Launched in late 2017 the MakerDAO protocol is a decentralized stablecoin system that doubles as a collateralized lending platform on Ethereum. The system functions by allowing individuals to take out collateralized debt positions (CDPs) against their Ethereum holdings, issuing the stablecoin DAI in return. Maker has quickly become the largest decentralized finance application in crypto, with over 3% of total Ethereum supply locked in these CDPs (see graph below).
For investors in Ethereum, Maker’s success should provide some upward pressure on prices as more Ether gets locked in CDPs. At the current rate of growth, roughly half of newly minted Ethereum daily is locked into the Maker ecosystem. For more on how the protocol works and what it means for the ecosystem as a whole, see the article on our blog here.
We are only now starting to witness the fintech revolution , with real products providing access to sophisticated financial instruments. This is just the beginning.
Bank account closures
Australian cryptocurrency exchange myCryptoWallet was ‘debanked’ by the National Australia Bank last week. It seems very strange that without explanation a legitimate business can simply have its bank accounts turned off. This rather reinforces the argument about protecting your assets from seizure through the use of cryptography.
This reminds me of Binance, the worlds largest cryptocurrency exchange by volume. Binance launched in 2017 and became the largest crypto-exchange in the world in its first 12 months of operation. Binance is a crypto only exchange, so it did this without a bank account and without a company, it was managed and controlled with tokens and smart contracts.
It is quite likely that more of these autonomous organizations will emerge, living outside the existing legal framework because it is so cheap and easy to do.
Bank for International Settlements
The BIS is based in Basel in Switzerland. Termed the central bankers central bank it plays a role in keeping global liquidity flowing.
This week the BIS released a report called ‘Beyond the Doomsday Economics of Proof of Work’. The report draws two conclusions:
1. That bitcoin should abandon the proof of work protocol. This is the effectively the mining algorithm that keeps the system honest.
2. That the fee market for bitcoin is not sufficient to support proof of work long time.
I wont deal with either point here but we will cover them on our blog later this year.
Despite the criticism here is the final paragraph:
The full report can be found here, which even though I don’t agree with it is really well written if you want to learn more about the workings of bitcoin
Swift testing out R3’s Corda Blockchain integration
SWIFT has announced a trial integration of R3’s Corda’s blockchain, an open source DLT solution designed specifically for business. R3’s blockchain offering is trying to position itself as the Crypto equivalent of SWIFT (albeit at a much smaller scale), as its Settler application released last year targets “global cryptocurrency payments within enterprise blockchains”. A recent deal to bring the Corda blockchain in closer collaboration with Ripple makes this piece of news significant not only for Corda, but also for the XRP ecosystem.
The major part of this deal is the potential integration of SWIFT based digital currencies into the Corda blockchain along with XRP, finally providing a means by which XRP can be used on a more sophisticated network. Whether this network can be valuable for corporate purposes is another question entirely, as similar blockchains to Corda – those that are designed entirely for “enterprise” purposes – have failed to attract transaction volumes and throughput. Typically, these chains trade decentralization and security for speed and practicality, which arguably makes the use of a blockchain redundant. Still, this system will be one to monitor.