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A governance proposal for Compound Finance aimed at removing the protocol’s user rewards failed on Thursday, despite heavy support from VC firm Andreessen Horowitz (a16z).

There were 499,849 votes against the proposal and only 492,678 for it (where votes equals tokens). Notably there were more than twice as many crypto addresses that voted for the proposal, suggesting multiple large holders of COMP tokens were against it.

At present, Compound, which is a lending and borrowing protocol, works like this. It pays COMP tokens out to borrowers and lenders on its protocol, a process also known as liquidity mining. Such token rewards serve as a yield paid to users locking in funds into Compound.

Yet some of the protocol’s contributors and investors view these rewards as an issue.

Compound developer TylerEther, who made the proposal to Compound’s governance forum, pitched the idea that Compound should slash these rewards to zero. He argued that user COMP rewards do not add value and those who receive the rewards immediately sell them. 

The developer made the case that though the COMP rewards were helpful in bootstrapping the protocol in its early phase — by rewarding early users — they have grown to be “very problematic” now.

“Since most COMP being distributed by the current rewards program is instantly sold off, existing users and token holders are at a great disservice. Their share of the protocol is being diluted for nothing other than farming COMP for profit,” Tyler’s proposal read. 

During the voting period, a16z came out in full support of the proposal. The voting results show that more than half of all favorable votes (492,678) came from a16z. 

As an entity running a crypto-focused fund worth $4.5 billion, a16z has made sizable bets in the Ethereum’s DeFi ecosystem, including Compound and other popular protocols like Uniswap. In the past, a16z has been criticized for swaying decisions in specific DeFi protocols it has invested in — primarily by voting with large amounts of governance tokens bought directly from the protocol founders. 

Highlighting the issue with Compound’s current system for rewards, Jeff Amico, a partner at a16z Crypto and head of network operations, said the newly-minted Compound rewards go to “recursive positions,” which he claimed were not a valuable use of the limited supply of tokens. 

A recursive position is when a user deposits funds into a lending protocol like Compound and uses the collateral to borrow more of the same asset in an effort to grow the position, so they can earn more COMP tokens. Amico estimated that it cost the Compound protocol $60 million annually to pay these rewards.

Those who voted against the proposal, including Compound’s co-founder and chief technology officer Geoffrey Hayes, said the proposal could have harmed Compound’s level of decentralization. Besides supporting a protocol’s liquidity, it is believed that token rewards help contribute to decentralization. By distributing a token far and wide rather, it lessens the chances that the ownership is concentrated in a few hands.

“I want to be very clear: decentralization of the protocol has been, and should continue to be, the primary target of governance,” Hayes said. He added the protocol should not hurry into passing it and that it should take more time to evaluate its consequences. According to Hayes, stopping the rewards could turn out to be a mistake and lead to a fall in overall health of the protocol.

© 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.

Venture capital giant Andreessen Horowitz (a16z) is diving deeper into the crypto market with the launch of a new academic lab dedicated to tackling research problems facing the fast-growing digital asset industry. 

Dubbed a16z Crypto Research, the new unit will be led by Tim Roughgarden, a prominent academic expert in game theory who has been a professor at both Stanford and Columbia. He joined a16z as a research advisor last year and will now take the title of head of research.

Roughgarden’s goal is to create a university-like effort within the firm akin to Bell Labs or DeepMind, the artificial intelligence research subsidiary of Google’s parent company Alphabet. 

“It is clear that web3 is a new scientific breakthrough that brings together ideas from computer sience, finance, economics and the humanities,” noted Ali Yahya, a general partner at Andreessen Horowitz, in an interview with The Block. 

The new lab will aim to pinpoint and address the fundamental research problems facing the pursuit of mainstream crypto adoption. In some instances, the group may develop new tools that can help a16z portfolio companies grow their business. The investment firm Paradigm has pursued a similar strategy. For instance, Paradigm recently worked with Rick and Morty co-creator Justin Roiland on a new mechanism for non-fungible token (NFT) sales. 

A16z aspires to contribute to research breakthroughs that can contribute to deployable code and technology as well as have an impact on the broader academic research field. The group may not simply focus on topics within the computer science or engineering fields, and could also explore topics like how NFTs should be thought of in the context of art history or the impact of decentralized autonomous organizations on political science. 

“Capital ‘R’ Research,” said Roughgarden, adding that he wants members of the team to nab relative research awards and contribute to peer-reviewed journals. “The main pitch is that there is an opportunity to do fundamental work right now that will be taught to undergrads in 2030,” he said. 

Joining Roughgarden on the new team are academic researcher Joe Bonneau, whose curriculum vitae spans social networking privacy and crypto protocols,  Standard PhD student and NFT product design expert Scott Kominers and Valerie Nikolanko, who was previously a research scientist and cryptographer for the Diem blockchain project. 

© 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 startup Aptos Labs has partnered with Google Cloud in a move that will allow companies and developers to build more easily on its network. 

Google Cloud will be one of Aptos’ inaugural cloud partners, in the first time that Google has opted to support a Layer 1.

Through this deal Aptos hopes to provide scalable, secure, and sustainable infrastructure for builders, it said on Thursday in a news release shared exclusively with The Block. 

The Layer 1 has a big tech pedigree, having been founded by former Meta employees. It launched with the goal of building a blockchain able to reach a wider audience of “billions” of people. The technology is based on the Diem network, which the company’s founders worked on while at Meta (former Facebook). The company also announced in March the launch of its “public Devnet.”

Through the Google Cloud collaboration, anyone can power a node on the Aptos network in less than 15 minutes, it said, adding that it is a step toward enabling developers to build without hardware requirements. 

Aptos co-founder and CEO Mo Shaikh said the team had been impressed with Google Cloud’s “commitment to decentralization.”

Aptos said that it takes about 15 minutes to set up the node if you already have an account. For new users, Google Cloud’s free trial gives users $300 in free credits. 

In a blog post it said that running a node on the Cloud usually provides better stability and availability compared with running it on your laptop. Validator support will be added in the future, it said. 

The move comes hot on the heels of the start up’s $200 million seed round, which it announced in March. The round was led by a16z, with other investors ranging from Multicoin Capital to Coinbase Ventures. At the time, Aptos founders told TechCrunch they were “well off into the unicorn territory” in terms of valuation.  

© 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

• The merger and acquisition deals in crypto mining over the past five years have fundamentally reshaped the industry’s landscape.
• In 2017, mining operators, hosting providers, landowners and power plants, while being partners to one another, were mostly separate businesses. 
• But now, they have become more overlapped and integrated than ever. 
• We take a look at how the M&A deals have played a role in the consolidation of the crypto mining industry.

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members of The Block Research.
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this Research content on The Block Research.

Bastion, currently the biggest DeFi protocol on the Aurora blockchain — a subnet of the NEAR blockchain — raised $9 million in a Series A funding round as it plans to expand.

Three Arrows Capital led the round, with FTX Ventures, Jump Crypto, Jane Street, CMS Holdings, Crypto.com Capital and others participating.

Bastion was launched last month by pseudonymous founder “N^2” aka “Near Squared.” The protocol offers a lending and stableswap platform on Aurora — an Ethereum-compatible scaling network created by the team at the NEAR protocol.

More than a month after its launch, Bastion has become the biggest DeFi protocol on Aurora, according to data from DeFi Llama. Its current total value locked or TVL stands at over $600 million. 

Bastion plans to further expand its ecosystem with new funding in place, N^2 told The Block. To that end, the project plans to hire people for its marketing and business development functions. Its current headcount is five people, N^2 said.

The Series A funding was raised via a mix of equity and token rounds, said N^2, adding that “value is in the token.”

Bastion launched its native token BSTN earlier today with a total supply of 5 billion. Users who pre-mined the token on Bastion or who participated in Bastion’s $410 million “lockdrop” IDO (initial DEX offering) are eligible to claim their BSTN airdrop on the Bastion app.

Lockdrop is a way of distributing tokens, similar to an airdrop. But unlike an airdrop, where free tokens are given, in a lockdrop, users have to lock their assets to receive a free reward.

N^2 said users locked in $410 million worth of capital into Bastion via its lockdrop IDO for up to 12 months in exchange for $3 million in NEAR rewards and 11% of BSTN’s total supply.

The rest of the token supply is allocated for team members and advisers, liquidity mining incentives and treasury.

Jane Street is a repeat investor in Bastion. The trading giant also participated in Bastion’s funding round last month, in which the protocol didn’t disclose how much it raised.

© 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.

Tron will have its own native stablecoin called USDD from May 5, Tron founder Justin Sun announced on Thursday.

The stablecoin won’t operate like traditional ones do, such as Tether (USDT) and Circle’s USD Coin (USDC), which keep dollars (and other assets) in bank accounts as backing. Instead USDD will be an algorithmic stablecoin like TerraUSD (UST) and Frax Finance (FRAX).

The stablecoin will have a similar system to these algorithmic stablecoins in order to keep its peg to the US dollar. As Sun explained, “When USDD’s price is lower than 1 USD, users and arbitrageurs can send 1 USDD to the system and receive 1 USD worth of TRX. When USDD’s price is higher than 1 USD, users and arbitrageurs can send 1 USD worth of TRX to the decentralized system and receive 1 USDD.”

The Tron founder claimed that USDD’s algorithm will ensure the stablecoin maintains its US dollar peg regardless of market conditions.

Getting $10 billion of backing

A decentralized autonomous organization (DAO) called Tron DAO will manage the blockchain’s stablecoin. According to Sun, Tron DAO will administer a reserve with a 30% interest rate.

Tron DAO will also provide custody reserves of up to $10 billion in highly liquid assets to serve as collateral backing for USDD. This is similar to Terraform Labs founder and CEO Do Kwon’s plan to acquire $10 billion of bitcoin to serve as reserves for UST.

Sun did not state which assets would serve as collateral but said they would be “highly liquid assets raised from initiators of the blockchain industry.” The assets would be used as a reserve to help keep the stablecoin pegged to the US dollar.

According to Sun’s announcement, USDD will be available on Ethereum and BNB Chain when launched via the BitTorrent network’s cross-chain protocol.

Justifying the need for a native stable currency on Tron, Sun explained that the expansion of USDT transaction volume on the network signaled the need for USDD. The former stablecoin gained popularity on the network from traders looking to exploit arbitrage opportunities without paying too much in transaction fees.

Today’s announcement follows on the heels of reports that Near Protocol, another blockchain network, is set to launch its own stablecoin — that may be in a similar guise to UST.

© 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 Australian Prudential Regulation Authority (APRA) set out initial risk management expectations for regulated entities dealing with crypto assets on Thursday, as well as a policy roadmap for introducing further standards over the next three years.

In a letter from APRA Chair Wayne Byres, the authority, which supervises banking, insurance and pension institutions in Australia, emphasized the need for due diligence and risk assessments when dealing with crypto assets. 

Its roadmap revealed plans to introduce operational risk standards by 2024, and, tentatively, crypto asset requirements and stored value facility standards by 2025.

It also advised that it would be looking at “possible approaches to the prudential regulation of payment stablecoins, among others.” 

Crypto has been growing in popularity in Australia. According to the Australian Taxation Office, more than 800,000 Australian taxpayers transacted in digital assets over the last three years, with an increase of 63% in 2021 over the previous year. Surveys from other companies, such as comparison site Finder, give estimates of the proportion of Australians holding crypto as high as 18%.  

The regulatory moves are ramping up as more companies and products enter the market. FTX announced plans to enter Australia last month, and last week The Block reported that four ETF issuers have agreed to cover the margin requirements to list new crypto-related products on Cboe Australia.

Embracing blockchain

Traditional finance institutions and government agencies have also been embracing blockchain technology. 

Earlier this year, three of the country’s four major banks started issuing digital bank guarantees for retail property leases, according to the Treasury, while the country’s main clearinghouse ASX has also replaced its Clearing House Electronic Subregister System with distributed ledger technology. 

In August last year, the Australian Border Force successfully concluded a trial using blockchain to digitize trade processes with partners in Singapore.

But APRA was not the only government body down under making crypto announcements today. The Australian Transaction Reports and Analysis Centre (AUSTRAC) — the country’s financial intelligence agency responsible for monitoring financial transactions linked to crime — also released guidelines on preventing the criminal abuse of digital currencies. 

A consultation with the industry is also underway at the Treasury with regards to regulating “crypto asset secondary service providers” such as exchanges. The paper, released on March 21, suggests regulators are leaning toward creating new frameworks for cryptocurrencies as opposed to bringing them under existing regulations.

However, the failure of previous attempts to regulate exchanges does still loom large in Australia. Melbourne-based exchange ACX.io suspended withdrawals in 2021 before falling into administration the following year. The fact that the company was a member of Blockchain Australia and held a digital currency license issued by AUSTRAC didn’t prevent investors from losing an estimated AUD10 million. 

“Many commentators have called for us to shoehorn crypto into the financial products regime. But crypto assets do not require the government to assure trust in the same way that financial products do… The Morrison Government wants to make sure that consumers can trust the exchanges they use to buy crypto,” the minister for superannuation, financial services and the digital economy, Jane Hume, said last month at Australian Blockchain Week 2022.  

“The Government will not be protecting consumers from market volatility. But Australian investors will be sure that if they use a licensed Australian exchange, they can trust that exchange to deliver on its commitments to its customers, and have appropriate protections.”

© 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.

Kadena, a proof of work (POW) blockchain, today announced a $100 million grant program funded by its treasury to support web3 development.

The program will be administered by Kadena Eco, the blockchain’s innovation network, and used to attract talented developers to contribute to the Layer 1 network’s codebase.

According to a company news release, the grant will focus on supporting builders in areas including NFTs, DeFi, gaming, metaverse and DAOs among others.

Kadena Eco will evaluate grant applicants based on technical strength, experience of teams and usefulness of the projects to the Kadena ecosystem.

Developers applying for grants must be willing to abide by the blockchain’s “build in the open philosophy” and submit detailed explanations about their protocols.

“Our goal at Kadena Eco is to onboard as many builders as possible, and grant applications from skilled builders and founder teams will be considered equally.  Grants are a stepping stone to potential future funding as part of other Kadena Eco initiatives such as our incubator, accelerator and venture fund programs,” Kadena Eco CEO Francesco Melpignano told The Block.

Kadena launched its blockchain mainnet in November 2019 and has grown to reach a current $968 million market capitalization.

© 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.

Cryptocurrency exchange Coinbase is reportedly in talks to buy Turkish exchange BtcTurk as it seeks to ramp up its presence in developing economies. 

The deal, first reported by MergerMarket and then cited by Bloomberg, could be worth close to $3.2 billion and is reportedly in the later stages of closing. A term sheet has already been signed and the company is currently completing its technical due diligence. 

The Block contacted both BtcTurk and Coinbase for comment but did not immediately receive a response. 

BtcTurk was founded in 2013 by Kerem Tibsuk and is one of Turkey’s most popular crypto exchanges, counting 4.5 million users and 850 employees. According to the Turkish newspaper Cumhuriyet, it reached a transaction volume of $116 billion last year. 

The move follows reports that the US-based exchange is looking to increase its presence in developing countries. Last month, Bloomberg reported that it was set to close an acquisition of 2TM, a Brazilian entity that controls Latin America’s largest crypto brokerage Mercado Bitcoin. 

Yesterday, Coinbase also made its move into the NFT space, launching an NFT marketplace in beta for select customers.

© 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.

This research piece is available exclusively to
members of The Block Research.
You can continue reading
this Research content on The Block Research.