Quick Take

• Bitcoin mining has entered a stage where the margin can reach 80% while the lead-time for new machines takes more than a year.
• That makes it more appealing to maximize the hashrate of existing ASIC miners when the energy cost is relatively less of a concern.
• But maximizing profits comes with potential problems. In this piece, we take a look at various techniques for hashrate boost and what pros and cons should be taken into account.

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Grayscale Investments, the world’s largest crypto asset manager, and Bloomberg have partnered to launch a new digital assets-based index.

Dubbed the Bloomberg Grayscale Future of Finance Index (BGFOF), it tracks 22 companies associated with several crypto-linked equities as well other firms in the broader fintech space, according to a press statement released Wednesday.

The index will, however, not directly invest in digital assets or their derivatives but will offer indirect exposure to crypto-linked equities. These crypto-linked equities will be rebalanced on a quarterly basis and cover market segments like exchanges, asset management, mining, and blockchain technology, among others.

According to the release, the basket of companies tracked by BGFOF represent firms that will play a pivotal role in the revenue growth of the emerging digital economy.

While the filing document does not list the companies tracked by the index, BGFOF consists of both U.S. and non-U.S. digital asset-based securities.

Grayscale’s Future of Finance index now joins a field of similar products tracking crypto-linked equities. Valkyrie’s innovative balance sheet ETF and Bitwise’s NFT-tracking index fund both launched in late 2021.

Grayscale’s BGFOF is part of a larger exchange-traded fund (ETF) strategy that includes plans to convert its flagship Bitcoin Trust to a bitcoin ETF.

The United States Securities and Exchange Commission (SEC), however, delayed its decision on the Grayscale bitcoin ETF in December 2021.

© 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 ongoing exploitation of the cross-chain protocol Multichain has now totaled $1.5 million, according to ZenGo co-founder Tal Be’ery.

A bug in the protocol is being exploited by multiple blockchain wallets, with either one hacker or many behind the attacks.

One of the hackers, who has stolen $200,000 through this bug, has offered some remorse. They claim to be a whitehat hacker and have offered to return 80% of the funds that they took.

This hacker said in a blockchain transaction, “whitehat here, send me the tx you lost your weth, I give 80% back. The rest is the tips for me saving your money.” Multichain has since replied to the hacker, hoping that they will return the funds to a blockchain address that they specified in the message.

It is unknown whether this particular hacker was behind any of the other thefts. When asked if this hacker also owned the wallet that stole $1.43 million through this exploit, Multichain told The Block that it was possible. Be’ery said, “Cannot really know.“

Multichain is a cross-chain protocol for swapping tokens across blockchains. The existence of the Multichain bug was first revealed by the project itself on January 17. While the project said it had fixed the bug, which affected six tokens including wrapped ether (WETH), it still impacted previous users of the protocol.

Anyone who had used the protocol previously needed to revoke permissions to the application in order to keep their funds safe from this specific attack. Despite Multichain’s warning, many users failed to do so.

Yesterday, the Multichain team reached out to the original address (that stole $1.43 million) via a message in a blockchain transaction. The message stated that the project offers a bounty for exploits, implying the hacker should give the funds back and receive a bounty. So far, that message has not seen a direct response.

© 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 mining company Griid quietly made a significant disclosure last month: a deal with tech conglomerate Intel to provide it with hardware.

The deal, first reported Tuesday by Fox Business, was detailed in Griid’s S-4 filing from late December. As reported in November, Griid is preparing to go public via a special-purpose acquisition vehicle, or SPAC, a process that will value the firm at more than $3 billion.

As the filing states:

“On September 8, 2021, GRIID entered to a supply agreement (the “Intel Supply Agreement”) pursuant to which GRIID may purchase Intel-designed BZM2 ASICs. The Intel Supply Agreement is for an initial four-year term and will automatically renew thereafter for one one-year period unless either party provides at least 90 days’ notice prior to the end of the initial four-year term. The Intel Supply Agreement provides GRIID with fixed pricing for the BZM2 ASICs for all orders placed prior to May 2023. In addition, subject to certain conditions, GRIID will be entitled to purchase from Intel at least 25% of all qualified Intel-designed ASICs through approximately May 2025.”

© 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.

Last year, cryptocurrency concerns took center stage in an ongoing debate over the US government’s trillion-dollar infrastructure bill.

The Infrastructure Investment and Jobs Act proposed a variety of ways to pay for its intended projects, including a heightened focus on crypto tax reporting. The Internal Revenue Service (IRS) has long teased unified broker reporting for exchanges, meaning entities that fall under the broker definition will be required to report information and send tax forms to the IRS. The infrastructure bill made it official: broker reporting is coming in 2023. 

But some are worried the bill’s definition of a “broker” is too broad and could encompass entities that can’t reasonably report to the IRS, like miners or decentralized finance (DeFi) entities. Key amendments to clarify that definition failed to pass, and it’s now all on the Treasury to clarify “broker” in its upcoming guidance.

In this week’s Policy Scoop, The Block’s Aislinn Keely dives into the current landscape of crypto tax reporting and how the coming guidance might affect taxpayers.

Keely spoke with Justin Woodward, tax attorney and co-founder of TaxBit, and Seth Wilks, Senior Director of SME and Government Relations at TaxBit about:

• The historical context of the long-awaited broker reporting guidance and why it matters.
• What will likely be in the guidance and why it’s likely to affect centralized exchanges first.
• When it will take effect and what that might look like.
• How the IRS is thinking about DeFi and non-fungible tokens.

© 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.

African gaming platform Carry1st has announced a $20 million Series A extension led by Andreessen Horowitz, with participation from Avenir and Google. A wide range of additional investors also took part in the round, including the founders of Axie Infinity and rapper Nas. The valuation was not disclosed. 

Carry1st, a16z’s first investment into the African region, is a gaming marketplace that is also building its own payments stack. Carry1st founder Cordel Robbin-Coker says that the payments environment on the African continent is fragmented and fewer than 10% own an internationally accepted credit card, locking the majority out of participating in the international content economy.

Carry1st’s embedded payments solution allows for the underbanked consumers to pay for content on its site through their preferred method — including via cryptocurrencies. 

“We have a thesis that crypto is going to be more important and more consequential in Africa than anywhere else in the world,” says Robbin-Coker. “We’ve already seen really significant adoption of crypto in many of our top markets because people have genuine day-to-day use cases for it.” 

Currently, the company enables transactions via ten different cryptocurrencies — including USD Coin (USDC), dogecoin (DOGE), and bitcoin (BTC) — and plans to add more altcoins in the near future. Robbin-Coker says that a quarter of the funding will likely go to the company’s fintech and web3 offerings and is currently exploring the development of an interface that easily brings its customers into crypto. 

© 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.

iTrustCapital, a platform that allows users to buy cryptocurrencies through their individual retirement accounts (IRAs), has raised $125 million in a Series A funding round.

Left Lane Capital led the round. iTrustCapital capital did not disclose participating investors, but its senior vice president of investor relations, Kevin Maloney, told The Block that the firm had initially closed on $100 million from Left Lane Capital, but it had additional demand and ended up raising $25 million more from Left Lane and other investors.

This is the first time iTrustCapital capital has raised VC funds. The firm was bootstrapped with $1.3 million in total seed capital secured from friends and family.

The Series A round brings the valuation of iTrustCapital — which only launched its platform in July 2019 — to over $3.1 billion.

Growing business 

Maloney said iTrustCapital has witnessed significant growth, increasing its revenue from $3 million in 2020 to more than $48 million in 2021.

The platform takes 1% transaction fees for letting people buy crypto from their self-directed IRAs. Investing through IRA platforms is different from crypto exchanges in several ways. The key difference is that IRAs provide tax-advantaged exposure to crypto. But, with IRAs, one cannot self-custody their crypto holdings because, per US IRA rules, assets must be custodied by IRA platforms.

iTrustCapital’s custody partners are Coinbase Custody and Fireblocks.

Besides no self-custody, another major drawback of crypto investing through IRAs is that early withdrawals before the age of 59.5 may incur a penalty.

But iTrustCapital is seeing increased demand for its platform. Maloney said more than 120,000 new accounts have been created on the platform since its launch, with more than 25,000 active monthly users. The platform has thousands of working professionals in the 45 to 65 age range, while the average age of a crypto investor is typically between 21 and 35 years. 

With fresh capital in hand, iTrustCapital plans to offer new products, such as staking of governance tokens, and explore acquisitions. “We are actively exploring opportunities to acquire high-quality senior-level talent and technologies that could help expand our footprint domestically and possibly, abroad,” said Maloney. 

iTrustCapital is also looking to expand its current headcount of 125 to over 250 people this year, said Maloney. To that end, the firm is also exploring raising a Series B round, likely in the $300 million-plus range, said Maloney.

© 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.

2021 is in the past and in this past year, DeFi gradually became the ‘old story’ in the blockchain world, and concepts such as NFT, GameFi, DAO and metaverse took turns to be the next new trend. With the rapid change in the industry, the development of the first generation of DeFi projects has attracted attention.

MDEX, which is about to celebrate its first anniversary, is a prime example of how the first generation of DeFi has evolved with the changing industry. It opened its DAO governance function before the concept of DAO was launched by ConstitutionDAO; between 30 September 2021 and the end of 2021, the community has completed more than 10 referendums on proposals, most of which address very practical issues. For example, some users propose to provide incentives for proposers so as to increase community members’ enthusiasm for DAO.

At the time of its 1 year birthday, MDEX has also followed up closely in the areas of NFT, GameFi and metaverse, by establishing a special fund for metaverse, collaborating deeply with several high-quality NFT projects and investing in the NFT incubation and trading platform Openmeta.

Looking back, MDEX has celebrated many milestones since its birth on January 19, 2021. One day after its establishment, MDEX 24H trading volume exceeded US$3.1 billion, topping the DEX ranking; on March 10, MDEX cumulative trading volume exceeded US$100 billion; on April 8, MDEX was launched on BSC and completed deployment on the Ethereum on October 8; on May 25, MDEX opened the IMO sector and launched the first IMO project; on October 30, MDEX launched the order book pending order function.

MDEX One Year Anniversary: launch new DAO and NFT

Turning the clock back to January 19, 2021, the fledgling MDEX just completed its deployment on the Heco chain. In addition to the classic liquidity farming rewards, it also added a trading reward mechanism. The “dual incentive” mechanism adopted gave MDEX a strong impetus to take off. On its first day of launch, MDEX became an instant hit, with a total lock-up value (TVL) of US$275 million and a single-day trading volume of US$521 million.

On September 2, 2021, MDEX launched the DAO governance function, with the aim of decentralizing power and giving users the authority to directly or indirectly lead the ecological development. According to the DAO rules set, users who hold the protocol governance token MDX can stake it’s to the Boardroom and later receive the lock-in credential xMDX. 

On 18 September, MDEX officially opened the first election of global board of directors and opened the DAO community proposal sector on 25 September. The basic autonomy function of DAO has been built since then.

Compared to other DeFi projects that lack in-depth practice and full participation in the governance, the MDEX community has developed a complete community voting scheme. According to the official website, the community will vote for nine directors each month, and one of the directors’ tasks is to select community proposals. MDEX DAO greatly lowers the threshold for user participation and allows any xMDX user to submit a proposal to be elevated into a community referendum stage if it is supported by more than five directors.

While popular DAOs such as ConstitutionDAO have yet to enter the real collaborative governance process, the MDEX DAO Boardroom has already completed more than 10 “practical” proposals for referendum.

Apart from DAO, MDEX is also closely following up on the deployment in metaverse and NFT. On 24 November, MDEX Foundation released a special fund for metaverse related projects. Earlier on, MDEX also entered into a partnership with MOBOX, a popular GameFi platform, to jointly explore the blockchain game sector.

What is striking is that on January 5, Meta-Elephant NFT, a series of NFTs based on the MDEX platform mascot, made its debut in the form of mystery boxes on the NFT distribution platform Element. The series of NFTs have 4 grades (N/R/SR/SSR), and have a total of 10,000 units. Users holding Meta-Elephant NFTs can stake them for farming in the future to gain revenue. It is revealed that MDEX team will develop blockchain games based on this series of NFTs. The current Meta-Elephant NFT first edition (Interstellar Expedition) figures are four types: Cruise Repairer, Cruise Navigator, Cruise Specialists and Cruise Pilot, and the subsequent game play is expected based on these different character settings.

Having developed for nearly a year, MDEX, which started with trading, has never ceased to explore new fields. Its engagement in DAO, NFT and metaverse has outlined a roadmap for the DeFi protocol to keep pace with the times.

Progression from DEX to a comprehensive DeFi platform

Initially, the most prominent features of MDEX were just token swap and liquidity rewards and trading rewards, and of these three functions, the liquidity rewards were considered a standard feature of DEX. From the beginning, MDEX set the goal of “more than DEX”, i.e. to create a DeFi platform that combines DEX, IMO and DAO.

Half a month after its launch, MDEX began its exploration of DAO  and launched the “Boardroom” section. On 4 February 2021, MDEX opened the Boardroom reward mechanism that allows users to stake MDX for token rewards; two days later, the MDEX Boardroom launched the repurchase and burn mechanism to reduce the inflation rate of MDX. As of December 28, 2021, MDEX had released 771 million MDXs and burned a total of 135 million MDXs.

On 8 April 2021, MDEX officially was launched on BSC, and became a dual-chain protocol. Its deployment on BSC was also well received by users, with a TVL of over $1.5 billion in 2 hours of launch.

The dual-chain deployment allowed MDEX to take a leap forward in terms of trading volume. By April 20, its cumulative dual-chain trading volume was close to US$200 billion, with 24H trading volume exceeding that of the top three DEXs, Uniswap, PancakeSwap and SushiSwap combined. Its extraordinary performance also placed it in the top 20 of the traditionally larger CEXs, surpassing well-known platforms such as ZB and FTX. According to KingData, in April 2021, MDEX had an average of 188,800 visitors per day and nearly 1 million views per day.

Besides trading, MDEX is striving to meet the goals it originally set out to achieve. On May 25, MDEX launched its first IMO program and saw a total asset swap of US$380 million. At this point, MDEX trading and IMO segments have been established, and with the completion of the deployment of its DAO governance in September, MDEX has officially reached its goal of becoming a “comprehensive DeFi platform”.

While diversifying its functions, MDEX also constantly upgrades its UI and filtering features. On 22 July, MDEX launched a new Chart function that allows users to check the price of each asset on the site at any time, and on 30 October, MDEX launched the Pending Order Book function to enable users to trade tokens at the desired price by means of limit pending orders.

The continuous iterations and upgrades have allowed MDEX to deliver a desirable business performance on its first anniversary. The data shows that MDX’s annual transaction volume in 2021 exceeded US$458.8 billion; the total number of users exceeded 55 million; the highest TVL exceeded US$5.7 billion; the number of dual-chain interaction addresses exceeded 1.25 million on BSC and HECO; the cumulative number of all DEX interaction addresses on the network ranked sixth, the cumulative number of dual-chain transaction pairs exceeded 40,000; the combined dual-chain addresses holding MDX exceeded 310,000; the cumulative number of MDX mined exceeded 773 million; and the cumulative number of MDX repurchased and burned exceeded 136 million.

After experiencing the highs and lows, MDEX, which is about to turn one year old, is gradually moving from the ‘old story’ of DeFi to new chapters such as metaverse, NFT and DAO. To keep up with the rapid development of the crypto industry and achieve long-term growth, it is upgrading its products, expanding its business segments and rallying its community.

Blockchain technologies are just starting to transform our world and as a vanguard, MDEX boasts endless possibilities.

© 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 Crypto.com security breach that allegedly led to the theft of 4,830 ETH ($15 million) as previously reported might be closer to $33 million, according to the pseudonymous ErgoBTC, an on-chain analyst at bitcoin (BTC) research outfit OXT Research.

Per ErgoBTC’s tweet on Tuesday, an additional 444 BTC ($18.5 million) was siphoned from Crypto.com’s payout wallet. Detailing the suspicious transactions, ErgoBTC said OXT Research first flagged a suspicious payout from the exchange’s custodial wallet to the tune of 52.55 BTC ($2.18 million).

This transaction was followed by “several hundred withdrawals” as noted by ErgoBTC that were later batched into four outputs of 67.75 BTC ($2.81 million) each. These four batched outputs totaling 271 BTC ($11.25 million) were funneled via a bitcoin tumbler — a mixing service that allows users to combine different transactions to make it difficult to trace BTC transfers.

According to ErgoBTC’s tweet, the bitcoin tumbler used by the alleged hacker to launder the 271 BTC is commonly used by Lazarus Group — the notorious North Korean state-backed cybercrime syndicate that has been linked to several crypto exchange hacks.

ErgoBTC also linked another address holding 172.9 BTC ($7.25 million) as belonging to the hackers responsible for the Crypto.com security breach. Details from blockchain explorer Blockchair show that the address received the funds around the same time as the other transactions identified as being part of the Crypto.com hack.

The alleged hacker has yet to route the funds through the bitcoin tumbler service as of the time of writing. Meanwhile, Crypto.com has yet to acknowledge any losses from the incident with the company’s CEO Kris Marszalek stating that user funds were safe — although the exchange did temporarily freeze withdrawals citing reports of suspicious activity. Marszalek also said that the exchange was carrying out an internal investigation into the matter.

We have reached out to Crypto.com and will update this story should we hear back.

© 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 UK’s Financial Conduct Authority (FCA) is set to strengthen its rules on how high-risk financial products, including crypto, are marketed.

The regulator has issued draft rules this morning, proposing restrictions on the marketing of certain crypto assets. The rules essentially bar firms from promoting crypto products to users without assessing their financial knowledge and experience.

The draft rules come a day after HM Treasury, the UK’s finance ministry, confirmed that it intends to extend the scope of the Financial Promotions Order to include “qualifying” crypto assets.

“We only want consumers to access [cryptoassets] knowingly, and after they have been assessed as having sufficient knowledge and experience to understand the risks involved,” said the FCA.

“We are therefore proposing to apply the same financial promotion rules to cryptoassets as we are proposing to apply to other high-risk investments,” which are categorized as ‘Restricted Mass Market Investments,’ it added. 

Such investments can generally be mass-marketed, but subject to certain conditions.

These conditions include categorizing the recipient of a crypto promotion as either a certified high-net-worth investor, a certified sophisticated investor, a self-certified sophisticated investor, or a certified “restricted” investor.

Secondly, firms must consider the consumer’s investment knowledge and experience to assess whether the product is appropriate for them.

The FCA is inviting feedback on its draft rules by March 23 and intends to confirm its final rules in summer of this year.

The FCA defines qualifying cryptoassets as “any cryptographically secured digital representation of value or contractual rights which is: (a) fungible; (b) transferable or confers transferable rights, or is promoted as being transferable or as conferring transferable rights, except if transferable or conferring transferable rights, or promoted as such, only to one or more vendors or merchants in payment for goods or services; (c) not any other controlled investment; (d) not electronic money; and (e) not currency issued by a central bank or other public authority.”

That means non-fungible tokens or NFTs don’t fall under the FCA’s draft crypto promotion rules.

Several countries have recently tightened their rules around crypto promotions, including Singapore and Spain.

© 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.