Ethereum stands to benefit greatly from DeFi “eating” traditional finance: analysts

As it stands, decentralized finance (DeFi) overtaking or rivaling Wall Street is a quixotic dream for its proponents.

There are many hacks of DeFi applications, like when a hacker recently drained $25 million worth of Ethereum and other crypto assets from a decentralized lending platform called dForce. And due to misunderstandings about protocols and coins, there is clearly much education to be done regarding how these applications work.

Despite these barriers to entry, a prominent investor believes it is only a matter of time before DeFi “eats” finance.

Investor explains why DeFi will “eat” traditional finance

DeFi threatens traditional finance due to the benefits of accessibility and liquidity, “active” DeFi investor and Ethereum proponent Arthur Cheong wrote in a recent edition of Camilla Russo’s The Defiant newsletter/publication.

Cheong explained that with the introduction of trustless and permissionless systems with Bitcoin and its derivatives, DeFi immediately one-ups traditional banks because it “can provide universal access to financial services.” This industry, as a result, can and will provide “much better products and services at scale than traditional finance,” he added.

He illustrated this assertion with the image below, showing the supply of stablecoins on the Ethereum blockchain. Due to the recent U.S. dollar shortage, demand for “blockchain dollars” have gone parabolic, with assets like USDT somewhat filling the holes in global demand for dollars.

stablecoin supply
Chart shared by Arthur Choeng; originally from Castle Island Ventures partner Nic Carter and Coin Metrics

Notably, there is no hard evidence to confirm that the real-world dollar shortage is causing demand for blockchain dollars to spike, but the timelines do match up.

The investor added that with the (relatively) high-interest rates offered by applications like Aave and Compound, coupled the low (and even negative) interest rates offered by traditional banks, the DeFi bull case is bolstered even further.

Ethereum stands to benefit.. really benefit

Many blockchains have their own role in DeFi — Tron has JUST, Bancor operates on EOS, and even Bitcoin acts as a transaction medium for crypto exchange and financial services company Abra.

But by and large, DeFi is an Ethereum-centric trend, with the blockchain hosting an $800+ million DeFi ecosystem by some estimates.

That means that should DeFi continue to grow, Ethereum — and ETH the cryptocurrency especially — stands to benefit.

Ryan Selkis, chief executive of crypto researcher and data provider Messari, explained that the introduction of this use case gives ETH a “higher ceiling” than 2017/2018 to rally towards in the next crypto bull market. For reference, the asset reached $1,400 in 2018 and a BTC price of around 0.12.

This was echoed by MakerDAO founder Rune Christensen, who recently said that Ethereum will “attract all value [in crypto]” due to DeFi:

“4 million Dai was just minted with WBTC in a single transaction. This really showcases the latent demand for non-ETH assets, and it’s the beginning of a broader trend of DeFi acting as an economic vacuum that will eventually attract almost all value to the Ethereum blockchain.”

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Is Reddit really launching Ethereum tokens for millions? Community Points explained

Last month, a Reddit user with the moniker “MagoCrypto” revealed in a number of posts that Reddit was seemingly beta testing an Ethereum-based feature called “Community Points,” which would allow users to earn ERC-20 tokens to get special access to certain communities — known as “subreddits.”

Mago indicated that Reddit also included basic Ethereum wallet functionality into the applications of the testers, of which he was one of them.

On May 13, this project was confirmed by Reddit admin “Jarins,” who published a post titled “Introducing r/CryptoCurrency Moons” to the CryptoCurrency subreddit.

As the leak indicated, the post indicated that the system being implemented is called Community Points and will exist on Ethereum, “where they are managed by a suite of smart contracts that handle balances, transfers, distribution/claiming, and purchasing Special Memberships.”

While the post was informative, not all aspects of the project were explained. Enter Adam Cochran — a crypto angel investor, partner at MetaCartel Ventures, and a moderator at r/cryptocurrency, the subreddit involved in this rollout.

Cochran broke down the details of the project in two Medium articles published in tandem, giving more insight into Community Points than the original Reddit posts.

Reddit’s Community Points project explained

According to Cochran, these tokens will first be rolled out for r/CryptoCurrency and r/FortniteBR — two prominent forums that purportedly have 20 million monthly active users between them. For the cryptocurrency community, the Points will be fittingly called “Moons”; for the Fortnite gamers, the Points will be called “Bricks.”

Though other subreddits are expected to get the tokens in the future, with visuals Cochran released mentioning the subreddits of Stellar and EthFinance, both of which were seemingly involved in the pre-launch testing of these coins.

Image from Adam Cochran of the logo mock-ups for these Ethereum-based Community Points.

These tokens will first be made available to users via a distribution scheme whereas users of the forums will get coins based on how much they have contributed to the community, and can be claimed via the built-in Ethereum “vault” in the latest version of the Reddit app on Android and iOS.

Community Points will have a number of uses including but not limited to tipping other users, buying badges and awards, getting more say in certain polls, or being spent on the new “Special Membership” feature.

These features, Cochran explained, are in line with Reddit’s attempt to convert towards (or at least dabble in) a more crypto-based business model.

Theoretically, though, they can be used for anything. Maybe one day we’ll be paying for coffee with Ethereum tokens earned on the CryptoCurrency subreddit.

Reddit won’t be using Ethereum’s mainnet… yet

One revelation Cochran conveyed outside of the Medium posts is, for the time being, Community Points will be located on the Rinkeby testnet for Ethereum software, with this being the contract address for MOON tokens. The Reddit post indicated that the Points will be on the testnet until it exits beta after this upcoming summer.

This means that for the time being, it will be hard to integrate these points into platforms like decentralized exchanges or DeFi, which could increase their functionality and adoption.

But this may be for good reason: due to the vast number of users that visit the subreddits involved in this pilot and already-increasing Ethereum fees, by keeping Moons and Bricks transactions off the main net, blockchain clog can be kept to a minimum for now.

It’s massive for Ethereum

While the project is still somewhat in a beta testing/pilot phase, analysts expect for Reddit’s new token system to be huge for Ethereum.

Under the assumption that Community Tokens will eventually be released to the entire Reddit userbase, Mythos Capital founder Ryan Sean Adams shared the tweet below outlining why these new Ethereum tokens are making him so bullish.

From how he sees it, as Reddit is the world’s seventh-largest site with a large Generation Z population — purportedly 64 percent of users are age 18-24 — the introduction of cryptocurrency functionality directly into the application will spark massive Ethereum adoption, making ETH “ridiculously undervalued.”

With over 430 million daily users, this may be the case, but it remains unclear to what extent Reddit will be “shilling” Ethereum so to say and how young people will adapt to cryptocurrency, if at all.

The post Is Reddit really launching Ethereum tokens for millions? Community Points explained appeared first on CryptoSlate.

Ethereum Isn’t Only Democratizing Finance: It’s Bypassing Censors Too


Over the past few months, China has been seemingly forthcoming with information regarding the outbreak of the coronavirus-caused illness COVID-19, with the country releasing images of outbreak facilities, the genetic code of the novel virus, and much more. But, not all information regarding the outbreak has been free-flowing.

A recent report featuring an interview with a doctor from novel coronavirus epicenter Wuhan, one Dr. Ai Fen, was wiped off WeChat, while censors have prevented the link and the contents from being shared in private group chats.

And interestingly, blockchain, specifically the Ethereum blockchain, has made itself a home in this debacle.

Ethereum, An Information Smuggling Tool?

Over the past few weeks, there’s been a quiet uprising on the Chinese intranet; there’s been a call for digital free speech, which trended on Weibo last month, in response to China’s censorship of whistleblowers of the virus, which recounted its effects first-hand weeks before “COVID-19” was splattered across the world’s headlines.

One such whistleblower was Dr. Ai Fen, who said in the now-censored interview that she was on the receiving “end of unprecedented and severe rebuke” after a test she did found a SARS-like virus in a Wuhan patient, which we now know was the coronavirus.

According to Sarah Zheng, a Hong Kong reporter at the South China Morning Post, excerpts of the interview aforementioned were published on the Ethereum blockchain “in an apparent pushback against online censorship.” The transactions involving these excerpts were not given.

This isn’t the first time Ethereum has been used to transfer information; in 2018, there was this linked Quartz feature on how #MeToo activists moved from WeChat and Weibo to the Ethereum blockchain to get the word out about attack allegations.

As a result of these cases and others like them, Etherscan, a website used to track transactions made on the network (including transaction information), has been blocked by the Chinese government, joining the ranks of Youtube, Facebook, most Western media, and many more websites deemed unsuitable by the censors. Of course, VPNs can be used to bypass these restrictions.

Along with decentralized blockchains, activists have been siphoning pertinent coronavirus information out through QR codes, encoded in sanctioned Chinese social media messages, sharing typo-filled versions of articles to bypass the automatic censors, and other unconventional vehicles.

Decentralized Finance First

While enabling the unfettered transfer of information seems to be amongst a blockchain’s top use case, for Ethereum, its killer use case is seemingly decentralized finance.

Raoul Pal, a former head of hedge fund sales at Goldman Sachs, said in the January edition of his Global Macro Investor report that  he is getting “increasingly bullish on Ethereum,” adding that the asset is “silver to Bitcoin’s gold.” His opinion on this was spurred by the growth of DeFi, which he pinned as central to “adoption rates and usage” of the technology.

Pal isn’t alone in touting this sentiment. Speaking with me in an interview late last year, Jon Jordan, Communications Director at DappRadar, explained that if you boil Ethereum down, it’s killer use case is decentralized finance.

With the ecosystem briefly surpassing $1 billion in locked value while accounting for a large portion of Ethereum’s gas budget and transactions (data from Eth Gas Station and DappRadar), it’s easy to see why Jordan and Pal think so.

Unfortunately, DeFi has been under some pressure late, with MakerDAO experiencing a multi-million-dollar shortage of collateral in the system caused by a combination of an oracle failure and a congested blockchain.

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