Shall crypto exchanges be fully decentralized?

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The Blends Briefs
TL’DR: Here’s a sneak peek into today’s newsletter

• Shall crypto exchanges be fully decentralized?

• Tether shows $3.2B excess reserves.

• MetaMask new security feature.

• Circle halts retail USDC.

• Backpack gets a licence from Dubai for its crypto exchange.

• Zodia launched in Hong Kong.

• Brands are embracing NFT as per NFT Paris' founder.

• Dictionomics: Minted Tokens

A must-have
Shall crypto exchanges be fully decentralized? Well, it depends!

One of the main questions that arises in the field of cryptocurrency is whether crypto exchanges should be fully decentralized or not. A decentralized exchange (DEX) is a platform that allows users to trade crypto assets without intermediaries, relying on smart contracts and peer-to-peer networks. A centralized exchange (CEX) is a platform that acts as a middleman between buyers and sellers, providing liquidity, security and regulatory compliance.

There are pros and cons to both approaches. DEXs offer more autonomy, privacy and transparency to users, as they have full control over their funds and transactions. They also reduce the risk of hacking, censorship and manipulation by third parties. However, DEXs also face challenges such as low scalability, high fees, limited functionality and user experience, and legal uncertainty.

CEXs, on the other hand, provide more convenience, speed and reliability to users as they handle the technical aspects of trading and offer a variety of services and features. They also comply with the regulations and standards of the jurisdictions they operate in, which can increase trust and legitimacy. However, CEXs also pose risks such as centralization of power, loss of privacy and sovereignty, vulnerability to cyberattacks and fraud, and potential conflicts of interest.

Therefore, the answer to whether crypto exchanges should be fully decentralized or not depends on the preferences and needs of each user, as well as the trade-offs they are willing to accept. There is no one-size-fits-all solution, but rather a spectrum of possibilities that can cater to different use cases and scenarios.

Global Biscuits

Tether shows $3.2B excess reserves.
Tether's Q3 audited attestation showed $3.2 billion in excess reserves, totalling $86.4 billion in assets (mainly in U.S. Treasuries) against $83.2 billion in liabilities. The report displayed $5.2 billion in secured loans, with a reduction of $330 million from the last quarter, but Tether's goal to eliminate loans entirely by 2023 remains unfulfilled. The stablecoin USDT holds a market cap of $84 billion and enjoys profitability from higher interest rates, generating around $1 billion in quarterly returns. Tether's newly announced CEO, Paolo Ardoino, plans to enhance reserve transparency in the future.

MetaMask new security feature.
MetaMask, a prominent crypto wallet, has teamed up with Blockaid, a security firm, to introduce a security alert feature to protect users against scams and hacking incidents. Utilizing the Privacy Preserving Offline Module (PPOM), MetaMask will offer a tool that simulates and validates potential malicious transactions without sending data to external servers. The phased integration aims to prevent false positives, ensuring user trust. Phishing scams are a significant concern, with Blockaid estimating 10% of decentralized apps as malicious. The new feature's success in an OpenSea experimental phase, involving 4% of MetaMask users, potentially prevented asset theft of $500 million. Once fully integrated, MetaMask and Blockaid believe the feature could prevent the loss of billions of dollars in assets.

Circle halts retail USDC.
Circle, the issuer of the USDC stablecoin, announced the discontinuation of support for legacy consumer accounts, necessitating individual retail customers to purchase tokens from exchanges or brokerages instead of minting them directly. Only institutional traders and fintech firms will have access to Circle Mint accounts. The move, though not impacting the business or institutional accounts, signals a shift from Circle's previous program. USDC faced a setback in confidence when Circle revealed significant reserves held in a now-closed Silicon Valley Bank, causing a temporary price dip and redemptions during the bear market, leading to a gradual decline in its market cap. 

Tastes of the regions

Backpack gets a licence from Dubai for its crypto exchange.
Backpack, a crypto wallet company, has obtained a Virtual Asset Service Provider (VASP) license from the Dubai Virtual Assets Regulatory Authority (VARA) to launch a regulated cryptocurrency exchange called Backpack Exchange. This exchange will incorporate advanced technologies such as zero-knowledge proofs of reserves (zk-proofs), Multi-Party Computation (MPC) for custody, and low-latency order execution. The platform is set to enter beta testing in November and become available to the general public in the first quarter of 2024. 

Zodia launched in Hong Kong.
Zodia, a crypto firm owned by Standard Chartered and Northern Trust, has launched in Hong Kong. The firm aims to provide custody services for institutional investors who want to invest in digital assets. Zodia will offer secure storage, transaction and reporting services for Bitcoin, Ethereum, Litecoin, Bitcoin Cash and XRP. Zodia is one of the first crypto custodians to be licensed by the Hong Kong Securities and Futures Commission. The firm plans to expand to other markets in Asia and Europe in the future.

Brands are embracing NFT as per NFT Paris' founder.
NFT Paris founder Alexandre Tsydenkov expressed optimism about the third NFT Paris conference in February 2024, noting the increased participation of mainstream brands engaged in NFT technology despite the bear market conditions. Anticipating a more diverse attendee range, the event will extend beyond industries like luxury, music, fashion, and gaming, focusing on blockchain builders and technical aspects. Tsydenkov highlighted the French government's efforts to position Paris as a crypto and NFT hub, contributing to a promising ecosystem. The event's introduction of a loyalty token aims to create a Web3 loyalty program, offering various perks and merchandise discounts and has already seen an overwhelming response with over 120,000 tokens minted.

Dictionomics
Minted Tokens

Minted tokens are digital assets that are created and issued on a blockchain network. They can represent anything from art, music, games, and collectibles to real-world assets like property, stocks, or commodities. Minting tokens is a way of creating scarcity and value for digital goods, as well as enabling ownership and transferability. Minted tokens can follow different standards and protocols depending on the blockchain platform they are built on, such as Ethereum, Binance Smart Chain, Solana, or Cardano. Some of the most popular types of minted tokens are non-fungible tokens (NFTs), which are unique and indivisible, and fungible tokens (FTs), which are interchangeable and divisible.

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