Forbes’ Would-Be Acquirer Outlines Blockchain Media Strategy

The takeaway

• Patrick McConlogue’s Borderless Services is offering $700 million to buy Forbes.
• McConlogue has a grand vision to reinvent media using crypto wallets, tokens and radio transmitters.
• But first he has to close a deal and is bidding against a SPAC for the 104-year-old property.

There are at least two competing bids to buy out storied chronicler of capitalism Forbes Media LLC.

It’s a competitive race that speaks to the disruption reshaping the current media landscape, as well as an increasingly frothy financial ecosystem where new economic models – from novel cryptocurrencies to less-traditional investment strategies – are making their presence known. 

Reuters reported last week that Forbes’ owners are considering a bid from tech investor Michael Moe, who would merge the media giant with an unnamed special purpose acquisition company (SPAC). Also reported was a $700 million offer from Patrick McConlogue’s Borderless Services Inc., a crypto-focused investment vehicle. 

In an interview with CoinDesk, McConlogue outlined new details of his proposal, including the cryptocurrency features he would embed in Forbes, as well as his grander ambitions for a media empire powered by blockchain technology. 

“The Forbes asset is not our primary target. It’s the first stop on our acquisition strategy,” McConlogue said in an interview. “Media is ripe for change, just like banking is ripe for change.” 

Cryptocurrencies are the way to reshape both, he said. 

McConlogue’s bid comes as crypto explodes into global prominence. Distributed technologies offer new ways to model trust, build economic units and finance deals; it’s possible cryptocurrencies could follow everywhere money flows. Though the sector promises much, it often underdelivers in practice. 

McConlogue said his offer is “fully capitalized,” meaning Borderless is in the position to immediately buy out Forbes’ owners, Integrated Whale Media Investments (which purchased 95% of the company in 2014) and the Forbes family (which owns the remaining 5%). 

The deal would be financed with debt and equity arranged by private equity firm Ares Management Corp. McConlogue has a background in traditional finance, including a stint as an engineer at storied hedge fund Citadel, experience he leveraged to gain access to a “deep equity table of long‑term, legacy members of Wall Street.” 

See also: Binance Drops Defamation Lawsuit Against Forbes Over ‘Tai Chi’ Document

Neither Forbes nor Ares responded to CoinDesk’s requests for comment by press time. Integrated Whale could not be reached for comment. It is unclear how far along discussions are – there is no guarantee Forbes would accept any offer.

McConlogue said the $700 million valuation is fair for a magazine that claims 6 million readers and reached 140 million people on the web. It was valued last at $475 million in 2014.

Crypto media empire

In addition to making a bid for Forbes, McConlogue said he plans to acquire a number of “cable networks and print media.” These deals would also be financed through Ares, McConlogue said. The endgame is to bring awareness of cryptocurrencies to readers and viewers interested in traditional finance.  

“That is because the demographic that’s untouched here is still, you know, the people who are opening up a magazine,” he said. McConlogue said he would change the scope of Forbes’ coverage to focus on “news of the future of finance.” (Forbes, it should be noted, already has a crypto and blockchain news wing, with CoinDesk alum Michael del Castillo among its writers.) 

This widened scope would include more dedicated reporting on crypto, robo-trading and quantitative trading: “Things like that, where the world is changing quickly and markets are changing without news,” McConlogue said. He would keep Forbes’ popular list products, such as 30 Under 30. 

Further, a Borderless-owned Forbes would boast a one-click crypto wallet integration, such as with MetaMask, that would feature prominently in a reader’s browsing experience. Readers might receive token disbursements for finishing articles, commenting or sharing over social media channels, similar to media site Decrypt’s experimental app. Each publication under Borderless’ remit would issue its own token, McConlogue said. (Token-supported journalism has been tried before, by the defunct ConsenSys-backed startup Civil and more recently the Brick House collective.)

The protocol

Borderless Services is “a skunkworks project” that has developed a “technology that changes the way that people consume information,” McConlogue said. 

Details were scant and McConlogue asked to go off the record at times, but he said he’s building a “wireless protocol” called Overline that can operate offline across blockchains. It sounded like Polkadot meets mesh networks.

McConlogue has a background in computer science. While in his early 20s he made headlines for teaching a homeless man how to code. Crunchbase cites him as a core developer at Block Collider, an interoperable blockchain project funded through a 2017 initial coin offering. 

It’s unclear if Block Collider and Borderless are related, though McConlogue said he has hired an in-house team of 17 developers, plus several contractors, to work on technological breakthroughs, including what he calls “attention mining.” 

See also: Opinion – Crypto Is Still the Frontier for Journalism

In all, the Borderless media empire would eventually involve a host of radio transmitters, and an antenna atop a New York skyscraper, to allow global crypto transactions “without ever touching the internet,” McConlogue said. 

If all this sounds ambitious if not fanciful, McConlogue said it begins with baby steps. His first tenth of a BTC (-0.67%) was mined with a Raspberry Pi, he said. The plan now is to make just one acquisition, then many. One node, then many.

That is, if Forbes’ owners buy his story.  

Cryptocurrency ATM provider Coin Cloud is about to install its 2,000th kiosk with the placement of machines in stores of the popular, Texas-based grocery chain H-E-B, Coin Cloud said in a press release.

The Las Vegas-based company has been on a spree in recent months, increasing its installations from 1,250 kiosks in December. The H-E-B pilot program calls for machines at 29 locations in the Houston area, according to a Houston Chronicle report.

But Coin Cloud has placed more than 200 machines at CAL’s Convenience stores and 300 kiosks at United Natural Foods (UNFI) customer locations. In a March conference call, UNFI President Chris Testa said that the kiosks could appear in as many as 4,000 locations that the retail service provider serves. At the time, UNFI and Coin Cloud had partnered on 80 contracts with retailers.

“Our growth is a tangible representation of interest in digital currencies and of Coin Cloud’s mission to provide communities with seamless options to buy and sell,” said Chris McAlary, Coin Cloud founder and CEO.

Separately, Coin Cloud has also struck a partnership with the National Alliance of Trade, which supports over 6,000 convenience retail stores.

Coin Cloud machines offer access to over 30 cryptocurrencies, including bitcoin (BTC, -0.67%), ethereum (ETH, -2.03%), dogecoin (DOGE, -3.3%) and a number of stablecoins and DeFi tokens. Customers are able to purchase or sell crypto with cash, debit or credit cards. The seven-year-old, Las Vegas-based company has kiosks in 47 states and Brazil. Its H-E-B kiosks will appear in the Houston area.

Privately held H-E-B ranked 13th among U.S. grocery chains with nearly $37 billion in revenue last year, according to the trade publication Progressive Grocer. The 116-year-old company has 340 stores throughout Texas and northern Mexico.

Correction: A picture that initially accompanied this story was of ATMs from a different company.

The Central Bank of Portugal (Banco de Portugal) has licensed two cryptocurrency exchanges for the first time. 

In an official statement, the entity announced that it recognized Criptoloja and Mind The Coin as “virtual asset service providers.” This is the first time exchanges have been licensed to operate since a new law around crypto trading platforms took effect earlier this year.

The approval came after nearly nine months. Criptoloja first filed for approval on Sept. 29, 2020, the company’s CEO Pedro Borges told CoinDesk. 

“It was a long way. Being the first regulated exchange in Portugal means a lot,” Borges said. 

In April, a bank executive confirmed that at the time, Banco de Portugal had received five formal registration requests and a total of 60 informal contacts, according to local media outlet Dinheiro Vivo. 

Mind the Coin and Banco de Portugal did not immediately respond to CoinDesk’s queries. 

Critpoloja plans to launch operations “in the next couple of weeks,” Borges said, adding that the company allows customers to open online accounts but has not yet enabled online trading. 

According to Borges, Criptoloja will seek to bring together Portuguese people who are looking to invest in cryptocurrencies and do not feel confident enough to open accounts in foreign exchanges. 

Borges added that the greatest adoption of crypto in Portugal is among the new generation of traders, although the company will seek to promote the crypto ecosystem among people of different profiles.

At block number 10,499,401, which is expected to be mined next Thursday, the Ethereum test network Ropsten will undergo a backward-incompatible upgrade dubbed “London.” 

This is the first of three test network releases for London in the lead-up to a main network activation tentatively scheduled by Ethereum developers for mid-July. Included in London are five code changes, also called “Ethereum Improvement Proposals” (EIPs). In a blog post released Friday, Ethereum Foundation’s Tim Beiko said:

“[EIP 1559] introduces changes to the block header, adds a new transaction type, comes with new JSON RPC endpoints, and changes the behavior clients in several areas (mining, transaction pool, etc.). It is highly recommended that projects familiarize themselves with the EIP.”

Out of the five EIPs in London, EIP 1559 is arguably the most anticipated and controversial code change of them all. EIP 1559 introduces a minimum payment, also called a “base fee,” for sending transactions on Ethereum that dynamically adjusts based on network activity and demand for block space. 

Since EIP 1559 was first proposed over two years ago in 2019, there have been several misconceptions about its use and impact on end users, miners and investors. The following are four common myths about EIP 1559 sourced from CoinDesk Research’s latest report, “The Investment Implications of EIP 1559.” 

Read the full report on the CoinDesk Research Hub. 

Myth 1: EIP 1559 is aimed at reducing high fees on Ethereum.

At its core, the aim of EIP 1559 is to make transaction fees less volatile and more predictable by creating an algorithmic model to automatically adjust costs by a factor of 1.125x at most per block. 

Under the current blind auction-like system for determining fees on Ethereum, the costs for sending a transaction can skyrocket at a moment’s notice depending on the ups and downs of the crypto markets. Under EIP 1559, fees are regulated to increase and decrease based on the use of block space. If blocks are filled above a set “gas target,” the base fee will increase by 12.5% and vice versa. 

See also: CoinDesk Research’s Metrics Report Explaining Ethereum Gas Costs

These changes to the inner workings of Ethereum’s fee model are not expected to reduce transaction fees on Ethereum, however. The issue of high fees is primarily caused by limited network capacity to process transactions. EIP 15559 on its own will not affect how many transactions the network is able to handle at once.

Myth 2: EIP 1559 will make Ethereum’s monetary policy more predictable.

EIP 1559 introduces a fee-burning mechanism that will permanently remove coins from the total circulating supply of ether (ETH, -2.03%) (ETH). The reason for burning the base fee rather than distributing them to Ethereum miners is to ensure there is no financial incentive for miners to artificially congest the network and keep the base fee high. 

Because of this burning mechanism, EIP 1559 may strengthen a bitcoin-like narrative of limited supply to the investment case for ether. It is difficult, however, to predict exactly how much ether will be burnt over time given that the base fee dynamically adjusts according to network activity and demand for block space. 

While EIP 1559 introduces a counterbalance against an ever-increasing ether supply, it doesn’t make Ethereum’s long-term monetary policy more stable. On the contrary, it introduces economic instability to the network by making it impossible to control what the total supply of ether will be over time.

Myth 3: It is likely that EIP 1559 will cause Ethereum miners to quit and attack the network.

It is estimated that miners will lose 20% to 35% of their income with the activation of EIP 1559, and so there have been petitions from mining entities on Ethereum to stop EIP 1559 in its current form from being accepted into the London upgrade. In addition, amendments to EIP 1559 have been proposed. Those include changing the proposal so that the base fee is not burned, increasing miner income from other sources such as block subsidies and making adjustments to Ethereum’s mining algorithm so that competition for network rewards among miners is more equitable.

Despite the opposition from members of the Ethereum mining community, EIP 1559 is expected to be released on Ethereum’s main network in July, which raises the question of whether miners could potentially resist the London upgrade by shutting down their machines and weakening the security of the network. 

While that is possible, there are a number of reasons why it is unlikely that the majority of miners will defect or try to sabotage Ethereum as a result of EIP 1559 activation. One of the primary reasons is that miners would have to forgo rewards they might have otherwise earned by upgrading their machines and continuing operations. There is also the reality that miners have a limited runway on Ethereum and will have to forgo 100% of rewards once the network switches to a proof-of-stake (PoS) consensus protocol early next year. 

See also: The New Plan to Merge Ethereum to PoS

Myth 4: EIP 1559 will solve the issue of miner extractable value (MEV) on Ethereum.

Miner revenue on Ethereum has historically consisted of a fixed block subsidy and transaction fees. However, as a result of the growing popularity for high-frequency trading on decentralized exchanges (DEXs), miner income from MEV has become increasingly lucrative. Research and development organization Flashbots estimates daily income from MEV has grown from half a million dollars at the start of this year to over $6 million in June.

As background, MEV is the income that miners can earn as a direct result of their ability to order transactions within a block. It is difficult to quantify because miner revenue made from reordering, including or censoring certain transactions within a block, can come anytime a user interacts with another user or application on Ethereum. 

See also: The Good, the Bad and the Ugly of MEV on Eth 2.0

EIP 1559 reduces the ability for miners to rely on transaction fees as a way to extract MEV from users, but the ability for miners to order transactions and thereby earn MEV through other means will remain unchanged under EIP 1559. Speaking to the continued need for research and development on MEV after EIP 1559 activation, Flashbots researcher Philip Daian said during a virtual Ethereum conference in May: 

“The transaction fees people are paying for inclusion [in a block] are actually a very small percentage of the eventual MEV market … The game is still fundamentally unchanged and the deeper protocol level mitigations are still things that we haven’t explored yet.”

For more information about EIP 1559 and its investment implications, download the full report by CoinDesk Research here.

Bitcoin declined about 5% over the past 24-hours as the price broke below $36,000 support. The world’s largest cryptocurrency by market capitalization is still up about 23% year-to-date, although some traders are concerned about the looming ‘death cross,’ which could indicate a shift from a bullish to bearish price trend.

The death-cross is defined by a cross of the 50-day moving average below the 200-day moving average, which could occur over the weekend.

Still, some analysts remain bullish on bitcoin relative to equities.

“When the equity tide pulls back someday, we expect bitcoin and gold to be the primary beneficiaries,” wrote Mike McGlone, commodity strategist at Bloomberg Intelligence in a Friday report.

Latest prices

Cryptocurrencies:

• Bitcoin (BTC) $35469, -5.92%
• Ether (ETH) $2166.02, -7.15%

Traditional markets:

• S&P 500: 4166.45, -1.31 %
• Gold $1769.37, -0.19%
• 10-year Treasury yielded 1.437%, versus 1.52% on Thursday

Technical backdrop weakens

“The recent stabilization just isn’t sufficient to suggest buying dips,” wrote Mark Newton, founder of Newton Advisors, in an email to CoinDesk.

Newton’s cycle work points to continued weakness this year. “For those who are aggressive traders, any break of 30k should lead down to 20-25k and that should be a better area to consider buying dips for a bounce,” Newton wrote.

And for ether, Newton expects a volatile decline over the next one or two weeks given the break below prior lows. 

Regulatory crackdown

Bitcoin has been weighed down by ongoing regulatory uncertainty and environmental concerns. 

On Thursday, miners in Ya’an, one of the major crypto mining hubs in China’s Sichuan province, received an inspection notice that required shut-downs. 

And on Friday, Wu Blockhcain reported that Alibaba Cloud, China’s largest cloud service provider, made calls to cryptocurrency and mining companies registered in China regarding potential domain name cancellations due to regulatory requirements.

“This has little impact on the exchanges, because their servers and registered locations are outside of China, but mining companies may need to do some replacements,” Wu Blockchain tweeted. 

Growing institutional demand

Despite regulatory hurdles, institutional demand for crypto remains strong, which could force countries to compete for crypto related businesses. 

For example, on Friday, Spanish banking giant BBVA is making its cryptocurrency trading and custody service available to private banking clients in Switzerland from June 21.

BBVA said the reason why the service will only be available to clients in Switzerland is due to clear regulations and the widespread adoption of digital assets in the region.

Crypto correlations rise

The chart below shows the one-month correlation between the top 10 crypto assets by market cap has greatly increased since mid-May, according to data from Skew. This reflects broad selling pressure from the sharp correction in May across cryptocurrencies.

Bitcoin ESG update

One month after Tesla CEO Elon Musk tweeted his concerns about the potential environmental harm from bitcoin mining, some industry players are rushing to respond. They’re looking at ways to address the environmental, social and governance (ESG) issues that might deter big institutional investors from embracing bitcoin. 

Crypto.com, an app for trading cryptocurrencies, set a goal for the next 18 months of becoming “carbon negative.” Asset management firm One River Digital filed for a bitcoin exchange-traded fund (ETF) that would be carbon neutral. Digital asset investment firm CoinShares made a strategic investment in Viridi Funds and said it would advise the manager on “the first ESG crypto mining product in the U.S.”  Wrapped, a collaboration between tokenization specialist Tokensoft and digital-asset custodian Anchorage, announced a “carbon-neutral bitcoin-backed-asset” called Eco BTC (eBTC). 

“They are doing it out of the sense of survival,” said John Reed Stark, a former chief of the U.S. Securities and Exchange Commission’s Office of Internet Enforcement who now works as a consultant. 

Altcoin roundup

• The Swiss Federal Council has enacted a new ordinance to regulate decentralized finance (DeFi). The ordinance creates a license for distributed ledger technology (DLT) trading facilities, which will be effective on Aug. 1. “This will allow for innovative DLT trading facilities and increase legal certainty in the event of bankruptcy,” the council said in the press release. The news broke after Mark Cuban, who said he lost money from the price crash of DeFi token TITAN, called for regulators to determine what constitutes a "stablecoin."
• Crypto-asset manager Grayscale said it is considering 13 more tokens, most of which are DeFi-related, for potential development into investment products. The tokens include 1inch, Bancor, Curve, Polygon and 0x, among others. 

Relevant news

Other Markets

All digital assets on the CoinDesk 20 were lower on Thursday. 

Notable losers as of 21:00 UTC (4:00 p.m. ET): 

nucypher (NU) -17.42%

aave (AAVE) – 11.76%

the graph (GRT) -10.58%