📌 An opinionated recap of the most interesting news in crypto
Token Economy
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For once, the “ICO madness” section of TE is empty and we are rushing to publish before something comes up. Last year we had to deliberately cut stuff out of it.
It's probably a sign of where we are in the cycle: the sharp correction in prices of Jan-Feb and the regulatory crack-down scared many tourists and scammers away, leaving behind the hardcore buidlers that continue to remain heads down shipping code and are now getting close or in the process of launching their products to market.
And we are clearly seeing that in the “Cool projects” section: it's getting longer and longer by the week and many projects a launching and starting to get used. It's refreshingly exciting.
Make no mistakes, we are still seeing some madness in the private rounds and will continue to point that out.
Bad behaviour in crypto
Jackson Palmer has had enough, and has publicly called out ZClassic / BitcoinPrivate founder Rhett Creighton, pointing attention to his now serial behavior as well as his recent name change.

Rhett after gaming Stellar's giveaways with Mechanical Turk, founded ZClassic as a fork of Zcash and then announced a "mergeforkdrop" (new term, deal with it) with Bitcoin to create Bitcoin Private. This inflated like crazy Zclassic's price making him insane amounts of money.

Given the story worked one time, he's now back at it with Primecoin to launch Bitcoin Prime.

Not that we need more examples of bad behavior in crypto, but this is certainly one that is not value-adding and very very borderline.

Here at Token Economy we have high hopes of seeing this market slowly rationalize and come to the conclusion that this stuff is important and fun, and there's enough money to be made by just building shit that is important, but not everyone clearly agrees.

We're confident our readership knows where to pour its efforts though. 🚀
One more addition to the crypto valuations folder.

It's quite a long read but it's filled with relatively simple to follow examples and numbers, totally worth going through all the math despite the final formula looking rather scary.

The conclusion is something we've heard before from the likes of Pfeffer and others: utility tokens at scale could end up becoming these hyper efficient public goods that won't need to store much value, but will "form a utility foundation for a new kind of industry."
Multicoin's latest post is on a topic we've recently touched on with many teams we've interacted with.

Kyle's point is that capitalism basically makes it inevitable that people will fork and clone other people's crypto inventions.

It fast turns into an argument that incumbents will be the ones to do that and apply their other advantages in order to win (eg. cash, userbase, partners, supply chains etc.)

This is clearly something that teams need to have figured out when they start - and its one of the most solid arguments against useless tokens, which will are just one fork away from nothingness.
It seems that CoinList's CEO has gone down the alternative currencies rabbit-hole I've been in for the past decade.

This is a good post to read about charter currencies (eg. privately issued currencies used for transactions in specific ecosystems).
It is a bit sad that we haven't seen massive experimentation in this area other than the get-rich ICO thingy to justify tokens, but as an avid localcoiner this would be an area I hope to see more stuff in.
Another solid post on blockchain governance, siding cautiously (like Vitalik and Vlad) against the on-chain models that are being adopted by some of the blockchain 3.0 projects.

The argument is that on-chain governance is really hard to implement without resulting in a plutocracy and, even if one accepted that, it's still a really bad model to govern early stage experimental software trying to solve hard, technical problems (though a good model to govern a nation state).

It will be interesting to see how some of these new on-chain governance models will be playing out in the wild.

Bonus: in the meanwhile, here's a relevant perspective from a core Ethereum developer on the current governance debate around the Parity wallet frozen ETH. To fork or not to fork?

"The lesson for me is that you cannot take the human out of governance. It’s just not possible. Maybe someday some future genius, human or artificial, will invent a perfect piece of software that never needs to be updated or redeployed. Maybe someone will come up with a perfect governance system that never needs to be amended. If you want to live in a world truly ruled by code, where we can never make changes, be my guest, but to me, well, that’s tantamount to rule by the machines."
Following nicely from the governance debate around blockchains 3.0, Spencer wrote an excellent post touching on the decentralization trade-offs that they are making.

In a pragmatic bid to attract developer mindshare, 3.0 smart contract platforms (e.g. EOS) have put a much greater emphasis on functionality and throughput than on 'sovereign-grade' censorship resistance. The argument being that a nation-stake type attack is less likely on a smart-contract platform than it is on something like Bitcoin for example, and therefore 'platform-grade' censorship resistance should suffice in providing developer with "strong assurances".

Spencer's view on this is that it's unsustainable:

"Either these platforms will offer strong assurances (“permissionless-ness”), in which case they will attract “sovereign-grade” attackers (and “platform-grade” censorship resistance will be insufficient) OR they will embrace censorship and permission-ing, in which case they will end up as less efficient varieties of today’s centralized platforms. Regardless, neither path appears sustainable."

His conclusion is that we need highly decentralized sovereign censorship resistant base-layer protocols, leveraging the efficiencies of centralization at the higher layers.
And while we are on the EOS subject.

Multicoin have produced a 29-page in-depth analysis outlining their thesis for continuing to be long (despite it being valued at $18 billion at the date of this writing and not having launched yet).
It's been a while since we've seen such a harsh, negative take on BTC by a seemingly smart person, so we thought it worth featuring.

Bill Harris is the former CEO of Intuit and founding CEO of PayPal and Personal Capital, and he took to the Recode pages for his crazy rant.

The arguments, as you might imagine, are always the same:
- no intrinsic value
- only good for criminals
- price volatility
- no acceptance
- pump-and-dump/MLM

This week we have two super interesting takes that stemmed from the EIP 999 debate.

In this one, Alex Van de Sande, explores the economics of a now-unlikely fork, as well as a potential solution by issuing a token and then finally describes a potential insurance mechanism.

Next, 👇
We have a super interesting insurance proposal for smart contracts, to address the potentials for bugs, locks and other scary things that could happen to your valuable ETH stored in contracts.

Hard to summarize, but worth reading.
💥Newsy stuff
The week started with a quite terrible DNS hack to Amazon's Route53 service, which enables some Russian scammers to redirect traffic headed to MyEtherWallet to their own phishing site.

The amount stolen is not entirely clear, and reports are varied, but the most credible understanding is that only around 215 ETH were stolen, even tho they ended up in an account that owns more than $20M worth in ETH and doesn't seem to be of an exchange.

Scary shit. Use Hardware wallets and check addresses on the wallet's screen.

For a better tech explanation of what happened, you can look at Cloudflare's post.
A security research company found an extremely large token transfer from a smart contract and then digged into the code to find the problem.

Turns out that there are quite a few contracts with the vulnerability that lets anyone transfer out massive amounts of tokens.

Stay safe, audit your code.

And kudos to Peckshield and other people doing security research in this space. We're all grateful for your work.
Parity published their stance on the EIP-999 situation, with a solid commitment to not splitting the chain. Or at least having no intention of doing that.

I would just note that this discussion is refreshingly civilized, and I'm really appreciating this from all sides. 🙏
In other news:
- Rumours surrounding the Earn acquisition suggest Coinbase priced its equity at $8 billion

- Compliance is expensive. Binance Outpacing Deutsche Bank In Overall Profit Yield

- Legacy exchanges are salivating at the sound of those profits. Nasdaq is open to becoming cryptocurrency exchange, CEO says

- More than $140M in BTC moved from the Mt.Gox wallets. Not sure what's gonna happen here. Coindesk.

- Monax, one of the OG projects, has pivoted to become one of the founding companies behind  The Agreements Network – a decentralized contract management system built on public, permissioned blockchain technology and optimized to be the Legal Layer for a Networked World.
😎 Cool new projects
We've been following Julien's writing for some time (and featured a few of his posts too). Turns out he's been working on his next gig all along.

Unlock is a protocol that allows creators to monetize their web content directly from their users. Technically this is achieved through a platform-agnostic embeddable JavaScript snippet that locks content for people unless they posses the right key. The key itself is a non-fungible token (we talked about tokenizing subscriptions last week) and on top of that there's a discount token that can be earned by sharing content.

This is awesome as it then becomes a platform layered on top of the existing web on which other content-related services can be built, like discovery for example.
The idea and vision are not entirely new: other than Brave Payments for publishers, some may recall a service called Flattr (founded in 2010 and ultimately acquired by Adblock Plus last year), that attempted at layering a centralized micro-payment service on top of the internet. It never really took off in a meaningful way, perhaps down to wrong timing. Medium itself has obviously been doing its thing with paid subscriptions and claps, and then we have things like Patreon and Staketree.

Perhaps not coincidentally, things seem to often fall together rather logically in this otherwise crazy industry. This week Vitalik publicly questioned Coindesk calling a boycott on Consensus 2018, also Ryan hit pause on his newly relaunched Daily Bit. Unlock unveiled. We are right in the middle of it with TE. It's clearer than ever that web publishing needs an alternative business model to ads or annoying paywalls, and perhaps the tools now exist to make that happen. 

Can't wait.
Coinfund has spun off a new project called Adapt which stands for An Open-Source Decentralized Application Programming Toolkit.

They aim to let you "develop and launch your own decentralized network unconstrained by existing platforms’ one-size-fits-all design decisions in an interoperable ecosystem and build the system that is right for your users."

This is an extremely tech-heavy project with the only goal to actually help out other participants in the ecosystem. It's beautiful to see. It doesn't have a token and is not trying to extract any rent "rather relying on its first applications to create economic value in the ecosystem."

To this tune, we are posting their full Social Commitment manifesto:

"In the days of the “ICO madness,” we are founding ADAPT as a platform for innovation in decentralization and technology-moderated social systems. ADAPT will not be built on a single cryptocurrency, but will encourage every participant to create their own.
ADAPT stands for sane decentralization. It will support all use cases, both centralized, consortia, trusted validators, and fully decentralized public topologies. It will be built in a way that allows a slow and measured transition from centralized to decentralized models and enables open and unbounded innovation by all users who wish to add components, modules, consensus protocols, infrastructure solutions, application libraries, etc. It will encourage usage in any context, be it for economic benefit, personal enrichment, or for public applications built with no economic purpose.

Decentralization is more than just crypto.
The community that uses an open-source platform and contributes to it is the ultimate judge and jury of its value and success.
Decentralization is a destroyer of egos.
Computable is going to launch a data-marketplace protocol, apparently competing with Ocean Protocol.

This team is also backed by the usual suspects including Pantera, Blockchain Capital, Compound.vc, Box Group, Ame Cloud Ventures, Lux capital, Kindred, etc.
Coinlist is launching an alternative to Earn for airdrops.

Coinlist leverage both its regulatory compliant platform (as it turns out airdrops may be considered securities offerings by the SEC) and its existing 4M users across CoinList, AngelList and Product Hunt with presumably better targeting.
The Alpha version of MyCrypto for desktop is out for testing on Windows, Mac and Linux.

This should make it dramatically harder to execute phishing attempts.
Speaking of 0x, lots of exciting developments in that ecosystem this week.

OpenFinance have launched on testnet the first 0x-powered relayer for security tokens, with a pipeline of 60 lined up and a combined market cap of $1.7B+

PS: if you are reading this, you'll probably like the Relayer Report, a bi-weekly newsletter featuring updates from the 0x ecosystem.
More 0x action. dYdX have made two big announcements this week:

- an updated whitepaper introducing their Margin Trading Protocol, a series of smart contracts allowing decentralized short selling and leveraged longs of crypto assets powered by 0x, with target testnet launch end of May;
- an extension of their protocol to tokenize short and leveraged long positions, effectively allowing the creation of ERC20 tokens that replicate the economics of the underlying derivative instrument.

With the emergence of this sort of financial instruments we should soon be seeing crypto asset performances becoming increasingly uncorrelated.
Bloqboard is live on Kovan!

This is the first debt relayer built on the Dharma protocol. Dharma is, in very crude terms, like a 0x for loans but without the native token bit (interestingly the simplicity in user experience was cited by the Bloqboard founders as a reason for picking Dharma as a platform to work on).

The cool thing here I think is that Bloqboard will support secondary market trading of debt tokens, so lenders can resell loans that they’ve invested in on a Bloqboard-hosted secondary market. 

The path to full derivatives on the blockchain becomes much more clear by the day, and who knows what will come on top of that.
Curated on a Product Hunt collection!
🤡 ICO madness
Empty for once!
👮 This week in regulation
As a follow up to his fuming tweetstorm in response to the NYAG's investigation into crypto exchanges, Jesse Powell CEO of Kraken wrote a longer missive.

It's worth reading to get the perspective on regulation from someone who's busy building a legit business and driven by a genuine mission.

Also, an interesting tidbit to get a sense for the scale of the Kraken's compliance operations:

"We currently employ nearly 200 people (more than 25% of the company) in compliance-related functions.  As of Q1 2018 we are processing more than 1 law enforcement request per day, seven days a week." 🤯
The legal debate over what constitutes a security heated up again this week, as former CFTC head Gensler hinted that Ether might indeed be a security (causing Stefano to yawn uncontrollably).

Peter van Vallkenburgh of Coincenter wrote his arguments against that conclusion, drawing a clear line between the token pre-sale and the token itself.

Peter admits that the 2014 Ether pre-sale agreement may fit the test for securities, however he is adamant that today ether is not a security due to a sufficient degree of decentralization:

"ether today is too useful and too decentralized for it to fit the relevant test for treatment as a security. Conflating the pre-sale and the running network is confused analysis that could be misunderstanding the tech or the law or both."
And unsurprisingly Preston Byrne disagrees, in a post that aims to demonstrate how in fact Peter's decentralization argument is weak.

Preston's defence is based on:
- horizontal commonality ie a shared interest in a common fund
- the presence of a Github account with administrators
- the dynamics of the pre-sale, which would show how "most of the Ether sold in the 2014 token pre-sale in exchange for Bitcoin may have been paid out to one person or, more likely, a handful of close associates working in concert"

The last point matters in that, depending on the activities performed by the small and influential group of ether holders post pre-sale, one could find grounds to prove "vertical commonality".

PS: if you want to dig deeper into the actual data from the 2014 pre-sale that Preston refers to, here's an excellent post with lots of charts that revisits its dynamics and raises some interesting points and further questions...

PPS: the debate continued healthily on Twitter in the "Great Security Wars of Crypto Twitter" thread.

Bonus: on Bitcoin there are less doubts thankfully: this week Clayton himself confirmed it is not a security and the Federal Reserve Bank of St Louis outlined three ways in which it is a regular currency.
💰 New funds
Recode picked up a couple of job posts on the A16Z website suggesting that the firm is looking to raise a dedicated crypto fund.

A16Z has been very active in the space for a long time, so the move could suggest that there are some other reasons for going down that route, perhaps related to the regulatory risk that some LPs in the main fund might not want to take, or perhaps to some GPs getting antsy...

The rumor we heard is that this is going to have a separate brand but will still be run as an A16Z thing. Chris Dixon is the point man obviously.

Not much else for now.
The amount of fiat money flowing in from China is not computable for my brain.

After the other $B funds we covered in the past weeks, there's a new city-specific fund.

This one will be managed by Donghai and Star Capital, two investment funds controlled by the State-owned Assets Supervision and Administration Commission of the State Council (SASAC).
Not sure it can be classified as a new fund, but it might soon be, as GS has hired Justin Schmidt as vp and head of digital asset markets to help the bank through its crypto exploration.
💸 Funding rounds
Neo-bank Revolut has raised a mind-blowing $250M Series C round at a $1.7 billion post-money valuation, led by DST Global, barely 3 years after starting up. An unprecedented pace of growth and quality of execution so far.

The company added 700k users to the million users it had when it announced it's move into crypto trading late last year.
MobileCoin, the privacy-centric mobile-focused crypto project advised by Moxie Marlinspike (founder of Signal), has raised $30M in BTC and ETH in a round led by Binance Labs.

Binance Labs is Binance's incubator, providing funds and advice to pre-ICO projects, as well as "priority consideration for listing on Binance.com". Yeah, but when Binance?
Origin, the marketplace-building protocol, announced their $28.5M mega round (which weirdly wasn't picked up by ANY publication).

Investors include an infinite list of both normal VCs and specialized crypto-funds: Foundation Capital, Garry Tan, Alexis Ohanian (no mention of Initialized here, so must have come personally from the two GPs..), Gil Penchina, Kamal Ravikant, Steve Jang, Randall Kaplan, Pantera Capital, BlockTower Capital, Kindred Ventures, Turing Capital, Cypher Capital, Smart Contract Japan, Red Robot, FBG, Danhua Capital, Continue Capital, PreAngel Fund, Hashed, Kenetic Capital, Sora Ventures, BlockAsset, Spartan Group, Iconic, Beyond Blocks, 1kx fund, KBW Ventures.


But interesting to see such a globally-distributed investor base. This seems to be the new normal in these mega-pre-sales with investors from 10+ different countries being the usual.
Templus announced a $10M round from SBI, adding to the funding from Raptor Group, Galaxy Investment Partners, Blockchain Capital and firstminute.capital.

Templum is one of the emerging platforms to run legally-compliant tokenized offerings and handle the subsequent white-listed secondary trading. It's founded by the son of legendary (at least to me as a Roma fan) hedge fund manager James Pallotta.
☕️ TE+Semantic London Founders' Breakfast
A rare shot from our Semantic + TE breakfast at the Chess Club in London two weeks ago.

A big thanks to the 25+ founders that woke up early to make it, and to Chess Club for offering the venue, coffee and food! Had a lot of great discussions and left super-energized from spending quality time with so many BUIDLers.

Where should we do the next one?
ℹ️ About us
Token Economy is written and curated by Stefano Bernardi & Yannick Roux.

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