Old coal plant is now mining bitcoin for a utility company

Old coal plant is now mining bitcoin for a utility company

Enlarge (credit: Aurich Lawson / Getty)

Bitcoin’s massive power consumption is the cryptocurrency’s dirty secret. To mine bitcoin, computers across the globe chew through enough electricity to power a medium size country, somewhere on the order of the Netherlands or Poland depending on the estimate.

In fact, electricity has become such a significant factor that one private equity firm bought an entire power plant to mine bitcoin. The company, Greenidge Generation, said at one point that they could mine one bitcoin for less than $3,000. Even today—at $40,000 per bitcoin, some 30 percent off its peak—the potential for profit is real.

Which is why an investor-owned utility has dropped a containerized data center outside a coal-fired power plant 10 miles north of St. Louis. Ameren, the utility, was struggling to keep the 1,099 MW power plant running profitably when wholesale electricity prices dropped. But it wasn’t well suited to running only when demand was high, so-called peaker duty. Instead, they’re experimenting with running it full-time and using the excess electricity to mine bitcoin.

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#bitcoin, #coal, #cryptocurrencies, #electric-utilities, #fossil-fuels, #policy, #power-plant

Bitcoin outlawed in China as country bans all cryptocurrency transactions

China has cracked down on bitcoin and other cryptocurrencies in a bid to limit capital outflows.

Enlarge / China has cracked down on bitcoin and other cryptocurrencies in a bid to limit capital outflows. (credit: Nuthawut Somsuk/iStock Editorial)

China’s crackdown on cryptocurrencies intensified today, with the country’s central bank announcing that all crypto-related transactions are illegal.

“There are legal risks for individuals and organizations participating in virtual currency and trading activities,” the People’s Bank of China said in a statement jointly issued with nine other government bodies. Even Chinese nationals working overseas weren’t exempt, with the government saying that they, too, would be “investigated according to the law,” according to a report in the Financial Times.

Bitcoin and other cryptocurrencies dropped on the news. Currently, bitcoin was down 4.5 percent at the time of publication, and ethereum was down 7.5 percent.

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#bitcoin, #china, #cryptocurrencies, #economy, #ethereum, #policy, #real-estate

For the love of the loot: Blockchain, the metaverse and gaming’s blind spot

The speed at which gaming has proliferated is matched only by the pace of new buzzwords inundating the ecosystem. Marketers and decision makers, already suffering from FOMO about opportunities within gaming, have latched onto buzzy trends like the applications of blockchain in gaming and the “metaverse” in an effort to get ahead of the trend rather than constantly play catch-up.

The allure is obvious, as the relationship between the blockchain, metaverse, and gaming makes sense. Gaming has always been on the forefront of digital ownership (one can credit gaming platform Steam for normalizing the concept for games, and arguably other media such as movies), and most agreed upon visions of the metaverse rely upon virtual environments common in games with decentralized digital ownership.

Whatever your opinion of either, I believe they both have an interrelated future in gaming. However, the success or relevance of either of these buzzy topics is dependent upon a crucial step that is being skipped at this point.

Let’s start with the example of blockchain and, more specifically, NFTs. Collecting items of varying rarities and often random distribution form some of the core “loops” in many games (i.e. kill monster, get better weapon, kill tougher monster, get even better weapon, etc.), and collecting “skins” (e.g. different outfits/permutation of game character) is one of the most embraced paradigms of micro-transactions in games.

The way NFTs are currently being discussed in relation to gaming are very much in danger of falling into this very trap: Killing the core gameplay loop via a financial fast track.

Now, NFTs are positioned to be a natural fit with various rare items having permanent, trackable, and open value. Recent releases such as “Loot (for Adventurers)” have introduced a novel approach wherein the NFTs are simply descriptions of fantasy-inspired gear and offered in a way that other creators can use them as tools to build worlds around. It’s not hard to imagine a game built around NFT items, à la Loot.

But that’s been done before… kind of. Developers of games with a “loot loop” like the one described above have long had a problem with “farmers”, who acquire game currencies and items to sell to players for real money, against the terms of service of the game. The solution was to implement in-game “auction houses” where players could instead use real money to purchase items from one another.

Unfortunately, this had an unwanted side-effect. As noted by renowned game psychologist Jamie Madigan, our brains are evolved to pay special attention to rewards that are both unexpected and beneficial. When much of the joy in some games comes from an unexpected or randomized reward, being able to easily acquire a known reward with real money robbed the game of what made it fun.

The way NFTs are currently being discussed in relation to gaming are very much in danger of falling into this very trap: Killing the core gameplay loop via a financial fast track. The most extreme examples of this phenomena commit the biggest cardinal sin in gaming — a game that is “pay to win,” where a player with a big bankroll can acquire a material advantage in a competitive game.

Blockchain games such as Axie Infinity have rapidly increased enthusiasm around the concept of “play to earn,” where players can potentially earn money by selling tokenized resources or characters earned within a blockchain game environment. If this sounds like a scenario that can come dangerously close to “pay to win,” that’s because it is.

What is less clear is whether it matters in this context. Does anyone care enough about the core game itself rather than the potential market value of NFTs or earning potential through playing? More fundamentally, if real-world earnings are the point, is it truly a game or just a gamified micro-economy, where “farming” as described above is not an illicit activity, but rather the core game mechanic?

The technology culture around blockchain has elevated solving for very hard problems that very few people care about. The solution (like many problems in tech) involves reevaluation from a more humanist approach. In the case of gaming, there are some fundamental gameplay and game psychology issues to be tackled before these technologies can gain mainstream traction.

We can turn to the metaverse for a related example. Even if you aren’t particularly interested in gaming, you’ve almost certainly heard of the concept after Mark Zuckerberg staked the future of Facebook upon it. For all the excitement, the fundamental issue is that it simply doesn’t exist, and the closest analogs are massive digital game spaces (such as Fortnite) or sandboxes (such as Roblox). Yet, many brands and marketers who haven’t really done the work to understand gaming are trying to fast-track to an opportunity that isn’t likely to materialize for a long time.

Gaming can be seen as the training wheels for the metaverse — the ways we communicate within, navigate, and think about virtual spaces are all based upon mechanics and systems with foundations in gaming. I’d go so far as to predict the first adopters of any “metaverse” will indeed be gamers who have honed these skills and find themselves comfortable within virtual environments.

By now, you might be seeing a pattern: We’re far more interested in the “future” applications of gaming without having much of a perspective on the “now” of gaming. Game scholarship has proliferated since the early aughts due to a recognition of how games were influencing thought in fields ranging from sociology to medicine, and yet the business world hasn’t paid it much attention until recently.

The result is that marketers and decision makers are doing what they do best (chasing the next big thing) without the usual history of why said thing should be big, or what to do with it when they get there. The growth of gaming has yielded an immense opportunity, but the sophistication of the conversations around these possibilities remains stunted, due in part to our misdirected attention.

There is no “pay to win” fast track out of this blind spot. We have to put in the work to win.

#blockchain, #column, #cryptocurrencies, #cryptocurrency, #facebook, #gaming, #loot, #mark-zuckerberg, #metaverse, #nfts, #opinion, #roblox, #startups, #virtual-reality

OpenSea admits incident as top exec is accused of trading NFTs on insider information

The “eBay of NFTs” is running into a scandal as it admits one of its employees traded the crypto digital assets using insider information from the platform.

Yesterday, a top executive at NFT platform OpenSea was accused of front-running sales on the platform, purchasing pieces from NFT collections before they were featured on the homepage of the platform. According to Twitter user @ZuwuTV, the startup’s Head of Product was using secret crypto wallets to buy drops before they listed on the main page of OpenSea, selling them shortly after they were highlighted publicly by OpenSea, and funneling the profits back to his main account. Users linked to a handful of transactions from accounts linked back to the executive on the public blockchain including an NFT drop that was, at the time, actively listed on the front page of the platform.

Today, OpenSea seemed to acknowledge the incident, saying in a blog post that it had “learned that one of our employees purchased items that they knew were set to display on our front page before they appeared there publicly.” The company did not identify the employee but said that they were conducting an “immediate” review of the incident. The startup, which was recently valued at $1.5 billion after raising a $100 million Series B from Andreessen Horowitz, added in the unsigned blog post that this incident was “incredibly disappointing.”

“We’re conducting a thorough review of yesterday’s incident and are committed to doing the right thing for OpenSea users,” OpenSea CEO Devin Finzer said in a tweet.

OpenSea, which did a record $3.4 billion in transaction volume last month, appears not to have had any rules in places preventing employees from using confidential information to buy or sell NFTs on its own platform to its own users. The company detailed that it was now implementing a policy that team members could not buy or sell “from collections or creators while we are featuring or promoting them,” and that they are “prohibited from using confidential information to purchase or sell any NFTs, whether available on the OpenSea platform or not.”

Most NFTs are not generally assumed to be securities, despite little official guidance from the SEC on the crypto asset class. Some in the space have questioned whether different mechanics around buying and selling, alongside ongoing rewards structures may be pushing some NFT sales further into securities territory.

“Many have been enticed by dramatic jumps in the value of new digital assets,” Senate Banking Committee Chairman Sherrod Brown said in a hearing yesterday — as transcribed by The Block — where the relationship between crypto markets and SEC enforcement was discussed. “Some professional investors and celebrities make earning millions look easy. But, as we are reminded time and again, it’s never that simple – and too often, someone’s quick profit comes at the expense of workers and entire communities.”

We’ve reached out to OpenSea for further comment.

#andreessen-horowitz, #blockchains, #ceo, #chairman, #cryptocurrencies, #cryptocurrency, #cryptography, #distributed-computing, #ebay, #ethereum, #executive, #head, #opensea, #tc, #u-s-securities-and-exchange-commission

CryptoPunks creator inks representation deal with major Hollywood talent agency

One of Hollywood’s biggest talent agencies is getting into the NFT game.

Larva Labs, the creator of CryptoPunks, just signed with United Talent Agency (UTA) in a representation deal that will bring one of the earliest and most iconic NFT projects into the entertainment and branding worlds.

“I would say that it is one of the first opportunities for an IP that fully originated in crypto-world to enter a broader entertainment space, and they earned it,” head of UTA Digital Assets Lesley Silverman told The Hollywood Reporter. “They really have hit the zeitgeist in a tremendous way.”

The deal could see CryptoPunks popping up across film, TV, video games and other licensing areas. Larva Labs’ other art projects, Meebits and Autoglyphs, will also be represented by UTA moving forward. The terms of the deal weren’t disclosed.

As speculative investment in NFTs explodes, CryptoPunks remain one of the most recognizable — and valuable — pioneers in the space. Larva Labs launched 10,000 of the individual algorithmically-generated pixelated figures on the Ethereum blockchain back in 2017.

To the untrained eye, and arguably to the trained eye too, CryptoPunks are just little pixelated portraits of different characters, some wearing pirate hats, others in aviator glasses smoking pipes. But to the crypto world, punks are a social signifier, communicating early investment into NFTs, personal style and, importantly, wealth.

The value of CryptoPunks skyrocketed from zero (they were initially given away for free) and now even the least expensive collectible punks run for hundreds of thousands of dollars, with the most valuable selling for millions. In May, a bundle of nine CryptoPunks sold for just under $17 million in an auction run by Christie’s. And last week, even Visa got in the game, spending $150,000 on CryptoPunk #7610, a digital illustration sporting a mohawk and green face makeup.

It’s noteworthy that a traditional talent agency best known for representing A-list celebrities is getting into the NFT game, but it’s not the group’s first time getting its feet wet in the wild world of crypto. Earlier this month, UTA signed a company called Rally that runs a platform that helps creators issue branded social tokens that fans can spend on merch and exclusive content.

#blockchain, #blockchains, #christies, #cryptocurrencies, #cryptopunks, #ethereum, #larva-labs, #nfts, #tc, #united-talent-agency

Offchain Labs raises $120 million to hide Ethereum’s shortcomings with its Arbitrum product

As the broader crypto world enjoys a late summer surge in enthusiasm, more and more blockchain developers who have taken the plunge are bumping into the blaring scaling issues faced by decentralized apps on the Ethereum blockchain. The popular network has seen its popularity explode in the past year but its transaction volume has stayed frustratingly stable as the network continues to operate near its limits, leading to slower transaction speeds and hefty fees on the crowded chain.

Ethereum’s core developers have been planning out significant upgrades to the blockchain to rectify these issues, but even in the crypto world’s early stages, transitioning the network is a daunting, lengthy task. That’s why developers are looking to so-called Layer 2 rollup scaling solutions, which sit on top of the Ethereum network and handle transactions separately in a cheaper, faster way, while still recording the transactions to the Ethereum blockchain, albeit in batches.

The Layer 2 landscape is early, but crucial to the continued scalability of Ethereum. As a result, there’s been quite a bit of passionate chatter among blockchain developers regarding the early players in the space. Offchain Labs has been developing one particularly hyped rollup network called Arbitrum One, which has built up notable support and momentum since it beta-launched to developers in May, with about 350 teams signing up for access, the company says.

They’ve attracted some high-profile partnerships including Uniswap and Chainlink who have promised early support for the solution. The company has also quickly piqued investor interest. The startup tells TechCrunch it raised a $20 million Series A in April of this year, quickly followed up by a $100 million Series B led by Lightspeed Venture Partners which closed this month and valued the company at $1.2 billion. Other new investors include Polychain Capital, Ribbit Capital, Redpoint Ventures, Pantera Capital, Alameda Research and Mark Cuban.

Offchain Labs co-founders Felton, Goldfeder and Kalodner

It’s been a fairly lengthy ride for the Arbitrum technology to public access. The tech was first developed at Princeton — you can find a YouTube video where the tech is first discussed in earnest back in early 2015.  Longtime Professor Ed Felton and his co-founders CEO Steven Goldfeder and CTO Harry Kalodner detailed a deeper underlying vision in a 2018 research paper before licensing the tech from Princeton and building out the company. Felton previously served as the deputy U.S. chief technology officer in the Obama White House, and — alongside Goldfeder — authored a top textbook on cryptocurrencies.

After a lengthy period under wraps and a few months of limited access, the startup is ready to launch the Arbitrum One mainnet publicly, they tell TechCrunch.

This team’s scaling solution has few direct competitors — a16z-backed Optimism is its most notable rival — but Arbitrum’s biggest advantage is likely the smooth compatibility it boasts with decentralized applications designed to run on Ethereum, compared with competitors that may require more heavy-lifting on the developer’s part to be full compatibility with their rollup solution. That selling point could be a big one as Arbitrum looks to court support across the Ethereum network and crypto exchanges for its product, though most Ethereum developers are well aware of what’s at stake broadly.

“There’s just so much more demand than there is supply on Ethereum,” Goldfeder tells TechCrunch. “Rollups give you the security derived from Ethereum but a much better experience in terms of costs.”

#arbitrum, #articles, #blockchain, #blockchains, #cardano, #chief-technology-officer, #cryptocurrencies, #cryptocurrency, #cto, #decentralization, #ethereum, #joseph-lubin, #lightspeed-venture-partners, #offchain-labs, #pantera-capital, #polychain-capital, #redpoint-ventures, #ribbit-capital, #tc, #technology, #uniswap, #united-states, #white-house

CryptoPunks blasts past $1 billion in lifetime sales as NFT speculation surges

Hello friends, and welcome back to Week in Review! Last week we dove into Bezos’s Blue Origin suing NASA. This week, I’m writing about the unlikely and triumphant resurgence of the NFT market.

If you’re reading this on the TechCrunch site, you can get this in your inbox from the newsletter page, and follow my tweets @lucasmtny.


The big thing

If I could, I would probably write about NFTs in this newsletter every week. I generally stop myself from actually doing so because I try my best to make this newsletter a snapshot of what’s important to the entire consumer tech sector, not just my niche interests. That said, I’m giving myself free rein this week.

The NFT market is just so hilariously bizarre and the culture surrounding the NFT world is so web-native, I can’t read about it enough. But in the past several days, the market for digital art on the blockchain has completely defied reason.

Back in April, I wrote about a platform called CryptoPunks that — at that point — had banked more than $200 million in lifetime sales since 2017. The little pop art pixel portraits have taken on a life of their own since then. It was pretty much unthinkable back then but in the past 24 hours alone, the platform did $141 million in sales, a new record. By the time you read this, the NFT platform will have likely passed a mind-boggling $1.1 billion in transaction volume according to crypto tracker CryptoSlam. With 10,000 of these digital characters, to buy a single one will cost you at least $450,000 worth of the Ethereum cryptocurrency. (When I sent out this newsletter yesterday that number was $300k)

It’s not just CryptoPunks either; the entire NFT world has exploded in the past week, with several billions of dollars flowing into projects with drawings of monkeys, penguins, dinosaurs and generative art this month alone. After the NFT rally earlier this year — culminating in Beeple’s $69 million Christie’s sale — began to taper off, many wrote off the NFT explosion as a bizarre accident. What triggered this recent frenzy?

Part of it has been a resurgence of cryptocurrency prices toward all-time-highs and a desire among the crypto rich to diversify their stratospheric assets without converting their wealth to fiat currencies. Dumping hundreds of millions of dollars into an NFT project with fewer stakeholders than the currencies that underlie them can make a lot of sense to those whose wealth is already over-indexed in crypto. But a lot of this money is likely FOMO dollars from investors who are dumping real cash into NFTs, bolstered by moves like Visa’s purchase this week of their own CryptoPunk.

I think it’s pretty fair to say that this growth is unsustainable, but how much further along this market growth gets before the pace of investment slows or collapses is completely unknown. There are no signs of slowing down for now, something that can be awfully exciting — and dangerous — for investors looking for something wild to drop their money into… and wild this market truly is.

Here’s some advice from Figma CEO Dylan Field who sold his alien CryptoPunk earlier this year for 4,200 Eth (worth $13.6 million today).


Image Credits: Kanye West

Other things

Here are the TechCrunch news stories that especially caught my eye this week:

OnlyFans suspends its porn ban
In a stunning about-face, OnlyFans declared this week that they won’t be banning “sexually explicit content” from their platform after all, saying in a statement that they had “secured assurances necessary to support our diverse creator community and have suspended the planned October 1 policy change.”

Kanye gets into the hardware business
Ahead of the drop of his next album, which will definitely be released at some point, rapper Kanye West has shown off a mobile music hardware device called the Stem Player. The $200 pocket-sized device allows users to mix and alter music that has been loaded onto the device. It was developed in partnership with hardware maker Kano.

Apple settles developer lawsuit
Apple has taken some PR hits in recent years following big and small developers alike complaining about the take-it-or-leave-it terms of the company’s App Store. This week, Apple shared a proposed settlement (which still is pending a judge’s approval) that starts with a $100 million payout and gets more interesting with adjustments to App Store bylines, including the ability of developers to advertise paying for subscriptions directly rather than through the app only.

Twitter starts rolling out ticketed Spaces
Twitter has made a convincing sell for its Clubhouse competitor Spaces, but they’ve also managed to build on the model in recent months, turning its copycat feature into a product that succeeds on its own merits. Its latest effort to allow creators to sell tickets to events is just starting to roll out, the company shared this week.

CA judge strikes down controversial gig economy proposition
Companies like Uber and DoorDash dumped tens of millions of dollars into Prop 22, a law which clawed back a California law that pushed gig economy startups to classify workers as full employees. This week a judge declared the proposition unconstitutional, and though the decision has been stayed on appeal, any adjustment would have major ramifications for those companies’ business in California.


Image of a dollar sign representing the future value of cybersecurity.

Image Credits: guirong hao (opens in a new window) / Getty Images

Extra things

Some of my favorite reads from our Extra Crunch subscription service this week:

Future tech exits have a lot to live up to
“Inflation may or may not prove transitory when it comes to consumer prices, but startup valuations are definitely rising — and noticeably so — in recent quarters. That’s the obvious takeaway from a recent PitchBook report digging into valuation data from a host of startup funding events in the United States…”

OpenSea UX teardown
“…is the experience of creating and selling an NFT on OpenSea actually any good? That’s what UX analyst Peter Ramsey has been trying to answer by creating and selling NFTs on OpenSea for the last few weeks. And the short answer is: It could be much better...

Are B2B SaaS marketers getting it wrong?
“‘Solutions,’ ‘cutting-edge,’ ‘scalable’ and ‘innovative’ are just a sample of the overused jargon lurking around every corner of the techverse, with SaaS marketers the world over seemingly singing from the same hymn book. Sadly for them, new research has proven that such jargon-heavy copy — along with unclear features and benefits — is deterring customers and cutting down conversions…”


Thanks for reading! And again, if you’re reading this on the TechCrunch site, you can get this in your inbox from the newsletter page, and follow my tweets @lucasmtny.

Lucas Matney

#analyst, #app-store, #apple, #bezos, #blockchain, #blockchains, #blue-origin, #california, #ceo, #cryptocurrencies, #cryptocurrency, #cryptography, #distributed-computing, #doordash, #dylan-field, #ethereum, #extra-crunch, #figma, #judge, #kano, #kanye-west, #lucas-matney, #onlyfans, #peter-ramsey, #uber, #united-states

Man robbed of 16 bitcoin hunts down suspects, sues their parents

Man robbed of 16 bitcoin hunts down suspects, sues their parents

Enlarge (credit: KeremYucel / iStock)

Andrew Schober was almost all-in on cryptocurrency. In 2018, 95 percent of his net wealth was invested in the digital tokens, which he hoped he could sell later to buy a home and support his family.

But then disaster struck. Schober had downloaded an app called “Electrum Atom” after clicking a link on Reddit, mistakenly thinking it was a bitcoin wallet. Instead, it was malware that allowed hackers to steal 16.4552 bitcoin when he tried moving some of his tokens. At the time, they were worth nearly $200,000. Today, they would be worth over $750,000.

Distressed, Schober didn’t eat or sleep for days. He vowed to track down the culprits. After years of private investigations costing more than $10,000, Schober thinks he has found the thieves, and he’s suing their parents to get his bitcoin back. Krebs on Security first reported on the lawsuit.

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#bitcoin, #cryptocurrencies, #hack, #malware, #man-in-the-middle-attacks, #policy, #theft

Trading platform Bitpanda raises $263M at a $4.1BN valuation

It’s not even half a year since crypto exchange Bitpanda announced a $170M Series B — when, back in March, Austria’s first unicorn was being valued at $1.2 billion. Today it’s topping that: Announcing a $263M Series C, led by Peter Thiel’s Valar Ventures, with the fintech startup now valued at a whopping $4.1BN — more than 3x its earlier valuation as crypto trading continues cooking on gas.

The round was signed earlier this month, just four months after the business gained unicorn status. Other participating investors include Alan Howard and REDO Ventures, with existing investors LeadBlock Partners and Jump Capital also joining the Series C.

There are a number of exchanges and trading platforms targeted at retail investors, of course, including some big US-based players. But Bitpanda has been making its mark by being Europe-focused, with offices and physical tech hubs located in eight cities across the region, including Vienna, Barcelona, Berlin, Krakow, London, Madrid, Milan, and Paris.

The platform has a further twist in that it lets its ~3 million users easily invest (commission-free) in precious metals (like gold) or in any established stock they fancy — in addition to encouraging individuals to hop aboard the crypto rollercoaster, which was its first focus. (The minimum investment amount set by the platform is €1.)

Despite diversification beyond crypto, a spokeswoman confirmed to us that crypto trading remains “the preferred choice” for Bitpanda’s current users, noting the Stocks trading product is still in beta. “With Bitpanda Stocks, we introduced a new way of investing in stocks and ETFs; it enables investing 24/7, any time, day or night. This is still in a beta phase, we’re adding constantly new assets. That said, stock trading is slowly picking up and increasing its share in overall trading,” she added.

More recently (in June) Bitpanda expanded into the b2b market — with a white label platform offering that lets other fintechs and banks offer trading to their own clients.

This combination of products and regional focus has helped the platform pile on new users in short order: Bitpanda says it’s “on track” to achieve 6x customer growth year over year, with revenues projected to increase sevenfold in 2021 vs the previous year.

The Series C funding will be used for international expansion and growth, per a press release, as well as going on further beefing up headcount (500+ strong at this stage), as well as on gearing up for further scaling of the business.

Tech and product are also set to get juiced with Series C funds.

Commenting in a statement, Eric Demuth, co-founder and CEO, said: “We started Bitpanda in 2014 with a clear vision: To bring investing closer to everyone, everywhere. We wouldn’t be here today without the efforts of our talented team members who are constantly ‘rolling up their sleeves’ to make things happen. We’re grateful to share our journey with these incredible people — and that’s why a key area of focus for us is to keep strengthening our team by bringing onboard world-class talent.We’re also grateful for the vote of confidence received from our investors, old and new, in this investment round. We look forward to working together as we shape the future of finance and grow Bitpanda into the #1 investment platform in Europe
and beyond”.

Bitpanda’s spokeswoman also told us that international expansion and growth are “key priorities”, adding: “We’ll keep building the team, opening new offices, and launching new products as we design for scale and optimise for growth. This also means strengthening Bitpanda’s position in existing markets — such as in the DACH region, Spain, France, Italy, and Poland, and also enter new markets, such as the UK or the markets in Central and Eastern Europe.”

In another supporting statement, Andrew McCormack, founding partner of Valar Ventures, said: “We believed in Bitpanda’s potential from the beginning and we are impressed by the results that Eric, Paul, Christian and the Bitpanda team have achieved. With more than 1.2 million users acquired in the first half of 2021, impressive net revenue growth and world-class executive hires, Bitpanda stands as the living proof that hypergrowth can be achieved in a sustainable way. We’re excited to further work together to bring the world of investing at the fingertips of everyone, anywhere.”

#austria, #bitpanda, #cryptocurrencies, #cryptocurrency, #europe, #finance, #fintech-startup, #fundings-exits, #jump-capital, #peter-thiel, #retail-investors, #startup-company, #tc, #valar-ventures

Regulating crypto is essential to ensuring its global legitimacy

The past decade has seen several structural changes in know your customer (KYC) and anti-money laundering (AML) regulations in Europe and globally. High-profile money laundering cases and the penetration of illicit funds into global markets have caught the attention of regulators and the public, and rightfully so.

The Wirecard scandal was a particularly salacious example, in which the investigation into widespread fraud revealed a chain of shell companies involved in illegal distribution of narcotics and pornography. Over at Danske Bank, some $227 billion was laundered through an Estonian subsidiary, going virtually unnoticed for nine years.

In the United States, the Securities and Exchange Commission filed an action against Ripple Labs and two of its executives, claiming they had raised over $1.3 billion through an unregistered, ongoing digital asset securities offering. That case is ongoing.

Traditional forms of regulation from the fiat world do not reciprocally apply to every aspect of crypto nor to the fundamental nature of blockchain technology.

As regulators and financial institutions improve their understanding of these criminal practices, AML requirements have likewise been improved. But these adjustments have been an overwhelmingly reactive, trial-by-fire process.

To address the challenges of the fast-evolving blockchain ecosystem, the European Union has begun to introduce more stringent financial regulations that further bolster the regulatory system in order to improve licensing models. Many member states now regulate crypto assets individually, and Germany is leading the way in being the first to regulate cryptocurrencies.

These individual regulations clearly prescribe the pathway for crypto companies, outlining the requirements for obtaining and maintaining a financial license from the regulator. Compliance naturally boosts investor confidence and protection.

As these financial crimes and crypto itself evolves, so have regulatory bodies’ efforts to monitor, address and enforce restrictions. Internationally, the most prominent monitoring body is the Financial Action Task Force (FATF), which outlines general guidance and determines best practices in anti-money-laundering practices and combating the financing of terrorism.

Although FATF is considered soft law, the task force sets the bar for workable regulations within crypto assets. Especially notable is FATF’s Recommendation 16, better known as the “travel rule,” which requires businesses to collect and store the personal data of participants in blockchain transactions. In theory, access to this data will enable authorities to have better oversight and enforcement of crypto market regulations. In other words, they’ll know exactly who is doing exactly what. Transparency is key.

The travel rule conundrum

FATF’s travel rule impacts two types of businesses: traditional financial institutions (banks, credit firms and so on) and crypto companies, otherwise known as virtual asset service providers (VASPs).

In its original incarnation, the travel rule only applied to banks, but was expanded to crypto companies in 2019. In 2021, many of the FATF member jurisdictions began to incorporate the travel rule into their local AML laws. This regulatory shift sent shockwaves through the crypto sector. The stakes of refusal are high: Failure to incorporate the travel rule results in a service provider being declared noncompliant, which is a major obstacle to doing business.

But, the travel rule is also a major hindrance that doesn’t take into account the novelty of crypto technology. It is problematic for crypto businesses to integrate due to the major amount of effort it poses when obtaining KYC data about the recipient and integrating it into day-to-day business.

In order for crypto businesses to obtain this information for outgoing payments, data would have to be provided by the client and would end up being virtually impossible to verify. This is highly disruptive to the crypto’s emblematic efficiency. Moreover, its implementation presents challenges regarding the accuracy of the data received by VASPs and banks. Also, it creates further data vulnerabilities due to additional data silos being created across the globe.

When it comes to international standardization measures rather than those isolated within certain communities, there is a wide gap between exclusively on-chain solutions (transactions that are recorded and verified on one specific blockchain) and cross-chain communication, which allows for interactions between different blockchains or for combining on-chain transactions with off-chain transactions that are conducted on other electronic systems, such as PayPal.

We must eventually find a halfway point between those with valid concerns about the anonymity crypto assets provide and those who see regulation as prohibitively restrictive on crypto. Both sides have a point, but crypto’s continued legitimacy and viability within the larger financial markets and industry is a net positive for all parties, making this negotiation nothing short of crucial.

Not anti-regulation, just anti-unworkable regulations

Ultimately, we need to regulate with efficacy, which necessitates legislation that is applicable specifically to digital assets and does not hinder the market without really solving any AML-related problems.

The already global nature of the traditional financial industry underscores the value of and need for FATF’s issuance of an international framework for regulatory oversight within crypto.

The criminal financial trade — money laundering, illegal weapons sales, human trafficking and so on — is also an international business. Thus, cracking down on it is, out of necessity, an international effort.

The decentralized nature of blockchain, which runs contrary to the central-server standard we know and use nearly everywhere, presents a formidable challenge here. Rules and regulations for traditional financial institutions are being implemented part and parcel onto crypto — a misstep and misunderstanding that ignores the innovation and novelty this economic ecosystem and its underlying technology entails.

Traditional forms of regulation from the fiat world do not reciprocally apply to every aspect of crypto nor to the fundamental nature of blockchain technology. However well intentioned they may be, because these imposed regulations are built on an old system, they must be adapted and modified.

The creation of fair restrictions on the technology’s use requires a fundamental understanding and cooperation within the limits and characteristics of those technologies. In traditional financial circles, the topic of blockchain is currently subject to more impassioned rhetoric than genuine understanding.

At the heart of the issue is the fundamental misunderstanding that blockchain transactions are anonymous or untraceable. Blockchain transactions are pseudo-anonymous and, in most circumstances, can offer more traceability and transparency than traditional banking. Illegal activity conducted on the blockchain will always be far more traceable than cash transactions, for example.

Technology with such immense potential should be made accessible, regulated and beneficial for everyone. Blockchain and digital assets are already revolutionizing the way we operate, and regulatory measures need to follow suit. The way forward cannot simply be delivering old-school directives, demanding obedience and doling out unfair punishments. There’s no reason a new way forward isn’t possible.

The end of the outlaw era

Activity can already be monitored through a collective database of users known to abide by international standards. This knowledge of approved users and vendors allows the industry to spot misconduct or malfeasance far sooner than usual, singling out and restricting illegitimate users.

By means of a well-thought-through tweaking of the suggested regulations, a verified network can collectively be built to ensure trust and properly leverage blockchain’s potential, while barring those bad actors intent on corrupting or manipulating the system. That would be a huge step forward in prosecuting international financial crimes and ensuring crypto’s legitimacy globally.

Crypto’s outlaw days are over, but it’s gained an unprecedented level of legitimacy that can only be preserved and bolstered by abiding with regulatory oversight.

That regulatory oversight can’t just be the old way of doing things copy-and-pasted onto blockchain transactions. Instead, it needs to be one that helps fight criminal activity, shores up investor confidence and throws a bone — not a wrench — to the very mechanics that make crypto a desirable financial investment.

#bitcoin, #blockchain, #column, #cryptocurrencies, #cryptocurrency, #europe, #european-union, #finance, #know-your-customer, #money-laundering, #opinion, #policy, #securities-and-exchange-commission, #tc

Hacker is returning $600M in crypto, claiming theft was just “for fun”

Hacker is returning $600M in crypto, claiming theft was just “for fun”

Enlarge (credit: Yuriko Nakao | Getty Images)

The hacker who breached the Poly Network crypto platform says the theft was just “for fun :)” and that the hacker is now returning the stolen coins. The hacker also claimed that the tokens had been transferred to the hacker’s own wallets to “keep it safe.”

Poly Network first disclosed the hack on Tuesday, saying that the hacker, or hackers, had stolen crypto coins worth about $600 million at the time of the heist. The thousands of tokens included $270 million on the Ethereum blockchain, $250 million on the Binance Smart Chain, $84 million on the Polygon network, and a smattering of other smaller coins, like Tether, Shiba Inu, and Matic.

As of 4 am this morning, Poly Network says $342 million has been returned. The remainder, which is apparently all in Ethereum, is being “gradually transferred,” the company said.

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#blockchain, #cryptocurrencies, #cryptocurrency, #hackers, #policy, #theft

Venmo to allow credit cardholders to automatically buy cryptocurrency with their cash back

PayPal-owned Venmo is expanding its support for cryptocurrency with today’s launch of a new feature that will allow users to automatically buy cryptocurrency using the cash back they earned from their Venmo credit card purchases. Unlike when buying cryptocurrency directly, these automated purchases will have no transaction fees associated with them — a feature Venmo says is not a promotion, but how the system will work long term. Instead, a cryptocurrency conversion spread is built into each monthly transaction.

Cardholders will be able to purchase Bitcoin, Ethereum, Litecoin and Bitcoin Cash through the new “Cash Back to Crypto” option, rolling out now to the Venmo app.

Venmo had first introduced the ability for customers to buy, hold and sell cryptocurrency in April of this year, as part of a larger investment in cryptocurrency led by parent company, PayPal. In partnership with Paxos Trust Company, a regulated provider of cryptocurrency products and services, Venmo’s over 70 million users are now able to access cryptocurrency from within the Venmo app. 

The cash back feature, meanwhile, could help drive sign-ups for the Venmo Credit Card, by interlinking it with the cryptocurrency functionality. Currently, Venmo cardholders can earn monthly cash back across eight different spending categories, with up to 3% back on their top eligible spending category, then 2% and 1% back on the second highest and all other purchases, respectively. The top two categories are adjusted monthly, based on where consumers are spending the most.

To enable Cash Back to Crypto, Venmo customers will navigate to the Venmo Credit Card home screen in the app, select the Rewards tab, then “Get Started.” From here, they’ll agree to the terms, select the crypto of their choice, and confirm their selection. Once enabled, when the cash back funds hit the customer’s Venmo balance, the money is immediately used to make a crypto purchase — no interaction on the user’s part is required.

The feature will not include any transaction fees, as a cryptocurrency conversion spread is built into each monthly transaction. This is similar to how PayPal is handling Checkout with Crypto, which allows online shoppers to make purchases using their cryptocurrency. The cryptocurrency is converted to fiat, but there are not transaction fees.

The feature can also be turned on or off at any time, Venmo notes.

The company views Cash Back to Crypto as a way for newcomers to cryptocurrency to enter the market, without having to worry about the process of making crypto purchases. It’s more of a set-it-and-forget-it type of feature. However, unless users make regular and frequent transactions with their Venmo Credit Card, these cash back-enabled crypto purchases will likely be fairly small.

The company has yet to offer details on how many Venmo credit cardholders are active in the market. So far, PayPal CEO Dan Schulman has only said, during Q1 earnings, that the card “is outpacing our expectations for both new accounts and transactions.” This past quarter, the exec noted that the company was also seeing “strong adoption and trading of crypto on Venmo.”

“The introduction of the Cash Back to Crypto feature for the Venmo Credit Card offers customers a new way to start exploring the world of crypto, using their cash back earned each month to automatically and seamlessly purchase one of four cryptocurrencies on Venmo,” noted Darrell Esch, SVP and GM at Venmo, in a statement. “We’re excited to bring this new level of feature interconnectivity on the Venmo platform, linking our Venmo Credit Card and crypto experiences to provide another way for our customers to spend and manage their money with Venmo,” he added.

The new option will begin rolling out starting today to Venmo Credit Cardholders.

#apps, #bitcoin, #credit-card, #crypto, #cryptocurrencies, #cryptocurrency, #digital-currency, #finance, #mobile-payments, #money, #paypal, #venmo

Crypto community slams ‘disastrous’ new amendment to Biden’s big infrastructure bill

Biden’s major bipartisan infrastructure plan struck a rare chord of cooperation between Republicans and Democrats, but changes it proposes to cryptocurrency regulation are tripping up the bill.

The administration intends to pay for $28 billion of its planned infrastructure spending by tightening tax compliance within the historically under-regulated arena of digital currency. That’s why cryptocurrency is popping up in a bill that’s mostly about rebuilding bridges and roads.

The legislation’s vocal critics argue that the bill’s effort to do so is slapdash, particularly a bit that would declare anyone “responsible for and regularly providing any service effectuating transfers of digital assets” to be a broker, subject to tax reporting requirements.

While that definition might be more straightforward in a traditional corner of finance, it could force cryptocurrency developers, companies and even anyone mining digital currencies to somehow collect and report information on users, something that by design isn’t even possible in a decentralized financial system.

Now, a new amendment to the critical spending package is threatening to make matters even worse.

Unintended consequences

In a joint letter about the bill’s text, Square, Coinbase, Ribbit Capital and other stakeholders warned of “financial surveillance” and unintended impacts for cryptocurrency miners and developers. The Electronic Frontier Foundation and Fight for the Future, two privacy-minded digital rights organizations, also slammed the bill.

Following the outcry from the cryptocurrency community, a pair of influential senators proposed an amendment to clarify the new reporting rules. Finance Committee Chairman Ron Wyden (D-OR) pushed back against the bill, proposing an amendment with fellow finance committee member Pat Toomey (R-PA) that would modify the bill’s language.

The amendment would establish that the new reporting “does not apply to individuals developing block chain technology and wallets,” removing some of the bill’s ambiguity on the issue.

“By clarifying the definition of broker, our amendment will ensure non-financial intermediaries like miners, network validators, and other service providers—many of whom don’t even have the personal-identifying information needed to file a 1099 with the IRS—are not subject to the reporting requirements specified in the bipartisan infrastructure package,” Toomey said.

Wyoming Senator Cynthia Lummis also threw her support behind the Toomey and Wyden amendment, as did Colorado Governor Jared Polis.

Picking winners and losers

The drama doesn’t stop there. With negotiations around the bill ongoing — the text could be finalized over the weekend — a pair of senators proposed a competing amendment that isn’t winning any fans in the crypto community.

That amendment, from Sen. Rob Portman (R-OH) and Mark Warner (D-VA), would exempt traditional cryptocurrency miners who participate in energy-intensive “proof of work” systems from new financial reporting requirements, while keeping those rules in place for those using a “proof of stake” system. Portman worked with the Treasury Department to author the cryptocurrency portion of the original infrastructure bill.

Rather than requiring an investment in computing hardware (and energy bills) capable of solving increasingly complex math problems, proof of stake systems rely on participants taking a financial stake in a given project, locking away some of the cryptocurrency to generate new coins.

Proof of stake is emerging as an attractive, climate-friendlier alternative that could reduce the need for heavy computing and huge amounts of energy required for proof of work mining. That makes it all the more puzzling that the latest amendment would specifically let proof of work mining off the hook.

Some popular digital currencies like Cardano are already built on proof of stake. Ethereum, the second biggest cryptocurrency, is in the process of migrating from a proof of work system to proof of stake to help scale its system and reduce fees. Bitcoin is the most notable digital currency that relies on proof of work.

The Warner-Portman amendment is being touted as a “compromise” but it’s not really halfway between the Wyden-Toomey amendment and the existing bill — it just introduces new problems that many crypto advocates view as a fresh existential threat to their work. Prominent members of the crypto community including Square founder and Bitcoin booster Jack Dorsey have thrown their support behind the Wyden-Lummis-Toomey amendment while slamming the second proposal as misguided and damaging.

Unfortunately for the crypto community — and the promise of the proof of stake model — the White House is apparently throwing its weight behind the Warner-Portman amendment, though that could change as eleventh hour negotiations continue.

#biden, #bitcoin, #blockchain, #broker, #cardano, #chairman, #coinbase, #cryptocurrencies, #cryptography, #democrats, #digital-currency, #electronic-frontier-foundation, #energy, #ethereum, #finance, #government, #internal-revenue-service, #jack-dorsey, #proof-of-stake, #proof-of-work, #republicans, #ribbit-capital, #ron-wyden, #tc, #white-house

Cent, the platform that Jack Dorsey used to sell his first tweet as an NFT, raises $3M

Cent was founded in 2017 as an ad-free creator network that allows users to offer each other crypto rewards for good posts and comments — it’s like gifting awards on Reddit, but with Ethereum. But in late 2020, Cent’s small, San Fransisco-based team created Valuables, an NFT market for tweets, and by March, the small blockchain startup was thrown a serendipitous curveball.

“We just wrapped up for the day, and I was about to go eat dinner, and all these people started texting me,” remembers CEO Cameron Hejazi. Then, he realized that Twitter CEO Jack Dorsey had minted Twitter’s first ever Tweet through Cent’s Valuables application. “I was basically like, mildly shivering for the rest of the night. The whole team, we were like, ‘Okay, battle stations, prepare to get hacked!’”

Dorsey ended up selling his NFT for $2.9 million, and he donated the proceeds to Give Directly’s Africa Response fund for COVID-19 relief. But for Cent, it was as if the small company had just been handed a free marketing campaign. Now, about five months later, Cent is announcing a $3 million round of seed funding with investors like Galaxy Interactive, former Disney chairman Jeffrey Katzenberg, Will.I.Am, and Zynga founder Mark Pincus.

On Valuables, anyone on the internet can place an offer on any tweet, which then makes it possible for someone else to make a counter-offer. If the author of the tweet accepts an offer (logging into Valuables requires you to validate your Twitter account), then Cent will mint the tweet on the blockchain and create a 1-of-1 NFT.

The NFT itself contains the text of the tweet, the username of the creator, the time it was minted, and the creator’s digital signature. The NFT also includes a link to the tweet, though the linked content lives outside the blockchain.

There’s nothing proprietary about minting tweets as NFTs — another company could do the same thing that Cent is doing. Even Twitter itself has recently dabbled in giving away free NFT art, though it hasn’t tried to sell actual tweets as NFTs like Cent. Still, Hejazi sees Dorsey’s use of Cent like an endorsement — he thinks it would be difficult for Twitter to shut them down, since Dorsey made $2.9 million on the platform himself. After all, Dorsey chose Cent instead of taking a screenshot of his first tweet, minting the .JPG as an NFT, and posting it on a larger NFT platform, like OpenSea.

“We’ve spoken with people at Twitter. I’m positive that we have a healthy relationship going,” Hejazi said (Twitter declined to comment on or confirm whether that’s true). “We thought about applying this approach to other social platforms, like Instagram and TikTok, but we hypothesized that this is particularly suited for Twitter, because it’s a conversation platform, and it’s where all of the crypto people are actually living.”

With Cent’s seed funding Hejazi hopes to continue building the platform. The company’s goal is to enable anyone creative to make an income through the use of NFTs — that means developing tools to make it simpler for its users to mint NFTs, but also, building out its existing creator-focused social network. The content people post on Cent is usually creative work, like art and writing, rather than short posts — it’s closer to DeviantArt than it is to Reddit. These are lofty goals for a $3 million seed funding round, but there are aspects of Cent’s Beta platform that make it promising.

“There’s already value in what we post on social media. It’s just being proxied through ad dollars, and it doesn’t have to be the case that there’s so much wealth concentration in a single entity. We can work toward a system that decentralizes that wealth,” said Hejazi. “These networks as they exist have monopolies on distribution — you can’t take your Twitter audience, download it as a .CSV, and send them all an email.”

A screenshot of Cent’s social platform.

In addition to independent distribution lists, Hejazi wants to move away from the ad-supported internet. He references Substack as an example of a company where the creator has control of their list, and at the same time, the platform can remain ad-free, since the money that propels it comes from the users who pay to subscribe to newsletters (and also, venture capital helps).

But Cent does something different by allowing users to essentially invest in creators who they think have the potential to take off on their platform.

Users can “seed” a post, which is how you subscribe to a creator participating on the creatives side of Cent’s platform. As the seeder, you pay a set fee of at least one dollar per month. There’s an incentive to support up-and-coming creators on the platform, because seeders get a portion of the creators’ future profit — it’s like making a bet on them that they will continue to make great content in the future. Five percent of profits go toward Cent, but the remaining 95% is split 50/50 between the creator and all of their past seeders. Participating on this platform would allow creators to network and show support for one another, but doesn’t prevent them from more directly monetizing their work on other creator platforms, like Patreon.

In addition to seeding posts, users can also “spot” other people’s posts — Cent’s version of a “like” button. Each “spot” is the equivalent of one cent from the user’s crypto wallet. Cent’s argument is that getting 1,000 likes on a post on other platforms yields nothing but a vague sensation of social clout. But on Cent, if a user gets 1,000 “spots,” that’s $10. Still, a project like this can only work if enough people use the platform.

“When we started Cent, we chose cryptocurrencies because we loved the idea of someone being able to earn money with nothing more than their creativity and a crypto address,” Hejazi said. “Over time, we’ve found it to be limiting as a payment type — very few people actually own it and have it ready to spend. We’re working on ways to make payments to creators using Cent easier, and are exploring both crypto-native and non-crypto options.”

This mindset echoes other NFT startups like Yat, which allows payments via credit card as part of its “progressive decentralization” model. So much of these companies’ success depends on public buy-in toward an eventual decentralized, blockchain-based internet. But until then, companies like Cent will continue to experiment in reimagining how creatives can get paid online.

#apps, #author, #blockchain, #ceo, #chairman, #computing, #cryptocurrencies, #deviantart, #disney, #ethereum, #funding, #jack-dorsey, #jeffrey-katzenberg, #mark-pincus, #operating-systems, #penny, #social-media, #software, #spokesperson, #twitter, #venture-capital, #zynga

The next generation of global payments: Afterpay + Square

Sunday was a big day in fintech: Afterpay has agreed to merge with Square. This agreement sets two of the most admired financial technology companies in recent history on a path to becoming one.

Afterpay and Square have the potential to build one of the world’s most important payments networks. Square has built a very significant merchant payment network, and, via Cash App, a thriving high-growth consumer payment service. However, these two lines of business have historically not been integrated. Together, Square and Afterpay will be able to weave all of these services together into a single integrated experience.

Afterpay and Cash App each have double-digit millions of consumers, and Square’s seller ecosystem and Afterpay’s merchant network both record double-digit billions of payment volume per year. From the offline register and the online checkout flow to sending money in just a few taps, Square and Afterpay will tell a complete story of next-generation economic empowerment.

As Afterpay’s only institutional venture investor, I wanted to share some perspective on how we got here and what this merger means for the future of consumer finance and the payments industry.

Afterpay and Square have the potential to build one of the world’s most important payments networks.

Critical innovations in fintech

Every five to 10 years, the global payments industry undergoes a critical innovation cycle that determines the winners and losers for the next several decades. The last major transition was the shift to NFC-based mobile payments, which I wrote about in 2015. The major mobile OS vendors (Apple and Google) cemented their position in the global payments stack by deftly bridging the needs of the networks (Visa, Mastercard, etc.) and consumers by way of the mobile devices in their pockets.

Afterpay sparked the latest critical innovation cycle. Conceived in a living room in Sydney by a millennial, Nick Molnar, for millennials, Afterpay had a key insight: Millennials don’t like credit.

Millennials came of age during the global mortgage crisis of 2008. As young adults, they watched their friends and family lose their homes by overextending on mortgage debt, bolstering their already lower trust for banks. They also have record levels of student debt. Therefore, it’s no surprise that millennials (and Gen Z right behind them) strongly prefer debit cards over credit cards.

But it’s one thing to recognize the paradigm shift and quite another to do something about it. Nick Molnar and Anthony Eisen did something, ultimately building one of the fastest-growing payments startups in history on their core product: Buy now, pay later … and never any interest.

Afterpay’s product is simple. If you have $100 in your cart and choose to pay with Afterpay, it will charge your bank card (typically a debit card) $25 every two weeks in four installments. No interest, no revolving debt and no fees with on-time payments. For the millennial consumer, this meant they could get the primary benefit of a credit card (the ability to pay later) with their debit card, without the need to worry about all the bad things that come with credit cards — high interest rates and revolving debt.

All upside, no downside. Who could resist? For the early merchants, virtually all of whom relied on millennials as their key growth segment, they got a fair trade: Pay a small fee above payment processing to Afterpay, get significantly higher average order values and conversions to purchase. It was a win-win proposition and, with lots of execution, a new payment network was born.

The rise of Afterpay

Image Credits: Matrix Partners

Imitation is the greatest form of flattery

Afterpay went somewhat unnoticed outside Australia in 2016 and 2017, but once it came to the U.S. in 2018 and built a business there that broke $100 million net revenues in only its second year, it got attention.

Klarna, which had struggled with product-market fit in the U.S., pivoted their business to emulate Afterpay. And Affirm, which had always been about traditional credit — generating a significant portion of their revenue from consumer interest — also noticed and introduced their own BNPL offering. Then came PayPal with “Pay in 4,” and just a few weeks ago, there has been news that Apple is expected to enter the space.

Afterpay created a global phenomenon that has now become a category embraced by mainstream players across the industry — a category that is on track to take a meaningful share of global retail payments over the next 10 years.

Afterpay stands apart. It has always been the BNPL leader by virtually every measure, and it has done it by staying true to their customers’ needs. The company is great at understanding the millennial and Gen Z consumer. It’s evident in the voice, tone and lifestyle brand you experience as an Afterpay user, and in the merchant network it continues to build strategically. It’s also evident in the simple fact that it doesn’t try to cross-sell users revolving debt products.

Most importantly, it’s evident in the usage metrics relative to competition. This is a product that people love, use and have come to rely on, all with better, fairer terms than were ever available to them than with traditional consumer credit.

Consumer loyalty and frequency drives powerful network effect, securing the lifetime value of a consumer

Image Credits: Afterpay H1 FY21 results presentation

Square + Afterpay: The perfect fit

I’ve been building payment companies for over 15 years now, initially in the early days of PayPal and more recently as a venture investor at Matrix Partners. I’ve never seen a combination that has such potential to deliver extraordinary value to consumers and merchants. Even more so than eBay + PayPal.

Beyond the clear product and network complementarity, what’s most exciting to me and my partners is the alignment of values and culture. Square and Afterpay share a vision of a future with more opportunity and fewer economic hurdles for all. As they build toward that future together, I’m confident that this combination is a winner. Square and Afterpay together will become the world’s next generation payment provider.

#afterpay, #column, #consumer-finance, #credit-cards, #cryptocurrencies, #debit-card, #finance, #financial-services, #financial-technology, #fintech, #klarna, #ma, #matrix-partners, #mobile-payments, #opinion, #payment-processing, #payments, #square, #startups, #tc

Yat thinks emoji ‘identities’ can be a thing, and it has $20M in sales to back it up

I learned about Yat in April, when a friend sent our group chat a link to a story about how the key emoji sold as an “internet identity” for $425,000. “I hate the universe,” she texted.

Sure, the universe would be better if people with a spare $425,000 spent it on mutual aid or something, but minutes later, we were trying to figure out what this whole Yat thing was all about. And few more minutes later, I spent $5 (in USD, not crypto) to buy ☕👉💩❗, an emoji string that I think tells a moving story about my caffeine dependency and sensitive stomach. I didn’t think I would be writing about this when I made that choice.

Kesha’s Yat URL on Twitter

On the surface, Yat is a platform that lets you buy a URL with emojis in it — even Kesha (y.at/🌈🚀👽), Lil Wayne (y.at/👽🎵), and Disclosure (y.at/😎🎵😎) are using them in their Twitter bios. Like any URL on the internet, Yats can redirect to another website, or they can function like a more eye-catching Linktree. While users could purchase their own domain name that supports emojis and use it instead of a Yat, many people don’t have the technical expertise or time to do so. Instead, they can make one-time purchase from Yat, which owns the Y.at domain, and the company will provide your with your own y.at link for you.

This convenience, however, comes at a premium. Yat uses an algorithm to determine your Yat’s “rhythm score,” its metric for determining how to price your emoji combo based on its rarity. Yats with one or two emojis are so expensive that you have to contact the company directly to buy them, but you can easily find a four- or five-emoji identity that’ll only put you out $4.

Beyond that, CEO Naveen Jain — a Y Combinator alumnus, founder of digital marketing company Sparkart, and angel investor — thinks that Yat is ultimately an internet privacy product. Jain wants people to be able to use their Yats in any way they’re able to use an online identity now, whether that’s to make payments, send messages, host a website, or login to a platform.

“Objectively, it’s a strange norm. You go on the internet, you register accounts with ad-supported platforms, and your username isn’t universal. You have many accounts, many usernames,” Jain said. “And you don’t control them. If an account wants to shut you down, they shut you down. How many stories are there of people trying to email some social network, and they don’t respond because they don’t have to?”

Yat doesn’t plan to fuel itself with ad money, since users pay for the product when they purchase their Yat, whether they get it for $4 or $400,000.

In the long run, Yat’s CEO says the company plans to use blockchain technology as a way to become self-sovereign. Yats would become assets issued on decentralized, distributed databases. Today, there are several projects working to create a decentralized alternative to the current domain name system (DNS), which is managed by internet regulatory authority ICANN.  DNS is how you find things on the internet, but uses a centralized, hierarchical system. A blockchain domain name system would have no central authority, and some believe this could be the foundation of a next-gen web, or “Web 3.0.”

Today, words like “blockchain” and “cryptocurrency” don’t appear on the Yat website. Jain doesn’t think that’s compelling to average consumers — he believes in progressive decentralization, which explains why Yats are currently purchased with dollars, not ethereum.

“Something we think is really funny about the cryptocurrency world is that anyone who’s a part of it spends a lot of time talking about databases,” Jain said. “People don’t care about databases. When’s the last time you went to a website and it said ‘powered by MySQL’?”

Y.at, however, was registered at a traditional internet registrar, not on the blockchain.

“This is laying the foundation — there are certain elements of the vision that are certainly more of a social contract than actual implementation at this point in time,” says Jain. “But this is the vision that we’ve set forth, and we’re working continuously towards that goal.”

Still, until Yat becomes more decentralized, it can’t yet give users the complete control it aspires to. At present, the Terms & Conditions give Yat the authority to terminate or suspend users at its discretion, but the company claims it hasn’t yet booted anyone from the system.

As Yat becomes more decentralized, our terms and conditions won’t be important,” Jain said. “This is the nature of pursuing a progressive decentralization strategy.”

In its “generation zero” phase (an open beta), Yat claims to have sold almost $20 million worth of emoji identities. Now, as the waitlist to get a Yat ends, Yat is posting some rare emoji identities on OpenSea, the NFT marketplace that recently reached a valuation of $1.5 billion.

A still image of a Yat visualizer creation

“For the first time ever, we’re going to be auctioning some Yats on OpenSea, and we’re going to be launching minting of Yats on Ethereum,” Jain said. Before minting Yats as NFTs, users can create a digital art landscape for their Yats through a Visualizer. These features, as well as new emojis in the Yat emoji set, will launch this evening at a virtual event called Yat Horizon.

Yat Creators will now have more rights,” Jain said about the new ability to mint Yats as NFTs. “We are going to continue to pursue progressive decentralization until we achieve our ultimate goal: making Yat the best self-directed, self-sovereign identity system for all.”

Consumers have a demonstrated interest in retaining greater privacy on the internet — data shows that in iOS 14.5, 96% of users opted out of ad tracking. But the decentralization movement hasn’t yet been able to market its privacy advantages to the mainstream. Yat helps solve this problem because even if you don’t understand what blockchain means, you understand that having a personal string of emojis is pretty fun. But, before you spend $425,000 on a single-emoji username, keep in mind that Yat’s vision will only completely materialize with the advent of Web 3.0, and we don’t yet know when or if that will happen.

#apps, #articles, #blockchain, #blockchains, #ceo, #computing, #cryptocurrencies, #decentralization, #emoji, #ethereum, #facebook, #ion, #mysql, #naveen-jain, #online-identity, #opensea, #social-network, #startups, #technology, #twitter

Tenderly raises $15.3M to help Ethereum developers ship decentralized apps faster

Blockchain infrastructure startups are heating up as industry fervor brings more developers and users to a space that still feels extremely young despite a heavy institutional embrace of the crypto space in 2021.

The latest crypto startup to court the attention of venture capitalists is Tenderly, which builds a developer platform for Ethereum devs to monitor and test the smart contracts that power their decentralized apps. Tenderly CEO Andrej Bencic tells TechCrunch his startup has closed a $15.3 million Series A funding round led by Accel with additional participation from existing investors. The Belgrade startup already raised a $3.3 million seed round earlier this year led by Point Nine Capital.

The startup’s aim to date has been ensuring fledgling blockchain developers aren’t left finding out about contract errors when users discover issues and complain, instead allowing users to discover these bugs proactively. While the company’s Visual Debugger is already used by “tens of thousands” of Ethereum developers, Tenderly hopes to continue building out its toolset to help more developers build on Ethereum networks without dealing with the headaches and irregularities that they’ve had to.

“Tenderly, from its inception, has been a solution to one of our own problems,” Bencic tells TechCrunch. “We wanted to make it as easy as possible to observe and extract information from Ethereum and the adjacent networks.”

Bencic hopes the company’s product can help developers get their products out more quickly without compromising on usability.

To date, the majority of Tenderly’s customers have been relatively small startup efforts aiming to tap into the exciting world of blockchain-based computing with a particular focus on decentralized finance. Tenderly itself is a small company with its team of 14 based in Serbia. Bencic says this funding will help the company expand its global footprint and build out engineering and business hires in other geographies.

Climbing cryptocurrency prices have historically aligned pretty closely with developer uptake in the blockchain world so there is some concern that bitcoin and Ethereum’s downward-trending price corrections will lead to less stability in the pipeline of new developers embracing blockchain. That said, volatility is far from unusual to the crypto world and many developers have learned that riding its ebbs and flows is just part of the experience.

“We built most of Tenderly in the bear market, and one thing we saw is that even though you get these concerning prices, people that are excited about the tech are excited about the tech whether the coins are up or down,” Bencic says.

#articles, #blockchain, #blockchains, #cardano, #ceo, #cryptocurrencies, #cryptocurrency, #cryptography, #decentralization, #decentralized-finance, #ethereum, #finance, #joseph-lubin, #point-nine-capital, #smart-contract, #tc, #technology

PayPal’s new ‘super app’ is ready to launch, will also include messaging

PayPal’s plan to morph itself into a “super app” have been given a go for launch. According to PayPal CEO Dan Schulman, speaking to investors during this week’s second-quarter earnings, the initial version of PayPal’s new consumer digital wallet app is now “code complete” and the company is preparing to slowly ramp up. Over the next several months, PayPal expects to be fully ramped in the U.S., with new payment services, financial services, commerce and shopping tools arriving every quarter.

The company has spoken for some time about its “super app” ambitions — a shift in product direction that would make PayPal a U.S.-based version of something like China’s WeChat or Alipay or India’s Paytm. Similar to these apps, PayPal aims to offer a host of consumer services under one roof, beyond just mobile payments.

In previous quarters, PayPal said these new features may include things like enhanced direct deposit, check cashing, budgeting tools, bill pay, crypto support, subscription management, and buy now/pay later functionality. It also said it would integrate commerce, thanks to the mobile shopping tools acquired by way of its $4 billion Honey acquisition from 2019.

So far, PayPal has continued to run Honey as a standalone application, website and browser extension, but the super app could incorporate more of its deal-finding functions, price tracking features, and other benefits.

On Wednesday’s earnings call, Schulman revealed the super app would include a few other features as well, including high-yield savings, early access to direct deposit funds, and messaging functionality outside of peer-to-peer payments — meaning you could chat with family and friends directly through the app’s user interface.

PayPal hadn’t yet announced its plans to include a messaging component until now, but the feature makes sense in terms of how people often combine chat and peer-to-peer payments today. For example, someone may want to make a personal request for the funds instead of just sending an automated request through an app. Or, after receiving payment, a user may want to respond with a “thank you,” or other acknowledgement. Currently, these conversations take place outside of the payment app itself on platforms like iMessage. Now, that could change.

“We think that’s going to drive a lot of engagement on the platform,” said Schulman. “You don’t have to leave the platform to message back and forth.”

With the increased user engagement, the company expects to see a related bump in average revenue per active account.

Schulman also hinted at “additional crypto capabilities,” which were not detailed. However, PayPal earlier this month increased the crypto purchase limit from $20,000 to $100,000 for eligible PayPal customers in the U.S., with no annual purchase limit. The company also this year made it possible for consumers to check out at millions of online businesses using their cryptocurrencies, by first converting the crypto to cash then settling with the merchant in U.S. dollars.

Though the app’s code is now complete, Schulman said the plan is to continue to iterate on the product experience, noting that the initial version will not be “the be-all and end-all.” Instead, the app will see steady releases and new functionality on a quarterly basis.

However, he did say that early on, the new features would include the high-yield savings, improved bill pay with a better user experience and more billers and aggregators, as well as early access to direct deposit, budgeting tools, and the new two-way messaging feature.

To integrate all the new features into the super app, PayPal will undergo a major overhaul of its user interface.

“Obviously, the [user experience] is being redesigned,” Schulman noted. “We’ve got rewards and shopping. We’ve got a whole giving hub around crowdsourcing, giving to charities. And then, obviously, Buy Now, Pay Later will be fully integrated into it…The last time I counted, it was like 25 new capabilities that we’re going to put into the super app,” he said.

The digital wallet app will also be personalized to the end user, so no two apps are the same. This will be done using both A.I. and machine learning capabilities to  “enhance each customer’s experiences and opportunities,” said Schulman.

PayPal delivered an earnings beat in the second quarter with $6.24 billion in revenue, versus the $6.27 billion Wall St. expected, and earnings per share of $1.15 versus the $1.12 expected. Total payment volume from merchant customers also jumped 40% to $311 billion, while analysts had projected $295.2 billion. But the company’s stock slipped due to a lowered outlook for Q3, impacted by eBay’s transition to its own managed payments service.

In addition, PayPal gained 11.4 million net new active accounts in the quarter, to reach 403 million total active accounts.

#apps, #cryptocurrencies, #cryptocurrency, #dan-schulman, #finance, #financial-services, #machine-learning, #mobile, #mobile-payments, #money, #online-payments, #paypal, #peer-to-peer, #united-states

European Investment Fund puts $30M in Fabric Ventures’ new $120M digital assets fund

Despite their rich engineering talent, Blockchain entrepreneurs in the EU often struggle to find backing due to the dearth of large funds and investment expertise in the space. But a big move takes place at an EU level today, as the European Investment Fund makes a significant investment into a blockchain and digital assets venture fund.

Fabric Ventures, a Luxembourg-based VC billed as backing the “Open Economy” has closed $120 million for its 2021 fund, $30 million of which is coming from the European Investment Fund (EIF). Other backers of the new fund include 33 founders, partners, and executives from Ethereum, (Transfer)Wise, PayPal, Square, Google, PayU, Ledger, Raisin, Ebury, PPRO, NEAR, Felix Capital, LocalGlobe, Earlybird, Accelerator Ventures, Aztec Protocol, Raisin, Aragon, Orchid, MySQL, Verifone, OpenOcean, Claret Capital, and more. 

This makes it the first EIF-backed fund mandated to invest in digital assets and blockchain technology.

EIF Chief Executive Alain Godard said:  “We are very pleased to be partnering with Fabric Ventures to bring to the European market this fund specializing in Blockchain technologies… This partnership seeks to address the need [in Europe] and unlock financing opportunities for entrepreneurs active in the field of blockchain technologies – a field of particular strategic importance for the EU and our competitiveness on the global stage.”

The subtext here is that the EIF wants some exposure to these new, decentralized platforms, potentially as a bulwark against the centralized platforms coming out of the US and China.

And yes, while the price of Bitcoin has yo-yo’d, there is now $100 billion invested in the decentralized finance sector and $1.5 billion market in the NFT market. This technology is going nowhere.

Fabric hasn’t just come from nowhere, either. Various Fabric Ventures team members have been involved in Orchestream, the Honeycomb Project at Sun Microsystems, Tideway, RPX, Automic, Yoyo Wallet, and Orchid.

Richard Muirhead is Managing Partner, and is joined by partners Max Mersch and Anil Hansjee. Hansjee becomes General Partner after leaving PayPal’s Venture Fund, which he led for EMEA. The team has experience in token design, market infrastructure, and community governance.

The same team started the Firestartr fund in 2012, backing Tray.io, Verse, Railsbank, Wagestream, Bitstamp, and others.

Muirhead said: “It is now well acknowledged that there is a need for a web that is user-owned and, consequently, more human-centric. There are astonishing people crafting this digital fabric for the benefit of all. We are excited to support those people with our latest fund.”

On a call with TechCrunch Muirhead added: “The thing to note here is that there’s a recognition at European Commission level, that this area is one of geopolitical significance for the EU bloc. On the one hand, you have the ‘wild west’ approach of North America, and, arguably, on the other is the surveillance state of the Chinese Communist Party.”

He said: “The European Commission, I think, believes that there is a third way for the individual, and to use this new wave of technology for the individual. Also for businesses. So we can have networks and marketplaces of individuals sharing their data for their own benefit, and businesses in supply chains sharing data for their own mutual benefits. So that’s the driving view.”

#accelerator-ventures, #articles, #blockchains, #china, #chinese-communist-party, #computing, #cryptocurrencies, #decentralization, #earlybird, #ethereum, #europe, #european-commission, #european-investment-fund, #european-union, #fabric-ventures, #felix-capital, #google, #managing-partner, #mysql, #north-america, #paypal, #railsbank, #rpx, #sun-microsystems, #tc, #technology, #united-states, #verifone, #yoyo-wallet

Shopify allows merchants to sell NFTs directly through their storefronts

Shopify has made it possible for eligible sellers to sell NFTs (non-fungible tokens) via its platform, which opens up a whole new world for e-commerce merchants.

On Monday, the NBA’s Chicago Bulls launched its first-ever NFTs –– including digital artwork of NBA championship rings –– by launching an online store on Shopify. Instead of having to go to an NFT marketplace, Bulls fans can now purchase the digital art directly with the team’s online store using a credit or debit card. In its first day of making them available, the NBA team sold out of the NFTs within just 90 seconds, according to Kaz Nejatian, Shopify’s VP of merchant services.

“You could buy NFTs on credit cards before, but honestly the NFT buying experience outside Shopify isn’t awesome for anyone right now,” he told TechCrunch “That’s why we decided to do this work. Merchants and buyers shouldn’t have to take a course in crypto to buy things they care about.”

It’s also about giving consumers more options to buy NFTs – especially those who are not well-versed in cryptocurrency.

By making it possible for merchants to sell NFTs directly through their Shopify storefronts, the company says it’s creating access for merchants who want to sell NFTs. They will eventually be able to choose which blockchain they’d like to sell on based on their products and customer base since Shopify supports multiple blockchains, Nejatian said.

“By contrast, if merchants want to sell on an NFT marketplace, they need to choose based on the blockchain supported by that marketplace,” he added.

The Chicago Bulls selected the Flow blockchain for their NFTs, for example. But overall, Shopify merchants can today choose from Flow and Ethereum, but soon “will have more choice with other blockchains on Shopify,” according to Nejatian.

The move was also driven by demand from merchants asking for the ability to sell NFTs and the desire to give creators and artists another forum to grow professionally.

“Many creators are already seeing the value of selling NFTs to their fans, but we’re removing some of the friction for themselves and their buyers, allowing them to better monetize their work and their connection to their audience,” he added. “We’re opening up a world where their fans feel meaningful connection to their brands, and where NFTs just increasingly become part of how we buy and sell online.”

#blockchain, #blockchains, #cryptocurrencies, #cryptocurrency, #e-commerce, #ecommerce, #ethereum, #national-basketball-association, #nba, #nfts, #shopify, #technology

Crypto infra startup Fireblocks raises $310M, triples valuation to $2.2B

Fireblocks, an infrastructure provider for digital assets, has raised $310 million in a Series D round of funding that tripled the company’s valuation to $2.2 billion in just over five months.

Sequoia Capital, Stripes and Spark Capital co-led Fireblocks’ latest round, which also included participation from Coatue, DRW VC  and SCB 10X – the venture arm of Thailand’s oldest bank – and Siam Commercial Bank. The latter is the third global bank to invest in Fireblocks in addition to the Bank of New York (BNY) Mellon and SVB Capital. 

In February, the New York-based startup raised $133 million in a Series C round at a $700 million valuation. The latest financing brings Fireblocks’ total raised since its 2018 inception to $489 million. And as for Fireblocks’ valuation boost, the growth correlates with its increase in customers and ARR this year, according to CEO and co-founder Michael Shaulov. 

Since January, Fireblocks has seen its customer base increase to about 500 compared to 150 in January. Its ARR (annual recurring revenue) is also up – by 350% so far in 2021 compared to 2020. Last year, ARR rose by 450% compared to 2019.

“We expect to end the year up 500%,” Shaulov said. “We’ve already adjusted our revenue predictions for 2021 three times.”

Put simply, Fireblocks aims to offer financial institutions an all-in-one platform to run a digital asset business, providing them with infrastructure to store, transfer and issue digital assets. In particular, Fireblocks provides custody to institutional investors and has secured the transfer of over $1 trillion in digital assets over time. 

Fireblocks launched out of stealth mode in June of 2019 and has since opened offices in the United Kingdom, Israel, Hong Kong, Singapore, France and the DACH region. Today, it has over 500 financial institutions as customers – a mix of businesses that already support crypto and digital assets and those that are considering entering the space. Customers include global banks, crypto-native exchanges, lending desks, hedge funds, OTC desks as well as companies such as Revolut, BlockFi, Celsius, PrimeTrust, Galaxy Digital, Genesis Trading, crypto.com and eToro among others. 

Of those 500 institutions, Fireblocks is working with 70 banks that are looking to join the cryptocurrency space, and start platforming their infrastructure, according to Shaulov. Siam Commercial bank, for example, is using the company’s infrastructure to transform into a blockchain-based bank.

“Our platform creates highly secure wallets for cryptocurrencies and digital assets, where institutions can store their funds or their customer funds, and also get security insurance,” he said.

Fireblocks’ issuance and tokenization platform allows for the creation of asset-backed tokens.

“We handle all the security or compliance, all the policies and workflows,” Shaulov said. “Basically all the complicated stuff you need to do as a business when you want to start working with this new technology. So it’s a bit like ‘Shopify for crypto.’ ”

Sequoia Partner Ravi Gupta is naturally bullish on the company, describing Fireblocks as “the leading back-end infrastructure for crypto products.”

“The team has the potential to build a large, enduring business serving crypto-native companies, consumer fintech companies, and traditional financial institutions alike,” he told TechCrunch. “Their growth has been tremendous, and the quality of their product and customer sentiment are remarkable.”

Image Credits: Left to right: Fireblocks co-founders Idan Ofrat, Michael Shaulov and Pavel Berengoltz / Fireblocks

Fireblocks has also started to see businesses outside of what would be identified as fintech or finance show interest in its platform such as e-commerce websites that are looking to create NFTs on the back of their merchandise. 

The Fireblocks platform, Shaulov said, helps spread the expansion of digital asset use cases beyond bitcoin into payments, gaming, NFTs, digital securities and “ultimately allows any business to become a digital asset business.”

What that means is that Fireblocks’ technology can be white labeled for crypto custody offerings, “so that new and established financial institutions can implement direct custody on their own without having to rely on third parties,” the company says.

Shaulov emphasizes Fireblocks’ commitment to staying an independent company after a wave of consolidation in the space. Earlier this year, PayPal announced its plans to acquire Curv, a cryptocurrency startup based in Tel Aviv, Israel. Then in early May, bitcoin-focused Galaxy Digital Holdings Ltd. said it agreed to buy BitGo Inc. for $1.2 billion in cash and stock in the first $1 billion deal in the cryptocurrency industry.

“Consolidation can be painful for clients,” he told TechCrunch. “It’s Important for us that we stay independent and that’s part of the purpose of this round.

The company will also use the funds to increase its engineering and customer success operations, and expand geographically, particularly in the Asia-Pacific region.  

“Fireblocks provides the most secure and flexible platform for a wide range of customer needs,” said Sequoia’s Gupta. “It uses world-class multi-party computation technology to secure digital assets in storage and in transit, and has the most flexible platform with controls for product teams to be able to build on and manage Fireblocks effectively.”

#articles, #asia-pacific, #bank, #bitcoin, #blockchain, #blockfi, #celsius, #coatue, #cryptocurrencies, #cryptocurrency, #curv, #decentralization, #digital-currencies, #etoro, #finance, #financial-technology, #fireblocks, #france, #funding, #fundings-exits, #galaxy-digital, #israel, #money, #new-york, #paypal, #ravi-gupta, #recent-funding, #revolut, #saas, #sequoia, #sequoia-capital, #shopify, #singapore, #spark-capital, #startups, #stripes, #svb-capital, #tel-aviv, #thailand, #united-kingdom, #venture-capital

Sila banks $13M to offer single API for developing financial products, services

Sila announced Monday it raised $13 million in Series A funding for its banking and payment platform that gives software teams tools to build the next generation of financial products and services.

Revolution Ventures led the round and was joined by existing investors Madrona Venture Group, Oregon Venture Fund and Mucker Capital, as well as Wise co-founder Taavet Hinrikus. The funding brings the total investment to date for Portland, Oregon-based Sila to $20 million.

The company was founded in 2018 by Shamir Karkal, Angela Angelovska, Isaac Hines and Alex Lipton to simplify digital payments and storage in a regulatory compliant way and build on blockchain technology. CEO Karkal has a long history in the fintech space, co-founding Simple, an app unifying various accounts into one accessible bank card, in 2009. It was acquired by BBVA in 2014 for $117 million and shuttered earlier this year.

Karkal told TechCrunch that the idea for Sila was born out of frustration while starting another bank. He saw a need for financial application development, but was hindered by a banking system “still stuck in the 20th century.” He thought consumers expected a different level of service, which is why many flock to fintechs.

However, whenever a business tried to connect existing banking systems, fintechs and cryptocurrency innovators, as it built and scale, would always run into technology and compliance issues, Karkal said.

“The problem with working with banks, is that you have to figure out how to integrate with their mainframe,” he added. “In the process, you end up having to also be compliance experts just to be able to do it.”

Whereas it took Karkal three years to get bank processes set up for other companies, it took Sila 18 months. Its banking APIs enable developers to create their own digital wallets, replacing the need to integrate with legacy financial institutions. Sila also has partnerships with fintech platforms, including Plaid, Alloy, Lithic and Arcus to move money, and is backed by Evolve Bank and Trust.

Sila can now get customers up-and-running in six to eight weeks. And unlike competitors that focus almost exclusively on e-commerce, most of Sila’s customers are doing regulated payments within the fintech, insurtech, commercial real estate and cryptocurrency spaces that tend to be more complex from a compliance basis, Karkal said.

Since the company launched its platform, business was building steadily, and took off in the second half of 2020. The company raised a $7.7 million seed round earlier in the year. In the last 12 months, Sila grew its revenue 10 times and customers’ end users grew over 500% in the last seven months.

Sila will use the new funding to increase headcount, target additional partners and expand product features, including its Ethereum MainNet stablecoin issuance and interoperability between FedWire and the Nacha Automated Clearing House network.

“There is a massive wave of fintechs emerging in the U.S., and we have barely scratched the surface,” Karkal said. “Places like India, Africa and Latin America could accelerate at the same time because they are mainly starting from zero. We are here to ‘arm the rebels’ and help those innovators build applications to give all end users a much better financial experience.”

As part of the investment, Clara Sieg, partner at Revolution Ventures, is joining the company’s board. She told TechCrunch she met the company’s co-founders through the Portland ecosystem.

Revolution tends to look at fintech startups from a consumer angle. Recognizing that the problem with building infrastructure meant dealing with banks, the firm set out how to find a company building the pipes to solve it, she said.

In the landscape of fintech, she considers Dwolla to be a competitor to Sila. Last week, the company raised $21 million to continue developing its API that allows companies to build and facilitate fast payments, specifically with a focus on ACH. However, it comes down to actually signing up customers, and that competitive landscape is pretty thin, Sieg added.

“Sila is building an easy way for people to program money and taking a regulatory eye to things,” Sieg said. “When Shamir was building Simple, he could see how challenging it was for incumbents to provide the tools developers need to embed financial services, and this is why we have confidence in his ability to win.”

 

#api, #bbva, #clara-sieg, #cryptocurrencies, #developer, #e-commerce, #finance, #financial-technology, #funding, #madrona-venture-group, #mucker-capital, #oregon-venture-fund, #payments, #plaid, #recent-funding, #revolution-ventures, #saas, #sharmir-karkal, #sila, #startups, #taavet-hinrikus, #tc, #venture-capital

Elon Musk says Tesla will ‘most likely’ accept Bitcoin again when it becomes more eco-friendly

Tesla will ‘most likely’ resume accepting bitcoin as a form of payment once the mining rate for the cryptocurrency reaches 50% renewables, CEO Elon Musk said Wednesday at a virtual panel discussion hosted by the Crypto Council for Innovation, remarks that are in line with statements he made last month on Twitter.

Tesla started accepting bitcoin as a form of payment in February, the same time that the company purchased a historic $1.5 billion in bitcoin – before reneging on its decision just three months later, citing environmental concerns.

Cryptocurrencies get a bad rap for energy usage because they do indeed use up an awful lot of energy, at least many of them do. Bitcoin and Ethereum, the space’s two biggest currencies, use a mechanism called proof-of-work to power their networks and mint new blocks of each currency. The “work” is solving complex cryptographic problems and miners do so by stringing together high-end graphics cards to tackle these problems. Major mining centers have thousands of GPUs running around the clock.

While Ethereum has already committed to transitioning away from proof-of-work to something called proof-of-stake, which vastly reduces energy usage, Bitcoin seems less likely to make this transition. So, becoming “eco-friendly” likely doesn’t mean making any major underlying changes to Bitcoin, but rather shifting what energy sources are powering those mining centers.

While Bitcoin’s global mining network does clearly lean on renewables, it’s pretty difficult to get exact insights on what the spread of renewables usage is given how, ahem, decentralized the grid is. What is clear is that it’s going to take some unprecedented transparency from the global network to even give Musk a starting point here to judge bitcoin’s current or future “eco-friendliness,” and in all likelihood Musk will have a lot of wiggle room to make this decision based on anecdotal data whenever he wants.

Today’s comments come as no surprise: he tweeted in June, “When there’s confirmation of reasonable (~50%) clean energy usage by miners with positive future trend, Tesla will resume allowing Bitcoin transactions.”

His comments do give him plenty of wiggle room, however. “As long as there is a conscious effort to move bitcoin miners toward renewables then Tesla can support that,” he added later in the talk. A large portion of bitcoin mining was done in China, where cheap coal and hydropower made it slightly more economical; but Musk noted that some of these coal plants have been shut down (and a large portion of miners in China have started to migrate abroad, in response to mining crackdowns by the Chinese party).

It should also be noted that his concerns over bitcoin’s environmental impact have caused controversy in the bitcoin community, with some arguing that bitcoin receives an oversized amount of scrutiny relative to its actual energy consumption. Twitter CEO Jack Dorsey, who also participated in the virtual panel, has actually argued that bitcoin can incentivize the transition to renewable energy. A white paper published by the Bitcoin Clean Energy Initiative, a program created by Square, argues that bitcoin mining could make renewables even cheaper and more economically feasible than they are today.

Musk’s comments, as ambiguous as they were, shows he still exerts considerable power over cryptocurrency markets. Bitcoin price fell below $30,000 on Monday, after hitting an all-time high of over $63,000 in April. But after the billionaire founder revealed more details about his and his companies’ holdings at the virtual panel, the price rebounded.

In addition to personal bitcoin holdings and Tesla’s bitcoin holdings, his aerospace company SpaceX also owns bitcoin. Musk added that he also personally owns ether and (of course) dogecoin. The price for all three cryptocurrencies rose after his comments.

#automotive, #bitcoin, #cryptocurrencies, #dogecoin, #elon-musk, #ethereum, #jack-dorsey, #spacex, #tc