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Christian Faes, co-founder and executive chair of London-listed fintech firm LendInvest, has quietly set up a crypto mining operation into which he and a small group of investors have poured tens of millions of dollars.

Faes told The Block that the business will be based in Texas, where the Australia-born entrepreneur hopes to build a mining facility powered by renewable energy sources.

He already has machines up and running at colocation data centres in Pennsylvania and Tennessee, but declined to disclose the size of the operation in terms of energy output or crypto mined.

The venture is being run out of Faes & Co., an investment firm through which he also manages his angel investing activities.

Faes says he has a partner running operations in the United States and is looking to hire people to grow the business. He and a group of half a dozen investors have poured tens of millions of dollars into the venture, he says, without giving an exact figure. The money has been spent on purchasing equipment and for colocation space.

“There’s a lot of investor interest in this, I’m definitely holding back capital at this stage,” says Faes.

Courting institutions 

Faes set up property lending platform LendInvest in 2008 and ran it as CEO until January 2020, when he took the role of executive chair. In July of last year, the company went public on AIM, a sub-market of the London Stock Exchange, at a valuation of £255.6 million. It has lent more than £4 billion to property developers and landlords in the United Kingdom, according to its website.  

Faes began exploring setting up a crypto mining company in early 2021, after London-listed Argo Blockchain caught his eye.

“I saw some similarities to LendInvest back in 2008, where there was a pretty good opportunity to get returns but few institutions in the space,” he says.

Building out what he calls a pilot version of the business has not been straightforward, however. Competition for the latest mining machines (ASICs) and for rack space within colocation sites is high. “There’s a lot of shysters in the sector,” says Faes.

The environmental concerns that have dogged crypto mining are another challenge. Earlier this week, a top regulator at the European Securities and Markets Authority (ESMA) called for a ban on proof-of-work mining within the bloc because of how energy intensive it is. Outright mining bans have already been instigated in China and Kosovo.

Texas bound

Given the political headwinds in Europe, Faes has chosen to base his operation in Texas. He plans to draw entirely on renewable energy sources — a mix of solar, wind and hydroelectricity. The machines Faes already has up and running elsewhere in the US are roughly 75% powered by renewable energy, he says.

Texas has proven a popular choice for crypto miners. Argo Blockchain is currently in the process of building out a site in Dickens County that could cost as much as $2 billion.

“In Texas, I think the political environment is quite pro-mining,” says Faes. “It’s kind of the centre of the universe in the space, which is a double edged sword because it is quite competitive.”  

He is hoping the mining business is fully operational by year-end.

© 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.

Bitcoin’s network mining difficulty has risen by more than 9%, marking the biggest difficulty adjustment since last summer. 

According to BTC.com, which tracks mining difficulty data, the difficulty rose by 9.32%. Today’s jump was the second thus far in 2022, following January 8’s 0.41% adjustment.

The Bitcoin network’s mining difficulty level adjusts every 2,016 blocks, on a roughly two-week schedule. Difficulty changes are designed to maintain an average block time of 10 minutes as the hash rate rises and falls, though actual per-block times often vary.

With the exception of a 1.49% decrease on November 28, the difficulty has seen steady growth since last summer’s mining crackdown in China, which plunged the difficulty by its largest share on record as miners in that country shut down their equipment and decamped to countries like the United States and Kazakhstan. 

As noted on The Block’s Data Dashboard, the mining hash rate has fully recovered since late August, with the US emerging as the world’s current mining powerhouse. 

According to an analysis from The Block Research, the total bitcoin hash rate has increased by about 18 EH/s since December 11. Notably, Foundry USA — owned by the Digital Currency Group subsidiary — has increased by approximately 5 EH/s in that time.

This represents the fastest rate of growth among the world’s top mining pools. The second-fastest growth during that period came from F2Pool, which expanded its collective mining power by 3.3 EH/s. 

© 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.

Thursday proved Fed chair Jerome Powell right in that the US central bank’s long-awaited central bank digital currency (CBDC) paper was right around the corner.

The 40-page paper represents a key step toward what one day might become a digital dollar – though the authors stress at the outset that the paper’s existence doesn’t foretell any definitive policy move on the part of the Fed. Rather, it’s intended to be a conversation starter.

That said, it does offer a window into both the existing thought process of the Fed as it pertains to a potential digital dollar, as well as any contributions Fed officials may make when it comes to global policy and action around CBDCs.

One area of particular note, in the section on potential CBDC benefits, offers some interesting clues as to a potential motivation for a CBDC issuance: the rise and spread of private digital money.

At first glance, the while report doesn’t seem to offer much in the way of implications for digital assets and cryptocurrencies, apart from reiterating past calls for Congress to regulate stablecoins more closely.

Yet on pages 14 and 15 of the report, it invokes the “proliferation of private digital money” in a “rapidly digitizing economy” – and explores what role a CBDC might perform in that environment.

The Fed states that a CBDC “would offer the general public broad access to digital money that is free from credit risk and liquidity risk. As such, it could provide a safe foundation for private-sector innovations to meet current and future needs and demands for payment services.”

The authors then posit that “[a]ll options for private digital money, including stablecoins and other cryptocurrencies, require mechanisms to reduce liquidity risk and credit risk,” explaining:

“But all these mechanisms are imperfect. In our rapidly digitizing economy, the proliferation of private digital money could present risks to both individual users and the financial system as a whole. A U.S. CBDC could mitigate some of these risks while supporting private sector innovation.”

Additionally, per the Fed paper, a CBDC could “help to level the playing field in payment innovation for private sector firms of all sizes.”

In the Fed’s view, smaller companies may not have the capability to issue their own private money. Rather, a US CBDC “could overcome this barrier and allow private-sector innovators to focus on new access services, distribution methods, and related service offerings.”

The Fed also floated the role of a CBDC for micropayments, long seen as a use case for digital assets.

“As noted above, for example, a CBDC could potentially be programmed to deliver payments at certain times,” the paper explains. “Additionally, a CBDC could potentially be used to carry out micropayments—financial transactions that usually occur online and involve very small sums of money—which traditional payment systems are not necessarily designed to facilitate.”

To be sure, the Fed doesn’t explicitly invoke the word “competition” here. But given the context and potential use cases cited, it’s fair to contend that, in the Fed’s view, some of the services and innovations being developed in the crypto space today could take place in a CBDC-enhanced payments environment of the future.

Such offerings would likely emerge from some of the major payments players that have made no secret of their CBDC-related ambitions. These companies include PayPal and Mastercard – both of which have pursued crypto-related initiatives.

© 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.

In a much-anticipated hearing earlier today, Congress heard testimony on cryptocurrency mining.

Despite standing criticisms of environmental impacts and energy usage, the hearing saw remarkably little excoriation of mining.

The lawmaker perspective

The hearing took place before the House Energy and Commerce Committee’s Oversight Subcommittee. It was actually the subcommittee’s first hearing since September, highlighting the increased profile of crypto as a current focal point for policymakers.

With Ethereum expected to transition to proof-of-stake consensus this year, the Bitcoin network was the central point of debate. Impressed with PoS’s reported advantage in energy use, subcommittee chairwoman Diana DeGette (D-CO) even asked, “Why can’t Bitcoin be moved to the proof-of-stake method?”

“We cannot bring entire fossil fuel plants back online,” said Rep. Frank Pallone, chairman of the full Energy Committee, of the return of peaker plants now used for Bitcoin mining. “Particularly in light of cleaner blockchain technologies that already exist.”

Bitcoin’s energy use is an especially pressing topic as the US has become the top source of Bitcoin’s hash rate in the world over the past year, since a widely reported clampdown on mining in China. That crackdown also cited energy use, but China has, in the same time period, taken drastic steps against its domestic tech industry, especially local pay platforms.

“The Chinese are more concerned about control than about energy consumption,” Morgan Griffith (R-VA), the leading Republican on the oversight subcommittee, told The Block. “They haven’t hesitated to build new coal power plants to take care of whatever other industries they want. From our viewpoint, I think we have to try to find ways that we can maximize the potential of cryptocurrency and at the same time minimize the energy consumption.”

And indeed, even the most caustic commentary from today’s hearing did not go so far as to advocate an explicit crackdown.

As far as legislation goes, the vehicle most likely to focus on crypto mining would be the remnants of the Build Back Better Act. The Biden administration has effectively conceded defeat on that massive bill and is looking to divide its provisions into chunks, many of which will be focused on addressing climate.

It’s possible that some of those will include new propositions to restrict crypto mining or provide oversight of mining companies’ energy mix. But right now, any consensus on approach has yet to materialize at the federal level given Congressional gridlock.

The witness controversy

As The Block anticipated earlier this week, despite a fairly strident hearing memorandum, the witnesses in attendance were fairly positive towards the role of PoW mining. The only one who truly seemed to support the idea of abandoning it was Cornell Tech’s Ari Juels, who began his testimony by declaring: “Bitcoin does not equal blockchain.”

In contrast, Brian Brooks, CEO of Bitfury said that “decentralization is what crypto is all about, and Bitcoin is the most decentralized.” It’s a situation he explicitly attributed to Bitcoin.

Another witness, John Belizaire, CEO of Soluna, advocated for policies that would incentivize green energy usage among US miners over potential attacks on PoW. Soluna’s origins were as a renewable energy firm. It now sets up modular data centers and, especially, crypto mines for isolated energy sources.

“We had a lot of the same challenges that power plants here in the US and all over the world faced, which is that our power gets stranded,” Belizaire told The Block. “We realized that if you combined mining and other computing that’s like mining, you could essentially bring a new load that you can bring to the generation instead of having to bring the generation to the load.”

There was, nonetheless, considerable controversy over the witness list. Nic Carter, a partner at Castle Island Ventures and a person many in the crypto industry put forward to testify, took to Twitter to decry the hearing’s preparations, which did not include any of a number of mining companies that are publicly traded in the U.S.

In an email to The Block, Carter said: “It’s a scandal that core sci, riot, mara, greenidge, stronghold, etc weren’t invited. The memo calls out greenidge and stronghold by name. But they don’t get a chance to defend themselves? It’s like a hearing on EVs without inviting Tesla. It makes no sense.”

Carter further wrote that he knows “for a fact that they weren’t invited. They were all willing to participate. Same for me.”

A representative for Core Scientific, for one, told The Block: “Core Scientific, and others, provided briefing information to the staff,” but did not mention any invitations to testify.

© 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.

Adidas Originals is working with Prada on an NFT collaboration that will feature user-generated content and creator-owned art.

The project will bring together people across fashion, design, and crypto to create a large-scale digital artwork inspired by the physical Re-Nylon collection, according to a Thursday statement from the two companies. 

adidas Originals and Prada will invite their collective audiences to contribute anonymized photographs to the NFT project on the Polygon network, an Ethereum-compatible network.

Digital artist Zach Lieberman will combine 3000 community-sourced minted NFT artworks and compile them as a single mass-patchwork NFT design. Contributors will maintain full ownership rights over their individual NFT tiles, and participation in the project, called adidas for Prada re-source, is free. Contributors featured in the final project will have the chance to sell it on the secondary market.

“Owners of each individual NFT will receive a percentage of the auction sale of adidas for Prada re-source by Zach Lieberman each time it is sold, in perpetuity,” the statement explained. “This new structure of shared ownership, made possible by Web3 technology, represents a cultural shift towards creator rights which is core to the crypto arts movement.”

The final NFT will be auctioned on SuperRare, a marketplace for curated NFT artwork. Most of the proceeds from the auction will go to the non-profit organization Slow Factory.

The project follows the success of Into the Metaverse – adidas Original’s debut NFT project that was launched in December 2021 and minted 30,000 NFTs to over 21,000 buyers. The project was in collaboration with PUNKS Comic, Bored Ape Yacht Club, and gmoney, as The Block previously reported.

© 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.

The US Fed’s long-awaited report on central bank digital currencies dropped Thursday afternoon.

Framed as a discussion paper, the Fed notes in its introduction release that it”examines the pros and cons of a potential U.S. central bank digital currency, or CBDC.”

“It invites comment from the public and is the first step in a discussion of whether and how a CBDC could improve the safe and effective domestic payments system. The paper does not favor any policy outcome,” the paper continues.

The paper, long-awaited by policywatchers and members of Congress, represents a significant foray into the Fed’s work in the realm of CBDC. However, the Fed has said that any movement toward an actual digital dollar lies squarely in Congress’ court.

Here’s more from the Fed release:

“Consumers and businesses have long held and transferred money in digital forms, via bank accounts, online transactions, or payment apps. The forms of money used in those transactions are liabilities of private entities, such as commercial banks. Conversely, a CBDC would be a liability of a central bank, like the Federal Reserve. While a CBDC could provide a safe, digital payment option for households and businesses as the payments system continues to evolve, and may result in faster payment options between countries, there may also be downsides. They include how to ensure a CBDC would preserve monetary and financial stability as well as complement existing means of payment. Other key policy considerations include how to preserve the privacy of citizens and maintain the ability to combat illicit finance. The paper discusses these and other factors in more detail.”

To wit, the Fed has released a series of questions alongside the paper in the hopes that the public will respond in the next 120 days.

“We look forward to engaging with the public, elected representatives, and a broad range of stakeholders as we examine the positives and negatives of a central bank digital currency in the United States,” Jerome Powell, Fed chairman, said in a statement along with the paper’s release.

The full paper can be found here.

This is a breaking story and will be updated with more details.

© 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

• Client demands push Wall Street investment banks to onboard new products to deliver cryptocurrency exposure
• BNY Mellon, Citi, J.P. Morgan, Morgan Stanley, Goldman Sachs, and Wells Fargo all have dedicated blockchain and digital asset divisions.
• The widespread increase in cryptocurrency popularity during 2021 led many banks to allow clients to engage in cryptocurrency investment  

This research piece is available to
members of The Block Genesis.
You can continue reading
this Genesis research on The Block.

NFT profile pictures have begun to arrive on Twitter.

Twitter Blue, the social media platform’s subscription service, rolled out the feature Thursday with a splashy introduction video and step-by-step explainer page. 

Ready to show off your NFT? Follow these simple steps to connect your crypto wallet and let’s see your NFT PFPs! pic.twitter.com/epSL7VXG5o

— Twitter Blue (@TwitterBlue) January 20, 2022

According to today’s announcements, Twitter’s profile picture feature is being powered by the API of NFT marketplace OpenSea. Supported wallets are Coinbase Wallet, MetaMask, Rainbow, Argent, Trust and Ledger Live.

“Setting up an NFT profile picture means people can associate your Twitter account with your connected wallet’s public crypto wallet address,” Twitter said on its explainer page. “This means your Twitter account will be associated with your current and historical crypto wallet transactions and holdings, including all other NFTs in that wallet, because this information is all available on the public blockchain.”

Twitter stressed that it will never seek funds from or access to a user’s wallet, cautioning about potential scammers who may attempt to do so. 

At present, the feature is limited to those on the iOS mobile platform.

“Right now subscribers can only set an NFT as their profile picture from the Twitter for iOS app, but the hexa-shaped profile picture is seen across all platforms,” said Twitter.

The move is a significant development for the platform’s crypto-related ambitions, which last September enabled bitcoin tipping via the Lightning Network. The company also offered details about its internal NFT projects as well. 

In practice, a Twitter account with the NFT profile picture feature enabled displays an array of information about the NFT in question, including its creator, specific properties and characteristics, network (like Ethereum) and which token standard was used to deploy it, among other details.

© 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

• Decentraland’s value proposition is centered on social experience, as evidenced by the current progress of its metaverse, which includes art galleries by Sotheby’s and Samsung virtual store.

• MANA’s value capture is based on the burning mechanism through its economic activity, but its community members opted to convert it to a revenue-generating mechanism to accelerate Decentraland’s development.

• Decentraland may be at risk of poor and inactive urban planning due to the ability to create ESTATEs by anyone with two or more adjacent lands. This could result in aimless exploration, leaving the users disinterested in staying in the metaverse.

This research piece is available to
members of The Block Genesis.
You can continue reading
this Genesis research on The Block.

It’s been a busy few months in the metaverse for Cyber, a startup that builds virtual showrooms for non-fungible tokens (NFTs).

Cyber has just unveiled new functionality that allows users to connect with each other using a portal with ‘doorways’ — each leading to a gallery curated by a different user. The firm had posted a teaser of the portal product on Twitter on January 10.

Now, Cyber’s founder Rayan Boutaleb tells The Block that it quietly raised $6.7 million in November in a round led by Variant, the ‘ownership economy’ seed-stage investor that itself raised $110 million for its second fund in October.

A bevy of big-name NFT collectors also invested — including Cozomo de’ Medici, artist Joey Colombo, Product Hunt founder Ryan Hoover, Adobe’s chief product officer Scott Belsky, Not Boring founder Packy McCormick, Art Blocks founder Erick Calderon, and the pseudonymous trio of 6529, DeeZe and Gmoney. Three Arrows Capital and TCG Capital Management, the investment firms, also participated.

Boutaleb did not disclose the startup’s valuation. He plans to use the proceeds of the raise predominantly for hiring while remaining “completely product-led.” Cyber’s mission, he adds, is to “allow people to deploy immersive spaces, no matter how big or small.”

A bottom-up metaverse

The term metaverse has been all the rage among investors over the past six months, with Facebook’s rebrand to Meta in October only adding to the hype.

The concept of the metaverse — coined in Neal Stephenson’s science fiction novel Snow Crash and popularized by other novels like Ready Player One — refers to a virtual reality space in which users can interact with each other.

Boutaleb has previously talked of taking a bottom-up approach to building such a thing.

Launched in February 2021, Cyber began by letting artists construct and sell virtual showrooms, which themselves take the form of NFTs. Collectors can then mint these and later trade them on marketplaces like OpenSea — or use them to display their art. But there are also free galleries, available to any user with a crypto wallet. 

Now that Cyber’s galleries can be connected through its new portal, Boutaleb believes the platform will start to resemble a kind of social media platform.

“The second stage is to allow users to connect in these spaces together in a more social kind of way,” says Boutaleb. “They’re going to kind of be creating their own metaverses, their own worlds.” And in Cyber’s worlds, as the startup explained in a blog post, every piece of content including the space itself is an NFT. 

In another recent blog post about the company’s development, Cyber said that a multiplayer feature — which looks as though it will involve touring galleries in the form of an avatar — is “right around the corner.”

In time, Boutaleb says he would also like to enable Cyber showrooms to be linked to other metaverse platforms, but he doesn’t see that happening soon.

© 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.