Wintermute $160M hack, Tether lawsuit, Nasdaq Bitcoin custody, Sardine $51.5M Series B, Sports Metaverse startup raises $200M, NFTs regulated as Securities, SEC and The Merge, PoW & PoS definitions.
22 September 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 we wanted to thank you for your feedback and recommendations. We sincerely appreciate your insight because it helps us to understand what we are doing right and what we can work on. As a result, we introduced two new sections: ⚖️ Policies and laws and 📚The term of the week. Enjoy it!
If you're reading this and haven't signed up, subscribe by clicking below and join a community of 4,500+ readers who share your interests. If you are already an aficionado, thank you!
Table of Content
🗞️The 12 news you should be aware of
💸PE/VC funding
⚖️Policies and laws
📚Reports, here is the TLDR
📈Charts of the week
💡Metaverse and NFT news, trends and insights
🔦Company spotlight
📅Blockchain, Crypto and Web3 events calendar
👩💻The job fair
📚The terms of the week
📎Miscellaneous resources
🗞️ The 12 news you should be aware of
1. Tether ordered to produce documents showing backing of USDT
Tether is required to produce general ledgers, balance sheets, income statements, cash-flow statements, profit and loss statements, and records of any trades or transfers of cryptocurrency. Tether has also been ordered to share details about the accounts it holds at various crypto exchanges.
2. Kraken’s Powell steps down, incoming CEO says culture will not change
Jesse Powell, the CEO of Kraken, is stepping down from the top job at the cryptocurrency exchange he founded in 2011. The company announced the news on Wednesday, adding that longtime Chief Operating Officer Dave Ripley will succeed Powell in the coming months.
3. Helium founders, T-Mobile launch crypto-powered 5G mobile service
It is set to launch in the first quarter of 2023 with an initial plan of $5 per month and users can also earn crypto token rewards for sharing data. The services will rely on both T mobile nationwide network and Helium’s user-operated 5G nodes.
4. Nasdaq to launch institutional Bitcoin
The move would put the stock exchange operator in competition with the likes of Coinbase and BitGo, as well as firms like BNY Mellon and State Street. the offering, subject to regulatory approval, adds to Nasdaq’s existing products aimed at staking its place in the cryptocurrency industry.
5. Crypto market maker Wintermute hacked for $160M, OTC services unaffected
Wintermute is the latest in the long list of crypto companies stung by hackers. Founded in 2017 watermute provides billions of dollars in liquidity across multiple avenues. Last week it was named as the official Defi market maker of Tron Network.
6. China says blockchain patent applications make up 84% of the world’s total
Information technology claimed, the county accounts for 84% of total world’s patent applications despite its ban on cryptocurrencies The cost of filing a patent in China is close to zero, but the upside to holding a patent, or even just filing a patent, is comparatively large, as it can add to a company’s profile.
7. Hong Kong central bank, BIS exploring blockchain for SME finance
Project Dynamo emphasizes bettering off the unmet $5.2 trillion financing demand of SMEs using Blockchain, defi, and smart contracts. BIS is interested in introducing AI for assessing SME credit risk, innovative supply chain financing solutions, and the interoperability of payment solutions.
8. Major players to develop a prototype of European Central Bank CBDC
Amazon, CaixaBank, the European Payments Initiative (EPI), Nexi, and Worldline will start working this month. CaixaBank to develop P2P transaction applications, others will focus on offline transaction solutions, POS, and e-commerce.
9. Crypto, stocks rally as Fed raised rates by 75bps for the third straight month
The quantitative tightening to mitigate inflation risk hopes to regulate the highest inflation the country has seen in more than four decades. US regulators sighted a lower production and consumer demand. Bank of England also raised the interest rate by 50 bases points despite the likely recession.
DeFi platform’s “head chef” will be elected by holders of the protocol’s native SUSHI token following a public campaign. SushiSwap is the sixth largest decentralized exchange. The nomination process is controversial as Sushi struggles to keep its treasury afloat.
11. Poly Network integrates with XRP Ledger in support of fast cross-border payments
Now users can send XRP assets to heterogeneous blockchain networks such as Ethereum, Polygon, Fantom, Avalanche, and Arbitrum, through Poly Network. Also, the network cluster effect grows larger which creates improved asset interoperability.
12. Boba Network becomes the first layer 2 to launch on Avalanche
Boba Network currently ranks as Ethereum’s eighth-largest Layer 2 with TVL of $28.7M. The launch allows Avalanche developers to access Boba’s Hybrid Compute feature set. Boba also offers a native NFT bridge, allowing users to transfer nonfungible tokens between L1 and L2.
💸 PE/VC funding
1. Grand Theft Auto creator backs web3 gaming studio in $7.6M round
The round also featured participation from IGNIA, 2 Punks Capital, ID345 and Polygon. The company aims to create an interoperable gaming franchise, named the Unioverse.
2. Sardine raises $51.5M led by a16z to sniff out fishy fintech transactions
The company announced it has raised $51.5 million in a Series B round led by Andreessen Horowitz’s (a16z) Growth Fund after closing $19.5 million for its Series A earlier this year. The other Series B participants were a mix of new and existing investors.
3. Azuki creator closes in on $30M fundraise
Three people familiar with the fundraising effort confirmed the intended size of raise. The news comes just a week after fellow NFT maker Doodles bagged $54 million at a $704 million valuation, in a round led by Reddit co-founder and NFT enthusiast Alexis Ohanian’s venture capital firm 776.
4. Messari raises $35M in fresh fundraise
The company said it will use the funds to hire more staff and keep developing its offerings, including its newly-launched Protocol Metrics and Data Apps products. Morgan Creek Digital, FTX Ventures were among new investors in Messari's fundraise. Existing investors that participated included Point72 Ventures and Coinbase Ventures.
5. Yellow Card banks $40M Series B
Pan-African cryptocurrency exchange’s Series B funding round was led by crypto-focused venture capital firm Polychain Capital. The funds will go toward expanding across the continent, developing new products and forming new partnerships, according to the press release.
6. Crypto platform Portofino lands $50M+
Portofino Technologies has raised over $50 million from Valar Ventures, Global Founders Capital and Coatue. The startup is a developer of high-frequency trading technology for digital assets.
7. Binance and FTX lead $50M race to purchase Voyager's assets
Voyager filed for bankruptcy in July with total outstanding liabilities of $10 billion. The firm’s demise came shortly after its largest debtor 3AC filed for bankruptcy. According to the wall street Journal, Binance’s bid is slightly higher than FTX
8. Sports Metaverse company secures $200M funding
LootMogul secured a $200 million investment commitment from Gem Global Yield, providing the company with a share subscription facility. The company said that the funding is expected to boost the development of Loot Mogul's metaverse focused on sports games, including "building meta (virtual) sports cities.
9. Variant leads $18.5 million fundraise for developer platform Hyperlane
Galaxy Digital, CoinFund, Circle, Figment, Blockdaemon, Kraken Ventures and NFX also participated in the round. The company is planning to use the funding to build the "Sovereign Consensus." This allows developers to safely customise an application's interchain security model.
⚖️ Policies and laws
1. Proof of security? Gensler eyes proof of stake after The Merge
Securities and Exchange Commission Chair Gary Gensler hinted that Ethereum’s shift from proof of work to proof of stake may make Ether a security in the eyes of the markets regulator.
2. Stablecoins should be ‘properly regulated’ says Jamie Dimon
“It’s equivalent to a money market fund, you should look at it exactly the same way in terms of disclosure, backup, gates and a whole bunch of different things” Dimon said.
3. Draft EU law could see NFTs regulated as Securities
According to University of Kentucky law professor Brian Fyre, the legislation’s language amounts to the EU labelling major blue-chip NFT collections like Bored Ape Yacht Club (BAYC), Cryptopunks, and Doodles, among others, as securities.
4. Australia’s financial watchdog expands team to better regulate Crypto
After the last week’s Ethereum Merge event, ASIC looks set to decide whether POS tokens Ethereum, Cardano, and Solana are subject to oversight. This will impact crypto exchanges either to delist or comply with stringent regulations
5. Latest draft of US crypto law would temporarily ban Terra-like Stablecoins
The Collapse of Terra USD has intensified the interest of lawmakers and regulators. Algorithmic stablecoins would be shelved for two years of study by federal agencies.
6. Indonesia wants crypto exchanges to stop reinvesting user funds
Indonesia will seek to clamp down on foreign ownership of crypto exchanges by introducing a new rule which mandates 66% of company board members and directors to be citizens living within the country.
7. The Biden administration put out a framework on regulating crypto
The framework outlines the ways in which the financial services industry should evolve to make borderless transactions easier, as well as how to crack down on fraud in the digital asset space.
📚 Reports, here is the TLDR
Relevance of on-chain asset tokenization in ‘crypto winter’ by BCG
Boston Consulting Group (BCG) and ADDX estimate that asset tokenization will reach $16 trillion by 2030, or 10% of global GDP. To put that figure in context, in 2020, the total assets under management for ETFs were $7 trillion (Source BIS), and total real estate investment trusts (REITs) were worth $2.5 trillion in 2021 (Source Nareit).
Asset tokenization refers to using blockchain to create tokens for financial and real-world assets ranging from equity, bonds and funds to art, real estate, commodities and patents.
The report said the current figure for security tokens was $310 billion. When we asked ADDX for details about what was included, they mentioned the range of assets above and added insurance policies, pension, alternatives investments, infrastructure projects, car fleets and patents.
Many current tokenization platforms are not public. For example, there are some significant blockchain and tokenization projects targeted purely at trading, such as the separate repo platforms from Broadridge and JP Morgan that transact tens of billions of trades weekly. Similarly, Baton Systems runs a number of DLT (but not token) platforms that settle tens of billions of dollars, but that is post-trade only.
BCG points to the crypto winter favouring blockchain tokenization. “Our analysis shows asset tokenization projects could emerge strongly,” said Sumit Kumar, Managing Director and Partner, BCG South East Asia.
“They are more likely to demonstrate viability in this capital-constrained environment and are therefore better positioned to attract the attention of investors, who continue to have a significant store of dry powder to deploy. This report projects that even using a conservative methodology, asset tokenization would be a US$16.1 trillion business opportunity by 2030. In a best-case scenario, that estimate goes up to US$68 trillion.”
Tokenization is seen as addressing the relative illiquidity of many assets today. The causes for the limited marketability are cited as
high ticket sizes, whereas tokens can be fractionalized
inability to fractionalize some assets, such as a house
lack of data for valuation
limited access
regulatory hurdles
complex user journeys.
ADDX (formerly iSTOX) is a Singapore-regulated exchange for security tokens. It recently raised $58 million in funding, including from the Thai stock exchange SET, bringing its total backing to more than $120 million. One of its highest-profile tokenizations was when it partnered with UOB bank for a $100 million bond for Singtel.
📈 Charts of the week
The table below shows the range of tokenization players emerging, with most being asset agnostic
💡Metaverse and NFT news, trends and insights
1. Walmart to sell NFT-linked DC comic books via pop culture retailer Funko
The “phygital” bundle includes a comic book cover from DC’s “The Brave and the Bold,” in both printed form and as a non-fungible token (NFT) redeemable online. Starting Oct. 7, Funko will begin selling the 30,000-unit “Brave and the Bold” collection at Walmart.
2. Digital fashion platform BNV will launch its own Metaverse
Luxury fashion brands have begun experimenting with presences in the metaverse, although the fruits of those endeavours have yet to truly materialize. In the next month, the company plans to roll out a beta version of its own metaverse platform, BNV World.
3. NFT marketplace OpenSea to integrate Ethereum scaling solution Arbitrum
Following successful deployment tomorrow, Arbitrum will join four existing networks on the marketplace: Ethereum, Solana, Polygon, and Klaytn.
4. Saudi Arabia takes National Day Celebrations to the Metaverse
Saudi Arabia has been one of the early adaptors of WEB3 and Metaverse. The event will be held in the Decentraland metaverse. The experience will also feature exclusive Saudi national attire offered as wearable NFTs for event visitors
🔦Company spotlight
The company: 👉 Ownera 👈 is a startup building infrastructure to connect tokenized platforms and trading interfaces being launched by traditional finance companies. This will allow clients to access a unified digital securities wallet, allowing them to invest, trade, lend and borrow against the connected tokenized assets.
The story: Ownera closed a $20 million Series A round led by J.P. Morgan and private asset management firm LRC Group, alongside Draper Goren Holm, tokentus Investment AG, Accomplice Blockchain, Polymorphic Capital, The Ropart Group and Archax.
Why should I care: The tokenization of securities has the capacity to digitise markets with total value in the trillions of dollars. The role of Ownera is to seamlessly interconnect them into one global distribution and liquidity network, using open-source network specifications and act as the neutral layer. This will enable digital trading between clients of financial institutions across any blockchain or traditional ledger, issuance or exchange platform, custody technology and settlement currency. The platform is based on the open-source FINP2P protocol and supports any type of securities tokenisation engine on any public or private blockchain plus traditional ledgers.
📅 Blockchain, Crypto and Web3 events calendar
….for the next couple of months
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
Seoul Meta Week 2022 | Oct 3-7, 2022 | Seoul, Korea
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
Digital Asset Summit 2022 | Oct 17-18, 2022 | London, UK
Vietnam Blockchain Summit | Oct 19-20, 2022 | Hanoi, Vietnam
Bitcoin Collective | Oct 21-22, 2022 | Edinburgh, GB
Money20/20 | Oct 23-26, 2022 | Las Vegas, US
Blockchain Expo Tokyo | Oct 26-28, 2022 | Makuhari Messe, Japan
Plan ₿ Forum | Oct 28-29, 2022 | Lugano, Switzerland
ETH Lisbon | Oct 28-30, 2022 | Lisbon, Portugal
San Francisco Blockchain Week | Oct 31-Nov 6, 2022 | San Francisco, CA, USA
LA Blockchain Summit | Nov 1-3, 2022 | Los Angeles, CA, USA
Blockchain Economy Summit | Nov 1-3, 2022 | Los Angeles, CA, USA
Florida Bitcoin & Blockchain Summit | Nov 4, 2022 | Tampa, FL, USA
Solana Breakpoint 2022 | Nov 4-7, 2022 | Lisbon, Portugal
Web3 & Blockchain World (W3B) | Nov 8-9, 2022 | Toronto, Canada
Crypto Nexus | Nov 8, 2022 | San Francisco, CA, USA
Blockchain Economy Summit | Nov 10-11, 2022 | Barcelona, Spain
🆕 Pacific Bitcoin | Nov 10-11, 2022 | Los Angeles, CA, USA
Istanbul Blockchain Week | Nov 14-17, 2022 | Istanbul, Turkey
🆕 Adopting Bitcoin | Nov 15-17, 2022 | San Salvador, El Salvador
🆕 ETH Gathering Barcelona 2022 | Nov 17-21, 2022 | Barcelona, Spain
🆕 Next Block Expo | Nov 23-24, 2022 | Berlin, Germany
🆕 NFT Fest Aus 2022 | Nov 23-24, 2022 | Melbourne, Australia
👩💻The job fair
Capgemini - Smart contract Developer - United States
Polygon - Web3 Project Manager Developer Intelligence - Remote
Binance - EDD Senior Compliance Analyst - Europe
Blockchian.com - Web3 front-end engineer, Asset scaling - London, UK
📚The term of the week
Proof of Work (PoW) is a consensus algorithm that rewards miners who expend computational energy to solve mathematical problems to mine new blocks. The probability of mining a block and receiving block rewards is a function of how much computational energy (i.e. hash power) a miner expends.
Proof of Stake (PoS) is a consensus algorithm that selects and rewards validators based on a validator’s economic stake (i.e. number of cryptocurrency tokens) in the network. The probability of creating a block in a PoS network is the result of economic value-at-loss.
📎 Miscellaneous Resources
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.