David Canellis

This is a segment from the Empire newsletter. To read full editions, <a href="https://blockworks.co/newsletter/empire">subscribe</a>.



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



It used to be that pop culture ran on a 20-year cycle. These days, it’s <a href="https://www.vice.com/en/article/how-the-20-year-trend-cycle-collapsed/">more like 10</a>, or even five.



Crypto is undergoing something very similar, and it’s fast becoming ICOs’ turn.&nbsp;



Seven years ago, a tidal wave of public token sales hit Ethereum, with over <a href="https://www.gemini.com/cryptopedia/initial-coin-offering-explained-ethereum-ico#section-ic-os-receive-increased-regulatory-scrutiny">2,000</a> separate offerings raking in more than $10 billion — almost two-thirds coming in the first three months of 2018 alone.



Here’s one clear sign that initial coin offerings are coming back: Corn’s recent token sale was seven times oversubscribed in the first few hours, so much so they ended up turning away thousands of investors.



Corn is merging two hot narratives from cycles past: public token sales and yield farming. It <a href="https://blog.usecorn.com/corn-the-genesis-of-the-super-yield-network-f52170ffbe84">debuted</a> last year as the “super yield network,” an Ethereum layer-2 on the Arbitrum Orbit stack with a Bitcoin twist.



It’s built to use tokenized wrapped bitcoin, BTCN, as its native asset — to stake, pay gas and otherwise be put to work across its budding DeFi <a href="https://usecorn.com/app?action=earn">ecosystem</a>.



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1600" height="833" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXeBeSmxKVaF5EfuIQoCaM2XSR4xykBC0OuUm66JLkcQNlT3uS9_yZ9Rr6S4nD4WHUeeBkLLYHXb81HYlBuYsDXgljON43Ku8zX7AhTAu-XwjqnzRs2MLtJSM9Kl1vu0_obIcr4I_A.png" alt="" class="wp-image-96486" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXeBeSmxKVaF5EfuIQoCaM2XSR4xykBC0OuUm66JLkcQNlT3uS9_yZ9Rr6S4nD4WHUeeBkLLYHXb81HYlBuYsDXgljON43Ku8zX7AhTAu-XwjqnzRs2MLtJSM9Kl1vu0_obIcr4I_A.png?w=1600 1600w, https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXeBeSmxKVaF5EfuIQoCaM2XSR4xykBC0OuUm66JLkcQNlT3uS9_yZ9Rr6S4nD4WHUeeBkLLYHXb81HYlBuYsDXgljON43Ku8zX7AhTAu-XwjqnzRs2MLtJSM9Kl1vu0_obIcr4I_A.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXeBeSmxKVaF5EfuIQoCaM2XSR4xykBC0OuUm66JLkcQNlT3uS9_yZ9Rr6S4nD4WHUeeBkLLYHXb81HYlBuYsDXgljON43Ku8zX7AhTAu-XwjqnzRs2MLtJSM9Kl1vu0_obIcr4I_A.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXeBeSmxKVaF5EfuIQoCaM2XSR4xykBC0OuUm66JLkcQNlT3uS9_yZ9Rr6S4nD4WHUeeBkLLYHXb81HYlBuYsDXgljON43Ku8zX7AhTAu-XwjqnzRs2MLtJSM9Kl1vu0_obIcr4I_A.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXeBeSmxKVaF5EfuIQoCaM2XSR4xykBC0OuUm66JLkcQNlT3uS9_yZ9Rr6S4nD4WHUeeBkLLYHXb81HYlBuYsDXgljON43Ku8zX7AhTAu-XwjqnzRs2MLtJSM9Kl1vu0_obIcr4I_A.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXeBeSmxKVaF5EfuIQoCaM2XSR4xykBC0OuUm66JLkcQNlT3uS9_yZ9Rr6S4nD4WHUeeBkLLYHXb81HYlBuYsDXgljON43Ku8zX7AhTAu-XwjqnzRs2MLtJSM9Kl1vu0_obIcr4I_A.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXeBeSmxKVaF5EfuIQoCaM2XSR4xykBC0OuUm66JLkcQNlT3uS9_yZ9Rr6S4nD4WHUeeBkLLYHXb81HYlBuYsDXgljON43Ku8zX7AhTAu-XwjqnzRs2MLtJSM9Kl1vu0_obIcr4I_A.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXeBeSmxKVaF5EfuIQoCaM2XSR4xykBC0OuUm66JLkcQNlT3uS9_yZ9Rr6S4nD4WHUeeBkLLYHXb81HYlBuYsDXgljON43Ku8zX7AhTAu-XwjqnzRs2MLtJSM9Kl1vu0_obIcr4I_A.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXeBeSmxKVaF5EfuIQoCaM2XSR4xykBC0OuUm66JLkcQNlT3uS9_yZ9Rr6S4nD4WHUeeBkLLYHXb81HYlBuYsDXgljON43Ku8zX7AhTAu-XwjqnzRs2MLtJSM9Kl1vu0_obIcr4I_A.png?w=80 80w" sizes="auto, (max-width: 1600px) 100vw, 1600px" /><figcaption class="wp-element-caption">You’ve heard of DeFi Summer. How about BTCFi Spring?</figcaption></figure>



Corn’s ICO was conducted through <a href="https://blockworks.co/news/mica-euro-stablecoin-renaissance">MiCA-compliant</a> token sale platform Legion. Nearly 4,300 applicants requested $69 million in allocations, with the team accepting $8.3 million from around 700 investors.&nbsp;



Legion is a merit-based venue for connecting projects with the right capital. All participants (which excludes UK and retail in the US) must first KYC, but the real value add is that users can also connect their crypto wallets, X accounts and GitHub profiles.



This allows projects to prioritize investors who are active in crypto, whether that’s showing up onchain or in code, if they so choose.



“We thought: ‘How do we create something that&#8217;s fair and open for small and big, and how do we get very targeted with our token distribution, so we can be in a place to say we have 1,000 or 2,000 long-term committed investors well before the token goes live?” Chris Spadafora, Corn founder, told me over the weekend.



“That&#8217;s what drove us to go down this path, but it wasn&#8217;t an easy decision and it required a lot of work to kind of coordinate all the different groups.”



<figure class="wp-block-image"><img loading="lazy" decoding="async" width="1382" height="996" src="https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXcKOPSTIwmo_JtLJH_WFH12OLS1O6-0CHxPGvUwd-4GH1XFrReGXJuz8miLHrMK-BSSJ7F_7_PbHE2AfvSO40AUfd7nKVMBe3jizgpMb_AFFIreA9BAJYHwJbk-gKfgs8ge7WwF.png" alt="" class="wp-image-96485" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXcKOPSTIwmo_JtLJH_WFH12OLS1O6-0CHxPGvUwd-4GH1XFrReGXJuz8miLHrMK-BSSJ7F_7_PbHE2AfvSO40AUfd7nKVMBe3jizgpMb_AFFIreA9BAJYHwJbk-gKfgs8ge7WwF.png?w=1382 1382w, https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXcKOPSTIwmo_JtLJH_WFH12OLS1O6-0CHxPGvUwd-4GH1XFrReGXJuz8miLHrMK-BSSJ7F_7_PbHE2AfvSO40AUfd7nKVMBe3jizgpMb_AFFIreA9BAJYHwJbk-gKfgs8ge7WwF.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXcKOPSTIwmo_JtLJH_WFH12OLS1O6-0CHxPGvUwd-4GH1XFrReGXJuz8miLHrMK-BSSJ7F_7_PbHE2AfvSO40AUfd7nKVMBe3jizgpMb_AFFIreA9BAJYHwJbk-gKfgs8ge7WwF.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXcKOPSTIwmo_JtLJH_WFH12OLS1O6-0CHxPGvUwd-4GH1XFrReGXJuz8miLHrMK-BSSJ7F_7_PbHE2AfvSO40AUfd7nKVMBe3jizgpMb_AFFIreA9BAJYHwJbk-gKfgs8ge7WwF.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXcKOPSTIwmo_JtLJH_WFH12OLS1O6-0CHxPGvUwd-4GH1XFrReGXJuz8miLHrMK-BSSJ7F_7_PbHE2AfvSO40AUfd7nKVMBe3jizgpMb_AFFIreA9BAJYHwJbk-gKfgs8ge7WwF.png?w=357 357w, https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXcKOPSTIwmo_JtLJH_WFH12OLS1O6-0CHxPGvUwd-4GH1XFrReGXJuz8miLHrMK-BSSJ7F_7_PbHE2AfvSO40AUfd7nKVMBe3jizgpMb_AFFIreA9BAJYHwJbk-gKfgs8ge7WwF.png?w=362 362w, https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXcKOPSTIwmo_JtLJH_WFH12OLS1O6-0CHxPGvUwd-4GH1XFrReGXJuz8miLHrMK-BSSJ7F_7_PbHE2AfvSO40AUfd7nKVMBe3jizgpMb_AFFIreA9BAJYHwJbk-gKfgs8ge7WwF.png?w=304 304w, https://blockworks-co.imgix.net/wp-content/uploads/2025/01/AD_4nXcKOPSTIwmo_JtLJH_WFH12OLS1O6-0CHxPGvUwd-4GH1XFrReGXJuz8miLHrMK-BSSJ7F_7_PbHE2AfvSO40AUfd7nKVMBe3jizgpMb_AFFIreA9BAJYHwJbk-gKfgs8ge7WwF.png?w=80 80w" sizes="auto, (max-width: 1382px) 100vw, 1382px" /><figcaption class="wp-element-caption">Early Corn users are earning <a href="https://docs.usecorn.com/docs/users/The_Kernel_Season_2/#how-does-the-program-work">points</a> (or Kernals) for keeping crypto within the Butter Network</figcaption></figure>



Those parties included existing Corn backers from its seed and venture rounds last year — venture capital firms Polychain Capital, GSR, Laser Digital and more.



“Anyone that participated in this round went through an identical process,” Spadafora said. “They had to onboard to Legion, they had to apply, and then we had to accept them.”&nbsp;



The kicker, according to Spadafora, is now that all those funds have been onboarded, the next project that wants to launch on Legion has a direct line and access to some of the biggest funds in the world — along with another 10,000 or 100,000 people on Legion that can invest at the same terms.



But if ICOs really are back, there would need to be improvements. ICOs in 2017 and 2018 were often opaque and painfully skewed toward insiders. Corn’s offering meanwhile had no side letters or secret undisclosed deals.&nbsp;



“There was one contract, it was loaded. If you wanted to invest $1,000 or a million dollars, it was the same deal. Take it or get the fuck out of here,” Spadafora said, and that attitude might be just what ICOs needed all along.



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



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Bitcoin

ICO for bitcoin yield farming chain Corn screams we’re so back

Macauley Peterson

A new Ethereum layer-2 rollup, announced Monday, has already attracted $27 million in total value locked (TVL), but there’s a twist: It doesn’t yet exist.



The promised network, Blast, would launch as an optimistic rollup in February 2024, but its backers immediately began soliciting deposits into a smart contract “bridge.”



In the span of half a day, the contract has amassed enough ether (<a href="https://blockworks.co/price/eth">ETH</a>) and dai (<a href="https://blockworks.co/price/dai">DAI</a>) to put it at number 16 in rollup tracker L2Beat’s TVL <a href="https://l2beat.com/scaling/summary">rankings</a>, ahead of established names such as <a href="https://blockworks.co/news/ribbon-finance-governance-approves-aevo-brand-merger">derivatives DEX Aevo</a> and <a href="https://blockworks.co/news/offchain-arbitrum-developers">Arbitrum Nova</a>.



The <a href="https://x.com/Blast_L2/status/1726747087906464024?s=20">announcement</a> touts Blast as “the only Ethereum L2 with native yield for ETH and stablecoins,” meaning it taps into Ethereum staking yield by directing all ETH to <a href="https://blockworks.co/tag/lido">Lido</a> and uses DAI to tap <a href="https://blockworks.co/tag/makerdao">MakerDAO&#8217;s</a> growing US Treasury bill yield through its <a href="https://blockworks.co/news/dai-savings-rate-us">Dai Savings Rate</a> (DSR), currently at 5%.



Blast’s development team, led by pseudonymous <a href="https://blockworks.co/tag/blur">Blur</a> co-founder Pacman, raised $20 million from venture capital firms Paradigm and Standard Crypto, joined by a motley crew of <a href="https://x.com/Blast_L2/status/1726747123952263195?s=20">angel investors</a> and crypto influencers.



Early reaction has focused on the one-way nature of the “bridge” — once you cross you can’t exit until after Blast actually launches and withdrawals are enabled.



Normally, a bridge allows assets to flow both ways. This contract is <a href="https://app.safe.global/settings/setup?safe=eth:0x67CA7Ca75b69711cfd48B44eC3F64E469BaF608C">apparently controlled</a> by a five-key multi-signature wallet. However, of the five addresses, one contains no ether and has no transaction history, and the other four were recently funded by <a href="https://etherscan.io/address/0x62abcf00d56057edcbcd8122dc06ab6a1fa643dd">a single address</a>.



That calls into question the independence of the signing cohort.



According to Pacman, there&#8217;s no need to worry.



&#8220;The Blast Early Access bridge contract does use a multisig, and each signer is a unique contributor to Blast,&#8221; he told Blockworks. &#8220;This is the same security model that other L2s like Optimism, Polygon, and Arbitrum utilize — these L2s are all upgradeable via multisig as well.&#8221;



Blockworks also contacted Paradigm and Standard Crypto for comment.



L2Beat designated the project &#8220;<a href="https://l2beat.com/scaling/summary#upcoming">upcoming</a>&#8221; rather than &#8220;active&#8221; as a result of its current implementation.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Following the recent rise of <a href="https://twitter.com/Blast_L2?ref_src=twsrc%5Etfw">@Blast_L2</a>, we&#39;ve decided to add it to our upcoming projects on our website, despite its whopping $87M TVL. We wanted to explain our decision. To the best of our knowledge, Blast is an upcoming rollup set to launch in Q1 2024 (according to their… <a href="https://t.co/8AG2e0gpAU">pic.twitter.com/8AG2e0gpAU</a>&mdash; L2BEAT 💗 (@l2beat) <a href="https://twitter.com/l2beat/status/1727268906090279209?ref_src=twsrc%5Etfw">November 22, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The use of Lido has drawn the ire of Ethereum community members concerned with centralization risk in staking providers, including Dankrad Feist, who <a href="https://x.com/dankrad/status/1726912734388765067?s=20">called it</a> “a very bad idea” on X.



“ETH and liquid staking derivatives are different assets with different risk profiles (and rewards), and users should have a choice about which one they want to use,” he said.



It should come as no surprise, given that Paradigm is an <a href="https://blockworks.co/news/lido-centralization-debate-ethereum">investor</a> in both Lido and Blur.



Critics also question the use of a multi-level-marketing style referral campaign, which doles out points, of unknown value, to incentivize sending invitations to prospective new users.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Sounds like a textbook ponzi. I’m in. <a href="https://t.co/aDzWD5zrDO">pic.twitter.com/aDzWD5zrDO</a>&mdash; NoSleepJon 💤⏩ (@nosleepjon) <a href="https://twitter.com/nosleepjon/status/1726756844809384403?ref_src=twsrc%5Etfw">November 21, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The site explicitly promises an airdrop based on early access participation. Points earned are <a href="https://x.com/Blast_L2/status/1726747138217144780?s=20">expected</a> to be redeemable in May 2024.



Points systems have increasingly been used as a <a href="https://blockworks.co/news/ether-fan-nfts-incentivize-stakers">growth bootstrapping</a> mechanism by protocol developers — including Pacman’s <a href="https://blockworks.co/news/blur-airdrop-nft-trading">prior marketing of Blur</a> — and are widely seen as a precursor to an airdrop or something else of value.



Updated Nov. 21, 2024 at 12:15 pm ET with comment from Pacman and Nov. 22 at 5:57 am ET with additional context.



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



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Blast

Wannabe L2 Blast bursts onto scene promising high ETH yield — in 3 months

<div id="highlights-block_62c81d1c5cf68" class="highlights">
 <ul>
 <li>The 0xB1 team ran a Twitter account touting itself as “champions of the people of #DeFi”, while working for Celsius</li>
 <li>The fund’s trading strategies “resulted in apparent losses of $390 million when the asset manager returned capital,” according to Arkham Intelligence</li>
 </ul>
 
</div>



If you were paying attention to DeFi in late 2020 and early 2021 you would have likely come across the name 0xB1.



The trader or group of traders ran <a href="https://etherscan.io/address/0xb1adceddb2941033a090dd166a462fe1c2029484" target="_blank" rel="noreferrer noopener">the Ethereum wallet</a> beginning with this prefix, which has sent and received between $1.33 billion and $1.95 billion over its existence, <a href="https://dappradar.com/hub/wallet/eth/0xb1adceddb2941033a090dd166a462fe1c2029484/usage-stats" target="_blank" rel="noreferrer noopener">according to DappRadar</a>.



Yesterday, Jason Stone, CEO of staking software and strategies firm KeyFi, <a href="https://twitter.com/0x_b1/status/1545153652624691200" target="_blank" rel="noreferrer noopener">outed himself</a> as the manager of the wallet’s activities from August 2020 until April 2021, in conjunction with <a href="https://cms.blockworks.co/celsius-accused-of-market-manipulation-by-ex-employee/" target="_blank" rel="noreferrer noopener">a lawsuit</a> filed against Celsius in New York State. He <a href="https://twitter.com/0x_b1/status/1545153656751853572" target="_blank" rel="noreferrer noopener">revealed Thursday, via Twitter</a>, that the 0xb1 address was one of several created to receive Celsius’ customer deposits for he and his team to manage.



In November 2020, a corresponding Twitter persona (going by @0x_b1) was created that quickly garnered a significant following, while making no mention of Celsius, or the source of its capital.



As all Ethereum transactions are public and immutable, the exploits of what was assumed to be a group of skilled proprietary traders — based on the scale and frequency of their on-chain activity — was closely followed. Nick Chong, now with ParaFi Capital, <a href="https://twitter.com/n2ckchong/status/1345640669386219522" target="_blank" rel="noreferrer noopener">called it</a> “by far one of the most interesting Ethereum addresses I’ve seen.”



Despite its notoriety, new research from Arkham Intelligence, shared with Blockworks, concludes that KeyFi lost millions of dollars of Celsius’ customer funds.



&#8220;These trading strategies resulted in apparent losses of $350 million when the asset manager returned capital compared to the value of the crypto assets Celsius originally sent at the time of return,” an Arkham spokesperson told Blockworks via email.



Arkham notes that the account’s fame took off shortly after the relationship with Celsius was put in place: “The DeFi giant soon became a crypto community folk hero.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">1/ Without the people, there is no DeFi. We are champions of the people of <a href="https://twitter.com/hashtag/DeFi?src=hash&amp;ref_src=twsrc%5Etfw">#DeFi</a>, announce opening the 2021 year with a celebratory series of games commemorating the true year of <a href="https://twitter.com/hashtag/DeFi?src=hash&amp;ref_src=twsrc%5Etfw">#DeFi</a>, the year of the Ox, and the year of <a href="https://twitter.com/hashtag/0x_b1?src=hash&amp;ref_src=twsrc%5Etfw">#0x_b1</a>. With gratitude, Let the games begin!&mdash; 0xb1 (@0x_b1) <a href="https://twitter.com/0x_b1/status/1349428654019895303?ref_src=twsrc%5Etfw">January 13, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Starting in August 2020, Celsius began transferring the wallet, run by Stone’s KeFi group, hundreds of millions of dollars.



Based on <a href="https://markets.businessinsider.com/news/stocks/celsius-network-partners-with-chainalysis-to-confirm-audit-of-3-31-billion-in-assets-1029878591?v=1" target="_blank" rel="noreferrer noopener">a December 2020 audit</a> by analytics firm Chainalysis, KeyFi had over 10% of all Celsius&#8217; assets under management as the year came to a close, or roughly $365 million. The company continued to send additional funds in the following months, which were deployed into a wide variety of DeFi strategies, such as using ether as collateral in Compound Finance to borrow stablecoins which were deployed into &#8220;yield farming&#8221; strategies from the <a href="https://harvest.finance/" target="_blank" rel="noreferrer noopener">Harvest Finance</a> DAO.



But the operation’s track record was much rockier than widely assumed, Arkham said, noting that on two occasions — on Thanksgiving Day, November 26, 2020, and in late February 2021 — around 85,000 ether deposited by 0xB1 in Compound Finance were liquidated.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Ultimately, it appears 0xB1 lost $61.19 million of what appears to be Celsius money in liquidations,” the researchers concluded.</blockquote>



The hole in Celsius’ accounts may be much larger when you factor in the interest owed to customers, Arkham added.



“As a result of Celsius&#8217; relationship with 0xB1, Celsius could have inadvertently ended up short of its customers&#8217; deposited assets, let alone the interest it guaranteed them. Furthermore, Celsius&#8217; business model relies on pocketing the spread between its returns and the interest it pays its users. Thus, Celsius users&#8217; account dashboards possibly informed them that they were accumulating crypto rewards that did not actually exist.”



Stone <a href="https://twitter.com/0x_b1/status/1545153669586468867" target="_blank" rel="noreferrer noopener">claims</a> that Celsius owes his firm money and that he “tried for over a year to quietly settle this dispute with Celsius.”



The report details other losses Celsius allegedly incurred through its use of DeFi protocols that ran into difficulties in 2021. Among them, the company lost around $70 million in June 2021 after <a href="https://stakehound.com/blog-post/fireblocks-eth-2-key-management-incident/" target="_blank" rel="noreferrer noopener">a key management mishap</a> by ether staking provider Stakehound and $50 million in December 2021, as a result of an <a href="https://cms.blockworks.co/?s=BadgerDAO" target="_blank" rel="noreferrer noopener">exploit of BadgerDAO</a>.



The report states that “Arkham was not compensated to publish this report, nor did Arkham or its leadership ever have any financial positions in CEL.”



Jason Stone could not be reached for comment. Requests to Celsius for comment have gone unreturned.



This story was updated on July 8, 2022 at 9:40 am ET, to reflect Arkham&#8217;s updated loss estimate for KeyFi&#8217;s activities.



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



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Arkham Intelligence

Celsius Farmed Out Funds to DeFi Degen

Shalini Nagarajan

<div id="highlights-block_62c2a31ff3558" class="highlights">
 <ul>
 <li>Celsius is still blocking customer withdrawals and transfers, three weeks after they were first paused</li>
 <li>In its latest update, Celsius said it’s exploring options and looking to restructure liabilities</li>
 </ul>
 
</div>



Celsius has joined a <a href="https://cms.blockworks.co/crypto-industry-layoffs-may-have-unintended-consequences/" target="_blank" rel="noreferrer noopener">series</a> of cryptocurrency firms to lay off employees as plunging prices and market contagion hits high-profile names.



The troubled cryptocurrency lender has let go of 150 employees, Israeli news outlet <a href="https://www.calcalistech.com/ctechnews/article/syvuxha99" target="_blank" rel="noreferrer noopener">Calcalist</a> reported on Sunday. These include employees in Israel.&nbsp;



Celsius’ latest headcount <a href="https://celsius.network/about-us" target="_blank" rel="noreferrer noopener">update</a>, from April 2021, showed over 200 employees across New Jersey, London, Tel Aviv, Cyprus and Serbia. The Hoboken-headquartered firm’s <a href="https://www.linkedin.com/company/celsiusnetwork/" target="_blank" rel="noreferrer noopener">LinkedIn</a> displays about 650 listed employees.



On the basis of the LinkedIn figure, the reported layoffs would represent a 23% cut to its workforce. Celsius didn’t immediately return Blockworks’ request for comment.



Launched in 2017, Celsius operates similarly to a bank, albeit with more risk and higher yields. The company gathers crypto deposits from customers and loans them to retail and institutional borrowers, as does stressed rivals <a href="https://cms.blockworks.co/voyager-seeks-strategic-alternatives-following-pause-to-withdrawals/" target="_blank" rel="noreferrer noopener">Voyager</a> and <a href="https://cms.blockworks.co/crypto-exchange-ftx-to-acquire-beleaguered-lender-blockfi/" target="_blank" rel="noreferrer noopener">BlockFi</a>. Customers then receive payments from the revenue Celsius gains from its loans. 



The network promises high-yield returns on deposits, as much as 18.6% annually. It claimed to have around $12 billion in assets under management in May and $8 billion in loans processed.&nbsp;



Celsius first sparked fears of a liquidity crisis when it <a href="https://cms.blockworks.co/celsius-lending-platform-suspends-withdrawals-and-transfers/" target="_blank" rel="noreferrer noopener">paused</a> withdrawals and transfers on its platform on June 12. It hasn’t resumed withdrawals more than three weeks later, leaving users <a href="https://twitter.com/SujeevanSegaram/status/1542801436144275458" target="_blank" rel="noreferrer noopener">frustrated</a>.&nbsp;



The firm has reportedly <a href="https://cms.blockworks.co/celsius-clashes-with-lawyers-over-chapter-11-bankruptcy-report/" target="_blank" rel="noreferrer noopener">resisted advice</a> from its own lawyers to file for bankruptcy and is relying on a show of support from users to help it avoid the elaborate process.



Blockworks also learned that Goldman Sachs was looking at helping an institutional investor <a href="https://cms.blockworks.co/goldman-sachs-joins-deep-pocketed-investors-eyeing-crypto-lender-celsius-assets/" target="_blank" rel="noreferrer noopener">raise about $2 billion</a> to acquire Celsius’ distressed assets at a discount.&nbsp;



Celsius’ last update came in a blog on June 30, in which it said the firm was working on stabilizing liquidity and operations.



“We continue to take important steps to preserve and protect assets and explore options available to us,” the firm wrote. “These options include pursuing strategic transactions as well as a restructuring of our liabilities, among other avenues.”



Celsius’ native token CEL is down 80% so far this year, but is up 8.7% in the last month at $0.89 as of Monday at 1:30 am ET, per <a href="https://www.blockworksresearch.com/assets/cel/" target="_blank" rel="noreferrer noopener">Blockworks Research</a> data.



In any case, Celsius finds itself on a growing list of crypto companies to downsize over the past month. 



Coinbase&nbsp;<a href="https://cms.blockworks.co/coinbase-cut-workforce-ceo-wary-of-potential-recession/" target="_blank" rel="noreferrer noopener">cut 1,100</a>&nbsp;staff (about 18% of its team) and&nbsp;<a href="https://cms.blockworks.co/coinbase-latest-crypto-firm-to-cut-costs-amid-market-downturn/" target="_blank" rel="noreferrer noopener">rescinded job offers</a>; BlockFi&nbsp;<a href="https://cms.blockworks.co/cryptocurrency-lender-blockfi-set-to-cut-staff-by-a-fifth/" target="_blank" rel="noreferrer noopener">laid off</a>&nbsp;about 20%; Gemini let go of roughly&nbsp;<a href="https://cms.blockworks.co/gemini-joins-growing-list-of-crypto-exchanges-cutting-staff-amid-downturn/" target="_blank" rel="noreferrer noopener">100 employees</a>; Singapore-based&nbsp;<a href="http://crypto.com/" target="_blank" rel="noreferrer noopener">Crypto.com</a>&nbsp;reduced staff by&nbsp;<a href="https://cms.blockworks.co/crypto-com-cutting-5-of-workforce-amid-digital-asset-downturn/" target="_blank" rel="noreferrer noopener">5%</a>&nbsp;and Singapore-based Vauld&nbsp;<a href="https://cms.blockworks.co/coinbase-backed-vauld-cuts-workforce-by-30-seeks-to-halve-exec-pay/" target="_blank" rel="noreferrer noopener">cut its headcount by 30%</a>.



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



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Celsius

Celsius Lays Off 150 Employees As Withdrawal Freeze Drags: Report

Luke Conway

Yield farming is the process of using decentralized finance (DeFi) to maximize returns. Users lend or borrow crypto on a DeFi platform and earn cryptocurrency in return for their services.



Yield farmers who want to increase their yield output can employ more complex tactics. For example, yield farmers can constantly shift their cryptos between multiple loan platforms to optimize their gains.



<h3 class="wp-block-heading">Quick facts:</h3>



<ul class="wp-block-list"><li>Yield farming is the process of token holders maximizing rewards across various DeFi platforms.</li><li>Yield farmers provide liquidity to various token pairs and earn rewards in cryptocurrencies.</li><li>Top yield farming protocols include Aave, Curve Finance, Uniswap and many others.</li><li>Yield farming can be a risky practice due to price volatility, rug pulls, smart contract hacks and more.</li></ul>



<h2 class="wp-block-heading">How does yield farming work?</h2>



Yield farming allows investors to earn yield by putting coins or tokens in a decentralized application, or dApp. Examples of dApps include crypto wallets, DEXs, decentralized social media and more.



Yield farmers generally use decentralized exchanges (DEXs) to lend, borrow or stake coins to earn interest and speculate on price swings. Yield farming across DeFi is facilitated by smart contracts — pieces of code that automate financial agreements between two or more parties.



<h3 class="wp-block-heading">Types of yield farming:</h3>



<ul class="wp-block-list"><li>Liquidity provider: Users deposit two coins to a DEX to provide trading liquidity. Exchanges charge a small fee to swap the two tokens which is paid to liquidity providers. This fee can sometimes be paid in new liquidity pool (LP) tokens.</li><li>Lending: Coin or token holders can lend crypto to borrowers through a smart contract and earn yield from interest paid on the loan.</li><li>Borrowing: Farmers can use one token as collateral and receive a loan of another. Users can then farm yield with the borrowed coins. This way, the farmer keeps their initial holding, which may increase in value over time, while also earning yield on their borrowed coins.</li><li>Staking: There are two forms of staking in the world of DeFi. The main form is on <a href="https://cms.blockworks.co/proof-of-work-vs-proof-of-stake-whats-the-difference/">proof-of-stake</a> blockchains, where a user is paid interest to pledge their tokens to the network to provide security. The second is to stake LP tokens earned from supplying a DEX with liquidity. This allows users to earn yield twice, as they are paid for supplying liquidity in LP tokens which they can then stake to earn more yield.</li></ul>



<h2 class="wp-block-heading">Calculating yield farming returns</h2>



Expected yield returns are usually annualized. The prospective returns are calculated over the course of a year.



Two often-used measurements are annual percentage rate (APR) and annual percentage yield (APY). APR does not account for compounding — reinvesting gains to generate larger returns — but APY does.



Keep in mind that the two measurements are merely projections and estimations. Even short-term advantages are difficult to forecast with accuracy. Why? Yield farming is a highly competitive, fast-paced industry with rapidly changing incentives.



If a yield farming strategy succeeds for a while, other farmers will flock to take advantage of it, and it will ultimately stop yielding significant returns.



Because APR and APY are outmoded market metrics, DeFi will have to construct its own profit calculations. Weekly or even daily expected returns may make more sense due to DeFi&#8217;s rapid pace.



<h2 class="wp-block-heading">Popular yield farming protocols&nbsp;</h2>



<h3 class="wp-block-heading">Curve Finance</h3>



Curve is the largest DeFi platform in terms of total value locked, with nearly $19 billion on the platform. With its own market-making algorithm, the Curve Finance platform makes greater use of locked funds than any other DeFi platform — a beneficial strategy for both swappers and liquidity suppliers.



Curve provides a large list of stablecoin pools with good APRs that are tied to fiat cash. Curve keeps its APRs high, ranging from 1.9% (for liquid tokens) to 32%. As long as the tokens don&#8217;t lose their peg, stablecoin pools are quite safe. Impermanent loss may be entirely avoided because their costs will not alter drastically in comparison to each other. Curve, like all DEXs, carries the danger of temporary loss and smart contract failure.



Curve also has its own token, CRV, that is used for governance for the Curve DAO. 


[stock_market_widget type=&#8221;accordion&#8221; template=&#8221;chart&#8221; color=&#8221;#5B35D5&#8243; assets=&#8221;CRV-USD&#8221; start_expanded=&#8221;true&#8221; display_currency_symbol=&#8221;true&#8221; api=&#8221;yf&#8221; chart_range=&#8221;1mo&#8221; chart_interval=&#8221;1d&#8221;]



<h3 class="wp-block-heading">Aave</h3>



Aave is one of the most widely used stablecoin yield farming platforms, with over $14 billion in value locked up and a market worth of over $3.4 billion.



Aave also has its own native token, AAVE. This token incentivizes users to use the network by providing benefits such as fee savings and governance voting power.


[stock_market_widget type=&#8221;accordion&#8221; template=&#8221;chart&#8221; color=&#8221;#5B35D5&#8243; assets=&#8221;AAVE-USD&#8221; start_expanded=&#8221;true&#8221; display_currency_symbol=&#8221;true&#8221; api=&#8221;yf&#8221; chart_range=&#8221;1mo&#8221; chart_interval=&#8221;1d&#8221;]



It is common to find liquidity pools working together when it comes to yield farming. The Gemini dollar, which has a deposit APY of 6.98% and a borrow APY of 9.69%, is the highest-earning stablecoin accessible on Aave.&nbsp;



<h3 class="wp-block-heading">Uniswap</h3>



Uniswap is a DEX system that enables token exchanges with no trust. Liquidity providers invest the equivalent of two tokens to create a market. Traders can then trade against the liquidity pool. In return for providing liquidity, liquidity providers get fees from trades that take place in their pool.



Due to its frictionless nature, Uniswap has become one of the most popular platforms for trustless token swaps. This is useful for high-yield agricultural systems. Uniswap also has its own DAO governance token, UNI.


[stock_market_widget type=&#8221;accordion&#8221; template=&#8221;chart&#8221; color=&#8221;#5B35D5&#8243; assets=&#8221;UNI1-USD&#8221; start_expanded=&#8221;true&#8221; display_currency_symbol=&#8221;true&#8221; api=&#8221;yf&#8221; chart_range=&#8221;1mo&#8221; chart_interval=&#8221;1d&#8221;]



<h3 class="wp-block-heading">PancakeSwap</h3>



PancakeSwap works similarly to Uniswap, however, PancakeSwap runs on the Binance Smart Chain (BSC) network rather than on Ethereum. It also includes a few extra gamification-focused features. BSC token exchanges, interest-earning staking pools, non-fungible tokens (NFTs) and even a gambling game in which players guess the future price of Binance Coin (BNB) are all available on PancakeSwap.



PancakeSwap is subject to the same risks as Uniswap, such as temporary loss due to big price fluctuations and smart contract failure. Many of the tokens in PancakeSwap pools have minor market capitalizations, putting them in danger of temporary loss. 



PancakeSwap has its own token called CAKE that can be used on the platform and also used to vote on proposals for the platform. 


[stock_market_widget type=&#8221;accordion&#8221; template=&#8221;chart&#8221; color=&#8221;#5B35D5&#8243; assets=&#8221;CAKE-USD&#8221; start_expanded=&#8221;true&#8221; display_currency_symbol=&#8221;true&#8221; api=&#8221;yf&#8221; chart_range=&#8221;1mo&#8221; chart_interval=&#8221;1d&#8221;]



<h2 class="wp-block-heading">Risks of yield farming</h2>



Yield farming is a complicated process that exposes both borrowers and lenders to financial risk. When markets are turbulent, users face an increased risk of temporary loss and price slippage. Some risks associated with yield farming are as follows:



<h3 class="wp-block-heading">Rug pulls&nbsp;</h3>



Rug Pulls are a form of an exit scam in which a cryptocurrency developer collects investor cash for a project and then abandons it without repaying the funds to the investors. Rug pulls and other exit scams, which yield farmers are particularly vulnerable to, accounted for about 99% of big fraud during the second half of 2020, according to a CipherTrace research <a href="https://ciphertrace.com/2020-year-end-cryptocurrency-crime-and-anti-money-laundering-report/#summary">report</a>.



<h3 class="wp-block-heading">Regulatory risk&nbsp;</h3>



Cryptocurrency regulation is still shrouded in uncertainty. The Securities and Exchange Commission has declared that some digital assets are securities, putting them within its jurisdiction and allowing it to regulate them. State regulators have already <a href="https://cms.blockworks.co/new-york-attorney-general-orders-crypto-lending-platforms-to-halt-operations-in-state/">issued</a> cease and desist orders against centralized crypto lending sites like BlockFi, Celsius and others. DeFi lending and borrowing ecosystems could take a hit if the SEC declares them to be securities.



While this is true, DeFi is designed to be immune to any central authority, including government regulations.



<h3 class="wp-block-heading">Volatility</h3>



Volatility is the degree to which the price of an investment moves in either direction. A volatile investment is one that has a large price swing over a short period of time. While tokens are locked up, their value may drop or rise, and this is a huge risk to yield farmers especially when the crypto markets experience a bear run.



<h4 class="wp-block-heading">What is impermanent loss?</h4>



During periods of high volatility, liquidity providers can experience impermanent loss. This occurs when the price of a token in a liquidity pool changes, subsequently changing the ratio of tokens in the pool to stabilize its total value.



Example:&nbsp;



Alice deposits 1 ETH and 2,620 DAI (US dollar stablecoins: 1 DAI = $1) into a liquidity pool because the value of one ether is $2,620 (at the time of writing). Say the pool only has three other liquidity providers who have each deposited the same amount to the pool, bringing the total value of the pool to 4 ETH and 10,480 DAI, or $20,960.



Each of these liquidity providers is entitled to 25% of the pool&#8217;s funds. If they wanted to withdraw at current prices, they would each receive 1 ETH and 2,620 DAI. But what happens when the price of ETH falls?



If the price of ETH starts to drop, that means traders are selling ETH for DAI. This causes the ratio of the pool to shift so that it is more ETH heavy. Alice’s share of the pool would still be 25%, but she would now have a higher ratio of ETH to DAI. The value of her 25% share of the pool would now be worth less than when she initially deposited her funds because traders were selling their ETH at a lower value than when Alice added liquidity to the pool. 



This is called an impermanent loss because the loss is only realized if the liquidity is withdrawn from the pool. If a liquidity provider decides to keep their funds in the pool, the liquidity value may or may not break even over time. In some cases, the fees earned from providing liquidity can offset impermanent losses. 



Read more: <a href="https://cms.blockworks.co/the-investors-guide-to-navigating-impermanent-loss/">The Investor’s Guide to Navigating Impermanent Loss</a>



<h3 class="wp-block-heading">Smart contract hacks</h3>



Most of the hazards associated with yield farming are related to the smart contracts that underpin them. The security of these contracts is being improved via better code vetting and third-party audits, however, hacks in DeFi are still common.



DeFi users should conduct research and use due diligence prior to using any platform.



<h2 class="wp-block-heading">Frequently asked questions</h2>



<h3 class="wp-block-heading">Is yield farming profitable?</h3>



Yes. However, it depends on how much money and effort you&#8217;re willing to put into yield farming. Although certain high-risk strategies promise substantial returns, they generally require a thorough grasp of DeFi platforms, protocols and complicated investment chains to be most effective.



If you&#8217;re searching for a way to make some passive income without investing a lot of money, try placing some of your cryptocurrencies into a time-tested and trustworthy platform or liquidity pool and seeing how much it earns. After you&#8217;ve formed this foundation and developed confidence, you may move on to other investments or even buy tokens directly.



<h3 class="wp-block-heading">Is yield farming risky?</h3>



Risk farming carries a number of risks that investors should understand before starting. Scams, hacks and losses due to volatility are not uncommon in the DeFi yield farming space. The first step for anyone wishing to use DeFi is to research the most trusted and tested platforms.&nbsp;



<h2 class="wp-block-heading">Further reading</h2>



<a href="https://cms.blockworks.co/interest-rate-swaps-will-be-catalyst-for-new-era-of-defi-says-voltz-ceo/">Interest Rate Swaps Will Be ‘Catalyst for New Era of DeFi,’ Says Voltz CEO</a>



<a href="https://blog.chain.link/defi-2-0-and-liquidity-incentivization/" target="_blank" rel="noreferrer noopener">DeFi 2.0 and Liquidity Incentivization</a>



<a href="https://cms.blockworks.co/celsius-ceo-mashinsky-the-8-8-yield-we-pay-on-stablecoins-is-true-value-of-usd/">Celsius CEO Mashinsky: The 8.8% Yield We Pay on Stablecoins is True Value of USD</a>



Get educated. Check out <a href="https://cms.blockworks.co/proof-of-work-vs-proof-of-stake-whats-the-difference/">Proof-of-Work vs. Proof-of-Stake</a>, <a href="https://cms.blockworks.co/the-investors-guide-to-nfts/">The Investor’s Guide to NFTs</a>, <a href="https://cms.blockworks.co/the-investors-guide-to-defi/">The Investor’s Guide to DeFi</a>, <a href="https://cms.blockworks.co/the-investors-guide-to-the-metaverse/">The Investor’s Guide to the Metaverse</a> or the guide to <a href="https://cms.blockworks.co/what-is-solana-everything-you-need-to-know-about-the-ethereum-rival/">Solana</a>.



This is not an endorsement of any project, and should not be interpreted as investment advice. This Guide is for educational purposes only.

Yield Farming

Newsletter

Blockworks Research