Russia

MakerDAO Debts Grow as DeFi Leader Moves to Stabilize Protocol

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A Russian government agency has requested contractor bids to find ways to block censorship-resistant internet technologies, like mesh networks. The list includes messaging app company Telegram’s yet-to-be-launched blockchain. 

The call for bids was published on March 3 by the General Radio Frequency Center, the agency controlling the use of radio frequencies in Russia, and first reported by the Russian-language cryptocurrency news outlet Forklog.  

According to the notice, the agency is looking for research on what technologies can be used to access restricted content, including content deemed extremist, beyond traditional internet protocols. 

The research should point at ways to block access to such tech, the agency told would-be contractors.

The list of such technologies in the document includes mesh networks, internet of things (IoT) protocols and protocols allowing anonymous browsing, including Invisible Internet Project (I2P), The Onion Router (TOR), Freenet, Zeronet, anoNet – and one blockchain, the Telegram Open Network (TON).

Such technologies are “used to build anonymous Darknet networks,” according to the agency. Bitcoin (BTC) isn’t mentioned, nor any other cryptocurrencies.

‘Unblockable’

It’s not clear how the list was formed. TON could have been included because the blockchain network Telegram has been building is designed to support applications for peer-to-peer networks (TON P2P Network), website hosting (TON DNS) and anonymity (TON Proxy).

According to the TON white paper, such a system, once launched in full, would allow browsing beyond the restrictions imposed by state actors on the service providers. “User network anonymity can be easily preserved by means of TON Proxy, and all services will be effectively unblockable,” the white paper said.

Even as Telegram is currently mired in a legal battle with the U.S. Securities and Exchange Commission (SEC), which is seeking to halt TON’s launch, there are signs the company keeps rolling out the components of the future network. Last week, Telegram published instructions for registering websites using TON DNS. 

The General Radio Frequency Center did not respond to CoinDesk’s request for comment by press time. 

Telegram has a history of confronting Russia’s authorities, which have tried to control the app or shut it down. In 2017, Russia’s counterintelligence agency, the Federal Security Service (FSB), demanded Telegram share the encryption key for its flagship messenger app. Telegram lost in court trying to fight that requirement but refused to hand over the keys anyway. 

Since the summer of 2017, Roscomnadzor, the General Radio Frequency Center’s supervising agency, has been trying to block Telegram in Russia but failed. Telegram used a technique called domain fronting, hiding its traffic behind other services’ domains.

As a result, while chasing Telegram, Roscomnadzor kept misfiring, blocking multiple other websites but not Telegram and provoking the anger of internet users and a wave of memes. 

Iron Curtain games

As for the future TON network, according to Mitja Goroshevsky, the CTO of TON Labs, the startup working on tools for TON developers, blocking TON would be even a trickier task.

“Even if there is an ‘Iron Curtain’ and all the communication channels with the outside world are blocked, chances to block it are around 5 percent,“ Goroshevsky said, pointing out that even during the Cold War people tuned into U.S. radio stations including Voice of America or Radio Liberty using home transistors. 

“It’s gonna be just a new disgrace for Roscomnadzor,” he said.

And to interfere with the network itself, no less than 30 percent of all validators would have to be compromised, and most validators will most likely be located outside of Russia, Goroshevsky said. 

The reason being, in Russia, there are no big cloud service providers like Google or Amazon, plus the risk of arbitrary blocking discourages validators from relying on Russia-based servers, he said.

In the meantime, Russia recently tested a mechanism for unplugging its segment of the internet from the rest of the world, following a law calling for a “sovereign Runet” similar to China’s Great Firewall.

Mar 13, 2020 at 18:29 UTC

Hand of a person casting a vote into the ballot box during elections https://www.shutterstock.com/image-photo/hand-person-casting-vote-into-ballot-552864952

Credit: ShutterstockWilliam FoxleyBrady Dale

MakerDAO’s emergency shutdown option – which was weighed by community members following the appearance of a $4 million debt bubble on the decentralized finance (DeFi) platform – will not pass at this time. If a shutdown was triggered by the Maker team, all dai stablecoins in circulation would convert to the underlying asset, ether (ETH).

A flaw in Maker’s system for generating collateralized debt positions (CDPs) caused some $4 million in ether to be swiped up for free. This was caused by network congestion on the Ethereum network and Maker’s pricing oracles failing to update quickly enough.

The amount of debt on the Maker platform continues to rise, however, hitting nearly $5.7 million as of press time Friday. 

This is likely caused by high chain congestion on Ethereum and the inability to add collateral to positions on Maker. Gas prices on the Ethereum mainnet continued to increase in the early UTC hours Friday with prices hitting 200 Gwei, according to data site Eth Gas Station.

Read more: DeFi Leader MakerDAO Weighs Emergency Shutdown Following ETH Price Drop

In an executive vote Friday, the Maker team is expected to address three pressing issues following Thursday’s turmoil: the dai peg, system debt and debt auctions. The 12 listed proposals that MKR holders voted on were intended to normalize the platform’s operations. 

Regardless of chain congestion, people with dai loans have poured ETH into the Maker protocol to shore up positions that could be undercollateralized if another drop in ETH’s value were to hit. 

Those not able to get collateral into the system to cover their loans were forcefully liquidated by the protocol, however.

In an earlier vote Friday, the MakerDAO community voted to adjust the system’s risk parameters. Though the move comes in the wake of a dramatic 30 percent drop in ETH’s price, the changes were first discussed during a March 5 governance call.

The voting ballot was first issued Friday at 4:30 UTC and passed three hours later, according to the Maker Foundation. The vote can be executed 24 hours after passage, or 7:30 UTC on March 14. 

The ballot’s content includes measures to increase the supply of dai on the market, which experienced a squeeze given market demand. Indeed, the demand for dai was reflected in the stablecoin’s interest rate reaching 22 percent Thursday on the second-largest DeFi platform, Compound.

Maker will also print new MKR governance tokens to refund CDPs that lost funds Thursday with the stated goal of returning dai to its dollar peg, according to a Maker Foundation blog post.

DeFi entrepreneur Ryan Berckmans described the action as a “haircut” for MKR holders in the spirit of the DeFi platform’s white paper. 

“During a Debt Auction, MKR is minted by the system (increasing the amount of MKR in circulation), and then sold to bidders for Dai,” the white paper states.

Both investment firm Paradigm and venture-backed DeFi startup Dharma have announced intentions to help Maker through the debt crisis by purchasing the newly printed MKR.

“MKR buyers should prepare for sustained high gas prices, and downward pressure on ETH and MKR,” Berckmans said in a summary of the March 12 call. “We should plan for global markets to potentially crash further, which may correlate with further crypto drops.”

Overall, MakerDAO stakeholders are now focused on returning dai to its 1:1 peg with the U.S. dollar after investors rushed to the stablecoin as a safe haven. 

The stablecoin shot as high as $1.22 per token yesterday and has since fallen to $0.98, according to CoinGecko. Data providers CoinMarketCap, CoinGecko and Messari all show dai’s price hitting an all-time high Thursday.

The peg was last discussed in the March 5 governance call.

“Major swings in ETH price are what is going to determine a lot of what happens with migration and with dai price,” Maker community member Vishesh said during the March 5 call.

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Whale Watching: Exchange Data Contained Early Warning of Thursday’s Bitcoin Dump

Mar 13, 2020 at 16:35 UTCUpdated Mar 13, 2020 at 16:54 UTC

the-whale-beached-1617

Image via Wikimedia CommonsOmkar Godbole

Whale Watching: Exchange Data Contained Early Warning of Thursday’s Bitcoin Dump

The big drop in bitcoin’s (BTC) price Thursday was in the making since March 8, data on the flow of funds into exchanges indicates.

The biggest cryptocurrency by market value collapsed from $7,900 to a 10-month low of $4,700 on Thursday and extended the decline to 12-month lows below $3,900 early Friday. 

Data provided by blockchain analysis firm CryptoQuant shows inflows into major exchanges, or deposits, began rising at higher-than-usual rate beginning March 8. One way to read this is as a possible co-ordinated action by whales to dump the cryptocurrency.

btc-inflows-all-exchanges
BTC inflows all exchanges
  • X-axis represents the block number, a proxy for time
  • The left side Y-axis is bitcoin’s price.
  • The right side Y-axis is the number of incoming coins into all exchanges.

Coins began flowing into exchanges at a faster rate starting from block number 620.8K, mined on March 8. Prior to that block, the average inflow per transaction was about 1,000 BTC. But after that, inflows ranged from 1.500 to 6,000 BTC in the run-up to Thursday’s price drop. 

Meanwhile, the cryptocurrency’s slide began with a near 10 percent drop on March 8. In the following three days, BTC posted marginal losses – before plunging by a staggering 39 percent on Thursday

The implication is that whales – individuals, or entities, that hold large amounts of digital currencies – started moving coins from wallets to exchanges at least four days in advance of the dump. 

binance-btc-inflows
Binance BTC inflows

A similar pattern can be seen at the world’s largest exchange, Binance. Prior to 620.817K, the average inflow per block was about 100 BTC. After that point in time, inflows ranged from 130 to 1,702 BTC in almost every block.

Notably, that huge inflow of 1,702 BTC was observed in block number 620.965 when bitcoin’s price was trading near $8,000. 

Again, the data suggests big players had begun preparing for the massive liquidation since March 8.

bitmex-btc-inflows
BitMEX BTC inflows

Similarly, inflows into BitMEX fluctuated between 97 and 1,994 BTC from block numbers 620.8K to 621.3K. 

One transaction, for 1,000 BTC, was recorded in block number 621,256 when bitcoin’s price was hovering around $7,900.

Lead indicator?

It is doubtful anybody could have predicted the magnitude of the sell-off seen on Thursday. That said, the increased inflow of BTC into exchanges was a sign the big sellers were getting ready to offload their holdings, which usually translates into big price slide.

The lesson: Keeping a close eye on inflows into exchanges can help leveraged traders avoid getting trapped on the wrong side of the market.