Blockchain Bites: Goldman’s Hire, Ether’s Options, Bitcoin’s Patronage

The Federal Reserve is rushing ahead with its payments platform, Russia’s largest bank is going in on blockchain and so is Goldman Sachs.

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Fed Now!
The Federal Reserve is working to get its FedNow payments platform up and running. Board Governor Lael Brainard said the U.S. central bank will debut its instant payment service “as soon as practically possible,” in 2023 or 2024. FedNow is being developed in response to private-sector, real-time, gross settlement initiatives. “By creating that neutral platform, banks in partnership with these other companies will be able to offer much more innovation services, services that we may not even be imagining,” Brainard said. 

Banking Coins
Sberbank, Russia’s biggest consumer bank, is launching a blockchain platform built on Hyperledger Fabric and mulling a stablecoin. The blockchain will be used for trade finance and potentially other existing lines of business. It’s an open system, with other banks or tech companies able to spin up nodes and build their own smart contracts. Anatoly Popov, Sberbank’s deputy chair, was quoted Wednesday saying the bank hopes to launch a ruble-backed stablecoin. The bank is waiting for a new digital assets law to come into force in January 2021, and after that will make the final decision. In similar news, Binance’s USD stablecoin has been green-lighted by New York’s financial watchdog for use by banks and other financial institutions.

Funding the Future
OKCoin is awarding its largest individual grant yet to Bitcoin Core maintainer Marco Falke, the second-most prolific contributor in the software’s history. Awarded an Independent Developer Grant, “equivalent of a developer salary for the year,” Falke will continue maintaining the code base, help organize geographically dispersed developers and ensure updates are merged. “I am proud to see what Bitcoin Core is today and how everyone’s contributions shaped Bitcoin Core for the future,” he said. OKCoin has previously awarded grants to Bitcoin Core contributor Amiti Uttarwar and to open-source payment processor BTCPay.

All Stars
Dapper Labs raised another $12 million in a round led by five professional National Basketball Association stars. Spencer Dinwiddie, Andre Iguodala, JaVale McGee, Aaron Gordon and Garrett Temple all invested along with Coinbase Ventures and existing partners Union Square Ventures and Andreessen Horowitz (a16z) Cultural Leadership Fund. The capital will be used for further development of blockchain games including the eventual launch of NBA Top Shot. “Sports are our most important vertical now,” Dapper Labs CEO Roham Gharegozlou said. To date, the firm has raised $51 million in seven rounds. 

Exchange Raise
IDEX has raised $2.5 million to relaunch as a trading platform accessible to market makers and algorithmic traders. The Ethereum-based hybrid exchange said Thursday the seed round cash – from G1 Ventures, Borderless Capital with other commits from Gnosis and Collider Ventures – would go to launching IDEX 2.0, a new, more liquid platform. The new exchange targets market makers, algorithmic and high-frequency traders. IDEX’s creator, Panama-based Aurora Labs, raised a $6 million ICO in early 2018.

Thursday, Goldman Sachs announced it hired a new global head to oversee its growing digit assets division. 

Mathew McDermott, an internal hire, told CNBC he envisions a world where the entire financial system resides on distributed ledgers. What’s more, he sees this happening within the next decade. 

“In the next five to 10 years, you could see a financial system where all assets and liabilities are native to a blockchain, with all transactions natively happening on chain,” he said.

Tasked with preparing the bank for this imminent future, McDermott is doubling his team’s headcount and mulling the creation of the bank’s own “fiat digital token,” colloquially known as a stablecoin. He reportedly snagged one of JPMcoin’s architects from the rival firm.

While the news shows more than one Wall Street titan is thinking seriously about the commercial viability of blockchain, it’s also an inside look into the black boxes that banks have become. 

“The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money,” Matt Taibbi wrote of the bank in the aftermath of the 2008 financial crisis. 

Just a few months ago, a leaked slidedeck showed Goldman analysts didn’t consider bitcoin and other cryptos investment grade. Now it seems the bellwether bank is keen on the underlying technology. 

Goldman’s clients apparently ignored the bank’s own advice anyway. “We’ve definitely seen an uptick in interest across some of our institutional clients who are exploring how they can participate in this space,” McDermott said. “It definitely feels like there is a resurgence of interest in cryptocurrencies.”

Ether Option
The ether options market is bustling, with open interest approaching $400 million. “Open interest is now 2.5 times higher than it was just a few weeks ago, touching a new record,” noted Chris Thomas, head of digital assets for broker Swissquote. Approximately $351 million of this activity is on Netherlands-based platform Deribit. “There’s almost zero real institutional volume through these exchanges,” said Thomas. He indicated those using ether options are high-net-worth individuals or small cryptocurrency funds preparing for increased ETH volatility. 

Not Baroque, Rococo
Parity Technologies’ Polkadot has launched a testnet, Rococo, of the protocol’s first parachain specification, according to a blog Thursday. Parachains underlie Parity Tech’s vision of a “protocol for protocols.” The Proof-of-Authority (PoA) network will enable three parachains attached to a “Substrate,” or a building kit for other blockchains to interoperate as a Polkadot parachain. This is the first test of this inter-blockchain communication. 

Patronage Over Parsimony
Nic Carter, a CoinDesk columnist and partner at Castle Island Ventures, thinks Bitcoin’s unofficial and piecemeal system of funding developers is one of its strengths. “For those versed in the dynamics of open source, Bitcoin’s patronage system as a funding model should come as no surprise. Bitcoin works in ways that are not short-term expedient, but pay dividends in the final analysis. Of course, a protocol-derived pool of rewards with which to pay developers would have been much more convenient, but it would have completely undermined the political neutrality of the monetary system,” he writes.

History of Central Banks
George Selgin, director of the Cato Institute’s Center for Monetary and Financial Alternatives, joins The Breakdown to walk through the 200-year history of central banking.