a16z meets Maker, ether options coming, and a new trading desk


“We remain committed to the struggle for financial privacy and sovereignty for all humans, and will continue to be tactical about how we further that cause.” — Erik Voorhees, CEO ShapeShift


The Big Block

Sometimes the news is both exciting and raises eyebrows at the same time. This morning’s announcement that a16z Crypto has purchased $15M worth of the MakerDAO’s MKR token is a perfect example. The group calls it a strong endorsement for the MakerDAO’s Dai stablecoin — and it is — but the complex nature of how this all works brought an immediate skeptical response. Let’s break it down.

What happened and why we care

First, it’s important to understand exactly what happened and who is behind it. The a16z Crypto fund is a creation of the Silicon Valley powerhouse venture-capital firm Andreessen Horowitz. But as today’s announcement reminds folks, a16z Crypto isn’t the venture firm itself. As they explain it: “Please note that the a16z crypto fund is a separate legal entity managed by CNK Capital Management …  a16z crypto is legally independent and operationally separate from the Andreessen Horowitz family of fund[s].”

That said, it is a $300M fund. And it exists because the AH venture folk believe in blockchain and crypto (see here on Dfinity and back five years ago on Coinbase). Today’s investment is just 5% of the capital at a16z Crypto but it backs an audacious project to create and foster a stablecoin, that is a cryptocurrency free of censorship features common to fiat currencies but with a consistent value like them. (Our Block by Block primer on stablecoins ran last week if you wish to learn more.)

The mechanism as to what the a16z fund did, however, is a little confusing at first. Although this investment is in support of the Dai stablecoin, it did not involve buying said coin, which trades in a rather boring pattern as it’s supposed to.

So what a16z Crypto did, instead was buy up 6% of the total supply of MKR coins, apparently at around a 25% discount to their underlying price per Meltem Demirors on Twitter. What Maker plans to do is outlined clearly: “As part of this partnership, MakerDAO will receive operating capital through the next growth stage, 3 years of support for the MakerDAO community, and most importantly, full operational support from the 80+ person Andreessen Horowitz a16z team. Specifically, Dai Stablecoin adoption and regulatory support are two of the first priorities.”

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Around The Block

The Block Exclusive: LedgerX ready to launch options for ether

Traders may soon have a new way to bet on ether, the second-largest cryptocurrency by market capitalization.

LedgerX, the crypto trading platform known for its bitcoin swaps and options, has an options product tied to ether ready to go live, according to a source familiar with the firm’s business.

The company, however, is waiting for regulators from the Commodities Futures and Trading Commission to get comfortable with the product before making it available to its clients. The source told The Block that approval could come after a regulatory meeting October 5. — More


The Block Exclusive: Wallet provider Blockchain has launched an OTC trading desk


Another cryptocurrency firm is breaking into the over-the-counter trading business.

Blockchain, the European cryptocurrency wallet provider, has launched in recent weeks an OTC desk to execute large trades off of public exchanges such as a Coinbase or Kraken, according a person familiar with the firm’s business. The new desk is being run by former DRW fixed-income trader Vince Machi, according to a source.

The business is part of a broader push by Blockchain, which is one of the best-known companies in the nascent digital currency market, to attract more business from institutions, including large asset managers and hedge funds. Its retail business already covers 28 million wallets, according to marketing materials on its website. — More


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