Hi, everyone, hope you’ve had a good week. This week Binance’s CZ is in the crosshairs, zkEVMs arrive like buses, along with updates on Do Kwon and SBF.
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).
[tl;dr]
Binance faces the most serious legal action yet from the CFTC
zkEVM finally goes live
SBF and Do Kwon, where have they been?
[CFTC goes after Binance]
Binance and its CEO Changpeng Zhao are feeling the heat from a U.S. regulatory body yet again, not from the Securities and Exchange Commission this time, but from the Commodity Futures Trading Commission (CFTC).
Sued: Binance has been accused by the CFTC of illegally serving U.S. clients, ignoring all registration and regulatory requirements under U.S. law. It also alleged that Binance has encouraged users to use VPNs to avoid U.S. compliance controls.
The CFTC’s thoughts: “Today’s enforcement action demonstrates that there is no location, or claimed lack of location, that will prevent the CFTC from protecting American investors.”
Outflows: Binance endured some $500M in outflows, although the BUSD stablecoin maintained its peg. News of the lawsuit did briefly impact the price of Bitcoin and Ethereum but both recovered. BNB-based tokens, however, have taken a hit.
CZ’s thoughts: Binance CEO Zhao called the suit an ‘incomplete recitation of the facts’ tweeting that people should ignore the “fake news” and “attacks.”
Sources: Stories by Scott Chipolina and Stefanie Palma of The Financial Times; Shaurya Malwa and James Rubin of CoinDesk.
[zkEVM is upon us]
The zero-knowledge Ethereum Virtual Machine (zkEVM), which executes smart contracts in a way that’s compatible with zero-knowledge proof computations and existing Ethereum infrastructure, has arrived, with the mainnet launches of zkSync Era and Polygon. While the arrival of zkEVM is a welcome development, it pales in comparison to the size of Optimism and Arbitrum which use optimistic rollups. If Arbitrum’s airdrop last week is anything to go by, it shows that the race for scalability is a hotly contested space.
Polygon’s zero-knowledge rollup went live on its mainnet on Monday, a sign that zkEVM has arrived. It has taken a while, and success will depend on what applications and projects start building on it. For now, it’s just another Layer 2, competing with the likes of Base and zkSync. Much will come down to the strength of their community and marketing.
Vitalik Buterin: marked the occasion by hiding a message in the first Polygon zkEVM transaction: “A few million constraints for man, unconstrained scalability for mankind.”
zkSync for its part has launched its alpha mainnet with its head of engineering, Anthony Rose saying there was a lot more work to be done: “We're not claiming this is the system that we expect it to be either 2 or 3 years from now. There’s lots and lots more engineering work to do. But this is the core skeleton of the zkEVM.”
Why it matters?: John Wolpert, founder of TacitPath.com, is embracing zero-knowledge would provide some privacy to public blockchains which he described as “digital nudist colonies on public beaches. Everything ever written to them is visible to anyone.”
Sources: Stories by Aleksander Gilbert of The Defiant; Andrew Hayward and Liam J. Kelly of Decrypt; John Wolpert of Forbes.
[Bad Boys of Crypto]
The U.S. and South Korea have formally begun extradition proceedings for Terra founder Do Kwon from Montenegro. First, he faces forgery charges from his hosts, and there’s talk Singapore might want him in their courtrooms as well. Sam Bankman-Fried will plead not guilty to new U.S. charges, including conspiring to violate campaign finance laws and bribe Chinese officials.
Do Kwon’s arrest in Montenegro is only the first step in what is likely to be a long process. The arrest comes almost a year after the collapse of the Terra ecosystem last May, an event that thrust the digital assets industry firmly into a crypto winter and contributed to the failure of several firms like the crypto hedge fund Three Arrows Capital(3AC). The U.S. is seeking his extradition, as is South Korea, and possibly Singapore. But first, he faces charges in Montenegro with forging documents and would be extradited only after a trial and any sentence served in the small Adriatic republic.
SBF meanwhile pleaded not guilty to bribery and campaign finance charges and plans to plead not guilty to a new 13-count indictment. In fresh charges, he is accused of attempting to bribe at least one and possibly more Chinese government officials as part of an effort to unfreeze certain accounts. A Federal judge also approved new bail restrictions for the FTX founder. It has been reported that his legal defense was being funded with money from Alameda, solving at least one mystery: after claiming he had only $100,000 in his bank account, how was SBF paying his legal bills? Apparently, the answer lies in a large gift he made to his father, funded by a loan from his exchange’s trading firm, Alameda Research.
Sources: Stories by André Beganski of Decrypt; Jonathan Stempel, Aleksandar Vasovic, Hyunsu Yim and Luc Cohen of Reuters; Sarah Emerson and Steven Ehrlich of Forbes.
[Tidbits]
Disney’s Metaverse Unit designed to promote the “next generation” of storytelling has cut 50 employees leaving only its lead Robert Iger. The decision comes from a company-wide chop of 7,000 employees. Story by Ryan S. Gladwin.
Computing hardware company Nvidia says that crypto adds nothing to society. Such a claim is surprising considering the company has profited massively from providing computing power and chips to crypto mining companies. The PC original equipment manufacturer (OEM) revenue jumped 200% in 2017 largely due to providing GPU products used in crypto mining. Story by Kate Irwin.
Crypto Exchange, Gemini, is preparing to launch an international cryptocurrency derivatives exchange. The exchange, led by the Winklevoss brothers, could be seeking to fill a void in the market that has been created by the collapse of FTX and the CFTC’s legal action against Binance. Story by Akash Pasricha and Aidan Ryan.
Former Hollywood script consultant Stacy Herbert and American Broadcaster Max Keiser become advisors for El Salvador’s Bitcoin experiment. Herbert has been introduced as the head of El Salvador’s “National Bitcoin Office.” Story by Santiago Pérez.
[Tweet of the week]
[Events]
Wow Summit HK | March 29th - March 30th 2023 | Hong Kong, China
Solana Crossroads | March 31st - April 1st 2023 | Istanbul, Turkey - Keep your eyes peeled for our CEO Samantha Yap who will be speaking!
NFT.NYC | April 12th - 14th 2023 | New York, NY, USA
EthCapeTown | April 14th - 16th 2023 | Cape Town, South Africa
[DeFi Definitions]
A new occasional segment exploring one particular aspect of DeFi.
This week “Blockchain” by Becky Corbel.
When Bitcoin was first invented in 2008, it gave birth to one of the most unique technological innovations of our time: blockchains. Blockchains can be described as "digital public ledgers." But why are they so innovative and unique?
Blockchains were created to record transactions in a decentralised manner. In other words, any transaction that happens on the blockchain is visible to anyone. This is an immensely revolutionary idea because it removes the need for centralised entities such as banks for keeping a record of transactions and exchanges thus completely rewriting the way in which we transact with one another. Furthermore, blockchains are immutable meaning that once information has been validated, it is permanent and tamper-proof, ensuring the integrity of the data.
All transactions have to be validated and added to the blockchain by validators/miners. Validation looks different depending on the respective blockchain, for example, Bitcoin uses proof-of-work and Ethereum uses proof-of-stake.
There are many different blockchains and they all have their unique functionalities. The most widely used and best known are Bitcoin and Ethereum, but they are very different from one another. The Bitcoin Blockchain is by far the most simple and is merely used for the exchange of Bitcoin. On the other hand, the creator of Ethereum, Vitalik Buterin, sought to nurture the decentralised nature of blockchains even further by allowing them to do essentially anything from exchanging crypto to building applications (dApps).
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.
This newsletter is prepared by YAP Global, an international P.R. Consultancy focusing on helping cryptocurrency, Decentralised Finance (DeFi) and Web3 brands through impactful storytelling. Find out more about us here.