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Quick Take

• The battle for ACH, and why stablecoins and CBDC built on public open infrastructure could offer a more competitive payment system

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Quick Take

• We analyzed the press releases of the SEC and the CFTC to draw insights on crypto-related enforcement efforts
• In 2020, we’ve seen the growth of crypto enforcement from the SEC drop while rising for the CFTC

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members of The Block Genesis.
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More than $1 million in user funds have been permanently locked in smart contracts that are part of Percent Finance, a fork of decentralized lending protocol Compound. 

According to an announcement post published by the development team behind the project on Wednesday night, the funds — which are made up of USDC, WBTC and ETH — are locked because of an unforeseen error that occurred when the team changed an interest rate parameter. This means users can no longer supply, borrow, repay or withdraw their assets.

The locked funds include 446,000 USDC, 28 WBTC and 313 ETH. 

In a Twitter thread published on Wednesday evening, the Perfect Finance team said the three frozen markets use an older version of an interest-bearing token on the platform, called CTokens. On November 4, Percent Finance tried to update these tokens to a newer interest model. But because the interest model formula and the old CToken code were incompatible, the tokens became locked, the team said. 

According to the thread, while the team has detected the error and can code for a new contract that will be compatible, the tokens from the old contract cannot be migrated over to the new contract. 

The Percent Finance team said it is in the process of reaching out to Circle and BitGo to help release the USDC and WBTC funds. A Circle spokesperson told The Block the Centre Consortium, which Circle and Coinbase co-founded, can only respond to a “valid, binding court-order from a competent US court that has authority over Centre.”

BitGo did not respond immediately to The Block’s requests for comment. 

The Percent Finance team has asked affected users to reach out for support via Discord. 

“Unfortunately, it seems the locked ETH may be irretrievable, but we are currently working on potential scenarios to make affected users whole,” the announcement said.

© 2020 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

• Will China’s central bank digital currency compete with AliPay and WeChat Pay?
• How will China’s central bank use the digital currency’s smart contract capabilities? 

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Square sold $1.63 billion in bitcoin during the third quarter of 2020, according to a newly released earnings statement.

As The Block reported at the time, Square made $875 million in bitcoin sales revenue and posted $17 million of bitcoin gross profit. For Q3, Square made $32 million in gross profit on its bitcoin sales.

“Bitcoin revenue and gross profit benefited from an increase in bitcoin actives and volume per customer,” the firm said in its report.

Square made headlines last month when it announced the purchase of $50 million in bitcoin. At the time, the payment firm said that “cryptocurrency is an instrument of economic empowerment and provides a way to participate in a global monetary system, which aligns with the company’s purpose.” The investment represented roughly 1% of Square’s total assets as of 2020’s second quarter, as reported at the time. 

Square said of that purchase in its Q3 report:

“In October 2020, we invested $50 million in bitcoin as we believe cryptocurrencies are an instrument of economic empowerment and aligns with the company’s purpose. We expect to hold this investment for the long term. The accounting rules for bitcoin will require us to recognize any decreases in market price below cost as an impairment charge, with no upward revisions when the market price increases until a sale.”

As The Block’s Ryan Todd wrote in a recent column, bitcoin sales to date have only formed a negligible — but still growing — amount to Square’s gross profit base.

“Through the first 10 quarters of selling bitcoin through the Cash App, the company has now sold more than $4 billion dollars worth of bitcoin. And yet, the net impact of selling bitcoin has only contributed a total of $34.1 million in net income to date when backing out the cost of acquiring the asset. In the second quarter of 2020, the $17 million in net income from the sale of bitcoin represented only 2.84% of total firm gross profit,” he wrote. 

Square reported overall gross profits of $794 million for the third quarter. Cash App, according to the report, generated a total of $385 million in gross profits.

“Cash App saw increased engagement as customers adopted multiple products: In the third quarter of 2020, the number of average daily transacting active Cash App customers nearly doubled from the same period last year,” the firm said.

This story is developing. 

© 2020 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 newly launched deposit contract address for Eth2 — the next-generation version of the Ethereum blockchain network — continues to grow, standing at 31,557 ETH as of press time.

3,200 ETH of that — worth roughly $1.3 million at current prices — was contributed by Ethereum creator Vitalik Buterin, according to EtherScan, which tracks the network’s blockchain data.

When reached for comment, Buterin said he expects that the deposit contract will continue to attract people “as stakers get their coins out of cold storage, get comfortable with the tools and confident that the tools work and they’re not accidentally throwing their coins away, etc.” 

As for whether the deposit contract address will hit the requisite 524,288 ETH — constituting 16,384 validators — by December 1, the earliest date upon which the genesis of Eth2’s Phase 0 can commence, Buterin struck a positive note but added: “There are not a lot of precedents.”

He went on to say:

“If you look at the ether sale in 2015 for example, there was a significant (but disappointing) level of participation on day 1, then very little on days 2-12, and then on day 13 and especially 14 (the last day with a full discount) there was a huge spike that ended up being something like half of all ether that ended up going into the sale,” he said in an email. “So it’s very possible that here too we’ll see a quiet period and then lots of participation in the last week of November. But this is me just speculating, we’ll see!

As reported earlier this week, the deposit address launch represents the final leg of what has been a years-long process to shift Ethereum from a proof-of-work network to one based on proof-of-stake. Phase 0 will see the launch of Eth2’s beacon chain, which will serve as a kind of backbone for the nascent network. 

In August, developers launched Medalla, a testnet that served as a multi-client dress rehearsal for the operation of Eth2’s Phase 0 launch. 

© 2020 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.