Industry Weekly Report | DeFi financing hits a new high, Kazakhstan invests $700 million in mining, Tesla employees report Russian hackers

OKEx Intelligence Bureau's weekly industry report helps you quickly review industry dynamics and clarify industry trends.

Table of contents:

• Market Overview

• Cryptocurrency Market

• DeFi Ecosystem

• Industry Voice

• Blockchain industry empowerment

• Industry anecdotes

Market Overview

According to Coingecko data, as of 17:00 on September 4, 2020, the total market value of the cryptocurrency market was 347 billion US dollars, and the total market value fell by 8.7% in 7 days. The market sentiment index was 40, and the level was panic; the USDT premium rate was +0.011859%, and the average over-the-counter price was ¥6.92.

According to OKEx spot data, as of 17:00 on September 4, BTC was temporarily reported at $10,447, up 11.6% in 7 days, and OKB was temporarily reported at $5.103, down 6.7% in 7 days. The long-short position ratio of OKEx BTC contract was 1.22, with the number of long parties in the market slightly superior; the total contract position was 826 million USDT, down 24.5% from last week.

1. Cryptocurrency Market

1. On September 2, Ethereum miners’ income hit a record high, with transaction fees accounting for 74%

According to Cointelegraph on September 4, on September 2, Ethereum miners' income reached an all-time high of 51,541 ETH, which was worth about $23 million at the time. Although this figure is still lower than the record of $32 million set on January 10, 2018, the price of ETH at that time was about three times the current price. More importantly, in 2018, only 12% of miners' income came from transaction fees, but on September 2, miners' transaction fees accounted for 74% of their income.

[Interpretation] On September 1, Ethereum miners earned $17 million in transaction fees, 3.7 times the previous record in December 2017 and January 2018. In contrast, Bitcoin miners only generated $1.5 million in transaction fees on September 1, which is only 9% of Ethereum miners' fees. Obviously, this is very beneficial to Ethereum miners, and on the other hand, it is also good for graphics chip manufacturers such as AMD and Nvidia.

2. Kazakhstan plans to raise more than $700 million for cryptocurrency mining

According to CryptoPotato on September 2, Kazakhstan's newly appointed Minister of Digital Development Bagdat Mussin claimed that the country is already in talks to attract more than $700 million in investment to expand the cryptocurrency mining sector. It is reported that the plan was first revealed at a Senate hearing in mid-June. At that time, Kazakhstan already had 14 cryptocurrency mining farms, which attracted about $200 million in investment over a few years. Therefore, he urged the country to increase its mining efforts.

[Interpretation] Kazakhstan has very rich natural gas resources, and the cost of oil and gas power generation is extremely low, about one-fifth of thermal power. Therefore, many domestic miners transport second-hand mining machines to Kazakhstan for mining on a small scale. Of course, all of this must be based on compliance. Now Kazakhstan invests in cryptocurrency mining as a country, which is not only a full utilization of cheap electricity, but also can earn foreign exchange, killing two birds with one stone. This is actually similar to the domestic Yunnan, Guizhou and Sichuan "hydropower consumption" policy.

3. Deloitte: Nearly 89% of respondents believe that digital assets will be critical to their industry in the next three years

According to Cointelegraph on August 30, Deloitte released a report titled "2020 Global Blockchain Survey". More than half of the respondents believe that digital assets will be very important, and nearly 89% of the respondents believe that digital assets will be essential to their industry in the next three years. The report shows that in traditional financial centers, cryptocurrency remains a priority in the blockchain world. In addition, the community has played a key role in the development of blockchain and cryptocurrency since its inception. Now, the industry must continue to recognize the important role that the community will play in the further development and adoption of the digital asset space.

[Interpretation] Deloitte Touche Tohmatsu Limited is one of the world's four largest accounting firms, with extensive auditing business worldwide and a long-standing reputation. Its survey results are of great reference significance. Deloitte's survey results show that the concept of decentralization is playing a role in the paradigm shift of the centralized world. When a few pioneers build the infrastructure for the decentralized world, this wind of innovation will come with a devastating speed and breadth. Whether you are ready or not, it has already arrived.

4. Filecoin Space Race global token rewards increased from 4.2 million to 4.6 million

On September 2, Beijing time, Filecoin core staff member ian released an announcement on Slack. The main points are as follows: 1) Global reward upgrade. When the total computing power of the entire network reaches 200PiB, 1.5 million FIL rewards will be unlocked, and the total reward amount will be as high as 4.6 million FIL; 2) New support for small miners. For miners who register and submit sectors before September 2, if they complete 1TiB of computing power, they can apply for 500 FIL rewards. If the effective computing power is greater than 10TiB, they can apply for up to 1,000 FIL rewards; 3) Miners must complete storage and retrieval order power of more than 80% and complete sector upgrades before they can apply for rewards; 4) The trading robot has been open source, and miners can make it more perfect; 5) The official is studying rewards for the best community members.

[Interpretation] After much anticipation, the Filecoin testnet is here. Is the mainnet far behind? At this critical moment when DeFi is taking a break and the Filecoin mainnet is launched, the spring of distributed storage projects is bound to come.

2. DeFi Ecosystem

1. The growth of DeFi has driven a surge in the number of Ethereum smart contract calls, which has tripled in three months

Glassnode tweeted on September 3 that with the rapid growth of DeFi in 2020, the number of smart contract calls (Smart Contract Triggers) on the Ethereum network has surged. Since the beginning of this year, the number of contract calls initiated by external accounts has almost tripled, from less than 300,000 times per day to more than 850,000 times currently. The number of internal Ethereum contract calls has increased from less than 1 million in June to more than 3 million per day currently, more than tripling in just three months.

[Interpretation] On the Ethereum network, each step of the smart contract needs to be called and executed. When the overall activity increases, the number of calls will also increase. Of course, all on-chain data on the Ethereum network has been increasing recently. For example, the total amount of tokens anchored to BTC on the Ethereum chain has risen to 57,000, equivalent to about 680 million US dollars, which also set a record high; the miner fee income on the Ethereum network has also set a record high, reaching 23 million US dollars.

2. Data: Nearly 50% of global blockchain investment and financing projects in August were related to DeFi

According to statistics from Zero One Think Tank, there were 49 financing events in the global blockchain-related industries in August 2020, of which 31 disclosed specific financing amounts, with a total financing amount of approximately US$370.9227 million, of which nearly 50% of blockchain investment and financing projects were related to DeFi. Compared with the record highs in both the amount and number of financings in July, the enthusiasm for investment and financing in the blockchain field in August has decreased, with both the amount and number of financings falling significantly compared with July.

[Interpretation] Note that the same phenomenon, that is, a large number of institutions entering the DeFi project, also occurred on the eve of the DeFi bull market!

3. Polkadot will soon test a new mechanism to automatically increase the number of validators

On September 3, Bill Laboon, director of technical education at the Web3 Foundation, tweeted that the Polkadot community has started a discussion on Polkassembly about increasing the number of validators on the Polkadot network. Based on the discussion on Polkassembly, and by comparing and learning from the different solutions adopted by the Kusama network to increase the number of validators, the official proposed three solutions: 1) community members submit public votes or initiate external motions; 2) planned event mechanism; 3) automatic increase function. At the same time, the official said that for Kusama, the recommended ratio is 40%, and the mechanism will be tested soon.

[Interpretation] Some people believe that cross-chain projects represented by Polkadot and Cosmos will become another focus of the blockchain industry after DeFi. In addition, we have also observed that recently, Phala Network, the privacy infrastructure of Polkadot's ecosystem, has a valuation of tens of millions of dollars, and investors include Candaq Group, IOSG Ventures, SNZ and many other well-known institutions. DeFi/ETH2.0/cross-chain/Filecoin, the blockchain industry is very lively in 2020.

3. Industry Voice

1. Vitalik: The only way to solve the problem of high transaction fees is to expand capacity

On September 2, V God tweeted that EIP-2929, announced today, may increase the gas cost of some particularly sensitive operations, making it safer to increase the gas limit. But this is only a tiny short-term relief, and reducing the fee from 465 to 372 gwei will not solve the problem. In a rollup-heavy ecosystem, the on-chain gas fee will remain the same, and 465 gwei may even become the standard, but most transactions will occur inside the rollup, and the fees actually paid by users will be hundreds of times lower. On the other hand, sharding increases the base layer capacity by about 100 times. This may lead to a 100-fold reduction in fees, although it will not be reduced so much in the long run because people's needs will also increase. In short, the only way to solve the problem of high transaction fees is to expand capacity. Today, Tether, Gitcoin, and other applications are right to migrate to ZK rollups. I am excited about the upcoming optimistic rollups, which will expand rollup capacity to full EVM contracts.

[Interpretation] Why is capacity expansion said to speed up transactions? The reason is very simple. Take Bitcoin as an example. The Bitcoin block size is 1M, the block time is 10 minutes, and a single transaction is 250Byte. Therefore, the number of transactions confirmed per second is: 1024*1024/10/60/250=6.99 transactions. The Bitcoin network usually confirms 7 transactions per second, which is calculated in this way. If you want to increase the confirmation speed, the most direct way is to increase the block capacity. For example, if the Bitcoin block size is increased to 8M, the number of transactions confirmed per second is 7*8=56 transactions.

2. OKEx Xu Kun: ETH is still the biggest beneficiary of the DeFi boom

At noon on August 31, Xu Kun, Chief Strategy Officer of OKEx, posted on Weibo that ETH is still the biggest beneficiary of the DeFi boom. She said that first of all, ETH is the most important underlying asset in the liquidity pool. Taking Uniswap as an example, there is currently a total of 1.56 billion US dollars in liquidity, of which ETH has reached 760 million US dollars, accounting for half of the volume. In addition, ETH has a large circulation volume and is easier to obtain in the secondary market. It is also the first choice for most CeFi users to enter DeFi; secondly, the activeness of DeFi has led to a continuous increase in the demand for ETH as a gas fee, approaching the historical high in 18 years; thirdly, DeFi's liquidity mining has attracted more assets to be locked in the Ethereum ecosystem. In addition, many popular DeFi projects have issued their own tokens based on Ethereum, and carrying more diversified assets has also further consolidated the value foundation of ETH.

[Interpretation] Indeed, the liquidity created by DeFi for Ethereum has boosted the value of the Ethereum network. Liquidity mining is essentially increasing the liquidity of Ethereum and DeFi project tokens. The greater the liquidity and the more active the transactions, the more fully the system value will be exerted. For example, in liquidity mining, even if the transaction fee reaches hundreds of dollars, there are still people willing to pay for it. This is why transactions can generate value (of course, labor can create value, and transactions can reflect the size of value). On the contrary, in the centralized financial world, the US dollar is experiencing a shortage of money caused by inefficient liquidity. No matter how hard the Federal Reserve borrows, it is still difficult to improve the problem of insufficient liquidity of the US dollar. The fundamental reason is that there is a problem with the US dollar system-everyone puts the US dollar in the financial market instead of using it for production and exchange, which is completely opposite to the active transactions on Ethereum.

3. Cobra: Miner revenue will become the main disagreement among Bitcoin traders in the next decade

In the early morning of September 3, Cobra, co-owner of Bitcoin's official forum Bitcoin.org, sent out several tweets in a row, saying, "If you are smart, you should worry about Ethereum's fees. In the long run, as Bitcoin block rewards decrease, to keep the blockchain the safest, miners must be incentivized to mine Bitcoin. There are two solutions, either increase the block size to allow more transactions to occur on the chain, so that miners can get more benefits from fees; or soft fork to change the fee policy and calculate a certain percentage of fees based on the value of the transaction. In the first decade of Bitcoin, the problem of miners needing economic incentives to mine Bitcoin did not exist because the block rewards were large and the price of Bitcoin had been rising sharply. However, this will be a major disagreement among Bitcoin traders in the next decade. The Lightning Network will actually make the problem worse because it greatly reduces the transaction fees of miners while reducing on-chain transaction activity."

[Interpretation] Cobra is known as Cobra in the industry. He is the holder of Bitcoin's official forum Bitcoin.org and a supporter of Bitcoin's expansion route.

4. Blockchain Industry Empowerment

1. Shenzhen Taxation Bureau and Tencent signed a new agreement to promote the implementation of blockchain application innovations in more tax-related businesses

According to the Securities Times e-company news on September 1, recently, the Shenzhen Taxation Bureau of the State Administration of Taxation and Tencent signed the "Smart Taxation" Innovation Laboratory Blockchain Application Cooperation Framework Agreement, which is a new upgrade of cooperation in the field of "blockchain + taxation" applications after the two parties jointly built the "Smart Taxation" Innovation Laboratory. According to the agreement, the two parties will expand the depth and breadth of the application of blockchain electronic invoices; consolidate the leading advantages of blockchain technology; promote the implementation of blockchain application innovations in other tax-related businesses; and jointly create a "taxation-industry" alliance chain ecosystem to help the development of the real economy.

2. Postal EMS uses Ant Chain technology to trace the admission notice, which has been made available to candidates across the country

According to Tencent News on September 1, Postal EMS uses Ant Chain technology to trace the admission notice, which has been launched for candidates nationwide, aiming to further improve the level of digitization and eliminate the security risks of candidates' admission information in the recruitment, submission, and mailing links. Note: The EMS traceability platform uses multiple parties' trust endorsement. The first is the college admissions office, which imports the admission notice information into the system and completes the information chain at the same time to ensure that the information cannot be tampered with from the source; the second is Postal EMS, which completes the information chain at the same time as the admission notice mail is processed in the collection, transfer, and delivery links, ensuring that the information cannot be tampered with in each link; the third is candidates, who can query the admission notice traceability information on the chain through the official EMS channels.

3. Encryption technology is included in China’s list of prohibited export technologies

On August 28, the Ministry of Commerce and the Ministry of Science and Technology adjusted and issued the "Catalogue of Technologies Prohibited and Restricted from Export in China" (Announcement No. 38 of the Ministry of Commerce and the Ministry of Science and Technology in 2020). In the restricted export section, "Cryptographic Security Technology (No.: 186103X)" was added to the computer service industry, with the following control points: 1. Cryptographic chip design and implementation technology (high-speed cryptographic algorithms, parallel encryption technology, cryptographic chip security design technology, on-chip cryptographic chip (SOC) design and implementation technology, high-speed chip implementation technology based on high-speed algorithm standards); 2. Quantum cryptographic technology (quantum cryptographic implementation method, quantum cryptographic transmission technology, quantum cryptographic network, quantum cryptographic engineering implementation technology)".

According to the Regulations of the People's Republic of China on the Administration of Technology Import and Export, all transfers of technology abroad, whether through trade, investment or other means, must strictly comply with the provisions of the Regulations of the People's Republic of China on the Administration of Technology Import and Export. The export of restricted technologies must apply for a technology export license from the provincial-level commercial authorities. Only after approval can substantive negotiations be conducted with foreign parties and technology export contracts be signed.

4. Michigan, USA uses blockchain voting platform Voatz to vote at the Democratic Convention

According to Decrypt on September 3, Michigan recently used the blockchain voting platform Voatz for the fourth time to vote at its Democratic Convention, recording a total of nearly 2,000 votes. Voatz had previously conducted pilots in several states in the United States, including Arizona, Michigan and West Virginia.

5. Several federal agencies, including the U.S. FDA and the Treasury Department, are experimenting with blockchain technology

According to Cointelegraph on August 30, several federal agencies such as the U.S. Food and Drug Administration (FDA) and the U.S. Treasury Department have begun using blockchain. Henry Francis, deputy director of research at the FDA's Center for Drug Evaluation and Research, has successfully developed a blockchain-based application that automatically obtains encrypted data from many sources in real time. In addition, the Treasury Department's Office of Financial Innovation and Transformation (FIT) is also trying blockchain, with its first application used to track mobile devices and the second application used for software license management. FIT also worked with the National Science Foundation to test whether the use of blockchain can improve the grant payment process. Earlier news, the U.S. Department of Agriculture (USDA) has certified BeefChain, a blockchain company that tracks the beef supply chain.

5. Industry Anecdotes

1. Tesla founder confirms that hackers bribed company employees with Bitcoin to install ransomware

According to Forbes on September 2, Tesla founder Elon Musk confirmed in a tweet that Russian man Egor Igorevich Kriuchkov bribed an employee at the Tesla factory in Nevada with $1 million in Bitcoin to install ransomware on Tesla's computer network. The employee did not carry out the plan, but notified other Tesla employees who contacted the FBI. The FBI arrested the Russian man in Los Angeles on August 22, and if convicted, he faces up to five years in prison.

[Interpretation] Will the honest Tesla employee be rewarded by Iron Man?

2. Class action lawsuit against Tezos ends in $25 million settlement

According to Cointelegraph, on August 28, Judge Seeborg approved Tezos' $25 million settlement agreement, and the three-year class action lawsuit against Tezos (XTZ) finally came to an end. According to the ruling, the funds will be distributed to "all individuals and entities" who participated in Tezos' 2017 initial coin offering from July 1 to July 13 and sold XTZ at a loss before November 25, 2019, did not sell tokens before November 25, or could not access XTZ due to password loss. The case began in December 2017, when the plaintiff sued Tezos founders Kathleen Breitman and Arthur Breitman, as well as the Tezos Foundation, alleging that the project's ICO contained an unlicensed securities offering.

[Interpretation] All cryptocurrency-related fundraising activities initiated in the United States must comply with the regulations of the U.S. regulatory authorities. Any violation of the regulations will be severely punished. Regulatory agencies related to cryptocurrency regulation include but are not limited to: 1) The U.S. Commodity Futures Trading Commission (CFTC) and the U.S. Securities and Exchange Commission (SEC) tend to believe that Bitcoin is a commodity; 2) The Internal Revenue Service (IRS) tends to believe that Bitcoin is a security, and investors need to pay transaction tax and capital gains tax in accordance with tax laws; 3) The U.S. Treasury Department (FinCEN) believes that Bitcoin is a currency, so a special anti-money laundering license is required for digital currency service providers; 4) The legal community believes that Bitcoin is a currency, so there is the Chief Justice of Washington’s statement that "Bitcoin is a currency" and it is necessary to comply with anti-money laundering regulations; 5) The New York State Department of Financial Services (NYDFS) has launched a BitLicence regulatory license specifically for cryptocurrency-related businesses (except for mining pools and mining businesses).

3. Malaysian authorities shut down two crypto mining companies that stole electricity, with the value of the electricity involved reaching more than $600,000

According to Cointelegraph on September 1, Malaysian officials recently shut down two organizations suspected of stealing electricity for mining. The two organizations stole more than $600,000 worth of electricity in three years. Nazlin Alim Sadikhi, regional director of the Malaysian Energy Commission, said that one of them had 100 mining machines and had been mining for three consecutive years. The other company's 48 mining machines have been mining cryptocurrencies for two years.

[Interpretation] Do you want Bitcoin or personal freedom?

4. CipherTrace claims to have developed a tool to track Monero , but is questioned by Monero researchers

According to Cointelegraph on August 31, cryptocurrency intelligence company CipherTrace claimed that it had developed a new tool to track Monero transactions. CipherTrace CEO Dave Jevans said that this tool has been developed for more than a year and the U.S. Department of Homeland Security will use it to track Monero transactions to support criminal investigations.

[Interpretation] Many people in the Monero community doubt the effectiveness of CipherTrace's claim to have developed a tool that can track Monero. Monero researcher Sarang Noether said that in his opinion, CipherTraceCipherTrace cannot obtain user identities from basic wallet addresses and transaction data, so it cannot identify Bitcoin users, so it did not provide "substantial details" to prove the effectiveness or scope of the tool. Monero is still Monero!