The Solana blockchain is back online after an hours-long outage.

As previously reported, Solana’s transaction blocks came to a stop on Tuesday. Developers later said that Solana’s mainnet “encountered a large increase in transaction load which peaked at 400,000 TPS. These transactions flooded the transaction processing queue, and lack of prioritization of network-critical messaging caused the network to start forking.”

Ultimately, the network’s stakeholders moved to executive a restart, a laborious process that played out in the community’s Discord channel. The restart path was taken after efforts to stabilize the network proved unworkable. Ultimately, a second restart patch was released to validators, and the successful reactivation occurred in the early hours of Wednesday. 

Still, the return to service wasn’t immediate, as noted by the Solana Foundation: “The Solana validator community successfully completed a restart of Mainnet Beta after an upgrade to 1.6.25. Dapps, block explorers, and supporting systems will recover over the next several hours, at which point full functionality should be restored.”

The price of SOL, the network’s native token, pared some of Tuesday’s losses in the aftermath, rising from a local low of around $146 to a press-time price of roughly $160, according to CoinGecko.  

© 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.

Since the introduction of Ethereum’s London upgrade on August 5, more than 297,000 ETH has been burned — worth just over $1 billion — according to The Block’s Data Dashboard.

The upgrade added a new burning mechanism to transaction fees with the goal of making them easier to price. To make a transaction, you now pay a base fee, which gets burned, and a priority fee that’s effectively a tip to the miner. (For a detailed explanation of how fees now work, see here.)

As a result, Ethereum’s inflation rate has been decreasing. Miners on the network produce about 13,000 ETH each day (given to them as mining rewards) but the burning mechanism is starting to counter that. Some days, the amount of ETH burned has overtaken the amount produced. Currently the net emission is around 6,800 ETH.

Part of the reason why so much ETH is being burned is the prevalence of high transaction fees on the network, due to consistent demand — along with moments of high demand as we are in NFT minting season. The number of Ethereum transactions has remained high at 1.2 million transactions per day.

Although, with second-layer solutions like Arbitrum starting to take off, it’s possible this could free up some room on the main blockchain — unless it just adds to the activity.

© 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 BAYC Frenzy

Bored Apes Yacht Club (BAYC) has been one of the most high-profile NFT projects in the space and the main driver of the whole NFT market in terms of price momentum and sentiment. Data from Dun Analytics shows that the floor price of BAYC has reached a new all-time high of 44.05 ETH in late August 2021, that’s more than 171,000 in USD and representing a 5800% of growth since early June. Despite the recent floor price correction, the overall trend and market demand seem to have remained robust.

Figure 1a: Floor Price of BAYC Figure

1b: Active Holders of BAYC

Source: Dune Analytics Source: Dune Analytics

On top of that, the diversity of BAYC’s owner landscape also seems to have increased over time. For example, in mid-April, only less than 100 hundred wallet addresses held at least one BAYC NFT, but the number grew exponentially to over 5400 in less than 6-month, and the trend didn’t stop there; we witnessed growth thereafter, as well.

Divergence in Pricing

While many considered BAYC as one of the blue chip properties in the NFT world, a major question emerged as investors are ape-ing in. How do we price a BAYC NFT piece correctly? Many will likely take references from the public market. However, that may even create more confusion. Add the volatility of NFTs, generally, and we have created a mess.

Just recently, BAYC #3749, aka “The Captain” was sold to The Sandbox on OpenSea at the price of 740 ETH, that’s almost 3 million in USD. The buyer claims that #3749 is the 27th rarest Ape out of all and wanted to be part of the company’s NFT collection.

    Figure 2: BAYC #3749 “The Captain”

      Source: Twitter

This case could be an excellent example of how the crypto/NFT crowd sees the market and a good reflection of their largely positive sentiment. In the past, similar high-profile trade could be a benchmark for BAYC NFTs, at least for the short-term, and may even trigger a price increase for some of the rarest Apes available in the market. However, it seems that this is not the case this time. Mainstream players and their views on NFT could be the reasons behind this.

Mispriced or Risk-Adjusted: The Case of Sotheby’s

The case of “The Captain” could be just part of the bigger picture here. International auction house giant Sotheby’s is hosting an online BAYC auction; the event has been one of the most widely debated topics among BAYC owners and many potential BAYC buyers.

Figure 3: Sotheby’s Ape in! Online Auction

Source: Sothebys.com

The Sotheby’s BAYC lot features a total of 107 NFTs, with 101 Apes, 3 M1, and 3 M2 Mutant serums. At the time of writing, the bid has been sitting at 19 million USD after 44 bids. Although the auction appears to be well received so far and the bid is already above the estimation, when you look deeper into the number, you will see that each Apes in the lot only cost less than 55 ETH. The number already excluded the Mutant serums. 

It’s worth noting that there are two golden fur Apes (#5809 and #7940) in the lot. If you follow the BAYC market closely, it’s not hard to find out the golden fur feature is one of the most valuable and highly-priced features, just like “The Captain”.

Regardless of which side has a bigger market influence, if the current market price of “The Captain” is 740 ETH, and if someone can buy a golden fur Ape, which “The Captain” shares the similar feature, with just less than 55 ETH through the auction, it will create a vast valuation gap in the BAYC market.

From the viewpoint of a prospective BAYC investor, it’s tough to get fair pricing by only observing the market due to this divergence in pricing and valuation. Although there are platforms like rarity.tools to help buyers filter out some of the most common Apes and help them focus on those with unique features, it won’t tell buyers whether an Ape is overpriced or undervalued. Add to this conversation the fact that there is increasing speculation in this space, and that the Apes do not have easily defined intrinsic value, and we have a very challenging appraisal problem.

A Decentralized Way to Price Apes Could Bring BAYC and NFT To Next Level

While the market seems to lack a proper pricing mechanism to price NFT such as BAYC, there could be a solution in DeFi with protocols such as Lithium Finance. It’s a decentralized pricing oracle solution focusing on private and illiquid assets, and NFT is also part of that.

There are two stakeholders in the Lithium ecosystem, Wisdom Nodes and Wisdom Seekers. Wisdom Nodes have specialized knowledge on pricing certain assets, while Wisdom Seekers are anyone who wants to acquire the pricing information. 

Figure 3: Illustration of Lithium Finance Wisdom Node Dashboard with a highlight of digital collectibles  

Source: Lithium Finance

Wisdom Seekers can post questions regarding the pricing information on a specific private asset, in this case, an Ape, with a bounty. Wisdom Nodes will answer them accordingly and signal how confident they are with the answer by how many LITH tokens they stake with the answer. 

So, imagine hundreds of Ape owners, NFT enthusiasts, alongside traditional art collectors, auction house appraisers, participating in Lithium as Wisdom Nodes to price NFTs like BAYC. As a result, buyers and investors will get a much more fair pricing on those NFTs and avoid the 740 ETH vs. 55 ETH situation. 

Lithium could be that missing link that can bring more long-term investors and traditional art collectors into the NFT space and truly make valuable NFTs such as BAYC and CyrptoPunks into the mainstream and become an asset class. 

Conclusion

Just like DeFi, NFT is undeniably here to stay and will be here for good. While there is no crystal ball to tell us which will be the next top NFT project, or if BAYC and CryptoPunks will remain what they are today, the long-term rising trend of NFT will continue, and for sure, it will be a bumpy road along the way. However, the flexibility of NFT makes them highly adaptable and easy to commercialize for the mass, even non-crypto natives. Still, given all the advantages NFT is enjoying, the lack of a proper pricing mechanism could be a hurdle for the space and could hamper the future growth of the overall NFT market. DeFi protocols such as Lithium Finance could be a game-changer for the NFT scene. Leveraging the crowd’s wisdom, Lithium could help to price the unpriced, using analytical methods to distill the wisdom of crowds, and helping to create reference prices for auctions to clear more easily and predictably.

© 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.

One of the non-fungible token (NFT) space’s biggest marketplaces has admitted that a senior employee has been getting the drop on its most popular drops.

Twitter users last night accused Nate Chastain, head of product at OpenSea, of using secret Ethereum wallets to snap up the platform’s front-page NFT drops before general release. Citing transactional data on Etherscan, Twitter user Zuwu said that Chastain seems to be selling these pieces “shortly after the front-page-hype spike for profits.”

His actions have been likened to frontrunning or insider trading, which in regulated financial markets refers to dealing on information that is not yet public.

On September 15, OpenSea published a blog post acknowledging Chastain’s actions.

“Yesterday we learned that one of our employees purchased items that they knew were set to display on our front page before they appeared there publicly,” said OpenSea. “This is incredibly disappointing. We want to be clear that this behavior does not represent our values as a team. We are taking this very seriously and are conducting an immediate and thorough review of this incident so that we have a full understanding of the facts and additional steps we need to take.”

The company has rolled out new policies specifying that team members may not buy or sell from collections while they are being promoted, and cannot use confidential information to purchase or sell NFTs.

How this was discovered

The accusations caused quite the stir on Twitter, with some users highlighting a tweet by Chastain on August 3 in which he appears to admit to snapping up an NFT from a collection by the artist Arya Mularama ahead of the public drop. “I just wanted to get one of these before they all disappeared tbh,” wrote Chastain at the time.

Others have turned to Etherscan to produce their own analysis of the movement of NFT-linked funds between wallets associated with Chastain.

Chastain is the owner of CryptoPunk #3501, which he purchased for 26.98 ether (about $92,000 at today’s prices) some seven months ago, according to OpenSea data. Since this NFT identified his Ethereum address, it was relatively simple for observers to watch his transactions and know that he was behind them.

Both Chastain and OpenSea were contacted for comment but did not respond by press time. The Block will update this story if it receives a response.

For more breaking stories like this, make sure to subscribe to The Block on Telegram.

© 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.

A crypto wealth management platform named Abra has closed a $55 million Series C fundraise a little over a year after settling charges with U.S. regulators.

Abra paid $300,000 in July 2020 to both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to settle charges that it sold off-exchange swaps while unregistered.

But the Mountain View, California-based firm has bounced back with a funding injection led by IGNIA and Blockchain Capital, according to a press release.

New investors such as Kingsway Capital, Tiga Investments and the Stellar Development Foundation also joined the round, alongside existing backers including Amex Ventures and CMT Digital Ventures. Founded in 2014, Abra has now raised $85 million to date.

“Cryptocurrencies, NFTs and DeFi are now top of mind for almost all investors. The crypto asset class is growing exponentially, even outpacing the early commercial Internet itself. Our vision of crypto-centric banking is coming to life in front of our eyes, and Abra is excited to serve as a leader in the space,” said Bill Barhydt, Abra’s founder and CEO, in a statement.

The Abra platform lets users trade over 100 different cryptocurrencies and borrow against their holdings. The company claims to have processed over $1 billion in crypto-backed loans to date. In the past year, its revenues have increased ten-fold, according to a press release.

The $55 million will be used to expand the company’s product and marketing team, as well as to further develop its high-net worth and institutional sales products.

© 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.

Stablecoin issuer Tether says that it doesn’t hold any commercial paper issued by the Chinese real estate giant Evergrande. This comes amid concerns that Evergrande’s struggles might impact the commercial paper market.

“Tether does not hold any commercial paper or other debt or securities issued by Evergrande and has never done so,” said a spokesperson for Tether. “As we have indicated in our published statements and in our most recent assurance attestation with a reporting date of June 30, 2021, the vast majority of the commercial paper held by Tether is in A-2 and above rated issuers.”

Tether is the issuer of the largest stablecoin in the crypto markets, USDT, which has a market cap of $68 billion. Backing the stablecoin is a variety of assets, mostly held in commercial paper and certificates of deposits along with treasury bills. (Other assets include loans, bonds, cash and cryptocurrencies).

Commercial paper and certificates of deposit make up nearly half of Tether’s assets, some $30.8 billion on June 30, 2021 — the date specified in its most recent assurance report. According to a report from the FT that came after its first breakdown in May, the sheer size of these holdings puts the firm in the same league as investment firms Vanguard and BlackRock.

Tether has provided little information on where this commercial paper is based. When asked by The Block if it held any Chinese commercial paper, the company said that it holds international commercial paper but would not disclose any futher details. It did, however, tell the FT that it has limits on regional exposure.

A growing crisis in China

In China, there are serious concerns about Evergrande, which has run up a $300 billion debt and is struggling to pay interest. If the company were to collapse, it would have a huge impact on the financial system. 

Evergrande has been trying to find ways to get out of its growing debt pile. The firm raised $8 billion by August, according to Bloomberg, but it wasn’t enough. On September 8, Fitch Ratings said that the company “appears probable” to default on its debt. Chinese authorities have since told banks that Evergrande won’t pay interest on its loans next week, per Bloomberg.

“This $300bn debt monster is potentially China’s Lehmann Brothers, trading in subterranean junk debt to Chinese (and global) counterparties (which may include Bitcoin via Tether) at spreads that imply insolvency,” said Nucleus Wealth chief strategist David Llewellyn-Smith in a recent article.

Evergrande is the biggest issuer of commercial paper in the Chinese real estate market, according to Reuters. At the end of 2020, it had $32 billion worth of commercial paper. The outlet estimated that the actual figure could be even higher, since it has other units, which also issue commercial paper.

“There is the stark reality that [a possible collapse] will have a huge impact on the commercial paper markets. Regardless of what commercial paper you hold, bonds and commercial paper would take a hit and some issuers may even fold,” tweeted Adam Cochran, partner at Cinneamhain Ventures.

As a result, even though Tether says it doesn’t hold commercial paper issued by Evergrande, an upheaval in the commercial paper market could still have wider ramifications.

© 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 Canaan has realized a record quarterly revenue of $167 million for Q2 this year.

The firm said in an earnings report Wednesday that it sold 5.9 million terahashes per second (TH/s) of hashing power during the quarter, which means each TH/s of its Avalon equipment was priced at around $32. That amount of hash rate accounts for about 4% of the bitcoin network’s total current hashing power.

Canaan said that this marks the “strongest quarterly sales in the company’s operating history,” which is up five times year-on-year and more than 1.5 times over the first quarter.

After taking out the cost of goods sold that was used to manufacture the equipment ($101 million), Canaan brought home a gross profit of $66 million with a net income of just under $40 million.

That translates to a 40% gross profit margin for Canaan’s miner manufacture business line.

Canaan’s sales record was largely thanks to the increasing level of investment poured into mining equipment from institutional buyers since the start of the year, particularly those in North America.

As of June 30, Canaan had $161 million worth of contract liabilities for equipment pre-orders that it is yet to deliver to its customers.

The firm expects its revenues for the third quarter to “have a sequential increase of 10% to 30%.” 

Over the past two months, the firm has sold at least 40,000 units of mining equipment to Mawson, Hive Blockchain and Genesis Digital Assets. 

Canaan also said in June that it has started to self-mine bitcoin in Kazakhstan amid China’s crackdown on crypto mining.

© 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

• The crypto/blockchain sector received nearly $2.1 billion in private investment across 124 funding rounds in August
• Two investment trends included capital injections towards Web3 technologies and exchanges in the Asia Pacific region
• For two consecutive months now, the NFTs/Gaming vertical has been the most common deal type

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Steve Cohen — the financier and owner of the New York Mets — announced his latest bet in the crypto market: a new trading shop, called Radkl. 

Cohen — who’s been ramping up his activity in the crypto market through his family office and hedge fund, Point72 Asset Management — has agreed to be an investor in the new venture, but the deal has not officially closed, according to a spokeswoman. Cohen will not be involved in the firm’s day-to-day operations, she added. 

In May, The Block reported that Cohen and Point72 were poised to make a “big” move into crypto. Since then, Point72’s venture arm has backed Messari in its Series A fundraise. Steve Cohen also has invested in Digital, an investment vehicle in the non-fungible token market. 

Radkl, which will engage in various types of trading strategies, was born out of trading firm and New York Stock Exchange market maker GTS and is led by Ryan Sheftel, a partner at the firm. Other employees at Radkl include high-speed trading guru Jim Greco, who leads the quant trading group. Greco is a board member at Gemini and previously held positions at Jefferies and KCG. 

Radkl plans to be an electronic market maker across crypto exchange venues and also trade on a bilateral basis with other market participants, as per the Wall Street Journal. 

© 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.

Payments company Square has become a member of the Open Invention Network (OIN), an organization that aims to reduce patent aggression in favor of open-source software, according to a Tuesday release. 

By joining as a member of OIN, Square can cross-license its patents to other members on a royalty-free basis — reducing patent risk while growing open-source platforms, apps, and services. 

“As a global leader in the effort to democratize financial services, we are pleased that Square is committed to patent non-aggression in core Linux and adjacent open source technologies,” Keith Bergelt, CEO of OIN, said in the release. 

The OIN is funded by Google, IBM, the Japanese computer and tech firm NEC, Philips, Sony, the German open-source software company SUSE, and Toyota. The Network has over 3,500 members, who gain access to over 2.6 patents and applications and OIN’s portfolio of over 1,000 IP assets when signing up.

Square helped establish the Crypto Open Patent Alliance (COPA), whose members vow to avoid using their crypto technology patents unless in defensive scenarios.

© 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.