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Developers have disclosed a critical software vulnerability within all Cosmos blockchains that run the inter-blockchain communication protocol (IBC), the network’s cross-chain messaging and bridge protocol.

The developers discovered the security issue during a software audit of the Cosmos network in light of the $100 million bridge hack on BNB Chain, a blockchain that uses Cosmos software under its hood, Cosmos co-founder Ethan Buchman wrote in a blog update on the project’s community forum on Thursday.

“Members of the core Cosmos and Osmosis teams have been extensively auditing IBC in the aftermath of the BSC exploit. We have discovered a critical security vulnerability that impacts all IBC-enabled Cosmos chains, for all versions of IBC,” Buchman said.

To fix its vulnerability, all of the IBC-enabled Cosmos blockchains will have to deploy a security patch planned for release at 10 a.m. EDT on Friday, Buchman said, adding that validators of various Cosmos chains may halt their networks during the Friday upgrade.

“Given the severity, we have been working tirelessly with core development teams and validators across the ecosystem to make the patch available privately and ensure chains are patched before communicating publicly,” Buchman wrote.

In cybersecurity, a critical vulnerability refers to a software bug that can allow hackers to break network systems to steal either data or funds. Cosmos is a blockchain network consisting of interoperable, application-specific blockchains. These chains can interact with one another using the IBC protocol.

Currently there are 51 blockchains in the Cosmos ecosystem that support the IBC protocol, including Osmosis, Cosmos Hub, Axelar, Evmos, Injective, Juno, Sifchain, and Cronos, according to Cosmos network explorer Map Of Zones. All of these projects will have to deploy a patch to secure themselves against hacks.

© 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.

Stablecoin issuer Tether has eliminated commercial paper from its reserves and says it has also increased its direct exposure to U.S. Treasuries by more than $10 billion in the last quarter.

The move has eliminated more than $30 billion of commercial paper without any losses, the company said in a series of tweets. 

“This is evidence of our commitment to back our tokens with the most secure, liquid reserves in the market,” Tether wrote in a tweet. A spokesperson directed The Block to a blog post announcing the news.

Tether has said for months that it was planning to improve the quality of its reserves, in part by reducing the amount of commercial paper it holds. Tether claims its tokens are pegged one-to-one with a matching fiat currency, and are backed by the company’s reserves.

The move comes months after the Terra crisis in May, when the company’s algorithmic stablecoin collapsed. 

© 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

• In this bi-weekly series, we look into some of the most interesting data and developments across the Layer 2 blockchain landscape, from DeFi and bridges to network activity and funding.
• Zk-rollups are often viewed as the most performant and secure scaling solution for Ethereum, but there are nuances and challenges that still plague the development and adoption.
• zkSync’s 2.0 mainnet is coming at the end of October and will likely usher in a surge of mercenary capital that intends to Sybil applications on zkSync for a potential airdrop in the future.
• StarkNet’s Regenesis intends to improve the fee market for users, but there has been feedback that Regenesis will render some of the existing development work obsolete.
• There are also new zkEVM efforts, which appear to have a significant premium in their valuations as opposed to non-zkEVM efforts.

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CoinShares has launched a Twitter bot to help NFT investors. 

The asset manager announced the launch of Twitter bot, the CoinSharesNFTAI or @CoinsharesNFTAI, on Thursday. CoinShares wants the bot to help cut through the noise around NFTs, which can ofter litter Twitter with hype, frauds and scams.

Twitter users can now tweet the bot with a link to the OpenSea link of the NFT and the hashtag CoinShares. The bot then replies with the fair price within less than a minute. 

The firm noted that pricing NFTs can be difficult, as some attributes are easily quantifiable while others can be more abstract. Nevertheless, it identified factors such as hype, rarity, the access it gives to exclusive communities, content, and products as well as transaction volume and history. 

CoinShares’ aim is to bring more transparency to the space. “NFTs are the newest asset to come to crypto markets and it’s important that everyone feels comfortable buying and selling them,” CEO Jean-Marie Mognetti said in a release. “To this end, we made our proprietary NFT pricing algorithm available to the public through our CoinSharesNFTAI Twitter bot,” he said. 

In a test run by The Block, the bot noted the fair value of Bored Ape Yacht Club 7378 was 95 ETH or $119,318 — significantly more than the 75 ETH price place on the piece at present. 

The difference in sale price and fair value could potentially be explained by the rout in the NFT market over the past few months, as crypto prices have plunged so too has the dollar value of NFT holdings and the appeal appears to have warn off for some investors. 

The trade volume for art and collectible NFTs was just over $20 million last week, trade volume reach $393 million the week of April 17 this year. 

© 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 mining hardware startup Fabric Systems raised $13 million in a seed round to fund the development of two core launch products including a liquid immersion-cooled ASIC machine it claims will achieve an energy efficiency of 20 watts per terahash (watts/TH).

Investors include bitcoin miner TeraWulf, Skype co-founder Jaan Tallinn’s fund Metaplanet, Blockchain.com and 8090 ventures, the company said.

For now, the company’s launch product is an immersion-cooling ASIC machine — meaning that it is submerged in a special liquid instead of being cooled via air with traditional fans. This type of computer cooling technology has been around for decades, but more recently the industry has seen companies like Argo and Riot deploy them at large scale in Texas.

It promises to “outperform every existing bitcoin miner in today’s existing marketplace” in terms of energy efficiency and is engineered to achieve an energy efficiency of 20 watts/TH.

For comparison, Bitcoin mining firm Luxor divides machines into three efficiency tiers: “Old-generation” ASICs are classified as over 68 J/TH, “mid-generation” as 38-to-68 J/TH and “latest generation” as under 38 J/TH. The measure of joules is interchangeable with watts, the firm clarifies.

Fabric Systems’s machine is supposed to go into production in the latter half of 2023, with shipments starting in the third quarter.

The software and hardware products are “a culmination of years of R&D since 2019,” co-founder and CEO Michael Gao told The Block. 

Gao previously founded Luminous Computing, a photonic AI supercomputing startup backed by Bill Gates, which got over $130 million in funding. He discovered bitcoin in 2011 at the age of 15 and founded a bitcoin mining operation from his dorm room, he said. Fabric Systems’ other co-founder is chief technology officer Sagar Reddy, who has 22 years of technical leadership in full-custom chip design and systems architecture.

Founder and CEO of 8090 Origin (a fund that spun out of 8090 Origin Partners) Jasper Lau said that they chose to invest in Fabric Systems precisely because of its CEO.

“Michael is a serial deep tech entrepreneur with a surprisingly far-reaching and concrete vision for the impact breakthrough technology could have on society,” Lau said. “We have backed him several times and are proud to be his partners again in creating Fabric Systems, which we believe will be a category-defining company in the >$100b market of cryptography acceleration.”

© 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.

Beeple is breaking new ground again, this time in the real world. 

 

The legendary NFT artist and pioneer took to Twitter on Thursday to announce a physical studio space being built in his home base of Charleston, South Carolina. He included a sped-up video – titled “BUILD” in all caps – showing a massive warehouse space undergoing a refitting. 

 

Beeple delivered an impassioned message as he promoted the new project. “I believe by showing people that this artwork can absolutely be shared and appreciated in real life, not just on our tiny screens, they will see that this medium is just like any other with the ability to bring beauty, provoke thoughtful discussion, and truly move us.”

 

He also wrote that showcasing digital art in the physical world might be exactly what the NFT market needs amid the recent downturn.  

 

now is the time to BUILD. 🧵 pic.twitter.com/4OuX4F25L8

— beeple (@beeple) October 13, 2022

“[T]he entire digital art/NFT community coming together and experiencing digital artwork IRL (in real life) is something that I think will help bring in the next wave of collectors,” he wrote, adding “and that is precisely what we need to move past this bear market.”  

The move comes amid a prolonged bear market, in which NFT trading volumes have taken a significant hit. 

Beeple, whose real name is Mike Winkelmann, remains one of the most successful NFT artists in the space. Last year, he sold an NFT through the auction house Christie’s for a record $69 million.

© 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.

Metaverse platform Mona has rolled out a new AI tool to help builders design more realistic objects in online worlds.

Launched on Thursday, the company says that its AI Material Designer will allow creators on its platform to generate textures for objects using a text description rather than code.

While its generator is currently limited to materials, Mona co-founder and CEO Justin Melillo told The Block that the technology to generate entire 3D objects with AI is already possible today. The tools just haven’t been made available to the public yet.

“We are actively working to build and incorporate these types of tools into our creation pipeline for our community. We’re not too far away from users being able to generate assets and entire worlds using AI inside Mona,” he said.

AI-generated art is having a moment. While the technology is hardly new, it’s only this year that generators usable by the average person have cropped up.

Generators like Stable Diffusion — whose database Mona is also using — and Midjourney work using “prompts,” which are text descriptions of the item users wish to create. 

Examples of materials generated via Mona’s tool. Source: Mona

The user bases for these tools are growing quickly. Midjourney launched its open beta in July this year and currently has over 3.2 million members on the Discord server where users submit their prompts.

Despite this growing audience, their use — particularly in the art world — is also controversial. Earlier this year, artist Jason M. Allen used Midjourney to create his winning entry for the Colorado State Fair’s annual art competition in the emerging digital artists category. Despite making clear he had used the software, he faced severe backlash from other artists.

The creators of Mona believe that AI could play a pivotal role in how builders, architects and other users realize their visions in the metaverse. Building worlds on metaverse platforms is, after all, currently no easy feat.

“Imagine using AI to create your digital hangout space, home, or world. This is only the beginning of AI-human creative collaboration,” co-founder and COO Matt Hoerl told The Block in an emailed statement.

© 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 NFT debt provider MetaStreet has raised $10 million in fresh funding. 

Investors in the round include DragonFly Capital, Nascent and Ethereum Ventures, who funded MetaStreet before. New investors participated as well, such as Fintech Collective, DCG, TheLAO, Focus Labs, Mirana Ventures, Metaversal, OpenSea Ventures, Ledgerprime, Meta4 and Flying Falcon.

Combined with $14 million total in seed funding acquired in February, MetaStreet’s total financing is now $24 million, according to a release shared with The Block. 

The firm will use the funding to create trust, credit and ownership products to facilitate debt and build out the NFT industry’s debt infrastructure. 

MetaStreet was founded in 2021 and provides liquidity and scaling infrastructure for NFT collateralization platforms. The firm aims to augment the NFT industry debt system by providing automated underwriting, mitigation waterfalls and other tools. 

While not as hot as in 2021, this year’s NFT trading industry sees consistent interest, especially in the gaming sector. Weekly trade volumes exceeded $30 million in sales in the first week of October, The Block’s data shows.

© 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.

Traders going long on bitcoin, ether and other cryptocurrencies were hit by $203 million in liquidations on Thursday.

The crypto market was in flux ahead of U.S. inflation data today, with the market contracting ahead of the release at 08:30 am ET. Markets sold-off following the higher-than-expected inflation figures as core inflation reached its highest level since 1982, up 6.6% year-on-year.

Thursday’s liquidations were the highest since Sept. 18, when just under $215 million worth of long positions were liquidated on crypto exchanges, according to The Block’s Data Dashboard. 

Bitcoin accounts for $46 million of the $203 million in long liquidations today, roughly 22%, according to The Block’s data. 

The liquidations come amid a choppy backdrop for cryptocurrencies as the latest macroeconomic data from the U.S. suggests further restrictive policy from the Federal Reserve. Prices contracted in the morning ahead of CPI but plunged following the hot U.S. inflation numbers. 

In keeping with the volatile price action, bitcoin was back within touching distance of $19,000 at the time of writing as equities also reclaimed earlier losses. 

© 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-native asset management firm BlockTower is launching a dedicated venture arm as well as a new $150 million fund. 

BlockTower general partner Thomas Klocanas — who previously managed a $50 million digital asset fund at White Star Capital — is in charge of the new venture side of the firm. 

The fund has been operating in the shadows since December of last year. The firm locked in most of the capital within the space of two to three weeks, Klocanas said.  

“We are currently on pace to deploy in something like three years — whereas as you’ve seen funds go as fast as a couple of months in this space — and that’s because we found the market to be overheated.” 

The investing thesis for the fund skews towards decentralized finance (DeFi) and crypto infrastructure companies.

Around 90% of the fund will be deployed to a core portfolio of between 20 to 25 positions. Checks can run anywhere from $500,000 to $6 million with the firm targeting ownership of between 5% to 10% on the equity side or between 2% to 5% on the token side. 

“Why these numbers?” Klocanas said. “They’re numbers that scale from a portfolio math perspective for your winners to be able to return your losers in a venture portfolio, so to speak. But they’re also numbers that scale on a web3 cap table.” 

A token advantage

A huge competitive advantage for the fund is that it leverages a Registered Investment Advisor (RIA) structure. This means the fund can invest in liquid tokens, illiquid tokens and secondary shares. 

A lot of venture funds rely on the “venture capital exemption” from investment advisor registration. This means that only 20% of their capital can be in non-qualifying investments, which applies to cryptocurrencies and tokens. An RIA structure avoids this challenge. 

“We can back the best deals because they are the best deals, not because of the instrument they are constrained to raising capital with,” Klocanas said. 

Crystallizing returns for LPs 

BlockTower operates three other strategies including a long-biased flagship fund, a market-neutral fund that focuses on arbitrage and basis trades, and credit strategies with the likes of MakerDAO and Centrifuge. 

The firm’s history as a hedge fund provides limited partners with an advantage when it comes to exiting those token positions. 

“I think we definitely have some of the better execution capacity out there on the street to be able to crystallize returns as close to the price on the screen as is achievable,” Klocanas said. 

Limited partners in the fund include Mass Mutual, VanEck Equities, BPI France, Circle and the Teacher Retirement System of Texas. 

© 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.