Poly Network hacked, NFTs are back and more |

What you need to know today in crypto and beyond

August 10, 2021

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–Daniel Kuhn

Today's must-reads

Top Shelf

SENATE SITUATION: A final attempt to soften the crypto tax provision in the bipartisan U.S. infrastructure bill was shut down by a lone senator, in a major blow to the domestic digital asset industry. A compromise amendment from Senators Lummis and Toomey received support from Democrats, Republicans and the Treasury Department, but was ultimately blocked by an unrelated call to increase military spending. The bill is now moving back to the House.

BITCOIN DEV GRANTS: The Human Rights Foundation’s Bitcoin Development Fund, alongside Compass Mining, selected a new grant recipient: Jon Atack. The $80,000, one-time donation supports Atack’s contributions to Bitcoin Core and is part of a larger set of donations from the HRF to improve the Bitcoin network.

DEFI HACKS: DeFi-related attacks made up roughly 75% of major hack volume this year, according to blockchain analytics company CipherTrace. DeFi’s portion in attack volume is up 2.7 times from 2020, though crypto crime overall is declining over recent years, from $4.5 billion in 2019 to $1.9 billion in 2020 and $681 million in the first seven months of 2021. On Tuesday, DeFi platform Poly Network was the most recent addition to the 75% figure as hackers drained roughly $600 million in crypto from the protocol.

NFTS ARE BACK: NFT marketplace OpenSea made a surprise finish atop the Ethereum leaderboard for gas consumption yesterday, finishing ahead of DeFi exchange Uniswap, which typically holds the spot. With NFTs’ resurgence in popularity, OpenSea is projected to pass $1 billion in trade volume this month with 300,000 unique users.

ETH OFF CEX: The proportion of ether (ETH) held on centralized exchanges dropped to 9.4% of the total supply, the lowest in three years. Eddie Wang, senior researcher at OKLink, attributes the outflow to DeFi and the popular practice of wrapping ether. Wrapped ether (WETH) now makes up 5.7% of the total supply.

–Eleanor Pahl & Eli Tan

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Overheard on CoinDesk TV

Sound Bite

“It really comes down to them understanding not only how the technology works but how important it’s going to be for the future of our economy.”

–Digital Chamber President Perianne Boring, on the infrastructure bill, on CoinDesk TV’s “First Mover.”

A message from CoinDesk

A Paradigm Shift in Mining

The dynamic crypto mining industry has been even more active following China's crackdown. The global hashrate has largely shifted to North America, making the U.S. a key mining hub where institutions now take central stage.

In this sponsored webinar on Aug. 10, Foundry CEO Mike Coyler explains how this new demographic of miners has special requirements that the company has been catering to through its rapidly growing Foundry USA Pool and other services. Register for free.

What others are writing...

Off-Chain Signals

Venmo launches crypto cashback for credit cards; meanwhile, CNBC discusses workarounds to the crypto tax requirement for using said crypto credit cards
Testnet gives Cardano its first-ever smart contracts (Crypto Slate)
An Interview with the Anon Who Bought 88 Punks for $5.5M (The Defiant)

–E.P. & D.K.

Putting the news in perspective

The Takeaway

Crypto Gets Political
The old saying was, crypto may not be interested in politics but politics is interested in crypto. Now, crypto is interested in politics, too.

Over the past few weeks, the blockchain industry has mobilized against a heavy-handed attempt at increased regulation. It was a show of force against a crypto tax provision in the Biden administration’s $1 trillion infrastructure package, a provision that fundamentally misunderstands and endangers the domestic cryptocurrency market. These efforts will likely have been in vain, in the short term, as the political machine bulldozes over attempts to amend the bill.

The experience seems like a turning point for crypto as a serious political force in Washington, D.C. Some of the industry’s most visible and/or respected voices – like Ryan Selkis, Meltem Demirors and Barry Silbert – are signaling their new political awareness and willingness to spend big supporting politicians who understand this emergent industry.

“Electoralism is going to become a fact of life for crypto now that it has become popular, even mainstream,” Paul Dylan-Ennis, an assistant professor in the College of Business at University College Dublin, said over Telegram. “We will see more and more serious political organizations” from now on.

There are calls to donate to the coffers of Washington insiders like Rep. Cynthia Lummis (R-Wyo.), likely the first U.S. senator to own bitcoin, and Sen. Ron Wyden (D-Ore.), a longtime advocate for financial and digital privacy. The rumblings of new crypto PACs (political action committees) or parties. And a new meme, “I’m a single interest voter” for crypto.

It’s more than just political signaling on Twitter: As the Washington Post reports, cryptocurrency firms are on track to spend more than $5 million on lobbying this year, twice the total from just last year. Organizations like the Blockchain Association and Coin Center have seen donations pour in.

The irony is radicalization in crypto once meant dropping out of the political process. By design, crypto empowers individuals over hegemonic corporations and states – it cuts out the middleman and bureaucrat. That’s why there was some resistance to even calling senators from some corners of the blockchain industry – any engagement with the State is anathema.

But if banks and big tech firms are willing to spend to protect their interests, then so should crypto.

“It's already risky and tricky enough to run validator nodes on emerging crypto networks without Uncle Sam getting involved and making up a whole new set of rules to try to follow,” Lauren G., a noted Ethereum coder, said. She would contribute to a crypto PAC when it comes time to vote, “especially if they take illiquid NFTs.”

Going forward, it’s entirely possible that politicians will run for office with an explicit crypto mandate. With 13% of Americans trading crypto in the last year and many more aligned with its values of freedom and self-reliance, the Crypto Vote is likely to become a political force that professional pols can't ignore.

“Crypto is bipartisan – and perhaps the only thing out there that is bringing Americans together at a grassroots level rather than pulling them apart,” Balaji Srinivasan, angel investor and essayist, said in a private message.

Still, crypto won't be captured completely by the state and the lobbying process. It might sound trite to say code doesn’t care about Washington, D.C., but in this case it’s true.

“I'm already considering other countries to operate in and, frankly, wouldn't mind leaving the U.S. with the direction all of this is going,” Lauren said. “Competition and innovation will always transcend national boundaries.”

–D.K.

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Crypto State 2021: Middle East

Even though many countries in the Middle East restrict or outright ban activities related to blockchain technology, the region is having its crypto moment. From Dubai’s first-of-its-kind Bitcoin Fund listing to the Bank of Israel’s trial of a digital shekel, interest is picking up in the region as crypto companies work closely with regulators in the Middle East and North Africa (MENA) to gain some clarity about oversight of digital currencies.

Join us as we jet-set through the Middle East on our #CryptoState2021 virtual tour and explore how different markets are thinking about crypto, their roadblocks and challenges, and crypto’s impact on the region. Register for the Crypto State: Middle East virtual tour on Aug. 11.

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