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Polkadot reveals ‘initial parachain offerings’ to counter traditional IPOs

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Much of the current blockchain ecosystem has been built around traditional concepts. Therefore, it’s not surprising to see crowdfunding mechanisms tailored specifically for blockchain projects that resemble initial public offerings. 

For example, in 2017, the blockchain space witnessed the rise of initial coin offerings, and while the ICO framework quickly attracted billions of dollars in venture capital, the approach was flawed, as any investor could participate by sending cryptocurrency to a project that had nothing to show for in terms of proof but a website (and sometimes a white paper). Unsurprisingly, many ICOs turned out to be fraudulent, resulting in a boom-and-bust period throughout 2018.

Then, in 2019, the blockchain space saw the development of initial exchange offerings, or IEOs. Spearheaded by Binance crypto exchange, IEOs allow a crypto exchange to raise funds on behalf of new projects seeking capital.

The science behind initial parachain offerings

As the blockchain space continues to mature, another crowdfunding mechanism has come into play. Referred to as an initial parachain offering, or IPO, this framework comes from Web3 Foundation’s flagship project, Polkadot.

Peter Mauric, head of public affairs at Parity Technologies — a blockchain company building the foundations for Web 3.0 — told Cointelegraph that an IPO allows emerging projects to obtain a parachain slot on the Polkadot network.

“Polkadot is a protocol of protocols where the Relay Chain provides layer-zero security and interoperability, and all the parachains attached operate as sovereign layer-one blockchains. We have seen many thousands of exciting projects launch implementations as smart contracts on protocols like Ethereum, and any of those and more will find life as a Polkadot parachain a much more efficient, powerful and optimized developer and user experience.”

It’s important to point out that Polkadot’s entire architecture is based on the concept of parachains, which are independent, cross-communicating blockchain networks. In order for a parachain to be added to Polkadot, it must secure an available parachain slot. However, only a limited number of parachain slots exist. Polkadot’s goal is to have 100 parachain slots available on its network.

Polkadot’s native token, Dot, is also required to bond a parachain to take advantage of the network’s scalability, security, interoperability and governance functionality. Therefore, parachain teams will need to acquire Dot tokens through a permissionless auction process. While teams could buy Dot on the open market, Mauric mentioned that most parachain projects will undergo an IPO to participate in these auctions, allowing teams to accept Dot loans from any Dot holder.

According to Mauric, funds secured through this module would go into an account on the Polkadot Relay Chain. If the project is able to secure enough contributions to win the auction, then the Dot loans will be returned to the contributors at the end of the parachain lease period. If the project is unable to secure enough contributions and the auction is lost, then the Dot loans will be returned to contributors immediately.

How IPOs differ from ICOs and IEOs

IPOs vary in a number of ways from what was previously seen with ICOs and IEOs. The most obvious distinction is the amount of transparency and flexibility investors should gain. For example, unlike the ICO boom where investors would send cryptocurrency to teams that could easily pull the rug, stakeholders are guaranteed to regain access to their Dot at the end of each lease period.

Mauric noted that with an IPO, Dot holders are simply lending their tokens to a team for a period of time in order for them to win a parachain slot. “This is a much safer, fairer arrangement for parachain teams because stakeholders regain access to their Dot at the end of the lease period,” he said.

Terry Rossi, head of investments at Blockchange Ventures — a venture capital firm investing in early-stage blockchain companies — told Cointelegraph that initial parachain offerings are also a better funding model compared to previous frameworks because IPO funds are held in a dedicated account on-chain: “Funds are required to be used for a parachain bond, so the model brings more transparency and accountability to the projects than was possible in prior models, such as ICOs.”

And unlike IEOs where projects have to carefully be vetted by exchanges, Rossi mentioned that IPOs give Dot holders more flexibility and choices. He explains that IPOs allow investors to generate returns from staking, or to use their tokens to get exposure to other exciting parachain projects. “This opens up a wide variety of avenues for Dot holders to help projects get off the ground, diversify their investments,” he commented.

Yet another flawed crowdfunding attempt?

While initial parachain offerings are still early in development, it’s notable that some companies have already announced they will be conducting an IPO. For example, Acala Network, a decentralized finance hub for Polkadot and Kusama, will be one of the first companies to host an IPO to crowdfund Dot and Kusama’s native token, KSM.

Bette Chen, a co-founder of Acala, told Cointelegraph that the company has chosen to do an IPO since it seems to be the ethical way to crowdfund, enabling the distribution of tokens into the “hands of well-intentioned community members.” Chen also commented that Acala is aiming to become the first parachain on each network, noting that the IPO framework forces companies to create real value within the parachain slot lease period.

One initiative Acala aims to create early on is to provide staking for collators. This is important since it’s currently not possible to participate in an IPO using staked Dot. According to Chen, Acala aims to provide collator incentives to package and submit transactions to the Polkadot Relay Chain.

Although IPOs attempt to bring about innovation, challenges remain. For instance, Mauric mentioned that as more parachains are bonded, the work required to gather a community of supporters for a new parachain could become difficult since stakeholders will likely be spread among many projects. Additionally, IPOs will benefit the Polkadot community rather than the blockchain community at large, proving to be much more niche than ICOs or IEOs.



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Visa, PayPal Join Crypto VC Blockchain Capital’s New $300M Fund

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PayPal confessed that this is its first time to become a Limited Partner in a blockchain or digital asset-focused fund.

PayPal is to partner with Visa in a venture fund meant for Blockchain Capital, whose fifth funding is estimated to be around $300 million. The announcement came in on Tuesday.

The two tech-savvy firms are green to the Cryptocurrency VC. Though each of them has previously invested, directly, in digital asset startups, working together as Limited Partners (LP) is a different ball game. The deal technically means that an external manager will be tasked with placing the equity investment in their stead. PayPal via correspondence, confessed to Coindesk that this is the company’s first deal of such nature, particularly with a VC.

In matters of venture capital, the Company is a renowned figure, actually one of the companies that have been around for quite some time. Blockchain Cap. owns over $1.5 billion, which is under management. Spencer Bogart, a general partner in the company revealed. The general partner also added that the company’s fifth funding got backed by universities and notable pension funds. However, he did not mention names.

From Bogart’s point of view, the two companies are very eager to invest in cryptocurrencies, a niche they have confidence in but need expert help to navigate. Bogart was quoted saying that steering startups to secure agreements with the big boys like Visa and PayPal was very fulfilling.

Jose Fernandez, Paypal’s crypto lead was quoted saying that if they invest in Blockchain Capital’s fund, it will give them an opportunity to learn from the pace setters in the Blockchain and digital assets niche. Blockchain is looking forward to pump $300 million in the venture, whose size can’t be compared to thé big boys like Coinbase and Kraken just yet, Bogart further added. Blockchain Capital began deploying capital over a year ago but a bigger share if its new fund is awaiting.

Purpose of the New Fund Supported by Paypal and Visa

The new funding is meant to support startups in building decentralized finance (DeFi) and non-fungible tokens (NFTs), but all the while, avoiding the digital assets, Bogart claimed. The last time Blockchain Capital’s fund was announced was in 2018 March. The fund was about $150 million.

Blockchain Capital’s fifth fund will definitely have the right outcome, considering that the big boys, PayPal and Visa are involved. Besides, the past funds were successful which is an indicator of what lays ahead. Where such companies, with a global outlook, are involved, you can be sure that proper research was done before the decision was arrived at.

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Patrick is an accounting & economics graduate, a Cryptocurrency enthusiast, and a Blockchain technology fanatic. When not crafting informative pieces on any of the above subjects, he will be researching on how the Blockchain technology can transform the world, particularly the financial space.



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Bitcoin Registers Sharp Dip in Price, BTC Is Below $30K

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The global Bitcoin market suffers a stark decline with a fall to below $30000 after the news that the PBOC ban on crypto went viral.

The cryptocurrency market suffered a major dip as the prices of Bitcoin fell with an approximate price of $30000. The fall in the BTC prices has been registered shortly after the news of China banning crypto made headlines. Earlier, China had issued fresh instructions to the People’s Bank of China to impose a complete restriction on BTC transactions in the country.

China has been persistent with its efforts to completely neutralize the growing crypto operations in the nation and also is practicing strict restrictions to ban Bitcoin and other cryptocurrency variants.

Bitcoin Registers a Serious Dip in Global Finance Market

The BTC prices have fallen yet again in a recent fall where the approximate amount that has fallen is credited at US$ 30000. The fall has been documented as a severe one and has affected the global finance forums. The prices of Bitcoin were on rising as several Latin American nations including El Salvador and Panama embraced the crypto transactions with legal tender, however, the recent crackdown of China’s Crypto move has yet again made the BTC prices suffer a massive blow.

The prices of Bitcoin had a steady rise in February 2021 with an average rate of US$ 64000 till mid-April. The prices have received frequent fluctuations after the first news of China imposing restrictions on crypto transactions in Sichuan went viral. In addition to the recent PBOC guidelines, the vrypto market underwent a significant fall amounting to approximately 35% of the total BTC rate.

Newest BTC Fall Affects the Hash Rate of Cryptocurrency

The Bitcoin prices managed to stay afloat with Latin American nations openly supporting the crypto transactions. The hash rate during March and April remained consistently rising and boosted the overall pricing of cryptocurrency variants.

With People’s Bank of China putting a lid on crypto for reasons such as growing environmental concerns had catapulted the hash rate of the BTC and the fall registered today decimated the hash rate by 5.5%.

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Juhi Mirza is an archaeological major who is obsessive about blockchain/Crypto technology and deems it to be the foundational philosophy of the future. Her dogged ability to research and crystallise technical facts/multiple perspectives into rivetting stories makes her an accessible finance writer. She tends to her archaeological pursuits and loves unearthing the past over the weekends.



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Chinese Bitcoin Mining Company Delivers First Machines to Kazakhstan

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BIT Mining was served with a notice on June 19 which stated that the Chinese power regulator was planning to suspend power supply to its Sichuan firm.

The popular Chinese Bitcoin miner BIT has begun its exodus from China to find a crypto-friendly mining environment. The company has moved operations to Kazakhstan and has already delivered 320 to their new working site after the suspension of Bitcoin mining activities in Sichuan, China. Before the end of June, the publicly-listed firm plans to take another 2,600 mining machinery to their new home, the company announced on Monday.

The Cryptocurrency mining powerhouse revealed that their remaining mining machinery will be translocated overseas. Already, the translocated machinery’s hash rate capacity stands at 18.2 PH/s. Besides Kazakhstan, BIT is keen on taking their operations to Texas. Already, $25 million has been invested in an upcoming facility in Texas.

Sudden Move of Bitcoin Mining Activities to Kazakhstan

Undoubtedly, China is not a fan of cryptocurrencies, particularly Bitcoin and any Bitcoin mining-related activities, and this is largely to blame for this momentous decision. Additionally, BIT Mining was served with a notice on June 19 which stated that the China’s power regulator was planning to suspend power supply to its Sichuan firm.

The Sichuan’s operations contributed about 3% of the company’s revenue. With the harsh regulations on Bitcoin mining in China, most companies have suspended their operations in the Asian powerhouse and are relocating their facilities, to countries whose laws are Bitcoin-friendly.

Miners Exodus

In the past, let’s just say since Bitcoin became popular and Bitcoin mining started trending, China hosted 50% of the world’s Bitcoin miners. However, the country has all over intensified crackdown on Bitcoin operations and Beijing wants all miners out of its jurisdiction ASAP.

The move (banning cryptocurrency operations) is allegedly meant to make way for China’s Central Bank Digital Coin (CBDC), the digital yuan. Most market watchers think that the Chinese authorities ignorantly believe that the yuan won’t thrive as long as Bitcoin is still around. However, that’s not the case according to some pundits, who believe that the two, yuan and Bitcoin, can coexist.

Earlier in the year, March, China’s crackdown on “the digital gold” set off what is now popularly called “the great mining exodus” in cryptocurrency circles. The exodus is currently underway and could be a game-changer for countries whose laws are friendly for Bitcoin mining.

Why Most Miners Have Their Eyes on Texas

Last winter, Texas experienced a day-long massive blackout but still, Bitcoin miners are trooping in. Why is that so? Texas is popular for low energy charges, plus the rate at which the use of renewable energy is growing is amazing, hence, a good place for Bitcoin mining. Texas sourced 20% of its energy from wind, a clean source of energy, in 2019.

The American state has relaxed energy regulations and allows power consumers to opt for their favorite power producers. Bitcoin mining is energy-intensive and is known to have adverse effects on the climate. Additionally, the use of electricity, non-renewable energy, is one thing that repels China’s, however, some people think otherwise.

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Patrick is an accounting & economics graduate, a Cryptocurrency enthusiast, and a Blockchain technology fanatic. When not crafting informative pieces on any of the above subjects, he will be researching on how the Blockchain technology can transform the world, particularly the financial space.



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