Hi, all, hope it's been a good week for you. This week the U.K. published a new regulatory regime in the hope of attracting DeFi (and broader fintech) innovators, a sign that regulators may be viewing crypto in a more positive light after months of bad news. DeFi security companies are attracting V.C. money — perhaps unsurprising since the continued haemorrhaging of tokens to hackers.
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, 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]
U.K. and the U.S. unveil open but still cautious stances towards crypto.
More moves to improve transparency and security.
Gap between Web2 and web3 shrinks for Decentralised Social Media services.
[Peak winter?]
Have we reached peak FTX? Not, certainly, the end of the scandal itself, or the casualties. But there are signs that DeFi and web3 are not the toxic brands they were a month or so ago. For example:
U.K.: The U.K. has published a new regulatory regime for crypto, aiming to align DeFi more closely with rules covering TradFi. The move is a positive one, seeking not to repress the sector but, post-Brexit to "strengthen our position as a world leader in fintech, unlock growth and boost innovation."
U.S.: President Biden is rowing in a similar direction, albeit more cautiously, saying it plans to unveil priorities for "digital assets research and development" while calling on Congress to strengthen legal frameworks to limit risks to the wider financial system.
Courts: Crypto won a rare victory in the U.S. courts when a judge dismissed a proposed class action lawsuit by customers of Coinbase who accused the cryptocurrency exchange of selling unregistered securities and failing to register as a broker-dealer. The judge said Coinbase had no direct role in the transactions.
Sources:
U.K. unveils wide-ranging plans to regulate crypto industry (F.T.'s Scott Chipolina)
Coinbase wins dismissal of lawsuit claiming it sold tokens illegally (Reuters' Jonathan Stempel)
The Biden Administration's roadmap to mitigate cryptocurrencies' risks and its Digital Assets Research and Development document seeking public comment by March 3 2023
[Security, transparency and privacy]
Crypto has long sought a balance between security, transparency and privacy. They're not mutually exclusive, and the nexus is providing opportunities for new start-ups and some left-field innovation:
Security: Several security companies are getting funding, including Sec3 which raised a $10 million seed round, and Hypernative, whose Pre-Cog platform tries to predict threats before they occur.
Hacks: Chainalysis says that $3.8 billion was stolen in crypto hacks, $500 million more than 2021. The company is not itself immune to the downturn, however, shedding 5% of its staff.
Transparency: Chainway is tackling the issue from another direction with its "proof of innocence" tool allowing users of sanctioned mixer Tornado Cash to show their money didn't come from a hacker or a sanctioned address.
Anti-privacy: Startup Addressable says it has matched 17 million crypto wallet holders with their Twitter accounts -- a move to help marketers better target crypto users. It just raised a $7.5 million seed round.
Sources:
Buterin's Stealth Address Crypto Idea Faces a Test (Bloomberg's Emily Nicolle)
Stripe's Ill-Timed Crypto Re-Entry (The Information's Aidan Ryan)
Web3 Security Firm Hypernative Secures $9M in Seed Funding (CoinDesk's Elizabeth Napolitano)
2022 Biggest Year Ever For Crypto Hacking (Chainalysis)
Blockchain Analytics Firm Chainalysis to Cut Jobs in Reorganization (CoinDesk's Jamie Crawley)
[Decentralised social]
As Twitter under Elon Musk continues to struggle for a clear revenue model, more decentralised services sense an opportunity to win over users, suggesting a shrinking gap between the Web 2.0 world of social networking and web3. Some clues:
Apple has approved the listing of Damus, a Twitter-like app built by decentralised social network Nostr, on its App Store. Nostr is an open protocol which, among other things, supports payments over Bitcoin's Lightning Network.
Former Twitter co-founder Jack Dorsey is building out Bluesky, a decentralised social network based on its own AT Protocol.
The so-called Fediverse of decentralised (or distributed) networks that use federated social web protocols has doubled in size since November to more than 20,000 nodes.
Meanwhile, Twitter itself is looking to expand the other way, applying for regulatory licenses to allow payments, including, according to Musk, eventually those involving cryptocurrencies.
Sources:
Decentralised Social Media Project Nostr's Damus Gets Listed on Apple App Store (CoinDesk's Bradley Keoun)
Elon Musk pushes forward with Twitter payments vision (F.T.'s Hannah Murphy)
Twitter Turmoil: We Need an Open Protocol for Public Discourse (The New Stack's Richard MacManus)
Damus, another decentralised social networking app, arrives to take on Twitter (Techcrunch's Sarah Perez)
[Tidbits]
Waves' USDN Token Abandons the Stablecoin Model in XTN Rebrand (CoinDesk)
Police Raid' Drug Farm,' End Up Finding BTC Miners (Cryptonews)
Blockchain Company Simba Chain Received $30M Funding Increase From US Air Force (Coindesk)
Tesla Details $140 Million Bitcoin Loss in SEC Filing (Decrypt)
Marubeni invests in Japanese blockchain network TradeWaltz (Ledger Insights)
[Tweet of the Week]
[Events]
The Blockchain Event | February 14th - 17th 2023 | Fort Lauderdale, Florida, USA
European Blockchain Convention | February 15th - 17th 2023 | Barcelona, Spain
Blockchain Fest | February 14th - 17th 2023 | Singapore, Singapore
[DeFi Definitions]
An occasional segment exploring one particular aspect of DeFi.
This week "Ethereum" by Lauren Bukoskey
As the Ethereum community prepares for the highly-anticipated Shanghai upgrade in March 2023, others look ahead to the future of Ethereum's roadmap. This begs the question, what is the Ethereum framework and how does it operate?
Ethereum is a decentralised open-source blockchain network that enables users to make transactions and trades, stake tokens, play games, and utilise NFTs. Transactions are verified on the blockchain through smart contacts, removing the need for a third party.
Ethereum is currently the second-largest cryptocurrency and was co-created by Vitalik Buterin in 2013. Ethereum is one singular decentralised system that runs the Ethereum Virtual Machine (EVM) where each node holds a copy of each of the thousand computers that exist in the Ethereum network.
All Ethereum transactions are public and are added to everyone's copy of the ledger once the miner broadcasts the transaction. Miners are paid to complete transactions in the fees that come with each transaction, called "gas" fees.
In September 2022, Ethereum launched The Merge, a software upgrade that swapped the platform's consensus mechanism from a proof-of-work protocol to a proof-of-stake system to reduce energy usage.
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.