Ben Strack

While enforcement actions against crypto-related entities aren&#8217;t anything new, industry participants said the recent <a href="https://blockworks.co/news/doj-busts-crypto-exchange">measures lobbied against exchange Bitzlato</a> show a persistent focus on controlling illicit activity in the sector — with a twist.



Law enforcement has, for the past 18 months, combatted what Ari Redbord, head of legal and government affairs at TRM Labs, called “the illicit underbelly of the overwhelmingly lawful crypto economy.”&nbsp;



The US Treasury department had implemented sanctions against crypto exchanges <a href="https://home.treasury.gov/news/press-releases/jy0364" target="_blank" rel="noreferrer noopener">Suex</a>, <a href="https://home.treasury.gov/news/press-releases/jy0471" target="_blank" rel="noreferrer noopener">Chatex</a> and <a href="https://home.treasury.gov/news/press-releases/jy0701" target="_blank" rel="noreferrer noopener">Garantex</a> within the last two years — each of which operated out of Federation Tower in Moscow, Russia.



These exchanges, while largely <a href="https://blockworks.co/news/doj-busts-crypto-exchange">unknown and considered insignificant</a> in crypto industry circles, <a href="https://blockworks.co/news/us-justice-department-to-launch-national-cryptocurrency-enforcement-team">have been prime targets</a> of US law enforcement aided by blockchain intelligence firms with government contracts such as <a href="https://blockworks.co/tag/trm-labs">TRM</a> and <a href="https://blockworks.co/tag/Chainalysis">Chainalysis</a>.



Garantex’s average monthly inflows, however, <a href="https://blockworks.co/news/ofac-sanctions-eased-crypto-crime">more than doubled</a> after the US took action against it last April, Chainalysis data showed, as Russia’s government did not enforce the sanctions.



Illicit crypto transaction volume overall rose for the second consecutive year in 2022, according to a Chainalysis <a href="https://blog.chainalysis.com/reports/2023-crypto-crime-report-introduction/" target="_blank" rel="noreferrer noopener">report</a> published earlier this month. Such activity hit an all-time high of $20.1 billion — up from roughly $18 billion in 2021.



Experts in illicit finance find the Bitzlato case more significant, according to Nick Smart, director of blockchain intelligence at Crystal, a compliance and risk management specialist.



“I think a lot of the reaction to Bitzlato has been a bit confused across the industry, and sort of misses why this is a bigger deal than at first glance,” Smart told Blockworks.&nbsp;



<h3>Treasury uses new tool</h3>



The Treasury’s Financial Crimes Enforcement Network (FinCEN) last week went a different route than sanctions. It identified Bitzlato as a “primary money laundering concern” pursuant to section 9714(a) of the Combating Russian Money Laundering Act — passed as part of the 2020 National Defense Authorization Act.



The designation came the same day the US Department of Justice (DOJ) <a href="https://blockworks.co/news/doj-busts-crypto-exchange">charged</a> Anatoly Legkodymov, a Russian national and senior executive of Bitzlato, with allegedly processing more than $700 million in illicit funds.



Bitzlato’s <a href="https://bitzlato.com/" target="_blank" rel="noreferrer noopener">site</a> has been shut down and could not be reached for comment. 



“OFAC sanctions are certainly one tool, but 9714 specifically targets Russian illicit finance,” said Redbord, a former senior adviser to the under secretary for terrorism and financial intelligence at the Treasury department.



This action is “very significant,” Redbord said, adding that it was the first designation under 9714(a), which allows the Treasury department to take severe action against a foreign financial institution to combat Russian money laundering.



French and US law enforcement authorities led the take-down of Bitzlato’s France-based digital infrastructure and interrogated platform managers, Europol said Monday.&nbsp;



About 46% of the assets exchanged through Bitzlato — worth roughly $1 billion — had links to criminal activities, Europol said. It added that roughly 1.5 million bitcoin transactions were made from Bitzlato users and the Hydra network, which the DOJ and German authorities took down in 2022.



Five individuals had been arrested as of Monday.



“[The] arrest of the founder, and with international cooperation in jurisdictions often enjoyed by Russian business people has a much bigger message,” Smart said, adding “particularly for other Russian P2P exchanges with similarly poor reputations, who must now be wondering ‘who’s next?’”



Money laundering service providers are crucial to the wider crypto crime ecosystem, according to Andrew Fierman, Chainalysis’s head of sanctions strategy.&nbsp;



“If cybercriminals cannot reliably convert the cryptocurrency generated by their activities into cash, the incentives to commit those crimes plummet,” he told Blockworks.



The powers granted under 9714(a) differ from traditional sanctions in that they provide FinCEN with a menu of special measures with which they can order financial institutions to comply. These range from information collection and record keeping, as well as prohibiting the opening of certain types of accounts or the transmittal of funds.&nbsp;



The special measures give compliance teams across the crypto industry valuable information to keep their platforms safe from illicit activity, Fierman said.



“This is also another proof point for the US government’s — together with their allies — ability to go after the Russian crypto crime ecosystem,” he added. “The overall disruption of the wider crypto crime ecosystem is what makes this action so significant.”



<h3>A sign of more to come?</h3>



Treasury Deputy Secretary Wally Adeyemo said in a statement last week that the designation marked a unique step taken only “a handful of times” in the Treasury’s history for what he called “some of the <a href="https://www.fincen.gov/resources/statutes-and-regulations/311-special-measures" target="_blank" rel="noreferrer noopener">most egregious</a> money laundering cases.”



The only other crypto-related entity the Treasury department designated a “primary money laundering concern” was Costa Rica-based Liberty Reserve in 2013. That was done under Section 311 of the USA Patriot Act.&nbsp;



Liberty Reserve founder Arthur Budovsky <a href="https://www.justice.gov/opa/pr/founder-liberty-reserve-pleads-guilty-laundering-more-250-million-through-his-digital" target="_blank" rel="noreferrer noopener">pleaded guilty</a> in 2016 to conspiring to commit money laundering.



“Because of its significant operations in, and connection to, Russia and Russian illicit finance, Bitzlato threatens US national security, the integrity of the US and international financial sectors, and businesses and institutions worldwide,” Adeyemo said. “Identifying Bitzlato as a ‘primary money laundering concern’ effectively renders the exchange an international pariah.”



Adeyemo added that “we will not hesitate” to expose and hold accountable virtual asset service providers going forward.



A Treasury department spokesperson declined to comment further.&nbsp;



Hacks on DeFi targets and cross-chain bridges last year resulted in a record $3.6 billion in stolen funds through November 2022, according to TRM Labs.&nbsp;



“This is certainly not the last time we will see the use of 9714 and similar authorities against non-compliant exchanges, darknet markets, darknet mixers — like Helix and Bitcoin Fog — and other money laundering concerns,” Redbord said.



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Bitzlato May Make Crypto Scoff, but Law Enforcement Thinks Otherwise

Bessie Liu

Following a successful Goerli testnet <a href="https://blockworks.co/news/shapella-upgrade-brings-ethereum-closer-to-long-awaited-withdrawals">upgrade</a>, Ethereum’s “Shapella” hard fork has now been scheduled to deploy on mainnet on Apr. 12.



The Shapella upgrade is the combination of the execution layer (Shanghai) with the consensus layer (Capella), which will allow validators to withdraw their locked-up ether from the network.



“It&#8217;s called &#8220;Shapella&#8221; as a portmanteau of &#8220;Shanghai&#8221; and &#8220;Capella,&#8221; Noam Hurwitz, engineering lead at Alchemy told Blockworks. The date was decided during today’s Ethereum core developers call.



In the existing proof of stake model, the Ethereum network is secured by decentralized validators who must post 32 ether — about $52,500 — to participate in block production on the network.&nbsp;



The first ETH stakers locked their tokens in the network’s Beacon contract in Nov. 2020. Ether was worth $450 at the time, now it&#8217;s trading for $1,660.



Activating withdrawals will enable two things, Hurwitz said. First, offline validators can reclaim their principal stake, and they can also claim earned fees.



“There&#8217;s also a less talked about change that reduces the gas cost applied to earning this fee,” Hurwitz said. “So in general, this is a much anticipated economic unlock for validators.”



A researcher at Arbitrum who goes by the pseudonym <a href="https://twitter.com/terencechain">terencechain</a> told Blockworks that there aren’t many roadblocks ahead of the Shapella hard fork on Ethereum’s mainnet.



“Goerli testnet went smoothly despite some operators forgetting to upgrade their nodes,” they said. “Client teams are gearing up for the main release for upgrading the mainnet to Shapella, not that we have an upgrade time. Expect releases in the next 2 weeks and minor last min bug fixes.”



Tooling is receiving last minute bug fixes, and user interface is receiving last minute touch ups to ensure optimal user experience.&nbsp;



“It&#8217;s important for them to be ready earlier so stakers can safely perform full withdrawal or partial withdrawal,” terencechain said.



Documentation is also being reviewed, he noted. Adding that “We want the documentation to be as solid as possible. That&#8217;s the gateway to stakers withdrawals.”



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Ethereum Devs Finally Set Date for ETH Withdrawals

The Federal Deposit Insurance Corporation (FDIC) said it seeks to sell Signature Bank’s entire business, contradicting a report that buyers would have to agree to give up the company’s crypto dealings.



The report came Thursday from Reuters, which cited people familiar with the matter. Bids for <a href="https://blockworks.co/tag/signature" target="_blank" rel="noreferrer noopener">Signature</a>, as well as Silicon Valley Bank (SVB), are said to be due Friday.&nbsp;



But the FDIC would not require the divestment of crypto activities as part of any sale of the banks, a spokesperson told Blockworks.&nbsp;



The FDIC’s stance is consistent with previous <a href="https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20230103a1.pdf" target="_blank" rel="noreferrer noopener">guidance</a> from the corporation — along with the Federal Reserve’s board of governors and the Office of the Comptroller of the Currency (OCC) —&nbsp; about the risks of cryptoassets.&nbsp;&nbsp;&nbsp;&nbsp;



“Banking organizations are neither prohibited nor discouraged from providing banking services to customers of any specific class or type, as permitted by law or regulation,” the regulators said in a January joint statement.



Potential acquirers of Signature will tell the <a href="https://blockworks.co/tag/fdic" target="_blank" rel="noreferrer noopener">FDIC</a> what assets and liabilities they’re willing to take from the bank, the FDIC representative added.



“So clearly, those who are interested in the bidding process will create their own conditions for purchase,” the spokesperson said.



Samuel Dibble, a partner at law firm Baker Botts, said some buyers might want to include a clause that excludes buying the crypto business for a couple reasons.&nbsp;&nbsp;



“They [may] have made a conscious decision not to acquire or hold any digital assets, or they don’t know how to value digital assets and therefore want to submit a bid that avoids having to value them,” he said.



<h2>Interest to buy?</h2>



An executive at a mergers and acquisitions (M&amp;A) advisory firm, who agreed to speak under the condition of anonymity, said Signature’s crypto-related business, including its digital payments platform, <a href="https://www.signatureny.com/business/signet" target="_blank" rel="noreferrer noopener">Signet</a>, is crucially important to the sector and will be “very valuable” to the right acquirer.



“I suspect that the crypto portion of the business will find a buyer,” they said. “We see this as a crucial test for the industry.”



Though <a href="https://blockworks.co/news/no-more-sen-now-what">Silvergate shut down its exchange network, SEN</a>, earlier this month, Signet remains operational. Signet, powered by technology from Tassat Group, allows commercial clients of the bank to transfer funds between one another in real-time.



“Signet … has operated smoothly and without interruption during this period to help facilitate needed intra-bank payments for Signature&#8217;s clients,” Tassat CEO Kevin Greene said in a statement. “The current events extend beyond Signature, and affect every bank in the country.”



But Donald Putnam, a managing director with M&amp;A specialist Grail Partners, said he expects banks that have acted as rails for fintech payment systems, such as Signature and SVB, will find few ready buyers.



“Those businesses are under regulatory scrutiny and low margin,” he added. “A few banks — Cross River comes to mind — have made a big profitable business supporting fintech, but they are the exception. The larger banks are still experiencing losses on every transaction when all costs are accounted for.”



Dibble said the benefit of buying Signature’s assets would be to acquire its relationships that it has with depositors and borrowers. But he noted, the market is a bit “spooked” right now.



“I don’t really see the ‘too big to fail’ banks rushing into a crypto business at this stage and I also don’t see any other mid-size or regional banks…looking to double down by acquiring all of Signature’s assets&nbsp; — or even just its crypto assets,” he said.



<h2>Advocacy groups speaking up</h2>



The <a href="https://blockworks.co/news/who-will-bank-crypto">crypto banking landscape is clearly in flux</a> after the collapse of Silvergate, Signature and Silicon Valley Bank.&nbsp;



The original report which stated whoever acquires Signature would have to give up the company’s crypto dealings sparked the ire of certain advocacy groups in the sector.&nbsp;&nbsp;



“As long as a crypto company can demonstrate its ability to be a good bank customer, it should be able to be banked and not be subject to a black-and-white blanket ban,” Sheila Warren, CEO of the Crypto Council for Innovation, said in a statement.&nbsp;



The Blockchain Association said Thursday it sent Freedom of Information Act (FOIA) requests to the FDIC, OCC and the Federal Reserve’s board of governors to investigate the potential de-banking of lawful crypto business, in what some have theorized could be part of a second “<a href="https://blockworks.co/news/operation-choke-point-2-0">Operation Choke Point</a>.”



The advocacy group added that allegations include account closures and the refusal to open new accounts, which it said is “more concerning in the wake of this week’s banking crisis.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">3/ These reports are especially concerning this month after the failures of Silvergate, Silicon Valley Bank, and Signature Bank. Those banks had many crypto companies as customers, who are now rushing to open new accounts elsewhere to make payroll and stay in business.&mdash; Jake Chervinsky (@jchervinsky) <a href="https://twitter.com/jchervinsky/status/1636356461914726402?ref_src=twsrc%5Etfw">March 16, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



A Blockchain Association spokesperson did not comment on which banks are allegedly de-banking crypto firms. The group has established a tip line seeking to collect more information.&nbsp;



Jake Chervinsky, the Blockchain Association’s chief policy officer, argued via Twitter that there is no valid reason to de-bank crypto companies.&nbsp;



“They&#8217;re just like all other law-abiding companies that need bank accounts to operate: they hold dollars to pay rent, salaries and taxes,” he wrote. “If regulators are debanking crypto companies, they&#8217;re breaking the law.”



Updated March 16, 2023 at 3:42 pm ET: Added comments from Samuel Dibble, a partner at law firm Baker Botts.



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FDIC Seeks To Sell Signature Bank — Crypto Business and All

John Gilbert

The Ethereum Foundation’s ERC-4337 account abstraction went live on Ethereum’s mainnet on March 1. While some expressed excitement for the news and the potential for smart contract wallets, the leading smart contract wallet providers reminded everyone that they already exist.



So what’s different? And what in the world is a smart contract wallet again?



Key takeaways:&nbsp;



<ul>
<li>Smart contract wallets provide a means of self custodying crypto assets.</li>



<li>They enable bundled transactions, customizable recovery options, the ability to pay gas fees in a different token, greater privacy in identity management and more.</li>



<li>Not all smart contract wallets remove the EOA from the equation.&nbsp;</li>
</ul>



<ul>
<li>There lacks a universal standard to account abstraction that can address risk concerns.</li>



<li>ERC-4337 is an account abstraction approach that intends to remove the reliance on centralized relayers and EOAs.</li>



<li>It can potentially provide a universal standard that addresses security concerns but needs further infrastructure.&nbsp;&nbsp;</li>
</ul>



<h2>What are smart contract wallets?</h2>



A smart contract wallet is a device or application that lets users customize the way they would prefer to manage their digital assets.&nbsp;



Account abstraction is how developers make smart contract wallets possible. They abstract all the essential functions of the Externally Owned Account (EOA) and plug them into a smart contract full of new levers and buttons.



In other words, it&#8217;s a choose-your-own-adventure approach to self custody.&nbsp;



<h3>Use Cases</h3>



You can program the smart contract wallet for the use cases that mean most to you — things like social recovery and bundled transactions. Proponents believe that it will onboard millions more to Web3 by revolutionizing the user experience, and critics fear that it introduces additional risks.&nbsp;



<h2>The Ethereum account model explained</h2>



Before we explain how it works and the significance of <a href="https://blockworks.co/news/ethereum-erc4337-account-abstraction-smart-contract">ERC-4337 account abstraction</a>, it&#8217;s worth refreshing our understanding of the Ethereum account model.



Unlike Bitcoin and other cryptocurrencies, Ethereum uses an account model instead of a UTXO (unspent transaction output) model. This allows users to deploy and use self-executing smart contracts that can run applications such as <a href="https://blockworks.co/tag/uniswap" target="_blank" rel="noreferrer noopener">Uniswap</a>.



There are two types of accounts on the Ethereum network: externally owned accounts (EOAs) and smart contract accounts.&nbsp;



<ul>
<li>Both are represented by a unique public address, which is essentially a string of letters and numbers.&nbsp;</li>



<li>Both can be used to send, hold or receive ether.</li>
</ul>



However, EOAs and smart contract accounts differ in how they are controlled and used. EOAs are controlled directly by the user through a private key signing function. This authorizes the account to perform three primary tasks:&nbsp;



<ul>
<li>Validate transactions&nbsp;</li>



<li>Execute transactions&nbsp;</li>



<li>Pay transaction fees&nbsp;</li>
</ul>



In contrast, smart contract accounts are controlled by their embedded logic — a series of if-then statements. But this design makes smart contracts dependent on EOAs. They are still needed to deploy the smart contracts and prompt smart contract actions.&nbsp;



The smart contract’s dependence on EOAs makes it difficult for wallet providers to program new ways for users to validate, execute and pay transaction fees.&nbsp;&nbsp;&nbsp;



<h3>Limitations of this model</h3>



This accounts model limits many wallet providers to only offer users a <a href="https://blockworks.co/news/what-are-seed-phrases">seed phrase</a> in the case that they lose access. The seed phrase though is notoriously vulnerable to users forgetting it or losing it to theft — which discourages users from interacting with the blockchain, and makes it difficult for them to manage their digital assets.



Read More: <a href="https://blockworks.co/news/what-are-seed-phrases">What is a seed phrase and are they necessary?</a>



Another pain point is the number of steps it takes for a user to interact with a smart contract. Since every interaction with a smart contract requires a signature, gas fees can get expensive quickly. This also adds vulnerability for the user, as each transaction increases risks associated with potential network congestion, errors in smart contract code, or other technical issues.



Lastly, the standard EOA model limits the innovation of wallet providers. There are workarounds that use smart contracts that enable more use cases with greater customization, but they come with a new set of risks.&nbsp;



<h2>How does account abstraction work?</h2>



Before ERC-4337, smart contract wallets had two general approaches to account abstraction. They could either use third party relayers with an abstracted EOA or use a layer-2 solution with native account abstraction.&nbsp;



<h3>The EOA and relayer approach</h3>



Smart contract wallets like Safe use an EOA as the basis of a smart contract wallet and a <a href="https://docs.safe.global/learn/gnosis-safe" target="_blank" rel="noreferrer noopener">transaction relay service</a> to bundle and process transactions on behalf of the smart contract account.&nbsp;



Remember, the current EVM logic requires users to deploy a smart contract with their EOA account. So in this approach, safe wallets use an EOA for its initial set up. But once the account is created, users can add a layer of customization to the authorization process.&nbsp;



<h4>Benefits</h4>



For example, with Safe, users can configure several types of transaction confirmation methods, including multi-sig, time-lock, and threshold signatures.&nbsp;



<ul>
<li>A multi-sig confirmation method is a security feature that requires multiple parties to approve a transaction before it can be executed. It adds an extra layer of security to transactions and helps prevent fraudulent activity.</li>
</ul>



<ul>
<li>In a time-lock confirmation method, a transaction is scheduled to execute at a future time and is confirmed automatically when that time is reached, without requiring any additional approval. This approach is useful for scenarios where a group of people want to agree on a transaction in advance, but don&#8217;t want to coordinate their approval at a specific time.</li>
</ul>



<ul>
<li>Threshold signatures is a multi-signature scheme where a transaction can be authorized by a subset of a group of signers, instead of requiring all signers to approve it. This allows for greater flexibility in the approval process and can increase security by reducing the likelihood of all signers being compromised at the same time.</li>
</ul>



This layer of abstraction can also be used to customize account recovery. For example, it lets users add trusted accounts that can help recover the account in case the user loses access. The recovery process involves a time delay and a confirmation from a majority of trusted accounts to prevent unauthorized access.&nbsp;



Since the smart contract is on Ethereum, it still costs gas to execute actions that require multiple transactions. So instead of executing a set of transactions individually, the smart contract can be programmed to send authorized transaction metadata to a transaction relay service that executes them on the user’s behalf.&nbsp;



<h4>Risks</h4>



This allows third parties to cover the gas fees for the user or let them pay the fees with a different token. The challenge though is, not all third party relayers are the same. Some contain unique centralization risks that the average user is not going to understand.&nbsp;&nbsp;



<h3>Layer-2 native account abstraction</h3>



Smart contract wallets like Argent have partnered with ZK-Era to provide account abstraction through a layer-2 solution. This avoids the need for third party relayers and removes the need for a user to set up an EOA.



ZK-Era’s native abstraction uses Zero-knowledge proof rollups to bundle a set of transactions from an Argent smart contract account that are then settled using the ZK-Era smart contract on the Ethereum blockchain.&nbsp;



<h4>Benefits</h4>



Since the accounts are on a layer-2, users don’t need to use an EOA for initial set up and authorization. This adds greater scalability and complexity because smart contracts on layer-2s can process more computations without delegating to a third party like a relayer.&nbsp;



<h4>Risks</h4>



The exact process is too complicated to explain here, but the main concerns are rooted in the security and dependency of the layer-2 smart contract responsible for settling deposits and withdrawals.



<h3>ERC-4337 account abstraction&nbsp;</h3>



ERC-4337 account abstraction offers an approach that doesn’t require third party relayers, layer-2 smart contracts, or a consensus layer change. It lets people manage a smart contract wallet without ever needing to use an EOA in the same way. 



It does this through providing a new standard of transaction messaging. Instead of executing transactions individually or sending the metadata of a set of authorized transactions to a relayer, smart contract wallets can send a series of user operations to a bundler.&nbsp;



So what is a bundler and user operation? And how are they different from a relayer and transaction?&nbsp;



<h4>Benefits and risks&nbsp;</h4>



To get a full breakdown of how this works, keep an eye out for an <a href="https://www.blockworksresearch.com/research?author=westie" target="_blank" rel="noreferrer noopener">upcoming report</a> from Blockworks Research analyst <a href="https://twitter.com/westiecapital" target="_blank" rel="noreferrer noopener">Ryan West</a>.



In short, the model offers the potential for a more decentralized version of what relayers do for smart contract wallets like Safe.&nbsp;



But many on Twitter have pointed out that the current bundler infrastructure is centralized and fragile.&nbsp;



Twitter user @blockomotive <a href="https://twitter.com/blockomotive/status/1631996557280116736" target="_blank" rel="noreferrer noopener">stated</a>, “there’s been other projects and technology offering transaction relaying services for a while.”



“However,” they <a href="https://twitter.com/blockomotive/status/1631996553102491655?s=20" target="_blank" rel="noreferrer noopener">added</a>, “until many bundlers are up and running (which still requires dedicated [infrastructure]), the system remains centralized and fragile. Currently, only a few projects offer API services to run bundlers, increasing the centralization of 4337.”



And @Safe <a href="https://twitter.com/safe/status/1625466577230389248" target="_blank" rel="noreferrer noopener">stated</a> in February 2023:



“We are evaluating an EIP-4337 integration (also based on a module). We will only roll out this integration when we meet our very tough security standards.”



<h2>Final thoughts</h2>



Even though the majority of the smart contract wallet discussion is centered around alternative account recovery systems, there are many more exciting use cases. Smart contract wallets have the potential to customize the way users manage their identity online, vote on governance proposals, delegate user responsibilities of DAO wallet and more.&nbsp;



Read more: <a href="https://blockworks.co/news/what-is-decentralized-identity">What Is Decentralized Identity? The Pillar of Web3</a>



Most account abstraction methods still require some form of dependency — whether it is a relayer, bundler or layer 2 smart contract. Web3 users shouldn’t be expected to understand the difference in risk between the three primary alternatives.



But if the industry adopts a universal standard, users may feel more comfortable using smart contracts wallets — unlocking the smart wallet advocate’s promised new wave of adoption.



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What Are Smart Contract Wallets? A Beginners Guide

The world’s largest annual blockchain conference has plans to grow beyond Denver after seeing record attendance at this year’s event.



ETHDenver saw headcounts jump by more than 50% this year, with an estimated 15,000 individuals from 115 different countries coming together to discuss the future of Web3 and crypto innovation.



The event, hosted by blockchain companies and 100% community-funded, is completely free for anyone interested.&nbsp;



“This year&#8217;s #BUIDLathon winners give a great look at the future of the crypto ecosystem, with strong projects across regenerative finance, NFT marketplaces and infrastructure demonstrating just how many interesting new projects are moving the industry forward,” John Paller, ETHDenver founder, told Blockworks.



More than 6,000 developers participated in the hackathon and almost 400 projects were submitted for review. An estimated $100,000 was awarded to 18 finalists.



Almost $1 million was further handed to developers in the form of bounties. This year, 62 sponsors distributed 180 bounties.



Following the success of this year&#8217;s event, organizers are looking to take the event global and attract more developers and interested participants into the space.



“From the incredible speakers to the immensely creative project winners, it’s invigorating to see what this community is accomplishing year in and year out at ETHDenver and beyond,” Paller said.&nbsp;



“We are hopeful that 2024 will bring new opportunities and locations to expand access worldwide.”



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ETHDenver Has Plans To Go Global After Record Attendance

Shalini Nagarajan

FTX transferred substantial amounts to Sam Bankman-Fried and other key employees, mainly via Alameda Research, the exchange’s new management said Wednesday. 



A total of $3.2 billion was disbursed, including $2.2 billion to <a href="https://blockworks.co/tag/sam-bankman-fried" target="_blank" rel="noreferrer noopener">Bankman-Fried</a>, $587 million to former co-lead engineer Nishad Singh, $246 million to co-founder Zixiao “Gary” Wang, $87 million to FTX Digital Markets’ co-CEO Ryan Salame, $25 million to former Alameda’s co-CEO John Samuel Trabucco and $6 million to former Alameda CEO <a href="https://blockworks.co/tag/caroline-ellison" target="_blank" rel="noreferrer noopener">Caroline Ellison</a>. 



The dates or timing of the transfers were not mentioned, but it is likely that these payments were made before the crypto exchange went bankrupt. “The amount and timing of eventual monetary recoveries cannot be predicted at this time,” administrators <a href="https://www.prnewswire.com/news-releases/ftx-debtors-file-schedules-and-statements-of-financial-affairs-with-bankruptcy-court-301773613.html?tc=eml_cleartime" target="_blank" rel="noreferrer noopener">said</a>, adding that further analysis will uncover more details on assets and liabilities.



The amount handed out did not include the more than $240 million spent to purchase luxury property in the Bahamas.



The new management at <a href="https://blockworks.co/tag/ftx" target="_blank" rel="noreferrer noopener">FTX</a> said it is investigating legal claims against the beneficiaries. New CEO John Ray has said his top priority is to repay customers who have funds stuck in the exchange.



A representative for Bankman-Fried declined to comment.



FTX sought bankruptcy protection in November after being unable to redeem customer withdrawal requests, going down as one of the worst disasters in digital asset history.



Ellison, Wang and Singh have agreed to plea deals on charges related to the exchange’s collapse. Meanwhile, Bankman-Fried has pleaded not guilty to charges of wire fraud and money laundering. He is scheduled for a criminal trial on Oct. 2, but his lawyers say the date may have to be <a href="https://www.reuters.com/legal/bankman-frieds-lawyers-say-october-trial-may-need-be-delayed-2023-03-09/" target="_blank" rel="noreferrer noopener">delayed</a> due to the need for more time to review evidence.



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FTX Transferred Over $3.2B to Bankman-Fried, Other Execs

David Canellis

Bankrupt crypto lender Voyager has almost finished liquidating its monumental crypto portfolio in a bid to make customers whole — but it still has about $166 million to go.



Blockworks compiled Arkham Intelligence data to recreate Voyager’s crypto holdings as of Jan. 1 — just days before it significantly ramped up deposits to crypto exchanges — to see exactly how the process has gone.



Voyager has so far pulled $433 million in stablecoins (mostly USDC and a small amount of USDT) from crypto exchanges Coinbase and Binance US year to date, having initially sent mountains of ether (<a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">ETH</a>), polygon (<a href="https://blockworks.co/price/matic" target="_blank" rel="noreferrer noopener">MATIC</a>) and shiba inu (<a href="https://blockworks.co/price/shib" target="_blank" rel="noreferrer noopener">SHIB</a>), among dozens of other tokens.



An additional $18.2 million USDC was received from market maker Wintermute, which also runs an over-the-counter trading desk. Voyager has sent Wintermute amounts of ETH, SHIB and MATIC, as well as smaller amounts of sushiswap (<a href="https://blockworks.co/price/sushi" target="_blank" rel="noreferrer noopener">SUSHI</a>), aave (<a href="https://blockworks.co/price/aave" target="_blank" rel="noreferrer noopener">AAVE</a>) and yield games guild (<a href="https://blockworks.co/price/ygg" target="_blank" rel="noreferrer noopener">YGG</a>).



(For the purposes of this report, crypto sent to exchanges is considered “sold.”)



Voyager at the start of the year:



<ul>
<li>held about $546 million in Ethereum-bound crypto across dozens of tokens; with</li>



<li>ether making up 46% of those funds, followed by USDC (15%) and SHIB (13%); and</li>



<li>kept 187.7 million <a href="https://blockworks.co/price/vgx">VGX</a> (then worth $56 million), 10% of its Ethereum token portfolio.</li>
</ul>



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/13015203/embed#?secret=hyQfxyXY6S" data-secret="hyQfxyXY6S" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Ether made up most of Voyager’s portfolio at the start of the year. Not anymore. | Chart by David Canellis</figcaption></figure>



As well, 6,905.61 <a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a> ($171 million) sat in a Bitcoin <a href="https://bitinfocharts.com/bitcoin/address/12qA97T8hsDgvVoRCXGZifd9PCraqvd2DW" target="_blank" rel="noreferrer noopener">address</a> that once handled some Voyager withdrawals until Wednesday, when it was sent to an external address which has been <a href="https://github.com/VHRanger/tether/blob/main/data/known_addresses.json" target="_blank" rel="noreferrer noopener">linked</a> to Coinbase. It’s <a href="https://twitter.com/shingolavine/status/1605473013800980481" target="_blank" rel="noreferrer noopener">unconfirmed</a> whether the address belongs to Voyager’s estate, so it’s currently excluded from the charts. Blockworks has reached out to Voyager’s bankruptcy lawyers Kirkland &amp; Ellis for comment.



<h2>Voyager already sold all its MATIC, worth $53M</h2>



<a href="https://blockworks.co/news/doj-binance-voyager-sec">Binance’s US arm has fought for the right to acquire Voyager’s assets</a>. The firm filed for bankruptcy last July under the weight of exposure to Three Arrows Capital and associated market volatility around that time, initially triggered by the demise of algorithmic stablecoin Terra.



Voyager said it had $1.3 billion in user crypto to liquidate at its first day bankruptcy hearing in July 2022, although an exact breakdown of its portfolio wasn’t provided. Considering the volatile and illiquid nature of some cryptocurrencies tied to Voyager’s estate, it’s likely their true value was much lower. Voyager also may have other assets on other blockchains not contained in this analysis.



Still, Voyager spent the following months hoovering crypto from various blockchain addresses to two primary Ethereum wallets. Initial estimates suggested Voyager has upwards of 100,000 creditors, to whom Voyager owes between $1 billion and $10 billion.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/13015352/embed#?secret=PIamYt3fw6" data-secret="PIamYt3fw6" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Toggle the chart between total value sold to date and percentage of stake sold | Chart by David Canellis</figcaption></figure>



As of this Wednesday, Voyager had 52,553 ETH ($86.7 million) left in its addresses, which means it has sent 75% of its initial ether stash for liquidation. And by raw number of tokens (not including stablecoins), Voyager addresses have sent almost 66% of all its cryptocurrency to exchanges so far this year.



The firm has already deposited all of its MATIC, BNB, ontology (ONT), ocean protocol (OCEAN), wrapped bitcoin (WBTC) and yearn finance (YFI) to exchanges, holdings which together were worth $42.5 million at the time of their outflows, nearly all of that MATIC.



<h2>Loads of shiba inu still left to unwind</h2>



Ether aside, Voyager’s largest non-stablecoin holdings are now SHIB and VGX. Its addresses started the year with 9 billion SHIB and 181.8 million VGX — worth $73 million and $54.3 million at the time, respectively.



Voyager has since sent almost 66% of its SHIB to exchanges, alongside 69% of its VGX. But thanks to increased crypto prices, Voyager’s remaining SHIB is still worth $32.6 million and its <a href="https://blockworks.co/news/bankrupt-issuers-tokens-survived" target="_blank" rel="noreferrer noopener">VGX</a> $18.2 million. 



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/13089230/embed#?secret=iPHjkaHyFJ" data-secret="iPHjkaHyFJ" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Voyager has sent $53M VGX to exchanges, $18M left to go | Chart by David Canellis</figcaption></figure>



VGX was intended as a utility token that also paid loyalty rewards. Users could pay for withdrawal fees and the like with VGX while earning tokens by referring new users, staking VGX and even as cashback rewards via Voyager’s debit card.&nbsp;



But with Voyager now defunct, VGX’s value proposition is effectively moot, much like <a href="https://blockworks.co/news/bankrupt-issuers-tokens-survived">other ‘zombie’ coins</a>.



So much selling might suggest that Voyager has been influencing token prices downward, but it doesn’t seem so.&nbsp;



Practically every token of which Voyager has offloaded a material amount of crypto has seen increased prices since Jan. 1, despite all the liquidations.&nbsp;



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/13014850/embed#?secret=jPG9RM76Uj" data-secret="jPG9RM76Uj" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Voyager’s ETH deposits to exchanges have ramped up over the past week | Chart by David Canellis</figcaption></figure>



All in all, Voyager’s bankruptcy estate has done quite well. What was a near-$550-million crypto portfolio is now worth $700 million — after selling two-thirds of those assets.&nbsp;



And in a bear market, no less.



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Voyager’s $500M Crypto Liquidation Is Almost Complete

Arbitrum Foundation, the governing body behind Ethereum layer-2 scaling solution Arbitrum, is making decentralization strides.&nbsp;



The latest indicator: plans for a token airdrop alongside launching Arbitrum Orbit, its layer-3 development tool.



The move falls in line with a <a href="https://ethereum-magicians.org/t/proposed-milestones-for-rollups-taking-off-training-wheels/11571" target="_blank" rel="noreferrer noopener">proposal</a> from Vitalik Buterin, Ethereum’s co-founder, in which he identified necessary steps to allow optimistic rollups to “take off training wheels” — and become fully decentralized in the process.&nbsp;



Steven Goldfeder, CEO at Offchain Labs, told Blockworks that Arbitrum would be one of the first Ethereum rollups to move from stage zero to one.



“This is a very big milestone, not only for us at off-chain or the Arbitrum Foundation, but also for Ethereum scaling,” Goldfeder said.&nbsp;



<h2>How Arbitrum mapped out its upcoming airdrop</h2>



Arbitrum is positioning its airdrop — expected March 23 — as a way to place governance power into community hands, Goldfeder told Blockworks.



“We worked very closely with Nansen over the past few months on designing airdrop eligibility criteria,” Goldfeder said. “We have a point system based on different criteria, such as usage, to help determine the amount of points each user gets.”



The eligibility criteria for the airdrop can be found on gov.arbitrum.foundation.



The user airdrop will make up 11.5% of the total token supply, with an additional 1.1% earmarked for DAOs.



“So, projects on Arbitrum that have their own communities will also be eligible for the DAO to get an airdrop,” Goldfeder said. “Our hope and expectation are that this ends up in the hands of Arbitrum users as well, but it is the DAO who will have the ability to distribute them.”



The remaining governance tokens will be distributed over time to the community through grant programs and other initiatives led by the DAO.&nbsp;



“We’d like things to have an open and fair process, and I think history has shown us the importance of delegation in the claiming flow,” he said.&nbsp;



<h2>Layer 3 developer tools to boot</h2>



Alongside the airdrop announcement, Arbitrum has also released a development kit for those interested in building a layer-3 solution on top of Arbitrum.



The L3 development toolkit, dubbed Arbitrum Orbit, will allow anyone to launch their own L3 on top of the Arbitrum code base.



“The community will have the ability to innovate and build and also modify the code,” Goldfeder said. “The idea is giving the licensing over into the hands of the community.”



In one prominent feature, the ARB token will not be used to pay any fees on the Arbitrum chain, and on-chain fees will remain payable through ETH.



The mechanism is similar to Optimism’s OP token, which operates only as a governance token. Arbitrum’s airdrop has been much <a href="https://twitter.com/milesdeutscher/status/1584518035142217730" target="_blank" rel="noreferrer noopener">anticipated</a> since its competitor Optimism revealed its governance token last May.



“What the Arbitrum Orbit does, it will bring yet another tool into the hands of developers,” Goldfeder said. “You can now build a smart contract with the public Arbitrum chains and get security derived from Ethereum.”



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Arbitrum’s ARB Token Airdrop: It’s Happening

The Investor’s Guide to Crypto Correlation

The US central bank has announced its instant payments system is set to go live in less than four months, giving citizens a new prompt settlement and clearing service for their transactions.&nbsp;



The Fed announced Wednesday that the service will kick off the formal certification process for participants in the first week of April, which will be followed by a trial program in order to get ready for sending live transactions through the system. Operations will begin in July.



&#8220;We couldn&#8217;t be more excited about the forthcoming FedNow launch, which will enable every participating financial institution, the smallest to the largest and from all corners of the country, to offer a modern instant payment solution,&#8221; Ken Montgomery, a FedNow program exec and chief operating officer at the Fed Reserve Bank of Boston, said in a <a href="https://www.federalreserve.gov/newsevents/pressreleases/other20230315a.htm" target="_blank" rel="noreferrer noopener">statement</a>. 



A varied mix of small and large financial institutions have shown intent to start using the FedNow service in July, according to the Fed. Montgomery said that access to the service is just the start point, with the major focus being on growing the network of participating institutions in order to broaden the availability of instant payments across the country.



Gabor Gurbacs, director of digital assets strategy at VanEck, said the timing of the service launch was suspicious, considering multiple US bank failures. “This may be the first leg into CBDC rails/reset,” he said.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Federal Reserve announces July launch for the FedNow Service. The first week of April, the Federal Reserve will begin the formal certification of participants for launch of the service. Suspicious timing around bank failures. This may be the first leg into CBDC rails/reset. <a href="https://t.co/2ENBtksZDD">pic.twitter.com/2ENBtksZDD</a>&mdash; Gabor Gurbacs (@gaborgurbacs) <a href="https://twitter.com/gaborgurbacs/status/1636125532155781125?ref_src=twsrc%5Etfw">March 15, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The FedNow service is seen as an alternative to <a href="https://blockworks.co/tag/cbdc">central bank digital currencies</a>, which are virtual currencies backed and issued by a central bank. US Fed governor Michelle Bowman last year said the service addresses the issues that some have raised about the need for a CBDC.&nbsp;



The US Treasury is currently <a href="https://blockworks.co/news/us-treasury-weighs-prospect-for-cbdc-adoption">considering the consequences of issuing</a> a CBDC, while lawmakers are still divided on the matter. But even as policy deliberations drag on, Treasury officials are designing the technology that would be needed for a CBDC in case it is determined that it should be used.



The service will launch with a solid set of clearing and settlement functionality, and other features will be added in future releases as the network expands.



It’s likely there is <a href="https://blockworks.co/news/fed-chair-powell-cbdc-and-stablecoins-can-coexist">a role for cryptographically secured stablecoins</a> even if the US eventually does issue a CBDC, which raises <a href="https://blockworks.co/news/cbdcs-privacy-not-mutually-exclusive">issues of privacy and centralization</a> of power.



Tom Barkin, a FedNow Program executive sponsor, said the Fed is creating a “leading-edge payments system that is resilient, adaptive and accessible.”



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Fed Says Real-time Payments Service To Launch in July

BlackRock chief Larry Fink highlighted the financial headway taking place in some countries other than the US, which appears to be falling behind in comparison.



In an <a href="https://www.blackrock.com/corporate/investor-relations/larry-fink-annual-chairmans-letter" target="_blank" rel="noreferrer noopener">annual letter</a> to investors published Wednesday, Fink wrote about rising interest in the digital assets space over the past year, even though bankrupt crypto exchange FTX really captured the spotlight.



He called attention to faster and more efficient payments in India, Brazil and parts of Africa. India’s <a href="https://www.npci.org.in/what-we-do/upi/product-overview" target="_blank" rel="noreferrer noopener">United Payments Interface</a> (UPI), a type of instant-real time payment system, has become a roaring success as it is now one of the most widely-used forms of payment in the country. A similar system in Brazil called <a href="https://business.ebanx.com/en/resources/payments-explained/pix-instant-payment-system" target="_blank" rel="noreferrer noopener">Pix</a> has evolved the way locals pay.&nbsp;



“By contrast, many developed markets, including the US, are lagging behind in innovation, leaving the cost of payments much higher,” he said.



Fink oversees the world’s largest asset manager, which has nearly $8 trillion in assets under management. And he believes the asset management industry is yet to utilize some of the most promising technologies in the digital asset space.&nbsp;



Specifically, the tokenization of assets is an attractive use case for the BlackRock CEO because it points to chances of “driving efficiencies in capital markets, shortening value chains, and improving cost and access for investors.”



He said BlackRock continues to explore the digital assets ecosystem, with a special focus on aspects that would drive the most value to clients, like permissioned blockchains and tokenization of stocks and bonds.&nbsp;



Other prominent financial institutions like Goldman Sachs, Hamilton Lane and Siemens have already piqued investor interest by undertaking their own distinct <a href="https://blockworks.co/news/2023-year-of-asset-tokenization">asset tokenization projects</a>. In fact, Hong Kong’s government tapped Goldman Sachs’ tokenization protocol to issue its first tokenized green bond.



This isn’t the first time Fink vocalized his thoughts about the potential of asset tokenization. He <a href="https://blockworks.co/news/blackrock-ceo-still-in-crypto-for-the-tech-despite-ftx-scandal">addressed</a> the FTX blow-up at the New York Times DealBook Summit in December, saying there were “some misbehavior of major consequences.” And despite the pitfalls associated with the collapse, he said the tech around cryptocurrencies will be “very important” going forward.&nbsp;



“I believe the next generation for markets and next generation for securities will be tokenization of securities,” he said then.



Fink acknowledged that participating in the digital assets industry doesn’t come without risks, and said there is a clear need for regulation in the market as it is yet to fully mature.



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BlackRock CEO Touts Tokenization, Warns US ‘Lagging’ in Innovation

Sebastian Sinclair

The UK Treasury said Wednesday it is updating tax return forms to ensure individuals declare profits or earnings generated from crypto as a separate category, rather than combining it with other income sources.



According to the government&#8217;s latest <a href="https://www.gov.uk/government/publications/spring-budget-2023/spring-budget-2023-html" target="_blank" rel="noreferrer noopener">budget announcement</a>, changes to the Self Assessment tax return forms are expected to be introduced during the 2024-25 fiscal year.



The change is expected to raise an additional £10 million, Maryna Kovalenko, co-founder of crypto accounting firm Kova Tax, told Blockworks.



“Adding the field to identify crypto specifically will increase awareness amongst self-lodgers of the need to declare their crypto gains,” she said. “This will result in an increase in tax revenue collected.”



The decision to add a crypto capital gains disclosure to the form marked a “positive step,” making it easier for individuals to comply with their tax obligations, Bill Hughes, Senior counsel and director of Global Regulatory Matters at ConsenSys told Blockworks in an email.



The Government’s move is also further proof that digital assets are “becoming more mainstream,” Hughes added. “Steps that regulators take to make compliance easier for the crypto ecosystem are appreciated,” he said.



Changes made to crypto taxation have likely been introduced to capture additional insights into how crypto is currently being declared, so the system can be better managed, Kovlenko said.&nbsp;



The data would then be used to inform future policymaking and possibly to direct tax enforcement activities.



Crypto taxation is expected to go toward funding various public services and programs, such as education, healthcare, transportation, infrastructure, defense, social security and welfare, per the announcement.



The budget is also part of a much broader plan to tackle inflation, grow its economy and reduce the debt in an attempt to avoid a nationwide recession, according to the announcement.



“The Office for Budget Responsibility, is now forecasting the UK economy will avoid a recession and supported by action taken at the Spring Budget, GDP is higher in the medium term,” Treasury said.



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Crypto Capital Gains Disclosure Added to UK Tax Returns to Boost Revenue

Traders and investors are flocking to bitcoin as uncertainty surrounds traditional banking institutions following last week’s collapse of Silicon Valley Bank.



Speculation is mounting over whether the Federal Reserve intends to rethink its campaign of future rate hikes amid a period of uncertainty, and even whether the government would once again resume quantitative easing (QE) measures.



While some believe the fallout from Silicon Valley Bank, Silvergate and Signature Bank has only added fuel to the fire, not all are convinced.



“The narrative is bailout and back to quantitative easing,” Dmitry Lapidus, junior partner at Dragonfly, told Blockworks. “I&#8217;m not convinced that&#8217;s true, although markets are definitely starting to fight the Federal Reserve again and crypto is responding.”&nbsp;



The primary objective of QE, narrated by policymakers in the past, has been to increase the supply of money and credit in the economy, which can lower interest rates and stimulate economic activity, particularly in the credit markets and the banking sector.&nbsp;



In the short term, QE can lead to a boost in asset prices, such as stocks, bonds, and real estate, as investors seek higher yields in response to lower interest rates. In turn, this can help create a &#8220;wealth effect&#8221; that encourages consumer spending and business investment, leading to further support for economic growth and job creation.



Bitcoin may be <a href="https://www.cnbc.com/amp/2023/03/15/bitcoin-btc-price-is-up-50percent-this-year-outperforming-stocks-and-gold.html" target="_blank" rel="noreferrer noopener">leading</a> a risk-on rally based on that shifting sentiment.



The world’s largest digital asset by market value is up more than 48% this year compared to ether’s 39% at $24,800 and $1,660 respectively, data from <a href="https://www.blockworksresearch.com/assets">Blockworks Research</a> shows. In the past week alone, both assets are up around 20% and 15%.



A look at the bitcoin to ether ratio, which measures the relative value of two, shows it is now at its highest point since the collapse of FTX in November last year, <a href="https://www.tradingview.com/chart/FN831Ttr/?symbol=BINANCE%3AETHBTC" target="_blank" rel="noreferrer noopener">TradingView data</a> shows.



Bitcoin’s outperformance over ether could reflect some unease over <a href="https://blockworks.co/news/shapella-upgrade-brings-ethereum-closer-to-long-awaited-withdrawals">Ethereum’s upcoming Shanghai-Capella</a> upgrade.



The ratio is also often used by traders and investors to determine which crypto is performing better at a given time. A high ratio suggests that bitcoin is outperforming ether, while a low ratio suggests the opposite.



“When traders are unsure about crypto prices, they flee to stables. When they&#8217;re unsure about stables, they flee to banks,” Paul Kremsky, trader and global head of Business Development at Cumberland, wrote in a LinkedIn <a href="https://www.linkedin.com/posts/paul-kremsky-8b3867159_when-traders-are-unsure-about-crypto-prices-activity-7040560209513119744-pvs-/" target="_blank" rel="noreferrer noopener">post</a> on Monday.



“But when they’re unsure about banks? It’s bitcoin’s time to shine,” he said.



This week marks the ten-year anniversary of a bank run that occurred in Cyprus, during which ATMs were drained, and bank vaults were emptied.&nbsp;



The event caused bitcoin to experience its largest-ever rally in terms of percentage increase, surging from $45 to $260 within a month, Kremsky added.



It&#8217;s worth noting that typically following a bitcoin-induced rally the market tends to experience a period of consolidation or a correction, as seen as recently at the start of January this year. Prices have begun to consolidate in a tight range between $24,300 and $25,000, data shows.



<h2>Markets leading the fed</h2>



Kremsky pointed to a <a href="https://twitter.com/biancoresearch/status/1635407339711787008?s=20" target="_blank" rel="noreferrer noopener">tweet</a> by Jim Bianco, president of market analysis firm Bianco Research, discussing a significant decline in the yield of the 2-year US Treasury note. 



Lapidus highlights there was a significant decline in the 2-year rates on Monday, the largest since 1982, suggesting markets may be leading the US Federal Reserve on interest rates.&nbsp;



While he predicts a 25 basis point hike, it marks a sharp shift from the market&#8217;s previous expectation of 50 basis points last week, indicating a 180-degree turn from bearish to bullish sentiment.&nbsp;



That would, in turn, point to an increased appetite for risk-on assets like bitcoin over the mid-term, a pattern that&#8217;s often reflected in rate adjustments from the fed.



“Rate markets have priced as dramatic a 180 as I&#8217;ve ever seen,” <a href="https://twitter.com/NorthRockLP/status/1635355055670054915?s=20" target="_blank" rel="noreferrer noopener">Hal Press</a>, founder of North Rock Digital, tweeted Tuesday. “Not to be biased, but the most obvious takeaway so far is that bitcoin and ether are probably the two best assets to own in the entire universe of investable assets.”



In a world where moving money around matters, crypto is a much better asset for handling that. Crypto is a more obvious beneficiary of potential future stimulus, he said.



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Bitcoin Leads Rally Over Ether as Banks Teeter

Though the idea of crypto regulation is not “sexy” — nor something to frame a re-election run around — timely attention to the industry’s quick-moving developments is crucial, senators said Wednesday.&nbsp;



A bipartisan effort to put guardrails in place is especially critical after the collapse of crypto exchange FTX, Sen. Thom Tillis, R-N.C., said during a panel hosted by the Bipartisan Policy Center, adding that the time to act is now.&nbsp;



“I do think FTX was an inspiring moment in a certain way that it is something we need to do,” the Republican lawmaker said. “The last thing I would want to do on my watch in this Congress is have something at the scale of FTX occur again.”&nbsp;



The collapse of the crypto exchange in November has been followed by <a href="https://blockworks.co/news/sec-crypto-enforcement-actions-accelerate">enforcement actions by the SEC</a> and other regulators against various players in the space. Such measures are being taken in part due to the absence of comprehensive legislation, industry participants have said.



The recent fall of Silvergate, Silicon Valley Bank and Signature Bank — which many have said go beyond crypto issues — has inevitably led to even more eyeballs on the industry.&nbsp;



Read More: <a href="https://blockworks.co/news/silvergate-collapse-not-crypto-problem">Is Crypto To Blame for Silvergate’s Fall? Industry, Politicians Disagree</a>



“When you have one crisis, the risk of something really bad happening in Congress goes up exponentially,” Tillis said. “When you have a couple in a reasonably short period of time, the risk goes up even more so.”



With Democrats controlling the Senate and Republicans holding a majority in the House of Representatives, Tillis and Sen. John Hickenlooper, D-Colo., who joined the Wednesday event, said a thorough, bipartisan approach to crypto regulation is the only way forward.&nbsp;



“This is not going to be a crowd-pleaser or an applause line at any of the red-meat circuits that we go on,” Tillis said of a potential crypto bill. “If we arrive at a good bi-partisan place, it will be sound regulation that addresses a lot of the exposures that we see now.”



Added Hickenlooper: “A lot of this stuff that’s not sexy — and is not going to get you on cable news — is the bread and butter.”



The senators’ comments come after Hickenlooper called on the SEC to better regulate the crypto industry in an October <a href="https://www.hickenlooper.senate.gov/press_releases/hickenlooper-calls-on-sec-to-regulate-cryptocurrencies/" target="_blank" rel="noreferrer noopener">letter</a> to Chair Gary Gensler. The senator said at the time that no coordinated regulatory framework creates uneven enforcement and can hurt investors. 



<a href="https://blockworks.co/news/senate-banking-hearing-on-crypto-crash">The first congressional crypto-focused hearing of the year</a>, held last month, gave little insight into the direction lawmakers could take from a policy perspective.



Still, Tillis said he would work with Hickenlooper, as well as Sens. Cynthia Lummis, R-Wyo., Kirsten Gillibrand, D-N.Y., and others in an effort to get crypto legislation passed, which has long been a moving target in the US.&nbsp;&nbsp;



Lummis and Gillibrand introduced the Responsible Financial Innovation Act in June and <a href="https://blockworks.co/news/gillibrand-lummis-revamped-crypto-bill">said earlier this month</a> that a revised version of the proposed <a href="https://www.gillibrand.senate.gov/news/press/release/-lummis-gillibrand-introduce-landmark-legislation-to-create-regulatory-framework-for-digital-assets/" target="_blank" rel="noreferrer noopener">law</a> would land on Senate desks in mid-April.



As Congress works on crypto regulation, Tillis said the industry should engage with his office..



“What I don’t really tolerate and have any patience for is the sniping around the edges from groups that…don’t want to be included in scope,” he said. “This is something that needs to be done, and we want it to be fair and we want it to be sustainable.”



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Crypto Legislation Won’t Be Sexy, Senators Say — But It’s Needed Soon

Though the crypto space is aware of its wide gender gap, industry participants say there likely isn’t a quick fix.



A study published last month by Boston Consulting Group (BCG) and People of Crypto Lab found that just 13% of Web3 founding teams include a woman. It defines Web3 companies as those developing applications involving the metaverse, blockchain and crypto.



The share of women at Web3 startups overall is roughly 27%, with women staffers often clustered in non-technical roles, such as human resources and marketing, according to the <a href="https://www.bcg.com/publications/2023/how-to-unravel-lack-of-gender-diversity-web3" target="_blank" rel="noreferrer noopener">report</a>. This level is lower than in the combined fields related to science, technology, engineering and math (STEM), where women make up 33% of the workforce. 



Some of the crypto-related gender gap can be attributed to the space’s origins from the male-dominated open-source developer community, according to <a href="https://www.linkedin.com/in/sandy-kaul-8571877/" target="_blank" rel="noreferrer noopener">Sandy Kaul</a>, a senior vice president at Franklin Templeton responsible for advisory consulting and thought leadership. 



“That’s where a lot of the partnerships and a lot of the collaborations have emerged, so there’s fewer women I think in that originating pool,” Kaul told Blockworks. “As these protocols and as these initiatives start to become more mature, that’s when you are starting to see more women coming into these organizations and ventures.”



Crypto companies know they face a gender diversity problem, and many consciously prioritize interviewing women into leadership positions, said <a href="https://www.linkedin.com/search/results/all/?fetchDeterministicClustersOnly=true&amp;heroEntityKey=urn%3Ali%3Afsd_profile%3AACoAACfAmvwByhSpBqUtS_PhUWdXRvrUacLC7Ms&amp;keywords=julia%20draheim&amp;origin=RICH_QUERY_SUGGESTION&amp;position=1&amp;searchId=ad0da485-1178-42f9-870a-2df96ef144f3&amp;sid=%2CaH" target="_blank" rel="noreferrer noopener">Julia Draheim</a>, a senior recruiter at staffing firm Proof of Talent. 



Draheim too sees a shortage of women in the talent pool — a trend she says bleeds into other areas of tech as well.   



“One thing I never see is a shortage of women being selected,” Draheim told Blockworks. “From my experience, the majority of companies in the Web3 space are actually more excited when they are able to interview and hire a woman.”



<h2>A matter of experience?&nbsp;</h2>



<a href="https://www.linkedin.com/in/thecryptorecruiter/" target="_blank" rel="noreferrer noopener">Emily Landon</a>, CEO of The Crypto Recruiters, said a need for built-in experience from young companies in the crypto and Web3 sectors also accounts for some of the lack of diversity.   



The strong women leaders within the talent pool that are looking to transition into Web3 may be getting “skipped over” for someone with prior experience in the space, she added.&nbsp;



“Most companies want to hire the right talent, especially when they&#8217;re not in a position to groom someone for the role, like most startups,” Landon said.



Franklin Templeton’s Kaul said many big traditional finance firms have sought to bolster gender diversity across their companies’ leadership teams via training programs and educational opportunities.&nbsp;



“But when you get into a smaller firm like a fintech, oftentimes that’s not a resource they can offer,” she said. “Then when you get to the subset of crypto, that whole problem becomes even more profound.”



An outlier in the space may be Binance, co-founded by He Yi. The crypto exchange’s workforce currently comprises 34.7% women employees, a spokesperson told Blockworks. Of the leaders reporting directly to Binance CEO Changpeng Zhao, 30.6% are women.&nbsp;&nbsp;&nbsp;



Binance offers women mentorship programs, talent workshops, educational courses and lectures to share industry experience and insights on how to break into a career in Web3.



The company did not comment on whether it has any specific women hiring targets it hopes to hit going forward.&nbsp;



<h2>Building the pipeline</h2>



Boosting the number of women working in the space is a two-way street, industry participants said, as companies wanting to bolster gender diversity must create an appealing environment in which women want to work.



<a href="https://www.linkedin.com/in/boblehto/" target="_blank" rel="noreferrer noopener">Bob Lehto</a>, vice president of people at Web3 privacy systems builder Discreet Labs, said he was tasked with hiring more women during his time as a human relations executive at digital wallets company BRD.



While in the role between April 2018 and November 2019, BRD hired roughly 20 additional people — resulting in an increase in the percentage of women at the company from below 10% to roughly 25%, according to Lehto.



“All the success was really because of the other female executives and engineers we had that were able to be candid and supportive to me so that they could call out my blind spots,” he noted.



Messaging, for example, on company websites and job descriptions, is one area in which many crypto firms can improve.



Replacing more “aggressive” words with “collaborative” language, for example, has been a priority at the companies Lehto has worked at, he said.&nbsp;



More firms in the space have also been adding lines to job descriptions encouraging people to apply even if they don’t think they satisfy all the role requirements.&nbsp;



“Once we had female candidates in the pipeline, they excelled in the interviews and were excited about joining the company,” Lehto said. “The bottom line…was helping paint the picture and having them see themselves at a crypto company.”



In addition to messaging improvements in job descriptions, having women executives be part of the hiring process is another key part of attracting women, the Discreet Labs executive said.&nbsp;&nbsp;&nbsp;&nbsp;



“As female candidates saw that gender parity of our executive team, it was a lot easier of a sell to entice females into the teams,” he added.



<h2>The funding problem remains</h2>



Beyond women as a percentage of the crypto workforce, funding remains a major hurdle for women in the space, said <a href="https://www.linkedin.com/in/serra-wei-63118216/">Serra Wei</a>, CEO of digital asset custodian Aegis Custody.



<a href="https://blockworks.co/news/women-web3-startups-funding">All-male founding teams raise nearly four times as much</a>, on average, as all-women teams — about $30 million compared to $8 million. And among Web3 companies that have raised more than $100 million, the percentage with all-women founding teams is zero.



“Obviously if less female founders get funded, you’re going to see less companies run by female founders,” Wei said. “Even if the companies get funded, the amount of resources is less.”



There is clear data showing that unconscious bias can sway funding decisions, according to the February report by the BCG and People of Crypto Lab.&nbsp;&nbsp;



“Put simply, all-male investment teams are more likely to back all-male founding teams,” the study says. “Given the rise of institutional focus on gender disparities in technology, some VC firms now require that investment teams include at least one woman.”



<h2>Where do we go from here?</h2>



Wei said a meaningful closure of the gender gap in the crypto and Web3 spaces is likely not going to come soon, adding it could be “a next-generation thing.”



That said, Wei, who founded Aegis Custody in 2018, said more of her executives now are women compared to when she started the company.&nbsp;



“It’s the women who see my commitment as well as my vision, and who become partners and then executives to take the risk with me and build this journey.



“We have to build the network and continue to support a lot of the other female CEOs and founders,” Wei continued. “That will accelerate what we see to be more of an equal [space] in terms of gender.”



Women who work in financial services — an industry that has put resources toward improving gender diversity in recent years — are beginning to rotate into fintech and crypto, Kaul said.



These leaders will begin bringing their networks with them.&nbsp;&nbsp;



“I think that you’re already starting to see part of the solution occur,” she said. “Now it’s just a matter of letting the time catch up with that.”



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Crypto Knows It Has a Gender Gap Problem. But What’s the Fix?

Casey Wagner

Moody’s Investors Service put the US banking sector on notice amid an ongoing sell-off in US equities spurred by fears of a widespread banking crisis. 



The bond credit rating firm lowered its outlook for all US banks from “stable” to “negative” and put six on watch for potential rating downgrades, including First Republic Bank and UMB Financial.&nbsp;



Moody’s notes that international contagion is a possibility, especially given the economy’s already precarious situation due to central bank rate decisions.&nbsp;



“Developing stresses in the US banking system will also weaken investor confidence and heighten funding tensions for European institutions that, as with any bank, by construction combine maturity mismatches with leverage,” Moody’s analysts wrote in the <a href="https://www.moodys.com/research/Banking-Europe-European-bank-balance-sheet-structure-limits-contagion-from--PBC_1361120" target="_blank" rel="noreferrer noopener">report</a>. 



“These effects are magnified when rates increase faster than expected, which causes some fixed-rate assets to fall in value and liabilities to start repricing upward more quickly than assets roll off and are replaced.”



While equity markets continue to take a beating, crypto has fared better. Bitcoin (<a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a>) and ether (<a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">ETH</a>) were up about 21% and 14%, respectively, in the past week, as of 1:00 pm, ET. The S&amp;P 500 and Nasdaq Composite indexes have lost 3.4% and 2%, respectively. 



Bitcoin and ether did pare some gains Wednesday with both assets dipping into the red during the afternoon in New York.&nbsp;



Moody’s has not made any updates to crypto-related bond offerings since the Silicon Valley Bank was taken over by the FDIC.&nbsp;



In its most recent review of Coinbase, Moody’s downgraded the exchange’s corporate family rating and senior unsecured debt offerings and changed its outlook from “stable” to “under review.”&nbsp;



“Today&#8217;s rating action reflects Coinbase&#8217;s substantially weakened revenue and cash flow generation capacity due to the challenging conditions in the crypto asset operating environment characterized by steep declines in crypto asset prices and lower customer trading activity,” Moody’s analysts wrote in mid-January.&nbsp;



“Moody&#8217;s expects the company&#8217;s profitability to remain challenged despite its 10 January announcement of a reduction in its global workforce of around 950 employees.”



MicroStrategy, on the other hand, has maintained a stable outlook since June 2021.&nbsp;



Moody’s has kept an eye on the crypto sector in recent years. Earlier this month, the agency referred to some central bank digital currency efforts, such as those underway in Brazil and the UK, as opportunities to reduce risk and “enhance public money usage.”



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Moody’s Eyes US Bank Downgrade While Crypto Stays Same — For Now

Macauley Peterson

The v9 Lambda upgrade to the Cosmos Hub came off without a hitch shortly after 4:00 am ET on Wednesday.



The new software version, which has been in the works for over a year, enables a new kind of app chain to launch, one which doesn’t need to establish its own security through a unique validator set to establish consensus. The network would instead piggyback on the four-year-old <a href="https://blockworks.co/tag/cosmos" target="_blank" rel="noreferrer noopener">Cosmos</a> Hub and its 175 validators.



Cosmos Hub’s decentralized set of <a href="https://hub.cosmos.network/main/validators/overview.html" target="_blank" rel="noreferrer noopener">validators</a> worked in concert to briefly pause the chain and initiate Lambda at a predetermined <a href="https://www.mintscan.io/cosmos/blocks/14470501" target="_blank" rel="noreferrer noopener">block height</a>.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Lambda Upgrade is successfully completed ⚛️ Replicated Security is live on the Cosmos Hub!<a href="https://twitter.com/hashtag/Cosmonauts?src=hash&amp;ref_src=twsrc%5Etfw">#Cosmonauts</a> get ready for the next phase&#8230;  It’s time to onboard Consumer Chains! The dawn of the Atom Economic Zone begins today 🔥 <a href="https://t.co/4C2DcH2XC2">pic.twitter.com/4C2DcH2XC2</a>&mdash; Cosmos Hub ⚛️ (@cosmoshub) <a href="https://twitter.com/cosmoshub/status/1635917476331438080?ref_src=twsrc%5Etfw">March 15, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Blockworks spoke to Avril Dutheil, who is managing the Neutron project, a smart contract platform which expects to go live in mid-April and make use of the hallmark feature of Lambda: interchain security (ICS), also known as replicated security.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Blockworks: You’re the first project that’s actually going to be using ICS, is that right?



Avril Dutheil: We’re the first to have signaled our interest in interchain security, we’re the first to receive funding for doing so. We’re likely to be the first to launch on interchain security as well, but that kind of depends on governance.



Blockworks: How would you characterize the interchain security debut in the pantheon of Cosmos upgrades? Cosmos is marked by this very interesting political dynamic, oftentimes very tumultuous.



Avril Dutheil: To a large extent, I think this is actually a good sign. In political systems, we tend to say, democracy is de-census. You don’t have democracy if you don’t actually have conflict. It’s actually a good thing to see dissent to some extent.



In general, it’s been resolved in Cosmos when we get dissent, and it usually leads to stuff getting done in the end. I think the most recent example [was] the <a href="https://blockworks.co/news/cosmos-ecosystem-will-soon-vote-on-atom-2-0-revised-white-paper">Atom 2.0 white paper</a> and vision <a href="https://blockworks.co/news/no-with-veto-cosmos-community-rejects-atom-2-0-white-paper">getting rejected</a>. To me, it was a surprise that the proposal itself, which was just a signaling proposal, got rejected entirely.



But what’s actually more interesting to me now is that <a href="https://www.blockworksresearch.com/research/the-implications-of-atom-2-0" target="_blank" rel="noreferrer noopener">a lot of these ideas</a> are actually getting built, but by specific teams that form around the ideas. So, for example, the governance vision is getting built by the likes of <a href="https://docs.daodao.zone/docs/introduction/welcome-to-dao-dao" target="_blank" rel="noreferrer noopener">Dao Dao</a>, [which] is actually going to be deploying on Neutron as well.



The Allocator [to fund new projects] is following a similar pattern, and the Scheduler [which would manage block space] is also being picked up by another team that has been working on MEV in Cosmos since day one. Basically all the main ideas, perhaps except inflation — the initial large mint of ATOM tokens that was proposed in <a href="https://www.mintscan.io/cosmos/proposals/82" target="_blank" rel="noreferrer noopener">Prop 82</a> — are actually getting built, but in a more piecemeal approach, essentially.



Blockworks: Compared to what the original vision was, do you think [the piecemeal approach] will be better as a result?



Avril Dutheil: For the Allocator, the products and the way they should be built are much more straightforward. And so it’s more of a question of having a good understanding of exactly which market the primitives work in, which is somewhat different from other DeFi primitives because it’s catering more towards inter protocol, DAO-to-DAO or even institutional clientele rather than retail consumers, and so designing the product with this in mind will be important as well as having good engineers that can make it happen in a way that’s very secure.&nbsp;



This is also getting built with smart contracts within the Cosmos Hub economic zone. I also think this is a really good outcome, especially since the initial idea was for the Allocator to be released as a consumer chain that would be secured by replicated security.



The problem, in my opinion, is when it comes to the economic model of ICS, for the short and perhaps medium term, I don’t see ICS scaling to dozens and dozens of chains — because the revenue that it generates will take time to bootstrap, but the cost on validators is pretty much instant.



It’s tough to launch a new consumer chain until the validators roughly achieve breakeven on the previous ones, because otherwise you end up adding pressure onto the bottom of the set, and that can turn into a centralizing force over time.



Mitigating this effect — distributing stake more equitably, distributing the revenue in perhaps different ways to achieve breakeven fast — and then the potential for opting in or out of replicated security are all avenues that are being explored in order to make this economic model more friendly to the bottom of the validator set.&nbsp;



Blockworks: Where do you position Neutron among other longer-running smart contract platforms like <a href="https://blockworks.co/tag/juno" target="_blank" rel="noreferrer noopener">Juno</a> and Evmos?



Avril Dutheil: I think there’s a fundamental difference between the two which is that, traditionally in Cosmos — well, actually any smart contract platform — as an application builder I have to choose which feature set and which market I’m actually going to be operating in. So that means if I’m interested in privacy I’ll probably choose Secret Network because they have this feature, but I’ll also be constrained by the size of their market.&nbsp;



In Cosmos, you can have token transfer functions very easily even as a smart contract application, but interoperability beyond that point — at least until Neutron launches — is not a solved problem. You can’t use interchain accounts because they were designed and built with other Cosmos SDK modules in mind…and interchain queries aren’t a thing that’s available to smart contracts either. When we started building Neutron, they weren’t a thing at all — they were an idea.



[Neutron] flips the script of general smart contract platforms on its head, because when you opt to deploy on Neutron primarily, you’re not choosing to deploy only on Neutron, you know that — because of Neutron’s features which enable your protocol to interact with other chains — you’ll be able to leverage feature sets from their other blockchains.



For example, let&#8217;s say I want to do private voting or sealed auction bids for my DeFi protocol or its governance. I can route the votes or the trades through <a href="https://blockworks.co/tag/secret-network" target="_blank" rel="noreferrer noopener">Secret Network</a> or Penumbra in order to anonymize them or conceal them — meaning that, I can get access to the privacy feature without being deployed on a private chain. I can get access to high speed by onboarding <a href="https://blockworks.co/tag/sei-network" target="_blank" rel="noreferrer noopener">Sei [Network]</a> and having some of my protocol’s logic run on Sei and then route trades that require that feature through Sei. 



So there will be a market on Neutron, but there are also markets on Juno, on Secret Network, <a href="https://blockworks.co/tag/osmosis" target="_blank" rel="noreferrer noopener">Osmosis</a> and the others.



And rather than being siloed onto one of these markets and knowing that it’s going to be difficult and will require tremendous engineering work to be able to onboard these other markets, you know that comes right out of the box.



Blockworks: Would there be impediments to upgrading Juno along these same lines?



Avril Dutheil: It’s much easier to make changes to a blockchain before it’s live. That being said, eventually I believe these functions will also be present on other chains. The thing though is that there’s a lot of engineering work required to make it work…We had to code the solutions in a way that is to a large extent not compatible with another Cosmos SDK chain, so even adapting it would require quite a bit of time in terms of engineering.



Blockworks: The design philosophy sounds a bit like <a href="https://blockworks.co/tag/axelar">Axelar</a>. Is that a fair comparison?&nbsp;



Avril Dutheil: I think there’s a bit of that, for sure. I do believe we’re working towards the same direction. The main difference between Axelar and Neutron is the technological stack that we built our interoperability on. For Axelar they built their own bridge system which is dedicated to Axelar. It is flexible enough to bootstrap interoperability between numerous chains with very diverse ecosystems. In our case, we mostly rely on <a href="https://blockworks.co/tag/IBC">IBC</a> [Inter-blockchain Communication]…because we think that it is likely going to be the long-term winner in terms of the actual protocol that is used to make blockchains communicate.&nbsp;



The main advantage of IBC is that it does not introduce any additional trust assumptions. If you trust the blockchains that you’re interacting with, you can trust IBC because the relayers — the third parties that are actually making it work — don’t have the power to change anything as long as you have the <a href="https://www.blockworksresearch.com/glossary#light-client-node" target="_blank" rel="noreferrer noopener">light clients</a> on both sides.



And so that’s a very interesting design philosophy and it’s also point-to-point, rather than having one chain that connects everything else together which would then act as a centralized point of failure. With IBC you can actually have a much more diverse network topography.



There are limitations to IBC — the main one being that, while IBC runs fine in Cosmos SDK blockchains, in most other environments running light clients inside a virtual machine takes a lot of gas and computation to verify all of the proofs. And so currently it’s difficult to make it widely adopted.&nbsp;



Blockworks: Are you optimistic that the impediment to having IBC working with Ethereum are going to be resolved?



Avril Dutheil: I wouldn’t be surprised if we see that this year, or conservatively next year — I’m sure it will be in production, yes.



The interesting thing of IBC is it specifies very little, meaning you can build very diverse applications on top of it. It’s very flexible beyond just ordering and the structure of the very basic messages and how you connect two chains. Beyond this, the sky&#8217;s the limit in terms of the applications you can build on it.



When IBC expands to these other chains, then suddenly our infrastructure, in the same manner, expands to these other chains, meaning that it will most likely be possible in the future to control accounts on Ethereum from a smart contract on Neutron, and I don’t believe it will require too much engineering to actually make that happen, once IBC is there.



The interview has been edited for clarity and brevity.



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Q&A: Neutron Project Manager Talks Cosmos Interchain Security Upgrade

Ren Yu Kong

Goldfinch: A Strong Contender in On-Chain Private Credit Markets

Permissionless is the brainchild of Blockworks and Bankless. Over 5,500 people attended the inaugural event in 2022, making Permissionless the world’s largest DeFi conference.&nbsp;



What sets Permissionless apart? It’s a crypto native’s paradise, crafted specifically for both builders and investors who are dedicated to scaling the industry.&nbsp;



Permissionless is headed to Austin in 2023, and you know what they say… Everything is bigger in Texas.&nbsp;



Permissionless 2023 will feature the biggest names in Web3, a gargantuan exposition hall filled with the top brands in the space, an awe-inspiring NFT Gallery, inclusive, community-focused parties and events, metaverse experiences, and so much more.



See you in Paradise.

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Speakers

Erik Voorhees

Mary-Catherine (MC) Lader is the Chief Operating Officer of Uniswap Labs, a developer of foundational web3-based products and applications. In this role, she oversees the company’s growth efforts, strategic initiatives, and operations. Previously, she held various leadership roles at BlackRock, including as the Global Head of the firm’s digital sustainability business, Chief Operating Officer of the firm’s digital wealth business, and leader of the firm’s strategic fintech investments and blockchain activities. MC began her career as an investor in Goldman Sachs’ Special Situations Group. She received her J.D. and M.B.A. degrees at Harvard Law School and Harvard Business School, respectively, and her B.A. at Brown University.

Mary-Catherine Lader

Zaki Manian is a Co-Founder of Sommelier, the most powerful coprocessor yet for DeFi traders and Liquidity Providers. He’s also a Co-Founder of iqlusion, which provides infrastructure like a data center and a Cosmos validator for next-gen crypto technologies. Previously, Zaki helped build the Cosmos ecosystem, including launching the first public Cosmos testnet, and served as a director of Tendermint. Zaki has been a leading developer in the blockchain space since 2014, when he taught himself cryptography and began contributing to projects including Bitcoin, Ethereum, Zcash, and Tendermint. Having studied history of science at the University of Pennsylvania, Zaki’s skill sets in software engineering, programming, and computer science are largely self-taught.

Zaki Manian

Justin Drake

At Alluvial, Chief Growth Officer Mara Schmiedt focuses on advancing industry participation and adoption of Liquid Collective, seeking out world-class partnership opportunities, and overseeing Business Development, Sales, and other strategic functions. Mara recently joined Alluvial as Chief Growth Officer from Coinbase, where she served as the Head of Sales for Coinbase Cloud, the leading developer platform for blockchain-based infrastructure products and APIs. She expanded Cloud's staking business, supporting large-scale organizations, enterprises, and institutional investors. Prior to joining Coinbase, she managed Business Development at Bison Trails, a leading provider of blockchain-based infrastructure acquired by Coinbase in February 2021. Mara also served as Strategy Manager at ConsenSys, where she supported the strategic development of Codefi, the blockchain application suite for Web3 Commerce and Finance.



Mara is passionate about open-source technology and has published multiple research reports and papers on liquid staking, such as <a href="https://drive.google.com/file/d/13-s15SvCIUBukhSZiNkpd0sTff3izQ5G/view">The Internet Bond</a> and <a href="https://consensys.net/insights/eth-2-staking-ecosystem-report/">Ethereum 2.0 Staking Ecosystem Report</a>.&nbsp;



Additionally, she has led various industry initiatives, including leading the working group with the Ethereum Foundation that developed the Ethereum Launchpad and the first distributed validator technology (DVT) PoCs. Mara's deep experience in bringing technology and blockchain-based products and services to market — as well as her track record of building world-class business and sales organizations — bolsters Alluvial's support of Liquid Collective.

Mara Schmiedt

Stani Kulechov

Hasu

Christine is a Partner and Head of Digital Asset Strategy at Apollo Global Management, Inc. In this newly created position, Christine leads digital asset strategy across the firm, exploring more ways to apply blockchain technologies to Apollo’s business. She also plays a key role in Apollo’s strategy to invest in some of the most innovative digital asset companies and founders, with a specific focus on those transforming the financial services sector where Apollo can serve as a validator and enabler of new technologies. Previously, she was a Managing Director at J.P. Morgan and led its Blockchain/Crypto/Metaverse program through initiatives in digital assets, tokenized payments, internet of-things, decentralized identity, NFTs, and virtual worlds. She is a graduate of Brown University. Christine was named in Fortune’s The Ledger 40 Under 40 list of “the most impressive, young superstars transforming business at the leading edge of finance and technology.”

Christine Moy

Santiago Roel Santos (CryptoPunk #9159) is an investor focusing at the intersection of DeFi and the Web3 metaverse (NFTs/gaming). Most recently was a Partner at ParaFi Capital, one of the largest crypto funds specializing in DeFi. Prior to that, he was at Sageview Capital investing in Internet and software and, before that, at JP Morgan investment banking. Santiago began investing in crypto in 2012.

Santiago Roel Santos

Michael Anderson is the co-founder of Framework Ventures, one of earliest and largest VC firms to enter the “DeFi” or Decentralized Finance industry. With over $1B in AUM, the firm has since expanded into additional maturing verticals like blockchain gaming and social crypto. Prior to Framework, Michael and his co-founder Vance Spencer launched Hashletes, a digital collectible startup with official licensing from the NFL. Before entering crypto, Michael served as a product manager at both Snapchat and Dropbox, where he helped build out their monetization platforms.

Michael Anderson

Soona Amhaz is founder and GP of Volt Capital, a venture firm that focuses on pre-seed and seed companies in the digital assets space. Soona is also an advisor to On Deck, Forbes 30 under 30 in VC, and an alum from the University of Michigan School of Engineering.

Soona Amhaz

Colleen Sullivan is Co-Head of Ventures at Brevan Howard Digital. Prior to joining Brevan Howard Digital, Colleen co-founded and served as CEO of CMT Digital, where she was also a partner with the broader CMT Group and commenced activities in the crypto industry in 2013. Prior to starting CMT Digital, Colleen co-founded Sullivan Wolf Kailus, a boutique law firm that specializes in hedge fund, private equity, venture capital, digital assets, and other alternative investment products. Colleen also previously practiced law in the Investment Funds and Derivatives group at Sidley Austin LLP and, at age 25, co-founded a company called iOptions Group LLC, which developed hedging and monetization strategies for holders of employee stock options. Ms. Sullivan currently serves on the Advisory Board of the Chamber of Digital Commerce.

Colleen Sullivan

Tarun is an alumni of D. E. Shaw Research (DESRES), Vatic Labs, an HFT firm, and Cornell. He fell into the blockchain world in 2011, when he was working on ASICs at DESRES and observed Bitcoin ASIC mining rigs substantially delay DESRES’s ASIC production. He has spent the last seven years working on simulation-based R&amp;D at the intersection of high-performance computing and AI and is applying this knowledge to the blockchain ecosystem.

Tarun Chitra

Kevin Owocki is the founder of Gitcoin.co — Where builders &amp; funders come together to build the open web.  Gitcoin has delivered <a href="http://gitcoin.co/results">$50mm worth of value</a> to OSS devs in the last several years. He has a BS in Computer Science, 15 years of engineering leadership experience in Open Source Software and Web Startups. Kevin is a community organizer in the Boulder Colorado Tech Scene.

Kevin Owocki

Meltem Demirors is Chief Strategy Officer of CoinShares, a publicly listed investment firm that manages over five billion in digital assets on behalf of a global investor base, and is a trusted partner to investors and entrepreneurs navigating the digital asset ecosystem.



 An established veteran of digital asset investing, Meltem draws on her substantial experience and widespread influence to accelerate growth and acceptance of the asset class. Prior to joining CoinShares, Meltem helped build and grow Digital Currency Group, raising capital from the world’s largest corporations and managing a portfolio of 120 companies and 4 subsidiaries. Before she was bitten with the bitcoin bug, Meltem worked in the Oil &amp; Gas industry in trading, corporate treasury, and M&amp;A roles. 



Meltem has been recognized for her personal contributions to the industry and serves as an outspoken advocate. She is a founding member of the World Economic Forum Blockchain Council. Meltem teaches at her alma mater MIT as well as Oxford, and is passionate about privacy and civil rights.

Meltem Demirors

Vance is the co-founders of Framework Ventures, a thesis-driven venture capital firm whose team of technologists, researchers, and investors partner with founders and teams to build token-based networks and develop the requisite cryptoeconomics, governance, and community to scale.

Vance Spencer

Jim Bianco is President and Macro Strategist at Bianco Research, L.L.C. Since 1990 Jim’s commentaries have offered a unique perspective on the global economy and financial markets. Unencumbered by the biases of traditional Wall Street research, Jim has built a decades long reputation for objective, incisive commentary that challenges consensus thinking. In nearly 20 years at Bianco Research, Jim’s wide ranging commentaries have addressed monetary policy, the intersection of markets and politics, the role of government in the economy, fund flows and positioning in financial markets.



Jim appears regularly on CNBC, Bloomberg and Fox Business, and is often featured in the Wall Street Journal, Bloomberg News, Grants Interest Rate Observer, and MarketWatch. Prior to joining Arbor and Bianco Research, Jim was a Market Strategist in equity and fixed income research at UBS Securities and Equity Technical Analyst at First Boston and Shearson Lehman Brothers. He is a Chartered Market Technician (CMT) and a member of the Market Technicians Association (MTA). Jim has a Bachelor of Science degree in Finance from Marquette University (1984) and an MBA from Fordham University (1989).

Jim Bianco

Mr. Forman is the Founder and Managing Partner of ParaFi Capital. ParaFi is a leading investment firm focused on the blockchain and digital asset markets, and an early pioneer in decentralized finance (“DeFi”). ParaFi is one of the largest investors, users, and governance participants within the DeFi ecosystem, spanning the full network lifecycle from pre-launch to full decentralization. Mr. Forman serves as the Chief Investment Officer across the firm’s strategies, which include investing in public and private cryptoassets, systematic credit and market neutral DeFi strategies, and blockchain-focused venture capital and growth equity investing.



Prior to founding ParaFi in 2018, Mr. Forman spent 10 years at leading alternative investment managers, including KKR and TPG. While at KKR, Mr. Forman served as a Director in the Credit business, investing across a wide array of industry sectors and strategies, including distressed special situations, private credit, and opportunistic and liquid credit. Prior to KKR, Mr. Forman served as a Vice President with TPG’s former credit business, Sixth Street Partners, as one of the first investment professionals to join the platform, helping scale its private credit vehicle, TPG Specialty Lending, which listed publicly in 2014. Earlier in his career, Mr. Forman worked in private equity at Littlejohn &amp; Company and investment banking at Rothschild &amp; Co. Mr. Forman graduated with a B.A. in Philosophy, Politics and Economics, magna cum laude, from the University of Pennsylvania.

Ben Forman

Haseeb is a Managing Partner at Dragonfly. He was previously a partner at Metastable Capital, and has a background in software engineering at Airbnb and Earn.com (acquired by Coinbase).

Haseeb Qureshi

Vanessa Grellet is a Managing Partner at Aglaé Ventures. Vanessa is a Global Executive with over 20 years of expertise in the Financial Services and Tech industry. At Aglaé Ventures she manages the Web 3 focused fund. Prior to joining Aglae she has Head of Portfolio growth at CoinFund and Executive director at ConsenSys where she focused on driving adoption for Ethereum based products,  Strategic initiatives, Alliances and Channels.  She was involved in setting up the Enterprise Ethereum Alliance (EEA), the Accounting Blockchain Coalition (ABC) and the Blockchain for Social Impact Coalition (BSIC). Prior to ConsenSys she was a Strategy Executive at NYSE focused on investments and M&amp;A and a key member of PwC’s global wealth management team. Vanessa is a Founding Board member of AABC focused on Blockchain and Art, a member of the Advisory Council of ConsenSys, a Milken Institute Associate, a contributor to the  World Economic Forum Digital Future Council and part of <a href="https://cointelegraph.com/top-people-in-crypto-and-blockchain-2022/vanessa-grellet">Cointelegraph’s list of 100 most influential people for 2022</a>. Mrs. Grellet graduated Cum Laude from Law School (Paris II Assas) and Business School (HEC).

Vanessa Grellet

Mihailo Bjelic received his MSc in CS from the University of Belgrade. Prior to entering Web3/blockchain industry, he co-founded an AI/ML-powered platform for automotive industry and several other smaller startups and side projects. In 2017, he decided to join the Web3 movement full-time, primarily as a researcher interested in Ethereum scaling and multi-chain paradigms. In parallel with his work, he became one of the prominent Ethereum proponents and community members. In 2019, he started working on Polygon and conceptualized its architecture, vision and brand. In 2020, he joined hands with the Matic Network team and they have been working together on Polygon since then.

Mihailo Bjelic

Ben is a co-founder of Optimism, a leading Ethereum L2 ecosystem. He served as Chief Scientist before becoming a director at the Optimism Foundation. In his free time, he makes Ethereum-based parody songs under his stage name, Weird ETH Yankovic.

Ben Jones

Kristin is the CEO of the Blockchain Association, the Washington, D.C.-based trade association representing more than 100 of the industry’s leading companies. She also serves as a board member of the Filecoin Foundation for the Decentralized Web. Kristin serves as a liaison between policymakers and the cryptocurrency industry to assist in the creation of legislation and regulation that promotes the growth of the cryptocurrency ecosystem in the U.S. She is also a leading, public voice advocating for the cryptocurrency and blockchain industry through top-tier media interviews, op-eds and letters to the editor, and global speaking engagements. Kristin is a renowned voice for the industry, having been featured on Fortune’s 2020 40 under 40 list, CoinDesk’s 2021 50 people who defined the year in crypto, and CoinTelegraph’s 2022 top 100 Influencers in Crypto and Blockchain. Prior to leading the Blockchain Association, Kristin helped blockchain and technology companies achieve their public policy objectives in Washington. She served as a Senate and congressional aide on Capitol Hill for nearly ten years, much of which was spent focusing on technology policy.

Kristin Smith

Avichal is a successful entrepreneur with executive experience at Google and Facebook, which acquired his previous company. As an angel investor, Avichal has invested in 15 unicorns and 5 decacorns including Airtable, Boom Supersonic, Color Genomics, Cruise, Deel, Figma, Newfront Insurance, Notion, Nova Credit, Pulley, and others. He co-founded Electric Capital in 2018 and has grown it to one of the largest crypto venture firms globally. Electric is an investor in many of the leading web3 protocols and companies such as Bitwise, Bitnomial, dYdX, Frax, Kraken, Magic Eden, NEAR, and Solana.

Avichal Garg

Matt Hougan is one of the world’s leading experts on crypto, ETFs, and financial technology. He is Chief Investment Officer for Bitwise Asset Management, a pioneer in cryptoasset index funds with more than $1.2 billion in assets under management. He was previously CEO of ETF.com, where he helped build the world’s first ETF data and analytics system, the leading ETF media site, and the world’s largest ETF conference, Inside ETFs. Hougan is co-author of both “A Comprehensive Guide to Exchange-Traded Funds” and “Cryptoassets: The Guide to Bitcoin, Blockchain and Cryptocurrencies for Professional Investors” from the CFA Institute’s Research Foundation. He is a crypto columnist for Forbes, and a three-time member of the Barron’s ETF Roundtable.

Matt Hougan

Li Jin

Ethan is the co-founder of the Cosmos network and serves as the CEO of Informal Systems. Informal Systems is a member-driven worker’s cooperative building software that enables trustworthy relationships between protocols and people to flourish. Ethan also serves as the President of the Interchain Foundation which funds and coordinates development of public goods in the Cosmos ecosystem. Ethan sees local money systems as the basis for self-sufficient local economies to prosper. With a background in cell biology, neuroscience, mathematics, machine learning, and distributed systems, his goal is to build systems that encourage humans to work cooperatively through methods of self-organization. He is currently focused on blockchain technology as a means to bring greater political and economic sovereignty to local communities around the globe. Prior to Informal Systems, Ethan co-founded the Tendermint and Cosmos projects, and served as CTO of Tendermint Inc. Today, dozens of projects are adopting technology conceived in the original Cosmos whitepaper, including the Inter-Blockchain (IBC) Communication protocol – an industry-standard for permissionless communication between sovereign blockchains. Today, the Cosmos ecosystem continues to pioneer technological paradigms for building interoperable application-specific blockchains.

Ethan Buchman

Tyrone leads J.P. Morgan’s Blockchain team and is responsible for creating innovative Web3-focused products &amp; solutions for J.P. Morgan’s businesses and clients, and for engaging with the industry at large in order to provide a holistic blockchain strategy for the firm. Tyrone is also the Head of Onyx Digital Assets, a multi-asset tokenization platform that enables the exchange of value for various types of digital assets. Tyrone was previously a Senior Blockchain Product Manager in J.P. Morgan’s Blockchain Center of Excellence and was also the Head of Product for Quorum, an open-sourced Ethereum-based blockchain platform built for Enterprise use. Prior to moving into the blockchain industry in 2015, Tyrone was a software engineer within J.P. Morgan's Credit Markets business, and before that he spent several years in Product transformation, managing and delivering large strategic programs across various businesses within J.P. Morgan, across Front, Middle and Back Office risk and trading systems. Tyrone sits on the Board of Directors of The Enterprise Ethereum Alliance and The Hyperledger Foundation.

Tyrone Lobban

Rich is a Co-Founder and President of GSR and leads the group across strategic initiatives and growth. He began his career at Goldman Sachs where he spent 11 years between New York and London in commodities trading as a Managing Director and Global Head of Crude Oil and Derivatives Trading. Prior to joining GSR, he spent a few years on the buy-side, running energy trading teams at two New York-based hedge funds. Rich earned a bachelor’s degree in Mathematics from Columbia University.

Rich Rosenblum

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<h2>Why Sponsor Permissionless 2023?</h2>
If you’re serious about crypto, you have to be at Permissionless. Permissionless brings together DeFi builders, DAO participants, protocol developers, crypto companies, funds and institutions, and more. It’s a true crypto-native’s paradise, where you’ll have the opportunity to showcase your offerings and form lasting connections with the community.
We’ll work with your team to define the perfect sponsorship opportunity that best fits your needs and budget. Want to do something completely revolutionary? Our team can help design a bespoke package that brings your vision to life.
Get in touch with us at <a href="mailto:sales@blockworks.co">sales@blockworks.co</a>
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