For a one-time setup fee of $100,000 and a monthly payment of $20,000 for six months, GSR agreed to “provide services related to increasing the liquidity” of STX, as well as to analyze market conditions. Blockstack will also lend $1 million-worth of bitcoin and ether with zero interest to fund the trading.

Blockstack, one of the first blockchain startups to have raised money in a Reg A+ offering, has hired GSR Markets to trade its “stacks” (STX) token.

According to an Oct. 24 filing with the U.S. Securities and Exchange Commission (SEC), the blockchain startup will pay GSR for providing liquidity in markets outside of the U.S.

Blockstack raised $23 million in its registered token offering in September, including $7.6 million from investors in Asia.

If the agreement should be terminated at a later date, GSR will return the bitcoin and ether, with half being calculated using the value of the cryptocurrencies against the value of STX.

According to a separate agreement, GSR will trade STX using its proprietary trading bot, provide Blockstack with daily reports on the STX market activity, analyze the market conditions and seek new exchanges Blockstack could approach for listings. All these activities should happen outside of the U.S., the document reads.

Hiring a professional market maker to provide liquidity is a common practice on the legacy markets and has become one for the crypto markets, too, says Eric Wall, a former blockchain lead at trading tech company Cinnober.

“Market makers serve a crucial role in thinly traded markets and are common everywhere where there’s trading, be it NASDAQ or Bittrex”, Wall said, adding:

“They provide a base-line of liquidity where there otherwise would be none. It’s essential in order to give investors the opportunity to enter and exit an asset without being too dependent on being matched with a seller or a buyer at that exact time same time.”

Without such market participants, the volatility of crypto tokens can soar when there are too few actual orders. That can turn people away from trading a token and “create bad publicity for the issuer”, Wall explained.

Blockstack got STX listed on the Binance and HashKey Pro exchanges last week. For the Binance listing, Blockstack paid 833,333 STX, or roughly $250,000, according to an earlier filing.

The company’s CEO, Muneeb Ali, told The Block that it was a “long-term payment” meant to incentivize Binance to keep STX listed “over many years.”

The token is currently trading at $0.20 per token on Binance, 30 percent down from its initial price of $0.30.

Blockstream’s ‘Watchtowers’ Will Bring a New Justice System to the Lightning Network

Watchtowers, a semi-trusted payment channel sheriff, will keep the peace among lightning nodes. The new feature is likely to be implemented in the coming months.

Spearheaded by Blockstream’s c-Lightning team, the Watchtowers are part of Eltoo, a proposed enforcement layer for the lightning network.

“A Watchtower is basically outsourcing the penalizing of your counterparty to somebody. If something happens, here’s a loaded shotgun with which you can go hunt the guy who cheated me”, c-Lightning developer Christian Decker said in a phone interview.

Currently, lightning uses fraud proofs to extract justice on the network from channels that steal funds. If a payment channel defrauds its peer, the wronged party can “steal” the perpetrator’s channel funds – all of them. With Eltoo, users who are often offline can defer to Watchtowers to protect their funds for them.

Not altogether a novel concept, the feature has been experimented with by lightning groups Electrum and Lightning Labs, though the implementation will be a first for c-Lightning.

Watchtowers were first pushed for on c-Lightning by developers Sergi Delgado Segura and Patrick McCorry in late November. Blockstream’s Decker said the feature gained traction as developers worked to make it interoperable with other projects.

As a semi-trusted peacekeeper, Watchtowers store local information from subscribing nodes and are purpose-built for nodes that go offline frequently, such as cell phones, which have quickly become a popular way to participate in the lightning network, Decker said.

“Watchtowers are most important when you run stuff on an unreliable network connections, so you maybe cannot check back in with the blockchain to react in time or you have devices that are often offline”, Decker said.

Not everything is in dry ink, however. Watchtowers are expensive to maintain as they store lots of local data, Decker said. Who will operate them remains to be seen, particularly as the lightning fee market remains immature.

Furthermore, its approval largely depends on when Taproot, a Bitcoin Improvement Proposal (BIP) currently under final review, is accepted, Decker said.

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