NEWSLETTER #6: Announcing Codefi Compliance
Hoping this email finds you well and adjusted (or adjusting) to our new patterns of behavior. This month, we look at some of the more nuanced applications of the Ethereum blockchain, and we recap both the launch of Codefi Compliance and the state of insurance on Ethereum.
Calls Into the Ether
Society has progressed through the ages on the heels of movements, rebellions, uprisings, protests, and outcries. These movements propel history forward, but are also misrepresented by our historical amnesia. Media bias, historical white-washing, intentional censorship, political agendas, and retrospective guilt can result in the distortion or dangerous misrepresentation of our reality.
On the Ethereum blockchain, messages in the past have been sent, stored, and maintained in perpetuity, beyond the influence of media, government, censorship, or erasure. The people who have sent these messages want to ensure we do not forget. A “call into the ether” is a call into eternity.
(Tip for the Etherscan links below. Navigate to: “Click to See More” → “Input Data” → “View Input As” → “UTF-8”).
| I Have A Dream |
From Lex Sokolin’s (Global Co-Head Codefi) June 1 Newsletter, the Fintech Blueprint:
It’s your school. It’s your television. It’s your job, and your legal system, and your board of directors, and your taxes, and your government representative. The gears of our countries turn on centuries of history, centuries literally built out of the things we find uncomfortable to watch today. You want to look away from the protests demarcating the fault lines in our society? You find the looting ugly, and the kneeling disrespectful?
Look at the history of power. Its threads are woven into our money. Our economic empire and its sovereign choices, stripping black lives of dignity, choice, and opportunity through a myth of capitalist meritocracy, dominates the world still. How do we change that which is the lifeblood of the world? All great powers were built on this blood, money flowing from inequity.
The dollar grew with cotton in the South, built the great railroads with Chinese hands, stood unemployed during the Great Depression, manufactured tanks for the World Wars, and exploded out of Hiroshima. It fought back evil and harvessed its own. It broke the Soviet Union and landed on the Moon. The dollar killed George Floyd. It will save countless others. It is up to us to wrestle for its soul.
If you don’t like what you see, vote with your money. Choose the tax you pay, whose sword you shine, and whose power you grow.
Announcing Codefi Compliance
Yesterday, Codefi announced the launch of Codefi Compliance, an automated and agile regulatory and compliance platform for cryptocurrency and digital assets. As a next-generation solution for anti-money laundering (AML) and countering the financing of terrorism (CFT), Codefi Compliance ensures digital assets meet regulatory expectations without compromising market and business requirements, regardless of jurisdiction and design. It is the only compliance solution designed exclusively for Ethereum-based assets and built by ConsenSys, the leader in Ethereum development.
Today, Codefi Compliance supports over 280,000 types of digital assets on the Ethereum network. Codefi Compliance uses a custom framework to provide an AML/CFT solution compatible with Ether and the most widely used token standards such as ERC20, ERC721, ERC179, ERC777, along with notable stablecoins like DAI, USDC and Tether, covering over 280,000 types of digital assets built on Ethereum. It is the first solution built for digital assets that will run on ETH 2.0, the much-anticipated network upgrade that will exponentially increase transactions per second and enable Ethereum scale.
“Providing robust AML/CFT compliance for Ethereum-based digital assets is a keystone step in bringing the institutional financial industry to decentralized finance. Codefi Compliance is the next module in our product suite to eliminate complexity and risk in using DeFi, and help any business benefit from using digital assets.” – Lex Sokolin, Global Co-Head of ConsenSys Codefi.
Quick Codefi Hits
New to the Newsletter and to Codefi? Check out this explainer video about ConsenSys Codefi.
ConsenSys Codefi Feedback: TLDR; we want to get to know you better and it’ll take a minute.
Announcing Codefi Compliance. Codefi Compliance ensures that digital assets meet regulatory expectations, and fulfill market and business requirements. We build trust in digital assets by delivering reliable anti-money laundering (AML) and countering-the-financing-of-terrorism (CFT) solutions using know-your-transaction (KYT) mechanisms to protect against fraud and financial crimes. Read the Bloomberg article on Codefi Compliance.
ConsenSys acquires Fluidity. Fluidity is the primary developer of AirSwap and has produced several industry firsts in real-estate tokenization, tokenized securities trading, systems to pledge real collateral to decentralized credit platforms, and has hosted the Fluidity Summit. Read more about Fluidity and ConsenSys.
Data Dive: Blockchain Insurance
A look at the on-chain performance of Opyn, one of the leading Ethereum insurance platforms. Data collected and analyzed by Codefi Data.
Opyn Insurance, which launched in February 2020, is an Ethereum insurance protocol providing protection for DeFi users and ETH speculators. Opyn’s existing products let users buy or sell protection for Compound deposits (USDC and DAI) and hedge against ETH price volatility by either buying or selling ETH protection.
Data shows that at least 35 options have been created for the ETH price hedge market since the launch. The stacked area chart below shows the individual balance of each option token contract and the total sum of value locked in Opyn’s platform. Locked value hit its all time high of $1.6m USD on 23rd April, and currently sits at ~$1.1m USD. The chart also shows the lifecycle of each option; when each colored stacked bar disappears, it means the option reached its expiry date and was exercised.
Typically, around four options have existed at the same time so far in 2020, and each locks an average of ~400k USD. The usual mature length is around 15 – 40 days.
USDC liquidity providers are the people who have deposited USDC into Opyn’s insurance protocol in order to provide liquidity to people wishing to buy ETH. These USDC depositors are betting that the ETH price increases, and aim to be able to withdraw USDC at a later date for a premium. The people who are buying ETH with the available USDC are protecting it against a price decrease.
Notably following the mid-March market crash – after which people may have been more interested in finding ways to protect their ETH holdings – the number of daily providers and the amount of USDC deposited have been increasing. Since April, there have been nearly 25 days with more than 20 liquidity providers, and four days with greater than 40 liquidity providers. Moreover, these liquidity providers are depositing larger amounts of USDC. In April, the end of the month saw records with just under $500k USDC deposited. May volumes reached even higher, with two days during which USDC deposits surpassed $500k USDC.
The incentive for liquidity providers is to gain a premium on their USDC deposits if the ETH price increases. The top USDC premium recipients have received between 700 and 22k USDC. The largest premium recipient – 22.3k USDC – has accounted for more than 30% of the total premiums on the Opyn platform.
Opyn’s platform launch in February came at a time when the blockchain, Ethereum, and DeFi ecosystem in particular has paid closer attention to security. Among a host of security and market events in the past two quarters, Ethereum users are looking for better ways to ensure their funds are protected as they work with these new platforms. Audits, strict security reviews, and open source architectures will undoubtedly help – but security events will continue to occur. Insurance is the only way to hedge against both security and volatility. Opyn and Nexus Mutual – the two largest players in the Ethereum insurance game – have both come to market to help the ecosystem remain even more resilient in the face of (un)expected events.
Thanks for sticking through this newsletter. Follow us on Twitter, learn more on our website, and let us know your thoughts. Whether you’re interested in working with us, for us, or you just want to say hello, please feel free to contact us.
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Till next time,
The ConsenSys Codefi Team