: The Possibilities of DeFi Derivatives Trading Are Substantial

• The derivatives market, and in particular options trading, has seen exponential growth in the DeFi sector and is expected to see further growth in 2023.
• Options provide traders with the ability to tailor trades and risk tolerance, allowing them to express investment views that incorporate new elements.
• The growth of DeFi options trading is hindered by the lack of knowledge about external events and how they affect the crypto market, however the use of data to analyze trends and events will help to increase adoption.

The past few years have seen a massive influx of investors into the cryptocurrency space. This influx has been driven by the promise of decentralization and self-custody, as well as the potential for economic empowerment for all. This promise has been realized in the form of decentralized finance (DeFi). DeFi has given rise to a diverse range of investment opportunities, with one sector in particular poised for exponential growth in 2023: derivatives.

Derivatives, and more specifically options trading, offer investors the ability to customize their trades and risk tolerance. Options allow investors to express investment views that incorporate elements such as price, timeframe, and velocity. The DeFi options market currently has a combined total value locked (TVL) of over $180 million, and has plenty of room to grow. If the crypto options market were to match traditional finance levels, it would need to see a 30 to 35 times increase.

So what is preventing the options market from achieving this growth? The main difference between crypto options and traditional finance (TradFi) options is that we are still learning how external events affect the crypto market. In TradFi, investors have access to earning reports or substantial company news covered by the media to inform their trades. However, crypto is still trying to figure out what is important. When someone tweeted that Vitalik Buterin had died, ether (ETH) temporarily “crashed” on the “news” before swinging right back, which shows how quickly the crypto market can move.

Fortunately, trading strategies like options provide us with ways to mitigate losses and customize risk levels. Our underlying blockchains also provide us with access to an enormous amount of consistently-generated, granular data such as spot data, which can be used to analyze trends and movements. The more DeFi is used, the more data we have and the more we learn.

DeFi options trading will continue to see exponential growth due to its dynamic nature, massive investment prospects, and soon, ease of access and use. Once the barriers to entry are reduced and more investors start to see DeFi for the evolution in our economy that it truly is, options trading will help drive adoption. With data-backed strategies and the right tools, DeFi options trading could become one of the most popular investment strategies of 2023.

: ZK Rollups are helping to make Ethereum’s decentralized vision a reality.

• Zero-knowledge (ZK) technology is a cryptographic tool that allows blockchain networks to prove the authenticity of their operations in the most efficient way.
• ZK tech is expected to revolutionize sectors from gaming to payments, and from digital identity to enterprise solutions.
• ZK rollups and zkEVMs are bringing Ethereum’s vision of a decentralized web into focus.

In 2015, the Ethereum protocol proposed a vision for a decentralized world computer capable of rearchitecting a free and open internet – removed from the whims and constraints of centralized entities. With the goal of realizing its full potential, Ethereum has been the foundation for the development of Web3. Among the most promising solutions to scale the network for mass adoption are systems using zero-knowledge (ZK) technologies.

ZK tech is an innovative cryptographic tool that allows blockchain networks to prove the authenticity of their operations, using the fewest possible steps, all while reducing costs, increasing throughput capacity, and expanding potential use cases far beyond what is currently possible. The advantages of ZK technology have not gone unnoticed, with many industry participants projecting that it would take more than a decade to build a performant, EVM-compatible ZK rollup. Fortunately, it took considerably less time than that.

The Ethereum Merge in 2022 was instrumental in transitioning the network from proof-of-work (PoW) to the more efficient proof-of-stake (PoS), and the development of ZK tech is a part of Ethereum’s longer-term vision. In order to truly trust the outputs of a ZK-powered tool, source-available code for every component is required to verify its inputs. This, in turn, will allow the application of ZK tech to be transformational for Web3 development.

Given the potential of ZK technology, it is expected to revolutionize myriad sectors, from gaming to payments, and from digital identity to enterprise solutions. In the payments industry, for example, ZK’s ability to increase throughput and security, while reducing fees, could take DeFi and consumer payments to the next level. Similarly, for blockchain gaming applications to match the volume of users seen in the mainstream gaming sector, ZK rollups will be essential for processing the hundreds of thousands, if not millions, of micro-transactions that a typical blockchain game would require.

In addition, enterprise users have been wary of the security issues presented by decentralized networks and their perceived lack of oversight and accountability. Zero-knowledge technology is the very thing that will deliver accountability to decentralized networks without submitting to arbitrary oversight. Its implementation will provide the kind of security that enterprises need to interact with decentralized blockchains, while also being applied to digital identity, providing a decentralized, privacy-first means for users to verify their credentials and identity without ever revealing personal information.

In response to the collapse of the FTX exchange, Vitalik proposed a ZK-based solution for preventing future FTXs. A cryptocurrency exchange could use Zero-Knowledge proofs to demonstrate solvency by publishing a proof of reserves. This would allow an exchange to confirm it has the liquidity to cover customer withdrawals without revealing the sensitive business information contained therein.

The potential of ZK technology is vast, and with its ability to increase throughput and security, reduce fees, and expand potential use cases, its adoption is likely to be widespread. This is especially true as the development and application of ZK tech adheres to the core ideals of Web3, with transparency chief among them. With its growing potential, 2023 promises to be the year ZK tech truly starts to take off.

The International Chess Federation Integrates With Avalanche on the Web3 Platform

• FIDE, the International Chess Federation, is partnering with the Avalanche blockchain to bring their competitions into Web3.
• This collaboration will allow for operational efficiencies for players, federations and game integrity, as well as AVAX-hosted tournament prize pools.
• This is not the first time chess has crossed paths with crypto, as chess legend Garry Kasparov launched his first collection of NFTs earlier this month.

The International Chess Federation (FIDE) has taken a major leap forward in utilizing the capabilities of Web3 and blockchain technology. On Friday, FIDE announced its partnership with the Avalanche blockchain, which will bring its competitions into a digital platform.

This collaboration with the Avalanche blockchain will provide a wide range of benefits to both players and federations. For players, this partnership will create operational efficiencies, such as publishing tournament data and player rankings on-chain. It will also introduce AVAX-hosted tournament prize pools, giving players the opportunity to earn rewards for their chess prowess.

FIDE is also introducing Core, a self-custody crypto wallet, as a featured sponsor for physical chess tournaments around the world, including the World Chess Championship and Chess Olympiad. This will help to unify the chess community and bring players, clubs, federations and FIDE closer together.

This is not the first time chess has crossed paths with crypto. Earlier this month, chess legend Garry Kasparov launched his first collection of NFTs. Play-to-earn chess games such as MetaChess have also been popular for much of the past year.

The partnership between FIDE and AVAX is a major step forward in the integration of Web3 and blockchain technology into the world of chess. FIDE’s move follows alongside the gradual embrace of digital mediums by the chess world, with more than 100 million people playing online chess regularly and competing in over 25 million virtual chess matches each day. The governing body of table tennis launched a similar Web3 campaign last August, further showcasing the potential of blockchain and Web3 in sports.

The benefits of this collaboration are clear. Not only will it create operational efficiencies and improve game integrity, but it will also provide players with the opportunity to earn rewards for their chess prowess. With FIDE’s move, the world of chess is now one step closer to entering the Web3 and blockchain world.

VC Leader Predicts Opportunities for Crypto Funding in 2023 Despite Plunge in 2022

• Blockchain startups received a record $25.2 billion in venture capital investments in 2021, with a surge in funding for NFTs and DeFi projects.
• Funding slowed dramatically in 2022, with major companies like Three Arrows Capital, Celsius and FTX collapsing.
• David Pakman of CoinFund predicts that in 2023, investments will focus on layer 1 and layer 2 blockchains, NFTs, gaming and Web3 development, as well as risk management and conservative use of leverage.

The blockchain industry has seen a huge surge in venture capital investments in 2021, with a total of $25.2 billion invested in startups utilizing the technology. The investments were driven by optimism surrounding non-fungible tokens (NFTs) and decentralized finance (DeFi) projects. However, in 2022, funding slowed significantly after a wave of major companies, such as hedge fund Three Arrows Capital, lending platform Celsius, and exchange giant FTX, collapsed.

In order to gain insight into the investment landscape of 2023, CoinDesk interviewed David Pakman, managing partner and venture investing head at crypto-focused venture capital firm CoinFund. Pakman discussed how the crypto industry can move forward in a post-FTX world, and what he believes the investment focus will be in the coming year.

Pakman explained that CoinFund had a small amount of equity in FTX before its collapse, which has now been written to zero. He noted that the downfall of FTX was due to human behavior, not technological failure, and expressed hope that the industry will weed out the scammers and unethical actors that are damaging the reputation of the crypto space.

When asked about CoinFund’s own fundraising efforts, Pakman said that they were nervous even at the beginning of 2021, but that they had lucky enough to have limited partners who preferred to invest during the current pricing environment. He also mentioned that bear markets can benefit venture capital firms, as shakier markets lead to lower valuations and more attractive entry points for potential investors.

Looking forward to 2023, Pakman predicted that investments will continue to focus on areas that were in progress before the turbulence, such as layer 1 and layer 2 blockchains, NFTs, gaming, and the Web3 development stack. The collapse of a centralized exchange has also put more emphasis on DeFi, and Pakman believes that there will be renewed interest in productizing DeFi in a way that is easier to access by both institutions and individuals.

In terms of risk management, Pakman advised startups to avoid using leverage altogether and to retire risk as they move on. He concluded the interview by noting that creating a startup is one of the riskiest things that can be done, and that it almost never works, so companies should focus on minimizing risk, rather than increasing it.

: The SEC is Examining Crypto Audits and SBF Has Received Bailout Funds

• Former FTX CEO Sam Bankman-Fried was released on bail after appearing in U.S. federal court in New York.
• The U.S. Securities and Exchange Commission (SEC) is increasing its scrutiny of audits of cryptocurrency companies.
• Documents show that Tron founder Justin Sun was a top client of crypto asset manager Valkyrie Investments, responsible for the vast majority of a key Valkyrie division’s assets under management.

The crypto markets have been volatile and unpredictable in recent months, with bitcoin having tanked 63% year-to-date. Crypto stocks, often seen as a proxy for digital assets, have suffered bigger losses than bitcoin. This has led investors to seek other ways to gain exposure to the crypto markets.

One such avenue was the recent news that former FTX CEO Sam Bankman-Fried had appeared in U.S. federal court in New York. Bankman-Fried was released on bail, with his release coming with a long list of requirements for him to remain free while he faces charges. These included not making financial transactions of more than $1,000, not opening new lines of credit, staying at home except to exercise, and going through substance abuse and mental health treatment.

In order to protect investors, the U.S. Securities and Exchange Commission (SEC) also announced that it was increasing its scrutiny of audits of cryptocurrency companies. Paul Munter, the SEC’s acting chief accountant, commented that investors “should not place too much confidence in the mere fact a company says it’s got a proof-of-reserves from an audit firm.” He added that having such a report “is not enough information for an investor to assess whether the company has sufficient assets to cover its liabilities.”

One of the most successful investors in crypto is Justin Sun, the founder of Tron. Documents recently revealed that Sun was a top client of crypto asset manager Valkyrie Investments, responsible for the vast majority of a key Valkyrie division’s assets under management. At one point in August, Sun had more than $580 million of bitcoin stashed with the asset manager.

Overall, investors interested in gaining exposure to the crypto markets must be extra vigilant when considering the various options available. While investing in bitcoin is still seen as a viable option, the SEC’s increased scrutiny of crypto audits must be taken into account when making any decisions. Investors should also be aware of the impressive track record of Justin Sun and other major crypto investors, but must do their own research to ensure they are making the right decisions for their portfolio.

: On the Eve of Retirement, One of Crypto’s Most Beloved U.S. Senators Proposes Last Bill

• The headline crimes and failures of 2023 have largely been attempts to use financial engineering to turn the future value of cryptocurrency into present-day U.S. dollars.
• Too often, the finance bros have used fragile, nested and interlocking leverage and outright fraud to take advantage of genuine public interest in crypto.
• 2023 in the crypto space will be a different year than in previous years, with hedge fund gamblers and token-shilling hype men relegated to supporting roles and super-coders taking the spotlight.

The crypto space has been in a state of flux over the past year, with collapses in the space being attributed to crypto itself. However, the truth of the matter is that these collapses had very little to do with crypto itself.

The vast majority of these collapses were caused by financial engineering attempts to turn the future value of cryptocurrency into present-day U.S. dollars. This type of financial engineering is not unique to the crypto space, with similar practices having been used to disastrous effect during the 2008 financial crisis.

In the crypto space, these financial engineering attempts have been carried out by financial brokers, often referred to as „finance bros“. These finance bros have leveraged the genuine public interest in crypto to their own advantage, often using fragile, nested and interlocking leverage and outright fraud to make a quick buck.

The year 2023 will be a different one for the crypto space. Hedge fund gamblers and token-shilling hype men will be relegated to supporting roles, with the real builders of the crypto space taking the spotlight. These super-coders are the ones who are developing and advancing the technology, and they will be the ones to drive the space forward in 2023.

The future of the crypto space is uncertain, but the focus in 2023 will be largely on the advancements of the technology itself. With the finance bros taken out of the equation, the crypto space will be one that is driven by innovation, creativity and genuine progress. This will be the year that crypto comes into its own and establishes itself as a viable and innovative technology.

: The Price of Popsicle’s ICE Token Triples Following the Return of the Controversial Founder of the DeFi Project Wonderland.

• Popsicle Finance’s native token ICE has quadrupled in price after hitting an all-time low of 9 cents two days before.
• The sudden surge came after blockchain developer Daniele Sestagalli said he was returning to the project.
• Popsicle Finance has had an atrocious 2022, with its total value locked deflating to $1 million from $120 million in November 2021.

The recent surge in the price of Popsicle Finance’s native token ICE has been nothing short of remarkable. The token, which was trading at an all-time low of 9 cents just two days ago, has now quadrupled in price and is currently trading at 36 U.S. cents.

The sudden surge has been credited to the return of controversial yet prolific blockchain developer Daniele Sestagalli to the project. Sestagalli had gone silent on Twitter for four months before announcing his return to Popsicle Finance on Wednesday. He had previously been involved with a loose conglomerate of DeFi projects known as “Frog Nation” that included Abracadabra.money and the since-failed Wonderland.

Unfortunately, Popsicle Finance has had an atrocious year in 2022. The project’s total value locked – a widely used DeFi metric to gauge activity and usage of any protocol – has deflated to $1 million from $120 million in November 2021, according to DefiLlama. Despite the recent surge in the token’s price, it is still down some 98% in a year.

In an effort to turn the project’s fortunes around, Popsicle Finance has recently deployed a yield optimizer service between blockchains called Limone in test mode on the Avalanche blockchain. The yield optimizer is designed to bring more users to the platform and create more liquidity.

The crypto community is hoping that with Sestagalli back in the fold, the project will be able to turn its fortunes around and recapture its former glory. Sestagalli himself has been vocal about his intention to focus on rebuilding the OG Popsicle Finance, and the community appears to have welcomed his return with open arms. Time will tell if he can succeed in reviving the project.

Stocks Recover Prior to Holiday Season as Bitcoin Remains Relatively Stagnant

• Bitcoin traded around $16,780 Wednesday as traders wrestled with the uncertain market outlook for next year.
• Ether (ETH) followed a similar trajectory, trading flat at $1,210.
• Alex Tapscott, managing director of the digital asset group at Ninepoint Partners, said that the bitcoin drawdown from its all-time high in November 2021 is around 77%, compared to previous bear market lows of 84%, which could suggest further downside.

The cryptocurrency market was relatively stable Wednesday, with Bitcoin trading around $16,780 and Ether (ETH) trading flat at $1,210. This comes as traders are still trying to make sense of the uncertain market outlook for the coming year.

The largest cryptocurrency by market capitalization has been trading between $16,700 and $16,900 in the past 24 hours, but hasn’t seen much of a boost from the positive risk-on environment running through Wall Street. U.S. equities were slightly more buoyant, with the tech-heavy Nasdaq Composite, Dow Jones Industrial Average and S&P 500 all up 1.4% or more.

Traders have been closely watching the U.S. Federal Reserve’s hawkish stance on possibly continuing to raise interest rates in 2023. Crypto trader Thomas Kralow previously said that the probability of a recession is high, and that when the Fed pivoted and interest rates finally started going down the market crashed another 40%.

Alex Tapscott, managing director of the digital asset group at Ninepoint Partners, said that the current market environment is similar to December 2018 when Bitcoin hit an all-time high in the winter of 2017 and 2018 began „a long period of contraction“ in terms of the value among crypto assets. Tapscott said that the Bitcoin drawdown from its all-time high in November 2021 is around 77%, compared to previous bear market lows of 84%, which could suggest further downside.

However, Tapscott also said that the market is in a „sweet spot“ where it’s starting to look a lot like previous eras. He advised traders to try and pick a bottom and set themselves up for a period of growth, but cautioned that they might not get rewarded for being early as the price could retest the same level a few more times.

: Self-Custody Is the Solution to Preventing Fraud with FTX

• FTX recently collapsed due to fraud, highlighting loopholes in the current system that allowed flawed or criminal intermediaries to stand between consumers and their assets.
• Warren Davidson, US Representative for Ohio’s 8th congressional district, is advocating for protecting consumers‘ inherent right to self-custody.
• Elizabeth Warren is proposing a bill to prohibit financial institutions from transacting with self-hosted wallets, which Roger Marshall and her are introducing to crack down on money laundering and financing of terrorists and rogue nations via cryptocurrency.

FTX, a cryptocurrency trading platform, recently collapsed due to fraud, prompting many policymakers to consider what loopholes enabled such criminal acts. It has become clear that the flaws of the traditional financial system, including fraud, still remain. FTX exemplified this, as the platform’s founder, Sam Bankman-Fried, found a way to convince customers and investors to allocate dollars to FTX’s platform by promising to be a third-party intermediary to purchase digital assets on their behalf. Customers then maintained “balances” in their FTX accounts while Bankman-Fried put funds under the control of Alameda Research, the trading firm he founded in 2017. He established his own cryptocurrency, FTT, to use as collateral for any loans made from FTX to Alameda. He then leveraged his assets under Alameda’s control at unprecedented levels.

The only sound protection against any third-party intermediary’s failure is for customers to transfer their digital assets off of the platform and onto their own self-hosted wallets, devices that allow digital assets to be stored off the internet. This approach provides a way for customers to protect themselves from fraudulent activities. U.S. Representative for Ohio’s 8th congressional district, Warren Davidson, is advocating for protecting consumers‘ inherent right to self-custody.

Meanwhile, Senator Elizabeth Warren (D-Mass.) is proposing a bill to prohibit financial institutions from transacting with self-hosted wallets. She has been “ringing the alarm bell in the Senate on the dangers of these digital asset loopholes.” Warren is also introducing this bill with Senator Roger Marshall (R-Kan.) to crack down on money laundering and financing of terrorists and rogue nations via cryptocurrency. However, Warren’s open hostility towards financial freedom is a clear and present danger to consumers and will only reinforce the system fraudsters continue to exploit.

In response, Representative Davidson introduced the Keep Your Coins Act last February in an effort to protect self-custody. He argued that “protecting self-custody is must-pass legislation” and that it is imperative to embrace this opportunity to protect consumers.

To protect the public against future catastrophes like FTX, it is important that policymakers and law enforcement continue to work together to ensure that the legal and regulatory framework supports the technology and provides the necessary protection. As Davidson noted, this includes protecting consumers‘ inherent right to self-custody of their digital assets, to own and possess private property. This is the only way to ensure that fraudsters are not able to take advantage of the system and put consumers at risk.

: Bernie Madoff’s attorney advises Sam Bankman-Fried to be silent.

• Ira Lee Sorkin has two words of advice for Sam Bankman-Fried: “Shut up.”
• Sorkin, who represented the late Ponzi schemer Bernie Madoff, believes that Bankman-Fried should not have given so many media interviews.
• Bankman-Fried is in the process of being extradited to the U.S., where he faces criminal and civil charges.

Sam Bankman-Fried, the disgraced CEO of the FTX crypto exchange, is facing criminal and civil charges in the United States. As he is in the process of being extradited from the Bahamas, where he was arrested, to the U.S., Ira Lee Sorkin, a partner at law firm Mintz & Gold, had two words of advice for him: „Shut up.“

Sorkin, who represented the late Ponzi schemer Bernie Madoff, believes that Bankman-Fried should not have given so many media interviews. He told CoinDesk TV’s „First Mover“ that if he had been part of SBF’s legal team he would’ve told the 30-year-old to refrain from speaking so candidly. Sorkin said that the only individuals and entities concerned with what Bankman-Fried had to say were regulators and prosecutors.

„He should’ve kept quiet,“ Sorkin later added. He questioned why Bankman-Fried went on a media tour in the first place, saying that no lawyer worth their salt would’ve told him to do so.

Now, Bankman-Fried is in the process of being extradited from the Bahamas to the U.S., where he faces criminal and civil charges. Sorkin said the extradition was „inevitable“ and is likely Bankman-Fried’s way of avoiding spending „weeks and months“ in an unpleasant Fox Hill prison. By waiving his extradition rights, Sorkin said Bankman-Fried is looking to speed up the legal process.

What happens next? According to Sorkin, Bankman-Fried’s bail conditions will depend on whether he is deemed a „threat to the community“ or a flight risk. Bankman-Fried could also face home confinement, with a high chance of being monitored and even wearing an ankle bracelet, Sorkin said. He said that based on what Madoff went through after his arrest and during his trial, „there will be enough cameras and press [and] satellite dishes surrounding where he’s staying that there’s no way at all that he could sneak out and skip.“

Sorkin’s advice for Bankman-Fried is to stay silent and let his legal team do the talking. He believes that if Bankman-Fried had followed his advice, he would be in a much better position than he is now. As it stands, Bankman-Fried faces a long and arduous legal process that is sure to be filled with surprises, twists, and turns.