Blockchain Confidential - 24 December 2021

Christmas Eve Confidential

The Week

In big news for blockchain scaling, the Polkadot project launched parachains and the first blocks have been produced. On the quantum front, Cellframe announced progress on quantum-resistant blockchain technologies, starting with digital signatures.

In 2021 surging interest in DeFi drove an astonishing 388% increase in stablecoin supply; as many commentators have noted, stablecoins are a crucial and potentially fragile leg in many DeFi transactions. Decentralized exchanges saw over $1T in volumes this year (up 858% from 2020) compared to $14T traded on centralized exchanges (up 689% from 2020), with Uniswap and Binance dominating in each category. Will the upstart DEX protocols overturn the CEX incumbents in 2022?

SEBA continued the move toward institutional DeFi pools by signing on for Aave’s whitelisted offering. To help address high gas fees on Ethereum, Uniswap will be linking up with the Polygon Layer 2 network. SWIFT, the great-granddaddy of electronic banking networks, will run experiments on tokenized assets in 2022. JP Morgan’s blockchain payments unit is pairing up with Siemens on a project to streamline its internal payments mechanisms.

In NFT-land we saw a successful launch from Adidas, which hit #2 on OpenSea. Instagram is exploring NFT integration, potentially providing a further bridge to mainstream adoption by creators. And did you wake up this morning craving immutable Communist propaganda? We’ve got you covered.

As Blockchain Confidential’s editor-in-chief fondly remembers Bridge to Terabithia from his boyhood, the launch of the Terebithia cross-chain bridge between Internet Computer and Ethereum merits mention, if nothing else to congratulate them for avoiding yet another obvious Bifrost reference (NEAR Protocol, this means you).

The Good Read

Given the growing interest in derivatives on DeFi, we suggest checking out QCP Capital’s recent post. Read An Explanation of DeFi Option Vaults (DOV’s).

Regulator Radar

In what is fast becoming to crypto market’s Lucy-pulling-the-football-from-Charlie-Brown routine, the SEC rejected two more Bitcoin spot ETF proposals. Sen. Cynthia Loomis (R, WY) plans to put forward a proposal for a U.S. crypto regulator in 2022. The Financial Stability Oversight Council (FSOC) echoed concerns from multiple regulators about systemic risks from stablecoins and DeFi, while acknowledging the potential benefits from these innovations.

In enforcements, the SEC action against Terraform ground forward, with Terraform arguing that the SEC lacks jurisdiction. This case could form an important precedent for applicability of U.S. securities laws to DeFi protocols.

Paraguay took a step toward digital asset regulation, with a law moving forward that among other things provides clear definitions for assets and guidelines for payment services, trading and mining.

At the Office

Cloudwall Capital SG Pte. Ltd., our Singapore legal entity, is now fully registered, and Jia Yng is moving on to establishing our legal, accounting and banking relationships so we are positioned to start hiring in Singapore in the new year. I toured our new virtual office space at 40 Wall Street and am looking forward to having our first NYC employees join us there for our weekly code jams in the new year. We are preparing to kick off product development sprints, with Ilya consolidating his research and me focused on drafting the technical specification for Serenity. We continue to interview people for our open roles in both locations, and hope to make some announcements of new team members and advisors in the new year.