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The Ethereum network has now burned $100 million in ETH since the introduction of a transaction fee burning mechanism in its recent London upgrade. According to burn tracking site WatchTheBurn, 32,100 ETH has been destroyed so far since the upgrade occured on August 5.

This represents about half of the amount of ETH that was issued in this time to miners as a reward for creating blocks (and processing transactions). About 61,600 ETH ($194 million) was issued in this timeframe.

The London upgrade contained a change referred to as EIP-1559, which was focused on simplifying the transaction fee process. It split the fees into two: a base fee that gets burned and a priority fee that is effectively a tip to the miner.

The base fee is generated based on the size of the previous block and is designed to increase when there’s high demand and decrease when there’s low demand. This is intended to work as a recalibration mechanism to accomodate the fluctuating demand for space on the blockchain. The base fee is burned and can no longer be used on the network — adding a disinflationary element.

The priority fee is similar to the previous type of fee. It goes directly to the miner and rewards them for processing the transaction (on top of the 2 ETH they get for mining the block). It can be used to entice miners to prioritize a specific transaction.

By burning a portion of transaction fees, this may reduce Ethereum miner revenue. That’s likely to happen unless priority fees rise so much that they represent the levels transaction fees were at prior to the upgrade — an occurance that would mean higher fees for users.

The upgrade also doubled the maximum Ethereum block size. Blocks can now accommodate transactions that, in total, contain up to 30 million in gas, rather than the previous limit of 15 million. This is designed to help with periods of high demand. Despite this change, the base fee is designed to help the block size tend toward the 50% mark.

© 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

• This research report is part of a series produced by The Block Research to provide insights and due diligence on some of the leading companies in the digital asset ecosystem. 
• Founded in 2014, Chainalysis is a blockchain intelligence software developer
• All data presented in this report has been updated as of August 02, 2021.

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Football star Lionel Messi, who recently signed a two-year deal with the Paris Saint-Germain club after leaving FC Barcelona, has received crypto fan tokens as part of his new package.

Paris Saint-Germain announced the news on Thursday, saying that Messi “received a large number” of PSG fan tokens as part of his financial package and that he is the first player signing such a deal at the club.

PSG tokens are blockchain-based digital assets powered by crypto startup Socios.com. The startup generates a finite supply of PSG tokens, which give fans the right to vote on club-selected decisions.

It is not clear what percentage of Messi’s package includes PSG tokens. Socios CEO Alexandre Dreyfus declined to comment to The Block when reached. Messi’s package is reportedly worth €40 million (nearly $47 million) per annum after taxes.

Paris Saint-Germain launched PSG tokens in February 2020 in partnership with Socios. The trading volume of PSG tokens has shot up this week given the Messi news. According to CoinGecko, PSG tokens had a trading volume of nearly $300 million in the last 24 hours. Over the last few days, PSG trading volumes have exceeded $1.2 billion, said Paris Saint-Germain. One PSG token is currently priced at around $42.

“Fully embracing Socios.com and $PSG Fan Tokens has proved a massive success for the Club,” said Marc Armstrong, chief partnerships officer of Paris Saint-Germain. “We have been able to engage with a new global audience, creating a significant digital revenue stream.”

Paris Saint-Germain is one of over 50 sporting organizations that have launched fan tokens with Socios.com. Other notable clubs include FC Barcelona, Juventus, Manchester City, Arsenal AC Milan, and others.

© 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

• Ether (ETH) demand among institutions is surging.
• That’s pushing firms like NYDIG and Fidelity to expand their services for the crypto.
• Sources say Fidelity’s clients are increasingly asking for ETH support, while NYDIG has already been offering custody for select clients.

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Last week, Securities and Exchange Commission chairman Gary Gensler appeared to express particular interest in exchange-traded products tied to bitcoin futures. 

In the wake of that speech, several companies have moved to submit proposals for just such products, with asset manager Valkyrie becoming the latest to do so on Wednesday.

According to a draft prospectus dated August 11 and submitted to the SEC, “[t]he Fund will not directly invest in bitcoin. Under normal circumstances, the Fund will seek to purchase a number of bitcoin futures contracts so that the total notional value of the bitcoin underlying the futures contracts held by the Fund is as close to 100% of the net assets of the Fund as possible.”

As the filing goes on to note:

“The Fund will invest indirectly, via a wholly-owned subsidiary of the Fund organized under the laws of the Cayman Islands (the “Subsidiary”), in standardized, cash-settled futures contracts on bitcoin. Such futures contracts are traded on commodity exchanges registered with the Commodity Futures Trading Commission (the “CFTC”). Currently, bitcoin futures contracts in which the Fund will invest are only traded on, or subject to the rules of, the Chicago Mercantile Exchange (the “CME”). The value of bitcoin futures is determined by reference to the CME CF Bitcoin Reference Rate, which provides an indication of the price of bitcoin across certain cash bitcoin exchanges. The Fund seeks to invest in cash-settled bitcoin futures.”

Valkyrie submitted its spot bitcoin ETF prospectus in April, but like its peers, the SEC has held off on definitively affirming or rejecting the current batch of proposals. Valkyrie raised $10 million in a June funding round, as previously reported.

ProShares, Invesco and, as of Tuesday, VanEck, have submitted filings for bitcoin futures-tied ETFs to the SEC since Gensler’s speech. VanEck first attempted to do so 2017, though that effort was ultimately unsuccessful. 

“I anticipate that there will be filings with regard to exchange-traded funds (ETFs) under the Investment Company Act (’40 Act). When combined with the other federal securities laws, the ’40 Act provides significant investor protections,” he said August 3, adding:

“Given these important protections, I look forward to the staff’s review of such filings, particularly if those are limited to these CME-traded bitcoin futures.”

© 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.

The Justice Department said Wednesday that a former fintech CEO has been sentenced to six years in prison after pleading guilty to charges related to COVID-19 pandemic loan fraud and crypto investment fraud.

Justin Cheng, per the DOJ release, was sentenced “for multiple fraud schemes he perpetrated.” Among the alleged crimes, Cheng raised $400,000 for a lending startup that used blockchain tech, dubbed Alchemy Coin. Prosecutors said that Cheng misled investors about the viability of the project and the legality of an initial coin offering held in connection with it.

As the DOJ release note:

“In addition to the COVID-19 pandemic loan fraud described above, from at least in or about 2017 through at least in or about 2019, CHENG committed securities fraud by soliciting and obtaining approximately $400,000 in investments in Alchemy Coin Technology Limited and related companies (“Alchemy Coin”) controlled by CHENG.  These investments were obtained through materially false and misleading statements and omissions regarding Alchemy Coin’s access to capital, use of investor proceeds, the product readiness of its purported blockchain-based peer-to-peer lending platform, and the registration of its tokens as part of an initial coin offering.”

Cheng also solicited millions of dollars in Paycheck Protection Program loans from a pandemic-focused relief program funded by the U.S. government. 

“Based on the fraudulent PPP loan applications submitted by CHENG, a total of more than $3.7 million in PPP loans were approved for the Cheng Companies and approximately $2.8 million in PPP loan proceeds were deposited into bank accounts solely controlled by CHENG,” the DOJ said. “Instead of using the PPP loan proceeds for payroll costs, mortgage interest, rent, and/or utilities for the purported Cheng Companies as required by the PPP, CHENG transferred over $1 million abroad, withdrew approximately $360,000 in cash and/or cashier’s checks, and spent at least approximately $279,000 in PPP loan proceeds on personal expenses.”

Additionally, prosecutors said that Cheng “committed wire fraud by fraudulently obtaining due diligence fees from various start-up companies as part of an advance fee scheme through materially false and misleading statements regarding the purpose and refundability of the fees and his interest and ability to make investments in the start-up companies” between 2018 and 2019.

Cheng pleaded guilty to the charges in April. In addition to the prison term, he was sentenced to three years supervised release and will be forced to leave the United States following his exit from prison. 

© 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.

The global IT consulting firm Accenture said it has recovered after a LockBit ransomware attack. However, Twitter users have noted the firm’s data has already been leaked on the dark web. 

A CNBC reporter first broke the story on Twitter. Accenture said in a statement that they “identified irregular activity in one of our environments. We immediately contained the matter and isolated the affected servers. We fully restored our affected systems from backup. There was no impact on Accenture’s operations, or on our clients’ systems.”

Users on Twitter who have accessed LockBit’s dark website note that the group has already published data said to be sourced from Accenture. The data allegedly includes case studies, PowerPoints, and quotes, according to the CNBC reporter. However, those on LockBit’s blog note that heavy website traffic has bogged down people’s abilities to actually download the data. 

Accenture is an Irish firm that earned $44.3 billion in the 2020 fiscal year. Its clients include 90% of Fortune Global 100 companies and 75% of Fortune Global 500 companies, according to the firm’s website. 

Accenture is yet another victim to a string of ransomware attacks this year, what with the Colonial Pipeline cyberattack in May and JBS meatpacking company hack in June. In all, ransomware victims paid attackers a total of $81 million in crypto in 2021 alone, The Block previously reported.

© 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.

When Representative Don Beyer introduced the new Digital Asset Market Structure and Investor Protection Act at the end of July, it took many in the crypto world by surprise. 

At 58 pages, the “Digital Asset Market Structure and Investor Protection Act” is a uniquely comprehensive approach to an issue that has been vexing regulators and legislators more and more recently.

Beyer, after all, had not produced any crypto-focused legislation before, nor had he been especially vocal about the industry.  This led to speculation by some that it was a push from other government agencies, particularly the Treasury Department.

Not the case, says the Beyer team. “We started working on this bill over a year ago. Rep. Emmer’s suggestion that this came from Treasury is inaccurate,” a spokesperson told The Block, saying: 

“The dramatic expansion of the digital asset marketplace and the relatively piecemeal approach Congress has taken to regulating the market so far provided much of the impetus to develop the comprehensive proposal we introduced last week.”

There’s no question the bill is timely. The controversial appearance in the Senate infrastructure bill of provisions to increase IRS reporting requirements for crypto network participants resulted in a surge of public visibility, particularly of the industry’s presence in Washington, DC.  

Wednesday morning, the public learned of the latest in the exchange between Gary Gensler, chairman of the Securities and Exchange Commission, and Senator Elizabeth Warren on crypto regulation. At the beginning of July, Warren had asked Gensler what sort of congressional authorization the SEC would need to do more in the crypto markets. Gensler’s response today included many of the areas that Beyer’s bill addresses. 

“There is a broad recognition that Congress needs to step in a more comprehensive way and major regulation of the digital asset market. We view our proposal as the start of that conversation,” Beyer’s spokesperson said. “Our bill responds to comments from regulators, particularly from SEC Chairman Gary  Gensler, asking Congress to weigh in and provide the necessary legal clarity.”

During this same timeframe, Beyer and Warren have been working together to close up tax loopholes. 

Indeed, much of what the bill does is authorize regulators to, for example, decide which cryptocurrencies are commodities or securities — in the language of the bill, “digital assets” and “digital asset securities,” respectively. The bill even has a provision for digital asset securities seeking to become digital assets, à la the SAFT framework, or SEC Commissioner Hester Peirce’s proposed safe harbor. It also requests an inter-agency report on regulating decentralized finance.

Many of its provisions are familiar. Voluntary federal registration with the Commodity Future Trading Commission, for example, showed up in a bill introduced by Michael Conaway. In April, a bill sponsored by Patrick McHenry and Stephen Lynch in the Financial Services Committee to coordinate the SEC and CFTC on digital assets was passed on to the Senate. This is not to mention the many attempts to classify various assets as securities or not, most notably Warren Davidson’s Token Taxonomy Act.

The Beyer bill addresses many of these same issues but in a more comprehensive fashion, and involves allocating authority directly to regulators, especially the SEC and CFTC. 

Pat McCarty, formerly of the CFTC and SEC and currently an adjunct professor at Georgetown Law, was involved in drafting the bill’s language. McCarty did not respond to The Block’s request for comment. 

© 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.

But anyone who has been closely following knows that we have only scratched the surface of discovering what experiences general purpose blockchains are capable of delivering. 

And while the term “Ethereum killer” has fallen out of favor, the pace of development in the Layer 1 platform arena has only accelerated over the past years. Dozens of platforms have emerged. 

Some are seeking to offer an easily adoptable alternative to Ethereum and challenge its status as the de-facto choice for launching decentralized applications. Others are focused on giving developers the highest level of flexibility in building their own blockchains and creating cross-chain communication protocols. 

With each passing year, a “one blockchain to rule them all” outcome fades further and further into the rearview. But analyzing these different platforms remains challenging. 

They are surrounded by technical jargon. Digestible comparisons amongst them are few and far between. Yet they already compose a significant portion of the “investable crypto landscape” and are poised to support ecosystems orders of magnitude larger than what we have seen to date. Analyzing them will be an important task for years to come.

Analyzing smart contract platforms outside of the context of Ethereum is difficult. Analyzing Ethereum outside of the context of Bitcoin is equally difficult. So, this report starts with a brief introduction to Bitcoin before diving into the current state of Ethereum. 

© 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.

A high-wire fight in Washington, DC over crypto tax reporting provisions included in a $1.2 trillion infrastructure bill drew widespread attention and impassioned remarks from supporters, opponents and powerful members of Congress.

And while Kristin Smith, executive director of the Blockchain Association, admits that the legislation’s current language is not perfect, the collective show of force from advocacy groups, business leaders and think tanks was “like no other thing I have experienced in my 20 years in Washington, D.C.”

On this episode of The Scoop, Smith joined host Frank Chaparro and senior reporter Kollen Post to discuss the legislation live during the podcast as senators conducted their last vote before sending the bill out of the chamber. 

According to Smith, the fight over the crypto tax reporting requirements — which opponents say puts undue burdens on businesses that aren’t clearly defined as “brokers” of digital assets and at one point risked choosing technological winners and losers — is far from over. 

“What we’re going to be doing in the sort of days and weeks ahead is trying to figure out how best to show that there is a groundswell of support for changing this language,” Smith remarked. 

Next up: pushing for positive changes before the legislation becomes U.S. law.

“We will be there and we will have amendments and we’re putting our lobbying team together,” said Smith, who added: “We do have a lot of time to work to undo this.”

In the end, Smith concedes that there ultimately may not be an opportunity to add amendments to the bill. However, the fight put the crypto industry front-and-center in Washington for the first time, with Smith saying: “We went from zero to 60 overnight, and we have caught the attention of the entire policymaking class in Washington.”

The bill now makes its move into the House which will reconvene in September for next steps.

This episode of The Scoop also focused on:

• Treasury Secretary Janet Yellen’s position on crypto
• The players in the DC crypto scene today
• Which policymakers and politicians favor amendments to the bill.

© 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.