Blockchain Confidential: 3 December 2021
Square renames itself, physical Bitcoin funds launch, and we explore ESG issues
The Week
This week marked the first anniversary of Ethereum 2’s Beacon Chain, the foundation of its scalability and proof-of-stake improvements. Coinbase reported its clients are staking more than $30B in crypto through them across multiple proof-of-stake blockchains, including Eth2. Although multiple third-generation blockchains have positioned themselves as lower-cost alternatives to Ethereum’s high gas fees, Avalanche showed it’s not always that simple. In Layer 2, StarkWare launched the alpha mainnet of its zero-knowledge proof-based rollup network. IDEX announced plans to launch a DEX on Polygon, with reduced transaction fees a major driver.
Defiance launched an NFT-focused ETF on NYSE’s Arca exchange, though it’s unclear how closely it will track the NFT market given the holdings. DAppRadar reported more than $100M of metaverse land changed hands last week. Pixlr Genesis aims to create a metaverse NFT art museum, which sounds kind of like the hype equivalent of a CDO^2. And perhaps following on the Stone Cats NFT fundraising phenomenon, NFT Studios will do something similar for films.
In other news, Square announced they plan to rename themselves to Block in a further signal of their push into the blockchain space. Goldman Sachs and other banks are exploring repo-like loans backed by Bitcoin collateral. And finally, Charlie Munger of Berkshire Hathaway wants cryptocurrencies to get off his goddamn lawn.
The Essay
This week’s essay wades into a particularly charged issue in the blockchain world. Read The Proof-of-Work ESG Debate.
The Good Read
In a new feature we’ll include from time-to-time, we will call out a longer piece published online that is worth reading. This week. check out Amber Group’s thoughtful survey of the decentralized identity landscape.
Regulator Radar
In the U.S. Treasury Secretary Yellen took the stand that FATF’s recent guidance on DeFi may not be as sweeping as feared and don’t apply to non-custodial protocols, and again highlighted the need for stablecoin regulation. In a fireside chat, Gensler nicely summarized his view on DeFi: “Similar activity should have similar regulation,” which should give pause to various DeFi protocols claiming they lack regulatory clarity; he has been quite consistent on this point. Morgan Stanley’s analysts think crypto banking regulatory clarity is coming sooner rather than later. And on December 8th there could be a bit of a circus with crypto industry executives called to testify before Congress.
The week saw not one but three physical Bitcoin products approved around the world, in Singapore (with a fund), Germany (an ETP) and Canada (an ETF), though a U.S. spot ETF appears as far away as ever. Germany’s new coalition government’s founding document appeared to express support for tokenized equity. Tanzania plans a CBDC, following Nigeria’s eNaira. A Bank of France official advocated for DeFi regulation beyond Europe’s recent MiCA initiative.
Finally, on the incidents side, BadgerDAO got hit with a $120M exploit that reportedly affected the Celsius protocol as well; the hack was via the front-end rather than the smart contract.
At the Office
With the U.S. corporation off the ground, we are turning our attention to setting up our Singapore legal entity, with an aim to get that done by January 2022. We are also working to build the hiring pipeline so we have the engineering & research talent we need to build our product, and have been spending a lot of time on financial projections for 2022 to prepare for transitioning to a running company.