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Framework Ventures leads $15.8 million round into ‘proof of solvency’ startup

Proven, a firm providing zero-knowledge proof technology so that crypto firms can prove solvency, raised a $15.8 million round led by Framework Ventures.

Other investors in the seed funding round included notable angels such as Balaji Srinivasan, Roger Chen, and Ada Yeo, per an announcement. 

A ZK proof is a cryptographic technique that confirms whether a statement is true or false without revealing that statement’s contents. While these are often used in crypto for Layer 2 scaling solutions, Proven’s so-called “Proof of Solvency” claims to enable firms to show both assets and liabilities without needing to publically disclose their balance sheets. 

“The last few months have highlighted an issue that has long plagued both traditional financial and digital asset firms — efficiently fostering trust with customers while maintaining a necessary level of privacy. The absence of this has led to significant distrust and, of course, contagion,” said Proven co-founder Richard Dewey in a statement shared with The Block. He said that it was designed to let customers and regulators have confidence in exchanges and other companies while protecting sensitive customer information.

Since the collapse of crypto exchange FTX in November, other exchanges including Binance, OKX and Crypto.com rushed to show proof of reserves. Those have come under heavy scrutiny by regulators and some auditing firms have even paused all work on such projects. 

Proven is likely hoping that it can offer an alternative way of verifying proof of reserves and the seed-stage startup so far counts firms such as Coinlist and Bitso as clients. It’s looking to target exchanges, asset managers and custodians as potential customers and will use the funding to expand its developer team. 

The firm is just one of a number of ZK startups that have raised funds recently including Ulvetanna, a startup that builds hardware to increase the efficiency of ZK proofs, and the Nil Foundation, a ZK data accessibility developer, which raised at a $220 million valuation. This week, The Block exclusively reported that Scroll, an Ethereum Layer 2 network that uses zk-rollups technology, raised $50 million in a new funding round that saw its valuation soar to $1.8 billion. 

© 2023 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.

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Author: Tom Matsuda

Hut 8 reports annual revenue decline, increase in mined bitcoins

North American crypto miner Hut 8 reported annual revenue of CA$150.7 million ($109 million) — a decrease of CA$23.1 million compared to the previous year — and a 65% increase in bitcoin holdings.

Hut 8 mined 3,568 bitcoins last year — an increase of 28% over 2021, which it attributed to an increase in hash rate resulting from its fleet expansion.

“While 2022 was a challenging time for the entire industry, we fared well thanks to our team’s commitment to operational excellence, our diversified lines of business and our strong growth profile,” CEO Jaime Leverton said in a statement.

“As we look ahead, we will continue to uphold these operating principles as we work to close our business combination with USBTC and begin operating as a U.S.-domiciled, digital asset mining, hosting, managed infrastructure operations and high performance computing organization,” she added.

Last month, Hut 8 announced a merger with US Bitcoin (USBTC) to form Hut 8 Corp., which will be based in the United States. It also filed a statement of claim in the Superior Court of Justice of Ontario against Validus Power Corp. and its subsidiary, Bay Power Corp., the third-party energy supplier to Hut 8’s facility in North Bay, Ontario, the month prior.

© 2023 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.

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Author: Adam James

Polychain Capital leads web3 dev tool provider Cubist’s $7 million raise

Cubist secured $7 million in a seed round for its project which aims to help make web3 development easier.

The seed round is led by Polychain Capital and also sees participation from Dao5, Polygon, Axelar, Amplify Partners and Blizzard, the company said in a release.

The infrastructure startup is co-founded by Ann Stefan, a former fraud operations specialist, as well as Riad Wahby, Fraser Brown and Deian Stefan, who are computer security professors that have taught at institutions such as Carnegie Mellon University and UC San Diego.

“The thing that really got us excited at first was playing around with existing tooling and realizing just how much it left you twisting in the wind,” said Wahby, who is also the CEO of Cubist, in an interview. “It’s so risky to build these applications that have so much money sloshing around inside and yet the tooling doesn’t help you get things right.”

Simplifying application development

The idea for the startup formed from the co-founders recognition that a lot of their academic work exploring how to build secure systems applied to the web3 space.

“Where we’re coming from with a high level is we don’t want web3 developers to have to think about the underlying technology that their applications are running on, which is what they have to do today,” Stefan said.

The long-term goal is to offer a set of security focused tools that developers can use from start to finish when deploying a decentralized application, Stefan said. The first piece of that puzzle is an open-source software development kit (SDK), which will enable developers to think about writing applications as if it all runs on one chain, Wahby said.

“There’s a configuration file that you specify, ‘Well, this contract is gonna run on this chain, this contract is going to run this chain [and] this is my bridging provider’ and all of that glue code that makes that happen gets generated automatically,” he added.

The configuration file also makes it easier for developers to add new chains or change bridging providers by abstracting away those complexities, Stefan said. The SDK currently supports popular Ethereum Virtual Machine(EVM) blockchains such as Polygon, Ethereum and Avalanche subnets, Stefan added. 

“Most of our code is written in Rust,” Wahby said. “One of the reasons its possible is just because several  people on the team are complier experts and really understand program analysis and how to build this tooling that really looks at the developer code and extends it in a really systematic and nice way.”

Maturing web3 development

The startup is hoping to ride the wave of the web3 industry professionalizing and making a move toward adopt development best practices such as continuous integration and deployment as well as strong documentation. It will earn revenue from offering enterprise features to businesses.

“Everyone’s got a free GitHub account but a lot of companies also pay extra on top of that,” Wahby said. “I think value add on top of great tooling that is open and available and extensible is a model that’s very familiar.”

The seed round closed in July. The funds from the round will be put toward hiring as well as scaling and publicizing the SDK.

“By positioning themselves at the union between security, efficiency and developer familiarity, Cubist is defining the next iteration of developer platforms to bring a privileged and confidential better experience for all in web3,” said Luke Pearson, senior research cryptographer, at Polychain Capital in the release.

This story has been updated to correct the spelling of Riad Wahby’s name. 

© 2023 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.

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Author: Kari McMahon

Gate.io launching Visa crypto debit card in Europe

Gate Group, the parent company behind crypto exchange Gate.io, plans to launch a Gate Visa crypto debit card through its Lithuana-based company, Gate Global UAB.

A waitlist and registration process is open for users in the European Economic Area, according to a statement from Gate. 

Visa’s head of crypto, Cuy Sheffield, noted that the payments giant “wants to serve as the bridge between the crypto ecosystem and our global network of merchants and financial institutions.”

“With programs like the Gate Visa debit card, Gate Group debit cardholders are enabled with a seamless way to convert and use their digital assets to pay for goods and services, anywhere Visa is accepted,” he added.

Gate is by no means the first crypto company to offer a crypto debit card. Crypto.com has had a similar offering for years and Ledger recently joined forces with Baanx to offer their own CL card.

© 2023 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.

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Author: Adam James

Ceramic releases tool that awakens its ‘storage for web3’ protocol

The Ceramic network released ComposeDB last week, an essential part of its tooling that enables developers to build on the network much more easily.

Ceramic is an open network that’s designed for web3 applications to store data that can be accessed by anyone. It’s particularly built for data that doesn’t need to be stored on a blockchain, but that blockchain applications may want to access. It’s more scalable and affordable than a blockchain but as an open network, it offers some of the same advantages.

While the network has been live for nearly two years, the launch of ComposeDB is a key step in making the network easily accessible for developers. This means the project finally is ready to see if it can garner adoption across the wider crypto space.

“What we really want to see happen — and the reason that we built ComposeDB over the last nine months plus — is we see all this demand to create experiences in web3 that were not possible in web2, like truly leveraging composable data in a way that creates value for users and communities,” said Danny Zuckerman, co-founder of 3Box, the company behind Ceramic, in an interview.

Essentially, ComposeDB makes it easy for developers to access the Ceramic network, enabling other projects to use it to store their own data — or to access what’s already there. This piece of tooling lets developers interact with it as though it were a normal database.

While this all sounds relatively simple, for the founders, it’s been a long time coming.

A seven-year grind

The idea was seeded when Zuckerman and fellow co-founder Joel Thorstensson were at Ethereum development company ConsenSys together. Thorstensson had been working on a project called uPort, which had a similar goal in mind. 

The pair decided to go their own way and in 2018, and launched 3Box with the intention of building their own service. They started with a software development kit (SDK) which was widely adopted by 1,000 applications including MetaMask, Zerion and Rarible. 

Yet Zuckerman said he felt the technology wasn’t working. “We were spending a lot of time just trying to find ways to scale and fighting fires.” Instead, the founders had to go deeper down the technology stack to really build what they needed.

“We started as this developer tooling, had to come down several layers to build a missing piece of the web3 data protocol ecosystem that wasn’t there, and now we’re coming back up a layer again to build ComposeDB so that app developers really have something approachable for them,” he added. “We kind of changed the engine mid-flight.”

How does Ceramic work?

The Ceramic network operates as a set of nodes that each store and provide access to certain databases of their choosing. Unlike many networks, not all nodes store all of the information. Rather it’s the reverse; many nodes are focused on storing the information just for the project they’re focused on. 

Zuckerman said a developer needs to ensure they have their own node running and at least one other (in case theirs goes down) for a project. As long as their nodes are online, the protocol can store data on them and anyone else can access this data too.

This makes the network very scalable, but, to some degree, it remains somewhat centralized, or at least running with only a few points of failure. Zuckerman said the network will likely need a token in the future in order to incentivize wider participation but that there are no specific plans for one just yet.

“We want this to be a community-driven data ecosystem. We want the community to govern the protocol and it should be a shared resource. And so we’re huge believers that tokens can be really powerful long term for coordinating an ecosystem,” he said.

What can Ceramic be used for?

Ceramic allows a protocol to store larger amounts of data in a place that it can access. This means the protocol doesn’t need to store the data on-chain and could reduce the weight that some protocols are currently placing on blockchain networks. 

Take Lens Protocol. It’s a social graph used for decentralized social networks where interactions are stored as NFTs on Polygon. This type of data could be stored on Ceramic instead, providing similar access to the information while not adding bloat to a public blockchain.

Zuckerman said that a bunch of projects are already building on Ceramic, including Collab Land — a protocol for creating token gated communities. He pointed to Gitcoin, which uses Ceramic for its protocol called Passport, a decentralized and private record of user credentials. Gitcoin uses this to reduce people using multiple accounts in its grant process. 

Ceramic can be used for a wide array of possible functions. This could range from decentralized exchanges, to decentralized social media, to blockchain gaming. Anything where a blockchain protocol needs to store information that doesn’t belong on-chain. 

It could also spearhead a new wave of open data. If a blockchain game were to use Ceramic, the data that it generates could be available to all protocols that want to use it — and they could contribute to the dataset too. This means that not only could user assets be portable, such as in-game items that are NFTs, but their gaming history could be too. 

“It’s pretty early in the gaming use case for us given that we just launched and they do consume a massive amount of work, produce a massive amount of data, but definitely something that we’re seeing and expect to see a lot more,” Zuckerman said.

This isn’t to say that all data will necessarily be public. It’s possible that projects elect to create gated access to such datasets, leading to a market for access to this type of data. That said, while Zuckerman sees selling access to data as a small use-case, he reckons simply delegating access will be what really takes off.

© 2023 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.

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Author: Tim Copeland

Grayscale CEO breaks down his firm’s legal strategy against the SEC

Episode 20 of Season 5 of The Scoop was recorded remotely with The Block’s Frank Chaparro and Grayscale CEO Michael Sonnenshein.

Listen below, and subscribe to The Scoop on AppleSpotifyGoogle PodcastsStitcher, or wherever you listen to podcasts. Feedback and revision requests can be sent to podcast@theblockcrypto.com.


Michael Sonnenshein is the CEO of Grayscale — the digital asset manager embattled in a court case against the Securities and Exchange Commission over the agency’s refusal to convert Grayscale’s flagship product, the Grayscale Bitcoin Trust (GBTC), into a spot Bitcoin ETF.

In this episode, Sonnenshein explains why a spot Bitcoin ETF could have shielded many U.S. market participants from the crypto ‘carnage’ of 2022, and how Grayscale’s veteran legal team is working to ensure GBTC holders receive the most favorable possible outcome.

During this episode, Chaparro and Sonnenshein also discuss:

  • What will happen if Grayscale exhausts all its legal options
  • Why Grayscale is waiting to lower its management fees
  • How a spot Bitcoin ETF will draw more capital to crypto

This episode is brought to you by our sponsors Circle, Railgun, Flare Network

About Circle
Circle is a global financial technology company helping money move at internet speed. Our mission is to raise global economic prosperity through the frictionless exchange of value. Visit Circle.com to learn more.

About Railgun
Railgun is a private DeFi solution on Ethereum, BSC, Arbitrum and Polygon. Shield any ERC-20 token and any NFT into a Private Balance and let Railgun’s zero-knowledge cryptography encrypt your address, balance and transaction history. You can also bring privacy to your project with Railgun SDK, and be sure to check out Railgun with partner project Railway Wallet, also available on iOS and Android. Visit Railgun.org to find out more.

About Flare
Flare is an EVM-based Layer 1 blockchain designed to allow developers to build applications that can use data from other blockchains and the internet. By providing decentralized access to a wide variety of high-integrity data from other blockchains and the internet, Flare enables new use cases and monetization models. Build better and connect everything at Flare.Network.

© 2023 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.

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Author: Davis Quinton and Frank Chaparro

Mt. Gox registration and repayment deadlines pushed back again

The payee deadline for the selection and registration, in regard to Mt. Gox’s rehabilitation plan, has been postponed to April 6 after obtaining court approval.

An announcement notes that this may be the last such extension. “In the interest of making the repayments to rehabilitation creditors as early as possible, unless there are unavoidable reasons, further extension of the deadline will be difficult,” it reads.

A court has also granted permission for the rehabilitation trustee to change the base repayment deadline, early lump-sum repayment deadline and intermediate repayment deadline to Oct. 31 from Sept. 30. This means repayments will now go out between April 6 and Oct. 30

Mt. Gox is a defunct bitcoin exchange that dominated the industry’s early days before ceasing operations in 2014 after losing hundreds of thousands of bitcoins.

© 2023 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.

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Author: Adam James

Marathon ends its credit facilities with Silvergate, prepays loan

Bitcoin miner Marathon Digital Holdings said it repaid its term loan and ended its credit facilities with liquidating Silvergate Bank, reducing its debt by $50 million.  

“We have been actively building a more robust balance sheet that features increased levels of cash and unrestricted bitcoin holdings,” Hugh Gallagher, Marathon’s chief financial officer on said a statement Wednesday. “Given our current cash position, we determined that it was in the Company’s best interest to prepay our term loan and eliminate both the term loan and (revolving line of credit) facilities.”  

Gallagher added that the company also “freed up” about $75 million in bitcoin.  

The news comes shortly after Silvergate Capital Corp. announced it was winding down operations and voluntarily liquidating Silvergate Bank.  Coinbase and Paxos, among other companies, have distanced themselves from the bank over the past few days. 

 

© 2023 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.

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Author: Sarah Wynn

Grayscale’s Sonnenshein left ‘encouraged’ after hearing in SEC case

Grayscale Chief Executive Officer Michael Sonnenshein is optimistic following a hearing over the Securities and Exchange Commission’s rejection of his firm’s application for a spot bitcoin ETF.

Sonnenshein said the company was left “feeling encouraged” walking out of the courtroom, before adding that yesterday was “another example of consistency” in a discussion with The Scoop’s Frank Chaparro. It was the latest leg of a media tour following oral arguments in the firm’s case versus the SEC on Tuesday. 

For a long time, the SEC maintained a stance of no bitcoin ETF products, which, while frustrating, was at least fair, according to Sonnenshein.

“There was no imbalance in the types of products coming to market,” he said. 

The turning point, as the CEO put it, was the approval of a bitcoin futures ETF by fund group Teucrium. Unlike previous bitcoin futures products, this application was filed under the Securities Exchange Act of 1934. Approved bitcoin futures products before then were filed under the Investment Company Act of 1940.

The argument of the act’s additional protections didn’t stand up after the Teucrium approval, Sonnenshein argues. He explained that bitcoin futures are a derivative of the spot market, another focal point of the firm’s argument. 

“Inherently, if the SEC got comfortable enough with bitcoin futures contracts to approve a bitcoin futures ETF, at the same time, they had to have gotten comfortable with that underlying spot market,” he said. 

‘Reg M experts’

When asked about offering redemptions, specifically Regulation M, Sonnenshein said there’s an abundance of experts, but in reality, it’s a “pretty nuanced piece of financial product rule.”

Sonnenshein said ETFs are granted relief from this regulation, which is designed to prevent manipulation by individuals with an interest in the outcome of an offering, and prohibits activities and conduct that could artificially influence the market for an offered security, according to the Financial Industry Regulatory Authority.

“What reg M relief allows them to create and redeem shares of the ETF simultaneously,” he said. The process of creating shares, or redeeming shares, helps to keep the ETF’s share price trading in line with the underlying asset — thus eradicating the premium/discount the fund trades at. 

GBTC

Shares in the Grayscale Bitcoin Trust rose more than 2% and GBTC’s discount to net asset value was 35.7%, following oral arguments. The bitcoin fund has been trading at a discount since early 2021, meaning shares in the fund are cheaper than the underlying bitcoin. The discount has narrowed to its lowest level since October.

Several investors and competitors have rejected the asset managers’ claim that conversion to a spot-based ETF is the best outcome for GBTC. 

FTX debtors sued the asset manager this week, saying shares would be worth $550 million, or 90% more, if the asset manager reduced fees and allowed redemptions.

“Our goal is to unlock value that we believe is currently being suppressed by Grayscale’s self-dealing and improper redemption ban,” FTX CEO John Ray III said in a statement. 

© 2023 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.

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Author: Adam Morgan McCarthy and Frank Chaparro

Bitcoin mining report: March 8

Bitcoin mining stocks tracked by The Block were mixed on Wednesday, with eight gaining and the other 10 declining.

Bitcoin fell 0.3% to $21,992 by market close.

Here is a look at how the individual miners performed today:

© 2023 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.

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Author: Larry DiTore


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