Chinese new civil code makes the inheritance of cryptocurrencies legal View in browser

“My personal belief is that nobody would use Bitcoin if it was run by the ‘Bitcoin Corporation’. Its power comes from the fact that nobody truly controls it.” ~ Robert Leshner, CEO at Compound DeFi protocol

Market State

There was a strong increase in the cryptocurrency market this Monday. Within 24 hours the market rose by $12 billion to over $280 billion. After weeks of slight correction Bitcoin broke the $10000 barrier and rallied above $10100. However the market rally was short-lived and the price of Bitcoin returned below $10000.  According to data from Bitinfocharts average Bitcoin transaction fee dropped by nearly 60% between May 20 and May 31. The cost of making a Bitcoin transaction dropped from $6.5 to around $2.5. Most major altcoins including Ether, Bitcoin Cash, Litecoin, BNB, Cardano followed the price action of Bitcoin. Despite recent price decline Ether has still performed the best, gaining more than 15% during the last week. Currently Ether is trading at around $238.

Ethereum blockchain has been experiencing unprecedented interest recently. A recent report by Delphi Digital, showed that the total gas used on the Ethereum blockchain has reached an all time high. Gas is a unit that used to calculate the amount of fees that need to be paid to the network in order to make a transaction. High demand in gas usage comes from higher use of smart contracts which consumes more gas. Ethereum’s Decentralized Finance (DeFi) apps are on the rise. Through smart contracts DeFi apps offer its users financial services without middlemen such as lending and borrowing cryptoassets. DeFi app users grew from 90,000 to 180,000 within the last 5 months. Total value locked in DeFi apps currently stands almost at around $1 billion. Analyst Arthur Cheong, one of the most active investors in DeFi recently predicted the progress of the DeFi sector is set to continue and will eventually eat the traditional finance sector.

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Meme of the week

“In code we trust” as the cryptocurrency version of the phrase “In God We Trust” that is written on U.S. currency

Quiz of the week

What algorithm does Ethereum use for its mining?

  1. Scrypt
  2. EtHash
  3. SHA-256

Scroll down to see the answer at the end of the newsletter.

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Top stories of the week
Chinese new civil code makes the inheritance of cryptocurrencies legal

At the Thirteenth National People’s Congress the Chinese parliament passed a new civil code that protects the civil rights of inheritance, marriage, property, personality, contract and infringement. According to Lixin Yang, a professor at Renmin University of China, the civil code states that “When a natural person dies, the legacy is the personal legal property left by she/he.” Personal legal property in this case also means “internet property” including virtual currencies. Chinese citizens will officially be able to pass down their cryptocurrency and virtual assets to their heirs starting from the 1st of January, 2021.

Previously several regional Chinese courts have treated cryptocurrencies as a lawful property. For example, last month the Shanghai No.1 Intermediate People’s Court ruled that Bitcoin is an asset protected by law for a theft case tracing back to 2018 and stated that stolen cryptocurrency must be returned to its lawful owners either immediately or or pay them what the coins were worth. In April, 2020 the Shenzhen (also known as China's Silicon Valley) Futian District People’s Court declared in another cryptocurrency theft case that Ethereum is legal property with economic value.

Compound Lending Protocol Is Fully Decentralizing Its Governance

Compound is a Decentralized Finance (DeFi) protocol that allows its users to lend and borrow cryptoassets without any middlemen. Like most DeFi apps Compound protocol consists of openly accessible smart contracts built on Ethereum. Lenders provide loans by locking their cryptoassets into Compound’s “Liquidity pool” which is a series of smart contracts. These smart contracts automatically match borrowers to available assets and algorithmically determine interest rates. Borrowers deposit assets to increase their “borrowing power.” If the borrower’s borrowing power falls below 0, their collateral is sold to cover the debt. The interest rates on loans are different for each asset and based on the supply and demand of each crypto asset. There is no minimum amount for either lending or borrowing. Lenders earn interest about every 13 seconds as it is the average Ethereum block time. Loans can be paid back and locked assets can be withdrawn at any time. On Compound each asset has its own cTokens, which is Compound’s native token. For example if a user lends USDC to the Liquidity Pool, they will receive an equivalent amount of cUSDC which automatically earns interest for the user. cTokens are simply ERC-20 tokens meaning users can transfer and trade them outside of the Compound protocol and use them in other applications.

Last year Compound protocol was criticized by Ameen Soleimani, cybersecurity researcher and Spankchain CEO who stated that Compound smarts contracts are under the influence of a centralized “administrator” which is controlled by Compound the company, which built the protocol. Compound founder Robert Leshner responded to the critique with a promise that the Compound would eventually become a fully decentralized application. Compound introduced their governance system in February, 2020 that includes a new governance token called COMP. This new governance system will replace the Compound protocol’s administrator with community governance and token holders will run Compound, not the company. The governance token went live in April, 2020. Anybody with 1% of COMP delegated to their address (more than 100,000 COMP) can propose a governance action such as adding support for a new asset, changing a market’s interest rate model, or changing any other parameter. COMP holders can delegate their voting rights to the address of their choice, which means a voter doesn’t need to own 1% of the supply.

New COMP tokens will be awarded every day to users of the Compound protocol, based on usage for free. According to the Compound blog post 4,229,949 COMP tokens will be placed into a "Reservoir" contract, from which approximately 2,880 COMP will be distributed to users of the protocol everyday. The public distribution is expected to last around 4 years.The distribution is allocated to each market (ETH, USDC, DAI…), proportional to the interest being accrued in the market. COMP tokens will be distributed evenly between the borrowers and lenders. In each respective market 50% of the distribution is earned by lenders, and 50% by borrowers, users earn COMP proportionate to their balance. Users can track the distribution on a newly created COMP Distribution Dashboard. All proposals are subject to a 3 day voting period. If a proposal gain the support of overall majority and at least 400,000 votes then the proposal is queued in the Timelock smart contract, and can be implemented after 2 days.

Argent The First Smart Wallet For Ethereum Blockchain Launched

London-based Argent team launched its smart wallet to the public after almost two years of development. The Argent wallet is a non-custodial (which means your funds aren’t held by a third party, but you control your funds), Ethereum only, mobile wallet available for both iOS and Android with easy access to decentralized finance (DeFi) applications. The wallet offers advanced features such as human readable Ethereum address, easy access DeFi apps to earn interest, daily transaction limits and recovery of your wallet with the help of friends and family members.

Argent is using smart contracts to provide these unique features with a user interface of conventional banking app like Revolut. Itamar Lesuisse, co-founder at Argent explained “We’ve abstracted all the complexity that comes with a non-custodial wallet. You don't have to backup a recovery phrase, you don't have to worry about transaction fees, you can use a decentralized finance (DeFi) protocol like Compound lending protocol in one tap.”

Non-custodial wallets ask users to write down a recovery phrase so that they can recover their wallet if they lose their device. If a recovery phrase is lost no one can help them to recover their funds. Many people new to cryptocurrency find it too difficult to understand. Well aware of this problem, Argent hides this complexity from the users with a unique approach called “Guardians.” A Guardian can be a friend or a family member you trust or a hardware wallet or a metamask or any combination of them. A Guardian never has access to your assets, but they can help recover your wallet on a new phone.

Argent is focused on the Ethereum blockchain and plans to support everything that Ethereum offers. DeFi apps are mainly built on the Ethereum blockchain. Some of them lets you lend and borrow cryptocurrencies or participate in no-loss lottery. Argent users can access multiple DeFi apps such as Aave, Compound, Dai Savings Rate, Kyber, PoolTogether, Social TokenSets, Uniswap V2 Liquidity. Transaction fees are not even visible in the app as they are fully paid by Argent on behalf of the users.

Institutional Investors Are Aggressively Buying Bitcoin

According to cryptocurrency insiders and market data, institutional interest in Bitcoin is experiencing an unprecedented surge. Grayscale Bitcoin Trust (GBTC), an exchange traded fund backed with Bitcoins, has been growing steadily in size over the past several years. However, in the last couple of months, its growth has begun to accelerate.

Over the last three months the pace at which institutional investors have been investing into GBTC has tripled, which was an increase by more than 60,000 BTC. If this trend continues for another three months, the fund would accumulate around 400,000 BTC or 2% of the total Bitcoin supply (21 million Bitcoins). According to Grayscale spokesperson, over 90% of the inflows come from institutional investors. As of today, Grayscale is holding 350,000 BTC which represents 2% of the circulating supply of Bitcoin (18.38 million Bitcoins). Since 2019, Grayscale has acquired 100,375 BTC, which is 17% of all the Bitcoins mined during this time period.

Following the Bitcoin’s third block reward halving Bitcoin’s annual issuance rate stands at 1.8% bringing it to parity with inflation rate for gold. It is not clear whether this rising institutional investment was spurred by the halving. Alex Mashinsky, CEO of Celsius, the crypto lending platforms that currently holds 55,000 BTC said “We now have over 260 institutional borrowers and we did close $10 billion in loans since our launch in August 2018. The price of Bitcoin does not matter, what matters is volatility of prices going up and down. Celsius could have easily lent out another 100,000 BTC if they had it, this is despite the fact that Celsius charges 5% to 12% annual interest rate.” He expects to see institutional interest to continue in this asset and rise steeply in the next few years.

Matt D’Souza, CEO of Blockware Solutions, a Bitcoin mining firm and manager of a Bitcoin hedge fund, said, “Most funds are hodlers, they’re not shorting really.” He believes that the combination of the central banks injecting trillions of dollars into the economy and the diminishing issuance of new Bitcoins because of the halving is creating a perfect opportunity for Bitcoin.

Proposed Russian Law May Criminalize Several Cryptocurrency Related Activities

Russian lawmakers are in the process of creating new laws that would criminalize the use of cryptocurrency with punishment of up to 2 million rubles (approximately $28,000) and 7 years in jail. Under the proposed law, Russians would be penalized for buying cryptocurrency with cash or with a Russian bank account. Operations like mining, sending small transactions, accepting cryptocurrencies as payment or issuance of cryptocurrencies would be banned.

According to the bills, companies that issue or circulate virtual currencies “using sites registered in Russia or technical equipment located in Russia” without approval from the Russian central bank would face fines of up to two million rubles or about $28000. Furthermore “if cryptocurrencies are used as payment for goods or services” companies would have to pay the equivalent of one million rubles ($13,900) and individuals at least 200,000 rubles ($2,800). People who already hold cryptocurrencies would be forced to register them with Russia’s tax agency and explain how they had acquired them.

If the same acts brought significant damage to citizens, organizations or the state, or if these actions led to enrichment on a large scale”, the offender could face a sentence of up to five years of forced labor or imprisonment for up to seven years. If these laws are enforced it could lead to a complete ban on cryptocurrency and paralyze the Russian cryptocurrency industry. Yuri Pripachkin, the president of the Russian Association of Cryptoeconomics and Blockchain (RACIB), claimed that the law could drive Russian cryptocurrency companies to relocated in neighbouring countries with more crypto-friendly jurisdictions, such as Belarus, Kazakhstan, Uzbekistan, and Ukraine.

There is no evidence that ISIS Is Using Bitcoin To Hide $300 Million

According to a recent report by Chainalysis, a blockchain analysis firm, there is no evidence that ISIS, the Islamic state terrorist organization, is storing $300 million in Bitcoin. In April, 2020 Hans-Jakob Schindler, director of the Counter Extremism Project, claimed that ISIS's war chest worth $300 million could be hidden in Bitcoin. The organization’s report, titled “Cryptocurrencies and Financing of Terrorism” said that authorities have been searching for this missing war chest since 2017. Schindler said “This would be an ideal storage mechanism until it is needed. If done right, it would be unfindable and unseizable for most governments.”

Chainalysis pointed out that Schindler’s theory is also highly unlikely and clarified “we know that most terrorism financing campaigns have raised less than $10,000, indicating limited adoption. Further, if ISIS had funneled oil proceeds into Bitcoin, trading volume of regional exchanges and money service businesses would have reflected this flow of funds.”

The blockchain analysis firm also highlighted that “cryptocurrency is not an ideal form of storing illicit money because cryptocurrency is inherently transparent. Every transaction is recorded in a publicly visible ledger. With the right tools, we can stop bad actors from abusing the system for terrorism financing and other crimes.” Cash and other traditional assets are better suited for this purpose, Chainalysis added.

Tweet of the week
Quiz answer

What algorithm does Ethereum use for its mining?

The correct answer is “B”.

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