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Cotton or oil markets cannot settle like Bitcoin — a fairly obvious point, but the distinction between the two was at the center of a May 25 roundtable hosted by the Commodity Futures Trading Commission.

The roundtable centered on the CFTC’s consideration of a proposal from crypto exchange FTX to disintermediate derivatives trading on its platform. 

Stakeholders from the derivatives trading industry appeared in force, with representatives from exchange operators CME and ICE joined by others from Citi, Goldman, FTX, Citadel, JPMorgan and BlackRock. 

FTX CEO Sam Bankman-Fried was also in attendance, as were representatives from crypto firms including Coinbase, CoinFund, Eris Clearing and Pantera Capital. 

Despite repeated comments from participants — like LSE professor David Murphy, who said “I don’t want to talk about crypto” — the proposal originates from FTX, a crypto exchange firm that has been operating this trading structure internationally for several years and is trying to get such a structure in its US branch.

Consequently, the specifics of crypto trading loomed large over the conversation — though even FTX has very much left open the door to applying this model to other assets down the road. While there were clearly drawn battle lines among certain participants, the overall conversation avoided bombast. This may largely be due to the density of the conversation, which focused on fairly wonkish parts of market structure.

FTX’s proposal does away with futures commissions merchants, or FCMs, a critical link in the chain of risk allocation in traditional derivatives markets.

As with prior debates on the proposal, a central question is whether FTX’s structure will extend to those more traditional markets. Broadly speaking, no one at the table seemed bothered by the notion of crypto traders dealing with the effects of 24-hour markets and real-time liquidations. 

However, that changes when applied to people who depend on price stability in things like energy and food products. 

“In a scenario with the auto-liquidation scheme,” said Nelson Neale of the National Council of Farmer Cooperatives. “For a crypto trader, a bad day certainly, but perhaps not as bad as if we consider the same situation for the average American farmer.”

Consequently, those in favor of the proposal emphasized that it would not flip a switch to allow all markets to do away with FCMs.  

As Robert Creamer of Geneva Trading asked directly: “Sam, do you see or can you envision certain market types in which your model would not work as effectively as you would like or as market participants would expect?”

“When you’re looking at physical agricultural products,” answered Bankman-Fried. “I don’t want to say those are unsolvable problems, but those are problems that would require further work and further thought.”

Robert Steigerwald, the event’s moderator, at one point called the argument “the fallacy of universalization of this argument.”

JP Morgan’s Emma Richardson noted the question of gating markets that would be approved. The question is, she put it: “How we might slow down that process a little bit as products outside of crypto are proposed?”

Bankman-Fried likewise emphasized that the current proposal doesn’t prevent the CFTC from rejecting or questioning future market players looking to apply such a structure to new assets. However, there were lingering questions about how responsive the CFTC would be to those new players.

© 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.

The crypto Twitter community is encouraging everyone to check links and stay vigilant following a hack targeting the popular Moonbirds non-fungible token (NFT) project. 

Late Tuesday, 29 Moonbirds valued at about 750 ETH ($1.5 million) were taken from their owner, DigitalOrnithologist, according to on-chain data. 

Despite having only launched a month ago, Moonbirds are quickly joining the Bored Ape Yacht Club as a popular target for hackers. The collection, a product of venture capitalist Kevin Rose’s Proof Collective, has skyrocketed in popularity and was at the center of a phishing scam shortly after its launch.

Twitter sleuth 0xLosingMoney has linked this new attack to an account on Twitter named @DVincent_, which now, along with its corresponding OpenSea page, has disappeared. He also noted that, prior to the attack, other NFT holders reported being approached by @DVincent_ for private sales.

Among them, Bored Ape holder @just1n_eth described how the account approached him on May 10. “We came to an agreement on price. Then this individual insisted we use a platform called ‘p2peers.io’. I have been in the space [for] over a year and hadn’t heard of it. I instantly knew something didn’t seem right.”

Another user responded by saying “the exact same happened to me. I told him I would only use NFTTrader and he kept insisting on the other scammy platform.”

The p2peers site, which is registered to a domain company in Finland, appears to have been suspended. According to Tal Be’ery, security research manager and co-founder and CTO of ZenGo, the aim of directing people to such sites is to trick victims into signing and approving a transaction that transfers ownership to the attacker.

Phishing attacks, particularly on Twitter, continue to plague the NFT community. Last week hackers also gained access to the Twitter account of NFT creator Mike Winkelmann, aka Beeple, and carried out a phishing attack that netted them $483,000 in cryptocurrency and NFTs.

© 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.

Love, Death + Robots, an animated Netflix show, has just found a new way to interact with its audience through non-fungible tokens (NFTs).

There are nine QR codes embedded both across the show’s social media accounts as well as the show’s episodes. Watchers can use their phones to scan the QR code for access to an NFT which will appear on their OpenSea accounts. 

The feature is only available to US users through a MetaMask wallet or Coinbase account. Users will have to pay the gas fees to mint the NFTs they get from scanning the QR code. 

According to the show’s OpenSea account, the NFT floor price currently sits at around 0.003 ETH or $6 USD. Since the show’s release on Netflix, there has been $36,000 USD in trading volume with just under 27,000 unique NFT owners. 

It’s unclear what Netflix’s long-term plans are for moving into the crypto, web3 and blockchain space. The Block contacted the platform for further information on other potential forays, but had not heard back by the time of publication. 

Netflix reported a 200,000 loss of paid subscribers in its first quarter earnings this year, which it followed by laying off 150 people, many from the company’s editorial and social media teams. The company estimates it will lose another 2 million paid subscribers by the time it reveals its second quarter earnings in July. 

Love, Death + Robot’s experiment is the latest example of film and TV looking to crypto to play around with formats. Earlier this month, a new type of entertainment company called Mad Realities raised $6 million to create a “decentralized media.” This company lets viewers co-create the shows they watch by participating using NFTs they hold. 

© 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 long as VC funding continues to plow into the crypto markets, a long winter should be avoided, according to analysts at JP Morgan.

In a research report on Wednesday, the investment bank wrote that VC funding is continue to flood into the crypto markets despite the fall of crypto’s most prominent algorithmic stablecoin — and as long as this continues to happen, the outlook is bright.

“Thus far there is little evidence of VC funding drying up post Terra’s collapse. Of the $25 billion VC funding [year to date], almost $4 billion came after Terra. Our best guess is the VC funding will continue and a long winter similar to 2018/2019 would be averted,” the report said. Yet if this funding dries up, a long winter could be on the cards, it noted.

The report also said that Terra’s collapse has had limited knock-on effects on the rest of the DeFi ecosystem (despite calling it a “significant blow to the crypto world”). According to the bank, the Total Value Locked (TVL) in other DeFi projects appears to have been “relatively resilient” to its demise. TVL is a figure used to represent the value of cryptocurrencies locked up in DeFi protocols.

While Terra’s collapse did sour investor sentiment, this hasn’t spilled over into other stablecoins. The report noted the differences between types of stablecoins, explaining that each design had a different risk-profile. It noted there was a modest pressure on the algorithmic stablecoin Frax and that Neutrino USD lost its peg.

Analysts see ‘significant upside’ for crypto

The report highlighted that, according to its estimates, bitcoin may currently be undervalued.

Based on the price of bitcoin (BTC) at the time of writing, which was $29,774 according to Coinbase data via TradingView, it is currently 21% below this price.

“The past month’s crypto market correction looks more like capitulation relative to last January/February and going forward we see upside for bitcoin and crypto markets more generally,” said the report.

© 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.

At fintech conferences, payment firms, lenders, and neobanks often take center stage over their counterparts in crypto. 

But at Finance Foward in Hamburg last week, a conference set up by the eponymous German fintech publication, the fallout from the collapse of the stablecoin UST hung in the air. 

Just a week before the conference, the price of Luna (LUNA) and its related algorithmic stablecoin UST went into freefall as the latter de-pegged from its target price of $1. This led to its native blockchain, Terra, halting operations twice and early investors like Binance losing much of their gains — or worse, sustaining heavy losses. 

During a fireside chat, Binance CEO Changpeng Zhao acknowledged that the event is a calamity for the crypto industry, noting that many people suffered financial losses. 

“Having shocks like this is a strong reminder for people to learn about real projects, don’t chase high incentives, and understand that new projects are very risky,” he said. “Stablecoins should be scrutinized and we should look into more about what is backing them.” 

Conversations that The Block had on the ground with fintech founders exploring crypto products for the first time, however, suggest that opinions remain divided on algorithmic stablecoins.

Kristina Walcker-Mayer, CEO of Nuri, a neobank with a crypto wallet that boasts close to 500,000 users, believes that the UST crash will help foster innovation, noting that the early days of the internet were also tumultuous. 

“Everyone who probably had a stake in [Luna] is already a first mover and should probably be aware of the risk,” she said. “I would never say that there’ll never be an algorithmic stablecoin — we’ll see how innovation moves forward and what the new concepts coming that’ll take into consideration the mistakes that were made.” 

The neobank is currently readying a savings account on DeFi rails, which it says will be the first of its kind to be regulated by BaFin, the German regulatory body. 

Erik Pondzuweit founder and CEO of Scalable Capital, a neobroker and robo-advisor that added crypto exposure late last year, was outwardly critical, however. 

“I don’t believe in algorithmic stablecoins,” he said. “We’ve seen this before with constant proportion portfolio insurance (CPPI) in the traditional finance world,  they’re stable until they’re not anymore.” 

Instead, Pondzuweit favors those that are backed by dollar reserves such as USDC and USDT and says that the company is looking at a DeFi product using such a stablecoin for yield generation. 

Bitpanda CEO Eric Demuth was similarly critical, saying that he is personally skeptical about new projects with huge incentives such as Terra and Anchor Protocol, which at one time advertised interest rates of 20%. Instead, he favors investment in the most well-known cryptocurrencies such as BTC and ETH. 

“I personally never really invested in [Luna],” he said, likening it to the overly-hyped altcoins that eventually dropped in value. “And I don’t really get the algorithmic stablecoin, which is not really a stablecoin as it’s not privately backed.” 

The trading platform, however, continues to offer Luna on its platform with a staking option and currently has no plans to remove it. Demuth says that they are waiting it out to see how the token adapts in the coming months.

”It’s not a huge scam or something where you have to remove it,” he said. “It’s just a system that failed.” 

This differs from other fintech firms such as Revolut, which removed the wrapped version of Luna from its crypto offerings due to compliance issues according to founder Nik Storonsky. 

Every fintech founder that The Block spoke to, however, says that the effect on the market is a momentary stutter rather than a sign of the collapse of an entire industry. 

“I think people are more resilient in the crypto market than they are in the normal stock market,” said Scalable’s Pondzuweit. “It took over ten years for tech stocks to bounce back from the dot.com crash, but in the cryptocurrency world people stay with their investments.” 

Founder of banking-as-a-service fintech Solarisbank Roland Folz says that they’ll only start offering algorithmic stablecoins on the platform if one has the potential for mass adoption. 

“I’m old enough to have pretty much-seen everything,” said Folz. “But I’m young enough to be really excited about any of these future projects. Some of them will work out. Probably the majority won’t.” 

© 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.

The opposition by CME to FTX’s proposal for margin disintermediation continues to play out in the public eye. 

The Commodity Futures Trading Commission is hosting a roundtable discussion on Wednesday related to crypto exchange FTX’s proposal to disintermediate derivatives trading. 

Among 31 panelists in attendance is Sean Downey, an executive director at CME, the leading source of derivatives trading in the US today. 

Downey criticized FTX’s proposal as based on several assumptions, saying that “one is essentially that an algorithm can replace capital.” 

“I want to clarify that margin and capital are two completely different things,” Downey said. “We’ve seen that movie before. In fact, we’ve seen that movie very recently, with the algorithmic stablecoin Terra.”

Terra’s collapse has become a key talking point for a wide range of criticisms of crypto actors. 

Two weeks ago, CME’s CEO unloaded on FTX as well, during a hearing before a Congressional committee. As the largest derivatives market by dollar value in the US, CME is the most notable market incumbent to defend futures commission merchants, the primary intermediary that FTX’s proposal would potentially threaten.

In his own remarks today, Sam Bankman-Fried, the CEO of FTX, downplayed the radical nature of the current proposal. “The core feature of it, I would say, is that the risk, the risk model and the collateral are all at the central party,” he said.

Photo by Kollen Post for The Block

© 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.

Turkish-American artist Refik Anadol has auctioned off one of his latest non-fungible token (NFT) collections for $6.2 million, the Korea Herald reported on Wednesday.

Titled “An Important Memory for Humanity,” the collection features data visualizations representing data collected from the first-ever all-civilian spaceflight.

The collection is a collaboration between Anadol and LG Display with the latter’s transparent OLED panels serving as the canvas for the digital art piece, developed using artificial intelligence.

According to Anadol, using LG Display’s transparent OLED panels allowed for easy visualization of health, video, and audio data from the spaceflight including telemetry, heartbeats, and ultrasound.

Anadol called the OLED panels an “exciting medium” adding that they are the right fit for displaying “data paintings and data sculptures.”

The Turkish-American new media artist recently sold another NFT piece called “Living Architecture” for $1.38 million. The sale was part of an event held by British auction house Christie’s earlier in May.

Anadol is part of a growing group of digital artists — like Beeple, Anyma, and Krista Kim — in the alternative art space who are using NFTs as a medium for their creative work.

© 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.

StarkWare, an Ethereum scaling startup that utilizes ZK-rollup technology, has quadrupled its valuation to $8 billion after raising $100 million in a Series D funding round.

Greenoaks Capital and Coatue led the round, Israel-based StarkWare announced on Wednesday. Other existing and new investors also backed the round, including Tiger Global. The funding also had a secondary component, meaning StarkWare’s employees were able to sell shares.

StarkWare’s valuation has surged sharply in the past six months, despite the recent souring of sentiment following the Terra blockchain’s collapse. Last November, the firm was valued at $2 billion when it raised $50 million in Series C funding. In March, the Israeli newspaper Calcalist reported that StarkWare was hoping to raise at least $100 million at a $6 billion valuation.

When asked what led to the jump in valuation, StarkWare co-founder and CEO Uri Kolodny told The Block in an interview that both developer and investor communities are realizing that StarkWare is offering “the most comprehensive, most powerful, most battle-hardened, most future-proof solution to scale blockchain and that triggers a considerable amount of interest in being part of StarkWare.”

StarkWare closed the round last week after Terra’s dramatic unwind, noted Kolodny.

StarkWare scaling

Founded in 2017, StarkWare offers two key products: StarkEx and StarkNet. The former is a permissioned tailor-made Ethereum scaling engine and the latter is a permissionless decentralized ZK-rollup that supports independent deployment of smart contracts. The idea behind Ethereum scaling networks is to increase the number of transactions on the network and reduce gas fees.

Several crypto projects use StarkWare’s technology, including dYdX, Sorare and Immutable. Kolodny said the firm looks to further expand its ecosystem with new funding in place.

“This round will allow us to expand our effort in product development, engineering and business development and grow our ecosystem around StarkEx and StarkNet,” said Kolodny.

To that end, StarkWare also plans to expand its team by hiring “dozens” of people this year, said Kolodny.

The Series D round brings StarkWare’s total funding to date to $262 million. Kolodny declined to comment when asked if StarkWare is looking to launch its own native token.

© 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.

Crypto tax startup ZenLedger has closed a $15 million Series B round led by ParaFi Capital, with participation from Three Point Capital, King River Capital, and its Series A lead investor Bloccelerate VC, among others.

ZenLedger amalgamates crypto investors’ transaction information across exchanges, NFTs, DeFi, and wallets into one dashboard for tax purposes. 

The company said in a press release that the ongoing movement in tax enforcement has resulted in it having its most successful tax season to date — it boasts more than 50,000 users. 

With the new funding, it will add products such as registered investment advisors (RIAs) and certified public accountants (CPAs) to bolster its professional offerings. 

“As the digital asset space matures, we expect the demand for services that help provide regulatory and tax compliance to grow significantly over the coming years. We believe ZenLedger offers one the most comprehensive crypto tax solutions in the market today and will help meet that growing demand,” said Parafi Capital principal Ryan Navi in a press release. 

The startup declined to share the valuation it had raised at.  

This new investment comes as numerous territories around the world begin to evaluate how to tax digital assets. Most recently, Germany confirmed that crypto sold after one year won’t incur taxes while in South Korea, the government is looking at ways of easing crypto tax requirements. 

© 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.

LayerZero Labs, developer of a protocol focused on improving the flow of assets between different blockchains, is seeking additional funding just a few months after its last raise.

The Vancouver-based company has held talks with various investors in recent weeks about raising fresh funds at a valuation of $3 billion, according to people familiar with the matter. It announced a $135 million raise at a $1 billion valuation less than two months ago.

One person close to the talks said its latest raise would be denominated in equity, as well as LayerZero token warrants, and tokens native to Stargate, a cross-chain bridge protocol. 

FTX Ventures has committed to leading the $3 billion round, but it is unclear whether any other investors have agreed to participate. FTX also co-led the $135 million raise in late March, alongside Sequoia Capital and Andreessen Horowitz (a16z). Other investors in that round included Coinbase Ventures, PayPal Ventures, Tiger Global and Uniswap Labs.

LayerZero Labs co-founder and CEO Bryan Pellegrino declined to comment when reached by The Block. A spokesperson for FTX also declined to comment.

Starry-eyed

Founded in 2021, LayerZero Labs is the main developer of the LayerZero protocol, a so-called “omnichain” designed to deliver interoperability between blockchains. Its technology helps decentralized apps (dApps) build tools that can function across multiple blockchains.

After the $135 million raise, Pellegrino described the firm’s goal as to “create the generic messaging layer that underpins all interoperability between blockchains.” The funds raised in March are being used to foster the development of more dApps on the protocol.  

Earlier in March, LayerZero launched Stargate, a protocol for swapping tokens across different blockchains. It kickstarted the project with a $25 million public sale of tokens native to the Stargate bridge. The idea behind Stargate is to facilitate token transfers between blockchains with a single transaction, negating the need for cumbersome steps like locking, minting and burning, and redeeming assets.

The total value locked in the Stargate protocol grew rapidly to more than $4 billion by early April, but it has since fallen to $736 million at the time of writing, according to DeFi Llama data.

Even in an increasingly rocky market for private investment, startups trying to solve cross-chain interoperability are getting raises away. Earlier this month, Chainflip Labs — a Berlin-based startup building a cross-chain decentralized crypto exchange — raised $10 million from venture capitalists. But the $3 billion price tag LayerZero Labs is seeking may prove more challenging, with later-stage investors battening down the hatches and conserving capital.

© 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.