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Privacy will be a big focus for a potential Digital Pound, according to FIS CBDC strategy head Julia Demidova.

“Privacy continues to be a key priority when it comes to a UK central bank digital currency. With a CBDC, central banks and regulators could achieve greater transparency and increase the visibility of transactions while protecting the privacy of individuals,” Demidova said in an emailed statement to The Block.

“For example, aggregated data can be used by central banks and governments in real time to analyze the health of the economy. Should the Bank of England press ahead with a Digital Pound, proper safeguards will need to be in place to respect end-user privacy,” she added.

FIS is a global financial services company. It acquired the payments giant WorldPay for around $43 billion in 2019 — one of the largest-ever acquisitions in the sector.

Demidova acknowledged there will be challenges though. “Launching a CBDC involves extensive testing, with various technical, regulatory and policy-driven aspects taken into consideration,” Demidova added. “Stakeholders across the industry will need to integrate CBDC into their infrastructure, and merchants will need to add CBDC options to their point-of-sale terminals. It’s likely that the launch of a CBDC will require time and, most importantly, it will require careful planning.”

Digital Pound consultation

Demidova’s remarks come as the Bank of England’s consultation on a potential Digital Pound — which began in February — came to an end on June 30. Demidova’s comments echoed those of the Bank of England’s head of strategy and architecture William Lovell last month in a webinar titled “Demystifying the Digital Pound,” presented by the Digital Pound Foundation and The Payments Association. “Neither the government nor the Bank of England will have access to Digital Pound users’ personal data,” Lovell said at the time.

The Digital Pound offers a new way of providing digital money without the same risks faced under the current monetary system, according to Lovell. Under its “platform model,” the central bank wants to run the underlying ledger, leaving banks and technology companies to handle Know Your Customer (KYC) and Anti-Money Laundering (AML) checks while running front-end services connected to the CBDC. 

However, the CBDC will not be completely anonymous to prevent financial crimes, would include limits on the amount of funds users can hold digitally and a final decision on its roll-out in combination with the UK Treasury may not be made for two years while it undertakes more development work, Lovell said last month.

Other countries, such as Switzerland, are developing CBDC pilots and the European Commission also recently outlined its vision for a Digital Euro. However, Fadi Aboualfa, head of research at crypto brokerage Copper, remains skeptical that the current wave of CBDCs are a viable replacement for cash.

UK embraces crypto

Beyond a potential CBDC, the UK has shown signs of embracing the crypto industry, with the country’s Law Commission recently publishing recommendations to create a distinct category of personal property to protect digital assets, establish a panel of industry experts to provide guidance on technical and legal issues and develop a bespoke legal framework for crypto. 

The Law Commission’s recommendations followed plans from UK Prime Minister Rishi Sunak to make the country a web3 hub, with venture capital firm a16z announcing in June it would open up a UK office.

Meanwhile, as regulators in the U.S. continue their crypto crackdown, last week Lightspark CEO David Marcus said it was “disheartening and frustrating to see the U.S. fall behind.” That followed similar remarks from Coinbase CEO Brian Armstrong earlier in June, that the U.S. regulatory environment was “hurting America’s economic competitiveness,” referring to the SEC’s lawsuit filed against the crypto exchange on June 6.

© 2023 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 Solana ecosystem has recorded an increase in the value of assets staked into liquid staking protocols, marking a 91% rise year-to-date.

By the end of June, a combination of liquid staking protocols, including Marinade Finance, Lido, Jito, JPool, and Socean, had cumulatively held $187 million in staked Solana (SOL) tokens, according to The Block Research. This represents a substantial growth from the initial $98 million staked at the beginning of the year. Currently, these protocols constitute 69% of the total value locked within the network, estimated to be around $270 million.

Kevin Peng, a research analyst at The Block, suggests that the rise in inflows into Liquid Staking Derivatives (LSDs) within the Solana ecosystem could be a result of the considerable growth seen in this niche across the broader crypto space. Specifically, the liquid staking growth on Ethereum following the Shapella upgrade may have spurred a ripple effect that extended to Solana.

“Overall, LSDs have grown as a category across crypto in 2023 in large part due to the new dynamics around staking on Ethereum, though demand for these products has trickled into the Solana ecosystem as well,” Peng wrote.

So far this year, about 1.66 million SOL, equating to $31 million, has been deposited into LSD protocols, which shows that increased inflows are partly responsible for the jump in liquid staking TVL. Another key factor propelling this trend is the increase in the price of Solana’s native token, SOL, which has soared by about 60%. This price appreciation has contributed to enhancing the value of SOL deposits in liquid staking. 

TVL in liquid staking on Solana | Source: The Block Pro

Marinade leads in Solana liquid staking

Marinade Finance has continued to dominate as the leading liquid staking project within the Solana ecosystem, boasting a formidable 62% market share and hosting approximately $120 million in total value locked (TVL), per The Block Research. Lido Finance, while leading the Ethereum ecosystem as its largest liquid staking protocol, only claims a 27% market share within Solana’s sphere.

Jito Labs, which operates a client software on the Solana network, has made a breakthrough in liquid staking as well. Utilizing its staking product, the project has managed to increase its share in liquid staking from 1.9% to 6.9% year-to-date.

© 2023 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 group of Ethereum community members has proposed a new standard to improve the security of decentralized finance (DeFi) protocols.

Dubbed ERC (Ethereum Request for Comments) 7265, the proposed standard would enable a “circuit breaker,” allowing DeFi protocols to easily add a back-stop in their smart contracts that stops tokens before they leave the contracts in the event of a hack, according to one of the standard’s builders who goes by @tcb_00 on Twitter. The other builders include @Diyahir and @real_philogy.

The proposed ERC 7265 standard comes amid rising DeFi hacks. Nearly $3 billion worth of funds have been stolen by attackers from DeFi protocols to date, according to The Block’s Data Dashboard. “We all agree, DeFi is broken,” said Meir Bank of Fluid Protocol. “Not only are there many hacks, but the results are catastrophic. When protocols are hacked, often they lose everything. The TVL [total value locked] tanks to zero in a matter of seconds.”

ERC 7265 to mitigate DeFi hacks 

DeFi attacks result in big losses because most protocols don’t react quickly enough to stop them, according to Bank, who said by the time anyone realizes what’s happening, it’s already too late, and even when a team tries to fix things, it’s usually too late.

“ERC 7265 allows teams to create a circuit breaker protecting their protocol, with highly customized rate limit parameters per asset,” Bank said. “When a hack happens, the attacker will no longer be able to drain an entire contract in seconds. The majority of funds can be recovered.”

The ERC 7265 standard is designed for protocols that can be upgraded by governance, which are the most common in DeFi. “There are very few downsides and many upsides for governed DeFi protocols to integrate ERC 7265,” Bank said. “We are going to continue education going forward to save DeFi.”

Given the ERC 7265 standard is a proposed standard, it remains to be seen whether the core Ethereum team accepts and implements it as the final standard. ERCs are proposed standards that define how specific features or functionalities should be implemented on the Ethereum network, while Ethereum Improvement Proposals or EIPs are submitted changes and improvements to the Ethereum protocol itself. ERCs and EIPs get finalized after they are passed by the broader Ethereum community and implemented by core developers.

© 2023 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.

Crypto derivatives and copy trading platform Bitget is making a foray into the cryptocurrency loan sector by introducing its Crypto Loans product.

Bitget aims to attract users dissatisfied with traditional credit institutions by offering an alternative funding solution backed by cryptocurrencies, according to a statement. Its Crypto Loans product follows a dual-coin approach, enabling users to stake one digital asset as collateral and obtain a loan in another. 

Bitget argues crypto loans have been gaining popularity in recent years thanks to an overall digital lending sector that surpassed $8.5 billion in 2022, with a compound annual growth rate of 20.5%, according to a report from Global Market Insights.

However, the crypto loan sector, in particular, suffered significant setbacks after a tumultuous 2022 for centralized crypto lending services — a year that saw the collapse into bankruptcy of firms like Celsius, BlockFi and Voyager Digital. It remains unclear the extent to which users will trust such services going forward.

Streamlining the crypto loan process

Bitget says it has streamlined the loan process, replicating a more familiar process found in traditional finance to ease user onboarding. The borrowed amount is determined by the market value of the collateral staked and is automatically disbursed, with each loan issued at a specific interest rate. Borrowers can utilize the funds as needed and adjust the collateral based on requirements. Users have the option to repay the loan before or at the predetermined deadline.

Bitget also said support for withdrawals and a swift review process on loan applications would encourage users to use the platform.

“Users now have the opportunity to stake less-demanded coins, enabling them to obtain loans in more liquid assets for investment purposes,” Bitget Managing Director Gracy Chen said in the statement. “Our platform’s flexible borrowing and repayment mechanism is designed to cater to the needs of all users, accommodating their requests and ensuring convenience.”

In March, Bitget acquired a controlling stake in the crypto wallet BitKeep — rebranded as Bitget Wallet — with an additional $30 million investment at a $300 million valuation. At the time, BitKeep claimed to be Asia’s largest crypto wallet, with 9.5 million users, while Bitget says it has 8 million users. 

Bitget also unveiled a $100 million venture fund in April, following a $10 million investment from Dragonfly Capital.

© 2023 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.

Current CBDC models are “not a viable cash equivalent that people could use in daily transactions,” according to Fadi Aboualfa, head of research at crypto brokerage Copper.

Central banks are either researching or trialing CBDC pilots, with the Bank of International Settlements (BIS) progressing a “unified ledger” system for global interoperability.

However, Aboualfa questioned the feasibility of current models. “There hasn’t been an actual CBDC model that is technically a replacement for cash, they all have several flaws and a central bank issuing a CBDC would be a mammoth undertaking for multiple reasons,” he told The Block.

CBDCs in direct competition with commercial banks

The researcher explained that central bank digital currencies (CBDCs) can be issued in two different ways, directly from a central bank, or via commercial banks. He said central banks don’t have the talent or the infrastructure to run a fully automated decentralized equivalent to cash. “Each central bank design is creating its own siloed approach, and the retail wallet infrastructure isn’t there yet,” he added.

In the case of CBDCs issued by intermediary banks, Aboualfa said consumer confidence issues could arise if tokens have specific commercial bank branding. “Commercial bank-issued CBDCs could lead to chaos in decentralized open markets if scandalous news hits one of the banks,” he added.

He outlined the complexity of establishing trading pairs and difficulty in maintaining a peg between CBDC brands issued by commercial banks. Aboualfa used Silicon Valley Bank as an example, saying that if it had issued a CBDC, consumers would have lost confidence as soon as it fell into distress, causing its token to lose parity with other dollar-pegged CBDCs.

He added that the crucial factor of CBDC interoperability has not been adequately considered. Arguing current designs point to multiple blockchains with intermediaries controlling the flow. “In the erroneous pursuit of common standards and blockchain use, how is everyone supposed to agree on the design and structure of a CBDC worldwide at the same time? The designs and models need to allow for integration, not vendor lock-in, and every central bank will have different considerations and requirements,” he added.

© 2023 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.

Bitcoin Ordinals launchpad platform Luminex has proposed the BRC-69 standard, designed to simplify the creation of Recursive Ordinals collections, reducing inscription costs and streamlining the on-chain pre-reveal process.

Ordinals developers introduced recursive inscriptions last month, helping to overcome Bitcoin’s 4 MB per block size limitation that restricts the size of NFTs by allowing inscriptions to work together. Previously, Ordinals inscriptions representing tokens and NFTs on Bitcoin were independent of one another, unaware of other inscriptions. Recursive inscriptions can reference the content of other inscriptions using a special syntax. 

Building on this, Luminex claims BRC-69 can reduce the cost of inscriptions by over 90%, helping to optimize the Bitcoin block space as the number of inscriptions grow. The reduction is achieved through a 4-step process of inscribing traits, deploying a collection, compiling it and minting the assets, Luminex said.

Luminex’s proposal means that minters only need to inscribe a single line of text rather than a full image. This text serves as a reference, allowing the final image to be automatically rendered across Ordinals frontends, only using on-chain resources. “The end result? A flawlessly rendered image. Unlike other SVG recursive collections, these images can be dragged, dropped and saved as typical image type Ordinals,” Luminex said.

In addition to cost savings, Luminex claims BRC-69 paves the way for more enhancements and features. For example, launching collections with a fully on-chain pre-reveal process — meaning the unveiling of a collection, including the final image and its associated traits, happens directly on the blockchain without requiring off-chain resources.

The Ordinals protocol came to prominence earlier this year, enabling the creation of tokens and NFTs on Bitcoin and causing a surge in transactions and fees on the network.

© 2023 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.

Law firm McDermott Will & Emery billed creditors of bankrupt crypto brokerage Voyager Digital about $5.1 million for legal services provided between March 1 and May 18.

In a Monday court filing, the law firm issued the bill to the “Official Committee of Unsecured Creditors,” bringing its total compensation to $16.48 million, covering the period from July 22, 2022, to May 18, 2023. Creditors have so far paid the law firm a total of $8.97 million.

In July 2022, Voyager filed for Chapter 11 bankruptcy protection after it was embroiled in the credit crisis that swept crypto last year.

Voyager billed

Another Monday court filing showed that law firm Kirkland & Ellis charged Voyager and related debtors a total of $27.97 million for its legal services during the period between July 5, 2022 and May 19 this year. 

To date, the debtors have paid $23.38 million in compensation to the law firm, according to the filing.

Kirkland & Ellis has also served a number of bankrupt crypto firms in addition to Voyager, including BlockFi and Celsius.

© 2023 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.

Cameron Winklevoss, co-founder of crypto exchange Gemini, issued a “final offer” to Barry Silbert, founder of Digital Currency Group (DCG), to repay a total debt of $1.46 billion or risk a lawsuit.

In an open letter published Monday on Twitter, Winklevoss said that the “games are over” — with Gemini Earn users still stuck in limbo with over $1.2 billion of assets stuck in Genesis Global, which DCG owns.

Winklevoss demanded DCG make payments totaling $1.465 billion, including the US$630 million payment that was due in May. As part of the offer, a payment of $275 million should be made by July 21.

“This proposal is fair and reasonable for everyone and represents the floor that creditors, who are required to support a deal, will accept,” Winklevoss said, adding that if Silbert fails to agree to this deal by 4 p.m. ET on July 6, Gemini will file a lawsuit against DCG and Silbert on July 7.

An ongoing feud

Gemini, which lent customer funds to Genesis as part of its retail Earn program, had previously threatened to file a lawsuit against DCG and its founder after Genesis Global filed for Chapter 11 bankruptcy in January.

DCG, which was caught up the credit crisis that swept crypto last year, has been in negotiations with Genesis creditors, but missed a $630 million payment to Genesis in May.

DCG and Genesis did not immediately respond to The Block’s requests for comment.

In an update on June 30, Gemini said the mediation period has been extended to July 5 to determine the contribution to be made by DCG.

“Gemini is disappointed in how long it has taken to negotiate a DCG contribution and we are committed to pushing DCG to pay what it already owes to Genesis and to compensate the Earn lenders for the role that DCG had in Genesis’s failure to return Earn assets to the Earn users,” Gemini wrote in the update.

© 2023 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.