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Several largest U.S.-listed bitcoin mining firms with operations predominantly in North America have collectively mined over 10,500 BTC year to date with nearly 40% of the output coming from the past two months.

Public data complied by The Block shows that Riot, Marathon, Bitfarm, Hut8 and Argo have mined a total of 1,796 BTC during August. That was slightly less than their collective productions in July but their individual output for Q3 so far has either matched with or already exceeded the production records during the second quarter. 

The increase of their outputs are due to the reduced competition from Chinese miners as well as the gradual expansion of their installed mining fleets as a result of the billions of dollars of investment put into bitcoin mining equipment since late last year.

As such, their collective output accounted for nearly five percent on average of the total bitcoin mining revenue year to date. This doesn’t include other notable private North American mining firms that are going through a U.S. listing process, such as Core Scientific, Greenidge Generation and Stronghold Digital.

Bit Digital is the only U.S.-headquartered bitcoin mining firm that saw a sharp decline of its quarterly production as it shut down its China operations in Q2 and is in the process of transmitting over 14,500 machines to North America. The firm has not updated its numbers for July and August. The current estimated data in the chart is based on Bit Digital’s mining results for Q2.

Except Bit Digital, the other five large bitcoin mining firms have been adding almost all of their mined bitcoin onto their balance sheets, which added up to 17,960 BTC as of August, worth around $820 million. But that does include 4,812 BTC that Marathon Digital purchased through the secondary market during Q1.

All told, the total amount of bitcoin that these five mining firms held as of August has more than four-folded since December 31 when they collectively held just 4,176 BTC.

© 2021 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.

dYdX initiated the distribution of its long-awaited governance token on Wednesday.

The decentralized finance (DeFi) platform first announced it planned to launch a token last month with an accompanying governance plan. It included plans for a safety staking pool, with users who stake $DYDX receiving a yield in the same token.

Wednesday’s kickoff wasn’t without headache, however. The dYdx team uncovered an error in the deployment of the safety staking pool contract shortly after it went live.

Consequently, access to the pool was blocked as the team sought to create an open-source fix for the contract. Because of the new governance model, the upgrade containing the fix will have to pass a governance vote during the first epoch. In a tweet thread explaining the snag, the dYdX Foundation said no user funds were at risk and all will be recoverable in the coming days.

“The design of the Safety Staking Pool included deposits being locked for a minimum of 1 epoch (28 days). Assuming an upgrade proposal can be passed within the next week, no user impact will have occurred, & the few early stakers will still be able to withdraw their funds on time,” it said. 

This vote could include ways to additionally compensate early stakers for the rewards they should have received if the error had not occurred, according to dYdX. The issue is being debated in a thread on the dYdX community forum.

The governance model allocated 7.5% of the tokens to retroactive rewards and 25% to user trading rewards. Those who completed a single transaction on the platform in the past three years were eligible for the airdrop. The price of the token reached $12 upon release, according to CoinGecko. For this reason, some claimed to have walked away with tens of thousands of dollars worth of tokens as a result of the airdrop. 

However, not everyone was able to reap the rewards, as geographic restrictions blocked some users from receiving the airdrop — particularly those based in the United States.

Under U.S. securities laws, airdropped tokens are a type of security, and Securities and Exchange Commission (SEC) chair Gary Gensler has made it clear that DeFi won’t get a pass under the agency’s purview.

At the Aspen Security Counsel Forum he said last month:

“Make no mistake: It doesn’t matter whether it’s a stock token, a stable value token backed by securities, or any other virtual product that provides synthetic exposure to underlying securities. These products are subject to the securities laws and must work within our securities regime.”

Some would-be participants took to Twitter to sarcastically commiserate that American regulators were “protecting” dYdX users from thousands of dollars.

© 2021 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.

On September 8, the Securities and Exchange Commission announced a suit against blockchain identity project Rivetz and founder Steven Sprague over the firm’s 2017 initial coin offering for RvT tokens. 

Per the SEC’s complaint, between July and September 2017, Rivetz allegedly sold $18 million worth of RvT via a Cayman Islands affiliate in what was an attempt to obtain capital for the project. Sprague and Rivetz advertised the sale to investors as an investment opportunity. The firm never filed as a securities issuer with the SEC, per the agency’s Wednesday statement.

The SEC has spent years investigating the unregistered offerings of the ICO boom of 2017 and 2018. More recent cases have generally centered on more creative profiteers off the market of the time. 

By the SEC’s account, the firm had spent or cashed out all of its ether earnings by March 2018. The agency alleged that “the firm [gave] Sprague a $1,000,000 one-time bonus, and [loaned] Sprague $2,500,000, which he used to purchase a house in the Cayman Islands that he then leased back to Rivetz Int’l.”

In its complaint, the SEC requests disgorgement of all funds from the raise as well as a penalty, but it doesn’t specify how much it is seeking.

The largest ICO in history was Block.one’s $4 billion offering of EOS tokens, which the SEC ultimately resolved with a settlement.

© 2021 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.

An independent lawmaker in Panama has introduced a bill to the country’s National Assembly that if approved will regulate crypto assets and promote blockchain adoption.

The proposed law aims to make Panama “compatible with blockchain, crypto assets and the internet,” tweeted congressman Gabriel Silva, whose profile photo features the red laser beam eyes popular with bitcoin enthusiasts. Silva, who tweeted about the proposal on September 6, is encouraging people to leave comments and feedback on his website.

“Our proposal is simple and seeks, first, to give legal certainty and safety to crypto assets in Panama—for example, cryptocurrencies,” Silva says in a video explaining the potential law. In addition, the law aims to attract digitally-focused entrepreneurs, companies and investments that could create local job opportunities and broaden financial services with lower prices. The proposal also seeks to offer citizens the option of paying taxes and fees with crypto assets.

The drafted “crypto law” specifically mentions bitcoin and Ethereum as types of crypto assets. 

“Natural persons located in the Republic of Panama or legal entities organized in the Republic of Panama may freely agree to use crypto assets, including without limitation Bitcoin and Ethereum, as means of payment for any civil or commercial operation not prohibited by the legal system of the Republic of Panama,” the bill states.

It has been a busy week for cryptocurrency developments in Latin America and the world, mainly due to El Salvador’s rollout of its own bitcoin law and wallet called Chivo. That country was the first to make bitcoin legal tender. But while Panama is also located in Central America and uses the U.S. dollar, its own crypto law has some important differences.

For starters, Panama’s law would focus more broadly on crypto assets and blockchain, while El Salvador’s is written to focus on bitcoin.

According to explanatory materials Silva shared on Twitter, Panama’s proposed law will not require companies to accept bitcoin or other cryptocurrencies. El Salvador’s law, on the other hand, indicates that businesses need to accept bitcoin as a form of payment, although it remains to be seen how widely it will enforce this (those without access to the necessary technologies would be excluded from the mandate).

© 2021 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

• Generative artists, who have long labored at the fringes of creative output, are now selling individual pieces for millions of dollars.
• But their success is closely linked with rampant NFT speculation, and there are fears that the genre may be diluted.

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this Daily feature on The Block.

Hundreds of institutions are looking to Coinbase as a trusted, publicly-traded exchange to create tailored crypto solutions for them. Now, as traditional finance firms begin to deploy capital into crypto services, Coinbase sees itself at the forefront of facilitating that institutional adoption.

“I think we’re moving away from the designation of Coinbase as an exchange to being a much more complex organization,” said Coinbase’s Greg Tusar, whose crypto brokerage startup Tagomi was acquired last year.

On this episode of The Scoop, Coinbase head of institutional sales Brett Tejpaul and head of institutional product Greg Tusar join for a discussion on Coinbase’s pace of growth to meet client demand and how the company is building itself into a full-scale prime broker.

“We’re focused more on the future of finance and DeFi,” said Tejpaul of Coinbase’s goal to combine its custodianship, exchange, brokerage and DeFi services for institutional clients. He went on to say that they have filled out some 250 requests for proposals from clients to build crypto products for their firms. The longest such RFP is a whopping 800 questions long, according to Tejpaul. 

“Just think through what it takes to, first of all, to answer 800 questions and think through how many people are working through and processing through that,” said Tejpaul.

The execs also touched on Coinbase’s role in growing retail interest in stablecoins and altcoins, citing how some 75% of clients own more than Bitcoin, 80% own some Ethereum and Tejpaul estimated that 50% of that group also own at least 5 or more cryptocurrencies. “And all that’s happened in the course of a year or so.” Said Tejpaul. 

Coinbase is growing its business with direct investment, expanding its sales team from 7 to 60-odd people in less than half a year, Tejpaul noted. The company is also focusing on growing its product base by creating a variety of familiar instruments for traditional finance institutions, which include providing means for institutions to gain sub-custody, tap into stablecoin utility to leverage DeFi protocols, and by creating capabilities for DeFi, smart contracts, and NFTs for broad institutional participation.

Beyond that, as Coinbase pushes itself to evolve, demand expansion is evidently applying pressure to provide as many services as possible to a range of institutional clients by facilitating the creation and adoption of their own crypto offerings. According to the execs, this is fueling growth in institutional revenue.

© 2021 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.

Lido Finance, a liquid staking protocol which currently supports Ethereum 2.0 and Terra blockchains, has expanded to Solana. The news means Lido’s users can now stake Solana’s native SOL token through the protocol and receive stSOL in return.

With centralized staking services such as crypto exchanges, when you stake a token, it gets locked up and cannot be used for other activities unless withdrawn. Lido is called a liquid staking protocol because it provides synthetic tokens such as stSOL, stETH, and stLUNA against staked tokens, which can then be used in decentralized finance (DeFi) applications for further yield-generating opportunities. So while your tokens are staked, you will have equivalent synethetic versions of the same tokens that you can use in the meantime.

DeFi projects that will initially support stSOL include Serum, Raydium, Saber Labs, Phantom, and SolFlare, Kasper Rasmussen, chief marketing officer at Lido, told The Block. He added that these projects will let stSOL holders provide liquidity and earn additional rewards on top of regular staking rewards that they will get through Lido.

Lido is currently very popular for staking ether (ETH). Rasmussen said the protocol has become one of the largest ETH staking addresses, staking more than 1% of all ETH. “We look forward to similar growth on Solana,” he said.

Other popular staking services for ETH include Kraken, Binance, Staked, Stakefish, Bitcoin Suisse, Huobi, and Bitfinex in that order, according to data compiled by The Block Research.

Lido plans to also launch a staking solution for the Polkadot and Polygon blockchains. Rasmussen said developments teams MixBytes and Shard Labs are working for the Lido DAO to bring staking services for DOT and MATIC tokens, respectively. The Solana staking solution was developed in partnership with Chorus One, he said.

Lido is backed by notable backers including Coinbase Ventures and Paradigm and the project has raised at least $75 million in total funding to date in two rounds. 

© 2021 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.

Robinhood announced Wednesday a new feature for its crypto product that will allow users to automatically make investments in the market on a recurring basis, the latest new feature for a fast-growing part of the company’s business. 

The brokerage app company said that the feature would help reduce the impact of crypto’s volatility by allowing users to invest in intervals rather than in large lump sums—a strategy known as dollar-cost averaging. The product will be available to a select number of users starting Wednesday.

“Dollar-cost averaging encourages investing money gradually at regular intervals, rather than all at once and regardless of where market prices stand, in order to help smooth out the price swings that can sometimes occur,” Robinhood said. 

To be sure, Robinhood isn’t the only crypto platform that allows users to atomically invests. Rivals like FTX.US and Coinbase offer similar features. Still, the addition of reoccurring investments for Robinhood represents a step toward broadening a crypto-focused business line that’s become more important for the brokerage, which recently went public on Nasdaq. 

According to the firm’s most recent earnings, the firm’s transaction-based revenues from cryptocurrency trading increased 4,282% from Q2 of 2020 to Q2 of 2021.

In an interview with The Block, Robinhoodcrypto lead Christine Brown said that the firm has been planning on offering to its clients for some time and hopes that it will “reduce the stress of timing the markets.”

As for future products, Brown said the firm has a “healthy appetite to continue to invest in products that democratize finance,” noting that a wallet function is on the product roadmap and is actively being developed.

© 2021 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.

a16z Crypto, the digital asset unit of venture investing giant Andreessen Horowitz, has hired former Winklevoss Capital associate Jane Lippencott.

Lippencott’s hire represents the latest move in a flurry of hires for a16z since it launched a $2 billion crypto-focused fund. Lippencott announced her new role as partner in a Wednesday tweet. 

Lippencott, who recently finished a 7-month long stint at the venture fund Distributed Global, serves as an advisor or mentor to crypto projects like Celo and Teller Finance. Before joining Distributed Global, she worked for Tyler and Cameron Winklevoss’ venture capital operation. In that capacity, Lippencott participated in several crypto deals, including TaxBit, TracerDao, and ChainFlip. 

a16z announced its $2.2 billion Crypto Fund II in June, which is co-led by Chris Dixon and Katie Haun.

The investment giant has pursued a broad mandate in its crypto investment strategy, focusing on areas from decentralized finance (DeFi) to bitcoin applications to Web3. The firm’s portfolio includes Dapper Labs, Celo, Uniswap, and Near, among others.

At the same time as the fund’s launch, a16z announced a string of hires including former advisor to President Joe Biden, Tomicah Tilleman, as its global head of policy. Former Coinbase public relations executive Rachael Horowitz also joined the firm as an operating partner charged with leading marketing and communications.

On September 2, a16z announced that Miles Jennings was joining the firm as general counsel. The former Latham & Watkins partner worked closely with venture capital firms and provided counsel to crypto starting ranging from Bitwise to Aave. 

© 2021 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.

Coinbase, the largest U.S. cryptocurrency exchange and one of the largest publicly traded cryptocurrency firms in the world, announced late Tuesday night that it has received a warning from the Securities and Exchange Commission about its planned Lend product, which would give users 4% interest on deposits of the stablecoin USDC, with other assets apparently to be added later. According to Coinbase, the U.S. regulatory agency last Wednesday sent the firm what’s known as a Wells notice, a warning of a planned lawsuit over the product.

(Disclosure: CoinDesk’s parent company, Digital Currency Group, is an investor in Circle, which issues USDC.)

But, according to Coinbase, the warning, which will likely block the launch of the Lend product, was issued after months of borderline stonewalling by the regulator. According to Coinbase CEO Brian Armstrong, that began as early as May, when he visited Washington, D.C., to meet with various lawmakers and regulators.

“The SEC was the only regulator that refused to meet with me, saying ‘we’re not meeting with any crypto companies,’” Armstrong wrote in a Twitter thread last night.

According to a blog post from Coinbase, the company has since presented the Lend product to the SEC and engaged in a long disclosure process before last week’s warning. Despite that effort at transparency, Armstrong says the SEC did not respond with any advice on how to properly structure the product ahead of issuing its Wells warning.

“We’re being threatened with legal action before a single bit of actual guidance has been given to the industry on these products,” Armstrong wrote.

Coinbase argues, plausibly, that Lend is not a security, because its returns are not formally tied to the company’s financial performance. Equally frustrating for the now-public startup is that similar products are widespread in the cryptosphere, offered by effectively unregulated entities including exchanges and DeFi protocols.

Other U.S.-regulated crypto companies have responded with empathy and frustration. “U.S. regulators are beating down good actors because it’s convenient,” wrote Jesse Powell, CEO of the Kraken crypto exchange. “Meanwhile, actual scams run unabated for years.”

Armstrong also questioned whether the SEC is really doing its job. “Who are they protecting here and where is the harm? People seem pretty happy to be earning yield on these various products, across lots of other crypto companies … Shutting these down would arguably be harming consumers more than protecting them.”

Armstrong is misdirecting here, at least slightly. The SEC is oriented towards protecting investors from risk, and whatever the returns on an unregulated crypto deposit product might be today, they are clearly very high risk on a longer timeline. Massive hacks of both DeFi products and exchanges remain disturbingly frequent, for instance.

Whenever you get interest, you’re essentially getting paid for your risk. And like it or not, in the current low-interest-rate environment, 4% interest on a stablecoin deposit implies substantial risk. With U.S. banks offering less than 1% on deposits and even 30-year Treasury yields under 2%, Coinbase’s offered rate certainly raises questions about where the premium is coming from.

In many of the DeFi “yield farming” programs Armstrong points to, for instance, supposed yield is actually paid in a platform’s native token. That makes most DeFi “loans” barely disguised securities because the value of the yielded tokens is based on the platform’s future performance. One plausible explanation of the SEC’s action is that it believes Coinbase is similarly subsidizing its interest rates from its own operating revenue.

That being said, Coinbase’s side of the story paints a disappointing picture of the SEC under new head Gary Gensler. As the exchange points out in its account, Gensler has repeatedly said he wants dialogue with crypto companies, but it seems he may not understand that that’s a two-way street.