlanetary File System (IPFS) protocol, and ION nodes can process up to 10,000 ID requests in a single transaction.

Users can create and manage multiple IDs with different keys for different services. Some of these may be used recurrently to log into services that users access daily including email and social media, or could be used in one-off ways such as verifying concert or event tickets.

Anyone interested in running ION can do so through a remote node or by downloading it directly on a native device.

Microsoft has developed an application programming interface (API) for developers who would like to interact with the service without downloading a node or wallet. The company has also built an explorer for looking up DIDs created on the network.

With version 1 launched, the team will focus on releasing a “light client” for bootstrapping nodes faster and streamlining ID resolution by authorizing an ID while its related transaction is still in Bitcoin’s mempool.

Are decentralized IDs the future?

Microsoft’s ION has attracted contributions from Bitcoin and crypto mainstays including Casa, ConsenSys, Gemini, BitPay and Protocol Labs, as well as a hand from the teams at Cloudflare, Spruce and others.

ION has also worked with the Transmute and SecureKey teams who are building their own DID networks.

Decentralized Identity is a good example of a non-monetary use case for public blockchains like Bitcoin, and it’s even on the radar of the World Economic Forum’s blockchain chief. The World Wide Web Consortium (W3C), a body for web standards founded in 1994), is currently evaluating DIDs as a candidate recommendation, meaning the forum is considering recognizing these identity frameworks as an international standard.

Blockchain Commons head and crypto veteran Christopher Allen told CoinDesk in 2019 that Microsoft embracing Bitcoin’s properties for DIDs is “a step in the right direction.”

“You could have a service that is in the cloud hosted by Microsoft Azure, but is absolutely secure because everything in it is encrypted with your keys that you control and everything that run under your authority, even though it’s in the cloud,” Allen said.

UPDATE (Nov. 8, 17:00 UTC): Corrects typo in fourth paragraph.

Quick Take

• Decentralized identity solutions that leverage blockchain technology are challenging centralized identity management paradigms.
• Identity issuers, holders, and verifiers could all stand to benefit by moving ID management processes onto distributed ledgers and blockchains. 
• While product experimentation is still underway, ID holders, application development companies, and blockchain consulting companies are well positioned to capture value should decentralized ID solutions achieve product market fit.

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Crypto staking services provider Staked has entered into the asset management space with its new ether (ETH) trust product.

The Staked ETH Trust gives investors both exposure to ETH and staking rewards of about 7.5% annually, as opposed to Grayscale Ethereum Trust and other similar products that provide exposure to ETH only.

Staked co-founder and CEO Tim Ogilvie told The Block that purchasing, custodying, and staking crypto assets is “complicated” for traditional investors. Thus, the firm wanted to offer all of these services in one vehicle.

“We believe that when staking is made easy for a larger pool of capital, the levels of participation will grow significantly,” said Ogilvie. Staked is one of the largest validators of ETH. 

The sponsor of the Staked ETH trust is Staked Capital, a wholly-owned subsidiary of Staked Securely. The custodian of the product is Fireblocks, and Staked Cayman Ltd provides staking services.

The product has an expense ratio of 1% and is open only by private placement to accredited investors. The minimum investment amount is $25,000, and investors face a 12-month lock-up period.

Like most crypto trust products in the market today, Staked ETH trust doesn’t have a redemption mechanism in place. But Ogilvie told The Block that Staked will look to enable liquidity for the product by listing the trust’s shares on over-the-counter markets.

Staked had been working on the ETH trust for the last six months, Ogilvie told The Block, adding that now is a good time to launch it because ETH is going through a “major evolution” and there is broader institutional interest in crypto.

“Ethereum Improvement Proposal (EIP)-1559 and move to proof-of-stake will materially change the ETH economic policy, and seem likely to lead to a declining overall supply of ETH,” said Ogilvie. “So investors that like the hard cap of 21 million bitcoin will really like the ultra-sound money ETH offers.”

Looking ahead, Staked could also launch trust products for more proof-of-stake coins, Ogilvie told The Block, because that would be a “natural fit.”

© 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.

Peer-to-peer payments company Circle has announced a payments solution for non-fungible token (NFT) marketplaces and vendors.

The goal of the service is to enable such platforms to accept credit card payments in addition to crypto, the firm announced Thursday. 

According to the announcement, NFT marketplaces and vendors can now offer buyers the choice of transacting via traditional or crypto payments using Circle’s NFT solution by building on the firm’s Payments, Payouts, and Digital Dollar Accounts APIs. 

The firm’s solution is designed to incentivize more NFT transactions as well as make the process more seamless for buyers. 

“This is not only an important and valuable trend for marketplaces and creators, it represents incredible demand from consumers – for collectibles, artwork, moments, and really anything that can be tokenized on the blockchain,” said Circle co-founder and CEO Jeremy Allaire. “People are very much ready for digital collectibles, and Circle looks forward to supporting the industry.”

According to the announcement, Circle is also releasing additional features in the next few months, including support for USDC, BTC, and ETH payments as well as NFT custodial services.

The launch is another sign that a growing number of crypto businesses are seeking to take advantage of interest around NFTs, which are effectively tokenized certificates that represent rights or ownership of digital works. Investors from Andreessen Horowitz to Paradigm are investing in platforms that cater to NFT producers and collectors, and mainstream media companies like the New York Times are experimenting with the form in a public way. 

© 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.