Author: Jody McDonald

Jody is a Brisbane-based freelance writer who specialises in writing about business, technology, and the future of work.

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Banking FTX Investing Markets

FTX Finalises Deal with BlockFi, Option to Buy for Up to $240 Million

Embattled crypto lender BlockFi has signed a deal with FTX US, the American arm of Sam Bankman-Fried’s crypto exchange, which will see FTX increase its credit facility to BlockFi with an option for FTX to acquire the struggling lender.

In an extensive Twitter thread, BlockFi co-founder Zac Prince explained the deal was valued at up to US$680 million, including a US$400 million revolving credit facility and the option for FTX to acquire BlockFi for up to US$240 million. According to Prince, as of July 2 the deal was still subject to shareholder approval.

BlockFi Hits Choppy Financial Waters 

BlockFi started to experience financial strain following the May collapse of the Terra blockchain and the subsequent bankruptcy of the highly LUNA-exposed Three Arrows Capital, to whom BlockFi had made sizeable loans.

These events – combined with the recent aversion to centralised lenders sparked by Celsius’ liquidity crisis, and the general market decline – have tested BlockFi’s resilience and forced the lender to shed around 20 percent of its workforce, approximately 170 employees.

In June, FTX extended a US$250 million line of credit to BlockFi to help the lender secure client funds. With this new deal, the credit facility has been extended to US$400 million.

According to Prince, BlockFi has not yet had to draw on the available credit, and the CEO insists the lender is still financially strong despite securing an increased line of credit and agreeing to a sale price far lower than its most recent valuation of US$1 billion:

We have not drawn on this credit facility to date and have continued to operate all our products and services normally. In fact, we raised interest rates, effective today. 

Zac Prince, co-founder and CEO, BlockFi

Deal Protects Client Funds

Prince said the deal was primarily about ensuring BlockFi could protect client funds and that FTX was the ideal partner as it shares the same client-first values:

“As a matter of principle, we fundamentally believe in protecting client funds,” Prince tweeted. “Not only because it’s absolutely the right thing to do, but this also benefits the ongoing health and adoption of crypto financial services worldwide. Therefore, it was important to add capital to our balance sheet to bolster liquidity and protect client funds.”

We were presented with various unattractive options where client funds would take a haircut or be behind a lender in the capital stack … Ultimately, we found a great partner in @FTX_US, who shares our commitment to clients. This represents the best path forward for all @BlockFi stakeholders and the crypto ecosystem as a whole.

Zac Prince, co-founder and CEO, BlockFi

According to Prince, the terms of the deal make repayments to FTX subordinate to protecting client funds, which means if the worst were to happen, and BlockFi couldn’t pay all its bills, priority would be given to cashing out clients.

Not Everyone Is Convinced

BlockFi’s claims of financial strength have been widely questioned on Twitter, with many users wondering why a company in a supposedly strong position would seek an increased line of credit and accept an option to acquire it for a fraction of its valuation:

Categories
CBDCs Crypto News Ripple Stablecoins

Ripple Pushes for Dominance on XRP Ledger, Launches ‘Innovation Challenge’

Ripple, the company behind the cryptocurrency XRP and the XRP Ledger (XRPL), has launched an innovation challenge to encourage the development of XRPL apps for central bank digital currencies (CBDCs). 

Entrants will need to either build a new solution or update an existing solution that uses CBDC tech and can be run on the XRP Ledger. 

Submissions for the challenge will be accepted from June 27 until August 25, with the winners announced on September 8 set to share in US$47,000 in prizes.

Winners of the challenge will then be invited to the Ripple CBDC Innovate Winners Only Event, which has a prize pool of US$150,000.

Challenge to Cover Three Categories

The innovation challenge will accept entries in three categories each with their own separate judging criteria: interoperability, retail-facing, and financial inclusion:

  • The interoperability category encourages entrants to build a solution that enables an XRPL-based CBDC to bridge with other digital assets, such as other CBDCs, NFTs and stablecoins.
  • The retail-facing category requires entrants to build an interface to work with a CBDC in a “hip and fashionable way”, which is accessible enough for any human to interact with.
  • The financial inclusion category instructs entrants to build a solution that can “leverage the benefits of a CBDC” to bring banking services to underserved populations.

Ripple Looking to Secure Dominant CBDC Position

Ripple has been known primarily for its cross-border payment solutions and on-demand liquidity, but recently it has also been making a push into the CBDC space. In addition to this CBDC-focused innovation challenge, last year the government of the Himalayan kingdom of Bhutan enlisted Ripple to pilot a CBDC running on the XRPL, and the Pacific island nation of Palau also partnered with Ripple to create an XRPL-based government-backed stablecoin.

In related news, earlier this year Ripple co-founder Chris Larsen joined forces with Greenpeace in a US$5 million campaign to encourage Bitcoin to abandon its proof-of-work consensus mechanism and transition to a more energy-efficient system such as proof-of-stake.

Categories
Crypto Exchange FTX Markets Terra Tether

FTX Founder ‘SBF’ Warns Some Crypto Exchanges Are ‘Already Insolvent’

One of the richest men in crypto, 30-year-old FTX founder and CEO Sam Bankman-Fried (also known as SBF), has warned that some “third-tier” crypto exchanges are already secretly insolvent.

Among his recent comments to Forbes, SBF declined to name which exchanges he believes are currently broke. However, his warning comes as the fallout from the May collapse of the Terra blockchain continues to wreak havoc across the crypto market, with the highly Terra LUNA-exposed Singapore-based venture capital firm Three Arrows Capital (3AC) recently announcing it’s nearing insolvency.

SBF Bails Out Struggling Firms

As a result of 3AC’s insolvency issues, fellow crypto-focused firms BlockFi and Voyager Capital – which had each given 3AC sizeable loans – also found themselves in treacherous financial waters. 

Fortunately for these firms, SBF swooped in, through his exchange FTX and trading firm Alameda Capital, to provide US$250 million in credit to prop them up and protect their customers’ funds.

Speaking to Forbes about the credit infusion SBF said, “ … You know, we’re willing to do a somewhat bad deal here, if that’s what it takes to sort of stabilise things and protect customers.” 

Of course, stabilising the crypto market and seeing it grow is also very much in SBF’s interest – his US$20.5 billion fortune is closely tied to the performance of the crypto market.

It has also recently emerged that SBF may be looking to go beyond simply providing credit to BlockFi, with reports suggesting he is now in talks to acquire the New York-based firm.

SBF Expects to See Numerous Exchanges Fail

Despite his willingness to prop up some ailing crypto firms, SBF doesn’t anticipate this generosity being applied indiscriminately across the industry. Talking to Forbes, SBF said there were companies throughout the crypto industry that were beyond saving:

There are companies that are basically too far gone and it’s not practical to backstop them for reasons like a substantial hole in the balance sheet, regulatory issues, or that there is not much of a business left to be saved. 

Sam Bankman-Fried, founder, FTX 

Tether Won’t Collapse

One much-maligned digital asset SBF has no fears for is crypto’s largest stablecoin, Tether (USDT). While many consider the collapse of the US$70 billion stablecoin is inevitable due to its reportedly less than ideal collateral situation, SBF claims there’s no reason to worry, saying: “I think that the really bearish views on Tether are wrong … I don’t think there is any evidence to support them.”

In other SBF news, the crypto magnate declared on a podcast last month that he was willing to donate up to US$1 billion to the US Democratic Party to keep Donald Trump from returning to the White House.

Categories
Australia Banking Ethereum Stablecoins

ANZ Bank Uses Its Stablecoin A$DC to Buy Tokenised Carbon Credits

The stablecoin created by the Australia and New Zealand Banking Group (ANZ), A$DC, has been used by one of its large institutional customers to purchase a tokenised representation of Australian carbon credits, marking a significant milestone for the usage of stablecoins in the Australian economy.

In March, ANZ became the first bank to mint an Australian dollar stablecoin when it created 30 million A$DC, which were used by investment company Victor Smorgon Group (VSG) to significantly speed up and avoid conversion fees on its purchase of crypto assets.

Zerocap Acts as Market Maker

In this latest transaction, ANZ provided the A$DC stablecoin to longtime institutional customer VSG to facilitate the purchase of tokenised carbon credits known as BCAUs from the blockchain-based carbon trading platform BetaCarbon.

Digital asset manager Zerocap was also involved in the transaction, acting as a market maker and providing liquidity to convert VSG’s A$DC, which BetaCarbon doesn’t recognise, into USD Coin (USDC) so it could be accepted by BetaCarbon. Unlike VSG’s previous stablecoin transaction with ANZ, the value of this transaction has not been disclosed.

Using this payment method meant the transaction could be completed entirely on the Ethereum blockchain, removing the need to use any external payment platform such as the Visa network or the new payments platform (NPP), which would have introduced complexity, additional fees and settlement delays.

ANZ Anticipates Big Things for A$DC

ANZ’s A$DC is fully collateralised by Australian dollars and is redeemable at parity with funds held by ANZ in its managed reserve account. 

Unlike algorithmic stablecoins such as Terra-based UST and Tron-based USDD, which have faced huge issues maintaining their pegs to the US dollar, A$DC has no pegging mechanism and there is no risk that it could become de-pegged from the Australian dollar. 

According to Nigel Dobson, ANZ’s head of banking services, the bank’s stablecoin can be thought of more as a “tokenised deposit” than a typical crypto stablecoin.

Speaking to the Australian Financial Review, Dobson said ANZ saw potential for stablecoins like A$DC to help banks and other financial institutions transition to a more efficient blockchain-based infrastructure:

We see this is evolving from being internet-protocol based to one of ‘tokenised’ protocols. We think the underlying infrastructure – efficient, secure, public blockchains – will facilitate transactions, both ones we understand today and new ones that will be more efficient.

Nigel Dobson, head of banking services, ANZ

Ethereum Blockchain of Choice for Now

Dobson added that the Ethereum blockchain was favoured at the moment because it had established a set of de facto standards, including ERC-20 smart contracts. However, he anticipates a possible shift away from Ethereum to other, faster and more sustainable networks, such as Solana or Polygon, as these networks implemented similar standards and matured:

Standards are absolutely fundamental to interoperability, and they will soon allow organisations to transfer assets off expensive, and arguably unsustainable, blockchains to ones with lower cost, faster throughput and sustainability credentials.

Nigel Dobson, head of banking services, ANZ

To date, A$DC has only been used for real-world transactions by VSG, but that’s likely to change soon. Earlier this month, ANZ revealed it was planning to extend access to its stablecoin to a wider range of institutional customers and, in the long term, possibly to retail investors.

Categories
Blockchain Ethereum Hackers Harmony

Harmony Protocol’s Multi-Sig Wallet Compromised in $100 Million Heist

The Harmony blockchain’s Horizon cross-chain bridge has been hacked, resulting in the theft of  approximately US$100 million worth of assets.

The Harmony team says it has identified the hacker’s wallet and is now working closely with security partners, forensic specialists and law enforcement to recover the lost assets.

During the attack – which occurred on the morning of June 23, US time – the hacker was able to steal a variety of assets including BUSD, USDC, ETH and wBTC, which have all since been swapped for ETH and remain in the hacker’s accounts on the Ethereum blockchain.

Hack Exploited Multi-Sig Wallet

According to Harmony founder and CEO Stephen Tse, the hack on Horizon bridge wasn’t due to vulnerabilities in the smart contract code. In a statement released in the days following the attack, Tse said the attacker somehow compromised several of the private keys used to sign transactions on the multi-signature wallet that controls the assets stored in the bridge:

The incident response team has found no evidence in any breaches of our smart contract codes nor vulnerabilities on the Horizon platform. Our consensus layer of the Harmony blockchain remains secure.

Stephen Tse, founder and CEO, Harmony

Tse added: “Our incident response team has discovered evidence that private keys were compromised, leading to the breach of the Horizon bridge. Funds were stolen on the Ethereum side of the bridge. The private keys were encrypted and stored by Harmony, with the keys doubly encrypted via passphrase and a key management service, and no single machine had access to multiple plaintext keys.” 

Before this hack, the multi-sig wallet controlling assets in the Horizon bridge required only two of four private keys to sign a transaction, making it highly vulnerable to attack. Since the attack, Tse has tweeted saying that the multi-sig wallet has been hardened to require four of five private keys to sign any transactions:

Harmony Offers Reward, Won’t Pursue Legal Action

In the aftermath of the hack, the Harmony team tweeted an offer of a US$1 million bounty for the return of the stolen funds and said it would advocate for no criminal charges if and when the funds are returned:

This is a relatively common tactic used by crypto projects to incentivise hackers to return lost assets, and while it sometimes works it’s not a widely supported tactic as it is seen by some as rewarding criminal behaviour:

Cross-Chain Bridges Vulnerable

Cross-chain bridges like Horizon provide interoperability between various blockchains, allowing users to swap tokens between the chains and easily take advantage of different applications and services on various chains, however they aren’t without risk.

One of the primary risks of cross-chain bridges is that their assets are often held in highly centralised multi-sig wallets controlled by a small number of individuals. This centralisation of enormous quantities of crypto assets makes them very attractive targets for hackers. Already this year, several cross-chain bridges – including Axie Infinity’s Ronin bridge and Solana’s Wormhole bridge – have been hacked for a combined total of close to US$1 billion.

Despite this recent spate of hacks on cross-chain bridges, DeFi remains by far the crypto sector most vulnerable to exploits. A recent report from blockchain analytics firm Chainalysis found that since the start of 2020, 97 percent of crypto hacks have targeted DeFi applications. Just weeks ago, the decentralised exchange Osmosis was forced offline after a US$5 million hack was identified by a Reddit user.

Categories
Doodles E-commerce NFTs Payments

Shopify Releases New Crypto Features Including NFT-Gated Storefronts

E-commerce giant Shopify has announced it will introduce new crypto-centric features to its platform including allowing brands to give NFT holders exclusive access to gated products and experiences, a feature Shopify refers to as ‘tokengating’:

The tokengating feature will be made available for both online sales and in-person purchases at bricks-and-mortar stores. Tokengating on Shopify is currently in closed beta and is available only to select merchants.

How Will Tokengated Stores Work?

According to Shopify, store owners will be able to easily create a tokengated store in the Shopify app or add the feature to a physical store. Customers will need to connect their crypto wallet to verify ownership of a required NFT before they can purchase or access gated content, products or experiences.

Shopify says this model will help retailers more easily turn enthusiasm for their brand into sales by recognising and rewarding brands’ biggest fans and giving them access to exclusive content. 

NFT Gating May Increase Brand Engagement

Tokengating will likely appeal to NFT collection creators looking to increase brand engagement and monetisation, allowing them to move beyond simply selling NFTs and into selling real world products. 

Evan Keast, co-founder of the popular NFT collections Doodles, says tokengating offers NFT holders a chance to access exciting new brand experiences:

As an ambitious community-driven project, we’ve placed a strong emphasis on setting the standard for unique NFT collector experiences. By partnering with Shopify on tokengated merch, we surprised our holders and gave the ownership of a Doodle a whole new meaning. 

Evan Keast, co-founder, Doodles

Tokengating isn’t Shopify’s first foray into the world of NFTs and crypto. Last month the platform announced a partnership with Crypto.com that allows merchants to accept zero-fee payments in more than 20 cryptocurrencies. And in December 2021, Shopify introduced functionality allowing merchants to mint NFTs directly from Shopify.

Categories
Crypto Exchange DeFi NFTs Uniswap

Uniswap Users Will Soon Be Able to Buy NFTs Directly on its Web App

Uniswap Labs announced on June 21 that it had acquired the NFT marketplace aggregator Genie, and plans to integrate NFTs into its products starting with the Uniswap web app:

The integration of NFTs into the popular decentralised exchange means users will soon be able to buy and sell the assets across most major marketplaces using Uniswap.

Uniswap Labs also plans to incorporate NFTs into its other products, including its developer APIs and widgets, which it says will make Uniswap “a comprehensive platform for users and builders in Web3”.

Airdrop for Genie Users

As part of its acquisition of Genie, Uniswap Labs will be launching an airdrop of USD Coin (USDC) to historical Genie users. In a tweet, the company said the airdrop would be open to any Genie users who had used the platform more than once before the snapshot was taken on April 15, along with any user who holds a GENIE:GEM NFT.

The airdrop is planned to launch in August and will be claimable by eligible users for 12 months.

Not Uniswap’s First Foray into NFTs

This is not the first time Uniswap Labs has dabbled in NFTs. In 2019, the company launched Unisocks, a platform where users could purchase a $SOCKS token that could then be redeemed for one real pair of limited edition socks. Uniswap Labs also helped to pioneer on-chain generative SVG images with the development of its Uniswap V3 NFT positions technology.

In its statement about the Genie acquisition, Uniswap Labs expressed its belief that NFTs are simply another way of generating value in the Web3 economy and are not separate from the ERC-20 tokens Uniswap has previously focused on:

We see NFTs as another format for value in the growing digital economy – not a separate ecosystem from ERC20s – and they’re already an important gateway to Web3.

Uniswap blog

Highs and Lows

Launching in late 2018, Uniswap was one of the first – and is currently one of the largest – decentralised exchanges on the Ethereum blockchain. In February 2021, the volume of Wrapped Bitcoin (wBTC) trading on the platform hit an all-time high following Tesla’s purchase of large amounts of Bitcoin.

More recently, in April this year a class-action lawsuit was launched against Uniswap alleging the decentralised exchange had been involved in the sale of unauthorised securities.

Categories
Australia Crypto Exchange Crypto News

Australian Exchange BTC.com.au Shuts Down Amid Market Volatility

The Australian-based crypto exchange BTC.com.au has announced it will be closing down by the end of this week, citing crashes in both the stock market and crypto market as the primary cause. 

As you have all likely seen and heard in the media this week, there have been multiple market crashes in both the crypto and stock markets, and sadly we have been very hard hit in this volatile climate and it is not possible for us to continue operating.

BTC.com.au statement

BTC.com.au says however it will keep its service alive until Friday, July 22 – giving users just over a month to prepare for its closure.

BTC.com.au Started Small, Had Recently Expanded Heavily

BTC.com.au started out in 2018 offering just a single cryptocurrency, Bitcoin (BTC). In the past year, as the crypto market boomed, the exchange expanded significantly, increasing its employee count five-fold.

In April this year, BTC.com.au announced the launch of its new full-fledged trading platform, adding support for several new cryptocurrencies and numerous other features.

Crypto Crash Puts Pressure on Exchanges

According to data from CoinGecko, since its peak last November the overall crypto market cap has plummeted close to 70 percent – falling from over US$2.9 trillion to under US$1 trillion. Many individual cryptocurrencies have seen even bigger declines, dropping 80-90 percent from recent highs. 

This degree of volatility can easily decimate heavily crypto-exposed businesses; unfortunately for BTC.com.au, the crypto winter hit immediately following its rapid expansion when it seems to have been particularly vulnerable.

Categories
Australia Ethereum GameFi Immutable X NFTs

Australia’s ‘Immutable X’ Launches $500 Million Fund to Accelerate Web3 Game Development

Immutable, the Sydney-based company behind the NFT-focused Ethereum scaling solution Immutable X, has announced the launch of its new US$500 million developer and investment fund:

The so-named Immutable Developer and Venture Fund will help accelerate the growth of Immutable X by providing grants to, and investing in, the most promising projects building on the protocol, with a particular focus on fostering the growth of Web3 game development.

New Fund to Supercharge Adoption

The fund will provide investment and grants in both cash and crypto, with crypto funding in the form of Immutable X’s native token, IMX.

The ventures side involves partnerships with several large VC firms including BITKRAFT, Animoca, AirTree, GameStop and others. The fund will look to invest in the most promising projects building on Immutable X, providing them with the necessary resources to help them scale and launch successfully.

Grants will provide developers with financial support tied to project milestones, as well as technical and educational support to help them realise their project goals. Drawing on its experience in blockchain-based game development, Immutable X will provide guidance to grant recipients to support them to transition to blockchain gaming:

We’re taking the lessons learned from building two of the blockchain’s biggest games – Gods Unchained and Guild of Guardians – and hiring the smartest people from Web2 studios like Riot Games to make entering the NFT gaming world simple and rewarding for gaming studios.

James Ferguson, CEO and co-founder, Immutable

Web3 Gaming Presents Huge Opportunity

James’s brother Robbie Ferguson, president and co-founder of Immutable, sees Web3 gaming as an enormous growth area moving forward that Immutable X will be well placed to benefit from with the launch of this fund:

Gaming is bigger than movies and music combined, and is compounding by 10 percent every year. With the knowledge we have from building two of the blockchain’s biggest games in-house, we’re going to be providing the funding, expertise and infrastructure needed to grow this to a trillion-dollar ownable economy over the next decade.

Robbie Ferguson, president and co-founder, Immutable

Immutable X Focuses on Gaming

Founded in Sydney in 2018, Immutable X was designed specifically to bring scalability and affordability to Ethereum’s NFT ecosystem. The protocol is fast – able to process up to 9,000 transactions per second – and has zero gas fees and is carbon neutral. 

Immutable X works by leveraging StarkWare’s zero-knowledge proof technology, which allows it to ‘roll-up’ thousands of transactions on its own network separate from Ethereum, and then commit them to the Ethereum blockchain in a single transaction.

Immutable X has had a busy few months, having raised $US200 million in its most recent funding round in March and in May partnering with gaming company Kongregate to launch a US$40 million developer grant fund.

Categories
Australia Blockchain Metaverse

Melbourne Sees $100 Million Invested in Metaverse Research Centre

Thai metaverse startup Translucia Global Innovation has announced it will partner with Australian software and design studio Two Bulls to launch the Metaverse Research and Development Centre (MRDC) in Melbourne. 

The MRDC is expected to have an initial budget of US$100 million and will be one of the largest metaverse research centres in the world, aiming to attract top global talent and innovate in the metaverse space.

Melbourne Centre Will Develop Translucia Metaverse Project

Last year, T&B Media Global, the Thai-based parent company of Translucia Global Innovation, announced plans to launch a metaverse project named ‘Translucia’ with several international partners, including Two Bulls. 

The new Melbourne-based hub will help develop the Translucia metaverse while also undertaking research on advanced technologies to enhance and support the experience and push the broader metaverse space forward.

Jwanwat Ahriyavraromp, founder and CEO of T&B Media Global, expects big things from the Translucia metaverse, insisting it will be “a world of happiness and smiles where people can live, work, enjoy business, socialising and entertainment in new ways”.

T&B Media Global expects the Translucia metaverse will soft-launch in November of this year during the company’s virtual expo.

Metaverse R&D Centre Hopes to Attract Best Minds

Speaking to the Bangkok Post, Two Bulls CEO James Kane said the new centre would attract the best minds in the industry and create a new kind of metaverse experience for users:

I think the Metaverse R&D Centre will be a great way to attract metaverse visionaries, helping Translucia fulfill its incredible vision and benefiting the world, introducing people to the concepts of the Translucia metaverse with its fresh perspective. 

James Kane, CEO, Two Bulls

Austalians are generally yet to embrace the metaverse, with a recent study finding only 44 percent of respondents were familiar with the technology. Despite this relative lack of awareness at home, globally the metaverse presents a huge opportunity – a report released last month suggested it may account for 2.8 percent of global GDP in 10 years, a whopping US$3 trillion.