Blockchain Bites: COMP x2, Reddit Scales and Factom Goes Bankrupt

The COMP governance token is seeing massive gains (increasing more than 270% day over day, according to CoinDesk’s First Mover team), as well as potential listings on Coinbase Pro and CoinFlip, a crypto ATM network.

This wild, retail-driven speculation is also driving value into Compound’s smart contract. With $395 million locked up, Compound is gunning for the position of DeFi king, long occupied by the MakerDAO protocol. By another metric, COMP has already surpassed MKR in fully-diluted value, according to DeFi Marketcap. 

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What this points to is a possible sea change in the DeFi lending standard. Compound is a lending protocol that allows users to leverage deposits and algorithmically sets interest rates based on demand. COMP, the protocol’s governance token, will let holders vote on development decisions, including which types of collateral to accept. 

Only launched Monday, with about 10,000 of the 4.2 million tokens set aside for community members in circulation, it’s impossible to gauge what comes next. To put it in Mythos Capital Founder Ryan Sean Adams’ words, “Stocks drunk. DeFi sober. I wrote that Monday. I jinxed us. Cause DeFi’s drunk now too.”

DeFi Darling
DeFi has been completely overtaken by Compound this week. As long as the token’s price remains above $100, the effective market cap of COMP, the new governance token, is more than $1 billion, though many of the tokens are illiquid. It’s hard to predict what will happen – as only approximately 10,000 of the 4.2 million tokens set aside for community members have been released, though here are a few staggering data points: 

Ethereum’s Progress: Reddit and Hard Forks
Reddit announced a partnership with the Ethereum Foundation to find a Layer 2 scaling technique for its Ethereum-based “Community Points” system, which may expand to the site’s 430 million users. These tokens are earned by garnering “upvotes” on posts and can be used to purchase specialized GIFs or emojis. While ZK-Rollups and Optimistic Rollups are product-ready L2s, they are targeted for exchanges. “Many of these designs don’t take into consideration the costs of obtaining tokens or entering the scaling system, which can be significant,” Reddit states. “Community Points distributions have cost an order of magnitude more gas than all other operations combined, primarily due to on-chain storage costs associated with on-boarding new users.” Applicants are asked to submit proofs-of-concept by July 31 with reviews concluded by September. 

Ethereum’s consensus algorithm is not the only thing changing with the launch of Eth 2.0. The underlying cryptography itself is getting an overhaul based on leading research out of the Electric Coin Company. Called BLS12-381, a new elliptic pairing curve will securely coordinate transactions on the proof-of-stake Eth 2.0 network, while opening up opportunities for data savings and privacy-tech solutions. The curve is slated for introduction at Ethereum’s next hardfork, Berlin, slated for July.

Bankruptcy & Cut Backs
Factom declared voluntary bankruptcy, saying it is currently not in a position to pay as much as $7.5 million in debts. Chapter 11 allows firms to restructure and pay creditors over time. The company’s board submitted its reorganization proposal with its bankruptcy filing, which will be evaluated by administrators. The company has raised $18 million from investors in a series of funding rounds. Elsewhere, Wirecard CEO Markus Braun resigned Friday, after an audit by EY found 1.9 billion euros (over $2 billion) worth of cash balances the German payment processor could not account for. (The Block) Lastly, We.trade has reportedly laid off around 50% of its staff, representing about 12 employees. (The Block)

Election 2020
Blockchain voting may be coming to a phone near you, but that doesn’t mean technologists, politicians or voters are happy about it. “There are a lot of companies working on election technology selling digital snake oil – overpriced junk that has never been tested by independent experts, or that we already know isn’t secure,” said U.S. Sen. Ron Wyden (D-Ore.) in an email. “Cybersecurity experts agree that hand-marked paper ballots are the safest way to vote.” Voatz, the most prominent blockchain voting app, has a range of security flaws, as uncovered by researchers, but also contains promise. “It’s up to voters, lawmakers and elections officials to decide if it’s a risk they’re willing to take,” CoinDesk’s Ben Powers said. 

Partnerships, Expansions & Products
ParaFi Capital, a San Francisco-based investment firm focused on blockchain, has invested in Kyber Network and partnered on its KyberDAO project. Meanwhile, Komainu, a venture involving Nomura Holdings, CoinShares and Ledger, officially launched Wednesday. Based in the U.K.’s Jersey Channel Islands, the new business serves as a custodian and provides regulatory compliance and insurance services to institutional investors for their digital asset holdings. Independently, the Google-backed, blockchain-powered internet-of-things startup Helium is looking to expand into Europe after already moving into over 1,000 U.S. cities. (Decrypt) Finally, EY launched CryptoPrep, a cryptocurrency application that helps its U.S. users with tax filings. (The Block)

He Said…
Galaxy Digital, a crypto merchant bank, which has never turned a profit, is banking on institutional investors to turn the company’s fortunes around. CEO Mike Novogratz said while bitcoin started out as a “retail-driven, people’s revolution,” his “intuition” is there’ll be a “big [institutional] take up in the next six to 24 months.” “If very few hedge funds get into the space, then my company’s going to suck.” Elsewhere, Jimmy Nguyen, president of the Bitcoin Association, the entity behind Bitcoin Satoshi Vision (BSV), accused Binance of hypocrisy after news came out earlier this week the exchange’s new mining pool was now the largest verifier on the BSV protocol. Nguyen said it was a “little too ironic” that Binance delisted BSV from its main exchange in April 2019 but sees it as economically worthwhile to mine. Meanwhile, Juggernaut’s John Cantrell was able to hack his way into a wallet containing 1 BTC as part of Alistair Milne’s social experiment. He reportedly checked over a trillion combinations of words, using several dozen GPUs rented from a cloud provider, to unlock the wallet. (Decrypt)

Bitcoin Hoarding 
Miner outflows of bitcoin have dropped to decade lows, with analysts suggesting a hoarding mentality is partly responsible. The seven-day average of the total amount of bitcoin transferred out of miners’ addresses declined to 987 on Thursday, hitting the lowest level since Feb. 3, 2010, according to data source Glassnode. The previous decade low of 988 was registered on May 23. “It is a sign of efficient miners continuing to hoard (only selling a proportion of BTC),” said Asim Ahmad, co-chief investment officer at London-based Eterna Capital.

Censorship or Speech?
Jill Carlson, a CoinDesk columnist and co-founder of the Open Money Initiative, sees both sides of the argument over tearing down public statues of ignominious men. As Boris Johnson said, it’s a form of censorship, while the ancient Romans practiced damnatio memoriae, where they would ritualistically deface statues of former leaders. Carlson’s take? “By all means, continue to educate generations to come about these men. Educate generations to come about these statues. And finally, educate generations to come about why some of these statues were defaced or removed. Removing or altering monuments to fit the morals and values of the day is not censorship. It is an act of speech in and of itself.”

Its Just My Job, Folks.
This week’s U.S. jobless report brought bad news. Whereas economists expected new claims to fall to 1.29 million from 1.57 million the week before, claims fell just 58,000 to 1.51 million. In the latest episode of The Breakdown, NLW looks at the mixed signals, confusing analysis, short-term shocks and demand destruction that lay behind these figures.