Alpha Finance Lab is a research lab and a decentralized asset management platform across Binance Smart Chain and Ethereum. Alpha Homora, its most successful product to date, allows for leveraged yield farming and lending on Ethereum.

Stella

Jack Kubinec

The major academic journal Nature Biotechnology has published an editorial this week arguing for some of the potential benefits decentralized autonomous organizations (DAOs) could offer to science.



The article points out two main selling points for the research world adopting DAOs –&nbsp; easier funding and greater transparency — and argues that scientific communities would ultimately be strengthened by adopting the DAO form.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">keenly following the DeSci space and projects like <a href="https://twitter.com/vita_dao?ref_src=twsrc%5Etfw">@vita_dao</a>, great to see this featured in Nature DeSci brings together two key value props of crypto: decentralized coordination and funding. One of the most promising applications for blockchains <a href="https://t.co/OWTHTo6kop">https://t.co/OWTHTo6kop</a>&mdash; Onedotfour (@consensus128) <a href="https://twitter.com/consensus128/status/1709176920229785706?ref_src=twsrc%5Etfw">October 3, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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“So far, the DAO model seems to work best with projects that tackle a difficult problem or a traditionally underfunded area of research,” the editorial reads, pointing to <a href="https://www.vitadao.com/">VitaDAO</a>, which funds life longevity research, alongside <a href="https://www.valleydao.bio/">ValleyDAO</a> and <a href="https://www.athenadao.co/">AthenaDAO</a>, which focus on environmental sustainability and women’s health, respectively.&nbsp;



Through DAO governance, researchers can collectively vote on whether to fund projects, and Nature suggests DAOs could mint the resulting intellectual property as an NFT. The DAO would own the resulting pseudo-patent.



The <a href="https://www.nature.com/articles/s41587-023-02005-1">article</a> additionally points out that DAOs could let patients in medical trials own their treatments, as is the case with hair-loss treatment collective <a href="https://www.hairdao.xyz/">HairDAO</a>, where DAO members govern funding and get first access to sign up for new treatments.



Beyond funding decisions, Nature thinks DAOs can create stronger scientific communities. In the scientific world’s current system of academic peer review, feedback mostly happens in private, and a lack of accountability regarding research methods has led published scientific findings not to <a href="https://www.nature.com/articles/533452a">replicate</a>.&nbsp;



But with DAOs, the article notes, research processes could move on-chain, meaning funding, feedback and study results would be transparent and public.



So far, the integration of DAOs into scientific research is limited. But VitaDAO, which Nature calls a “flagship” science DAO, has already minted several <a href="https://www.vitadao.com/projects">projects</a> as “IP-NFTs,” with most securing DAO funding allocations in the hundreds of thousands of dollars.



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Science has a transparency problem. Some scientists are turning to DAOs

Sebastian Sinclair

On Tuesday, the SEC targeted Coinbase&#8217;s bid to dismiss its case, heightening discord between the regulatory entity and the publicly listed crypto exchange.



Recent court documents show the SEC&#8217;s focus is on whether Coinbase facilitated transactions in &#8220;investment contracts&#8221; without necessary registration, violating federal securities laws.



Contradicting Coinbase&#8217;s assertion that its platform couldn&#8217;t enable &#8220;investment contracts,&#8221; the SEC highlighted the exchange’s stance as erroneous, pushing for the case to proceed.



It’s an argument the regulator has long pursued in an attempt to bring the industry to heel, echoing its previous filings <a href="https://blockworks.co/news/sec-sues-coinbase">against the exchange</a> in June.



Coinbase <a href="https://blockworks.co/news/coinbase-pushes-to-dismiss-sec-lawsuit">filed a motion</a> to dismiss two months later, claiming the “subject matter” of the lawsuit “falls outside of the agency’s delegated authority.”&nbsp;



In an effort to secure a response, Coinbase referred Blockworks to posts on X, formerly Twitter, by the exchange’s Chief Legal Officer, Paul Grewal.



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Drawing upon a longstanding landmark decision, the SEC is grounding its case on the well-known &#8220;Howey test,&#8221; a metric for determining investment contracts.



Howey stipulates that a deal must include the investment of funds in a shared venture, anticipating gains from others&#8217; efforts.



The counter-filing portrays Coinbase&#8217;s alleged misunderstanding of securities regulations, implying that the exchange is redirecting blame towards the SEC for its ongoing legal challenges.



In its Tuesday response, the SEC contends Coinbase recognized, since 2016, the possibility of digital assets on its platform being designated as securities in relation to the Howey criteria.



The oversight body suggests that token producers influenced investors to anticipate an increase in asset values which Coinbase facilitated.



“This lawsuit cannot really come as a surprise to Coinbase. It has known all along that a crypto asset bought and sold on its trading platform is a security if it meets the Howey test,” the SEC said.



The commission also dismissed Coinbase&#8217;s attempt to leverage public statements by SEC Chair Gary Gensler, deeming his remarks as unrelated to the case&#8217;s legal standing.



“[The motion to dismiss] contends the SEC blessed Coinbase’s violative conduct when Coinbase went public, that SEC Chair Gary Gensler’s answer to a question at a Congressional hearing (which Coinbase distorts) controls this Court’s application of the federal securities laws.”



The SEC did not immediately respond to Blockworks’ request for comment.



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SEC calls Coinbase’s motion to dismiss arguments ‘flawed’

Katherine Ross

Judge Analisa Torres shut down the Securities and Exchange Commission’s hope for an interlocutory appeal on Wednesday.



In a ruling, Torres wrote that the appeal for a stay of trial was also denied, ensuring that the trial against Ripple CEO <a href="https://blockworks.co/news/ripple-sec-jury-trial-spring">Brad Garlinghouse and Christian Larsen</a> will move forward as previously planned.&nbsp;



Torres denied the SEC’s ability to pursue an interlocutory appeal on the grounds that her previous order — which gave <a href="https://blockworks.co/tag/ripple">Ripple</a> a partial win — did not entail an order that “involved a controlling question of law,” which is necessary for the certification of an interlocutory appeal.&nbsp;



The court did not find a “substantial ground for difference of opinion,” Torres wrote.&nbsp;



If neither of those legal standards applied, then the SEC could have argued that the certification would “materially advance the termination of the litigation,” but Torres did not find merit in that argument.&nbsp;



&#8220;Here, the SEC has not presented a ‘pure question of law’ that could be ‘decided quickly and cleanly without having to study the record,&#8221; Torres wrote.



&#8220;The SEC does not argue that the Court applied the wrong legal standard in deciding the cross-motions for summary judgment,&#8221; she continued. &#8220;Rather, the core of the SEC’s argument is that the Court improperly applied the Howey test to the facts in the undisputed record.&#8221;



As cited by Torres herself, the SEC has said that the Howey test should be applied to “the facts and circumstances at hand,” which means that its argument is not valid.&nbsp;



The SEC <a href="https://blockworks.co/news/sec-files-ripple-appeal">filed its appeal</a> in early August. At the time, the agency said that the appeal would &#8220;avoid the possibility of engaging in protracted remedies&#8221; in litigation.



Ripple did not immediately respond to a request for comment.



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Judge rejects SEC’s Ripple interlocutory appeal

Casey Wagner

Kevin McCarthy was ousted as house speaker in a vote held by the House of Representatives on Tuesday. 



The historic outcome marks the first time a vote was successful in ousting the current speaker. Rep. Matt Gaetz filed a motion to vacate in order to strip McCarthy of the post. 



McCarthy is a crypto-friendly Republican, he’s previously admitted that he likes bitcoin and supports the decentralization aspect for cryptocurrencies. Back in 2019 — prior to the collapse of <a href="https://blockworks.co/tag/ftx">FTX</a> and lenders such as Celsius and BlockFi — he praised blockchain’s ability to revolutionize the security of the financial industry.



In his place, Rep. Patrick <a href="https://blockworks.co/tag/patrick-mchenry">McHenry</a> is to become speaker pro tempore. McHenry also has a past of being crypto-friendly, while also chairing committees overseeing digital asset bills.



Back in July, McHenry said that politicians on the Hill were going to take a “historic step for American innovation and consumer protection as we undertake the first ever legislative markup of digital asset legislation.”



He also has <a href="https://blockworks.co/news/mchenry-support-grayscale-sec">signaled support for the Grayscale ruling</a>, as well as questioning the timing of the <a href="https://blockworks.co/news/mchenry-sec-prometheum">special purpose broker-dealer approval that Prometheum received</a>.



Back in July, at the makeup session of the stablecoin bill McHenry said, ​​“I had hoped to announce an agreement with the ranking member on stablecoins legislation.” “This will not be the case. […] It was the White House’s unwillingness to compromise that has once again brought that negotiation to a halt.”



The markup was packed with drama, as it devolved into a shouting match, <a href="https://blockworks.co/news/house-stablecoin-markup">as previously reported by Blockworks</a>.&nbsp;



The official replacement of McCarthy remains unknown, with the House needing to elect a new speaker. Gaetz has publicly spoken in favor of House Majority Whip Tom Emmer.



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McCarthy ousted, crypto-friendly McHenry to become speaker pro tempore

Ben Strack

A former executive at one of the world’s largest ETF providers is set to join 21.co as it aims to expand across markets and product types.



Mandy Chiu is now the Europe-based ETP issuer’s head of financial product development&nbsp;— a role created “to meet our ambitious global expansion and overall company growth,” according to 21.co president Ophelia Snyder.



“She will be leading our global teams to continuously enhance existing products while&nbsp; developing new products that take investors through the journey of crypto and blockchain investments, with the same stringent approaches of [traditional finance],” Snyder told Blockworks.



Chiu joins from Tabula Investment Management, where she was the London-based ETF firm’s chief product officer. Before that, she was State Street Global Advisors’ (SSGA) head of ETF products for the Europe, Middle East and Africa (EMEA) and Asia Pacific (APAC) regions.



<figure class="wp-block-image size-full is-resized"><img decoding="async" loading="lazy" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/10/Mandy-Chiu.jpg" alt="" class="wp-image-69879" style="width:221px;height:221px" width="221" height="221" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/10/Mandy-Chiu.jpg?w=720 720w, https://blockworks-co.imgix.net/wp-content/uploads/2023/10/Mandy-Chiu.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/10/Mandy-Chiu.jpg?w=150 150w, https://blockworks-co.imgix.net/wp-content/uploads/2023/10/Mandy-Chiu.jpg?w=257 257w, https://blockworks-co.imgix.net/wp-content/uploads/2023/10/Mandy-Chiu.jpg?w=261 261w, https://blockworks-co.imgix.net/wp-content/uploads/2023/10/Mandy-Chiu.jpg?w=219 219w, https://blockworks-co.imgix.net/wp-content/uploads/2023/10/Mandy-Chiu.jpg?w=80 80w" sizes="(max-width: 221px) 100vw, 221px" /><figcaption class="wp-element-caption">Mandy Chiu, Source:&nbsp;<a href="http://21.co/" target="_blank" rel="noreferrer noopener">21.co</a></figcaption></figure>



SSGA&#8217;s 138 US ETFs manage about $1 trillion in assets. They rank third, behind only BlackRock and Vanguard in this domain.



As a State Street Global Advisors executive from February 2016 to December 2021, Chiu Managed about 110 ETFs — with $80 billion in assets — across EMEA and APAC, according to her Linkedin profile.



While Switzerland-based 21Shares has built a large crypto ETP lineup in Europe in recent years, it does not intend to stop there.



The hire comes as 21Shares <a href="https://blockworks.co/news/ark-21shares-spot-bitcoin-etf">pursues ETF launches in the US with Ark Invest</a>. It first partnered with the Cathie Wood-led firm in 2021 as part of a joint filing for a spot bitcoin ETF — a type of fund it most recently re-filed for in April.&nbsp;



The companies have proposed to launch seven crypto ETFs in the country so far, including others that would invest in bitcoin and <a href="https://blockworks.co/news/ark-21shares-ethereum-etf">ether futures contracts</a>, as well as a spot ether offering.&nbsp;&nbsp;



Ark Invest chief operating officer Tom Staudt told Blockworks last week the firm — with help from 21Shares — expects to have “the most encompassing, most complete, most diverse and deepest” crypto ETF suite in the US.



Read more: <a href="https://blockworks.co/news/ark-invest-etf-battle">Ark anticipates win in US crypto ETF battle with ‘deepest’ suite, COO says</a>



Though the US Securities and Exchange Commission has never allowed a spot bitcoin ETF to come to market, some industry watchers have suggested that an August <a href="https://blockworks.co/news/judges-grayscale-sec-ruling">court win by Grayscale Investments</a> over the regulator <a href="https://blockworks.co/news/grayscale-sec-spot-bitcoin-etf">made such an approval more likely</a>.&nbsp;



The SEC is <a href="https://blockworks.co/news/sec-decision-date-bitcoin-etf">slated to rule on the proposed Ark 21Shares Bitcoin ETF</a> by Jan. 10.



“With 21Shares’ deep-rooted crypto legacy and ARK’s global leading role in disruptive technology and thematic investments, the partnership will look to bring more crypto education and products to the market,” Snyder said.



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21.co taps ETF veteran to aid ‘ambitious global expansion’

Shalini Nagarajan

Once a bustling hub for crypto trading and mining, Eastern Asia has witnessed a significant decline in crypto activity, with China&#8217;s stringent bans on crypto-related businesses serving as the main culprit.&nbsp;



Yet, there&#8217;s a renewed sense of optimism out of Hong Kong. Recent crypto initiatives and favorable regulations in the region appear set to reignite enthusiasm for cryptocurrencies, according to Chainalysis.



While China&#8217;s crypto ban had perceived objectives of reducing yuan-to-crypto exchanges and enhancing digital yuan adoption, the evolving connection between China and Hong Kong has raised questions about the Chinese government&#8217;s stance on cryptocurrencies.&nbsp;



Some speculate that Hong Kong&#8217;s emerging role as a crypto hub might suggest a potential shift or increased openness to crypto initiatives within China, Chainalysis said in a <a href="https://www.chainalysis.com/blog/eastern-asia-cryptocurrency-adoption/">report</a> published Monday.



Since Hong Kong regulators introduced their licensing program for digital asset operators earlier this year, interest in establishing a presence in the region, particularly among exchanges, has been growing.&nbsp;



So far&nbsp; however, only two crypto exchanges — HashKey and OSL Exchange — hold the status of virtual asset trading platforms, as <a href="https://www.sfc.hk/en/Welcome-to-the-Fintech-Contact-Point/Virtual-assets/Virtual-asset-trading-platforms-operators/Lists-of-virtual-asset-trading-platforms">recognized</a> by the Securities and Futures Commission.



Despite appearing strong, trading volumes in both Hong Kong and China have declined compared to the levels <a href="https://go.chainalysis.com/rs/503-FAP-074/images/2022-Geography-of-Cryptocurrency.pdf">seen</a> between 2021 and 2022.



Hong Kong&#8217;s crypto transaction volume between July 2022 and June 2023 surpassed $64 billion, signaling a slight decline from the previous year&#8217;s trading volume of over $70 billion.&nbsp;



In contrast, China recorded $86.4 billion received in the same period. This number is far lower than the nearly $225 billion last year, according to Chainalysis data.&nbsp;



East Asia contributed 8.8% of the global crypto activity during this time frame, representing a drop from its 12.9% share in the previous year.



The year 2022 witnessed significant turbulence in the crypto market, marked by multiple crashes driven by factors. Reasons include hacks, inadequate risk management practices and fraud committed by prominent industry players such as <a href="https://blockworks.co/tag/ftx">FTX</a>’s implosion.



Read more: <a href="https://blockworks.co/news/sbf-trial-day-1">Sam Bankman-Fried’s trial begins: Live updates</a>



Alongside these market downturns, bitcoin’s (<a href="https://blockworks.co/price/btc">BTC</a>) value experienced a nearly 80% decline from an all-time high in 2021 due to adverse macroeconomic conditions. This includes the ongoing conflict in Ukraine, consecutive interest rate hikes by the Federal Reserve and the strength of the US dollar.



The global cryptocurrency market has not yet recovered entirely from last year’s approximate $2 trillion loss, <a href="https://www.reuters.com/article/usa-bankmanfried-markets/graphic-the-crypto-market-still-bears-the-scars-of-ftxs-collapse-idUSL1N3B4372">research</a> by Reuters shows.



<h2 class="wp-block-heading">Hong Kong’s crypto adoption ranking slides despite emerging hub status</h2>



Despite its efforts to position itself as a virtual hub, Hong Kong&#8217;s worldwide crypto adoption ranking experienced a notable decline in Chainalysis&#8217; most recent assessment, dropping from 46th place in 2022 to the 47th position, <a href="https://www.scmp.com/tech/tech-trends/article/3234523/hong-kongs-crypto-adoption-ranking-drops-one-spot-chainalysis-report-city-tries-woo-virtual-asset?module=hard_link&amp;pgtype=article">per</a> South China Morning Post.



Yet, a significant driver of Hong Kong’s crypto activity this year is its vibrant over-the-counter (OTC) market, as identified by the analytics firm.



OTCs, often catering to institutional investors and high-net-worth individuals, discreetly facilitate large trades to avoid impacting asset prices or disclosing traders&#8217; activities.



OSL Securities’ co-founder Dave Chapman told Chainalysis that Hong Kong&#8217;s growing affinity for crypto in the past year shouldn&#8217;t automatically imply a shift in China&#8217;s overall attitude toward the industry.&nbsp;



He emphasized that while these advancements bolster Hong Kong&#8217;s prospects as a prominent global center for regulated digital assets, it&#8217;s still too early to draw conclusions about China&#8217;s broader stance on the matter.



Apart from introducing regulatory guidelines, Hong Kong has advocated for major banks including HSBC and Standard Chartered <a href="https://blockworks.co/news/hong-kong-banks-embrace-crypto">to engage with crypto exchanges as clients</a>.



Reflecting this perspective, the Hong Kong Monetary Authority underscored in an April letter that safeguarding secure and effective banking systems while facilitating access to essential banking services for legitimate enterprises remain core objectives.



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Hong Kong crypto initiatives offer ray of hope in East Asia: Chainalysis

Andrew Thurman

A DeFi protocol that once attracted $22 million in total value locked (TVL) and boasted some of the industry’s top venture capital backers is shutting down operations.



Yield Protocol’s closure, announced Tuesday, represents the latest casualty of a bear market that has seen multiple former high-flyers shutter their projects.



Yield Protocol’s X account announced that the protocol would “wind down.” The protocol offered duration-based fixed-rate lending and borrowing on stablecoins, and noted that borrowing and lending would cease in December 2023.&nbsp;



In a follow-up tweet, Lead Engineer Alberto Cuesta Cañada thanked “everyone for all your support during these years.”&nbsp;



Yield Protocol’s website lists backers like Paradigm, Framework Ventures, CMS, and Robot Ventures. The platform attracted over $22 million in TVL at its April 2022 peak, and sits at just over $2 million today.&nbsp;



A protocol spokesperson cited lack of demand and an uncertain regulatory environment as key drivers behind the decision to cease operations.&nbsp;



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true">The decision to wind down arises from the lack of sustainable demand for fixed-rate borrowing on our platform along with the increasingly challenging regulatory environment in the US, Europe, and the UK.&mdash; Yield Protocol (@yield) <a href="https://twitter.com/yield/status/1709232389434519690?ref_src=twsrc%5Etfw">October 3, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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A team representative did not respond to a request for comment by publication time.&nbsp;



Yield Protocol isn’t the only DeFi project to wind down in recent weeks. In September, Avalanche-based yield protocol GRO <a href="https://blockworks.co/news/gro-dao-shutdown-total-value-locked-defi-sector">held a DAO vote to cease operations</a>, and in July Algorand-based lending platform AlgoFi <a href="https://blockworks.co/news/algofi-defi-algorand">announced its closure in a blog post</a>.&nbsp;



Much of the DeFi downturn is attributable to an industry-wide activity slump. DeFi’s aggregate TVL is down 75% from 2021 highs of $320 billion to just under $80 billion today – part of a <a href="https://blockworks.co/news/ethereum-blockspace-profitability-negative-merge">pullback in overall onchain activity</a>.



Smaller startups may be among the hardest hit. In a recent tweet, BlockTower Capital founder Ari Paul said that there’s a growing market for down rounds of between 70-90% equity. 



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Seeing a lot of crypto start-ups with down rounds of 70-90%. Not negative signalling imo, the opposite. A simple necessity in many cases, but doing it before it&#39;s a pure last resort shows maturity and realism. The crazy valuations of the original raises are a &#39;sunk cost&#39;…&mdash; Ari Paul ⛓️ (@AriDavidPaul) <a href="https://twitter.com/AriDavidPaul/status/1708900905368621319?ref_src=twsrc%5Etfw">October 2, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Fixed rate-focused Yield Protocol is the latest DeFi project to wind down

Darren Kleine

Decentralized finance technology has been around for a while now but still hasn’t managed to attract the mainstream crowd, investor Santiago Santos observes. “We’re a decade in and we have ten users in DeFi,” he quips.&nbsp;



In today’s “we’re still so early” crypto industry, the self-deprecating “ten user” joke continues to ring true. DeFi’s relatively lackluster numbers hardly resemble what most would consider to be the “mass adoption” phenomenon that was promised years ago.



The timing of the <a href="https://blockworks.co/category/defi">DeFi</a> movement has been a little out of sync, Blockchain Capital general partner Aleks Larsen says, because the technology was born into an environment where the infrastructure wasn’t ready to accommodate mainstream usage.



On the Empire podcast (<a href="https://open.spotify.com/episode/7gxOwAAYYnDO1fMI5eab2Q?si=lCgldroYTZCj3C6u8biH4Q">Spotify</a>/<a href="https://podcasts.apple.com/us/podcast/blockchain-capitals-%24580m-dollar-bet-on-crypto-spencer/id1554930038?i=1000630027335">Apple</a>), Larsen explains that the <a href="https://blockworks.co/tag/ethereum">Ethereum</a> network — the overloaded backbone of early DeFi innovations — “got bloated really quickly. Transaction fees were through the roof,” he says.&nbsp;



But he insists that the DeFi thesis, at its core, “is powerful.”&nbsp;



“These are massive markets that DeFi is going after,” Larsen notes. “That&#8217;s one of the most exciting things about crypto,” he says. “You’d expect a new technology maybe to go for niche use cases initially, but <a href="https://blockworks.co/news/bitcoin-price-market-trajectory-spot-etf-approval">crypto goes straight for the juggernauts</a>.”



“Global permissionless financial services are,” Larsen continues, “at a very fundamental level, better suited to serve the internet economy and will grow with it.”



<h2 class="wp-block-heading">You’re not a daily active user of a mortgage</h2>



DeFi’s mass adoption won’t necessarily look the way many imagine, Larsen says, “You’re not a daily active user of a mortgage.”



Larsen says that DeFi statistics will never resemble the frenzied activity volume of a game, for example, due to the technology’s unique purpose. “But the amount of capital that the system has amassed, I would say, is quite impressive.”



The retail sector drove volume in DeFi’s early days, Larsen explains, but was caught in an “unsustainable transaction fee environment” that “put a damper on adoption” just as broader attention turned to the nascent technology.



Web3 infrastructure simply wasn’t ready for DeFi when it first hit the scene, but “we’re getting there now,” he says. “We&#8217;re going to have infrastructure that&#8217;s high performance, that&#8217;s cheap to use, that’s secure. And we&#8217;ve seen a lot of progress on that front.”



<h2 class="wp-block-heading">The next leg of DeFi users</h2>



Larsen says the industry is now waiting on the “next leg of users,” who will likely not be retail in nature. The “power users” of financial services tend to be institutional, he says.



“When you think about the next leg of innovation in DeFi, <a href="https://blockworks.co/tag/derivatives">derivatives</a> come to mind for me. And these are not really retail products. These are products for sophisticated users of financial tools.”



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Larsen says the movement “<a href="https://blockworks.co/news/real-world-assets-empire-buzzwords-defi">bleeds into tokenized markets</a>,” with upcoming developments from massive entities like <a href="https://blockworks.co/tag/blackrock">BlackRock</a> who are “angling to enter the space.” He adds that he “wouldn&#8217;t be surprised to see them do something big in the next couple of months.”



“Until then,” he concludes, “the major potential user here remains crypto degens and <a href="https://blockworks.co/tag/dao">DAO</a> treasuries, and perhaps forward-looking neobanks.”



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The ‘next leg’ of DeFi users will be institutions, Blockchain Capital’s Larsen expects

Sam Bankman-Fried’s trial is underway, and a plea deal was never even on the table, prosecutors reveal.&nbsp;



<a href="https://blockworks.co/tag/sam-bankman-fried">Bankman-Fried</a> appeared in federal court in Manhattan Tuesday in a suit and tie, a far cry from his signature cargo shorts he sported during the height of <a href="https://blockworks.co/tag/ftx">FTX</a>’s apparent success.&nbsp;



The government at no point offered Bankman-Fried any sort of plea deal if he were to accept the charges, the prosecution confirmed Tuesday.&nbsp;



About half of the first pool of <a href="https://blockworks.co/news/sbf-trial-day-1">potential jury members had been dismissed</a> when the court recessed for lunch.&nbsp;



Southern District of New York senior judge Lewis Kaplan hopes the court can assemble its necessary jury – 12 jurors plus six alternates – by the end of the day, putting the trial on schedule to kick off with opening statements Wednesday.&nbsp;



Don&#8217;t miss a moment of SBF&#8217;s time in court. Stay up to date with all <a href="https://blockworks.co/tag/sbf-trial">trial coverage</a> from Blockworks.



“With luck and a strong wind at our back we will finish today,” Kaplan said.&nbsp;



The defense and prosecution assembled a list of questions for Kaplan to screen potential jurors, including inquiries about their familiarity with FTX and the case and their perceived ability to serve unbiasedly. So far, none of the prospective jurors have claimed they have personally dealt with or interacted with Bankman-Fried.&nbsp;



Proceedings started about an hour behind schedule, likely due to former President Donald Trump’s trial taking place on the same block in the New York Supreme Court.&nbsp;



“I’m told we can thank the delay to what is happening in the courtroom down the street,” Kaplan said.&nbsp;



<a href="https://blockworks.co/news/sam-bankman-fried-trial-starting-soon">Bankman-Fried faces seven counts of federal violations</a>, including two counts of wire fraud and five counts of conspiracy.&nbsp;



The judge also explained to Bankman-Fried that despite any potential advice from his lawyers, he has a right to testify and his decision to do so is solely his own.&nbsp;



When asked if he understood that, the former FTX CEO responded, “Yes.”



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SBF was never offered a plea deal, prosecutors say amid jury selection

Bessie Liu

The beta introduction of Chainlink Functions enables developers to use a single oracle network for data configuration and computation.



This means that developers can use any data source of their choice, ingest it into Functions, and then define the code they wish to compute the data source with, Chainlink co-founder Sergey Nazarov told Blockworks in an interview.



Historically, on <a href="https://blockworks.co/tag/chainlink">Chainlink</a>, developers could create multiple networks that were focused on specific tasks.



“Developers have to define what a network does. It couldn’t do just data configuration or computation, it could just do one or the other,” Nazarov said. “With Functions, you no longer need to make these two networks. Both these things can now work together in a network and you can build it in an hour instead of days.”



Chainlink Functions is part of a broader plan to create a decentralized computing marketplace, where developers can combine various functionalities to create a verifiable application.&nbsp;



Other available tools include Chainlink Automation and its data streaming service.



Similar to how on Amazon Web Services, where there are low code environments and specialized tools, Chainlink Functions will be an easier-to-use environment, whereas Chainlink Automation and data streaming are specialized tools.&nbsp;



“Data streams is a very efficient specialized tool for derivatives,” Nazarov explains. “That&#8217;s basically low latency data. And that&#8217;s something that has now gone live on to production with the first big user of data streams, GMX.”



Chainlink Automation, on the other hand, is a tool primarily focused on triggering things on-chain. A developer could use Chainlink Automation to trigger a smart contract every two hours, for example.



This means that gas costs can be significantly reduced, Nazarov said, as developers now can customize logic.&nbsp;



“This is like a big unlock, in my opinion, for what people can build, that’s what we want to do,” Nazarov said. “We don’t make any end-user applications, we just make the infrastructure.”



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Chainlink moves a step closer to creating a decentralized computing marketplace

A longtime crypto mining executive has departed Galaxy Digital. She will now advise miners in preparation for the upcoming bitcoin halving.



Amanda Fabiano spent the last three years as Galaxy’s head of mining. Before that, she was director of bitcoin mining at Fidelity Investments.&nbsp;&nbsp;&nbsp;



“Building upon my earlier experiences at Fidelity, I successfully established a thriving mining business at Galaxy, in the face of challenging market conditions,” Fabiano said in a Tuesday X <a href="https://twitter.com/_amanda_fab/status/1709192674694098969">post</a>. “Now, I&#8217;m packaging all that valuable expertise and enthusiasm as I proudly introduce Fabiano Consulting, my inaugural endeavor.”



It is not clear who is set to replace Fabiano in her role. A Galaxy spokesperson did not immediately return a request for comment.&nbsp;



Fabiano joined Fidelity in 2014, according to her LinkedIn page — the year the financial services giant started mining bitcoin. <a href="https://blockworks.co/tag/fidelity">Fidelity</a> later launched its institutional crypto custody and trading platform in 2018.



She then joined <a href="https://blockworks.co/tag/galaxy-digital">Galaxy</a> in September 2020, a few months before the company launched its mining business in January 2021. The new unit was designed to be a financial services platform for miners — offering trading and risk management, investing and lending, as well as corporate advisory to players in the segment. 



The crypto investment firm also established its own bitcoin mining operation at the time, hosting machines at a third-party data center.&nbsp;



Galaxy’s mining revenue was $15.4 million in the second quarter of 2023, a 51% quarter-over-quarter increase, the company reported in August. Galaxy said it is set to surpass 4 exahash per second (EH/s) of hashrate under management by the end of the year.



Now in a consulting role, Fabiano’s first clients include Compass Mining, where she also serves on the board.



Mining strategies hold “paramount significance” ahead of <a href="https://blockworks.co/news/anniversary-of-2016-btc-halving">the next bitcoin halving event</a> set for April 2024. At that time, per-block rewards are reduced from 6.25 bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) to 3.125 BTC, which is expected to put stress on certain companies in the segment.



Read more: <a href="https://blockworks.co/news/miners-market-tumble">Where top crypto miners stand as stock prices tumble</a>



“As we witness <a href="https://blockworks.co/news/bitcoin-miners-growth-2023?utm_source=CryptoNews&amp;utm_medium=app">a continuous rise in hash rate</a>, it becomes imperative for companies to ask the pivotal question: ‘How can I position myself for success in the present market conditions and the post-halving future?’” Fabiano said. “This is the very question that gets me excited. I firmly believe that there&#8217;s no shortage of companies wondering this same question.”



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Galaxy mining head exits to consult miners ahead of halving

Nova Labs, the founding team behind the Helium wireless network, announced today the release of at-home hotspots for Miamians willing to shell out $250, plus a bump in their electric bill.



The hotspots are meant for deployment in commercial areas, such as cafes, where business owners could plug in a Helium hotspot and slowly accrue Helium-native MOBILE tokens.&nbsp;



For Nova Labs, which <a href="https://decrypt.co/152533/helium-mobile-debuts-crypto-wireless-network-miami-5-month">debuted</a> its Miami mobile network in partnership with T-Mobile in mid-August, the hotspots present another step in what has so far been a rocky road to economic sustainability. 



Helium has <a href="https://blockworks.co/news/where-is-the-revenue-helium-investors-inquire">caught flack for the economics of its hotspot miners</a> in the past as coverage providers struggled to earn the price of their mining rigs back amid tumbling MOBILE token prices. <a href="https://coinmarketcap.com/currencies/helium-mobile/">MOBILE</a> is down almost 40% this month, per CoinMarketCap.



But as Nova Labs releases its own hotspot rigs, Boris Renski, the head of wireless, says the community has picked up a dose of bear market pragmatism.



In earlier iterations of Helium, hotspots were deployed indiscriminately, causing MOBILE returns to fall for individual miners, Renski told Blockworks. But recent proposals from Helium token owners would <a href="https://github.com/helium/HIP/blob/main/0074-mobile-poc-modeled-coverage-rewards.md#reward-algorithm">create</a> tiered reward systems based on signal strength and <a href="https://github.com/helium/HIP/blob/main/0093-addition-of-wifi-aps-to-mobile-subdao.md?ref=blog.hellohelium.com#313-capping-per-hex">limit</a> the number of hotspots that can operate in the same area.&nbsp;



Today’s Helium is optimized “towards more realistic steady state returns versus speeding into the hype cycles, so to speak,” Renski said.&nbsp;



Under the Miami hybrid phone plan, users use Helium data unless there aren’t hotspots in range, at which point T-Mobile’s service takes over — and Helium foots the bill. Renski said Helium’s pathway to profitability and scale depends on subscribers using data from Helium hotspots instead of T-Mobile’s towers.



With these new hotspots, which Renski says come in at a lower price point and with easier setup than traditional <a href="https://www.arubanetworks.com/faq/what-is-cbrs/#:~:text=CBRS%20or%20Citizens%20Broadband%20Radio,used%20for%20private%20mobile%20networks.">CBRS</a> cells, Helium is hoping it can move the needle.



Still, building a decentralized mobile network from scratch is a tricky financial proposition. Helium’s unlimited cellular plan also only <a href="https://blog.hellohelium.com/hi5unlimited/">costs</a> users $5 per month, which is useful for adoption but not for the company’s bottom line.



“That’s not a secret: we are losing money on every subscriber,” Renski said.



Updated Oct. 3, 2023 at 5:05 pm ET: This article was updated to clarify the relationship between Helium Network, Nova Labs and Helium Mobile.



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Helium hotspots go live in bid to turn Miami network profitable

Ethereum scaling startup Optimism has published the first release of “fault-proof system alpha.”



Now available on the OP Goerli testnet, the system has three components: a fault-proof program (FFP), the code that executes the EVM; a fault-proof virtual machine (FPVM); and a dispute game protocol.&nbsp;



The goal of these different systems is to work in tandem in an effort to challenge malicious activity on the Optimism network. Fault proofs are designed to prevent fraudulent activities or errors from being processed in rollup transactions.&nbsp;



Optimistic rollups are “optimistic” in nature, as they assume transactions are accurate until proven otherwise. Fault proofs form an important security measure to ensure that false activities aren’t accepted on the network.



OP Labs CEO Karl Floersch told Blockworks in an interview that the fault-proof system builds off the <a href="https://blockworks.co/news/optimism-bedrock-upgrade-superchain">Bedrock upgrade</a> and is designed to set the stage for <a href="https://medium.com/l2beat/introducing-stages-a-framework-to-evaluate-rollups-maturity-d290bb22befe">the project’s second stage of decentralization</a>.



Upon launch, users will be able to participate in the dispute game <a href="https://disputify.optimism.io/">protocol</a>, but they are not incentivized to do so, Floersch explains. This is because the bonding design will not be added during the protocol’s testnet release but will be included ahead of the OP mainnet launch.&nbsp;



A bond refers to the amount of money a sequencer must post on Ethereum in order to participate in network activities. If fraud is proven, the sequencer’s bond will be slashed and redistributed to verifiers.&nbsp;



“The dispute game is indeed permissionless so that there can be multiple clients and multiple fault proofs that are all running in parallel,” Floersch said. “This does not mean that the system is bulletproof at the moment; we’re launching this testnet to get a bunch of eyes on the design. It is critical we get the community to understand how it works.”



Multiple players can participate in the dispute game, which will not be limited to 1v1. This design was to mitigate the potential of denial-of-service vectors in 1v1 games, where malicious actors could potentially challenge themselves and lead to deadlock or inaccurate resolutions.&nbsp;



<h2 class="wp-block-heading">Path to decentralization</h2>



Fault proofs are a step in achieving a permissionless transition of information between a layer-1 and a layer-2. This means that an end user should be able to deposit their tokens into a layer-2 from a layer-1, and then withdraw their tokens from a layer-1 —&nbsp;without anyone being able to stop the process.&nbsp;



It’s important to note that tokens directly deployed to a layer-2 do not have any dependencies on the fault-proof system, as there is no bridge back to the first network layer for those tokens.&nbsp;



“This is critically important because [layer-1s] have the highest security and decentralization properties,” Floersch told Blockworks. “It also allows users to opt out of upgrades to the [layer-2].”



As it currently stands, every major layer-2 project has trusted parties who hold upgrade keys that can execute protocol upgrades, making it a primary point of centralization. This is because if upgrade keys were to be compromised, all deposited assets in the layer-2 protocol would be at risk.



“The goal of what we’re doing is that we’re drawing the fastest path to decentralization,”&nbsp; Floersch explained. “And the prerequisite for that is multiple fault-proof implementations.”



OP Lab’s fault-proof system will be entirely open-source, and a bug bounty will be put in place, according to Floersch.



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Optimism devs tackle bad actors with fault-proof system testnet launch

The International Monetary Fund (IMF) released a working paper last week seeking to tackle the rapidly changing crypto market and highlight significant macro-financial risks they believe have yet to be fully addressed.



The “Assessing Macrofinancial Risks from Crypto Assets” paper points out the crypto industry is becoming an increasingly integral part of the global financial system, essentially operating as a parallel, unregulated financial system.&nbsp;



This brings about considerable systemic risks that the traditional financial sector cannot afford to overlook, the IMF said in its <a href="https://www.imf.org/en/Publications/WP/Issues/2023/09/30/Assessing-Macrofinancial-Risks-from-Crypto-Assets-539473">paper</a> released on Friday.



In a bid to meet that challenge, the IMF is proposing a new tool — the Crypto Risk Assessment Matrix (C-RAM) — aimed at monitoring and assessing those perceived emerging risks both nationally and globally.



One of the most pressing challenges identified is the absence of centralized data and regulatory oversight, which calls for immediate international cooperation.&nbsp;



The IMF also urges that given the fast-paced innovation and the decentralized nature of the crypto market, existing policy frameworks are inadequate for effective risk management.



A need to expand current macroprudential policies to include crypto and decentralized finance considerations is required to shore up concerns surrounding their risk profile, the IMF said.&nbsp;



Read more: <a href="https://blockworks.co/news/g20-imf-fsb-guidelines-crypto">G20 nations endorse IMF and FSB guidelines for crypto regulation</a>



It also suggests that this expansion should be in concert with other macroeconomic policies to build a comprehensive risk management strategy.



Based in Washington DC and consisting of 190 member countries, the IMF positions itself as an entity promoting global economic stability and growth. It achieves this through financial support, policy guidance, surveillance, technical aid, research and capacity building. It often serves as a forum for international financial cooperation.



Its paper last week also took aim at countries that have mandated bitcoin as legal tender to co-exist alongside their national currencies, including El Salvador and the Central African Republic.



“These legal changes could quickly increase the adoption and exposures of highly volatile crypto assets, amplifying the many above mentioned risks,” it said.



El Salvador adopted bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) as legal tender in November 2021, becoming the first nation to do so. Four months later the <a href="https://blockworks.co/news/imf-asks-el-salvador-to-remove-bitcoins-legal-tender-status">IMF urged the Latin American country to ditch those efforts</a>, citing systemic financial risks it poses to the wider community.



The IMF plans to update its conceptual framework as more data and country-specific analyses become available. It will aim for a coordinated international effort to curtail the potential “macro-financial risks” from the crypto sector, it said.



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IMF calls for greater oversight on crypto, proposes new risk assessment matrix

As former FTX CEO Sam Bankman-Fried faces trial in New York this week, his lawyers continue to clash with the US government.&nbsp;



In a letter sent to Judge Lewis Kaplan, who will oversee the trial, Bankman-Fried’s attorneys are pushing to toss a motion from the US government.&nbsp;



Bankman-Fried’s<a href="https://blockworks.co/news/sbf-trial-day-1"> trial begins with jury selection on Wednesday</a> and is expected to last roughly six weeks.



Read more: <a href="https://blockworks.co/news/sam-bankman-fried-trial-starting-soon">Sam Bankman-Fried’s trial starts Oct. 3: What you need to know</a>



According to the letter filed by the government, prosecutors are both seeking and seeking to use testimonies from <a href="https://blockworks.co/tag/ftx">FTX</a> customers on how they believed their assets were being used, investor testimonies focused on FTX as a custodian, and “alleged coconspirator witnesses regarding their interpretation of statements made by” SBF.



Lawyers for <a href="https://blockworks.co/tag/sam-bankman-fried">Bankman-Fried</a> argued that the government is seeking the motion prematurely and the testimonies are focused on the opinions and interpretations of the FTX customers.&nbsp;



Bankman-Fried’s team was <a href="https://blockworks.co/news/sam-bankman-fried-witness-reject-judge-lewis-kaplan">dealt a loss ahead of the trial</a> when Judge Kaplan ruled in favor of the government’s motion to block a handful of expert witness testimonies. On the same grounds, Bankman-Fried’s team argues, the government should not be able to use investor testimony.



“The Second Circuit held that excluding defense expert testimony that would counter the government’s arguments as to what a reasonable investor would have found material would leave the defendant “only with the ‘victims’ of his conduct as sources of potential testimony on this issue, an odd limitation where the jury is to evaluate materiality in an objective manner,” lawyers wrote Monday.



Finally, in regards to the alleged co-conspirators, the lawyers claim that the request for testimony is both premature and vague “because none of the requisite evidentiary and factual foundations exist and it is unclear whether they ever will be.”



However, if Kaplan rules in favor of the government then the defense argues that it should, at the very least, be allowed to cross-examine the witnesses.



Blockworks reporters <a href="https://twitter.com/caseywagnerr">Casey Wagner</a> and <a href="https://twitter.com/JamesCirrone">James Cirrone</a> are covering Sam Bankman-Fried&#8217;s trial from the courtroom in New York. Follow for instant trial updates on their X accounts.



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Bankman-Fried’s lawyers want to block potential trial testimonies

One of the great promises of cryptocurrency is the creation of fully open financial rails that can be utilized by anyone, anywhere in the world. But what are the risks to developers if public code is used by criminals?&nbsp;



Taylor Monahan — for my money, one of the two or three best Twitter follows out there if you’re an analytics junkie — published data on Sunday showing that upwards of 65% of decentralized exchange Thorswap’s ETH-to-BTC swap volume over a four-month period came from criminals, including the North Korean-sponsored Lazarus Group.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Welp, the hackers and money launderers—both the Russian/CIS region ones and North Korean ones—are loooooving <a href="https://twitter.com/THORChain?ref_src=twsrc%5Etfw">@ThorChain</a> lately. In fact, in the last four months, ***more than 50%*** of the ETH -&gt; to ThorSwap Router -&gt; to BTC have been stolen funds. 😬😬😬😬😬 rip. <a href="https://t.co/V4KscNilRA">pic.twitter.com/V4KscNilRA</a>&mdash; Tay 💖 (@tayvano_) <a href="https://twitter.com/tayvano_/status/1708630905634664862?ref_src=twsrc%5Etfw">October 1, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Publishing code that happens to be utilized by criminals appears to be becoming a dangerous practice, particularly when the user is North Korean. The US government in particular has a history of coming down hard on developers who become entangled with the Hermit Kingdom: In 2022, Ethereum developer Virgil Griffith was sentenced to over five years on charges related to giving an educational speech at a conference in Pyongyang.&nbsp;



More recently, two privacy mixer Tornado Cash developers were arrested by Dutch and American authorities, and the US Treasury sanctioned dozens of Ethereum smart contracts and addresses associated with the protocol.&nbsp;



I worry that Thorchain developers might soon face a similar situation. What are the material differences between how North Koreans are utilizing <a href="https://blockworks.co/news/tornado-cash-privacy-debate" target="_blank" rel="noreferrer noopener">Tornado Cash</a> and Thorchain? To my untrained legal eye, it wouldn’t be difficult to cobble together similar (and similarly bogus) charges for money laundering and operating an unlicensed money transmitter — and the same applies to any protocol that happens to be used by North Korea. In short, potentially on the chopping block is any team whose code has facilitated an exchange by a user the governments of the world find unsavory.&nbsp;



But how does a piece of code even get sanctioned in the first place? One answer is: Incompetently.&nbsp;



The Treasury’s <a href="https://ofac.treasury.gov/recent-actions/20220808">list</a> of “specially designated nationals” (traditionally only persons or companies) included a list of Ethereum addresses, including some head-scratchers such as Tornado Cash’s Gitcoin donation address. It was later found that officials simply sanctioned every address that happened to be labeled as being associated with the Tornado Cash protocol by Etherscan.&nbsp;



Then again, if you wield a large enough cudgel, it’s okay to be clumsy. Two of the three Tornado Cash founders have been arrested and are awaiting trial. One sat in a Dutch jail for three months without charges, and the other was recently released on a $2 million bond in Seattle. Note that this is all being pursued with novel legal theory — according to one law <a href="https://www.jdsupra.com/legalnews/all-roads-lead-to-roman-alleged-tornado-8554740/">blog</a>, “it is conceivable that different courts will issue different rulings which are in tension with one another, or potentially outright contradict each other.”&nbsp;



Ironically, this strong-arming has arguably only been partially successful. If the goal of the sanctions and charges and imprisonment was to shut down Tornado Cash, they’ve failed — according to a Dune Analytics <a href="https://dune.com/poma/tornado-cash_1">dashboard</a>, as of July, the protocol was still facilitating nearly $6 million in deposits and withdrawals per day.&nbsp;



When you’re trying to bludgeon someone, nuances like legal interpretation or even the accomplishment of coherent goals don’t matter. The Dutch and US governments have succeeded in making the developers’ lives miserable.&nbsp;



This open cruelty from governments pose existential questions for the industry writ large. <a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">Embedded in Bitcoin’s genesis block</a> is a shot taken at the British government for their failure to contain a fiscal crisis, and in my view every single Bitcoin transaction since then — from drugs bought on Silk Road to donations to Ukraine to trading on DEXs — have in part been political statements. The goal of financial disintermediation is inherently political.&nbsp;



Read more from our opinion section: <a href="https://blockworks.co/news/cftc-enforcement-defi" target="_blank" rel="noreferrer noopener">C is for crypto, but the CFTC didn’t get the memo</a>



The coalition that peoples the crypto movement is ideologically disparate, from rabid Randian libertarians to “greenpilled” socialists. But regardless of whether a given developer is working on privatizing transactions or on a DAO that grows vegetables, odds are that they’re cooking something that either replicates or undermines nation state power.&nbsp;



Right now, it seems like nation states can only be bothered to care about crypto when some suit in a back office finds some violation or another to be particularly egregious; eventually, governments will get more sophisticated and attempt to push back en masse. And when that point comes, it’s important to remember that political movements can often lead to political prisoners.&nbsp;



The treatment of the Tornado Cash developers by the Dutch and US governments have been capricious and ham-handed displays of blunt carceral force, but in the quest to build permissionless financial rails accessible by anyone — yes, even criminals — I’m growing increasingly worried that such treatment of developers will become the norm, not the exception.&nbsp;



<hr class="wp-block-separator has-alpha-channel-opacity"/>


<div class="wp-block-post-author-biography">Andrew Thurman is a Data Editor based in Washington, DC. He previously wrote for CoinDesk and Cointelegraph, and worked in various roles for Chainlink and Nansen. His analysis has been quoted in The Financial Times, The Washington Post, The Wall Street Journal, Bloomberg, Forbes, Fortune, Reuters, The BBC, CNBC, and elsewhere. Contact Andrew at andrew@blockworks.co.</div>


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