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Quick Take

• The increasing frequency of later stage rounds has resulted in at least 64 companies in the blockchain/crypto sector reaching unicorn status or a firm with a valuation of $1 billion or more
• Compared to 2020, the number of blockchain unicorns is up 1,850% YoY, with 39 firms reaching unicorn status so far during 2021
• The Block Unicorn Index was determined through the public valuations of private rounds, estimated revenue based on comparable exchange volumes, and industry sources

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Sotheby’s said Thursday night that a rare copy of the U.S. Constitution was sold for $43.2 million at auction — but unfortunately, the win did not go to a week-in-the-making community that raised tens of millions of dollars for just this purpose.

Organizer Julian Weisser confirmed the loss amid a chaotic online viewing party both on social media as well as the ConstitutionDAO Discord, during which some reports indicated that the crypto group had actually won. 

“We did not win the bid for the copy of the U.S. [C]institution,” Weisser wrote. “While this wasn’t the outcome we hoped for, we still made history tonight with ConstitutionDAO. This is the largest crowdfund for a physical object that we are aware of—crypto or fiat. We are so incredibly grateful to have done this together with you all and are still in shock that we even got this far.”

The sometimes hasty-appearing effort drew its share of supporters and critics in the past week. The pace of donations gathered steam in the run-up to the auction date. According to Weisser, “[w]e had 17,437 donors, with a median donation size of $206.26. A significant percentage of these donations came from wallets that were initialized for the first time.” The group raised about $47 million in total. 

Looking ahead, the group will begin processing refunds — minus the cost of transacting on the Ethereum network — to participants.

“You will be able to get a refund of your pro rata amount (effectively minus gas fees) through Juicebox,” Weisser wrote. “Please expect more details from us about this tomorrow – our team has not slept in the past week, and we are giving people the night to get some rest before we’re back at it tomorrow AM.”

© 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.

Osprey Funds — a crypto investment firm that offers institutions exposure to several crypto assets —announced Thursday it is breaking into the market for non-fungible tokens (NFTs). Osprey will launch a new fund that might set the foundation for the firm investing hundreds of millions in the nascent market. 

According to a press release, the firm is launching a new entity dubbed Osprey Alpha, LLC, which will offer institutional investors access to funds that actively invest in NFTs, covering a wide range of assets including collectibles, art, and gaming assets. The firm has hired Justin Paterno to lead the new effort as managing director and portfolio manager. 

“Over time we could have hundreds of millions of dollars across these funds,” Osprey Funds CEO Greg King said in an interview with The Block.

King said that NFTs represent a new type of asset class for investors that is uncorrelated to both crypto markets and more traditional equity markets. “This is what we are really excited about,” he said. 

The market for NFTs took off earlier this year, and the most popular NFT marketplace, OpenSea, has already reached unicorn status.

According to data from The Block, the average price of an NFT sale within the arts and collectible category has soared to more than $100,000. Still, the market has been dominated mostly by retail players given the lack of funds and institutional custody products for large investors.

“We’re in business to provide investors with exposure to the most exciting segments of the digital asset ecosystem,” King said in a press release. “With Osprey Alpha, we will focus on the development and rollout of several unique, actively-managed strategies for sophisticated investors beginning with our NFT product.”

Still, by some measures interest has waned. Monthly volumes on OpenSea have declined from a peak in August above $3 billion to just below $1 billion in November. 

© 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 Securities and Exchange Commission has charged a California man with conducting two unregistered and fraudulent securities offerings by hosting platforms that allegedly solicited bitcoin and promised false returns.

Ryan Ginster raised about $3.6 million in bitcoin through his websites MyMicroProfits.com and Social Profimatic, according to the SEC’s complaint. In both cases, Ginster promised that “cryptocurrency trading and advertising arbitrage” would yield what the SEC called “astronomical rates of return” for customers.

The agency also claims Ginster misappropriated at least $1 million of the funds for personal expenses like tax payments, housing expenses and credit card bills. 

The SEC filed the complaint with the US District Court for the Central District of California, charging Ginster with violating the antifraud and registration rules in the Securities Act of 1933 and the Securities Exchange Act of 1934. 

As a result, the agency is seeking permanent injunctions against Ginster, as well as disgorgement and civil penalties. 

© 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

• Athena Bitcoin confirms more details of its role in El Salvador’s Chivo project.
• The company is developing a new product based on its offerings in El Salvador that other governments or institutions could use.

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Crypto exchange Gemini announced today that it has brought in external capital for the first time, raising $400 million at a valuation of $7.1 billion. 

Morgan Creek Digital led the growth equity financing with participation from 10T, ParaFi, Newflow Partners, Marcy Venture Partners, the Commonwealth Bank of Australia and others. 

The news confirms earlier reports from The Block, which reported in September that Gemini had been exploring a fundraise since the spring and was in the final stages of the round. Co-founders Cameron and Tyler Winklevoss had funded the exchange by themselves until this point. 

The funding is reportedly to help Gemini finance the building of a more decentralized metaverse. The announcement focused on the ways Gemini has diversified its efforts in the crypto space and sought to expand beyond traditional exchange services, like growing its non-fungible token (NFT) platform, Nifty Gateway. Since its launch, the platform has generated more than $420 million in sales. 

“We are leading the first outside investment in Gemini because of our shared conviction in crypto and belief in the company that Cameron and Tyler are building,” said Sachin Jaitly, General Partner of Morgan Creek Digital, in the announcement. “Their vision for the role of crypto in redesigning money, the financial system, art, and the Internet, and their track record of incubating and scaling innovative technologies, gives us confidence in Gemini’s ability to continue to be an industry leader.”

In an interview with Forbes, Cameron Winklevoss contrasted a decentralized model of the metaverse with the Meta — once Facebook — path. Facebook rebranded to focus its efforts on building out the metaverse last month. 

© 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.

DAOs are undeniably catching hold in the crypto world, enabling people to come together and buy expensive NFTs, unique music albums — and potentially even a rare version of the U.S. Constitution.

But they remain difficult to set up and fragmented across multiple decentralized services. Voting is done via snapshot, governance via Aragon, communication via Discord channels and smart contract interactions by hand. It’s disorganized.

That’s why Upstream, a company focused on networking and live events, is launching an all-in-one DAO offering: Upstream Collective. It lets anyone launch a DAO by issuing tokens. These tokens can then be used to create proposals and vote on them. If a proposal passes, the proposed actions will be automatically carried out on-chain. Participants won’t even need to know how to code.

While the DAO will provide these services, it won’t custody tokens. So participants in the DAO will need to use their own Ethereum wallets to store the tokens and sign transactions.

Upstream Collective is launching today in beta mode, with initial access to Upstream’s biggest NFT community, but will be expanding toward the end of the year. The platform will also be adding a chat functionality in the same timeframe to enable communication between DAO members.

One of Upstream Collective’s main priorities is to keep it accessible. In the same way that Top Shot refers to collectibles instead of NFTs, it’s using the word collectives to replace the word DAO. 

“We are taking these complex blockchain crypto worlds and making them something that is accessible and usable. From our experience, the reason most people haven’t joined a DAO is because they’re not technical or don’t have financial means,” said Upstream co-founder Alex Taub. “We think there’s a middle ground that doesn’t exist yet — that we’re hoping to create.”

Taub explained that when he previously built a platform for analyzing your social following, called SocialRank, it was dependent on Twitter and Instagram — and when they changed their APIs, it would break the software. The frustrations from that experience led him to focus on building everything in-house. That’s why the new service doesn’t simply connect to all the pre-existing tools needed for a DAO; it seeks to provide an alternative to using each of them individually.

In its first form, Upstream Collective will prohibit users from building DAOs that are used for investment purposes. This is to avoid running the risk of creating securities. But Taub said that the next version might be more flexible in this regard and provide options for those building DAOs to make them regulatory compliant.

Upstream was launched in November 2019. The team is made up of 11 full-time employees who work remotely. It raised $750,000 in a pre-seed round at the end of 2020 and $2.5 million in a seed round in May 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.

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

Latin America exchange Bitso today announced a new payment product that it says will make it easier and cheaper for small businesses and individuals in the United States and Mexico to complete cross-border transactions, and have more control over when they convert currency through holding U.S. dollar-pegged stablecoins. 

The new product, called Bitso Shift, will use Circle’s payment infrastructure so that small businesses and freelance workers can convert between Mexican pesos and stablecoins, in addition to making payments and completing deposits and withdrawals through domestic wire transfers. 

Bitso users can hold the equivalent of U.S. dollars through a pool of different stablecoins, and use Circle’s USD Coin (USDC) for transactions, Bitso product manager Carlos Cota told The Block. Wire transfers using Shift take one to two days to clear, whereas the conversions between Mexican Pesos and stablecoins take “seconds,” Bitso says in its press release.

Cota said that it’s hard for Mexicans living far away from the U.S. border to get U.S. bank accounts. This means they have to convert dollars they receive into pesos, which can carry high fees and unattractive exchange rates. The idea of Bitso Shift is that it gives users the option to hold U.S. dollar value in stablecoins, and then use it as needed for payments or other transactions. 

“In Mexico, based on regulation, it is very, very hard for an individual to be able to have an account where they can hold their payments in the currency [in which] it was sent — in dollars,” Cota said. “So, that means that [it] gets automatically converted to Mexican pesos at a rate that they didn’t choose, based on whatever happened on that day. And what users want is to be able to decide when they want to convert that, to be able to do that 24/7.” 

Monthly remittances to Mexico, which mainly come from the U.S., have been hitting record highs this year. They totaled $4.74 billion in August, Bloomberg reported.

Bitso is incorporated in Gibraltar but offers services in Latin America, where it has more than three million users. The company became a unicorn after completing a $250 million Series C raise announced in May.

© 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:

• Bosonic is like CLS Bank for crypto: except it’s an immediate decentralized virtual match and Atomic Exchange of value – no need to custody or touch client assets, instead, we push Payment-vs-Payment trading into the transaction layer
• Eliminates counterparty credit and settlement risk: real-time clearing and settlement with trades executed on-chain as an Atomic Exchange with fully automated net settlement at the client’s custodian
• Non-custodial and custodian agnostic: trade on an aggregation of any market makers and exchanges from your own account at any custodian with no pre-allocation
• Multi-lateral netting and cross margining: go long against a market maker and short with an exchange or market maker and you are net flat in real-time
• Game changing products leveraging core Layer-2 infrastructure: planned release of a lending marketplace, virtual custodian and cross-custodian net settlement solution

Institutional demand for access to cryptocurrencies is here.  With the market cap crossing $3 Trillion it is now truly too large a market for any firm to ignore.  The profiles of TradFi firms entering the space is shifting at a rapid rate to those who are regulated and/or acting as fiduciaries and as such, they have mandates that can’t be compromised, resulting in a hyper focus on risk.

Currently, the biggest barrier for the participation of institutional investors, especially fiduciaries in Crypto and Digital Assets, is there’s no Tier-1 bank prime broker, central clearing-house or institutional consortium like DTCC or CLS Bank. So, there’s no entity providing an equivalent solution to fully eliminate these major risks like Bosonic.

A unique global solution 
Bosonic believes that Crypto needs a solution that leapfrogs the existing TradFi and CeFi dependencies on central counterparties, big balance sheets, complicated papered legal agreements and promises to pay.  Bosonic has spent years developing unique properties and specific technologies to ease the complications of clearing and settlement without compromising the essential functionality provided by trusted legacy systems. 

Bosonic has spent the past several years building a next generation clearing and settlement framework.  The validation of the system’s capacity and resiliency has been confirmed with the execution of almost $10 billion over 2 million trades. This performance has exceeded the expectation of the soft launch.   

Delivering exchange liquidity without tying up assets at each exchange
Through the use of Bosonic, exchanges can distribute their liquidity to any client without having to custody the client’s assets, thus eliminating the dependency on exchange funding or credit.  Exchanges on the Bosonic Network simply hold a secondary client omnibus account balance at a custodian of their choice on the network, with no cost of capital to the exchange.  Any client on the Bosonic Network can then access the exchange’s liquidity while retaining their collateral in their own account at the custodian. Bosonic then clears and settles the trades in real-time with no counterparty credit or settlement risk.  

Delivering market maker liquidity without bilateral credit and settlement
Market makers, similarly, can distribute their liquidity to any client without having to use bilateral credit and perform bilateral settlement movements.  Market makers and their clients, who almost exclusively transact on unsecured credit today, can use Bosonic to trade with real-time clearing and settlement against assets held in their own accounts at the custodian of their choice.  This makes it possible for market makers to face both institutions who are unable to take credit risk, and clients that are not credit worthy.   

Market makers and exchanges also have the option of using Bosonic for post-trade clearing and settlement for trades done away from Bosonic’s platform, by delivering FIX post-trade messages that get processed with Bosonic’s Atomic Swap process, as well as flowing through the automated net settlement movements at the custodians.  

Multi-lateral netting and cross-margining
With Bosonic, not only is the aggregation of liquidity truly tradable because it can be cleared and settled at the custodial level, in addition, the trades are netted in real-time.  For example, if you trade long with a market maker and short with an exchange or another market maker, you are net flat instantly from a collateral perspective.  Clients realize the capital efficiencies of executing from one pool of collateral across any number of liquidity sources and other counterparties fully netted in real-time with no pre-trade pre-allocation. 

Eliminating AML/KYC burdens without compromising compliance
All counterparties in the Bosonic Network™ gain access to the network through a BSA regulated firm or the equivalent, who are absolutely responsible for AML/KYC of their clients.  Consequently, the market makers, exchanges and other counterparties don’t need to AML/KYC all their counterparties and can transact anonymously on the Bosonic Network.   

Payment network for collateral management
Participants in the Bosonic Network can make 24×7 instant payments in Crypto or Fiat without using wire transfers or public leger transactions.  As far as collateral management goes, clients can move assets without cost for use cases like margin management for OTC derivatives or fast P/L settlements. Moreover, it changes the ownership at the custodial level making collateral immediately useable by the recipient.

The ultimate Bosonic game changers
Now that the core of Bosonic is stress tested with real clients, the company is finalizing the rollout of scheduled features that will bridge all market participants together:   

Lending Marketplace: collateral stays in lender and borrower accounts at their own custodians, however, enables margin and leverage financing facilitated with repo transactions in real-time, executed as an Atomic Exchange on custodial Layer-2 blockchain ledgers.  This enables all trading counterparties to remain fully funded even when trading on margin.

Virtual Custodian: trade from any self-custody wallet with any counterparty on the Bosonic Network with Atomic Exchange on a Layer-2 which is secured by assets locked in Layer-1 Smart Contracts, or at brick-and-mortar custodians.

Cross-Custodian Net Settlement: custodian-to-custodian atomic net settlement on behalf of all clients in support of cross-custodian trading and payments. Automatically settles netted quantities on Layer-2, as well as delivering residual quantities that need to move between custodians for both Fiat and Crypto assets using Layer-1 Smart Contracts.

© 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.