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Crypto investment firm Paradigm is raising more than $1 billion for a new fund, sources confirmed to The Block. 

CoinDesk first reported the news Monday, citing an investor deck that claimed the fundraising efforts will close on Nov. 12. The funds will be used for startup investments. Paradigm plans for the fund to weigh in between $1.25 billion and $1.5 billion, according to CoinDesk. 

With the raise comes a new hire, The Block has learned. Matthew Mizbani from hedge fund Coatue Management has signed as a partner at Paradigm. He previously worked at Morgan Stanley and Two Sigma. A source familiar with the matter told The Block that Paradigm hired Mizbani for the new fund.

Investment in the crypto space is ramping up. During Q3, the industry received an infusion of $8 billion in private investment across 423 deals, according to The Block Research. Paradigm led the fourth largest round with Genesis Digital Asset’s $431 million raise. 

© 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.

Ethereum-focused software company ConsenSys is raising again — and this time at a valuation of $3 billion, according to sources familiar with the matter. The Financial Times first reported the news over the weekend.

This latest funding effort comes at a time of considerable growth in the Ethereum space as the use of non-fungible tokens continues to pick up. It also comes at a time of reinvention for the Brooklyn-based firm.

In February of 2020, it underwent a major restructuring that divided its software and investment arms and reduced its staff by 14%. The restructuring saw ConsenSys split into two different companies: a venture firm and a developer of cryptocurrency products. The latest raise is for the latter, according to sources close to the matter.

It’s also the second raise in the past six months for ConsenSys. The firm raised $65 million via convertible note, with investors including JPMorgan, UBS, Mastercard, Alameda Research and the Maker Foundation.

In the wake of the raise in April, the firm’s Ethereum wallet MetaMask crossed 5 million active users. At the time, MetaMask use had quintupled in six months, according to ConsenSys. The Block’s data dashboard shows new address creation on the Ethereum network, which includes providers outside of MetaMask, continues to grow despite declining since April of 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.

Artist Jason Peterson, who recently painted a mural of American rapper Kanye West in Chicago, is selling the artwork as an NFT on the Avalanche blockchain.

The NFT will be sold on a new marketplace called YeahProbablyNothing.com, developed by Peterson, NFT startup Kalao, and Ava Labs, the development team behind Avalanche.

The auction of the NFT will take place on October 11 at 1 pm Eastern Time and close on October 22 at 1 pm Eastern.

The owner of the NFT will be linked to the artwork via a QR code located on the physical mural. The ownership of the NFT will be visible on the Avalanche blockchain anytime, and if it changes hands, the information tied to the QR code will also update.

The Kanye West mural is Peterson’s first NFT piece. The artist, who has 1 million followers on Instagram, plans to launch more NFTs featuring some of the best photographs from his career.

“Contemporary artists are constantly seeking new ways to challenge the status quo of art and its medium,” Peterson said in a statement. “NFTs brought in an innovative, new medium to the art world, allowing artists to fully control the distribution of their art as well as experiment with new ideas.”

While most NFTs today are built on Ethereum, other blockchains such as Solana, Tezos, and Avalanche appear to be picking up in the NFT space. American rapper Doja Cat, for instance, recently launched her first NFT collection via the Tezos-based OneOf platform. Last month, the Solana blockchain saw its first million-dollar NFT sale.

© 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 combination of crypto’s two biggest buzzwords, Ethereum innovators are starting to combine DeFi with NFTs — and it just lost someone a $340,000 NFT.

DeFi stands for decentralized finance and refers to any kind of financial tool that’s built on a decentralized platform, while NFTs are tokens that represent images (and can have exorbitant values).

In this case, traders have started putting up NFTs as collateral when borrowing money using DeFi lending platforms. The idea goes: you could put up an NFT worth 10 ETH, for example, and that would enable you to borrow 5 ETH as a loan. And if you don’t pay back the loan in time, then you lose the NFT.

That’s exactly what happened here.

Putting up an NFT to take out a loan

Around three months ago, an NFT collector borrowed 3.5 ETH (currently worth $12,600) on the NFTfi platform. To make the loan, they put up an “Elevated Deconstructions” NFT — part of the Art Blocks Curated set — which were selling for about 11 ETH ($39,600) at the time. Although the last sale price for that NFT was 3.25 ETH ($11,700), which was below the value of the loan.

Over that timespan, the value of these NFTs shot up. This was largely triggered by endorsements from Punk 6529 (a Twitter account run by the owner of that CryptoPunk) and Cozomo de’ Medici, a pseudonymous art collector. Not before long they were selling for 85 – 200 ETH ($306,000 – $720,000).

Yesterday, the 3.5 ETH loan ended and the borrower had not repaid the loan during those three months. As a result, the collateral was passed to the lender, who ended up losing their 3.5 ETH but gaining the Elevated Deconstructions NFT.

The current floor price— the cheapest available NFT on the market in this collection — is 95 ETH ($342,000). In theory this puts the lender up about $329,000. Although, despite the high floor price, this doesn’t necessarily mean the lender can sell the NFT for this much.

In fact, there hasn’t been a sale of an Elevated Deconstructions NFT for 18 days. As a result, it’s possible that the borrower chose to forgoe on the loan to get some immediate liquidity. This is unlikely, however, because they could have dropped the NFT price significantly and likely still sold for more than 3.5 ETH.

Not for the first time

A curious twist to this story is the fact that this NFT has been put up as collateral twice in its history — and both times, the borrower has defaulted on it.

As the historical data shows, this NFT was part of a loan that was defaulted on in April over a 3 ETH ($10,800) loan, which is how the previous owner obtained it before giving it up over the weekend.

The previous owner has been involved in a couple of other NFT-backed loans. In April, they tasted their first liquidation, receiving an Arago NFT when a 3 ETH loan was not repaid. In May, they had 1 ETH returned (with interest) on a loan they gave out that was backed by a Decentraland parcel of land.

But since they took out the sale at the end of June, they haven’t been particularly active. According to blockchain records, the wallet’s last transaction was 58 days ago.

© 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.

OpenSea, the online marketplace for NFT trading, has suspended trading in a pixelated turtle project claiming it broke rules related to carrying out financial activities.

The collection of 10,000 DAO Turtles dropped on October 4 and has since recorded trading volume on OpenSea of more than 570 ether (roughly $2 million).

When sales of the turtle images came to an abrupt end late last week, the project’s founders asked staff at OpenSea why the ban had been enforced and shared details of their correspondence on Twitter.

An employee of the company wrote that DAO Turtles had violated its terms of service, clarifying that it is forbidden to use OpenSea to “carry out any financial activities subject to registration or licensing, including but not limited to creating, listing, or buying securities, commodities, options, real estate, or debt instruments,” or for fundraising for a business or protocol via an array of methods including Initial Coin Offerings.

It is not clear exactly which of OpenSea’s rules DAO Turtles had broken. OpenSea was contacted for comment but did not respond by press time.

One of DAO Turtles’ founders told The Block that they too are unsure how they had breached OpenSea’s terms, but insisted that they had done nothing illegal. The team has now altered language on its website that had promised to pay a percentage of future NFT projects to DAO Turtle owners. It still promises to give each NFT holder a “Turtleshell token.”

Securities concerns

OpenSea’s move may have big implications for NFTs, which hit $10.7 billion in sales volume in the third quarter of this year.

Since the DAO Turtle ban, Twitter users have pointed out that other big-name NFT projects would also appear to be in breach of OpenSea’s rules.

Concerns about the attachment of NFTs to financial products has led some to suggest that they could come to be viewed as securities. For its upcoming NFT marketplace, crypto exchange FTX will eschew projects that offer royalties.

Brett Harrison, president of FTX.US, said that “a token which guarantees you a percentage income stream from the sales of a pool of assets starts to look like a security.”

© 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 it gears up to launch its Solana-focused NFT marketplace, crypto exchange FTX has announced it will steer clear of projects that offer royalties.

A newly published FAQ states, “we will reject any NFT from a collection/project that distributes or advertises the distribution of royalties to NFT holders.”

Royalties are a relatively new concept when it comes to NFTs. With an overabundance of projects out there, many are looking to add value to their token holders and experimenting with how they can do so. One way is to give back a portion of the fees generated when NFTs are bought and sold on marketplaces to token holders — known as royalties. The idea is that this should incentivize buyers to hold for the long term. But marketplaces are concerned that this could make the JPEGs fall foul of U.S. securities laws.

FTX.US president Brett Harrison said, “We will list NFT projects that pay royalties to the artists/creators, but we can’t list those projects which distribute the royalties from collection sales to NFT holders. A token which guarantees you a percentage income stream from the sales of a pool of assets starts to look like a security.”

Ethereum-focused NFT marketplace OpenSea has similar concerns. Its terms and conditions identify a range of types of NFTs that might be unsuitable for its platform, including those that can be redeemable for financial instruments and ones that “entitle owners to financial rewards.” 

Last week, these concerns led OpenSea to stop the buying and selling of the Turtle DAO NFT collection — which awards tokens to NFT holders — although it didn’t state which specific term the project violated.

© 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

• Disclaimer: The Block Research team has, is, and will be experimenting with the various protocols, projects, and applications mentioned in this series. The projects mentioned in our reports are not recommendations from our team and should not be misconstrued as investment advice. Many projects that appear in this series are highly experimental and, as such, will come with risks. Readers should evaluate their own risk tolerance before experimenting with these projects.
• DeFi Digest is a series that summarizes recently launched projects and applications that our research team found interesting.
• This week’s digest looks at JPEG’d and NiftyOptions

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

El Salvador will use part of its $4 million in bitcoin profits to build a modern-looking pet hospital, its president Nayib Bukele explained Saturday in a series of tweets.

Bukele said the trust El Salvador created to help make Bitcoin legal tender now has a surplus due to the cryptocurrency gaining value. El Salvador’s lawmakers approved the $150 million fund before Bitcoin officially became legal currency on Sept. 7, and the country has also purchased a total of 700 bitcoins. 

Bukele wrote a series of tweets on Oct. 9 explaining how the trust works, and why it has a surplus. The president said that the amount of funds in this trust, known as FIDEBITCOIN, is established in dollars by law. The trust’s balance sheet includes both dollars and bitcoin. Chivo, the state company that operates the trust, must settle that amount in dollars to El Salvador’s development bank Bandesal. Chivo is also the name of the commission-free wallet app that Salvadorans are using to send remittances and make digital payments to businesses, both in dollars and bitcoin. 

According to Bukele, the trust now has a $4 million surplus. Chivo can get rid of those millions without affecting the total amount in the trust, which keeps the same quantity of bitcoin even when the U.S. dollar amount goes down. 

“By the way, we’re not selling any BTC, [we are] using the USD part of the trust, since the BTC part is now worth more than when the trust was established,” Bukele followed up in an English-language tweet. He also added that the value of the pet hospital “will probably appreciate in relation to USD.”

One of Bukele’s tweets shows a video montage with renderings of the pet hospital, which has an exterior sign reading “Chivo Pets.” Along with standard offices, the facility would be decked out with areas to handle emergency vet appointments, operations, rehabilitation and grooming, in addition to having a laboratory, classrooms, an auditorium and coworking space. 

Bitcoin’s market capitalization recently broke $1 trillion for the first time since 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.

Bitcoin mining hardware manufacturer Bitmain will no longer deliver its machines to mainland China addresses.

The Beijing-based firm announced the news on Sunday, saying that it will follow local regulations and suspend domestic delivery starting from Monday, but overseas business remains as usual. 

Bitmain’s move may not impact the company much as its domestic sales had been declining since late last year amid the rise of North American mining operations. The company’s move perhaps formally marks the end of its domestic market share, which accounted for nearly 50% of its profits in 2017 and about 40% in 2018.

At-home mining

There has been a growing number of at-home mining operations in China with graphics processing units (GPUs), but Chinese authorities have been reinforcing their measures in sniffing out secret mining activities.

For instance, China’s Jiangsu provincial government recently conducted a probe into local energy consumption and mining pool IP traffic. It detected over 4,502 IP addresses in the province that were suspected of mining activities and consumed 260,000 kilowatt-hour of energy. Interestingly, 21% of those mining IP addresses were found to be inside government agencies, public schools, and enterprises.

Some Chinese miners have also been recently sharing anecdotes of them receiving calls from local energy and telecommunication bureaus, who questioned them over mining suspicion and sent staff for on-site inspection because of their abnormal energy consumption, based on group chat messages seen by The Block.

© 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.

Creative Artists Agency (CAA), a leading Hollywood talent agency with high-profile clients such as Beyonce, Shakira and Jennifer Aniston, has signed a deal with famous NFT collector known as “0xb1,” according to a report from The Hollywood Reporter. 

 The CAA will help the pseudonymous NFT collector monetize their pieces through licensing and brand partnerships, according to the report. The agency will also facilitate “advisory partnerships” between 0xb1 and “blue-chip brands looking to enter the NFT space,” the report said.

0xb1 confirmed the deal on Twitter, saying that they will “work hard to bring open license NFT brands & properties mainstream,” starting with their Bored Ape Yacht Club, Cool Cats, and Spunks by Spongenuity NFT collections.

This is not the first time CAA has signed a deal in the NFT space. Last month, the agency onboarded Jenkins The Valet (from the Bored Ape Yacht Club) for representation across books, film, TV, podcasts, and more. The agency also inked similar deals with NFT creators Micah Johnson and Mack Flavelle in recent weeks.

Another American talent agency, UTA, recently signed a deal with Larva Labs, the creator of CryptoPunks, Autoglyphs, and Meebits NFTs, to represent their artworks for film, TV, video games, and publishing projects.

© 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.