Consensus Day 2, Recapped: Behind China's Mining Ban

Also: SBF on the Bitcoin Mining Council, BT's NFT, and more |

What you need to know today in crypto and beyond  May 25, 2021 Sponsored By:     Welcome to The Node. This week is Consensus, CoinDesk's biggest event of the year, featuring panels, workshops, keynote speakers, fireside chats, networking and more, all exploring the evolution of digital finance and blockchain technology. The Node will bring the best of Consensus to your inbox in special morning and evening editions from May 24-27. There's still time to register for Consensus here.  If you were forwarded this newsletter and would like to receive it, sign up here.  Questions? Feedback? We'd love to hear from you! Simply reply to this email. –Cameron Hood, newsletter editor What happened at Consensus today  The Roundup 5 Takeaways From Consensus Day 2 1. Crypto could be a modernizing force for regulation: SEC Crypto may force the SEC to modernize its custody rules faster than it would otherwise, Commissioner Hester Peirce said at Consensus 2021. "The bottom line message I have is that we have work to do in modernizing our custody rules, all across the board," she said. "I think, as with many other areas, crypto may force us to do that modernization faster than we otherwise would do."   2. Making sense of the Mongolian mining ban China's highest economic planning agency has issued draft guidance on how to ban crypto mining in the autonomous region of Inner Mongolia. The guideline includes specifics on monitoring and punishing companies and individuals involved in crypto mining (including internet cafes!). Several Consensus panels discussed how this policy is different from a similar 2019 ban – with most in agreement that the new law, if it goes into effect, would affect a wider range of businesses. Ballet founder Bobby Lee, for one, raised the prospect that Mongolia may choose not to enforce the ban.  3. BTC, ESG, OPEC: SBF Yesterday evening two Bitcoin figureheads, Elon Musk and MicroStrategy CEO Michael Saylor, joined forces on the Bitcoin Mining Council, an apparent attempt to address Bictoin's worrisome environmental footprint. The council has been derided by some as a shadowy cabal that could damage bitcoin's fungibility or decentralization. FTX CEO Sam Bankman-Fried said today that an "OPEC-like" strategy wouldn't work because "anyone can come in and mine bitcoin." It's unknown how the council will address the hashrate problem besides advocating for greater transparency of where miners source their energy and encouraging the uptake of renewables. For his part, Bankman-Fried has pledged to start buying carbon offsets. Read more: 'This Isn't the Start of OPEC': New Bitcoin Mining Council Just Wants to Promote Greener Practices, Member Says 4. A peek at what state-backed interoperability looks like Yifan He, the CEO of Red Date Technologies, one of the technological backers of the Blockchain-Based Service Network (BSN), gave a first peek under the hood of the so-called blockchain of blockchains. Although still at a "very early stage," the state-backed BSN will integrate with AWS, Google Cloud, China Mobile and AliCloud to provide cloud services, and have a "Public City Node" layer to provide public and private blockchain services. The most significant technological advancement? BSN has "unified API gateways" to help developers connect to all the various supported chains with just a single set of credentials.  5. Meet the NFT maximalists Innovation is still happening in the NFT space at a breakneck pace, despite a recent pullback in hype and prices. Brian Transeau, the electronic musician known simply as BT, has unveiled one of the most innovative token projects to date. Called Genesis.json, the NFT/dapp is a 24-hour audiovisual event featuring about 15,000 bits of music and imagery all hand-sequenced and hard-coded by BT. Noah Davis, Christie's point person on NFTs, called the token standard "the art world's Napster" that could disrupt the auction system forever. He added that the auction house is planning to continue offering NFT "drops," with recent auctions involving blue-chip items such as Andy Warhol NFTs and more experimental rollouts.    –Daniel Kuhn A message from Nexo Your digital assets deserve a savings account in their BEST INTEREST. Leading crypto lender Nexo treats you, your crypto and your fiat to industry-best Crypto & Fiat services, featuring:    * Up to 12% interest on digital assets, paid out daily! * Yields available on BTC, ETH, LTC, BCH, XRP, XLM, EOS, TRX, LINK, BNB, PAXG, USDT, USDC, TUSD, PAX, DAI, HUSD, GBP and EUR. * No minimum or maximum limits on funds deposited, offering infinite opportunities to earn. * #ZeroFees on all transactions. * Military-grade wallet security and top-tier insurance on all custodial assets with SOC 2 Type 2 certified crypto custodian BitGo.   Get started at nexo.io This Week at #Consensus2021 The quixotic dream of crypto has always been personal financial freedom without reliance on traditional intermediaries. Today, more than ever, these technologies are offering individuals a self-sovereign financial future.    This week at Consensus by CoinDesk, our virtual big-tent conference, we examine the trails being blazed and the people leading the charge.    Join our Explorations track "Dimension C: Life in the Parallel Financial System," sponsored by eToro, with Brooklyn Nets point guard Spencer Dinwiddie, eToro CEO Yoni Assia, Venrock's David Pakman and more at Consensus by CoinDesk, running to May 27. Register today. Today's must reads Top Shelf CAPITAL FLOWS: Mark Cuban has made an undisclosed investment in Polygon, a layer 2 Ethereum scaling solution. The Dfinity Foundation unveiled a roughly $230 million grant fund to support initiatives to get more developers working on its Internet Computer. Crypto venture capital firm 1confirmation received $125 million for its third – and largest – crypto-focused investment fund. Finally, OneOf, a Tezos-based NFT platform built for musicians, raised $63 million from environmental activists, VCs and tech legends and will launch next month with collectibles from Whitney Houston, Doja Cat and Jacob Collier, among others.  TON O' FUN? Former investors in Telegram's scuttled blockchain project are suing, claiming the proposed buyout was insufficient. The Da Vinci Capital venture fund, which helped investors take part in the TON token project, said some clients did not receive enough time to decide on how they wanted to be compensated (either receive 72% of their funds then, or 110% in 2021). Telegram shut the $1.7 billion project after a court battle with the SEC, which claimed TON was an unregistered security. FAR OUT: Decentralized infrastructure provider SpaceChain will send two commercial payloads aboard SpaceX Falcon 9 rockets in June. The space-blockchain startup will install a "space node" in the International Space Station (ISS) to decentralize the Ethereum network on its first launch. The second mission will bring Bitcoin nodes to a YAM-2 satellite. WATCH IT GROW! [Chi-chi-]Chia Network is on "an accelerated timeline" to issue its initial public offering, the company's chief operating officer and president said Monday. Gene Hoffmann described the schedule for an IPO as "near-term" not long after Bloomberg reported the programmable money platform had completed a $61 million Series D funding round.   –D.K. What others are writing... Off-Chain Signals Can BlockFi Be Trusted with Your Bitcoin? (Decrypt) Ontario regulator accuses Poloniex of 'disregarding' securities laws in enforcement action against crypto exchange (The Block) Coinbase is hunting top editorial talent – for journalism or marketing? (Protos) –D.K. Putting the news in perspective The Takeaway Avivah Litan is a distinguished analyst at Gartner Research specializing in emerging technologies. She has deep insight into everything from enterprise blockchain to the buzzy world of NFTs. CoinDesk sat down with her to discuss what's the latest in emerging tech.    You've written and advised clients on enterprise blockchain. Where does enterprise blockchain stand now that Microsoft Azure has decided to shut down its blockchain department? Does this signify anything for IBM or ConsenSys' experiments?    Blockchain as a Service (BaaS) is not an area where enterprises need the most help. BaaS addresses the easiest part of blockchain implementation, i.e., provisioning and operating nodes, and related basic services. Instead, enterprises need help aligning their use cases and business ecosystems with blockchain distributed ledger technology. Most users are not clear on why they need the technology.   The value of permissioned blockchain is hard to understand since it does not implement the most revolutionary aspect of public blockchains – i.e., trust minimization and elimination of central authority, achieved via decentralized consensus. Instead of eliminating central authority, permissioned blockchain replaces it with task force authority managed by consortia. Task forces are good at producing studies and academic papers but often fail at getting projects implemented. Too many cooks in the kitchen translates to competing priorities and budgets.   Several blockchain service providers add application services on top of basic infrastructure services, making them more useful to enterprises than just basic BaaS. These services include Kaleido and Consensys Quorum (Ethereum-based). In fact, Microsoft suggested its BaaS users consider Quorum as an alternative to their dying service. But the problems inherent to task force management and group governance are never going to go away, no matter how great the blockchain technology services are. Companies simply do not want to give up control. If anything, they want to usurp more of it. The simple answer is to recognize this fact – central authority is here to stay in the enterprise. But that doesn't mean centralized organizations cannot embrace decentralized applications wrapped by their centralized services.   In the meantime, there is real business value in enterprise blockchain so long as all participants agree to the terms of participation. Our 2020 survey showed that about 14% of projects made it into production, but even then, transaction volume is limited. The promising enterprise blockchain use cases we identified and documented are still in early stages, mainly because of process and governance issues and not because of technology. Project participants are often stuck in those areas, and access to BaaS infrastructure services is the least of their concerns and won't help them get unstuck.   What do you make of China's Blockchain-Based Service Network (BSN)? Is this a legitimate model for enterprise blockchain going forward?    It looks like a well-thought-out, easy-to-use and cheap service if all you want are infrastructure services. It's interesting how they only allow international customers on the public permissionless blockchains, but won't let their Chinese customers use them. In any event, I wouldn't advise any of our clients to use BSN because of privacy and confidentiality issues – it would be hard to trust.   Major corporations like ING Bank and Bank of America are discussing the disruptive potential of DeFi. Is this how crypto penetrates the mainstream – by getting folded into a banking app?   Centralized companies like banks and insurance companies must determine how to add value, protections and new revenue streams to DeFi while their legacy businesses are cannibalized by decentralized protocols and contracts. DeFi technology also needs to mature, and the user experience needs to markedly improve. This transition WILL inevitably happen. We already see this trend unfolding during recent Gartner client inquiries. The future of enterprise blockchain includes centralized protection services and products wrapped around decentralized apps.    It will take three to five years to come to fruition, but it will combine the best of both worlds – new-school innovations with old-school protections, such as KYC, custodial services, fraud detection, escrow services and more. At that point, many standalone enterprise blockchains will morph into CeDeX (Centralized Decentralized Everything) environments.   The use of ransomware is increasing, and increasingly profitable. Many seem to suggest that crypto's open access and semi-anonymous design is part of this growing problem. Is that true? What would increased surveillance or the presence of law enforcement mean for the blockchain industry?    Law enforcement can already look at all the bitcoin transactions used for ransomware. They have a better chance catching the criminal if they get paid in bitcoin than if the criminal uses the opaque banking system transfers and launders the money through mule accounts. Increased law enforcement analysis of blockchain transactions alone (WITHOUT subpoenaing centralized exchange records) should not be an inhibitor to blockchain growth and innovation. On the other hand, more regulation on KYC and AML at exchanges will not be positive for innovation and will likely not do that much in catching bad actors.   Look at how far KYC and AML has NOT taken us in preventing criminals from using the banking system for nefarious activities.   Are there any consumer-level privacy/data preserving tools or online hygiene techniques you might recommend?    Certainly we advise to keep all sensitive data off-chain and use ZKPs or hashes of linked data (and other methods) if information must be linked to blockchain operations and functions.   What do you think of $DESK? Does tokenization have any promise for media companies or in the fight against mis/disinformation?   I didn't check it out, but I am a big believer in using blockchain to track provenance of information akin to a whitelist. I've written on that and can send you more info if you want to see it. You also have to detect misinformation along with whitelisting good information on blockchains since most information will not be whitelisted (so that provenance can be tracked). You need a layered approach that includes misinformation detection to cover the entire population of information out there.   –D.K. The Chaser... ATTENTION: Scammers have been sending fraudulent emails with links to sites disguised to look like coindesk.com. If you are in doubt about a link, type https://www.coindesk.com directly into your browser; do not copy and paste. Remember, if something seems too good to be true, it probably is. The Node   A newsletter from CoinDesk   See Previous Editions Copyright © 2021 CoinDesk, All rights reserved.    250 Park Avenue South New York, NY 10003, USA You can manage your preferences here or unsubscribe from all CoinDesk email.