Cryptographic Infrastructure Opportunities: Security, Reliability, Scalability

Hello and welcome to Protocol Fintech. This Monday: Building Crypto Infrastructure, Fed Eyes Marcus, and Biden Executive Order Gets Results – Sorry, Reports.

out of the chain

Cryptocurrencies are like securities in a crucial way: prices move in inexplicable ways and people are constantly trying to graft explanations after the fact. The Ethereum merger went off without too much of a hitch last week, but the price of Ether failed to recover, leading some to conclude that the technical transition was somewhat of a failure. This assumes that the Ethereum blockchain only exists to enrich ether holders, which – I hate to tell you – is not the case. More likely, savvy traders had already factored in the long-planned meltdown, and the only ones buying Ether that day were the naive ones the smart set loves to scam. What was I saying about crypto like the stock market?

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—Owen Thomas (E-mail | Twitter)

Build it and they will come

Despite a drop in token prices, more and more companies are getting into blockchain. And a host of startups are building infrastructure to accommodate them. Venture capitalists looking for massive success — like the one they’ve scored in traditional infrastructure over the past decade — think they have another shot with this wave of blockchain.

Police custody is a great opportunity. Several multi-billion dollar companies have already dabbled in protecting customers’ digital assets.

  • One startup that benefits from this decision is Fireblocks. Founded in 2018, Fireblocks is known for its custodial service and wallets, especially multiparty compute or MPC wallets, which do not rely on a single private key and require multiple people’s approval to access funds, a feature suitable for business.
  • Several other major companies provide custody and help manage the crypto assets of major institutions, including Anchorage, which was recently valued at $3 billion, and BitGo, which recently saw its acquisition deal by Galaxy Digital collapse. in the midst of a legal dispute. Others, like Alchemy, recently valued at $10 billion, help companies manage crypto node infrastructure.
  • Fireblocks, valued at $8 billion in January, has hit $100 million in annual recurring revenue, the company said recently. Revenues grew 600% last year and the company expects 300% growth this year, said Michael Shaulov, its co-founder and CEO.

Security, reliability, and performance are big issues that need to be addressed. Blockchains are still far too slow and vulnerable for business needs.

  • An example of a new security need is automated auditing of smart contracts, which is usually done manually now. Smart contracts have seen large-scale hacks, raising concerns about code holes and operational vulnerabilities. Companies like OpenZeppelin and Tenderly monitor smart contracts and other parts of a product to notify engineers in real time of issues, while others like Chaos Labs focus on scenario planning to prepare for issues.
  • New methods are emerging to perform verification and compliance to determine if people are who they say they are through KYC and AML checks – an area of ​​interest for regulators, the Lux Capital investor said Grace Isford, and therefore an opportunity for startups.
  • To scale cryptonets, new technologies such as zero-knowledge proofs should be essential. While many industry players expect zero-knowledge proofs to eventually provide a robust method for scaling Ethereum, current ZK rollups on layer 2 blockchains are not yet compatible with the large-scale Ethereum virtual machine at a reasonable cost. That means it’s still difficult for most apps to run on ZK rollups, Isford said.

While consumer apps and NFTs tend to garner the most press and consumer interest, infrastructure is what will make the industry thrive, investors say. “What’s under the hood is far more important than what’s built on top if you’re looking for real maturity and long-term viability,” said Keli Callaghan, partner at Arrington Capital.

— Tomio Geron (E-mail | Twitter)

A version of this story appeared on Protocol.com. Read it here.

A MESSAGE FROM VERSAPAY

With a tough economy and high inflation, cash flow is essential. Check out our exclusive report in partnership with Wakefield to find out what’s really slowing down cash flow and what you can do about it.

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on the money

Goldman Sachs’ Marcus unit is under intense scrutiny by the Federal Reserve. Fed officials asked Goldman management about the consumer-focused online banking division.

UK regulators have issued a warning regarding FTX. The Financial Conduct Authority has issued a consumer warning about the Sam Bankman-Fried crypto exchange, saying it is not licensed by the regulator to offer any financial services or products in the country.

Shopify will allow staff to choose a combination of cash and stock compensation. Employees can adjust their mix of cash, restricted stock units and stock options, with the ability to withdraw stock immediately.

Celsius is asking a bankruptcy court for permission to sell its stablecoin holdings. The crypto lender revealed that it has $23 million worth of stablecoins held by three of its corporate entities.

Bitcoin has fallen to its lowest level in three months. The cryptocurrency fell 5% early Monday to a low of $18,276 as investors dumped risky assets in anticipation of higher interest rates.

Do Kwon could face a red notice from Interpol. South Korean prosecutors have asked Interpol for help in arresting Do Kwon, founder of the company behind the collapse of UST and luna coins, as they seek to charge him with alleged crimes, including violations of capital market laws. Kwon denied being on the run.

Heard, the Biden crypto EO edition

The Biden Administration fleshed out the details of its crypto strategy in new reports from key departments. Here are some of the most crucial points.

The Treasury Departmentwhich published three reports, cited the potential benefits of a digital dollar, but also said “there could be unintended consequences of a US CBDC, including runs to the US CBDC in times of stress.”

“As with any financial asset, CBDCs could be used by criminals, including terrorists, for illicit activities,” the ministry also said.

The ministry insisted on the need to “coordinate and promote consumer education efforts on crypto-assets” to “ensure that user-friendly, reliable and consistent educational materials are accessible and inclusive, where possible”.

“Automated same-day clearinghouse transactions and blockchain-based authorized payment systems are examples of the rapid pace of innovation that appears to be reshaping domestic and global transfers,” says the department.

“Darknet markets – which facilitate the exchange of cryptocurrency for criminal purposes – remain an important target of law enforcement efforts,” the justice department also highlighted in a separate report.

“The scale of the challenge posed by digital assets also requires partnerships between government actors and the private sector,” added the DOJ.

“Tokenization, or the digital representation of real-world objects other than assets issued by traditional financial institutions or entities, has potential utility in applications such as manufacturing, healthcare, the Internet of Things ( IoT) and supply chain monitoring”, the Commerce Department says the report.

Coming

The pinnacle of banking automation began Sunday and continues through Tuesday in Seattle. Session topics cover everything from how to develop for cloud technology to budgeting strategies for automation.

The U.S. House Committee on Financial Services will hold a hearing on Tuesday on alternative payment systems and national security. The hearing will include representatives from Chainalysis, TRM Labs, the Atlantic Council, the Center for a New American Security, and the Wilson Center.

The same committee will hold another hearing later today on diversity and inclusion in insurance companies. Witnesses include representatives from Allstate, Evolution Advisors, the American Council of Life Insurers and the Congressional Research Service.

InsureTech Connect runs Tuesday through Thursday in Las Vegas. The event claims to be the world’s largest event for insuretech leaders and features speakers from Google, Deloitte, ServiceNow and more.

MarketWatch’s Best New Ideas in Money festival takes place Wednesday and Thursday at Center415 in New York City. This one-of-a-kind event features speakers like Ray Dalio of Bridgewater, AOL co-founder Steve Case and Jasleen Kaur of Nyca Partners.

The NextGen Payments and RegTech Forum is also this Wednesday and Thursday in Athens, Greece. The event discusses how to move businesses forward amidst technological and regulatory changes.

On Thursday, the US House Committee on Financial Services will hold a hearing on the impact of wildfire risk on the insurance market. Insurers must adapt to rising risk as wildfires burn with increasing frequency, particularly on the West Coast.

Don’t miss Protocol Enterprise’s “Securing the Enterprise” event on October 4 at 10 a.m. The online event will cover cybersecurity threats faced by all online businesses and best practices for protecting businesses against them. Reserve a place now.

A MESSAGE FROM VERSAPAY

image

With a tough economy and high inflation, cash flow is essential. Check out our exclusive report in partnership with Wakefield to find out what’s really slowing down cash flow and what you can do about it.

Learn more

Thanks for reading – see you tomorrow!



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Cryptographic Infrastructure Opportunities: Security, Reliability, Scalability


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