The Weekly Wrap – China crackdown on crypto and the NFL enters the Metaverse

Oct 1, 2021 - 5 min read

1. China cracks down on crypto service providers

The Facts:

  • Last Friday, the Chinese central bank issued an announcement on services related to cryptocurrencies, rendering many activities with crypto assets illegal.
  • This announcement has led to many providers, including exchange Huobi and market data providers CoinGecko, CoinMarketCap and TradingView being restricted in providing their services for users in mainland China.
  • As a further reaction to the government’s actions, the China-based Ethereum mining pools Sparkpool and Beepool have announced a full shutdown of their services.

Why it’s important:

  • While China’s restrictive stance on cryptocurrencies is not new, this crackdown could provide an economic opportunity to other jurisdictions where crypto assets are less restricted.
  • As a major player in the cryptocurrency markets, the move of the Chinese government could have a short-term impact on crypto asset market structure and liquidity.
2. NFL and Dapper Labs reportedly plan to launch NFT market

The Facts:

  • According to a report, the National Football League and its players association are partnering up with Dapper Labs to launch an NFT market.
  • The marketplace is expected to launch before the end of the current football season, enabling users to collect NFTs of NFL sports highlights.
  • NFL and NFLPA are to acquire equity in Dapper Labs, whilst the developer of CryptoKitties and NBA Top Shot would enable an NFT market on its Flow blockchain product.

Why it’s important:

  • With Dapper Labs’ flagship project NBA Top Shot’s massive success during the basketball season, the NFL partnership showcases another major sport entering the NFT metaverse, paving the way for further sports organizations to enter this space.
3. Aave readies for launch of permissioned institutional DeFi offering

The Facts:

  • DeFi lending protocol Aave is starting up its institutional DeFi pool, Aave Arc, which is an adaptation of Aave’s protocol designed to restrict a pool to only whitelisted users.
  • In Aave’s governance forum, Fireblocks, an institutional custody firm, proposed to be added as the first whitelister for Aave Arc.
  • As a whitelister, Fireblocks would be designated to conduct KYC checks on the user, to onboard the users with appropriate terms and conditions, and to grant specific permissions to user addresses.

Why it’s important:

  • With an offering for institutional clients, Aave is reducing the barriers for institutions previously restricted from using DeFi lending markets.
  • Institutional adoption of decentralized finance could further boost the liquidity in the decentralized lending markets, making them more efficient.

(*) Answer to the question “Mr. Chairman, as a matter of policy, is that your intention to ban or limit the use of cryptocurrencies like we’re seeing in China?” during Testimony on Pandemic Economic Recovery, September 30

4. El Salvador starts Bitcoin mining project with energy from volcanoes

The Facts:

  • A video shared by El Salvador’s president Nayib Bukele shows a Bitcoin mining facility powered by geothermal energy from volcanoes.
  • This update comes after the president announcing his intentions to start mining with volcano energy back in June.
  • El Salvador is not the first country to use geothermal energy for Bitcoin mining, as Iceland was pioneering the use of this natural resource for this purpose.

Why it’s important:

  • With Bitcoin mining coming under scrutiny for its energy use, El Salvador’s move to geothermal energy could further boost the Bitcoin mining hash rate powered by renewable energy.
  • Geothermal energy not only provides a renewable source of energy, but is also comparably cheap to produce, incentivizing mining companies to switch.
Number of the week

– fee for a single $100k Ethereum transaction mistakenly spent by Bitfinex, then returned by miner

5. Compound Finance experiences $50m bug exploit

The Facts:

  • In a recent upgrade, DeFi lending protocol Compound introduced a change to the distribution of COMP tokens.
  • After the upgrade took effect, it became evident that it included a bug that mistakenly allowed users to claim as much as 168’000 COMP tokens.
  • As there is no centralized party with admin keys, the faulty distribution cannot be halted, other than through a 7-day governance process.

Why it’s important:

  • This event highlights the importance of thorough smart contract code audits, a process which could have discovered the bug in the code upgrade.
  • In a decentralized protocol governed by a token, it is essential that decentralized safety measures are in place to halt certain aspects of a system in case of unexpected behavior.

In other news

  • Bitcoin Lightning Network capacity at all-time high (via The Block)
  • Ripple announces $250m fund to support NFT projects on XRP (via The Block)
  • Crypto exchange FTX moves operations to Bahamas (via The Block)

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