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Executive directors of the International Monetary Fund (IMF) have urged El Salvador to remove Bitcoin’s status as legal tender in the country, according to a Jan. 25 announcement from the organization. 

The recommendation came as the IMF’s executive board finished a so-called “Article IV consultation” with El Salvador on Jan. 24, which refers to mandated discussions the organization conducts with its member countries. 

IMF executive directors “stressed that there are large risks associated with the use of Bitcoin on financial stability, financial integrity, and consumer protection, as well as the associated fiscal contingent liabilities,” the latest press release stated. “They urged the authorities to narrow the scope of the Bitcoin law by removing Bitcoin’s legal tender status.” It continued: “Some directors also expressed concern over the risks associated with issuing Bitcoin-backed bonds.”

The directors’ comments come after a previous announcement in late November when a staff team visiting El Salvador warned about the risks of using Bitcoin as legal tender in a concluding statement.

IMF directors generally agreed with the previous staff report, including the view that increasing financial inclusion in El Salvador is important and digital payment systems like the government-issued Chivo wallet could have a role in doing so. But they also underscored that the country needs “strict regulation and oversight of the new ecosystem of Chivo and Bitcoin.”

The IMF’s take on Bitcoin in El Salvador is especially relevant due to reports that the organization has been in lending talks with the Central American country. Today, Bloomberg reported that the IMF’s concerns about Bitcoin have “stymied” talks with El Salvador about providing a $1.3 billion IMF loan.

El Salvador made Bitcoin legal tender alongside the U.S. dollar on Sept. 7, a few months after president Nayib Bukele announced plans to do so last June. 

© 2021 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.

Dragonfly Capital, a crypto-focused venture capital firm, is raising $500 million for a new fund, according to a filing submitted with the Securities and Exchange Commission. 

The new fund, dubbed Dragonfly Ventures III Feeder, will join a number of newly launched investment vehicles in the space, including Paradigm’s $2.5 billion venture fund and crypto exchange FTX’s newly launched fund. 

Dragonfly had also launched a $225 million fund in March of 2021 that was focused on non-fungible token (NFT), Ethereum Layer 2 solutions and related businesses, decentralized finance (DeFi)  and centralized finance infrastructure, The Block previously reported. 

The venture firm backed numerous funding rounds for crypto startups within the past year, such as the DeFi “credit score” protocol ARCx, the smart contract automation project Gelato Network and the Web3 investment firm Folius Ventures LLC. 

As per the LinkedIn profile of Dragonfly partner Mia Deng, the firm manages $2 billion—making it one of the largest venture investment firms in the crypto market. 

Dragonfly declined to provide comment.

© 2021 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.

As macro anxieties ripple through cryptocurrencies and stock indexes, the market for non-fungible tokens continues to see meaningful gains in floor prices and volumes. 

Stocks gyrated during Monday’s trading session and the benchmark Dow Jones ended the day in the green after dropping by 3.25% around midday. Worries about the US Federal Reserve’s plans to scale back stimulus and raise interest rates pulled stocks lower earlier Tuesday, with the Dow Jones up a mere 0.07% at press time.

Bitcoin, subject to a steep price decline since the start of the year, is currently trading hands at around $37,300 on Coinbase. 

Meanwhile, the NFT market appears to be offering a sort of oasis for investors and speculators. The floor price for Bored Ape Yacht Club (BAYC) and CryptoPunks are both up in the last 24 hours, according to data from NFT Price Floor. The floor price for CryptoPunks is up 13.33%, while BAYC is up 8.14%. 

Volumes for NFT marketplaces have also ticked up. OpenSea set a record for monthly volumes this week, surpassing its August record after reaching more than $3.2 billion in total monthly volume, according to The Block’s Data Dashboard. 

The divergence between NFTs and the broader crypto ecosystem illustrates the specific characteristics of the former, which are less liquid than tokens and closely tied to specific communities that are incentivized to hold. 

As noted by The Block Research’s Thomas Bialek, the US dollar-denominated value of NFTs has outperformed the price of ETH, further suggesting a decoupling between NFTs and major cryptocurrencies.

© 2021 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.

Justin Roiland, co-creator of the Rick and Morty animated series, is collaborating with two researchers from crypto investment firm Paradigm on a new mechanism for non-fungible token (NFT) sales.

According to Paradigm’s Dave White, the new concept would allow a project to more seamlessly sell large quantities of NFTs over a long period of time at stable prices, depending on demand in the market. 

“When NFTs are being sold too quickly relative to the target rate, we want to be able to adjust prices quickly,” according to a white paper. “The higher the sales rate compared to the target rate, the faster we want to raise prices.”

Through this mechanism, prices slowly will decline when demand decreases. 

“However, we want to decay prices slowly over time, because we managed to hit the target rate at previous prices and we don’t want to drop prices more than we have to,” the white paper added. A Solidity implementation of CRISP can be found on GitHub.

NFTs — the form of which spans artworks, collectible trading cards, in-game items, and more  — have driven significant activity in the past year, with volumes on unicorn OpenSea reaching more than $3 billion this month.

The motivation for Paradigm’s project was inspired by lackluster user experiences during NFT auctions. “Auctions cost gas, and we want users to be able to buy one of these NFTs at any time, without having to wait for an auction to terminate,” the researchers wrote in a post that details the project.

For instance, if a project like Parallel wanted to sell 100 Parallel cards every 30 minutes for the next seven days, they could use this mechanism to allow the price to automatically adjust based on the demand so that the goal of 100 sales every day could roughly be achieved. 

© 2021 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

• Capitalizing on users’ growing discontent with OpenSea, a new cohort of decentralized NFT marketplaces originated with the goal of dethroning OpenSea
• With liquidity being the lifeblood of an NFT marketplace, these competitors cultivated ingenious liquidity incentive designs
• The relative trading volume of most competitors is still dwarfed by OpenSea, with LooksRare emerging as the only potential threat so far

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Quick Take

• SPAC deals have surged over the past year, with many fintech firms riding the wave of hype. 
• Despite the red hot pipeline, experts in the market are now warning that, there is trouble ahead.

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The Multichain bug that has led to the theft of $2 million in crypto (so far) could have been “enormous,” according to the company that disclosed the vulnerability last week.

Blockchain security firm Dedaub, which disclosed the bug on January 10, has published a blog post providing more details. It said that the amount of money at risk could have been worth more than $1 billion.

“​​Given the above, the potential practical impact (had the vulnerability been fully exploited) is arguably in the billion-dollar range. This would have been one of the largest hacks ever—given the theoretically unbounded threat, we are not getting into more detailed comparisons,” said Dedaub. 

Multicoin (formerly Anyswap) is a cross-chain protocol that allows its users to swap tokens across blockchains. According to Dedaub, the bug led to two major vulnerabilities in two blockchain contracts. The bug impacted a few accounts looking after huge sums of money, a bridge between the Ethereum and Fantom blockchains, some of the same contracts on other blockchains and 5,000 addresses that had interacted with the Multichain protocol.

Dedaub said $431 million in WETH could have been stolen in a single transaction from just three victim accounts if the vulnerability had been fully exploited.

The main would-be victim account, the AnySwap Fantom Bridge, was holding over $367 million in WETH by itself, said Dedaub. The risk on the other networks, i.e., Binance Smart Chain, Polygon, Avalanche, and Fantom, was estimated at around $40 million, said Dedaub. 

“The threat was enormous and multi-faceted — almost “as big as it gets” for a single protocol,” Dedaub wrote.

The attack is still ongoing

While the big honeypots were fixed ahead of time, Multichain was unable to protect users that had given permissions to the protocol to spend their coins. When it disclosed the bug, it told them that they needed to revoke these permissions or their funds could be stolen.

While the platform encouraged users to do so, many didn’t do so in time and were exploited. The attack is still ongoing as long as there are people remaining who haven’t revoked these permissions.

There have been three main attackers taking advantage of the exploit so far. The first took around 450 ETH ($1.1 million). The second took another 450 ETH ($1.1 million) but returned 320 ETH ($780,000) after conversing with the victim. A third took 250 ETH ($600,000).

There have also been other attackers taking small amounts of money. It’s possible that there were fewer or more attackers than this — since it’s looking at unique addresses per exploit rather than knowing who was behind each one.

In total, around 1150 ETH ($2.8 million) has been lost to the attacks, while about 320 ETH ($780,000) has been returned, with a net loss of over $2 million.

“When so much is at stake, web3 projects need to think beyond passive defenses (i.e. auditing, bounties) and add more active compensating controls to identify attacks when they happen and then automatically respond in a way that would immediately protect their funds,” said ZenGo co-founder Tal Be’ery.

Six tokens on the router contract — wrapped ether (WETH), wrapped Binance coin (WBNB), Polygon (MATIC), Avalanche (AVAX), official mars (OMT) and Peri Finance (PERI) — were and are still at risk. That means if a Multicoin user has approved any of the contracts of the six tokens, they need to revoke approvals, or else their tokens are still in danger of being potentially lost.

© 2021 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.

PleasrDAO, a collective of crypto luminaries, is seeking an investment of $69 million.

A slide from the group’s fundraising deck, obtained by The Block, shows that it plans to add $69 million – categorized as an investment — to its treasury by February 2022.

Two people briefed on the raise said PleasrDAO is aiming for a valuation of roughly $1 billion. A spokesperson for PleasrDAO declined to comment. 

The group — a decentralized autonomous organization or DAO — was formed in March 2021, when its members put $525,000 towards the purchase of an animated Uniswap ad in the form of a non-fungible token (NFT). The ad, created by artist pplpleasr, depicts a pink unicorn making its way towards an Ethereum logo-cradling oasis.

Since then, PleasrDAO has collected other big-ticket items — all linked to what it describes as “culturally significant” ideas and causes, according to its website.

“Dubbed as an art collecting empire, the DAO is experimenting with novel concepts in digital and community art ownership,” reads a statement on PleasrDAO’s site. “Its members are exploring ideas such as fractionalizing iconic pieces to be distributed to, and owned by, the community.”

The group has already splashed $4 million on an NFT of the image that inspired Dogecoin; $5.4 million on a piece by Edward Snowden; and $4 million on a rare Wu-Tang Clan album.

Its members include dozens of DeFi founders, NFT collectors and digital artists. In December, venture capital firm a16z announced an investment in the group. The company did not disclose the size of its investment, but TechCrunch reported that it held less than 5% of the DAO’s governance tokens.

Treasury growth

The document obtained by The Block also suggests that PleasrDAO’s reserves will grow from 7,895 ETH to (roughly $18.8 million at current prices) this month to 27,725 ETH (around $66 million) by February, while its USDC stockpile will increase from a negligible sum to $3 million.

It’s unclear exactly how this is connected, if at all, to the fundraise — as the group’s total assets are only expected to grow from $83.6 million to $153.6 million (an increase of $70 million) after the deal has closed.

The same document indicates that 11 people currently work for PleasrDAO — a headcount that will more than double to 28 by the third quarter of next year.

© 2021 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.

YouTube is exploring the idea of helping its content creators to capitalize on NFTs, according to YouTube CEO Susan Wojcicki in an annual letter to content creators, as reported by Bloomberg.

“We’re always focused on expanding the YouTube ecosystem to help creators capitalize on emerging technologies, including things like NFTs, while continuing to strengthen and enhance the experiences creators and fans have on YouTube,” said Wojcicki.

She added that YouTube was taking Web3 as a “source of inspiration.”

© 2021 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.

Earlier this week, some OpenSea users were shocked to find that their precious NFTs had been sold for next to nothing. And many, understandably, were devastated.

“I just lost an ape guys…. I’m crying…. How did this just happen????” tweeted an OpenSea user who goes by TBALLER on Monday, adding 15 crying emojis.

TBALLER saw their Bored Ape Yacht Club (BAYC) NFT get sold for around $1,800 on OpenSea — 99% below the floor price — due to a user interface (UI) issue on the NFT marketplace. The buyer who poached the NFT then resold it immediately for nearly $200,000, making a profit of $198,000 within an hour.

The issue, while not new, resurfaced in a big way this week. Blockchain analytics firm Elliptic identified at least three attackers who purchased more than eight NFTs worth over $1 million for much less than their market value on Monday. Those NFTs were from collections such as BAYC, Mutant Ape Yacht Club, Cool Cats, and CyberKongz. One attacker gained 332 ether (worth over $800,000) by purchasing NFTs below market value due to the issue, according to blockchain security firm PeckShield.

An OpenSea spokesperson told The Block that the company is “actively reaching out to and reimbursing affected users” who saw their NFTs get sold below market value due to the “confusing UI” issue. At the same time, the marketplace is trying its best to solve the problem by increasing awareness of it and giving users more visibility and control when managing their NFTs.

What is the issue?

Here’s the root of the problem. Say an OpenSea user has an offer to sell their NFT at a certain price. But instead of canceling the offer and paying gas fees to do so, they chose to move the NFT to a different wallet. This shows that the offer is no longer there on OpenSea. But the problem occurs if they move the NFT back to the same wallet — the offer still exists and is still valid, and anyone can accept it.

This issue is a much bigger deal when the NFT in question has shot up in value between the times of the original offer and when it’s moved back to the same wallet. While the user now believes their NFT to be worth hundreds of thousands of dollars (in the case of BAYC), the NFT gets sold for their original price, which might be as low as a thousand dollars. And it’s this discrepancy that’s causing such misfortune.

The only way to cancel a sell offer on OpenSea is to do an on-chain transaction, which is often costly due to high gas fees on Ethereum. This is why OpenSea users choose to move their NFTs to a different wallet instead of canceling their sell offer.

“Gas price evasion is driving bad design and bad behavior from users,” Ledger CTO Charles Guillemet told The Block. “The challenge of scalability has never been so actual, and the solutions are Layer 2 [networks] and not off-chain logic tricks.”

OpenSea has had this UI design since its launch. But the flaw has only been noticed by attackers in the last few months. The OpenSea spokesperson said the company has not communicated broadly about this issue “because we did not want to risk bringing it to the attention of bad actors who could abuse it at scale before we had mitigations in place.”

“This is not an exploit or a bug — it’s an issue that arises because of the nature of the blockchain,” said the spokesperson. “OpenSea cannot cancel listings on behalf of users. Instead, users must cancel their own listings.”

How is OpenSea trying to prevent it?

OpenSea said it has taken the UI issue “incredibly seriously” and is working on several product improvements.

First, the platform has launched a new listings manager that allows users to easily see and cancel their listings.

Second, OpenSea is changing its default listing duration from six months to one month so that if an NFT is transferred back into a wallet after one month, the listing will have expired, said the spokesperson.

OpenSea will further provide notifications to users when they transfer an NFT that has an active listing associated with it out of their wallet and ask them if they want to cancel it. If OpenSea has the user’s email address associated with their OpenSea profile, it will also send them an email in that regard, said the spokesperson.

This is not the first time OpenSea users have gone through issues. In September, a bug in the NFT marketplace accidentally destroyed at least 42 NFTs, worth a minimum of $100,000. Early last year, an OpenSea user named Tom Kuennen saw his NFT vanish from his wallet because the platform did not support ERC-1155 tokens at the time.

OpenSea is a market leader in the NFT space with over 60% market share currently — down significantly this month due to the increase in activity on LooksRare, which has largely been driven by wash trading. The company recently raised $300 in a Series C funding round that brought its valuation to $13.3 billion.

© 2021 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.