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Ethereum’s London hard fork has gone live and its effects are already underway. The network upgrade included a specific improvement called EIP-1559, which was designed to simplify how transaction fees are paid.

But part of the new mechanism involves burning a portion of the transaction fees, removing them from the circulating supply of coins. And while new ether (ETH) is being issued every block, this reduction in supply is helping to counter that — effectively reducing the network’s rate of inflation. 

And so far, 213 ETH has already been burned, at a value of $559,000 — according to block explorer Etherchain’s burn tracker.

ETH burned per block. Source: Etherchain.

How do you burn a cryptocurrency?

While burning is a very dramatic term, it just means removing the coin from circulation.

Typically, this is very simple in technical terms. To burn a cryptocurrency, you send it to an address that nobody has control over. Unless someone happens to guess the private keys to that address (an exceedingly unlikely possibility) nobody will ever be able to spend the coins.

In this case, however, the tokens are actually destroyed by the protocol — which means they no longer exist on the network.

According to MyCrypto developer Luit Hollander, this happens by removing the ETH from the person making the transaction (and paying the base fee) but not giving it to the miner. This is unlike transaction fees that are paid directly to miners. As a result, nobody is able to spend it on the network from that moment on.

Will it continue at this rate?

So far, the network has been burning ETH at quite a high rate. But it won’t necessarily continue like this.

As The Block explained, the upgrade enables the network to adapt to moments of higher demand. So when there are more transactions, there is a higher base fee (the part that gets burned) and more ETH gets burned. But once the network goes quiet, less ETH gets burned.

So right now, the network is processing all the transactions in the current backlog, a pre-blockchain limbo called the mempool. Once those transactions have been processed, then there will be lower demand and the base fee will likely drop.

“Don’t expect the current burn rate to cont forever,” wrote pseudonymous security researcher Hasu. “Once the mempool has been cleared entirely (which should happen any moment now), blocks will become smaller and basefee will fall again.”

Burning more than is minted

While EIP-1559 is not slated to make Ethereum deflationary — where the network would burn more supply than is being newly issued — there has already been a block where that was the case.

As pointed out by EthHub co-founder Eric Conner, Ethereum block 12,965,263 saw more ETH being burned than was issued. In this case, there was 2.078 ETH burned in base fees, while the amount of new ETH given to miners for mining blocks is only 2 ETH. Conner described this as, “The first deflationary block in history.“

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© 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.

Crypto exchange operator Coinbase has agreed to acquire Zabo — a crypto data aggregator that enables fintechs and financial services firms to connect with crypto exchanges, wallets, and protocols.

Zabo announced the news on Wednesday, saying that it is joining Coinbase to further its mission of bringing crypto mainstream. Zabo did not disclose the deal’s financial terms, but co-founder Alex Treece told The Block that it is an acquisition and not an acquihire, meaning Coinbase is buying Zabo for its offerings, not just its staff.

Founded in 2018, Zabo provides APIs or software that enables financial applications to connect with users’ crypto accounts. Zabo’s offerings can be compared with Plaid, which allows applications to connect with users’ traditional bank and brokerage accounts.

With Zabo, users can connect to any crypto exchange or wallet and track their balances and transactions history. This, in turn, can help them with tax calculations and monitoring their overall net worth.

Treece said the Coinbase deal is expected to close by the end of this month. He declined to say whether Zabo’s offerings will be rolled into Coinbase or Zabo will continue to operate independently. But he said Zabo’s entire core team, consisting of 10 people, is moving to Coinbase.

There were no banking advisors for the deal, and legal advisors included Egan Nelson LLP from Zebo’s side and Fenwick & West LLP from Coinbase’s side, said Treece.

Zabo has raised $3.5 million to date from investors, including Moonshots Capital, Blockchange Ventures, and Digital Currency Group. Moonshots Capital co-founder and general partner Craig Cummings called the Coinbase deal a “huge milestone” for Zabo and a “successful exit” for the venture capital firm.

As for Coinbase, the Nasdaq-listed company has acquired several firms to date. These include crypto trading firm Tagomi, crypto custody provider Xapo’s institutional business, blockchain analytics firm Neutrino, crypto staking infrastructure provider Bison Trails, crypto data provider Skew, and crypto trade execution platform Routefire.

© 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 quintet of upgrade packages are set to go live on the Ethereum blockchain network Thursday as part of the London hard fork.

“Hard fork” is software parlance for a backward-incompatible upgrade, meaning that post-London activation, if you want to stay connected to the Ethereum network, you’ll need to download London.

Thursday’s activation is the culmination of months of work and, at times, drama, particularly as it relates to one of the five Ethereum Improvement Protocols (EIPs), called EIP-1559, that London contains. Earlier this year, upgrade proposal drew opposition from some mining pools, the operators of which argued that EIP-1559 would unfairly cut into their income.

But we’re getting ahead of ourselves here. Let’s take a look at what’s actually coming with the London hard fork.

What the heck is London? And EIP-1559? What’s going on here?!

London is the overarching title for Thursday’s hard fork, which includes a total of five EIPs. For details on each part of the overall London suite, check out this post by the Ethereum Foundation from last month.

In sum, the main goal of London is to improve the quality of life for Ethereum users. For instance, though London isn’t going to make Ethereum cheaper to use,it does aim to make the cost of using Ethereum more predictable. The controversial proposal dubbed EIP-1559 was designed to achieve this.

EIP-1559 aims to adjust the makeup of Ethereum’s fee market. A blockchain fee market, simply put, is the function of transactors paying fees on their transactions and miners collecting those fees as they add these transactions to the chain.

The way it works now is that the higher the fee a transactor offers in a transaction, the more likely that transaction is likely to be included in a block quickly.

But EIP-1559’s authors contend this is inefficient, and so have proposed a way for block sizes to adjust depending on the degree of congestion on the network and for a “base fee” that either rises or falls based on existing demand. The adjustment of the block size allows for more transactions at a given time.

As The Block Research noted in a piece from January:

“User experience is improved by decreasing the variance and delays waiting for transactions to be approved since miners can adjust to periods of high demand. Fees are easier to estimate because (apart from periods where demand grows quickly) there’s an obviously optimal fee that can be bid to be included in blocks. When there is no congestion, users can always get into the next block with the fixed base fee. If blocks are congested, transaction costs increase rapidly with an increasing base fee, driving the demand down.”

As in the past, included in the London set of EIPs is a fresh delay of Ethereum’s “difficulty bomb” or “ice age” mechanism. This mechanism, if allowed to play out unabated, renders block times on the network incrementally longer and, as a result, makes the network increasingly difficult to use.

Simply put, the bomb exists to incentivize regular updates to the network’s code.

So, when is this happening?

Luckily, there are a few simple ways to monitor when London will actually go live.

First, you can go right to the source and watch the blocks come rolling in.

The activation block is number 12,965,000, according to Ethereum.org. As of the time of the writing of this sentence, Ethereum just added its 12,959,923th block, meaning there are (well, or were) 5,077 blocks to go.

Admittedly, this isn’t a very efficient way to track things.

There are also a handful of Web-based countdown tools, including this one from EtherNodes. The tool currently estimates that activation will happen roughly around 8:30 a.m. ET on August 5, but given how block times aren’t exactly consistent, this time window could shift a bit beforehand.

Okay. But what does this mean for ETH’s price?

Practically? Maybe…nothing? Or something? I don’t know.

There’s been a fair bit of ink spilled about how London is price-positive or “bullish” because it introduces deflationary characteristics to the network. CoinDesk’s Omkar Godbole spoke to some analysts for a piece Wednesday and the collective opinion appears to be “meh” on any immediate market response to London’s activation.

In an investor note sent out this week and obtained by The Block, Goldman Sachs looked at this “ETH as a deflationary asset” topic and struck a downbeat note.

Here’s what the bank had to say:

“The London upgrade will not make ETH a deflationary asset by default. Mainstream media has long touted the idea that burning the Base Fee, would turn ETH deflationary, thereby making it a more attractive store of value for investors. In order for this to happen, the Base Fee burnt would need to offset the ETH issuance rate (i.e. block reward). Some commentators go as far as comparing the Base Fee burning akin to a share buy-back, which takes part of miner’s revenue and internalizes it. What the upgrade does do is decrease the overall ETH inflation rate, while making ETH itself sometimes inflationary and sometimes deflationary. More interestingly, greater Ethereum network activity will mean more ETH burnt as Base Fee and less ETH for miners to resell in the market, potentially reducing miner selling pressure.

As far as the network’s economy is concerned, Compass Mining’s Will Foxley estimates that due to the fee market changes in EIP-1559 miner income could fall by as much as 30%.

Under the new regime, users can opt to pay a “priority fee,” also known as a “tip,” to miners in order to make their transactions more attractive. However, the base fee paid by users won’t be given to miners — under EIP-1559, it’ll be burnt instead.

Whether the economic shift resulting from London leads to broader changes in the topography of the global cryptocurrency mining ecosystem is tough to predict.

Miners make money when the cost of producing coins is lower than the expense of powering and taking care of these machines, and a steep income drop would likely cause headaches for low-margin operations.

© 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 weather information provider AccuWeather announced Wednesday that it is launching a Chainlink node to place its weather APIs directly onto blockchain-based smart contracts, according to a release.

AccuWeather APIs include weather information such as temperature, precipitation, wind speed, and natural disaster classifications. A few possible uses for AccuWeather-powered smart contracts include non-fungible tokens (NFTs) that can change depending on weather forecasts, weather prediction markets against natural disasters, and automatic supply chain shifts correlated with the weather, according to the weather firm. 

“As one of the initial weather-related data products to join Chainlink, we are thrilled to expand our reach in bringing value to the emerging blockchain-based market,” Kurt Fulepp, Global Chief Product Officer of AccuWeather, said in the release.

Chainlink, an Ethereum-based network of decentralized blockchain oracles, allows off-chain data to be placed into smart contracts.

The crypto exchange Kraken also recently incorporated a Chalinlink node to facilitate price predictions on decentralized finance (DeFi) apps, and the digital asset investment firm Grayscale also added Chainlink’s native token, LINK, to its investment fund.

© 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 trio of U.S. senators is proposing a legislative exclusion for crypto companies, including miners and software developers, from a tax reporting provision in a long-in-the-making bipartisan infrastructure bill.

The Wyden-Lummis-Toomey amendment, made public Wednesday, comes days after it first emerged that the trillion-dollar infrastructure bill included language aimed at tightening reporting requirements for “brokers” in the digital asset space. But critics quickly highlighted the vague language used in the provision, which they said could subject companies not involved in the actual brokerage of digital assets to overly burdensome regulation.

The push to amend the existing language won some key allies in the Senate in the days that followed, resulting in today’s Senate amendment. Over the weekend, Ron Wyden, chairman of the Senate Finance Committee, wrote that the initial language was “an attempt to apply brick and mortar rules to the internet and fails to understand how the technology works.”

Sen. Rob Portman, a leading author of the infrastructure bill, defended the provision on Thursday, writing on Twitter that “the legislation does not impose new reporting requirements on software developers, crypto miners, node operators or other non-brokers.”

Still, The Wyden-Lummis-Toomey amendment enshrines that intent in the legislation itself.

As the text notes: 

“Nothing in this section or the amendments made by this section shall be construed to create any inference that a person described in section 6045(c)(1)(D) of the Internal Revenue Code of 1986, as added by this section,  includes any person solely engaged in the business of….validating distributed ledger transactions…selling hardware or software for which the sole function is to permit a person to control private keys which are used for accessing digital assets on a distributed ledger, or…developing digital assets or their corresponding protocols for use by other persons, provided that such other persons are not customers of the person developing such assets or protocols.”

Crypto industry firms, including Coin Center, the Blockchain Association, Coinbase and Ribbit Capital published a joint statement of support on Wednesday, saying that the senators “are right that this language would place unworkable requirements on a nascent industry and we support their propose amendment to the provision.”

© 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

• Algorithmic stablecoins are tokens that are typically pegged to the value of the US dollar, by means of predefined algorithms and market forces
• There are an increasing number of projects aiming to create capital-efficient algorithmic stablecoins, such as FRAX and UST
• They are crucial in the reduction of cryptocurrency markets’ reliance on centralized fiat-backed stablecoins 
• However, they can also experience complete failure in edge cases, where the algorithms designed to maintain the peg becomes its own undoing

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Grayscale Investments has hired David LaValle to head up its ETF division, as the firm plans to turn its investment products into ETFs. LaValle will be a senior managing director and global head of ETFs.

“Grayscale is 100% committed to converting our investment products, including Grayscale Bitcoin Trust (GBTC), into ETFs,” Grayscale CEO Michael Sonnenshein said in a release. “Dave is a pioneering leader in the ETF space with expertise spanning critical components of the ETF ecosystem, including product development, distribution, capital markets, trading and regulation.”

LaValle was previously CEO of index provider Alerian and worked for four years as US head of ETF capital markets at State Street. Prior to that he spent three and a half years as head of exchange trade product marketplace at Nasdaq. He has also worked at NYSE Euronext and the American Stock Exchange.

“There’s been a fundamental shift in investor preferences, directly impacting wealth managers and the asset management industry. I’m delighted by the opportunity to leverage my broad experience to work with Michael and the Grayscale team to advance this digital evolution,” said LaValle.

The release noted that Grayscale has doubled its headcount in the last year and expects to continue growing its team. It expanded its executive team earlier this year with hires for COO, chief compliance officer and chief people officer. It has also been hiring ETF specialists and has linked up with BNY Mellon to prep for its bitcoin ETF push.

The investment manager has suffered from a lack of inflows into its main trusts, particularly its Grayscale Bitcoin Trust (GBTC), ever since its premium turned negative. It hopes to turn the products into ETFs to rectify the situation — although the SEC has been unwilling to approve a single one thus far.

© 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

• Supported by a wave of funding, crypto firms have been rapidly growing their headcounts during 2021.
• This article provides a breakdown of the hiring numbers for 19 firms and how many people they expect to hire by the end of the year.

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A CryptoPunk valued above $69,000 was sold for less than a cent today, in what appears to be a costly mistake. 

CryptoPunks are a collection of 10,000 NFTs, featuring pixelated faces of humans, apes, zombies and aliens. The CryptoPunk in question was Punk 3860, a male Punk with a cigarette, big shades, a shadow beard and a mohawk. It was last sold for $69,369 on July 29. 

According to Jonathan Clark, co-founder of DeFi platform Float Capital, the owner intended to sell the Punk in a whitelisted sale for under a cent — but instead, made it available on the open market. This meant that anybody watching the market closely could have seen the listing go live and snap the Punk up. 

In this case, however, someone made sure that they beat everyone to the punch. According to blockchain data, the buyer spent 22 ETH ($57,000) to bribe an Ethereum miner to prioritize the inclusion of their transaction in a block. They did so using the communication protocol Flashbots, which is commonly used to extract MEV.

There have been a few other bids for the NFT, although some of them may have been competing bids trying to buy it before it was sold. The max bid so far is 35 ETH ($91,000).

The buyer has put the NFT for sale for 52 ETH ($131,000). If somebody chooses to buy it at that price, the original buyer will end up with a profit of $74,000.

© 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.

Blockchain development platform Alchemy has brought in several angel investors from different industries to advise and guide the company’s expansion efforts.  

The roster of investors includes individuals from the crypto space and beyond: Chainalysis founder and CEO Michael Gronacer, DoorDash founder and CEO Tony Xu, Morgan Stanley president and COO Vikram Pandit, and Dreamworks co-founder Jeffrey Katzenberg to name a few. 

The San Francisco-based company provides development and infrastructure tools for various NFT marketplaces including OpenSea, MakersPlace, and SuperRare, as well as notable NFT projects like CryptoPunks, Nba Top Shot, and Axie Infinity. 

“We’re seeing an explosion of new use cases, new types of users, and new products being built with NFT technology,” said Alchemy CEO Nikil Viswanathan. “Alchemy is excited to play a part in powering the NFT space.” 

The company raised $80 million in a Series B funding round three months ago, which valued the company at half a billion dollars. The platform launched publicly exactly a year ago.

© 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.