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MakerDAO, the issuer of the stablecoin DAI, has initiated the first step toward allocating $500 million of its stablecoin reserves into short-term US treasury bonds and investment-grade corporate bonds. 

The decentralized autonomous organization (DAO) approved a $1 million pilot transaction Wednesday following an executive vote by Maker token holders. The full investment is to follow in the coming days.

MakerDAO explained the move as a way to strengthen the project’s balance sheet with exposure to low-risk liquid traditional assets. For this allocation, the DAO has partnered with an asset advisor firm called Monetalis. This firm will act as the asset advisor as well as form an acceptable legal structure for the Maker DAO protocol to gain exposure to traditional assets. 

Here, the DAO aims to invest 80% of the allocated sum into short-term US treasury bonds whereas the remaining 20% would be invested into corporate bonds.

“The 80-20 split between treasuries and bonds remained the favored approach during the voting process. This showcases the opportunity associated with the move, and seeing such adamant support from the community is very exciting,” said Nadia Alvarez, head of MakerGrowth.

Monetalis’ allocation of $500 million stablecoin will be divided equally between investment management firms Sygnum Bank and Baillie Gifford via Monetalis. This will take place in two phases, MakerDAO noted.

In the first phase, asset management firm Sygnum will serve as a crypto-to-fiat gateway and help convert 250 million of MakerDAO’s stablecoin into U.S. dollars, which will then be diversified into traditional assets.

MakerDAO founded DAI 2017 as a decentralized stablecoin backed with ether (ETH) and other crypto collaterals to back DAI. In the last year, MakerDAO has pivoted to a strategy of diversifying its treasury into real-world assets (RWAs).

Currently, DAI is the fourth-largest US dollar stablecoin with a market capitalization of over $6.3 billion, per CoinGeko data.

© 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 head of institutional coverage at crypto financial services firm FalconX announced Thursday her departure from the firm—the latest executive to leave their post in the digital asset market amidst the slump in price. 

Aya Kantorovich in many ways served as FalconX’s face to Wall Street and the media as head of institutional coverage at the firm.

“I have full confidence that FalconX is on a rocketship to drive institutional adoption into digital assets and will continue to cheer the team on evermore,” she wrote on LinkedIn. “What I will remember most fondly are the incredible people at FalconX and I am excited for what you all can achieve together.”

“It has been a blast so far, and we are only just beginning,” she added. 

She is part of a broader wave of early employees and senior executives that have parted ways with their firms in recent months, including president Brett Harrison who led FTX.US as president and Genesis Global Trading’s former CEO Michael Moro. 

Kantorovich, who joined FalconX in 2019, previously held roles at crypto investment firm Pantera Capital as well as Tegus, the buy-side investor research platform, according to her LinkedIn. 

FalconX is among the various firms vying for market share in crypto trade execution and credit, offering institutional investors financing to make big bets. 

In June, the firm raised $150 in new funding in a round that valued the company at $8 billion, with backing from Singapore’s sovereign wealth fund GIC and B Capital. At the time of the raise, the firm’s CEO Raghu Yarlagadda told Reuters he expected to increase his workforce by 30% in the coming months. 

© 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.

Two former Coinbase employees have raised $5.3 million in a seed funding round for their web3 infrastructure startup.

Scale3 Labs emerged from stealth today alongside the fundraising announcement. The round was led by Redpoint Ventures, with participation from Mysten Labs and Howard University.

Founders Ola Muse and Karthik Kalyanaraman left Coinbase in August and managed to raise and close the seed round within two months, they told The Block in an interview. Scale3 is an infrastructure startup especially focused on serving blockchain node operators.

Kalyanaraman said that running nodes is “super hard” today for multiple blockchains. Nodes are an integral part of blockchain networks that validate transactions and keep networks safe. Muse said it currently takes about eight hours for operators to update their nodes and Scale3 reduces that time to “less than 20 minutes.”

Scale3 does that by offering a platform that does all the backend work and provides direct links for updates, similar to how an average web user updates their apps from an app store, according to Kalyanaraman. Scale3 also provides a monitoring dashboard that provides real-time updates from blockchain creators.

Scale3 currently supports Mysten Labs’ Sui blockchain on its platform, called Autopilot. Next, it plans to support Ethereum, Solana and Aptos. Muse said Scale3 aims to support the top 10 blockchains over the next six months.

With fresh capital in hand, Scale3 plans to grow its team and ecosystem. The current headcount of the firm is seven and Muse is looking to scale his team to 20 by early next year, with hires focused on engineering, product and marketing.

Muse declined to comment on the firm’s valuation and on whether the seed funding was an equity round, but he said that Scale3 doesn’t plan to issue its own native token.

The firm did not add any board seats in this round, according to Muse.

© 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.

Alexandre Kech, Citigroup’s director of blockchain and digital assets has left to join Six Digital Exchange.

Kech announced his departure to the digital assets exchange, which offers the trading, settlement, and custody of crypto assets, in a LinkedIn post earlier this week. 

“This may seem like a short tenure, and it is, but sometimes, an exceptional opportunity comes along,” he said in the post. “I will share more about it when I start my new exciting challenge in November.” 

Kech confirmed the departure to the exchange when The Block reached him for comment but did not provide further details on the role. 

The departure follows similar executive departures from the banking giant to crypto companies.

In August, The Block reported that Citi head of global head of foreign exchange, Itay Tuchman, left the bank after more than two decades to head to a digital assets role. In the same month, digital asset investment firm CoinFund hired former Citigroup exec Christopher Perkins to serve as its new president and managing partner. 

This follows a string of departures to leave the banking giant in search of new roles in the digital asset space. As per reports in April, no fewer than 15 top-flight Citi employees have traded traditional finance for digital asset-focused destinations over the past year. These include top jobs at Copper, Paxos, Genesis and the Provenance Blockchain Foundation. 

© 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 miner Marathon invested a total of $31.3 million in hosting provider Compute North, which recently filed for Chapter 11 bankruptcy.

The investments are broken down between different Compute North corporate entities. Marathon invested $10 million in convertible preferred stock of Compute North Holdings, Inc and $21.3 million related to an unsecured senior promissory note with Compute North LLC. Additionally, Marathon paid Compute North entities a total of $50 million in operating deposits.

Marathon doesn’t expect the bankruptcy process to affect its projected growth target of 23 exahashes per second (EH/s) in 2023, according to a statement published Thursday.

“While we expect operations to continue as originally anticipated, our asset light model provides us with the optionality to relocate our miners to other locations, should the need arise,” said Fred Thiel, Marathon’s chairman and CEO.

The firm recently started energization at a colocated 280-megawatt wind-powered bitcoin mining facility in West Texas with Compute North. The two companies also closed an additional 42-megawatt hosting deal in July. 

The Compute North entities associated with both the King Mountain wind farm and Wolf Hollow sites in Texas sites are not directly subject to the Chapter 11 process, Marathon said. While there have been “some delays” at Wolf Hollow — which Compute North has attributed to a regulatory matter — the King Mountain site has not been negatively impacted, the company said.

“Compute North has been a supportive partner, and we respect this voluntary step to stabilize their business,” Marathon 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.

The team behind the legendary Coolkicks sneaker chain has raised $6 million for their new web3 endeavor, MynaSwap. 

Built on the Avalanche network, MynaSwap is a trading and vaulting platform for collectibles, such as sneakers, sports cards and watches. 

Investors include the Avalanche ecosystem fund Blizzard, Spartan Capital, Wave Financial and NFL superstars Odell Beckham Jr. and Kyler Murray, according to a company release. 

Wait, what is Coolkicks?

Coolkicks is a collectible sneaker retail chain founded by sneakerhead Adeel Shams. The brand is best known for its flagship store on Melrose Avenue in Los Angeles, which has attracted visits from celebrities such as NBA player Ja Morant, NFL quarterback Drew Brees and entrepreneur Gary Vee. Over 1.4 million subscribers on YouTube tune in to watch celebrities drop by the store. 

Shams’ collection of stores has inspired the vision for his most recent endeavour. He noticed that people were often trying to trade items from his collectible streetwear store with items from the sneaker store in LA.  

Shams and his MynaSwap co-founder Sukh Singh saw potential in this business model and believed it could now scale globally with blockchain technology. 

“The blockchain aspect allows you to do this much easier than the web2 [technologies],” said Shams in an interview with The Block. “There’s no brand out there that’s doing this currently and we feel like with the brand that we built in the last six to eight years and the relationships we’ve fostered, we feel like we could take the space over.” 

Introducing MynaSwap

MynaSwap is a platform that enables individuals to discover, buy, sell and trade collectibles around the world. 

Users will send physical items to MynaSwap’s vault for authentication. If the items pass the check, they will then be stored in a high-security, temperature-controlled vault and minted as a digital asset. The owner will then be able to trade and sell the corresponding digital asset on the MynaSwap platform.  

“This is a common denominator across a lot of these verticals, whether it’s sneakers, watches, sports, cards, wine,” Singh said. “A lot of times collectors will keep a small portion of the collection at home, but they don’t necessarily need to keep 65 watches at home, right? They might keep three or four of their favorites and the rest they can vault it.” 

When the owner does want custody, they just need to request it on the platform. 

“In that case, it will just go through our outbound process,” Singh said. “Our outbound process ensures delivery in two to three business days, which is effectively 50% faster than any of our counterparts and then we would burn the digital twin from circulation.” 

Coolkicks already has a subscription-based app with over 200,000 users, Shams said. They will be transitioning those users to MynaSwap, which is set to launch in the fourth quarter of this year. 

“[MynaSwap is] gonna have a large Coolkicks imprint and there’s 100% support,” Singh said. “We even envision where Coolkicks, the brick-and-mortar physical footprint, will be used as an onboarding center for Myna users and Myna inventory in upon launch.” 

The team believe it’s vital to provide services to both crypto natives as well as “no-coiners.” Users will be able to choose to either self-custody or sign up for a Myna custodial wallet with email and password. 

Raising at a $50 million valuation

Coolkicks launched without any outside capital where everything was bootstrapped. The team knew how to build brand, but they were starting from scratch when it came to fundraising. 

For the Coolkicks team launching MynaSwap is almost like working backwards, Singh said. 

“We stuck to our guns at a $50 million valuation,” Singh said. “We didn’t want to budge from there. Multiple people told us to downsize the round as well to a lower valuation and that’s not something we wanted to compromise on, so it took us a little bit longer to raise.” 

Blockchain seed and pre-Series A deal size

Ultimately the round ended up oversubscribed. The $6 million raise is above the median check size for a seed round in August, according to data from The Block Research. 

“I think that speaks to the strength of the team, the product vision and just all-in-all execution and what we’ve done in the past,” Singh said. 

The cap table features several top athletes. Many of these athletes connect with the MynaSwap platform because they are in lockstep with culture, Singh said. 

“What’s more important is they also understand the concept of these assets going up in price,” Singh said. “These guys have been collecting for a long time, right? They’re one of us. They were collectors when they were younger, and now they’ve just reached a level of stardom and fandom where they could do that and amplify that even more.” 

The funds from the round will be used to grow the team of nine and expand vault locations globally. 

© 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.

Zcash, a privacy-focused proof-of-work blockchain, has been undergoing a spam attack.

Analysts say the blockchain has processed a large volume of transactions that aim to disrupt the network. To do this, the attacker misused Zcash’s “shielded transactions” meant for privacy.

Here, the attacker has been adding hundreds of output values within shielded transactions that are proving to be very data-intensive. As a result, the blockchain size has grown dramatically, going from 31 GB in mid-June to more than 100 GB currently, according to data from Blockchair.

The situation is placing high demands on the network. While Zcash has not had any downtime, the blockchain’s rapidly growing size has led to troubles for nodes’ ability to sync with the network. On-chain records indicate that while the situation has persisted for months, it has been brought to public attention only recently.

“At this point, there only seems to be two problems with the spam: it’s bloating the chain size, and it’s making it harder for wallets to sync,” Sean Bowe, an engineer at Zcash’s core development firm Electric Coin Company said.

Others pointed out that Zcash doesn’t have spam prevention systems in place. A transactor pays a small fee of 0.0001 ZEC (worth a few cents) for shielded transactions with hundreds of output values, Zcash’s block explorer shows.

“It’s sad to see. There was always a risk of DoS given Zcash’s deliberate lack of a fee market,” security researcher Ian Miers, who has previously worked at Zcash, noted in a tweet Wednesday. “The proofs are much larger and slower to verify, making the attack worse.”

The motive for this attack has not been determined, but industry commentators have offered varying theories.

Nick Bax, head of research at Convex Labs, speculated that someone is trying to profit off harming the network. He also floated a possible theory that the spam attack is an attempt to “make it harder for people to run nodes” as this can potentially allow them to surveil users’ activity on the blockchain.

What are shielded transactions?

Across blockchains that use the UTXO model like Zcash, transactions are validated by linking the sender address, receiver address, and input and output values. But these values can be easily traced on a public blockchain. To enforce transactional privacy, Zcash uses cryptographic proofs called zk-SNARKs to obfuscate the input-output values of transactions.

Zcash transactions that make use of this technique are called shielded transactions and are meant for legitimate usage. However, the lack of a fee market can unintentionally let malicious actors spam the network if they use a large number of output variables. On this point, Solana Labs CEO Anatoly suggested that the project should increase the fees by 100 times for each output aiming to reduce spam.

In August, Zcash researchers proposed a new fee mechanism that aimed to incorporate fees based on transaction size. In such a scenario, fee rates would keep increasing when the network is under extreme usage. 

© 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

• Not all games require tokens, not all assets must be tokenized, and it doesn’t matter if the gameplay is good or “fun” if the token is poorly designed.
• This research piece will examine in greater detail how tokens are designed and which games would benefit from having their currencies tokenized.
• This piece is the second part of the Web3 Games series. The core issue with regard to tokenizing in-game currencies can be found in Part 1.   

This research piece is available exclusively to
members of The Block Research.
You can continue reading
this Research content on The Block Research.

UK investment firm Abrdn is taking another major leap into the digital asset space by partnering with enterprise blockchain Hedera. 

The asset manager, which oversees $579 billion in assets, will join the likes of Google, FIS, Standard Bank and Nomura on the Hedera Governing Council. 

“We’re really long-term investors,” said Duncan Moir, senior investment manager at Abrdn, in an interview with The Block. “We see this as being a very long-term story for us and for the industry.” 

What is the Hedera network?

Hedera is an enterprise blockchain that uses the hashgraph consensus mechanism for transactions. 

The Hedera Governing Council run the consensus nodes, which determine the transaction ordering. They also manage the software and vote on decisions related to the network. 

Many major industry players from the council are building on the network. IBM has incorporated the Hedera consensus mechanism into its Hyperledger Fabric product, while digital workflow company ServiceNow is integrating Hedera into its Now platform. 

Despite this mainstream interest, general adoption on the chain remains light. Total value locked (TVL) amounts to $17.95 million with four decentralized applications, according to DefiLlama. By contrast, Ethereum had around $32 billion in TVL and Solana has around $1.3 billion at the time of writing. 

Selecting Hedera wasn’t a difficult decision for Abrdn, Moir said. The chain aligns with the company’s values in terms of both innovation and sustainability.  

Researchers at the University College London found Hedera to be the most sustainable proof-of-stake network compared to others like Algorand, Cardano, Ethereum, Tezos and Polkadot. However, the chain compromises on some components of decentralization through its governing council. 

The enterprise grade solution sits well with the institutional community, he added. 

Shaking up the investment industry

Abrdn, formerly known as Standard Life Aberdeen, is a titan in the UK investing industry. It was founded in 1825 and offers a range of investment services focused on investment solutions, tools and technologies for financial advisers and a personal wealth business. 

It sees the investment industry as ripe for a shake up and that blockchain technology might be the key to creating this shift. 

“I don’t think anybody is really, let’s say, full service. They’re very much focused on specific things and they’ve been dipping their toes in,” Moir said. “We want to go about it a bit more comprehensively.” 

The company sees potential in using Hedera to tokenize investment funds, which can then be listed on digital exchanges. Tokenization will enable a secondary market for funds that have less frequent redemptions and create opportunities for better price discovery, Moir said. 

It’s also one step toward a fully on chain process, Moir added. Consumers will be use blockchain technology to access a class concept. 

Abrdn isn’t the only firm dabbling in investment fund tokenization.  Investment manager Hamilton Lane, which has $832.5 billion in assets under management, tokenized three funds this week in partnership with Securitize. Private equity giant KKR has also been exploring tokenizing funds on the Avalanche blockchain. 

Leading the way in digital assets

Abrdn wants to go deeper than just tokenization instead exploring how it can help shape the investment industry with blockchain technology. 

The firm started dipping its toes into the digital assets space for a few years ago, first exploring crypto as an asset class within hedge funds. 

It then plunged into the deep end earlier this year with a significant stake in digital assets exchange Archax, creating a route for investors to access opportunities within digital securities as well as connect existing offerings through tokenization.

Moir expects that Abrdn will announce more about the firm’s plans in the digital assets space towards the end of 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.

The European Union has toughened restrictions on crypto payments from Russian accounts, wallets or other holding services to European ones. 

In the eighth sanctions package against Russia since its invasion of Ukraine in February, the bloc removed the cap of €10,000 which was established in April to a prohibition “irrespective of the amount of the wallet.”

The EU’s new sanctions also include import bans totalling up to €7 billion in an attempt to restrain Russia’s war, and lay the groundwork for implementing an oil price cap.

Policymakers in the European institutions pushed for implementing more severe sanctions on Russia in response to the results of the “sham referenda” conducted in the occupied Ukrainian regions of  Donetsk, Kherson, Luhansk and Zaporizhzhia – which MEPs called “null and void.”

© 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.