Welcome back to The Context, where we roll up all the week’s main crypto happenings into one newsletter. Speaking of rolling up…
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]
Matter Labs rolls out ZK Stack 🛒
Hong Kong Bitcoin ETF goes live 🇭🇰
New FTX report paints even worse picture of SBF 🖼️
[A Stack of Super Hyperchains ⛓️]
Matter Labs, the team behind Ethereum layer-2 blockchain zkSync Era, has rolled out ZK Stack. Developers can use ZK Stack to build blockchains that run in parallel or atop zkSync Era. All of these blockchains will use zero-knowledge proofs, a cryptographic method to show that something is true without revealing any other information. This “zk” technology is much lighter than traditional blockchains, which is why it’s being used to scale the Ethereum network.
What Matter Labs Said 🔬: “It's open source, EVM compatible, battle-tested, and future-proof,” tweeted zkSync. 🥊
And Matter Labs CEO Alex Gluchowski told Blockworks’ Macauley Peterson: “It’s going to be the only alternative — fully open-source alternative — to Optimism’s stack that is available today for anyone to build rollups.” 🛼🔝
What Journalists Said 🗞️: The Defiant’s Samuel Haig agreed: “ZK Stack is Matter Labs’ answer to Optimism’s OP Stack, and lays the groundwork for a unified ecosystem of ‘hyperchains’ that leverage its technology.” ⛓️ The OP Stack, which Coinbase, Binance, and Zora all use for their own chains, has been available since early June.
The technology is different, however, The Block’s Tim Copeland reiterated: “Optimism is built on optimistic rollups, while zkSync is built using zero-knowledge proofs for all transactions.”
The former involves an assumption that transactions are valid but builds in time for them to be challenged and reversed, meaning settlement takes days. In the latter, which allows for quick settlements, “transactions are batched into a ZK proof, and then a series of those ZK proofs are batched into a single proof for progressively greater compression,” explained Andrew Fenton for Cointelegraph.
Why It Matters: The Ethereum scaling roadmap has incorporated rollups for some time. Given their speedy finality, ZK rollups hold the potential to be even more transformative than optimistic rollups.
[HSB(T)C 🏦]
Megabank HSBC reportedly began allowing Hong Kong customers to buy and sell Bitcoin and Ethereum exchange-traded funds (ETF) listed on Hong Kong’s stock exchange. 🇭🇰 Those offerings are CSOP’s Bitcoin Futures ETF and Ethereum Futures ETF, as well as the Samsung Bitcoin Futures Active ETF.
What HSBC Said: HSBC hasn’t made any public announcements and didn’t comment when asked by Bloomberg’s Denise Wee.
What Journalists Said 🗞️: Independent Chinese journalist Colin Wu, who had the scoop, tweeted that “the move will expand local users’ exposure to cryptocurrencies.”
This is no surprise, suggested Fortune’s Marco Quiroz-Gutierrez: “The news comes after the region’s banking regulator earlier this month pressured several of the biggest banks in Hong Kong, including HSBC, to accept crypto exchanges as clients.”
This is “not really news,” countered CoinDesk reporter Jamie Crawley. “HSBC's customers in Hong Kong have in fact been able to trade such crypto investment products since they were listed on the Hong Kong Stock Exchange (HKEX) in December, as the bank allows trading of all publicly-listed ETFs.” The news is that they can now “access these ETFs from the bank’s investment platform.”
Why It Matters: The US has actually allowed Bitcoin futures ETFs for trading since 2021, as Blockworks’ Ben Strack reported. 🇺🇸 But with the SEC yet to approve a spot BTC ETF, HSBC’s low-key move fuels the narrative that Hong Kong is becoming the new “it” place for crypto. ⛽
[SBF/FTX 💣]
John J. Ray III published his second asset recovery report since being named FTX CEO.
What SBF Said 🧑🦱: Sam Bankman-Fried appears to finally be taking legal advice and avoiding talking to reporters or taking to Twitter. Thus far, he’s declined to comment on the report. 💬❌
What Journalists Said 🗞️: This “report is packed with bombshells,” declared CoinDesk columnist David Z. Morris. For one, it alleges that SBF and other FTX execs knew in August 2022 that the exchange had an $8 billion hole — three months before it collapsed and while SBF was proclaiming the firm’s financial strength. 💹 The debtor’s report also claims that millions of dollars went to “seemingly not real investments” and that the exchange backdated financial documents and hand-signed them. “This is radioactively bad for Bankman-Fried’s criminal defense, for two reasons,” writes Morris. ☢️ “First, the one-time use of a physical signature indicates a clear strategy to avoid generating Docusign metadata that might reveal the document was not signed in 2019. That clearly indicates Bankman-Fried was engaging in conspiracy to commit and conceal fraud.” 👲
“Most FTX watchers already believe claims that the firm made use of funds deposited by users of the FTX exchange, but allegations made in this report would confirm that more directly than we've previously seen and shed considerable light on various aspects,” wrote Axios’ Brady Dale. The “bottom line” is that “the document explicitly accuses Sam Bankman-Fried and his staff of lying about customer funds repeatedly.” 〰️
Why It Matters: Sam Bankman-Fried is slated to be tried in October. Liquidators for his former company may be digging up evidence the prosecution will use. 💧⛏️
[Tweet of the Week]
[Tidbits]
“The European Union (EU) has reached a political agreement on changes to the Capital Requirements Regulation and Directive, including new regulations for crypto assets.” Story by Decrypt (Mattis Meichler) 🇪🇺
“The Monetary Authority of Singapore (MAS) released a report on how asset tokenization and decentralized finance (DeFi) can work within the bounds of international standards and institutional market infrastructure.” Story by The Block (Brian McGleenon) 🇸🇬
“Nevada's Financial Institutions Division filed to take over crypto custodian Prime Trust and freeze all of its businesses, the regulator announced on Tuesday.” Story by CoinDesk (Nikhilesh De) 🥶
[Events]
IVS Crypto 2023 Kyoto | 28th - 30th June 2023 | Kyoto, Japan
Blockchance 2023 | 28th - 30th June 2023 | Hamburg, Germany
ETH Barcelona | 5th - 7th July 2023 | Barcelona, Spain
Crypto Week Madrid Summit | 7th - 8th July 2023 | Madrid, Spain
[EthCC[6] Returns]
EthCC, the largest annual European Ethereum conference created for the community, by the community, will return for EthCC[6] from 17-20 July 2023 in Paris, France, and bring together the top minds in Ethereum to share their vision for the future of the ecosystem. The conference will gather more than 350 speakers from all around the world with various talks, workshops, and side events with the goal of sharing and transmitting knowledge to develop a positive and abundant Ethereum ecosystem.
[DeFi Definitions]
A segment exploring one particular aspect of DeFi.
This week: ‘Censorship Resistance’ by Iris Au.
With an increased lack of privacy and trust in the internet, people are turning to Web3 for its decentralised nature and high level of censorship resistance.
Censorship resistance refers to the concept that no individual or entity can stop others from using a protocol or carrying out an action. In blockchain technology, this idea specifically refers to the freedom to transact and freedom from asset confiscation. In other words, anyone can transact without the approval or intervention of third parties. Through censorship resistance, blockchain transactions will remain public, permanent, and unalterable, establishing transaction immutability that prevents political or social influences.
Back in 2017, the term was first introduced by Adam Ludwin, the ex-CEO of Chain, when describing the unique value proposition of cryptocurrency. Censorship resistance is especially important when building DeFi protocols as it effectively lowers the barriers to entry while eliminating the middleman or government institutions. Many see censorship resistance as a way to achieve financial freedom.
Although it is very difficult to censor blockchains, it is not entirely impossible. A 51% attack could be used to censor transactions temporarily. However, this rarely occurs as it takes a lot of resources and capital to conduct such an attack.
The team: founder Samantha Yap and consulting editor Jeff Benson, Sam O'Donohoe, Andrew Wickerson, Tiffany Mac Sherry, Damian Alvarez, 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.