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Episode 102 of Season 4 of The Scoop was recorded at Messari Mainnet 2022 with The Block’s Frank Chaparro and North Island Ventures Managing Partner Travis Scher.

Listen below, and subscribe to The Scoop on Apple, Spotify, Google Podcasts, Stitcher, or wherever you listen to podcasts. Email feedback and revision requests to podcast@theblockcrypto.com.

In September, North Island Ventures launched a new $125 million fund to invest in emerging crypto and Web3 companies.

In this episode of The Scoop, North Island Ventures Managing Partner Travis Scher unpacks the thesis behind the new fund and explains his firm’s vision for how the crypto industry will evolve over the next couple of decades.

According to Scher, the tribalism that currently pits enthusiasts of competing blockchains against each other will fade over time:

“I do not think there will be one blockchain to rule them all. I think that when we look back in ten years, we will think that the tribal battles among branded blockchains that we see playing out at conferences like this were really quite silly.”

One corner of the market North Island is focusing on in particular is the Cosmos ecosystem, as Cosmos’ interoperable network of blockchains aligns with North Island’s long-term view of the crypto market.

As Scher explains, North Island envisions crypto evolving into a seamless network of blockchains:

“When we set our thesis in 2020, we said, ‘We believe, in its end state, crypto is an interoperable network of networks that facilitates the seamless exchange of value and data all across the world.”

During this episode, Chaparro and Scher also discuss:

• Why DeFi and NFTs still have plenty room to mature
• What red flags to look for in founders as a VC
• How VCs can best support their portfolio companies

This episode is brought to you by our sponsors Tron, Ledn

About Tron
TRON is dedicated to accelerating the decentralization of the internet via blockchain technology and decentralized applications (dApps). Founded in September 2017 by H.E. Justin Sun, the TRON network has continued to deliver impressive achievements since MainNet launch in May 2018. July 2018 also marked the ecosystem integration of BitTorrent, a pioneer in decentralized web3 services boasting over 100 million monthly active users. The TRON network completed full decentralization in December 2021 and is now a community-governed DAO. | TRONDAO | Twitter | Discord |

About Ledn
Ledn was founded on the unshakeable conviction that digital assets have the power to democratize access to the global economy. We help you to experience the real life benefits of your Bitcoin without having to sell it. Start a savings account, take out a loan, or double your Bitcoin. For more information visit Ledn.io

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Bitcoin Group SE, a crypto-focused investment holding company based in Germany, is reportedly considering purchasing local bank Bankhaus von der Heydt. Bloomberg Law reported the news on Thursday, citing people familiar with the matter. The sale could value the bank at around €20 million ($19.6 million), according to the report.

Bankhaus von der Heydt is the same bank crypto exchange operator BitMEX planned to acquire in January of this year, but the deal fell through in March after the two parties reportedly mutually agreed to call off the acquisition. The reasons were unknown, but the deal was subject to the approval of German financial regulator BaFin.

Bankhaus von der Heydt was founded in 1754. Last year, the bank partnered with Fireblocks to offer crypto services to its clients. Headquartered in Munich, the privately owned bank has struggled to manage technology costs and has been looking for a buyer, according to the Bloomberg Law report.

As for Bitcoin Group SE, it currently owns shares in two companies: Futurum Bank AG and Sineus Financial Services GmbH. The group holds 100% of the shares in Futurum, which operates the crypto-trading platform Bitcoin.de and offers other financial services, and 50% of the shares in Sineus Financial Services, a financial service provider supervised by BaFin.

Bitcoin Group aims to build up a portfolio of companies through acquisitions that meet the requirements of its investors in terms of risk diversification and potential returns, according to its website.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

The new sheriff in town features some familiar faces.

Naxo, a newly-launched cybersecurity firm, was co-founded by former FBI special agent Chris Tarbell and computer scientist Matt Edman. They both played pivotal roles in the arrest and prosecution of Ross Ulbricht, the man behind the infamous Silk Road marketplace.

Now they’re turning their attention to cybercriminals with a taste for cryptocurrencies and other digital assets.

“People are realizing that it is still a wild wild west out there, and not everything is what it appears to be,” said Tarbell in an interview with The Block.

His fellow founder Edman notes that while the good uses of cryptocurrency have increased over the past decade, beneath this layer lies a network of criminal activity that persists in darknet markets. As he played a pivotal role in the technical takedown of the Silk Road website and crypto assets, Edman has first hand knowledge of digital black markets.

“You have to have a very good understanding of the fundamentals of the technology, and that understanding has to evolve with the criminal,” Edman said.

Naxo is arriving at a time when hackers and exploits are at a record high. This year is on pace to be the biggest for hacks so far, according to blockchain analytics firm Chainalysis. And  October is already the worst month on record. More than $700 million has been compromised thus far this month, Chainalysis said. It’s a stark reminder of what is at stake to an ecosystem rife with locked value resting on the laurels of freshly deployed code.

Technological leaps lead to more opportunistic cybercriminals that learn and adapt from past mistakes, according to Tarbell. He noted that, although he loves the U.S. legal system, he thinks it provides would-be criminals with a roadmap to pull off future crimes, via affidavits. Cybercriminals, in turn, study investigative documentation and make adjustments to leave fewer traces as they exploit fringe cases, where projects are maximally exposed to a number of risks.

While the good uses of cryptocurrency have increased over the past decade, according to Edman, beneath this layer lies a network of criminal activity that persists in darknet markets.

“You have to have a very good understanding of the fundamentals of the technology, and that understanding has to evolve with the criminal,” he said.

Naxo, which says it is focused on cryptocurrency and serves a number of unnamed government entities, says its approach accounts for multiple needs, ranging from raising education levels around crypto-related human risk factors, to technical network layer factors such as proper deployment and peer review of smart contracts source-code, and protections for cryptographic keys.

In the context of losses in an industry that can see as much as a billion dollars wiped out by hackers or protocol bugs, Tarbell said that developers would be “crazy” not to take a security conscious approach.

Naxo is entering a crowded field. Firms like Hacken, OpenZeppelin, CertiK, Quanstamp and ConsenSys Diligence  offer similar services in the crypto-cybersecurity and auditing space.

With a window into the world of cybersecurity investigation and enforcement, Tarbell admitted he isn’t “a big regulation guy,” adding that officials are often misaligned on enforcement, and that although he lacks faith, he holds hope they will get it right this time.

Edman said he “may be a little more pro regulation,” but he agreed that it “needs to be influenced with a strong level of technical competence” and that regulators “need to understand the technologies that they’re regulating.”

Still, Edman acknowledged that the pace of growth in the industry poses ongoing challenges to lawmakers as “technologies are evolving drastically faster than the regulators can keep up.”

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Parties in the Celsius bankruptcy proceedings are beginning to hash out a process for a possible auction of the company’s assets.

Those assets remain in flux as crypto custodian Prime Trust agreed to return about $17 million in crypto to the embattled lender at today’s hearing.

Additionally, the court also agreed to appoint a fee examiner to take a look at the rising costs of the bankruptcy process. 

Chief Bankruptcy Judge in the Southern District of New York Martin Glenn heard arguments regarding the timing of proposed bidding procedures for assets held by the mining business and retail platform. Lawyers for Celsius had revised its timeline to accommodate questions surrounding which assets constitute custody as opposed to other products. It’s now aiming to wrap up any possible sale process before the end of the year. 

Celsius may see additional funds through the resolution of its dispute with custodian Prime Trust. Prime Trust previously held nearly $120 million in assets for Celsius and returned the majority of those funds when the relationship dissolved, but Celsius sued for the return of the final $17 million that it claimed Prime Trust failed to return. At today’s hearing, Prime Trust said it would return the funds to a Celsius wallet pending court approval. 

Celsius has yet to file a standalone plan in the bankruptcy process, which would come before an auction. The independent examiner appointed to the case is still at the start of the investigation process.

The findings of that investigation could affect the disbursement of assets to creditors and reveal more about the state of the business and its regulatory dealings, which would affect an auction process.  

Part of the concern around setting the dates for a possible auction has to do with preserving the remaining funds of the estate. Bankruptcy processes are costly and can cut into already scarce funds that are often meant to end up in the hands of creditors. This was the main concern raised before the court appointed the independent examiner and led to a narrowed scope of the intended investigation. 

Now, the court is appointing another examiner to review the monthly fee statements filed by retained professionals throughout the bankruptcy process. Judge Christopher Sontchi will take up the role. He previously served as a bankruptcy judge in the District of Delaware before retiring from the seat to focus on mediations and arbitrations as well as serving as an International Judge of the Singapore International Commercial Court on insolvency matters.

Celsius entered the Chapter 11 process in July. The next hearing in the case is set for Nov. 1. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

With the ASIC market “stuck in a deflationary spiral,” there’s a clear gap between the prices sellers are offering and what bitcoin miners are willing to pay, newly released data from Foundry shows.

While numbers vary significantly from model to model, for a newer-generation machine such as Bitmain’s S19J Pro buyers are looking to pay $15/TH or less and most sellers are asking for $20/TH.

“The market is somewhat locked as most miners face cash constraints and hosting options remain limited,” the company said. “However, there are deals getting done in the middle around $18/TH.”

Bitcoin miners have seen their profit margins squeezed in the past few months, as bitcoin’s value dropped and energy prices went up, along with global hash rate and mining difficulty.

ASIC prices are down 80% from their peak and sellers now have to choose between letting go of inventory at lower prices or hiding on to it until Bitcoin rallies, the company said.

The industry has already seen Bitcoin mining hosting provider Compute North file for bankruptcy in September, while other companies like CleanSpark and Crusoe have been buying up assets in the bear market.

“We are fielding several calls a week from institutional investors looking to buy distressed mining assets,” Foundry said.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Michael Patchen, chief risk officer for crypto broker and lender Genesis, has left the firm after only three months on the job.

Patchen’s departure was reported by CoinDesk and Bloomberg. His LinkedIn profile also suggests a departure sometime this month after he joined in July.

His hire was announced along with other leadership additions in August at the same time CEO Michael Moro stepped down and Genesis laid off 20% of its staff. The moves followed losses connected to Genesis’ dealings with failed crypto hedge fund Three Arrows Capital. 

Patchen previously held roles at AQR Capital, SAC Capital and Goldman Sachs. 

A representative for Genesis did not respond to an emailed request for comment. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto exchange Bitso doubled its customer base in the past year to more than 6 million customers in Latin America, citing increased crypto adoption in the region.

Bitso is based in Mexico City and licensed in Gibraltar. The exchange operates in Argentina, Brazil, Colombia and Mexico. It now has about 1 million users in Argentina and more than 1 million in Brazil, a spokesperson told The Block. 

Bitso laid off 80 members of its staff in late May as the crypto winter started to set in, saying that the fast-paced crypto industry required it to “constantly remix” its high-value skills. The company currently has 31 open jobs listed on its website. Mercado Bitcoin parent 2TM and Buenbit also announced layoffs this year. 

Bitso contended that it is using the down market cycle to build new products. The company has attracted 1 million of its customers to its Bitso+ feature, which advertises the ability to earn up to 8% yields on the BTC, ETH and USDC already in customers’ wallets. 

The exchange recently introduced QR crypto payments in Argentina and is gearing up to launch a new crypto card in Mexico with Mastercard that includes cash-back rewards denominated in bitcoin. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Tether stablecoins will be available at more than 24,000 ATMs across Brazil starting Nov. 3, thanks to an integration with Brazilian payment solution startup SmartPay. 

Brazil residents and visitors alike will be able to visit their local Banco24Horas ATM and convert Tether stablecoins (USDT) into Brazilian reais, according to a Tether statement. The Banco24Horas ATMs are a common sight around Brazil, located in high-traffic areas such as malls, grocery stores and gas stations. 

“Adding Tether tokens to ATMs across Brazil provides the opportunity to include more people in the financial system,” Tether’s Chief Technology Officer Paolo Ardoino said in a statement. “This will bring major changes not only to the payments industry but to the entire Brazilian financial ecosystem.”

Tether calculated that Brazil-based crypto users moved more than $1.4 billion in USDT transactions in August. Brazil saw nearly 80,000 USDT operations that month, with transaction amounts averaging nearly $18,000. 

Brazil ranked seventh in the latest Global Crypto Adoption Index from blockchain analytics firm Chainalysis. The company calculated that Brazil received nearly $142.7 billion in cryptocurrency between July 2021 and June 2022 — more than any other country in the region. 

SmartPay has already provided a connection between USDT and Pix, the country’s widely-used instant payment system used for paying friends and family, businesses and even bills. 

TecBan is the operator of the Banco24Horas ATMs, which operate under an independent network. 

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Quick Take

• The insurance industry is a cornerstone of the financial sector, collecting over $1.36 trillion in premiums in the US alone.
• With the recent surge in DeFi exploits, it has become imperative for the crypto space to review the maturity of its decentralized insurance alternatives.
• While there are numerous solutions looking at providing decentralized insurance for crypto-specific events, there are usually trust assumptions in the claims process.
• Generic frameworks, such as Etherisc, have surfaced to leverage blockchain technology to provide a decentralized alternative for real-world insurance.
• Traditional centralized insurers are also beginning to enter the crypto domain, which could accelerate the development and maturity of insurance products for crypto.

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Most bitcoin mining stocks tracked by The Block trended downward on Thursday.

The coin, which had been mostly trading at around $19,200 for the past two days, dipped slightly to $19,000, according to data from TradingView.

BTCUSD Chart by TradingView

Digihost Technology’s stock fell 11.06%, followed by Argo Blockchain (-8.28% on Nasdaq), Iris Energy (-6.08%) and SAI.TECH (-4.62%).

Northern Data, on the other side, saw its stock rise by 8.79%, followed by Core Scientific (+4.61%), which filed a document with the U.S. Bankruptcy Court for the Southern District of New York Wednesday evening seeking bankrupt Celsius Mining to pay “overdue” utility charges.

Here’s how crypto mining companies performed on Thursday, Oct. 20:

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.