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The Aave community is currently voting on how the latest update to its decentralized lending protocol, called Aave v3, should be deployed on Ethereum.

Aave v2 on Ethereum controls $3.96 billion in liquidity and is the protocol’s biggest implementation across all chains, as it accounts for over 70% of the DeFi lender’s total value locked. Deciding on how to bring about the new version in Ethereum has a direct impact on the future of Aave v2 which is currently the largest decentralized lender in Ethereum’s DeFi ecosystem.

The community is deciding whether to issue a new version of the application (which keeps the old one in place) or to upgrade the old version. So far, 99% of the votes cast have been in favor of a fresh Aave v3 deployment on Ethereum rather than upgrading the previous version. The voting process will end on Oct. 11 at 6:00 AM EST.

Pros and cons

Both approaches have their own advantages and possible drawbacks.

Aave contributor Bored Ghosts Developing (BGD) has been working on coordination and execution parameters for a possible upgrade of Aave v2 to Aave v3 on Ethereum. The team recently put forward a summary of the possible trade-offs between both approaches.

One of the supporting arguments for a fresh deployment is that it is the easier route to follow. Aave v3 can easily be deployed on Ethereum and the transaction cost will be cheaper than upgrading the older version’s smart contracts. A fresh deployment will also not require a security audit as this has already been performed, whereas doing the upgrade would require another set of audits.

On the flip side, a fresh deployment will fragment Aave’s liquidity on Ethereum between both versions. Upgrading the old version would sidestep this issue and remove the need for users to migrate their positions from v2 to v3.

For BGD, a fresh deployment is better than a version upgrade. “Our opinion is that the advantages of doing a new deployment of an Aave v3 Ethereum holistically and importantly outweigh those of upgrading the current Aave v2 smart contracts,” said the BGD team.

Previous calls on Aave v3 deployment

So far, Aave v3 has already been deployed on several other blockchains and layer two scaling solutions: Arbitrum, Fantom, Harmony, Optimism, Polygon and Avalanche.

For Polygon and Avalanche, each had the older version running on their chains prior to the development of the new version. This meant that the community had to decide between deploying a fresh v3 or upgrading the older v2 to the new version.

The Aave DAO favored the first option and so both versions of the DeFi lending platform now exist on Polygon and Avalanche.

© 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 various sharded blockchains
• Near and Aurora remains the largest shard chain by TVL, with a relatively robust ecosystem that is still active
• Elrond appears to have fallen off in terms of TVL, but user metrics indicate that Elrond’s ecosystem is still growing at a steady pace
• Harmony has lost a significant amount of TVL prior to the Horizon bridge hack, but the TVL has stayed low post-hack, indicating that liquidity is unlikely to return to the ecosystem
• Zilliqa has made bold moves venturing into the metaverse and gaming space, though it remains to be seen if these are the right solutions to tackle Zilliqa’s lackluster adoption

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Bitcoin and ether were trading higher on Tuesday morning ET, as financial markets perked up following a smaller-than-expected rate hike in Australia. 

The Reserve Bank of Australia (RBA) decided to increase interest rates by just 25 basis points this week, becoming the first major central bank to break the mould. The status quo around rate hikes could be under threat going forward, as the United Nations urged rich nations to temper restrictive rises on Monday.

U.S. stock futures rose on Tuesday, with S&P 500 futures up over 1.5% and Nasdaq 100 futures up almost 1.9%. Cryptocurrencies climbed with them, with bitcoin testing levels around $20,000.

Bitcoin was trading up 3.7% at $19,929 over the past 24 hours, according to Coinbase data. The leading cryptocurrency by market cap registered modest gains last week as it briefly appeared to decouple from movements in equities, which it had begun to track closely through the end of the summer and into September — the bitcoin Pearson correlation is now at its lowest point since June, according to The Block’s data dashboard. 

Ether was also trading higher on Tuesday, up nearly 4% at $1,350, according to data from Coinbase. Ethereum’s native token had traded down through the end of September, with many commentators noting the token experienced a “buy-the-rumor, sell-the-news” moment following The Merge.

Despite crypto showing signs of breaking with traditional markets, Tuesday’s increase appears to be largely in line with equities and tracks a weakening dollar — which FTX’s Sam Bankman-Fried previously noted as a contributing factor in lower bitcoin prices. 

© 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.

Elliptic researchers say financial criminals have laundered billions with the help of popular crypto tools.

Since 2020, cyber criminals have used decentralized exchanges (DEXs), cross-chain bridges and non-KYC exchange services (called coin swaps) to move nearly $4 billion in funds connected with illicit activity, the on-chain analytics firm said on Tuesday.

The firm clarified that while these tools usually have legitimate use cases, they are also being increasingly used to process funds linked with activities such as thefts, dark web services, mixing, scams and ponzi schemes, ransomware and others.

“To be clear, Elliptic is not saying DEXs or bridges are used exclusively by criminals, in fact, the opposite is true, they are mostly used by legitimate users. But Elliptic has traced illicit funds (from hacks etc) that have been moved through DEXs and bridges in order to obfuscate their origin,” a spokesperson for Elliptic told The Block.

In its report, Elliptic researchers broke down its findings for each of these blockchain tools, starting with DEXs. Since 2020, DEXs have facilitated the movement of $1.2 billion in ill-gotten assets, Elliptic said. DEXs are protocols that let users execute buy and sell orders with the help of smart contracts. The use of DEXs by criminals is closely associated with exploits in the decentralized finance (DeFi) space and hacks of centralized exchanges, the firm reported.

Cross-chain bridges are the second kind of tool found by Elliptic to be popular among criminals. Here, the Elliptic researchers reported that since 2020, criminals have funneled nearly $750 million of illicit funds via cross-chain bridges, an activity referred to as “chain hopping” by Elliptic. These bridges let users transfer assets among blockchain networks. The vast majority of these illicit assets moving through bridges (over $540 million) have been processed by RenBridge, a cross-chain bridge between Bitcoin and Ethereum.

The report went on to explain criminals use blockchain-based tools like DEXs and bridges primarily for money laundering or to obfuscate their on-chain activity so it’s harder to catch them. Both strategies serve to obfuscate transaction trails and make investigations more difficult.

The third tool detailed in the report are “coin swaps” or non-KYC cryptocurrency swap services. These allow users to swap assets both within and across blockchains without opening an account. According to Elliptic, coin swaps are mostly advertised on Russian cybercrime forums and cater almost exclusively to a criminal audience. These account for $1.2 billion in illicit transactions since 2020.

© 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

• Crypto CEOs continued make headlines in September with several big-name exits, including Kraken’s Jesse Powell. 
• While some firms showed signs of slowing down hiring during the month, others such as Polygon and Doodles are hoping to hire. 

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The digital asset divisions of investment firms Brevan Howard and Morgan Creek have led a $40 million round into web3 gaming startup Horizon Blockchain Games.  

The Series A funding will be used to build its platform for developers Sequence and Niftyswap, a digital-asset marketplace, said the startup in an interview with Bloomberg on Tuesday.

Gaming giants Ubisoft Entertainment SA and Take-Two Interactive Software also participated in the round. 

Horizon will also continue to funnel capital into the development of its NFT fantasy trading card game.

“It’s something that anyone can use and that anyone can participate in,” said  co-founder and CEO Kieltyka said in the interview, outlining how the company was committed to making blockchain-based games more accessible for the everyday user. 

The company declined to disclose its valuation after the round but noted that it was higher than when it previously raised capital in July last year. The Block contacted a Horizon representative for comment but did not receive a reply before publication time. 

The news comes when gaming startups in the blockchain sector continue to attract fresh funding from investors despite notable calamities in the sector such as the Axie Infinity hack. According to The Block Research, last month NFTs and Gaming startups accounted for 38% of Seed and Pre-Series A deals. 

© 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 Parliament voted in favor of a resolution that acts as a crypto-focused double whammy — tackling both tax evasion through crypto-assets and streamlining rules for their taxation.

The resolution tries to identify what makes a taxable event, and suggests that the conversion from crypto to fiat currency is the most viable option. The European Commission is yet to clearly define this and other possible taxable events, and is considering the borderless nature of crypto-assets. 

Additionally, the exchange of taxpayer information by cross-national tax administration will need to include information on crypto-assets. However, the policy also calls for a “simplified tax treatment” for smaller transactions.

Blockchain technology is also pushed forward as an instrument for tax collection, identifying the technology’s potential to “automate tax collection, limit corruption and better identify ownership of tangible and intangible assets allowing for better taxing mobile taxpayers”, according to the European Parliament’s release. 

The Commission is called upon to implement blockchain technology into taxation programs. It also encourages EU member states to reform their taxation authorities.

The file passed in the Parliament’s plenary session with an overwhelming majority of 566 votes in favor, 7 votes against and 47 abstentions. Leading the report is MEP Lídia Pereira, member of the center-right European People’s Party in the Parliament.

© 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.

Hugo, the youth-focused arm of Hugo Boss, said that it would be taking its apparel into the metaverse via a partnership with the whimsical NFT project Imaginary Ones. It will launch a “holistic, 360-degree metaverse experience,” Hugo announced on Tuesday, as part of a “global refresh” of its brand. 

The NFT collection, which launches in early November, will consist of 1,001 three-dimensional animations and will be entitled Embrace Your Emotions (EYE). 

“The aim of the collection is to encourage everyone to connect with their emotions, and to share a message that all feelings – positive and negative – are valid and should be embraced, as the freedom to feel and express can significantly improve mental health and overall well-being,” Imaginary Ones explained in a release.

Proceeds will be donated to the charity Youth Aware of Mental Health (YAM).

Hugo x Imaginary Ones

While it’s not immediately clear what a “360-degree” metaverse experience actually involves, the brand said an allowlist of 500 spots will be allocated to customers who purchase a limited edition “phygital” t-shirt. Each t-shirt will contain a QR code, from which users will be directed to a Snapchat lens to create a special augmented-reality effect.

Holders of the NFT will have access to Imaginary Ones’ staking ecosystem, which grants the holder a separate set of special Hugo x IO merchandise, experiences and content — including digital wearables.

Imaginary Ones original NFT collection is a set of 8,888 animated characters. Its floor price is currently 0.73 ETH ($980).

Fashion looking to web3

Hugo Boss is the latest of many fashion brands attempting to make a splash in metaverse fashion. Various brands have tried — with varying degrees of success — to capitalize on web3. 

Earlier this year, Gucci announced joining its first decentralized autonomous organization with SuperRare. Burberry also launched a web3 game. Meanwhile, Louis Vuitton filed four trademark applications, dated June 23, for NFTs, virtual goods and digital collectibles. 

Projects that will survive long-term, according to LVMH’s web3 leader Nelly Mensah, are the ones that find an overlap between who their customer is and who the current web3 consumer is. For Hugo Boss, this seems to be rooted in the younger market. 

© 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.

Mastercard plans to unveil a fresh software solution to assist banks and card issuers in combating crypto-related fraud, CNBC reported today, citing the company. 

Dubbed Crypto Secure, the new software makes use of artificial intelligence algorithms — with a reliance on on-chain data, powered by Mastercard-acquired blockchain-security startup CipherTrace — to assess crypto exchange-related risk on Mastercard’s network.

Crypto Secure offers banks and card issuers a dashboard that aims to visually detail whether or not a crypto-related activity is suspicious, and to what degree. Notably, the system itself does not take action — only the card issuer may intervene.

Crypto fraud, in focus

Despite widespread declines in cryptocurrency prices, crypto-related fraud remains common — and regulators continue to scrutinize the industry. Senior U.S. regulators are asking Congress to pass multiple laws strengthening rules for the blockchain and digital asset industry. The European Union, meanwhile, has its own Markets in Crypto-Assets (MiCA) rules in the global spotlight.

In late August, Rep. Raja Krishnamoorthi, D-III, called on U.S. federal regulators and top cryptocurrency exchanges to take stock and account for their fraud-combating policies.

Fundraising solutions

Authorities’ continued focus on crypto-related fraud has helped provoke similar moves from Mastercard’s competitors.

Last month, fraud detection platform Sardine closed a $51.5 million Series B round led by Andreessen Horowitz (a16z), with participation from, among others, Visa.

In similar news, web3 firewall provider Blowfish closed an $11.8 million Paradigm-led funding round last week.

© 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.

Celsius Network has set a timeline for the auction of its assets. The bankrupt cryptocurrency lender will have a final bid deadline of Oct. 17 at 4 p.m. Eastern Time — with an auction, if necessary, on Oct. 20 at 10 a.m. ET. A sale hearing will be held on Nov. 1 at 11 a.m. ET before Chief U.S. Bankruptcy Judge Martin Glenn via Zoomer, according to a filing with the U.S. Bankruptcy Court for the Southern District of New York dated Monday.

Celsius filed for bankruptcy in July — roughly a month after halting client withdrawals and trapping billions of dollars across more than a million accounts. Recent court documents showed that Celsius’s liabilities were more than $6.7 billion and its assets were worth only around $3.9 billion, resulting in a balance sheet hole of $2.8 billion.

Amid the bankruptcy proceedings, Celsius founder and CEO Alex Mashinsky resigned last week. Mashinsky reportedly withdrew $10 million before the company froze client withdrawals and ultimately declared bankruptcy.

A large number of participants is expected to attend the sale hearing of Celsius, per Monday’s court filing. It remains to be seen who emerges as the highest and best bid for the firm’s assets.

FTX CEO Sam Bankman-Fried is reportedly considering bidding on Celsius’s assets. Last week, FTX’s U.S. unit won an auction for bankrupt crypto firm Voyager Digital’s assets, with a bid coming in at about $1.4 billion.

© 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.