Yesterday in Crypto - Issue #4

Here’s what you missed yesterday, 7/19/23:

In the high-stakes world of venture capital, two firms are making a strong case for the longevity and potential of the crypto industry. Polychain Capital and CoinFund have collectively amassed a whopping $350 million in funding, a feat that shines brightly against the backdrop of a general downturn in crypto sector funding.

Polychain Capital, a venture capital firm with a reputation for backing DeFi protocols and blockchain projects, has successfully raised $200 million for its fourth investment fund. CoinFund, a crypto-focused investment fund, has surpassed expectations by raising $158 million in seed funding, significantly outperforming their initial target of $125 million.Despite the “crypto winter” and poor macro conditions, funds are still flowing in to help build the next phase of Web3 development.

The U.S. Senate is currently deliberating over a new bill that could pose a significant threat to the decentralized finance (DeFi) sector. The proposed legislation, ominously named the Crypto-Asset National Security Enhancement Act of 2023, seeks to impose heavy-handed anti-money laundering (AML) requirements on DeFi protocols.

DeFi protocols are innovative financial applications that operate on blockchain networks, enabling users to borrow, lend, and trade cryptocurrencies via smart contracts. These protocols, unlike centralized entities such as Coinbase, operate directly on permissionless blockchains, making them a beacon of financial freedom but also a regulatory puzzle.

The proposed bill attempts to solve this puzzle in a way that could stifle the very essence of DeFi. It aims to impose requirements on anyone who 'controls' a DeFi protocol or makes an application available to use the protocol. This could target groups who build user-friendly interfaces for protocols' smart contracts, much like Uniswap Labs does for Ethereum's top decentralized exchange.

If the bill is passed, these entities would be forced to vet and collect information on their customers, maintain anti-money laundering programs, report so-called suspicious activity to the government, and prevent sanctioned individuals from using their protocol. This could potentially undermine the privacy and freedom that DeFi users currently enjoy.

Moreover, the bill seeks to expand the Treasury Department's authority to monitor alleged money launderers in non-traditional financial settings, including crypto. This could subject DeFi protocols to the same invasive scrutiny as traditional banks.

The bill, introduced by Sen. Jack Reed and co-sponsored by Mike Rounds, Mitt Romney, and Mark Warner, represents a worrying development in the ongoing dialogue around crypto regulation in the U.S. It raises concerns about the future of DeFi and the freedom of financial innovation.

Stride, a major player in the Cosmos ecosystem that provides liquid staking tokens, has recently made a significant change to its security model. It has adopted the Cosmos Hub's Interchain Security (ICS) - a move that has greatly enhanced its security.

Stride is built using the Cosmos software development kit and uses a technology called inter-blockchain communication to interact with other blockchains in the ecosystem. It's a provider of liquid staking, a process that allows users to stake (lock up) their tokens and still have them available for use in other applications.

Stride's recent adaptation of the Cosmos Hub's Interchain Security means that it has switched its entire validator set to the Cosmos Hub validators. Validators (individuals and organizations all over the world) are crucial in a blockchain network as they are responsible for verifying and adding new transactions to the blockchain.

This change is a big deal because it means Stride's security is now backed by the Cosmos Hub and its $2.3 billion in staked ATOM tokens, which is a hundred times greater value than the amount of $STRD staked.

This transition required collaboration from various teams in the Cosmos community and is seen as a significant technical achievement. It's similar to the Ethereum Merge, where Ethereum's consensus switched from proof-of-work to proof-of-stake from one block to the next.

Stride's move to join ICS doesn't change its governance model. Holders of its native token, STRD, still govern the platform. However, the STRD token is no longer needed for its economic security. This job is now outsourced to the Cosmos Hub.

This change is expected to make Stride more attractive to stakers as it reduces the technical risks associated with liquid staking. It also means that the Cosmos Hub participants independently staking ATOM collectively receive a portion of Stride's liquid staking rewards, further aligning the interests of both platforms.

Stride is the first chain to migrate from a stand alone appchain to ICS, and the second overall ICS Chain (Neutron). Will more chains join in? Will ICS be the killer application that ATOM and the Cosmos Hub has been desperately needing? It sure appears that way.. but only time will tell.

Bitcoin is down bad, right? It’s all-time-high is around 69,000 USD. Currently it sits around $30,000 USD.

What if I told you that we were wrong… $BTC is actually nearing it’s all time high! If us Americans can take off our beautiful, red white and blue glasses for just a moment, this will make sense.Although inflation is coming down here in the US (albeit slowly), other countries are having a difficult time. Fiat currencies are doomed to fail - historically, they all have. Here’s what the worlds top inflation rates look like:

Let’s zoom in on Argentina. 116%?!? I thought things were bad here in America. Now lets look at the chart for $BTC:

You can see Bitcoin hovering around $30k, nowhere near its ATH of ~$69,000. However, we are looking at chart in US Dollar terms. What if we look at it in terms or Argentine Pesos?

This chart tells a different story. When comparing the price against the Argentine Peso, you can see that $BTC has crushed its previous ATH of ~7,000,000 in late 2021, and has now smashed past the 8,000,000 Argentine Peso mark.

The Argentine Peso is inflating so badly that $BTC has worked as a safe-haven for the Argentinian people. By holding Bitcoin, they’ve saved themselves from their bleeding currency.Nobody can say that $BTC has no utility. The proof is in the pudding.. er.. well… the Peso.That’s all for today. We’ll see you tomorrow

“Like the Internet, Bitcoin will change the way people interact and do business around the world.” - Erik Voorhees, CEO ShapeShift