Casey Wagner

<div id="highlights-block_6287b7c9b0ea0" class="highlights">
 <ul>
 <li>Ledger, predominantly known for its crypto hardware wallets, plans to add a cryptocurrency wallet extension on Safari</li>
 <li>Coinbase CEO Brian Armstrong, meanwhile, said he’s expecting users to more seriously consider taking their assets into their own hands</li>
 </ul>
 
</div>



As retail and institutional interest in digital assets grows, wallet providers are betting on crypto holders taking ownership of their assets.&nbsp;



Self-custodying digital assets is the “future,” said Charles Hamel, vice president of product at crypto hardware wallet manufacturer Ledger. He added that ownership is “really unique and esoteric to the things we are building.”



Ledger&#8217;s hardware wallets allow users to store digital assets directly on a USB drive while securely controlling their private keys, as opposed to web-based or software wallets. 



Exchanges are also starting to think about the role self-custody and ownership plays in the current digital asset landscape, Hamel said.



Crypto holders increasingly want to keep their assets themselves, often for fear of misplacing their private keys and losing their funds forever, he said. As a result, exchanges have started offering self-custody services, often for a premium fee.



Coinbase CEO Brian Armstrong said he expects users to more seriously consider taking assets into their hands. The exchange now offers self-custody wallets and soon will give users the option to do so directly through the app, Armstrong wrote in a recent <a href="https://blog.coinbase.com/embracing-decentralization-at-coinbase-7fa0e5d1084b" target="_blank" rel="noreferrer noopener">blog post</a>.



As investors become more comfortable with the technology, concerns swirling around possession and security are becoming paramount, Hamel said.



“The products that the most crypto-forward people are using today will be used by mainstream customers in a year, and by institutions a few years after that,” Armstrong wrote. “We need to start integrating them today.”



Ledger unveiled plans to add a crypto wallet extension, Ledger Connect, on Safari that will allow users to connect hardware wallets to Web3 applications such as Ethereum and Solana.&nbsp;



“We want to reduce the friction for ledger users to bring their keys to Web3,” Hamel said.&nbsp;



Security is likewise key when it comes to self-custody, he added. Ledger Connect plans to add a new security layer, “Web3 Check,” Hamel said, which intends to flag suspicious Web3 apps. Users will be alerted if an app is linked to past scams, hacked websites or fraudulent smart contracts —&nbsp;the latter are on the rise as decentralized finance protocols rise.&nbsp;



“Having something in your hand is essential for people — the tangibility of it is really important,” Hamel said.



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<hr class="wp-block-separator">

Crypto’s Future is Self-Custody, Dealing Blow to Exchanges, Ledger VP Says

David Canellis

<div id="highlights-block_628516b22f243" class="highlights">
 <ul>
 <li>Permissionless panelists agreed that algorithmic stablecoin Terra’s doomed design was reckless</li>
 <li>Terraform Labs founder Do Kwon was originally scheduled to appear on-stage alongside his critics</li>
 </ul>
 
</div>



Circle redeemed $7 billion worth of USDC last week as markets reacted to Terra’s demise — highlighting how critical stablecoin collateralization is during intense volatility.



The Boston-headquartered stablecoin issuer redeemed $61 billion last year, Circle’s vice president of product management Joao Reginatto said during a panel discussion at Blockworks’ Permissionless event in Palm Beach on Wednesday.



That means Circle processed more than 11% of its total redemptions for an entire year in just one week — a week that saw $280 billion drained from cryptocurrency’s total market capitalization.



Other panelists included <a href="https://www.castleisland.vc" target="_blank" rel="noreferrer noopener">Castle Island Ventures</a>’ Nic Carter, Visa’s head of CBDC and protocol Catherine Gu, MakerDAO lead developer Sam MacPherson, and Frax founder Sam Kazemian. Terraform Labs founder Do Kwon was originally scheduled to appear on the panel.



“Our model is super boring, it’s very, very simple: full collateralization,” Reginatto said. “Customers bring a dollar, we give them 1 USDC, we keep that dollar. They bring USDC, we give them back a dollar.”



Circle’s approach is in stark contrast to Terraform Labs’ failed algorithmic stablecoin TerraUSD (UST). Circle backs USDC with a mix of cash and US Treasurys, while UST sought to maintain its dollar peg via arbitrage and a complicated minting and burning process involving a secondary token, LUNA.



<h3>Terra was crypto’s ticking time bomb</h3>



Terraform Labs’ bombastic founder Kwon had tried to reinforce UST’s viability by amassing more than $3 billion in bitcoin. This wasn’t technically collateral to back UST, but crypto to be spent on “defending” the stablecoin’s peg if it started to shake.



Still, UST collapsed from $1 to as low as $0.04 earlier this month. LUNA, on the other hand, fell from more than $86 to a fraction of a cent. More than $46 billion had been vaporized from UST and LUNA’s combined market capitalization in just four days.



“Luna/Terra was clearly the largest ticking time bomb [in the crypto space], certainly the most fragile project,” Carter said.



Carter described Terra’s non-collateralized design as “reckless financial engineering,” and labeled its demise predictable for those who “had a bit of perspective.” Terra’s algorithms were veiled in complexity, even deliberately so, making it difficult for onlookers to investigate and understand how they were supposed to work.



“People couldn’t speak out against it because [Kwon] was so vocal on Twitter. There was a sense that you don’t want to offend your industry peers who had invested in Terra — there were enormous incentives to not investigate,” Carter added.



<a href="https://twitter.com/MakerDAO?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor" target="_blank" rel="noreferrer noopener">MakerDAO</a> lead developer MacPherson agreed that Terra’s design was reckless, “pretty much from the start.” UST’s implosion emphasized the need for stablecoins to be collateralized, MacPherson said. It’s why MakerDAO chose to overcollateralize its stablecoin DAI (currently by 164%), “so that users can be certain they can always trade DAI for a dollar.”



<h3>Stablecoins are crypto’s killer app</h3>



Panel host Kate Rooney of CNBC asked Visa’s Gu how the finance giant felt about the Terra fiasco. Gu said Visa wants “interesting use-cases” and its focus in the stablecoin space is on fiat-backed digital currencies. Visa also studies projects that utilize on-chain collateral — a fancy term for crypto-backed stablecoins such as MakerDAO’s DAI.



<blockquote class="wp-block-quote">“We must think about how these different projects are being constructed — safeguards and standards are important for consumers, retail investors and institutions alike,” Gu said.</blockquote>



It’s important to understand how stablecoin reserves are audited and who models and tests their systemic risks, she said, stating that “even the safest assets can have risk.”



Frax founder Kazemian agreed, despite his stablecoin’s reliance on a fractional algorithm to maintain its peg — although it’s designed somewhat differently to Terra’s UST. Frax is currently 89% collateralized, with the remaining 11% maintained by algorithms that generate value by interacting with various decentralized finance (DeFi) protocols.



Kazemian said: “This is why Frax’s collateralization is entirely on-chain. Its collateralization is adjusted by an algorithm, and you can see the amount of debt and liquidity across lending markets. You can’t just do a lot of these things and hope for it to work out for the best: You paint a target on your back.”



Some believe that CBDCs (central bank digital currencies) could one day fill the gaps in the stablecoin market. Visa’s Gu cited a recent Bank for International Settlement study that found nine out of 10 central banks are researching and actively experimenting with CBDCs. Unlike stablecoins, CBDCs will have the same status as other central bank money, that is, full convertibility to other forms of legal tender currency.



MakerDAO’s MacPherson didn’t have strong opinions about CBDCs, but if they come on-chain they could potentially serve as collateral for decentralized stablecoins, he said.



Circle’s Reginatto was a little less positive.



“Central banks don’t come across as the type of organization that could operate these mechanisms at scale,” he said. “Frax, Maker, Circle, these are very complicated to operate.”



Reginatto also explained that Circle believes in the permissionless nature of public blockchains, stating that the firm never signed a deal with Maker and Frax, but both projects leverage USDC to collateralize their tokens.



But the most scathing critique of the CBDC concept came from Carter, who labeled stablecoins “an incredible consumer product.”



“Stablecoins are crypto’s killer app so far, no question. They’ve been responsible for great transactional autonomy,” Carter said, before stressing that privacy is incredibly important when it comes to cash in a digital context. Policymakers are considering the privacy pitfalls of putting digital dollars on an immutable ledger, but Carter was skeptical that they would ultimately choose to emulate the relative anonymity of cash.



“No government is going to give that to us, no CBDC plan is sincere about that…We have to look at the stablecoin sector for that.”



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Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can’t-miss tweets and more from&nbsp;<a href="https://blockworks.co/newsletter/research" target="_blank" rel="noreferrer noopener">Blockworks Research&#8217;s Daily Debrief</a>.
 
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<hr class="wp-block-separator">

Stablecoins Are Crypto’s Killer App So Far – Just Not Terra

Liz Coyne

The Challenges of ‘Permissionless’ at the Institutional Level

Jason Yanowitz

<div id="highlights-block_60f5948bef2eb" class="highlights">
 <ul>
 <li>More than 3,000 registrants are expected to attend Permissionless in Spring 2022</li>
 <li>Today, more than $50 billion in assets are stored on DeFi platforms — a number that is expected to increase to more than $1 trillion in assets by 2025.</li>
 </ul>
 
</div>


<div id="highlights-block_60f5947aef2ea" class="highlights">
 
</div>



Blockworks is excited to announce the launch of <a href="https://cms.blockworks.co/events/permissionless" target="_blank" rel="noreferrer noopener">Permissionless</a>, the world’s largest DeFi conference, set to take place in Spring 2022.&nbsp;The conference and expo will be in-person at a U.S. based location to be announced soon. 



We’re proud to partner with Electric Capital, Dragonfly Capital, Multicoin Capital, Delphi Digital, Bitwise and Bankless on Permissionless with the shared goal of bringing DeFi to the world.&nbsp;



<h3>What is DeFi?</h3>



Decentralized Finance, or DeFi for short, is a global alternative to legacy financial services. With DeFi platforms, anyone with a smartphone and internet connection can access transparent financial services such as savings, loans, trading, insurance and more.



Today, more than $50 billion in assets are stored on DeFi platforms — a number that is expected to increase by more than 10 times by 2025.



&#8220;DeFi is the single most exciting sector of the crypto market, with huge potential, incredible innovation, and of course, significant risks,&#8221; said Matt Hougan, chief investment officer, Bitwise. &#8220;We’re seeing huge demand from institutional and professional investors to learn about the space, and many are investing. The world needs a conference like Permissionless and needs it now.&#8221;



&#8220;DeFi is going to disrupt traditional finance in the same way that Amazon disrupted Sears.&nbsp;The writing is on the wall. It&#8217;s finance, but faster, cheaper, better,&#8221; said Hougan.



<h3>Introducing Permissionless</h3>



Permissionless is the one place where professional investors can learn what DeFi&nbsp;is, what it isn’t and what it could become.



The two-day conference and exhibition includes networking, expert panels, hands-on sessions, debates and roundtable discussions that explore the big-picture potential of DeFi, and provide deep dives into DeFi protocols like Aave, Uniswap, Compound and Maker to help guests generate alpha for their portfolio.



Topics include:



<ul><li>The rise of DAOs&nbsp;</li><li>How to successfully yield farm</li><li>An update on EIP-1559&nbsp;</li><li>DeFi from the eyes of an institutional investor</li><li>Ethereum competitors and the potential of a multichain future</li><li>How to govern a DeFi-led world</li></ul>



Buy your ticket today. The first 100 <a href="https://cms.blockworks.co/events/permissionless" target="_blank" rel="noreferrer noopener">Permissionless</a> tickets are $15.59.



On September 1st, ticket prices increase to $99. Prices go up on an ongoing basis as the event nears.