📌 An opinionated recap of the most interesting news in crypto
Token Economy
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A while back, the completely outrageous and absurd news coming out of Tezos and EOS would have prompted us to write a detailed column with our thoughts, but now they somehow got relegated to the News section of the newsletter.

I think this goes to show just how much craziness we've had to endure in the past months, and how numb we all might have become to completely unacceptable behavior by ecosystem participants.

Lots of other great stuff to make up for that, so onwards as usual. Big news on the week was the regulatory-induced 'phew' following the SEC statement on Ether, more on that in the regs section.
A Bitcoin-maximalist's take on 'smart contracts', outlining many flaws and limited use cases.

"Smart contracts are simply too easy to screw up, too difficult to secure, too hard to make trustless and have too many external dependencies to work for most things. The only real place where smart contracts actually add trustlessness is with digital bearer instruments on decentralized platforms like Bitcoin."

The points are largely valid if one assumes no further work will ever go in security, oracles and legal enforceability of smart contracts.
As a counter to the above post, here's another very thoughtful post by Julien highlighting how historically the tech platforms that achieved large moats started off 'half-baked' and grew from there hand in had with an ecosystem of applications and developer tools. The reference is to the smart contract platform wars that are heating up.

"Every day spent optimizing transactions per second on another Layer 1 platform sees hundreds of new engineers embracing Solidity, Web3.js or Metamask and making the limited Ethereum as the only platform of choice."
A new research paper by two professors from the University of Texas emerged providing substantial statistical evidence of Bitcoin price manipulation involving the use of Tether.

This will no doubt provide additional materials to the DOJ, that launched a probe into price manipulation a few weeks back, covered in issued #50.
Nadia's new post is not related to crypto so much, but we feel it is still worth reading to understand and empathize in more depth with open source tool developers.

In crypto everything is (supposed to be) open source, and thus we face the very problem outlined in the post all the time.

There are many teams trying to figure out solutions to it, but we're still locked in the dilemma.
Emin Gun Sirer shares in a talk at MoneyConf the protocols whose white-paper we shared in issue #49.

Worth a look.
L4 finally released their Counterfactual white paper.

There is a lot of research going on in generalized state channels as one of the key scaling solutions.

This is one of the most exciting areas in crypto research at the moment, in my view. It is needed and it will happen.

We've seen many payment channel technologies (Lightning obviously, Raiden, SpankChain payment channels, and so on) and a good framework for generalized state channels feels like a mandatory building block to make blockchains usable by dapps users of any kind.

Some people are not particularly happy with the sharing timeline as well as with the contents. I'd take a look at Ameen's thread on it, given he has been one of the first production users of state channels as well as an amazing voice in the community to explain them to everyone else.
Pawel from Point Nine has been spending time researching and understanding NFTs and here's his landscape post.

If you're in Berlin, we suggest going to the first Crypto Collectibles Club NFT meetup organized by our friend Tobia.
Interesting and detailed post on an attack vector for TCRs: bribery attacks. 

A reccommend read for anyone working on TCR implementations (ignore part 2 on Dharma as it covers a different topic).
Miko proposes an alternative token taxonomy to the tired utility/security one.

1/ asset-backed (backed by a noun - i.e. gold)
2/ service-backed (backed by a verb - i.e. redeemable for a service)
3/ infrastructure (backed by nothing and everything - e.g Bitcoin)
Recommended read to learn more about both Schnorr signatures and the new MuSig whitepaper released by Blockstream.

Fairly technical stuff.
An undershared post by Mike Dudas about the feelings of being in the crypto world.

For some reason, I've particularly enjoyed reading it, as it explains so well the reasons for the fatigue I sometimes feel.

My favorite passage:
"The people in frontier tech are different. They behave as if they’re in the Wild West — in competition with everyone, including other true believers. Few true believers share the same vision, the same “religion”, the same belief system. All can see something better — but it is impossible to translate fully what is in one’s mind to another’s mind. What is certain to one is uncertain to another. The path looks different to each. And while there is a glorious outcome in the future, it has infinite forms."
A very interesting case for applying TCRs and bonding curves to music, that could be easily applied to many different industries.

(BTW, Interesting to read pieces which honestly assume the world will be completely tokenized in the future).

(I'm also starting to develop some thesis around the perverse incentives of early TCR stakers, and will try to write a full post about it.)
💥Newsy stuff
Complicated stuff, but worth understanding as this is the future of Ethereum. 

Casper and sharding are now combined.

One notable update is that now to become a validator you just need to deposit 32 ETH on the PoW chain (unlike a previous requirement to stake 1500ETH).
This would also mean that this update would be a separate chain, fully PoS based, with RANDAO beacon, attestations and the Casper FFG mechanism, all tied back to the main PoW chain with block referencing and one-way deposits.
We personally know some early Tezos backers, and man are they pissed!

The Tezos foundation has instituted a new, retroactive KYC requirement before being able to receive the tokens. There doesn't seem to be the option to not participate and get a refund.

This puts in a very bad situation many investors who don't want their identities tied to this, or people residing in black-listed countries, underage participants and so on.

Perhaps the biggest risk is tying the identities of 30k+ participants to Bitcoin wallets they thought were anonymous.

This is the umpteenth blow to what has become one of the worst managed projects around.

And after Vitalik even offered a script to ease a hard-fork of the project, it seems there are a few attempts, with nTezos emerging this week.

For a chain that promised to solve governance, I hope the irony of having forks before even launching is not lost on the proponents and investors.

We will leave you with the infamous quote we featured in issue #19:

“Kathleen Breitman told Reuters that participating in the Tezos fundraiser was like contributing to a public television station and receiving “a tote bag” in return. “That’s kind of the same thing here,” she said.”
What a shitshow™.

Just after starting with their 21 block producers, EOS hit a bug that halted (in an apparently "planned" freeze) the block production.

Block.one had to rush to develop a fix and release 1.0.5.

I can't even.
Some people are praising how the problem was handled and communicated, but we're definitely not going to give a pass to a project that raised so much money to deliver.. this.
This announcement caused a fair bit of noise and raised eyebrows.

Swarm announced their plans to sell security tokens representing equity in high growth tech companies like Coinbase, Ripple, Robinhood and Didi. And they plan to do that without the consent (nor the knowledge) of the actual companies, who denied involvement and some like Coinbase and Ripple went as far as issuing cease and desist letters referring to transfer restrictions.

Tony Pompliano has a much clearer explanation of the mechanics behind it in his related post (tl;dr they are tokenizing SPVs that already hold shares), as to the legality of it all the debate goes on.
Quantstamp is facing some difficult questions from its community as it turns out, at the time of its $20M token sale, it may have overpromised on the utility of its native token and the appetite of customers to adopt it as a means of payment. For one, their protocol isn't ready yet, so one already should wonder what the point of selling a token was (other than raising capital that is), on top of that they have been accepting payments for their service in USD and ETH rather than in the native token.

There are probably hundreds of token stories like this out there, not that folks weren't warned. But obviously very few raised such questions when prices were at all time highs.
In other news:
- M&A. BitWall, the maker of the Bitcoin and Twitter-powered paywall product, gets acquired by Watch Out.

- Crypto Twitter Drama. This week it's Ari Paul, whose leaked DMs with an anonymous crypto Twitter user have sparked quite the drama. In the DMs he claims he has knowledge of Stellar acquisition of Chain.

- Zap! Zap Desktop, Zap mobile on iOS and a Lightning iMessage widget. They're almost ready.

- Open the floodgates. Coinbase has finally opened up its Index Fund for investors with $250,000 to $20M cheques.

- Etc. Etc. Coinbase is going to list Ethereum Classic across its now, many, many different products.

- XRP. Ripple seems to be admitting to facing difficulties in convincing banks to use xCurrent and its currency for international payments.

- CRYPTO MOVIE! We're in for a treat in 2019, as Crypto, a new original screenplay, will come out with a host of famous actors.

- R3 update. In a public statement, the CEO denies the recent false rumours that the company is in financial troubles, panting a very rosey picture across the board. The truth is probably somewhere in the middle, as always...
❞ Quote of the week
"Every currency is a meme. Some just have stronger memes. Soon every meme will also be a currency." - @simondlr
😎 Cool new projects
Vyper is a new language to compile to the Ethereum Virtual Machine, so an alternative to Solidity.

It is very opinionated and will try to make writing insecure code super-hard for developers.

They launched a first beta version, I'd encourage developers to give a good look here!
Just in time for the world cup, rare sports cards are live on the Ethereum mannet!

You can now buy them in packs and do 1-1 trades.
This will be pretty handy to anyone developing TCRs.

It's an open-source UI/UX framework for interacting with TCR smart contracts.
Connext, which we first covered in issue #25, have unveiled their new direction after realizing the need to work collaboratively on better scaling infrastructure before driving user adoption.

They are now an open source platform for setting up state channel hubs, with a view of ultimately becoming a network of hubs connected to state channel hubs from other ecosystems. 

Very cool.
We continue to see interesting stuff happening at the intersection of art and crypto.

This time it's Ujo music, the decentralized platform for rights management, getting into the NFT game with patronage badges to unlock new forms of demand amongst artists super fans.
Curated on a Product Hunt collection!
👮 This week in regulation
The big news of the week is that the long awaited SEC stance on Ether has finally been provided:

"...putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions."

The crypto industry emitted a collective 'phew'. The full transcript of Director of the division of Corporation Finance William Hinman's speech at the Yahoo Finance All Markets Summit can be found here.

The implication, though not clearly stated, is that at the time of the ICO Ether was most likely a security. It's unclear whether the SEC will take any action in this regards but the sentiment is that they will probably not.
This view is entirely consistent with what Chairman Clayton has said in the past, that the definition of security is not static over time:

"If the network on which the token or coin is to function is sufficiently decentralized – where purchasers would no longer reasonably expect a person or group to carry out essential managerial or entrepreneurial efforts – the assets may not represent an investment contract."

Stating the obvious, the SEC only interprets the law, and this was just a statement rather than an official ruling; the existing law itself has certainly not changed (in fact federal judges may take a different view in court) nor any new law has been written. The question then is what further guidance, if any, will be provided to qualify 'sufficient decentralization' as a criteria.
They are open to provide no-action guidance, so I'd expect their inboxes to fill up pretty quickly.

Lastly, Hinman reiterates the SEC views on Bitcoin but spends not a single word on XRP. Based on the 13 criteria outlined as guidance, it's hard to see how the same conclusion would apply though.

Other relevant readings:
- Marco Stantori's tweetstorm
- Fred Wilson's take
- Preston Byrne's scepticism
The Canadian Securities Administrators (CSA) has provided more guidance on ICOs along the lines of their previous stance that "most token offerings are subject to Canadian securities laws".

Their position is generally very similar to that of the SEC, what's interesting here is that they have provided some examples of token offerings that may not be deemed securities: airdrops outside of a fundraising event, non-fungible tokens, inflationary supply tokens and stable-coins.
Despite the headline that spins to story around, the Swiss have voted largely against an initiative promoted by a crypto-inspired association aimed at abolishing fractional reserve banking in the country, giving the sole authority to create money to the central bank.

The results are interesting though: in aggregate 24.3% of voters voted in favour, with some cantons like Geneva touching 40%.
The CFTC is being challenged in a case against an alleged $6M ICO fraud where the defendant's lawyer claims the agency has no authority over crypto currencies (only on commodities).

A ruling against the CFTC, albeit unlikely by the look of it, could compromise its future ability to combat fraudulent activity in crypto.
💸 Funding rounds
After participating in Bitmain's $50M funding round back in September 2017, Sequoia is now said to be leading a $400M round at $12B valuation ahead of an IPO in September that could value the business at $30-40B. 

If that actually happened, has any business ever achieved such an astronomical valuation in only 5 years?
Samuli, ex Protocol Labs developer, & team from Haja Networks have announced a seed funding round of undisclosed size with participation from Polychain, Outlier Ventures, BigChainDB and Creathor.

They are working on decentralized database infrastructure for dapps, which is a critical building block of the future web.
Following the footprints of Placeholder, BlueYard Capital have also built a position in Decred (DCR). 

The thesis is that best-in-class governance coupled with a built-in mechanism to provide continuous funding of development are critical to the long term success of a decentralized network. As a reminder, Decred is completely organically bootstrapped, never raised any funding nor sold any token. Not that surprisingly DCR is been one of the best performers in the recent downturn.
Galaxy and Blockchain Capital have invested $15M into AlphaPoint Corp., a company that sells whitelabel exchange and asset tokenization platforms.
Argo Blockchain, a new mining-as-a-service company, is planning to raise £20M through an IPO on the London Stock Exchange valuing the venture at £40M (so 50% dilution at the starting blocks I guess..).

Gil Penchina seems to be involved in this one too.
Elph raised a bit less than $1M in a pre-seed round (how refreshing).  Coinbase,  The House Fund and numerous individual investors participated.

Elph seems to want to be a desktop Toshi/Cypher.

Team is ex-Box and Coinbase.

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

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