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Novogratz’s Galaxy Digital Crypto Fund Lost $272.7 Million in 2018

news Galaxy Digital Holdings, the crypto merchant bank founded by former hedge fund manager Michael Novogratz, lost $97 million in the fourth quarter, according to financials disclosed Monday. The net loss widened from $76.7 million in the third quarter and from about $100,000 a year earlier, according to the filing with Canadian securities regulators. (Last…

Novogratz’s Galaxy Digital Crypto Fund Lost $272.7 Million in 2018

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Galaxy Digital Holdings, the crypto merchant bank founded by former hedge fund manager Michael Novogratz, lost $97 million in the fourth quarter, according to financials disclosed Monday.

The net loss widened from $76.7 million in the third quarter and from about $100,000 a year earlier, according to the filing with Canadian securities regulators. (Last February, New York-based Galaxy bought a Canadian publicly traded company in a reverse takeover.)

For all of 2018, its first full year of operation, the company lost $272.7 million.

The majority of the red ink in 2018, $101.4 million, came from selling digital assets at a loss.

Galaxy also recorded $75.5 million in paper losses on crypto it held that declined in price, $8.5 million in unrealized losses on investments in companies and $88.4 million in operating expenses.

Which coins lost

At the end of 2018, Galaxy held 9,724 bitcoin ($36.4 million), 92,545 ether ($12.3 million), 2.4 million EOS ($6 million) and 60,227 of monero ($2.8 million).  The firm increased its investment in bitcoin and ether from the beginning of the year when it held 5,902 BTC and 57,000 ETH.

Galaxy also used to hold large amounts of Wax ($50.2 million) and BlockV tokens ($17.4 million), which disappeared from the top ranks of the firm’s investments at the end of the year.

According to the report, Galaxy lost money selling bitcoin ($70.3 million) and ether ($64.4 million), which was partially offset by $54.3 million earned selling some cryptocurrencies short (it’s not specified which ones).

Bitcoin was the biggest source of losses at the beginning of 2018, while ether caused the most damage during the rest of the year.

Interestingly, Galaxy lost as much as $47 million on the depreciation of the Wax token, an asset created to power a platform for trading virtual goods like items in video games.

Several other altcoins also lost in price before Galaxy could profitably sell them during 2018: Kin ($10.9 million in losses), BlockV ($17.2 million) and Aion ($8.6 million). Some $5 million was also lost on EOS.

Protocols, mining and ICOs

A number of companies and investment funds in Galaxy’s portfolio declined in value.

For example, the Pantera ICO Fund LP shares’ depreciation caused the loss of $14.1 million (Galaxy currently has $17.4 million invested in the fund). The firm also took a haircut of $11.3 million on its shares of Canada-based Hut 8 Mining Corp, and $11.1 million on crypto wallet firm Xapo.

As of the end of 2018, Galaxy held $41.9 million in the stock of Block.One’s, the creator of EOS, plus some $5 million more in Galaxy EOS VC Fund focused on developing the EOS.IO ecosystem.

Meanwhile, payments startup Ripple Labs received $23.8 million, including “an indirect investment through a special purpose vehicle,” the report says.

Galaxy also invested $26 million in mining businesses, including Hut 8 Mining and Bitfury; $7.5 million in custodian and multi-signature wallet provider BitGo; and $5 million in Bakkt, the bitcoin futures exchange yet-to-be-launched by New York Stock Exchange parent ICE.

Other investments include Silvergate Capital Corporation, parent of the crypto friendly Silvergate Bank; tokenization startups AlphaPoint and Templum; investment vehicles Cryptology Asset and Pantera Venture Fund; and Mercantile Global Holdings, a Puerto Rico-based entity operating the recently founded San Juan Mercantile Exchange. The firm also provided $3.8 millions of loans for the crypto lending platform BlockFi.

Risk factors

Talking about the risks Galaxy may face in the future, the report pays special attention to the concentration of power in the hands of the CEO and major stakeholder Mike Novogratz, who owns more than 71 percent of Galaxy.

Among the regulatory and market risks, Galaxy is “highly dependent on Michael Novogratz, exposing shareholders to material and unpredictable ‘key man’ risk,” the document says, adding that the CEO’s “interests may be different from those of shareholders,” and there is a danger he “could engage in activities outside of GDH LP or could quit GDH LP in favor of other pursuits.”

No less notable, the report adds: “Mr. Novogratz’s public profile makes it more likely that GDH LP will attract material regulatory scrutiny, which would be costly and distracting regardless of whether GDH LP has engaged in any unlawful conduct.”

Image of Mike Novogratz via CoinDesk archives 

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Mining News

Two Miners Purportedly Execute 51% Attack on 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…

Two Miners Purportedly Execute 51% Attack on 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.

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Mining News

Firefox Browser Adds Option to Automatically Block Crypto Mining Scripts

announced on its blog Tuesday.” data-reactid=”12″ type=”text”>The option is being offered alongside control of cookies and trackers in the “Privacy & Security” tab of the browser, where users can now also choose to tick a box that prevents “cryptominers” from running, Mozilla announced on its blog Tuesday.Crypto-mining scripts on websites run in the browser, normally without users’ knowledge…

Firefox Browser Adds Option to Automatically Block Crypto Mining Scripts

announced on its blog Tuesday.” data-reactid=”12″ type=”text”>The option is being offered alongside control of cookies and trackers in the “Privacy & Security” tab of the browser, where users can now also choose to tick a box that prevents “cryptominers” from running, Mozilla announced on its blog Tuesday.

Crypto-mining scripts on websites run in the browser, normally without users’ knowledge or consent, using the power of the computer processor to mine cryptocurrency for hackers’ personal gain.

Opera Will Soon Add Tron Support to Its In-Browser Crypto Wallet

“These scripts slow down your computer, drain your battery and rack up your electric bill,” Mozilla said.

The option to block mining scripts has been available in beta since the feature’s initial launch in April, with Mozilla partnering with cybersecurity firm Disconnect for the service.

View Ads, Get BAT: Brave Delivers on ICO Promise of Paid Web Browsing

Opera also offers miner protection in its smartphone version, while Google’s Chrome has banned miners from its extensions.” data-reactid=”26″ type=”text”>Mozilla revealed its plan to offer the feature last August, saying its goal was to prevent third-party scripts from hampering the user experience. Web browser Opera also offers miner protection in its smartphone version, while Google’s Chrome has banned miners from its extensions.

Illicit crypto mining, sometimes called crypto-jacking, is fast gaining in popularity with criminals (there are more legitimate uses too). The code that carries out the task of mining can be propagated by malware and placed directly within computer systems, or it can be placed on websites by hackers to mine using victims’ machines through browsers.

A report from Skybox Security last year found that the method now account for 32 percent of all cyberattacks, while ransomware only makes up 8 percent.

In 2017, Skybox found that the situation was almost exactly reversed. While ransomware attacks – in which the data on an individual’s computer is encrypted by malware and only unlocked upon payment of a fee – made up 32 percent of all attacks, cryptojacking represented 7 percent of the total at the time.

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  • Opera Launches Desktop Dapp Browser With Built-In Ethereum Wallet
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