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At least 23% of Ethereum blocks are complying with U.S. sanctions due to the use of a service called Flashbots.

Ethereum researcher Toni Wahrstätter has published research showing that maximum extractable value (MEV) operator Flashbots is censoring all transactions originating from Tornado Cash. Out of all 19,436 Ethereum blocks generated on Ethereum after The Merge using Flashbots’ relay software (for MEV Boost), not a single block contained a transaction connected to Tornado Cash, according to Wahrstätter.

“It’s concerning to see how quickly the potential for censorship has grown unchecked since the Merge, and its potential to get much worse as more validators opt-in to mev-boost, unless awareness is raised,” said Labrys, a web3 development company that built a site tracking compliant Ethereum blocks, on Twitter.

Flashbots appears to have been censoring transactions by default on its offering as it aims to be compliant with regulatory requirements. This is in line with comments made by Flashbots Strategy Lead Hasu in August that it planned on filtering out sanctioned transactions.

While Flashbots alone accounts for 23% of Ethereum blocks, it’s possible the actual percentage of compliant Ethereum blocks may be much higher. “This data currently only shows validators that use MEV-Boost but those that don’t can also be OFAC compliant through their own internal systems,” said The Block researcher Steven Zheng.

A graph showing how many blocks from different relays that contain Tornado Cash transaction. Image: Toni Wahrstätter.

The data shows that Flashbots is the only MEV relay participating in transaction censorship. Meanwhile, MEV relay operators like Blocknative, Eden Network, Bloxroute, and Manifold are still producing blocks that have Tornado Cash transactions in them, according to Wahrstätter. This contrasts claims by Blocknative, Eden Network and BloXroute Regulated that they are complying with sanctions.

What is MEV?

MEV refers to the maximum value that can be extracted from block production and can be achieved by the reordering of transactions in a block. On Ethereum’s proof of stake blockchain, MEV is made possible by MEV Boost, a open source middleware mechanism to help gather transactions and propose blocks, relaying them to the block validators. 

Flashbots runs one of the most widely used relays on MEV Boost. This relay tells validators which transactions they should prioritize in block production to get extra rewards and it receives a fee in return. The use of Flashbots has been steadily increasing since The Merge.

The action from Flashbots has been taken in response to the U.S. Office of Foreign Assets Control (OFAC) blacklisting of decentralized crypto mixer Tornado Cash in August. Here, OFAC sanctioned the use of Tornado Cash and certain Ethereum addresses connected to the app, citing use by cybercriminals for money laundering. 

After the sanctions were announced, infrastructure projects like Alchemy and Infura refused to service users who try to bring assets to their platforms from Tornado Cash-linked accounts. Flashbots is the latest one to make a similar move.

Last month, Ethereum supporters and developers expressed worries that OFAC sanctions could make the blockchain vulnerable to censorship at the base layer. The developers highlighted the possibility that validators in the post-merge environment start censoring transactions leading to validators censoring on the network to an extent. MEV relays are also another point from where fears of censorship can potentially stem from.

Wahrstätter told The Block that Flashbots open-sourcing its code is a good attempt to get the issue under control. He said, “Flashbots is doing a great job and now we can hope for increasing competition in the block building markets.”

© 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.

Chainlink Labs, a provider of blockchain oracles, has announced a program for encouraging blockchain ecosystem development related to oracles. 

SCALE stands for “Sustainable Chainlink Access for Layer 1 and 2 Enablement.” The program’s goal is to grow decentralized application ecosystems in the Layer 1 and 2 space by helping with access and cost barriers to oracle services and configurations.

Chainlink oracles allow on-chain smart contracts and applications to utilize off-chain data in a secure and decentralized manner.

Chainlink’s services are used by a wide variety of blockchain applications that handle a lot of value. In fact, Chainlink’s Transaction Value Enabled (TVE) — which is a measure of its total value of facilitated transactions — sits at $6.1 trillion, Chainlink CEO Sergey Nazarov told The Block. This figure includes transactions such as swaps, borrowing, and derivatives.

The SCALE program is an initiative within Chainlink’s broader Economics 2.0 program, which aims to improve data security, utility, and operating costs of Chainlink oracle services.

The initial blockchains collaborating with Chainlink Labs on this initiative are Avalanche, Metis, Moonbeam, and Moonriver. Each ecosystem will contribute toward oracle networking operating costs.

Nazarov said Chainlink Economics 2.0 and SCALE put in a place a “holistic economic model” that is viable for the long-term success of blockchains, decentralized applications, and the Chainlink ecosystem.

© 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.

India’s Directorate of Enforcement (ED), a law enforcement agency that investigates financial crimes, has frozen cryptocurrencies worth 128 million rupees ($1.5 million).

ED froze 77.6 bitcoins under the Prevention of Money Laundering Act (PMLA) as part of an ongoing investigation into Aamir Khan and others linked to gaming app E-nuggets. The frozen bitcoins were initially purchased on WazirX before being transferred to Binance — where the assets have been frozen.

Led by the Park Street police in Kolkata, the investigation has been ongoing since February 15, 2021, according to the announcement — which also notes that Aamir Khan and his partner, Nesar Ahmed Khan, launched E-nuggets in an attempt to defraud users. “After collecting a seizable amount of money from the public, all of a sudden withdrawal from the said app was stopped on one pretext or the other,” it reads, continuing, “Thereafter, all data including profile information was wiped from the said app servers.”

In the course of its investigation, ED discovered the accused had been transferring the funds overseas using crypto exchanges. Using the name Sima Naskar, an account was opened at WazirX — which saw its bank balances frozen in August by the ED — and was used to purchase cryptocurrencies that were transferred to Binance. ED’s notice said the crypto relating to these transfers and held on Binance has now been frozen.

Aamir Khan previously had 173.2 million rupees (approx. $2.1 million) in cash seized from his property during a search. 

Neither Binance nor WazirX responded to requests for comment, as of the time of publishing.

© 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.

Summary

• The two main approaches to implementing decentralized social networks using a blockchain are decentralizing the social graph and sufficiently decentralizing protocols.
• Sufficient decentralization is when the most primitive action (registering) is delegated to the blockchain.
• Decentralizing the social graph builds on sufficient decentralization and delegates many actions to the blockchain (e.g. follows and posts).
• The key idea behind decentralized social networks is giving users the choice to exit from any application whilst maintaining their social connections.

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A potential investor in troubled South Asian crypto exchange Zipmex has asked the company’s founder and group CEO Marcus Lim to forfeit all his shares, according to an email obtained by The Block.

The email sent Tuesday by Chalermchai Mahagitsiri via his representative asked Lim to forfeit 100% of his shares upon the closing of any potential investment. Last month, The Block reported that Mahagitsiri, son of Thai billionaire and coffee king Prayudh Mahagitsiri, is one of two parties in advanced investment talks with Zipmex.

“We request the Zipmex Team to prepare a confirmation letter of your share forfeiture for you to sign and to take effect at closing,” the email addressed to Lim reads. “We look forward to moving on from this situation and receiving this confirmation letter.”

Zipmex halted client withdrawals in July due to its exposure to Babel Finance and Celsius, two beleaguered crypto lenders that froze customer funds in June. Zipmex has estimated its total exposure to Babel and Celsius at $53 million and it is reportedly looking to raise about that much from investors. Zipmex has until Dec. 2 to sort out its financial problems, having received a three-month moratorium extension from the Singapore High Court in August.

“As my team and I continue to work towards bringing in new investments to make our customers whole, negotiations with various parties are entering a critical phase,” Lim told The Block in emailed comments. “As such, I am unable to comment on any details as there is a non-disclosure agreement (NDA) between parties and until they have been agreed upon by all stakeholders I cannot disclose more. I am however surprised any interaction (even if it occurred) was leaked given the NDA.”

Lim has also been a target of Zipmex’s existing shareholders, who have been seeking his departure, according to a Bloomberg report from last month. The report said at least one “large” Zipmex shareholder wrote to Lim asking him to resign, citing a loss of trust among partners and the firm’s severe cash crunch.

It remains to be seen whether Lim agrees to forfeit his equity. Last month, he told the Australian Financial Review he intends to stay on and work on a restructuring plan to make Zipmex’s customers whole — unless the firm’s new major shareholders tell him to resign.

Greater say for shareholders

“This plan includes potentially bringing in new majority shareholders who may want a greater say in management decisions,” Lim told the AFR at the time. “Should this happen, my co-founder Akalarp [Yimwilai] and I have made it clear that we will fully cooperate with them and their wishes in the event they may be looking for a management change.”

Indeed, The Block has also obtained a separate letter dated Aug. 14, in which Yimwilai, who is also the CEO of Zipmex’s Thailand unit, offered to resign from his director and CEO posts and forfeit all his shares upon the closing of an investment or acquisition of Zipmex Asia. In that letter, written to Zipmex’s board and shareholders, Yimwilai also expected Lim to “make the same decisions.”

Yimwilai did not respond to a request for comment by press time.

Zipmex Group operates five entities — Zipmex, Zipmex Asia, Zipmex Thailand, Zipmex Indonesia and Zipmex Australia — and all these entities sought creditor protection from the Singapore High Court.

© 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 infrastructure company Coral has raised a $20 million strategic funding round co-led by FTX Ventures and Jump Crypto.

The company is known for creating the Solana development framework Anchor, but is set to dive into the consumer crypto wallet space with a new product.

Other participating investors in the round, which closed in May, include Multicoin Capital, Anagram and K5 Global, according to a release on Wednesday. It declined to share its valuation with The Block. 

Along with recruiting efforts, the funds will primarily be used to launch its first consumer offering. Named Backpack, Coral envisions that its wallet will allow users to access all of their assets and decentralized apps in one place through the uptake of its “xNFT” developer framework.

xNFTs aim to act as applications within Backpack, allowing users to engage assets from tokens to decentralized applications, fiat onboarding and NFTs across different blockchains and protocols.

“We’re excited to launch a step-function improvement in the way users in the Solana ecosystem interact with protocols and smart contracts,” said founder Armani Ferrante in a statement. “xNFTs make the crypto experience smoother, require fewer steps and give projects the power to create more customized experiences for their communities.” 

 This all hinges on developer interest, however — and Coral claims that more than 10 of the largest projects on Solana are already developing using the framework. Under the private beta of Backpack, NFT marketplace Magic Eden, blockchain gaming projects DefiLand and Aurory, and trading app Mango Markets are set to debut as xNFT applications. 

News of the round follows other recent raises from crypto infrastructure companies creating crypto wallets, despite declines in funding across the sector. Earlier today, hardware wallet maker OneKey announced it had raised $20 million in Series A funding, and yesterday, Bitcoin payments firm and wallet provider Strike said it has raised $80 million in Series B funding. 

According to The Block Research, 25 deals went towards crypto infrastructure companies, second only to the NFT and gaming sub sector. 

© 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.

Xterio, a game development firm valued at $300 million, has partnered with the blockchain gaming platform XPLA. 

XPLA is operated by the South Korean gaming studio Com2Us and was a prior investor in Xterio’s $40 million raise via a SAFT sale. Through this partnership, Xterio and XPLA plan to bolster their offerings of blockchain-based games built on XPLA. 

In addition, XPLA now has access to Xterio’s exclusive relationship with the mobile and AAA Swiss game developer FunPlus, which also has participated in Xterio’s SAFT sale.

“Our partnership with Xterio continues the development of XPLA and will bring a new element of entertainment for our users to enjoy,” said Kyu Lee, president of Com2Us, in a press release.

Xterio’s SAFT sale occurred on Aug. 30, 2022. It was co-led by FunPlus, Makers Fund, FTX Ventures and XPLA, with additional participation from Animoca Brands, HashKey, Foresight Ventures, Infinity Ventures Crypto and Matrix Partners, The Block previously reported.

© 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.

Ribbon Finance, an Ethereum-based DeFi derivatives platform, announced plans to launch a new crypto options trading service called Aevo.

Aevo is the latest structured DeFi product launched by Ribbon Finance. It builds upon “DeFi Option Vault” (DOV), the platform’s yield-generating instrument based on crypto options, derivatives and fixed-rate cryptocurrency investment products. Ribbon described the product as a “high-performance, order-book-based decentralized exchange” for crypto options trading. The announcement also stated that Aevo has been designed to cater to pro traders.

Ribbon Finance plans to integrate Aevo into its suite of structured crypto products. “Eventually, by becoming the best options exchange and settlement platform in DeFi, we think it will make sense for other DOV projects to build on top of Aevo and leverage the liquidity of the exchange,” the announcement stated, adding, “Someone could spin up a DOV that sells daily options, or does some other type of complicated strategy, and use Aevo as the underlying venue for where these options contracts clear.”

The product will be launched for closed beta testing in October before going live on the public Ethereum mainnet by the end of the year. Ribbon says it expects Aevo to achieve up to $100 million in daily trading volume six months after its launch.

ETH options trading has, so far, defied the wider bear market trend. Open interest recently reached an all-time high of over $8 billion, according to The Block’s Data Dashboard. On the other hand, open interest in ETH futures has been more than halved since its all-time high in late 2021.

© 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.

Pantera Capital is seeking to raise $1.25 billion for a second blockchain fund, founder Dan Morehead told Bloomberg in an interview. 

The investment firm is one of the oldest in the crypto space, having launched in 2013. It started its first cryptocurrency fund when bitcoin was around $65 and now currently has $4.5 billion in assets under management, according to its website. 

Pantera currently runs three different fund strategies. The blockchain fund is a venture fund that invests in equity, early-stage tokens and liquid tokens.

The first blockchain fund launched in 2021 and targeted a $600 million raise. Earlier this year, Pantera announced it had secured more than $1 billion in commitments for the fund. 

The firm plans to close the second blockchain fund in May, Morehead told Bloomberg. He is also looking to buy additional shares in some companies that Pantera’s already invested in since valuations have dropped. 

Pantera’s portfolio includes companies like Anchorage Digital, Amber Group, Coinbase, Flashbots and FTX. 

“We want to provide liquidity for people that are kind of giving up because we’re still very bullish for the next 10 or 20 years,” said Morehead in the interview. 

Morehead is known for his strong views on the macroeconomic environment, which he explores in monthly investment letters. 

“Unfortunately, crypto pricing has become correlated with risk assets, which I honestly don’t think has to be true,” said Morehead in the interview. “My hope is that soon crypto will decouple from the macro markets.” 

© 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.

Regulators must address cryptocurrency before it is of systemic importance, Jon Cunliffe, the Bank of England’s (BoE) deputy governor for financial stability has said.

If done properly regulatory frameworks can help innovation, by reducing the risks of “confidence-destroying crashes,” he added, in a speech given at the AFME Conference. 

The speech also touched on the potential for post-trade technology to improve processes. The post-trade taskforce, an industry group which the BoE acts as an observer for, said earlier this year that innovation in post-trade process has lagged behind other areas of financial markets.

The possibilities for disruption of the current post-trade landscape might come from innovative approaches and technologies that have been developed for the trading, clearing and settlement of cryptocurrencies, Cunliffe noted.

Tokenised representations of money and securities that trade in mainstream markets brings both components of the trade onto a single ledger, Cunliffe said. This process “facilitates near-instant settlement of trades and, building on modern cryptography, atomic settlement.”

Cunliffe also spoke about smart contract technology, and the ability of crypto exchanges to collapse a large number of activities into a smart contract. These activities, he said, would be split across custody banks, exchanges, central counterparties and central securities depositories, in traditional markets.

The opportunity to improve the process and gain in cost from consolidation could be significant, Cunliffe noted, “fewer intermediaries should mean less fees.” However, it is not just the end investor that could benefit, Cunliffe said a simplified structure with fewer participants in the process could make it more resilient, benefitting regulators.

“With fewer critical points in the chain, the potential points of failure in the system are reduced.”

© 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.