The Power of the Network and the Blockchain Revolution
From the rise of Terra (Luna) to the foresight of Nakamoto.
As computers get faster and the total computing power applied to creating bitcoins increases, the difficulty increases proportionally to keep the total new production constant.
Satoshi Nakamoto
In one of the historical messages that Satoshi Nakamoto has handed down to us, it was specified that "A lot of people automatically dismiss 1990's. I hope it's obvious it was only the centrally controlled nature of those systems that do not work. I hope it's obvious it was only the centrally controlled nature of those systems that doomed them. I think this is the first time we're trying a decentralized, non-trust-based system."
The creator of Bitcoin specified that unlike previous experiments in electronic currencies, the first cryptocurrency would not have a central entity based on a single trust but a network made of people. To maintain this principle, the fundamental basis was that among the participants, to ensure the efficiency of the network, there should be no admixture but that the interest of the individual, replicated for each node, would be the guarantee of success over time.
And so far, the theory is proving to be sound.
Very often, the assumption that the interest of a single user, whether it be a large mining farm or one of the holders of the most conspicuous wallets (with the massive sale of its assets or with a joint agreement between the major whales) can succeed in modifying the Bitcoin protocol turns out to be unfounded, or complicated if not impossible to apply and precisely because of a lack of knowledge of this very rule.
And not only for Bitcoin.
These days we have had a further demonstration of how the trust between users, unknown to each other and often with different interests, can create that unique synergy able to make inefficient the theft by a single or a group of hackers.
Last week we witnessed, the most important cryptocurrency theft so far ever carried out against decentralized finance protocols. An individual or a group of hackers attacked the Poly Network protocol causing the loss of over $600 million. However, a few hours later, all the loot was recovered, thus undoing the biggest heist in history for DeFi protocols.
How was this possible?
Unlike in the past, when similar attacks took place against traditional exchanges (those that for Satoshi fall under the category of central entity), this time it was a flaw in the decentralized finance protocol. In this case, the responsibility was not of an exchange or the network but the inefficiency of a single automatic code, the smart contract. Yet, just over 48 hours later, all the "loot" was returned through the collaboration of what might have appeared to be later on a "white hat hacker," sometimes called also "ethical computer hacker."Â Without going into the well-known details, we want to underline that this was made possible by the "goodness" of the hacker and the "living" activation of the network that created a concatenation of actions that led to the final solution. In fact, after a few minutes from the announcement of the attack, then confirmed by the Poly Network team, a protection mesh was quickly activated by the different centralized and decentralized exchanges that immediately blocked parts of some funds. In the following hours, many users started to trace back the various addresses usually used to transfer funds, a technique adopted to make them lose track of the traces, identifying some addresses that could lead to the hacker's identity. Feeling hounded, the hacker started to bargain for the possibility to give back the entire sum, passing his action not as theft but as an attempt to highlight the flaw in the protocol without causing damage to the community. The official version raises some doubts. What we are interested in underlining is the crucial piece of this story that resides in the importance that is given to the network itself and how much trust, in reality, regulates these mechanisms of consent.
Samczsun is another example (of different depths) of excellent collaboration between users engaged in safeguarding the weak points of decentralized realities. This young researcher from the Paradigm team managed to avoid a sure $350 million loss through a personal analysis of the smart contract highlighting a considerable vulnerability in Sushiswap's MISO platform. The ideal security of a decentralized system based on collaborative interconnections between users is perhaps the most substantial evidence that this will be the future line of global economic exchange.Â
So, when a user begins to find possible resolving tracks, he does it only to guarantee the efficiency of the same network with the purpose to demonstrate that the union strengthens the community. This line leads automatically to the evidence that the interest of a single user is not seen as a reason to prevail on all the rest of the community, and the actions of strength and global collaboration have demonstrated that by changing the ending of the story completely. Because the power of the community as a whole unites the interests of multiple people in ensuring the efficiency of the digital protocol, we return to the philosophy (never been more practical and real) of the basis of decentralized finance, where Satoshi Nakamoto was a visionary in this reading as well. The winning team is not the most powerful one but the best-organized one. A clear example can also be the demonstration of the last European soccer championship won by the Italian national team, which from the beginning did not prove to be the strongest on paper, but certainly, it was in the creation of a real group. A principle that is often overlooked but on which, instead, is based a concept that turns into progress, especially when it is not the immediate interest that prevails but above all that of building solid foundations for the future to the benefit of the entire ecosystem.
And we all know that this is precisely what is being realized in the new technology of the leading Blockchains.Â
Decentralized Finance
Another electrifying week for the decentralized finance sector. Two projects have channeled the attention of these last days with substantial price rises. We are talking about Solana (SOL) and Terra (LUNA) that in a few days, have scored increases that in some parts of the day have risen over 100%. Both projects find consensus in the community that has begun to value both Blockchains offering services with alternative consensus mechanisms and easily scalable finance services. Although only six projects were launched on the Terra DeFi protocol, the Total Value Locked (TVL) has exceeded $6 billion in counter value, bypassing Polygon, another well-known and popular project among users.
However, the best weekly performance regards Avalanche (AVAX), which gained over 150% in just a few days. The rise in the price of the Avalanche, a project that offers decentralized trading and other financial assets, which in less than a month sees its value rise by over 430%, 250% of which in the last week alone, also benefits from the upcoming synergies with the Aave and Curve Finance projects, allowing users greater flexibility with the new decentralized assets. User appreciation for these new synergies also drives purchase demand, with prices soaring to over $48 from just over $9 in mid-July.Â
The new spring for DeFi is the main reason supporting the increase in tokens since the beginning of the year. In fact, over 3200 new tokens have seen the light of day since January 1st. A record that exceeds the total annual issuance compared to previous periods. This is the reason why also this week an in-depth article has been published on IlSole24Ore, the major Italian financial newspaper.
The TVL on all DeFi projects now exceeds $85 billion, close to surpassing the historical record of $88 billion set last May.
Aave's protocol remains the leader with over $15 billion locked, followed by
InstaDApp, Curve Finance, and Compound, all three projects with over $10 billion TVL.
Like last week this is the first time four projects individually exceed $10 billion in regards to TVL.
Despite the buzz, the total weekly trading volume on DEXs drops 8% to $17 billion. -
Much of the responsibility lies with the Uniswap project, which despite over 144k active traders traded a counter value of $11.3 billion, or 65% of the entire weekly volume, is down $1 billion from last week.
It is followed by Sushiswap with $2.2 billion and
Curve Finance with $1.1 billion.
With $65 billion traded since the beginning of August, total movements on DEXs are on their way to ending the month with one of the most active monthly trading averages over the course of the year.
Summer 2021 is, however, is confirming a consolidation of the recovery started from the second half of July after a period of uncertainty that lasted about two months when the difficult moment of the whole sector in a few days had accused a drop of more than 60% of the Total Value Locked. A loss now totally recovered with the return of the TVL to a few hundred million from the absolute records of last May. The previous month's rise has so far a structure similar to that of last year, precisely in the same summer period when values were far from the current ones with a TVL of around $15 billion.
In the last week, the network has shown cooperation, confirming what we wrote in the opening of this issue. Samczsun, one of the teams of research partners of Paradigm - a company that invests in new technology projects - discovered a vulnerability in the system linked to the MISO platform of Sushiswap, managing to avoid a loss of 109,000 ETH through the analysis of the smart contract for the sale of BitDao tokens, finding a bug and immediately alerting the CTO Joseph Delong. That is yet another proof of how the system works based on continuous collaboration between those who are part of the decentralized finance dimension, a linking philosophy that serves as a master of the global institutional paradigm.
Non Fungible Token
The summer confirms an upward trend in Non-Fungible-Token trading, with Axie Infinity continuing to post substantial volumes despite a slight weekly decrease and still at $204 million in trades generated from over 480,000 transactions. This innovative NFT platform enables many people to create a steady income, especially in the Asian context. Many are actively engaged in this dimension and even decide to leave their current job. Surprising is the substantial jump up, on a weekly basis, and with an increase of more than 80% of the volumes of Art Blocks. This generative art platform allows artists to create digital works generated by variable and random combinations of the same protocol, with more than $112 million traded in the last seven days.
In the third position jumps, with trades much lower than the previous two, $45 million in the last week, but of all respect, the project of Parallel Alpha, based on the Ethereum blockchain and which narrates a parallel world with five realities through which exchanges of collectibles occur that in turn generate the sustainability of this parallel world.
Surprisingly, this week, the first five highest auctions do not see CryptoPunks but Art Blocks with 650 ETH equal to 1,833,416 USD. The ArtBlocks is - Artefidenza_#723 - a random digital representation that, only two months ago (June 12), had been traded for only 4 ETH. The second-highest auction of the week, again for ArtBlocks, is another randomly generated work - Archetype #397 -Â previously sold (on April 14) for 20 ETH, equal to just under $50,000 and now hammered for 420 ETH with a counter value of 1,184,000 USD.
The other three highest digital NFT auctions of the week are from the DeafBeef project, which in the last week has traded just over 10 mln USD generated by ten transactions alone, and with this goes yet another use of the NFTs with computer-generated audiovisuals that are inspired by works of art created by a C programming language and coined by a random algorithm which in turn also influences the musical aspect. A new generation of NFTs that integrate video and audio, indeed a strong innovation for the future.
We conclude with the Fans Token of Paris Saint Germain that have seen in the last seven days a decrease of 80% from last week's levels caused by the effect of the striker Messi; they continue to beat the rise with over 450 mln USD exchanged through the token of Chiliz. In the second position, the English club of Manchester City, the only one of the five clubs, that rises with an increase of over 125% and trades of 161 mln USD. The third is the club of Atletico Madrid with over 120 mln USD.
5 hottest DeFi news of the week
Coinbase: new $500 million purchase in cryptocurrency
White Hats Just Defused a Potential $350M Heist on SushiSwap
SEC boss says DeFi platforms are ‘highly centralized’ and will need to register
Liquid exchange hacked to the tune of $80 million
Alibaba launches its new NFT ART marketplace.
Technical Analysis
Bitcoin (BTC)
After surpassing 47,000 USD (1), a resistance level that coincides with 50% of the Fibonacci retracement that takes into account the recent historical highs of April (2) and lows of July (3), prices are now timidly testing the psychological threshold of 50,000 USD (6). Professional operators also identify this strike level in derivatives as a watershed level that might determine the future trend.
Technically, the monthly cycle that began in July (4) could have ended with the recent minimums of August 19 (5). If this is the case, the breakup of the 50,000 USD (6) is expected in the next few hours. For this reason, it is necessary to constantly and carefully follow the trend in the coming days. At the moment, the only not very comforting clue is the daily volumes traded below the quarterly average. In fact, since the end of July, the counter value of the daily volume traded on the leading exchanges has never exceeded $10 billion.
BTC levels to monitor for the week:
° To the Upside: it is the 50,000 USD level to watch for the next few days. A break sustained by buying would begin to make 56,000 USD (7) the next target level for the following days/weeks.
° To the downside: failure to break above 50,000 USD could create a return to test 43,700 USD (8), the levels of the mid-August relative lows. A lunge below this area would require monitoring of the 42,500 USD area (9) not to be exceeded to the downside to risk compromising the excellent bullish work of the last three weeks.
BTC Options
Positions to hedge against possible declines are increasing. In fact, the number of open Put options has increased, bringing the ratio with Call options to 1:3. On the downside, strikes for protection were opened in the 38,000 USD - 43,000 USD range. That will be the range to monitor in case of reversals. While on the upside, the overcoming of 50,000 USD highlights the possibility of important extensions.
Ethereum (ETH)
The slowdown in the climb of the last few days does not ruin the bullish trend that since the July lows (1) has allowed prices to gain over 90% in less than a month. Despite that, the price oscillates in the upper part of the highs recorded last week, highlighting an excellent hold and solidity that remains set on the upside. Technically, the medium-long term structure remains unchanged, and for this reason, it is not necessary to add further indications to what has already been written in previous reports.
ETH levels to monitor for the week:
° To the upside: the week promises to be very important for the holding of 3,000 USD (2). The holding of the monthly support increases the probability in favor of the hypothesis of the closing monthly cycle that began on July 20 (2). If the setting of its direct 10-day sub-cycle is correct, prices have entered the most delicate phase of the quarterly cycle that began at the end of June and should end between mid-September and early October.
° To the Downside: the holding of the 3,000 USD continues to be crucial. An eventual price slide below this support should not push prices below 2,800 USD to avoid invalidating the bullish trend.
ETH Options
Professional traders continue to defend the strikes positioned in the 3,500 USD area by increasing Call options positions with a 1:1.7 ratio against Put options. On the contrary, there are no critical hedges below 2,800 USD for downside protection. A sign that if there should not be an evident change in strategy in the coming days, an eventual descent below these levels could increase volatility and speculation the downside.
Realm CrossChain NFT
We live in a historical moment where digital art and Non-Fungible Tokens "NFT" are gaining more and more importance within markets and society. NFTs are very important because they allow artists to create and exhibit their digital art and allow users to engage in investment and speculation.
This new and important trend can be traced back to the historical period and the resurgence of Non-Fungible Tokens, which this time, however, are not only traded on Ethereum blockchain, such as ERC721 but also on Reef chain, Layer 2 Polygon, and BSC, other new blockchains. One of the projects that currently caught our attention, both for NFTs and tokens, is REALM. REALM is defined as a unique virtual world and an ecosystem, created, driven, and developed by the community, allowing NFT artists and composers to express their ideas and artistic visions.
REALM represents the innovation of a cross-chain project that gives the possibility to be developed on several blockchains simultaneously, thus offering users an interaction between chains that have already involved several projects for NFTs and that are now going to prepare for total immersion in an innovative virtual reality.
REALM allows the creation of unique ecosystems with any kind of NFT inside: pets, NFT plants producing fruits, exhibition or exclusive digital art, always through live streaming and audio through augmented reality. We can safely admit that interacting with this new dimension has never been easier and that the player's levels of interaction and creative freedom reach unprecedented heights, just as the name REALM reminds us.
Therefore, the goal is to create many small micro-universes of NFTs, linked together via cross-chain, to offer users maximum interconnection and interoperability between NFT tokens that can come from a multitude of blockchains or very famous NFT marketplaces such as Opensea or Rarible.
REALM will be a decentralized platform able to offer a unique gaming experience by creating REALMs, small worlds that can be developed at 360 degrees in any aspect. The platform and the official game will see their launch in October 2021, flanked by the $REALM Token that will allow players to receive fantastic rewards, making it one of the most exciting projects and ecosystems of the moment.
By Claudio Canini
Pandemic crisis and proposed use of SDRs.
To date, the world is struggling to emerge from a pandemic that has strained world economies. Among the solutions proposed to mitigate the damage caused by Covid-19, some economists, such as Domenico Lombardi and Jim O'Neill, have suggested using SDRs as a possible systemic response to the crisis. SDRs represent the IMF's unit of account, consisting of a basket of foreign currencies with greater liquidity in international circuits. For this reason, they are used as a unit of accounting reference by institutions such as the International Fund for Agricultural Development, the Asian Development Bank, and the Universal Postal Union. In 2018, Russia and South Korea experimented with using a cryptocurrency (specifically, a stablecoin) anchored to the value of SDRs and, therefore, incredibly stable, called XDR.
The basic idea was that transfers and transactions in XDR could solve the problem of high commissions in cross-border remittances, especially considering that, according to World Bank data, commissions for sending money between countries oscillate between 7% and 20%. Moreover, it is known that due to high transaction fees and levels of currency instability, many citizens of developing countries (particularly Africans) are turning to bitcoin to transfer value with lower costs. More than 600,000 monthly transactions have been recorded, for example, as transfers to and from Africa (explicitly involving Nigeria, Kenya, South Africa, and Ghana), providing a better option than the progressive and expensive purchase of USD. Specifically, Reuters stated that bitcoin payments help individuals who have relatives living abroad to send cash home, limiting the dispersion of acquired value. The proposed increase in SDR allocation to grant resources to countries in proportion to their share of influence on the IMF would also, in the logic of proponents, allow for a faster response to the crisis and greater financing capacity for countries in need. Yet, unlike the use of bitcoin, not only the difficulty in coordination and direct transfers of resources to member countries would remain to be solved, but above all, the limitation of the SDRs liquidability in the real economy.
A country like the United States might then want to avoid that China or Europe take possession of a share of dollars that constitutes the underlying share of SDRs, whose relevance is obviously a consequence of the weight of the currencies that make up the basket. Not only. All the reference currencies are, in fact, in competition with each other, in line with the fundamental nature of the SDRs, which is to guarantee the credibility of the IMF as an international institution and which, therefore, imposes the maintenance of precise balances, preventing claims of reformulation of the basket. Once again, thus, what emerges and characterizes every approach to the crises, although summarily and without exhaustiveness examined here, is that currency is first and foremost a geopolitical instrument and not a neutral asset and that the economically stronger countries - and, among these, first and foremost the United States - have no interest in questioning the logic of privilege long maintained.
By Martina Granatiero