Elliptic Announces Support for MimbleWimble on Litecoin

A week after Litecoin activated the long-anticipated MimbleWimble Extension Blocks (MWEB) upgrade, blockchain analytics firm, Elliptic announced adding support for the privacy feature of the cryptocurrency.

Elliptic-Litecoin MWEB

As per the official announcement, the move will allow regulated businesses to continue to support Litecoin transactions while remaining compliant with anti-money laundering (AML) regulations and sanctions. Elliptic said that its solutions will enable merchants to identify whether a Litecoin transaction or wallet includes funds that have leveraged MWEB. This information can be used by compliance professionals to analyze risk and perform further due diligence.

Elliptic is involved with businesses and government entities to assess blockchains for fraudulent activities. Tom Robinson, Chief Scientist and Co-Founder at Elliptic commented,

“By providing visibility of Mimblewimble activity, Elliptic’s transaction and wallet screening solutions provide businesses with the risk insights they need to continue to support Litecoin while meeting their legal obligations.”

According to Robinson, identification of the MWEB activity may not potentially demotivate businesses to add LTC as their payment method. The exec told CryptoPotato that “as long as businesses have visibility of when these privacy features are being used by customers, they can still perform effective due diligence and comply with regulations.”

Investment Warnings

Just days after Litecoin announced MWEB activation, it was reported that two leading South Korean cryptocurrency exchanges, UpBit and Bithumb, issued investment warning against the upgrade. The two platforms cited Korea’s Act on the Reporting and Use of Specific Financial Transaction Information as the reason behind designating the cryptocurrency as an “investment warning.” It has been noted in the past that exchanges tend to delist tokens after such warnings.

When asked if such risks persist, Robinson said:

“Exchanges or merchants don’t need to delist Litecoin because of the activation of confidential transactions through Mimblewimble. It is still perfectly possible for these businesses to comply with anti-money laundering regulations when supporting Litecoin. All cryptocurrencies have some way to hide transaction flows – be it coinjoins on Bitcoin or Tornado Cash on Ethereum.”

Crypto execs believe bear market could help filter bad players from industry

Leaders of various blockchain and crypto organizations believe recent turmoil in the digital assets market could help eliminate bad actors from the nascent industry, CNBC reported on May 27.

Speaking at the World Economic Forum in Davos, Switzerland, Bertrand Perez, the CEO of the Web3 Foundation, said the crypto sector is currently in a bear market, which is good because it will sieve out people who entered the crypto market with bad intentions.

Perez added:

It’s good also, because all those projects are gone. So the legit ones will be able to focus only on developing on building and forget about the valuation of the token because everyone is down.

Perez also noted that people get greedy during bull cycles and only think about making a fortune, which he considers is the wrong mindset.

Echoing these sentiments was Polygon co-founder Mihailo Bjelic, who said the sell-off was necessary. He pointed out that the market had become irrational and a little reckless. To this end, a correction was vital and healthy for the industry.

Ripple CEO Brad Garlinghouse said:

Bitcoin about two years ago right now, bitcoin was about $8,000. Now it’s at 30,000. So yes, there’s been a crash and a trillion dollars came off. But when you zoom out a little bit further and look at the long term trends, I think you see that crypto is here to stay.

Institutional investors are to blame

The recent crypto market crash resulted from a slump in stock markets and the collapse of the TerraUSD (UST) stablecoin and its associated token Terra LUNA.

FTX.US CEO Brett Harrison said institutional investors exacerbated the LUNA situation.

According to Harrison, institutional investors are increasingly embracing the crypto sector. While this indicates the market is maturing, he said institutions always drop risky assets first whenever global markets plummet, and crypto currently tops the list of such investments.

Harrison’s comments are similar to those of Cardano founder Charles Hoskinson who said institutional investors manipulate the crypto market. Per Hoskinson, Wall Street investors treat crypto like any other assets and dump them whenever they underperform.

However, not all institutional investors are driving the bearish trend in crypto. For instance, MicroStrategy has held on to its Bitcoin (BTC) purchases despite the poor market conditions.

The post Crypto execs believe bear market could help filter bad players from industry appeared first on CryptoSlate.

Ethereum Profitability Dumps To 2-Year Low As Price Corrects Below $2,000

Ethereum has been on a downtrend along with the rest of the crypto market. This has seen the value of the cryptocurrency plunged below $2,000 and efforts to recover above this major resistance level have been futile. Naturally, the decline in the value of the digital asset has affected its profitability. What has resulted from this is Ethereum wallets that are in profit at current prices have now declined to a two-year low.

Ethereum Profitability Declines

Ethereum remains the second-largest cryptocurrency by market cap but when it comes to profitability, it tells another story. Data shows that the percentage of ETH wallets that are in profit has declined significantly in the last couple of months. Along with the price, most of the profitability decline has happened in the last six months.

Related Reading | Market Sentiment Dangerously Negative As Crypto Fear Index Drops To Two-Year Low

IntoTheBlock shows that only 56% of all Ethereum investors are currently in profit. This puts a total of 43% in the loss while only 1% of all investors are sitting in the neutral territory, meaning that they purchased their tokens at current prices. 

Data from Glassnode supports this metric although it puts the number of addresses in profit at a slightly higher percentage. The data aggregation tool shows that 58% of all ETH investors are still in profit. However, what is notable about this figure is that the last time that Ethereum profitability was this low was almost two years ago, back in July 2020.

ETH price trading at $1,781 | Source: ETHUSD on TradingView.com

It is no coincidence that the majority of those in profit has been investors that have been in the market for more than a year. The long-term outlook for the smart contract network has always favored those who followed it compared to those in the short term. 

Small Wallets Ramp UP

Even through the downtrend that has rocked the digital asset, support has still not waned. Smaller investors have continued to throw their hats in the ring with Ethereum. This is evidenced by the growing number of wallets holding at least 0.01 ETH reaching a new all-time high. It is now sitting at a new record of 22,874,566 addresses.

#Ethereum $ETH Number of Addresses Holding 0.01+ Coins just reached an ATH of 22,874,566

View metric:https://t.co/XXb0u19ouH pic.twitter.com/gYKCAAlgcZ

— glassnode alerts (@glassnodealerts) May 27, 2022

This metric has hit multiple all-time highs in just the first two quarters of 2022. It shows renewed interest from smaller investors but unless this interest becomes evident in the largest ETH investors, there may not be any significant change in value.

Related Reading | Bitcoin Dominance Remains High As Market Sell-Offs Settle

As for the price of the digital asset, Ethereum’s price is down more than 60% from its all-time high in November. It is currently trading at $1,770 with a market cap of $213.9 billion. It remains the largest DeFi platform with over $67 billion in TVL.

Featured image from Coingape, chart from TradingView.com

Follow Best Owie on Twitter for market insights, updates, and the occasional funny tweet… 

Ethereum founder Vitalik Buterin sees potential for algorithmic stablecoins

Ethereum founder Vitalik Buterin has been in a contemplative mood recently. After posting a series of “open contradictions” in his “thoughts” and “values,” Buterin has now taken his musings to the arena of “automated stablecoins.”

Commonly referred to as algorithmic stablecoins, Buterin wrote a blog post this week assessing the viability of such unbacked tokens amid the fallout of the Terra catastrophe.

An evaluation of automated stablecoins

Buterin wrote the blog post in collaboration with Paradigm head of research Dan Robinson, Uniswap creator Hayden Adams, and Ethereum researcher Dankrad Feist.

Buterin began the post by citing the UST de-peg events and said he would welcome a “greater level of scrutiny on Defi financial mechanisms, especially those that try very hard to optimize for “capital efficiency.”

The Ethereum founder continued with a call to “return to principles-based thinking,” which he proposed through two thought experiments:

Thought experiment 1: can the stablecoin, even in theory, safely “wind down” to zero users?

Thought experiment 2: what happens if you try to peg the stablecoin to an index that goes up 20% per year?

What is an automated stablecoin?

Notably, the definition of an automated stablecoin used by Buterin is a “stablecoin, which attempts to target a particular price index… [using] some targeting mechanism, … is completely decentralized… [and] must not rely on asset custodians.”

He explained that the current thinking is the targeting mechanism must be some form of a smart contract. Buterin then explained how Terra Classic worked “by having a pair of two coins, which we’ll call a stablecoin and a volatile-coin or volcoin (in Terra, UST is the stablecoin and LUNA is the volcoin).”

The below chart visualizes the method by which Terra maintained UST’s peg.

Source: vitalik.eth

In comparison to UST, Buterin also described RAI, an Ethereum-based automated stablecoin. He clarified that he did not choose DAI for his example as RAI:

“Exemplifies the pure “ideal type” of a collateralized automated stablecoin, backed by ETH only. DAI is a hybrid system backed by both centralized and decentralized collateral.”

Thought experiment 1

In his first thought experiment, Buterin compared businesses within the non-crypto world.

Companies generally do not tend to last forever, and when they are wound down or closed, their customers are rarely hurt economically. Investors may lose capital depending on the method of closure, but even this is not always the case as traditional insolvency processes exist to ensure creditors are paid out.

Within the world of automated stablecoins, Buterin claimed that Terra is a prime example of users being financially impacted by the failure of a crypto “business.” It is hard to argue with this point as thousands of investors worldwide have lost millions during the past few weeks.

Also, Buterin highlighted that other factors could play out with a Terra-style stablecoin. A drop in activity for the “volcoin” leads to a decline in market cap, which subsequently causes the relationship to the stablecoin to become extremely fragile.

As happened with LUNA, a sharp change in price at this moment causes hyperinflation within the volcoin. Eventually, the stablecoin loses its peg as it cannot handle the discrepancy. As soon as the peg is lost, the seignorage method fails and creates a death spiral for both coins.

Buterin explained that with Terra, as soon as the market lost faith in the project’s future potential and the market cap of LUNA began to decline, the above became a self-fulfilling prophecy. He highlighted that a slow wind-down in the market cap of LUNA could have stopped the death spiral, but the safety mechanisms in place did not allow this to be a possible outcome.

Buterin explained that:

“RAI’s security depends on an asset external to the RAI system (ETH), so RAI has a much easier time safely winding down.”

The externality means that:

“there’s no risk of a positive-feedback loop where reduced confidence in RAI causes demand for lending to decrease.”

Thought experiment 2

In this experiment, Buterin explained that a stablecoin could be pegged to a “basket” of assets like “a consumer price index, or some arbitrarily complex formula.”

He then hypothesized an asset class that rose 20% in dollar terms annually. What would happen if a stablecoin were pegged to such an asset? No such asset exists; however, as a thought experiment, Buterin explained that there are two ways to a 20% yield asset,

It charges some kind of negative interest rate on holders that equilibrates to basically cancel out the USD-denominated growth rate built in to the index.
It turns into a Ponzi, giving stablecoin holders amazing returns for some time until one day it suddenly collapses with a bang.

From the above options, Buterin claimed that LUNA acts like point 1 and RAI like point 2. Therefore, Buterin’s core point states:

“For a collateralized automated stablecoin to be sustainable, it has to somehow contain the possibility of implementing a negative interest rate.”

Ultimately, he postulated that a successful automated stablecoin “must” have a response mechanism to “situations where even at a zero interest rate, demand for holding exceeds demand for borrowing.”

Buterin sees two ways to achieve this:

RAI-style, having a floating target that can drop over time if the redemption rate is negative
Actually having balances decrease over time

Conclusion

In conclusion, Buterin sees a potential future for automated stablecoin. However, it is fraught with technical concerns and needs to move away from comparisons to the traditional financial world. Buterin seems to believe that Terra did not do enough to assess the risks during periods of high volatility or negative growth in the case of Terra.

He ended the post by reiterating that:

“Steady-state and extreme-case soundness should always be one of the first things that we check for.”

The post Ethereum founder Vitalik Buterin sees potential for algorithmic stablecoins appeared first on CryptoSlate.

Tether’s USDT Stablecoin Launches on Polygon (MATIC) Network

Tether – the company behind the world’s largest stablecoin – has now launched its premier Tether token (USDT) across Polygon. This will bring Tether’s utility to thousands of dapps running on the blockchain.

Polygon is a layer 2 scaling solution for the Ethereum network. It allows for speedier transactions with lower fees, using technologies like optimistic rollups and ZK rollups.
Over 19,000 dapps run on the network – up from 3000 in October – created by more than 8000 developer teams.
Tether issues a variety of tokens backed by assets with a relatively “stable” value, such as US treasury bills and commercial paper. These assets are used to keep its tokens pegged to a relatively stable value.
Tether’s USDT tokens are value pegged to one dollar each. Meanwhile, Tether’s recently announced MXNT is pegged to the Mexican peso.
Such stable assets are helpful for executing fast trades in the crypto market, and for alleviating risks caused by market volatility in the defi ecosystem.
With the Polygon launch, USDT is now available on 11 blockchains. These include Ethereum, Solana, Avalanche, Algorand, Tron, Omni, EOS, Liquid Network, Kusama, and Bitcoin Cash’s Standard Ledger Protocol.

“We’re excited to launch USD₮ on Polygon, offering its community access to the most liquid, stable, and trusted stablecoin in the digital token space,” said Paolo Ardoino, CTO at Tether.

USDT recently experienced some instability following the stablecoin panic in the wake of TerraUSD’s (UST’s) collapse. UST was an algorithmic stablecoin, backed by an unstable cryptocurrency rather than direct dollars.
However, Tether’s peg quickly recovered, and the company reassured holders that reserves were fully backed in a report last week.