Ethereum’s much-debated “rollup-centric road map” was the right call, but comes with its own set of pitfalls, according to the blockchain’s co-founder, Vitalik Buterin.

Ethereum has ambitions of serving as a “world computer” — the rails on which a new set of leaderless, user-owned businesses and organisations will run.

But the blockchain is slow and expensive.

In their quest to build a blockchain that can serve billions of users reliably and affordably , Ethereum’s team of developers decided the blockchain should expand through many complementary blockchains rather than through improvements to Ethereum itself.

Doubling down on these complementary blockchain s— called layer 2s or rollups, in crypto-speak — was the right call, Buterin argued in his influential blog last week.

“This is powerful, and enables a lot of creativity and independent innovation,” he wrote.

The rollup model has created a diverse community that is still united by a shared set of values, he said.

“Layer 2s allow subcultures to emerge that are armed with substantial resources, and a feedback loop that forces them to learn and adapt in order to be effective in the real world,” Buterin wrote.

“In general, every Ethereum layer 2 has a unique ‘soul’: some combination of Ethereum’s culture, together with its own particular twist.”

But this happy status quo shouldn’t be taken for granted, he said.

Coordination is difficult, with little incentive for competing layer 2 blockchains to collaborate, according to Buterin.

Danger of “monoculture”

Layer 2 blockchains and their communities could “start acting like separate universes, with little cross-pollination between them,” he wrote.

Alternatively, some layer 2 blockchains might come to dominate, snuffing out Ethereum’s pluralistic ethos for a “monoculture.”

“Whether due to shared human biases or shared economic incentives (or too strong of a unified Ethereum culture), everyone ends up looking in similar places for what applications to build and perhaps even what technical choices to make,” he wrote.

Buterin suggested layer 2 blockchains coordinate by subsidising the development of shared infrastructure

“There is a lot of value in trying to expand on these ideas, and keep working to make the best of Ethereum’s unique advantage as a pluralistic ecosystem.”

Layer 2s booming

Layer 2 blockchains have boomed in recent years.

According to crypto research site L2BEAT, almost 100 layer 2s are active or in development.

Existing layer 2 blockchains have processed almost twice as many transactions as Ethereum itself over the past year, according to data collected by Jack Gorman, a data scientist at venture capital firm Variant Fund.

Aleks Gilbert is a DeFi Correspondent at DL News. Got a tip? Email him at aleks@dlnews.com.

Wall Street is wading into crypto. And that will probably mean the end of DeFi as we know it.

“A lot of institutions are actually fascinated by DeFi,” Vertex co-founder Darius Tabai told DL News. “The problem is that DeFi is still in Wild West mode.”

DeFi enables anyone, anywhere to perform complex financial transactions — for example, taking a loan out on Ethereum through the lending protocol MakerDAO — without needing to submit identification.

And because these protocols are lines of code rather than companies with an office, there’s no one to send that identification to anyway.

That’s a big problem on Wall Street, where firms are legally obligated to assess counterparty risk — knowing who’s on the other side of the transaction.

A former global head of metals trading at Merrill Lynch and Credit Suisse, Tabai said that most institutions wouldn’t be able to use protocols that don’t require identification.

The solution?

“It’s been clear to people for a while that there will be a next generation of DeFi platforms that are permissioned in some way or other,” he said.

Hybrid models

Crypto projects generally belong to one of two categories: centralised or decentralised.

Centralised platforms, like Binance or Circle, are run like companies and require identity checks.

But decentralised protocols, like Uniswap or Tornado Cash, are open-source software programs steered by their communities — at least in theory — that anyone can use without providing information about themselves.

These two categories will likely converge into one hybrid that takes advantage of the security provided by blockchain technology while retaining the efficiency and identity checks of centralised models, Tabai said.

Case in point: Vertex, a perpetuals exchange that he co-founded, executes trades offchain, like a centralised firm, but records all transactions onchain, like a decentralised protocol.

And while it doesn’t yet have KYC, or know-your-customer checks, the team uses third-party monitoring services like Chainanalysis to flag high-risk wallet addresses.

Vertex isn’t the only protocol organising itself that way.

Cube.exchange, a trading platform launched in December, has already implemented KYC checks. But users can track where their funds are in real time — just like when they use a decentralised platform.

Cube’s hybrid design prevents the team from misappropriating customer funds, or hackers from syphoning them away. These issues have plagued crypto since Mt. Gox’s demise in 2014, and they came back to the fore when FTX collapsed in 2022.

“Hybrid models solve for a number of the problems that have provided easy fodder for critics, and offer a far superior experience to both centralised and decentralised exchanges,” Cube co-founder and CEO Bartosz Lipiński told DL News.

Evolution

For Tabai, this model is only going to become more widespread.

“Some of the standards from TradFi will start to move into crypto,” he said. That includes KYC checks, which Tabai said weren’t ubiquitous even five years ago.

“Now, all centralised exchanges do these checks,” Tabai said. “It makes sense that at some level, DeFi will probably do the same.”

Lipiński, meanwhile, said that “many” decentralised exchanges already perform identification checks to comply with anti-money-laundering rules.

And that might be enough for Wall Street to begin using these platforms once the regulatory uncertainty around crypto lifts, he said.

“It’s not a new idea,” Tabai said. “It’s just an idea that’s being refreshed.”

Tom Carreras is a markets correspondent for DL News. Got a tip about Wall Street and DeFi? Reach out at tcarreras@dlnews.com

As presumptive Republican presidential nominee Donald Trump awaits a verdict in his hush-money trial, a handful of crypto bettors have made up their mind.

Polymarket’s “Trump found guilty in hush money case?″ market now has $115,000 on the line, with bettors putting the odds of a guilty verdict at 78%.

That’s actually declined since the trial began in April, when bettors on Polymarket put the odds that Trump would be found guilty at 83%.

Polymarket creates betting markets with simple, binary options, such as “ETH above $2,000 on June 30?”

Bettors buy shares whose price reflects an outcome’s odds at the time of purchase. In the case of the Trump trial, bettors could buy “yes” shares for $0.78 Thursday. Those shares would be worth $1 if they were right — in other words, if Trump is found guilty — and nothing if they were wrong.

Closing arguments in Trump’s case began Tuesday, and jurors began their deliberations on Wednesday.

Prosecutors have accused the former president of falsifying business records in connection with hush-money payments made to retired porn star Stormy Daniels.

According to Daniels, she and Trump had an affair in 2006. Trump has denied the allegation.

In the days before the 2016 election that brought Trump to the White House, Michael Cohen, then one of Trump’s attorneys, paid Daniels $130,000 to buy her silence.

Trump, in turn, repaid Cohen. That’s where his legal troubles start: According to prosecutors, Trump deliberately — and illegally — labeled the payments as “legal expenses” in an effort to conceal the hush-money payments.

Trump faces 34 felony counts in the case. If convicted, Trump faces probation or up to four years in prison, according to the New York Times.

Crypto market movers

Bitcoin is up 2.1% in the last 24 hours to $68,700.

Ethereum has risen 1% over the same period to about $3,780.

What we’re reading

Vitalik Buterin’s $112,000 Tornado Cash donation is just one part of his fight for crypto privacy — DL News.

The Best Solana Wallets Of 2024 — Milk Road.

Ethereum ETFs Likely Protect Ether From the SEC. But What About Staked ETH? — Unchained.

Crypto Tax Loss Harvesting — Milk Road.

Is Bitcoin on balance sheets the new trend? Wall Street experts weigh in — DL News.

Aleks Gilbert is a DeFi correspondent at DL News. Got a tip? Reach out at aleks@dlnews.com.

Vitalik Buterin, the co-founder and primary architect of Ethereum, donated 30 Ether, or more than $112,000, on Thursday to support the legal defence for Alexey Pertsev and Roman Storm, the developers behind the crypto mixer Tornado Cash.

At the same time, Buterin is helping develop a new crypto mixer that will provide users with an anonymising tool for crypto transactions.

But the new Ethereum-based platform will differ from Tornado Cash in one major way — it is being designed to be compliant with anti-money laundering laws.

Volatile period

Buterin’s twin moves mark a volatile period for crypto privacy. In May, Pertsev was sentenced to more than five years in prison after being convicted by a Dutch court in a $2.2 billion money laundering case.

In September, Roman Storm, another Tornado Cash dev, will be tried on similar charges in US court. Privacy advocates have rallied to Storm’s defence. In the meantime, Pertsev has filed an appeal to the judges’ verdict.

What’s next for Tornado Cash devs?

Their cases have transfixed the blockchain and open-source communities, which fear that developers will be held liable if their code is misused by third parties.

The Pertsev conviction also threw the future of smart contracts used in anonymising platforms into jeopardy.

The Dutch court ruled that Pertsev was responsible for the parties using Tornado Cash’s technology even though smart contracts are designed to run autonomously.

Coinbase, the Blockchain Association, and additional trade associations have submitted so-called “friend-of-the-court” briefs supporting Storm.

Matter Labs, the developer group behind layer 2 network ZKSync, donated $100,000 to the developers’ legal defence. The Uniswap DAO is currently mulling giving as much as $1.5 million in UNI tokens.

According to the decentralised funding platform Juicebox, the onchain legal defence fund has already attracted $2.2 million in donations.

Privacy and Blackrock

For his part, Buterin and other researchers, including Ameen Soleimani, outlined a unique mechanism for users to maintain their privacy without offering criminals squeaky-clean crypto, according to a 2023 paper.

The technology is called Privacy Pools and lets users opt out of mixing funds with potentially ill-gotten funds.

Soleimani is already implementing the idea in his project 0xbow.

It is designed to show that DeFi’s cypherpunk ethos is alive and well even as the sector attracts mounting interest from Wall Street powerhouses such as BlackRock and Fidelity.

Inbar Preiss and Liam Kelly are Europe-based correspondents for DL News. Got a tip? Email them at inbar@dlnews.com and liam@dlnews.com.

Revolut, the UK fintech firm, aims to top up its talent pool with 12 new hires as it pushes to expand its crypto business.

The neobank, which is valued at $26 billion, serves 40 million customers.

Revolut, which as an early crypto adopter among fintechs, is seeking to partner with more crypto walets such as MetaMask, a company spokesperson told DL News.

Revolut isn’t the only digital payments platform hiring for crypto roles. PayPal, the global payments processor, advertises 22 crypto-related roles. And Stripe and Robinhood, the discount trading platform, each have four open positions each, while Checkout.com has one.

The companies did not return requests for comment.

Their hiring efforts are testament to the industry’s renewed optimism amid regulatory approval of both Bitcoin and spot Ethereum exchange-traded funds this year

Not only are the biggest crypto exchanges hiring over 1,200 new roles, but industry watchers expect Bitcoin to break its March record, and venture capital investments to skyrocket.

“We are in a bull market like we’ve never experienced before — there’s going to be so much work for us from a recruiting perspective,” Sam Wellalage, founder at crypto recruitment firm WorkInCrypto.Global, recently told DL News.

Fintech competition

Revolut faces competition from other firms muscling into the sector.

Johann Kerbrat, the general manager of Robinhood’s crypto arm, has told DL News it wants to be “the on-ramp to the crypto world.”

Robinhood’s crypto push will catapult its market cap to about $26 billion in 2025, up from $18 billion today, analysts at research firm Bernstein estimate.

Elsewhere, Stripe will resume crypto payments this summer, and PayPal has recently added its own stablecoin to its mix of crypto services.

Revolut’s crypto push

Revolut has made crypto a key part of its business model since it first launched crypto trading across Europe in 2017.

During the 2021 bull run, crypto contributed between 30% and 35% to Revolut’s £39.8 million profit, CEO Nikolay Storonsky told Bloomberg TV in 2022.

Those tailwinds ceased in 2022 when Revolut went back in the red, revealing a £25 million loss in 2022.

In March, the neobank unveiled Revolut Ramp, which allows users to buy and deposit crypto directly into MetaMask wallets.

Eric Johansson is DL News’ News Editor. Got a tip? Email at eric@dlnews.com.

As Bitcoin’s price swells and inflation and global conflict weigh on the economy, one company is looking at assets other than the dollar to preserve its wealth.

On Tuesday, med tech stock Semler Scientific revealed that it had used some $40 million of its cash reserves to buy 581 Bitcoin.

“Our Bitcoin treasury strategy and purchase of Bitcoin underscore our belief that Bitcoin is a reliable store of value and a compelling investment,” the firm said in a press release.

“It has unique characteristics as a scarce and finite asset that can serve as a reasonable inflation hedge and safe haven amid global instability.”

Semler’s stock jumped 24% the day of the announcement then rose another 11% the day after. Bitcoin fans also celebrated the investment, and are watching to see if other companies will follow suit.

But Semler’s investment is unusual.

“I would be surprised if this establishes a trend,” a Wall Street healthcare analyst, who declined to be named citing company media policy, told DL News.

“If anybody of size did that, they would get sued for breach of fiduciary duty because that is hardly conservative treasury management for a healthcare company.”

Protecting purchasing power

Only a handful of companies have disclosed investments in Bitcoin or other crypto assets.

MicroStrategy is the biggest corporate Bitcoin holder, with around $15 billion worth of the cryptocurrency on its books.

Tesla holds $725 million worth, while a recent regulatory filing for Reddit said the firm had invested an “immaterial” amount of its excess cash reserves in Bitcoin and Ether.

Besides MicroStrategy, the amount of crypto as a proportion of these companies’ overall wealth pales in comparison to Semler Scientific. Its $40 million Bitcoin investment accounts for almost 18% of its $227 million market capitalisation.

“Fiat currencies are looking less stable,” Juan Leon, a crypto research analyst at Bitwise Asset Management, told DL News. “Companies are beginning to look for alternative assets to currencies and bonds in order to protect their purchasing power.”

For companies with spare cash, US Treasury bonds are usually the go-to asset. That’s because they earn a yield, currently around 5.2% on short-dated bonds, and are widely viewed as the safest investment in the market.

But in recent years, Treasuries have, at points, earned a negative real yield in dollars. That means that the dollar’s inflation outsripped the yield bonds pay out, reducing the purchasing power of dollars invested in bonds.

‘Intrinsically scarce assets’

With a shaky outlook for the dollar, more companies could start looking at alternative investments to avoid losing out.

“I expect a transition from abundant assets to intrinsically scarce assets,” including debt, central bank balance sheets and currencies, Jeroen Blokland, founder of Blokland Smart Multi-Asset Fund, told DL News.

“Anyone seeking to balance the risks will look at assets like gold and Bitcoin.”

But Bitcoin’s volatility raises questions around companies holding large amounts of it on their balance sheets. A sharp decline could spell ruin.

Tim Craig is a DeFi Correspondent at DL News. Got a tip? Email him at tim@dlnews.com.

Debra Nita is a senior crypto public relations strategist at YAP Global.

The media machine remains obscure to most people who consume its products.

Investigative reporting aside, the news embargo is a lesser-known process that generates many stories we read daily.

Robert Holloway’s recent piece, “An embargo is an agreement, not a crypto PR hype tactic,” reignited a heated debate around challenges with embargoes in crypto.

Embargoes are press releases written about an organisation’s developments that are shared with the media before a fixed publication date.

These documents aim to help crypto media professionals accurately report on the industry’s fast-paced and complex technological evolution.

Necessity

The piece sparked the exchange of horror stories about embargoed announcements gone wrong amongst journalists and public relations professionals in the Association of Cryptocurrency Journalists & Researchers (AJCR), the Crypto Communications Collective (CCC), and other groups.

The necessity of embargoes was called into question.

However, removing embargoes would do more harm than good in practice. Embargoes continue to help journalists report accurately about a complex world.

This is especially true given the zeitgeist of shrinking newsrooms that add more pressure on existing journalists.

Until the response to “I work in the blockchain industry” is no longer met with “blockchain is interesting, but I have no idea what it means” by outsiders, embargoes have a well-deserved space in effective crypto journalism.

Embargoes help journalists write newsworthy stories

Imagine a world without embargoes: It’s dark.

A journalist receives a press release, invests time in discussions with founders, and crafts a compelling story with editorial input.

They’re ready to hit ‘publish’, but realise the story was posted by a competitive outlet hours ago, and circulated on X.

The story is deemed old news, and the potential impact of their efforts is diminished.

This only needs to happen a few times before a journalist’s job turns into rewriting press releases. Articles could start to lack the research or fact-checking required due to the pressure of timeliness.

Taking away an intrinsically useful process like embargoes would lead to the deterioration of crypto journalism’s quality.

And thus, the quality of wider conversations.

It is notable that only one crypto publication makes Wikipedia’s list of reliable news sources. Even then, the outlet qualifies merely as “generally unreliable.”

It’s a telltale sign of how crypto journalism is perceived.

A common objection is that many news embargoes do not contain newsworthy stories. However, is the embargo process the problem, or poorly prepared press releases?

Journalists continue to retain the authority to determine what is newsworthy and are never obliged to comply with the demands of PRs.

If an embargoed press release does not check the boxes of newsworthiness, the journalist can and should reject the story.

What is newsworthy is also context-specific.

What may seem like an incremental technological development to one journalist who writes for end users may interest another journalist whose readers are tech founders or traders who place a premium on nuance.

That said, a crucial element of success here is skilled PR professionals who can craft compelling press releases and consistently dedicate effort to understand who they pitch.

Better policing

Embargoes need to be better policed.

An embargo is an agreement, as Robert Holloway pointed out.

All agreements are relationship-based. When two parties engage in a deal, both ascertain who they’re dealing with, asking themselves whether they can trust the other to deliver on commitments.

Bad embargo practices ruin the news reporting “game” for everyone.

On one side, journalists who want to write compelling, accurate and timely stories; and PRs who want high-quality articles published about their clients who develop important technologies.

The solution shouldn’t be to change the rules, but instead change the players who get to play the game.

Experienced PRs are needed to represent projects and collaborate with journalists, acting as the bridge between complex technology and quality journalism.

Some PRs intentionally abuse embargoes — communicating different timelines to different publications, resulting in some publications being scooped by a competitor.

At other times, embargoes are broken by journalists who are at best careless, and at worst irresponsible.

In some ways, these problems are understandable.

Crypto is a new industry. Challenges with embargoes are part of the growing pain. We should build the best practices around embargoes in this emerging space, rather than try to get rid of them.

Better policing would involve PRs advising clients more regularly to use alternative formats like “media alerts” without fixed dates rather than embargoes for developments that may not contain enough newsworthy elements. This requires skillful handling of clients but is crucial to continuing positive long-term relationships with the media.

Journalists already instinctively do their own policing, often ignoring their inbox, and instead dealing with preferred collaborators over direct messages.

What could help is setting clearer expectations with PRs.

Since embargoes enable longer timelines, they could request fresh perspectives or angles tailored to their writing style and audience, instead of blanket pitches they often receive.

To create more transparency, they could ask for more embargo information – such as who else the pitch has been offered to.

Not just a PR tactic

One final objection worth discussing: embargoes put journalists on a leash.

In other words, the claim is that journalists are participating in a PR’s marketing tactics under their conditions.

Embargoes do not undermine journalistic integrity as newsworthy stories under embargo can still be written accurately, objectively, and independently.

Using a promotional strategy is also not intrinsically wrong.

Both media and PRs are incentivised to see a story reach the greatest number of readers. It’s a marketing tactic, not dissimilar to how outlets build the most eye-grabbing headlines and stories to win over readers.

The media have goals for brand building, traffic volume, and revenue generation, so why can’t PR?

A PR’s client receives greater recognition as a result of wide coverage. Equally, a story “marketed” by multiple publications makes it more valuable than if it was only covered by one outlet. It creates network effects, reaches greater audiences, and increases advertising opportunities.

The bigger picture?

More business growth could create more opportunities for better crypto journalism.

Whether we like it or not, embargoes are a must-have for effectively covering the complex and often chaotic crypto industry.

News embargoes aid reporters in remaining organised, and accurately assessing the nuances of a story. They set the table for better reporting, even when both sides of the aisle game them.

Instead of debating the need for embargoes, we should focus on building out more effective embargo practices and holding people accountable to them to continue elevating journalism in crypto.

BlackRock CEO Larry Fink’s end goal of tokenising traditional assets just got a power-boost from three massive firms providing the plumbing of global financial markets.

The Depository Trust and Clearing Corporation, Euroclear, and Clearstream put out a whitepaper this week.

It outlines principles for safe and reliable tokenisation of assets like stocks and bonds — paving the way for companies looking to tap into a market projected to be worth $16 trillion by 2030.

Financial firms need guidance on how to go all-in on blockchain at a crucial moment for mainstream adoption of the tech, Nadine Chakar, managing director and head of DTCC Digital Assets, told DL News.

“The events of the past week alone — including the passage of FIT21, the Securities and Exchange Commission paving the way for Ethereum ETFs, and other recent activities — are watershed moments that signal a shift toward broader institutional adoption,” she said.

The House of Representatives passed FIT21 — a draft law that would put in place a market structure for crypto firms — on May 22 with a bipartisan vote.

And on May 23, the SEC made a rule change to allow certain exchanges to list and trade spot Ethererum funds.

Chakar said the DTCC was happy to see strong interest in blockchain tech, but the financial industry needs a push.

That’s where the DTCC, Euroclear, and Clearstream hope their whitepaper will help.

Not household names

The three firms may not be household names, but they are hugely important pieces of the world’s financial markets.

The DTCC, for example, clears about $10 trillion of securities transactions daily. Its user-owners include large investment banks like JPMorgan, Citigroup, and Morgan Stanley.

Clearstream and Euroclear are the DTCC’s equivalents in European markets.

These firms are generally very involved in helping to develop standards for high finance — and now they’re hoping to give investment banks and asset managers a way to adopt blockchain technology.

While banks have issued around $4 billion of tokenised bonds, and firms like BlackRock and Franklin Templeton are offering tokenised money market funds to investors, the whitepaper said it’s just the start.

Blockchain can help banks and asset managers offer clients faster and cheaper services, while also cutting their annual global infrastructure operational costs by up to $20 billion, the whitepaper said.

Yet, broad adoption of blockchain technology in financial firms is still low — only 37% of the financial industry are using blockchain technology, according to a trade organisation survey.

And projects are often confined within the walled gardens of highly competitive investment banks.

The whitepaper does the following:

Puts forward six core principles addressing compliance and best practice all along the chain of digital asset creation.

Addresses the lifecycle of a digital security — from its issuance to how firms should interact with clearing agencies like the DTCC, to how assets should be safeguarded once created.

Recommends that the principles become the responsibility of a neutral third-party like an financial industry organisation that can develop them further.

“We see this work as a fundamental building block to the discussion around standards,” Chakar said.

“That will allow us to speak a ‘common language’ on tokenisation, including how we facilitate interoperability across platforms and systems — both on-chain and legacy.”

Joanna Wright writes about the intersection of traditional financial markets and crypto. Reach out to the her at joanna@dlnews.com.

When 620 weary developers emerged after three days of nonstop coding at this year’s ETHBerlin event last week, few expected Vitalik Buterin to be speaking on stage.

The co-founder and prime architect of Ethereum was a surprise guest.

What was even more surprising were some of his reflections on building the industry’s second-largest blockchain. Buterin described some of the regrets he had about the initial design of Ethereum in detail.

For many in the audience, his discourse not only evoked the halcyon days of the network’s birth in 2014, but it also helped fill in the road map for what comes next for a cryptocurrency now worth $448 billion.

The US has just approved a spot Ethereum exchange-traded fund, and BlackRock, the world’s largest asset manager, has launched its own tokenised fund on the blockchain.

The Ethereum network has spawned a sprawling ecosystem of developers and financial applications worth more than $63 billion, and it has become a byword for decentralised finance.

List of things

Still, Buterin, a 30-year-old Canadian-Russian programmer, said he has a list of things he would have done differently. They range from the development of Ethereum’s Virtual Machine to smart contracts to the Proof of Stake consensus mechanism.

And he remarked that even as Ethereum goes more mainstream, it’s still misunderstood.

“Bitcoin has a simple narrative which is digital gold,” Buterin said. “But like with Ethereum, it’s like ‘Whoa, what the heck is Ethereum?’”

ETHBerlin04 in numbers 🧮

- 802 super humans in total
- 627 hackers
- 83 project submissions
- 56 volunteers
- 40 experience hosts
- 33 judges
- 18 mentors
- 15 core team
- 13 speakers
- 20ish dogs

— ETHBerlin04 (@ETHBerlin) May 26, 2024

Seated on comfy couches on stage with ETHBerlin organisers Afri Schoeden and Franziska Heintel, Buterin opened his chat by sharing his fondest memories of the German capital over the years — hacking in the old office with Ethereum co-founders Gavin Wood and Jeffrey Wilcke, launching Devcon Zero, and celebrating the Merge upgrade in 2022.

Then Schoeden popped the question.

“With everything you know and everything you learned over the last 10 years, how would you build Ethereum differently today if you could start from scratch?” Schoeden asked.

Too many bits, too early

Buterin’s first qualm concerns Ethereum’s Virtual Machine, which is key to making the network function as a kind of decentralised mega crypto computer.

He explained that Ethereum’s original EVM design used 256-bit processing instead of 64- or 32-bit.

In computer architecture, the size of computing is measured in bits, with larger bits offering better efficiencies and processing more data. But 256 bits is very inefficient for most operations, and can create a lot of bloat on a blockchain, even for simple tasks.

For a network in its early days, Ethereum didn’t need to optimise for this.

“The original design was way too overfitted for 256-bit,” Buterin told the audience.

Optimise smart contracts

Second, Buterin said the early Ethereum developers should have focused on making it easier to write smart contracts with fewer lines of code.

The reason? Added transparency.

With fewer lines of code, he said, “people can properly see and check what’s going on inside of them.”

Switch to a ‘crappier’ version of staking

Instead of custom-built computers — called miners — running nonstop to secure a blockchain network, Ethereum switched to a different model.

Ethereum’s switch from a Proof of Work consensus mechanism — the way nodes in a blockchain like Bitcoin’s agree on the state of transaction data — to Proof of Stake in 2022 should have happened much earlier, Buterin said.

“When we switched to Proof of Stake, we should have been willing to switch to a somewhat crappier version of Proof of Stake earlier on,” he said. “We ended up wasting a lot of cycles on really trying to make Proof of Stake perfect.”

Instead of miners, Ethereum is now secured by validators who have staked 32 Ethereum, worth roughly $124,000, to do the same thing — and be rewarded for it. If they misbehave by validating fraudulent transactions, for example, they are penalised.

In sum, the switch swapped out raw, energy-intensive computing power with economic incentives.

“We could have saved a huge amount of trees if we had a much simpler proof-of-stake in 2018,” Buterin said.

Issue logs from day one

From big-money token transfers to backdoor honey pots, users can follow the money quite easily in crypto. That’s thanks in part to automatic logging.

But as the industry advances, notably moving from externally owned accounts like MetaMask to smart wallets like Safe, certain aspects of that crucial logging are lost.

Notably, automatic logs for Ether transfers.

“It should have been in there from the beginning,” Buterin said. “It could have been like 30 minutes of coding from myself, Gav and Jeff. Instead, it’s an EIP.”

Ethereum Improvement Proposals are formal proposals made by developers to change certain aspects of the Ethereum network.

EIP-7708, which Buterin submitted on May 17, would make this precise change.

Drop Keccak

Buterin also said he would have used SHA-2 for Ethereum’s encryption rather than the current encryption called Keccak.

To understand the difference, one must dig into a bit of cryptography lore, specifically about how SHA-3 became a standard. Remember, before crypto became synonymous with celebrity memecoins and nine-figure initial coin offerings, it was about complicated math.

When Ethereum was being built, the encryption it used was in a “hash function competition” — yes, that’s a thing.

The National Institute of Standards and Technology organised the competition to create a new hash standard alongside SHA-2.

Previous standards had been attacked and debunked. But SHA-2 was unscathed and the NIST simply wanted a safe alternative. After all, variety is the spice of life (and apparently cryptography).

Keccak was just one of several contestants that entered the competition. During the competition, the team made some minor changes to its algorithms, eventually leading to them being crowned the winner. In other words: SHA-3.

The early Ethereum team had, however, already implemented a non-standardised version of Keccak. Essentially, Ethereum is using a pre-SHA-3 iteration.

Big whoop, right?

Well, this meant that Ethereum developers needed a custom library — collections of reusable code that needn’t be rewritten from scratch — to accommodate both SHA-3 and Keccak.

“We’re not compatible with other systems using SHA-3,” Marius van der Wijden, a core Ethereum developer, told DL News. “We have to support both algorithms in the EVM.”

It’s essentially been solved. Today, big libraries support both encryption mechanisms.

So, yeah, big whoop indeed.

“It doesn’t matter in the grand scheme of things, and current development is definitely not impacted by it,” said van der Wijden.

Ethereum’s crack team

Despite the list of minor design misses, Buterin said it’s inevitable for any project to have a few.

“I’m just really happy that I feel like our core devs and their execution capacity feels like it just keeps increasing with each passing year,” he said.

“We’re in a position to effectively and safely correct some of these mistakes.”

Liam Kelly is a DeFi Correspondent at DL News. Got a tip? Email at liam@dlnews.com.

Four months after the launch of spot Bitcoin exchange-traded funds, BlackRock’s iShares Bitcoin Trust, or IBIT, has surpassed the Grayscale Bitcoin Trust, or GBTC, in size.

“It’s official now. IBIT is king of the category and probably will be for decades,” Bloomberg Intelligence ETF analyst Eric Balchunas posted on Wednesday.

“The low fees, big boy liquidity, and iShares brand name [are] just too powerful,” he added.

IBIT closed Tuesday with $19.68 billion in assets vacuumed up — putting it $30 million ahead of GBTC, per Bloomberg data.

“This represents a significant shift in the supply/demand equation,” according to crypto market maker Wintermute.

“Since its conversion in January, the GBTC unwind has been considered a supply overhang, reducing the positive impact of inflows seen in other vehicles,” Wintermute said.

Grayscale converted its Bitcoin trust into an ETF after it received approval to do so from the Securities and Exchange Commission.

Now, investors will stop paying so much attention to GBTC, Wintermute said, and instead focus on IBIT’s inflows, which “may now drive sentiment and a renewed interest in Bitcoin.”

Battle of the titans

IBIT launched on January 11 and has amassed its haul in 20 weeks. GBTC, on the other hand, has existed since 2013 and had roughly $27 billion in assets prior to its conversion into an ETF.

But GBTC’s head start didn’t last. Because of the way the trust was initially designed, GBTC shares could only be created, not redeemed.

That meant that GBTC holders couldn’t cash out on their gains until the product converted into an ETF. When that happened at last, the fund experienced a record $17 billion in outflows.

In other words, GBTC lost more than half its assets — the only reason they retain close to $20 billion is because Bitcoin’s price appreciated at the same time.

But IBIT’s performance has been just as “absurd,” Balchunas said.

“There’s only been one ETF in history to reach $20b in assets in under 1,000 days. [JPMorgan’s] JEPI, which did it in 985 days. IBIT is a hair away at 137 days,” Balchunas posted.

Tom Carreras is a markets correspondent at DL News. Got a tip about Bitcoin ETFs? Reach out at tcarreras@dlnews.com

Bankrupt crypto lender Gemini announced on Wednesday that its Earn customers will recover more than $940 million in crypto — more than triple what they lost when the firm shuttered the lending programme in early 2023.

Some 232,000 Earn users will recuperate 100% of their digital assets in-kind, Gemini said in a statement.

What does that mean? Well, if a customer lent one Bitcoin to Earn, they will get one Bitcoin back.

That’s great news for customers. With Bitcoin now at $67,000 — compared with $20,000, when Genesis closed withdrawals — Gemini clients will be making a 232% recovery in dollar terms, according to Gemini.

Gemini and Genesis

Earn, which allowed investors to lend money to Gemini for 8% “low-risk” returns, was jointly managed by the exchange and brokerage Genesis Global.

Genesis had funds tied up in FTX, and so when that exchange collapsed in November 2022, Genesis suspended withdrawals for Gemini Earn customers.

Amid roiling markets, and the beginning of a bitter crypto winter, Genesis declared bankruptcy in January 2023 — at the lows of the bear market.

Since then, however, crypto prices have taken off. And an in-kind payment to Earn creditors means they will get back the value of their crypto pegged to their notional dollar value as of May 28, 10 am Eastern.

“We are thrilled that we have been able to achieve this recovery for our customers,” said Cameron Winklevoss, who founded Gemini along with his twin brother Tyler.

“We recognise the hardship caused by this lengthy process and appreciate our customers’ continued support and patience throughout,” Cameron Winklevoss said.

The money comes partly from $50 million that Gemini contributed, as well as from a court settlement that allowed Genesis to sell $1.6 billion in Grayscale Bitcoin Trust shares.

Gemini said customers will get back 97% of their crypto immediately and receive the rest of their balance within a year.

The returns are in stark contrast to the way FTX is being wound up.

In that case, money is being clawed back from the liquidation of the exchange’s assets — meaning it can go only so far toward paying back creditors.

FTX’s lawyers celebrated the bankruptcy plan they proposed recently, saying customers would get paid in full, with interest.

However, some customers say that’s not good enough, partly because their assets are valued as of November 2022, and don’t reflect crypto’s rally.

Joanna Wright writes about markets for DL News. Email her at joanna@dlnews.com.

Uniswap DAO members will on Friday begin voting on a proposal that brings the cooperative one step closer to turning on the so-called “fee switch.”

For years, proponents have argued turning on the fee switch would be a boon for investors of Uniswap’s governance token, UNI, by creating a way for them to share in Uniswap’s success.

Uniswap has collected more than $3.6 billion in fees since its launch almost five years ago.

“The presumption many have been making is, ‘Someday, this thing is going to get turned on, and I will get some revenue,’” Getty Hill, co-founder of GFX Labs, told DL News.

“Otherwise, there hasn’t really been much of a reason to tokenise these things in the first place,” he said.

GFX Labs is one of the largest participants in the Uniswap DAO, helping run the network.

Uniswap, the largest decentralised exchange on the Ethereum blockchain, processed more than $20 billion in trades over the past week, according to DefiLlama data. UNI jumped more than 20% on the announcement of Friday’s vote.

But activation of the fee switch isn’t a done deal, according to Hill.

“This is another vote in a series of many votes, and there needs to be some more votes until we actually get to a ta-da moment where revenue begins to flow,” Hill said.

What is the fee switch?

UNI tokens grant membership in Uniswap DAO, the digital cooperative that manages the exchange, as well as the right to propose and vote on changes.

The fee switch proposal would divert a portion of Uniswap’s revenue to UNI token holders.

The latest version of the proposal — and the first to have the backing of the Uniswap Foundation, a nonprofit tasked with supporting the protocol — is designed to accomplish something else, as well: boost otherwise lacklustre participation in the DAO.

Under the current fee switch proposal, only those who “delegate” their tokens for use in protocol governance will earn revenue via the fee switch. Delegation is when users loan the voting rights attached to their governance tokens, typically to subject matter experts. Token holders can also delegate to themselves.

“Free-riding and apathy remain existential risks to the Uniswap Protocol’s sustainability,” reads the February 23 proposal, authored by Uniswap Foundation governance lead Erin Koen. “Less than 10% of circulating UNI is used to vote on a given proposal.”

Friday’s vote “lays the groundwork for autonomous fee collection and distribution,” Koen wrote in Uniswap’s governance forum. “Additional votes will be required to turn on fees in Uniswap V3 pools.”

Koen didn’t immediately return DL News’ request for comment.

That process might not conclude until the latter half of August, Hill said.

And, while he’s confident Friday’s rather technical proposal will pass, he’s less certain that later votes that actually activate the fee switch will garner enough support.

“I’m optimistic, but I wouldn’t call it a certainty by any means,” he said.

The SEC looms

That’s because a regulatory cloud still hangs over the effort.

“We have heard questions about whether the proposal could make it more likely that UNI is scrutinised more closely” in the US, the foundation wrote in 2022 in response to an earlier, failed effort to turn on the fee switch.

“Regulators or private litigants could bring lawsuits against the DAO, and seek to hold UNI token holders liable.”

Indeed, the Securities and Exchange Commission last month signaled its intent to sue Uniswap Labs — the company that built the Uniswap protocol — for violating federal securities laws.

Among other things, the SEC alleged that UNI is an unregistered security, according to Uniswap Labs.

It was a significant escalation in the SEC’s war against crypto, marking the first time the regulator turned its ire toward the developers of a major DeFi protocol.

Additionally, some delegates are worried about tax implications of activating the fee switch, according to Hill.

Others simply dislike the proposal, afraid it could drive away liquidity providers, who currently earn all the revenue generated by the protocol.

Liquidity providers deposit their crypto in Uniswap to facilitate trading.

“There’s still a lot of opinions that are floating around about how this should be done,” Hill said. “It’s one thing to talk about implementing and arguing over the infrastructure, but it’s a complete other thing to say, ‘Hey, let’s actually turn it on, finally.’”

Aleks Gilbert is a DeFi Correspondent at DL News. Got a tip? Email him at aleks@dlnews.com.

Last week, a Nigerian judge directed prison officials to transfer detained Binance executive Tigran Gambaryan for treatment after he collapsed in court.

Yet Nigeria’s Correctional Service ― which runs the country’s prison system ― has disregarded the court order, according to Yuki Gambaryan, Tigran’s wife, and a government official familiar with the matter.

As a result, Gambaryan, who is suffering from malaria and a severe throat infection, has been denied access to a hospital.

‘Devastated and shocked’

Instead, he is being treated in a clinic at Kuje Prison, which DL News has learned is poorly supplied and in dire need of refurbishment.

Yuki Gambaryan fears that her husband’s physical and mental health is deteriorating.

“I am devastated and shocked that, despite the court’s clear directive for his admission to a hospital, the authorities have not allowed him to leave the very prison causing his illness,” Yuki said in a statement sent to DL News on Tuesday.

While delaying compliance or outrightly disobeying court orders is de rigueur among Nigerian officials, Gambaryan’s ordeal seems connected to attempts by prosecutors and prison authorities to block his transfer to Nizamiye Hospital ― the preferred facility prescribed by his lawyers.

Last week, prosecutors urged the court to include language that would allow prison officials some flexibility in the choice of hospital for Gambaryan’s treatment.

‘He has done nothing wrong and is suffering simply because he accepted an invitation to a meeting in Abuja.’

Yuki Gambaryan

“Some people are pushing for him to be transferred to Kuje General Hospital,” a person close to the matter told DL News on the condition of anonymity. “They feel that it is closer and they don’t know if there are escape plans tied to that hospital his people want him to go to.”

“You know they are the ones who will have to guard him while he’s in hospital,” the source said.

While Kuje General is indeed closer to the prison, the care facility has a reputation for mismanagement. Nizamiye Hospital, on the other hand, is an upscale private medical complex.

Gambaryan’s plight continues to elicit anguished pleas from his family.

“Tigran does not deserve such inhumane treatment,” Yuki said. “He has done nothing wrong and is suffering simply because he accepted an invitation to a meeting in Abuja.”

That meeting, in February, was to settle a simmering dispute between Binance and Nigeria’s government after the latter blamed the crypto exchange for its role in the country’s currency woes.

Gambaryan attended the meeting with British lawyer Nadeem Anjarwalla, Binance’s Africa manager based in Kenya.

Detained

Both men were detained when the meeting ended deadlocked and their passports were seized. Anjarwalla escaped custody a month later and hasn’t surfaced since. An Interpol red notice has been issued for his arrest.

Nigerian officials escalated the dispute with Binance in April by charging Gambaryan, Anjarwalla, and the crypto exchange with tax violations and money laundering.

Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. To share tips or information about stories, please contact him at osato@dlnews.com.

In its long-running rivalry with Ethereum, Solana has enlisted a surprising new ally — PayPal.

The online payments pioneer has agreed to add its stablecoin, PYUSD, to the Solana blockchain network, the two companies said on Wednesday.

While PayPal already makes its stablecoin available on Ethereum, the development bolsters Solana’s credibility in the colossal payments processing space. The market is worth $2.6 trillion and is expected to grow to almost $5 trillion by 2029.

A JPMorgan Chase report from a few years ago even concluded that new technologies and consumer behaviour may lead to $54 trillion in global payment flows.

Duel with Ethereum

PayPal users can choose between sending and receiving the stablecoin on Solana or Ethereum from their PayPal accounts and Venmo wallets.

Sizing up the duel with Ethereum, Sheraz Shere, the Solana Foundation’s general manager of payments, said the slower transaction speeds on Ethereum layer 1 networks create a valuable opportunity.

“I think there’s a lot of use cases that have probably been throttled because of the nature of transacting on Ethereum layer-1 that will be lit up once PYUSD is on Solana because it’s faster and cheaper,” Shere told DL News.

Solana processes payments at nearly 2,000 transactions per second, according to Solana analytics platform Solscan. Ethereum averages 15 transactions per second. Solana also costs less to use.

The deal is major for Solana. With over 420 million active accounts, PayPal is a force in the global payments space and has proven nimble at adapting to new technologies such as stablecoins.

PayPal, as it happens, is chasing its own rival. In December, Visa expanded its stablecoin pilot with Circle — another large stablecoin issuer — to Solana to improve settlement times.

The key to cracking the global payments market is partnerships. The process of sending a payment digitally from point A to point B is fraught with complexity and regulatory realities.

No player, let alone a crypto startup, can do it alone.

Yet the advent of stablecoins is changing the game. As easy-to-use tools for converting fiat currencies into cryptocurrencies, industry stalwarts quickly recognised their utility.

Now, the race is on to develop what payments geeks call “rails” — the conduits payments use to make the journey from sender to receiver.

Three year collaboration

Engineers at PayPal and Solana have been collaborating for three years to make PYUSD work on the blockchain network’s rails, said Shere.

One key area was Solana’s token extensions feature. This allows token issuers to create specific conditions for who can interact with the asset being created on the network and to block those who can’t.

For regulated entities like PayPal and Visa, this is crucial. They need to be able to satisfy authorities such as the US Treasury Department’s Office of Foreign Assets Control that no sanctioned addresses are parties to payments on the network.

“A lot of the development of token extensions was done in partnership with PayPal, understanding their requirements,” Shere said. “They’re actually minting the PYUSD token using the extension standard.”

Shere said PYUSD’s utility in cross-border payments and remittances opens up mammoth markets in the space. He hopes Solana can tap into other parts of its business, too.

“One area I think about is the PayPal merchant base,” said Shere, who spent eight years at American Express doing business development.

“Something that PayPal could do to activate the PYUSD coin in their ecosystem is give all the PayPal merchants a Solana address to accept PYUSD.”

Liam Kelly is a Berlin-based DL News’ correspondent. Contact him at liam@dlnews.com.

Amid a market frenzy for all things artificial intelligence, some are looking to leverage blockchains to ride the wave.

One recent trend is a fledgling crypto sector called DePIN — short for a mouthful term, decentralised physical infrastructure networks.

DePIN projects, in particular those sourcing decentralised computing power, are usually deployed on high-speed, low-cost blockchains including Solana and Cosmos.

Kellen Blumberg, a data scientist at crypto data platform Flipside, told DL News that DePIN projects can provide faster, cheaper, and more secure services compared to centralised providers.

Demand for computing power is growing. Experts say the computational power required for sustaining AI’s rise doubles every 100 days. That’s about 1220% per year — a potentially lucrative opportunity.

Flipside published a report that predicts that investment in and adoption of decentralised compute providers will outpace other DePIN sectors.

Meeting AI demand

DePIN projects aim to lower the costs of everything from mobile services to sourcing computing power needed to train AI.

They do this by tapping into a decentralised network of participants, rather than single centralised providers like Amazon Web Services or Google Cloud.

Decentralised compute providers recruit individuals with idle computer hardware, such as graphics processing units — or GPUs.

Providers then combine the GPUs in their network into a pool of computing power and rent it out. Those on the other end use the GPUs to train AI, conduct scientific research, or other tasks that require large amounts of processing power.

Render, a Solana-based decentralised compute provider that focuses on media rendering and AI, is currently the highest-valued, with a market value of over $3.8 billion.

According to Flipside’s report, Render has amassed a network equivalent to approximately 33,000 hours using high-end GPUs since its launch in 2017.

Other projects, like Cosmos-based Akash, claim to undercut prices at centralised computing power providers such as Amazon Web Services and Google Cloud by as much as 70%.

Both Render and Akash have issued tokens, which have soared in recent months. Render’s RNDR rallied 127% since the start of the year, while Akash’s AKT is up 113%.

DePIN tokens

There are reasons to be cautious, according to Chris Newhouse, a DeFi analyst at Cumberland Labs.

“Several newer DePIN protocols struggle to truly align economic incentives in a way that demands a token,” Newhouse told DL News.

Most tokens issued by decentralised compute providers function as an ecosystem currency, where those renting out computing power can pay in the project’s native tokens, while those lending their computing power to the network are also paid in the token.

At the same time, traders use the tokens to speculate on a given DePIN protocol’s future adoption.

Newhouse questioned why such projects need a token in the first place.

“If payment is in a native token, what does the supply and demand of compute power we’re renting out look like?” he said. “Why wouldn’t they just pay in US dollars or through stables?”

Some DePIN projects use native tokens as an incentive to get more computing power onto their networks, Blumberg said. “Incentives are helpful for attracting initial users, but sustainability is crucial.”

The situation is similar to that of crypto airdrops, where DeFi projects reward early users with newly-created tokens to attract users and deposits. But in recent months, many projects running this playbook have flopped.

The value of several projects’ newly-launched tokens have plummeted in step with their user activity after the airdrop incentive goes away.

DePIN projects may also be susceptible.

“Avoid projects that rely solely on high rewards and/or token trading activity without demonstrating genuine utility or adoption relevant to their stated purpose,” Blumberg said.

Tim Craig is a DeFi Correspondent at DL News. Got a tip? Email him at tim@dlnews.com.

Nvidia is on a tear.

The chipmaking company nudged a new all-time high on Tuesday. Worth almost $3 trillion, Nvidia has seen its stock rise a whopping 130% since January 1.

But that pales in comparison to some crypto projects involving artificial intelligence.

Outperforming Nvidia

Nvidia has risen almost twice as much as Bitcoin since the beginning of the year, but some crypto tokens associated with AI technology have kept pace — or even outperformed — the firm over the same period.

Fetch.AI has soared more than 200% and SingularityNET 190%.

Meanwhile, Akash Network and Render Network are both up roughly 120%. And Near Protocol, the sector laggard, still put on an impressive 100% performance.

Even so, the price correlation between AI tokens and Nvidia has remained relatively low after reaching a multi-month high in February, said research firm Kaiko.

Put differently, while both are risk-on market plays, AI tokens haven’t necessarily been influenced by Nvidia’s price action lately.

In fact, Worldcoin’s token, WLD, has been more tightly correlated to Nvidia than the AI-adjacent tokens mentioned above.

That’s despite the fact that Worldcoin markets itself as an identity protocol, not specifically an AI project, despite it being co-founded by OpenAI CEO Sam Altman.

Meanwhile, the sector’s weekly trading volume has soared 2,500% from an all-time low of $300 million in 2023 to $8 billion on average, according to Kaiko.

Binance market share

Binance — which used to be the leading exchange for trading AI tokens — has seen much of its market share bleed away.

The crypto exchange, which processed more than 70% of the sector’s trading volume at the beginning of 2023, now only commands 39% of the market, Kaiko said.

The platforms that benefited from the sector’s growth, Kaiko said, were exchanges based in the US — mostly Coinbase — and in South Korea.

Crypto market movers

Bitcoin is down about 1% in the last 24 hours to $67,849.

Ethereum has falled about 2% over the same period to about $3,815.

What we’re reading

Jailed Binance exec in Nigeria is struck by malaria amid anguished pleas from his lawyers and family — DL News.

Best NFT Tax Loss Harvesting Tools 2024 — Milk Road.

Why Many Democrats, Including the White House, Have Come Around on Crypto — Unchained.

Best Ethereum Wallets Of 2024 — Milk Road.

Binance France drops CZ and names two new shareholders to preserve European foothold — DL News.

Tom Carreras is a markets correspondent at DL News. Got a tip about Bitcoin ETFs? Reach out at tcarreras@dlnews.com

A couple of days after my arrival in Hong Kong last June, I attended my first crypto event. It did not disappoint.

The party organised by OKX and the Hong Kong fan club for Manchester City, the top English football team and a corporate partner of the cryptocurrency exchange, was buzzing.

The room thronged with people in sky blue Erling Haaland shirts who oscillated between free food and drinks and half-listened to presentations from OKX executives.

OKX was clearly looking forward to a bright future in the rejuvenated Hong Kong market as it prepared to apply for its virtual asset trading platform licence.

Not long after the party, OKX managing director Lennix Lai told me how excited he was to cement the firm into the city where it maintained its base of operations.

Then last week, OKX abruptly withdrew its application for the Securities and Futures Commission licence.

Careful consideration

It gave its reason as “careful consideration” of its business strategy, while assuring Hong Kong users that their funds were safe. It will cease trading services by Friday.

At first glance, the departure of OKX would appear to be a blow for Hong Kong’s aspirations to become Asia’s go-to crypto hub.

With daily trading volume of $3 billion, the centralised exchange is the fourth ranked platform worldwide, according to CoinMarketCap.

Moreover, OKX is just one of seven companies that have withdrawn licensing applications since the deadline passed at the end of February.

Like OKX, all these firms — and any others serving Hong Kong clients that have not applied for a licence — will need to wind down their services to city residents by May 31.

In addition to OKX, subsidiaries of other international exchanges have withdrawn from Hong Kong in recent weeks, including Gate.io and HTX, formerly known as Huobi.

HKVAEX, which the SCMP reported in October last year was backed by Binance, also withdrew its application.

Investing heavily

Yet the departure of these firms may signal progress in regulators’ efforts to clean up Hong Kong’s freewheeling crypto scene.

Last year, Lai told me that getting the licence wasn’t an easy process.

Finding qualified people to conduct the required audits could be challenging.

OKX also had to invest heavily in hiring talent, innovation, technology, compliance and system security to prepare for the application. (A report from CoinDesk estimated the cost of applying for a licence was between $12 million and $20 million.)

The thing is, getting a licence is supposed to be hard. That’s the point. Given the level of fraud in Hong Kong’s crypto markets, the SFC wants crypto exchanges to comply with rigorous rules.

The number of companies withdrawing applications isn’t necessarily unusual.

When Singapore introduced licensing for cryptocurrency service providers in January 2021, over 100 of the 170 applicants withdrew or were rejected by the end of the year, according to Nikkei Asia.

In the UK, 71% of applications to the Financial Conduct Authority have also been withdrawn.

Angela Ang, a senior policy advisor at TRM Labs, told DL News it seems the trend in Hong Kong is par for the course.

“This could be a combination of higher regulatory expectations in wake of events like FTX, as well as the crypto industry being relatively new to regulation,” she said.

Time and money

Nevertheless, licence applications aren’t a trivial endeavour and require a significant amount of time and money.

“Nobody will pull out lightly after investing all that time and resources,” Ang added. “Those that pulled out probably did so only after it was clear that they would otherwise have their applications rejected.”

The timing of the withdrawals just ahead of the cut off date for shutting down may also be an effort by the SFC to weed out those that don’t make the cut for the deeming arrangement that will allow them to continue operating past June 1.

“It sends a very clear signal about the type of crypto hub Hong Kong wants to be: strict,” Ang said.

Callan Quinn is DL News’ Hong Kong-based Asia Correspondent. Get in touch at callan@dlnews.com.

Even with the approval of spot Ethereum ETFs in the US last week, Ether is struggling to make new highs.

The second-largest cryptocurrency was recently trading at $3,840, roughly the same price as on Thursday, when the Securities and Exchange Commission approved Ethereum spot exchange-traded funds.

How come? According to Noelle Acheson, former head of market insights for Genesis Global Trading, Ether’s price is being bogged down by persistent inflation fears.

Manufacturing pushing inflation up

Just like Bitcoin, Ethereum is sensitive to global macro forces, Acheson wrote in her newsletter, “Crypto is Macro Now.”

On Thursday, while the crypto industry was celebrating the SEC’s approval of Ethereum ETFs, the release of the S&P Global’s purchasing managers’ index — or PMI, an indicator that provides insight into manufacturing and services — showed “quite stunning” numbers.

“It looks like the US economy is in full expansion, with the manufacturing sector joining services in keeping inflation high,” Acheson said.

That’s a problem for Bitcoin and Ethereum. The Federal Reserve has kept interest rates relatively high in order to fight inflation.

High rates deter investors from piling into risk-on investments, like crypto and tech stocks, because they can earn high yields from risk-free Treasuries.

“It looks like rates are going to be truly ‘higher for longer,’” Acheson wrote, pointing out that expectations of lower rates have moved even further back from two weeks ago.

Quinn Thompson, founder of crypto hedge fund Lekker Capital, also said that crypto mania wouldn’t happen until the US dollar weakened — which will likely occur when the Fed cuts rates.

Crypto market movers

Bitcoin is down 2.9% in the last 24 hours, trading at $68,000.

Ethereum slumped 2.3% in the same period, to $3,840.

What we’re reading

Disgraced project ZKasino says it will return deposits — but investors only have 72 hours — DL News.

Semler Scientific Adopts Bitcoin As Primary Reserve, Buys $40M In BTC — Milk Road.

Senator Cynthia Lummis on Why Crypto Now Has Bipartisan Support in Congress — Unchained.

Mt. Gox Transfers 140,000 BTC, Triggering Bitcoin Price Drop — Milk Road.

Jailed Binance exec in Nigeria is struck by malaria amid anguished pleas from his lawyers and family — DL News.

Tom Carreras is a markets correspondent at DL News. Got a tip about Bitcoin ETFs? Reach out at tcarreras@dlnews.com

Tigran Gambaryan, the Binance executive jailed in Nigeria for nine weeks, is suffering from malaria and a throat infection, DL News has learned.

Last Thursday, Gambaryan collapsed in court on the second day of his trial in Abuja, the Nigerian capital, on a money laundering charge.

He was hospitalised amid pleas from his wife Yuki that her 40-year-old husband is being mistreated by Nigerian authorities as part of his “unjust detention.”

It is unclear whether Gambaryan, who lives in Atlanta, Georgia, with his family, contracted malaria during his time in Nigeria. He arrived in the tropical African nation on February 26 for talks with officials on Binance’s crypto operations.

Gaunt and stressed

In his brief court appearance last week, Gambaryan looked gaunt and stressed. He has been held at Kuje Prison in Abuja since April 8.

Justice Emeka Nwite, who is presiding over his trial, denied the Binance man bail on May 17 after finding him to be a flight risk.

While more than 240 million people worldwide suffer from malaria, those who live outside the equatorial zone may be more vulnerable to the mosquito-borne disease because they have not built up natural resistances.

“Malaria is a severe disease for American citizens which can result in death because they do not have the immunity that ordinary Nigerians have against the disease,” Gambaryan’s legal team said in a letter to the court read by DL News.

Indeed, the US Centers for Disease Control advises its citizens to complete a full course of malaria prophylactic medication before travelling to Nigeria.

Last week, Mark Mordi, Gambaryan’s lead lawyer, asked the court to authorise his transfer to Nizamiye Hospital, an upscale private medical facility in Abuja.

Justice Nwite agreed to the request.

“My husband is a strong, healthy person but he is facing an environment that would bring even the strongest among us to our knees,” Gambaryan’s wife, Yuki, said in a statement sent to DL News last week. “My husband is sick, he needs help.”

Simmering dispute

Gambaryan and his colleague Nadeem Anjarwalla, a British lawyer, came to Nigeria to settle a simmering dispute with the country’s government and the company.

Nigeria’s government blamed Binance for allowing its platform to be used for foreign exchange racketeering.

When talks broke down, both men were detained in a state-run guesthouse and their passports seized.

Anjarwalla escaped a month later, fleeing the country with a Kenyan passport concealed from state officials. He is now the subject of an Interpol red notice.

Nigerian prosecutors have slammed money laundering and tax violation charges against Gambaryan, Anjarwalla, and Binance.

Gambaryan has pleaded not guilty to the money laundering charge but is yet to enter a plea in the tax violation indictment.

Court proceedings will resume on June 14 with the tax violation arraignment and cross-examination in the money laundering case on June 20.

Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. To share tips or information about stories, please contact him at osato@dlnews.com.

Crypto gambling platform ZKasino, which was accused by Dutch authorities of vanishing with some $30 million in user deposits last month, says investors can apply to get their funds back.

“We are now initiating the 2-step bridge back process in which bridgers can sign up and bridge back their ETH at a 1:1 ratio,” ZKasino said in a May 28 blog post.

The move comes after Dutch police arrested a 26-year-old man suspected of fraud, embezzlement and money laundering in connection with ZKasino on May 3.

Dutch authorities also said they had seized €11.4 million worth of various assets, including real estate, a luxury car, and various cryptocurrencies.

The sudden turnaround, coupled with no communication with Dutch authorities, has left many questioning if the offer is legitimate.

“They can send all our ETH back without playing these games,” Mick1794, a ZKasino investor, said in the ZKasino Legal Task Force Telegram — a messaging app.

Additionally, ZKasino said investors only have 72 hours to sign up.

“After three days, the ability to sign up is closed and deposits are halted,” the ZKasino post said.

This relatively short period investors have to sign up to get their funds back could mean many who thought their funds were gone will miss out.

In March, ZKasino and its founders announced a programme called Bridge-to-Earn, offering users a chance to lock up their Ether temporarily to earn rewards.

But when it came time to redeem a month later, ZKasino suddenly changed the rules and kept some $30 million worth of deposits.

Both investors and Dutch authorities accused ZKasino of running off with the funds.

Scam allegations

Despite Dutch authorities asserting that ZKasino is a scam, the project has always maintained that it is legitimate.

“We have initiated the process for bridgers to bridge back their ETH for those who choose not to be part of the ZKAS conversion,” ZKasino said in its blog post, without acknowledging the accusations.

Those who bridged Ether as part of ZKasino’s Bridge-to-Earn programme can now deposit the ZKAS tokens they received in return to get their Ether deposits back.

“Signing up forfeits the remaining 14 months of ZKAS release,” the post said.

The post however, made no mention of the Ether staking rewards that ZKasino earned on users deposits.

Onchain records show ZKasino has converted investors’ Ether to Lido’s Wrapped Staked Ether shortly after the end of the Bridge-to-Earn programme on April 20.

At the current Lido staking yield of 3.3%, combined with Ether’s recent rally, the staking rewards accrued by ZKasino are worth over $100,000.

Tim Craig is a DeFi Correspondent at DL News. Got a tip? Email him at tim@dlnews.com.