FTX debacle; Hyperledger Digital Identity; Iberpay, BBVA, Santander & Digital Euro; Crypto.com $400M slip-up; Ramp & TRM Labs $70M round; New CBDC pilots & TLDR; Apple, Nike & the Metaverse.
16 November 2022
Hello there and welcome to the Blockchain From First Principle newsletter where we curate some of the week's news, summarise reports, 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 15 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 15 news you should be aware of
1. Genesis Global Capital suspends redemptions, with the impact spreading to Gemini
“This decision was made in response to the extreme market dislocation and loss of industry confidence caused by the FTX implosion,” parent company Digital Currency Group said. Business operations at DCG and its other wholly-owned subsidiaries were not affected.
2. Uniswap overtakes Coinbase as second-largest exchange trading Ethereum
Traders are flocking to decentralized exchanges after FTX's collapse. DEXs allow customers to trade crypto while retaining full control over their funds. Many DEXs recently posted an overnight doubling in trade volumes. Uniswap is now the world's second-largest venue for trading Ethereum. Binance continues to lead the category.
3. Circle adds support for Apple Pay
Circle is extending its support for Apple Pay. Customers are now able to buy cryptocurrencies using Apple Pay on their preferred exchanges. The integration will be beneficial for crypto-native businesses. Circle plans to bring in more payment options to make cryptocurrency payment acceptance easier.
4. Solana DeFi sees almost $700M in value wiped out on FTX fallout
Solana applications stored more than $10 billion on the network at its peak last November. The network's total value locked has since dropped to just over $300 million. More than $700 million has exited the ecosystem since the beginning of this month. FTX's collapse resulted in falling sentiment towards Solana as Sam Bankman-Fried heavily endorsed the network.
5. Hyperledger launches new digital identity project, AnonCreds
The technology itself is not new, as it was originally part of Hyperledger Indy, the digital identity ledger project. However, it has now been separated from Indy so that it can be used for verifiable credentials on ledgers such as Hyperledger Fabric or Ethereum-based Hyperledger Besu, or others. It uses Zero Knowledge Proof (ZKP) encryption to enable these sorts of selective disclosure
6. FTX’s collapse will likely lead to an extended crypto winter
The collapse of crypto exchange FTX derailed an emerging positive situation in cryptocurrency markets after the significant deleveraging of May and June. Coinbase research report says poor liquidity could last till at least the end of the year.
7. Only 20% of miners have switched to other proof-of-work networks
Only 20% or 200 TH were able to find a new home in crypto mining, while also suffering from a significant decrease in margins. Till now one fifth of the miners are mining alternative coins, bitcoin still being their favorite.
8. Bahamian Supreme Court approves liquidators for FTX assets
The Supreme Court of the Bahamas has approved two insolvency experts at PricewaterhouseCoopers as provisional liquidators overseeing FTX's assets. Also, FTX filed for bankruptcy in the U.S. last Friday, listing its 134 affiliates and subsidiaries around the world as entities also seeking protection against insolvency
9. S&P Global crypto report: pegged currencies more stable than stablecoins
S&P Global compares three dollar-pegged stablecoins, Tether, USDC, and DAI, and the Hong Kong Dollar (HKD), a fiat currency also pegged to the U.S. dollar. The report concludes HKD is significantly less volatile.
10. Iberpay, BBVA, Santander, Spanish banks launch digital euro proof of concept
Iberpay and most of Spain’s banks shared plans to simulate digital euro payments during Proof-of-Concept trials this year. The Spanish banks want to test how a retail CBDC would be included in the current payment infrastructures, including banks, processors and other offerings such as the local instant payment system Bizum.
11. Crypto.com CEO says 'Business as Usual' after revelations of 'Accidental' $400M transfer
Crypto.com is in trouble as users question the health of its finances and make the irresistible parallel to the recently imploded FTX exchange. But Crypto.com CEO Kris Marszalek says not to worry: all is solvent and above board. After this news, the token shed 20% of its value, and at least $45 million has since been withdrawn from the exchange.
12. BnkToTheFuture drops plan to acquire crypto lender salt lending due to FTX exposure
The crypto contagion that was ignited by the collapse of FTX has claimed another victim: crypto lender Salt Lending. Online investing platform Bank to The Future said it terminated its previously announced non-binding letter of intent to buy Salt Lending due to the latter's FTX exposure.
13. FDIC doesn't back any crypto firms or cryptocurrency, says acting head
No crypto firm has federal deposit insurance, the acting head of the FDIC says. The collapse of FTX should be a “renewed call for Congress to take a serious look at crypto exchanges and lending platforms.”
14. FTX CEO resigned, 134 companies commenced voluntary bankruptcy proceedings
Sam Bankman-Fried will no longer be the CEO of FTX but is under jurisdiction and surveillance by authorities. Chapter 11 proceedings do not include LedgerX LLC, FTX Digital Markets Ltd, FTX Australia Pty Ltd. and FTX Express Pay Ltd. The hole in the balance sheets roughly estimated to be $9 Billion.
15. BlockFi Mulls bankruptcy filing and layoffs in wake of FTX collapse, met with Binance
Crypto lender paused all customer withdrawals last week as crypto exchange FTX fell apart and filed for Chapter 11 bankruptcy protection. BlockFi accepted a $400 million line of credit from FTX US over the summer. BlockFi is just one of many victims of FTX’s unexpected unraveling last week.
💸 PE/VC funding
1. TRM Labs raises $70M in expanded Series B round
Blockchain-based intelligence company TRM Labs announced a $70 million expansion to its Series B funding round, bringing the total raised to $130 million. The round was led by Thoma Bravo, with Goldman Sachs and previous TRM investors. The funds will support product development and talent acquisition to deliver accessible tools to counter illicit finance and fraud, as well as address demand for incident response services and training programs.
2. Brevan Howard Digital co-leads $4.8 million round for NFT fraud detection startup Yakoa
Brevan Howard Digital, Volt Capital and Collab+Currency co-led the round, with Uniswap Labs Ventures, Alliance DAO, Orange DAO, Time Zero Capital, Sunset Ventures and others participating. With the fresh equity capital in hand, Yakoa plans to increase its team size.
The Series B investment round was co-led by venture firms Mubadala Capital and Korelya Capital. The funds would go toward improving its product line, expanding into new locations and increasing the number of fiat currencies and payment methods offered.
4. JoePegs raises a $5 million funding round co-led by Avalanche Foundation and FTX Ventures.
JoePegs has raised $5 million in a round co-led by Avalanche Foundation and FTX Ventures. The fundraising closed in June and the funds were transferred from FTX accounts long before the bankruptcy.
The $17 million came from $9.5 million in equity from existing investors and $7.5 million of incremental proceeds under a term loan.
6. Yahaha’s raises $50 million
Dual-headquartered in Finland and Shanghai, Yahaha raised a Series A+ of $50 million. The round was co-led by Temasek and Alibaba. The funds will be used to expand Yahaha’s team and ecosystem.
⚖️ Policies and laws
1. India’s central bank partners with five banks for retail CBDC pilots
India is moving rapidly since the announcement of the pilot CBDC plan in February. Beginning of this month, it launched a wholesale CBDC trial targeting the settlement of government bond transactions. For retail trials, it partnered with Banks SBI, ICICI, HDFC, and IDFC, these trials also involve NPCI, which plans to explore whether the current system is interoperable.
2. U.S. banks launch a digital Dollar blockchain pilot
While the crypto market is shaken to its core by the failure of FTX, traditional financial institutions including HBSC, Mastercard, and Wells Fargo—announced on Tuesday the launch of a proof-of-concept digital money platform called the Regulated Liability Network (RLN). The group says the RLN will run for twelve weeks and only operate in U.S. dollars
3. NY Federal Reserve, Singapore’s MAS partner for cross-border CBDC
Project Cedar Phase II x Ubin+ will explore the use of CBDC for cross-border payments in particular investigating the reduction in settlement risk by using wholesale CBDC (wCBDC) as a settlement asset and the interoperability of two networks using different technologies.
4. SEC enforcement and remedies reached $6.4 billion last year
The Securities and Exchange Commission announced that penalties, as well as remedies to investors affected by criminal or civil wrongdoing, reached a total of $6.4 billion during the last federal fiscal year.
5. FTX fallout adds urgency to South Korea’s push for crypto regulations
Regulators stressed the need to have a regulatory framework in place during a meeting of South Korea’s National Assembly, The grouping was a follow-up to an emergency meeting held to protect investors after the collapse of Terraform Labs in May.
📚 Reports, here is the TLDR
Report 1 - Project Bridge: Connecting economies through CBDC
The recent technological and logistical advancements erased physical boundaries, and cross-border e-commerce gains momentum. Merchants across the globe now feel a pressing need to accept and process online global payments.
The Asia Pacific region’s cross-border payments are expected to reach US$156 trillion globally (BCG report) this year. Innovators in this fast-growing segment are not only fintech start-ups but also central banks keen to build faster, cheaper, more transparent, and more efficient conduits for financial flows in the region.
There are various projects being run by the central bank, and fintech start-ups to address challenges in cross-border payments. Here is our tldr of the M Bridge Project
Multiple CBDC (M Bridge) Project, initiated by the BIS hub of Hongkong, is a co-creation project that explores the capabilities of distributed ledger technologies (DLT) and studies the application of CBDC in enhancing the financial infrastructure of cross-border payments)
MBridge is a multi-CBDC project involving a single blockchain infrastructure, with each central bank hosting its own node and controlling its digital currency. It’s a wholesale multi-CBDC payment infrastructure where only the central and commercial banks participate, and it is primarily intended for cross-border payments.
Member Countries/ Banks
The BIS Innovation Hub Hong Kong Centre, the Hong Kong Monetary Authority, the Bank of Thailand, the Digital Currency Institute of the People's Bank of China, and the Central Bank of the United Arab Emirates. are working together to build such a prototype platform, called "mBridge".
Roles and Responsibilities
Each country has a different role, with China leading the technical work and the UAE spearheading the business side with use cases.
Milestones/ Major Developments
The first-ever pilot with real-value transactions took place from Mid Aug- September, below is the summary and analysts are of the view that the platform will pave the way for the internationalization of the digital yuan.
More than 20 commercial banks participated
Over 11 million value was issued on the platform
160 Cross border transactions totaling >$22M
Following the pilot, it is now being developed into a minimally viable product ahead of a production deployment. During the pilot, more transactions were done via the People’s Bank of China, in part because Hong kong and China started the pilot earlier than the other central banks.
How it works
Commercial banks can request the issuance of CBDC against reserves in their local currency at their local central bank and also redemption. Additionally, they can hold foreign CBDCs.
Commercial banks can initiate peer-to-peer push payments for trade in any platform digital currency. And they could also execute FX PvP with other commercial banks.
The FX transactions proved less popular for a couple of reasons like liquidity, RTGS timing mismatch, and the way FX rates are determined off a bridge. This all issues will be addressed in the next phase.
Use Cases
Expanding the use of digital yuan in cross-border payments partially replacing the US Dollar
Promoting Chinese Foreign investment initiative” OneBelt One Road
Using CBDC cross-border infrastructure alternative to correspondent banking.
Proposed Impacts
MBridge can connect directly to a real-time gross settlement (RTGS) system to convert central bank reserves to digital currency.
In the near future, cross-border payments will become far more fragmented compared to the recent past dominated by SWIFT.
Cross-border trade between the four jurisdictions amounts to $730 billion annually. This is the major application area
M Bridge can also be used domestically
Conclusion
A key issue not yet addressed by MBridge is how to support a foreign currency not represented by the participant central banks. The US dollar is the most obvious one.
As decentralized applications (dApps) continue to evolve, the tools needed by developers and users to make effective use of them have become more sophisticated.
In this report, Block Research dives into each layer of the dApp framework and focuses on prominent projects building at each layer to highlight how web3 operates today, where the limitations and opportunities are for infrastructure providers, and what the web3 of tomorrow may look like.
The dApp framework enables one to holistically assess how access to web3 is instantiated and the variety of factors that impact relative levels of decentralization.
The report infers that with the massive value stored and transacted in web3, it is of utmost importance to find ways to ensure security while also maintaining decentralization and scalability – in other words, solving the blockchain trilemma.
In the ideal case, the web3 stack will be supported at all levels by an infrastructure cooperative, where hosted and p2p nodes support each other in blockchain access and operations.
Where infrastructure is most needed will depend entirely on which web3 applications gain the most traction but while web3’s core activity happens at the level of basic protocols like Ethereum, these protocols need infrastructure providers to
make it easier and more economical for both general consumers and enterprise users to ensure reliable and secure access to dApps
support a better user experience
and simplify decentralization with DaaS.
📈 Charts of the week
The table below shows the Bitcoin Exchange balance and Net position change
Charting it out Crypto Contagion
The areas where Binance has been investing
Binance Labs has an investment portfolio worth $7.5B across 200+ projects in 32 countries. The investment arm of Binance has attained a 2,100% return since its inception in 2018.
💡Metaverse and NFT news, trends, and insights
1. Sony files patent for tracking in-game Digital Assets with NFTs
The patent would allow gamers to own unique in-game assets and collectibles from their favorite esports stars. Sony wants to use DLT digital media assets, gameplay and video clips and include a unique token with a unique identifier and meradata that would identify properties of the digital asset.
2. Web3 firms make up two-thirds of Disney accelerator participants
Disney hosted its Disney Accelerator Demo Day for the participants to present their solutions to 15 senior company executives. The four participants include Lockerverse, Flickplay, Lockerverse, Obsess, and Polygon. The hiring trends had shown Disney interested in NFT, Metaverse and Blockchain.
3. Nike enters the Metaverse with dot Swoosh, a new metaverse platform
Using blockchain technology, the platform allows community members to collect and trade Nike’s virtual creations. Members will also soon be able to wear the virtual apparel in digital games and immersive experiences. The virtual products come with utility.
4. Apple’s hiring process suggests the company want its own metaverse now
Recent trademark on the new headset with multi- cameras installed for creating virtual digital content and change in technological Development Group suggests that Apple working on its own metaverse project. Headset could charge between $2,000- $3,000 making it a high-end offering from Apple.
5. FTX customers attempt roundabout ways to withdraw their funds in Bahamas
From buying NFTs to bounties to FTX employees, investors in FTX are trying all possible ways to withdraw their money after bankruptcy filing. Investors are ready to offer a lucrative amount to the FTX employees to change their country of residence to the Bahamas and KYC processes.
🔦Company spotlight
The company: 👉 Voatz 👈 is a mobile voting platform running on blockchain. A Techstars Boston 2017 cohort, Voatz makes election participation easier and more accessible by enabling voting via smartphone, while also reducing election security risks by combining biometrics and blockchain for incorruptible, transparent election outcomes.
The story: Founded in 2015, Voatz is part of Techstars Boston 2017 cohort and has since raised over $10M in funding. The latest was in H2 2021, concluding with Series A round.
Why should I care: Voatz can be used in all kinds of voting events, including overseas citizen absentee voting, state political party conventions, town hall meetings, university student government elections, professional organizations and more. Depending on the election, Voatz leverages both high-security and low-security measures in order to protect both the voter's privacy and the vote in all conditions. Voatz makes it a priority to work closely with each election jurisdiction to ensure smooth integration and a seamless workflow. To date, Voatz has conducted more than 100 successful live elections including state party conventions; state, municipal, and federal elections; union elections, student government elections; and town meeting voting. In its largest election, more than 1.7 million votes were cast. With absentee voting seen as controversial in many states, Voatz provides a tech solution to bridge the gap.
📅 Blockchain, Crypto, and Web3 events calendar
….for the next couple of months
🆕 Web3 Dubai Conference | Nov 17-18, 2022 | Dubai, UAE
🆕 Texas Blockchain Summit | Nov 17-18, 2022 | Austin, TX, USA
ETH Gathering Barcelona 2022 | Nov 17-21, 2022 | Barcelona, Spain
Metamorphosis | Nov 18-20, 2022 | 2022 Bangalore, India
Cardano Summit 2022 | Nov 19-21, 2022 | Lausanne, Switzerland & Online
Blockchain: Applied - An Introduction to Web3 | Nov 20, 2022 | London, UK
Finance Magnates London Summit 2022 | Nov 21-23, 2022 | London, UK
Dutch Blockchain Week 2022 | Nov 21-27, 2022 | The Netherlands
Next Block Expo | Nov 23-24, 2022 | Berlin, Germany
NFT Fest Aus 2022 | Nov 23-24, 2022 | Melbourne, Australia
🆕 Blockchain Thailand Genesis 2022 | Nov 26-27, 2022 | Bangkok, Thailand
🆕 sub0 2022 – The Polkadot Conference | Nov 28-29, 2022 | Lisbon, Portugal
DCentral Miami 2022 | Nov 28-29, 2022 | Miami, FL, USA
Decipher 2022 | Nov 28-30, 2022 | Dubai, UAE
MiamiWeb3 | Nov 28-30, 2022 | Miami, FL, USA
FinTech Connect 2022 | Nov 30-Dec 1, 2022 | London, UK
🆕 Women Web3 Summit 2022 | Nov 30-Dec 1, 2022 | Miami, FL, USA
Nordic Blockchain Conference | Dec 1, 2022 | Copenhagen, Denmark
Blockchain Expo Global | Dec 1-2, 2022 | London, UK
Africa Bitcoin Conference | Dec 5-7, 2022 | Accra, Ghana
🆕 Puerto Rico Blockchain Week | Dec 5-10, 2022 | Carolina, Puerto Rico
Future of Crypto by Benzinga | Dec 7, 2022 | NYC, US
Israel Crypto Conference | Dec 7-8, 2022 | Tel Aviv-Yafo, Israel
CoinAgenda Caribbean 2021 | Dec 7-9, 2022 | San Juan, Puerto Rico
World Blockchain Summit Bangkok | Dec 8-9, 2022 | Bangkok, Thailand
Taipei Blockchain Week | Dec 12-17, 2022 | Taipei, Taiwan
MetaVentures Bangkok | Dec 14-15, 2022 | Bangkok, Thailand
🆕 Web3 Galaxy | Dec 15-16, 2022 | Dubai, UAE
Blockchain Expo World 2022 | Dec 21-31, 2022 | Istanbul, Turkey
Metavsummit | Jan 11-12, 2023 | Dubai, UAE
🆕 CFC St. Moritz | Jan 11-13, 2023 | St. Moritz, Switzerland
🆕 World Crypto Conference | Jan 13-15, 2023 | Zürich, Switzerland
👩💻The job fair
Binance: Business development, Merchant Acquisition - Remote/Europe
Crypto Finance: Product Manage - Zurich, Switzerland
MetaMask: Visual Designer - United states
Stealth Mode: Full stack Engineer - India/Remote
📚The term of the week
Not Your Keys, Not Your Coins. The expression is a popular one in the world of cryptocurrencies and refers to needing to own the private keys associated with your crypto funds. If someone doesn’t own the private key, he/she is entrusting his/her crypto to a third party. If someone does own his/her key, he/she has complete control over how and when to use - e.g. sell or transfer - his/her funds.
📎 Miscellaneous Resources
Sam Bankman-Fried’s Magic Money Box Enriched Vast Crypto Network
Binance’s Billionaire CEO Casts Himself as Crypto’s New Savior
Why Did We Put So Much Faith in the Crypto Whiz Kid? (New York Times)
Wait, Wasn’t Bitcoin Supposed to Solve This? (Financial Times)
Matt Levine’s Money Stuff: Crypto Wants a Central Bank (Bloomberg Opinion)
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 the third-party websites linked above.