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The European Commission released a bid to study the possibilities of monitoring decentralized finance through “embedded supervision” last week. 

Stemming from the Commission’s Directorate-General dedicated to finance and markets, the proposal sets out to investigate how financial supervisors could regulate Ethereum — which it sees as the biggest payment settlement platform for DeFi. 

The pilot program would go on for a minimum of six months and is estimated at a value of €250,000 (approximately $242,500). Applications to participate remain open until December 1.

Lawmakers in the Commission recognize that DeFi and Ethereum’s open-source nature is a vantage point for regulatory watchdogs to follow protocol activity. The study will focus on “automated supervisory data gathering directly from the blockchain to test the technological capabilities for supervisory monitoring of real-time DeFi activity,” according to the Commission’s document.

Patrick Hansen, EU policy and strategy head at Circle, tweeted that the impact of the pilot could be significant as “the capability of regulatory bodies to automatically monitor compliance by reading public blockchain data could drastically reduce the need for market participants (e.g. DAOs) to actively collect, verify & deliver data to authorities.”

© 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.

dYdX, the derivatives protocol, has tapped Charles d’Haussy as the new chief executive of its foundation.

Charles d’Haussy, who previously spent almost four years working at ConsenSys most recently as director of strategic initiatives, was announced as CEO of the foundation on Monday. The dYdX Foundation is independent not-for-profit foundation based in Switzerland and set up to grow awareness of the protocol.

In his role as CEO, he will be expected to drive growth and develop the dYdX protocol, community, and dYdX DAO. The new chief executive said he is keen to work with the technology, community and staff at dYdX, in order to democratize access to financial opportunities.

d’Haussy’s cross-industry experience of engaging with different stakeholders will be valuable to the foundation, as it works toward its next stage of growth, according to Arthur Cheong, president of the dYdX Foundation council. 

While the announcement was made on Monday d’Haussy began working with the Foundation on September 26, he told The Block via Twitter. 

© 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 firm Luxor, which runs a mining pool and a hardware trading desk, is launching an over-the-counter derivative product based on bitcoin mining revenues.

The new product, Luxor Hashprice NDF, is a non-deliverable forward contract for Bitcoin mining “hashprice” — a term coined by the company, referring to revenue miners earn from a unit of hashrate over a specific timeframe.

“While many derivative instruments exist for miners to hedge their Bitcoin price exposure, as well as their power and energy exposure, the space was lacking an instrument to easily hedge their hashrate exposure,” Luxor Head of Derivatives Matt Williams said.

It will also give proprietary trading firms, hedge funds and other investment firms exposure to the bitcoin mining industry, the company said.

Luxor will settle payments using its bitcoin hashprice index as the reference rate for hashrate value. Contracts can pay out in either dollars, BTC or a USD stablecoin. Their durations will be flexible and bespoke according to counterparty needs.

Contract terms will be structured according to a locked-in price, daily hashrate being sold and the duration of the contract. 

The company said this is just the first of “many derivatives” that it plans to launch next year.

“Hashprice derivatives are the apotheosis of our vision of hashrate as an asset class,” said Luxor co-founder and CEO Nick Hansen.

© 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 difficulty crossed an all time high of 35.61 trillion hashes on Monday, as miners ramp up their operations or more miners join the network.

Bitcoin difficulty is an automatically adjusting feature of the bitcoin protocol that determines how difficult it is to mine a bitcoin block. It’s implemented to ensure transactions are processed at a steady pace, which is 10 minutes.  

The difficulty is adjusted every 2016 blocks in line with hash rate changes. As of the latest estimates, the difficulty spiked by 13% to reach 35.61 trillion, making it the biggest upward adjustment in the mining difficulty on the Bitcoin network since the middle of 2021. The increased block difficulty will make it harder for miners to compete in solving cryptographic puzzles using specialized hardware chips called Application Specific Integrated Circuits (ASICs).

And it’s not just the difficulty level that has soared. Bitcoin network’s hash rate, another important metric, is at an all-time high of 257 exahashes per second (EH/s) according to data from The Block. The hash rate is the amount of computing power assigned to the blockchain to verify transactions and earn block rewards. The mining difficulty rises in response to an increase in hash rate.

A myriad of factors are credited for the jump in the difficulty rate, according to analysts. “It’s a combination of infrastructure coming online, meaning more capacity being built out, heatwaves dissipating which is resulting in better uptime and less curtailment across mining facilities, and more efficient latest generation mining equipment being deployed,” Kevin Zhang, senior vice president at mining pool Foundry, told The Block last week.

The spike in block difficulty can potentially impact the miner’s profitability, costing more to mine blocks. As the difficulty jump was anticipated, analysts had estimated it could crush the miners’ profitability by about 20%, The Block previously reported. This comes at a time when Bitcoin’s price has been on a slump year-to-date dropping from $46,000 to nearly $19,300 now amid an unfavorable macro scenario.

© 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.

London-based blockchain firm Fnality is delaying the launch of its Sterling Fnality Payment System (FnPS) to the third quarter of next year, according to a statement from the company shared with The Block.

The decision to delay the launch, which was expected to happen this month, was made in conjunction with the Bank of England to allow further time to work on regulatory and onboarding tasks, said Fnality in the statement. 

“Fnality’s plans to launch in other global markets have not been impacted by this decision,” said the company in the statement. “Fnality is still progressing towards the launch of wholesale payment systems in the US and Europe, with this on track to occur from 2023 onwards.” 

In August, Fnality’s FnPS was brought within the Bank of England’s regulatory purview following a recognition order from the HM Treasury that recognized “FnPS as a systemically important payment system in the UK.” 

What is Fnality?

Formed in 2019 and initially known as Utility Settlement Coin (USC), Fnality aimed to create a network of wholesale blockchain-based payments systems denominated in five currencies: U.S. dollars, Canadian dollars, euros, British pounds and yen. The tokenized currencies would be fully backed by fiat currency held by the relevant central bank. 

In September 2020, Reuters reported that the project had faced delays in its bid for regulatory approval. 

Then in February of this year, Fnality ran a proof-of-concept for issuing a tokenized security on Ethereum, with Fnality handling the payment part of the process. Fnality’s CEO Rhomaios Ram said at the time of the test that the firm was on track to finally launch its payment system in October 2022, thanks in part to the rollout of the BoE’s omnibus accounts. 

High-profile backers

The startup raised £50 million ($56 million) in a Series A in June 2019 when it formed as a commercial entity. The Block recently reported that Fnality is seeking to raise another £50 million in a Series B round. 

“Following on from its successful Series A investment round, Fnality is currently raising funding as part of an ongoing Series B investment round. Full details will be provided by Fnality upon the completion of the round,” a spokesperson for Fnality International told The Block at the time. 

Japanese banking giant Nomura also recently joined the firm’s impressive list of backers, which include UBS, Barclays, Nasdaq, MUFG Bank and State Street, as part of the current round. 

© 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 ParaSwap community is mulling a proposal that will change the way users earn rewards, which come in the form of native token emissions and a redistribution of transaction fees.

The proposal before the ParaSwap DAO governance forum calls for a new rewards system called social escrow. In social escrow, users earn rewards by performing actions deemed positive for the protocol. This differs from the current system where users who stake their tokens earn a portion of the fees generated by the decentralized exchange aggregator and its native token emissions.

These socially beneficial actions include staking the platform’s native PSP token, trading on the protocol and inviting other users via referral links. Users earn a score for performing any of these actions.

According to ParaSwap founder Mounir Benchemled, social escrow drives better user participation than vote-locked escrow (where token holders lock up their tokens to receive greater voting rights). “In the social escrow model, users are encouraged to trade and participate in the governance. The more of these things they do, the higher their score, and the higher their protocol share will be,” said Benchemled.

The ParaSwap founder also said there are objective metrics for measuring these actions and rewarding users who do them. Benchemled stated that things like the number of referrals generated by a user and the volume from users who stake their tokens can be tracked.

The pivot to a social escrow system is part of a broader tokenomics change for ParaSwap. This aims to transition the protocol from its current model to one that has significantly reduced token emissions. This change will be put to a vote among members of the ParaSwap community.

© 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.

Matter Labs will launch a public testnet for an Ethereum scaling prototype called ‘Pathfinder’ in Q1 2023, which might turn out to be the first Layer 3 network built on top of Ethereum.

Matter Labs is the Ethereum development company behind zkSync, a Layer 2 network on Ethereum that is set to launch this month. A Layer 2 network is one that runs on top of the main Ethereum blockchain and provides a boost to scalability, allowing it to process more transactions at a lower cost. Once this is in place, the company hopes to launch its testing environment for the Layer 3 network Pathfinder — which aims to provide even further benefits to Ethereum.

“Pathfinder represents a special moment for Ethereum. Not one that’s only experienced by the few, but one where we get to see history being made together as an ecosystem on a public testnet,” zkSync Chief Product Officer Steve Newcomb told The Block.

Layer 3s enhance all the benefits of Layer 2s, while adding significant leaps in other key scaling areas, Newcomb said, adding that this boost will enable wider adoption of cryptocurrency technology.

Upon launch, Pathfinder will be in a prototype stage open to the public in a testing environment. This will enable anyone to publicly experiment, research, and participate in the development of its new scaling solution. It will also allow input from other members in the Ethereum and crypto ecosystem.

“For us on the engineering team, Pathfinder gives us the ability to really understand the shape these systems are likely to take in the future, and to tackle some of the hardest problems early on. We believe that when it comes to engineering complex systems the best way to make progress is to aggressively build, test, and iterate with feedback from the real world,” zkSync Head of Engineering Anthony Rose told The Block.

Building new bridges

Another key benefit of Layer 3 networks, according to Newcomb, is that they enable native bridging between blockchains.

Native bridging is when a user wants to move tokens or money from one blockchain to another, without having to lock or give their tokens to a third-party ‘escrow’ bridging service. Native bridging enabled by Layer 3s could solve one of the industry’s main pain points, as billions of dollars have been stolen through exploits of non-native bridges between Layer 1 and Layer 2 blockchains this past year.

Once zkSync fully launches its Layer 3 network, “we won’t have non-native bridges, hopefully, in the future,” Newcomb added.

© 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.

A new version of the FTX crypto exchange will go live on Nov. 21, featuring an improved matching engine aimed at addressing complaints from users about the performance of the current one.

“We’ll be rolling out a whole new order matcher, lower latency API pathways, a whole slew of other features,” FTX CEO Sam Bankman-Fried tweeted today.

Crypto exchanges, like other asset trading desks, use matching engines to match buy and sell orders. This process is what facilitates the buying and selling of crypto tokens on exchanges.

FTX’s matching engine has long been the subject of complaints from users. These complaints have been about the high latency and low throughput of the platform’s matching engine. Latency in the context refers to how fast the matching engine can match the buy and sell orders of users. Higher latency means slower trade execution which can be detrimental for users as profitable trading positions can be lost due to high latency.

According to Bankman-Fried, these improvements will double FTX’s order throughput while reducing the latency by 50%. He stated that these upgrades have been in the works for most of the year and are almost ready for release on the platform.

FTX suffered a downtime last month due to what Bankman-Fried described as web interface-related issues. The glitch prevented users from accessing the crypto exchange’s website in the immediate aftermath of the September U.S. consumer price index report going live.

© 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.

Earlier today, crypto news outfit Wu Blockchain, citing “multiple sources,” reported that Justin Sun, the founder of the Tron blockchain ecosystem, is the “real buyer” of the recent Huobi stake sale. However, Sun told The Block that the claim is “wrong.” 

“I’m only an advisor to Huobi,” Sun told The Block, reiterating what he said in a Twitter post earlier today.

Huobi officially announced adding Sun to its advisory board, among others.

Several news outlets have followed Wu Blockchain’s report, which also claims that FTX founder Sam Bankman-Fried possibly bought a stake in Huobi with Sun. Bankman-Fried told The Block that neither he nor FTX is involved in the deal.

Huobi announced its stake sale early Saturday, saying that “the controlling shareholder” of the company had agreed to sell its stake to Hong Kong-based investment company About Capital Management’s M&A fund.

While Huobi did not name the controlling shareholder, the news came after reports that claimed Huobi founder Leon Li was seeking a buyer for his nearly 60% stake in the company and was asking for at least $1 billion. Huobi did not disclose the terms of the deal with About Capital Management.

Li founded Huobi in 2013 in China. The exchange operator exited its China business in December 2021. Now under new ownership, Huobi plans an international expansion and will receive an “injection of sufficient capital in margin and risk provision fund,” it said in the stake sale announcement on the weekend.

© 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.

Episode 97 of Season 4 of The Scoop was recorded remotely with The Block’s Frank Chaparro and Coinbase CEO Brian Armstrong.

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.

The cameras have been rolling over at Coinbase, CEO Brian Armstrong revealed last Friday, when he announced the release of Coin: A Founder’s Story — a feature-length film over three years in the making.

In this episode of The Scoop, Brian Armstrong sits down with host Frank Chaparro to share his thoughts on Coinbase’s new film, including his take on how some of the thornier moments of Coinbase’s history are portrayed. 

As Armstrong explains, he decided to produce the $2 million film because he wanted to “demystify” the ups and downs of taking a company public:

“I decided to make this film because I wanted to tell the story of what it really is like to create a tech company — all the way from being on your laptop and writing the first few lines of code, to going and becoming a public company.”

The film candidly portrays highlights, such as the moments before Coinbase’s public listing, as well as controversies, such as Armstrong declining to answer a question about the BLM movement at a company all-hands meeting, as well as Coinbase’s controversial acquisition of Neutrino — a market intelligence firm with members linked to selling spyware to countries like Saudi Arabia, Sudan and Venezuela. 

Ten-time Emmy-award-winning producer Greg Kohs had full creative control over Coin, and Armstrong himself “didn’t have the ability to change anything.” 

With that being said, Armstrong thinks Kohs accurately represented Coinbase’s story, and he’s happy with how it turned out:

“He did show people who disagree with us, people who thought that we had made mistakes, but I actually thought it was a very fair take — and so I’m happy with how it turned out.”

 

This episode is brought to you by our sponsors Tron

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 |

© 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.