Kurt Hemecker

<div id="highlights-block_633dddfebcc7a" class="highlights">
 <ul>
 <li>The collapse of TerraUSD and the subsequent bear market has regulators scrutinizing the crypto space</li>
 <li>Clear and fair rules governing stablecoins may well foster a market where innovation increases exponentially</li>
 </ul>
 
</div>



Stablecoins have come under fire since the <a href="https://coinpedia.org/news/report-on-what-happened-to-terrausd-ust-prior-to-historic-collapse/" target="_blank" rel="noreferrer noopener">unraveling of UST</a> triggered crypto’s lingering bear market, leading to mixed results of industry views when it comes to the role of regulation. 



But, the reality is, all of crypto stands to benefit from clear, fair regulation.



Without clarity around how cryptocurrencies will be treated, decentralized applications (dapps), financial institutions and users must navigate the potential for sudden shifts that could upend their businesses, hindering innovation and growth.&nbsp;



Governments take action on standards&nbsp;



If regulators strike a healthy balance between supporting innovation — while simultaneously protecting users against high-risk and negligent projects — rule-making will greatly enhance DeFi&#8217;s growth.



President Biden&#8217;s administration recently followed its March executive order with a framework for how the US intends to responsibly approach cryptocurrencies. A <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/09/16/fact-sheet-white-house-releases-first-ever-comprehensive-framework-for-responsible-development-of-digital-assets/">fact sheet</a> acknowledges great potential benefits derived from digital assets. Indeed, protecting users and investors — while taking actions to guarantee financial stability — can only help Web3’s long-term viability.



Though the fact sheet is low on details on what shape policies pertaining digital assets should take, global regulators for payments and settlements issued guidelines in July that proposed <a href="https://www.coindesk.com/policy/2022/07/13/international-standard-setters-publish-guidance-on-stablecoin-regulations/">treating stablecoins like other assets that perform a transfer function</a>. The maneuver would require stablecoins to meet attributes outlined in the <a href="https://www.bis.org/cpmi/info_pfmi.htm">Principles for Financial Market Infrastructures</a> (PFMI), should financial watchdogs choose to enforce it. The PFMI includes guidance when it comes to risk management, financial strength and ready-to-go recovery plans in the event of a sudden downturn.



Though we&#8217;ll never know if such guidelines would have prevented the collapse of the Terra ecosystem, they form a solid baseline for building stronger, more resilient stablecoin rails.



Protecting users and fostering innovation



Clear and fair rules governing stablecoins may well foster a market where innovation increases exponentially.&nbsp;



Privacy-preserving stablecoins leveraging <a href="https://hackernoon.com/eli5-zero-knowledge-proof-78a276db9eff">zero-knowledge proofs</a>, for instance, can play an important role in enhancing and expanding stablecoin use cases, privacy and stability.&nbsp;



Institutional TradFi players have been hesitant to dive head-first into crypto, in no small part due to the radical transparency inherent to the bulk of blockchains.



The likes of banks and hedge funds do not necessarily like the idea of competitors witnessing how much capital they’re moving, when — and via what financial instruments. The privacy-preserving capabilities of zero-knowledge proofs can help assuage TradFi concerns, bringing that much more liquidity into DeFi.



The need to get regulations right



The stakes are high. If laws governing stablecoins are not properly designed, they will inevitably weaken the US’s standing as a world economic leader.&nbsp;



The formation and adoption of regulations will inevitably determine the future of finance, as DeFi becomes synonymous with TradFi and Web2 evolves into Web3.



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Mina Foundation

Want an Innovative Crypto Future? It Takes Regulation.

Morgan Chittum

<div id="highlights-block_62334f9f52f94" class="highlights">
 <ul>
 <li>Participants include Pantera, Brevan Howard, Alan Howard, Amber Group, Blockchain.com, Circle Ventures and Finality Capital Partners</li>
 <li>The capital will go toward “opening up more grant programs, such as a more robust grant program to support developers,” according to Mina Foundation’s Evan Shapiro</li>
 </ul>
 
</div>



Blockchain protocol Mina secured $92 million in a funding round led by FTX Ventures and Singaporean hedge fund Three Arrows Capital.



The capital will go toward “opening up more grant programs,” to “support developers,” Evan Shapiro, chief executive at Mina Foundation, told Blockworks.&nbsp;



“This [investment] from some of the most respected entities in crypto bolsters our aim to ensure that Mina becomes the go-to privacy and end-to-end security layer for Web3 while remaining powered by participants,” Shapiro said.



Other investors in the round include Pantera, Brevan Howard, Alan Howard, Amber Group, Blockchain.com, Circle Ventures and Finality Capital Partners.



Mina is the creator of a proof-of-stake protocol which bills itself as the “world’s lightest blockchain.” The project uses recursive zero-knowledge proofs to keep the state of the network at a tiny 22 kilobits (kb) — about 2,800 characters or 10 tweets. For comparison, Bitcoin’s blockchain <a href="https://ycharts.com/indicators/bitcoin_blockchain_size" target="_blank" rel="noreferrer noopener">is currently</a> about 396GB, while Ethereum <a href="https://ycharts.com/indicators/ethereum_chain_full_sync_data_size" target="_blank" rel="noreferrer noopener">weighs in</a> at 601GB to sync the full chain.



Imagine taking a picture of a sunset while on vacation in Hawaii to prove you were there. Now, someone takes a picture of your picture. Only, unlike with snapshot photos, a cryptographic technique known as <a href="https://minaprotocol.com/blog/what-are-zk-snarks" target="_blank" rel="noreferrer noopener">zk-SNARKS</a> allows the second picture holder to prove with certainty that you were there in Hawaii just as well as you yourself could.



In theory, the blockchain&#8217;s small size means Mina could more easily <a href="https://cms.blockworks.co/measuring-decentralization-is-your-crypto-decentralized/" target="_blank" rel="noreferrer noopener">decentralize</a>, because node operators do not require a significant investment in hardware. Developers of both Ethereum and Bitcoin have plans to allow for so-called “<a href="https://eth.wiki/en/concepts/light-client-protocol" target="_blank" rel="noreferrer noopener">light clients</a>” that would use similar techniques to function without a full copy of the chain history.



But on Mina, all participants act as full nodes and take part in maintaining consensus, <a href="https://minaprotocol.com/blog/what-is-ouroboros-samisika" target="_blank" rel="noreferrer noopener">using a variation</a> of the Ouroboros proof-of-stake protocol that was first developed for Cardano.



The system relies on another network participant dubbed a “prover” (a bit like <a href="https://cms.blockworks.co/the-investors-guide-to-bitcoin-mining/" target="_blank" rel="noreferrer noopener">a Bitcoin miner</a>, but without the energy use) which does need to store the full state.



There is a downside to computing zero-knowledge proofs, however: <a href="https://youtu.be/EugpncZGNnU?t=345" target="_blank" rel="noreferrer noopener">Mina’s 1 transactions-per-second</a> (TPS) rate makes it considerably slower than alternative layer-1 chains like Cosmos and Solana, and even slower than the Bitcoin network’s 7 TPS.



The team prefers to focus on a different mental model for scalability, <a href="https://minaprotocol.com/blog/solving-the-scalability-trilemma" target="_blank" rel="noreferrer noopener">they call ScaDe</a>, for Scalability-per-unit-of-Decentralization.



Mina is “built for mass adoption at both the user and application level,” Brian Lee, a partner at FTX Ventures, told Blockworks, adding that it will “enable a new generation of Web3 applications.”



Last year, the blockchain <a href="https://www.coindesk.com/business/2021/05/05/lightweight-mina-blockchain-raises-187m-in-coinlist-token-sale/" target="_blank" rel="noreferrer noopener">raised $18.7 million</a> in its token sale on CoinList.&nbsp;



Macauley Peterson contributed reporting for this story.



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