Institutions are Coming to Ether as DeFi Works to Make Them Irrelevant

Also, $TAPE token, MetaCartel Ventures' first investment, Aave's new features.

Hello Defiers! Here’s what’s happening in decentralized finance,

  • Institutions can now access regulated ether markets
  • A tokenized cassette tape is selling for $500+
  • The first for-profit DAO since The DAO makes its first investment
  • Aave’s plan to increase DeFi derivatives utility

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ErisX Launches First CFTC-Regulated Ether Futures

Investors can now trade ether futures on a regulated US exchange for the first time.

ErisX yesterday launched physically settled, CFTC-approved, ether futures contracts. The move will give institutional investors a safe and familiar way gain exposure to ether. Futures will also give miners and other players a way to protect against ETH volatility, and it will help in price discovery of the asset.

“Ethereum has genuine functionality and use cases with real people, firms and governments using the network, and its structure has many similarities with existing commodity markets,” said ErisX in its post announcing the launch.

Physically Settled

These are physically settled contracts, which means ErisX has to actually buy ETH to trade them, unlike CME’s cash settled bitcoin futures, where no actual BTC is involved. This could potentially increase demand for Ethereum’s cryptocurrency.

Still, volume for physically settled bitcoin futures on ErisX is tiny, and the CME, which dominates volume for US bitcoin futures trading, isn’t planning on adding ETH futures in the near term, said Tim McCourt, the exchange’s global head of equity benchmarks, in an interview I co-hosted at Consensus: Distributed yesterday.


Image source: ErisX’s Medium


The contracts are the first futures offered on a regulated US exchange for a digital asset other than bitcoin. The CFTC has classified only bitcoin and ether as commodities. This means derivatives of only these two cryptocurrencies can be traded on regulated exchanges in the US.

In addition, ether is also the only cryptocurrency other than bitcoin that SEC officials have argued is not a security. This further clears the way for institutions to trade ETH without fearing any regulatory repercussions.

Miners and Stakers

Futures allow investors to buy or sell an asset for a fixed price at a pre-determined date. In cryptocurrencies, these contracts are especially useful for miners, who have income in crypto, but expenses in fiat currencies, so they need to ensure they’ll be able to sell their crypto at a minimum price to be able to sustain their business.

This is true for ether in its current proof-of-work chain, but it will also help node operators, called validators, when it transitions to proof-of-stake. Validators are required to stake at least 32 ETH, and futures can be a way to protect against volatility in the value of their assets, which they’ll need to keep locked up for long periods of time.

Downward Pressure

There’s still the open question on whether futures contracts exert downward pressure on the price of cryptocurrencies. Regulated futures for bitcoin were launched near the peak of the bubble in late 2017, and some have attributed bitcoin’s subsequent slide to futures trading, as investors betting on a lower price of the digital asset can lead to actual selling.

In any case, the move continues legitimize and validate ether as the only cryptocurrency other than bitcoin that has proven to be decentralized enough to be considered a commodity, and to have the volume and activity needed to support trading in regulated US markets.

So yes, institutions are coming to ether. But decentralized finance is proof developers haven’t forgotten the promise of crypto is to actually disrupt them.


Aave Plans to Take Money Legos to Whole New Level

Aave, a decentralized lending protocol, isplanning to accept tokens that represent investments in other platforms, within its own application, Stani Kulechov, the project’s founder and CEO said last week at the Ethereal Summit. The move will increase DeFi derivatives use cases.

Aave wants to accept tokens representing deposits in Uniswap liquidity pools as collateral in its own platform. That means that users who are providing liquidity on the Uniswap decentralized exchange, and gaining fees for that service, can now use the tokens that Uniswap issues to represent that investment, to take out a loan on Aave. The same will be true for tokens representing investments on TokenSets, which automates trading strategies, and issues a token to represent users’ investments.


Image source: Ethereal Summit

Right now, TokenSets and Uniswap pool tokens don’t do much, other than sit on wallets, providing a handy way to track users’ investments. With Aave’s plan, these tokens will turn into another lego block within the DeFi ecosystem.

Kulechov also said token economics for Aave’s LEND token will change. Users will be able to stake their LEND and earn rewards. The token will be used as a backstop in case the protocol becomes insolvent, similar to how MKR was minted after MakerDAO’s liquidation system broke down.

Limited Edition Tokenized Cassette Selling for $500+

Grammy-award winning André Allen Anjos, known as RAC, is selling a limited-edition cassette tape of his new album BOY via digital tokens called $TAPE. The tokens, which had a starting price of $20 on the Zora marketplace for tokenized assets, are now trading at over $500.

There will only be 100 cassette tapes made, which can be traded like a cryptocurrency with the $TAPE token. Token holders will be able to redeem their token for the physical good, where 1 $TAPE can be exchanged for 1 cassette, which has a clear shell, pink labels, and comes with a hard case with the BOY album cover. 18.96 of the 100 tokens have been sold so far.


Image source: Zora

While $TAPE was first listed on Zora, the tokens can also be traded on Uniswap. “You can use their dedicated interface, but part of the beauty of ERC20s is you can immediately use any other interface as well,” said Uniswap founder Hayden Adams.

$TAPE is the latest of a series of tokenized assets issued in the past few months. Zora and MetaFactory are providing a marketplace for these goods, including t-shirts and socks. Crypto tokens guarantee scarcity and make trading easier, while also allowing creators to directly benefit from secondary trading of their goods.

[More here: Digi-Physical Tokens to Change Ownership as We Know It]

MetaCartel Ventures’ First Investment is a Stablecoin

MetaCartel, the first for-profit decentralized autonomous organization since The DAO announced it’s backing Reflexer Labs in its first investment. The decentralized venture fund is investing $50k and leading the pre-seed round, likely to close in the next three months.Relfexer Labs is making MetaCoin, a protocol for issuing collateralized assets, which are not meant to be pegged to a fixed value. The stablecoin’s price is meant to float and have less volatility compared to the collateral supporting it.

“We believe that DeFi needs a resilient, safe and governance minimised stablecoin. We see Reflex Bonds as a first step towards this vision,” MetaCartel Ventures said.

[More here: A For-Profit DAO (And Its Goblins) is Coming]


The best part about the bitcoin halving yesterday was that a New York Times headline on central banks printing trillions was added to the bitcoin block right before issuance was cut, in a reference to The Times headline on bank bailouts included in bitcoin’s first block.


Jameson Lopp @loppThe final Bitcoin block with a subsidy of 12.5 BTC was mined by @f2pool_official and contained the following message in its coinbase transaction: 🐟NYTimes 09/Apr/2020 With $2.3T Injection, Fed's Plan Far Exceeds 2008 Rescue…


blockchair.comBitcoin / Block / 629999 — BlockchairBitcoin (BTC) block 629999, hash: 0000000000000000000d656be18bb095db1b23bd797266b0ac3ba720b1962b1e, date: 2020-05-117:31 PM ∙ May 11, 20209,619Likes4,435Retweets

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The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money.

About the author: I’m Camila Russo, a financial journalist writing a book on Ethereum with Harper Collins. (Pre-order The Infinite Machine here). I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.