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Decentralized exchanges have been growing at breakneck speed, with volume surging to nearly $40 billion for January 2021 — the highest level ever reported.

Just a year ago, DEX-based trading was almost non-existent, data from The Block indicates. In January 2020, a mere $600 million traded across DEXs. And DEX projects that raised tens of millions of dollars during the 2017-2018 period had little volume to show for their efforts.

So what changed? According to Polychain Capital’s Olaf Carlson-Wee, a confluence of factors have played into what might be characterized as a DEX Renaissance.

First, the user experience improved thanks to wallets like Metamask. 

“So one, you needed distribution and this is primarily in the form of wallets like, say, Metamask,” he said. “If you remember the early Ethereum days, people weren’t using Metamask as much and they were mostly using kind of desktop Ethereum browsers that kind of doubled as full nodes and it was a clunkier user-experience for sure.”

There’s also more liquidity on DEXs, resulting from more tradable assets being offered and new innovative ways to incentive liquidity — such as governance tokens.

As Carlson-Wee put it during the latest episode of The Scoop:

“Also, DeFi depends on there being different Ethereum compatible assets that are interesting to trade and use. 2017, I don’t think there was ten. Actually represents some sort of cash-flow. They represent some sort of right to cash flows  in the way that a lot of these DAO assets do. Things like Compound’s tokens or Uniswap’s token or Sushi’s token all do. In addition to that, there’s a real tech breakthrough. Uniswap introduced this automated market maker model that substantially increased the liquidity available to trade against and one of the big reasons volumes have been higher.”

Listen to the full conversation with Polychain’s Olaf Carlson-Wee below. 

© 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.

Quick Take

• There’s a new DeFi whale in town and it’s taking Crypto Twitter by storm. 
• @0x_b1, whose handle is a reference to an Ethereum address worth over $300 million, has gotten recent buzz for its commentary on various DeFi projects. 
• The Block interviewed the team behind @0x_b1 to learn more about how it began, what it looks for in a DeFi project, and its thoughts on where the DeFi world is headed.

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A registration statement for a new bitcoin exchange-traded fund (ETF) from Valkyrie Digital Assets, public records show.

The firm, a subsidiary of Valkyrie Investments, filed to register the Valkyrie Bitcoin Fund, a trust that will hold physical bitcoin (which will be held in custody by Coinbase, per the application). The S-1 is dated January 22.

As noted in the registration statement:

“The Valkyrie Bitcoin Fund (the “Trust”) is an exchange-traded fund that issues common shares of beneficial interest (the “Shares”), which represent units of fractional undivided beneficial interest in and ownership of the Trust. The Trust’s purpose is to hold bitcoins, which are a digital commodity based on the cryptographic protocols used by the decentralized, peer-to-peer bitcoin computer network. The investment objective of the Trust is for the Shares to reflect the performance of the value of a bitcoin as represented by the Index (as defined herein), less the Trust’s liabilities and expenses.”

The registration statement represents the latest effort in a years-long push to create and list a bitcoin ETF in the United States. In the final days of December, asset manager VanEck renewed its efforts to launch such a product, as previously reported. 

But the U.S. Securities and Exchange Commission has thus far refused to allow a bitcoin ETF to move forward. The first major effort — pursued by Gemini founders Cameron and Tyler Winklevoss — was knocked down by agency which cited concerns around market manipulation and a lack of surveillance agreements among exchanges.

More recently, SEC commissioner Hester Peirce has dissented to such objections, arguing at the start of 2020 that the SEC has applied “ever-shifting standards” to proposed bitcoin ETFs.

© 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 custody firm established by Nomura, CoinShares and Ledger has won a bid to safeguard cryptocurrency confiscated by British police.

The Derbyshire Constabulary, on behalf of the National Police Chiefs’ Council Cybercrime Programme, has partnered with Komainu – the crypto custodian which won a licence from Jersey regulators in November 2019.

Komainu will store confiscated digital assets on behalf of the police while crimes are being investigated.

The first police seizure of cryptocurrency in the United Kingdom came in July 2018, when more than £1.2 million in bitcoin was confiscated from a senior member of an organized crime gang.

Phil Ariss leads the Cybercrime Programme’s efforts to increase awareness of cryptocurrencies and how they are used by criminals within the police force, in addition to driving improvements in the police’s operational capabilities — through the use of tools like Komainu.

Over the past few years, the Cybercrime Programme has been training officers in crypto investigations, while giving them the skills and tools necessary to seize ill-gotten digital assets. Ariss himself was involved in the seizure of more £300,000 from a drug dealer in Leicestershire in June 2020.

An increase in such seizures led to a rise in demand for secure options to store the confiscated crypto.

“Virtual assets and cryptocurrency feature heavily in a significant proportion of cybercrime in the UK,” Ariss told The Block.

“The fact that we require a bespoke solution suggests that we’re talking about significant sums of money.”

He added that, up to this point, “a range of different options” have been utilized by the police to store confiscated cryptocurrency. Concern over the security of this arrangement is what led the Cybercrime Programme to seek a more uniform solution.

Komainu’s successful bid for the procurement contract was supported by CoinShares, a digital assets specialist with around $3 billion in assets under management, and Gentium, a British law enforcement consultancy focused on cybercrime.

Jean-Marie Mognetti, chief executive of CoinShares and a director at Komainu, told The Block that Komainu will handle secure storage for the police while CoinShares will help convert seized funds into fiat currency in the event of a successful prosecution.

It is not exactly the role Komainu, which targets institutional investors, was set up for — but Mognetti says the firm is well-suited to the job.  

“Komainu is built by institutions for institutions. Komainu is powered by trust, technology and transparency,” he said.

“When you’ve built an institutional product, national bodies and supranational bodies feel that you’re ticking the box for them as well.”

The collaboration may be part of what appears to be a wider attempt by UK authorities to up their game when it comes to tackling criminality involving crypto.

The National Crime Agency (NCA) recently advertised a job opening for a Financial Investigator (Criminal & Civil). The job ad stated that the NCA has a number of roles open in Cyber Crime Financial Investigations, and that candidates should have “experience of conducting financial investigations into cyber dependent and enabled crime and the criminal abuse of crypto currencies”.

The NCA did not respond to requests for comment in time for publication.

© 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.

Coinbase — the largest cryptocurrency exchange in the U.S. — alerted shareholders that the firm would launch a secondary market for its private stock on Nasdaq Private Market. 

The move comes ahead of the firm’s much-anticipated public market debut. Coinbase, which filed a confidential S-1 in mid-December, said that it would provide further details to shareholders on Monday about the secondary market launch.

“On Monday, January 25 at noon PT you will receive an email from the Nasdaq Private Market with details, including how you can access the market, what shares are eligible for trading, and how the market will function,” the message explained.

The move will likely allow current and former employees with vested equity in the firm to sell shares. Nasdaq Private Market offers services for companies ahead of an IPO, including “controlled liquidity programs for pre-IPO companies looking to raise secondary capital for shareholders and investors.”

It is expected that Coinbase will tap the public markets via a direct listing rather than a standard IPO. The debut is anticipated to draw significant interest — pre-IPO contracts are trading on FTX valuing the Silicon Valley unicorn at more than $70 billion, according to data compiled by The Block. 

© 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.