Bancor’s Approach to Handling Impermanent Loss Shows Financial Viability

Bancor has been working on a reliable method to address impermanent loss and it seems to have struck gold with its insurance-based approach

The Bancor Network has been busy trying to solve the issue of impermanent loss on its decentralized exchange. In a recent report, the protocol showed significant success with its approach, leading to the belief that it might be able to handle the protection of temporary loss of funds in the long term.

Impermanent Loss on DEXs

Yesterday, Bancor released a Protocol Health Report for its v2.1 decentralized exchange (DEX) upgrade.

The report covered the exchange’s financial and operational performance for the past quarter, showing significant liquidity and revenue gains.

As the report showed, liquidity across the DEX rose by 100 percent over the past three months, resulting in about 700,000 BNT (worth $1.12 million) in earnings from swap fees. However, the platform’s strategy on impermanent loss appeared to have faltered.

When Bancor launched the DEX late last year, it focused primarily on effective impermanent loss management.

Also known as divergence loss, the impermanent loss is a problem that affects mostly exchanges that run on the automated market maker (AMM) protocol. It occurs when liquidity providers (LPs) lose funds due to the volatility of a trading pair. It basically describes how much revenue an investor would have earned if they had held on rather than provide liquidity to the market.

The effect of this divergence is a loss of value, compared to the benchmark “buy and hold” portfolio.

The loss is termed “impermanent” because it could be reverted if the prices returned to their original state. However, even in the best scenarios, losses due to divergence will reduce liquidity providers’ profits from price swings.

Possible Long-Term Benefits

Bancor had initially tried to solve the problem with oracles, which reads token prices and render arbitrage virtually unnecessary.

However, front-running issues rendered this approach impractical. So, the exchange deployed an insurance mechanism to cover the cost of impermanent loss.

The project implemented a vesting schedule to incentivize LPs to stake their tokens in the long term.

The protocol’s strategy was to incentivize more altcoin holders to become LPs instead of adopting the buy-and-hold strategy. Another strategy Bancor plans to explore is to encourage projects to use their treasuries to provide liquidity to AMMs. Just like proof-of-stake (PoS) rewards, the method could allow projects with considerable token reserves to increase liquidity on token pairs and also get additional rewards.

The vesting schedule will see Bancor provide one percent coverage on liquidity capital for up to 100 days. However, LPs who make withdrawals before 30 days won’t get any compensation for losses in that period.

Bancor’s approach appears to be yielding benefits. As the company reported, the total impermanent loss associated with withdrawn liquidity amounted to 41,000 BNT ($64,000). On the flip side, the protocol also earned 350,00 BNT ($560,000) in fees.

Bancor added that some LPs withdrew their deposits before getting 100 percent insurance. These LPs got partial protection, which was paid based on their coverage level. The report pointed out,

“As the proportion of insurance policies with 100% protection increases over time, it stands to reason that the associated cost to the protocol will rise. However, various factors suggest the protocol is able to handle this insurance burden.”

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Author: Jimmy Aki

Venezuela’s Bolivarian Army Embarks on Bitcoin Mining for Income and Sanction Evasion

Venezuela is further expanding its crypto foothold in what seems to be a tact towards salvaging the country’s economy while evading imposed sanctions, especially by the United States. Through one of its engineering brigades, the Venezuelan army recently revealed a Bitcoin mining center dubbed ‘Digital Assets Production Center of the Bolivarian Army of Venezuela.’

Inaugurated via an Instagram post, the center is fitted with ASIC machines to mine crypto assets by cracking the proof-of-work (PoW) algorithm. This implies that Bitcoin is probably the main asset which the Venezuelan army plans to mine within its newly launched facility.

The move comes as Venezuelans continue to struggle to make ends meet after the country’s economy tumbled on oil prices coupled with political uncertainty under Maduro’s administration. Today, the Venezuelan Bolivar is almost useless, trading at 1 million VES against the U.S dollar.

Given the circumstances, it is not surprising that Venezuela is among the jurisdictions that have experimented with crypto assets the most. The state had approved its oil-backed crypto-asset dubbed ‘petrodollar’; however, it did not solve the shortcomings as expected.

The Venezuelan army now says that a mining center might be part of the solution to its ailing economy and sanctions. Presenting the new operation, General Lenin Herrera noted that the goal is to strengthen and achieve self-sustainability within the Bolivarian army units.

He went on to highlight that this milestone will also generate ‘unblockable sources of income.’ Therefore, he could act as an alternative in evading colonial interests from countries like the U.S. Notably, Venezuela recently legalized Bitcoin mining but with a central oversight through a national digital mining pool.

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Author: Edwin Munyui

Macro Investor Raoul Pal Goes ‘Irresponsibly Long’ on BTC, But More Bullish on ETH

You got faith in it; bet everything on it. This seems to be the philosophy of Raoul Pal, a former Goldman Sachs hedge-fund manager who announced over the weekend that he is going all-in in Bitcoin.

However, he did clarify that he can afford to take this road and cautioned others to do the same as him and “do your own research and size accordingly.”

By betting his 98% liquid net worth, Pal has beaten another vocal Bitcoin bull Anthony Pompliano who says his 90% investment is in BTC. But as Pal points out, he is

“older and in a position to take more risk. And it is risk, no guarantees.”

The prominent bitcoin bull is putting it where his mouth is as he prepares to sell all of his gold and invest it all in Bitcoin and Ethereum. Pal, the co-founder of Real Vision tweeted,

“I have a sell order in tomorrow to sell all my gold and to scale in to buy BTC and ETH (80/20). I don’t own anything else (except some bond calls and some $’s). 98% of my liquid net worth. See, you can’t categorize me except #irresponsiblylong.”

While only 20% of the latest investment is in Ethereum, Pal has a “hunch” that it would be Eth that would beat Bitcoin in price performance. Explaining the reason behind his 80/20 allocation, he said,

“I think ETH outperforms possibly by 5 to 1 but who knows. BTC is the easy bet.”

It would be no surprise if Eth actually outperforms Bitcoin because it did so in the last cycle too.

Compared to Bitcoin’s 1,300% gains in 2017, ETH rallied 9,162% the same year. Moreover, while BTC is just over 7% away from its all-time high of $20,000, ETH has yet to surge 63% to reach its all-time high of $1,570.

In terms of year-to-date performance as well, ETH has gained 341% to Bitcoin’s 156% while trading at $575 and $18,470, respectively.

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Author: AnTy

Pakistan Regulators Look to Build Friendly Framework for Digital Assets

Pakistan seems to realize the potential of digital assets in the financial future as the country seems geared up for formulating a new framework to regulate cryptocurrencies such as bitcoin. This is highly bullish since Pakistan was among the very few countries that in mid-2018 blanket banned digital assets in any form. It wasn’t until April of 2019 that regulators started to change their minds.

The Securities and Exchange Commission of Pakistan (SECP), on November 6th, released a consultation paper about regulating digital assets. The paper mentioned that the finance ministry is looking to make new laws as they look at the regulatory frameworks set by other countries.

SECP believe digital assets is a “start of a new era of digital finance.” The consultation paper further noted that to propel this new digital finance era, a new set of frameworks would be required to drive its adoption.

“Digital assets also known as Virtual Assets, and Crypto Assets are the start of a new era of Digital Finance, and demand innovative regulatory measures and approaches by the regulators across the world.

This could only be possible by initiation of a new era that re-invents regulatory regime/measures as they are known to the regulators globally today.”

It is also important to note that many developed countries in the West are currently discussing launching a Central Bank-issued Digital Currency (CBDC); however, the consultation paper makes no mention of any such plans by Pakistani financial watchdog. At present, they are only focusing on regulating private digital assets such as bitcoin.

The paper made a note of two types of tokens, namely security tokens and utility tokens, where the regulatory body sees a security token as an important tool that might help in fractionalizing real-world assets and digitize them.

The paper mentions that they have 2 choices as regulators; restrict digital assets due to current rules or take a ‘let-things-happen’ approach. Which they mention that they are heavily leaning towards the do-no-harm approach.

The paper also welcomed feedback from the stakeholders of the decentralized space in developing the new framework.

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Author: James W

SEC Proposes $5 Million Settlement in Kik’s $100 Million ICO for KIN

Kik Interactive, the embattled Canadian messaging startup, seems to have finally reached a settlement deal with the SEC regarding its illegal ICO back in 2017. Since the summer of 2019, the two parties in court have gone back and forth, with the latest ruling by a New York judge, favoring the SEC.

With barely three weeks since the ruling, the SEC has now proposed that Kik should settle with a fine of $5 million with the market watchdog. Kik’s ICO had raised a total of $100 million, intended for a crypto network dubbed ‘KIN.’ This was, however, cut short by the SEC, which sought to pursue Kik on account of issuing an illegal security.

According to the SEC’s court document, the two parties have agreed on a proposed judgment and are now seeking the court’s approval. Other than the $5 million in penalties, Kik will be required to give a 45-day notice if they want to launch another Kin token sale. The document states,

“The proposed Final Judgment, if approved by the Court, would permanently enjoin Kik from committing future violations of Section 5, according to Section 20(b) of the Securities Act of 1933, 15 U.S.C. § 77t(b); impose a conduct-based injunction, as outlined in the proposed Final Judgment, under Section 21(d)(5) of the Securities Exchange Act of 1934, 15 U.S.C. § 78u(d)(5); and require Kik to pay a penalty of $5 million, under Section 20(d) of the Securities Act, 15 U.S.C. § 77t(d). The proposed Final Judgment would conclude this action.”

Unlike Telegram, which had a similar encounter with the SEC, Kik has not been obliged to return its investors’ funds. This means that the project’s tokenization dreams could be realized despite the SEC’s 16-month long legal battle. Notably, Kik has previously argued that its Kin token was sold based on its underlying utility instead of a speculative nature suggested by the SEC.

If the court approved the proposed judgment, Kik would only settle for $5 million; this amount is equivalent to what they collected during their fundraising initiative dubbed ‘Defend Crypto’ Campaign. Other ‘illegal’ ICOs like EOS and Telegram have had it a bit rougher, with each settling at $24 million and $18 million, respectively.

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Author: Edwin Munyui

Gene Simmons of KISS is into Bitcoin & Crypto

Rock star Gene Simmons seems to be endorsing bitcoin.

The frontman of the legendary band KISS, Simmons responded to crypto exchange Gemini co-founder Cameron Winklevoss’ tweet where he talks about buying crypto. Winklevoss said,

“It’s easier to buy Bitcoin and Ether if you are already in the old system. If you don’t have a bank account, it’s hard to get funds into crypto. We need to change this.”

“I will. I am,” responded Simmons.

The musician who also has other titles; singer, songwriter, record producer, entrepreneur, author, and actor to his name didn’t elaborate on it despite several attempts by the crypto community.

Per Simmons’s previous comment about bitcoin, he is surely into digital assets.

“I am interested in Bitcoin, but only as a piece of the [investment] puzzle,” he said in an interview in late 2017 with The Street.

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Author: AnTy

Apple is Censoring DeFi & ‘Stifling Innovation’ in Crypto Industry: Coinbase CEO

Apple having a row with developers and app providers is nothing new, but the tech giant seems to be especially targeting the cryptocurrency industry.

Last month, Epic games and Apple got into a legal battle when the Fortnite creator launched its own in-app payment system, which also involved the use of bitcoin and cryptos, to circumvent Apple’s “monopoly over in-app payments on iOS.”

As a fact of fact, Apple doesn’t allow to add the ability to earn money using crypto and access Defi apps or Dapps in their iOS apps, said Brian Armstrong, CEO of crypto exchange Coinbase, which has regularly come under fire for taking up the authorities’ side against their customers.

“Why would Apple want to prevent people from earning money during a recession? They seem to not be ok with it, if it uses cryptocurrency,” he said.

According to market participants, tech giants want to be everyone’s bank, and as Podfather Adam Curry told Joe Rogan, it is how they control people.

Stop This!

In a Twitter thread, Armstrong shared the struggles Coinbase is also going through with Apple, which end up creating a “worse” experience for customers.

Besides the company’s Coinbase Earn program, Apple doesn’t let them provide a list of decentralized apps, “which are really just websites” to iOS users.

In the past couple of months, the DeFi sector has exploded, reaching almost $10 billion, amidst the central banks’ quantitative easing and interest rate cuts, which have been devaluing the fiat currencies around the world.

“DeFi and Dapps are a major area of innovation in financial services that has seen rapid growth lately,” and has “enormous potential.”

But Apple doesn’t let companies help the “unbanked and underbanked” on the grounds that the “app offers cryptocurrency transactions in non-embedded software within the app, which is not appropriate for the App Store.”

According to Armstrong, Apple is “holding back progress in the world” by censoring the features and further protecting competition.

He likened Apple’s actions with Microsoft forcing users to use Internet Explorer on Windows, which “led to all their antitrust issues.”

“Apple, it’s time to stop stifling innovation in cryptocurrency. We would like to work with you productively on this. Some day, cryptocurrency could even be integrated into IAP to give people in emerging markets better access to the financial system globally,” said the Coinbase CEO.

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Author: AnTy

BitMEX Mandating KYC by Feb 2021, Not Bad for Crypto Market

Crypto derivatives exchange BitMEX now seems to be feeling the pressure of regulators as it announces mandatory know-your-customer (KYC) measures to “meet evolving international regulatory standards.”

Starting August 28, 2020, all BitMEX customers will be required to complete their ID checks within the next six months.

As per the User Verification Program, a user has to go through a four-step process, much like other cryptocurrency exchanges, that includes uploading a photo ID and proof of address, a selfie, and answering “a few multiple-choice questions about the source of funds and trading experience.”

With this move, the exchange says, they will be able to “create a more trusted and secure trading environment for all BitMEX users.”

Crypto trader DonAlt feels the same as he said it is “part of growing up,” and “all of the crypto will soon be KYC’d.” BitMEX also has “to do it at some point.”

It wasn’t shocking given the increased scrutiny the crypto space has been getting from regulators, who have already been probing into BitMEX for the past year.

“Whales are in all likelihood already KYCed. No reason to panic,” said trader and economist Alex Kruger. But because “Bitmex funding is flat which means longs and shorts are rather balanced. This matters in the event of unwinds.”

Moreover, this will help the industry as a whole, including the customers and new business entrants.

“I wouldn’t say that’s necessarily bad, just means shady stuff decreases while legit stuff (hopefully) increases,” said DonAlt.

Fellow crypto trader CryptoGainz is of similar opinion as the move by BitMEX will even the playing ground “in favor of newer exchanges building relationships with retail and offering favorable rates.”

However, the exchange has been losing its ground in the industry ever since the March sell-off as it saw its web traffic and BTC balance declining.

To soothe the sting of getting KYC’d, the exchange said it would also be launching a Trading Tournament with “sizable prizes.” Still, of course, only those that have completed verification will be eligible to compete.

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Author: AnTy

Here’s Why DeFi Tokens Can Still Rally After Seeing A Massive 2,600% Gains This Year

2020 seems to be the year of Decentralized finance (DeFi). In a matter of months, the market cap of the DeFi space has gone from a billion-dollar to nearly $8 billion, as per DeFiMarketCap.

In 2020 so far, Aave (LEND) has surged a whopping 2,600%, Kyber network (KNC) 800%, Bancor (BNT) 511%, Republic Network (REN) 495%, Loopring (LPC) 413%, Synthetix (SNX) 174%, 0x (ZRX) 118%, and Augur (REP) 105%.

There are only a few DeFi coins that have recorded either shallow greens or losses such as Maker. But despite these massive gains, 2020 might not be done with these yet!

More Gains for DeFi

“We are still early in the DeFi cycle, and while valuations are no longer cheap, they are not exuberant either,” said Spartan Black, a partner at crypto hedge fund The Spartan Group.

He argues that those who joined this cycle early on are still allocating more capital to DeFi. In contrast, new pools of DeFi allocated capital are being formed, which will get allocated in the coming months.

On top of that, many investors are still “heavily overweight” BTC, ETH, and other legacy digital assets.

“Driven by the rise in the valuation of listed DeFi assets, we are also starting to see inflation in the valuation of DeFi assets on the private side (notably for “series A” rounds),” he noted.

Interestingly, these assets are not widely available on centralized exchanges, which are starting to play catch up as these projects see a spike in prices and increased valuation.

“As more exchanges list these assets in the coming months, opening them up to more investors, this will facilitate the re-allocation of funds to these newer DeFi assets causing them to re-rate further in absolute terms and relative to legacy crypto assets,” said Black.

But Not for ETH or BTC

Ethereum-based DeFi tokens have been flying, recording substantial gains to Ethereum, which is only up 86% YTD.

But while Defi tokens can still rally despite these massive gains, it’s harder for the second-largest network to see such gains yet, or Bitcoin for that matter. This is because “DeFi can rally without a ton of new money coming in, but BTC/ETH is at the point where they need real, institutional/macro fund flows to take it to the next level,” said analyst Ceteris Paribus.

Crypto investor, co-founder, and CIO of BlockTower Capital – Ari Paul – is also of this opinion. He explains that most of the new money in the crypto space first flows into BTC and some other large-cap cryptos, allowing crypto insiders to profit in those coins, before looking at riskier investments like DeFi tokens.

Moreover, the same amount of dollars funds will have a bigger impact on DeFi tokens than the $27 million market cap Ethereum.

“Recycling of profits is real when there’s new real money entering the system, but likely has a pretty small impact on BTC and ETH since they’re so much bigger than the token profits that can be recycled,” Paul said.

As such, the analyst is not excited about a big ETH rally right now, even though Crypto Twitter is calling for it.

“Can ETH be a higher beta play in a full-on bull? Sure. But it’s hard to see ETH making a huge move with BTC range bound. Just a different level of capital needed for that,” Ceteris Paribus said.

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Author: AnTy

Bitmain’s Internal Brawl Drags On After Ousted CEO, Micree Zhan, Halts Mining Equipment Shipments

Bitmain’s battle for control seems far from over after a recent shipment disruption by Micree Zhan. The ousted CEO physically took over Beijing’s office at the beginning of June after hiring private guards. Reports have now emerged that Zhan is interfering with the shipment of mining devices from Bitmain’s factory in Shenzhen.

BlockBeats, a Chinese media publication, quoted its sources who allege that Zhan prohibited Bitmain employees from delivering client orders. Notably, the reason behind the move is yet to be clarified. This comes amid the ensued brawl between Zhan and Jihan Wu since October 2019 over Bitmain’s control.

Despite being a market leader in the production of crypto mining equipment, Bitmain came under pressure when this internal wrangling started. Wu ousted Zhan by claiming to ‘save the ship’ and regaining the top position within the firm’s hierarchy. It was then that it got messy and noisy for the Beijing headquartered firm.

Zhan has since filed multiple lawsuits noting that the takeover was illegal. In May, the situation escalated after a brawl erupted over Bitmain’s deal. Recent developments now indicate that Zhan might have regained partial control of Bitmain’s operations. However, Bitmain had issued a statement towards the end of May confirming Zhan’s ouster.

Wu: Situation is Under Control

Following this shakeup, Jihan Wu’s side of Bitmain has come out to assure employees that things are under control. According to the update, the team is pursuing damages caused by Micree Zhan through legal channels. It goes on to reassure that Bitmain will compensate all damages suffered by the employees, urging them to “work together to protect Bitmain.”

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Author: Edwin Munyui