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IOTA makes 40%+ move after $100M ecosystem foundation announcement

IOTA price saw a high volume surge that took the altcoin to a near 1-year high, but are there reasons to support further upside?

IOTA, an open-source distributed ledger and cryptocurrency focused on the Internet of Things (IOT), saw its native IOTA token rally 43% on Nov.

According to a press release from the project, the foundation will be seeded with $100 million in IOTA tokens, which will be vested over a four-year period and traders clearly perceived the announcement and funding plan as a short-term bullish catalyst.

Historically, ecosystem and developer incentives by blockchain and DeFi protocols tend to attract liquidity to the project and boost market participants sentiment.

In August 2021, Avalanche’s AVAX token went on a 1,400% tear after the announcement of the Avalanche Rush DeFi incentive program.

A similar outcome was seen with Trader Joe’s JOE token in the months following December 2022 after the DeFi protocol announced plans to establish a presence on Arbitrum.

Currently, the Arbitrum ecosystem is hosting liquidity and developer incentives and these initiatives align with the recent 62% resurgence in ARB token price.

Was IOTA’s price move another sell-the-news event?

On Nov.

Traders often interpret funding rates and longs-to-shorts ratios as sentiment gauges and indicators of how active investors are positioned.

Read more

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IOTA launches $100 million Abu Dhabi foundation for Middle East expansion

The IOTA Ecosystem DLT Foundation is the first to receive approval from regulators in Abu Dhabi after its financial authority passed a new, related law earlier in the month.

The open-source blockchain developer IOTA announced on Nov. 29 that it is launching a foundation, the IOTA Ecosystem DLT Foundation, based in Abu Dhabi to focus on the growth of its distributed ledger technology (DLT) in the Middle East region.

According to the announcement, the new foundation will be supported by $100 million IOTA digital tokens, which will be vested throughout the course of the next four years.

One of the primary goals of the foundation is to push for accelerated growth of its DLT and “convert real-world assets into digital ones” according to the company’s co-founder and chairman Dominik Schiener.

"The market right now is being reshuffled so we have a big opportunity to position ourselves by focusing on onboarding institutions, offering them to work on-chain because now it's more feasible to do that in the UAE.”

In addition to growing its technology to support developments in the Middle East region, the network will begin “tokenizing” assets. 

Hamad Sayah Al Mazrouei, the chief executive of the Registration Authority of the Abu Dhabi Global Market (ADGM), said the country aims to be “the leading jurisdiction for the blockchain industry."

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The IOTA Ecosystem DLT Foundation became among the first blockchain-focused organizations to be approved by regulators from the ADGM.

This development comes less than a month after ADGM introduced comprehensive regulations on Nov. 2 targeting DLT foundations like IOTA. The regulations claim to provide opportunities for organizations to expand into DLT in the region.

According to the new regulations, compliance includes disclosing names of key figures, having a name that ends with “DLT Foundation,” a council consisting of two and 16 members, tokenholders being treated as beneficiaries, and not being allowed to conduct activities licensable by the ADGM.

This new framework also paves the ways for DAOs to legally operate and issue tokens to its members.

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Decentralized file sharing, explained

Decentralized file sharing is a peer-to-peer network system where files are distributed across multiple nodes, eliminating the need for a central server.

The importance of decentralization in file sharing

Decentralized file sharing revolutionizes data access by eliminating dependence on centralized servers and utilizing P2P technology to distribute files across a network of nodes.

Distributing and accessing data without depending on a centralized server is possible with decentralized file sharing. Rather, files are kept on a network of linked nodes, frequently through the use of peer-to-peer (P2P) technology

To enable file sharing, each network user can provide bandwidth and storage space. BitTorrent and InterPlanetary File System (IPFS) are two well-known instances of decentralized file-sharing protocols.

The decentralization of file sharing has completely transformed the way users access and store digital content. In contrast to conventional centralized file-sharing systems, which store files on a single server, decentralized file-sharing uses a P2P mechanism. Dispersing files among a network of linked nodes promotes a more robust and secure system.

Key components of decentralized file sharing

Decentralized file sharing depends on a number of essential elements to allow for a dispersed and safe data exchange. 

Firstly, P2P networks, which enable direct user contact in the absence of a centralized server, are the backbone of a decentralized file-sharing system. By doing this, a robust system where participants directly share files is fostered.

Blockchain technology is essential to maintaining integrity and trust in decentralized file-sharing networks. It improves the general security of transactions and file transfers by enabling transparent and impenetrable record-keeping. Smart contracts are self-executing contracts with pre-established rules that automate tasks like access control and file verification.

Furthermore, files are distributed throughout a network of nodes using decentralized storage systems, which often use protocols like BitTorrent or IPFS. This approach eliminates the need for a central server and enhances the availability and reliability of data due to its redundant nature.

Cryptographic methods also protect the integrity and privacy of data. User confidence in decentralized file-sharing systems is increased by end-to-end encryption, which guarantees that only authorized parties may view the content. Together, these elements essentially provide a safe and dispersed setting for easy file sharing via the decentralized web.

How does decentralized file sharing work?

Decentralized file sharing operates on P2P networks by leveraging a distributed architecture rather than relying on a central server.

Peer discovery

Participants in the network (peers) need a way to discover one another, which is accomplished by using distributed hash tables (DHTs) or decentralized protocols. Peers build a network without a central authority by keeping track of other peers with whom they are linked.

DHTs are decentralized systems that enable distributed storage and retrieval of key-value pairs across a network, while decentralized protocols enforce communication rules that enable peer-to-peer interactions without relying on a central authority or server.

File distribution

A file is split up into smaller parts where every component is dispersed among several network peers. This approach enhances file availability, as it is not stored in a single location, ensuring better accessibility and reliability.

Dispersed storage

By distributing file portions over several nodes, decentralized storage systems lessen reliance on a single server. For instance, IPFS employs a content-addressed approach, in which files are recognized by their content as opposed to their physical location.

Peer interaction

Peers request and share file portions directly with one another. The coordination of file transfers no longer requires a central server, thanks to this direct connection. Every peer participates in the file distribution process by serving as both a client and a server.

Blockchain and smart contracts

Blockchain technology is incorporated into several decentralized file-sharing systems to increase security and transparency. Smart contracts are self-executing contracts with pre-established rules that can automate tasks such as access restriction and file verification and reward participants with tokens.

Often, decentralized file-sharing systems use cryptographic techniques like end-to-end encryption to provide privacy and security for the shared files. This ensures that the content can only be accessed and deciphered by authorized users.

Working of a decentralized storage system

Advantages of decentralized file sharing

The benefits of decentralized file sharing include enhanced resilience, improved privacy, scalability and censorship resistance.

By removing a single point of failure, it improves reliability and resilience. In a peer-to-peer network, where files are dispersed among several nodes and peers, the system continues to function even in the event that some nodes go down.

Also, decentralized file sharing, by its very nature, offers enhanced security and privacy. By ensuring that only authorized users can access and decode shared content, cryptographic solutions like end-to-end encryption help lower the danger of unauthorized spying or data breaches.

Better scalability can also be attained as the network expands. In decentralized networks, more users add to the network’s capacity, allowing it to accommodate more demand and traffic without requiring modifications to the centralized infrastructure.

Additionally, decentralized file sharing encourages resistance against censorship. It is harder for any organization to censor or limit access to particular files or information because there isn’t a single entity in charge of the network.

Furthermore, decentralized file sharing frequently incorporates incentive mechanisms through token economies or other reward systems to encourage users to contribute resources like bandwidth and storage, thereby creating a cooperative and self-sufficient environment. 

Challenges and limitations of decentralized file sharing

Challenges associated with decentralized file sharing involve scalability issues, consistency concerns, user adoption complexities, security risks and regulatory uncertainties.

Firstly, as the network grows, scalability issues become more pressing. A poor user experience may result from increased involvement if it causes slower file retrieval times and greater bandwidth requirements.

Moreover, in decentralized systems, problems with consistency and coordination could surface. It may be difficult to maintain consistency in file versions throughout the network in the absence of a central authority, which could result in conflicts and inconsistent data.

Complicated interfaces and user acceptance present another difficulty. When compared to centralized options, decentralized file-sharing platforms frequently have a higher learning curve, which may put off consumers who are not familiar with P2P networks or blockchain technology.

Furthermore, security vulnerabilities still exist, especially in the early phases of decentralized file-sharing deployments. As these systems grow more widely used, they are targeted by different types of attacks, which makes the continuous development of strong security measures necessary.

Regulatory uncertainty is another difficulty. The adoption and long-term viability of decentralized file-sharing platforms may be impacted by the changing legal environment surrounding cryptocurrency and decentralized technology.

The future landscape of decentralized file sharing

The future of decentralized file sharing involves blockchain technology, P2P networks and tokenization for secure, efficient and collaborative data exchange, which challenge traditional models.

Decentralized file sharing is expected to bring about a more inclusive, secure and productive environment. Distributed ledger and blockchain technology will be essential in guaranteeing tamper-proof and transparent transactions and facilitating file sharing among users without depending on centralized intermediaries. 

Decentralized protocols powering peer-to-peer networks will enable direct data transmission between users, cutting down on latency and reliance on centralized servers. Strong encryption techniques will allay privacy concerns and provide consumers with more control over their data. 

Furthermore, tokenization could encourage resource sharing among users, resulting in the development of a collaborative ecosystem. Innovative file-sharing services will probably proliferate as decentralization gains pace, upending established paradigms and promoting a more robust and democratic digital environment.

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Blockchain adoption continues unabated — Bloomberg analyst

Blockchain adoption has been "unabated" throughout bull and bear markets over the past years, says Bloomberg analyst Jamie Coutts.

Should the current rate of adoption continue, blockchain technology could have 100 million daily users by 2028, according to projections by Bloomberg Intelligence analyst Jamie Coutts. 

On X (formerly Twitter), Coutts pointed out that blockchain adoption has been "unabated" throughout bull and bear markets over the past years. "Not having exposure to one of the largest structural trends of the next decade could be costly," said the analyst.

Daily active addresses exceed 5 million in the third quarter of 2023, up 14% from 2022, according to Coutts, while quarter-on-quarter growth has averaged 29% since 2019. "If we apply a more moderate 20% QoQ growth rate then we could reach 100 million daily users by 2028."

Coutts compared blockchain rate adoption with PayPal’s rate growth. According to him, it took the fintech giant 13 years to reach 100 million daily users. "If Ethereum was day zero for smart contracts (2015) then it may take a similar time frame for blockchains to reach similar level of adoption," he added.

Keeping the current pace of adoption, blockchain-based companies may also see a rise in valuations. Coutts noted that basic regressions show the blockchain ecosystem could be valued between $5 trillion to $14 trillion once 100 million users are onboard. "Thats up from $350b today."

Coutts projections are consistent with data suggesting sustained interest in blockchain technology. In spite of the market downturn, development in the crypto industry rose 5% in 2022. Additionally, a survey conducted by Celent in 2022 showed that 91% of institutional investors are interested in investing in tokenized assets — blockchain-based tokens that represent ownership of physical and digital assets.

"While overly simplistic extrapolations such as this should never be soley relied on for valuation purposes it, the exercise illustrates that users and prices are inextricably linked and that as adoption continues prices are likely to track much higher for some assets," Coutts predicted.

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AI and blockchain will ‘reshape sectors’ and create new markets from scratch — Moody’s

According to an analysis from Moody's Investors Service, AI and distributed ledger technologies are set to disrupt companies, industries, and economies across the globe.

Artificial intelligence (AI) and blockchain technologies have reached a "tipping point" and are set to shrink established industries while creating new ones, forecasts a report from Moody's Investors Service published on Sep. 6. 

According to the authors, the combined impact of AI and distributed ledger technologies (DLTs), such as blockchain, has effects "far beyond corporate balance sheets," and "will likely reshape entire sectors, leading established industries "to shrink or disappear altogether while creating new markets from scratch." The report notes:

"History has shown that transformative technologies can shrink established sectors shrink or wipe them out entirely [...] AI will drive the emergence of new sectors, possibly in content generation, mobility, education, or healthcare fields. DLT has already led to the emergence of cryptocurrencies and decentralized finance, although the track record of these segments has been uneven over the past 18 months."

The report highlights that AI will boost economic growth by increasing productivity through task automation, partially offsetting the effects of aging and shrinking populations in many countries. As for DLT, the benefits include fostering financial inclusion and modernizing payment systems. However, it is unlikely that these benefits will materialize before the next decade.

How AI and DLT will transform organizations' strategies. Source: Moody's Investors Service.

When considering the impact on global financial markets, the authors outline that AI and DLT will improve process efficiency and create new products, thereby enhancing credit profiles for financial firms, as long as financial, regulatory, and cybersecurity risks are properly addressed. 

"The coming transformation will bring process efficiency and new products, but also amplify existing risks and give rise to new ones," reads the report, adding that the "interaction of risk and opportunity will be transmitted to debt issuer credit profiles through five broad channels, with impact varying by sector and issuer strategy."

Measures of credit risk that will be influenced by the technologies include business strategy and implementation, financial performance, governance and risk management, and industry and economy-level changes.

"The overall economic and financial effects of technological changes, including the policy and strategic shifts they prompt, are likely to be positive. However, there will be considerable differences in how the costs and benefits of progress are distributed among people, companies, and countries."

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CBDCs offer faster settlements: Citi survey of global securities firms

The year-on-year growing support CBDCs is supported by ongoing domestic pilots and cross-border initiatives in various jurisdictions, banking giant Citi found.

Discussions around shortening local financial settlement cycles within the next five years have most securities firms eyeing central bank digital currencies (CBDCs)

CitiBank’s latest edition of the Securities Services Evolution whitepaper highlighted India’s recent move to T+1 settlements, which ensures all trade-related settlements conclude within 24 hours of a transaction. As the United States and Canada, among other leading economies, step up efforts to transition to T+1 settlement cycles, the CitiBank survey gauges the importance of distributed ledger technology (DLT), CBDCs and stablecoins in expediting this transition.

Global economies transitioning to faster settlement times. Source: Citibank

87% of the 483 survey respondents and 12 financial markets infrastructures (FMIs) see CBDCs as a viable option for shorter settlement cycles by 2026. The support for CBDCs saw a near 21% increase from securities firms when compared to the previous year.

Expected form of digital money to be used to support securities settlements. Source: Citibank

The year-on-year growing support for digital cash is supported by domestic pilots and cross-border initiatives. The Citibank report read:

“Recent crossborder multi-bank experiments are now providing detailed insights into how central bank funding can be operationalized in a digital context, both internally and across entire markets.”

However, over the next years, some of the major roadblocks to widespread adoption of digital assets include regulatory uncertainties, limited knowledge, backward compatibility with traditional financial systems and blockchain interoperabilities, among others, as listed below.

Top impediment to the widespread use of digital assets in the next three years. Source: Citibank

Out of the various financial institutions, institutional investors, banks and asset managers have the greatest ability to scale and deliver market-wide solutions, a crucial determinant to the widespread adoption of CBDCs, stablecoins and other centrally governable financial instruments.

In the coming five years, by 2028, financial aspirations will move beyond T+1, envisions Citibank’s report. Some anticipated changes will include the mainstreaming of DLTs, shorter settlement cycles, digital cash-focused funding mechanisms and removal of core banking systems.

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Just a month after India pitched the idea of conducting cross-border payments using its CBDC to 18 central banks, the Reserve Bank of Australia completed its in-house CBDC pilot.

The Australian central bank believes that a CBDC may support financial innovation in areas such as debt securities markets, could promote innovation in emerging private digital money sectors and enhance resilience and inclusion within the wider digital economy.

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Gaining speed on tokenization is vital for UK’s financial future, banking group warns

UK Finance says it’s not too late for the United Kingdom to make up for other jurisdictions’ faster start to securities tokenization, and it better do it if it wants to remain a global financial leader.

Advocacy group UK Finance is urging the British government to encourage securities tokenization. The market is small now, but the future stakes are high, it said.

In a report co-written with consulting firm Oliver Wyman, UK Finance said the advantages of tokenization, such as lower costs, lower risk and wider access, are not just “a nice-to-have.” Tokenization “can transform the financial system, and the UK should be at the centre of this transformation,” it said.

UK Finance chair and former Bank of England court member Bob Wigley wrote in a Financial Times editorial timed to the report’s release:

“The UK is at risk of falling behind other financial centres, as digital bond issuance to date has been in other places such as Singapore or Switzerland […] Our progress is similar to the US, which could quickly leap ahead given its huge financial resources, deep capital markets and technology knowhow.”

“The UK government has given some indications of its commitment to tokenisation and its enablers. Industry now requires action from government,” the report added. It held up Singapore’s Project Guardian as an example of a government exploring collaboration with the private sector to develop the use of tokenized assets.

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The U.K. already has a growing legal foundation that is “fit for purpose” for securities tokenization, if in need of adaptation, the report said. UK Finance suggested a road map for the United Kingdom to position itself as a global tokenization market leader.

The detailed plan had three components — innovation, interoperability and global standards leadership — with a five-year horizon. Financial market infrastructure sandboxes, due for launch this year by the Treasury, played a key role in the plan.

Tokenization is currently only carried out on a small scale, with 1% of $20.6 trillion of global long-term fixed income instruments tokenized in 2021, according to research cited in the report.

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NY Fed, banks wrap up regulated liabilities network proof of concept using wCBDC

The theoretical network would help the dollar maintain its status internationally with “game changing” improvements in service.

The Federal Reserve Bank of New York’s Innovation Center (NYIC) has completed its proof of concept of a regulated liability network (RLN) in conjunction with nine large financial institutions and the Swift network. The project created theoretical infrastructure to exchange and settle commercial bank deposit tokens and central bank liabilities using distributed ledger technology and a simulated U.S. central bank digital currency (CBDC).

Asset transfers are currently carried out through messaging along the chain of the parties involved. Messaging takes place almost instantly, but settlement does not, Tony McLaughlin, head of emerging payments and business development at Citi Treasury & Trade Solutions, said in a webinar introducing the project results.

The project abandoned trustlessness and anonymity, among other features, from its blockchain to create a system that contained value in the ledger, rather than settling via messaging. The simulated RLN functioned round the clock with multiasset settlement and programmability, McLaughlin said.

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The simulated RLN preserved full U.S. Anti-Money Laundering and Know Your Customer protections in international settlements, McLaughlin said. He called the RLN “a gamechanger for international users of the dollar” that would help maintain the dollar’s role as the international currency of choice.

The results of the project were also summed up in separate technical, business and legal reports. The legal report noted, “We have not identified any legal issues that would prevent the creation of the RLN system under current rules and regulations.” Since the project looked at regulated assets, cryptocurrency and stablecoin were not included. Permissionless blockchains and retail CBDC were not considered either.

The NY Fed included its usual disclaimer about the research not signaling a decision on the introduction of a U.S. CBDC. NYIC director Per von Zelowitz said in a statement:

"From a central banking perspective, the proof of concept was conducive to exploring tokenized regulated deposits and understanding the potential functional benefits of central bank and commercial bank digital money operating together on a shared ledger."

The project was announced in November as a 12-week pilot. BNY Mellon, Citi, HSBC, Mastercard, PNC Bank, TD Bank, Truist, U.S. Bank and Wells Fargo took part in the project.

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Singapore central bank reports on tokenized asset network models after trials

Three trial use cases have been completed as part of the project, and the report uses them as a “framework for consideration” of financial market infrastructure.

As asset tokenization continues at a rapid pace, the Monetary Authority of Singapore (MAS) and 11 financial institutions examined infrastructure models to facilitate tokenized asset trading. The key to unlocking the full benefits of the technology is open and interoperable digital asset networks, the MAS said in its Project Guardian report released June 26.

Project Guardian identified options for platform type, asset type and network access with an eye to best practices. It used three test cases and drew observations on them while carefully noting that it does not endorse any of them.

The first use case was over-the-counter (OTC) foreign exchange transactions. A detailed examination highlighted a collaboration between DBS Bank and SBI Digital Asset Holdings. It concluded:

“Trading in a permissioned liquidity pool protocol achieves greater efficiency by reducing friction and minimising risks, while the tokenised assets bring the benefits of atomic settlement.”

The second use case was trade finance and focused on Standard Chartered Bank’s asset-backed securities tokenization. In this model, tokenized trade finance receivable assets are repackaged as natively issued fungible tokens and divided into two tranches with differing risk exposures. Trading in the “senior,” less risky tokens would “broaden the investor base for real economy assets,” the report concluded.

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The third use case was OTC-structured notes, which are “a popular wealth management product with substantial traction and demand in Asian wealth centres.” Currently, issuance of such notes is labor-intensive and has manual elements, and the notes require a high level of servicing.

A network created by HSBC, Marketnode and United Overseas Bank produces OTC-structured notes in a “token factory” by whitelisting parties on a public, permissionless platform, resulting in greater efficiency in creating and distributing the notes. Those institutions are part of an industry-wide effort to establish common standards for asset issuance and exchange.

Project Guardian was launched in May 2022. It will continue to examine “other focused themes of Trust Anchors and Institutional DeFi.”

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BIS releases unified-ledger proposal for cross-border, tokenized asset transactions

Like the IMF’s single-ledger proposal released a day earlier, BIS’ unified ledger uses familiar concepts, such as tokenization, without the blockchain.

The Bank for International Settlements (BIS) has released a chapter of its annual report early. That chapter, on the future of the monetary system, discusses “a new type of financial market infrastructure — a unified ledger.” The chapter was published June 20, one day after the International Monetary Fund (IMF) released a paper describing its “single ledger” cross-border payments concept.

The BIS proposal harnesses central bank digital currency and tokenized assets into “a new type of financial market infrastructure” — that is, the unified ledger, which would be powered by application programming interfaces (APIs). The authors of the proposal critiqued existing financial technology. They said:

“The collapse of crypto and the faltering progress of other tokenisation projects underline a key lesson. The success of tokenisation rests on the foundation of trust provided by central bank money and its capacity to knit together key elements of the financial system.”

One drawback of current tokenization schemes is that they exist in silos, the proposal claimed. A unified ledger would incorporate the ledgers of the counterparties, programmed reconciliation and messaging, enabling faster transactions and atomic (simultaneous) settlement in a “partitioned data environment” where privacy and transparency are controlled.

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A unified-ledger system would allow for considerable disintermediation in transactions with securities. Cross-border transactions would require more coordination, assuming an intermediated system with the presence of both central banks and private payment service providers.

BIS general manager Agustín Carstens first mentioned unified-ledger technology at the Singapore FinTech Festival in February. Like the IMF “single ledger” introduced a day earlier, the unified ledger uses concepts and technology familiar to the cryptocurrency community. The IMF proposal was met with immediate pushback from the crypto community.

Neither the single ledger nor the BIS unified ledger crucially relies on blockchain technology. Project Rosalind, undertaken by the BIS and the Bank of England, also depended on API technology. The full BIS annual report is due out on June 25.

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