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Episode 74 of Season 4 of The Scoop was recorded live at The Block headquarters with The Block’s Frank Chaparro and TBD Lead at Block, Mike Brock.

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.

Block CEO Jack Dorsey has called ‘Web5,’ a decentralized identity platform under development by TBD, the Block’s blockchain arm, “likely our most important contribution to the internet.”

In this episode of The Scoop, TBD lead Mike Brock explains how Web5, whose name is a play on the idea of connecting Web2 and Web3, aims to reimagine the way trust is established and maintained, and how digital identity can connect the emerging decentralized financial system to the existing real-world economy.

Hardcore crypto proponents dream of creating a fully decentralized, trustless system. But Brock says there are some practical problems with transacting in such a world:

“Are you going to go and buy a gold watch from an anonymous online merchant and then send them a non-reversible payment for $10,000 and just hope that it gets drop-shipped to you?… We can’t build an economy around that. We have to have a way to authenticate with the real world.”

That’s where the Web5 platform comes in. Brock describes it as a “messaging layer that ultimately allows you to establish secure transactions, with negotiated social trust.”

Users of Web5 are in control of both their identities and their data — something Brock believes will facilitate a new way for the developing decentralized economy to connect with known, verifiable actors in the real world:

“We’re trying to build on-ramps and off-ramps from the real world — fundamentally, that’s what digital identity ultimately gets you.”

During this episode, Chaparro and Brock also discuss:

• The danger of ‘hyperscale’ Web2 platforms
• The shortcomings of Web3
• How Web5 helps prevent identity theft

This episode is brought to you by our sponsors Chainalysis & IWC Schaffhausen

About Chainalysis
Chainalysis is the leading blockchain data platform. We provide data, software, services, and research to government agencies, exchanges, financial institutions, and insurance and cybersecurity companies in over 60 countries. Backed by Accel, Addition, Benchmark, Coatue, Paradigm, Ribbit, and other leading firms in venture capital, Chainalysis builds trust in blockchains to promote more financial freedom with less risk. For more information, visit www.chainalysis.com.

About IWC Schaffhausen
IWC Schaffhausen is a Swiss luxury watch manufacturer based in Schaffhausen, Switzerland. Known for its unique engineering approach to watchmaking, IWC combines the best of human craftsmanship and creativity with cutting-edge technology and processes. With collections like the Portugieser and the Pilot’s Watches, the brand covers the whole spectrum from elegant timepieces to sports watches. For more information, visit IWC.com

© 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 wallet firm Crypto.com has obtained two licenses in South Korea through the purchase of two local startups. 

The company secured the licenses through the acquisition of PnLink and OK-BIT, according to a press release issued today. PnLink is a payments service provider, OK-BIT a virtual asset service provider.

The deals give Crypto.com Electronic Financial Transaction Act and Virtual Asset Service Provider registration, it said.

“We are committed to working with regulators to continue to bring our products and services to market, particularly in countries like South Korea where consumers have shown strong interest and adoption of digital currencies,” said Kris Marszalek, Crypto.com’s co-founder and CEO, in a statement.

Founded in 2016, Crypto.com serves more than 50 million customers worldwide, according to today’s announcement. It already holds licenses in Singapore, Dubai, Italy, Greece and Cyprus.

This is not the first example of crypto giants attempting to navigate local regulation through acquisition. In the UK, for example, both Binance and Bitpanda have acquired smaller startups that were successfully registered under the Financial Conduct Authority’s anti-money laundering regime. But in each case, the UK watchdog was quick to warn that registrations could be cancelled if necessary.

© 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.

One of the most popular prediction markets will have to close its doors after the Commodity Futures Trading Commission (CFTC) said it failed to comply with the terms of a no-action letter. 

PredictIt has operated in the US since October 2014 under the protection of a No Action letter from the CFTC. The company’s Twitter account brands it “the stock market for politics.” Users purchase and trade shares representing an outcome priced by public consensus. Traders will see a larger payout if they place their predictions when the public disagrees and the shares for the outcome are priced lower. If the trader is right, the value of the shares rise and traders can either sell their shares or hold on until the market closes.

Of course, if a trader is wrong, they’d lose money.

Some argue prediction markets are a means of more accurately establishing public opinion, since users have to put their money where their mouth is. PredictIt is a project out of the non-profit Victoria University in Wellington, New Zealand.

But some, including some regulators, view the activity as akin to gambling or unregistered sales of futures contracts. Many prediction platforms, including PredictIt, run political markets as a means of polling for election data. In the US, it’s illegal to gamble on the presidential election. The CFTC also prohibits the unregistered trading of futures contracts. As of last week, the CFTC has revoked PredictIt’s protected status, saying the firm failed to comply with the terms of the letter.  

“[The Division of Market Oversight] has determined that Victoria University has not operated its market in compliance with the terms of the letter and as a result has withdrawn it,” said the notice. “As stated in the withdrawal letter issued today, to the extent that Victoria University is operating any contract market in a manner consistent with each of the terms and conditions provided in CFTC Letter 14-130, all related and remaining listed contracts and positions comprising all associated open interest in such market should be closed out and/or liquidated no later than 11:59 p.m. (EDT) on February 15, 2023.”

The CFTC has not clarified which rules PredictIt failed to comply with in its statement. For its part, the firm maintains that all open markets are within the terms of the letter. In a statement, it said the security of trader funds won’t be affected by this action, but it is halting the addition of new markets. It will continue to accept new deposits and signups and honor withdrawal requests. The platform has not decided how to settle markets with end dates after the February deadline. 

The firm’s statement also included a link to submit comments to the CFTC. In the days since the decision came down, PredictIt’s twitter account has retweeted multiple accounts soliciting comments to the CFTC on its decision and giving analysis on the sudden change of tune from the regulator. 

“We love our community and we appreciate all of the support we are getting right now,” the firm tweeted. 

The decision follows an enforcement process with crypto prediction market platform Polymarket, which settled with the CFTC at the start of this year. The platform touts itself as a decentralized information market. The mechanisms, though blockchain-based, are similar to PredictIt, allowing users to buy contracts tied to certain outcomes and potentially see a payout as consensus shifts or the market settles an outcome. Since the enforcement, Polymarket has geoblocked US customers and added former CFTC chair Christopher Giancarlo to its advisory board to potentially help it navigate a reentrance into the US. 

After news of PredictIt’s revoked protection, Polymarket tweeted:

“Viva la PredictIt. You will forever have a special place in our hearts and those of the prediction market community. The foundation you laid will not go to waste.”

© 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.

© 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 prices pulled back this week following two weeks of relatively unencumbered growth at the tail end of July. 

At the time of writing, bitcoin was trading at $23,119, down 0.2% over the past 24 hours, while ether was at $1,701 according to CoinGecko. 

Earnings calls provided much of the news this week as MicroStrategy revealed CEO Michael Saylor would transition into an executive chairman role from Monday, Robinhood’s crypto revenue ticked up from quarter-to-quarter and Block announced a 6% decrease in its second-quarter net revenue year-on-year.

Meanwhile, futures have begun to surge as bitcoin and ether activity heats up, as seen through more bitcoin and ether open interest — which indicates the value of all outstanding contracts that have yet to settle. Bitcoin open interest for August is already ahead of July at $1.54 billion, compared with $1.47 billion the previous month.

The Block reported earlier that ether derivatives activity was heating up as large traders began speculating on the forthcoming merge, which commentators noted again this week. 

Here’s what key players had to say about this week’s price action and what to watch for next week:  

Recession fears grow

Market maker QCP Capital noted several positives in its weekly market update on Friday, namely that the peak inflation narrative is playing out as West Texas intermediate oil prices fell below $90. The update suggested that falling inflation may allow central banks to be less hawkish.

However, the Singapore-based firm went on to say that economic data globally is pointing to poor growth and an impending global recession. Based on this, the company’s view is that markets will trade sideways and be sensitive to economic data releases — such as the US CPI release on Wednesday.

Finally, QCP suggested that there is increasing concern the merge will not be as smooth as most expect. It has now been suggested that ethereum could see a hard fork — creating two active chains, ethereum proof-of-stake and ethereum proof-of-work. 

If the proof-of-work chain were to retain some material value, there could be significant price disruption akin to a stock split or special dividend, according to the market maker. Chicago-based Cumberland echoed this sentiment in a Twitter thread on Tuesday.

Founder of Dfinity, Dominic Williams, spoke to The Block on Friday, sharing his thoughts on what was driving the market over the past week. According to Williams, the macro outlook for crypto markets is hostile, although a global recession and tightening monetary policy have already been priced in. 

Williams went on to say that earning reports were significantly better than many had feared.

Earnings heat up   

 MicroStrategy surprised many with the announcement that Michael Saylor would be stepping down as CEO from Monday to take up an executive chairman role. Saylor insisted the move made sense for all involved and will give him more time to concentrate on his bitcoin advocacy. The firm remains committed to its bitcoin strategy, according to new CEO Phong Le. 

The stock popped during early morning trading on Wednesday, gaining more than 10% shortly after 9:30am ET. Speaking to The Block at the time, Forex.com and City Index global head of market research Matt Weller said:

“When you bet the farm and lose, there will inevitably be consequences. While Saylor’s conviction in bitcoin seemingly remains stronger than ever, the shakeup means that MicroStrategy will have a new CEO for the first time in its 30+ year history following a nearly $1 billion loss on its bitcoin holdings. Despite the change at the top, not much is likely to change for investors, with MicroStrategy likely to remain a de facto leveraged bet on bitcoin for the foreseeable future, given its massive holdings and relatively small enterprise software business.”  

Elsewhere, Block (née Square) reported total net revenue in the second quarter of $4.4 billion. Excluding the impact of bitcoin, the company’s total net revenue jumped 34% to $2.62 billion, it said in a letter to shareholders prior to its earnings call.

Cash App’s parent company reported a net loss of $208 million for the quarter, including a $36 million impairment loss related to bitcoin. The firm reported $1.79 billion in bitcoin revenue in the second quarter from Cash App, a drop of 34% year-on-year. The app’s bitcoin gross profit was $41 million, down 24% from the same three-month period a year earlier. 

Robinhood dished out several surprises this week, first announcing layoffs, before dropping its earnings a day early in which it revealed revenue was up modestly versus the first quarter of the year.  

Next up this week are Marathon Digital’s earnings on Monday, before Coinbase — which revealed it’s working with BlackRock to offer its institutional clients access to crypto — announces its Q2 results on Tuesday. Core Scientific, Hut 8, Cipher and CleanSpark all have results dropping in the next seven days.

© 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.

American luxury jewelry retailer Tiffany & Co. debuted and sold out all 250 non-fungible tokens (NFTs) on Friday in about 20 minutes. Each NFT sold for 30 ether (ETH), or about $50,000, generating some $12.5 million in revenue for the company.

Tiffany’s NFTs are called “NFTiffs,” which are digital passes exclusive to CryptoPunk NFT holders and give them the right to turn their NFT into a custom pendant, containing gemstones and diamonds. NFTiffs are powered by blockchain technology firm Chain.

Those who purchased NFTiffs must redeem their tokens by August 12, according to Tiffany’s website. As for custom pendants, they are expected to be delivered to buyers early next year. If an NFTiff holder sells their token before shipment of a pendant, then they cannot receive the pendant, per the website. Each customer was entitled to buy a maximum of three NFTiffs in the sale.

While Tiffany quickly sold out NFTiffs, their floor price — the lowest price at which an NFTiff is currently available for sale — has declined from its sale price. The current floor price is about 27 ETH or $46,000, which could mean a slight loss for its holders, according to tracker NFTGo.

There have also been resales of NFTiffs, with their trading volume reaching over $1 million in the last 24 hours, according to NFTGo.

Tiffany & Co. has a “clear and forward-thinking vision” for web3, according to Chain CEO Deepak Thapliyal. With NFTiffs, the company “created a memorable piece of history,” Thapliyal tweeted on Saturday.

© 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 Crypto and Digital Assets All Party Parliamentary Group (APPG) said it has begun an inquiry into the UK crypto sector with the aim of producing a report and recommendations to share with the government.

The bipartisan group is made up of MPs and lords from the main political parties and acts as a forum for policymakers and the UK crypto sector in discussing the industry. 

The inquiry will focus on key policy issues concerning UK crypto and digital assets, with written submissions accepted until Sept. 5, the APPG said in a news release. 

The group wants to hear from crypto operators, regulators, industry experts and government on the role of regulation, CBDCs, consumer protection and economic crime. It also plans to hold several evidence sessions in forthcoming months. 

MP Lisa Cameron, chair of APPG, said: “It’s vital that the UK does not take its foot off the gas and that government and regulators keep to their commitments when it comes to crypto and digital assets.” 

The group will also share its findings with the Treasury Select Committee in Parliament, which has announced its own inquiry into the 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.

Singapore-based crypto exchange Bitget has launched a $200 million fund to protect its users’ assets. 

The Bitget Protection Fund was created to provide security and to ensure secure trading for its users, the company said in a news release on Friday.

The fund, which is currently worth about $200 million, consists of 6,000 BTC and 80 million USDT. The company has pledged to secure its value for the next three years.

Crypto investors have experienced a volatile period over the last two months amid unfavorable macroeconomic conditions in the traditional finance field.

Bitget has also put in place stringent KYC and AML policies and partnered with third-party legal and compliance partners to strengthen its standards and maintain a regulated operation, it said.

The company’s managing director, Gracy Chen, said: “As we continue to endure the crypto winter, it is crucial that our users can rest assured that their funds are kept safe.”

Bitget said in June that it planned to double its workforce to 1,000 employees over the next six months despite the current market downturn.

The company, which was founded in 2018 and offers crypto copy trading, has been experiencing growth and generating strong cash flow amid less-than-perfect market conditions, it said at the time.

© 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.

BitMEX, one of the longest running derivatives exchanges in the crypto market, is moving into traditional financial markets with the launch of perpetual swap contracts tied to foreign currencies. 

The firm announced Friday the launch of FX perpetual swap contracts (FX perps), which will allow its users to trade more than 20 contracts tied to foreign currencies—even during after-markets trading for these currencies. This is the firm’s most notable move into non-crypto related products since the firm rebranded and brought on exchange veteran Alexander Hoptner as chief executive office, replacing founder Arthur Hayes. 

At the time of Hoptner’s joining BitMEX, the company said that it signaled the firm would explore a “wider vision.” Although, there have been setbacks including recent layoffs and the calling off of an acquisition of a German bank by the firm. 

Still, the launch of FX perps reflects the ongoing strategy to give existing and new users of BitMEX “a broader range of crypto-margined contracts, including products that will allow traders access a range of currencies and commodities,” according to a statement from the company. 

“BitMEX FX perps are a transparent exchange-traded contract which allows FX traders to go long and short as a taker or maker for which we offer a 1 basis point fee rebate, which is unique in the industry,” said Daniel Egloff, Head of Quants at BitMEX, in a statement. “For institutional users, FX perps provide an entirely new way to create synthetic crypto pairs to arbitrage – for example, Bitcoin quoted in non-USD currencies.”

© 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 weekly series, we dive into some of the most interesting data and developments across the Layer 1 blockchain landscape, from DeFi and bridges to network activity and funding
• The EVM remains the most common execution environment among L1s with significant on-chain activity today. Yet even as scaling solutions have begun to trend toward a modular architecture over time, those with monolithic designs continue to offer promising alternatives to the EVM with reimagined execution systems
• This week, we look at two of the newest L1 chains leveraging the MoveVM with the goal of achieving greater security and execution speed: Aptos and Sui

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