Self-custody, control and identity: How regulators got it wrong

Self-custody, control and identity: How regulators got it wrong

The EU proposal requiring one to link a self-custodial wallet to their identity fundamentally misunderstands the concept of self-custody.

The recent European Union proposal requiring centralized crypto exchanges and custodial wallet providers to collect and verify personal information about self-custodial wallet holders shows the dangers of recycling traditional finance (TradFi) rules and applying them to crypto without appreciating the conceptual differences. We can expect to see more of this as countries look to implement the Financial Action Task Force (FATF) Travel Rule, initially designed for wire transfers, to transfers of crypto assets.

The (missing) link between self-custody, control and identity

The aim of the proposed EU rules is “to ensure crypto-assets can be traced in the same way as traditional money transfers.” This assumes that each self-custodial wallet can be linked to someone’s verifiable identity and that this person necessarily controls the wallet. This assumption is wrong.

Related: Authorities are looking to close the gap on unhosted wallets

In TradFi, a bank account is linked to the verified identity of its holder, giving them control over that account. For example, sharing your online banking details with your partner doesn’t make them the account holder. Even if your partner changes the login details, you can regain control by proving your identity to the bank and having it reset the details. Your identity gives you ultimate control which cannot be permanently lost or stolen. Of course, in exchange for the bank’s custody protections, you lose self-sovereignty over your assets.

Self-custody of crypto assets is different. Control (i.e., the ability to transact) over the self-custodial wallet is held by whoever has the private keys to that wallet. Control is not linked to anyone’s identity and there is no one to prove your identity to. All you need is to download a piece of software and safely store your private keys. In exchange for this responsibility, you maintain self-sovereign ownership.

Implementing the proposed rules

Let’s look at how a custodial wallet provider would go about complying with the EU proposal. Assume that Alice wants to send 0.3 Ether (ETH) from her custodial wallet account to Bob’s self-custodial wallet to pay for Bob’s consulting services. Before the transfer goes through, the custodial wallet provider would have to 1) collect Bob’s name, wallet address, residential address, personal identification number, and date and place of birth; and 2) verify the accuracy of these details. Broadly the same details would be required for a transfer from Bob’s wallet to Alice’s custodial wallet account. Alice would likely need to ask Bob to send her his details, and Alice would then provide them to the custodial wallet provider — as recently recommended by a custodial wallet provider in a similar context.

The rules would apply even to the smallest transactions — there is no minimum threshold. Custodial wallet providers would conceivably also need to withhold incoming transfers (creating greater custody risks) and return them to the self-custodial wallet if the verification is unsuccessful.

Related: ​​Crypto in Canada: Where are we today, and where are we heading?

Identity does not equal control, making compliance impossible

While collecting data and potentially withholding incoming transfers is operationally cumbersome, the verification obligation risks are potentially outright impossible to comply with. In TradFi, the point of identity verification is to ensure that the person controlling a bank account and claiming to do so is the same one. But how could the custodial wallet provider fulfill the verification obligation if control over Bob’s self-custodial wallet does not depend on his identity?

Even if the custodial wallet provider managed to confirm that Bob is the person he purports to be, this doesn’t mean that he controls the wallet. It could be controlled by a decentralized autonomous organization that redistributes payments to members like Bob or a criminal group, with Bob merely being their money mule. There is no third party to prove Bob’s identity to in order to transact — whoever controls the private keys is the “bank.”

Exposing legitimate users to disproportionate security risks

Let’s assume that custodial wallet providers manage to comply with the proposed rules, or a less stringent version of them that does not require verification. Custodial wallet providers would need to keep large databases of self-custodial wallet users, exposing users to the risk of data breaches. For legitimate users, i.e., those who declare their true identity and also actually control the related self-custodial wallet, this risk has far greater consequences than TradFi data collection (e.g., FATF’s Travel Rule for wire transfers).

In TradFi, if a criminal compromises someone’s bank account or card, they wouldn’t get very far because the bank can block the account. By definition, self-custodial wallets lack this feature. Self-sovereign ownership, secured through cryptography and the user’s own vigilance, is seen as an advantage by tens of millions of users worldwide, including those who are excluded from the banking system. However, self-sovereignty presumes personal privacy.

Once privacy is compromised — for example, by hacking the custodial wallet provider’s database of self-custodial wallet users — users are left exposed to an unfair level of risk compared to TradFi. Knowing someone’s name, address, date of birth and ID number, together with their on-chain activity, would make it easier for criminals to launch highly personalized phishing attacks, targeting users’ devices to retrieve private keys, or blackmailing them, including threats to physical safety. Once private keys are compromised, the user irreversibly loses control over their wallet.

Related: The loss of privacy: Why we must fight for a decentralized future

Since criminals will find ways around the rules — for example, by running their own nodes to interact with the blockchain without ever having to rely on custodial wallet providers or self-custodial wallet software — it will only be the legitimate users who will have to bear these security risks.

Inconsistencies with EU’s own policy framework

Security aside, the proposal raises broader privacy concerns. The reporting obligation would clash with General Data Protection Regulation (GDPR) principles such as data minimization, which requires that collected data are adequate, relevant and limited to what is necessary for the purpose of collecting them. Ignoring for a moment the argument that data collection serves little purpose, given the missing link between self-custodial control and identity, it’s hard to see — even by TradFi’s standards — how someone’s residential address, date of birth and ID number is relevant or necessary for making a transfer. While banks regularly keep such data about their account holders, you as the account holder don’t need to ask (and know!) these details when sending money or paying for a service.

It is also unclear for how long custodial wallet providers would need to store the data — under GDPR, personal data should be kept only for as long as necessary to fulfil the purpose of collection. Nor is it clear how users’ individual rights under GDPR such as the “right to be forgotten” and the “right to rectification” could be respected if their personal details are linked to their on-chain history, which cannot be altered.

Related: Browser cookies are not consent: The new path to privacy after EU data regulation fail

The lack of any risk-based assessment or a minimum threshold (unlike the 1,000 euro threshold for fiat transfers) is also out of line with EU policy principles. The proposal seems to treat all crypto transfers with suspicion just because they involve crypto assets.

Now is the time to engage with policymakers

Faced with the prospect of developing costly compliance processes that would likely fail to effectively implement the rules, and risking penalties for non-compliance and potential data breaches, EU-based custodial wallet providers may decide to restrict transfers from and to self-custodial wallets altogether. They may also start servicing EU users from outside the EU. This sends bad signals to the crypto industry and risks discouraging tech talent and capital from the EU, similar to the recent departure of some crypto operators from the United Kingdom.

Related: Consolidation and centralization: How Europe’s new AML regulation will affect crypto

More users may also switch to peer-to-peer transactions and decentralized players to avoid the burdensome rules. While this could be beneficial for some users, the EU should encourage smooth interconnectivity between centralized and decentralized players and promote users’ freedom to choose how they want to transact.

The proposal has now moved to negotiations between the EU legislative bodies starting April 28, with the final text expected by the end of June. If the rule passes in its current form, there will still be a chance to review it within 12 months after its coming into force. However, we can’t rely on this — now is the time for the European crypto industry to coordinate and engage with policymakers. Instead of forcibly applying TradFi rules to a developing technology, we should promote outcome-based policies that allow the emergence of novel compliance solutions that respect how crypto works.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Natalie Linhart is a legal counsel at ConsenSys, where she advises on products including MetaMask, NFT experiences and institutional staking. She also focuses on European regulatory issues affecting the crypto industry. She previously worked as a financial regulatory and derivatives lawyer at Clifford Chance London, advising clients on launching financial products, accessing new markets and mitigating regulatory risks. She also worked on derivatives and debt capital markets transactions including at a global investment bank.

Rari Fuze hacker offered $10M bounty by Fei Protocol to return $80M loot

Rari Fuze hacker offered $10M bounty by Fei Protocol to return $80M loot

DeFi investigator BlockSec’s monitoring system detected a loss of more than $80 million — citing the root cause as a typical reentrancy vulnerability.

Decentralized finance (DeFi) platform Fei Protocol offered a $10 million bounty to hackers in an attempt to negotiate and retrieve a major chunk of the stolen funds from various Rari Fuse pools worth $79,348,385.61 or nearly $80 million.

On April 30, Fei Protocol informed its investors about an exploit across numerous Rari Capital Fuse pools while requesting the hackers to return the stolen funds against a $10 million bounty and a ‘no questions asked’ commitment.

While the exact losses from the exploit were not officially released, DeFi investigator BlockSec’s monitoring system detected a loss of more than $80 million — citing the root cause as a typical reentrancy vulnerability. While reentrancy bugs have been the main culprit in many exploits within the DeFi ecosystem, the $80 million loot makes the Fei Protocol exploit one of the largest reentrancy hacks ever.

Invocation flow. Source: BlockSec

Upon further investigations, Rari developer Jack Longarzo revealed a total of six vulnerable pools (8, 18, 27, 127, 144, 146, 156) that have been temporarily paused while an internal fix is underway. At the time of writing, Rari’s internal and external security engineers partnered with DeFi service provider Compound Treasury to further investigate and neutralize the hack.

Providing further insights into the development, blockchain investigator PeckShield narrowed down the exploit to a reentrancy bug, which allows hackers to use a function and make external calls to another untrusted contract.

Security-focused ranking platform CertiK told Cointelegraph that the attacker has sent 5400 Ether (ETH) (~$15,298,900) to Tornado Cash and still holds $64,245,245.43 (22,672.97 ETH) in their wallet. The attack has drained funds from the Rari pool whilst the Fei Pools (Tribe, Curve) remain unaffected.

Last year, in May 8, 2021, Rari Capital became victim to a high-priced exploit that was related to an integration with Alpha Venture DAO (previously Alpha Finance Lab). At the time of reporting, there have been no official announcements from the Fei Protocol team on the results of their investigation.

Related: Plan for $1M bug bounties and double the nodes in wake of $600M Ronin hack

As the crypto community goes through an ever evolving battle against hackers, numerous projects and protocols have decided to amp up their security measures. On April 28, the Ronin Network and Sky Mavis revealed plans to upgrade their smart contracts — following the $600 million hack in the previous month.

The Federal Bureau of Investigation (FBI) attributed the attack to North Korea-based and state-sponsored hacking group Lazurus, as it fired off a warning to other crypto and blockchain organizations.

Is Web3 like playing Minecraft?

Is Web3 like playing Minecraft?

Web3 is coming. Are you ready for it? Use the newest version of the internet and expand your whole online experience.

How to use Minecraft to understand Web3?

Minecraft makes the transition from analog block building to an immersive gaming experience rather easy and playful.

Users can turn the Minecraft experience into whatever they want it to be. They can play, create, socialize and invest. For everyone who wants to hop on the Web3 train and explore the opportunities of the Metaverse can start by playing the game in a 3D world.

It goes without saying that if you’re familiar with Minecraft or even the concept of online gaming in general, you can imagine how to build and play in one or more virtual worlds. This Minecraft universe, especially with the newest addition of the NFTs, is like the portal to the Metaverse. Build blocks in the Minecraft worlds and continue to build blocks — on the blockchain — in NFT Worlds.

The Minecraft Metaverse?

Minecraft not only enables P2E and enters the world of Web3 gaming. It also is taking the first steps in the Metaverse.

The Metaverse is a network of all kinds of 3D virtual worlds. NFT Worlds is enabling the Metaverse experience, which is what makes NFT collectors, Metaverse fanatics and enthusiastic gamers happier.

NFT Worlds is not only an endless universe of different Minecraft worlds, but it’s also a way to earn money while gaming. It’s called play-to-earn and essentially, you’re earning tokens while playing the game. With these tokens, you can buy NFTs and even collect them if you like. After the decentralized finance (DeFi) boom in 2020 and the NFT rise in 2021, Web3 gaming may be the newest trend for 2022.

Related: Crypto Raiders explains how blockchain gaming attracts new users to Web3.

How will Web3 change our lives?

Web3 will make our online lives more personalized and more secure and will vouch for a better experience.

It’s important to know that Web3 will have to communicate intelligently with people and with machines and data. Software must be able to process information conceptually and contextually. But, in which ways are you going to explore the differences between Web2 and Web3? What is the point of web 3.0?


So, in summary, it will be more user-oriented and accessible, like playing Minecraft. Say what? What’s Minecraft got to do with it? Aren’t little kids playing Minecraft?

How does Web3 work?

Web3 puts major companies like Meta out of business and gives every user rights to develop the next big thing together. Decentralization and the combination of humans and machines will be the heart of the Web3 projects.

There is a reason for users’ passive participation: We’re still busy trying to get the biggest part of the pie. But now, Web3 is in the pipeline. This is going to change radically. In the upcoming years, there’s going to be a shift from tech giants who are “the boss” to individuals who are taking the lead.

When the development of Web3 is concluded and if you’re working within IT, blockchain or crypto space, you’re working on it too, we’re all going to be the boss. Data is going to be stored in a decentralized manner and everyone and everything will be connected. It offers opportunities and has risks at the same time. Think about privacy and compliance risks, smart contract hacks and rug pulls. Greater control requires greater responsibility.

Cryptocurrency, NFTs, smart contracts and blockchain technology will be essential in the upcoming Web3. Smart contracts are fully digital contracts and they will take the lead in a secure and automated online environment. Machine learning, artificial intelligence and the Internet of Things will also have a seat at the table, so you can imagine what kind of revolution this will have on us as daily users of the internet.

Web3 vs. Minecraft

Web3 enables the newest version of Minecraft and will upgrade the gamer experience.

So, we know now what Web3 is, but what’s the difference between Web3 and Minecraft? And, how is it connected to the Metaverse? Web3 is the newer version of the internet, where everything is more connected and decentralized — just like the already existing Minecraft worlds. Minecraft is an adventurous game with endless possibilities, where you can build and explore the ever-changing landscape.

The evolution of Minecraft could easily be described as a transformation from building blocks on your own computer to building blocks for the Metaverse. In March 2022, Minecraft launched a new blockchain layer which is mindblowing news for all the fans. It allows players to access Web3 features in a play-to-earn (P2E) kind of way, as they can purchase items for their Minecraft world. The combination of Minecraft and nonfungible tokens (NFTs) even got a catchy name: NFT Worlds.

With NFT Worlds, Minecraft enters the world of third-party servers. NFT Worlds is built on a Polygon-based layer, so all users get access to the Web3 functionalities. The in-game experience can be made more compelling by purchasing items on the online shop. You’re no longer paying with United States dollar or euro because $WORLD ERC-20 tokens are here to let you play the game.

What is Web3?

Web3 may feel like hype but will most likely be the newest version of the internet.

Web3 is a buzzword lately, especially for those who are interested in technology, blockchain technology and crypto. It’s going to be the future of the internet, where we all are going to take part in. Even though we’re used to buying, watching and finding everything online, there’s one thing we can’t do at the moment: taking the lead.

Giants like Google, Meta and Amazon are ruling the online world right now, but they’re excited for the new making its appearance. Alphabet Inc. CEO Sundar Pichai tells in a Bloomberg interview he’s “watching the blockchain space and looking at how Google’s parent company can add value to development of the technology that’s being embraced by many of his Silicon Valley peers.”

Related: How to use Minecraft to understand the metaverse and Web3.

Meta to launch metaverse hardware store, Elon Musk buys Twitter for $44B and ApeCoin pumps to new highs: Hodler’s Digest, April 24-30

Meta to launch metaverse hardware store, Elon Musk buys Twitter for $44B and ApeCoin pumps to new highs: Hodler’s Digest, April 24-30

Coming every Saturday, Hodlers Digest will help you track every single important news story that happened this week. The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions and much more a week on Cointelegraph in one link.

Top Stories This Week

Elon Musk buys Twitter for $44B crypto industry reacts

Eccentric billionaire Elon Musk bought Twitter for around $44 billion this week, or $54.20 per share in cash. After the deal was accepted, Musk said he hoped that even my worst critics remain on Twitter, because that is what free speech means.

The crypto industrys reaction was mixed, with Dogecoin co-creator Jackson Palmer describing the acquisition as a hostile takeover antithetical to the idea of freedom, while Bitcoin bulls Anthony Pompliano and Michael Saylor welcomed the move.




ApeCoin (APE) hits a new all-time high ahead of this weeks Otherside land auction

Bored Ape Yacht Club-affiliated ApeCoin (APE) hit a new all-time high of $22.60 on Thursday amid growing excitement about the upcoming Otherside metaverse land auction, which is being held by Animoca Brands and BAYC creator Yuga Labs.

Otherside is a forthcoming metaverse project within the BAYC ecosystem, and it is hosting the sale of its first 100,000 land parcels on Saturday. Wallets that already hold a BAYC or Mutant Ape Yacht Club NFT will be able to claim a land parcel for free.


Meta will open physical metaverse-themed store in San Francisco Bay Area

Mark Zuckerbergs Meta is set to open a retail store in Burlingame, California that will sell virtual reality and metaverse hardware. The store will be located on Meta’s Burlingame campus and will feature a wall-to-wall curved LED screen that displays what users see using Meta headsets.

The store will also provide demos for anything related to virtual reality headsets, video communications displays and smart glasses. The Meta Store is going to help people make that connection to how our products can be the gateway to the Metaverse in the future, said store head Martin Gilliard.



Central African Republic will adopt Bitcoin as legal tender: Report

The Central African Republic (CAR) reportedly passed a bill this week enabling Bitcoin to be used as legal tender alongside the franc. The CAR now joins El Salvador in taking the ambitious plunge into fully adopting BTC.

President Faustin-Archange Touadras chief of staff, Obed Namsio, was quoted as saying that the move was aimed at making the CAR one of the boldest and most visionary countries in the world. The nation of 5 million has one of the smallest economies in the world with a gross domestic product of roughly $2.4 billion.


Brazil’s Senate approves ‘Bitcoin law’ to regulate cryptocurrencies

The Federal Senate of Brazil also made a strong crypto move this week, passing the countrys first bill governing cryptocurrencies. The bill will enable the government to create a regulatory framework for the local crypto industry.

Senators have discussed providing crypto miners with incentives for setting up shop in Brazil, and they are also looking to introduce heavy punishments for any fraudulent or bad behavior in the sector.

In order to become law, the bill must next be approved by the Federal Senate’s Chamber of Deputies and then signed off by President Jair Bolsonaro.






Winners and Losers


At the end of the week, Bitcoin (BTC) is at $39,032, Ether (ETH) at $2,854 and XRP at $0.62. The total crypto market cap is at $1.77 trillion, according to CoinMarketCap.

Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are ApeCoin (APE) at 60.14%, STEPN (GMT) at 20.28% and Kava (KAVA) at 13.88%.

The top three altcoin losers of the week are Zilliqa (ZIL) at -23.84%, Waves (WAVES) at -23.07% and Axie Infinity (AXS) at -23.02%.For more info on crypto prices, make sure to read Cointelegraphs market analysis.





Most Memorable Quotations


Bitcoin will never become zero because it has intrinsic value beyond its technological and monetary merits.

Lili Zhao, director of ecosystem growth for Neo


Theres a pre-pandemic world and a post-pandemic world, and a post-pandemic world has a lot more government deficits it has a lot more uncertainty related to growth.

Anthony Scaramucci, founder and managing partner of SkyBridge Capital


I hope that even my worst critics remain on Twitter, because that is what free speech means.

Elon Musk, CEO of Tesla


We were given a big gift when China banned crypto mining and trading it was a big mistake for them.

Greg Tanaka, Palo Alto City Council member


Our survey shows something we have advocated over a long time: talking about the survival of digital assets is firmly over the question is now about evolution.

Julian Sawyer, CEO of Bitstamp


The problem with [Bitcoin] is you cant have truly free trade unless you have private trade.

Edward Snowden, government surveillance whistleblower



Prediction of the Week


Bitcoin repeats rare weekly chart signal that resulted in 50% BTC price dips

Bitcoins price traded largely sideways this week while still experiencing some volatility. The asset traded both above $40,000 and below $38,000 at times during the week, based on Cointelegraphs BTC price index.

Bitcoin could be headed for negative price action, according to pseudonymous Twitter personality Nunya Bizniz. Bizniz pointed out a pattern on Bitcoins chart that has previously occurred prior to 50% price drops the downward sloping of the assets 20-week and 50-week moving averages. This chart pattern has occurred twice before, each time seeing BTCs price subsequently decline by more than 50%.



FUD of the Week

STEPN impersonators stealing users’ seed phrases, warn security experts

Blockchain security firm Peckshield exposed multiple phishing websites for Web3 lifestyle app STEPN. According to the company, bad actors have been able to create and attach dubious MetaMask browser plugins that can be used to steal users’ seed phrases.


Bored Ape Yacht Club NFTs stolen in Instagram phishing attack

The Instagram account belonging to the Bored Ape Yacht Club NFT project was hacked on Monday. According to various unconfirmed social media reports, roughly 100 NFTs worth a combined $400,000 were stolen as part of a phishing attack and fake airdrop. Users believed the links used to carry out the attack were legit since it coincided with the one-year anniversary of BAYCs launch.


New York State Assembly passes ban on new BTC mines that don’t use green power

The New York State Assembly passed a bill earlier this week that aims to place a two-year ban on all new proof-of-work (PoW) cryptocurrency mining facilities that are backed by carbon-generated power. The bill also states that current miners who rely on carbon-powered rigs wont be able to renew their permits once they expire.



Best Cointelegraph Features

Crypto Valley and the Crypto Oasis: Ralf Glabischnig

A few spots worldwide will attract the people who can afford it because its safe for their family and those people bring the business.

The loss of privacy: Why we must fight for a decentralized future

As early blockchain adopters, we must bring decentralization to the masses and fight with the tech behemoths that are its natural enemies.

Decentralized credit scores: How can blockchain tech change ratings

Borrowing and lending are two important parts of DeFi, but they have been missing an effective operating credential: a decentralized credit rating.


The best of blockchain, every Tuesday

Subscribe for thoughtful explorations and leisurely reads from Magazine.

By subscribing you agree to our Terms of Service and Privacy Policy



Smart money is accumulating Ethereum even as traders warn of a drop to $2.4K

Smart money is accumulating Ethereum even as traders warn of a drop to $2.4K

Short-term analysis sets a $2,400 price target for ETH, but data shows smart money continues to accumulate in anticipation of the Merge.

The upcoming Ethereum merge is one of the most widely discussed topics in the crypto sector and analysts have a wide range of perspectives on how the transition to proof of stake could impact Ether's price. 

ETH/USDT 1-day chart. Source: TradingView

Whales accumulate ahead of the merge

A deeper dive into the ongoing accumulation of Ether by whale wallets was provided by cryptocurrency intelligence firm Jarvis Labs, which posted the following chart looking at the percentage change in whale wallet holdings versus ET price. 

Ether whale holding change. Source: Twitter

The color of the dots relates to the price of Ether, with the chart showing that whale wallets began decreasing their holdings when the price was above $4,000 and they didn't start to reaccumulate until after the price dropped below $2,300.

Jarvis Labs said,

“Whales are continuing to accumulate Ether, their accumulation remains in sideways-to-uptrend.”

And it's not just the whales who are looking to scoop up Ether on the dip as shown in the following chart where red dots indicate that both whale wallets and smaller wallets have seen an increase in accumulation. 

Ether divergence. Source: Twitter

Analysts at Jarvis Labs said,

“Looking at just the Ether wallets distributions, it can be inferred that Whales UP + Fishes UP (Both whales and Fishes seem to be accumulating). Merge narrative?”

Is an Ethereum decoupling on the horizon?

Analysts at Delphi Digital contemplated whether Ethereum price could decouple from BTC leading into or after the merge. The analysts also predict that the altcoin is “likely to see more consolidation for ETH/BTC in the short run.”

ETH/BTC price trends. Source: Delphi Digital

One of the main questions this chart elicits is what will it take for Ether to break free from “the invisible chain” that has kept it tethered to Bitcoin for so long.

According to Delphi Digital, the current bullish "ultrasound money" and "Merge" narratives surrounding Ether might be just the thing to help Ether break free from its correlation to Bitcoin price action.

Delphi Digital said,

“The interest in “post-Merge” Ether is only going to get stronger from here, especially as more people recognize the opportunity to earn higher real yields denominated in a deflationary asset.”

Ether staking gains momentum

Ether staking statistics. Source:

Even with Ether price continuing to decline, data shows that the number of ETH staked on the beacon chain continues to increase. Data from Dune Analytics also shows increasing deposits to Eth2 and multiple analysts have shared their view on how institutional investors and whales might trade Ether in the pre and post Merge phase.

Lido Eth2 deposits. Source: Dune Analytics

Overall, the data shows that even with Ether price trading 42.5% away from its all-time high, the smart money continues to accumulate due to the expected boost in the staking reward percentage and anticipation that price will turn bullish once Ethereum becomes a deflationary asset.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should conduct your own research when making a decision.

VC Roundup: Gaming, crypto fintech and blockchain infrastructure dominate venture capital rounds

VC Roundup: Gaming, crypto fintech and blockchain infrastructure dominate venture capital rounds

HBAR Foundation, bloXroute, GamerGains, Spruce, Venly, Playmint and headline the latest funding deals from the world of blockchain.

Cryptocurrency markets remain caught in a macro-based downtrend, with Bitcoin (BTC) and Ether (ETH) showing further signs of weakness at the end of April. But, venture capital activity in the crypto and blockchain sectors is the strongest it has ever been, offering further evidence that major investors are looking beyond immediate price action and ignoring divisive bull/bear narratives. The latest edition of VC Roundup highlights the growing excitement surrounding Web3 gaming, decentralized finance (DeFi) and blockchain infrastructure.

The first quarter of 2022 was brutal for crypto prices, but venture capital activity was the strongest ever. 

bloXroute secures $70M from major investors

Blockchain distribution network provider bloXroute has raised $70 million in funding to continue developing scalable infrastructure services for the cryptocurrency and DeFi industries. The Series B funding round was led by SoftBank Vision Fund 2, with participation from Dragonfly Capital, Jane Street, ParaFi Capital, Blindspot, GSR and others. The company recently launched its Blockchain Distribution Network, which is said to overcome network congestion to provide users with reliable information about buy and sell orders.

HBAR Foundation launches $50M fintech innovation fund

Hedera ecosystem promoter HBAR Foundation has launched a $50 million fund to incentivize Hedera-focused development work around central bank digital currencies (CBDC), stablecoins, remittance services, micropayments and asset tokenization. The fintech and payments fund is now seeking proposals for these and other finance-based integrations. At the time of writing, Hedera was the 35th most valuable blockchain network with a total market capitalization of $3.2 billion, according to CoinMarketCap.

Related: HBAR Foundation launches a $250M metaverse fund to enhance consumer brand adoption

Crypto industry heavyweights back decentralized venture studio

Web3 venture studio Decent Labs has partnered with BlockTower Capital, Digital Currency Group and others to launch a new incubator decentralized autonomous organization (DAO) ecosystem called Decent DAO. The backers allocated a combined $10 million in on-chain investments to the initiative at a valuation of $56 million. Decent DAO wants to fix a major problem plaguing many decentralized autonomous organizations — namely, a lack of proper governance and leadership — and has developed a system that ensures all project backers are fully invested in the space.

a16z leads $34M Spruce raise

Andreessen Horowitz, also known as a16z, led a $34 million funding round for decentralized identity startup Spruce. The Series A funding round also had participation from Ethereal Ventures, Electric Capital and Y Combinator, among others. Spruce is developing a protocol that lets users control their personal data across the Web2 and Web3 economies. Spruce has also partnered with the Ethereum Foundation to develop a new authentication method for Ethereum accounts and ENS profiles.

Gaming industry veterans raise capital for Web3 studio

Gaming industry professionals formerly of EA, Disney and Epic Games have raised $4 million for Playmint, a new venture studio developing massively multiplayer on-chain games, also known as MMOCG. The seed round was led by BITKRAFT Ventures with participation from Ethereal Ventures, Cherry Ventures, Play Ventures and 1kx. Playmint’s first title is called The Crypt, a loot-based dungeon game that’s built on the blockchain.

Related: Animoca Brands to bet big on MMORPG blockchain games

GamerGains closes $5.8M seed round backed by Winklevoss Capital

Developer GamerGains Labs has closed a $5.8 million seed round to support the development of a cryptocurrency-based play-and-earn (P2E) platform. Unlike other crypto-focused developers, GamerGains is building a platform for traditional PC and console gamers, allowing players to earn crypto and token rewards for typical gameplay. The funding round had backing from some of blockchain’s biggest venture studios, including Tiger Global, FTX, Winklevoss Capital, CMS Holdings and BlockFi.

Blockchain developer Venly raises $23M

Belgian technology provider Venly is looking to bring more industries to blockchain and has secured $23 million in Series A investments to further this initiative. The funding round was led by Courtside Ventures with participation from Transcend Fund, Coinbase Ventures, Tioga Capital and others. The company, which develops tools and APIs that allow Web2 companies to utilize Web3 technology, is primarily focused on game publishers and e-commerce businesses. Its application programming interface (API) platform has been used by the likes of Shopify and The Sandbox, among others.

Related: Crypto Biz: If you think crypto is bearish, you’re not paying attention, April 21–27, 2022 secures $6M Series A funding round

Decentralized finance platform has raised funds to continue building its consumer-focused DeFi products and tools. The platform allows DeFi users to connect their crypto wallets and earn yields on their Bitcoin, Ether and other holdings. The funding round, which was secured through a combination of crypto and fiat, was led by Libertus Capital, with additional participation from several angel investors from within the crypto industry.

Avalanche (AVAX) loses 30%+ in April, but its DeFi footprint leaves room to be bullish

Avalanche (AVAX) loses 30%+ in April, but its DeFi footprint leaves room to be bullish

AVAX is trading below $65, but the network’s large DeFi ecosystem and DApp use are reflective of its strong fundamentals.

Avalanche (AVAX) price is down more than 30% in April, but despite the negative price move, the smart contract platform remains a top contender for decentralized applications due to its scalability, low-cost transactions and its large footprint in the decentralized finance (DeFi) landscape.

AVAX token/USD at FTX. Source: TradingView

The network is compatible with the Ethereum Virtual Machine (EVM) and unique in that it does not face the same operational bottlenecks of high transaction fees and network congestion.

Avalanche was able to amass over $9 billion in total value locked (TVL) by offering a proof-of-stake (PoS) layer-1 scaling solution. This indicator is extremely relevant because it measures the deposits on the network’s smart contracts. For instance, the BNB Chain, running since September 2020, holds $10.4 billion in TVL.

Positive news could create a price support

Even though the AVAX token price has suffered and the TVL stands behind some of its competitors, investors remain bullish, based on fundamentally positive developments that occurred in the month of April.

According to an April 14 report by Bloomberg, Ava Labs, the lead developer of the Avalanche blockchain, raised $350 million from investors. This deal valued the company at $5.25 billion and according to data from DappRadar, Avalanche holds nearly 100 active applications, ranging from decentralized finance to nonfungible token (NFT) marketplaces and gaming.

Earlier in April, the organizations behind the Terra USD algorithmic stablecoin purchased a combined $200 million in AVAX for their strategic Terra USD reserves. Terra co-founder Do Kwon cited Avalanche’s solid ecosystem growth and large user base.

Even with the positive news, AVAX's price remains 53% below its $147 all-time high, resulting in an $18.4 billion market capitalization. In comparison, the market cap of Terra (LUNA) stands at $31.0 billion, and Solana (SOL) has a $33.3 billion total value.

Total value locked drops 10.5%, but follows the market-wide downtrend

Avalanche’s primary DApp metric strengthened in the last 30 days as the network‘s TVL rebounded to 121 million AVAX.

Avalanche Total Value Locked, AVAX. Source: DefiLlama

The chart above shows how Avalanche's DApp deposits peaked at 132.9 million AVAX on March 14, but drastically declined earlier in April to the lowest level since Jan. 3. As a result, the current $8.5 billion TVL is down 10.5% over the last 30 days.

As a comparison, Solana’s (SOL) TVL decreased by 9.5% in the same period, reaching $4.8 billion. Similarly, Ethereum smart contract deposits decreased from $88.3 billion to $80.1 billion in the same period, which is a 9% decline.

To confirm whether the TVL drop in Avalanche is troublesome, one should analyze DApp usage metrics. Some DApps such as games and collectibles do not require large deposits, so the TVL metric is irrelevant in those cases.

Avalanche DApps 30-day data. Source: DappRadar

As shown by DappRadar, on April 28, the number of Avalanche network addresses interacting with decentralized applications declined by 14% versus the previous month. In comparison, the Solana network faced a 60% user increase, while Ethereum remained flat.

Avalanche’s strong DeFi use-case is still a bullish factor

Even though Avalanche’s TVL has been hit the hardest compared to similar smart contract platforms, there is solid network use in the DeFi segment. For instance, Trader Joe’s 180,830 active addresses outnumber those of Ethereum’s leading DeFi application, MetaMask Swap, which holds 116,210 active users.

The above data suggest that Avalanche is holding ground versus competing chains. Given that AVAX price plunged 29.5% in 28 days, investors should not panic because the decentralized application network posted a solid TVL and DApp usage data.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Price analysis 4/29: BTC, ETH, BNB, SOL, LUNA, XRP, ADA, DOGE, AVAX, DOT

Price analysis 4/29: BTC, ETH, BNB, SOL, LUNA, XRP, ADA, DOGE, AVAX, DOT

Bitcoin’s inability to hold above $40,000 has traders now targeting extreme lows in the $25,000 zone, a move that would be absolutely deadly for most altcoins.

The U.S. dollar index (DXY) turned down from its 20-year high on April 29 but that has not changed the bearish price action seen in Bitcoin (BTC) and the U.S. equity markets. Equities remain under pressure and this week, Amazon stock saw its biggest intraday drop since 2014 after uncertainty over the U.S. Federal Reserve’s tightening measures placed investor sentiment back into choppy waters.

If Bitcoin extends its correction, on-chain analysis platform Whalemap believes that the $25,000 to $27,000 zone may be the best place “to go all-in” on Bitcoin.

Long-term investors do not appear to be panicking over the current weakness in Bitcoin and on-chain data from CryptoQuant shows that the combined BTC reserves of 21 crypto exchanges has plummeted to levels not seen since September 2018.

Daily cryptocurrency market performance. Source: Coin360

The HODL mentality is not limited to Bitcoin investors alone. A nonfungible token (NFT) survey report by CoinGecko showed that more than 50% of respondents said they have a HODL mentality because they believe NFTs could be important items in games. The report added that the Metaverse could become an $800 billion market in the next two years.

Could Bitcoin and altcoins decline further or is a reversal on the cards? Let’s study the charts of the top-10 cryptocurrencies to find out.


Bitcoin pulled back to the 20-day exponential moving average (EMA) ($40,363) on April 28 but the long wick on the day’s candlestick suggests that bears are selling on rallies to this level.

BTC/USDT daily chart. Source: TradingView

The downsloping 20-day EMA and the relative strength index (RSI) below 41 indicate that the path of least resistance is to the downside. If bears sink and sustain the price below the support line of the channel, the BTC/USDT pair could extend its decline to $34,300 and later to $32,917.

To invalidate this negative view, the buyers will have to push and sustain the price above the 50-day simple moving average (SMA) ($41,981). If they succeed, the pair could start its northward journey to the 200-day SMA ($47,433) where the bears may again pose a stiff challenge.


Ether (ETH) pulled back to the 20-day EMA ($2,991) in the past two days but the bulls could not push the price above it. This suggests that the sentiment remains negative and traders are selling on rallies.

ETH/USDT daily chart. Source: TradingView

The bears will now attempt to sink the price to the uptrend line. This is an important level for the bulls to defend because a break and close below it could invalidate the developing ascending triangle pattern. The ETH/USDT pair could then decline to $2,450.

This negative view could invalidate in the short term if the price turns up and breaks above the 50-day SMA ($3,045). That could attract buyers who may then push the pair to the 200-day SMA ($3,464). A break and close above this level could signal the start of a new up-move.


BNB dropped below $391 on April 26 but the bears could not sustain the lower levels. The price rose back above the breakdown level on April 27. This suggests demand at lower levels.

BNB/USDT daily chart. Source: TradingView

The bulls pushed the price to the 50-day SMA ($410) on April 28 but could not clear this hurdle. This suggests that bears are selling on rallies. The bears will now attempt to pull the price below the $391 to $380 support zone.

If they manage to do that, the BNB/USDT pair could drop to the strong support at $350. The buyers are expected to mount a strong defense at this level. The short-term trend could turn positive if bulls push and sustain the price above the 50-day SMA.


Solana (SOL) bounced off the support line of the ascending channel on April 27 but the bulls could not sustain the positive momentum and clear the overhead hurdle at the 20-day EMA ($101).

SOL/USDT daily chart. Source: TradingView

The bears now sense an opportunity and will try to sink the price below the support line of the channel. If they manage to do that, the selling could accelerate and the SOL/USDT pair could slide to the strong support at $75. This is an important level for the bulls to defend because a break and close below it could signal the resumption of the downtrend.

This negative view could invalidate in the short term if the price turns up and breaks above the 20-day EMA. The pair could then rise to $110 and later attempt a rally to $122.


The failure of the bulls to push Terra’s LUNA token above the psychological resistance at $100 could have tempted short-term traders to book profits. That pulled the price below the minor support at $86 on April 29.

LUNA/USDT daily chart. Source: TradingView

The RSI has dipped into the negative zone, indicating that the bullish momentum has weakened. If bears sustain the price below $86, the LUNA/USDT pair could drop to the strong support at $75. The bulls are expected to defend the zone between $75 and the 200-day EMA ($69) aggressively.

On the upside, the buyers will have to overcome the stiff barrier at $100 to set up a potential retest of the all-time high at $119. A break and close above this level could signal the resumption of the uptrend.


Ripple (XRP) rebounded off the support at $0.62 on April 26 but the weak rebound suggested a lack of aggressive buying. The selling resumed on April 29 and the bears have pulled the price below the critical support.

XRP/USDT daily chart. Source: TradingView

The 20-day EMA ($0.71) is sloping down and the RSI is in the oversold zone, suggesting that the path of least resistance is to the downside. If the price sustains below $0.62, the XRP/USDT pair could plummet to $0.55 and later challenge the psychological support at $0.50.

Contrary to this assumption, if the price rebounds off the current level, the buyers will make one more attempt to push the pair above the 20-day EMA. If they succeed, it will suggest that the pair may consolidate between $0.62 and $0.91 for some time.


Cardano (ADA) tried to start a relief rally from $0.81 on April 27 but failed to reach the 20-day EMA ($0.91). The selling resumed on April 29 and the bears will now attempt to pull the price to the strong support at $0.74.

ADA/USDT daily chart. Source: TradingView

The 20-day EMA is sloping down and the RSI is near the oversold territory, suggesting that bears have the edge. If bears sink the price below $0.74, the selling could intensify and the ADA/USDT pair could plummet to $0.68.

Contrary to this assumption, if the price rebounds off $0.74, the bulls will try to push the pair above the 20-day EMA. If they succeed, the pair could rally to the psychological level at $1, which is likely to act as a stiff resistance.

Related: 3 reasons why Dogecoin price can now gain 50% by September


Dogecoin (DOGE) has managed to stay above the 50-day SMA ($0.13) for the past three days but the bulls have not been able to sustain the price above the 20-day EMA ($0.14). This suggests that the bears are selling at higher levels.

DOGE/USDT daily chart. Source: TradingView

The failure to bounce may attract further selling, which could pull the price below the 50-day SMA. If that happens, the DOGE/USDT pair could drop to $0.12 and later to the psychological support at $0.10.

Contrary to this assumption, if the price rises and sustains above the 20-day EMA, the buyers will try to push the pair to the overhead resistance at $0.17. The bulls will have to clear this hurdle to signal a possible change in trend.


Avalanche (AVAX) has declined to the strong support at $65. The bulls had defended this support on two previous occasions; hence, they will again try to arrest the decline at this level.

AVAX/USDT daily chart. Source: TradingView

However, the bears are likely to have other plans. The downsloping 20-day EMA ($74) and the RSI near the oversold territory favor the bears. If the price breaks below $65, the AVAX/USDT pair could drop to the critical support at $51.

Alternatively, if the price rebounds off $65, the pair is likely to hit a wall at the 20-day EMA. If the price turns down from this resistance, the prospects of a break below $65 increase.

The bulls will have to push and sustain the price above the 20-day EMA to indicate that the bears may be losing control. The pair could then rise to the 200-day SMA ($85).


The bulls are defending the support of the large range between $16 and $23 but haven’t been able to achieve a strong rebound off it. This suggests that demand dries up for Polkadot (DOT) at higher levels.

DOT/USDT daily chart. Source: TradingView

The downsloping 20-day EMA ($18) and the RSI in the negative territory indicate advantage to sellers. The bears will now attempt to pull the price below the $16 support and if they manage to do that, the DOT/USDT pair may drop to $14.

The buyers will have to push and sustain the price above the 50-day SMA ($19) to signal that the corrective phase may be over. The pair could then start its journey toward the overhead resistance at $23.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Market data is provided by HitBTC exchange.

A Look At The Future Of Specter And Bitcoin Sovereignty With Moritz Wietersheim

A Look At The Future Of Specter And Bitcoin Sovereignty With Moritz Wietersheim

Specter is a Bitcoin wallet provider that builds tools for the entire Bitcoin usage stack, from commercial to individual use.

The core principle and design goal of Bitcoin was to be "a purely peer-to-peer version of electronic cash." While this statement from the whitepaper is traditionally viewed as being related solely to the processing of payments independent of a financial institution, there are other aspects of Bitcoin that are incredibly important to maintain in order to keep it a peer-to-peer system that empowers its users to maintain control over their own finances. Self-validation is one of the most important things for a Bitcoiner to do in order to maintain their own sovereignty over their money. Privacy is another thing that is also incredibly important in relation to self-sovereignty. Obviously in addition to these two aspects, managing your own keys is key (get it?) to having full control over your own bitcoin.

Specter is a family of open source projects that have been working to make all of these important qualities accessible and easy to use for Bitcoiners since 2018. Moritz Wietersheim from Specter was kind enough to give some time to answer questions regarding the past, present state and future plans of the Specter team in expanding their software and hardware devices to continue simplifying the process of using Bitcoin in the most sovereign way possible.

The project began in 2018 in Lisbon during a steak dinner after the Building on Bitcoin conference. Wietersheim met Stepan Snigirev during the conference, where Snigirev had won the hackathon event with a prototype of a hardware wallet with integrated Lightning Network support. During the course of the dinner, Wietersheim and Snigirev decided to start working together on what would become the Specter DIY (Do-It-Yourself) hardware wallet. This became the core piece for an entire ecosystem of different tools for interacting with Bitcoin.

Specter DIY

The Specter DIY Wallet was designed at a time when the hardware wallet space was much less mature. A comprehensive breakdown of many of the vulnerabilities discovered during that time period can be found at Saleem Rashid's website as well as the Wallet.Fail presentation at the Chaos Communication Congress. At the time it was an almost monthly occurrence for pretty nasty vulnerabilities to be found in different hardware devices. Although the space has matured quite a lot since that time period, I think it is important to note the environment at the time to give context to the thinking behind Specter DIY.

The Specter DIY is built around the STM32 microcontroller, the same MCU (microcontroller unit) used by hardware wallets such as the Coldcard, Trezor, Bitbox, etc. It’s mounted on a Discovery developer board which has both an SD card slot and USB for communication with software wallets. It also has optional support for a QR code scanner. The original notion of a "stateless" signing device — one that does not persistently store the mnemonic seed or private keys on the device — was pioneered by the Specter DIY. This design decision was made because of the MCU’s lack of physical security when storing sensitive data (the STM32 has been physically compromised to extract secrets many times in the past).

By not persistently storing your private keys on the device, you limit the attack surface any malicious actor can exploit if they are able to gain physical access to the device. Without the seed, the most an attacker can hope to do is access your device, compromise it to persist or transmit your keys instead of wiping them and then replace it and hope you do not notice it has been tampered with before the next time you load your keys on the device. This is by no means perfect, but in the world of security nothing is, and this is a huge improvement compared to simply persistently storing your keys on the STM32 where they can be accessed by anyone with the time to compromise the chip. You can deactivate this mode and store the private key data in the MCU, but unless you can physically secure your device with a very high degree of certainty, this should be something you consider carefully before doing. As well, without a secure element it would be advisable to use a passphrase with such a setup.

The software side of the project is built using the embit library. It is a MicroPython/Python 3 library for interacting with Bitcoin data that was built specifically for use with the Specter DIY (it's also used by SeedSigner and krux, both of which are stateless signing device projects; an LNBits watch-only extension; the Specter Desktop software wallet). The library supports BIP39/BIP32 (mnemonic seed generation and derivation paths for keys), PSBT support for versions one and two, custom SIGHASH flag support (signing different parts of the transaction instead of the whole thing), and output descriptors and miniscript (datastrings to store what's needed for wallets to find UTXOs it controls and a high level language to make creating Bitcoin scripts easier). It also has experimental support for Shamir Secret Sharing, the Liquid Network, and Taproot (still in progress). For cryptographic functions it uses the libsecp256k1 library maintained by Bitcoin Core. The library is very well rounded with features necessary to meet the basic needs of wallets today, as well as features laying the groundwork for future improvements in existing functionality and the incorporation of expanded features not yet widely deployed in most wallets. Overall it's a very solid foundation to build from and was all initially put together for the Specter DIY.

In addition to the basic Specter DIY, an extended version called Specter Shield is a major increase in physical security. This is a custom extension board for the main STM32 Discovery board that the base model is built around. The files necessary to have one produced by a PCB board manufacturer are available on their Github repository (linked above). The Shield board has a QR code scanner, a battery and a smart card reader slot. This last feature is really what makes this extension board important. With the extension board and a smart card equipped with a secure element, the wallet can function with the same security model as something like a Coldcard. The key material can be stored on the secure element in a smart card and loaded onto the device during use, but only persistently stored on the smart card. Communication between the MCU and the secure element on the card are encrypted, so the information passed between them is not accessible to the microcontroller handling the smart card interface.

The flow of the wallet (with or without the Shield extension) when persisting keys is the same as most other hardware wallets. The MCU generates a unique secret which is stored in flash memory, and in combination with a user-provided pin encrypts the actual private keys (again regardless of whether storing them on the smart card secure element or the STM32) so that an attacker would have to access both your pin and the secret on the MCU to decrypt your bitcoin keys. This puts both dominant models of bitcoin hardware devices — stateless signers and key storage devices — in the hands of people in a DIY fashion. If you prefer to not rely on a secure element and purely depend on an open source MCU, the Specter DIY can be constructed in that fashion. If you prefer the additive security of a secure element in addition to an open MCU, that can be accomplished with the use of the Shield extension board. To top it all off, it also accepts user input entropy from coin tosses to not depend on the hardware random number generator. Disruptions of supply chains internationally have made it somewhat difficult to get your hands on the necessary hardware, but if you can, the project is worthwhile.

Wietersheim and Snigirev truly accomplished quite a feat in putting together the Specter DIY. It is by no means the first DIY hardware wallet out there, but it's the first that modularly supports in layman's terms anything between the security model of something like a Trezor to something like a Coldcard based on what the user constructing it wants. There was just one issue outstanding: wallet software to use it with.

Specter Desktop

When looking at companion apps for the hardware wallet, everything out there seemed to fall short of what Weitersheim and Snigirev were looking for. They did like the functionality of Bitcoin Core, but despite the stability brought to the table by developers, Bitcoin Core has a very minimalistic and in some ways non-intuitive user interface. It does however have a nice interface for PSBTs (Partially Signed Bitcoin Transactions) and the HWI (Hardware Wallet Integration) interface, so Stepan hacked together the first version of Specter as a minimal user interface improvement for interacting with Bitcoin Core.

Think of Specter Desktop as a “wrapper” for Bitcoin Core. It includes a nice GUI with multisig support; hardware wallet integration PSBT communication over QR codes, SD card, or USB; verification of receive addresses over QR code and USB; RBF (Replace by fee) support; a labeling system to keep track of your UTXOs and where they came from; and coin control to select specific UTXOs when spending (as well as the ability to freeze specific UTXOs to safeguard yourself from mistakes when spending). They have even integrated an easy to use one click solution to install Bitcoin Core directly from inside Specter Desktop (although, independently installing Bitcoin Core and connecting Specter is something even Peter McCormack was able to accomplish on his own).

In addition to the feature flexibility, the fact that Specter requires spinning up your own full node as a backend is a major privacy benefit compared to many wallets available to users. Most wallets in this ecosystem utilize a third party backend to track their UTXOs, meaning that the operator of that backend is able to correlate all of your UTXOs to a single identity. As well, if not communicating with the backend over Tor or through a VPN service, the operator is able to correlate all of those coins to your IP address. This is a horrible privacy leak that is remedied by Specter's insistence on a local Bitcoin Core instance to track your Bitcoin balance.

Specter also supports the Liquid Network, a federated Bitcoin sidechain, that also has one-click install support for a Liquid Elements full node within the Specter GUI. It supports Liquid wallets using the Blockstream Jade, Specter DIY, as well as hot wallets directly in Specter. Liquid offers a few interesting benefits with some tradeoffs compared to the main Bitcoin network itself. The sidechain is a federated system, meaning that utilizing the chain requires depositing your BTC into a multisig wallet controlled by the federation operating the sidechain, and then receiving L-BTC, a token issued on the sidechain backed by BTC custodied by the federation. For the tradeoff of trusting the federation, users have the ability to take advantage of Confidential Transactions, a basic zero-knowledge proof scheme that hides the amounts (and type of asset, in the case of Liquid's implementation) being transacted on the blockchain. It utilizes a "range proof" which cryptographically proves money is not being printed out of thin air without revealing the amounts being transacted.

Liquid also supports the issuance of other assets. A useful example is stablecoins such as Tether (L-USDT), a dollar-denominated stablecoin that allows users to avoid the volatility of Bitcoin in a "self-custodial" way (the token still requires the issuer to honor redemption to acquire "real money" at the end of the day). Liquid asset issuance also allows the creation of other types of tokens such as equities that could be self-custodied and the scripting functionality of Liquid supports more features than Bitcoin itself, allowing more advanced smart contracts such as BTC-backed loans, all handled directly by a user through their own wallet. Specter has chosen to support Liquid to allow users to interact with Liquid in the same way as the main chain: with privacy and total self sovereignty.

Specter Enterprise

Projects such as the Bitcoin Beach wallet actually use Specter as a backend for managing their on-chain multisig funds. They are not the only company using Specter on the backend to manage company funds and, according to Wietersheim, they were not even aware of the companies utilizing Specter until they were approached for assistance. A large part of the revenue keeping the project afloat is actually from such companies paying the Specter team for custom firmware for the Specter DIY and other development services, allowing them to work full time on maintaining their entire software suite.

It's interesting to think that the same toolset developed to offer individual users the path to self-sovereignty and security are also being used by actual companies towards the same ends. It's common to think of each group as totally separate markets with completely different needs, but as demonstrated here with Specter, the overlap is much larger than one might think at first glance.

A Bitcoiner's Command Center

The team at Specter has accomplished something truly spectacular with the project. Everything from hardware devices that securely manage private keys and signing operations to software to validate your transactions has been built out by the team in a seamless, interoperable way. It really is a Swiss Army knife of tools for the self-sovereign Bitcoiner, whether you are an individual user or a professional company managing other peoples' funds, to handle everything you need to interact with the Bitcoin network. The project is invaluable and the team should be commended for the excellent work they have done in creating this suite of open-source software and hardware for everyone in this space to take advantage of.

This is a guest post by Shinobi. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.