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776 Management, the VC firm owned by Reddit co-founder Alexis Ohanian, has raised $500 million for two new funds primarily focused on crypto. 

The Wall Street Journal reported the news on Tuesday, with a comment from Ohanian that crypto “will be the majority of the portfolio by the end of this year.”

The firm, which derives its name from the year of the first recorded Olympic Games, already counts crypto stalwarts such as gaming company Sky Mavis, bitcoin rewards startups Lolli and crypto tax company CoinTracker. 

This comes at a time of crypto funding frenzy in the private market. Last month, it was reported that Andreessen Horowitz is planning to raise up to $4.5 billion for two new crypto funds. Former a16z partner Katie Haun is also said to be raising close to $900 million for a new venture capital firm and in November, crypto VC firm Paradigm launched a $2.5 billion fund for web3 companies and protocols. 

News of the new fund comes four months after Ohanion earmarked $100 million to invest in building out a decentralized social media network to run on the Solona blockchain. 

© 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.

ConsenSys, the company known for its MetaMask and Infura products, is set to take over wallet manager MyCrypto. The terms of the deal were not disclosed. Whilst the two brands will initially stay separate, the move will see MyCrypto merge with MetaMask over time, with emphasis on the latter brand in the long run. 

“The MyCrypto wallet is going to continue to exist and serve its current audience,” says Dan Finlay founder of MetaMask,  “But we’re going to be putting a lot of our shared energy into the Metamask brand, because that’s the product that has more users today.”

For Finlay, another key reason for the acquisition is developer talent — specifically, the MyCrypto team’s previous focus on user safety and security. The wallet manager’s developer experience in building desktop apps will be used to further build out MetaMask’s security and anti-phishing processes, create developer documentation and enable a shared team across both company’s core libraries for its products. 

“These are things that we’ve wanted to do for so long,” says Finlay.”With the MyCrypto acquisition, we’re finally putting ourselves over the threshold where we’re going to be able to give all these things specific, dedicated focus.” 

He also notes that both teams have known each other for a while, with the team collaborating since 2015 on anti-phishing campaigns and security tip knowledge bases during the ICO boom. 

“I’ve been through war with [founder of MyCrypto] Taylor Monahan,” says Finlay. “We’ve experienced the shared trauma of several market cycles, where there’s been an urgency to keep our users safe.”

When asked if further acquisitions were in the pipeline, Finlay didn’t rule out future buyouts despite it not being a core MetaMask strategy. 

“There are some other product software services that we have particularly good relationships with that we are open to considering [too].” 

MetaMask making moves 

The news comes after The Block reported last week that the company that created MetaMask is raising a primary round of $300 million at a pre-money valuation of $6.7 billion. In November last year, the Ethereum software company raised $200 million from HSBC, Coinbase Ventures, and Marshall Wace. 

Finlay would not confirm if the acquisition was financed through the company’s previous round nor would he comment on ConsenSys’ prospective raise that would see the software company double its valuation. 

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© 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.

NFT collector Larry Lawliet lost seven expensive Bored Apes and a set of other NFTs to a suspected social engineering attack on Monday.

The perpetrator appeared to trick Lawliet into signing fake transactions that granted them access to the his NFTs. They then used this access to transfer the NFTs to their own wallet.

Lawliet took to Twitter saying that 13 of his NFTs had been stolen by the attacker including seven Bored Apes, five Mutant Apes, and one Doodle. In total, Lawliet’s loss stands at $2.7 million based on the floor price of the NFTs stolen from his wallet.

How it happened

The victim’s troubles began when an attacker (likely the same person) took control of the Discord server of another NFT collection called Moschi Mochi to post a fake announcement about an extra mint. The scam involved inviting members of the Moschi Mochi community to participate in an extra mint of 1,000 NFTs for a chance to win a $25,000 raffle.

A look at Lawliet’s wallet address on Etherscan shows that he interacted with the fake mint and sent 0.49 ETH in exchange for 14 of the scam NFTs. Immediately following the transfer, Lawliet’s transaction history shows numerous “set approval” transactions.

These set approval transactions all had the hacker’s “0xD27” address set as an approved address. This meant that the victim was tricked into calling the “setApprovalForAll” call when signing these transactions with his own wallet.

The NFTs that were stolen. Image: Twitter.

A key thing here is that when someone approves a blockchain transaction via an in-app browser like MetaMask, it’s not always clear exactly what permissions they are giving to the website. In this case, the victim assumed they were regular transactions when in fact he was giving out control over his own NFTs.

There is, however, a feature on MetaMask that allows users to examine the exact nature of their transactions before executing them. This step involves clicking the “details” tab which then displays details about the transaction including vital information like addresses being granted approval. But during the rush for an NFT mint, investors may not always check this.

This particular contract call — setApprovalForAll — allowed the hacker to initiate the “transferFrom” contract call which enabled them to transfer all of the victim’s Bored Apes to another wallet. In programming, a call allows a user to execute the code of another contract, in this case, the ability to transfer NFTs from the victim to the hacker.

Once the attacker had permission to control the victim’s NFTs, they started moving them to a different wallet. The hacker was able to use this method to take the Bored Apes and other NFTs including Mutant Apes and Doodles.

Possible preventative measures

Owners of popular NFT collections like BAYC continue to be targets of social engineering attacks aimed at stealing their valuable NFTs. As of the time of writing, the collection has a floor price of over 118 ETH ($320,000).

In response to incidents like these, security experts generally advise the use of “burner wallets,” addresses that contain only a small amount of funds to cover gas fees. Thus, if the transaction happens to be a phishing attack, the victim’s loss will be significantly limited.

Verifying transaction details before approving might also be a useful preventative measure. As Tal Be’ery put it, approvals should only go to “trustworthy contracts” with relatively long transaction histories. Web wallets like MetaMask show details of transactions and can be a useful tool in spotting phishing attacks.

© 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.

Solana Labs has launched a payments protocol called Solana Pay to let merchants accept crypto payments directly from consumers.

With Solana Pay, merchants can accept the USDC stablecoin, Solana’s native token SOL, and other Solana-based tokens on the Solana blockchain. Transactions will be instant, said Solana Labs, adding that merchants will receive “real-time” payments.

They will also have to incur lower costs due to Solana’s lower fees, according to Solana Labs. “Merchants and consumers want a frictionless experience without taking on unnecessary volatility risk, and consumers don’t necessarily want to transact with their investments,” Sheraz Shere, head of payments at Solana Labs, told The Block.

“If people can seamlessly transact on-chain just like they do with cash, we believe that will spur interest and create new innovations which is why the protocol is designed to allow for developers to build new commerce experiences on top of it.”

A joint effort

Solana Labs has developed Solana Pay in partnership with Circle, Checkout.com, and payments processing company Citcon, and with digital wallet integrations from Phantom, FTX, and Slope.

Circle, for instance, will let merchants accept USDC via a Circle Account, where they can also convert funds back to fiat. Phantom, on the other hand, will enable transactions via Solana Pay.

Solana Labs has also been working with Shopify to let their merchants accept crypto payments via Solana Pay, but that integration isn’t live yet.

“Enterprises who run their own checkout flows can begin building integrations right now,” said Solana Labs. “Solana Pay’s point-of-sale client makes it easy for small restaurants, shops, food carts, and more to accept digital payments for fractions of a penny.”

When asked if Solana Pay is looking to compete with companies like Visa and Mastercard, Shere said Solana Pay isn’t looking to compete with any one specific payment system. “Rather it is trying to change the whole paradigm of payments to one that puts merchants in control by creating rails that are decentralized, permissionless and P2P and enable new commerce experiences in web3.”

While the Solana blockchain is faster and cheaper, it has been experiencing issues lately. Shere said, “we’re very confident that the core protocol developers in the ecosystem will continue to enable the network to serve hundreds of millions of users and support scalable use cases like merchant payments.”

© 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.

MicroStrategy has continued its bitcoin-buying spree. The Nasdaq-listed enterprise software company announced Tuesday that it has bought an additional 660 bitcoins for around $25 million in cash.

The purchase was made between December 30 and January 31 at an average price of around $37,865 per bitcoin, inclusive of fees and expenses.

The company now holds a total of 125,051 bitcoins (worth nearly $5 billion at current prices). MicroStrategy’s bitcoin bet appears to be paying so far as it acquired these bitcoins at an aggregate purchase price of $3.78 billion and an average purchase price of approximately $30,200 per bitcoin.

That’s a $1.22 billion gain at current prices, with bitcoin around $38,700.

MicroStrategy CFO Phong Le recently said that the company will continue to purchase bitcoin despite recent downturns. But what happens to MicroStrategy if bitcoin crashes at some point in the future? Some observers recently told The Block that if the price of bitcoin were to plunge far enough, MicroStrategy could struggle to pay its over $2 billion debt that it has taken on to purchase its bitcoins.

© 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.

After a brutal start to the year, the cryptocurrency market kicked-off February in the green, with leading cryptocurrencies like Solana and Terra clocking in double digit gains over the course of the last 24-hours.

Since yesterday, the price of bitcoin was up 4%, while ether was trading up 9.9%, according to CoinGecko data. The relief to the market comes after a brutal January, which saw coins hit their lowest levels since the middle of last year alongside a rout in global equity markets. Solana—which hit lows near $86 at the end of January—was up 17.82% at $107, while Terra—which hit lows near $43 last month—was trading up 11% at $52.

Solana and Terra are still down 40% and 43%, respectively, since the start of the year. Bitcoin is down about 18% year-to-date. 

Broadly, investors fled risky assets like stocks and cryptos last month as Fed-tied anxieties grasped markets. The US Federal Reserve is set to hike rates and scale back its balance sheet in an attempt to curb inflation—a move that would remove liquidity that’s helped prop up a wide-range of asset prices.

Indeed, the US stock market last month experienced the worst January since the global financial crisis, as noted by the Financial Times. 

But it looks like Fed fears are subsiding. 

In a note to clients on Tuesday, JPMorgan said that it views the market as over-sold. 

“The stock market is not only in correction, it is already in bear market territory without a recession in site,” the bank’s analysts wrote. 

“Investor sentiment is already extremely bearish with Put/Call ratio reaching the highest level since March 2020.”

As for the Fed specifically, the bank said (emphasis is our own):

“We disagree with the current fear of a Fed policy mistake or an early end to the current cycle … The current cycle is taking place in a backdrop of above average nominal GDP and EPS growth, which should allow the equity market to easily outperform cash and fixed-income over the coming years, even if one assumes some gradual de-rating.”

If the bank is correct and Fed-tied fears soon abate, then that could serve as a tailwind for broader cryptocurrency markets. Although bitcoin has long been touted as a store of value or hedge against stock performance, cryptocurrencies—for the most part—have traded in a similar direction to stocks. 

Already JPMorgan’s clients are gearing up to enter the stock market again, with 78% of surveyed clients noting that they are likely to increase their equity exposure over the coming days and weeks. 

© 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.

Bitfinex hackers who stole funds from the crypto exchange in 2016 have moved a total of 64,643 bitcoins (worth nearly $2.5 billion at current prices) to unknown wallets.

The movements were tracked by Whale Alert on Tuesday and the funds were sent across 21 different transactions. These transactions included various amounts of bitcoin, from less than one bitcoin to 10,000 bitcoins per transaction.

Six transactions of the 21 total transactions moved a total of 60,000 bitcoin, with each transaction carrying 10,000 bitcoin. All the 64,643 bitcoins have been transferred to unknown wallets.

Bitfinex lost 119,756 bitcoins in 2016 (worth $66 million at the time and nearly $5 billion at current prices). With today’s 21 transactions, 99.9% of the stolen funds have now been moved, a Bitfinex spokesperson told The Block.

Fourteen bitcoins are still to be moved, the spokesperson added.

Bitfinex has been trying to recover the stolen funds. To date, it has recovered about 50 bitcoins (worth nearly $2 million at current prices), said the spokesperson.

The exchange “continues to work globally with law enforcement agencies, digital token exchanges and wallet providers to recover the bitcoin stolen in the 2016 hack,” the spokesperson added.

© 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 has provided a much-anticipated clarity on crypto taxation in its Union Budget for the fiscal year 2022-23.

The budget, presented on Tuesday by India’s Finance Minister Nirmala Sitharaman, said that any income from the transfer of any virtual digital asset will be taxed at a rate of 30%.

The transfer of assets typically means their sale, exchange, and relinquishment, Amit Maheshwari, partner at accounting firm AKM Global, told The Block. He said clarity in taxation suggests that crypto will not be banned in India. 

Finance Minister Sitharaman said the magnitude and frequency of crypto transactions made it imperative to provide a specific tax regime for crypto taxation.

Besides the high tax rate on crypto, India will also not provide any deduction on crypto income except their cost of acquisition. Further, loss from transferring crypto cannot be set off against any other income, which is a “bad” measure, according to Maheshwari.

Loss from stocks, on the other hand, is allowed to be set off in India. Such losses can be set off against gains in the next financial years.

Tax deduction at source or TDS will also be imposed on payments for the transfer of crypto assets at a rate of 1% for transactions over a certain threshold. Gifts of crypto assets will also be taxed in the hands of the recipient.

CBDC launch

The budget also provided a specific timeline for India’s central bank digital currency (CBDC) launch.

Sitharaman said “digital rupee using blockchain and other technologies” will be issued by the Reserve Bank of India starting in 2022-23.

“Digital currency will give a big boost to the digital economy. Digital currency will also lead to a more efficient and cheaper currency management system,” said Sitharaman.

The clarity on crypto taxation is “a step in the right direction,” according to Sumit Gupta, co-founder and CEO of CoinDCX. “It gives much-needed clarity and confidence to the industry,” he said.

But India still awaits regulatory clarity on crypto. In December, the government was scheduled to introduce a crypto bill in Parliament for discussion, but it didn’t get presented. The bill, when presented, will provide specific details on whether India is going to embrace crypto officially or not.

The Indian crypto industry remains hopeful, as The Block has reported previously.

© 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 Federal Reserve released a new research report on stablecoins today, noting the risks and potential of the emerging digital assets.

In the report, researchers Gordon Liao and John Caramichael examine the current stablecoin ecosystem and the impact of stablecoins on credit intermediation and the central bank balance sheet. The paper identifies potential threats to the stability of US Federal Reserve monetary policy and examine ways they could be mitigated. 

Safe haven assets

The report found that dollar-pegged stablecoins have exhibited “safe asset qualities,” compared to other crypto assets. Their price occasionally rises above their peg during market distress events, which leads to more issuance, compared to other digital assets that plummet. Essentially, when prices of cryptos like bitcoin decline, traders seek safety in stablecoins.

“These episodes demonstrate the potential for stablecoins to serve as a digital safe haven during market distress,” said the report.

But, a run, or mass redemption of safe haven assets could severely disrupt markets. The authors recommend audits and liquidity requirements to mitigate the fallout of potential runs. Tether, the largest stablecoin, has historically avoided offering a full audit, according to regulators. 

“We think this type of instability is addressable with proper institutional and/or regulatory guardrails such as transparent financial audits and adequate requirements on the liquidity and quality of stablecoin reserves,” they said.

Systems for stability

The Fed research dives deeper on credit intermediation, essentially how broad adoption of stablecoins could impact balance sheets of financial institutions and how that would affect the interactions between consumers and banks. It compares stablecoin narrow banking, in which physical cash is tokenized and backed by full reserves at the central bank, to two-tiered intermediation, in which stablecoins are backed by deposits issuers hold at commercial banks.

“Among the various scenarios, a two-tiered banking system can support both stablecoin issuance and maintain traditional forms of credit creation,” said the report. “In contrast, a narrow-bank stablecoin framework can bring the most stability but at the potential cost of credit disintermediation.”

Researchers found a two-tiered system creates less risk to US financial stability. A narrow bank approach guarantees the stablecoin peg remains unmoved, but financial distress could create a situation in which large swaths of people move their money from commercial bank deposits to safe haven stablecoins, which puts the system at risk. 

“Though this credit disruption effect could be mitigated by limits on stablecoin holdings and differential reserve interest rates, the overall structure of the narrow bank approach to stablecoin reserves is potentially destabilizing for the banking system,” said the report. “Additionally, the narrow bank approach could lead to an expansion of the central bank’s balance sheet in order to accommodate the demand for reserve balances from stablecoin issuers.”

As for the future, the Fed paper noted that stablecoins could see further use cases outside of trading. 

“In conclusion, the current usage of stablecoins is primarily driven by cryptocurrency trading, limited peer-to-peer payments, and DeFi,” the paper noted. “Looking forward, stablecoins may see further growth through their facilitation of more inclusive payments and financial systems.”

The wider conversation

Stablecoins have been on the mind of regulators in recent weeks. Both chambers of Congress have hearings scheduled for February to discuss the President’s Working Group on Financial Markets Report on Stablecoins. That report came out in November and urged Congress to limit stablecoin issuance to insured depository institutions.

During the House hearing, lawmakers will hear from a number of crypto CEOs, including stablecoin issuer Circle’s Jeremy Allaire and Bitfury CEO Brian Brooks, who allowed banks to hold stablecoin reserves during his time as Acting Comptroller of the Currency. 

© 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

• Verifiable decentralized networks have enabled novel web applications and models whereby creators and communities can monetize and internet-native communities can collaborate
• Although Web3 is still nascent, it is clear that there is already significant economic activity taking place resulting in new goods and services in an ecosystem comprising DeFi protocols to NFTs and gaming to DAOs and more
• Here, we take a look at select numbers behind the emerging Web3 economy to try to start quantifying this new economic activity

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