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Kraken is now restricting Russia-linked accounts, according to Russian-language emails sent to customers and obtained by The Block.

The extent of the restrictions currently in effect is unclear at this time, based on the email’s contents. One source told The Block that on Oct. 19, some users were yet to experience any restrictions on their account, though The Block has not been able to independently verify this claim. Another user said their account was closed but that they could withdraw funds.

The developer of the decentralized finance platform Yearn, Banteg, tweeted that withdrawals were the only feature available.

“Kraken complies with the legal and regulatory requirements in all jurisdictions that we operate in,” a Kraken spokesperson told The Block when asked about the email and tweet. “Since the EU’s announcement, we have been working to make the changes needed to comply with the latest package of sanctions against Russia.”

Kraken’s former CEO, Jesse Powell, previously stated that the crypto exchange would not ban Russian accounts unless required by law.

Kraken is the latest crypto platform to restrict access to Russian users in line with EU sanctions. Last week, Blockchain.com and Crypto.com began enforcing restrictions on such accounts, with the latter exchange providing a withdrawal window for users to remove their funds.

Dapper Labs froze the NFTs of accounts with ties to Russia earlier this month. The company has since provided users with the ability to transfer their NFTs out of their custodial wallet and into a non-custodial wallet.

© 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

• Announced Q3’22 earnings on October 19, 2022
• Reported $1.05 Adj. EPS, +9.4% on consensus expectations of $0.96 
• Reported $21.5bn Total Revenue, +2.9% on consensus expectations of $21.0bn
• Tesla’s $218mm digital asset holdings on balance sheet did not change quarter over quarter
• 3-1 Stock Split Announced on August 5, 2022
• Part of The Block Research’s ongoing market coverage and a follow up to Analysis of Tesla’s Q2’22 Earnings
• Disclaimer: This is a market commentary research piece and includes opinionated views from our research team. Nothing contained in this piece constitutes a solicitation, recommendation, endorsement, or offer by The Block Research

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Solana’s largest NFT marketplace Magic Eden announced last week a switch to an optional royalty model, a move that means those buying or selling NFTs may choose what percentage cut of the sale is returned to the original artist.

The reaction was swift and predictable. One NFT artist called it a “sad day for Solana.” Broccoli DAO, a community built around the CyberVillainz and CyberHeroez NFT collections, said that the decision could kill its project. It estimates it has lost $27,000 to 0% royalty marketplaces and is now taking measures to block anyone avoiding royalties from its Discord channels.

Magic Eden’s defection was a blow to royalty supporters in the Solana network. The company accounts for 86% of the sales volume on Solana NFT marketplaces over the past month, according to data from Hello Moon. The second, third and fourth most popular marketplaces on Solana by sales volume (Solanart, YAWWW and Hadeswap) are also 0% royalty. Together they account for 99% of NFT sales on Solana. 

Despite its decision, Magic Eden still supports creator royalties and it is committed to finding ways to make royalties enforceable, co-founder and COO Zhuoxun “Zedd” Yin told The Block in an interview.

Prisoner’s dilemma  

Creator royalties have long been touted as one of the top use cases for NFTs, allowing creators to make money on secondary sales. But there’s no way to make people cough up on the protocol level. Instead, collecting royalties has traditionally been left to NFT marketplaces themselves. If markets don’t collect, creators don’t get paid.  

Several royalty-free marketplaces have emerged over the last few months on both Ethereum and Solana. The most prominent is X2Y2 on Ethereum. In the last few months, it has taken around half of the share of marketplace volume on the chain, although it’s not clear how much of this is wash trading, which is the practice of buying and selling the same NFT over and over to create a false impression of greater marketplace activity. By some calculations X2Y2 and another marketplace, Sudoswap, have less than 20% of the market share when adjusted for wash trading.

Nevertheless, they proved popular, taking market share from giants like Magic Eden and OpenSea. “In my view, this is sort of a classic prisoner’s dilemma situation… We felt that in the absence of technically enforceable solution at the protocol level things would continue to trend basically toward optional royalties anyway,” Yin said. 

Not everyone agrees. Some believe that the move toward 0% royalties could even be a chain-specific issue. Despite X2Y2’s gains on Ethereum, Fidenza artist Tyler Hobbs recently told Decrypt that “the Ethereum space is really much more serious” and that “creators will put up much more of a fight.” 

“We did not want to go down this path. We tried to avoid this as long as possible because we knew that this decision is something that would be fairly controversial,” Yin added.

Blurred NFTs

Part of the fight is finding a way to enforce royalties or penalize those that don’t pay them through technology that can track whether royalties have been paid on NFT trades. One such tool was created by Magic Eden itself. It launched Metashield last month as a tool for creators to track traders circumventing royalties and blur the NFT images of holders who didn’t pay their dues. 

Now it could be used to blur NFTs sold on Magic Eden’s own platform. Unsurprisingly, Yin seems to regret the blurring feature and says Metashield in its current form isn’t going to be developed any further by Magic Eden. But he’s encouraging developers to tinker with it — and some have already reached out to take him up on the offer.

“One of the lessons that we took away from the whole Metashield experience was that, as a marketplace, we should not be in the business of anything that really touches someone’s NFT,” said Yin.  

But that doesn’t mean it isn’t open to funding projects that do. Magic Eden is planning to offer $1 million as prize money for a hackathon focused on the development of royalty protection tools and exploration of different ways for creators to monetize. Solana’s co-founder Anatoly Yakovenko is among the judges.

Yet the fact remains that 0% marketplaces dominate the Solana ecosystem and have captured a large share of the market on Ethereum. In a bear market, not having to pay a premium on NFTs is simply too appealing to customers. Non-royalty trades are already surpassing royalty trades on Magic Eden. In addition, it has managed to claw back some market share from 0% competitors.

The data for Oct. 20 represents the number of sales as of 12pm UTC, not for the full 24-hour period. Source: Dune Analytics

Magic Eden transaction data over the past week certainly don’t suggest a mass exodus from disgusted buyers.  The last few holdouts among NFT marketplaces are likely watching what happens next closely.  

“Something’s gotta give. Either the whole ecosystem has to come to the table to effectively figure out what is the right solution… Or this just regresses into a slow, slow burn toward basically 0% royalties,” Yin said. 

When asked whether it was thinking about following suit, a Rarible representative said that it was still discussing internally.

Solana NFT creation platform Metaplex was not immediately available for comment but directed The Block to documents stating that it believes 0% royalty trades create “a structural risk to the NFT economy at-large because it breaks the incentive alignment between creators and buyers.” 

OpenSea did not respond to multiple requests 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.

Collegiate sport fan experience platform Mercury has raised $7.5 million in a seed round led by Multicoin Capital. Other investors in the round include North Island Ventures, Crosslink Capital and Brevan Howard Digital, according to a company release. 

Co-founded by Porter Grieve and Justin Johnson in 2021, Mercury connects collegiate sports brands to fans through hyper-localized fan experience platforms. The startup has partnered with University of Central Florida’s athletic department, Clemson University’s athletic department and has signed over 50 student athletes from Kentucky Athletics.  

“We were focused on the collegiate space from the beginning because college fans are so tribal in how they interact with their teams and how they interact with the players they love is so rabid and slightly different from professional sports,” said Grieve in an interview with The Block.  “The NCAA [Name, Image and Likeness] rule change, that just happened at the right time for us,” he added. 

A hyper-localized fan experience

The platform will offer fans experiences, such as access to sit-down interviews with players and coaches, as well as limited NFT drops catered to each individual fan base. 

For example, in the coming weeks, Mercury is reimagining Clemson’s “tombstone tradition” on its platform. Any time Clemson beats a ranked opponent away from home, they put a tombstone in a graveyard on campus. Mercury will bring Clemson tombstones to the platform as NFTs with the owners gaining access to real experiences, like kicking a field goal or meeting a player, Grieve said. 

Clemson tombstone from Mercury’s platform

“Our core demographic that we want to reach is the average sports fan, rather than the person that loves speculating on NFTs or the NFT fans,” Grieve said. “To me, if we were to focus on that person, that would be like the NFL focusing on people who love tickets rather than people who love football.”  

A web2 user experience

Grieve aims for the platform to feel as much like a web2 user experience as possible by enabling options such as payments with credit cards. 

“It’s important that it’s on chain for everything that we’re building and where things will be going in the future,” Grieve said. “But we want the average sports fan, the 56-year-old alumni, to not feel like they need to understand or do a ton of reading on blockchain before they interact with one of our platforms.” 

The platform is currently leveraging the Flow blockchain and all the assets are being custodied on Mercury, Grieve said. “Over time, things will evolve and things will shift as we feel like the consumer base evolves,” he added. 

Ramping up hiring

The new funds will be used to expand their partnerships with the new schools as well as continue to grow their roster of student athletes.

They will also ramp up leadership hiring. Mercury recently hired sports media personality Adam Breneman as vice president of NIL and media. He will work with top athletes to cultivate their brands on platform as well as on Mercury’s Next Up podcast series.

“Mercury is building so much more than ‘NFT collectibles’; they have imagined, created, and delivered to top universities a net new experience for athletes and fans alike that wouldn’t be possible without the combination of blockchain technology and their deep substantive experience.” said Colleen Sullivan, co-head of ventures at Brevan Howard Digital, in the release.

© 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.

Decentralized finance proponents have taken to Twitter to criticize Sam Bankman-Fried after the FTX CEO shared an “industry norms manual” that suggested websites facilitating trading on decentralized exchanges should be regulated. 

Bankman-Fried’s suggestion of regulation for tools enabling retail traders to access DeFi protocols triggered horror among those who argue apps like Uniswap are simply software, not a legal entity that can be censured. To DeFi proponents, these decentralized exchanges (DEXs) are different beasts to the classic central counterparties required in traditional finance: they exist purely as code allowing individuals to trade with one another. 

“If you host a website that makes it easy for U.S. retail to connect to and trade on a DEX, you would likely have to register it as something like a broker-dealer/FCM/etc. You would also potentially have KYC [know your customer] obligations,” Bankman-Fried wrote on Wednesday. At the same time, the crypto exchange executive said it’s “extremely important that on-chain code and DeFi remain free and open, and uncensored.”

One particularly loud voice is that of scupytrooples, the pseudonymous founder of DeFi protocol Alchemix, who tweeted a list of unsubstantiated complaints against Bankman-Fried. 

“I see them using the playbook of large corporations, where they ascend to the top, and then get involved in lobbying to make rules favorable for them to hurt the competition, and ultimately cement their position there,” scupytrooples told The Block in separate comments. “No different from Amazon, Exxon Mobil, Goldman, etc.”

“He’s been on the record that he doesn’t care about crypto and is only here for the money,” they continued. “It’s plainly obvious to see he is not a good actor in this space.”

Bankman-Fried didn’t immediately respond to a request for comment from The Block.

‘A cancer on this ecosystem’

Anthony Sassano, a well-known independent Ethereum educator, also criticised the FTX CEO, who is often known by his intitials.

“SBF is and always will be a cancer on this ecosystem,” he wrote to his 225,000 Twitter followers. “Anyone supporting him and his cronies should be ashamed.”

Sassano’s statements came in response to Scott Lewis, the founder of DeFi Pulse and other projects, who has also been critical of Bankman-Fried.

“SBF trying to get a bad law passed,” Lewis stated on Twitter. “Now is the time to get loud and fight.”

Specifically, he suggested boycotting both FTX and “crypto media on Sam’s payroll,” as well as denylisting FTX users from airdrops.

‘Better to have a dialogue’

The list of high-profile crypto-related accounts on Twitter sharing similarly negative sentiments is long, while those defending Bankman-Fried’s proposal are few and far between.

Those coming to Bankman-Fried’s defense tended to cite the belief that regulation in the crypto industry is an inevitability. “Better to have a dialogue about it than to pretend that crypto is immune to regulation or ought not be regulated,” shared one account, which Bankman-Fried retweeted.

Others argue that the FTX CEO’s proposed regulations are a necessity to onboard more institutions into crypto. “Unpopular opinion: I am intimately familiar with conversations happening with lawyers at public companies who want to get into crypto,” noted one account. Without sharing specifics, they continued, “SBF is right. People might not appreciate that now, but they will in the future.”

Bankman-Fried himself, meanwhile, noted that he is open to the idea that he is wrong.

Sam Bankman-Fried’s crypto exchange, FTX Trading Ltd is incorporated in Antigua and Barbuda. Its subsidiary, FTX Digital Markets Ltd is licensed under The Bahamas’ Digital Assets and Registered Exchange Act, 2020. As such, it is regulated by the Securities Commission of the Bahamas.

Bankman-Fried has donated large sums to U.S. politicians and has testified before the U.S. House Committee on Agriculture.

Critics argue that Bankman-Fried’s money and energy are being spent to benefit his own company, as opposed to the wider industry. However, FTX is facing legal scrutiny from U.S. regulators regarding its adherence to financial laws. Specifically, an investigation by Texas regulators may affect the exchange’s proposed purchase of bankrupt crypto lender Voyager’s assets.

© 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 giant Binance has been granted registration as a Crypto Asset Services Provider by Cyprus’ financial regulatory body, the company announced in a statement on Thursday.

This is the fourth European country where Binance has gained regulatory approval — following France, Italy and Spain. 

The Cypriot license lets Binance offer its services while complying with national anti-money laundering and counter-terrorist financing rules issued by the Cyprus Securities and Exchange Commission.

“Binance has some of the most thorough AML and CTF compliance policies in the industry,” Changpeng Zhao, Binance’s founder and CEO, said in the announcement. “Recognition of the efforts we have made to be on the leading edge of compliance that our registration in Cyprus represents is testament to that. Effective regulation that protects users and stimulates innovation is essential to the continued growth of our industry,” he continued.

Binance is gaining more and more national registrations worldwide. Most recently, it gained approval in New Zealand earlier in October.

© 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.

Serial entrepreneur Jason Goldberg has raised $3 million in a pre-seed round for his latest venture Airstack, a web3 API platform. 

Goldberg has been an entrepreneur for over 20 years having played a role in seven companies including Hem, a furniture design label which was sold to a private investment company in 2016; Moxie, a fitness platform that raised $8 million in 2021 and Fab.com, a shopping platform that was once an e-commerce unicorn.

After exiting Moxie earlier this year, Goldberg jumped full-time into web3 alongside his Airstack co-founders Deepesh Nath, Sarvesh Jain, Ignas Peciura and Vysakh Nair, all of whom played founding roles in his previous startups. 

Investors in Airstack’s pre-seed round include Animal Ventures, Polygon, Fenbushi and Resolute Ventures, according to a company release. 

What is Airstack?

Airstack wants to make it easy for individuals to discover and consume data from across the web3 ecosystem via APIs. 

“I would say that our focus for the next year is developers, developers, developers,” said Goldberg in an interview with The Block.  

Developers working in web3 often have to start completely from scratch patching different pieces of infrastructure and tooling together, Goldberg said. In the next phase, he expects developers will have access to a plug-and-play model enabled by companies like Airstack. 

Airstack will work by having decentralizaed applications provide data in a common format into the “Airstack engine.” The data will be parsed into a metadata format that will make it very fast for developers to query with APIs, Goldberg said. 

The Airstack vision will be made possible using a hybrid of a web2 and web3 tech stack. On the web3 side, it will use subgraph and substream technology, which can be used to manage high volumes of live streams of data. On the back end, data will be stored using a cloud system like AWS. 

“Our plan is over time to decentralize that as well,” Goldberg said. “It’s just the priority for us in the near term is to provide the best experience for developers, which means super-fast, super robust, and then will decentralize over time.” 

Raising in the depths of the bear market

Goldberg founded Airstack in May of this year and started raising funds in the depths of the bear market. 

“To be honest, no one would even answer my calls,” Goldberg said. 

Polygon and Animal Ventures provided the startup with a $500,000 check, which Goldberg used to build out a proof of concept. The rest of the funds for this pre-seed round have come in the last three weeks all from inbound requests, he added. 

“I think that’s going to be the really the best model for this bear market is build something, show it to people and raise versus the previous model of just hype, hype, hype,” Goldberg said. 

He limited the check size per fund to $250,000. 

“A number of funds were not happy about that,” Goldberg said. “They wanted to invest $500,000 or $1 million into Airstack. They can talk to us the seed round.” 

Airstack is just one of several data infrastructure startups that have raised in recent weeks. Space and Time, a platform that aims to make it easy to run SQL queries on blockchain data, recently raised $20 million in a strategic round, while Nxyz recently emerged from stealth having secured $40 million to provide blockchain indexing services. 

Infrastructure deals at the seed stage increased 24% in the third quarter compared to the prior quarter, according to data from The Block Research. 

© 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 team behind decentralized exchange PancakeSwap has proposed the exchange expands to the newly launched Aptos blockchain. 

The team intends to deploy four of its main features — swaps, farms, pools and initial farm offerings — quickly to the blockchain, according to the proposal. The goal is to take hold of the market share as early as possible, with the hope of becoming the dominant exchange in its ecosystem.

This will also involve creating a native version of the CAKE token on Aptos, which will be the first native CAKE token on another blockchain. The deployment will take place during Q4, assuming the community backs the idea.

The Aptos blockchain went live on Oct. 12. It aims to provide a high-throughput blockchain with low transaction fees. While the majority of tokens are held by the foundation, core developers and investors — plus a community pool largely under the control of the foundation — there was a small airdrop to early adopters.

The move comes just weeks after PancakeSwap expanded to the Ethereum blockchain. On Oct. 4, the exchange announced that the integration was live and cross-chain farming — farming tokens across both chains — began a week later.

PancakeSwap, which originally started out on BNB Chain, is the second-biggest decentralized exchange by trading volume, according to DeFiLlama. It comes in behind Uniswap. By total value locked, PancakeSwap ranks third, behind Curve and Uniswap.

A PancakeSwap product manager, known by the title Chef Mochi, said in a July AMA that the exchange’s focus is to go multichain in order to increase protocol revenue — as noted by a DeFi researcher known as Ignas. Another goal is to bring users from these chains back to BNB Chain.

© 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.

Plaid — a company most known for providing open banking APIs — has launched Wallet Onboard its first web3 product and the first of a series of forthcoming products aimed at developers in the crypto space, according to a release Thursday. 

“This is the start of Plaid’s journey of bridging web two and web three worlds,” said product manager Clay Allsopp in an interview with The Block. 

Plaid’s new product aims to offer developers the ability to easily access over 300 Ethereum wallets. “As a developer either you could go and write an integration to all these different wallets and deal with the differences between them and how their user experience should be,” said Allsopp, “Or you could can in drop Plaid and we handle all those differences on their behalf.”

On the consumer side, this means that users can access a drop-down list of available and recently used wallets when using web3 apps. It draws inspiration from its Plaid Link product, which allows users to connect their financial accounts across different fintech applications. In an effort to preserve privacy, Allsopp says that the product doesn’t collect wallet addresses. 

It’s being used by developers at web3 wallet and DeFi company Zerion. The company integrated the wallet onboard product to ease the user experience of tracking holdings across many different wallets. Other companies in the NFT, lending and web3 data space are also using or showing interest in the product, claimed Allsopp. “We’re seeing a large trend of diversity in the different products that people want to use this for just because every crypto app needs to connect a wallet,” he said.

Plaid is also eying further products in the web3 space while looking to replicate the products it already has, such as identity verification, on crypto rails. 

“So how do we do privacy-preserving identity verification for developer and user while not revealing actual personally identifiable information,” Allsopp asked. “So maybe fragments of information such as this address lives in a certain area or this address is over a certain age.”

Currently, the Wallet Onboard product is only integrated with Ethereum and EVM-compatible chains, but the company is exploring integration with Solana and other blockchains. 

© 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.

Binance CEO Changpeng Zhao has clarified that the exchange did not intentionally delegate a large amount of UNI tokens to itself, claiming it was a quirk of the Uniswap system. This has eased concerns that the exchange may have been making a move into the governance process of the Uniswap exchange.

Uniswap founder Hayden Adams noted on Twitter yesterday that the exchange had delegated 13 million UNI ($83.5 million) to itself. This made it the second-largest entity by voting power in the Uniswap DAO — the decentralized exchange’s governance forum — second only to VC firm a16z.

Zhao said today that the exchange was merely transferring tokens between its wallets but that, due to the way Uniswap tokens work, this caused the tokens to get automatically delegated. “UNI transferred between internal Binance wallets, causing the UNI to be automatically delegated. This is part of their protocol, not “we intended,” he said on Twitter. “Binance [doesn’t] vote with user’s tokens.”

Adams noted that this happens when Uniswap tokens are sent to an address that is already delegated some tokens. “So the transfers just increased the amount delegated – there was already a binance address that had delegated a smaller amount,” he 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.