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When most people consider what it takes to run a successful bitcoin mining operation, the price of the digital asset or the availability of so-called mining rigs come to mind. 

Weather also matters. 

In a recent episode of The Scoop, Marathon CEO Fred Thiel talked through the logistics of Marathon’s new West Texas plant, including how extreme weather conditions affect miner productivity.

As Thiel explains, temperature extremes in both directions have a direct impact on the energy demanded from the grid:

“If it’s 105 degrees in Austin, I bet you there’s a lot of air conditioning running and it’s running 24/7 versus just between 4 and 9. And then, in the opposite weather conditions, when it’s really cold, people are running their heaters.”

Still, in these periods of extreme temperature, Thiel says bitcoin mining operations can act as “energy capacitors,” since miners are able to switch off their machines and provide the energy they were consuming directly to the grid. 

Marathon has a contract with the Electric Reliability Council of Texas (ERCOT) through which its mining operations can be temporarily halted if the grid needs more power:

“They can just curtail us and then we shut down for an hour or 2 hours, whatever it is they need, and then we come right back online. You can’t do that with food processing industries, you can’t do it with steel, you can’t do it with most manufacturing — it’s a very unique, symbiotic relationship that bitcoin mining and the power industry can have in this regard.”

The impact of weather was on display this week with high temperatures in Texas leading to record-breaking usage of power. 

As reported by The Block, many Bitcoin miners in the state have set agreements with ERCOT to power down at peak energy demand times. Advocates say this kind of flexibility can be an asset to the grid.

Outside of the fluctuations in energy demand caused by temperature extremes, another way weather affects bitcoin mining is related to overheating the machines themselves, as Thiel explained during the interview:

“Where the high heat affects the mining industry is when the temperature starts getting into the 100 degree range… Then all of a sudden you have to start shutting down miners just because they overheat.”

Marathon is stocking the forthcoming West Texas facility with Bitmain S19 miners, which are rated for operation between 0-40 degrees celsius (32-104 fahrenheit), according to the product specifications from Bitmain’s website.

While the Texas climate is a force to be reckoned with, miners are still able to remain operational for most of the year, according to Thiel:

“When you balance it out over the course of the year, you can most probably even with severe heat spikes and curtailment resulting from that and then cold spells in the winter, you’re still most probably over 90% uptime.”

To hear more about Marathon’s bitcoin mining operation, listen to the full episode now.

© 2022 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.

Optimism’s hacker today claimed to be open to returning 18 million Optimism (OP) tokens stolen on Thursday morning.

In an on-chain message, the unknown perpetrator offered conditionally to return the exploited tokens.

On Thursday, the hacker stole 20 million OP tokens (worth more than $30 million) after the Optimism development team transferred them to a multi-signature wallet address presumed to be controlled by a market-making company called Wintermute.

Still, Wintermute did not have control over the address on the Optimism Layer 2 network and the perpetrator found a way to claim the tokens. Later, the hacker sold 1 million of them and sent another 1 million to an Optimism address believed to be owned by Buterin.

Earlier, the Wintermute team had requested that the exploiter return the 19 million tokens to a specific return address, and offered assurances that no legal action would be taken if this was done.

Optimism hacker’s on-chain message to Vitalik Buterin (source: Etherscan)

In the on-chain message to Vitalik today, the hacker offered to make the transfer to the return address, on condition that Buterin make the first move and transfer the 1 million OP tokens he had been sent in order to verify the genuineness of the return address.

“Hello, Vitalik, I believe in you, just want to know your opinion on this. BTW, help to verify the return address and I will return the remaining after you,” the exploiter wrote.

The hacker also wrote: “And hello Wintermute, sorry, I only have 18M and this is what I can return. Stay Optimistic.”

© 2022 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.

Circle, the issuer of the USD Coin (USDC) stablecoin, has agreed to acquire Cybavo, a crypto infrastructure startup that serves institutional customers.

In a blog post published today, Jeremy Allaire, co-founder and CEO of Circle, said the acquisition of Cybavo will help Circle advance its own technology capabilities and serve more customers. The deal’s terms weren’t disclosed and it is expected to close at a later date.

Cybavo was founded in 2018 in Singapore and offers a range of services, including crypto custody, staking and blockchain infrastructure. Its clients include crypto exchanges, non-fungible token (NFT) and blockchain gaming platforms and decentralized finance (DeFi) protocols. 

“Cybavo co-founders Paul Fan and Tim Hsu have built an incredibly impressive product,” Allaire said in a separate statement. “They are unlocking value for developers and operators across nearly every major sector impacted by crypto and web3. That will help Circle create new opportunities for enterprise and developer services while also providing compelling enhancements to our Circle Account and Circle API capabilities for an improved customer experience, helping to grow adoption of USDC.”

Cybavo is backed by investors, including Taiwan’s H&D Asset Management Company and New Economy Ventures. Last August, the firm raised $4 million in a pre-Series A funding round.  

This is Circle’s fourth publicly known acquisition, after equity crowdfunding platform SeedInvest, mobile investing platform Trigger Finance and crypto exchange Poloniex. In late 2019, Poloniex was spun out from Circle into a new independent company, Polo Digital Assets. Circle has also been looking for a buyer for SeedInvest since 2020.

Circle was founded in 2013 and was valued at $9 billion in February of this year. In April, the company announced a $400 million round but didn’t disclose its valuation at the time.

Circle plans to go public via the special purpose acquisition company (SPAC) Concord Acquisition Corp this year and list on the New York Stock Exchange. 

© 2022 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.

Episode 51 of Season 4 of The Scoop was recorded remotely with The Block’s Frank Chaparro and James Stickland, CEO of Elwood Technologies.

Listen below, and subscribe to The Scoop on Apple, Spotify, Google Podcasts, Stitcher or wherever you listen to podcasts. Email feedback and revision requests to podcast@theblockcrypto.com.

Elwood Technologies — an Alan Howard backed digital asset platform that is building trading infrastructure for institutional investors — closed a $70 million Series A last month co-led by Goldman Sachs and Dawn Capital.

In this episode of The Scoop, Elwood CEO James Stickland sits down with host Frank Chaparro to discuss Elwood’s recent fundraise, and to provide a closer look at the institutional activity that is occurring in the crypto market.

According to Stickland, institutional exposure to crypto “is more on the derivatives end of the market,” largely because of the lucrative spreads:

“Crypto derivative specialists are still able to make spreads they can drive buses through. Which is fantastic for them, which is obviously therefore creating FOMO, and with the synthetic nature and capability of it, is driving that real appetite.”

While derivatives are, for now, the extent of many institutions’ crypto exposure, Stickland claims that regulatory clarity regarding digital assets will “really allow engagement on spot and holding on balance sheet.”

Stickland views the combination of coming regulatory clarity along with more robust market infrastructure as having a powerful impact on the market in the long run:

“Getting great prime, getting great credit approved facilities, and the regulator making a call — that plus having some real stable infrastructure, that lights this thing up beyond all belief.”

During this episode, Chaparro and Stickland also discuss:

• Market liquidity conditions
• The evolution of neobanks
• Crypto ‘dark pools’

This episode is brought to you by our sponsors Fireblocks, Coinbase Prime & Cross River
Fireblocks is an enterprise-grade platform delivering a secure infrastructure for moving, storing, and issuing digital assets. Fireblocks enables exchanges, lending desks, custodians, banks, trading desks, and hedge funds to securely scale digital asset operations through the Fireblocks Network and MPC-based Wallet Infrastructure. Fireblocks serves over 725 financial institutions, has secured the transfer of over $1.5 trillion in digital assets, and has a unique insurance policy that covers assets in storage & transit. For more information, please visit www.fireblocks.com.

About Coinbase Prime
Coinbase Prime is an integrated solution that provides institutional investors with an advanced trading platform, secure custody, and prime services to manage all their crypto assets in one place. Coinbase Prime fully integrates crypto trading and custody on a single platform, and gives clients the best all-in pricing in their network using their proprietary Smart Order Router and algorithmic execution. For more information, visit www.coinbase.com/prime.

About Cross River
Cross River is powering today’s most innovative crypto companies, with banking and payments solutions you can rely on, including fiat on/off ramp solutions. Whether you are a crypto exchange, NFT marketplace, or wallet, Cross River’s API-based, all-in-one platform enables banking as a service, ACH & wire transfers, push-to-card disbursements, real-time payments, and virtual accounts and subledgers. Request your fiat on/off ramp solution now at crossriver.com/crypto.

© 2022 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.

Mastercard has announced plans to widen access to the non-fungible token (NFT) market through the use of card payments.

In a blog post published on June 9, Raj Dhamodharan, an executive vice president at the company, said it had partnered with Immutable X, Candy Digital, The Sandbox, Mintable, Spring, Nifty Gateway and MoonPay to enable NFT commerce.

“We’re working with these companies to allow people to use their Mastercard cards for NFTs purchases, whether that’s on one of these companies’ marketplaces or using their crypto services,” he said. “With 2.9 billion Mastercard cards worldwide, this change could have a big impact on the NFT ecosystem.”

As things stand, the process of purchasing an NFT from a marketplace like OpenSea typically involves loading a crypto wallet with funds and paying in a token, such as ETH or SOL. But that is starting to change.

Mastercard has already been working with Coinbase to support cash payments on its recently-launched NFT platform. Visa is also looking closely looking at the NFT market after buying a CryptoPunk late last year. MoonPay has also been offering an NFT payments service for its partners since January.

In the blog post, Dhamodharan said that a recent Mastercard survey of more than 35,000 people across 40 countries found that 45% of respondents has bought an NFT or would consider doing so, and that around half wanted more flexibility in payment methods.

“Overall, these integrations are designed to make crypto more accessible and help the NFT ecosystem keep growing, innovating and bringing in more fans,” he said.

© 2022 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.

Terraform Labs’ court loss over Mirror Protocol opens the doors for greater action on the collapse of stablecoin TerraUSD. 

Yesterday, the Second Circuit Court rejected Terraform Labs’ appeal against the Securities and Exchange Commission, upholding an earlier decision from the Southern District of New York. The SEC served founder Do Kwon with a subpoena as he prepared to go onstage to speak at Messari’s MainNet event in Manhattan back in November. 

In the attempted appeal, Kwon’s lawyers argued that the SEC does not have jurisdiction over Kwon and Terraform Labs, both based in South Korea (though Terraform is registered in Singapore). Kwon had promulgated the claim that the SEC had no jurisdiction back in December. His attorneys also objected to the procedure of serving Kwon directly rather than his lawyers.

In its response to the decision, the SEC noted that the court had found Terraform’s “‘purposeful and extensive U.S. contacts’ such as promoting to US investors, employing US-based personnel, and contracting with US-based entities” as the basis for the determination that a base in South Korea does not insulate the firm from US accountability. 

“I find that there is specific personal jurisdiction with respect to both Kwon and Terraform Labs because they purposefully availed themselves of the privilege of doing business in the United States,” wrote the judge in the initial district court decision. “There are employees in the United States, including the general counsel, which I think is telling.”

The case has major ramifications, both for Mirror Protocol, which allowed users to trade tokens whose prices mirrored US stocks, and for the broader network of connected projects. Most prominently that includes TerraUSD (UST), whose dramatic crash early in May wiped out over $40 billion in value and has shaken the whole crypto ecosystem.

In the lead-up to the final decision, David Shargel, a partner at law firm Bracewell, told The Block: “Whatever the Second Circuit decides will either encourage a class-action lawsuit in the United States or really throw some water on plaintiffs’ lawyers even thinking about it.”  

Consequently, the Second Circuit’s establishment of jurisdiction over Terraform in the case of Mirror has ramifications both for further legal action from US authorities, and potential class actions from private citizens.

“As the Second Circuit made clear, courts will find jurisdiction, including over foreign persons and issuers, where the US capital markets are accessed, tokens are promoted to US investors, and promoters facilitate secondary trading in the US,” Attorney Philip Moustakis, who left the SEC to join Seward & Kissel’s blockchain and cryptocurrency practice, told The Block in an email.

On June 9, South Korean news outlet JBTC reported that the SEC was investigating some of UST’s lead designers, as well as suspected money laundering by Do Kwon. Citing an unnamed source, Bloomberg’s Matt Robinson also wrote that the SEC had begun a probe into the UST crash. 

“I don’t see how the SEC or CFTC could not investigate the ashes of UST and Luna as well as other stablecoins and their issuers,” wrote Moustakis. “In fact, I would expect some coordination between the two agencies in this regard.”

There are legal complications to pursuing distinct business entities. The emergence of the Luna Foundation Guard, or LFG, in January, shortly after Terraform began its suit against the SEC, complicated matters. LFG is a non-profit registered in Singapore.

Singapore hosts a fairly opaque system of corporate registration and court record access. But given all the public scrutiny, it is certainly possible to establish a meaningful relationship between Terraform Labs and LFG. “They may be separate entities but they’re companies that are potentially run by the same people and using the same sort of infrastructure,” said Shargel.  

In the event of a broader legal case, Terraform Labs or any related entity would also likely end up facing the threat of jurisdictional discovery, a process that would put to the public record information potentially establishing links between companies. Findings can then end up streamlining civil cases, including potential class actions, that would similarly have been on the hunt to establish jurisdiction. 

The SEC had not responded to a request for comment as of publication time. The agency generally does not comment on investigations. 

© 2022 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.

As high temperatures in Texas this week have led to record-breaking power use levels for the month of June, presenting a test for state’s power grid. And the heatwave has had implications for some of Texas’s bitcoin mining operations.

Energy demand hit a peak of 72,386 megawatts on Monday, setting a record for June — only to be surpassed the following day, when demand hit 72,785 megawatts, according to data from the Electric Reliability Council of Texas (ERCOT). The all-time record was 70,257 MW on June 23, 2021.

An influx of Bitcoin miners into the state has raised questions about the potential consequences for its grid. “ERCOT expects sufficient generation to meet forecasted demand,” ERCOT told The Block via email Thursday.

Many Bitcoin miners in the state have set agreements with ERCOT to power down at peak energy demand times. Advocates say this kind of flexibility can be an asset to the grid.

Bitdeer said that while this week’s record-breaking temperatures were unusual, the company would respond as it normally does when demand goes up. The company curbs power during times of peak demand on the grid and when electricity prices get too high. It responds to signals from its retail electric provider, ERCOT traders, and power consultants.

“We curtailed operations on June 7 during the late afternoon and will continue to do so when monitoring usage on the grid as well as rising temperatures,” a Bitdeer spokesperson said via email. “We power down by using automated software triggers when power costs reach certain price points,” they added.

Bitcoin miner Argo said earlier this week that it had mined 25% less bitcoin in May for a variety of reasons — one of them being the time it had shut off power due to higher temperatures. 

“That was probably worth about five bitcoin, in terms of higher temperatures,” Argo CEO Peter Wall said in a video posted Tuesday. “We voluntarily curtailed a couple of times. Energy prices went up, we gave that power back to the grid and that happened on a couple of occasions.”

Riot has recently indicated that it would also likely be curtailing operations this week as temperatures went up.

“Next week they’re predicting 100 degrees, 5 days of 100 degrees. (…) We will turn out power off and during that time that power that we’re not using can be used in the grid itself so that it can support two or 300,ooo homes in and around our community,” said Chad Harris, Riot’s chief commercial officer on May 31 in a video the company recently published. “We already know, we’re already setting up, we’re checking everything.”

Harris was speaking at the company’s Whinestone facility, which is expected to reach a total capacity of 750 megawatts when fully built out.

© 2022 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.

PartyDAO, the decentralized organization behind the NFT bidding platform PartyBid, has raised $16.4 million in a funding round led by Andreessen Horowitz (a16z). 

Other participants in the round include Standard Crypto, Compound Crypto, Dragonfly Capital, Uniswap Ventures (after having invested in PartyDAO in April of this year) and Loot creator Dom Hofmann, according to a Thursday statement. 

PartyDAO’s main application, PartyBid, allows multiple people to buy and own or fractions of digital assets by pooling funds and sharing ownership. 

PartyDAO’s funding round suggests that interest in NFT fractional ownership remains strong despite the broader crypto market downturn. While the NFT market has largely lost value due to the broader crypto market downturn, many of the most popular NFT projects remain prohibitively expensive for the average retail buyer. 

“To date, PartyDAO has been funded entirely by our own members and on-chain revenue. This helped us focus, but limited us from going all out,” wrote PartyDAO developer John Palmer in a blog post. “Our new funding means that PartyDAO can now pursue our goals with the firepower they deserve.”

© 2022 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.

Most crypto investment vehicles in Europe traded marginally down on Thursday, while others bucked the trend. 

21Shares Cardano ETP was the worst performer on our list for June 9, trading at $12.89 — representing a daily loss of 1.55%. Other notable drops were 21Shares Ripple XRP ETP, down 0.83%, and BTCetc ETC Group’s Physical Bitcoin ETN, which lost 0.62% on Thursday. 

Elsewhere, 21Shares Tezos ETP was the best performer, gaining 4.99% to close at $12.20. VanEck’s Solana ETN also closed up, finishing Thursday’s trading session at €2.09 from an open of €2.02.

Here is a brief look at how some of the major European crypto investment vehicles performed on Thursday, June 9:

For more information on ETNs and ETPs check out The Block initial daily report on these investment vehicles here

© 2022 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

• May saw venture capital investment of around $3.5 billion in crypto startups — the lowest since last October.
• Twenty new crypto VC funds were also launched, including from a16z, Standard Crypto and SPiCE VC.

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