Confident in the Future: EOS Developers Attempt 10% Buyback Ahead of Major Announcement

EOS developer Block.one is attempting a 10% buyback of its stock.

Earlier this week, it was revealed that EOS developer Block.one is attempting a 10% buyback of its stock, reportedly the second one in less than a year.

It seems that some of the company’s investors are up for a big payday: The earliest backers could expect a hefty 6,567% return on their initial investments, while Michael Novogratz has already managed to secure a much more modest, though still profitable, 123% return.

But why would Block.one buy its shares back in the first place? It appears that the startup’s executives are confident about the future of their network — and a marketed announcement scheduled for June 1 could be one of the reasons.

What is Block.one?

Block.one is a private company known for developing and publishing the EOS.io protocol. It is registered in the Cayman Islands, lead by CEO Daniel Larimer and chief technology officer Brendan Blumer.

EOS.io, in turn, is a blockchain-powered smart contracts protocol for the development, hosting and execution of decentralized applications (DApps). In other words, it’s a decentralized alternative to cloud hosting services.

EOS.io is supported by its native cryptocurrency, EOS, currently the fifth-largest by total market cap. The tokens can be staked for using network resources: As per the project’s white paper, DApp developers can build their product on the top of the EOS.io protocol and make use of the servers, bandwidth and computational power of EOS itself, as those resources are distributed equally among EOS cryptocurrency holders.

The platform was launched in June 2018 as open-source software, with its first testnets and original white paper emerging earlier in 2017.

Notably, Block.one holds the absolute record in terms of funds raised during an initial coin offering (ICO): It has managed to gather around $4.1 billion — or about 7.12 million ether (ETH) — worth of investments for EOS.io after fundraising for nearly a year. The second-biggest campaign of the sort, the messenger Telegram, has raised less than half the amount — i.e., $1.7 billion.

What is the purpose of the new buyback?

Having raised a record-breaking amount of money last year, the EOS.io publisher is now performing a 10% buyback of its shares.

A Block.one spokesperson has confirmed to Cointelegraph that the stock repurchase is “closing,” and hence at the final stage. The company’s representative also said they are unable to reveal the participants.

“Buybacks are a normal activity for many companies,” the spokesperson told Cointelegraph. “Block.one is confident of its growth prospects and industry opportunities. We are pleased with the support from investors, and that they have been able to benefit from, and participate in, the success of our company.”

Notably, this isn’t the first buyback for Block.one. As per Bloomberg, this stock repurchase offer comes “less than a year” after the initial buyback, in which Block.one reportedly aimed to acquire 15% of its outstanding shares at $1,200 each, but gathered a total of 13.8% in the end, which equaled around $300 million.

The new buyback, in turn, values the company at around $2.3 billion, up from about a $40 million valuation in 2017. The repurchase price being offered is reportedly even higher this time, at $1,500 per share — up 6,567% from the original price of $22.50.

Later backers — including PayPal co-founder Peter Thiel, crypto mining hardware billionaire Jihan Wu of Bitmain, as well as hedge fund managers Louis Bacon and Alan Howard, who all bought into Block.one in July 2018 — could also be in for a massive payoff, if they agree to sell.

According to Bloomberg, Bacon and Howard have declined to specify whether they are going to sell their shares, while Thiel is not responding to messages. Cointelegraph has reached out to Bitmain to clarify whether Wu is planning to participate in the buyback but has not heard back as of press time.

Nevertheless, there is at least one confirmed investor who has agreed to participate in the stock repurchase. Novogratz’s crypto merchant bank, Galaxy Digital, accepted the offer and sold shares in Block.one for $71.2 million — securing a 123% return on the initial investment.

In an accompanying press release, Novogratz stressed that “substantial outperformance” from Block.one had contributed to the decision and that his bank will continue to work with the startup. “We continue to work closely with Block.one as a key partner across a number of our business lines, including the Galaxy EOS VC Fund, which invests in companies building on the EOS.IO protocol, and remain excited about the EOS.IO protocol,” the Galaxy Digital CEO said.

Later, Novogratz took to Twitter to reiterate that Galaxy Digital is still a shareholder in Block.one as well as a “large holder of $EOS tokens.” To explain why his crypto merchant bank sold the shares, he stated the following: “Took profit to rebalance our portfolio.” The investment bank had a net loss of $272.7 million in 2018 — evidently due to the bear market — and the recent deal might be an attempt to mitigate those losses.

According to a Blockforce Capital analyst Charlie Smith, the most likely scenario is that Block.one believes it is worth more than the price it is buying back at. In an email to Cointelegraph, Smith wrote:

“By buying back shares from investors, Block.one can clear some names off the cap table and establish more centralized decision making. Even if the investors that sold shares had no say in the direction of Block.one, by clearing them off the cap table, Block.one can focus more on its own interests.”

What is Block.one planning to do with all that money?

Block.one’s total assets, including cash and investments, amounted to $3 billion at the end of February, according to Bloomberg, who reportedly obtained that number from a March 2019 email to the company’s shareholders.

$2.2 billion of this was held as what the company called in its email “liquid fiat assets,” with most of it invested in U.S. government bonds. The letter also reportedly revealed that the company’s crypto portfolio had halved to around $500 million during the crypto winter. However, in a more recent email sent out in May, the company ostensibly said those losses were “more than fully recovered,” given that bitcoin has been on a rally over the previous months.

The new buyback as well as the “few outward signs of progress since the sale of EOS tokens,” as Bloomberg puts it, raise the question: What is Block.one’s plan, and why does the startup need all that money?

“Basically, Block.one raised a massive fortune with the EOS ICO, and most of it just sat there,” Mark D’Aria, founder and CEO of Bitpro Cryptocurrency Consulting, told Cointelegraph. “They used some to fund development of the ecosystem but as the Bloomberg report points out, there was never any need for billions of dollars to create something like EOS.”

Blumer, CTO of Block.one, strongly disagrees with the idea that his company has not largely advanced since the ICO phase, citing an earlier Bloomberg article penned by Alastair Marsh to prove his point. “I guess taking 48% of active Dapp users in market share in its first year is what Alastair interprets as showing ‘Little signs of progress,’” he wrote in the official EOS Telegram group chat, adding:

“Last year’s buyback was to make room for new investors without unnecessarily inflating our balance sheet. This round included highly strategic shareholders such as Peter Thiel, Alan Howard, and Louis Bacon, and was a very positive thing for the company. This year’s buyback positions us for the same, and we also expect it will be another milestone for us.”

According to Blumer, this information, “along with a lot of other material,” was presented to Bloomberg’s Marsh, but “facts were chosen and arranged deceitfully and with poor journalism standards.”

When asked by a Telegram group member to specify why Block.one needs to make room instead of doing equity dilution, Blumer replied:

“Block.one was a VC funded startup and after so much growth it’s prudent to allow liquidity to earlier investors to make room for larger more strategic ones.”

According to Larimer, who also joined the Telegram chat to address investors’ questions regarding the stock repurchase, Block.one couldn’t have chosen to buy EOS tokens instead, because the company cannot own more than 10% of the total supply, which it has already maxed out. “We […] want eos to remain decentralized,” the CEO added. “We keep our non-EOS treasury in a blended portfolio of Crypto and Fiat.”

Is centralization a problem for EOS?

Notably, decentralization might be one of EOS’ weakest spots. In November 2018, its governance model was exposed, as evidence suggesting that some confirmed transactions were reversed surfaced on social media, which puzzled some pundits as well as ordinary crypto enthusiasts.

Around the same time, blockchain-testing company Whiteblock published the results of “the first independent benchmark testing of the EOS software.” The investigation came to several conclusions about EOS, the most bold of which was that “EOS is not a blockchain, rather a distributed homogeneous database management system, a clear distinction in that their transactions are not cryptographically validated.”

Further, in October 2018, allegations arose accusing the platform’s major Block Producers (BPs) — entities that essentially get to “mine” the EOS blockchain after being elected — of “mutual voting” and “collusion,” suggesting that the entire model of governance might be corrupt.

However, full decentralization is not necessarily paramount to the project’s success at this point, D’Aria of Bitpro acknowledged to Cointelegpraph:

“Yes, EOS is unequivocally more centralized than Bitcoin or Ethereum. Decentralization has a tremendous cost in terms of performance and efficiency, and EOS gets around those limitations by simply being less decentralized. It’s not fully centralized, it’s just further down the spectrum than ETH. So then the question becomes, ‘is EOS decentralized enough’? For a lot of use cases, I do believe it is.”

In D’Aria’s view, EOS has a high chance of effectively competing with Ethereum as the main platform for DApps, which seems to be Block.one’s current primary aim. D’Aria opined, “If you asked me whether ETH or EOS would ultimately be more successful 10 years from now, I’d have a really hard time answering that question because they’re both legitimate competitors for that space.”

EOS’ future is looking bright — at least in the eyes of its creators

Notably, Block.one’s leaders appear to be confident about the future of their product. “We sold a product, a place on a snapshot list that could be used by the community to create the highest performance and most used blockchain,” Larimer wrote in the Telegram group chat. “We sold the community tools that enabled them to create $6b in value.”

“If we had not sold our funds on an ongoing basis we would have inflated Ethereum to the moon and then crashed it when exiting,” Blumer also wrote in the chat. “One day btc will probably run on eosio chains.”

Also, Block.one has scheduled an event for June 1, which will take place in Washington, D.C. While the company has not revealed what product might be presented there, the most common prediction is that it could be a social media platform.

Major Swiss Telecoms Firm Swisscom to Distribute Tokenized Artwork

Major Swiss telecommunications firm Swisscom announced its plans to distribute tokenized artwork through its Swisscom TV television network.

Major Swiss telecommunications company Swisscom announced its plans to distribute tokenized artwork through its Swisscom TV television network. The news was reported by Cointelegraph auf Deutsch on May 24.

Per the company’s press release, limited artworks — initially 100 works by 30 artists — from selected artists are exclusively available on the Swisscom TV box through the NOOW app. The app was developed by Swiss tokenization startup Dloop. The works have been chosen by Stefanie Marlene Wenger, who commented in the press release on the development:

“This is about more than creating a virtual gallery; the next step will be to include curated exhibitions on the platform and a close collaboration with galleries.”

Since its launch, NOOW app reportedly allows users to select pieces and buy certified copies, which will be issued in limited numbers. The press release claims that digitization has eroded the value of original art by allowing it to be copied without any quality loss.

As the announcement claims, in the Swisscom system “the owner receives a certificate of authenticity and knows how many copies of a work exist.”  Basel artist Jonas Baumann is also quoted, praising the distribution advantages of digitization:

“NOOW helps me to bring art to the screen. It also offers new creative opportunities to experiment with animated images and offer them to a wider audience.”

As Cointelegraph reported in March, the blockchain-based art registry startup Artory has acquired auction house database Auction Club.

Also, in May last year news broke that American online art auctioneer Paddle8 and The Native, a Swiss tech company, were launching a blockchain-based art authentication service.

Research: ICO Sector Signals Uptick After Crypto Winter

A new report from ICObench claims that the initial coin offerings sector is showing signs of an uptick due to positive investor sentiment.

The initial coin offerings (ICO) sector is showing signs of an uptick due to positive investor sentiment, apparently spurred by the recent crypto market rally. The data was revealed in a new report from token rating platform ICObench, shared with Cointelegraph on May 25.

Providing data as of May 21, the report notes that the success rate of ICOs has increased, ostensibly reflecting a rise in projects’ quality. 85% of total funds raised so far in May reportedly belong to projects with a high (3-3.5) rating — as compared with 68% in April.  

According to ICObench’s data, the number of published projects in May has increased by 157 to hit 5,512 projects, with 287 ongoing ICOs and 140 upcoming token sales expected.

The report notes that data for the total funds raised so far in May has been overwhelmed by the reported $1 billion initial exchange offering (IEO) from cryptocurrency exchange Bitfinex — bringing the total amount of funds raised via token sales this month to roughly $1.075 billion.

As reported, an IEO represents an alternative model of token offering wherein a centralized crypto exchange operates the sales and ostensibly vets both the projects themselves and prospective investors.

Aside from Bitfinex, IEOs from Economi and Poseidon each raised around $10.5 million and 2.4 million respectively, according to the report.  The sum of all funds collected from the top 5 IEOs (excluding Bitfinex) so far this month hit almost $15.5 million.

Bitfinex’s major offering has resulted in May being the month with the highest total funds raised so far in 2019. In ICObench’s historical data — which represents May 2018 through May 21, 2019 — only May and June 2018 saw higher levels of total funds raised via token sales.

In terms of geographical distribution, the Brisitish Virgin Islands took the lead in terms of total funds raised, followed by the Cayman Islands. The United Kingdom contributed the highest number of ICOs — with 9 projects — yet scored only 7th place in terms of total funds.    

In mid-May, Bitfinex unveiled its own native exchange utility token, LEO, for which the exchange had ostensibly raised the $1 billion in a private IEO — removing the need for a public offering. Also this month, together with spin-off Ethfinex, Bitfinex has launched an IEO platform.

The exchange meanwhile continues to challenge court proceedings sparked by the New York Attorney General’s (NYAG) recent accusations against it. The NYAG alleges that the firm lost $850 million in user deposits and had subsequently secretly covered up the shortfall using funds from its sister firm, stablecoin operator Tether.

UK Financial Watchdog Warns Public of Crypto Clone Firm

The FCA has reported that ICAP Crypto is a clone firm borrowing details from ICAP Europe Limited.

The primary financial regulator of the United Kingdom, the Financial Conduct Authority (FCA), warned that ICAP Crypto is a clone firm in a public announcement on May 24.

According to the report, ICAP Crypto is a clone firm of ICAP Europe Limited. Clone firms are a type of scam in which the scammers use information from legitimate firms in an attempt to convince targets that they are genuine.

In this case, ICAP Europe Limited is a legitimate firm that is authorized by the FCA, and its details are being propagated in scams using the similarly-named ICAP Crypto “firm” which is neither authorized nor registered by the FCA.

In 2018, the FCA issued warnings over at least two nominally crypto-related clone firms. The first clone, Fair Oaks Crypto, attempted to confuse targets by claiming to be affiliated with Fair Oaks Capital. The second clone, Good Crypto, ran its scam by misrepresenting some of the registration information of the legitimate firm Arup Corporate Finance as its own.

As previously reported by Cointelegraph, the FCA stated this week that crypto and forex investors in the U.K. were scammed out of over $34 million from 2018–2019. The FCA went on to say that it was contemplating a ban on “high-risk derivative products linked to cryptoassets.”

The FCA also recently accepted three blockchain businesses into its regulatory sandbox. According to the FCA, previous blockchain projects they have approved include:

“… digital identity solutions, platforms which tokenize issuance of financial instruments, and services aimed at facilitating greater access to financial services for vulnerable consumers.”

Two Miners Purportedly Execute 51% Attack on Bitcoin Cash Blockchain

Two miners have purportedly executed a 51% attack on the bitcoin cash blockchain.

Two miners have reportedly executed a 51% attack on the bitcoin cash (BCH) blockchain, according to tweets by Cryptoconomy Podcast host Guy Swann on May 24.

A 51% attack occurs when someone controls the majority of mining power on a Proof-of-Work blockchain network. This means that the majority block verifier can prevent other users from mining and reverse transactions.

While many have assumed that a 51% attack would be carried out with malicious intent, the above case happened as the two mining pools attempted to prevent an unidentified party from taking some coins that — due to a code update — were essentially “up for grabs.”

According to Swann, two miners with majority control of the network — BTC.top and BTC.com — performed the attack in an effort to stop an unknown miner from taking coins that were sent to an “anyone can spend” address following the original hard fork in May 2017.  As per Swann’s tweets:

“When the unknown miner tried to take the coins themselves, http://BTC.TOP  & http://BTC.COM saw & immediately decided to re-org & remove these [transactions] TXs, in favor of their own TXs, spending the same P2SH coins, + many others … So just 2 miners, in secret & w/ no trouble, took it upon themselves to remove 2 blocks w/ another’s TXs, & replace with their own.”

51% attacks have generally been considered an undesirable and unprofitable option to take funds, as it would require a massive amount of computing power, and once a network is considered compromised, users would ostensibly flee.

According to statistics on Coin.Dance, BTC.top and BTC.com control 43% of the bitcoin cash mining pool.

As Cointelegraph reported, the Ethereum Classic (ETC) blockchain experienced a 51% attack in January. Researchers at the crypto exchange Gate.io reportedly found that an attacker had reversed four transactions, resulting in a loss of 54,200 ETC. The exchange promised to compensate the affected users, and advised other trading platforms to block transactions initiated by the attacker’s address.

Telegram Introduces New Programming Language for TON Network

Encrypted instant messaging service Telegram has created a new programming language for its Telegram Open Network.

Privacy-focused encrypted instant messaging service Telegram has created a new programming language for its Telegram Open Network (TON), according to a post on the project’s Telegram channel published on May 23.

The post introduces a new language called Fift that is specifically designed for developing and managing TON blockchain smart contracts, and interacting with the TON Virtual Machine (TVM).

TVM, in its turn, executes smart contract code in the TON blockchain, supporting all operations required to parse incoming messages and persistent data, and to create new messages and modify persistent data. The document provides a brief overview of Fift, including the language’s basics and TON-specific operations, among other issues.

The release follows a recent report, stating that Telegram plans to launch TON in the third quarter of 2019. The TON network will supposedly host decentralized applications, similar to the Ethereum network.

The eventual release of TON has been highly anticipated in the crypto and blockchain communities, as Telegram — which boasts over 200 million users — raised $1.7 billion in two initial coin offerings last year.

Telegram reportedly launched a private beta testing of the TON blockchain to a limited number of global developers in April. While testing did not provide any specific outcomes, two anonymous testers revealed that the TON Blockchain demonstrated an “extremely high transaction speed.”

Also in April, TON partnered with German financial services provider Wirecard to develop new digital financial products.

Montana Passes Bill to Recognize Utility Tokens and Exempt Them From State Securities

Montana Governor Steve Bullock signed a bill exempting utility tokens from state securities earlier in May.

The United States State of Montana has recognized utility tokens and exempted them from state securities by passing a new bill this month. House bill 584, titled “Generally revise laws relating to cryptocurrency,” was signed by the Governor of Montana Steve Bullock on May 8.

Initiated by State Representative Shane Morigeau, the bill had its first reading in February 2019. The Bill has now passed with 33-15, and will come into force on July 1.

The new law defines a utility token as a digital unit that is created, recorded on blockchain, capable of being exchanged without a third party, and issued to enable owners to access a good or service delivered by the issuer “without vesting the holder with any ownership interest or equity interest in the issuer.”

According to the bill, a utility token transaction has to meet a number of requirements, with the purpose of a token being “primarily consumptive,” while using such tokens for speculative or investment purposes is prohibited. In this regard, the legislators explained that utility tokens should be used to provide or receive goods, services or content.

While utility tokens are exempt from state securities law, the issuers of such tokens still have to interact with the securities commissioner, and must file a notice of intent to sell such tokens.

By passing its utility token law, the State of Montana has joined other crypto-friendly states, including Wyoming and Colorado. In January 2019, the State of Wyoming passed a bill recognizing cryptocurrencies as money. Subsequently, the State of Colorado passed cryptocurrency exemptions to its digital token act, enabling licensing requirements for entities operating with digital tokens.

ITIF Releases Guide to Regulating Blockchain for Policymakers

ITIF asks governments to put forth more effort in supporting legitimate blockchain innovation and adoption

The Information Technology & Innovation Foundation (ITIF) released recommendations for policymakers on how to regulate blockchain technology on April 30.

Founded in 2006, ITIF is an independent nonprofit institute that provides policymakers with information, analysis and recommendations for handling new technology. In its new guide, ITIF included an array of proposals for policymakers to better regulate blockchain based on principles like technology neutrality and public-sector adoption.

The guide predicts that blockchain will likely factor into major applications such as cryptocurrencies, shared data services, smart contracts, decentralized marketplaces, authenticity tracking, and digital identity applications.  It also adds that uninformed lawmaking threatens to hamstring development.

Data-use regulations in particular can affect blockchain deployment. For instance, some of the E.U.’s provisions, the guide explains, are inconsistent with the tamper-proof nature of blockchain transactions.

As blockchains are peer-to-peer networks without intermediaries, it is difficult to edit or retroactively change data. It is possible that some users could exploit the technology to store prohibited information, but the report stresses that “current versions of public blockchains are not optimal solutions to storing or sharing illicit or pirated content.”

Generally, ITIF encourages governments to make more effort to support legitimate blockchain innovation and adoption by developing relevant regulations that do not limit blockchain-based applications out-of-hand.

Reflexive measures run the risk of cutting off blockchain development outright.  Earlier this week it came to light that the Indian government is examining a bill that would ban cryptocurrency entirely.  

Coinbase Custody Now Supports Mainnet KIN Tokens

Coinbase Custody announced immediate support for mainnet KIN tokens.

Coinbase Custody announced immediate support for the mainnet iteration of the KIN token today, April 30, 2019.  

As Cointelegraph previously reported, KIN is a cryptocurrency created by Canadian organization Kik Interactive of Kik Messenger fame. The token was originally developed on the Ethereum and Stellar networks and now operates on its own blockchain (a fork of Stellar).

“KIN holders can now benefit from Coinbase Custody’s industry-leading offline storage platform and insurance coverage,” they say.

Coinbase Custody is a custodial service provided by San-Francisco-based platform  Coinbase. Coinbase Custody was first announced on Nov. 16, 2017 and launched on July 2, 2018. As we previously covered, its main goal has been to provide robust security of crypto assets, which according to Coinbase has been institutional investors’ “‘number one’ concern.”

In 2019, Coinbase Custody has continued to expand its capabilities. Coinbase Custody has become directly integrated with the Coinbase over-the-counter (OTC) trading desk, with the intention of speeding up the process of a user accessing offline funds. Coinbase Custody has also begun to move into staking, which Proof-of-Stake (PoS) cryptocurrency networks use to incentivize user activity.

ConsenSys Spinoff Truffle Integrates With Goldmans Sachs-Supported Blockchain: Report

Truffle is integrating with AxCore as it seeks to expand into enterprise-grade solutions, according to a Forbes report.

Truffle is integrating with AxCore, a proprietary blockchain jointly created by Goldman Sachs and JPMorgan-supported Axoni, Forbes reported on April 29.

The ConsenSys spinoff, which makes tools that are widely used by Ethereum developers, has reportedly raised $3 million as it aims to expand into enterprise-grade solutions.

According to the Forbes report, Truffle plans to use the investment to complete a suite of blockchain development tools designed to appeal to enterprise clients.

An estimated 60% of Truffle’s current revenue comes from liaising with startups, larger corporations and governments that want to use its services.  The company’s executives believe the capital will enable it to explore “other revenue-generating opportunities.” Truffle’s founder and CEO, Tim Coulter, told Forbes:

“Enterprise adoption is finally happening because the maturity of our space is finally advancing to a level where enterprises can capitalize.”

Coulter added that the U.S.-based company plans to grow beyond the Ethereum ecosystem and “go where the large, important projects are.”

As reported by Cointelegraph last year, Axoni raised $32 million in a funding round led by Goldman Sachs amid plans to process transactions for the Depository Trust & Clearing Corporation’s Trade Information Warehouse by using distributed ledger technology. DTCC held an active test phase of the technology in November 2018.

Cointelegraph has contacted Truffle for comment but has yet to receive a response as of press time.