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Quick Take

• Traditional order books are difficult to implement on-chain given the storage constraint of blockchains
• Constant product market maker is a common design among existing decentralized exchanges such as Uniswap
• Different asset-specific constant function market makers have arisen to accommodate some special properties of certain collections of assets

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Crypto exchange and custodian Gemini has acquired crypto custody startup Shard X for an undisclosed sum.

Announcing the news on Wednesday, Gemini said Shard X’s multi-party computation (MPC) technology would help increase the speed at which it can transfer customer assets and increase usage of assets on its platform.

“Integrating Shard X’s MPC technology into Gemini’s custody enables us to meet the current demand for fast withdrawals, interacting with DeFi staking, or the transferring of digital assets with greater efficiency,” Gemini COO Noah Perlman told The Block.

MPC is a cryptographic technology, which is said to be fast and more secure. In MPC, private keys are never constructed in full, removing a single point of failure. The MPC technology breaks up private keys into shards or parts and distributes them between various parties to sign a transaction.

Shard X’s technology, in particular, uses MPC technology on Entrust nShield hardware security modules (HSMs) and claims to provide benefits of both these technologies, i.e., accessibility of “hot” or online wallets and security of “cold” of offline storage.

Shard X was founded in 2018  by Yaniv Neu-Ner, Nikita Lesnikov, and Navaho De Wet in London. With Gemini’s acquisition, all three members, Shard X’s entire headcount, will be joining Gemini’s UK affiliate, Perlman told The Block.

Perlman declined to disclose the deal’s financial terms, including whether this was equity, cash, or a mix of both. But he said the deal was advised by an internal strategy team that focuses on mergers and acquisitions.

This is Gemini’s third acquisition, after buying NFT marketplace Nifty Gateway in 2019 and crypto credit card firm Blockrize earlier this year.

Crypto deals, especially in the crypto custody space, are growing at a fast clip. Last month, Galaxy Digital agreed to buy crypto custodian BitGo for $1.2 billion in cash and stock, the first $1 billion deal in the crypto industry. In March, PayPal acquired crypto custody specialist Curv.

As for Gemini, it is looking to invest in more companies, Perlman told The Block, without disclosing interest areas. Gemini recently launched an investment fund, which aims to back early-stage crypto projects and startups.

© 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.

Baidu and Weibo, two of the biggest internet services in China, appear to be taking coordinated censorship effort on keywords of the three major crypto exchanges that cater to Chinese investors.

Searching either the Chinese or English names of Huobi, Binance and OKEx on both the desktop and mobile version of Goolge-like search giant Baidu now shows zero search results, The Block has learned. This is the first known instance that Baidu is censoring search results based on keywords relating to the cryptocurrency space.

However, it appears the censorship effort on Baidu is taking effect gradually as Baidu has not yet banned search results on keywords that contain the name of the three crypto exchanges. For instance, searching for “Huobi app download” instead of only “Huobi” in Chinese on Baidu still generates millions of results.

Meanwhile, Twitter-like social media platform Weibo is taking a similarly coordinated measure. Currently searching for any keyword, or combination of keywords, containing either the English or Chinese names of Huobi, OKEx and Binance, generates no search results at all on Weibo’s desktop and mobile fronts. But while the search results no longer appear, the posts have not been deleted and are still available to view directly.

Cracking down on crypto

It’s unknown when exactly the two internet giants pressed the censorship button but Chinese users started to notice the change late afternoon on Wednesday local time. Such measures arrived not long after the recent high-level comment from the Chinese central government about cracking down on bitcoin trading and mining activities.

In addition to self-censorship that’s often related to politically sensitive content, Chinese internet services also take directions from the Cyberspace Administration of China regarding additional terms or content that should be filtered in search results.

It appears the two internet giants are targeting top tier exchanges that serve Chinese crypto traders at this point. Other exchanges or terms like Bitcoin or Ethereum are not censored.

This comes on the same day that the Changji prefecture government in Xinjiang issued a notice to shut down bitcoin miners in the Zhundong Economic Technological Development Park, a notable bitcoin mining hub in the region.

Weibo’s censorship also comes days after it suspended more than 25 accounts of crypto influencers who had been active with millions of followers combined.

© 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.

Bitcoin miners in one of the major economic and technological development zones in China’s Xinjiang province have been ordered to shut down their operations immediately.

The Reform and Development Commission in the Changji Hui Autonomous Prefecture in Xinjiang issued a notice on Wednesday to its subordinate government officials in the Zhundong Economic Technological Development Park. According to the notice seen and verified by The Block, officials in the development park have been instructed to shut down all crypto mining activities under their administration by 2:00 pm China time on Wednesday.

The park is a 15,500 square km area home to a variety of coal production industries including coal-based power plants and industrial factories. It also houses some of the largest bitcoin mining facilities in the country due to the high capacity of fossil fuel-energy.

The instruction was based on the high-level bitcoin trading and mining crackdown comment brought up during the China State Council meeting last month, the notice said.

The notice cited the “Measures for the Energy Conservation Examination of Fixed-Asset Investment Projects” passed by China’s National Reform and Development Commission as the relevant ordinance for government officials to carry out the order.

Though it is hard to pinpoint how much energy capacity exactly is powering up bitcoin mining operations in the Changji Prefecture, the Zhundong development park is known for being a major bitcoin mining hub in Xinjiang with predominantly fossil fuel energy.

Hash rate impact

Xinjiang’s measures on Wednesday may impose a more serious impact on bitcoin’s hash rate than the ones issued by its counterpart in Inner Mongolia.

Although both provinces are mostly dependent on fossil fuel energy, bitcoin mining operations in Xinjiang have always outrun those in Inner Mongolia by scale. Further, bitcoin miners in Inner Mongolia have already been moving out of the region since early March.

Bitcoin’s total seven-day average computing power has seen a slight growth to 150 exahashes per second (EH/s) since the last mining difficulty adjustment that happened on May 29.

China’s State Council, the central government cabinet, made a comment about cracking down on bitcoin trading and mining in a meeting last month.

The concern was due to a conclusion that bitcoin mining’s growth in China was behind the rising demand for coal in certain parts of China, according to a Bloomberg report. The government in Inner Mongolia reacted almost immediately with plans to enforce eight measures to drive out bitcoin mining operations in the area. 

Meanwhile, the government in Sichuan, another major bitcoin mining hub known for its cheap hydro-electricity, hosted a meeting last week to gauge how shutting down bitcoin miners would affect the local hydropower economy. No immediate plan was announced during the meeting.

The looming bitcoin mining crackdown in China has so far created as much a challenge as an opportunity for overseas bitcoin mining farms as Chinese investors have been turning to back-up plans.

© 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.

El Salvador’s legislature has passed a bill that will make bitcoin legal tender in the country. This marks the first time a country will recognize the cryptocurrency as a satisfactory form of payment for any sort of monetary debt.

El Salvador’s president, Nayib Bukele, submitted the bitcoin proposal to the Legislative Assembly on Tuesday evening, calling for the country to “regulate bitcoin as unrestricted legal tender.”

The proposal received a favorable opinion from the legislature, before they held an official vote. Legislature members passed the bill on late Tuesday night with a supermajority vote, receiving 62 votes for the bill out of a possible 84. According to the count, 19 opposed and three abstained. 

“The #BitcoinLaw has been approved by a supermajority in the Salvadoran Congress,” Bukele tweeted. “History!”

The new law makes several proposals around how the country should adopt the cryptocurrency. This includes requiring any business — whether it be for acquiring a good or service — to accept payments in crypto, allowing people to pay their taxes in bitcoin. On top of that, it excludes bitcoin from capital gains taxes.

In addition to this, the country will also be required to provide alternatives that allow the user to make transactions in bitcoin and be able to seamlessly convert from bitcoin to USD if they want to.

The law calls for the country to put into place training and other educational materials that will help the population understand how bitcoin transactions work. It also calls for the creation of a trust at the Banco de Desarrollo de El Salvador to enable instantaneous convertibility of bitcoin into USD. 

“In order to promote the economic growth of the nation, it is necessary to authorize the circulation of a digital currency whose value answers exclusively to free-market criteria, in order to increase national wealth for the benefit of the greatest number of inhabitants,” an English translation of the bill stated. 

The president will sign the bill early in the morning, and it will go into effect 90 days after its publication in the Official Gazette, where all documents ordered by EL Salvadorian law are published. 

“This night is historic and the Salvadoran people have been watching what is happening. This day, we have begun a major economic transformation,” said Congressman William Soriano. 

© 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.

El Salvador’s president, Nayib Bukele, submitted a proposed law to the country’s national legislature that, if and when approved, will “regulate bitcoin as unrestricted legal tender.”

Specifically, the proposed law covers a number of areas, according to an English translation of the bill posted on Twitter by Bukele on Tuesday evening.

Articles of the so-called Bitcoin law include the ability for bitcoin to be used to pay taxes, the exclusion of bitcoin from capital gains taxes and the use of the U.S. dollar as a “reference currency” when denominating prices.

What’s more, the bill mandates that “every economic agent must accept bitcoin as payment when offered to him by whoever acquires a good or service.”

According to the text, El Salvador’s government will play a role in facilitating the use of bitcoin in the country alongside private-sector services.

As the bill notes:

“Without prejudice to the actions of the private sector, the State shall provide alternatives that allow the user to carry out transactions in bitcoin and have automatic and instant convertibility from bitcoin to USD if they wish. Furthermore, the State will promote the necessary training and mechanisms so that the population can access transactions.” 

Per the text, it appears that the Development Bank of El Salvador will play a role in this process via a trust.

Bukele’s plan to have bitcoin declared as legal tender in El Salvador was announced over the weekend during the Bitcoin 2021 conference in Miami, Florida.

The El Salvadorean president’s office previously outlined plans to provide tax incentives to bitcoin-focused businesses following tweets from Bukele. Justin Sun said Monday that Tron would establish an office in the country. 

© 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 Web traffic hit a record high of 638.2 million visits in May, according to SimilarWeb data compiled by The Block. 

Traffic to crypto exchanges grew 20.4% in May compared to April’s figure. May’s 638.2 million in crypto exchange traffic drew 108 million more hits than the last all-time high, which occurred in January 2018: 531.7 million hits. 

The crypto exchange receiving the most visits in May was Binance with 39.4% of the traffic, followed by Coinbase with 19.1%. 

For more informational insights into the crypto space, visit The Block’s Data Dashboard.

© 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.

MicroStrategy — the publicly traded company best known for holding bitcoin on its balance sheet – has reportedly attracted more than $1.6 billion worth of orders for its latest deal to purchase bitcoin. 

As previously reported by The Block, the firm said it would raise $400 million to buy bitcoin through a debt offering of senior secured notes. The net proceeds of the offering would buy bitcoin. The firm upped the amount it would raise to $500 million. 

According to Bloomberg, the company has been inundated with demand for orders, “including interest from a large number of hedge funds.”

The deal would offer such funds a yield slightly above 6%. Junk bonds are known for offering higher yields (and a higher risk of default). Jefferies, the investment bank, is conducting the offering.

MicroStrategy officially announced its offering in a statement Tuesday, saying “the pricing of its offering of $500 million aggregate principal amount of senior secured notes due 2028 (the “notes”), which will bear interest at an annual rate of 6.125%.”

“MicroStrategy estimates that the net proceeds from the sale of the notes and the related guarantees will be approximately $488 million, after deducting initial purchaser discounts and commissions and estimated offering expenses payable by MicroStrategy. MicroStrategy intends to use the net proceeds from the sale of the notes to acquire additional bitcoin,” the firm said.

In total, MicroStrategy has accumulated more than 92,000 bitcoin, according to data from The Block.

© 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.

BlockFi is raising around $500 million in a funding round that gives the company at a pre-money valuation of $4.75 billion, according to a source with knowledge of the deal. 

The Series E raise, which was previously reported by The Information, is being co-led by Third Point — the hedge fund run by Dan Loeb — and London-based venture capital firm Hedosophia, according to the source. The firm announced a $350 million Series D raise in March.

Loeb recently also tweeted that he was exploring crypto. “I’ve been doing a deep dive into crypto lately,” the hedge funder wrote. “It is a real test of being intellectually open to new and controversial ideas.”

The fresh capital injection comes amid a lull in the price of bitcoin and other major cryptocurrencies. The deal is expected to close at the end of the month.

It also follows an embarrassing snafu at BlockFi. Last month, the firm erroneously sent some users payments denominated in bitcoin that were meant to be sent in cash. The payouts were apparently related to a March giveaway, in which qualifying customers were eligible for bitcoin rewards if they traded a certain volume during the period between March 18 and March 31.

In a note to potential investors about the raise, the firm said the mistake equated to a “loss exposure” of under $6 million. It said the move has “galvanized” the team “into action.” KPMG, the accounting firm, has been brought on to conduct a full audit of the incident. 

© 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.

Blockdaemon, a blockchain firm that provides crypto staking and node management infrastructure, has raised $28 million in a Series A funding round.

The round was led by Greenspring Associates, with participation from Goldman Sachs, BlockFi, Voyager Digital, Uphold, and others. Goldman Sachs, in particular, invested $5 million, Blockdaemon founder and CEO Konstantin Richter told The Block. The bank will also join Blockdaemon as “board observers,” said Richter.

Blockdaemon’s existing investors, including CoinShares, Borderless Capital, and Blockchain.com Ventures, also participated in the Series A.

With fresh capital at hand, Blockdaemon plans to double its headcount to 100 by the end of this year by hiring mostly engineers, Richter told The Block.

Founded in 2017, the New York-based firm says it has seen its business grow in recent months. Richter said Blockdaemon now has over 100 institutional clients, including crypto natives and traditional financial services firms.

These clients rely on Blockdaemon’s staking infrastructure to let their end users earn yields on their coin holdings. Blockdaemon says it has deployed over 10,000 nodes across 40 blockchain networks and global regions.

The Series A brings Blockdaemon’s total funding to date to around $40 million, Richter told The Block. He declined to comment on the firm’s valuation.

As for Goldman Sachs, the megabank also invested in crypto data firm Coin Metrics last month. It led the firm’s $15 million Series B funding round at the time.

© 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.