📌 An opinionated recap of the most interesting news in crypto
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So it happened. Lightning Labs released lnd 0.4-beta, and is now usable on Bitcoin's mainnet.

As some of you may have noticed, I've been slowly getting more and more excited about Lightning in the past months.

The massive congestion and poor user experience that Bitcoin users have experienced recently have been a real threat to the future success potential of Bitcoin and crypto currency in general.
Lightning, albeit with its own quirks, solves a lot of problems at once and brings back the original promise of ~free, fast, p2p value transfers.

The main reason that I'm excited about this, is the fact that I've been thinking more and more about the entanglement of the Store of Value and Medium of Exchange use cases.
My latest thinking is verging towards a realization that in order for a currency to be used as a medium-of-exchange, it also needs to have won the store-of-value use case.

Put it another way, I don't think there's going a currency launched that will take away the medium-of-exchange use case from Bitcoin, unless it also steals the store-of-value use case.

(I'm taking out the unit-of-account scenario here, as I'm still of the belief that one can actually be virtualized and not necessarily tied to the others.)

The reasoning is the following: for a currency to be exchanged, it needs to be held in the first place, and people would only hold it if they thought it would retain value.
At the same time, it would be really, really, inconvenient for users if they had to immediately exchange a currency for another every time they had to do or receive a transfer. It can surely be automated, but it's way suboptimal, and complex.

Given the above, technology like Lighting obviously makes the SoV use-case stronger in my mind, and thus, as a holder of BTC, ultimately makes me happier. 


Worth noting the participants in the reasonable $2.5M funding round for Lightning Labs: 
Jack Dorsey, David Sacks and Vlad Tenev (yes, you can release a product without raising hundreds of millions!).

David Sacks was PayPal's COO, but most importantly Jack Dorsey and Vlad Tenev both run consumer-facing companies very much into crypto today: Square and Robinhood.

I wouldn't be surprised to see LN adopted in earnest at these and other SV-based firms.
A nice take on why Lightning is important from someone who suggested similar ideas in 2012
📌 Token Economy
Plasma is a big deal people.

The biggest takeaway is a super interesting thing: Plasma second layers don't need to be blockchains. You can use a MySql database as a "child chain" gaining massively in performance for some use cases where that would be appropriate.

"What is most exciting to me is that Plasma gives us the best of both worlds. We get trustless, censorship-resistant money and compute execution at the base Ethereum layer while also being able to utilize SQL’s performance on a second layer. In Plasma, a user deposits money on Ethereum and can then spend that money instantly and with no transaction fees on a second layer web application. When the user is dissatisfied with the service, he or she can trustlessly withdraw that money with no intermediaries and deposit into another service.

This is the
internet of money we were promised and it will facilitate a new wave of permissionless innovation in the financial technology space. And like the web enabled new business models, so too will Plasma."
If you haven't already listened to Patrick O’Shaughnessy's podcast with Albert Wenger, cancel everything on Monday morning and dive right into it, it's pure gold from the beginning to the end, and the host does a superb job at driving the conversation for over a hour.

The most interesting part is when Albert describes how the promises of a decentralized internet never materialized: in his view, it was down to a protocol flaw, namely that http was not meant to remember state. That left empty space to companies that, by leveraging cookies, ended up in the business of maintaining state in a centralized manner (the GAFA). 
And the rest is history. 
Fred Ersham has a good and long post on decentralized machine-learning and AI marketplaces.
Massive news for Storj as it poaches some solid "real-world" talent with Ben Golub who was the CEO of Docker for the past 4 years.

The storage wars have yet to begun and are already fairly heated with some of the best projects around.

Lovely space to watch different approaches being played out, and another testament to how crypto is becoming a magnet for the best talent around.
Brendan from Tetras Capital dives deep into crypto assets valuations and why he thinks they mostly don't stack up. 

Brendan is of the Pfeffer school of thought, arguing that most crypto assets are bad at capturing value unless they solve for the store of value use case (for which there won't be many).
Brock Pierce is out at EOS, in the weirdest of announcements.

Doesn't really matter as he seems to be founding things at a faster pace than he can get out of them.
A historical recap of how we arrived at the latest paradigm shift of investing driven by the emergence of decentralized technology, by our partner Alex and Ramon from YC.

(long read).
A fascinating step-by-step mental experiment about how a hostile takeover of a token network would unfold.

We would not be surprised if some teams were already working on something like this behind the scenes. Andy's view is that, as many networks go live this year, we should expect to see this sort of activism with more frequency.
Genesis Capital, a lending unit of crypto trader Genesis Trading, has already handed out close to $100 million in loans just two weeks after being founded.

Clearly shows that professional crypto-denominated lending has an institutional market ready for it.
Plattsburgh, New York has imposed an 18-month moratorium on Bitcoin mining to prevent miners from using all the city’s cheap electricity.

Coinmint was apparently using more than 10% of all the power supply.

We will start seeing more and more of these clashes between normal electricity users and Bitcoin miners seeking cheap power.
If you're one of those people into the Howey test and what falls into the securities category, then here's a nice examination of why ETH should fall squarely in that bracket.
Quite the trip on this one, where Andy looks at a scenario in which someone tries to “take over” a token network, via a malignant fork.

Blueprint goes like this:

  • Coordinate with key suppliers
  • Raise public awareness
  • Execute the fork
  • Airdrop to drive users over
  • Bonus step: Sell into the market
As crazy as this might sound, we are genuinely worried/excited about forks and clones. We think networks could be brought down in this way and value could be eroded for investors.

In the end, we are trying to remove rent seekers, and networks with poor supply distribution and inflated prices could be seen as a rent-seeking endeavor.
😎 Cool new projects
Taken at face value this would be a pretty big headline: the largest crypto exchange announces it is developing its decentralized version.

"As a public blockchain, Binance Chain will mainly focus on the transfer and trading of blockchain assets, as well as provide new possibilities for the future flow of blockchain assets. Binance Chain will focus on performance, ease-of-use, and liquidity. Binance Coin (BNB) will be upgraded to exist on its own blockchain mainnet, becoming a native coin. At the same time, Binance will transition from being a company to a community."

The post itself however is very shy of details, while in an interview with Bloomberg we learn a little bit more from Changpeng Zhao about the plan for Binance Chain to ultimately coexist alongside its centralized version. So is building a dex a way to continue offering a market for the long tail of unregistered tokens? And what about the plan to transition from company to community?

A day or so from the post, Binance announced a $1m "Dexathon", to effectively recruit a team or source an implementation to complement their internal work. Hard to believe quality projects will be selling off their IP for $1m worth of BNB tokens.

Also hard to believe Binance Chain will go live by year end as CZ hinted, but undoubtedly a bold move if they pull it off.
A cool introduction for a project we missed last week, Hoard.

Hoard is developing a toolkit to let game developers easily tokenize their virtual gaming assets, introduce crowdfunding, and manage their virtual economies all while tracking it all on public chains.
Someone didn't really take the "BETA only, don't really use this in prod" warning literally and has already implemented Lightning payments.

Something that has weirdly been missing in the space was a wallet with integrated instant exchange.

Abra stepped in with a beautiful product that supports 20 currencies today and will support more in the future.

No trading fees but a spread. First reviews seem to be positive.
The (O)1 Labs team has released Snarky, an OCaml DSL for verifiable computation. If you're interested in verifiable computation, and you should be, do take a look at the post.
🤡 ICO madness
Yay for revenue-share tokens!

Sia wrote a post explaining their decisions behind the Siafund tokens, and I think they're trailblazing what will be a standard in the future.

Might be a dual-token model like them, or a single rev-share token + the underlying bolockchain token for MoE.

Interesting tidbit:

"Nebulous, Inc. — the company that employs Sia’s core team — owns 87.5% of all Siafunds and less than 1% of all Siacoin. This means that our incentives are wildly different from projects that raise funds through utility token ICOs.

Since Siafunds produce revenue
only when users on the Sia network pay for storage, we are highly incentivized to take actions that encourage users to store data on the Sia network."
Great post by the Dharma team explaining why they aren't doing a token sale.

They addressed the elephant in the room straight on: "We think that many (most?) token models are detrimental to the user experience."

The post is well worth a read if you are considering a token sale for your decentralized project. While it may seem obvious that many projects don't need a token, this one applies specifically to "legit" token projects, and not to obvious money-grabs (I mean, to those as well - but they are so obvious there's no need to explain).
TBH, airline miles would benefit from a bit more transparency, but -as always- here the focus seems to be just on raising $$$.
As the Cambodian government prepares to launch the token sale for its own digital currency (the Entapay, for which it aims to raise a whopping 400k ETH starting in a couple of weeks), it has also issued a timely ban on crypto transactions for financial institutions. 
👮 This week in regulation
As Pierre covered for us in issue #37, France is taking a very liberal and innovative approach to ICOs and crypto asset more generally. The consultation led by the AMF, the French regulator, is now leading to new regulations that will be presented officially on April 18th.

As emerged from the results of the consultation, the approach to ICOs will be one of voluntary regulation, where projects will be able to opt to take the regulated path, or avoid it. The regulated path will entail a certain level of compliance and disclosures, but not excessive such that it would discourage companies from pursuing it. On the other hand, companies taking the non-regulated path will have to do a good job at justifying their choice, at the risk of being perceived as scams. Game theory applied to regulation. 

It will be interesting to see what else will be part of the loi Pacte as it comes out in mid-April, but based on what we hear France is clearly campaigning to become the world's premier jurisdiction for crypto projects.
The Capital Markets, Securities, and Investments Subcommittee of the US House of Representatives Financial Services Committee held their first hearing on crypto this week. Witnesses included Chris Brummer (Professor of Law, Georgetown University), Mike Lempres (Chief Legal and Risk Officer, Coinbase),  Robert Rosenblum (Partner, Wilson Sonsini) and Peter Van Valkenburgh (Director of Research, Coin Center).

It is pretty clear from the questions and ensuing debate that there is yet absolutely no consensus amongst the policy makers on crypto, about whether it's disruptive innovation or just a "crock" and about how it should be regulated.

Coinbase’s written testimony was also published on their blog.
This is interesting as it shows that there's yet another regulator (this time the FTC - Federal Trace Commission, whose purpose is to protect consumers and promote healthy competition) looking into crypto in the US. And it just launched a dedicated Blockchain working group to monitor the space more closely.

A greater level of coordination between the various regulatory bodies at this stage would no doubt prove more efficient and effective. 
As it became evident with the news of the 80+ subpoenas, the SEC is actively looking into crypto hedge fund practices, particularly into their valuation methodologies (hedge fund managers earn annual performance fees based on high-watermark accounting, which in illiquid markets could be easily manipulable). 

Other areas of investigation include custody, conflict of interest (eg personal dealing in ICOs) and the instrument of the SAFT itself.
The Winklevoss brothers, through Gemini, have outlined their proposal for a Virtual Commodity Association, a self-regulatory organization (or SRO) for US virtual commodity exchanges and custodians.

The post highlights some of the sound practices that members of the VCA should comply to.

SROs have proved to be an effective self-policing construct in other industries and have been advocated by a few proponents in crypto. A CFTC Commissioner has expressed strong approval for the Winklevoss' plan.
💸 Funding rounds
The company developing the OpenBazaar raised its Series A from Omers Ventures (the fund of the Ontario Municipal Employees Retirement System).
Bitmain also participated.
Hashgraph finally announced their funding round, which ended up totaling $18M, but they didn't share who the investors are (asking around is fairly easy for this one).
DST is apparently leading a $350M funding round in Robinhood, which is going to value the company at more than $5B! Their crypto volumes as still tiny, but the funding will no doubt heat up the battle with Coinbase for new users.

ℹ️ About us
Token Economy is written and curated by Stefano Bernardi and Yannick Roux.

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