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DeFi Still Needs a Silk Road Moment

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Mainstream criminal adoption would prove that decentralized finance (DeFi) is building tools with real utility, because if there’s any one group that is both underserved in its access to sophisticated financial products and willing to pay huge premiums to acquire them, it’s criminals. 

The Silk Road was launched in February of 2011 and quickly became the first example of Bitcoin’s product-market fit. While some proponents of cryptocurrencies argue that today criminal activities are a small percentage of all cryptocurrency transactions, censorship resistance is one of the key features of all decentralized technologies and criminals have played a part in crypto’s wider adoption. 

Boaz Sobrado works in tech, bringing the opportunities of the internet to those who need them most.

Bitcoin’s ability to make payments “the man” doesn’t want you to make is what makes the cumbersome tech worth it. This can include criminal activity such as ransomware and darknet markets (DNMs), but also funding Sci-Hub (a rogue academic publisher) and opposition leaders in oppressive regimes.

Adoption by criminal enterprises is evidence of the product/market fit of censorship-resistant technologies and an indicator of whether innovation will see usage in the non-criminal world. It would have not been possible to create the Silk Road without a truly effective censorship resistant payments method. The fact that Silk Road and other criminal enterprises are able to use bitcoin effectively is evidence cryptocurrencies are a useful and censorship resistant tool. As of now criminal activity online is mostly based on bitcoin, although other cryptocurrencies, such as monero, also play a part.

The 2017 initial coin offering bubble and “games” like FOMO3D have shown that Ethereum is useful for a different sort of criminal activity: unregistered security sales and other elaborate Ponzi schemes. In a way, this is evidence of its effectiveness as a permissionless smart contract platform. But just because Ethereum has proven itself to be useful for Ponzi schemes and scams does not mean it is useful for more than that. Criminal adoption is a necessary, but not a sufficient, condition for the success of censorship-resistant technologies.

The latest hot new trend on Ethereum is decentralized finance (DeFi). According to Associate Professor Jeremy Eng-Tuck Cheah, DeFi is the ability to create and use “financial services using smart contracts, which are automated enforceable agreements that don’t need intermediaries like a bank or lawyer and use online blockchain technology instead.” 

I’ll believe DeFi has a product-market fit when drug smugglers can buy trust-minimized insurance for their shipments and retail speculators can gamble on the price of cocaine in Australia the same way they do with the price of oil in Texas.

These contracts are programmable and can be built into decentralized applications (dapps). We now have automated market makers, decentralized autonomous organizations (DAOs) that play an important role in funding allocation, protocols such as UMA and SNX for building synthetic assets that mimic the price action of off-chain assets, decentralized price oracles such as Chainlink to bring off-chain data onto smart contracts, and all sorts of other infrastructure that were not available in 2017.

Some would argue this is not new infrastructure, but these are just fishy toys designed to take money away from fools. Is there real utility to this new financial infrastructure? Or are most of the problems DeFi is solving problems the same problems DeFi caused in the first place, as Nic Carter believes? 

There are a few hints that financial infrastructure of criminals is being built. One of the largest DNMs, Hydra, considered doing an ICO late last year but eventually desisted. Given the extensive history of DNM exit scams, it is highly risky that a DNM would be tempted to take the funds they raised and run. The largest and most trusted DNM, Empire Market, recently exit scammed, reportedly taking $30 million in BTC of user’s funds. Given that governance tokens are all the rage these days, why not set up a market that can be owned and managed by both the users and the vendors in a trust-minimized way? Think Uniswap meets the Silk Road.

Another product DNM vendors would gladly purchase are insurance products that protect against market exit scams and other sources of systemic risk, such as continued DDOS attacks against DNM sites. Current DeFi analogs include Nexus Mutual.

Disputes over insurance claims and even over drug shipments could also be handled in a decentralized way. Dispute resolution is one of the most resource-consuming problems of DNMs, and dispute resolving admins are proven to be security holes as a trusted third party. Why not outsource dispute resolution to a decentralized platform such as Kleros?

The price information on the DNMs themselves can be used to create financial products. A price index can easily be assembled for a variety of products ranging from high-purity cocaine in Florida to amphetamines in Australia. In the same way the West Texas Intermediate (WTI) oil price is a reference price for oil markets, the South Florida Cocaine index could be a reference point for cocaine markets. Synthetic assets such as perpetual swaps could be built upon the price index using the Perpetual Protocol or SNX. Producers and smugglers would then be able to hedge their positions, in the same way airlines hedge their fuel costs for the year using WTI futures.

History doesn’t repeat itself, but it rhymes. If these projects truly are censorship resistant and create value, we will inevitably see them adopted by those who need them most: criminals. I’ll believe DeFi has a product-market fit when drug smugglers can buy trust-minimized insurance for their shipments and retail speculators can gamble on the price of cocaine in Australia the same way they do with the price of oil in Texas.

For the DeFi enthusiasts reading this, it may be worth thinking: Will we be seeing this sort of adoption? If not, what is stopping it from happening? Those reasons are the true obstacles to the growth of DeFi adoption.





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MicroStrategy Buys Additional 13,005 Bitcoin for $489 Million

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With the current BTC price, MicroStrategy’s total Bitcoin holding is worth more than $3.4 billion.

MicroStrategy Inc (NASDAQ: MSTR) has continued its Bitcoin acquisition spree as it has purchased another $489 million worth of BTC. As of the 21st of June, the Nasdaq-listed business intelligence company holds 105,085 Bitcoins.

The company announced its latest Bitcoin acquisition earlier today. According to the company, the newly acquired BTC totaled 13,005 at an average price of about $37,617, fees and expenses included. The purchase came after MicroStrategy generated $500 million in cash from the sale of debt to fund the purchase of BTC.

Before MicroStrategy purchased the most recent Bitcoin, the company had unveiled plans to buy Bitcoin in a filing with the US Securities and Exchange Commission (SEC). In the filing, MicroStrategy said it would be selling up to 1 billion of its class A common stock through an “Open Market Sale Agreement” with Jefferies LLC. The company added that proceeds from the stock sales would be used to buy more Bitcoin. MicroStrategy explained:

We intend to use the net proceeds from the sale of any Class A common stock offered under the prospectus for general corporate purposes, including the acquisition of bitcoin, unless otherwise indicated in the applicable prospectus supplement.

MicroStrategy Focuses on Bitcoin Acquisition

In addition, MicroStrategy has made Bitcoin acquisition a focus for the company. The company said that it mainly pursues two corporate strategies. Apart from growing its enterprise analytics software business, a major strategy for the company is to acquire and hold BTC.

In the SEC filing, the Nasdaq-listed company added that it is currently seeking opportunities to implement Bitcoin-related technologies like blockchain analytics into its software offerings. Also, the company intends to hold its Bitcoin holdings long-term and not engage in regular trading.

MicroStrategy became the first publicly-traded company to buy Bitcoin in August 2020. At the time, the company bought 21,454 BTC worth $250 million, making BTC its primary treasury reserve asset. When MicroStrategy made its initial Bitcoin purchase, BTC was trading at $11,653 per coin. This means that the price of Bitcoin has surged about 5 times since the first purchase.

After debuting into the crypto space in August last year, MicroStrategy had purchased more and held more than 90,000 BTCs before its latest acquisition, announced on the 21st of June.

At the time of writing, Bitcoin is hovering around $33,000. With the current BTC price, MicroStrategy’s total Bitcoin holding is worth more than $3.4 billion. According to MicroStrategy, its new subsidiary – MacroStrategy, manages about 92,079 BTC of its coins.

MSTR stock is currently at $595.79, a 7.64% decline over its previous close of $646.46. The company has grown nearly 403% in the last twelve months and 53.57% in its year-to-date record. In addition, MicroStrategy stock has gained more than 26% over the past month. However, MSTR has shed 17.65% over the past three months and has dropped 0.30% in the last five days.

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Ibukun is a crypto/finance writer interested in passing relevant information, using non-complex words to reach all kinds of audience. Apart from writing, she likes to see movies, cook, and explore restaurants in the city of Lagos, where she resides.



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Wise Fintech to Go Public via Direct Listing on London Stock Exchange

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In the future, Wise plans to roll out OwnWise, a client shareholder program that will allow its users to own a stake in the company.

British fintech Wise, formerly TransferWise, announced Thursday its plans to go public via a direct listing on the London Stock Exchange (LSE). The money transfer company said it had sufficient funding and therefore, did not require underwriters or issuing of new shares.

Wise will pioneer direct listing in London, a deal which will be finalized on July 5. Sources speculate the listing could value Wise at anywhere between $6-7 billion, up from its latest $5 billion valuations. This would also make it one of the biggest floats this year.

Founded in 2010, Wise has managed to accumulate 10 million customers who use its services to send £5 billion ($7 billion) every month. Its rivals include Western Union and MoneyGram in addition to startups like WorldRemit and Revolut.

Since 2017, Wise’s track record shows consistent profitability with a 54% annual growth rate. The latest 2021 fiscal year report shows it made £30.9 million in profits out of the £421 million ($589 million) sales revenue. This year, the company’s payments app registered £54.4 billion of international transfers for 6 million clients.

Wise Listing on LSE

Listing the giant company is a great accomplishment for London as it competes with “The Big Board”, New York Stock Exchange Group (NYSE), to attract more high growth and Blue-chip firms. As of 2020, the NYSE had 2800 company stocks and its market cap as of June, 2021 was $24.68 trillion. LSE, on the other hand, has listed over 1300 companies and its market cap is at 40.08 from today’s MarketWatch data.

To further this development, the British government is considering increasing leniency in firm enlisting guidelines to encourage issuing of dual-class shares. However, European stock markets have been hit with a lot of volatility this year, with at least two IPO cancellations in recent weeks.

The dual share structure is what Wise is opting for as it allows them to retain voting control while accommodating investors and customers into their shareholder base. At present, however, it locks them out of the lucrative Financial Times Stock Exchange (FTSE) indices.

Nevertheless, the company intends to issue both class A and class B shares with the latter holding the privilege of 9 votes per share. The expiry for Class B shares is in the fifth year following Wise’s IPO. It is likely for concerns to arise over this structure as it may give executives excessive influence on shareholder votes.

In the future, Wise plans to roll out OwnWise, a client shareholder program that will allow its users to own a stake in the company. Financial endeavors for the company are advised by Goldman Sachs, Morgan Stanley, Barclays and Citigroup.

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A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies.
Mythology is my mystery!
“You cannot enslave a mind that knows itself. That values itself. That understands itself.”



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JPMorgan Acquires Nutmeg Robo-Advisor, Furthering UK Retail Banking

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Before the deal, JPMorgan and Nutmeg had partnered late last year to offer clients an assortment of globally diversified exchange-traded funds (ETFs).

JPMorgan Chase & Co (NYSE: JPM) said Thursday it has closed a deal to purchase Nutmeg, an online investment management service, for an unnamed price. US biggest bank hopes the agreement, which awaits regulatory approval, will complement its launch of a standalone digital bank brand in the UK during the year.

Using the latest technology from Nutmeg will help boost JPMorgan’s retail and institutional push since the company aims at establishing as many branches as it can outside the US.

With over £3.5 billion (4.9 billion) worth of assets under management, the decade-old Nutmeg is one of the UK leading and award-winning robo-advisors. The company offers various investment accounts including Individual Savings Accounts (ISAs), general investment, and pensions accounts.

Additionally, its competitors include Wealthsimple, Moneybox, and Moneyfarm. Before the take-over, Nutmeg had raised over $150 million in investments from Goldman Sachs and the British venture capital firm – Balderton Capital.

JPMorgan CEO Jamie Dimon stated last year that the banking giant would be “much more aggressive” in adding assets by conducting more acquisitions. The bank may also be stepping up to competition from adversary Morgan Stanley (NYSE: MS) which, in recent years, has spent $20 billion in merger agreements with E-trade and Eaton Vance.

Dimon also mentioned leveling up against blue-chip tech firm Alphabet Inc (NASDAQ: GOOGL) and other fintech firms such as PayPal Holdings Inc (NASDAQ: PYPL).

JPMorgan Stock Market and Nutmeg Acquisition

Before the deal, JPMorgan and Nutmeg had partnered late last year to offer clients an assortment of globally diversified exchange-traded funds (ETFs). This is not the first time the bank has partnered with a company then acquired it later. In October 2020, JPMorgan partnered with 55ip, a tax-smart fintech start-up, then bought it a couple of months down the line.

Differing regulatory guidelines in Europe and the UK made it necessary for JPMorgan to purchase the robo-advisor, rather than use investment technology available in the US. However, its US-based investment service You Invest is currently doing well, with assets valued at about $50 billion, as Dimon states.

JPMorgan’s tech initiative marks one among many happening in Britain’s retail banking sector. Banks such as Revolut, Starling, and Monzo manage digital-only checking accounts which have attracted a host of clients. Going by data from Innovate Finance, FinTechs in the UK probably make up the world’s largest markets, having pulled in $4.1 billion investment from venture capitalists as of last year.

JPMorgan Securities served as financial advisor in the JPMorgan-Nutmeg transaction, while Freshfields Bruckhaus Deringer acted as legal counsel. Arma Partners was Nutmeg’s financial advisor and Taylor Wessing was legal counsel.

As of June 17, 2021, at 7:59 p.m. EDT, JPMorgan stock closed at $151.76, down 2.89%. In the after-hours session, it was trading at $151.48, down 0.18% in 24-hours.

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A financial analyst who sees positive income in both directions of the market (bulls & bears). Bitcoin is my crypto safe haven, free from government conspiracies.
Mythology is my mystery!
“You cannot enslave a mind that knows itself. That values itself. That understands itself.”



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