Hi, hope you had a good week. This week, Ethereum’s cautious but clear timeline of improvements offers a narrative-busting counterpoint to the prevailing DeFi gloom. We break down the reasons why. That’s not to say there isn’t plenty to be gloomy about, as journalists and prosecutors sift through the entrails of FTX etc. The usual disclaimer: This newsletter collates the main themes and headlines of the week in DeFi/crypto/metaverse/web3/NFT land and tries to provide unbiased context. It’s aimed at anyone who wants to keep an eye on the space. It’s put together by a team at YAP and doesn’t contain any promotion of our clients (if one is mentioned, we’ll flag that).
The team: founder Samantha Yap and consulting editor Jeremy Wagstaff, with Sam O’Donohoe, Ewan Brewster, Tiffany Mac Sherry, Becky Corbel and Delon Chan. Your feedback is as always welcome. Ping us at thecontext@yapglobal.com. Old newsletters can be found here.
[tl;dr]
More buzz and growth around Ethereum ahead of the Shanghai upgrade.
FTX, DGC and Binance continue to cause chaos in headlines and wallets.
[Ether-real]
Interest in Ethereum continues ahead of the Shanghai upgrade mentioned last week. There are several parts to this:
Liquid staking: Consensys, the company behind wallet provider MetaMask, is adding a feature to its one-stop shop that would allow users to stake via Lido or Rocket Pool, the two leading community-led validator services (Lido, one of the highest-ranked protocols, is a YAP Global client.)
Hodlers: The number of holders of Ethereum grew 263% last year, against 20% for owners of Bitcoin, driven by the Merge and institutional interest.
The number of smart contracts on Ethereum grew nearly 300% in 2022, with the peak of activity falling in the final quarter — when FTX was collapsing and the sky falling, suggesting that the developer community is resilient and web3 is still a thing.
Deflation: Ethereum hit highs not seen since last November and has fallen into deflationary territory — meaning the supply of ETH dwindles, making it more desirable.
Stories by Sam Kessler of CoinDesk, Andrew Asmakov of Decrypt, Monika Ghosh of Cryptoslate.
[The usual suspects roundup]
Updates from the frontier of the battle to disentangle the collapsed, the collapsing and the collaterally damaged.
FTX
Some 196 members of the current U.S. Congress had taken direct contributions from Sam Bankman-Fried and other then FTX executives, with many of them now trying to offload the donations to charities.
SBF allegedly propped up FTX in part by shilling so-called ‘Samcoins’ on his exchange.
The art world is waking up to the possibility that much of the purchases of NFT artworks can be traced back to FTX or related entities.
News site Semafor is still trying to find a way to offload its biggest outside backer, Sam Bankman-Fried, who contributed more than a third of the $25 million the company received in initial funding.
Digital Currency Group
DCG media unit CoinDesk is exploring options to be bought, in part or whole.
DCG lending unit Genesis Global Capital is negotiating a bankruptcy plan with creditors, led by Winklevoss twins’ Gemini. It may happen this week.
WSJ wrote a profile of Barry Silbert, who owns 40% of DCG.
Binance
While the U.S. Treasury’s announcement that it had arrested a co-founder of exchange Bizlato was greeted by shrugs, journalists have explored Bizlato’s relationship with Binance. This was not only a major counterparty to Bizlato, but also to Hydra, a darknet market which was also a major counterparty to Bizlato.
Stories by Jesse Hamilton, Cheyenne Ligon and Elizabeth Napolitano of CoinDesk, Gregory Zuckerman, Caitlin Ostroff, Lauren Thomas and Vicky Ge Huang of the WSJ, Adam Morgan McCarthy and Frank Chaparro of The Block, Nate Freeman of Vanity Fair, Emily Flitter and David Yaffe-Bellany of The New York Times , Alex Barker and Anna Nicolaou of the FT; and Protos.
[Buzz]
The World Economic Forum is not ignoring crypto. UBS’ settlement coin is now owned by 17 financial institutions and is set to launch this year. UBS chairman Colm Kelleher told the WEF that blockchain “will reduce huge operational friction, reduce costs and, harnessed properly, will be a very good value additive to the chain.”
Stable stablecoins: National Australia Bank is contributing to something similar in Australia, and is the second of the country's big banks to create a stablecoin, allowing business customers to settle transactions on a blockchain -- in theory speeding up the settlement of multiple linked transactions to be settled simultaneously.
Send in the Clowns: Su Zhu and Kyle Davies, the founders of collapsed crypto hedge fund Three Arrows Capital (3AC), are hoping to raise $25 million to start a new crypto exchange offering to convert claims on FTX into a new a token called USDG. The move has attracted widespread mockery (“The clowns of cryptoland haven’t given up,” according to the FT)
Baseless: Coinbase is leaving Japan, citing market conditions. Despite this and recent layoffs, Coinbase’s shares rose more than 40%, buyers apparently impressed that its market share has increased from 29% to 39% since the collapse of FTX.
Stories by James Eyers of the Australian Financial Review; Jemima Kelly of the FT, Ledger Insights, Alys Key of Decrypt.
[Tweet of the Week]
[Events]
Blockchain Economy 2023: London Summit | January 27th - 28th 2023 | London, England
[DeFi Definitions]
An occasional segment exploring one particular aspect of DeFi.
This week “Appchains” by Leila Stein
There is a lot of discussion about the ideal blockchain for developers and decentralised app builders. As block space on Ethereum becomes more sought after and Cosmos finalises its interchain security, the benefits of application-specific blockchains are gaining traction.
Appchains, or application-specific blockchains, are designed for one specific application rather than a basis upon which multiple applications can be built. These specific chains dedicate their block space to one application and enable dApp developers to build with more freedom and customisability through multiple layers of their stack. This could be in the form of permissions, security, or token models.
Since appchains have dedicated computation and storage, the dApps built on them are noted for their improved performance and usability. Without competing for space, developers have more freedom to make changes and upgrades that dApps built to Layer 1 mainnets might struggle with.
An example of an appchain ecosystem would be the Cosmos SDK. Originally created in 2016, the “internet of blockchains” envisioned an ecosystem of appchains as the best way forward for blockchain development. Despite the early start, development on these chains has been slow - with 2021 seeing the whitepaper for the next phase of Cosmos development. This speaks to the still novel development of this kind of dApp development.
This newsletter is prepared by YAP Global, an international PR Consultancy focusing on helping cryptocurrency, Decentralised Finance (DeFi) and Web3 brands through impactful storytelling. Find out more about us here.