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Twitter has taken its “most severe enforcement action” against Aave founder Stani Kulechov’s account by permanently banning it.

Kulechov’s verified account was suspended Thursday, a day after he posted a joking tweet saying that he was joining Twitter as interim CEO.

Earlier this week, Twitter accepted Tesla CEO Elon Musk’s takeover offer worth $44 billion, which will make the social media company private. Still, until the deal closes, Twitter CEO Parag Agrawal will remain CEO of the company, he told The Verge earlier this week. The deal is expected to close sometime this year, subject to stockholder and regulatory approvals.

Suspension amid Musk’s call for free speech

Kulechov’s Twitter account suspension comes as Musk has strongly advocated for free speech — that, in fact, being one of the main reasons for his acquisition of Twitter.

“Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated,” Musk said in a statement earlier this week.

“By ‘free speech’, I simply mean that which matches the law,” Musk later clarified in a tweet. “I am against censorship that goes far beyond the law.”

Since Kulechov’s account suspension is permanent, he will not be allowed to create new accounts, according to Twitter rules.

“When we permanently suspend an account, we notify people that they have been suspended for abuse violations, and explain which policy or policies they have violated and which content was in violation,” the rules say.

Violators can appeal permanent suspensions if they believe Twitter has made an error. Upon appeal, if Twitter finds that a suspension is valid, it responds to the appeal with information on the policy that the account has violated.

It is unclear whether Kulechov plans to appeal. Neither Kulechov nor Twitter immediately responded to The Block’s requests for comments.

© 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.

Reality Labs, Meta’s business focused on building a virtual world where users can socialize, work, and play, is not yet profitable. But it is laying the groundwork for an “exciting 2030s,” said Meta CEO Mark Zuckerberg, in today’s after-hours earnings call.

Reality Labs reported a loss of $2.9 billion in the first quarter of 2022. “I recognize it’s expensive to build this, it’s something that’s never been built before. And it’s a new paradigm for computing and social connection,” Zuckerberg said.

“So, over the next several years our goal from a financial perspective is to generate sufficient operating income growth from Family of Apps to fund the growth of investment in Reality Labs, while still growing our overall profitability.”

One near-term focus, Zuckerberg said, will be on building out better hardware and Horizon Worlds, the company’s latest social VR product, to help creators make money. Meta stirred controversy earlier this month when it said it would take nearly half of the earnings of any items sold on Horizon as transaction fees.

“Our other focus for Horizon is building out the metaverse economy, and helping creators make a living working in the metaverse,” said Zuckerberg. “We expect to be meaningfully better at monetization than others in the space, and we expect that should become a sustainable advantage for our platforms as they develop.”

On the hardware side, the company is working on developing virtual reality headsets. It is scheduled to release a higher-end VR headset, codenamed Project Cambria, later this year. That headset will be designed specifically for work use cases and eventually “replacing your laptop and work set up,” according to Zuckerberg. The hardware devices will also feature eye tracking and face tracking so users can make good eye contact in the virtual world.

Earlier this year, Meta Platforms lost over $250 billion in market value after a disappointing fourth quarter and first quarter outlook. Shares crashed around 26% when the company reported that daily active users fell by one million, due to increased competition from short-form video app TikTok.

The company has seen slowed growth in 2022, because of privacy changes to Apple’s iOS operating system that have made it hard to both target advertising to users and measure the outcome of those ads on the platform.

Meta stock soared after hours on earnings, up 17.5% in late trading.

© 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.

PayPal’s CEO stressed during the company’s quarterly earnings call on Wednesday that digital wallets will play a key role in the digital payment firm’s future growth. 

“We need to double down on the digital wallet,” PayPal president and CEO Dan Schulman said during the call. “We believe that is where the future of the industry is going, it’s the future of PayPal, it is the heart of what we’re trying to do from an engagement perspective.” 

Schulman cited several statistics as the rationale: more than 50% of the PayPal base uses the company’s digital wallet, customers who use the digital wallet transact 25% more at checkout than users who don’t, and over 70% of buy now pay later (BNPL) users did it through the firm’s digital wallet.

In addition, according to Schulman, the digital wallet’s churn rate, or the rate at which customers stop using a given service, is 25% less than the rest of the PayPal customer base. 

“Across both PayPal and Venmo, we are working hard to have our digital wallets at the center of our consumers’ daily financial lives,” Schulman said.

In January of this year, PayPal confirmed that it is also actively exploring a stablecoin, or a cryptocurrency pegged to a country’s currency like the US dollar.

Alongside its data on digital wallet usage, PayPal announced Wednesday that it earned $6.5 billion in net revenue and added 2.4 new accounts in the first financial quarter of 2022.

© 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.

Sky Mavis, the company behind the play-to-earn game Axie Infinity, said it is looking to become a “zero-trust organization” in the wake of last month’s $600 million attack on the Ronin network.

This refers to a security stance in which the team will constantly scan for new threats that may be targeting the game’s creator Sky Mavis, the team said in a new post-mortem report published Wednesday. 

“Our goal is to become a fully antifragile, zero-trust organization. Zero-trust is a framework that assumes that Sky Mavis is always at risk to external and internal threats,” the report said. 

The report recalled the March 23 attack during which hackers stole more than 173,600 ether and 25.5 million USDC hackers from its Ethereum-connected bridge. The overall loss amounted to more than $600 million and made it one of the biggest crypto hacks to date.

These hackers were later identified as the North-Korean hacking entity known as Lazarus Group.

Ronin to have 100 validator nodes

The Ronin team is now focused on redesigning its still-closed cross-chain bridge and increasing the number of validators — entities that play part in verifying transactions. At the time of the security breach, Sky Mavis had nine validator nodes.

The attackers took control over four of the total nine validators. First, they stole four validator keys controlled by Sky Mavis. Yet another validator — belonging to Axie DAO — was compromised through a “gas-free signature”. After this, the hacking group attained a majority control (5/9 validators) and had the ability to make illegitimate fund transfers from Ronin’s bridge on Ethereum.

As revealed in the Wednesday update, Sky Mavis is planning to expand the total validator nodes to 21 in the next three months, and target having more than 100 nodes in the long run to strengthen the sidechain security.

In recent weeks, Sky Mavis said it conducted internal surveillance checks in collaboration with two cybersecurity firms — CrowdStrike and Polaris Infosec. It also announced a bug bounty of over $1 million for ethical hackers who can find vulnerabilities in its code. 

As far as Sky Mavis goes, it raised $150 million from a group of investors, including crypto exchange Binance and VC firms a16z and Paradigm, as part of its efforts to reimburse affected 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.

Meta Platform Inc., formerly known as Facebook, released its first-quarter 2022 results on Wednesday, reporting that its Reality Labs unit, which focuses on the company’s metaverse, posted a $2.9 billion loss in Q1 of 2022.

This loss figure represents an increase from the $1.8 billion loss in Q1 2021.

On the revenue side, Reality Labs earned $695 million during the first quarter of this year, up from Q1 2021’s $534 million.

“We expect 2022 total expenses to be in the range of $87-92 billion, lowered from our prior outlook of $90-95 billion,” the earnings report states. “We expect 2022 expense growth to be driven primarily by the Family of Apps segment, followed by Reality Labs.”

Reality Labs is focused on virtual reality and augmented reality products and services, through which users can socialize, work, and play. In its business financials earlier this year, Reality Labs posted a more than $10 billion loss across 2021.

Around $4 billion of the losses were due to employee costs, R&D, and costs of items sold, Meta CFO David Wehner said in the company’s February earnings call.

Meta stirred controversy earlier this month when announcing that they would take nearly half of the earnings of any items sold in the metaverse, as transaction fees, as The Block previously covered.

The total company’s total revenue for Q1 2022 is $27.9 billion, per the report, up from $26.1 billion a year ago.

© 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.

Mayor of New York City Eric Adams discussed crypto regulation, financial literacy in schools, and the future of recordkeeping in his closing keynote interview during an event on Wednesday.

“Crypto and blockchain are [the] next chapters in the future, crypto and blockchain are here to stay, we can’t let this opportunity pass us by,” said Adams in a virtual Q&A with Financial Times associate editor Jonathan Guthrie.

When asked about regulation, and whether crypto should be regulated by the SEC, Adams discussed cooperating with lawmakers and industry insiders to bridge the traditional financial sector with this emerging area. The goal, he said, is to move “this important new entity” in the right direction.

“The most important thing is to listen to those who are in the industry. Because this is relatively new and sometimes we are fearful when it comes down to new technologies,” said Adams. “It is imperative that we work with the state lawmakers and regulators. I’m really happy to see Governor Hochul is leaning into this industry as we examine what are the bureaucratic issues that we need to look at.”

Adams also discussed the need for financial literacy in schools that includes crypto in the curriculum, something that three state governors also advocated for in an interview with CNBC earlier this month.  

“I’m going to partner with all of the leaders in this industry and start building out school curriculum so we can have young people prepared to fill jobs that will be available [in crypto],” he said.

Adams also discussed plans for more affordable housing opportunities for younger people trying to break into the crypto sector, who may be taking on equity over large salaries to work at crypto startups in the city. The focus, he said, will be on creating spaces like co-op living. 

He also discussed the possibilities of using blockchains for record-keeping of the city’s documents.

“We are dealing with real issues of how do you have proper documentation, how do you ensure fraudulent deeds are not being used? Fraudulent other documents and records. We believe that blockchain brings a real opportunity in the record-keeping department.”  

© 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.

Galaxy Digital’s Mike Novogratz and ARK Invest’s Cathie Wood see the tides changing for a spot bitcoin exchange-traded fund (ETF) and for Twitter under Elon Musk.

During a Tuesday panel at FTX and SALT’s Crypto Bahamas conference, Novogratz and Wood addressed how the recent Twitter deal could be good for crypto and how coming shifts in the political sphere could lead to the approval of a spot bitcoin ETF. 

Twitter

Novogratz and Wood butted heads over the recent deal between Tesla head Elon Musk and Twitter. Musk bought the social media platform with the intention of taking it private in a $44 billion deal this week.

Last year, Wood participated in a panel about bitcoin with Twitter founder and Block Head Jack Dorsey and Musk. Since then, Wood said she suspects their relationship has grown.

“I think Jack Dorsey and Elon Musk have gotten much closer since our ‘B Word’ conference last year,” she said.

Given this relationship and where it began, Wood said she expects more crypto aspects to crop up on the platform.

“I think we’re going to see a lot more crypto permeating Twitter,” she said.

For his part, Novogratz said he’s skeptical of Musk’s ability to decentralize the platform. In his view, the long-term hope is for decentralized social media, and the recent deal has just shifted the point of centralization from Twitter’s board to Musk.

Wood took issue with this, pointing out that Musk has frequently delivered on his promises over time, and she’s confident he will open-source the platform.

Bitcoin ETF

A spot bitcoin product has been notoriously challenging to get through the US’s Securities and Exchange Commission (SEC), with the securities regulator rejecting every proposal it’s been pressed to make a decision on thus far. The SEC has, however, approved futures-based products, likely due to their reliance on the Chicago Mercantile Exchange, which chairman Gary Gensler has expressed as a more palatable venue for market surveillance.

ARK’s offering was rejected at the start of this month. Yet Wood said ARK will reapply at some point. Galaxy’s proposal is still before the SEC.

For the time being, Wood said she’s confused by the SEC’s logic of approving a futures-based product without a sense of comfort with the underlying. Grayscale, which has an application for a spot ETF with the SEC, has expressed similar sentiments.

Novogratz said he believes an approval could come soon, as Gensler faces mounting pressure from crypto-friendly lawmakers. In Novogratz’s view, Democrats will likely lose in the midterms, and Gensler will shift his views on bitcoin “sooner rather than later,” as more technology-focused lawmakers take their seats.

“I do think we’ll have a bitcoin ETF this year, maybe next year,” he said.

Wood said it’s less of a party divide pushing crypto-friendly regulation forward, it’s lawmakers who are focused more on technology than financial services.

“Those who are thinking about it from a technology point of view are accepting it,” she 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.

Bitcoin miner Riot announced Wednesday plans to expand its mining capacity by up to 1 gigawatt (GW) in a new facility located in Navarro County, Texas.

Between the new site and the Riot’s growing Whinstone facility, the company’s long-term goal is to reach 1.7 gigawatts in total developed capacity.

“Upon completion of the Expansion, Riot’s developed capacity will total 1.7 GW, establishing the Company among the largest Bitcoin mining operations globally,” said Jason Les, CEO of Riot.

Riot has already started developing an initial 400 megawatts of capacity on a 265-acre site in Navarro. Those mining machines should go online by July 2023. The facility will use immersion-cooled technology and will also offer hosting services.

According to Riot’s estimates, the first phase of the project will cost $333 million, which is scheduled to be invested gradually between now and the first quarter of 2024. According to the company, it is also expected to create around 270 direct jobs.

In the future, the Navarro site will be able to handle an extra 600 megawatts, via the 345 ​​Kilovolt switch located 1,250 feet away from the property. However, Riot hasn’t announced when it plans to move on to this second phase.

The new site is about a two-hour drive from Riot’s Whinstone facility in Rockdale, Texas. The company has already built out 400 megawatts of capacity there and plans to reach a total of 750 megawatts.

© 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

• NFT Worlds is essentially a decentralized metaverse built upon existing centralized infrastructure, Minecraft.
• Using its own internal tool, NFT Worlds is able to get unique imagery of each world and sync the changes made on the world in Minecraft back to its corresponding NFT.
• But because it relies on Minecraft’s source code, NFT Worlds is at the discretion of Minecraft developer Mojang Studios and Microsoft, which might lead to the erosion of NFT Worlds’ value proposition.

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The Commodity Futures Trading Commission will hold a public discussion on disintermediation next month, with a proposal from crypto exchange FTX looming large. 

The CFTC announced the May 25 roundtable on Wednesday. CoinDesk’s Jesse Hamilton broke the news of the discussion last week.

Critical to the roundtable is the role of futures commission merchants, which FTX is proposing to do away with via its proposed model for clearing derivatives. The elimination of FCMs would streamline trading by reducing the number of times assets change hands, each layer of which entails separate requirements for liquidity holding. 

However, it’s a new way of approaching clearing that has generated major blowback from both progressives suspicious of financial operations and entrenched financial institutions ⁠— including FCMs themselves. 

The CFTC’s announcement does not mention FTX by name, instead referring to “a number of registered entities [that] have discussed with CFTC staff proposals to offer ‘non-intermediated’ or direct trading and clearing of margined products to retail customers.” 

Representative David Scott (D-GA), the chairman of the House Agriculture Committee, took aim at FTX’s proposal at a hearing with CFTC chairman Rostin Behnam at the end of last month, announcing an oversight hearing on the subject that has yet to materialize on the Congressional calendar. 

© 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.