Blockchain Confidential: 5 November 2021

Inaugural edition of Blockchain Confidential

The Week

The week started with celebrations of the 13th anniversary of the Bitcoin Whitepaper, with Dan Morehead of Pantera Capital perhaps inevitably once again showing off his Bitcoin Whitepaper conference room. (We are so jealous, Dan.)

In another milestone, DeFi hit $250B Total Value Locked according to DeFi Llama. For reference it was $500M a year ago, and is up from $100B around six months ago. Related, DeFi tokens are at an all-time high with $150B market cap. In their most recent report, Genesis Trading speculated there may be a rotation afoot from Bitcoin into DeFi tokens by institutional investors.

There is about to be a new version of Aave, V3, with 99.9% of the governance token votes in support of the proposal. Features include support for cross-chain “Portals” and a new mechanism called High Efficiency Mode, which I imagine is kind of like Tesla’s Insane Mode for DeFi: Aave Plaid, anyone? MakerDAO also passed a proposal for DAI Direct Deposit Module (D3M), helping to stabilize Aave rates during periods of rate volatility and also further reinforce the stablecoin peg.

Quentin Tarantino is getting into the NFT game with an auction of Pulp Fiction collectibles, something we explore in detail in The Geek Out. And Vitalik Buterin shared his thoughts on crypto cities.

The Geek Out

In this week’s Geek Out we look behind the news and dive into the Secret Network, the blockchain behind the Quentin Tarantino NFT drop. Read Too Many Secrets.

The Essay

This week’s “What If” essay, we take a look at what institutional DeFi trading could look like in the 2030’s, and what that might mean for traditional finance and the broader economy. Read The Blockchain Economy.

Regulator Radar

In less happy news for DeFi, The Block reported there have been $680M in exploits of DeFi protocols in 2021 so far — although note this is the net loss, with $1.4B stolen and $760M returned. With SEC Chair Gensler repeatedly highlighting his concerns about lack of investor protection in digital asset markets, continued rug pulls, bugs and collapses will likely attract a lot of negative attention on DeFi.

In an expansion of regulated products on traditional markets, the CME announced it will launch micro ETH futures next month, making it easier for small investors to get exposure. The EU is rumbling toward publishing a final Markets in Crypto Assets (MiCA) framework by early 2022. Blockchain Confidential will of course be on the case unpacking the final draft for you when the time comes.

In Australia CBA announced support for crypto trading in its banking app: notable in that it appears they are offering spot trading with custody of the digital assets rather than more traditional financial products. With the recent Basel consultation on prudential treatment of cryptoassets proposing eye-wateringly high capital requirements for banks keeping digital assets on their balance sheets, this is one to watch. Do other banks get approval to start trading digital assets directly, and are they willing to support trading even if it means holding assets with a 1250% risk weight? Exciting times.

Finally, Eric Adams announced he would take his first three paychecks as NYC mayor in Bitcoin, in a bid to make NYC the capital of crypto fintechs. While as a native New Yorker I could not be more delighted if that happened, he may want to give the NYDFS a ring and ask them about the BitLicense before he gets too excited.

At the Office

We launched Cloudwall Capital officially on November 1st. Ilya Kulyatin joined as Head of Research & Co-founder, and at the start of next week we will announce our third and final co-founder. Today also marks the end of Sprint 1 for our prototype development process. The pre-seed Launch Team — eight of us altogether now — are in stealth mode working on building a world-class platform for institutional investors in digital assets. We look forward to telling you more about it in the coming months.