Big news this week was that Basis, the company developing the algorithmic stablecoin protocol, is shutting down barely a year from start. They announced they will return funds to their investors.
A few thoughts:
- the hype around this project was *insane* from the early days, many investors fomo'ed in indiscriminately at valuations that made absolutely no sense given the stage and risks involved. - many skeptics had raised concerns about the long term viability of algorithmic stablecoins. We shared some of those views, though ultimately we accept that venture capital is there for experimenting with and backing crazy things (Uber and Airbnb probably sounded as crazy and borderline illegal in the very early days too). - the algorithmic stable coin model proposed by Basis didn't ultimately see the light of day, so we won't know whether it would have worked as intended. It probably would have failed as many predicted, like the large majority of startups after all. What's very clear though is that the algo model isn't viable in the context of US securities laws. - compromises to the original model were deemed not worthy of a shot and that comes across as grown up behaviour, at least for this industry's standards. No one really needs yet another semi-centralized stable coin frankly. - it also seems clear that investors either ignored US securities regulation or more likely took the bet that a more lenient regulatory environment would have somehow emerged. - Many jaws dropped at the amount of money raised ($133M), though most of the capital was reserved for the company to "play the role of trader", at least initially to bootstrap the model. - returning the capital is the normal course of action in a dissolution event. There's a bit of a debate around what investors who contributed crypto will get back, though it seems that the majority of funds were raised in USD and investors will get most of it back. Jake's view is that there will be litigation regardless. - The widely cracked joke was that this will end up as the best deal of the year, with the runner up being 'it was stable after all'.
PS: big kudos to TheBlock who has been stepping up its investigative / scoop area lately and is doing a tremendous job of reporting news and uncovering crazy stories (as you can read later), and was the first to report on Basis.
Another big development this week was the decision by the DDEX team to fork away the 0x protocol and carry on with their own implementation of the protocol, named Hydro.
We have some mix feelings on this one, and we are still processing it. But here are some very rough thoughts:
- on the one hand, it shows the emergence of multiple (conflictual?) interests in the 0x ecosystem, which governance could theoretically give a voice to today - on the other hand, the fact that a large user leaves is hardly a positive sign, whichever way one spins it, for a token that is supposed to capture value via governance engagement - yes, it's early days for all of this, even DDEX does immaterial volumes despite being the largest DEX, so it'll probably not matter in the long term - but the question remains as to how, and for how long, 0x can retain its larger users, who at some point will need specialization: will companies building on top of the 0x protocol have the patience to wait until governance exists to exert influence in their desired direction? - for them, the pragmatic and most rational decision is probably to fork now because they have a business to run today and believe the benefits of a specialized implementation out-weight the costs of forking.
Great analysis by Chris looking at the divergence between fundamentals and market prices for both ETH and BTC. He does so by comparing what price drop would be rationally 'justified' given the correction in fundamental activity (using an interpretation of Metcalfe's law) and the actual price drop.
While his model shows a widening divergence between prices and fundamentals, Chris' overarching conclusion is that "Mr. (Crypto) Market has only a vague idea of what he’s doing right now" because of a lack of widely agreed-upon models for how to value these networks at this stage.
Thought provoking piece by Jesse of A16Z crypto on the evolution of blockchain architectures over time.
His contention is that the next logical step for blockchains bottom-up adoption after Bitcoin 'calculator era' (low composability) and Ethereum 1.0 'mainframe era' (turing complete, high composability but low scalability), is a full stack architecture to blockchains themselves composable ('server era' eg Cosmos, Substrate).
The 'promised land' though looks more like the 'cloud era', where innovation is mostly a software problem (ie scalable composability):
"We’ve already laid the cables and built the data centers— “cloud era” blockchain computing is mostly software innovation. Whenever we get there, it seems clear that trustless composability will be a new superpower for developers, and when developers can do more with less, we’ll all be the beneficiaries of more collaboration, creativity, and choice on the internet."
Delphi have released an amazing report on Bitcoin.
They seem to support a thesis that the bottom has almost been reached in the price, but I'd really suggest looking at this 59-page PDF as it goes into additional interesting areas such as what the future price drivers could be.
BitMex research team looks into mining profitability in light of the recent price crash. We've all seen recent rumors circulating on Twitter of Chinese mining farms capitulating, so this post is helpful in that it surfaces some interesting data points beyond the decline in hash-rate and difficulty adjustments.
Though the analysis only accounts for electricity costs and assumes they are normally distributed (two big *ifs*), it shows that margins have significantly shrunk (particularly on Ethereum mining). Depending on the cost base of the equipment though, some miners could still be running profitably even accounting for fixed costs.
An interesting interview with a much-more-sober-than-a-year-ago Novogratz, going through how Galaxy has fared the bear market so far. Tl;dr it's been rough but they are still well capitalized.
Some interesting gems that in retrospect were such obvious signs of a top: "I’d be walking down the street, and people would come up to me wanting to take selfies."
Also pretty mind blowing data point if true: Second Life still does $500M a year of GDP!
Last, a memorable quote: "I keep telling my guys we’re a surfer getting ourselves in shape for when the next wave comes, and when the wave comes we’d better be the Laird Hamilton of crypto."
Some interesting results from a survey of EOS block producers. It's fascinating to think that there is a whole ecosystem of companies that decided to dedicate their time, mental cycles and money to this - but there is, so it might be well worth to learn more about it.
An absolutely fascinating comparison on an EOS vs ETH hackathons.
The ethos behind the two projects could not have transpired more clearly, and not necessarily in a critical way. It's helpful to look into what's happening outside of the ecosystems we are most familiar and aligned to, we should all do that more often (sounds like the swag was worth it in this case!).
Amazing investigative piece by TheBlock on the founder of Blockchain Terminal and how he ran all of the ICO process under disguise, given he was a convicted former hedge fund manager.
Scammers gonna scam.
💥Newsy stuff
- M&A. NFT marketplace OpenSea has acquired Atomic Bazaar, the team behind KittyHat and KittyExplorer. We'll see more of this sort of M&A in the current market environment.
- Kraken. On that note, the exchange is raising funding from its wealthy customers at a $4B valuation to build "a war chest for acquisitions in the bear market".
- In the meantime Coinbase published a new promotional video, all about how crypto is the future or money and finance and how it can empower the unbanked or those whose financial system is collapsing. Firing on all cylinders.
- Zuckcoin. C. 40 employees, including several former PayPal execs, now work in Facebook’s secretive blockchain group. The rumor is that they are working on "a decentralized digital currency for the social network’s 2 billion users". Suspect we'll know more in 2019.
- Samsung. The new Galaxy S10 may come with a pre-installed crypto wallet app.
- In their December market update, Pantera anticipated that 25% of their ICO fund's capital is invested in projects that could face regulatory headwinds.
- Big ETC drama this week. I unfortunately don't have the bandwidth to follow and understand it, but there are a lot of interesting points about decentralized governance to be learned from this. If you see of anyone doing an analysis or post-mortem, we'd love to see it and feature it. #requestforpost
- Looks like Opera might beat even Brave and the others to the Web3 with a built-in crypto wallet on Android, Web3 api support and also native cryptokitties support.
- Nitfy wallet, which is a Metamask fork from the POA team, added support for interacting with smart contracts directly from its UI.
- Wanchain now supports DAI. Interoperability between different chains and tokens is shaping to be one of the coolest features around.
Missed this last week but looks solid. Roll is a tool to let anyone create their fancoins which can then be used to incentivize different behaviors from followers.
Gemini stepping up its consumer game with a new mobile app which offers all the usual trading features + the option of buying baskets (or sets) of tokens.
Bloqboard, the Dharma protocol debt relayer, has launched a new feature that allows token holders to create 'offers to lend' directly from their Metamask wallet (until today a lender had to accept an existing offer from a borrower).
Nym Technologies wants to do it all. It's a bit of a cypherpunk dream but they want to develop their own privacy coin as well as enabling anonymized smart contract execution, decentralized exchanges and so on. They're coding up a MimbleWimble implementation for a lot of this. Let's hope this Darkwallet2.0 will see the light of day one day.
0x gets its own ecosystem programme, allocating $1M a year in grants ranging from $10-100K to teams building new relayers in new verticals, open-source infrastructure and tools or doing R&D.
Apparently 15 projects have already been accepted (would love to see the list!).
Well, this seems kind of different. Later stage growth capital for blockchain companies that have built a product.
"YGC takes blockchain companies that are ready for commercialization, and brings them to enterprise, industry, and consumers."
The fund is led by David Johnston and the initial capital comes from his family office. It will be interesting to see what kind of deals they will end up doing.
Good Money is Gunnar Lovelace's new project (he formerly founded Thrive Market and raised a ton of VC capital for that), a mobile-first neo-banking platform that promises its users a piece of the equity and 2% on deposits.
Still no mention of token or crypto in the press release or the website, though as reported by Coindesk a couple of months ago the plan supposedly involves a stablecoin, a security token and fiat on and off ramps. As well as a go to market that involves endorsements from social media influencers...
The $30M Series A round was led by Galaxy Digital and includes Breyer Capital, Blocktower Capital, Boost VC, Ken Howery, BlockChange Ventures, Cross Culture Capital, Troy Carter, Mitch Kapor, Peter Diamandis, Blake Mycoskie, Justin Rosenstein, and others.
The Blockstack ICO was structured with specific milestones that would unlock funding tranches. The first one was successfully achieved, as deliberated by an advisory board, and $25M is now made accessible.
Great to see this sensible funding model in action.
Risk Labs raised a $4M seed round led by Placeholder with participation from Bain Capital Ventures, Blockchain Capital, Box Group, Coinbase Ventures, Dragonfly Capital, FinTech Collective, and Two Sigma Ventures.
We are not smart enough to understand the blogpost explaining what they do, so we'll just link to it and hope you get it. Apologies.
Busy week for Galaxy, who participated in this $4M convertible round in BlockFi, a startup that provides dollar-denominated loans against bitcoin, ether and litecoin (a bear market proof use case). The round comes only 6 months after a $50M+ financing that Galaxy led, which presumably was meant to fund the loan book rather than operations.
This round was led by Akuna Capital, with participation Morgan Creek Digital, Susquehanna Government Products and Fidelity-linked Devonshire Investors.
When it comes to finding government money for supporting local tech, France is second to none.
After allocating €1.5B to AI investments, there's a proposal to deploy €500M into making France a "blockchain nation" over the next 3 years, including the possibility of a Central Bank-issued digital currency.