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The Bitcoin network’s hash rate has suffered a short-term loss as miners in China’s Sichuan region are facing temporary power limitations.

The State Grid in Sichuan’s Aba county, one of the mountainous ares in the province that houses hydropower plants, issued a notice on May 16, requiring local energy-intensive enterprises to limit their power consumption as the province is currently facing a surging utility demand.

The notice, seen and verified by The Block, was not specifically targeting bitcoin mining farms but requiring all operations in Sichuan’s “Hydro-electricity Consumption Industrial Demonstration Zones” to cut down their power usage for the time being.

As The Block previously reported, these industrial zones were set up by the local government to attract power-intensive industries to help consume excessive hydro-electricity during the summer rainy season. As such, bitcoin mining farms have been operating their facilities in these government-sanctioned locations but they are now affected by the power limit until further notice. 

The three-day and seven-day moving average of bitcoin’s computing power are now at 145 and 154 exahashes per second (EH/s) respectively, down nearly 20% from the period between May 2 and May 13. Meanwhile, some bitcoin miners in Xinjiang are also gradually unplugging their machines from Northern fossil fuel power plants to transport to Sichuan in time for summer.

There are multiple contributing factors

In Sichuan, a region hailed as a bitcoin mining hub due to its abundant cheap hydro-electricity, the rain typically starts in May, gradually reaches its peak from June to September and then cools off in October. Therefore, the months of May and October are considered as the flat season and the three months in between are the wet season.

According to the State Grid’s notice, there is currently surging demand for electricity from the general public as the weather has been getting hotter in May than usual. But the volume of the rain so far has been relatively small, resulting in a severe power demand and supply imbalance.

Meanwhile, China is on its mission to cut down the coal use to below 56% of 2021’s energy consumption. This is also leading to increasing difficulty for the State Grid in Sichuan to purchase and distribute energy from northern provinces, where the energy is mostly based on fossil fuel power.

It remains to be seen when the situation will be resolved. While the Sichuan State Grid’s notice didn’t provide a timeline, a report from China Times on Thursday said the situation could be improved after May 25, citing estimates from local mining farm operators.

© 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.

PancakeBunny Finance, a decentralized finance (DeFi) protocol based on the Binance Smart Chain, was exploited late Wednesday and saw $45 million drained from its ecosystem.

The attacker used an exploit to mint millions of bunny tokens and sold the majority of them for BNB, leaving liquidity providers short. While this didn’t affect the protocol’s vaults directly, it sank the price of bunny tokens, affecting all holders.

Here’s how the attack happened

The exploitation occured because PancakeBunny had a bug regarding how the protocol calculates the number of new bunny tokens to be minted, according to The Block Research’s Igor Igamberdiev. Bunny (BUNNY) is the native governance token of the protocol.

The calculation function for minting new tokens depended on the price of the BNB-USDT pool. If the ratio of the BNB or USDT reserves of this pool were higher, the pool’s price would fall — and vice versa. In other words, the price of this pool could be manipulated based on the reserves of BNB and USDT.

The exploiter took advantage of this bug by using flash loans. They took eight flash loans, seven from PancakeSwap pools and one from ForTube Bank, a DeFi lending protocol. The attacker borrowed 2.3 million BNB (worth $704 million) and 2.9 million USDT ($2.9 million), for a total of nearly $707 million.

These flash loans were then used to manipulate the price of BNB in the BNB-USDT pool. The attacker used a small portion of BNB and USDT from the flash loans to provide liquidity to that pool.

They then swapped all the remaining BNB tokens from the flash loans in the pool to manipulate the reserves in the pool, minting 7 million bunny tokens in the process.

The attacker then sold most of the minted bunny tokens for BNB, resulting in a price crash of nearly 100% for bunny. The token fell from $146 to $0.9 following the attack. At the time of writing, bunny is trading at around $28, according to CoinGecko.

The price crash means bunny holders have suffered losses due to the exploitation. The PancakeBunny protocol tweeted that it is “working on a reimbursement plan.”

In the process, the exploiter pocketed $45 million. They swapped the minted bunny for BNB. Then they used most of the BNB to pay back the eight flash loans. The remaining bunny and BNB resulted in a profit for the attacker.

The attacker then went on to swap some of the BNB to the anyETH token via Nerve Finance’s bridge and transferred it to an Ethereum address. At the time of writing, $41.4 million is sitting on the attacker’s Ethereum address, and $4 million is on their Binance Smart Chain address.

© 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

• As a result of DeFi attacks, at least $370M was stolen in a year and a half.
• The BSC’s success has led to a new outbreak of attacks due to unqualified developers and an auditors’ shortage.
• Most often, DeFi is exploited during the weekend.

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Berlin-based neo-broker Trade Republic, which recently branched out into crypto trading, has raised $900 million in a Series C round led by Sequoia.

The fundraise gives Trade Republic a valuation of over $5 billion, placing it among Europe’s most valuable fintech firms.

TCV and Thrive Capital also participated in the round as new investors in the startup, alongside existing backers Accel, Founders Fund, Creandum and Project A.

Launched in 2015, Trade Republic’s core offering is a trading platform for ETFs and fractional stocks. The startup expanded into crypto trading in late April, in keeping with a wider push among neo-brokers into the crypto sector.

“At Trade Republic, we believe everybody should have the right to participate in economic growth. This requires an easy-to-use, accessible and affordable savings platform that is open to everyone,” said Trade Republic’s co-founder and CEO Christian Hecker in a statement.

The firm currently offers trading in bitcoin, ether, litecoin and bitcoin cash, and said at launch that it would charge a flat fee of €1 to cover third-party execution.

Silicon Valley-based Sequoia, which led the round and has also backed the likes of Klarna and Stripe in Europe, opened its first office in Europe late last year and has been hiring to ramp up investment in the region.

Thomas Pischke, another of Trade Republic’s co-founders, said in a statement that half of the platform’s customers — more than 500,000 people — have never invested in capital markets before.

“We empower people to start with wealth creation, who have been neglected by big banks for too long, with high fees and opaque products,” he added.

Trade Republic currently has more than €6 billion in assets under management.

© 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 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.

Instagram is hosting an event for non-fungible token (NFT) creators as part of its inaugural “Creator Week.”

The virtual program features a series of invitation-only events to solicit feedback from creators on how the Instagram and Facebook platforms can better support their content. It’s slated to run three days, from June 8-10. 

Variety first reported the event, calling it a “professional development” series for 5,000 Instagram creators.

NFT artist Sean Williams tweeted an invitation from the series for a panel entitled “A virtual creator event for visual artists and a special discussion on crypto art.” An Instagram spokesperson confirmed that the series would contain an NFT-focused event. 

In his thread, Williams said the invitation amounted to an ask for “high level business consulting” in panel form, and indicated that Instagram is looking to build out an NFT platform.

Instagram said it had “no updates to share” on whether it’s looking into building out an NFT platform. 

Image Credit: ALEX_UGALEK / Shutterstock.com

© 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.

Crypto lender BlockFi mistakenly sent some users promotional rewards payments in bitcoin this month instead of U.S. dollars. Some of those users went ahead and withdrew the outsized rewards.

Now BlockFi is scrambling to pick up the pieces. “Our exposure currently is less than 200 BTC and the total incorrect withdrawal amount wasn’t much more than that,” BlockFi CEO Zac Prince told The Block. He did not specify exactly how much was withdrawn but said it was a “couple hundred BTC” from less than 100 clients.

More than half of those clients have already sent back BlockFi the inadvertently withdrawn funds, Prince said. He did not reveal the exact amount the firm has recovered.

It is also not clear exactly how many BlockFi users received bitcoin by mistake. According to social media posts, one user apparently received more than 700 BTC. Prince said that mistake “was fixed within hours.” And then “a tiny subset of clients who received the promo payouts were able to withdraw due to an edge case — which was caught quickly,” he said.

The promo payouts are apparently related to a March giveaway, in which qualifying customers were eligible for bitcoin rewards if they traded a certain volume during the period between March 18 and March 31.

Last week, however, BlockFi tweeted that some participants “may see an inaccurate bonus payment displayed in their transaction history.” He added that the company was “working on a fix and the proper amounts will be reflected shortly.”

Prince said BlockFi’s current exposure to potential loss is “well within range of loss reserves we hold for various purposes.” It is a “fraction of loss reserves we carry in equity,” he said. At current prices, the exposure amounts to about $7.5 million.

Some users have claimed on social media that BlockFi has threatened to begin legal action against them if they didn’t return the money. Prince said the company has not initiated any lawsuits, but that legal action is possible. BlockFi “will evaluate doing so on a case by case basis,” he said.

Prince said BlockFi’s operations are not affected by the situation, and that “all client funds are available as usual.”

© 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.

Acting Comptroller Michael Hsu wants to collaborate with his fellow regulators on a unified banking framework for crypto.

During a virtual hearing of the House Financial Services Committee on Wednesday, Hsu’s crypto comments centered on what he sees as “fragmented” regulation the asset class has faced from federal regulators.

The hearing brought separate regulators with oversight of the nation’s banks together for a hearing entitled “Oversight of Prudential Regulators: Ensuring the Safety, Soundness, Diversity, and Accountability of Depository Institutions.” Rep. Tom Emmer (R-MN) pressed each of those in attendance on what their agency is doing related to creating rules for crypto today. Randal Quarles, Vice-Chair of the Federal Reserve Board of Governors, and Federal Deposit Insurance Commission (FDIC) chair Jelena McWilliams focused on internal efforts, which mostly amount to requests for comment from industry participants and studies of the emerging technology related to central bank digital currencies (CBDC) and other innovations.

But Hsu’s answer was more collaborative in nature.  He, McWilliams and Quarles have been in conversation about a possible “interagency sprint team” on cryptocurrency regulation related to banking, according to Hsu. Quarles later reiterated that the three are currently engaged in a “joint effort” to come up with unified definitions related to crypto.

“We are focused very intently on these crypto issues with the aim of having answers and joint views very quickly,” said Quarles. “I think that’s very achievable.”

The lack of collaboration among federal regulators on the crypto question is a pain point, according to Hsu. 

“I am concerned that the regulatory community is taking a fragmented, agency by agency approach to the technology-driven changes taking place today,” he said.

Hsu’s testimony today followed his announcement of a staff review of actions taken by the previous regime at the Office of the Comptroller of the Currency (OCC). That includes pending actions related to crypto, including interpretive letters related to bank custody of stablecoins and stablecoin reserves and crypto firm applications for federal banking charters. That review is slated to finish this summer, according to Hsu.

Former comptroller Brian Brooks made considerable strides related to crypto, though some in Congress accused him of overextending the power of the U.S. banking regulator. Hsu’s testimony indicated that he was interested in reviewing all actions to hear from “all stakeholders” more fully.

Now that some crypto firms have federal charters, guidance from the Federal Deposit Insurance Commission (FDIC) may be needed, as Rep. Warren Davidson (R-OH) pointed out. Currently, the FDIC doesn’t insure crypto deposits. His question to McWilliams was submitted for the record and will likely be answered in writing in the future.

Similarly, the Federal Reserve just released guidance for “novel institutions” — which includes standards for some newly OCC-chartered firms to gain access to Fed services. The regulator is currently seeking public comment on the guidance. 

Hsu said that U.S. banking regulators need to provide some path to approval for crypto and fintech firms and shouldn’t ignore the growing interest in bank charters as a path to compliance. Part of the reason the OCC is conducting its review of pending actions to reexamine necessities and effects that crypto bank charters create in other spaces, according to Hsu. 

“That’s why we’re re-reviewing [OCC actions on crypto], that that balance is struck in the right way,” said Hsu, who added:

“And that we’re doing it together because this isn’t just happening at the OCC. It’s happening in other spaces as well.”

© 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’s price retreat Wednesday morning retraced during the hours that followed in a move that two trading firms have chalked up to institutional buying activity.

The price of bitcoin climbed from its lows Wednesday morning at $30,000 to above $40,000 — a more than 30% appreciation within a few hours. Aya Kantorovich, head of institutional sales for FalconX, told The Block: “TradFi asset managers are buying on our end.

“We are no longer stressed!” Kantorovich added in a message.

Ahead of the market ascent, Genesis Global Trading sent out a note to its counterparties, noting that macro funds began buying at the $35,000 level.

The firm said that the selling overnight and into the morning was largely driven by forced liquidations on derivatives venues. These cascading liquidations, which drove the price of bitcoin down, have been quickly bought in past instances.

Several traders also told The Block that derivatives traders offshore were positioned to heavily short gamma — meaning sell to hedge — at the $40,000 price level, exacerbating the market sell-off. 

“My money would be on Deribit short gamma guys forcing liquidations and making it even worse for themselves and dragging the whole market down,” Evgeny Gaevoy, CEO of market-making firm Wintermute, said in a message.

© 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.

Multiple crypto exchanges are experiencing outages today amid a steep price drop for many crypto assets. The venues report heavy traffic crashing platforms and high network use congesting the Ethereum network, resulting in withdrawal delays.

Voyager Digital’s application is in maintenance mode, according to the exchange. “Due to market volatility, there are wide-spread exchange outages and exchange connectivity issues across the market,” Voyager tweeted.

Bitcoin’s price, among other assets, saw a sharp drop this morning, leading to the increased exchange activity.

The price of ether has seen a similar decline. As many people have been attempting to withdraw their ETH or ERC-20 tokens — or trade them on decentralized exchanges — this has congested the Ethereum network, causing increased withdrawal time at exchanges and exceptionally high gas fees.

Coinbase is reporting “intermittent downtime” on its platform. It did not list an identified issue, but said a fix is being implemented. In addition to frequent outages, Coinbase customers are reporting delayed ether, ERC-20 and Stellar withdrawals.

Binance.US is also reporting increased withdrawal time related to the Ethereum network, but no deposit issues. Its affiliate company Binance has resolved the issue, but has increased withdrawal transaction fees to account for higher gas fees. 

Kraken is reporting users are experiencing “connectivity issues” on its platform. A fix is currently being implemented, according to the notice. 

Gemini has undergone emergency maintenance for a range of issues, including delays to its market data and web user interface, but has already implemented a fix that it it is currently monitoring.

Bitstamp said any issues related to application outages have been resolved as of an hour ago. The exchange said it’s continuing to monitor the progress. 

© 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.