DFX Finance

Casey Wagner

Digital asset investment products clocked their fourth straight week of inflows last week, with $76 million pouring into the asset class, according to data from CoinShares.&nbsp;



Year-to-date inflows for crypto investment vehicles now total $230 million, “highlighting a decisive change in investor sentiment,” James Butterfill, head of research at CoinShares, wrote in a <a href="https://blog.coinshares.com/volume-117-digital-asset-fund-flows-weekly-report-f9cda81d18a4" target="_blank" rel="noreferrer noopener">report</a> released Monday. Total investment assets under management in the crypto space have increased nearly 40% since the start of the year, according to Butterfill. 



Bitcoin was the most popular asset, making up 90% of total flows for the week, as investors put $69 million into bitcoin products. Ether, by contrast, which is up more than 35% since the start of the year, saw $700,000 in inflows last week.&nbsp;



The moves come amid a busy week for macroeconomic news as traders took in US jobs data, the Federal Reserve interest rate decision and other central bank moves last week. The Fed’s decision to opt for a <a href="https://blockworks.co/news/federal-reserve-raises-interest-rates-25-bps">25 basis point increase</a> calmed markets initially, but more hawkish remarks from central bank head Chair Jerome Powell spooked investors.&nbsp;



“While there were some promising aspects of the jobs report — cooling wage growth and higher participation — it&#8217;s impossible to ignore the fact that the labor market remains red hot,” Craig Erlam, senior market analyst at Oanda, said. “For now, it&#8217;s hard to argue that the easier policy move for the Fed is to keep hiking in 25 basis point increments.”



Crypto was trading relatively flat Monday, with bitcoin (<a href="https://blockworks.co/price/btc" target="_blank" rel="noreferrer noopener">BTC</a>) down around 0.2% and ether (<a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">ETH</a>) moving into the green with a 0.3% gain. Equities struggled to keep the momentum growing, with the S&amp;P 500 and Nasdaq Composite indexes posting 0.6% and 0.7% losses, respectively, as of 11 am ET. 



Overall, a shift into risk-off sentiment in the coming weeks ahead of the Fed’s next policy-setting meeting in March should not come as a surprise, analysts said.&nbsp;



“No doubt the Fed will worry about tipping the economy over into a recession that then spirals out of control, but no doubt it is also counting on being able to drop rates fast should unemployment start to move,” Noelle Acheson, editor of Crypto is Macro Now and former head of market insights at Genesis, wrote in a <a href="https://noelleacheson.substack.com/p/monday-feb-6-2023?utm_source=substack&amp;utm_medium=email" target="_blank" rel="noreferrer noopener">note</a> Monday.



“The market is counting on that, too, and indeed seems to have been pricing that in,” she said.



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Risk-off Sentiment Incoming, but Crypto Investment Products Aren’t Listening

Shalini Nagarajan

SperaxUSD, a yield automator on Ethereum layer-2 rollup Arbitrum, announced a user was able to explode the balance of their stablecoin tokens over the weekend.&nbsp;



In a <a href="https://twitter.com/speraxusd/status/1622003045776195587" target="_blank" rel="noreferrer noopener">Twitter thread</a>, the team said an exploiter somehow obtained 9.7 billion <a href="https://www.coingecko.com/en/coins/stably">USDS</a> tokens for barely any collateral and managed to liquidate around $300,000 worth before being blocked by the Sperax and <a href="https://blockworks.co/tag/arbitrum">Arbitrum</a> teams.



The Sperax team has identified the account and is in the process of taking action in coordination with centralized exchanges. The liquidated amount will be recapitalized before the protocol’s relaunch, it said. The exploit did not impact the DeFi protocol’s governance token SPA.



<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">On February 4th, the SperaxUSD protocol on <a href="https://twitter.com/arbitrum?ref_src=twsrc%5Etfw">@Arbitrum</a> was exploited. The Core team is ready to share the known elements now, and the detailed report will follow on Monday, February 6th. 1/6&mdash; SperaxUSD: Stablecoin with organic Auto-Yield (@SperaxUSD) <a href="https://twitter.com/SperaxUSD/status/1622003045776195587?ref_src=twsrc%5Etfw">February 4, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



SperaxUSD didn’t return Blockworks’ request for comment on further details, but a detailed report was set to be published Monday.



“We have reached out to the exploiter to discuss options and we are hopeful for a peaceful resolution. The issue has been figured out and will be resolved with a smart contract upgrade. Recapitalization will be implemented early next week, then transactions will restart,” the team said.



<h2>Code bug?</h2>



A blockchain analyst who goes by the name “Spreek” on Twitter provided the likely attacker’s address in a <a href="https://twitter.com/spreekaway/status/1621737055112896512" target="_blank" rel="noreferrer noopener">tweet</a>, singling out its Ethereum Name Service as “kochironnosaif.eth.”



The attack was “puzzling” as there were no transfer logs of minting or transferring the infinite number of tokens, nor was there any malicious upgrade to the contract, the sleuth said.



“Therefore I would guess [the] likely cause is [a] bug in rebasing code,” they said.



Blockchain security firm PeckShield said the root cause of the hack was due to an “internal balance accounting discrepancy caused when migrating an account from non-rebasing to rebasing-based accounting.”



<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">The root cause of the <a href="https://twitter.com/SperaxUSD?ref_src=twsrc%5Etfw">@SperaxUSD</a> hack is due to its internal balance accounting discrepancy caused when migrating an account from non-rebasing to rebasing-based accounting. And here is the triggering tx from a simple transfer: <a href="https://t.co/tkLORdWnmg">https://t.co/tkLORdWnmg</a> <a href="https://t.co/QpYJyhpsXK">https://t.co/QpYJyhpsXK</a> <a href="https://t.co/VYN2n8ZoHs">pic.twitter.com/VYN2n8ZoHs</a>&mdash; PeckShield Inc. (@peckshield) <a href="https://twitter.com/peckshield/status/1622004310816198657?ref_src=twsrc%5Etfw">February 4, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



SperaxUSD is a “hybrid” stablecoin whose design includes both collateral-backing and an algorithmic stabilization mechanism, according to its <a href="https://raw.githubusercontent.com/Sperax/USDs-Whitepaper/main/USDs_Whitepaper.pdf" target="_blank" rel="noreferrer noopener">white paper</a>.



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Arbitrum Stablecoin Exploiter Snagged $300K From $9.7B Token Boost

Bessie Liu

Capitual, a multicurrency digital bank that offers cryptocurrencies in Brazil, has partnered with Azimut to expand its services to various European countries and Mexico.



The Brazilian company that offers fiat on-ramp services is the point of entry into its country for many sizeable global cryptocurrency exchanges, including Kucoin, Huobi and Bitget, but this latest partnership will finally allow the company to offer its services internationally.



“We want to replicate the product we have in Brazil in other countries, serving our partners in other jurisdictions as well,” Guilherme Nunes, chief executive of Capitual, <a href="https://valor.globo.com/financas/criptomoedas/noticia/2023/02/03/capitual-recebe-aporte-da-azimut-para-expansao-externa.ghtml" target="_blank" rel="noreferrer noopener">told</a> Valor Econômico, a news company based in Brazil. “The idea is to become a center of blockchain technology in these markets,” he added.



Azimut will also invest 15 million euros ($16.1 million) into Capitual to assist with its expansion ambitions. This latest funding will bring Capitual’s valuation to 302 million euros, edging it closer to unicorn status in Brazil.



The asset management firm has always had an interest in cryptocurrencies. In September 2021, it launched a <a href="https://blockworks.co/news/sbi-sygnum-and-azimut-found-new-75m-fund">$75 million venture fund</a> with SBI Group and Sygnum to invest in early-stage startups working on decentralized finance DeFi, blockchain and distributed ledger technology (DLT) infrastructure projects.



Giorgio Medda, the CEO of Azimut, <a href="https://www.linkedin.com/feed/update/urn:li:activity:7027384652696809472/" target="_blank" rel="noreferrer noopener">noted</a> on LinkedIn that this latest partnership reflects the firm&#8217;s belief that blockchain technology will eventually change the financial services industry as we know it. 



“The partnership with Capitual focuses on the technology built to ensure protection and compliance in the infrastructure embedding the disruptive changes which are forming new business paradigms in our industry,” Medda said.



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Brazilian Crypto Company Moves Into European Markets With New Partnership

Sebastian Sinclair

Venture capital firm <a href="https://blockworks.co/tag/a16z">a16z</a> voted against a governance proposal on Friday that, if passed, would deploy Uniswap V3 to Binance’s BNB Chain, connected to Ethereum via the cross-chain bridging solution Wormhole.



The vote is active for a total of one week, ending Feb. 10.



Wormhole, initially created by Certus One, is an interoperability protocol that allows users to bridge assets across blockchains.&nbsp;



The <a href="https://www.tally.xyz/gov/uniswap/proposal/31">proposal</a> will later seek to provide Uniswap V3 users the ability to partake in Uniswap DAO’s Ethereum-based governance on BNB Chain.



The bridge built atop the Wormhole protocol, previously lost <a href="https://blockworks.co/news/in-second-largest-defi-hack-ever-blockchain-bridge-loses-320m-ether">$325 million</a> in DeFi’s second-largest-ever exploit, at the beginning of last year, and <a href="https://wormholecrypto.medium.com/wormhole-protocol-vs-portal-bridge-whats-the-difference-a9ad98696e64">rebranded</a> to Portal.



Portal is a major competitor to LayerZero’s offering — an a16z-backed company whose solution the venture capital firm is hoping will handle the job instead. A16z, Sequoia Capital and FTX <a href="https://www.crunchbase.com/funding_round/layerzero-labs-series-a--7212c4e5">led</a> a $135 million investment round into LayerZero in March of last year with a valuation of $1 billion.



A16z’s 15 million votes cast against the measure has led some <a href="https://twitter.com/ChrisBlec/status/1622201701921964035" target="_blank" rel="noreferrer noopener">skeptics</a> to question the ability of UNI governance ability to act in the protocol&#8217;s best interest.



Typically, those holding more tokens have a greater share of voting power and are able to greatly affect the direction of a given proposal.



In a16z&#8217;s case, the firm owns roughly 64 million UNI, but many of those tokens are delegated to third parties. For instance, the venture fund <a href="https://twitter.com/UMichBlockchain/status/1402832670191669255" target="_blank" rel="noreferrer noopener">has delegated</a> to a blockchain group at the University of Michigan, which was one of the governance representatives voting in favor of the proposal.



The ‘for’ votes outnumber the ‘against’ by 62% to 38% as of Monday at 9:00 am ET, but a quorum threshold has not yet been reached.



Blockworks attempted to contact a16z, but did not receive a reply by press time.



<h2>Bridging Uniswap</h2>



After a prior debate and <a href="https://snapshot.org/#/uniswap/proposal/0x6b8df360fdf73085b21fdf5eef9f85916fbde95621a3d454cb20fbe545ffc852" target="_blank" rel="noreferrer noopener">Snapshot vote</a>, the community selected the Wormhole bridge for the Uniswap V3 deployment on the BNB Chain, receiving 28 million votes. The solution provided by the LayerZero team came in second at 17 million.



Uniswap’s aim is to capitalize on the growing interest in DeFi within the Binance ecosystem by allowing more capital to flow across various ecosystems, according to the proposal on Tally. Wormhole is designed to shore up the security involved in the bridging of digital assets, despite its exploit woes last year.



Total value locked on BNB Chain has ballooned roughly $1 billion this year to $5 billion, data at <a href="https://defillama.com/" target="_blank" rel="noreferrer noopener">DeFi Llama show</a>. That still pales in comparison to Ethereum’s $29 billion claim to the overall $48.5 billion locked across leading DeFi protocols. Still, authors of the proposal said Friday that Uniswap should be pursuing the more than 750,000 weekly users on BNB Chain.



BNB Chain has a large and growing user base, fast transaction speeds, low fees, staking, cross-chain support and an active community making it a suitable platform for Uniswap v3, they said.



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A16z Delegated to Group that Opposed Its Vote on Uniswap for BNB Chain

Payments giant Visa reportedly seeks to meet customer requests to convert digital assets into fiat payments, similar to how it converts foreign currencies.&nbsp;



“We’ve been testing how to actually accept settlement payments from issuers in USDC starting on Ethereum and paying out in USDC on Ethereum,” Cuy Sheffield, head of crypto at Visa, said during the StarkWare Sessions 2023 event in Tel Aviv. “So, these are large value settlement payments.”



He noted that the effort would clone foreign currency exchange executed on the card network’s payment platform.



Global settlement with digital assets and fiat currencies is an area in which <a href="https://blockworks.co/tag/visa">Visa</a> wants to build “muscle memory,” Cointelegraph <a href="https://cointelegraph.com/news/visa-s-crypto-strategy-targets-stablecoin-settlements">reported</a>, Sunday.



“The same way that we can convert between dollars in euros on a cross-border transaction, we should be able to convert between digital tokenized dollars and traditional dollars,” he said.&nbsp;



Visa didn’t return Blockworks’ request for comment by press time.



<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">. <a href="https://twitter.com/cuysheffield?ref_src=twsrc%5Etfw">@cuysheffield</a> and <a href="https://twitter.com/Visa?ref_src=twsrc%5Etfw">@visa</a> have fell into the rabbit hole of Account Abstraction! This is huge! <a href="https://t.co/CFniLLBq5C">pic.twitter.com/CFniLLBq5C</a>&mdash; Starknet-Ecosystem.com ✨ (@StarkNetEco) <a href="https://twitter.com/StarkNetEco/status/1622212729061646339?ref_src=twsrc%5Etfw">February 5, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Visa announced the use of <a href="https://blockworks.co/price/usdc">USDC</a>, a stablecoin backed by the US dollar, to settle a transaction with the network over Ethereum in March 2021.



“We’re seeing wallets and crypto native neo-banks building payment products entirely with digital currency, and we want to meet these companies where they are,” <a href="https://blockworks.co/news/visa-partners-with-50-crypto-platforms-on-card-programs">Sheffield told Blockworks</a> at the time. “The ability to make settlement payments to Visa in digital currencies could offer meaningful benefits and efficiencies, particularly for fintechs who run their business in crypto.”



Visa hasn’t yet integrated blockchain tech to support regular money movement on its network, but is currently exploring the move. Still, the company has already launched a blockchain-powered business-to-business payments network called <a href="https://www.businesswire.com/news/home/20190611005296/en/">B2B Connect</a>.



It was among the first financial companies to embrace both blockchain and cryptocurrencies. To help clients and partners explore opportunities in the space, the firm launched a <a href="https://blockworks.co/news/visa-launches-crypto-advisory-unit">crypto advisory practice</a> in late 2021.



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Visa Eyes High-Value USDC Settlement Payments on Ethereum

Rallies in both traditional and crypto-related equities experienced temporary setbacks last week, as benchmark cryptocurrency, bitcoin, ended the session 3.4% lower to $22,930.



Digital assets have taken pause after a 33% increase in total market value year-to-date — from $828.7 billion to $1.1 trillion — driven largely by renewed interest in the asset class in the first quarter.



On-chain analytics platform CryptoQuant told Blockworks bitcoin appears to have bottomed with some valuation metrics suggesting the start of an “early bull stage.” The shift in sentiment is expected to have a ripple effect on the altcoin market as well.



&#8220;Altcoins have shown positive performances this year amidst a backdrop of rising on-chain network activity,&#8221; said CryptoQuant Senior Analyst Julio Moreno. “The total number of transactions on the Ethereum network has rebounded and is now near the record levels seen in June 2021.”



Market activity in US equities flashed signs of volatility on Friday as participants attempted to make sense of historic low <a href="https://blockworks.co/news/jobs-data-crushes-estimates-markets-rethink-fed-predictions">unemployment figures</a>.&nbsp;



The S&amp;P 500, which initially attempted a rally, closed the day roughly 1% lower, while the Dow Jones Industrial Average reported a 0.15% dip by the end of the week.



US stocks and crypto continue to be loosely correlated, which became less clear on Sunday as the <a href="https://www.questionpro.com/blog/spearmans-rank-coefficient-of-correlation/" target="_blank" rel="noreferrer noopener">Spearman coefficient</a> hit its lowest level in two weeks at 0.23. A coefficient of 1 indicates the two assets are moving in tandem, while a dip below 0 signifies they are moving in opposite directions.



US dollar strength bounced back to a three-week high, above 102.9 on Friday, after reaching a nine-month low on Wednesday. The US dollar index has started to gain steam again and is now above 103.3, according to data from the DXY US Dollar Currency Index.



It&#8217;s worth noting that this year&#8217;s crypto rally has gained momentum alongside a decline in the DXY, meaning a strengthening US dollar against most other currencies could put additional pressure on foreign buyers in the short term.



A strong US dollar can have both positive and negative effects on stocks. On one hand, a strong dollar can make foreign investments more profitable for US-based investors, leading to an increase in stock prices, particularly for multinational corporations and companies that generate a significant portion of their revenue from abroad.



On the other hand, a strong dollar can make US exports more expensive and less competitive in foreign markets, affecting the profits and stock prices of companies that heavily rely on exporting products and/or services overseas.



The Federal Reserve&#8217;s recent decision to raise the federal funds rate by 25 basis points marked the eighth consecutive meeting where the policy interest rate has been raised. Further Increases are likely in the coming months as the bank continues its inflation-busting efforts.



Despite the Fed&#8217;s projection for rates to peak above 5% and remain there, market sentiment is diverging as investors anticipate rate cuts before the end of the year.



If that market is right, it could bode well for digital assets long-term as participants begin to reallocate a portion of their capital back into the market amid declining rates and a weakening dollar.



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US Dollar Surge Dampens Crypto Market Momentum

Hindenburg Research is known for revealing corporate fraud and is notorious for betting against electric truckmaker Nikola in 2020, so it’s surprising that it found no such cases within the crypto space in one of the most scandalous years for the industry. 



On its website, Hindenburg says it looks for “man-made disasters floating around in the market and aim to shed light on them before they lure in more unsuspecting victims.”



The research firm, founded by chartered financial accountant <a href="https://www.linkedin.com/in/nathanzanderson/" target="_blank" rel="noreferrer noopener">Nathan Anderson</a>, says it hunts for accounting irregularities, bad actors in management and unethical business practices.



Hindenburg’s exposure of <a href="https://hindenburgresearch.com/nikola/" target="_blank" rel="noreferrer noopener">Nikola</a> contributed to a 90% plunge in the electric vehicle maker’s stock price and the collapse of its founder Trevor Milton. And just last week, the firm announced a short position in Indian conglomerate Adani Group, calling it “the largest corporate fraud in history,” and <a href="https://www.reuters.com/markets/deals/indias-adani-enterprises-calls-off-share-sale-source-says-2023-02-01/" target="_blank" rel="noreferrer noopener">wiping off billions</a> in market value from seven of its listed companies.&nbsp;



<h2>Hindenburg mostly skipped crypto-related fraud</h2>



Hindenburg might have had some juicy targets in the form of the biggest crypto blow-ups of 2022, including Three Arrows Capital, Celsius, Voyager and FTX.&nbsp;



Acting as the cop in the digital currency ecosystem takes on different dynamics considering the advanced technical resources and expertise that are required, according to one industry observer.&nbsp;



“That [Hindenburg] did not uncover FTX&#8217;s greed prior to its bankruptcy cannot be held against the firm. FTX blindsided everyone, even the top security platforms that are dedicated to the nascent industry,” Simon Schaber, Spool DAO’s chief business development officer.



“In reality, the crypto ecosystem operates in a way that may be alien to most investigators, and unless there is a direct whistleblower who shares insights into a firm’s operational inconsistencies, companies like Hindenburg Research will have little or nothing to work with.”



But there are several crypto companies that Hindenburg has gone after.



<h2>Crypto miner Riot Blockchain</h2>



Riot Blockchain has been called out by the fraud-exposer at least thrice, publicly anyway. The first instance was in December 2017, when it <a href="https://hindenburgresearch.com/riot-blockchain-sudden-business-pivot-suspicious-acquisitions-questionable-special-dividend/" target="_blank" rel="noreferrer noopener">pointed out</a> that Riot went from being a “life science tool” to a self-described leader in the blockchain industry.



Indeed, in October 2017, biotech company Bioptix <a href="https://www.prnewswire.com/news-releases/bioptix-changing-name-to-riot-blockchain-as-company-shifts-focus-to-strategic-investor-and-operator-in-blockchain-technologies-300530737.html" target="_blank" rel="noreferrer noopener">changed its name</a> to Riot Blockchain due to a pivot in the company’s business direction. The firm originally began operations in 2000 with the aim to develop products used in a blood test that evaluated acute appendicitis. But the change in business strategy saw its shares <a href="https://www.theglobeandmail.com/globe-investor/investment-ideas/bioptix-shares-surge-after-rebranding-to-riot-blockchain/article36491746/" target="_blank" rel="noreferrer noopener">nearly double</a>.



Hindenburg alleged that the company handed out a “special cash dividend” that sapped 63% of its cash by giving it away to company insiders. It also noted an individual with a controversial past, Barry Honig, had an “influential behind-the-scenes stake” in Riot.



Another <a href="https://seekingalpha.com/article/4136235-riot-blockchain-this-crypto-clown-car-continues-hurtling-toward-abyss" target="_blank" rel="noreferrer noopener">Hindenburg report</a> in January 2018 raised flags after filings showed Riot frequently shuffled its auditors.



And a month later, Hindenburg <a href="https://hindenburgresearch.com/riot-blockchain-yet-another-suspicious-cash-depleting-transaction/" target="_blank" rel="noreferrer noopener">alleged</a> that Riot spent six times more than it should have on equipment brought from a highly suspicious new entity, and revealed it had a short position on the company.



“We have seen a lot of ridiculous things in our day, but we believe Riot has engaged in some of the most brazen activity we have seen in a U.S. listed equity,” Hindenburg said.



<h2>China-based crypto firm Ebang</h2>



Hindenburg <a href="https://hindenburgresearch.com/ebang/" target="_blank" rel="noreferrer noopener">revealed</a> its short position on Chinese bitcoin mining machine producer Ebang in April 2021. 



Describing Ebang as a “China Hustle,” it said the company engaged in opaque deals with company insiders and once sent $21 million to a relative of its Chairman and CEO, among a string of other allegations.



“Ebang is yet another cautionary tale for inexperienced retail investors enthused by anything crypto-related. As is so common with other ridiculous China-based schemes, the company will likely keep selling shares as long as investors are willing to keep buying them. We think this is a clear one-way street, and the capital isn’t coming back,” it said.



<h2>Stablecoin issuer Tether</h2>



In October 2021, Hindenburg offered a whopping <a href="https://hindenburgresearch.com/tether/" target="_blank" rel="noreferrer noopener">$1 million bounty</a> to anyone who offered information on the reserves backing its stablecoin. 



The short-seller’s claims about Tether’s disclosures being opaque came right after the US Commodity Futures Trading Commission fined the stablecoin issuer $21 million over misleading statements.



Hindenburg has doubts about the legitimacy of Tether’s backing due to the company’s sparse disclosures,” it said.



A Tether spokesperson described the bounty offered as a stunt and “a pathetic bid for attention.”



They are attempting to discredit not just Tether, but an entire movement. Thankfully, everyone sees through their opportunism,” Tether told Blockworks.



Read more: <a href="https://blockworks.co/news/what-backs-tether-58-us-treasurys-and-a-mess-of-other-stuff">What Backs Tether? 58% US Treasurys and a Mess of Other Stuff</a>



“This is not the first time Hindenburg Research has orchestrated an alleged scheme in pursuit of profit. Nor will it be the last. Tether abhors and denounces their actions and transparent motives,” they added.



Hindenburg didn’t reply to a query seeking comment on whether it has so far received enough information to warrant paying out the $1 million bounty. Blockworks has also reached out to Riot and Ebang, but has yet to receive a response.



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3 Crypto Companies Hindenburg Research has Named and Shamed

Startups locked down a total of $185 million from investors this week — quite the dip from the $578 million emerging Web3 companies locked down over the same period from one year prior, <a href="https://defillama.com/raises" target="_blank" rel="noreferrer noopener">data</a> from DeFiLama shows. 



On a cumulative funding basis, things are down. But things are looking up when it comes to the net number of startups pulling off capital raises.&nbsp;



Around the same time last year, only three startups were said to have landed outside capital:  Dune Analytics, Phantom and FTX. Let’s move on…



Now, 20 different startups managed to land funding, albeit under smaller raises. 



So, who were the lucky funding winners?



<h2>SIMBA Chain</h2>



While it may not be your traditional definition of “funding,” blockchain enterprise solutions provider SIMBA Chain, brought in <a href="https://blockworks.co/news/us-air-force-simba-blockchain-supply-chains">$30 million from the US Air Force’s STRATFI program</a> — on the heels of several previous military-commissioned projects undertaken by the startup.&nbsp;&nbsp;



Born out of the University of Notre Dame in 2017, SIMBA Chain connects government agencies with Web3 tech. The chain has been working with USAF to tokenize its budget and improve its accounting.&nbsp;



Bray Ritchie, SIMBA’s chief executive, said in a statement that the government is sending a “strong demand signal for blockchain technology,” adding that the inner workings of the Department of Defense’s immense supply chain “signals an opportunity to collaborate and increase adoption within the commercial industry.”



<h2>Block Joy</h2>



Venture-backed Web3 infrastructure developer Block Joy landed a $12 million Series A.



Investors, just to name a few: Gradient Ventures, Draper Dragon and Dragon Roark.



Can we get one more (funding) dragon? Please? People are asking.



The company has earmarked the incoming cash to build products that plan to slash Block Joy’s enterprise operations costs— including running staking nodes and utilizing APIs — by more than 80%. 



Existing clients include centralized exchanges Binance and Crypto.com. And new networks are on the way, including Ethereum 2, Cosmos and Solana.



<h2>Pow.re</h2>



Canadian crypto mining company Pow.re secured a $9.2 million Series A led by Haru United with participation from Trinito Corporation, RFD Capital and others.



Haru United also made an $18 million bullish bet on the company’s first high-density computing (HDC) site in Paraguay.



The latest investment bumped up Pow.re’s valuation to $150 million, per the company.



<h2>Wait, there’s more (dollars):</h2>



<ul>
<li>Hypernative, a crypto-security company, landed $9 million in seed funding from IBI’s tech fund. Piling on were the likes of Blockdaemon, Alchemy, Borderless, CMT Digital and Nexo. Blockchain rollups project Sovereign Labs secured $7.4 million in a round led by Haun Ventures.</li>



<li>Crypto security startup Sec3 secured $10 million in a seed round led by Multicoin Capital.</li>



<li>Web3 marketer Addressable landed $7.5 million from Fabric Ventures and Viola Ventures.</li>
</ul>



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Funding Roundup: Investors Are Bidding Small But Plenty on Crypto Startups

With Elon Musk’s new “For You” feature and a seemingly never-ending parade of spam accounts, parsing through Twitter to find the best content feels like a full-time job.



Lucky for you, we’ve curated the best of Crypto Twitter from last week, so you can stay up to date on the latest in memes, alpha and market sentiment.&nbsp;



The tweet that got everyone talking about Coinbase’s NFT marketplace: 



Artist Jessica Yatrofsky broke the news to her followers that her planned February drop on Coinbase’s NFT marketplace had been canceled. The tweet, in conjunction with <a href="https://blockworks.co/news/coinbase-lays-off-950-staff-cuts-operational-costs-by-25">Coinbase’s recent layoffs</a>, sparked speculation in the creator and crypto communities that the exchange may be shuttering its marketplace. 



<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">Re: Coinbase NFT, please share &amp; retweet 🙏🏼 <a href="https://t.co/PXQXR2x5S9">pic.twitter.com/PXQXR2x5S9</a>&mdash; Jessica Yatrofsky ✡️ (@jyatrofsky) <a href="https://twitter.com/jyatrofsky/status/1620838411690209280?ref_src=twsrc%5Etfw">February 1, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Honorable mention to Coinbase’s response, also, of course, posted on Twitter:&nbsp;



Coinbase’s official NFT account responded on Twitter and confirmed that upcoming creator drops had been paused. The exchange cited a need to focus on other “tools and features” creators want and denied claims that its marketplace would be shutting down.&nbsp;



<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">Rest assured, our mission for Coinbase NFT hasn’t changed and we remain optimistic about our future as we continue building. We’re excited to find more opportunities to work with with creators in the future.&mdash; Coinbase NFT (@Coinbase_NFT) <a href="https://twitter.com/Coinbase_NFT/status/1620863084972883968?ref_src=twsrc%5Etfw">February 1, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Ordinals receive mixed reaction:&nbsp;



A major narrative of the week was Bitcoin NFTs. Ordinals, the controversial <a href="https://blockworks.co/news/cant-ignore-bitcoin-nfts">new genre of NFT which recently debuted on the Bitcoin blockchain</a>, are, in theory, supposed to create a “higher standard” for digital artifacts. Crypto Twitter, to no one’s surprise, had strong feelings. 



<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">I hate to say it but Ordinals is the most interesting thing to happen to bitcoin in&#8230; years?&mdash; Jill Gunter (@jillrgunter) <a href="https://twitter.com/jillrgunter/status/1620937079206338560?ref_src=twsrc%5Etfw">February 2, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Bitcoiners prove that DOOM can, in fact, run on anything:&nbsp;



Someone uploaded a cloned version of the 30-year-old video game classic <a href="https://blockworks.co/news/play-doom-bitcoin">DOOM to the Bitcoin blockchain</a> as an inscription on Ordinals. It yet again proves that coders can play the game on virtually anything (in the past, successful versions of DOOM have run on ATMs and calculators), to the delight of many crypto Twitter and Reddit circles. 



<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">Someone has just uploaded DOOM to the BTC blockchain. Go here to try it out:<a href="https://t.co/DLuBYj06CS">https://t.co/DLuBYj06CS</a>&mdash; Hector Lopez (@hlopez_) <a href="https://twitter.com/hlopez_/status/1620936502317563904?ref_src=twsrc%5Etfw">February 2, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Blockworks’ David Canellis debunks Ripple rumors:&nbsp;



As the industry gears up for a resolution to Ripple’s ongoing lawsuit with the SEC, many <a href="https://fortune.com/crypto/2023/02/01/despite-sec-litigation-ripple-sold-226-million-of-xrp-last-quarter-and-the-token-gained-21-last-month/" target="_blank" rel="noreferrer noopener">reports</a> have focused on Ripple Labs’ direct XRP sales in the fourth quarter of 2022. But Blockworks compiled the full six-year history of Ripple Labs’ quarterly markets reports, stretching back to the inaugural edition in the fourth quarter of 2016, and it turns out Ripple’s direct XRP sales only tell one part of the story.



Read More: <a href="https://blockworks.co/news/ripple-xrp-sec-lawsuit-markets">Ripple Bought $8.4B XRP Since SEC Lawsuit ‘To Support Healthy Markets’</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">Saw lots of reports about how Ripple sold $226M in XRP last quarter. On closer inspection, that&#39;s actually *net of purchases.* Ripple sold $2.96B directly but spent $2.74B on secondary XRP markets last quarter alone! So, I dug further. <a href="https://twitter.com/Blockworks_?ref_src=twsrc%5Etfw">@Blockworks_</a> <a href="https://t.co/TQCaYFYoJx">https://t.co/TQCaYFYoJx</a>&mdash; David Canellis (@dcanellis) <a href="https://twitter.com/dcanellis/status/1621537305461772291?ref_src=twsrc%5Etfw">February 3, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



A guide to options trading in DeFi:&nbsp;



Twitter user <a href="https://twitter.com/DefiIgnas" target="_blank" rel="noreferrer noopener">@DefiIgnas</a> is out to help traders get the 411 on option protocols, which they say are “primed for explosive growth.” Catch up on the retail alpha in this thread. 



<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">1/ Options trading is one of the most overlooked areas of <a href="https://twitter.com/hashtag/DeFi?src=hash&amp;ref_src=twsrc%5Etfw">#DeFi</a> But it&#39;s only a matter of time until they take off. Here&#39;s your chance to catch up and learn what option protocols have to offer: 🧵&mdash; Ignas | DeFi Research (@DefiIgnas) <a href="https://twitter.com/DefiIgnas/status/1620335655435014144?ref_src=twsrc%5Etfw">January 31, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



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Crypto Twitter Week in Review

Roofstock, a property technology company focused on selling single-family rental homes, has completed its second on-chain property sale through Roofstock onChain (ROC), its Web3 subsidiary.



The property <a href="https://etherscan.io/tx/0xa7b2e89bf6d5cc8e605c1cf8823e532f87790d1816f7f98df77127cc98a1021f" target="_blank" rel="noreferrer noopener">sold</a> for $180,000 on an NFT marketplace built by Origin Protocol. It will be the first home to have been purchased on any NFT marketplace with on-chain leverage from DeFi lender Teller protocol.



Roofstock was not designed to be a blockchain project — but as the company grew, it saw the potential in blockchain technology and its ability to make single-family rental homes more accessible, Geoffrey Thompson, chief blockchain officer at Roofstock, told Blockworks.&nbsp;



Ultimately, he said, “what it boils down to is being able to transact a real-world home with one click using NFT smart contracts.”



<h2>So, how does it work?</h2>



The process of purchasing a property through the NFT marketplace is relatively simple, Sanjay Raghavan, head of Web3 initiatives at Roofstock, told Blockworks.



Following existing Web2 real-estate processes, a prospective buyer must purchase a real estate property and title it as a single-purpose limited liability company (LLC).&nbsp;



“The purpose of that LLC is to hold title for the property,” he said. “The Web3 part is creating an NFT that is associated with the sole ownership of this LLC — so, when people are selling the NFT on a marketplace, in essence, what is really happening is the ownership of that LLC changing hands.”



Read More: <a href="https://blockworks.co/news/your-guide-to-nft-platforms">The Top 8 NFT Marketplaces – Where To Buy NFTs</a>



To create an NFT, prospective buyers and sellers must mint membership tokens through a know your customer (KYC) check. Once a buyer is verified, their membership token, a non-transferable — sometimes known as “soulbound” — token, will reflect their verification status.



“The Web3 home is purchased on an NFT marketplace, but our smart contract checks to see if the buyer is KYC&#8217;ed for the transfer to go through. This is true for both primary and subsequent sales,” he said. “In addition, for subsequent sales, the property&#8217;s diligence info will need to be refreshed, after which the NFT is updated with a sellable flag.”



<h2>Legal compliance</h2>



Property NFTs by ROC follow an <a href="https://www.blockworksresearch.com/glossary#erc-721-token" target="_blank" rel="noreferrer noopener">ERC-721</a> standard, often used to represent the ownership of NFTs. 



Thompson notes that a large part of his initial efforts in the project was focused on ensuring that legal compliance was sufficient to allow for effortless property transactions.&nbsp;



“The NFT is associated with a single-member LLC that is member-managed,” Thompson said. “What it boils down to, effectively, is that the owner of the token makes the decisions about what happens to the house — if they want to rent it on a short-term basis using Airbnb, or if they want to rent it on a long-term basis — those are going to result in different economics.”



As the token does not meet the elements of the Howey four-prong test — a method used by the US Supreme Court to determine whether a transaction is considered an “investment contract” — it is not considered a security, Thompson said.



“In an investment contract, a passive investor relies on the managerial efforts of a sponsor or promoter to produce economic gains,” he said. “We avoid the securities laws by not promising returns for anyone and by not taking on management duties for people.”



<h2>Onboarding real-world assets to DeFi</h2>



Another benefit of bringing properties on-chain is the ability to now provide DeFi lenders with real-world asset collateral, Thompson said.&nbsp;



Roofstock partnered with Teller protocol to allow borrowers to raise loan requests and finance their purchases through <a href="https://app.usdc.homes/collections/roofstock-onchain-homes" target="_blank" rel="noreferrer noopener">USDC.homes</a>. 



Once a lender accepts the borrower&#8217;s request, the protocol will “permissionlessly [use] funds to purchase the LLC NFT,” then transfer the NFT to a smart contract escrow vault until loans and interests are repaid.



Buyers can make a down payment for a little as 20% of the value of the property. In the present case of <a href="https://app.usdc.homes/collections/roofstock-onchain-homes/asset/2" target="_blank" rel="noreferrer noopener">205 Cloverbrook Drive in Harvest, Alabama</a>, the borrower took out a two-year, $108,000 loan, at an interest rate of 7%. 


<div class="wp-block-image">
<figure class="alignright size-medium"><img decoding="async" loading="lazy" width="300" height="186" src="https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-02-at-12.41.09-PM-300x186.png" alt="" class="wp-image-46412" srcset="https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-02-at-12.41.09-PM-300x186.png 300w, https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-02-at-12.41.09-PM-768x477.png 768w, https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-02-at-12.41.09-PM-414x257.png 414w, https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-02-at-12.41.09-PM-420x261.png 420w, https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-02-at-12.41.09-PM-353x219.png 353w, https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-02-at-12.41.09-PM-80x50.png 80w, https://cms.blockworks.co/wp-content/uploads/2023/02/Screen-Shot-2023-02-02-at-12.41.09-PM.png 921w" sizes="(max-width: 300px) 100vw, 300px" /><figcaption class="wp-element-caption"><a href="https://app.usdc.homes/collections/roofstock-onchain-homes/asset/2" target="_blank" rel="noreferrer noopener">205 Cloverbrook Drive in Harvest, Alabama</a> | Roofstock</figcaption></figure></div>


“The DeFi world is so much cleaner in terms of how financing can be done,” Raghavan said. “Financing can be instantaneous, so you don&#8217;t have to wait three, four weeks to send out pay stubs, bank statements, tax records and all these things to a lender who’s then sitting in underwriting for weeks.”



Using cryptocurrencies to finance real estate is an exciting development for DeFi, Matthew Liu, the co-founder of Origin Protocol, notes.



&#8220;More RWAs coming on-chain means that DeFi will see accelerated growth and TVL and other metrics will go up over time,” Liu said. “Conversely, we are showing that DeFi has a place in the physical world. Over time, we expect other RWAs like luxury handbags, watches, cars, commercial real estate, commodities, etc. to move on chain.&#8221;



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Roofstock Sells Alabama Rental Property Via NFT

Ben Strack

Crypto-related layoffs spiked in January, but the downturn didn’t stop a number of firms from touting their additions and appointments last month.&nbsp;



Digital asset job cuts hit 2,806 last month, according to <a href="https://www.coingecko.com/research/publications/crypto-layoffs-by-month" target="_blank" rel="noreferrer noopener">CoinGecko</a>, up from 649 in December — good for a 330% bad-news pop.&nbsp;



Consider that <a href="https://blockworks.co/news/coinbase-lays-off-950-staff-cuts-operational-costs-by-25" target="_blank" rel="noreferrer noopener">Coinbase</a> alone moved last month to cut an additional 950 staffers as part of the beleaguered crypto exchange’s latest attempts to cut down on bear market expenditures.&nbsp;



The sector’s January layoffs have already accounted for 41% of all 2022 crypto staff slashes. It is the second-highest monthly total — nearly reaching the 3,003 layoffs of last June after the collapse of Terra. And it comes as even blue-chip crypto companies continue to wade through the market’s churn that started in earnest in the fourth quarter with FTX’s implosion.&nbsp;



But reports of job cuts over the last few weeks have seemed to stall as the month turned (If we didn’t just jinx it, anyway!)



Crypto data and software provider Lukka hired <a href="https://www.linkedin.com/in/ian-hurst-ba143084/" target="_blank" rel="noreferrer noopener">Ian Hurst</a> Wednesday to head the firm’s European operations, expanding his role beyond the advisory position he has worked in for nearly two years.



A former general manager of global financial services at IBM, Hurst was also previously a partner at top consultancy Mckinsey &amp; Company.



The hire follows Lukka moving its headquarters to Zug, Switzerland, as well as its deal to support Bitcoin Suisse’s middle and back office operations — each signaling the company&#8217;s intent to increase its presence throughout the continent.&nbsp;



Bitcoin Suisse is an institutionally oriented crypto firm also based in Switzerland.&nbsp;&nbsp;



Arrington Capital — a firm that has invested in digital assets and Web3 since 201 — named <a href="https://www.linkedin.com/in/bhavik-patel-16704645/" target="_blank" rel="noreferrer noopener">Bhavik Patel</a> its chief investment officer.&nbsp;&nbsp;&nbsp;



Previously chief product officer and head of derivatives at crypto exchange BitMEX, Patel helped the firm’s founding team design its perpetual swap product.



Dubit, a developer of metaverse games and experiences, appointed <a href="https://www.linkedin.com/in/regine/details/experience/" target="_blank" rel="noreferrer noopener">Regine Weiner</a> as its head of studio Thursday.



Weiner joins from developer Mediatonic Games. She has also worked in senior roles at Space Ape Games, Nickelodeon, Cartoon Network and Disney.



Dubit has crafted metaverse experiences for Nickelodeon, the Grammys and Samsung — and the company recently said it’s rolling out Loooptopia, a Roblox-based world for the clothing brand H&amp;M.



<h2>What else did we miss?&nbsp;</h2>



Well, Anchorage Digital went on a bit of a spree, snapping up a slate of new executives in a push to focus on security and compliance.



See: <a href="https://blockworks.co/news/anchorage-hires-new-execs">Bank Secrecy Act Officer Amid Anchorage Digital’s Latest Hires</a>



New to the bank are Chief Compliance and Risk Officer <a href="https://www.linkedin.com/in/mark-dubose/">Mark duBose</a>, who formerly worked at Circle; Chief Information Security Officer <a href="https://www.linkedin.com/in/fweichelt/">Frieder Weichelt</a>, who joined from BitGo; and <a href="https://www.linkedin.com/in/dustinkpalmer/">Dustin Palmer</a>, a former senior advisor to general counsel at the US Department of Treasury. Palmer is in another privacy-oriented executive seat.&nbsp;



A non-crypto-focused bank, albeit with developing digital asset dealings, also appointed a new chief.



See: <a href="https://blockworks.co/news/bny-mellon-names-digital-assets-ceo">BNY Mellon Names Digital Assets CEO</a>



The world’s largest custodian bank named <a href="https://www.linkedin.com/in/caroline-butler-b489821/" target="_blank" rel="noreferrer noopener">Caroline Butler</a> to its CEO of digital assets post, a newly created role. Butler joined the company in 2020 and was previously CEO of BNY Mellon’s custody services.



Though details are scarce, the hire is one indication the financial services giant is looking to follow up on BNY’s launch of its digital custody and administration platform in the US for select institutional clients last October.



And as talk around crypto regulation continues, companies are looking to elevate their influence in Washington.&nbsp;&nbsp;



See: <a href="https://blockworks.co/news/mike-pence-nephew-binance-newest-lobbyist">Mike Pence’s Nephew Among Binance’s Newest Lobbyists</a>



Binance has registered three new lobbyists from legal counsel firm Ice Miller, according to a recent <a href="https://lda.senate.gov/filings/public/filing/6a74c35b-89fc-45bf-bebf-8535e2be9fdd/print/">filing</a> — John Pence, Jarrod Loadholt and Meagan Bolton.&nbsp;



Tether, Bakkt, a16z and Riot Platforms have also disclosed fresh lobbyist roles.



And we could be sharing updates from eBay on future Fridays, considering the digital marketplace is hiring specialists for its NFT marketplace KnownOrigin.



See: <a href="https://blockworks.co/news/ebay-nft-jobs-web3-knownorigin-amazon">EBay NFT Job Openings Hint At Web3 Showdown With Amazon</a>



Last June, <a href="https://blockworks.co/news/ebay-acquires-uk-based-nft-marketplace-knownorigin">eBay acquired UK-based KnownOrigin</a> for an undisclosed amount.



Rival Amazon, meanwhile, put up a job posting for a senior go-to-market <a href="https://www.amazon.jobs/en/jobs/2320871/senior-gtm-specialist-web3">specialist</a>, who would be responsible for growing adoption of Web3 workloads on its cloud computing division.&nbsp;



And don’t forget that Amazon is planning to <a href="https://blockworks.co/news/amazon-nft-marketplace-web3">launch an enterprise-grade NFT initiative</a>.

Latest in Crypto Hiring: Layoffs Spike But Turnaround Ahead?

In the latest draft of the Pregame Maker Constitution — Rune Christensen, the founder of MakerDAO — requests 20,000 MKR tokens ($14 million) to be dedicated to a Scientific Sustainability Fund.



The Pregame Maker Constitution is a work-in-progress document that will shape Maker Governance prior to <a href="https://blockworks.co/news/are-subdaos-the-future-of-dao-governance">the launch of SubDAOs</a>. The constitution will be a living document and be subject to updates and modifications.



In the <a href="https://forum.makerdao.com/t/wip-pregame-maker-constitution-mip-draft/19621">document</a>, Christensen notes that “MakerDAO will always share financial success with the world through charity that is distributed broadly and with thoughtful and genuine consideration of its impact.”



This practice would be implemented through a Purpose System, to be established by the Constitution and designed to allocate tokens to charities that will have a meaningful and verifiable impact.



Among the many charitable causes, Christensen highlights the importance of Scientific Sustainability — which he describes as a “core principle of the Maker Constitution that recognizes the unique, critical relationship between financial infrastructure and the global environmental risks of climate change.”



Stressing the catastrophic disasters that could result from climate change, Christensen empathizes that “immediate action is required,” and therefore asks DAO members to fund awareness campaigns and educational programs on energy solutions over decades.



“The Scientific Sustainability Fund is a temporary measure and will wind down and be fully replaced by the Purpose System in 2040,” he said.



Despite Christensen’s good intentions, MakerDAO Governance participant <a href="https://forum.makerdao.com/u/LongForWisdom">LongForWisdom</a> responded in the proposal’s <a href="https://forum.makerdao.com/t/wip-pregame-maker-constitution-mip-draft/19621/4">forum discussion</a> that the Constitution should not contain reasoning and only contain rules.



Though noting that explanations could be used in speeches or to convince someone to approve a proposal, he said, “it creates ambiguity that weakens the document as what is essentially part of a legal code.”



On Twitter, the proposal has also drawn critiques. Eden Au, a research director at The Block, <a href="https://twitter.com/0xedenau/status/1621209167381024768">tweeted</a> that, “Rune has gone full Effective Altruism.” With many other Twitter users noting that Christensen should “use his own money instead of the MKR treasury,” to achieve objectives that are arguably personal and political.



<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">Why doesn’t he use his own money instead MKR treasury&mdash; Popcorn Kirby 🚀 (@PopcornKirby) <a href="https://twitter.com/PopcornKirby/status/1621211268794421248?ref_src=twsrc%5Etfw">February 2, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Christensen’s passion for climate activism is well known. He previously published documents on MakerDAO’s governance forum on “<a href="https://forum.makerdao.com/t/the-case-for-clean-money/10684">The case for Clean Money</a>,” and has <a href="https://blockworks.co/news/rune-christensen-wants-out-of-maker">participated in earlier conversations</a>, stating that <a href="https://blockworks.co/news/makerdao-votes-in-favor-of-rune-christensens-endgame-plan">the Maker Endgame plan</a> is not only the last chance for the DeFi protocol — it could be the last chance for humanity, too.



Christensen did not immediately respond to Blockworks’ request for comment.

MakerDAO Founder Seeks $14 Million in MKR to Fight Climate Change

Friday’s jobs data showed the economy added far more jobs than analysts expected, putting the unemployment rate at its lowest in more than 50 years. 



It sent markets into a frenzy trying to decipher what this means for interest rates. 



Markets slipped on the news initially before recovering later in the trading session. The S&amp;P 500 and Nasdaq Composite indexes each lost around 1% before paring losses to around 0.3% each as of 10:30 am in New York. Cryptos also bounced back to the green, with 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>) trading about 0.6% and 1.4% higher, respectively. 



The Federal Reserve opted to <a href="https://blockworks.co/news/federal-reserve-raises-interest-rates-25-bps" target="_blank" rel="noreferrer noopener">increase interest rates</a> a quarter of a percentage point Wednesday, noting that “peak employment” was still a top priority for the central bank. The market remains tight though, with the number of posted jobs per unemployed worker rising yet again in December, according to <a href="https://www.bls.gov/news.release/pdf/empsit.pdf" target="_blank" rel="noreferrer noopener">data</a> from the Bureau of Labor Statistics. 



“The past year the biggest risk to markets heading into each jobs report was that it would print ‘Too Hot’ and cause the Fed to hike rates even more than before and get more hawkish in its language,” Tom Essaye, founder of Sevens Report Research, wrote in a note ahead of Friday’s labor data release.&nbsp;



Markets were still pricing in an almost certain likelihood that the Fed would go for another 25 basis point interest rate increase in March, according to <a href="https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html" target="_blank" rel="noreferrer noopener">CME Group data</a>. 



“But given Powell did not push back on the market’s expectations for just one more rate hike and two-to-three rate cuts in late 2023, it implies that the labor market is not as big a hawkish risk as it seemed because there’s been little progress on restoring balance in the labor market (the balance the Fed stated it desired),” Essaye added.&nbsp;



Coming off of an exceptional month for asset performance across the board, analysts are speculating how long cryptos can sustain their run. Bitcoin still has not managed to break the $24,000 level while ether continues to flirt around $1,600.&nbsp;



“January was a robust month for crypto and the FOMC decision helped keep all risky assets going higher,” Edward Moya, senior market analyst at Oanda, said. 



“Bitcoin is rallying as the post-Fed rally holds and global bond yields extend their declines. Bitcoin is riding this risk-on mood from Wall Street, but it might struggle to break above massive resistance from the $25,000 level.” 



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Jobs Data Crushes Estimates, Markets Rethink Fed Predictions

Silvergate’s stock inched higher early Friday as two of the world’s largest financial institutions have revealed growing stakes in the crypto bank in recent days.



State Street owned 9.32% of Silvergate stock as of Dec. 31, according to a Thursday <a href="https://www.sec.gov/Archives/edgar/data/93751/000009375123000093/Silvergate_Capital_Corp.txt" target="_blank" rel="noreferrer noopener">filing</a>.&nbsp;&nbsp;



The filing came a few days after a separate disclosure showed that BlackRock, the world’s largest asset manager, upped <a href="https://www.sec.gov/Archives/edgar/data/1312109/000130655023005093/us82837p4081_013123.txt" target="_blank" rel="noreferrer noopener">its Silvergate stake</a> to 7.2%.&nbsp;



Most of BlackRock’s position in the crypto bank is spread across a number of the fund manager’s ETFs, reflecting investor demand for exposure to indexes that comprise Silvergate.



BlackRock has roughly $10 trillion assets under management, while State Street manages about $3.5 trillion. The latter company also had nearly $37 trillion in assets under custody and administration at the end of 2022.  



Spokespeople for BlackRock and State Street declined to comment.



Silvergate stock was up nearly 2% on the day at 10:30 am ET Friday. Though down about 80% from a year ago, the stock is up about 20% so far in 2023.



Bloomberg <a href="https://www.bloomberg.com/news/articles/2023-02-02/silvergate-faces-doj-fraud-probe-over-ftx-and-alameda-dealings" target="_blank" rel="noreferrer noopener">reported</a> Thursday that prosecutors in the US Justice Department’s fraud unit are investigating Sivergate’s dealings with bankrupt crypto exchange FTX and affiliate Alameda Research.&nbsp;



Silvergate CEO Alan Lane <a href="https://blockworks.co/news/silvergate-has-ample-liquidity">previously described</a> the bank’s due diligence process on FTX and Alameda in a December letter.



“When Silvergate received payments directed to Alameda Research and credited it to the account of the same name, this was consistent with the instructions from the sender of the wire and industry practice,” Lane said at the time.&nbsp;



A Silvergate representative declined to comment further.



The Bloomberg report came a few days after US Sens. Elizabeth Warren (D-Mass.), Roger Marshall (R-Kan.) and John Kennedy (R-La.) <a href="https://www.reuters.com/technology/silvergate-pressed-by-senators-after-evasive-responses-ftx-bloomberg-law-2023-01-31/" target="_blank" rel="noreferrer noopener">reportedly</a> sent a letter to Silvergate asking for details about its risk management practices and ties to FTX — following up on <a href="https://blockworks.co/news/crypto-bank-silvergate-asked-to-detail-records-of-purported-ftx-ties">a December inquiry</a>.



Silvergate disclosed last month <a href="https://blockworks.co/news/silvergate-stock-plummets-45-on-major-staff-cuts-massive-withdrawals">it was forced to sell assets</a> at a major loss during the fourth quarter to fulfill roughly $8 billion of customer withdrawals.



The crypto bank held $4.3 billion of short-term Federal Home Loan Bank advances, as of Dec. 31, according to a Jan. 5 company <a href="https://ir.silvergate.com/news/news-details/2023/Silvergate-Announces-Select-Preliminary-Fourth-Quarter-2022-Financial-Metrics-and-Provides-Business-Update/default.aspx" target="_blank" rel="noreferrer noopener">filing</a>. This funding <a href="https://blockworks.co/news/silvergate-home-loan-bank-advances">was used to satisfy outflows</a>, according to the company.



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State Street and BlackRock Boost Silvergate Stake. What Is the Stock Doing?

David Canellis

Ripple Labs’ XRP token has dropped 20% since the SEC sued the firm, and two top executives, over alleged unregistered securities sales back in December 2020.



And since then, Ripple Labs has poured billions of dollars into buying back the XRP token on secondary markets.



Some <a href="https://fortune.com/crypto/2023/02/01/despite-sec-litigation-ripple-sold-226-million-of-xrp-last-quarter-and-the-token-gained-21-last-month/" target="_blank" rel="noreferrer noopener">reports</a> have focused on Ripple Labs’ direct XRP sales in the fourth quarter of 2022. The move to acquire XRP tokens — ostensibly a bullish indicator — has been trumpeted as boosting the ecosystem’s liquidity.



Those reports often link the nearly $3 billion of in-house sales to XRP’s fast-moving 27% pump in January. They have propped up a narrative in which XRP’s latest revival has been made all the more notable by the fact that it’s played out with an uncertain, and, likely decisive, regulatory outcome hanging in the balance.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;



Those sales specifically refer to institutions and other corporate clients acquiring XRP from Ripple directly for use within its On-Demand Liquidity (ODL) network, a product pitched to help smooth the cross-border remittance process via XRP-powered crypto rails.



Blockworks compiled the full six-year history of Ripple Labs’ quarterly markets reports, stretching back to the inaugural edition in the fourth quarter of 2016.



Ripple’s direct XRP sales only tell one part of the story. It’s true that Ripple sold around $2.97 billion of XRP last quarter — on par with the previous period’s $2.82 billion — but the reality is that Ripple has appeared to push much of that money into buying XRP on public markets, per its own disclosures.



In total, Ripple Labs has publicly reported $11.1 billion in ODL-related sales from the beginning of 2021 until the end of 2022. Since then, the firm has shelled out nearly $8.4 billion throughout a sustained XRP buying campaign initially pitched to protect the token’s markets and its customers, averaging more than $1 billion per quarter.



Ripple Labs’ disclosures indicate the firm has, since the SEC’s charges, essentially recycled 75% of the revenue generated from direct XRP sales on buying its own token on secondary markets, and 67% of overall sales revenue from the start of 2016’s fourth quarter.



Blockworks reached out to several contacts at Ripple on multiple occasions with the specific details contained in this story, and did not receive any response.



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<h2>Ripple spends billions on XRP market ‘health’</h2>



Collating figures contained in each of Ripple’s quarterly market reports (including the most <a href="https://ripple.com/insights/q4-2022-xrp-markets-report/">recent</a>), across the six years of disclosures, Blockworks found that Ripple sold $12.55 billion in XRP directly to customers across that period.



Of that, $744.6 million was sold “programmatically,” a common term for selling on public markets, such as crypto exchanges.



Ripple stopped programmatic sales after the third quarter of 2019. No particular reason was given in the underlying <a href="https://ripple.com/insights/q3-2019-markets-report/">disclosure</a>. But the firm then said it was focusing on over the counter (OTC) sales with partners working in “strategically important” regions including EMEA and Asia.



The following year, Ripple said it was <a href="https://ripple.com/insights/q2-2020-xrp-markets-report/">focusing</a> “solely on its OTC sales as part of providing increased XRP liquidity to RippleNet’s ODL customers.” It described that liquidity as “vital” as ODL grows.



Ripple first disclosed that it was an XRP buyer on secondary markets in 2020&#8217;s second <a href="https://ripple.com/insights/q2-2020-xrp-markets-report/">quarter</a>, although purchase <a href="https://ripple.com/insights/q3-2020-xrp-markets-report/">figures</a> didn’t appear until the third quarter of that same year.&nbsp;



“A healthy, orderly XRP market is required to minimize cost and risk for customers, and Ripple plays a responsible role in the liquidity process,” Ripple <a href="https://ripple.com/insights/q2-2020-xrp-markets-report/">said</a> in Q2 2020.



<blockquote class="wp-block-quote">
“As more financial institutions leverage RippleNet’s ODL service, more liquidity is added into the XRP market. That said, Ripple has been a buyer in the secondary market and may continue to undertake purchases in the future at market prices.”
</blockquote>



To start, Ripple Labs was snapping up around $40 million per quarter, in Q3 and Q4 2020. It then took a break until Q4 2021, when it ramped up efforts significantly by spending $322 million.



Around $1.08 billion was spent in the first three months of 2022, then $1.71 billion in the following quarter. That expenditure jumped almost 50% in the quarter after that, when Ripple <a href="https://ripple.com/insights/q2-2022-xrp-markets-report/">reported</a> $2.5 billion in secondary purchases.&nbsp;



Last quarter, it spent $2.74 billion on XRP. The price of XRP, meanwhile, dropped by 30%.



Ripple described its buying campaign as a “near-term product solution” for an XRP lending operation <a href="https://ripple.com/insights/fund-instant-cross-border-payments-with-a-line-of-credit-from-ripplenet/">announced</a> in Oct. 2020.



The firm said in its Q3 2020 <a href="https://ripple.com/insights/q3-2020-xrp-markets-report/">report</a> that it was building “new ODL capabilities to dynamically source XRP liquidity from the open market, not just Ripple,” hinting that its XRP buys on secondary markets would eventually slow — but its budget for XRP buybacks has only increased.



<h2>Centralization and securities laws</h2>



The question of whether XRP and its underlying crypto infrastructure are sufficiently decentralized to avoid SEC scrutiny plagued San Francisco-headquartered Ripple Labs for years.



That debate culminated in the SEC’s lawsuit, which seeks to prove that purchases of the XRP token constitute investment contracts. Ripple Labs holds sway over the network and the value XRP, the regulator has argued, which would mean that its token offering falls under securities law per the Howey test.



Companies selling securities must register with the SEC and lodge regular financial disclosures, among other things, in order to provide reliable information on which investors can base their decisions.



In a landmark <a href="https://www.sec.gov/news/speech/speech-hinman-061418">speech</a> in 2018, William Hinman of the SEC noted that “If the network on which the token or coin is to function is sufficiently decentralized – where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts – the assets may not represent an investment contract.” He specifically named Bitcoin and Ethereum as tokens that met this standard. XRP’s omission from his speech was the first sign that XRP was potentially under the gun.



Still, decentralization is a spectrum, and there are many ways by which to <a href="https://blockworks.co/news/measuring-decentralization-is-your-crypto-decentralized">gauge decentralization of crypto projects</a>. Some relate to their technological underpinnings — how many validator nodes the network has, for example, and how they’re chosen.&nbsp;



Another is the centralization of supply; if one party holds too many tokens, they could wield outsized influence over markets.



In October 2022, Ripple <a href="https://twitter.com/bgarlinghouse/status/1585777993359642625">declared</a> that it — for the first time — owned less than 50% of the outstanding supply of XRP, which is currently about 50.8 billion ($21.08 billion). In 2017, that <a href="https://www.cnbc.com/2017/12/29/ripple-soars-becomes-second-biggest-cryptocurrency-by-market-cap.html">figure</a> was as high as 61%.&nbsp;



Ripple distributing XRP through its direct and ODL-related sales contributed to that reduction.&nbsp;



It’s difficult to gauge the actual market impact of Ripple consistently buying so much XRP over the past two years (it’s now the sixth largest digital asset by market value, in <a href="https://coinmarketcap.com/historical/20150101/">2015</a> it was the second-biggest behind bitcoin).



<h2>Buybacks common Wall Street practice</h2>



While order book depth is a fluid metric and changes rapidly, CoinGecko recently <a href="https://www.coingecko.com/en/coins/xrp#markets">place</a>d the 2% depth of Binance’s XRP/USDT market at about $2.3 million on the upside and $1.6 million on the downside — meaning bids of those sizes would shift XRP’s price 2% in either direction.&nbsp;



When averaged out on a daily basis, Ripple’s XRP buys over 2022 would’ve amounted to $22 million per day – more than 10 times the reported amount required to move the needle on markets. (Ripple disclosed sales were executed daily in its Q2 2017 <a href="https://web.archive.org/web/20220124004742/https://ripple.com/insights/q2-2017-xrp-markets-report/">report</a>, although no information has been given about the rate of purchases)



Ripple has openly telegraphed its buys. And, for what it’s worth, token buyback schemes are common in crypto markets. Crypto exchange tokens often <a href="https://blockworks.co/news/native-crypto-exchange-tokens-hint-at-first-sign-of-broader-market-recovery">acquire and burn their own token</a>s; crypto lender Nexo has been <a href="https://nexo.io/media-center/nexo-commits-additional-50-million-to-long-standing-buyback-initiative">running</a> buybacks for years, a move that has carried over to buzzy projects like <a href="https://twitter.com/blockworksres/status/1612056633718476801">BitDAO</a>.



(Ripple doesn’t burn XRP directly, instead its ledger automatically <a href="https://xrpl.org/transaction-cost.html">burns</a> a small amount for every transaction).&nbsp;



Token buybacks, while an unregulated process, mimic stock buybacks seen in traditional equities markets (which are all securities). Meta just <a href="https://www.cnbc.com/2023/02/01/facebook-parent-meta-announces-40-billion-stock-buyback.html">announced</a> a $40 billion buyback scheme which appears to have heavily influenced its recent 27% rally, despite somewhat lackluster earnings.&nbsp;



Stock buyback schemes are intended to return capital to shareholders. They can present their own <a href="https://corpgov.law.harvard.edu/2020/10/23/the-dangers-of-buybacks-mitigating-common-pitfalls/">concerns</a>, including executive compensation gaming and destroying long-term value propositions.



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</div><figcaption class="wp-element-caption">XRP has more-or-less tracked bitcoin since SEC filed its charges</figcaption></figure>



Whether XRP <a href="https://blockworks.co/news/ripple-sec-final-briefs-provide-case-summary">is a security</a> has yet to be determined. A ruling is expected sometime this year.&nbsp;



On Dec. 22, the day SEC filed charges against Ripple, co-founder Chris Larsen and CEO Brad Garlinghouse, the latter stated in a <a href="https://ripple.com/insights/the-secs-attack-on-crypto-in-the-united-states/">blog</a>: &#8220;Unlike securities, the market value of XRP has not been correlated with Ripple’s activities. Instead, the price of XRP is correlated to the movement of other virtual currencies.&#8221;



Crypto prices across the board indeed tend to correlate. But based on Ripple’s own disclosures, it’s clear the firm has been busy directly maintaining the “health” of XRP markets throughout its battle with the SEC — to the tune of billions — all while attempting to <a href="https://dfpi.ca.gov/wp-content/uploads/sites/337/2022/09/Ripple-comment-letter-8.5.22.pdf?emrc=4cdda7">disprove</a> its influence over XRP.



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Ripple Bought $8.4B XRP Since SEC Lawsuit ‘To Support Healthy Markets’

Reddit’s native cryptocurrency moons (MOON) has, well, mooned over the past month.



Currently trading at $0.13 per token, the cryptocurrency has soared by about 73% since the start of the year, <a href="https://www.coingecko.com/en/coins/moon" target="_blank" rel="noreferrer noopener">data</a> from CoinGecko show, with the caveat that there are few markets where it trades and liquidity is miniscule. 



Moons is a token built on Ethereum’s blockchain that powers the<a href="https://www.reddit.com/r/CryptoCurrency/" target="_blank" rel="noreferrer noopener"> r/Cryptocurrency </a>subreddit — an online forum for crypto enthusiasts to discuss — and, often, debate — their favored digital assets and related protocol projects. It’s also evolved into an industry hub to share notable news, often as emerging information impacts a token’s price and market capitalization.



Participating Redditors are rewarded with moons tokens, and the token is stored in the social platform’s in-house digital asset wallet.



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<h2>Moons&#8217; use cases </h2>



Moons can be used for a variety of purposes on Reddit, including the purchase of a membership to the r/Cryptocurrency forum for 466 moons a month. Subscribers also receive four new loyalty badges monthly and can include gifs in comment threads. 



The moons token also allows users to partake in polls and tip their peers on content shares, generally those perceived to add value for industry participants.



A Reddit user who wished to remain anonymous told Blockworks that they don’t recall when or why they opened their Vault on Reddit, but it was likely due to the fact that “it was there.”



The user said they have used the cryptoassets on a couple of occasions to tip helpful users. Reddit’s nascent crypto tipping mechanism adds an extra incentive for savvy posts on the forum in particular, they said.



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Another user, <a href="https://www.reddit.com/user/No_Scientist_7094" target="_blank" rel="noreferrer noopener">No_Scientist_7094</a>, told Blockworks that they view the token as similar to the Basic Attention Token (<a href="https://blockworks.co/price/bat">BAT</a>) — a blockchain system designed to reward users for their attention on websites via the web browser Brave, a popular pick for digital assets advocates concerned with digital <a href="https://www.coindesk.com/tech/2021/05/13/brave-integrates-crypto-blockchain-domains-expanding-access-to-web-30/" target="_blank" rel="noreferrer noopener">privacy</a>.



On Web2 platforms, if a user looks at ads, the company often pockets the ensuing revenue. But with the introduction of moons on Reddit, the user credited for bringing eyeballs onto the screen would earn money, they said.



“It&#8217;s a revenue sharing scheme…I hope it will expand and other platforms will use a similar setup,” they said.&nbsp;



No_Scientist_7094 said that the emerging ecosystem could also be used as pocket money, though they personally had yet to sell any of their tokens — and were not looking to do so for a long time.&nbsp;



“I just tip some here and there and use it to vote on new proposals,” they said.



<h3>Reddit&#8217;s r/Cryptocurrency succeeding where rivals failed  </h3>



The Reddit user <a href="https://www.reddit.com/user/Mr_Bob_Ferguson" target="_blank" rel="noreferrer noopener">Mr_Bob_Ferguson</a> told Blockworks that he had contributed to a slew of internet messaging boards, forums and platforms since the 90s. And there had never been an expectation for financial rewards until moons came along.



Despite other subreddits having attempted something along the same lines —&nbsp; and failed (BRICK is a prime example), the reward system has managed to pick up steam.&nbsp;



“Use-cases for moons are slowly building, beyond the initial ‘sub governance voting power,’ through to a new Moonplace.io site, and many are hopeful that Reddit will provide further official integration, such as allowing moons to be used to purchase the popular Reddit Limited Edition Avatars (NFTs) in the future on a marketplace,” he said. 



Companies are also using moons to pay for banner advertising and AMAs (ask me anything) in the sub, he said. “These payments are not insignificant, costing several thousand dollars.”



Moons tokens <a href="https://www.coingecko.com/en/coins/moon" target="_blank" rel="noreferrer noopener">currently</a> have a market cap sitting around $15 million, and Mr_Bob_Ferguson remains optimistic on the potential for the cryptocurrency to continue on its upward trajectory. 



<h2>One downside: ‘moons-farming’</h2>



Although the sentiment around the moons ecosystem has mostly been positive among Reddit community members, users said the token’s introduction also added more fuel to the fire of so-called “moons-farming” behavior.



The practice entails commenting merely for clout’s sake, rather than to contribute to advancing thoughtful discussion contributions.



“The Reddit voting system often doesn’t reward the highest effort content, but instead often low value content that follows a certain narrative,” Mr_Bob_Ferguson said. “For example, after the recent FTX collapse a simple comment of “they should be in jail” would always be rewarded more than a detailed, well thought out, reply.”



Even so, he said, the introduction of moons has upped his own personal engagement on r/Cryptocurrency.



“It is a highly unique way of rewarding users for content,” he said. “It feels as though this type of model may be the future for contributing on social networks.”



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