GS Bond; State Street & BBH; BlockFi bankruptcy; IBM Maersk; Aave 17 tokens; CBDC; ConsenSys user data; Matrixport $100 round; Kraken settles; Crypto EU taxation; PE Q322 analysis & JPM re FTX TLDRs.
30 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 19 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 19 news you should be aware of
1. Ethereum software firm ConsenSys reveals it collects user data
ConsenSys collects user data related to its on-chain wallet service MetaMask. It collects data such as contact details and other profile information. It also collects IP addresses and wallet address information when using Infura, the default remote procedure call provider. Users can prevent financial data from being collected by switching to a different RPC on MetaMask.
2. Ethereum Foundation to test withdrawals of staked ETH
The Ethereum Foundation JavaScript Team will relaunch the Shandong Testnet with ETH withdrawals enabled over the coming days. The Ethereum client teams have launched a multi-client devnet to test Beacon Chain withdrawals. Withdrawals will be enabled during Ethereum's next major upgrade, which is expected to take place late next year. Some people have complained that soft-promised timelines for when withdrawals will be enabled appear to be meaningless.
3. WBTC Depeg has DeFi community on edge
Wrapped Bitcoin has traded for a discount since FTX's collapse. Alameda Research created more than 100,000 WBTC, making it the top Wrapped Bitcoin merchant by the number of tokens minted. Three Arrows Capital was the fourth largest minter. Many users are warning against exposure to the token due to its association with FTX. BitGo, the centralized custodian servicing Wrapped Bitcoin, has reassured investors that WBTC is safe as every WBTC is 1:1 backed, a fact that can be verified on-chain.
4. Goldman Sachs unveils digital asset platform with EIB €100m blockchain bond
Goldman Sachs has launched its digital asset tokenization platform, GS DAP, with the issuance of a €100 million ($104m) digital bond for the European Investment Bank (EIB) on the private GS blockchain. This is EIB’s second digital bond, and as with the previous bond, Goldman, Santander, Société Générale and the Banque de France were involved.
5. Binance launches proof-of-reserves system for BTC holdings
Binance has released a new site that explains its proof-of-reserves system. The exchange currently has a Bitcoin reserve ratio of 101%, meaning that it has enough to cover all users' balances. The funds included in the proof-of-reserves system don't include Binance's own funds, which are kept on a completely separate ledger. Binance plans to release similar information for its ETH, USDT, USDC, BUSD, and BNB holdings.
6. DeFi giant MakerDAO voting on hiking DAI stablecoin rewards
The MakerDAO community is voting on whether to increase the annual reward for DAI up to 1%. Members have until December 1 to cast their votes. MakerDAO has boosted its revenue by putting a part of its $7.7 billion in multiple yield-generating investment strategies. Raising the reward will make DAI more competitive and attractive for crypto investors.
7. State Street terminates $3.5 bln deal for Brown Brothers unit
It is not in the best interests of clients, shareholders or employees to continue to invest time and resources in the transaction in this challenging financial services M&A environment, State Street said.
8. Crypto lender BlockFi files for bankruptcy
The bankruptcy filing submitted in New Jersey lists Ankura Trust Company as its largest creditor, to the tune of $729 million, followed by FTX US at $275 million. The SEC is fourth on the list, owed $30 million as a result of penalties laid down earlier this year.
9. Phantom wallet adds support for Polygon and Ethereum
Phantom wallet will add support for Polygon and Ethereum across browsers, iOS, and Android. The new features will go live via private beta in the next few weeks. They will be available to the public soon after. The new wallet will enable users to store and transfer assets and use dApps. Phantom already has more than 3 million active users.
10. Putin calls for non-bank digital currency payment to bust sanctions
Vladimir Putin pushed back on international sanctions against Russia, suggesting the creation of a digital currency payment system for cross-border transactions independent of banks and similar to hawala. The President said, ”Today international payments are expensive and are controlled by narrow states and financial groups.”
11. Poland and Italy join EU Intellectual Property Office blockchain
The European Intellectual Property Office (EUIPO) created the genesis block on its IP Register blockchain, used for logging all registrations and updates to trademarks and design filings. The EUIPO announced the patent offices of Poland and Italy to join the network, bringing the number of nodes on the network to six.
12. IBM, Maersk shutter shipping blockchain TradeLens
Launched in 2018, many believed that Maersk would not be able to attract other container shipping firms, but MSC and CMA-CGM joined in 2019. The two big issues that came up are the slow adoption of digitization in shipping and a lack of willingness to share data.
13. IOTA, Chomaway, and Billon make the final cut in EU blockchain infrastructure pre-procurement
The European Blockchain Services Infrastructure (EBSI) aims to deliver cross-border public services. Hence in late 2020, the European Blockchain Partnership issued a call for tenders to develop a series of use cases that EBSI can deliver. it announced that IOTA, Chromaway, and Billon have made it to the final cut of the process.
14. BVNK becomes UK EMI licensed operator
BVNK, a London-based crypto-powered payments and banking platform for businesses, has secured a UK Electronic Money Institution license through the acquisition of System Pay Services Limited (SPS Ltd).
15. African central banks have different CBDC motivations
BIS published a paper on the developments of CBDC in Africa, highlighting how different it is from emerging countries. Overall, the BIS assessed the African continent as slower moving in CBDC deployment compared to other parts of the world.
16. Bank of Japan to partner with big banks for digital yen CBDC tests
The Bank of Japan (BoJ) is coordinating with the country’s three largest banks, MUFG, SMBC, and Mizuho to participate in retail central bank digital currency (CBDC) experiments. Japan was one of the earlier CBDC explorers, with several rounds of research before Facebook unveiled Libra.
17. Aave pauses lending markets for 17 Ethereum-based tokens
Decentralized lending protocol Aave has temporarily frozen lending markets for 17 tokens in an effort to protect itself from taking on bad debt due to future market manipulation attacks. Although Aave stated that it had sufficient funds to make up for the bad debt, the project wants to prevent such incidents from happening by way of freezing low-liquidity asset pools.
18. Uniswap is diving into NFTs in a very big way
Uniswap, the largest DEX in the market, is now focusing on NFTs. The exchange's GitHub offers some insight into what it is working on. There are 214 commits related to NFTs. This Twitter thread looks through the commits to preview what will be on Uniswap's NFT platform. Features explored include a leaderboard for top collections by floor price, a feature that can be used to sweep multiple NFTs in just a single transaction, and a page that shows specific NFT history and token details.
19. Here are the three biggest stories in crypto to look out for this coming week
Miami’s busiest week of the year is about to kick off as Art Basel gets underway.
Sam Bankman-Fried is set to appear at NYT’s DealBook summit this week, although it’s expected he’ll be dialling in virtually.
GBTC’s discount to NAV hit an all-time low last week, which will be something to watch as Genesis grapples with liquidity issues.
💸 PE/VC funding
1. Matrixport is seeking to raise $100M in funding at a $1.5B valuation
The startup already has $50 million in commitments and seeks investors for the other half of the round. Investors in previous rounds for Matrixport have included DST Capital, Paradigm, Dragonfly and Tiger Global Management.
2. Polkadot-based protocol t3rn raises $6.5M
The Polkadot-based blockchain interoperability protocol aims to facilitate cross-chain transactions. Polychain Capital led the round, with Huobi Ventures, Figment Capital, Blockchange Ventures, Lemniscap and others.
3. Cameroonian crypto and savings platform Ejara raises $8M
Ejara offers fractional shares, cryptocurrency, and other affordable investment opportunities to Francophone Africa. Ejara hopes to reach more customers with its services and expand cryptocurrency activity in the region.
4. Burn Ghost raises $3.1M for gaming platform
Burn Ghost, a startup focused on casual games that reward NFT prizes to players, is set to open up to the public in the first quarter of 2023.
5. Web3 DAO Game7 unveils $100M grant program
Game7, a Web3 gaming-focused decentralized autonomous organization (DAO), launched a $100 million grant program on Monday to help accelerate blockchain-enabled games by smoothing some of the technological bumps on the path to widespread adoption.
⚖️ Policies and laws
1. India Central Bank (RBI) launches retail CBDC pilot this week
The central bank digital currency (CBDC) is to be issued as digital tokens in the same denominations as physical cash via the banks. The participating banks will provide mobile wallets, and consumers can pay each other or shop by scanning QR codes. The settlement will be instant and like cash, the digital currency will not attract any interest.
2. Crypto taxation talks gain traction in the EU
Crypto taxation is climbing up on the European Union’s agenda as speakers in a Brussels tax symposium highlighted the need to crack down on tax avoidance in crypto. The European Commission plans to adopt a draft of new crypto tax proposals on Dec. 7. A single tax regime for crypto across the bloc will be under consideration.
3. House lawmakers set first FTX hearing for Dec 13
House lawmakers will begin their investigation into the collapse of crypto exchange FTX, and its broader impact on the digital asset industry, at a hearing scheduled next month. Senate lawmakers are also taking a close look at the FTX crisis. FTX, once valued at $32 billion, filed for bankruptcy protection earlier this month.
4. Exchange Kraken settles case with US Treasury over serving customers in Iran
The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) has reached a settlement with crypto exchange Kraken over serving customers in Iran, OFAC said in a statement Monday. Kraken agreed to pay $362,159 to settle its potential civil liability for apparent violations of sanctions against Iran. Kraken also agreed to invest $100,000 in implementing additional sanctions compliance controls.
5. Israel’s Ministry of Finance proposes new guidelines for regulating Digital Assets
Israel's Ministry of Finance published a set of recommendations Monday for the regulation of digital assets, advancing the country’s foray into the world of cryptocurrencies. The taxation of cryptocurrencies comprises a major part of the proposal.
📚 Reports, here is the TLDR
Report 1 - Private Equity Pulse: takeaways from 3Q 2022
The PE sector continued to experience several cyclical headwinds in the third quarter, reveals Pete Witte, EY Global Private Equity Lead Analyst, in another insightful report. So is it all doom and gloom?
Activity in 3Q22 declined 55% relative to Q2.
PE fundraising activity in 3Q22 slowed by 13% to US$125b versus Q2.
PE exits also fell 67% in 3Q22 versus last year amid depressed valuations and the widening gap in the expectation of prices between acquirers and sellers.
So where does that leave us? Pete Witte says that, despite headwinds, firms continue to position themselves for long-term strategic growth. In particular:
PE firms continue to innovate with products and technology - e.g. KKR’s tokenized fund on the Avalanche blockchain or Apollo’s vehicle designed for retail investors
Operational value creation will drive the bulk of PE returns
LPs are bullish about the asset class
Firms will pursue creative ways to deploy capital
Report 2 - The crypto ecosystem post FTX
The collapse of FTX is likely to increase investor and regulatory pressure on crypto entities to disclose more information about their balance sheets, safeguard client assets, limit asset concentration, and will induce more diligent risk management including management of counterparty risk among crypto market participants.
Here are the main changes J.P. Morgan envisages after FTX collapse:
Accelerate approvals. Existing regulatory initiatives are likely to be brought forward - e.g. MiCA that introduces important rules and brings crypto assets and markets under the supervision of ESMA and EBA
Focus on custody. New regulatory initiatives are likely to emerge focusing on the custody and protection of customers’ digital assets
Unbundle activities. New regulatory initiatives are likely to emerge focusing on unbundling of broker/trading/lending/clearing/custody activities
More transparency. New regulatory initiatives are likely to emerge focusing on transparency mandating regular reporting/auditing of reserves, assets, liabilities
Regulated venues. Crypto derivative markets will likely see a shift into regulated venues with the Chicago Mercantile Exchange (CME) emerging as a winner.
The report also highlights some of the current DeFi hurdles and reasons why J.P. Morgan believes that centralized exchanges (CEX) - vs. decentralized exchanges (DEX) - will continue to play a big role in the crypto ecosystem in the future:
DeFi protocols rely heavily on centralized exchanges to be able to function (e.g. price discovery)
Smart contract and platform risks. Chainalysis estimates S3bn lost due to hacks across DeFi platforms this year
Management, governance, and auditing of DeFi protocols without compromising too much on security and centralization
Systemic risks could arise from a potential cascade of automated liquidations that materialize if the collateral provided drops below certain levels (e.g. Terra, FTX)
Over-collateralization, front-running in DEXs, and the absence of limit order/stop-loss functionality put DeFi at a disadvantage relative to traditional finance
Difficulty in assessing risk/return tradeoffs due to different tokens and pooling of assets into liquidity pools might make institutional investors uncomfortable.
📈 Charts of the week
Venture Capital Blockchain Investment - October 2022
BlockFi Unsecured Claims by the Block
BlockFi currently has $1.3bn in outstanding unsecured claims. Excluding client funds, the three largest claims belong to Ankura Trust, FTX.US and the SEC.
Crypto sustainable biz models by token terminal
💡Metaverse and NFT news, trends, and insights
1. Sony launches motion-tracking metaverse wearables
The Mocopi sensors will cost about $358 and allow users to move as an avatar in real time. Sensors are placed on the 6 different points in body to detect body motion. The product uses"proprietary technology and a smartphone app" to create a video of avatars using sensors.
Gucci’s experience will feature “Gucci Vault Land,” an experimental space where users will go on a journey through the fashion brand’s history through games and NFTs. Gucci is now hosting its own metaverse experience in The Sandbox.
3. OpenSea adds support for BNB Chain NFTs
The BNB one of the top blockchain by active users will alow sales of NFT on OpenSea. Users can list and sell digital collectibles on OpenSea's marketplace using BNB blockchain. BNB ecosystem already supports more then 1300 dapps which includes blockchain games, NFTs, DeFi and metaverse.
4. Candy digital cuts staff in mass layoffs
Candy Digital is the latest NFT-centric firm to face layoffs in recent months after drop in NFT sales impacting 87% loss in trade volume. Sports NFT startup just found a year ago surged at a valuation of $1.5B completed layoffs on Tuesday. Candy had laid off more than one-third of its approximately 100-person team, Sportico reported.
5. Porsche unveils plans for 911 NFT collection in web3 push
Porsh unveils its NFT collection as a part of web3 strategy in its own NFT marketplace.The artwork is created by Patrick Vogel, a Hamburg-based designer and 3D artist. Buyers can influence the Heritage, Performance, and Lifestyle routes with 150,000 potential variations. A few weeks back Scoda entered the metaverse too and now Porche by Volkswagen Group.
🔦Company spotlight
The company: 👉 Pyypl 👈 is a platform that makes digital money safe for everyone, enabling digital payments and financial services Pyypl is becoming a strong advocate for financial inclusion as, unlike Apple Pay or Google Pay, people don’t need bank accounts, cash, or credit cards to participate.
The story: Pyypl was founded in 2017 in UAE, with the original purpose to cater to the Middle East and Africa. The smartphone market size was 600 million at the time, but Pyypl noticed these users were underserved from a financial standpoint. Pyyplexpanded from UAE to MEA, gaining the Ripple 2021 Global Visionary award., The platform has strong partnerships with other financial institutions, including Visa.
Why should I care: Pyypl changed the situation in conventional payments by taking a decentralized approach and connecting those users to the formal financial system. Thus, their customers became connected to thousands of merchants worldwide, being able to trade in multiple currencies.
📅 Blockchain, Crypto, and Web3 events calendar
….for the next couple of months
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
🆕 ETHIndia | Dec 2-4, 2022 | Bangalore, India
Africa Bitcoin Conference | Dec 5-7, 2022 | Accra, Ghana
Puerto Rico Blockchain Week | Dec 5-10, 2022 | Carolina, Puerto Rico
Berlinverse | Dec 6-7, 2022 | Berlin, Germany
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
Crypto Summit | Jan 16-20, 2023 | Zürich, Switzerland
Bitcoin Day Naples | Jan 21, 2023 | Naples, FL, USA
🆕 Quantum Miami | Jan 25-27, 2023 | Miami, FL, USA
👩💻The job fair
Quest Group LLC - Smart Contract Engineer - United States
Nansen.ai - Account executive Ecosystem Growth - United States
Blockswap - Ecosystem Success Manager
Binance - Business Development - Remote
Coinswitch - Blockchain Developer - Bengaluru
📚The term of the week
Decentralized finance (DeFi) is an umbrella term for peer-to-peer financial services on public blockchains. These financial services or instruments do not rely on intermediaries such as brokerages, exchanges, or banks by using smart contracts on a blockchain.
In the U.S., the Federal Reserve and Securities and Exchange Commission (SEC) define the rules for centralized financial (CeFi) institutions, which consumers rely on to access capital and financial services directly.
📎 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.