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RelayNode NYC #24 - October 21

David Gogel

Welcome to RelayNode NYC Area edition! The NYC blockchain ecosystem is growing rapidly. Our goal is to harness its energy and innovation for the benefit of New Yorkers and provide a weekly curated list of interesting content, upcoming events, and local jobs.

Some personal thoughts…

This week, I had the opportunity to attend an A+ panel hosted by UMA (Universal Market Access) on decentralized finance primitives and cross chain interoperability. UMA demonstrated how synthetic Bitcoin (Keep’s tBTC) can collateralize yDai (yTokens from Yield Protocol) on the UMA platform and then be traded on Uniswap. yTokens are like zero coupon bonds and are secured by collateral. Before expiration yTokens trade at a discount allowing investors to infer an interest rate. This enables users to create a BTC/USD yield curve. Demo here. That was a mouthful. Let me try to distill this as best as I can.

What are synthetic assets and why are they important in the decentralized world?

I recommend reading a post by Dmitriy Berenzon, Research Partner @ Zenith Ventures // Alum @ CoinFund. He recaps synthetic assets in DeFi including use cases and opportunities.

A synthetic position is a way to recreate the payoff and risk profile of a particular financial instrument using a combination of other financial instruments. There are many reasons why investors purchase synthetics including lower funding costs, liquidity creation, and broadened market access. Synthetics can provide a mechanism for real-world assets to be traded on the blockchain and scale liquidity.

UMA

UMA is a decentralized platform enabling two counterparties to create financial contracts of their own design. It uses self-enforcing smart contracts and a “provably honest oracle mechanism” to enable users to create financial products. Investors can design their own ERC20 tokens for creating tokenized derivatives that long, short or leverage exposure to real-world underlying assets. Oracles are a difficult challenge to solve. Hart Lambur, Co-founder of UMA, released a design for a Data Verification Mechanism (DVM), a blockchain oracle with economic guarantees around the cost of corrupting the system.

tBTC

tBTC was developed by the Keep Network. It is an ERC20 token that is trustlessly backed by and redeemable for Bitcoin. It is a way for users to deposit Bitcoin and mint Bitcoin tokens on Ethereum.

yTokens

Dan Robinson, Researcher at Paradigm, published a paper introducing a new framework, Yield Protocol, for issuing overcollateralized zero-coupon bonds on Ethereum that are both cash and physically settled. yTokens are like zero-coupon bonds: on-chain obligations that settle on a specific future date based on the price of some target asset, and are secured by collateral in another asset. By buying or selling yTokens, users can synthetically lend or borrow the target asset for a fixed term. yTokens are fungible and trade at a floating price, which means their “interest rates” are determined by the market. The prices of yTokens of varying maturities can be used to infer interest rates, and even to construct a yield curve. yTokens will trade at a discount to face value throughout their terms to reflect the time value of money, with the discount serving as a form of yield. yTokens can be built using an on-chain price oracle, or, when the target asset is an on-chain asset, using “physical settlement.”

Uniswap

Uniswap is a decentralised exchange and onchain market maker allowing for the exchange any ERC20 token, including the native ETH token, without middle men. It allows investors to contribute to liquidity pools for any ERC20 token, and therefore gain commissions in the form of exchange fees.

Where does that leave us?

Recent FinTech innovation has been largely limited to the *distribution* of financial products - the digitization of distribution via mobile and web. The *manufacturing* process of financial products has remained largely intact. Then cryptocurrencies & blockchains came along and disrupted the manufacturing process. Permissionless innovation is exponential: it allows anyone anywhere to become a financial engineer (both exciting and potentially risky!!) and create financial products enabling new applications. Products (e.g. fees from Uniswap liquidity pools) are uniquely enabled and are equivalent in novelty to the ETF.

Imagine creating a new financial market from scratch. Why do bonds, synthetics, and derivatives exist? What purpose does leverage provide? How do you sequence lending, borrowing, speculating, investing, and hedging? Some enthusiasts like Bitcoin because it limits fractional-reserve banking and the excessive leverage of the traditional financial system. Indeed, most of the leverage in crypto comes from overcollateralization.

People in crypto either want a stablecoin or levered exposure to speculate. High amounts of leverage are necessary to attain positions in synthetic markets. Easy leverage on position is necessary, especially for gamma exposure. Traders can get centralized leverage on BitMEX but there are limits. We are a long way away before we see unsecured lending onchain. A potential avenue for growth is through decentralized leverage. To this end, UMA recently released a research paper “BitDEX: Building a Decentralized BitMEX with Priceless Financial Contracts” describing a decentralized levered contract-for-difference (CFD) trading platform.

Financial instruments evolve in a market to serve a specific function. If that function is successfully performed, the instrument succeeds; experimentation and evolutionary iterations then follow. If the function is not performed successfully, the instrument eventually fades from use. I believe that the cryptocurrency markets will evolve in a similar manner to traditional markets and more sophisticated financial instruments will continue to emerge, few of which will gain critical mass (e.g. BitMEX’s perpetual swap) by addressing the needs of participants properly. Network effects and liquidity will be key. To this end, we are likely to see the development of 1) a synthetics market with limited leverage 2) a futures market that brings leverage 3) an options markets to make arbitrage realizable. As Matt Levine says “cryptocurrency markets keep rediscovering financial history for themselves.”

RelayNode Links: Sign up | Submit events

RelayNode NYC is curated by:

David Gogel

Advisor @ Paperchain fmr Associate @ Techstars' Blockchain Accelerator, Co-president @ Wharton FinTech

Hsin-Ju Chuang

Director of Community & Growth @TQ Tezos, ex-Head of Growth @Stellar/Lightyear, Side Hustle @Dystopia Labs

Things to Read

💰Funding & Exits

  • Layer1, the first U.S.-based vertically integrated Bitcoin mining company, raised $50M in a Series A (at a $200 million valuation) from Peter Thiel, Shasta Ventures, and Digital Currency Group.

  • Kava Labs, a decentralized finance project that offers collateralized loans and a stablecoin, is raising $3M via an IEO on Binance Launchpad. The token will be issued at a price $0.46 per KAVA token. Kava is offering 6.52% of its total token supply. Previously, Kava Labs had raised $5.48M and is backed by several notable investors, including Ripple and Arrington XRP Capital.

  • Juno, a digital “neo-banking” platform built on top of Ethereum lending protocol offering interest on USDC, raised a $3M Seed round, led by Polychain Capital and Sequoia Capital India’s accelerator programme Surge, with participation from Dragonfly Capital, Consensys Labs, Astarc Ventures and Singapore Angel Network.

  • MediaLab, a holding company that owns Whisper and Datpiff, announced it acquired Kik messenger. Carta, an SF-headquartered company that helps companies, investors, and employees manage equity and ownership, announced that they acqui-hired 51 former Kik employees. Financial terms were not disclosed.

  • Poloniex is spinning out from Circle into a new company called Polo Digital Assets, Ltd. This new company will have the full backing of a major Asian investment group that plans to spend more than $100M developing the exchange to offer new features, services and assets to global customers. US customers will no longer be able to trade.

💸 STOs / Stablecoins / Libra

  • The 21 initial members of the Libra Association formally signed the Libra Association charter, formalized the Libra Association council, elected the Board of Directors, and appointed members of the Libra Association executive team.

  • The gold-backed token market is heating up. Cryptocurrency assets manager CoinShares, wallet provider Blockchain and Swiss gold trading firm MKS jointly launched a gold token called DGLD, which is built on the bitcoin blockchain. This product joins B2C2’s gold derivative product, Paxos’s gold-pegged token and Digix’s DGX.

🌉Infrastructure

  • Wyre announced the launch of V2, helping to solve the fiat-crypto on-ramp issue. V2 is simple, secure, fast, and requires only a few clicks from users. KYC/AML is abstracted from the user by leveraging information already provided by Apple Pay and Google Pay.

🏦Institutionalization

  • Grayscale Investments, a digital currency asset manager, announced that Shares of Grayscale Digital Large Cap Fund have received approval from FINRA for public quotation under symbol: GDLCF on OTC Markets. GDLCF enables investors to gain exposure to the price movement of a diversified basket of large-cap digital currencies through an investment vehicle, avoiding the challenges of buying, storing, and safekeeping digital currencies directly.

  • Grayscale Digital released its Q3 2019 Investment Report. Q3 2019 was its strongest quarter since inception with $254.9M raised into its investment products, triple what was raised in Q2 2019 ($84.8M).

  • Binance, a leading global cryptocurrency exchange, announced a unique partnership with Amun AG, a leader in the issuance of cryptocurrency Exchange-Traded Products (ETP). The companies are launching a BNB ETP on the regulated segment of the SIX Swiss Exchange. The Amun BNB (ABNB) is backed initially by $20M worth of Binance coins (BNB).

🍰 Layer 1

  • Flipside Crypto published an article last week suggesting that the majority of blockchains are businesses. This was met with some pushback from the community - check out Chris Burniske blog post. Flipside Crypto followed up with a post on the 0.1%, 0.9%, and 99% rule of blockchains.

  • Alex Gluchowaski from MatterLabs explores threat models, specifically a nearly-zero cost attack scenario on Optimistic Rollup (which relies on strong censorship-resistance of Layer-1 for its security).

  • The 2nd Tezos protocol upgrade “Babylon” has been successfully activated. In this thread, Jacob Arluck from TQ Tezos breaks down Babylon, why it matters, and how it’s different than Athens (the 1st Tezos protocol upgrade).

⚖️ Legal

  • U.S. and international law enforcement officials announced the takedown of one of the world's largest child pornography sites. Chainalysis Reactor helped investigators analyze the website’s cryptocurrency transactions that ultimately led to the arrest of the site’s administrator and 337 users and the rescue of at least 23 children from their abusers.

  • Telegram filed a response to the SEC, writing that the SEC’s emergency injunction was unwarranted. Telegram is asking a federal court to deny the regulator’s motion to enforce a subpoena.

Highlighted Industry Jobs (non-exhaustive list for NYC / remote):

If you would like to highlight jobs or internships in future editions, please email links here.

Events this week:

Blockchain LatinX October Community Gathering at NYC Blockchain Center (Free)

When: Tue, October 22, 2019, 6:00 PM – 8:00 PM EDT

Where: NYC Blockchain Center, 54 West 21st Street, Suite 1001, New York, NY 10010

Do you have #FOMO from DevCon5? Devcon is an annual gathering held by the Ethereum Foundation for Ethereum Developers and community members. The conference this year will take place 10/8 - 10/11 in Osaka, Japan. If you're a ETH fan or a crypto-newbie, don't miss this meetup. Join us this month to catch up on the latest news and updates from Osaka.

Q&A with Jehan Tremback from Althea (Free)
When: Tuesday, October 22, 2019, 6:30 PM to 8:00 PM

Where: CoinShares, 101 Fifth Avenue Suite 605 · New York, ny

Jehan Tremback will speak about Althea, which allows people to bring faster, cheaper internet to their communities. Small antennas on rooftops spread the signal, while their owners earn money. Jehan will cover some of the technical details of the system, and go over learnings from running it in production in the past 6 months, supplying a small town in Oregon with internet access.

[Whitepaper Wednesday] Headless Brands (Free)

When: Wednesday, October 23, 2019, 12:00 PM to 1:00 PM

Where: Rent24, 25W 39th Street 14 Fl · New York, ny

In this meetup series, we spend a lot of time talking about the technical details of different peer-to-peer projects, but the social side of them is at least as important. This week, we're reading a paper about decentralized-projects-as-brands: https://otherinter.net/web3/headless-brands/

The story of a blockchain startup: inspiration, insights & the future ($6)

When: Wednesday, October 23, 2019, 6:00 PM to 8:00 PM

Where: Axoni, 156 5th Avenue, 7th Floor · New York, ny

In this session, you’ll hear the story of a blockchain startup from female founder, TongTong Gong - the inspiration, the successes & challenges raising capital and building technical teams, and the insights she's gleaned from her experiences in growing the company. TongTong is the co-founder of AmberData, a Blockchain and Digital Asset Data company. As she tell's the story of AmberData, she'll be sharing broader insights on how distributed systems benefit from blockchain, what's now possible that wasn't possible before, and her thoughts on the future of blockchain.

BitDevs: Socratic Seminar 97 (Free)

When: Thursday, October 24, 2019, 7:00 PM to 9:00 PM

Where: NYU Stern, 44 West 4th Room 1-70 · New York, ny

Discussion topics: Please see our link aggregator for a list of potential discussion topics. Feel free to make suggestions in the comments section below. A final topic list will be posted the day before the event. https://www.zotero.org/groups/691739/devsny/items/collectionKey/TLHMLG8R

IC3 Meetup Hosted by JP Morgan – “DC-Nets and Anonymity Protection” (Free)

When: Thursday, October 24, 2019, 6:30 PM to 8:30 PM

Where: J.P. Morgan, 383 Madison Ave · New York, NY

Anonymous communication is important for dissidents, activists, whistleblowers, journalists, and any individuals that might be under surveillance by other parties. Dining Cryptographer Networks (DC-Nets) provide the strongest anonymity protections and the lowest possible latency of any current cryptographic solution. Unfortunately DC-Nets are faced with three fatal flaws that prevent their deployment in the real world: prohibitive bandwidth consumption, denial of service attacks (DoS) by participants, and low fault tolerance. In this talk, I will discuss DC Nets and how they work, and then present Howl, our new open source project and decentralized anonymity network that solves these issues to make DC-Nets usable in the real world. We leverage a new aggregation protocol for bandwidth and fault tolerance issues, and use trusted execution environments (TEEs) to prevent DoS. All privacy is handled by the DC-net protocol and at no point does broadcast privacy rely on the trusted execution environment or aggregation network. About the Speaker: Tyler Kell is a Research Engineer at Cornell Tech & the Initiative for Cryptocurrencies and Contracts (IC3) in New York City. In a prior life, before becoming a researcher, he worked as a penetration tester and security consultant.

Crypto: Blockchain, Bitcoin and Beyond (Free)

When: Fri, October 25, 2019, 12:00 PM – 2:00 PM EDT

Where: U.S. Securities and Exchange Commission, 200 Vesey Street in Brookfield Place, 4th Floor Hearing Room, New York, NY 10281

Upcoming events

The Dawn Of The Enterprise Token (free)

When: Monday, October 28, 2019, 6:00 PM to 9:00 PM

Where: Rise New York, 43 W 23rd St · New York, NY

A speaker and panel series focused on the exploration of enterprise tokens like the JPM coin, Libra, & the Walmart patent, what it all means, where it is headed and how you might position for it.

NYC Blockchain Center Member Demo Showcase (Free)

When: Tue, October 29, 2019, 6:30 PM – 8:30 PM EDT

Where: NYC Blockchain Center, 54 West 21st Street, Suite 1001, New York, NY 10010

Join us for a showcase of new products from four of our member companies. BTBlock, Milligan Partners, and others will demo recent work ranging from identity and cybersecurity to enterprise transactions and tokenization.

BlockchainWeekend NYC ($39)

When: Thursday, November 7th - Sunday, November 10th

Were: TBD

BlockchainWeekend is a city-wide inaugural initiative supported by New York City Economic Development Corporation (NYCEDC) and the biggest tech ecosystem players in New York. It will take place on Thurs., Nov 7 to Sun. Nov 10th, with 50+ blockchain-focused events to take place across all five boroughs. With events covering in all industries of blockchain, you will experience the latest blockchain technology and how the technology is used. Browse and discover what you like!

Consensus Invest: NYC (Free for Qualified Investors, $899)

When: Tuesday, November 12

Where: New York Marriott Marquis located at 1535 Broadway New York, NY 10036.

Invest: NYC is an annual forum focused on delivering discussions on the trends and investment opportunities for cryptoassets, the fastest-growing alternative investments in history. Invest brings together global investors across asset management, commercial banks, hedge funds, pension funds, mutual funds, insurance companies and service providers, all with unique perspectives and experiences to underline the current sophistication of digital securities and commodities.

Notable Conferences

Nothing written in RelayNode NYC is legal or investment advice and should not be taken as such. No one should make any investment decision without first consulting his or her own financial advisor and conducting his or her own research and due diligence.