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Quentin Tarantino settles Miramax lawsuit over Pulp Fiction NFTs

Miramax sued the Hollywood director in November last year after the blockchain provider Secret Network announced the auction of his "uncut screenplay scenes."

Miramax sued the director in November last year after the base-layer blockchain provider Secret Network announced the auction of "uncut screenplay scenes" from the 1994 film as NFTs. The film studio claimed to own all rights to "Pulp Fiction," except for those reserved for Tarantino, which excluded nonfungible tokens.

The company was developing its own NFT strategy at the time. In a statement, the studio's attorney Bart Williams wrote: “This one-off effort devalues the NFT rights to "Pulp Fiction," which Miramax intends to maximize through a strategic, comprehensive approach.”

On the auction's original press release, Secret Network claimed that Tarantino owned "exclusive rights to publish his Pulp Fiction screenplay and the original, handwritten copy has remained a personal creative treasure he has kept private for decades." The auction raised $1.1 million in January, but was followed by the cancellation of additional NFT sales due to the dispute.

Tarantino and Miramax have partnered in other successful productions, including "Kill Bill: Volumes 1 and 2". "Pulp Fiction" ended up grossing $107.93 million in the United States and $213 million worldwide in the years since its release in 1994.

Hollywood director Quentin Tarantino and producer Miramax appear to have settled their lawsuit over nonfungible tokens (NFTs) related to the blockbuster film Pulp Fiction following a months-long legal battle. The movie studio reportedly plans to withdraw its lawsuit within two weeks and collaborate with the filmmaker in the future, including on NFTs projects. 

Trump Authorizes US Government To Explore Strategies for Actively Purchasing Bitcoin

Why quantum computing isn’t a threat to crypto… yet

Quantum computing still has a long way to go before posing a threat to blockchain technology.

Quantum computing has raised concerns about the future of cryptocurrency and blockchain technology in recent years. For example, it is commonly assumed that very sophisticated quantum computers will one day be able to crack present-day encryption, making security a serious concern for users in the blockchain space.

The SHA-256 cryptographic protocol used for Bitcoin network security is currently unbreakable by today’s computers. However, experts anticipate that within a decade, quantum computing will be able to break existing encryption protocols.

In regard to whether holders should be worried about quantum computers being a threat to cryptocurrency, Johann Polecsak, chief technology officer of QAN Platform, a layer-1 blockchain platform, told Cointelegraph:

“Definitely. Elliptic curve signatures — which are powering all major blockchains today and which are proven to be vulnerable against QC attacks — will break, which is the ONLY authentication mechanism in the system. Once it breaks, it will be literally impossible to differentiate a legitimate wallet owner and a hacker who forged a signature of one.”

If the current cryptographic hash algorithms ever get cracked, that leaves hundreds of billions worth of digital assets vulnerable to theft from malicious actors. However, despite these concerns, quantum computing still has a long way to go before becoming a viable threat to blockchain technology. 

What is quantum computing?

Contemporary computers process information and carry out computations using “bits.” Unfortunately, these bits cannot exist simultaneously in two locations and two distinct states.

Instead, traditional computer bits may either have the value 0 or 1. A good analogy is of a light switch being turned on or off. Therefore, if there are a pair of bits, for example, those bits can only hold one of the four potential combinations at any moment: 0-0, 0-1, 1-0 or 1-1.

From a more pragmatic point of view, the implication of this is that it is likely to take an average computer quite some time to complete complicated computations, namely those that need to take into account each and every potential configuration.

Quantum computers do not operate under the same constraints as traditional computers. Instead, they employ something that is termed quantum bits or “qubits” rather than traditional bits. These qubits can coexist in the states of 0 and 1 at the same time.

As mentioned earlier, two bits may only simultaneously hold one of four possible combinations. However, a single pair of qubits is capable of storing all four at the same time. And the number of possible options grows exponentially with each additional qubit.

Recent: What the Ethereum Merge means for the blockchain’s layer-2 solutions

As a consequence, quantum computers can carry out many computations while simultaneously considering several different configurations. For example, consider the 54-qubit Sycamore processor that Google developed. It was able to complete a computation in 200 seconds that would have taken the most powerful supercomputer in the world 10,000 years to complete.

In simple terms, quantum computers are much faster than traditional computers since they use qubits to perform multiple calculations simultaneously. In addition, since qubits can have a value of 0, 1 or both, they are much more efficient than the binary bits system used by current computers.

Different types of quantum computing attacks

So-called storage attacks involve a malicious party attempting to steal cash by focusing on susceptible blockchain addresses, such as those where the wallet’s public key is visible on a public ledger.

Four million Bitcoin (BTC), or 25% of all BTC, are vulnerable to an attack by a quantum computer due to owners using un-hashed public keys or re-using BTC addresses. The quantum computer would have to be powerful enough to decipher the private key from the un-hashed public address. If the private key is successfully deciphered, the malicious actor can steal a user’s funds straight from their wallets.

However, experts anticipate that the computing power required to carry out these attacks would be millions of times more than the current quantum computers, which have less than 100 qubits. Nevertheless, researchers in the field of quantum computing have hypothesized that the number of qubits in use might reach 10 million during the next ten years.

In order to protect themselves against these attacks, crypto users need to avoid re-using addresses or moving their funds into addresses where the public key has not been published. This sounds good in theory, but it can prove to be too tedious for everyday users.

Someone with access to a powerful quantum computer might attempt to steal money from a blockchain transaction in transit by launching a transit attack. Because it applies to all transactions, the scope of this attack is far broader. However, carrying it out is more challenging because the attacker must complete it before the miners can execute the transaction.

Under most circumstances, an attacker has no more than a few minutes due to the confirmation time on networks like Bitcoin and Ethereum. Hackers also need billions of qubits to carry out such an attack, making the risk of a transit attack much lower than a storage attack. Nonetheless, it is still something that users should take into mind.

Protecting against assaults while in transit is not an easy task. To do this, it is necessary to switch the underlying cryptographic signature algorithm of the blockchain to one that is resistant to a quantum attack.

Measures to protect against quantum computing

There is still a significant amount of work to be done with quantum computing before it can be considered a credible threat to blockchain technology. 

In addition, blockchain technology will most likely evolve to tackle the issue of quantum security by the time quantum computers are widely available. There are already cryptocurrencies like IOTA that use directed acyclic graph (DAG) technology that is considered quantum resistant. In contrast to the blocks that make up a blockchain, directed acyclic graphs are made up of nodes and connections between them. Thus, the records of crypto transactions take the form of nodes. Then, the records of these exchanges are stacked one on top of the other.

Block lattice is another DAG-based technology that is quantum resistant. Blockchain networks like QAN Platform use the technology to enable developers to build quantum-resistant smart contracts, decentralized applications and digital assets. Lattice cryptography is resistant to quantum computers because it is based on a problem that a quantum computer might not be able to solve easily. The name given to this problem is the Shortest Vector Problem (SVP). Mathematically, the SVP is a question about finding the shortest vector in a high-dimensional lattice.

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It is thought that the SVP is difficult for quantum computers to solve due to the nature of quantum computing. Only when the states of the qubits are fully aligned can the superposition principle be used by a quantum computer. The quantum computer can use the superposition principle when the states of the qubits are perfectly aligned. Still, it must resort to more conventional methods of computation when the states are not. As a result, a quantum computer is very unlikely to succeed in solving the SVP. That’s why lattice-based encryption is secure against quantum computers.

Even traditional organizations have taken steps toward quantum security. JPMorgan and Toshiba have teamed up to develop quantum key distribution (QKD), a solution they claim to be quantum-resistant. With the use of quantum physics and cryptography, QKD makes it possible for two parties to trade confidential data while simultaneously being able to identify and foil any effort by a third party to eavesdrop on the transaction. The concept is being looked at as a potentially useful security mechanism against hypothetical blockchain attacks that quantum computers might carry out in the future.

Trump Authorizes US Government To Explore Strategies for Actively Purchasing Bitcoin

Mt. Gox creditors fail to set repayment date, but markets to remain unaffected

While a Bitcoin price dip may not be on the cards anytime soon, intriguing new details regarding the Mt. Gox saga have continued to emerge over the past week.

Eight years ago, in 2014, the crypto world was rocked by the crippling hack of Mt. Gox, a popular Bitcoin (BTC) exchange, which was forced to shut down after miscreants were able to make away with approximately 850,000 BTC, worth more than $16 billion at today’s exchange rates. 

At the time of the incident, the Tokyo-based exchange was the world’s largest cryptocurrency trading ecosystem, processing over 70% of the crypto market’s daily Bitcoin trading volume. However, due to its lack of quality security protocols, hackers were able to make their way with the crypto assets of over 24,000 customers, which is still one of the largest such incidents in the history of the digital asset industry.

Now nearly a decade removed, Mt. Gox customers affected by the hack have been issued a notice that they have until Sept. 15 to make or transfer a claim. However, the payouts have been engulfed in a long-standing legal battle, with the rehabilitation plan being delayed numerous times. Recently, there have been rumors that the payout could happen soon, potentially in a major Bitcoin dump.

The rumors gained so much traction that Mt. Gox creditors recently had to take to social media to say that they were completely false, with one highlighting that the defunct exchange’s repayment system is still quite far from going live.

Creditors set the record straight 

As part of a recent Twitter thread, Eric Wall, a creditor for Mt. Gox, noted that contrary to the news floating on the internet that 137,000 BTC would be dumped into the market soon, the exchange had not yet devised the infrastructure needed to facilitate such a move and, therefore, there would be no repayments anytime soon.

Furthermore, as things stand, Wall highlighted that customers affected by the Mt. Gox hack have not even been able to register the address where their due Bitcoin and Bitcoin Cash (BCH) payments need to be transferred, signaling that there is no immediate reason to worry about an impending market crash.

The creditor also believes that the payments will most likely take place in many installments, thereby calming fears that thousands of BTC will be sold all at once and subsequently dump the price of the flagship crypto. Lastly, Wall noted that the crypto exchange has yet to issue an exact timeline regarding the repayment process, further arguing that even if the BTC were released, it would make sense to “buy rather than sell” the asset due to the prevailing market conditions. At press time, BTC is trading at $18,893.

Similarly, Marshall Hayner, another Mt. Gox creditor, took to Twitter to confirm that Mt. Gox was nowhere close to issuing its due payments. He assured market participants that a vast majority of the individuals due to receive Bitcoin had “vowed” not to sell their holdings in the near term.

The proposed redistribution plan and its possible implications

Earlier this year, in July, Nobuaki Kobayashi, the appointed rehabilitation trustee for the Mt. Gox rehabilitation plan, announced to the public that the exchange is preparing a repayment plan. In an official document, he and his team noted that eligible individuals have the option of receiving their payments in the form of either BTC or BCH. 

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The rehabilitation plan first came into existence two years ago and was approved last year. However, out of the 850,000 BTC owed, the exchange only has approximately 150,000 BTC to pay its creditors. Providing his insights on the matter, Konstantin Shirokov, a representative for decentralized money market Fringe Finance, told Cointelegraph:

“The distribution of the said coins is just a matter of time, and this accounts for what has fueled the rumors about the exchange finalizing plans to release this money. The agitation of the potential beneficiaries is very valid, and so are the concerns of the investors in the broader digital currency ecosystem about what the release and probable sell-off of that massive amount of coins can have on the price of Bitcoin.”

He added that while the proposed coins are worth just about $2.9 billion at today’s prices, which should not weigh the market down so much, the general sentiment in the market is rather negative. “As such, the release of the coins and the likely offload can depress the price of Bitcoin in the days following the release,” Shirokov stated.

Lastly, creditors are due to receive an initial base payment, after which they can choose to take the remainder of their funds via a lump sum payment or smaller reimbursements at a later stage. The repayments are being made via cash reserves acquired via the liquidation of Mt. Gox’s BTC coffers.

Mt. Gox’s stolen BTC stash moves after nine years

Late last week, it came to light that two old Bitcoin addresses created back in 2013 sent approximately 10,000 BTC to several different crypto accounts. Using heuristics and clustering techniques, it became apparent that the BTC was associated with Mt. Gox. In this regard, a data engineer working for OXT Research, a platform providing analysis of ongoing events in the Bitcoin ecosystem, noted

“Despite a Kraken deposit, these coins are not sourced from Kraken. They are however sourced from Mt. Gox and possibly controlled by Jeb McCaleb. [...] The user annotation to this [BTC] cluster links to a blog post by @wizsecurity blog. Wizsec is the Mt Gox saga expert.”

Following this, another 5,000 BTC related to the defunct exchange was transferred to various third-party accounts. The movement was caught by BTCparser and occurred exactly 120 hours after the above-stated development. According to a researcher for OXT Research, this latest Bitcoin, too, is connected with Mt. Gox and could possibly even belong to Jed McCaleb.

What lies ahead for those affected by the Mt. Gox saga?

For this massive BTC stash — that had been lying idle for nearly a decade — to suddenly start moving around when the digital currency is trading for approximately $20,000 is striking, to say the least, since these tokens have absolutely nothing to do with Mt. Gox’s repayments other than the fact that the timing of this move is serendipitously aligned with the trustee’s latest update.

As per a rehabilitation plan released by Kobayashi recently, after Sept. 15, there will be a phase of “assignment, transfer or succession, provision as collateral or disposition by other means of rehabilitation claims are prohibited.” That said, the document is still quite gray in its wording when it comes to setting a deadline for the “restriction period” but does acknowledge that it will be followed by the first entire repayment to creditors, as outlined in the rehabilitation plan that was approved by 99% of all eligible users affected by the case.

Lastly, the document notes that claimants who file a notice of transfer after Sept. 15 may potentially see the trust being unable to determine who to send the due amount to, adding:

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“This may result in rehabilitation creditors being unable to receive their preferred Repayments, the Repayment date being delayed significantly compared to other rehabilitation creditors, or at worst, the Repayment amount may be deposited with the Tokyo Legal Affairs Bureau in accordance with laws and regulations.”

Therefore, while the Mt. Gox saga continues to pique the interest of people all over the globe, it will be interesting to see how it all plays out eventually, especially with so many new developments — such as the resurfacing of the above said dormant Bitcoin — coming to the forefront recently.

Trump Authorizes US Government To Explore Strategies for Actively Purchasing Bitcoin

What is veTokenomics and how does it work?

Users lock up their tokens and turn them into veTokens, which control the protocol's governance, according to the veTokenomics model.

All facets of a token's production and management, including its allocation to various stakeholders, supply, token burn schedules and distribution, are managed through tokenomics analysis. Tokenomics help to determine the potential value of decentralized finance (DeFi) projects. Since the law of supply and demand cannot be changed, tokenomics dramatically impacts the worth of each nonfungible token (NFT) or cryptocurrency.

Related: What is Tokenomics? A beginner’s guide on supply and demand of cryptocurrencies

However, there are various loopholes in the tokenomics design, such as a substantial initial supply allocation to insiders, which may be a pump and dump warning sign. Also, there is no manual on how founders, treasury, investors, community and protocol designers should split the tokens optimally. 

As a result, DeFi protocols, such as Curve, MakerDAO and Uniswap, lack a carefully planned initial token distribution, which results in sub-optimal token distribution because higher contributors might not always get the best allocation or vice-versa. To solve these issues, the Curve protocol introduced vote-escrowed tokenomics or veTokenomics. In this article, you will learn the basic concept of veTokenomics; how veTokenomics works and its benefits, and drawbacks.

What is veTokenomics?

Under the veTokenomics concept, tokens must be frozen for a set period, which encourages long-term participation and lowers the tokens' market supply. In return, users receive veTokens that cannot be sold and are non-transferable. That said, to participate in the governance mechanism, one needs to lock their tokens over a fixed time period, which will cause an organic token price increase over time.

One can already lock up your tokens in some DeFi initiatives to receive a portion of the protocol revenue. However, the veToken architecture differs in that owners of these locked tokens can control the emission flow, increasing the liquidity of a particular pool. 

The rate at which cryptocurrencies are created and released is called emission. The cryptocurrency's economic model, specifically whether it is inflationary or deflationary, affects the emission rate.This leads to better alignment between the protocol's success and the incentives earned by the tokenholders because whales cannot use their votes to manipulate the token prices. 

How does veTokenomics work?

To understand the working of vote deposit tokenomics, let's see how Curve implements veTokenomics. Similar to other DeFi protocols, liquidity providers (LPs) earn LP tokens for offering liquidity to Curve's pools. These LP tokens can be deposited into the Curve gauge to get the Curve DAO token (CRV), which liquidity providers can enhance by locking CRV. The liquidity gauge calculates how much liquidity each user is contributing. For example, one can stake their liquidity provider tokens in each Curve pool's unique liquidity gauge.

Curve protocols gauge mechanism

Additionally, veCRV holders and LPs share the fees generated by Curve Finance. One must lock their CRV governance tokens for a fixed time period (one week to four years) and give up their liquidity to obtain veCRV. This means that long-term stakers want the project to succeed and are not in it merely to earn short-term gains.

veCRV holders can increase stake rewards by locking tokens for a long time, decide which liquidity pools receive token emissions and get rewarded for staking by securing liquidity through swaps on Curve. However, the length of time tokenholders have locked their veTokens affects how much influence they have in the voting process.

Consider Bob and Alex, who each have the same amount of CRV. Bob locked his tokens for two years, while Alex only had them for one year. The veCRV, voting power and associated yields are doubled for Bob because he locked his tokens for a longer period than Alex. Such a dynamic promotes long-term engagement in decentralized autonomous organization (DAO) projects and assures that the token issuance is conducted democratically.

Other examples of veTokenomics include Balancer, which introduced veBAL tokens in March 2022 with a maximum locking time of up to one year. Frax Finance also suggested using veFXS tokens, letting owners choose gauges that would distribute FXS emissions among various pools on different decentralized exchanges (DEXs).

What are the benefits and drawbacks of veTokenomics?

From understanding the basics of veTokenomics, it is evident that tokenholders get rewarded for blocking the supply of veTokens, which reduces the supply of LP tokens and thereby selling pressure. This means tokenholders holding a substantial amount of tokens cannot manipulate their price. Furthermore, this popular tokenomics model promotes the addition of more liquidity to pools, strengthening a stablecoin's ability to keep its peg.

Since there was no market for tokens of liquidity providers other than exercising governance rights and speculating, the initial DeFi governance tokens had little to no impact on the price. However, locked veTokens positively impact the supply dynamics because the community expects enhanced yields, valuable governance rights and aligning the priorities of all stakeholders.

Despite the above pros of the vetoken model, there are various drawbacks of veTokenomics that stakeholders must be aware of. Since not everyone invests for the long-term, the protocol following the veTokenomics model may not attract short-term investors.

In addition, if tokens are locked for longer, the opportunity costs can be too high as one can't unlock them till the maturity date if they change their mind. Moreover, this model diminishes long-term oriented incentives and weakens the decentralization of governance if the protocol offering such tokens has the majority of veTokens.

The future of the veTokenomics model

In the traditional tokenomics model, governance tokens that only grant the power to vote are considered invaluable by Curve Finance (the pioneer of the veTokenomics model). Moreover, it believes there is little reason for anyone to become fully committed to a project when "governance" is the only factor driving demand.

The new tokenomic system called veTokenomics is a significant advancement. Although it lowers the supply, compensates long-term investors and harmonizes investor incentives with the protocol, the veTokenomics model is still immature.

In the future, we may experience additional protocols incorporating veTokenomics into their design architecture in addition to developing novel ways to build distinctive economic systems that use veTokens as a middleware base. Nonetheless, as the future is unpredictable, it is not possible to guess how tokenomics models will evolve in the upcoming years.

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Trump Authorizes US Government To Explore Strategies for Actively Purchasing Bitcoin

DeFi Regulations: Where US regulators should draw the line

The U.S Federal agency’s approach to the DeFi market has raised several concerns over the future of the industry: Experts weigh in on what’s the right approach.

Decentralized finance (DeFi), one of the fastest growing ecosystems in the cryptocurrency market, has long been a dilemma for regulators, given the decentralized nature of the space. 

In 2022, United States regulators paid special focus to the nascent area with significant attention to ending the anonymous nature of the ecosystem.

DeFi protocols allow users to trade, borrow and lend digital assets without having to go through an intermediary. DeFi ecosystems by nature are decentralized with the majority of projects being run by automated smart contracts and decentralized autonomous organizations (DAOs). Most DeFi protocols don’t require heavy Know Your Customer (KYC) requirements, making way for traders to trade anonymously.

A leaked copy of a U.S. draft bill in June showed some of the key areas of concern for regulators including DeFi stablecoins, DAOs and crypto exchanges. The draft bill paid a special focus on user protection with the intention to eliminate any anonymous projects. The bill requires any crypto platform or service provider to legally register in the United States, be it a DAO or DeFi protocol.

Sebastien Davies, principal at institutional infrastructure and liquidity provider Aquanow, blamed regulators’ lack of technological understanding as the reason behind the regressive approach. He told Cointelegraph that events like the sanctioning of Tornado Cash users after the application was added to the Specially Designated Nationals list produced by the Office of Foreign Assets Control demonstrate a lack of technological understanding. He explained:

“I think the point that policymakers were trying to get across is that they’ll make it very difficult for developers/users of protocols that completely obfuscate transaction history and that they’re willing to act swiftly. Officials may eventually walk their stance back, but the precedent will be severe. Participants in the digital economy should continue to engage with regulators as often as possible to maintain a voice at the table to avoid these types of shocks and/or partake in the balancing dialogue after the fact.”

Another discussion paper by the U.S. Federal Reserve Board released in August claimed that even though DeFi products represent a minimal share of the global financial system, they may still pose risks to financial stability. The report noted that DeFi’s resistance to censorship is overstated, and transparency could be a competitive disadvantage for institutional investors and an invitation for wrongdoing.

Forced legislation will drive out budding projects

The concerns of regulators around user protection are understandable, but experts believe that shouldn’t come at the cost of innovation and progress. If the focus is only on collecting data and putting barricades that hinder innovation, then the U.S. would be left behind in the innovation race.

Hugo Volz Oliveira, secretary at the New Economy Institute — a nonprofit organization focused on developing digital economy policy recommendations — explained to Cointelegraph why regulators’ current approach and focus on eliminating anonymous projects won’t be fruitful. He said:

“Take the fact that policymakers and regulators continue to insist on eliminating anonymous crypto projects and teams, de facto trying to choke this industry by targeting its builders. But this won’t be feasible in the more sophisticated projects that are being developed according to the ethos of the community.”

He added further that there’s a real danger that the legislators will be successful in driving most of the crypto industry away from North America. He said, “This is also problematic as the rest of the world still needs large nation-states to stand up to the bullying from FATF and other undemocratic institutions that seem more keen on preserving their monopoly on power than on fostering a risk-based approach to innovation.”

On Aug. 30, the U.S. Federal Bureau of Investigation released a fresh warning for investors in DeFi platforms, which have been targeted with $1.6 billion in exploits in 2022. The law enforcement agency warned that cybercriminals are taking advantage of “investors’ increased interest in cryptocurrencies,” and “the complexity of cross-chain functionality and open source nature of Defi platforms.”

While decentralization is a key aspect of the DeFi ecosystem, criminals can take advantage of it to process their illicit transactions. However, it is important to note that laundering via crypto has historically proven to be riskier as they can be traced and blocked. Criminals laundering their funds even after several years of the theft have been caught.

DeFi regulation requires a mindset shift

Crypto regulations themselves are a significant discussion point in the mainstream industry, given that, apart from a few states with niche crypto-centered laws, there’s no universal rule book in the United States for crypto operators. Thus, in absence of fair clarity around the overall crypto market, regulating a niche ecosystem could be a complex task.

Jackson Mueller, director of policy and government relations at blockchain-based financial and regulatory technology developer Securrency, told Cointelegraph that there’s a growing interest among policymakers regarding the DeFi space.

However, they are currently caught up between whether to apply existing long-standing yet arguably unsuitable regulatory regimes or consider stepping outside the regulatory box to develop appropriate and responsible frameworks. He explained:

“Policymakers are never going to be comfortable with a system based on complete anonymity, hence the push for the application of Anti-Money Laundering and KYC regulations. While this obviously triggers privacy and level-playing field concerns, advanced technologies capable of being deployed today can greatly preserve an individual’s right to privacy, without significantly restricting the potential of DeFi services or propelling opaque markets. Regulated DeFi is not an oxymoron. The two can, and must, coexist.”

A new proposal released by the U.S. Securities and Exchange Commission (SEC) in February earlier this year highlighted the lack of understanding of the space by the SEC. The proposal aims to amend the definition of “exchange” by the Securities Exchange Act of 1934. The amendment would require all platforms with a certain threshold transaction volume to register as exchanges.

The proposal threatens many DeFi projects as most of them are not operated centrally, and having to register as an exchange could very well spell doom for the industry. Hester Peirce, the SEC commissioner who is a well-known crypto advocate, was among the first to call out the flawed proposal and said it could reach more types of “trading mechanisms, including potentially DeFi protocols.”

The multiple proposals and warnings by U.S. federal agencies suggest a hard-handed approach, which many experts believe wouldn’t necessarily work. Gabriella Kusz, CEO of a self-regulatory group called the Global Digital Asset and Cryptocurrency Association (Global DCA), told Cointelegraph:

“DeFi regulation requires a mindset shift — away from the concept of a ‘cop on the beat’ and toward the concept of ‘community management.’ In a DeFi world where the nature of interactions and entities is decentralized, the entire nature of the relationship between the regulator and the regulated must change. As opposed to being reactionary, regulation must be reimagined to shift towards preventative measures, supporting the constructive development of the industry.”

She added that Global DCA is working specifically on this subject to design and create a self-regulatory organization that forms a broad dialogue with a diverse group of stakeholders in the digital asset ecosystem. These insights and perspectives will be “reflected back in a framework for self-regulation which may help to advance market integrity and consumer protection.”

Eric Chen, CEO and co-founder of DeFi research and development firm Injective Labs, told Cointelegraph that ecosystem stakeholders should have an input in regulatory discussions:

“I personally believe that regulators should have more open conversations with Web3 companies and founders. I think this dialogue would help both sides of the spectrum to reach definitive regulatory clarity more rapidly. Many may not recall but the early Web2 space was also beholden to an opaque regulatory structure. This of course was rectified over time as regulators and founders began to work together to craft proper guidelines.”

Any new technology that gains mass traction becomes a point of concern for regulators. However, their approach is key to determining if that technology can be utilized for good or simply prohibited because of a few bad actors. Industry experts believe that the current approach to regulating the DeFi market under existing financial laws could be devastating for the nascent industry and that dialogue is the right way to move forward at this point.

Trump Authorizes US Government To Explore Strategies for Actively Purchasing Bitcoin

Crypto noobs: What to tell newcomer friends about digital currency

A look at some of the questions that friends, family and acquaintances may have about crypto and some appropriate responses.

Interest in crypto has been growing since the 2017 bull market and has increased even further since 2021, which saw the nonfungible token (NFT) boom and Bitcoin (BTC) hitting its highest price so far. 

So, what can a crypto investor tell family and friends who are interested in cryptocurrency? Here are some common and important questions that one can come across regarding crypto and some appropriate responses with opinions from experts in the industry.

What is cryptocurrency?

One of the most common questions a crypto investor might get asked is what cryptocurrency is in the first place. Cryptocurrency is a digital currency that is designed to be used as a medium of exchange. This exchange can come in the form of peer-to-peer (P2P) payments and retail purchases. 

Lucaz Lee, CEO of Affyn — a mobile-based metaverse platform — told Cointelegraph, “A cryptocurrency is a digital or virtual currency designed to work as a medium of exchange. It uses cryptography to secure and verify transactions, making it difficult for anyone to create fake transactions or counterfeit money.”

Lee continued, “Additionally, cryptocurrencies are decentralized and use distributed ledger technology, meaning no central bank or government is controlling them.”

Cryptocurrencies exist on the blockchain, which is a public ledger that records all transactions that take place, making it possible for anyone to see how money moves through the network. While anyone can see how much money a user owns and how it is spent. Users need a wallet to send and receive crypto, and these wallets use alpha-numerical identifiers, which add a layer of anonymity to the users.

What purpose does cryptocurrency serve?

The main purpose behind cryptocurrency is the ability for anyone to send and receive money through a decentralized P2P network. This works as a digital version of cash. For example, when users pay with cash, they pay directly to another person without having to go through an intermediary such as a bank or payment processor.

Cryptocurrency does this on a digital level, allowing anyone to transfer money directly to another person, entity or organization while retaining control of their funds at all times. Lee agreed with this take, stating, “cryptocurrencies can be used as a medium of exchange or payment for specific services without any intermediary or centralized control. It removes the limitations of traditional finance, enabling the globe's large numbers of unbanked and underbanked users to access financial services.”

Cryptocurrencies are also being used as investment vehicles, with users being able to make high returns due to their limited supply, high volatility and high level of speculation.

Lee added, “With each passing day, cryptocurrencies are becoming more attractive investment options. Certain variations also support opportunities to generate passive returns, helping investors expand and diversify portfolios.”

If crypto isn’t backed by anything, how is it worth anything?

Most cryptocurrencies aren’t backed by any traditional assets apart from stablecoins like USD Coin (USDC) and Tether (USDT), which have a large portion of their tokens backed by reserves of fiat money and bonds. Some people may wonder why cryptocurrency has any value if they aren’t backed by anything. 

First, a lot of the value comes from the utility of a cryptocurrency. The more a cryptocurrency is needed for a particular task, the more demand there will be for that cryptocurrency. Examples include using crypto as a store of value and uses for particular protocols within sub-industries like decentralized finance (DeFi) and NFTs.

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Igor Mikhalev, partner and head of emerging Tech at EY and decentralized autonomous organization chairman of Blueshift — a decentralized exchange — weighs in on this question, telling Cointelegraph, “cryptocurrencies built well are worth increasingly more because they exhibit the foundational functions of traditional currencies: scarcity, medium of exchange/account and store of value. It is possible due to advances in the underlying tech, legislation and people’s general attitude toward it.”

It’s also worth noting that fiat currencies like the United States dollar, euro and Great British pound aren’t backed by anything (hence the term “fiat” currency). Mikhalev spoke on this, adding, “the USD is not backed by real assets such as gold and is only backed by people’s trust in the U.S. as the issuer. So, why should we not want to support, own and exchange currencies issued by other mission-driven collectives backed by their value and utilities? This is the foundation of the new decentralized economy.”

Lee gave his opinion on the value of cryptocurrency, adding, “cryptocurrency is not backed by anything, but it is intrinsically worth something because people believe it has value. Market forces of supply and demand determine the price of a cryptocurrency.”

Speculation and investment also play a role in the value of cryptocurrency. If investors believe the value of a coin will increase over time, they’re more likely to buy and hold that coin, expecting to turn a profit in the future.

Lee added, “the more people want to buy a cryptocurrency, the higher the price will be. The more people want to sell the cryptocurrency, the lower the price. Blockchain technology has proven reliable and secure; accordingly, many people believe in its longevity and therefore invest in cryptocurrencies.”

Can cryptocurrency replace real money?

In a broad sense, no, as cryptocurrency isn’t regulated, and there are a lot of services, products and commodities that will always need traditional cash. However, governments are looking into creating their own digital tokens known as central bank digital currencies (CBDCs) and there are growing uses for decentralized cryptocurrencies.

“You can’t walk into a Starbucks in America and pay with Swiss francs or pounds. Yet, both of these are real money. Context matters.” Rockwell Shah, co-founder at Invisible College — a Web3 learning community — told Cointelegraph, adding:

“Similarly, the major cryptos are native currencies of their own digital nations. They have relevancy in their own blockchain borders. If the use cases of crypto are so compelling that people use them instead of traditional currencies even outside of their digital borders, then great. Welcome to the free market.”

Lee also believes the answer to this question is context-based. “The answer to this question is not a simple yes or no. It depends on the country and the corresponding economic system. In countries like Venezuela, where the government has mismanaged the economy and sparked high hyperinflation, cryptocurrency has become a way of life for many people.”

“Compared with traditional money, cryptocurrency is very new and its implications on the larger society are yet to be tried and tested. Nevertheless, central banks are exploring the idea of transition to digital currencies, known as central bank digital currencies,” he added.

Some experts believe that the underlying principles behind cryptocurrencies actually put them ahead of traditional currencies when it comes to adoption.

Recent: Crypto winter teaches tough lessons about custody and taking control

“Remarkably, crypto has already started surpassing national currencies on the foundational functions because of their democratic and transparent nature people intrinsically lean toward. Coupled with the decline in trust in government/official institutions, this presents fertile grounds for accelerated adoption,” Mikhalev said, continuing:

“One can see this awkward (for traditional money institutions) situation already today: The debate around the introduction of CBDCs (nation-level digital currencies) is stalling. Central, by nature, institutions do not want decentralization, as it will lead to their demise. However, there is no turning back. Once the technology is mature enough (and one can argue that it has already happened), it will only take one major geopolitical event for the explosive adoption to begin.”

Can cryptocurrency be hacked?

Blockchains themselves are largely impervious to cyberattacks. Lee spoke to this point:

“Blockchains, by design, are nearly impossible to hack because they are decentralized and rely on different security mechanisms. However, external variables such as hot wallets, centralized wallets, bridges and even smart contracts can be hacked.”

Therefore, the best way to secure users can secure their funds is by storing them in a noncustodial wallet, which is a wallet that allows them to own the private keys and wallet seed. This way, an attacker would need to know the private key and wallet seed to access their funds. Regarding platforms, hackers usually resort to phishing attacks to try and trick users into giving away information such as passwords and login info so the hackers can access their funds.

What causes cryptocurrency prices to increase?

Speculation and supply and demand are some of the main factors driving cryptocurrency prices. Most cryptocurrencies have a limited supply, and when there is a lot of demand for that coin (due to speculation of utility), the price usually surges in response to this.

Lee also believes supply and demand is the main reason a cryptocurrency’s price increases, stating that “the price of all assets, including cryptocurrencies, are determined by demand and supply. When the demand for an asset exceeds the supply, it creates a price surge. At times, macroeconomic and geopolitical factors also influence crypto prices.”

Trump Authorizes US Government To Explore Strategies for Actively Purchasing Bitcoin

Ripples of Bitcoin adoption at Biarritz’s Surfin Bitcoin Conference in France

Thanks to grassroots and big bitcoin displays of Bitcoin advocacy, could the tide be changing on France’s anti-Bitcoin sentiment?

A sublime sunset enveloped Biarritz Casino on Aug. 27, bringing France’s largest Bitcoin (BTC) conference to a close. Located in southwest France and organized by French Bitcoin exchange Stackin Sat, Surfin Bitcoin assembled a host of Bitcoin OG’s, newbies and no coiners, those yet to buy or earn crypto, in a setting that would rival any Hollywood film set.

Bitcoiners networked in the hope of learning more about the Lightning Network, landing jobs at one of the many French Bitcoin companies present — from Galoy Money to Découvre Bitcoin — or simply rubbing shoulders with fellow Bitcoin believers. In a touch of bear market irony, as the Bitcoin chips are currently way down, the event venue took place at the illustrious Biarritz Casino. 

From Bitcoin core maintainers to European royalty to naturally CEOs from the largest French crypto companies, the vibe was distinctly French, albeit with a fizzy international influence.

Cointelegraph and Ledger CEO Pascal Gauthier (right) in front of the Biarritz Casino and Biarritz’ Grande Plage.

Bitcoin maximalism was on full display. Panelists and moderators had carte blanche to slamdunk on shitcoiners as hotly anticipated debates compared crypto venture capitalists to gamblers and boasted the merits and queried the limitations of Bitcoin’s layer-2 Lightning Network. Representatives from Aave and various crypto decentralized autonomous organizations (DAOs) expressed their admiration for Bitcoin but held true to their vision of a multi-coin future.

While there were several official commercial announcements during the event, speakers spontaneously stumbled across certain revelations. During a panel on mining, Pierre Rochard of Riot Mining announced his intention to rename mining to “timestamping” to avoid confusion regarding the act of retrieving scarce resources from a physical space. Timestamping would make education easier, he explained, and it’s also Satoshi Nakamoto’s way of explaining mining in the white paper.

Similarly, on the Lightning Network panel, Blockstream’s Christian Decker, also known as Dr. Bitcoin, described the Lightning Network as an “ant network.” In essence, he explained, the LN behaves like an ant colony. Much like a group of ants, the LN seeks out productive areas of activity and congregates in spaces where efficient routes or channel hops can link together.

Among the workshops and Q&A sessions, European Bitcoin artists such as Lina Seiche, the creator of the Little Hodler, displayed their pieces. Konsensus, a Bitcoin book publisher, sold French translations of popular Bitcoin books for a couple of Satoshis — the smallest denomination of a Bitcoin —in the main hall. The usual Bitcoin t-shirts and merchandise could also be purchased for sats. But, to many Bitcoiners’ chagrin, coffees, beers and refreshments were paid for with fiat money. 

Daniel Prince, co-host to the United Kingdom’s second biggest Bitcoin podcast, Once Bitten, told Cointelegraph that Bitcoin adoption at the conference and surrounding area was poor:

“The casino guys are not orange-pilled, they’re only accepting cash or card as payment. Even though, I just asked ‘I wanna pay you guys in Bitcoin,’ but no, they’re not set up.”

Nonetheless, while the waves crashed around the Bitcoin bubble on Biarritz’s La Grande Plage, the waves of Bitcoin adoption were meager by comparison. From interviews snatched with street vendors, merchants, churros sellers and even surfers, Cointelegraph reporters learned that the area was “no coiner” territory. Nobody in the surrounding area had transacted with Bitcoin; no one could accurately describe the cryptocurrency or even recognize the Bitcoin “B” on a t-shirt or conference logo.

There was one exception. The 19-year-old driver of Biarritzs’ sightseeing tour train, Le Petit Train, had a crypto story to share. The train conductor reportedly bought Bitcoin when he was 14 — when the price was around $500 — but sadly, he had lost access to his seed phrase to the 2.36 BTC. He joked that’s why he was working as a train driver over the summer.

The Stackin Sats team hit a dead-end for Bitcoin payments when the mayor of the Biarritz region reportedly halted the conference hall bars from accepting Bitcoin. As such, Bitcoiners were obliged to hodl their coins and spend their euros instead. That didn’t discourage many of the Bitcoiners — including Prince — from orange-pilling local merchants such as taxi drivers and surf instructors. After all, Bitcoin is a grassroots, community-driven movement.

Tonnellier interviewed by Cointelegraph on the terrace.

Josselin Tonnellier, a co-founder of the conference, told Cointelegraph that the French crypto scene is dominated by blockchain companies, not Bitcoin advocates. In an exclusive interview, he lamented that the French fail to discern Bitcoin and blockchain. There there is a lot more education to be done, he said, as “pro blockchain narratives” hinder adoption in his home country

Related: Bitcoin is for those in need, the rest need time to learn: Surfin Bitcoin panel

In an attempt to encourage no coiners, the first day of the conference was free entry. The open day, called “Surfin Day,” enticed locals to dip their toes in the balmy Bitcoin waters. There was a Satoshi-inspired treasure hunt, a surf competition to win Sats and a screening of the popular French Bitcoin documentary, Le Mystère de Satoshi. The day promoted exchange and discussion “between participants of a growing Bitcoin community.”

It appears to have worked. At a surf shop up the street from the conference, local Cécile told Cointelegraph on Aug. 28 that not only did she attend the Surfin Day, but she was inspired to learn more about Bitcoin. “Bitcoin is not as difficult as it first seemed,” she explained in French. Maybe she’ll accept Bitcoin in time for next year’s edition of Surfin Bitcoin.

However, with flagrant reminders that Bitcoin uses more energy than “insert small to medium-sized country here” and that “unhosted wallets” should be banned and faced with grueling Know Your Customer laws, it’s no wonder that Bitcoin adoption in France is slow. The European Union’s stance on Bitcoin is clear-cut: regulation is coming and Bitcoin will be lumped together with every other crypto project.

Bitcoin adoption in France will undoubtedly remain a ripple as the price continues to tread water. To make waves, Bitcoin would require a swell of positive public sentiment or a pro-Bitcoin splash from Macron — France’s anti-crypto leader — or the European Union, which shows no sign of abating its Bitcoin bashing.

The Bitcoin Boat, called Sato Boat, set sail on the final day of the conference. Faced with a calm sea and an extended bear market, the Bitcoin adage, “stay humble, stack sats,” springs to mind. Overall, Surfin Bitcoin is “ze place to be” for the French Bitcoin believers, but there’s a lot of work and a heck of a journey ahead for the French Bitcoin scene to achieve greater levels of adoption.

Bon voyage. 

Trump Authorizes US Government To Explore Strategies for Actively Purchasing Bitcoin

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Trump Authorizes US Government To Explore Strategies for Actively Purchasing Bitcoin

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Trump Authorizes US Government To Explore Strategies for Actively Purchasing Bitcoin

Crypto winter teaches tough lessons about custody and taking control

Many agree that digital assets should be held in hard wallets, but recent actions in the EU and the U.S. may make that more difficult, not easier.

The crypto winter has pumped new life into the adage “Not your keys, not your coins,” particularly after the collapse of some high-profile enterprises like the Celsius Network, whose funds were frozen in June. Just last week, Ledger CEO Pascal Gauthier hammered home the point further, warning: “Don’t trust your coins and your private keys to anyone because you don’t know what they’re going to do with it.”

The basic idea behind the adage, familiar to many crypto veterans, is that if you don’t personally hold your private keys (i.e., passwords) in an offline “cold wallet,” then you don’t really control your digital assets. But, Gauthier was also framing the issue in a larger context as the world moves from Web2 to Web3:

“A lot of people are still in Web2 [...] because they want to stay in the matrix where they’re being controlled, because it’s easier, it’s you know just click yes yes yes and then someone else is going to deal with your problems.”

But, giving away control won’t set you free. “Taking responsibility is how you become free.”

Admittedly, Gauthier has a self-interest here — Ledger is one of the world’s largest cold-wallet providers. Then, too, he may have been stating the obvious. In May, Coinbase acknowledged in an SEC 10-Q filing that if it ever went bankrupt, customers that entrusted their digital assets to the exchange “could be treated as our general unsecured creditors,” i.e., could find themselves standing at the back of the creditors’ line in bankruptcy proceedings.

“It doesn’t matter that the exchange’s contract with you says you ‘own’ the currency,” Georgetown University law professor Adam Levitin told Barron's at the time, “That’s not determinative of what will happen in bankruptcy.” 

But, Gauthier’s statement raises other questions, too. This notion of seizing “control” of one’s keys and coins could become more complicated given recent regulatory proposals in Europe, as well as a key government agency interpretation in the United States. Moreover, as the world transitions from Web2 to Web3, is it really so certain that centralized solutions like Coinbase and others might still not have an important role to play with regard to custody and, yes, even privacy?

Learning the hard way

Generally speaking, it appears that consumers still do not understand the potential risks when they turn their crypto private keys over to centralized platforms and exchanges.

“It’s been made abundantly clear that even the most seemingly trustworthy custodians can still make grave missteps with user funds,” Nick Saponaro, CEO at the Divi Project, told Cointelegraph. “The promise of self-sovereign ownership of your money is immediately obliterated when users hand over their private keys to any third-party, regardless of that third-party's genuine intent.”

“All crypto users should learn and be responsible for the security of their own coins by storing them securely on hardware wallets,” Bobby Ong, co-founder and chief operating officer at CoinGecko, told Cointelegraph.“However, this is not a popular move because for most crypto users, it is probably more convenient to store them on centralized exchanges.”

Recent: Blockchain firms fund university research hubs to advance growth

Still, a centralized exchange (CEX) can be useful at times and maybe we should expect to live in a hybrid cryptoverse for a while, with both cold and hot wallets, centralized and decentralized exchanges (DEXs).

“There is a case for using centralized exchanges for sending funds to others to not doxx your crypto addresses,” said Ong. “This is because when you send a transaction to someone else, they will know your address and can see your balance, historical transactions, and all future transactions.”

Indeed, Ong tweeted recently: “The basic advice now is to have multiple wallets for various purposes and to fund these wallets using centralized exchanges. This works well but it’s not good enough. If you use FTX or Binance, Uncle Sam and Changpeng Zao will know all your wallets and they can profile you instead.”

Continued Ong, “To get full privacy for your new wallet, a service like Tornado Cash is needed. Granted, it’s probably more expensive, slow and tedious,” but having such an option would ensure privacy and make crypto behave more like cash, he added.

Justin d’Anethan, institutional sales director at Amber Group, agreed that trade-offs remain. “You can’t do as many sophisticated trades from a private wallet as you can on a centralized platform, or at least not as easily and efficiently,” he told Cointelegraph. Large, sophisticated traders will always need to have some of their holdings on exchanges to optimize returns. In his personal case:

“I hold a chunk of my core holdings in private wallets, but I definitely hold some assets on centralized platforms for yield generation, some rebalancing, etc.”

Corporate entities, especially, may not want to handle the operational side of a trade, including investment and custody, and they may also want to interact with a recognized and established centralized entity that can perform due diligence. Also, corporations may want to have an identifiable and liquid entity to sue “in the event of an error,” added d’Anethan.

On the retail side, setting up a private wallet can still be daunting, which may explain why so many entrust private keys to CEXs and the like, even if it isn’t always the best way. As d’Anethan told Cointelegraph:

“You might not know how — or have the motivation — to buy a private wallet, set it up to hold your private key and bear the risk of losing it. So, the path of least resistance wins.” 

Do regulators still not “get it?”

Elsewhere, self-hosted wallet providers may soon face tough regulations in Europe if and when the EU’s Transfer of Funds Regulation (TFR) proposal takes hold. It could overturn this whole notion about taking control of one’s private keys and coins. 

“Effectively, it would amount to a ‘de facto’ ban on self-hosted wallets by enforcing to connect personal identities with self-hosted wallets,” wrote Philipp Sandner and Agata Ferreira.

Mikolaj Barczentewicz, associate professor at the United Kingdom’s University of Surrey, told Cointelegraph:

“The TFR proposal doesn’t ban self-custodied wallets, but it does incentivize service providers to treat them as ‘high risk’ for money laundering.[…] It may become practically very difficult to transact using self-hosted wallets.”

Defenders of the TFR might respond that it’s not regulators’ fault that businesses are not better at risk-based analysis and at distinguishing situations of genuinely high risk of criminality, but “I don’t think that answer works,” continued Barczentewicz. “It shows a lack of understanding — or care — for the fact that regulations need to be designed to be workable in the real world. The EU is basically saying to businesses: ‘You figure it out.’”

However, the biggest threat to self-custodied wallets in Barczentewicz’s view “is something like the scenario we’ve been watching in reaction to Tornado Cash being sanctioned by the U.S.: Businesses are afraid and engaging in over-compliance, doing more than the law requires.”

As reported, on Aug. 8, the United States Department of the Treasury’s Office of Foreign Assets Control (OFAC) issued legal sanctions against digital currency mixer Tornado Cash for its role in laundering over $455 million worth of cryptocurrency stolen by the North Korean-linked hacking organization Lazarus Group.

According to data analytics firm Chainalysis, the obligations of non-custodial crypto wallet providers are now unclear under OFAC’s recent designation: “An extreme interpretation could mean that non-custodial wallet providers might also need to block transfers to the sanctioned addresses, though this would be unprecedented.” 

At a minimum, government actions like these suggest that cold-wallet solutions to help crypto users take control of their private keys could become more problematic — not less — at least in the immediate future.

An education imperative?

Overall, does the crypto industry face an education challenge here i.e., to explain the importance of cold storage and individual “responsibility” to both individuals and policymakers? 

“I think we have to be honest with ourselves,” answered Saponaro. “Yes, education can help some individuals avoid the pitfalls we’ve witnessed in recent months, but most people will not read every article, watch every video or take the time to educate themselves.” Developers have a responsibility to develop products that guide users “into learning by doing.”

“The crypto community, including in the EU, can still do much more to educate policymakers,” added Barczentewicz. “But this education cannot be limited to just explaining how crypto works. It is a mistake to think that once policymakers ‘get it,’ they will come up with sensible rules on their own.”

The crypto community needs to be proactive in proposing detailed technical and regulatory notions of how to fight crime and malfeasance without giving up key benefits of crypto, like self-custody, he said. “It is not enough just to mention buzzwords like ‘zero knowledge proofs’ and then expect the policymakers to do the hard work.”

Is taking “control” really important?

What about Gauthier’s larger point that people simply have to learn to take "responsibility" for their assets — digital and otherwise — because “taking responsibility is how you become free?”

“Crypto is a game-changer because we now have full control of our money without the need to trust any third-party,” said Ong. That said, some people “may choose to pass on the responsibility and trust a third-party custodian who may be better equipped to store their coins safely — and that is acceptable too,” he told Cointelegraph.

Recent: Crypto volatility may soon recede despite high correlation with TradFi

“In the crypto space, you typically have very binary opinions about how things can grow from here. I think the truth is somewhat in the middle,” said d’Anethan, adding:

“One is delusional if one thinks every individual and corporate is going full DeFi tomorrow. But, one would also be delusional if one thinks the growing digital world will forever stay within the Web2 infrastructure.”

What may be best is to have both centralized and decentralized platforms, “so that the user base can gradually shift where it sees the most value — however long that takes,” he said.

Trump Authorizes US Government To Explore Strategies for Actively Purchasing Bitcoin