Tesla sells Bitcoin, the 'Merge Trade' has begun, Binance flips Coinbase, and TLDRs about Ethereum and VC Reports. Plus a new section for the Metaverse and NFT specific news.
21 July 2022
Hello there and welcome to the Blockchain From First Principle newsletter where we curate some of the week's news, summarise reports, podcasts, articles and look at blockchain, crypto and web3 from the first principles for those seeking to understand more and stay ahead of their game.
This week Vaibhav Singh and Farid Fatah joined our team and contributed to this edition of the newsletter with some of the most interesting stories. Welcome aboard!
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Table of Content
🗞️The 13 leading news you should be aware of
🔦Company spotlight: Blockdaemon
💸 The development of a startup ecosystem and major PE/VC funding
📚Reports and breakdowns of noteworthy developments, here is the TLDR
📈Charts of the week
💡Inside the Metaverse and NFT latest news, trends and insights
📅Blockchain, Crypto and Web3 events calendar…
📎Miscellaneous resources
🗞️ The 13 news you should be aware of
1. Tesla sells $936M worth of Bitcoin in the second quarter, and still holds Dogecoin
During the second quarter, Tesla sold $936M in Bitcoin. It presently has approximately $218M in Bitcoin. Elon Musk stated that the automaker sold its stakes because of concerns about COVID lockdowns in China. Tesla remains open to expanding its Bitcoin holdings in the future. Dogecoin has not been sold by the company.
2. Introducing Polygon zkEVM, the first EVM-equivalent ZK L2
Polygon zkEVM is an EVM-equivalent zero-knowledge layer 2. It can run any smart contract or dev tool that can be used on Ethereum, but with the scaling power of ZK tech. Polygon zkEVM rolls up batches of transactions and uses a ZK proof to validate those transactions on Ethereum. The layer 2 provides high throughput, low latency, and low fees.
3. The 'Merge Trade' has begun as Ether surges and stETH discount narrows
Investor interest in ETH and stETH has increased since Ethereum Foundation member Tim Beiko suggested September 19 as the provisional launch date for the Merge. ETH investors tend to factor in bullish developments in advance, for example, ETH rallied in the three weeks leading to the London hard fork. Experts believe that the market has priced in risks and is now focusing on the upcoming positives. The Goerli testnet's planned transition to Proof-of-Stake is scheduled for August 11.
4. Celsius lawyers claim users gave up legal rights to their crypto
According to Celsius' lawyers, users with Earn and Borrow accounts on the platform transferred the title of their coins to the firm as per its terms of service, which means Celsius was free to use, sell, pledge, and rehypothecate those coins as it wishes. The terms claim that the firm can't use coins in custody accounts without user permission, but the lawyers are questioning whether there is any difference between crypto assets held under Custody and assets held in the Earn program. Celsius' recovery plan involves waiting for the market to turn around and using its mining operations to pay off debts.
5. Staking company Figment will support MEV after Ethereum merge
Blockchain infrastructure company Figment will support MEV once the network moves to Proof-of-Stake. MEV is the process where individuals who create new ETH can further profit by prioritizing certain users' transactions. Figment offers a staking service that allows retail validators to earn rewards without pledging the full 32 ETH required. It plans to leverage Ethereum's new MEV boost feature to increase user rewards by up to 50%.
6. Binance flips Coinbase to become the exchange with the most BTC held globally
Binance is now the exchange that holds the most Bitcoin. Coinbase was in the lead up until recently. Binance has been increasing its public trust through public relations efforts. It recently launched zero-fee trading for 13 Bitcoin spot trading pairs and it plans to eliminate charges for more tokens. Binance this year secured full regulatory approval in Dubai, Bahrain, France, Italy, and Spain.
7. Lido is launching stETH on Layer 2
Lido stakers will soon be able to use their stETH assets on Layer 2. The supported Layer 2 networks will be announced soon. This change will mean lower gas fees and an expanded DeFi ecosystem for Lido stakers. Lido is launching L2sDAYS, a weekly series on the concepts, projects, people, and values making Ethereum scaling happen.
8. A 1000-page legal document came out today on Three Arrows Capital
A 1,000-page legal document on Three Arrows Capital (3AC) came out recently that brings more clarity to the case. It discusses 3AC's creditors, the timeline of its collapse, the purchases made by its founders, 3AC's business structure, and more. This Twitter thread summarizes some of the topics in the document. A link to the full document is available.
9. Nomura announces plan to establish new Digital Asset Company
Nomura Holdings, Inc. (“NHI”) today announced the creation of a new digital asset company that will offer institutional clients a comprehensive suite of trading, investor products and investment services. The new company will operate as a wholly owned segregated entity of NHI, with dedicated capital and resources to accelerate time-to-market and ensure the pace of innovation required in the digital asset ecosystem. Specialist staff from Nomura will be integrated into the new company in addition to external hires.Due to launch later this year, the new digital asset company will provide institutional clients and investors with products and services linked to cryptocurrencies, stable coins, decentralized finance (DeFi), non-fungible tokens (NFTs) and other tokens.
10. ING spins out Pyctor digital assets technology to GMEX Group
ING announced that it has spun out Pyctor to GMEX Group (‘GMEX’), a leader in digital business and technology solutions for exchanges and post-trade market infrastructure. Pyctor’s digital post-trade market infrastructure technology is designed for firms operating in regulated environments. It provides highly secure digital custody and transactional network services for a broad range of digital assets, as well as delivering interoperability between permissioned and public blockchains. Pyctor was incubated in ING Neo’s Amsterdam innovation lab, in collaboration with major financial institutions and regulators.
11. VW partners with Energy Web blockchain for electric vehicles powered by renewable energy
The Energy Web blockchain and Volkswagen (VW) have partnered for a smart charging solution. The organisation is also working with BMW and other big brand partners fonor a renewable energy solution. EthereumEnergy Web’s “24/7” matching algorithm maximises the use of renewable energy. “The purpose of this project has been to showcase that advanced EV charging solutions can empower EV owners to set their own preferences for when and where they get their energy,” said Jesse Morris, CEO aoft Energy Web. the blockchain is public and derived from etherEthereumeum but uses Proof of Authority to avoid unnecessary usage of energy.
12. Crypto mixer sanctioned by US Treasury for a role in Axie Infinity hack
The United States Treasury Department Office of Foreign Assets Control (OFAC) announced Friday that it was sanctioning cryptocurrency mixer Blender.io for its role in laundering proceeds from the hacking of Axie Infinity's Ronin Bridge. North Korean state-sponsored hackers Lazarus Group have been identified as the perpetrators of the attack. Treasury Under Secretary for Terrorism and Financial Intelligence Brian E. Nelson said in a statement: “Today, for the first time ever, Treasury is sanctioning a virtual currency mixer. […] We are taking action against illicit financial activity by the DPRK and will not allow state-sponsored thievery and its money-laundering enablers to go unanswered.”
13. U.K. Government takes step on making stablecoins a form of payment
Nadhim Zahawi, the chancellor of the Exchequer in the U.K., said the government will introduce a bill to set out how stablecoins may be used as a means of payment. In May, the Terra ecosystem collapsed after its algorithmic stablecoin, UST, slipped its peg and cratered. Its failure triggered a deep selloff in crypto markets and contributed to the failure of other big players such as Three Arrows Capital, the $10B hedge fund that recently declared bankruptcy. U.S. Treasury Secretary Janet Yelles has asked Congress to introduce legislation this year as part of a crackdown on stablecoins. The U.K., famed for its “light touch” approach to financial regulation, has taken a softer tack. In April, the U.K Treasury recognized stable tokens as a “valid form of payment”.
🔦Company spotlight
The company: 👉 Blockdaemon 👈 Blockdaemon connects businesses to blockchain with one integration. It offers node operations and infrastructure tooling for blockchain projects, across their life-cycle: testing, staking/reporting, clusters for exchanges/custodians and APIs for developers.
The story: Blockdaemon has raised a total of $398.2M in funding over 8 rounds. It is funded by 43 investors. Citi Ventures and Invicta Growth are the most recent investors.
Why in the spotlight: Blockcdaemon has acquired Danish crypto wallet security firm Sepior in its fourth acquisition in two years. Sepior will further facilitate Blockdaemon’s ability to connect businesses to blockchains with one integration. Following the acquisition, Blockdaemon will add the ability to offer institutional customers custodial and non-custodial wallet solutions for digital assets.
💸 The development of a startup ecosystem and major PE/VC funding
1. FTX raising money at $32B valuation after buying crypto firms
FTX and FTX US are looking to raise a new round of capital. They are targeting the same valuation as its January round, when FTX raised $400M at a $32B valuation and FTX US raised $400M at an $8B valuation.
2. Company that helps gamers pay bills in Smooth Love Potion raises $13M
XLD Finance’s $13M funding round was led by Dragonfly Capital and Infinity Ventures Crypto. The funds will be used to scale its product and engineering teams, as well as to expand its networks of licensed partner financial institutions, merchants and billers.
3. Tiger Global leads $22M round for Meow
The series A was led by Tiger Global, with support from QED Investors and FTX. Based in New York, the company enables institutional and corporate investors to participate in cryptocurrency investing. The funds will be used to support the company’s rapid growth with new hires and enhanced product features.
4. India's latest blockchain unicorn 5ire valued at $1.5B
Web3 start-up 5ire raised $100M in Series A round from UK-based conglomerate SRAM & MRAM. As of June 29, the country is home to 104 unicorns with a total valuation exceeding $ 336B, according to research firm Invest India. The funds will be deployed towards sales and marketing, hiring new talent and acquiring business.
5. XAnge pulls in €220M for new fund, launches Web3 vehicle
French investor XAnge has closed its fourth flagship fund at €220M. The vehicle will be used for early-stage investments in France and Germany. XAnge is also raising a Web3 fund with a target of €80M.
The funding round was co-led by Andreessen Horowitz (a16z) and Variant, with the participation of 80 other investors. Morpho is intended to plug into existing lending protocols such as Compound and Aave to offer higher yields through peer-to-peer liquidity.
7. ZKX raises $4.5m in seed funding
Investors include StarkWare, Alameda Research, Amber Group, Huobi, Crypto.com and others. In addition, ZKX received investment from notable individual investors including Sandeep Nailwal, Co-Founder of Polygon, and Ashwin Ramachandran, General Partner at DragonFly Capital. The funding will go towards further development of ZKX’s core offerings, the ZKX open-source protocol, DAO funding and continued growth of the ZXK ecosystem.
Metaverse project MetaOasis DAO announced that it has closed a $1.5m seed funding round co-led by KuCoin Ventures and Windvane, with participation from Stratified Capital, NFTScan and others. MetaOasis DAO will launch public mint of its NFT collection Zzoopers on Windvane on July 12th at 11:00 UTC.
9. Ex-Coinbase exec raises $30M led by a16z
Dan Romero, a former Coinbase executive, announced a fundraising of $30M in a round led by Andreessen Horowitz (a16z) to develop a social networking protocol called Farcaster. The company has been testing Farcaster with clients and is now working on a second version of its protocol, with an aim to launch later this year.
10. Zamp raised $25M with valuation now at $160M
Amit Jain – who recently quit as a managing director at Sequoia Capital India – has raised about $25M for his new venture, named Zamp. The round, led by Sequoia Capital and a clutch of high-profile individual investors, values Jain’s startup at almost $160M, a person aware of the matter said.
📚 Reports and breakdowns of noteworthy developments, here is the TLDR
Highlights
Ethereum has grown into a significant settlement layer with a transaction of more than $11.6 Trillion last year more than Visa ($10.4 Trillion) and Bitcoin ($4.6 Trillion).
About half of the activities are connected to stablecoin, meaning transactions are connected to real-world financial activities indirectly.
The evolution of the Ethereum ecosystem from a business perspective
There are two main types of scaling solutions: Layer 2s (L2s) and sidechains. Without going into the details, L2s are separate systems (often, but not always, other blockchains) tied to Ethereum that bundle transactions together (known as a “rollup”) and anchor the data onto the Ethereum Mainnet in a way that ensures its validity. In this way, they “inherit” the security properties of the Mainnet, and so can be considered equally secure. Through bundling, L2s can massively increase transaction volume and reduce transaction fees. Sidechains are separate blockchains that work with the Ethereum Mainnet but are not as directly tied to it as L2s, and so do not necessarily inherit its security properties.
Rise in the number of Ethereum service providers, vendors and Blockchain-as-a-Service (BaaS) platforms. Businesses can also find an increasing number of providers to assist them in asset tokenization, the process by which an issuer creates blockchain-based digital tokens to represent either digital or physical assets.
A brief summary of Ethereum update
Scheduled upgrades should address cost and performance too. The chief of these is the introduction of sharding, a well-known method for improving database speeds by splitting them into parts. With sharding, the throughput of the Mainnet is set to improve dramatically.
The update is supposed to minimise the energy consumption of the Ethereum Mainnet by 99.95%.
Business projects in Blockchain by industry
Case Studies:
ACRE Africa uses Ethereum Mainnet to automate weather index parametric micro-insurance for farmers in sub-Saharan Africa, reducing costs and complexity while speeding up claims payouts and increasing demand for the product.
Blockchain-based information provenance verification for syndicated news stories
Blockchain-based automation reduced the cost of the company’s micro-insurance. Offering trust via a publicly accessible audit trail makes a difference in their market, and could not be achieved by traditional means.
The total amount of investment and aggregate individual deals can give an inaccurate sentiment of investment in the crypto market.
Individual deal activity has been up 19.9% since Q1. However, the pace has been slowing since April.
In addition, the average deal value declined 16.5%, suggesting that VCs are still willing to fund projects, albeit with more modest capital amounts. Web3 dominated almost every metric in Q2.
Early-stage investments in Seed rounds saw the most activity as usual and total capital inflows of $2.18B.
The Web3 sector also slightly had more individual deals than DeFi and CeFi in the later-stage investment and expansion rounds.
Interestingly, CeFi was not a sector that saw substantial attention from investors over the past five quarters, except CeFi players such as Coinbase, FTX, and Binance. In Q2, the number of deals across all stages of investment increased significantly and could be the start of a future trend.
The top 10 most active VCs switched focus to Web3 in Q2 instead of DeFi and NFTs in Q1. Seven of the top 10 most active investors’ number one capital allocation sector were in Web3.
These seven investors’ percentage allocation ranged from 43% to 75% of all their investment activity in Q2. The top 10 most active VCs accounted for 65% of all individual deals in 2021 and Q1 2022.
However, this number fell to just over 42% in Q2, while the total number of individual deals increased to 621, 100 more than last quarter.
Andreessen Horowitz (a16z) announced a $4.5-billion fund, believing we have entered the “Golden Era of Web3” and using the fund to help hasten Web3 adoption and growth.
With 43% of all individual deals, Web3 dominated the VC capital interest in Q2. DeFi took a back seat with 16% of capital inflows, a drastic change from the last five quarters.
Animoca Brands was involved in five acquisitions focused on GameFi, marketing, and education. Out of the 43 individual deals Animoca Brands entered in Q2, 72% focused on Web3.
📈 Charts of the week
The Chart shows that Binance has surpassed Coinbase to become the exchange with the most Bitcoin
The below chart shows that Stablecoin TVL has leveled off at $153.6B since the Terra implosion, leaving USDT ($66.4B), USDC ($54.6B), BUSD ($18.0B), DAI ($6.5B), and FRAX ($1.4B) to round out the top 5. The market has deemed USDC to be the most stable asset during market turmoil as the asset’s market cap jumped nearly 30% since January 1.
💡Inside the Metaverse and NFT latest news, trends and insights
1. MetaMundo launches marketplace for interoperable metaverse NFTs
BVI-based MetaMundo said on Tuesday that it has launched its 3D non-fungible token (NFT) marketplace for metaverse assets such as galleries, villas, music venues, parks, avatars and vehicles that can be used across multiple metaverse platforms.
2. Dubai's metaverse strategy plans to add $4B to economy by 2027
Dubai's crown prince, Hamdan bin Mohammed bin Rashid Al Maktoum, announced on Monday that the emirate would look to use the metaverse to create 40,000 "virtual jobs" and add $4B to its economy over the next five years.
3. Yuga Labs champions openness, collaborative development in Otherside litepaper
Yuga Labs set out its vision for the Otherside on Saturday in a document that speaks to the direction and ethos of what will become the company's "world-building metaverse platform."
4. 300+ NFTs stolen, $400K in Ethereum taken in Premint hack
Hackers infiltrated the popular NFT registration platform and used a fake pop-up to coerce users into giving up their wallet information. With 320 NFTs and more than $400,000 in profit it is one of the top NFT cybercrime this year. The hackers then send the funds to Tornado cash Mixing services.
5. GameStop NFT almost outperforms coinbase in two days
GameStop's NFT market overtakes Coinbase in terms of sales activity. OpenSea is still the market leader in transaction volume. Gamestop, dominated by The MetaBoy collection, generated a volume of $4M with top 50 collections, while Coinbase NFT volume was still at $2M with OpenSea at top $17M.
6. Italy instructs Museums to halt contracts with NFT companies
The Italian ministry that regulates the country’s museums has asked institutions to temporarily cease contracts with NFT providers. This decision comes after the Uffizi Galleries made a paltry profit from the sale of a Michelangelo’s Doni Tondo (1505–06, pictured below) NFT.
7. Tony Hawk partners with the Sandbox to open a Skate Park in the Metaverse
Tony Hawk, one of the most popular skateboarders in the world, has announced he will build a digital skateboarding park in the metaverse. The venue will be built in partnership with The Sandbox.
8. Christies launches New Venture fund to invest in Web3, fintech and emerging technologies
The venture fund will explore Web 3, art-related fintech products and technologies that enable seamless art consumption. The fund has successfully closed its first investment in LayerZero Labs. The new fund will also advance Christie’s activities in the presentation, education, and sales of fine art and luxury goods.
📅 Blockchain, Crypto and Web3 events calendar…
…for the next couple of months
Redefine Tomorrow | Jul 21-22, 2022 | Online
Crosstech Mexico | Jul 21-22, 2022 | Ciudad de México, Mexico
Blockchain Economy Conference | Jul 21-22, 2022 | Istanbul, Turkey
Sustainable Blockchain Summit | Jul 22-23, 2022 | Paris, France
Mining Disrupt | Jul 26-28, 2022 | Miami, Florida
Blockchain Economy Istanbul Summit | Jul 27-28, 2022 | Istanbul, Turkey
NFT South | Jul 28-30, 2022 | Dallas, Texas
NFT Expoverse Los Angeles | Jul 29-31, 2022 | Los Angeles, California
Sustainable Energy: Blockchain and Cryptocurrency | Aug 1-3, 2022 | Online
NFT3 Awards 2022 | Aug 5-7, 2022 | Los Angeles, California
Korea Blockchain Week | Aug 7-14, 2022 | Seoul, Korea
ETHToronto | Aug 8-10, 2022 | Toronto, Canada
Blockchain Futurist Conference 2022 | Aug 9-10, 2022 | Toronto, Canada
Fintech Fest 1.0 | Aug 10, 2022 | San Diego, California
Play-2-Earn Expo | Aug 10-13, 2022 | Bangkok, Thailand
Superverse | Aug 20-21, 2022 | Mexico City, Mexico
Coinfest Asia | Aug 25-26, 2022 | Bali, Indonesia
🆕 The Science of Blockchain | Aug 29-31, 2022 | Stanford, California
BlackSeaChain | Sep 1-2, 2022 | Varna, Bulgaria
🆕 MetaWeek | Sep 11-14, 2022 | Dubai, United Arab Emirates
Hyperledger Global Forum | Sep 12-14, 2022 | Dublin, Ireland
🆕 Blockworks Digital Asset Summit | Sep 13-14, 2022 | New York, New York
The Family Office & High Net Worth | Sep 15, 2022 | New York, New York
🆕 NFT Show Europe | Sep 17-18, 2022 | Valencia, Spain
🆕 Crypto Gibraltar | Sep 22-24, 2022 | Gibraltar, Gibraltar
📎 Miscellaneous Resources
The ULTIMATE thread on Polygon and its potential in 2022 and beyond
Here are 8 misconceptions about "The Merge" on #Ethereum that you should know
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