Web3 identities and iPhone Apps, Galaxy Digital and BitGo acquisition, CBDC pilots, tokenized bonds, new $300M Web3 fund and Hell’s Kitchen. Finally, will the Metaverse replace physical locations?
18 August 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.
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Table of Content
🗞️The 17 news you should be aware of
💸 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's latest news, trends and insights
🔦Company spotlight
📅Blockchain, Crypto and Web3 events calendar
📎Miscellaneous resources
🗞️ The 17 news you should be aware of
1. Token Front-Running was common at Coinbase crypto exchange, a new study argues
A study by researchers at the University of Technology Sydney found that insider trading occurred on up to 25% of new crypto listings at Coinbase between September 2018 and May 2022. Over four wallets were involved with suspicious trading. The four wallets identified earned 1,003 ETH from their trades. A former Coinbase product manager and two others were charged with wire fraud and insider trading in July.
2. Tech industry consortium to run CBDC pilot with sterling stablecoin
A cross-industry consortium is being launched in the UK to run a retail CBDC pilot, which will feature a live Digital Sterling (dSterling) stablecoin asset. The initiative is being coordinated by Dutch financial infrastructure group paywith.glass, with Boston Consulting Group as its consulting partner, and supported by The Payments Association in the UK.
3. Colombia to introduce Central Bank Digital Currency
Colombia is considering a central bank digital currency. The country's new president has shown an interest in digital assets and has said that the country should mine Bitcoin using renewable energy instead of producing cocaine. Columbia is becoming increasingly crypto-friendly. It released draft rules for crypto companies that want to operate in the country last month.
4. Coinbase plans to halt Ethereum deposits and withdrawals during the Merge
Coinbase will temporarily suspend Ethereum-based deposits and withdrawals during the Merge upgrade. The suspension will impact all on-chain ETH and ERC-20 token movements. It will help the exchange ensure that the upgrade is properly reflected within its internal systems. Trading of assets already at the exchange is not expected to be impacted. Users should be wary of Merge-related scams. More details about Coinbase's Merge plans are available in the article.
5. Buenos Aires to run Ethereum nodes by 2023
Buenos Aires will deploy several Ethereum validator nodes in 2023 for exploratory and regulatory purposes. Running the nodes will help regulators develop a deeper understanding of the Ethereum chain. The nodes will be deployed in partnership with private companies. Buenos Aires started allowing its citizens to pay taxes with cryptocurrency last April and it is working on a blockchain-based identification system.
6. Acala’s stablecoin falls 99% brought back to normal by a governance vote
Hackers planted a bug in the newly deployed liquidity pool and minted 1.3B tokens from iBTC-aUSD liquidity pool. The incident caused a decline in the value of stablecoin by 99%. However, the stablecoin has since pumped 10,150% with a DAO vote to burn those illegally minted 1.3B tokens.
7. Ethereum completes Goerli Testnet Merge
Goerli proof of stake consensus mechanism has merged into Goerli’s execution layer. Next is the Ethereum mainnet. According to ethereum.org, the merger is set to reduce ETH issuance by 90% as well as energy consumption by 99.95%. The concept of Hashrate will disappear after the POS shift.
8. Galaxy Digital abandons 1.2B plan to acquire BitGo
BitGo, which was about to be acquired by Galaxy Digital, lost the deal as it failed to provide the financial statement for the financial year 2021. The deal had been announced 15 months ago in the middle of the Bull market but the economic downturn hit the market and indeed Galaxy Digital too. The company reported a loss of $554.7M and the share price declined 60% since March.
9. Tencent exits the NFT market
Tencent stops sales on its NFT platform Huanhe a year after the launch but existing users can share digital collectibles. With a Ban on cryptocurrency, strict government scrutiny and external factors, a number of Chinese tech giants including Tencent signed an agreement in June which includes probation on secondary trading of digital collectibles.
10. Unstoppable Domains streamlines use of Web3 identities through iPhone App
Unstoppable Domains is releasing an iPhone app that will allow users to connect their profiles to crypto wallets and log into more than 180 decentralized applications. It will make blockchain-based applications accessible and transferable across a handful of protocols. An Android app will be launched at the end of the year. Unstoppable recently raised $65 million in a Series A funding round led by Pantera capital.
11. Jump crypto partners with Solana to build new validator software
Jump Crypto joined Solana to create a new validator client. The client will maintain the integrity of the blocks. Any stakeholder of Solana tokens with the right hardware can become a validator. Kevin Bowers, chief science officer at Jump Trading will oversee the team building the validator.
12. OpenSea volume sinks to 13 months low
The number of transactions plunged two-thirds in the last six months. The volume of the NBA NFT sports series also dropped by 87% from its high in April. Most of the collectibles are down including Doodles and Clone X, but some of them gained interest like CryptoPunks jumped 82% since May 30.
13. Genesis Cuts 20% of the staff, CEO Michael Moro out
Derar Islim will take over as interim CEO. The company fired 260 employees for cost reduction as per Bloomberg. Genesis had $4.9 billion in active loans at the end of June while reporting over $17 billion in spot volume trading during the second quarter.
14. Iran makes first import order using cryptocurrency
The order, worth $10 million, was a first step towards allowing the country to trade through digital assets that bypass the dollar-dominated global financial system and to trade with other countries similarly limited by U.S. sanctions, such as Russia.
15. India freezes Peter Thiel-Backed Vauld's crypto and bank assets worth $46M
After WazirX now ED freezes crypto assets of Vauld. The assets were deposited by 23 entities which are involved with criminal predatory lending practices. Flipvolt failed to justify the transactions and hence, breached the KYC norms and EDD mechanism.
16. Transforming the green finance ecosystem through crypto
Credible data, open platforms, democratization — these are qualities that lend themselves to green finance values across its various products and goals. Crypto addresses these issues allowing for innovation and deployment of green investment products and services to flourish to their full potential.
17. Australian Securities Exchange takes step towards tokenized asset trading
Companies on the Australian Securities Exchange (ASX) could be able to trade tokenized bonds, equities, funds, or carbon credits after a successful proof-of-concept trial led by the digital asset investment platform Zerocap.
💸 The development of a startup ecosystem and major PE/VC funding
1. Crypto investment firm CoinFund launches $300M Web3 fund
The CoinFund Ventures I fund will invest in companies showing commercial traction that also belong to a crypto sector with a large total addressable market, said David Pakman, CoinFund managing partner and venture investing head. Areas of interest include layer 1 blockchains, Web3 infrastructure, non-fungible tokens (NFT), gaming and asset management.
2. Paradigm leads $20 million round for Fractional as it rebrands to Tessera
Other investors include Uniswap Labs, E Girl Capital and Focus Labs, as well as more than 50 angel investors including DC Investor and Keyboard Monkey. Tessera’s Series A comes almost a year after the startup raised a total of $7.9 million in seed funding, a round which was also led by Paradigm.
3. Polygon and Alpha Venture DAO back Icetea Labs’ first Web3 accelerator program
Icetea Labs has partnered with Polygon and Alpha Venture DAO to launch its first web3 incubation and accelerator program for Southeast Asia. The program aims to help web3 startups in their fundraising efforts, market entry strategy and sustainable growth.
4. Agya Ventures closes $32M first investment fund with plans to invest in Metaverse Proptech
Agya Ventures, a venture capital firm focused on early-stage real estate and construction technology, announced today the close of its $32 million first investment fund (Fund I). The firm plans to invest about 50 to 55 per cent in conventional proptech while the remaining 45 per cent will be invested in metaverse real estate startups that bridge the gap between the real and virtual world.
5. Dragonfly buys hedge fund backed by A16z and Sequoia to expand Web3 strategy
Dragonfly has announced its acquisition of crypto hedge fund MetaStable. The crypto-focused venture capital firm is beefing up its web3 strategy with the purchase. MetaStable Capital has over $400 million in assets under management and is backed by leading venture capital firms Sequoia Capital and Andreessen Horowitz (a16z).
6. Digital Business Ireland launches €10M fund to onboard businesses to Web3
Digital Business Ireland (DBI) is raising €10 million for a new program that will help Irish businesses transition to Web3.
7. .bit raises $13M series Afunding to build cross-chain Decentralised Identity Protocol
Open-source decentralised identity protocol .bit has raised $13 million in a Series A funding round from CMB International, HashKey Capital, QingSong Fund, GSR Ventures, GGV Capital, and SNZ. Four former Tencent executives founded the startup exactly a year ago.
8. EtherMail raises €2.9M to reimagine email for Web3
Fabric Ventures and Greenfield One have led a $3 million seed investment in EtherMail. The startup offers a blockchain-based encrypted wallet-to-wallet email application for Web3 companies. EtherMail says it will use the funds for the expansion of its team.
9. Invisible Universe has raised $12M in a series A led by Seven Seven Six.
The internet-first animation studio is backed by Jennifer Aniston and Serena Williams. The animation studio partners with celebrities to develop animated character franchises for social media and Web3 platforms.
10. LongHash Ventures launches Fund II
LongHash Ventures has launched its second fund with a target of $100 million, which it aims to reach by the end of the year, TechCrunch reported. The firm focuses on Web3 investments.
11. Crypto miner Prime Blockchain and 10X SPAC cancel $1.25B merger deal
Prime Blockchain and 10X Capital Venture Acquisition Corp II, a special purpose acquisition company (SPAC), have mutually agreed to terminate a $1.25 billion merger deal, according to an 8-K filing published on August 12. The goal was to have the merger complete by the second half of 2022.
12. Huobi founder in talks to sell a majority stake in crypto exchange
Founded in China in 2013 but headquartered in the Seychelles, Huobi remains one of Asia’s largest crypto exchanges by volume. Potential buyers include exchange giant FTX and Justin Sun, the founder of Tron.
13. Jito Labs has raised $10 million in Series A funding
Jito Labs, a crypto startup building infrastructure to mitigate the negative impact of maximum extractable value (MEV) on Solana, has raised $10 million in a Series A funding round led by Multicoin Capital and Framework Ventures. Other investors included Alameda Research, Solana Ventures, Delphi Digital and Robot Ventures.
📚 Reports and breakdowns of noteworthy developments, here is the TLDR
1. The Metaverse will enhance — not replace — companies’ physical locations
Is the Metaverse replacing Silicon Valley? According to the authors of this article, the Metaverse is less a substitute for location and more a complement to it and here is why:
It will be unable to replicate the emotional cues, body language, serendipity, and diversity that happen when human beings cluster and collaborate in real places.
It is likely to reduce the set of places that truly matter. Only a relatively small number of large global cities have the size, scale, and connective infrastructure to function as global collaborative hubs.
The Metaverse and cities are complements: they are both a channel — each good for transmitting different kinds of information.
The Metaverse is a channel for delivering and using a lot of information in a convenient form. The physical world can deliver much deeper social, emotional, and sensory data. This kind of interaction remains necessary to build trust and social capital over time.
Instead of replacing actual stores, physical spaces can provide a way for customers to access the Metaverse — maybe for the first time — and experience the latest AR/VR technologies.
Lastly, regarding the virtual and physical nature of work, companies will need to think more strategically about what the office is for and where physical presence is required.
More café or canteen than cubicle.
The authors conclude that the coming age of the Metaverse is making the location an increasingly central component of business success and that Metaverse and physical location or cities are much better understood, and acted upon, as complements to one another.
The US Federal Reserve Board has provided additional information for banking organizations engaging or seeking to engage in crypto-asset-related activities saying banks should notify the central bank prior to engaging in such assets.
The emerging crypto-asset sector presents potential opportunities to banking organizations, their customers, and the overall financial system, however, it may also pose risks related to safety and soundness, consumer protection, and financial stability.
The supervisory letter issued by the US central bank on Tuesday outlines the steps Board-supervised banks should take prior to engaging in crypto-asset-related activities, such as assessing whether such activities are legally permissible and determining whether any regulatory filings are required.
Banks should have adequate systems and controls in place to conduct crypto-asset-related activities in a safe and sound manner prior to commencing such activities.
Crypto trade assumes relevance as various financial institutions and central banks also have been flagging concerns about the financial risks attached to the virtual currency trade, including cryptocurrency. This form of currency can potentially be used for various anti-social activities.
It is important to note that the price of widely traded digital asset Bitcoin has dropped sharply from its all-time high over the past several months, turning investors poorer. Most other prominent crypto-assets too have experienced steeper declines recently.
The Financial Stability Board, an international body that monitors and makes recommendations about the global financial system, will report to the G20 finance ministers and central bank governors in October on regulatory and supervisory aspects of stablecoins and other crypto-assets. It is working to ensure that crypto-assets are subject to robust regulation and supervision.
"Crypto-assets, including so-called stablecoins, are fast-evolving. The recent turmoil in crypto-asset markets highlights their intrinsic volatility, structural vulnerabilities and the issue of their increasing interconnectedness with the traditional financial system" the Financial Stability Board had said.
📈 Charts of the week
L1 Real Yields
Avg Inflation rate = 5.6% (ETH post-merge 0.20%). Only 4/15 L1s with a Real Yield premium to ETH. If Ethereum is to become the benchmark yield in crypto, and unless the Merge is being priced to fail, other L1s seem mispriced.
The below figure shows the Redemption rights of different stablecoins
💡Inside the Metaverse and NFT's latest news, trends and insights
1. Gordon Ramsay enters the metaverse with Hell’s Kitchen
Sandbox is partnering with ITV Studios to bring Hell’s Kitchen to the metaverse. The Hell’s Kitchen restaurant setting represents the first experiences based on cooking themes to appear in The Sandbox. Additionally, Hell’s Kitchen-themed assets, including limited edition Gordon Ramsay avatars, will be available down the line for players and creators to include in their own original experiences.
2. Creta, a metaverse gaming platform, sold its first private NFT collection in just under 26 minutes
The collection of 500 NFTs dubbed Genesis Pass and available for private investors from the territory of South Korea has been purchased within 26 minutes after the official launch. The launch marked the release of Creta's own marketplace solution that will serve as a library of NFTs linked to both in-game and metaverse assets that will be available for acquisition and listing by the players once the games and the marketplace go live.
3. MTV opens a metaverse experience to promote the Video Music Awards
MTV created the VMA experience on Roblox to reach younger viewers and to learn about the platform, executives said. The VMA experience will include three games, starting with one on Aug. 12 and adding a new one each Friday until the award show on Aug. 28. Players can stock up on chances to vote for the best metaverse performance by collecting MTV-logo tokens throughout the experience and by playing the games.
🔦Company spotlight
The company: 👉 Data Gumbo 👈 provides a network for users to build, negotiate and execute their own smart contracts. As a neutral third-party, they supply the blockchain technology and infrastructure for companies to build and operate their own contracts, thereby empowering industrial enterprises to transact transparently and efficiently. It created the first Smart Contract Marketplace with 40+ smart contract templates ready to reduce transactional friction between the 180+ enterprises participating in its smart contract network.
The story: Data Gumbo just closed its $4M series C funding led by the venture subsidiaries of energy operators Saudi Aramco and Equinor. This comes after successful Series A and B rounds which brought in over $20M in raised capital.
Why should I care: The continual investment of oil giants into Data Gumbo shows that there is significant demand on an enterprise level to apply blockchain technologies across complex operational processes and supply chains. This is done to exploit the benefits of Blockchain as a Service (BaaS) namely significant cost savings, better reporting, treasury management, and clarity and certainty over financial positions for all parties in the supply chain.
The blockchain technology is supported by Industrial Internet of Things (IIoT) which allows for the backend processes such as payments releases to be automated and integrated within the supply chain verticals. The provision of such BaaS are set to grow exponentially within the next 5 years with the market size of BaaS expected to reach $17.9 billion by 2027.
📅 Blockchain, Crypto and Web3 events calendar
….for the next couple of months
Superverse | Aug 20-21, 2022 | Mexico City, Mexico
Coinfest Asia | Aug 25-26, 2022 | Bali, Indonesia
Surfin' Bitcoin | Aug 25-27, 2022 | Biarritz, France
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
Australian Crypto Convention | Sep 17-18, 2022 | Gold Coast, Australia
Blockchain Expo Europe | Sep 20-21, 2022 | Amsterdam, Netherlands
Mainnet 2022 | Sep 21-23, 2022 | New York, New York
Web 3.0 for Developers 2022 | Sep 22, 2022 | Tel Aviv, Israel
Crypto Gibraltar | Sep 22-24, 2022 | Gibraltar, Gibraltar
Asia Crypto Week | Sep 26-Oct 2, 2022 | Singapore, Singapore
Cosmoverse | Sep 26-28, 2022 | Medellin, Colombia
Converge22 | Sep 27-20, 2022 | San Francisco, US
TOKEN2049 | Sep 28-29, 2022 | Singapore, Singapore
SmartCon 2022 | Sep 28-29, 2022 | New York, New York
Blockchain & Infrastructure | Sep 29-30, 2022 | Washington, US
World Blockchain Expo | Sep 29-30, 2022 | Dubai, United Arab Emirates
Crypto Fest 2022 | Sep 30, 2022 | Cape Town, South Africa
Blockchain Economy Dubai Summit | Oct 4-5, 2022 | Dubai, UAE
Crypto Expo Dubai | Oct 5-6, 2022 | Dubai, UAE
🆕 Blockchain Expo North America | Oct 5-6, 2022 | Santa Clara, US
DeFi Conf 2022 | Oct 6, 2022 | Belfast, United Kingdom
Future Blockchain Summit | Oct 10-13, 2022 | Dubai, UAE
Stellar Meridian 2022 | Oct 11-13, 2022 | Rome, Italy
CBDC Summit 2022 | Oct 12-13, 2022 | Washington, US
Bitcoin Amsterdam 2022 | Oct 12-14, 2022 | Amsterdam, Netherlands
🆕 World Blockchain Summit Dubai 2022 | Oct 17-18, 2022 | Dubai, UAE
📎 Miscellaneous Resources
Absolute Beginner's Guide to Running DeFi Front-Ends Locally
Ethereum Scalability: The Roadmap to 100k Transactions per Second
The opinions are our own. The content of this newsletter is not intended to serve as financial advice and is for general informational and educational purposes only. We do not warrant, endorse, or assume responsibility for the accuracy of any information offered by third-party websites linked above.