What’s Yappening, people? It’s a busy week in paradise. Ledger announced its new offering Ledger Recover, much to crypto-natives’ dismay. DCG misses out on a $630 million loan repayment to Gemini. Meanwhile, Reuters reports that Binance commingled its customer funds.
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]
Ledger rolls back plans for Ledger Recover feature after backlash 📜
Gemini says Digital Currency Group welched on $630 million loan ♊
Binance refutes Reuters scoop 🍨
[Stepping back from the Ledger 📒]
Last week, hardware wallet company Ledger announced an optional seed-phrase recovery feature available via a firmware update. It didn’t go over well. 👎 This week, the French crypto firm changed course.
What Reporters Said 🔎: The service was meant to reassure users worried about losing their keys on a device designed to never share those details with anyone, wrote CoinDesk’s Anna Baydakova: “The opt-in update, available for Nano X models, allows Ledger owners to use a service named Ledger Recover and share their seed phrase (a sequence of words used to recover a lost wallet) with a set of trusted custodians, namely Ledger, Coincover and EscrowTech.”
Somewhere along the line, however, security concerns nearly torpedoed the project.
What Columnists Said: Ledger really messed up its communication when one of its accounts tweeted that it’s always been able to extract user keys through a firmware update, wrote CoinDesk columnist David Z. Morris. While accurate, “the message added immensely to the confusion, fueling even more panicky rhetoric on Twitter – including claims that Ledger devices have been revealed to have some deep flaw or ‘back door’.”
What Ledger Said: The real problem here was a lack of transparency, CEO Pascal Gauthier said in a lengthy blog post on Tuesday, responding to critics who noted that some of Ledger’s operating system code can’t be viewed: “We will open source the Ledger Recover protocol, enabling the community to have as much choice as possible over your self-custody, in addition to the service being fully optional.”
Why It Matters: Crypto firms are looking for ways to onboard users who are put off by stringent security requirements and self-custody. But many in crypto think, “Without that, what’s the point?”
[No Money, Mo Problems 💵]
Crypto exchange Gemini says investing firm Digital Currency Group (DCG) missed a $630 million loan repayment this month. Gemini had loaned $900 million to DCG-owned crypto lender Genesis before the latter filed for bankruptcy.
What Reporters Said 💬: It’s a whole mess, hinted Emily Mason at Forbes. 🍝 Gemini tapped Genesis to administer its Earn program: “The Earn deposits were entrusted to Genesis which lent them out to generate the interest for Gemini’s customers. Two of the top borrowers were now-defunct entities Three Arrows Capital, a hedge fund, and cryptocurrency exchange FTX. When they went under, they took Gemini Earn customers’ $1.1 billion in deposits with them.” Gemini ended Earn in January.
Meanwhile, it’s unclear what DCG—who also owes Genesis more than $1 billion—can actually afford to pay: “Layoffs have struck a number of DCG companies over the past year, as well as DCG itself,” wrote Blockworks’ Sebastian Sinclair.
What Gemini and Genesis Said: “Genesis, [its creditors], and Gemini are considering whether to provide a forbearance to DCG to avoid a DCG default,” Said Gemini. For its part, Genesis says it’s also working to “address Digital Currency Group’s nonpayment," a company spokesperson told Decrypt.
What DCG Said: “DCG continues to be engaged with the various stakeholders in the Genesis Capital restructuring process pursuant to the 30-day mediation period entered into by all parties on May 1,” a DCG spokesperson told multiple outlets.
Why It Matters: A DCG default could indicate that the Terra and FTX market contagion will continue. DCG owns multiple big-name companies that could feel financial pressure, including news outlet CoinDesk, Bitcoin mining firm Foundry, and asset manager Grayscale.
[Commingle or No Mingle? 🍻]
Reuters this week, citing three unnamed insiders, reported that Binance regularly mixed revenue with customer funds throughout 2020 and 2021.
What Reuters Said 🔎: “The money flows at Binance described by Reuters indicate a lack of internal controls to ensure customer funds were clearly identifiable and segregated from company revenues, three former U.S. regulators said. They said the commingling of these funds put client assets at risk by obscuring their whereabouts.”
What Reporters Said 🗣️: These are the types of reports that make everyone nervous, suggested CoinDesk’s Sandali Handagama: "’Commingling’ or the mixing of customer and company funds has become a bit of a dreaded buzzword in the crypto sphere since revelations following the fall of exchange giant FTX in November last year gave rise to concerns the practice may be widespread in the industry.”
It’s also not the first time Binance has been accused of it: back in January, Bloomberg’s Emily Nicolle reported that the exchange “acknowledged that it mistakenly keeps collateral for some of the tokens it issues in the same wallet as exchange-customer funds.”
What Binance Said: Hogwash, said Binance CCO Patrick Hillman, tweeting: “We’ve been very public about where the company had regulatory shortcomings in the past, there’s no reason for a respected news outlet like Reuters to continue making stuff up.”
Why It Matters: Trust is a huge factor in an ecosystem where trustlessness is the ideal. Ledger lost a little bit of it this week; Binance wants to avoid any customer doubt.
[Tweet of the week]
[Tidbits]
“Necessity is the mother of invention…” - developers at crypto start-up Keyp convert the 90s artifact, Gameboy, into a hardware wallet in seed phrases are now gamified. Story by Kate Irwin (Decrypt)
“Licensed to thrill” - Hong Kong's Securities and Futures Commission (SFC) will begin accepting applications for crypto trading platform licenses on June 1, according to a Tuesday announcement. Story by Lavender Au and Sandali Handagama (CoinDesk)
“Solana all in on AI” - Solana has integrated ChatGPT into its network to help onboard more Web3 users. Story by Jacquelyn Melinek (TechCrunch)
“Bitcoin Pizza Day with Dips”- Crypto community celebrated Bitcoin Pizza Day on Monday while scammers bag six-figure sums causing token prices to dip slightly. Story by Marco Quiroz-Guitierrrez (Fortune)
[Money, Culture & Crypto - the Love Triangle Explained]
We're excited to kick off Season 3 of YAP Cast: The Story of Money with a deep dive into the relationship between money, culture, and cryptocurrencies. In the season premiere, Samantha Yap and Dr. Paul Dylan-Ennis explore how our attitudes towards money shape societal values and how cryptocurrencies influence cultural trends. This enlightening discussion illuminates the role of money as a tool for expressing our beliefs and what we value. Listen to the first episode of YAP Cast: The Story of Money here.
[Events]
ETHDublin | 26th - 28th May 2023 | Dublin, Ireland
Isreal Crypto Conference | 29th - 30th May 2023 | Tel Aviv, Isreal
London Blockchain Conference | 31st May - 2nd June 2023 | London, England
Money Tel Aviv Conference | 31st May 2023 | Tel Aviv, Isreal
Render ATL | 31st May - 2nd June 2023 | Atlanta, Georgia, USA
Crypto Currency World Expo | 1st - 2nd June 2023 | Istanbul, Turkey
Israel’s Web3, CBDC & Crypto Regulation | 1st - 2nd June 2023 | Tel Aviv, Isreal
Crypto Valley Conference | 1st - 2nd June 2023 | Switzerland
Web3 Tales | 1st - 2nd June 2023 | Croatia
Prague Blockchain Week | 2nd - 11th June | Prague, Czech Republic
ETH Belgrade | 2nd - 6th June 2023 | Belgrade, Serbia
ETH Seoul | 2nd - 4th June 2023 | Seoul, South Korea
Belgrade Blockchain Week | 2nd - 9th June 2023 | Belgrade, Serbia
TLV Blockchain Week | 3rd June 2023 | Tel Aviv, Isreal
Gateaway to Cosmos | 3rd - 5th June 2023 | Prague, Czech Republic
UTXO | 4th - 5th June 2023 | Prague, Czech Republic
Web3Privacy Prague | 5th June 2023 | Prague, Czech Republic
BUIDL Asia 2023 | 6th - 7th June 2023 | Seoul, South Korea
Brussels Blockchain Week | 7th - 8th June 2023 | Brussels, Belgium
Non-Fungible Conference (NFC) | 7th - 9th June 2023 | Lisbon, Portugal
Solana Hacker House | 7th - 11th June 2023 | New York City, NY, USA
BTC Prague | 8th - 10th June 2023 | Prague, Czech Republic
DEFI Summit | 8th - 9th June 2023 | Prague, Czech Republic
ETHPrague | 9th - 11th June 2023 | Prague, Czech Republic
Epic Web3 Conference | 9th June 2023 | Lisbon, Portugal
FANS LOVE IT! Web3 Football and Sports Conference | 10th June 2023 | Istanbul, Turkey
[DeFi Definitions]
A new occasional segment exploring one particular aspect of DeFi.
This week: “Airdrop” by Leila Stein.
An airdrop is a mechanism for distributing cryptocurrency or digital assets to a large number of individuals or wallet addresses. There are a few purposes of airdrops, though most relate to promoting and marketing a project. Token issuers use airdrops to distribute tokens to the market initially, raise awareness for a project, stimulate user adoption, reward loyal community members, or distribute tokens fairly.
In a typical airdrop, project developers or companies determine specific criteria for participation, such as holding a certain amount of a particular cryptocurrency or meeting specific project participation requirements, such as contributing to the project’s Discord. Once the criteria are met, the project team executes the airdrop by sending the designated tokens directly to the participants' digital wallets.
Airdrops continue to be the mechanism by which projects share their tokens initially. However, they have come under scrutiny recently. Airdrop farmers, who look to gain tokens for little community input, are common and undermine the community-building element.
The team: founder Samantha Yap and consulting editor Jeff Benson, 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.