Vitalik Buterin compares DeFi tokenomics to the Fed’s money printer

Ethereum’s co-founder has taken aim at coins designed to incentivise yield farming, comparing their underlying economics to irresponsible monetary policies

Vitalik Buterin, the co-founder of Ethereum (ETH), has again taken to Twitter to warn against naive bullishness in the decentralized finance (DeFi) sector, comparing the economics of yield farming tokens to the Federal Reserve’s money printing.

Yield farming - providing liquidity to earn interest in the form of tokens - has taken the crypto community by storm and sparked the DeFi boom.

However, Buterin highlighted the aggressive supply inflation of many governance tokens, saying this puts downward pressure on the prices of “coins that are getting printed nonstop to pay the liquidity providers.”

Seriously, the sheer volume of coins that needs to be printed nonstop to pay liquidity providers in these 50-100%/year yield farming regimes makes major national central banks look like they're all run by Ron Paul.

Buterin is not alone in his assessment of these inflationary aspects of the DeFi sector, with Twitter user ‘Larrypc’ likening yield farming to “a giant Ponzi scheme.”

Yield farming at this point is just a giant Ponzi scheme

Someone forks a well-established project, makes minimal changes, gives it a funny name

Some insiders farm a large amount of coins, shill it on social media, and dump it on naive investors at massively inflated prices

— Larry | larrypc.eth (@Larrypcdotcom) August 31, 2020

Not everyone is a skeptic, with investor David Lach responding: “If you see those printed coins as new cryptocurrencies (like BTC, ETH etc.) then yes, it's insane. But if you see them as equity in new crypto startups/projects that generate cash-flows, it's not that crazy. There will always be new startups with real potential in crypto.”

But Buterin countered that he sees “no plausible path” for many projects to generate cash flow, emphasizing the need for fee-generating applications to sustain a project over the longer term:

So far the only strategy toward generating long-term fees that I see is some kind of weird financial attack to grab liquidity and steal network effect from Uniswap. And I'm pessimistic on that strategy.

Buterin’s comments come in the light of decentralized exchange and yield farming platform SushiSwap exploding in popularity over the weekend owing to an aggressive governance token distribution strategy intended to incentivize early users, with 10 times the base rate of 100 SUSHI per block set to be paid out to liquidity providers.

The yield farming frenzy has reignited concerns regarding Ethereum’s scaling capacity, with the complex smart contract executions underpinning the transactions of many DeFi projects resulting in fees in triple-figures to perform basic operations.

DEX) for ERC-20 tokens, Uniswap, has emerged as the network’s largest source of gas fees — driving roughly $7 million in fees over just the past month.

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Analysts predict Yearn Finance's ETH vault could spark renewed Ether bull run

Excitement for Yearn Finance’s yETH vault has reached a fever pitch after rumors of the product’s release circulated on Twitter.

Analysts predict that the imminent launch of yETH by Yearn Finance could trigger a renewed surge in buying pressure on the ETH markets. The product, which is being voted on by YFI token holders, will automatically find the highest yielding decentralized finance (DeFi) protocol/strategy for Ether (ETH) deposits.

Yearn Finance’s core products are ‘vaults’ that seek the best returns for yield farmers, while also pooling funds to reduce gas fees. With Yearn’s vault purporting to guarantee the highest returns while removing the labor and research needed to maximize the profitability of yield farming, combined with hype around the brand, the yETH vault is expected to drive up demand for ETH.

Some members of the crypto community speculate that guaranteed premium yields may attract capital that might have otherwise been designated for Ether staking in phase 0 of the ETH 2.0 rollout.

The yETH vault from @iearnfinance is going to be a black hole for ETH.

That is, once ETH goes in, it is going to be very hard for it to come out.

Now think about what this does to the price of ETH.

— Anthony Sassano | sassal.eth ‍ (@sassal0x) August 31, 2020

Nuggets News founder Alex Saunders also believes that yETH has major potential:

The new product that has me excited & even more bullish on ETH, is yETH. This adds to a long list of catalysts for Ethereum, but it also reduces the available supply. Anyone who owns ETH can earn the best yield automatically by HODLing yETH

However, some crypto media outlets reporting that Yearn Finance’s Ether ‘vault’ was voted into existence last night, a thread on the project’s governance forum suggests the vote is yet to have taken place — with user ‘Juanma’ describing reports of yETH’s launch as “clickbait.”

Yearn Finance’s founder Andre Cronje tweeted on August 21 that the first community built strategy for an ETH vault was “coming soon.” Then, on August 31, the Twitter account of DeFi Farmer John announced yETH had launched after a test candidate for the project had been deployed. 

However, Yearn developer Banteg replied, stating: “There will almost certainly be another deployment since we’ve already identified a few things to improve.”

Meanwhile, demand for Yearn’s governance token YFI has also reached a fever pitch, with the token more than doubling in price over three days and its market cap growing to more than $1 billion for the first time. YFI currently ranks as the 27th-largest crypto asset and is trading for nearly $34,000.

Despite YFI’s massive price relative to other cryptocurrencies, Saunders believes many traders are underestimating the room that YFI still has to grow given its maximum supply of just 30,000 tokens,

Messari’s Ryan Watkins similarly asserted that people are “being too conservative with their YFI targets,” offering $1 billion as a somewhat tongue-in-cheek price target.

Yearn Finance is currently the sixth-ranked DeFi protocol with $792 million in locked funds according to DeFi Pulse.

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Malaysian authorities arrest crypto miners for $600K power theft

The two crypto mining operations stole almost $20,000 in electricity monthly.

Officials in the Malaysian state of Johor shut down two crypto operations which had stolen more than $600,000 worth of electricity over three years. 

According to a Sept. 1 report from local news site The Star, Malaysia’s Energy Commission, power utility firm Tenaga Nasional Berhad (TNB), and local officials arrested individuals responsible for the theft of more than $600,000 in electricity used for crypto mining. The authorities raided two mining operations in the city of Iskandar Puteri.

Nazlin Alim Sadikhi, a regional director with the country’s Energy Commission, said one of the crypto mining operations with 100 rigs had been operating nonstop for three years. The other setup with 48 rigs chugged along mining crypto for two years. The owners only paid $7-14 monthly for electricity, but together with the rig operators siphoned almost $20,000 worth of power monthly.

“We found that illegal wiring was installed so that electricity was supplied directly and not through the TNB meter,” Sadikhi said.

Bitcoin (BTC) mining operations illegally obtaining power are an ongoing problem in Malaysia, though crypto mining and trading are allowed in the country. 

Under Section 37 of Malaysia’s Electricity Supply Act, those who steal electricity in some place other than a “domestic installation” for more than one offence face a maximum penalty of $1.2 million or ten years’ imprisonment. However, The Star reported the individuals responsible for the recent theft may face ten years in jail or a maximum fine of $240,000 if found guilty.

TNB engineer Mohd Satari Mohamad said authorities had raided 90 similar installations in 2020, totaling 288 since 2018. Cointelegraph reported last year that TNB had lost more than $25 million in electrical costs as of June 2019, with one August raid taking down 33 operations that had stolen $760,000 worth of electricity.

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Major Swiss health insurance company now accepts crypto payments

Policyholders can pay in either Bitcoin or Ether through Bitcoin Suisse.

A major health insurance provider in Switzerland has made Bitcoin and Ether payments available to its policyholders.

According to an Aug. 31 announcement, Atupri Health Insurance is partnering with crypto financial services company Bitcoin Suisse for its 200,000 customers to make payments using Bitcoin (BTC) or Ethereum (ETH). Atupri, based in Bern, will not be holding any digital assets itself, but rather just receiving fiat payments in Swiss francs once the BTC or ETH is exchanged by Bitcoin Suisse. The insurance company — with roughly $887 million in annual sales as of 2019 — will have customers paying for any fees associated with mining. 

“As digital pioneers in the healthcare sector, we anticipate social trends and offer insurance solutions with long-term prospects, said Caroline Meli, Head of Marketing and Sales at Atupri. “Blockchain technology and the associated use of cryptocurrencies are becoming increasingly important.”

Bitcoin Suisse custodies more than $1 billion in assets and has been making forays into different financial sectors for some time. In May, the crypto broker added custodial support and staking services for Tezos (XTZ), and included gold, silver and platinum for trading on its platform. It also reportedly has plans to hold a security token offering next year and list its assets on the stock exchange by 2022.

Residents of Switzerland are often at the forefront of crypto solutions. The country is home to the ‘Crypto Valley,’ a FinTech-friendly region based in the city of Zug where many institutions and even public transportation accept crypto. The Swiss municipality of Zermatt also recently rolled out a Bitcoin tax payment option in partnership with Bitcoin Suisse.

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Binance Card to soon expand to US as Swipe taps new partnership

All services on Swipe are immediately available on Binance Card.

Binance Card, a newly launched cryptocurrency debit card powered by Binance and the Binance-owned crypto commerce company Swipe, could soon enter the United States. This is all thanks to a new partnership which unlocks direct USD deposits for users in the country.

Announcing the news to Cointelegraph on Monday, Swipe representatives said that USD checking accounts will be enabled on the platform through a partnership with Evolve Bank & Trust — a banking institution operating in the United States.

Swipe users will be able to directly deposit their paychecks into these newly available accounts from Evolve Bank & Trust, and then use those funds to buy and sell supported cryptocurrencies on-demand. The accounts will include Federal Deposit Insurance Corporation insurance up to applicable limits, the execs said.

While further information about Binance Card could not be disclosed at the current stage, this new development seems to bring the card closer to the U.S. market. “Everything Swipe offers becomes available for Binance Card,” a spokesperson for Swipe told Cointelegraph. The person noted that the new feature is expected to be available “in [the] next few weeks.”

Cointelegraph has reached out to Binance with additional queries and will update this article pending any new information.

Binance acquired Swipe in early July 2020 in order to focus on crypto debit cards. Shortly after the companies announced the acquisition on July 6, Binance Card officially debuted in countries within the European Economic Area, or EEA, on July 14.

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South Korea’s Central Bank Starts Technical Phase for Digital Currency Ahead of 2021 Pilot

The Bank of Korea is seeking a partner to help develop the architecture for a potential central bank digital currency.

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First Mover: Huobi Takes on OKEx in Futures, Opening New Front in ‘Chinese’ Rivalry

Huobi is taking on OKEx in the business of bitcoin futures trading, opening a new front in the ongoing rivalry between the two Chinese-led exchanges.

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