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Bill Ackman, a billionaire investor and the founder of the hedge fund management company Pershing Square Capital Management, has said that he wouldn’t invest in bitcoin because it is a purely speculative asset.

“It is only worth what someone else will buy it from you for,” said Ackman earlier this week in a webinar hosted by the New York City-based Fifth Avenue Synagogue.

But there are some other interesting cryptocurrencies, according to Ackman. He gave an example of Helium. Helium (HNT) is a token of the Helium project, which has built a decentralized wireless network. It sells so-called Helium Hotspots, like a small router, and provides HNT in return for hotspot usage.

“By deploying a simple device in your home or office, you can provide your city with miles of low-power network coverage for billions of devices and earn a new cryptocurrency, HNT,” reads Helium’s website. “Hotspots earn HNT for building and securing network infrastructure and transferring device data.”

Ackman said Helium is “motivating people to build out a global wireless network” but clarified that neither he nor Pershing have invested in the project or its token.

Helium was founded in 2013 and is backed by investors like Union Square Ventures and Multicoin Capital.

Ackman said he is expanding his knowledge about crypto as it is a sort of interesting phenomenon but hasn’t invested in any cryptocurrency.

“I think crypto is here to stay,” said Ackman. “It’s really interesting in terms of the business opportunities it helps create, although I wouldn’t invest in bitcoin or currency that’s a pure speculative asset.”

This is not the first time Ackman has shared his views on bitcoin or crypto. Earlier this month, at The Wall Street Journal’s Future of Everything Festival, Ackman said bitcoin has no intrinsic value.

“Intrinsic value to me is driven by cash generation,” said Ackman. “You have to be able to build a discounted cash flow calculation.”

Ackman said he would be concerned if one of his friends had a lot of their net worth invested in one or more cryptocurrencies. “I’d want them to take the money, put it into something a little more durable,” he said. Ackman is also not a gold investor because of similar reasons, he said.

© 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 Financial Crimes Enforcement Network (FinCEN) announced Wednesday that it is soliciting participation for its Innovation Hours Program on September 9, 2021. 

Specifically, FinCEN is seeking out input from companies that deal with privacy technology such as zero-knowledge proofs, an encryption method used in conjunction with blockchain networks in which a transaction can proceed without requiring sensitive information from the participants, as well as homomorphic encryption — the ability to use encrypted data without having to first decrypt it. 

“This program is an example of FinCEN’s ongoing dedication to advancing the integrity and innovative strength of the U.S. financial system, which includes balancing transparency and accountability with the important principles of privacy and security,” Acting Director of FinCEN Michael Mosier said in a statement.  “We support responsible innovation, especially that which promotes the resilience and safety of our financial system and the American people.”

Companies must submit an online request by July 23, 2021 before being considered for the event.

© 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 team behind the decentralized exchange (DEX) Uniswap is preparing to deploy the exchange on the upcoming Ethereum scaling solution Arbitrum. The deployment will go ahead as long as a snapshot vote passes, one that is showing overwhelming support in favor of the expansion.

Uniswap is the biggest DEX on Ethereum and the second biggest across all blockchains, according to The Block’s Data Dashboard. But since it runs on Ethereum, it is often plagued by high transaction fees for swapping tokens. Right now a swap will set you back about $13, but these costs have skyrocketed to up to $200 at times.

Enter Arbitrum, a second layer scaling solution that’s built on top of Ethereum and promises to handle many more transactions with much cheaper fees. It uses optimistic rollups, a technology praised by Ethereum co-founder Vitalik Buterin, in order to scale. It works by processing transactions on a sidechain and then regularly settling them in batches to the main Ethereum blockchain.

Arbitrum is set to launch this Friday, with help from blockchain developer platform Alchemy, which plans to help more developers integrate the scaling solution into their applications. So far, more than 150 projects have requested early access to the scaling solution, according to CoinDesk. 

Voting for the deployment is taking place through an off-chain snapshot poll that ends Friday. Anyone can vote on the poll with tokens they have delegated to themselves, or tokens that have been delegated to them. Voting is done through signing a message in MetaMask rather than making an on-chain transaction. So far, 41.43 million UNI tokens have been used to vote in favor of the proposal, with just 204 UNI tokens voting against.

“Assuming the snapshot passes we intend to support the community by deploying the v3 smart contracts to Arbitrum! We have already begun work on interface support and planning the deployment,” tweeted Uniswap founder Hayden Adams.

If Uniswap deploys on Arbitrum, it will provide a way for DEX users to swap Ethereum-based tokens at a much lower cost. This will help Ethereum stay competitive against high-throughput blockchains, such as Binance Smart Chain, which have seen volumes increase in recent months, as well as sidechains like Polygon.

Uniswap was expected to launch this month on Optimism, a rival scaling solution that also uses optimistic rollups but with a few differences in technical implementation. In March, however, Optimism delayed its mainnet launch until July. So, since Arbitrum is launching so much earlier, Uniswap’s deployment there will help it maintain market share. The exchange plans to later deploy on Optimism when it’s live.

Why just a snapshot poll?

Uniswap has an on-chain governance system that lets token holders decide how the protocol is developed. This upgrade, however, looks set to pass without a formal governance vote — something that came as a surprise to some in the community.

The Uniswap team explained that upgrades happen in one of two ways. Either the on-chain governance system proposes and votes for a change to the protocol, or the team deploys the upgrade with sufficient support from the community. In theory, the team could also deploy anyway, according to the license, if it thought it was in the best interests of the community. These options are shown in the diagram below.

Adams said that this specific proposal “had overwhelmingly massive support. We decided to deploy ourselves. As the Licensor we don’t need a license.” That’s in contrast to when an on-chain governance vote happens, which enables the community to grant additional uses of the core code, rather than the core team.

© 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 U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) wants Chainalysis software for “mission-critical research.”

A new public notice dated May 26 outlines OFAC’s intent to subscribe to the Chainalysis platform for its purposes. OFAC wants to use an online application for blockchain tracing  “to equip investigators in its Office of Global Targeting (OGT) to analyze and track virtual currency transactions.” It plans to use this information to identify parties that may be put on the Specially Designated National and Blocked Persons List as part of its cyber sanctions efforts. 

OFAC first put out a call for blockchain analytics tools earlier this month, when it called for the specific features Chainalysis provides: address clustering capabilities, wallet explorer tool, transaction flow mapping and analysis of user behavior and market data.

“Moreover, Chainalysis’ use by key industry, U.S. Government, and foreign partners necessitates OFAC’s use of the same tool to be able to collaborate easily and seamlessly with these partners in investigations and anti-money laundering and terrorist finance inquiries,” said the notice.

Within its use of Chainalysis’ tools, it also wants OFAC employees to take advantage of its training courses. In addition to case support and other functionalities, OFAC is seeking access to the “Get Certified Training Package” and “Specialist Training.”

OFAC could use the service for as long as the next five years. The notice cites a base period beginning July 15 and ending July 14 of 2022. It then lists four “option periods” of the same dates, each lasting a year. The final expiry date is July 14, 2026. 

© 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.

On Thursday, the blockchain analysis firm Elliptic published its 2021 Sanctions Compliance in Cryptocurrencies report describing trends in crypto compliance — and avoidance.

Ever since the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) first sanctioned two bitcoin addresses in 2018, blacklisted wallets have received more than $175 million in BTC and ETH as of the report’s publication. 

As the report finds, financial criminals have increasingly attempted to sidestep through the following methods: obscuring the origins of illicitly gained crypto through mixers, privacy coins and privacy wallets; using unregulated exchanges to avoid know-your-customer information; and increasingly becoming involved in crypto mining. 

“As sanctioned actors increasingly interact with the crypto space, compliance officers need to be alert to the likelihood of increased exposure to these parties,” Elliptic wrote in the report. 

Crypto companies can avoid unwittingly interacting with sanctioned wallets by screening wallets before a transaction to spot suspicious prior activity, the report finds. In addition, keeping in mind red flags, such as when a customer engages in indirect transactions for no apparent reason, can alert compliance officers to potential financial criminals. 

With compliance a major concern, many crypto firms have beefed up their compliance team over the past year. Prominent crypto firms like BitMEX and BitGo made strategic hires to their compliance executives in October 2020 and January 2021, respectively. 

The peer-to-peer exchange LocalBitcoin also bolstered its compliance by implementing better know-your-customer (KYC) tools — which helped to reduce user dark market connected activity by 70% in 2020.

© 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.

Large investors used bitcoin’s price crash last week to acquire more coins, according to blockchain analytics firm Chainalysis. 

In its latest market intel report, Chainalysis chief economist Philip Gradwell wrote that “investor whales” bought 77,000 bitcoin last week, an amount currently worth just above $3 billion. This is based on Chainalysis’s monitoring of on-chain data.

Last week, bitcoin’s price slid considerably from $49,000 to a low of $30,000, at one point wiping out $3.3 billion in liquidations during a single hour.

The market intel report concurs with The Block’s reporting that hedge funds and asset managers were buying the dip, particularly in bitcoin’s $30,000 – $35,000 range.

Large on-chain losses

According to Chainalysis’s report, this price crash saw a considerable amount of bitcoin being moved on-chain at a loss. Gradwell stated that 1.2 million bitcoin was sent at a 5 – 25% loss, with 120,000 bitcoin moved at a 25% loss or worse. 

“However, this was a smaller number of bitcoin sent at loss than in the late 2017 and mid-March 2020 price crashes, suggesting that last week was not the worst capitulation of holders in bitcoin’s history,” he said.

When measured in U.S. dollars, however, the losses stacked up. The report noted that $3.2 billion was sold at a loss last week, coins that had only been acquired 4 – 13 weeks earlier. In fiat terms, it was “the worst week ever for bitcoin investors.”

It was a similar picture for Ethereum. Last week witnessed the most amount of ether ever moved at a loss. The report stated 22.6 million ether was sent at a 5 – 25% loss. On the flip side, Gradwell noted that, “while people took losses on Ethereum, they were not extremely large in percentage terms.”

Returning to average purchase prices

According to the report, the price of bitcoin has now returned much closer to its average purchase price over the last year. Gradwell noted that the average purchase price was $37,800, a number that bitcoin fell below but has recently broken back above.

The economist said that historically, prices for both bitcoin and ether have often returned to this cost price and that it typically provides a floor, except for the crypto winter of 2018.

For ether, the average purchase price over the last year is $1,700, a price it has not returned to during this crash. Currently, at $2,830, the price of ether is $1,130 higher than this level.

© 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

• Polygon is a scaling solution built on top of the Ethereum blockchain
• Since its rebranding in February, Polygon has grown in TVL from 0.5B to 5B in May, with notable partnerships with AAVE, Curve Finance and SushiSwap
• Polygon intends to build a suite of scaling solutions ranging from Plasma Chains (which is currently live) to Rollups, and become Ethereum’s Internet of Blockchains infrastructure

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members of The Block Genesis.
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this Genesis research on The Block.

Government officials of Sichuan’s energy regulators are hosting a seminar next week to gauge the impact that shutting down local bitcoin mining activities will have on the hydro-electricity excess this year.

The Sichuan energy regulatory office under China’s National Energy Administration sent a meeting summon on May 25 to representatives in various state-owned energy entities such as the State Grid’s Sichuan office, the Sichuan Energy Industry Investment Group and the Energy Trading Center.

Based on the seminar summon seen and verified by The Block, the meeting is set to happen on June 2 in Chengdu, the capital city of Sichuan province, as per the request of National Energy Administration.

The meeting request came just four days after China’s State Council iterated a comment about cracking down bitcoin mining and trading activities. But different from a direct shut-down proposal that the Inner Mongolia government is taking, the Sichuan government aims to understand the impact before making a decision. 

Based on the meeting agenda outlined in the note, representatives from major energy sectors in Sichuan are asked to present the size of crypto mining activities under their remit as well as how big of an impact they think it will have on the government’s plan to consume energy excess this year if these mining activities are all shut down.

Sichuan is known for being a major bitcoin mining hub due to its abundant water resources during the summer, which generate cheap and also excessive hydro-electricity every year. One of the local government’s long-time priorities is to attract enough businesses to consume such energy excess which would otherwise go wasted.

According to Chinese government data, the total wasted hydroelectricity in Sichuan annually from 2012 and 2016 was 7.6 billion kilowatt-hours (kWh), 2.6 billion kWh, 9.7 billion kWh, 10.2 billion kWh, and 14.2 billion kWh.

As The Block reported previously, the Sichuan government has set up the so-called “Hydro-electricity Consumption Industrial Demonstration Zones,” which welcome energy-intense industries, including bitcoin mining farms, to help consume energy excess during the summer in a compliant way.

© 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’s next-generation iteration, known as Ethereum 2.0 or Eth2, has been cited as a potential threat to demand by Nvidia for its graphics card (GPU) products.

On Wednesday, Nvidia revealed its financial results for the first quarter of fiscal year 2022, reporting an 84 percent year-over-year jump in revenue — hitting $5.66 billion — as well as $2.76 billion for its gaming unit, a 106 year-over-year increase.

Nvidia said that it believes the $2.76 billion figure benefited by demand for Nvidia’s GPUs by cryptocurrency miners, but CFO Colette Kress indicated in a commentary release that the firm doesn’t know the full extent of the impact.

“Gaming revenue was up 106 percent from a year ago and up 11 percent sequentially, reflecting higher sales in GeForce GPUs, with both desktop and laptop setting records, as well as in game-console SOCs. We continued to benefit from strong sales of our GeForce RTXTM 30 Series based on the NVIDIA Ampere architecture. We believe Gaming also benefited from cryptocurrency mining demand, although it is hard to determine to what extent,” Kress noted. 

Longer-term, Nvidia indicated in its 10-Q filing with the Securities and Exchange Commission (SEC) that demand from the mining sector could fluctuate based on the state of the cryptocurrency market as well as “[c]hanges to cryptocurrency standards and processes including, but not limited to, the pending Ethereum 2.0 standard.”

As Nvidia noted:

“Demand and use of GPUs for cryptocurrency has fluctuated in the past and is likely to continue to change quickly. Volatility in the cryptocurrency market, including changes in the prices of cryptocurrencies, can impact demand for our products and our ability to estimate demand for our products. Changes to cryptocurrency standards and processes including, but not limited to, the pending Ethereum 2.0 standard may also create increased aftermarket resales of our GPUs and may reduce demand for our new GPUs. During the first quarter of fiscal year 2022, we believe Gaming benefited from cryptocurrency mining demand, although it is hard to determine to what extent.”

The reason behind that line of thinking is that unlike the current iteration of Ethereum, which uses the hardware-intensive proof-of-work validation approach, Eth2 uses proof-of-stake, which doesn’t require the use of GPUs or similar hardware. 

As shown in data collected by The Block Research, ETH miners generated more than $2 billion in revenue during May.

As noted previously, Nvidia has attempted to prevent some of its GPU products from being used to mine by throttling hash rate performance. At the same time, it moved a dedicated mining product to market. 

According to Kress, the so-called Cryptocurrency Mining Processors generated $155 million in revenue — roughly in line with an estimate produced in April. 

© 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.

Billionaire investor Carl Icahn is eyeing the crypto space, according to a Wednesday interview, though he appeared to demur on the idea of making direct purchases in the immediate future.

Icahn cited both bitcoin and Ethereum in an interview with Bloomberg, remarking that “While I don’t now own cryptocurrency but I think there could be something to it.”

After pushing back against criticisms that cryptocurrencies have no value, Icahn was pressed on whether he is weighing any involvement in the market. To this, he told the outlet:

“I’m looking at the whole business. I’m not looking at what to buy necessarily at this time. I’m just looking at the whole business and how I might get involved in it with Icahn Enterprises in a relatively big way, because I do think it’s here to stay in one form of another.”

When asked what “a relatively big way means,” Icahn replied: “Well, a big way for us would not be to buy a few coins or something…. I don’t believe in trading the market if I can help it.”

Asked about the specific dollar amount, either in hundreds of millions or billions, Icahn said: “A big way for us, you know, a billion dollars, billion and a half dollars, something like that. That would e sort of a big way, I guess, for us. But sometimes we go bigger than that, sometimes a lot smaller, so I’m not going to say exactly.”

© 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.