EU Backs $130M Crypto Fund

What you need to know today in crypto and beyond

July 29, 2021

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Today's must-reads

Top Shelf

EU BACKED: London-based venture capital fund Fabric Ventures has closed a $130 million war chest for investing in early-stage blockchain firms. While a fund of this size is something of a rarity for the region, also notable is the first-time, $30 million check from the European Investment Fund – comprised of the European Investment Bank, the European Union and other financial institutions – to invest in digital assets.

BIG-FISH INVESTORS: Paxos, the firm powering PayPal’s crypto service, has received $300 million in Series D funding from a heavyweight list of investors including Bank of America, FTX, Peter Thiel’s Founders Fund and Coinbase Ventures. Oak HC/FT led the capital raise, which the company announced in late April at a valuation of $2.4 billion. Paxos has raised more than $540 million over multiple rounds.

DEFI/TRADFI: Uniswap's growth lead said the decentralized exchange is having low-level talks with PayPal, Robinhood and other fintech darlings, in a deleted video from the EthCC conference in Paris. "We're trying to put Uniswap and the rest of DeFi right there in those applications so that we can bring the dream of open, 100% uptime liquidity to the whole world," Uniswap's Ashleigh Schap said

NEW BILL: A bipartisan infrastructure bill in the U.S. Congress proposes to raise $28 billion from crypto investors by applying new information reporting requirements to exchanges and other parties. According to a draft copy of the bill shared with CoinDesk, any broker that transfers any digital assets would need to file a return under a modified information reporting regime.

–Helene Braun

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Putting the news in perspective

The Takeaway

Cats Clog Ethereum

Ethereum had another hairball, this time called “Stoner Cats.” Sales of the much-anticipated, star-studded animated series with a non-fungible token (NFT) tie-in resulted in losses of 344.6 ETH ($790,000) due to failed transactions at the show's launch on July 27, according to Dune Analytics.

Demand was high for the rare crossover event between crypto and Hollywood, developed by actress Mila Kunis and featuring Ethereum creator Vitalik Buterin alongside a host of comedic legends. Some 10,420 Stoner Cats NFTs sold out at 0.35 ETH (~$785) within 40 minutes.

But many ran into cat-astrophe while minting their Stoner Cat NFTs. The influx of users throttled the Ethereum network and caused the pricing mechanism on the minting contract to present incorrect gas fee estimates.

The high-profile event once again raises age-old questions about the limitations of the Ethereum protocol, as well as newer considerations about the responsibility creators have to their audience.

What went wrong

According to industry publication The Defiant, the majority of users who lost out were likely those who attempted to mint 20 NFTs (the maximum allowed) without manually adjusting the gas limit in Metamask. An influx of buyers temporarily drove Ethereum gas fees to $33.67 (from $9.50), according to analytics firm Defi Prime, meaning those whose bids placed earlier likely didn’t have enough gwei to pay for the entire transaction. Although those transactions failed, the gas was still paid.

“In this case the gas limit wasn’t set high enough to cover all steps in the transaction, so the transaction failed. However it’s not failing until it runs out, so ~100% of allocated gas is actually being used even without the transaction succeeding,” decentralized finance developer 0xWave theorized.

In crypto, the prevailing ideology is that people take responsibility for their actions. If you “ape into” an unaudited project and lose your shirt, that’s on you. In this instance, that mindset is complicated. As many have noted, it’s possible that Stoner Cat developers failed to anticipate the demand for the project and set the minimum gas price too low.

The devs have reportedly blamed MetaMask, a key component of the Ethereum stack. It should be noted the show delayed its NFT launch after technical challenges on Monday.

Another piece of the puzzle is the inbuilt limitations of Ethereum itself. Although it has ambitions to become a global computing platform for anyone to deploy unstoppable code, spiking gas fees and limited throughput have long plagued the second-largest blockchain by market cap.

“As usual, cats clogged Ethereum,” DeFi Prime tweeted, in a nod to the first successful NFT project, CryptoKitties, which infamously caused Ethereum to crawl to a halt in 2017. Back then the cat-themed dapp reportedly prevented 30,000 transactions from being processed.

Transactions were delayed, people complained and Ethereum’s core developers began work on a complete network overhaul, called Ethereum 2.0, which is still in progress. It can’t come soon enough.

“Stoner Cats” is reportedly the first TV show entirely funded by NFTs, or at least the first that mainstream media cares about. It’s unlikely to be the last. The show raised over $8 million on Wednesday by selling NFTs. The production team plans to release a further 3,000 each episode. It’s a model that lets fans share in the wealth created while also giving its creators near-complete creative control.

But there are still bugs to work out. "Stoned Awakening" – the series’ first episode – is set to premiere today. The “Stoner Cat” team said they have “fun stuff to try and make everyone feel good” after Wednesday’s minting meltdown.

–D.K.

Crypto State 2021: Middle East

Even though many countries in the Middle East restrict or outright ban activities related to blockchain technology, the region is having its crypto moment. From Dubai’s first-of-its-kind Bitcoin Fund listing to the Bank of Israel’s trial of a digital shekel, interest is picking up in the region as crypto companies work closely with regulators in the Middle East and North Africa (MENA) to gain some clarity about oversight of digital currencies.

Join us as we jet-set through the Middle East on our #CryptoState2021 virtual tour and explore how different markets are thinking about crypto, their roadblocks and challenges, and crypto’s impact on the region. Register for the Crypto State: Middle East virtual tour on Aug. 11.

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