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Sister crypto companies Bitfinex and Tether have entered a new area of business: building peer-to-peer (P2P) applications.

The two firms — along with P2P infrastructure developer Hypercore — have created a new company and protocol called Holepunch and the trio has launched its first app Keet: a peer-to-peer encrypted video calling app.

Keet will allow users to schedule audio and video calls, send text chat and share files for free, Bitfinex and Tether said in a statement shared with The Block on Monday. The Keet app is powered by a technology called Distributed Holepunching (DHT) that allows users to locate and connect to each other “using only cryptographic key pairs upon authorization.”

Five years of effort

Bitfinex, Tether and Hypercore have been building this technology over the last five years, Paolo Ardoino, CTO of the two companies and now also the chief strategy officer of Holepunch, told The Block in an interview.

“So what we have been working towards is to create a platform that would allow users to access applications that are unstoppable and provide freedom of speech,” said Ardoino.

“In many places around the world, freedom of speech is extremely more limited than what we are used to say in the US or the UK. And freedom of speech is not just going to sit there and say whatever you want, but it’s like sharing and talking with the people you want all the time without having concerns that big tech is listening to you or using your data, is collecting your data, and potentially either monetizing your data or using that against you.”

Besides devoting five years to the project, Bitfinex and Tether have also invested around $10 million to build Holepunch and Keet, Ardoino said. He added that the two companies are open to investing $50 million to $100 million more in the future as they build out more P2P applications.

The Holepunch protocol is currently closed source and plans to move to open-source code in December. Once open source, anyone can build applications on the protocol and make money, Ardoino added.

Holepunch will also integrate the Lightning Network in its protocol and the tether stablecoin (USDT) to support a default payments system.

Holepunch is being led by Mathias Buus as its CEO, a self-taught JavaScript hacker from Denmark. He has been working on open source and P2P projects for years and has been associated with Node.js, an open source server environment, since its early days.

Buus told The Block in the interview that Holepunch will be building “great apps without any strings attached.”

© 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.

In legal documents filed Sunday, Voyager representatives described a proposal by crypto exchange FTX and sister firm Alameda to offer liquidity to Voyager’s beleaguered customers as “misleading or outright false.”

In the filing, bankruptcy lawyers from Kirkland & Ellis LLP said the proposal was a “low-ball bid dressed up as a white knight rescue.”

“By making its Proposal publicly in a press release laden with misleading or outright false claims, AlamedaFTX violated many obligations to the Debtors and the Bankruptcy Court,” the document said. “Voyager reserves all rights and remedies against AlamedaFTX for its clear and intentional subversion of the bankruptcy process.”

In response to the filing, FTX’s CEO Sam Bankman-Fried defended the proposal, arguing that it is trying to offer Voyager customers with an opportunity to access the funds locked up in Voyager as it wades through complex bankruptcy proceedings. Of course, FTX stands to benefit as the deal requires customers to open up an account with FTX. 

Still, FTX’s Bankman-Fried said Voyager’s retort represents the self-interest of its legal advisers, whom stand to benefit from a drawn-out process. 

“To clarify: our offer would give Voyager customers back 100% of the remaining assets that Voyager has, including claims on anything recovered in the future,” the billionaire said in a tweet.

In a message to The Block, FTX’s Ramnik Arora said that its proposal is “simple.”

“We’re buying the estate assets at FMV and distributing it to the customers.”

Arora continued:

“So imagine, if the estate had 10ETH and you had deposited 1ETH. You basically should have 10% of the recovery. However, the way bankruptcy works, you can never get more than your claims (denominated in USD). So if this whole process took 5 years, and ETH ripped to $10k, you’d still only get a maximum of $1150.”

Bankman-Fried’s Alameda and Voyager are navigating the market following the blow up of hedge fund Three Arrows Capital, which has served as a headwind for firms across the market. Three Arrows defaulted on a loan from Voyager worth more than $670 million. 

Alameda, which was founded by Bankman-Fried, has borrowed $376.8 million in crypto from Voyager. Voyager in turn took out a $75 million loan from Alameda to manage its liquidity, according to the Wall Street Journal. 

Voyager further claimed that the offer “transfers significant value to AlamedaFTX, and completely eliminates the value of assets that are of no interest to AlamedaFTX.” 

The firm laid out a series of arguments as to why the proposal “harms customers” but “benefits AlamedaFTX.” For one, it believes that it would hinder the competitive process and therefore undermine efforts to maximize value.

The firm also argued that it ignores the tax consequences of converting and paying cryptocurrency claims in US dollars and would “effectively eliminate the VGX token” resulting in the loss of over $100 million in value.

Voyager said that it will consider “any serious proposal” that is better for customers than its own stand-alone plan.

© 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 price of Ethereum’s native token continued its rally into the weekend, trading above $1,600 for much of Sunday, according to data from TradingView.

The coin was up by roughly 4% on Sunday afternoon, continuing a rally that kicked off in the middle of July. It’s up about 6% over the last 24-hours. Since bottoming out sightly above $1,000, the price of the coin has appreciated by more than 40%. 

“Ethereum continues to outperform the rest of the cryptos,” noted hedge fund LedgerPrime in a market commentary note sent out to counter-parties. “ETH seemed to form a base above the $1.5K level, where it started a new increase and climbed throughout the week to $1.65k, where significant resistance was found.”

To be clear, ether isn’t the only crypto seeing gains with Solana and MATIC up 4.1% and 5.7% over the last 24 hours. 

Broadly, the market has appreciated by about 19% over the last ten days, while the total market cap climbed past the $1 trillion mark once again.

Bitcoin has progressed at a slower pace than Ethereum, having increased by about 15% in value during the same period.

Ethereum’s transition from proof-of-work to proof-of-stake is looming closer. Crypto market maker Cumberland said this week that institutional investors have been increasing long positions on ether.

“This move has been crypto-fundamental: the Sepolia testnet successfully merged to proof-of-stake on July 6th, setting the stage for an early-autumn mainnet merge,” the firm tweeted.

Ethereum’s value is still far from its all-time high of around $4,800 in November of last year. The coin’s price has been declining since, parallel to other crypto assets, plunging between June and May, amid the wider market turbulence.

© 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.

UK-based banking giant Barclays is planning to take a stake in crypto financial services firm Copper. 

The bank is joining a funding round that will include other investors and is set to finalize in the next few days, according to Sky News.

Barclays is expected to invest a “relatively modest sum in the millions of dollars,” sources told the publication.

Copper has been looking to raise at least $500 million in the past few months, seeking an evaluation in the billions of dollars, but has run into regulatory issues in the UK, as The Block previously reported.

Last year, the firm raised $50 million in a Series B funding round and later an additional $25 million from billionaire British macro investment legend Alan Howard. It counts former UK chancellor Philip Hammond among its roster of advisors.

Founded in 2018, Copper offers institutional investors custody, prime broking and settlement service.

Barclays is no stranger to crypto, having previously invested in institutional crypto services provider Elwood Technologies, as reported by the Financial Times in May. The bank joined Goldman Sachs and Mike Novogratz’s Galaxy Digital in a funding round that valued the company at $500 million, according to the FT’s sourcing. 

© 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.

Zipmex, an embattled South Asian crypto exchange, said it has received an offer regarding a potential rescue deal. 

In a Twitter post today, the exchange discussed the possibility of a bailout, noting that one party had offered deal terms in a confidential memorandum of understanding (MOU).  Zipmex did not identify the party nor specify whether the offer might be an investment or a buyout proposal.

“Our conversations with various interested parties have progressed significantly.  One of those parties has offered terms in an MOU [memorandum of understanding] which includes confidentiality obligations so as to be able to commence Due Diligence,” the exchange said.

On Thursday, the firm halted all customer withdrawals on its platform, citing “financial difficulties” of its partners. As such, it was clear that Zipmex was the latest to face cascading effects of a financial crisis in the crypto sector. 

The exchange disclosed that it had a $48 million exposure to Babel Finance and Celsius, two crypto firms that have defaulted on loans after accruing severe losses in the crypto market.

Later, Zipmex resumed withdrawals from Trade Wallet, likely providing relief to some of its customers. Still, clients’ funds deposited in the Z Wallet, a second type used by the exchange for paying rewards, have continued to be inaccessible.

© 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.

Decentralized music streaming protocol Audius reported that a hacker stole funds from its community treasury using a malicious governance vote. 

According to security firm CertiK, the hacker successfully modified certain configurations in the smart contract used by Audius’s governance system. With these changes, the perpetrator was able to become the “guardian” of the contract.

The hacker then proceeded to create and approve a governance proposal (Proposal #85) requesting a transfer of 18 million AUDIO tokens from the community treasury. According to on-chain data, the exploit took place at 7 p.m. ET on Saturday.

While these stolen tokens had a market value of more $6 million, the hacker could only sell them for 705 ether ($1.1 million) amid high amounts of market slippage. The exploited funds still sit in the hacker’s address.

In an update, Audius said that it had identified and fixed issues in its smart contract, adding that a post-mortem report will be provided soon. Meanwhile, the smart contract has been put on a pause.

Audius is a decentralized music streaming protocol that allows artists to monetize their work using the governance and utility token called AUDIO. The token could be used on Ethereum and Solana networks. 

© 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.

Susquehanna International Group, a large quantitative trading firm that operates in both traditional as well as crypto markets, is plotting an expansion to the small island nation of The Bahamas, following in the footsteps of Sam Bankman-Fried’s FTX. 

The financial services firm, which is currently based in Bala Cynwyd Pennsylvania, has been active in the crypto market since at least 2018, trading across centralized and decentralized trading marketplaces. It has also backed firms including KuCoin in venture deals. 

CoinDesk first reported the news. 

The Block reported in April that a wide range of firms had been looking to set up shop next to Sam Bankman-Fried’s FTX, which broke ground earlier this year on a new office and hosted a conference at the Baha Mar resort with Anthony Scarmucci’s SALT. 

A big draw of The Bahamas for crypto companies is that the regulatory environment is relatively friendly, particularly compared with the US. 

In an interview with The Block at the so-called Crypto Bahamas conference in April, FTX’s Ryan Salame said the Bahamian government has established itself as a regulatory leader by establishing a crypto framework with the DARE Act in 2020,” Salame said. “The industry is looking for clear rules of the road and that is what the Bahamas has provided.”

© 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.

Coinbase’s spot trading volumes have collapsed from $200 billion in May 2021 to $59 billion in July. But its new derivatives unit is seeing new retail traders pour into its “nano” bitcoin futures product, which saw volumes hit records three straight days in the last week.

Coinbase launched its nano bitcoin futures product in June. The cash-settled futures contract represents 1/100th of a bitcoin and trades across a number of retail brokers including Wedbush, EdgeClear, and NinjaTrader. 

“It requires less upfront capital than traditional futures products and creates a real opportunity for significant expansion of retail participation in US regulated crypto futures markets,” Boris Ilyesky, head of Coinbase Derivatives Exchange, said at the time of the product’s launch. 

Notional volumes for nano futures hit 217,045 on July 19 after several days of increasing, but data from Bloomberg shows that contract volumes declined to 117,493 on July 22. Volumes stood below 50,000 contracts traded per day for much of June and July. According to an email sent out by Coinbase’s sales team, the firm saw a “surge in activity ever since retail broker partners started marketing/ promotional efforts last week.”

Coinbase jumped into the crypto derivatives market this year after it acquired FairX, a derivatives venue regulated by the Commodity Futures Trading Commission. It faces steep competition with firms like FTX and CME Group trading tens of billions of dollars per month in bitcoin futures. 

© 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.

Count this as a sign that merger-and-acquisition activity in the crypto market is robust despite the slump in cryptocurrency prices. 

Blockchain infrastructure firm Chain announced on Saturday the acquisition of Measurable Data Token (MDT). The $100 million deal will provide Chain — which offers developers cloud services to build blockchain-based applications — with a number of assets, including MDT, cash-back application RewardMe and financial data protocol MeFi. 

The deal is unique inasmuch as it will involve a token conversion in which MDT will become Chain’s native token XCN — an example of the sometimes idiosyncratic nature of transactions in the digital asset space. 

The firm’s internal M&A handled the deal, alongside advisers from Tanner De Witt and Rooney Nimmo. 

“With this acquisition, there will be a sunset of the Measurable Data Token (MDT) which will be burned and swapped for XCN token,” a blog post said. “MDT token holders will receive the benefit of the swap and will be expected to receive a $0.08 MDT token value for the swap.”

To be sure, there is precedence for this type of deal, as now-beleaguered Voyager Digital’s acquisition of LGO Markets resulted in a merge between the two firms’ tokens. 

Speaking to the process, Chain CEO Deepak Thapliyal said it was “complicated and requires a lot of counter-party assistance.”

He added: 

“We will need the assistance of exchanges to support the swap for tokens that are off-chain. For tokens on-chain, the process will be a lot less complicated and will be available through a simple smart contract since we are both primarily ERC20 tokens.”

At last check, XCN was trading on Coinbase at $0.09 a coin. 

Chain was founded in 2014 by Thapliyal, who is a well-known NFT collector and investor. Thapliyal purchased an Alien Punk for $23.5 million. 

As for the M&A market, Galaxy Digital’s lead investment banker told The Block that the market downturn may lead to more opportunities for deal-making. 

“Overall, there is a lot more receptivity to the idea of M&A in this market environment,” Galaxy’s head of investment banking, Michael Ashe, said in an email to The Block.  

Already, crypto lender Nexo has agree to acquire Singapore-based rival Vauld. Sam Bankman-Fried’s firm FTX.US also announced its own plan to snap up BlockFi. Binance’s Changpeng Zhao said in an interview with Yahoo Finance that the crypto exchange was looking at about 50 to 100 investment and acquisition 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.

Quick Take

• Despite all the recent layoffs in the industry, many firms are still adding jobs.
• Applicants with technical skills are particularly in demand.

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