Gauntlet’s Tarun Chitra wants to de-risk DeFi with an automated governance platform

“A lot of it has just been putting a finger to the wind.”

Tarun Chitra, a former programmer at D.E. Shaw, is talking about the nature of decentralized finance (DeFi) governance. For much of the young market’s history, vital protocol decisions — ranging from changes to stability rates to interest rates — have been made through Zoom calls with the loudest voices often seeing their recommended changes see the light of day. In many ways, it reflects the scrappy nature of the burgeoning market, but it is also un-scientific, says Chitra. That’s the problem his company Gauntlet Network is trying to solve. 

The firm, which launched in 2018 as a ratings agency-like company for the crypto market, has pivoted to offer a platform that makes it easier for market participants to make governance decisions in an automated fashion. The shake-up comes as decentralized entities in crypto are picking up steam. Non-custodial exchanges are now seeing hundred of millions of dollars in trading volumes, whilst trading of DeFi coins are making up an increasing percentage of trading volumes on centralized exchanges.

DeFi projects are governed by a community of governance token holder with varied structures, the most common of which is a multi-sig one in which a set of private key holders execute votes on behalf of token holders.

“Shareholder advocacy is going to exist more seriously in crypto but currently it is difficult for investors to think about these projects and the things they would need to vote on, such as interest rates,” Chitra said. 

At a high-level, Gauntlet monitors various DeFi protocols, running various simulations of certain governance decisions such as the parameters around what would trigger a pay-out for a decentralized credit default swap to the addition of new collateral types for Maker DAI. After examining these various simulation, Gauntlet submits what conditions would translate into the best performance for a given asset to the platform — which users can then automatically submit to the protocol. 

“Compound might want to increase collateral in the event of a March 12-like event,” Chitra said, explaining:

“So Gauntlet would be listening to the on-chain activity and then automatically say, “hey look BTC is very scary right now, so we are submitting code to the blockchain to make the collateral limit a lot lower and we generate a dashboard that shows the reasons why you can vote for this. They are still choosing but we are monitoring and generating proposals.”

“We are trying to automate as much as possible, taking these best in class financial models and measuring risk in all these protocols and acting as an alert system for investors,” he added.

 In a sense, it is also helping introduce less risk to the system. Indeed, Chitra says the platform takes a leaf from the page of hedge fund risk systems. “On Wall Street, you have a risk desk at a hedge fund they are running similar simulations and if certain conditions are met the systems will shut down a trading strategy,” Chitra said.

Already the firm has lined up “most of the big COMP/UNI holders,”according to Chitra.
One observer of the DeFi market said “this is actually very similar to e.g. delegating tokens in Proof-of-Stake—only their expertise extends to other protocols.”
“I think this is clear & useful though,” the person added. 

“Automated Governance acts as an immune system for a DeFi contract, providing the community with an off-chain risk monitoring system,” a blog post by Gauntlet reads. “Investors can rest assured, knowing that their assets are monitored for safety even in the rockiest conditions, much like a hedge fund’s risk management system or application performance monitoring.”

Underpinning Gauntlet’s monitoring system are new models purposely built for DeFi. In a way, Chitra said the firm had to go to the drawing board, devising new types of financial models that look different from Wall Street’s due to the unique nature of these markets.

“In crypto, it is a lot more crazy because there are unique dynamics between participants. It is possible for a third party to see you trade and pull liquidity,” he said, adding:

“It feels like the 1980s when the unique dynamics in options and derivatives gave birth to models like Black-Scholes.”

© 2020 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Ethereum Users Now Have More Than $10 Billion at Play in DeFi

The decentralized finance sector within the cryptocurrency industry has been on fire in 2020, and today, DeFi has broken through another major threshold.

DeFi users have now locked more than $10 billion in digital assets, including cryptocurrencies such as Ethereum and dollar-pegged stablecoins, into DeFi applications, according to data aggregator DeFi Pulse. This figure stood at just above $1 billion a mere three months ago.

Nearly all of that $10 billion total is in Ethereum, and more than half comes from just three protocols, as the biggest names in DeFi begin to capture outsized market share and attention while batting away copycat projects in a rapidly expanding marketplace.

Metrics site DeFi Pulse gathers data from different DeFi protocols through blockchain analysis to determine the value of all assets deposited by users, known as total value locked (TVL). The metric is widely used as a way to measure the current popularity of DeFi products in the market among users. 

DeFi protocols allow users to deposit digital assets into automatic financial applications, with all but a few running on the Ethereum blockchain. The DeFi protocols, powered by automated code known as smart contracts, allow users to take loans or earn interest using their assets as collateral as they would at a bank. 

DeFi users can typically receive better interest rates than they would at traditional financial institutions thanks to lower overhead costs enabled by operating on an automated decentralized network.

Uniswap, a token swap platform that automatically processes token trades without an order book, previously held the top spot for total value locked. This was largely thanks to a surge of interest following the release of the exchange’s UNI governance token last week. The new token allows its holders to vote on the future development and direction of the Uniswap platform. But Uniswap no longer holds that stop spot in the rankings.

Ethereum Locked in Uniswap Soars to $1.6 Billion After UNI Launch

Maker is another very popular service among DeFi users. It allows crypto enthusiasts to lock up digital assets such as Ethereum, Bitcoin, and other tokens for use as loan collateral paid in dollar-pegged DAI stablecoins. It has now narrowly edged out Uniswap in total value locked—$1.9 billion to Uniswap’s $1.89 billion.

The third-most popular DeFi product out there right now is Aave, with approximately $1.4 billion in total value locked. Aave is a DeFi service offering both crypto-backed loans and interest earning deposits, as well as pioneering functionality like unsecured loans using delegated collateral from other users, known as credit delegation loans.

With so many billions now flowing, it’s easy to lose sight of the fact that $10 billion in TVL represents 400% growth in DeFi since the beginning of July. It’s the sort of ultra-fast growth only possible in the world of cryptocurrencies—and one that, at this rate, might seem like a small and distant memory soon enough.

The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment, or other advice.

Akash Network Integrating With Kava to Launch Cross-Blockchain DeFi Platform

The Akash Network, the self-described “world’s first decentralized cloud computing marketplace and the first DeCloud for DeFi,” has revealed it is integrating with Kava, “the first cross-blockchain DeFi platform,” to “enable Kava’s stablecoin USDX as the first coin for fee settlement on Akash’s DeCloud platform,” according to a press release from the group.

Akash will be the first decentralized cloud platform to have a stablecoin, the release continues, “allowing cloud providers to avoid the market volatility of cryptocurrency, and developers to pay for cloud computing using USDX. This integration strengthens AKT’s liquidity and provides Akash users with a stable medium of exchange, while achieving greater adoption for Kava’s stablecoin and an increased debt ceiling from AKT collateral.”

Speaking on the matter is Greg Osuri, the CEO at Akash Network, who said:

We built Akash to give developers and companies faster, lower cost, and more flexible access to cloud computing with multi-currency settlement. We’re excited to partner with Kava Labs to integrate the first stablecoin in the Cosmos ecosystem, bringing dollar denominated payments to Akash.”

Also sharing some thoughts is Brian Kerr, the CEO of Kava Labs, who said:

“Akash’s promise to provide decentralized compute resources at significantly lower costs than leading providers like Amazon makes it one of the most promising projects in the blockchain space today. Akash’s technology will transform the compute industry and be a critical foundation for decentralized projects and Web 3 applications going forward.”

Israeli Draft Bill Proposes Bitcoin be Defined as Currency to Cut Down the Hefty Capital Gain Tax

Four members of the Knesset, Israel’s legislative body, from the Yisrael Beiteinu faction, the secular nationalist political party, have submitted a private member’s bill seeking to amend the taxation of crypto-related activities so that the sale of bitcoin and crypto-assets isn’t subject to 25% capital gains tax, as per local media reports.

The private member’s bill, submitted by MKs Oded Forer, Yevgeny Soba, Yulia Malinowski Kunin, and Alex Kushnir, was tabled earlier this week on Tuesday that seeks to amend the way digital assets activities are taxed under the Income Tax Ordinance.

Under the ordinance, digital currency is considered an asset; as such, its sale and conversion in fiat currency are subject to capital gains tax. Currently, the tax on most capital gains in the country is 25%.

Section 91 of the Income Tax Ordinance, however, provides relief in the taxation of capital gains from short-term lenders or non-CPI linked bonds — they are taxed at only 15%.

“The regulatory reality in Israel is not adapted to the existing reality in the field,” claims the memorandum of the proposal.

The bill also seeks to add a section in the Ordinance, which deals with the “determination of distributed digital currency.” Under this proposed section, the Minister of Finance may prescribe provisions under which the digital assets shall be determined as a distributed digital currency.

The purpose of the bill is that Bitcoin and other digital assets are considered a currency for the taxation purpose.

“The State of Israel has the ability to be among the leaders in the field of digital currencies, if only it recognizes the use of the blockchain as a currency for everything. It is precisely in this period, when the economic future is unclear It is possible to promote digital payment options due to the social distance that has been forced on us,” said K Forer after the bill was submitted.

The same day another bill was tabled in the Knesset that seeks to allow reporting on digital asset trading once every six months or year.

Currently, those who sell digital currencies are required to submit a report to the tax authority within 30 days of the sale, along with paying an advance on the tax rate applicable to the capital gain arising from the transaction.

“The two bills passed last night by MKs Oded Forer and Sharan Hashakel are an infrastructure on which Israel can be developed as a global financial center and a leader in the field of digital currencies,” said Manny Rosenfeld, chairman of the Israeli Bitcoin Association.

Related Reading:

Breaking: European Commission Proposes Legislation to Turn Crypto-Assets into Regulated Financial Instruments

More Reading: US Lawmakers Propose Two New Bills to Streamline Digital Asset And Crypto Exchange Regulation

Also Read: Russia’s Ministry of Finance Tells Traders to Disclose Crypto Wallets Or Face Fines And Jail

The post Israeli Draft Bill Proposes Bitcoin be Defined as Currency to Cut Down the Hefty Capital Gain Tax first appeared on BitcoinExchangeGuide.

Fintech enabler Plaid offers full support for DeFi

Plaid, a fintech enabler owned by Visa, is currently working with no less than two decentralized finance (DeFi) startups, according to a recent report.

Keith Grose, head of Plaid UK, has always been an advocate of the evolution currently playing out in the cryptocurrency industry and how fintech firms can tap into that trend.

Presently, the company has a partnership with Uniswap-centered DeFi wallet Dharma, with the integration drawing support from Coinbase and other crypto exchanges. It is also partnering with Teller Finance, which is trying to introduce unsecured lending in Ethereum blockchain.

DeFi grows in popularity despite challenges

Although DeFi and open banking are operating on different levels of digital evolution, Grose says both can have an intertwined relationship where they can benefit from each other in terms of the access and use of financial assets.

He said DeFi is still far behind when it comes to standing in as the major financial route, but there are strong indications that it is getting there.

Salary Payments In Cryptocurrency Become More Popular Across The Globe

The main problem for DeFi’s use in Fintech firms is the fact that systems are entirely accessible to anyone, and the identities of the participants are usually hidden behind their wallet address. According to Grose, this makes it a difficult scenario in the digital world, where transaction security is of utmost interest.

DeFi moving in the right direction

Equipped with a massive $5.3 billion exit and a widely-used API, Plaid has played a big role in expanding consumer finance, as transaction data is easily shared with third-party fintech platforms.

But Grose, who thinks crypto is the way forward, says persuading banks and the mainstream financial players to do business with fintech is the right step. He also acknowledges that there are many more things to go right to conclude that DeFi is having the desired impact. Open banking can do a lot of things for fintech and Defi, he noted. The main goal is to enable people to easily use their crypto assets in combination with traditional payment and budgeting applications.

Grose is also excited about the prospect of decentralized derivatives exchange such as Andreessen Horowitz-backed dYdX.

Plaid provides an expansive view of all user assets with real-time data, which is different from DeFi, with the decentralized finance combining crypto lending with decentralized exchange. However, Plaid could have a more important role to play in the future, as it can make access to DeFi less daunting.

Gemini Adds Uniswap’s UNI and 14 Other DeFi tokens

American crypto exchange Gemini has announced the addition of 15 new decentralized finance (DeFi) tokens today, including DeFi darlings such as Uniswap (UNI) and (YFI).

Starting today, Balancer (BAL), Curve (CRV), Ren Network (REN), Synthetix Network (SNX), Uma (UMA), Uniswap (UNI) and (YFI) will be supported for both trading and custody on Gemini, according to the announcement.

“With these new token additions, we now offer trading and custody support for a total of 24 cryptos and custody support for another 10 cryptos,” said Gemini.

As Decrypt reported, Ethereum-based decentralized exchange Uniswap has launched its governance token UNI just over a week ago, and it already became one of the most widely distributed tokens in DeFi. Just a day after its launch, Ethereum locked in Uniswap surged to $1.6 billion.

In its turn, YFI, the governance token of yield farming protocol, has recently peaked at $38,682—reaching almost four times the price of Bitcoin ($11,596 at the time) and nearly doubling Bitcoin’s all-time high of roughly $20,000.

Another five tokens that were previously supported only for Gemini custody are now also available for trading: Decentraland (MANA), Kyber Network (KNC), Maker (MKR), Storj (STORJ) and 0x (ZRX).

Etherum Fees Double In a Week As DeFi Heats Up

Finally, the exchange added three entirely new DeFi tokens—Keep Network (KEEP), Wrapped Bitcoin (wBTC) and tBTC (tBTC)—to its custody service (but not for trading).

However, there are concerns with supporting DeFi assets. Crypto exchange Binance makes it clear to its users that any tokens they trade may lose 50% of more of their value. But clearly, crypto exchanges think it’s worth the risk.

‘DeFi was vaporware from its onset’ says known crypto bear Roubini

He’s been dismissive of all things crypto for years, but does he have a point this time?

Known for his previous comments criticizing the crypto industry, economist Nouriel Roubini recently posted fresh negativity against the digital asset sector.

“DeFi was vaporware from its onset,” he said in a Sept. 24 tweet. “Now totally faltering as blockchain was always the most over-hyped technology in human history.” A slang term, Vaporware essentially refers to a highly touted product, service, etc. that holds no actual value or technology behind it. 

Roubini’s tweet came in response to a post from crypto and blockchain industry author David Gerard. “DeFi is out of fashion, finance CryptoKitties are the new hotness for the basement pink wojaks,” Gerard said, referencing a meme illustrating “crushing regret and self-hatred among those who invested heavily in cryptocurrency and may be facing an impending crash,” according to a blog post from the IDEX crypto exchange.

CryptoKitties surfaced near the height of crypto’s last major bull run in 2017, when people payed obscene amounts of money for online cats built on the Ethereum blockchain. The fad largely faded in subsequent months, though the project continues to adopt new means of kindling intrigue amongst its core user base.

To some, today’s DeFi craze resembles CryptoKitties and other passing fads. Some industry participants have posted comments seemingly in line with this school of thought. A number of those comments, however, compare DeFi to other bubbles in hype, but not necessarily in actual structure. They believe that DeFi’s decentralized tech and ideals hold great future potential

Roubini has expressed a number negative comments on crypto over the past couple of years, including claims of BitMEX violating regulations.   

Why does DeFi in 2020 have echoes of 2017’s market?
DeFi is the latest hype machine in the crypto-market. It has evolved from simply earning interest by locking crypto to Governance tokens and being able to trade these derivatives. As of 01 January 2020, the total value locked [TVL] in DeFi was just around $675 million. However, as DeFi, governance tokens, and yield farming mania […]

Gemini lists seven new DeFi tokens, including UNI and YFI

Crypto exchange and custodian Gemini has added support for seven new decentralized finance (DeFi) tokens.

These are Balancer (BAL), Curve (CRV), Ren Network (REN), Synthetix Network (SNX), Uma (UMA), Uniswap (UNI), and (YFI), Gemini announced Friday.

“We believe in the potential of DeFi and are here to help usher in this next wave of growth and financial innovation for the world,” said Cameron and Tyler Winklevoss, founders of Gemini. “DeFi promises greater choice, independence, and opportunity for all.”

Gemini is also adding trading support for five more tokens: Decentraland (MANA), Kyber Network (KNC), Maker (MKR), Storj (STORJ), and 0x (ZRX). These are already supported for custody.

Additionally, Gemini is supporting three new tokens for its custody service: Keep Network (KEEP), Wrapped Bitcoin (wBTC), and tBTC (tBTC).

Gemini said deposits for these tokens began at 8 am ET today, and trading will start at 11 am ET via limit orders on Gemini’s API and ActiveTrader solution. On the website and mobile applications, trading will open on a rolling, token-by-token basis as liquidity builds, said Gemini.

With today’s additions, Gemini now supports a total of 24 tokens for trading and 34 tokens for custody.

Notably, New York residents are allowed to trade in DeFi tokens on Gemini. Rival Coinbase blocks residents of the state from trading in DeFi tokens on its platform.

© 2020 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

How many DeFi projects still have ‘God Mode’ admin keys? More than you think

The vast majority of DeFi projects still have the ability to enter ‘God Mode’ and unilaterally make changes to pretty much everything.

Twelve out of 15 of the most popular decentralized finance protocols still have access to a ‘God Mode’ admin key, according to data on review platform DeFi Watch.

These full-access controls allow developers to modify or replace the smart contracts underpinning their projects, including making adjustments to user balances.

While admin keys have been justified as a way to protect users’ funds and are often used with security features such as timelocks and multi-sigs, analysts argue this calls into question exactly how “decentralized” these projects really are.

In a YouTube video posted on September 24, “Mastering Bitcoin” author and educator Andreas Antonopolous defined a truly decentralized project as one that does not have custodial control over the funds:

“That’s a very important criterion. I think that’s the foundational criterion.”

By that standard, most protocols fall well short. Of the fifteen projects reviewed on DeFi Watch, only InstaDapp, MakerDAO, and Uniswap are reported to have no admin keys associated with their product. The remaining projects — which include Aave, Compound, DDEX, Yearn Finance, Nexus Mutual, and Synthetix — all have admin keys allowing varying degrees of control.

Aave’s admin key, which is owned by an Aragon DAO consisting of just five members, only requires three “yes” votes to make sweeping protocol changes. Aave currently sits third among all DeFi projects by total value locked (TVL) with more than $1.38 billion locked.

However, several projects, including Compound, have implemented security features to protect the integrity of the admin keys, and many projects have plans to migrate to fully decentralized governance system sin future.

While many users have suggested that Aave and other projects have been upfront about their admin keys, DeFi Watch founder Chris Blec believes that DeFi protocols need to be explicit if they retain the option to enter God Mode:

Blec added that even when project acknowledges that an admin keys exist, few clearly outline the ramifications. For example, nowhere “does it say ‘Aave can change your account balance’ or ‘Aave can replace all code with new code.’”

Aave’s website states all funds are held in non-custodial contracts and has an opaque warning:

“Aave will keep ownership of the protocol in these early days in order to ensure that the protocol remains secure if any issues arise.”

Synthetix smart contracts are similarly fully upgradeable via the admin key, with DeFi Watch stating that the core team possess “vast power to do just about anything, including adjusting user balances and draining funds.” Despite Synthetix’s core team acknowledging that the project is highly centralized, the protocol has attracted more than $590 million in assets from the DeFi community.

Uniswap does not have any admin keys, however blockchain analytics firm Glassnode, suggested in a report this week that the DeFi project has essentially created their own equivalent backdoor through the distribution of their UNI governance token.

According to Glassnode, the team potentially has immediate access to almost 40% of the entire supply, which is over double the amount currently held by the rest of Uniswap’s community. With UNI tokens facilitating project governance, including access to the project’s Treasury, this would put them firmly in control of a decentralized protocol.

DeFi Watch states that trustless protocols are something of a mirage at present and in the end, security comes down to the project team’s competency:

“The only way that you can truly feel secure while using these DeFi products currently is to trust in the competency of the team and their ability to secure their admin key.”