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Episode 50 of Season 4 of The Scoop was recorded remotely with The Block’s Frank Chaparro and Fred Thiel, Chair and CEO at Marathon Digital.

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.

Marathon Digital produced a “record” 1,259 bitcoins during the first three months of 2022. Yet the US-based bitcoin mining firm reported a Q1 net loss of $13 million, largely due to the decline in bitcoin’s price since last year’s highs.

Despite falling short on revenue estimates, Marathon CEO Fred Thiel claims that the current cost for his company to produce one bitcoin via mining is “about $6,250,” giving the firm plenty of margin before they would need to consider scaling down their operation.

In this episode of The Scoop, Fred Thiel sits down with host Frank Chaparro to discuss the intricacies of effectively managing a bitcoin mining company, along with Marathon’s growth over the years.

As Thiel explains during the interview, there are three main considerations when it comes to operating a bitcoin mining company:

“There are really three things we worry about: the price of Bitcoin, the cost of power, and our ability to deploy and then access hardware. Capital is important, too, but those are the three KPIs we look at all day long.”

While the price of bitcoin will always be prone to fluctuation, the energy cost for bitcoin miners is typically predictable since it is purchased on long-term contracts. As Thiel explains:

“Just like the airline industry will hedge their fuel purchases by buying futures on fuel, when we write a hosting agreement, we are locking in a fixed price for five years. So our cost of hosting, which is energy hosting, services, etc., is locked in a little over $0.04 a kilowatt hour for five years. And our energy provider has to take out the hedges to make sure that they’re not upside down on the energy cost.”

The third consideration — the ability to deploy and access hardware — is often a bottleneck for Marathon, because the company has to wait on government bodies to approve operational permits.

During this episode, Chaparro and Thiel also discuss:

• Renewable energy and mining operations
• Weather’s impact on bitcoin mining
• NY State’s new mining regulation

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.

Yuga Labs has removed its ability to mint an infinite number of Bored Ape Yacht Club non-fungible tokens (NFTs), more than a year after it first said it would do so — removing a potential hack vulnerability that could have seen new Apes flood the market.

“The contract owner has now been burned. While we’d been meaning to do this for a long time, we hadn’t out of an abundance of caution. Felt comfortable doing it now. All done,” a Yuga Labs co-founder and developer known as EmperorTomatoKetchup said on Twitter. 

EmperorTomatoKetchup and another Yuga Labs co-founder known as Gargamel provided a link to the transaction where the code was revoked, with a timestamp of 7:07 p.m. ET on June 7.

The issue was raised as early as June 2021, when NonFungibles CEO Dan Kelly pointed out on Twitter that, according to code on the Ethereum blockchain, it was possible for Yuga Labs, the company behind the popular NFT collection, to mint as many Bored Apes as it liked. At the time, the official Bored Apes Twitter account replied that it was obviously never going to run that code and that it was planning to revoke the ability to use it in a few days.

Cut to June 5, 2022, and this still hadn’t happened. An NFT developer known as foobar noted that this code still existed and that Yuga Labs had never revoked it.

Having this code revoked might be of relief to Bored Ape holders since the project has frequently been targeted with phishing attacks. Just four days ago, its official Discord server was hacked — for at least the second time this year — and 200 ETH ($357,000) worth of NFTs were stolen from users.

© 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.

Osmosis, a blockchain that runs a large decentralized exchange (DEX) in the Cosmos ecosystem, was halted today.

After a critical bug in its liquidity pools led to an estimated $5 million exploit, the core development team and the network validators stopped the chain at block #4713064. 

The vulnerability was first noted by a user on Reddit who warned in a now-deleted post that if someone added funds to an Osmosis pool and removed it, the position somehow increased by 50%.

On-chain transactions show that before the network was stopped, users had already begun to exploit the vulnerability to siphon funds out from Osmosis.  While the exact nature of the vulnerability is still unclear, the Osmosis team confirmed the bug let malicious users drain about $5 million worth of assets from liquidity pools.

“Liquidity pools were NOT “completely drained”. Devs are fixing the bug, scoping the size of losses (likely in the range of ~$5M), and working on recovery,” an official post from the Osmosis team stated.

Due to the chain halt, the Osmosis DEX and its native wallet remain unusable for the time being. The team is now working to issue a patch before the network could be restarted. 

© 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.

MoonPay is building out its celebrity non-fungible token (NFT) concierge service following a quiet rollout last year, according to two announcements from new hires joining the team.

Former associate director at Standard Chartered Bank, Charlotte Laborde joined MoonPay in February as strategy lead to the COO. On Tuesday she updated her job title on LinkedIn to concierge manager. Justin Johnson, who held a role as creator partnerships lead for North America at Meta, has also announced joining the team.

The Block first reported on the existence of a beta version of MoonPay’s concierge service late last year, when the company described it as a “white glove service for high net worth individuals who want to purchase NFTs in the simplest way without all the hassle of setting up a wallet, buying crypto, using that crypto to purchase an NFT and then taking custody of it.”

The increased emphasis on hiring new people for the service demonstrates MoonPay’s designs on the NFT market and a move away from its core business model of crypto onramp infrastructure for payments. 

Previous clients of the service include TV host Jimmy Fallon and rapper Post Malone. 

MoonPay CEO Ivan Soto-Wright told The Block in December 2021 that Post Malone offered the company the chance to sponsor his upcoming music video after it helped him acquire his first Bored Ape Yacht Club NFT. Soto-Wright described the concierge as “creating a really cool cultural conversation.”

Jimmy Fallon also mentioned purchasing an NFT on-air using MoonPay shortly after his own ape purchase. MoonPay was then mentioned a second time on his show in January during a segment with Paris Hilton.

But the company’s links to celebrities don’t stop there. MoonPay’s courting of celebrities continued into April when its latest funding round saw almost $87 million in investment from a star-studded list of celebs including Justin Bieber, Bruce Willis, Paris Hilton and Matthew McConaughey.

Its clients’ penchant for getting in on the craze as quickly as possible has led to its concierge service overpaying for popular NFTs. According to calculations by The Block in March, MoonPay paid on average an additional 26% for Bored Ape NFTs relative to the collection’s floor price.

© 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.

Blockchain operator Solana this morning announced a new $100 million fund for Korean web3 startups.

Solana Ventures and Solana Foundation, the Switzerland-based entity that promotes the growth of the network, have jointly stumped up the funds. They will be used for investments and grants in a range of Korean crypto startups, but with a focus on those in gaming, non-fungible tokens (NFTs) and DeFi.

“We have been working with Korean developers and actively investing in the ecosystem for some time now, which helped us build a deeper understanding of the Korean market,” said Johnny B. Lee, general manager of games at Solana Foundation, in a statement. “Korea is at the forefront of web3 game design and development and we are focused on helping even more builders in Korea bring their ideas to reality.”

The fund is the first launched by Solana Ventures with a distinct geographic focus. It comes just a few weeks after the spectacular collapse of Terra and UST, a blockchain and its stablecoin that numerous crypto startups in Korea had relied on. Terraform Labs founder Do Kwon is currently facing prosecution in South Korea.

Beyond capital, Solana will offer Korean developers help with product and engineering, and will have advisors based in the region, it 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.

Digital asset bank Custodia, previously known as Avanti, is suing the Federal Reserve Board of Governors and the Federal Reserve Bank of Kansas City for delaying a decision on its application for a central bank master account.

A Federal Reserve master account allows institutions direct access to the Fed’s payment systems. It enables the most direct access to the US’s money supply available to financial institutions. Those without master accounts are often forced to rely on partner banks with master accounts to provide services.

The Wyoming-chartered crypto bank Custodia wants an account to “sharply reduce its costs” and “bring new products and options to users of financial services,” according to the complaint. The bank says direct access is “vital” to its ability to operate effectively. Forbes first reported the news Tuesday.

But its application has been stuck in limbo before for more than a year and a half, according to its complaint.

Custodia filed its application with the Kansas City Fed in 2020. The Kansas City Fed confirmed Custodia’s application was complete and contained “no showstoppers,” according to the complaint. In the spring of 2021, the Fed board of governors stepped in and sought control of the decision-making process, starting the delay.

Between then and now, Custodia contends that it has exhausted all informal means of obtaining a decision on its application. 

The firm argues the delay violates the one-year statutory deadline and breaches the schedule on the filings, which says a master account decision usually takes five to seven days. 

The delay has also forced the bank to put off offering its services as a solo bank and instead partner with a correspondent bank that has a master account, which the firm contends is costlier and introduces counterparty credit risk and settlement risk that it wished to avoid by having a master account of its own.

“There is a black-box bureaucratic process with no clear rules or standards for processing applications, no clear lines of accountability or responsibility between the Board and Kansas City Fed, and no clear end to Custodia’s application saga in sight,” said the complaint.

Custodia is seeking a “speedy hearing” and a court order compelling the Kansas City Fed and the Board to process and decide the application within 30 days of the order. 

The full complaint can be read below:

Custodia Filed Complaint by MichaelPatrickMcSweeney on Scribd

© 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.

Grayscale, a leading crypto asset manager, has retained a heavy hitter from the Obama-era Department of Justice.

The new legal counsel, Donald B. Verrilli Jr., was the solicitor general under President Obama. The role is a Department of Justice appointment that represents the US government in cases before the Supreme Court.

Verrilli is currently a partner at Munger, Tolles & Olson. 

Jennifer Rosenthal, Grayscale’s VP of communications announced the hire in a June 7 Twitter thread, noting the firm’s “unwavering commitment to converting $GBTC to an #ETF.” 

GBTC is Grayscale’s Bitcoin Trust, an investment vehicle that tracks the performance of Bitcoin, albeit at a premium. The firm has spent an extended amount of time wrestling with the US Securities and Exchange Commission to get the regulator to approve the conversion of the trust to an exchange-traded fund (ETF). 

The SEC has denied a steady stream of applications to issue spot Bitcoin ETFs on the grounds that the underlying spot markets fall under no market regulator’s oversight. The commission did, however, begin allowing Bitcoin futures ETFs to trade back in October. 

Verrilli’s track record in litigation is extensive, but his available biographies do not highlight securities law. He does, however, have extensive experience in Administrative Procedures Act cases, which Grayscale has in the past cited as a legal argument against the SEC’s handling of its ETF application. 

© 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

• Last week a grand jury indicted former OpenSea head of product Nate Chastain for actions related to an alleged insider trading scheme.
• But Chastain wasn’t indicted for securities law violations, which are usually associated with insider trading.
• If successful, the case could create a way for US regulators to police front-running in crypto regardless of whether implicated tokens are securities.

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Decentralized finance-focused venture deal activity slumped in May, according to data gathered by The Block Research.

Funding in terms of a dollar amount came in at $176.30 million for the sector in May, its lowest amount since September 2021.

Further, DeFi wasn’t one of the two most popular deal types, according to John Dantoni, an analyst at The Block Research. May represented the first time this has occurred since July 2020.

Funding hasn’t entirely dried up in the sector, however. 

There were 12 funding raises over $10 million for DeFi and Web3 in April. Some notable examples in 2022 include ox Labs, a decentralized exchange protocol, which raised $70 million in Series B funding, and Tribal, a B2b financing platform bridging TradFi and DeFi, which raised $60 million. BloXroute, a firm built for DeFi trading, raised $70 million led by SoftBank in April. In May, Certora, which provides security analysis for smart contracts, raised $36 million in a Series B led by Jump Crypto. 

Despite these deals, the drop in DeFi funding is a stark contrast to the summer of 2020, often referred to as “DeFi Summer,” which marked billions locked into DeFi applications and protocols, according to previous research complied by The Block. 

Summer of DeFi notable deals.

© 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.

A large number of bitcoin miners saw their stocks fall on Tuesday.

Cipher Mining, Argo Blockchain and Iris Energy posted some of the largest drops — -7.80%, -5.31% and -4.72%, respectively.

Argo announced on Tuesday that it mined 25% less bitcoin in May due to factors like network difficulty and pool rewards.

Network difficulty increased by 5.56 % on April 27  and 4.89% on May 11, but more fell back down by -4.33% on May 25, according to BTC.com.

Iris Energy, on the other hand, mined 10% more bitcoin in May than in the month before, according to its latest monthly update.

Here’s how crypto mining companies performed on Tuesday, June 7:

© 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.