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Crypto exchanges have been under pressure recently, with a broader liquidity slump and pull back from large trading firms pulling back from the market. 

But the volume slump that’s plagued venues like Coinbase and Binance has not befallen their decentralized counterparts to the same extent. Indeed, whilst the seven day moving average for centralized crypto exchanges hit their lowest level of the year this week, decentralized exchange volumes are on track this month to come in at the same level as April. 

Meanwhile, The Block’s DEX to CEX ratio — which tracks the volumes of decentralized exchanges relative to centralized venues — is at an all-time high, hitting over 20% for the first time.

Traders flocking to DEXes

One Crypto Twitter personality, @BasedKarbon, points to memecoin mania to explain the switch in preference toward DEXes.

“The limited number of market participants went back to DEX trading amid Memecoin mania,” he noted in a direct message to The Block. 

Indeed, centralized exchanges were slow to list memecoins like Pepe. Coinbase, for instance, still does not support trading in the token, while Binance took several weeks to list the crypto after it became a market zeitgeist. But traders didn’t wait around for these listings, having already turned to DEXes — with Pepe volumes on Ethereum-based DEXes surging above $600 million on May 5. 

Some centralized exchanges are, however, trying to get in on the memecoin action. Justin Sun, owner of Poloniex and and advisor to Huobi, told The Block that his teams are quickly listing as many memecoins as possible. 

“The memecoin narrative has contributed a lot of the revenue on Huobi Exchange,” Sun said. “The top ten tokens, at least four of them are the most tradable assets on Huobi, like four of them are our memecoins.” Sun has also said he plans to start trading memecoins in his personal wallet — although it’s hard to see among all the random tokens being sent there by onlookers.

With reporting from David Quinton. 

© 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 latest price moves in bitcoin (BTC) and crypto markets in context for May 22, 2023. First Mover is CoinDesk’s daily newsletter that contextualizes the latest actions in the crypto markets.

Crypto hedge fund BXB Capital or Block by Block Capital is launching a bitcoin-focused trading fund in July.

The fund, which was co-founded by former Binance Korea co-founders J.J. Petersen and Alex Friedberg, already has 400 bitcoin (worth around $10 million at current prices) in commitments and plans to raise up to 1,000 bitcoin (nearly $27 million), Petersen told Fortune in an interview published Monday. The fund is raising capital exclusively in bitcoin and will also only trade in bitcoin and provide returns in bitcoin.

“There are very few funds that look at bitcoin as the asset you want to make more of,” Petersen told Fortune. “People are starting to change their framework and are no longer trying to just acquire more wealth in USD or fiat.”

BXB Capital’s Petersen told Fortune that many crypto native investors do not want to hold more dollars, so the new fund gives them a chance to earn bitcoin without getting involved in lending or yield products.

“You basically need to earn [more] dollars to outpace inflation,” Petersen said. “If you earn more Bitcoin, you just own your token, so you increase your total percentage of the circulating supply permanently.”

What is BXB Capital?

Petersen and Friedberg co-founded BXB Capital in 2017 as a proprietary trading firm. The firm’s initial mandate was trading so-called “kimchi premium,” which involved taking advantage of price differences between bitcoin in South Korea and other markets, a tactic popularized by now bankrupt crypto firms Three Arrows Capital and Sam Bankman-Fried’s Alameda Research. Over the years, BXB Capital’s scope expanded to include other opportunistic trading strategies.

Petersen and Friedberg had also launched the South Korean won-backed stablecoin KRWb as part of their company BxB Inc. In 2020, BxB Inc. was acquired by Binance and rolled into a joint venture for the launch of their Binance branded stablecoin, BKRW, and Binance Korea, according to Petersen and Friedberg’s LinkedIn profiles — where they are mentioned as co-founders of Binance Korea. Binance Korea, however, shut down less than a year after being in operation due to tight liquidity and low transaction volumes.

The news comes as bitcoin is seen as a more popular safe haven than the U.S. dollar, according to Bloomberg’s Markets Live Pulse survey conducted last week. The possibility of U.S. debt default looms larger than ever before, posing a significant threat to global markets. Earlier this month, Tether, the issuer of the world’s largest stablecoin USDT, said it will regularly invest up to 15% of its profits in bitcoin as it shifts its reserves towards crypto and away from U.S. government debt.

© 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.

Last week, the once-wildly popular web3 game Axie Infinity announced it will be available for download on Apple’s App Store, signaling that perhaps the powerful tech giant is warming to the idea of allowing blockchain-based mobile games to operate on its iPhone.

Now Stepn, a blockchain-powered fitness app that incentivizes users with crypto rewards, has announced arguably even bigger news. The Australia-based company said its users will now be able to buy and sell Stepn’s digital assets without being forced to exit the app and use an external marketplace.

“It is a very, very big step,” said Stepn’s Chief Operating Officer Shiti Manghani during an interview with The Block. “Nothing like this has been done before. Internally we’re saying this is the biggest thing happening in crypto and not that many people know about it.”

Stepn also announced a new integration which will allow users to purchase digital assets using traditional debit and credit cards linked to Apple Pay.

Historically Apple’s App Store policies regarding the buying and selling of in-game assets have been considered hostile by some companies. One of Apple’s most controversial stances has been requiring app developers to share 30% of transaction revenues; a particularly costly requirement for blockchain-based applications that want to allow for the trading of digital assets, which in some cases can fetch hundreds, thousands, if not millions, of dollars.

Stepn outdoes Axie Infinity

Stepn, which has been downloaded millions of times, is an app that allows people to first buy digital sneaker NFTs and then earn token rewards by “walking, jogging or running.” Each pair of NFT shoes have unique characteristics which influence how users are able to earn rewards.

In order for iPhone users to purchase the sneaker NFTs they will need to purchase in-app credits they can then exchange for the digital assets. The NFT sneakers can also be bought or sold for cryptocurrency on Stepn’s marketplace.

Stepn said that all of this will be possible on the iPhone without having to exit the app. Iphone users will be able to access the company’s marketplace while still inside Stepn’s smartphone app, it said.

This represents a marked shift from the deal Sky Mavis inked with Apple for Axie Infinity. With the Axie Infinity app currently running on iPhones in a limited number of countries, there are no in-app links to the game’s NFT marketplace; there isn’t even a mention of the marketplace in the app, a company spokesperson said.

“Due to Apple’s policies, Axie Infinity: Origins does not contain direct links or explicit references to the marketplace within the app at this time,” the spokesperson said by email. “Sky Mavis uses other platforms such as Discord and email marketing to educate the community on how to integrate the NFT marketplace into the gameplay experience on the Apple app build.”

Growing user numbers

While Stepn has been downloaded millions of times, Manghani acknowledged the app’s monthly active user numbers have been declining, recently falling to about 500,000, she said. Manghani and her team are hoping the Apple integration will help add users. Toward the end of last year, Stepn said it had amassed nearly five million registered users who had walked or ran nearly 70 million miles.

The Stepn executive also said that while paying Apple 30% fee of all in-app transactions is far from ideal, the opportunity to attract new users from the Apple ecosystem is too attractive to pass up. That said, striking the deal was arduous, she added. 

“Working collaboratively with Apple has been one of the best things that has happened to our app,” said Manghani. “[But] for every acceptance we’ve gotten many, many rejections as well. There have been many sleepless nights … It has taken us months.”

Stepn was founded in 2021 by Satoshi Labs. Past investors include Sequoia Capital India, Alameda Research and Santiago Santos, a former ParaFi Capital partner.

© 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 blockchain game sees fiat onramps such as Apple Pay as a means onboarding the next 100 million users to Web3, STEPN chief operating officer Shiti Manghani told CoinDesk.

Ethereum co-founder Vitalik Buterin expressed concerns about overcomplicating the Ethereum consensus mechanism beyond its original design, specifically in terms of re-staking.

In a new blog post, Buterin voiced reservations about initiatives that could unnecessarily introduce risks into the ecosystem and complicate the roles of Ethereum validators beyond their primary duty of verifying the core protocol rules. Buterin was concerned about re-staking, a mechanism being developed by Eigen Layer, among others, which broadens the responsibilities of Ethereum validators to include securing external chains. He was worried that re-staking might introduce risks that could affect the safety of the network.

“We should tread lightly when application-layer projects aim to extend the ‘scope’ of blockchain consensus beyond the validation of essential Ethereum protocol rules,” Buterin stated in the post.

In Ethereum’s proof-of-stake model, validators are selected based on the number of ether they hold and are willing to stake. The network has the largest validator set among all proof-of-stake chains, both in terms of the number of validator entities and the total value of staked ether, some 18 million ETH (~$34 billion). This considerable size has prompted the development of systems to leverage this network security to secure third-party chains. However, Buterin advocated for a cautious approach.

The risk of re-staking

Buterin noted that while re-staking can be used for low-risk purposes, there are situations where it could compromise the mainnet’s security, such as when Ethereum validators face slashing on third-party chains. Slashing is a punitive measure for validators who engage in undesirable activities, like improperly maintaining their stake or incorrectly processing transactions.

“We should instead preserve the chain’s minimalism and support uses of re-staking that do not seem like slippery slopes towards extending the role of Ethereum consensus,” Buterin suggested.

Buterin’s comments elicited responses from Sreeram Kannan, co-founder of Eigen Layer. Kannan agreed with Buterin’s analysis and acknowledged that Eigen Layer should avoid building complex financial primitives with the help of re-staking, as they “can spiral out of control.” Nevertheless, he stated that re-staking can be used for “low-risk” scenarios.

Kannan agreed that Eigen Layer can extend the functionality of validators beyond Ethereum but said these should be developed without the need for “slashing,” which would introduce unnecessary complexity. He further emphasized that Eigen Layer is cautious about not impacting Ethereum’s security in any way, aligning with Buterin’s blog post.

In his discussion, Buterin also raised concerns about a proposal from Martin Köppelmann, the founder of Gnosis, for an “ultimate oracle” – another application that exceeds the primary design of Ethereum’s core protocol rules. In the context of smart contracts, oracles are vital as they supply off-chain data. However, Buterin said that if the security of these data feeds were intertwined with Ethereum’s stake, it might heighten systemic risks and contribute to increased complexity.

Buterin suggested that such expanded roles or “duties” added to Ethereum’s consensus mechanism could magnify the challenges and risks involved in operating a validator. He emphasized, “Validators are required to exert significant human effort in terms of monitoring, running, and updating additional software to guarantee their adherence to any newly implemented protocols.”

© 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.

Hotbit users have until 04:00 UTC on June 21 to withdraw their assets from the platform.

Should the country decide to issue a digital pound, existing data protection, security and anti-money laundering rules would need amending, said Louise Abbott, partner at U.K.-based Keystone Law.

The Securities Commission (SC) of Malaysia ordered Huobi Global Limited to wind down operations in the country as it had been operating its crypto exchange without registration. The SC took action against both Huobi and its CEO Leon Li for operating illegally in Malaysia.

“This decision comes after concerns about the platform’s compliance with local regulatory requirements and protecting investors’ interests,” the regulator said Monday. It added that operating a digital asset exchange without being registered is an offense under section 7(1) of the Capital Markets and Services Act 2007.

The Malaysian SC said Huobi must disable its website and mobile apps in the country as well as cease any advertisements to Malaysian investors. “Leon Li, as the CEO, has also been specifically ordered to ensure that the above directives are carried out,” the regulator said. The SC urged Huobi’s Malaysian users to withdraw all their investments from the platform and close their accounts.

“In response to recent reports, we would like to clarify that the situation outlined pertains to the previous Huobi entity and former shareholders. This is not associated with the current Huobi platform, which adheres to strict regulatory compliance globally,” Justin Sun, founder of Tron and “advisor” to Huobi, told The Block. “We’re committed to providing a safe, secure, and compliant trading environment for our users worldwide.”

In October 2022, Huobi announced that “the controlling shareholder” of the company had agreed to sell its stake to Hong Kong-based investment company About Capital Management’s M&A fund. While Huobi did not name the controlling shareholder, the news came after reports that claimed Leon was seeking a buyer for his nearly 60% stake in the company and was asking for at least $1 billion. While reports claimed that Sun, who clearly has a significant role in the exchange, was the real buyer of the exchange, he continues to deny this.

The SC enforcement action comes as Sun aims to revitalize Huobi by listing memecoins. Sun recently also accused Li’s younger brother Li Wei of receiving millions of free Huobi (HT) tokens and profiting $7.45 million in the process. Sun wants Wei to return the profit and wants to destroy his remaining tokens as he has no role to play in Huobi’s development.

Founded in 2013, Huobi is the fourth largest crypto exchange in the world by trading volumes, according to The Block’s Data Dashboard.

© 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 country’s regulator told CEO Leon Li to ensure the website and mobile apps are disabled.