Author: Yves Longchamp

Tokenomics are the rulebook defining a crypto asset monetary policy, aligning the incentives between all relevant actors.

DeFi is a new financial paradigm that generates significant benefits. As of September 2021, DeFi transactions were funded by no less than USD 88.7 billion. The risks associated with DeFi are also significant and amplified by its unregulated environment. Since 2017, the evolution of the crypto industry has shown that a regulatory approach that can provide certainty to the private sector, support innovation, and mitigate money laundering and investors’ risk can boost cryptocurrencies adoption. The same holds true for decentralised finance (DeFi). The critical question is how to regulate DeFi. In this context, the current debate in the US suggests…

Since the cryptoasset market peaked in May, all major cryptoassets have taken a hit, and prices have remained under pressure. Measured in US dollar, the most indices dropped by double digits in June, more than Bitcoin (-5.3%), illustrating that altcoins have been impacted more heavily. However, last month’s performance differential should be taken with a pinch of salt. Indeed, most crypto indices’ year-to-date performance is more than 100%, while price of bitcoin has increased by about 21%, showing the massive outperformance of altcoins so far this year. The success of altcoins mirrors the rise of DeFi applications that have boomed…

The largest decentralised asset management protocol on the Ethereum blockchain is currently Yearn Finance. It was a pioneer in this space and has grown to one of the largest projects in Decentralised Finance (DeFi). A thorough analysis of Yearn Finance and its token “YFI”. Yearn Finance is a decentralised finance (DeFi) protocol that pioneered asset management for passively earning yield on stable and risky assets. One can think of it as an automated asset manager allocating depositors’ funds into the best yield generating strategies for the highest returns. What started as a simple yield generating product called iEarn by developer…

Globally, the regulatory landscape for crypto financial services is fragmented, but developing and improving. Market participants investing in crypto assets or operating related processes may face considerable regulatory uncertainty, depending on their chosen jurisdiction. Our own records show that over 100 jurisdictions and at least 15 supranational bodies have taken formal steps to regulate crypto financial products and processes over the last few years. None of the supranational bodies have banned or prohibited it, and the large majority of countries have embraced the asset class by increasing regulatory certainty for market participants and promoting innovation in a risk-controlled way. Crypto…

Two authoritative market intelligence reports on the illicit use of cryptocurrencies, released in February 2021, evidence a marked decrease in the phenomena during 2020 – compared to 2019 – but also new worrying trends in the areas of ransomware and Decentralised Finance (DeFi). The most recent market intelligence on illicit use of cryptocurrencies made available during February 2021 by Chainalysis and CipherTrace are summarised as follows. Marked decrease in the illicit use of cryptocurrencies The year 2020 recorded a transactional value of $10bn associated with illicit on-chain activities. This number represents 0.34% of the total value of cryptocurrencies transactions. One…

Centralised Exchanges have played a pivotal role in the crypto asset ecosystem, acting as fiat ramps, custodians, exchange, market makers and VCs. Algorithmic smart contract based Decentralised Exchanges (DEXes) offer a non-custodial alternative and have turned into serious competition. Bitcoin started in 2010 as the first crypto asset, and the only way to acquire it initially was through mining or transacting with a miner. Mt. Gox, launched in July 2010, soon became the leading exchange to buy and sell bitcoins for US dollars. Enthusiasts did not have to mine or barter with miners to acquire bitcoin anymore. As the crypto…

Many look at Bitcoin (BTC) as a very volatile asset, unattractive for traditional investors looking to diversify their portfolio. Yet digital assets seem to drastically improve the Sharpe ratio, a measure frequently used to quantify the performance of a portfolio in contrast to risk. In the first few days of 2021, bitcoin (BTC) price reached a new all-time high of about $42,000, fell back by $10,000 to increase again to $38,000 at the time of writing. This episode depicts what bitcoin is to many investors: an attractive but volatile asset. With this backdrop, is there any benefit to add bitcoin,…

We discuss how blockchains’ inherent inability to connect to the real world limits their use and how oracles provide the solution by acting as middleware to their connection to the world. “The oracle problem” will be a central part of the analysis as well some of the leading projects. We find that oracles are pervasive in their use across decentralised applications and find use throughout all key themes and implementations of blockchain technology such as decentralised finance (DeFi), interoperability and supply chain. We also cover key oracle projects that are enabling the growing ecosystem of decentralised applications today. Blockchains are…

Interoperability is the ability of software to exchange information between different ecosystems. In the case of blockchains, it has the potential to break the silos and to create a network of blockchains: A broad overview of blockchain interoperability and the Polkadot project. More and more people are considering blockchains as safe and promising. Thousands of projects relying on different blockchains have emerged in the last few years. They have specialised in payments, smart contracts platforms, data storage solutions, supply chain management, to name a few. These blockchains are either public or private and have made different choices in terms of…

The regulatory framework for the Distributed Ledger Technology (DLT) in Switzerland was being worked out for years already. The adaption of Swiss law is now getting to the final stages, with overwhelming support from the Federal Coucil, and expected to be completed in 2021. Switzerland has been developing a regulatory framework for DLTs since 2014, following the principle of ‘technological neutrality’. Consequently, Switzerland has been adapting existing principles-based laws to technological innovation in a pragmatic way, aiming to preserve systemic stability, grant consumer protection and favour sustainable investments in the DLT space. The ongoing consultation on the adaptations to various implementing…

Even though blockchains are generally considered to be superior to traditional networks, no single blockchain is perfect. Due to the inability to maximise the components scalability, security and decentralisation – the so-called Blockchain Trilemma – there are distinct use cases for different chains. Before diving into the dynamics of the trilemma, we broadly define what scalability, security, and decentralisation mean: Scalability is the ability of the blockchain to accommodate a higher volume of transactions Security is the ability to protect the data held on the blockchain from different attacks or blockchain’s defence against double-spending Decentralisation is the redundancy in the network that makes…

One of the advantages of the blockchain technology is supposed to be the added security and resilience to cyber attacks. The open-source nature of blockchains does make them an open target for different types of attacks though. We explore three popular attacks and how to prevent them. Examples of attacks to blockchains range from traditional and general threats that all network platforms face, to unique and specific attacks to blockchains. Before we go into depth about the types of attacks, we identify 4 elements of a blockchain which can face vulnerabilities: Blockchain nodes Smart contracts Consensus mechanisms Wallets Distributed Denial…

DeFi has been a strong driving force for the digital assets’ narrative this summer. Within DeFi there are multiple investment strategies one could adopt. We analyse the performance of different strategies and conclude that active buying and selling of governance tokens was the best strategy. In the third quarter of 2020, decentralized finance (DeFi) seized a major mind share of the cryptoasset industry. With billions of dollars on public blockchains, the intuitive next step is to generate yield through an on-chain credit system aka the blockchain banking layer. What happened in DeFi this summer is a step ahead in an…

DeFi has significantly improved token design and distribution compared to the ICO era. Still, the current yield farming trend does not seem sustainable. It’s likely that only bigger protocols, which have added value and have defensibility, will survive in the long term. While not yet complete, this year can already be classified as unexpected and surprising! It is unexpected because no one imagined that a novel virus would paralyse the global economy and lead to the greatest economic contraction on record. In the United States, GDP contracted by about one third (at an annualised rate) in Q2—more than in the…

Mining is the process of adding transaction records to Bitcoin’s public ledger of past transactions. This is the only way to create new Bitcoin and is a highly expensive process. We will provide a summary of the history and profitability of Bitcoin mining businesses. Bitcoin mining has come a long way since it launched in 2009. The cumulative revenue from bitcoin mining as of 4 August 2020 was just shy of USD 19 billion, with approximately USD 2.8 billion in revenue to date in 2020 alone. As bitcoin mining becomes increasingly sophisticated, our article investigates the viability of a mining…