Citi Report on Digital Currencies, UBS Intraday Repo, MEV bots lose over $25 m, Tokenized T-Bill Vault, blockchain-based deposits vs stablecoins vs CBDCs, MPC vs. AA and Project Atlas by BIS
6 April 2023
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Table of Content
šļøThe 13 news you should be aware of
šøPE/VC funding
āļøPolicies and laws
šReports, here is the TLDR
šCharts of the week
š”Metaverse and NFT news, trends, and insights
š Blockchain, Crypto, and Web3 events calendar
š©āš»The job fair
šThe term of the week
šMiscellaneous resources
šļø The 13 news you should be aware of
1. Brazilian investment bank BTG Pactual launches dollar stablecoin
BTG Pactual, one of South Americaās largest investment banks, announced the launch of BTG Dol, a dollar-backed Stablecoin. The crypto asset is offered as part of the bankās Mynt crypto platform and is portrayed as providing investors the opportunity to ādollarizeā part of their portfolio.
2. Manifold is building its own liquid staking platform, secures 25,000 ETH deal with Cream Finance
Manifold Finance is building its own liquid staking protocol with its own omnichain token, called mevETH, that will offer additional yield through MEV opportunities. Also acquired Cream Financeās validator set, meaning that the 25,000 ether in its contracts will move to the new protocol.
3. UBS does intraday cross border repo on blockchain
Today UBS executed its first intraday cross border repo trade with a global Asian bank using Broadridgeās Distributed Ledger Repo (DLR). A key benefit of the DLR is it enables greater flexibility in settlement timing, with intraday liquidity rising in importance alongside interest rates.
4. Ethereum MEV bots lose over $25 million in sophisticated attack
A group of MEV bots lost over $25 million in a sophisticated attack on the Ethereum blockchain. The attacker replaced the normal MEV transactions of the bots with malicious ones, causing them to lose money.
5. Swiss Government-Owned Bank PostFinance to Offer Customers Crypto
Post Finance fully-owned by the Swiss government, will start by providing its 2.5 million customers access to buy, store and sell leading cryptocurrencies such as bitcoin (BTC) and ether (ETH), with more crypto-tokens to be added in due course, thanks to a partnership with Switzerlandās Sygnum Bank.
6. Credit Agricole CIB, SEB launch public blockchain bond network
The bond network aims to improve efficiencies in the bond issuance process with a sustainable twist. The network isnāt targeting green bonds e but aims to be eco-friendly in how it operates. It positions itself as an open platform that is only semi-permissioned compared to most bank bond platforms that are fully permissioned.
7. S&P Global plans decentralized finance push as it looks for DeFi director
A recent job advert says S&P Global is looking for a DeFi director to āenable the successful build-out and execution of a DeFi team strategy.āThe role will report to S&Pās chief DeFi officer Chuck Mounts.Ā
8. BIS launches project to track crypto, DeFi data
The BIS Innovation Hub Euro system Centre is collaborating with the Deutsche Bundesbank and De Nederland Che Bank to create an open source data platform that will initially explore geographic crypto flows. Rather than the typical price data thatās available to traders, central banks are interested in the macro-financial implications and potential impact on financial stability.
9. DeFi dominance declines as bitcoin, XRP steal crypto-market spotlight
DeFiās percentage share of the crypto market has declined ā hitting lows not seen since last summer. Bitcoin has benefited from the ongoing western banking crisis.XRP has seen price increases as Ripple battles the U.S. Securities and Exchange Commission.
10. Nomura-backed Komainu custody launches triparty crypto collateral solution
Komainu launched new crypto collateral management solution that avoids the need to lodge cryptocurrency collateral at trading venues. With the collapse of multiple crypto exchanges and lending platforms, keeping the collateral separate from trading venues is critical.
11. Arbitrum's backtrack raises questions about nature of DAO governance
Arbitrum, an Ethereum Layer 2 scaling project, was forced to backtrack on a key proposal earlier this week. While the result could be seen as a win for the promise of DAOs ā truly decentralized governance that works, even when it goes against what management wants ā the ordeal raised a number of thorny issues.
Paxful, a peer-to-peer bitcoin trading platform, is sunsetting its marketplace. The crypto ecosystem has now lost two long-running P2P marketplaces since February when Local Bitcoins closed. The platform cited ākey staff departuresā and regulatory challenges as issues it needs to work through.
13. Former Gemini Execs Launch Tokenized T-Bill Vault OpenEden
Ex-Gemini executives Jeremy and Eugene Ng launched crypto startup OpenEden, offering tokenized Treasury Bills through the OpenEden T-Bill vault. Users earn yield from the vault by minting USDC stablecoins in return for the "TBILL" token. A pool remains on-chain while off-chain funds are used to invest in short-dated US Treasury Bills. A small amount of USDC is kept on-chain and available to help facilitate withdrawals. OpenEden aims to onboard 30-50 clients, including DAOs, crypto funds, and DeFi protocols. Future plans include support for more stablecoins and tokenized assets, such as bonds, stocks, and REITs.
šø PE/VC funding
1. Blockchain data indexing platform Satsuma raised $5 million in seed round
Satsuma raised $5 million in seed funding co-led by Initialized Capital and Archetype. The blockchain data indexing platform wants to make the lives of web3 developers easier with its tooling.
2. LayerZero reaches $3 billion valuation in Series B funding round
Blockchain interoperability protocol LayerZero raised $120 million in Series B funding. LayerZero is now valued at $3 billion and plans to expand into APAC and gaming.
3. Dragonfly invests $10 million in derivatives exchange Bitget
Dragonfly Capital has invested $10 million in Bitget as the derivatives exchange looks to grow its spot and earn products. The news come just a few weeks after Bitget bought a controlling stake in wallet operator BitKeep, adding millions of users.
4. VC Saison Capital lays out what it looks for before making an investment
What makes a pre-seed company appeal to investors? Credit Saisonās Qin En Looi sat down with The Block to share what his fund looks for. Saison Capital is backed by Credit Saison and deploys between $25 and $30 million each year.Ā
5. Re7 Capital, Republic Crypto go live with $100 million fund for liquid tokens
Re7 Capital and Republic Crypto launched RxR Opportunities Fund on April 1. The fund invests in liquid crypto tokens, focusing on those with smaller market caps.
āļø Policies and laws
1. UK economic crime plan looks to tighten grip on crypto kleptocrats and fraudsters.
The UK laid out plans to up the ante on combatting crypto crime. A new policy paper points to goals such as cutting fraud, reducing money laundering, recovering criminal assets, combatting kleptocracy and driving down sanctions evasion.Ā
2. Japan Regulator flags 4 crypto exchanges including Bybit for operating without Registration.
The FSA issued a formal warning letter to bybit for operating without permissions back in 2021. The exchanges were violating the country's fund settlement laws by "conducting crypto asset exchange business without registration. The list of unregistered traders "does not necessarily indicate the current state of unregistered business."
3. SEC Chair Gensler: Existing rules regulate crypto, legislation unnecessary
Securities and Exchange Commission Chair Gary Gensler said additional legislation is unnecessary for crypto, but should Congress act, itās important that lawmakers not undermine existing laws.Gensler also declined to talk about any actions his agency may take against crypto exchange Binance, which was sued by a separate regulator on Monday.Ā
4. Crypto Exchange Beaxy Shut Down After SEC Lawsuit
SEC accused Beaxy Digital Ltd. of illegally raising $8 million in the offering of an unregistered security with its BXY token. The agency additionally noted Hamazaspyan āmisappropriated at least $900,000 for personal use, including gambling.ā. The exchange posted āit was suspending its operations because of the āuncertain regulatory environment surrounding our business.ā
5. FDIC seeking Signet buyer, returning Signature crypto deposits next week
Members of the House Financial Services Committee pressed FDIC Chair Martin Gruenberg over the agencyās handling of crypto following the bankruptcies of Signature Bank and Silicon Valley Bank. Emmer asked Gruenberg questions about the FDICās communication with banks about cryptocurrencies.
6. U.S. Futures Watchdog Issues Compliance Rule for Crypto Activities Among Members
In the absence of formal crypto rules from U.S. government agencies, the National Futures Association is setting up standards for its members that deal in digital-assets commodities. This is a clear example of using existing authority to ensure that there are customer protections in place,ā
š Reports, here is the TLDR
MONEY, TOKENS, AND GAMES
āBlockchainās Next Billion Users and Trillions in Valueā
Citi in its report Outlines a Bright Future for Digital Securities. While blockchain technology, which has been touted as a transformative force for several years now, hasnāt yet realized mass adoption, its potential is immense, and we are fast approaching an inflection point where blockchainās promised potential will be realized, Citi said in this report.
Disruptive technologies change the state of doing things: how we live, work, spend, invest, interact, and more. Blockchain ā and the associated Web3 concept ā are disruptive technologies. However, blockchain as a disruptive technology is different from many others. As it involves money ā a highly regulated domain in most countries. To be sure, blockchain is not about to have a ChatGPT moment.
How Big Is the Market for Emerging Technologies?
Out of all emerging technologies, blockchain has the highest total addressable market growth forecast. Blockchain and Web3 today are relatively small markets (see Figure 1). When assessing total addressable market (TAM) size and time to impact. The largest of the emerging technologies today is AI, a general-purpose technology with use cases across nearly every aspect of society and the economy, impacting both consumer-facing and infrastructure layers.
Blockchain, on the other hand, could take longer for mass adoption (6-8 years perhaps) due to the need for collaboration among participants, standardization of platforms, as well as interoperability, and compatibility with existing systems and software.
Four Key Takeaways from This Report
Billions of Users
CBDCs of major currencies coming our way towards the second half of this decade, with many CBDC projects being partially DLT-linked. Get ready for CBDC versions of the euro (EUR), British pound (GBP), and Indian rupee (INR). Together, these four jurisdictions constitute more than 25% of the global population and 22% of global bank deposits. Hence, we think CBDCs could have at least 2 billion users and $5 trillion plus in circulation. Art and collectibles are also moving onto the blockchain because these industries resonate with one of blockchainās key features. Amazon is planning to launch an NFT marketplace for its 167 million Prime users in the U.S. in 2023. It will be interesting to see how those figures increase if this development goes global
Trillions in Value:
Tokenization of financial and real-work assets could be the killer use case driving blockchain breakthrough with tokenization expected to grow by a factor of 80x in private markets and reach up to almost $4 trillion in value by 2030. By 2030, up to $5 trillion of CBDCs could be circulating in major economies in the world, half of which could be linked to distributed ledger technology.
The big inflection point for the digitization of trade finance is the upcoming UK legal reform that will make the acceptance of digital documents legal under common law ā a huge step for the global trade finance industry, as around 80% of global volumes are governed by English law
Technology Enablers
There is a long shopping list of technical specifications that blockchain must have ā ranging from transaction scale to strong user experience (UX) and user interface (UI) ā to reach billions of users, combined with four key technology drivers that will drive mainstream blockchain adoption.1) Decentralized Digital Identities. 2)Zero Knowledge Proofs 3) Legal Enablers 4)Security Bridges
Legal Enablers:
The next wave of contracts (āContracts 2.0) is underway with the development of smart legal contracts (SLCs). A smart legal contract is defined by the UK Law Commission as āa legally binding contract in which some or all of the contractual obligations are defined in and/or performed automatically by a computer program. Regulatory considerations are also necessary to allow adoption and scalability without hindering innovation.
Although we think mass adoption could still be six to eight years away, momentum on adoption has positively shifted as governments, large institutions, and corporations have moved from investigating the benefits of tokenization to trials and proofs of concept.
š Charts of the week
Comparison of blockchain-based deposits, stablecoins and CBDCs by J.P. Morgan
This chart from Moonblock illustrates what has been heard from all corners of the Crypto/Web3 market for 2022. Established brands have not been deterred by the bears this time.
š§Ŗ In 2021 a few brands have already ventured forward and taken the first steps. However, most of their NFT projects were little more than experiments with no claim to sustainable success.
š Towards the end of 2021 until May 2022, many brands jumped on the bandwagon. There has been a steady increase in new NFT branding projects. When the market finally collapsed, brands have stayed and have not backed away from plans to launch new projects. Some of these projects were even extremely successful. As recently as August, Tiffany's "NFTiff" fetched a record-breaking $12 million.
š§āš¬ While all this doesn't mean that NFTs have become inevitable for brands and should inevitably be used, it does make it clear that more and more brands are building necessary structures and exploring sustainable use cases.
š”Metaverse and NFT news, trends, and insights
1. Metaverse could drive up profits ā but most businesses may not be ready to invest yet
Tech, media and telecom executives see the potential that metaverse can bring to businesses in terms of higher profits and lower operating expenses. But a similar proportion acknowledged that, despite the metaverseās rich potential, it still needs further refinement and development. āThe majority of TMT executives taking part in our survey feel that the metaverse is several years from becoming a thriving commercial ecosystem,ā said KPMG.
2. Mark Zuckerberg is spending most of his time on A.I., says Meta CTO
The tech giant, which owns Facebook and Instagram, announced a product group in February that is focused on generative AI.Metaās Reality Labs division, home to the companyās metaverse technologies and projects, posted a $13.72 billion loss in 2022.
3. An ambitious project opens the doors to the metaverse in the heart of Dubai
The Verse Estate Showroom is strategically located in the heart of Dubai, UAE which is a leading hub for blockchain and crypto, with the government actively promoting the adoption of disruptive technologies.
The Metaverse is ānot yet set,ā according to Micaela Mantegna, an affiliate at Harvard Universityās Berkman Klein Center, and, owing to this, it could still be possible to reduce the toxicity, harassment and hatred which have spread across the web and social media.Ā
5. MetaX Exchange Launches āSweep the Floorā Campaign to Support Gaming and Metaverse NFT Projects
MetaX Exchange, the GameFi and Metaverse multi-service platform, has announced its āSweep the Floorā campaign to support gaming and metaverse NFT projects.
6. LandVault raises additional $3 million to expand metaverse offering
There's clearly still interest from the VC community in the opportunities that await the next generation of the interwebz.
7. Walmart Eyes Metaverse with Sam's Club Trademark Application
Walmart's foray into the metaverse could potentially reshape the retail landscape, offering a new way for consumers to interact with the brand and its products
š Blockchain, Crypto, and Web3 events calendarĀ
ā¦.for the next couple of months
April 20
NFT.NYC 2023 | Apr 12-14, 2023 | New York, USA
DAO Tokyo | Apr 13, 2023 | Tokyo, Japan
ETHGlobal Tokyo | Apr 14-16, 2023 | Tokyo, Japan
EthereumZuri.ch | Apr 14-16, 2023 | Zurich, Switzerland
Bitcoin Alive 2023 | Apr 15, 2023 | Sydney, Australia
HYFI Conference 2023 | Apr 20, 2023 | Ho Chi Minh, Vietnam
Sol.Ladies Build Hacker House | Apr 20-24, 2023 | Austin, TX, USA
Consensus 2023 | Apr 26-28, 2023 | Austin, TX, USA
Bitcoin Day Omaha | Apr 29, 2023 | Omaha, NE, USA
May 2023
Avalanche Summit 2023 | May 3-5, 2023 | Barcelona, Spain
MoneroTopia 2023 | May 5-7, 2023 | Mexico City, Mexico
Blockchain Economy Istanbul Summit | May 8-11, 2023 | Ä°stanbul, Turkey
NFT Tallinn | May 8-10, 2023 | Tallinn, Estonia
The Crypto and Digital Assets Summit | May 9-10, 2023 | London, UK
š CryptoVSummit | May 10, 2023 | Dubai, UAE
š Solana Taipei Hacker House | May 10-14, 2023 | Taipei City, Taiwan
š Crypto-Energy Summit | May 11, 2023 | Pittsburgh, PA, USA
š©āš»The job fair
Elliptic : Senior Crypto Threat Analyst, Newyork
Decent DAO : Creative Copywriter, Remote
Cometh : Blockchain Developer, France
Flowcarbon : Tokenisation Lead, New York
Cyberjin : Head of Marketing,Palo Alto, CA
šThe term of the week
Delegated Proof of Stake (DPOS):
A Consensus method whereby users of a Blockchain vote on a certain number of āwitnessesā who are paid to validate transactions and create Blocks, with the weight of a userās vote being proportionate to the percentage of applicable Tokens that he or she owns (see POS). While witnesses may prevent specific transactions from being included in a Block, they cannot change the details of a transaction and are thus equivalent to Miners in a POW Consensus model. Voting for witnesses is a continuous process, with each witness being at risk of replacement.
š 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 the third-party websites linked above.