#80 The Context: 3 Things You Might Have Missed After Ripple
Celsius, Uniswap, and BlackRock, oh my!
Almost immediately after we published The Context last week, Ripple Labs ⚗️ won a partial ruling in the SEC’s case against it. The aftermath and forward path have been discussed at length all week, crowding out a few other important developments. To wit, that same day, the ex-CEO of Celsius was arrested. Then, the SEC moved forward with BlackRock’s Bitcoin ETF application and Uniswap announced a new product. We’ve got the details below.
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]
The former CEO of Celsius was arrested 🚓
Uniswap released a new routing protocol to improve DeFi liquidity 💧
The SEC agreed to review BlackRock’s Bitcoin ETF application 🪨
[Celsius Feeling the Heat 🌡️]
Alex Mashinsky, the former CEO of bankrupt crypto lending platform Celsius, was arrested last Thursday on fraud charges. He pleaded not guilty. Mashinsky and Celsius were also sued by the Securities and Exchange Commission and the Commodity Futures Trading Commission. (The company settled a suit brought against it by the Federal Trade Commission by agreeing to pay $4.7 billion frozen on the platform. It also dodged prosecution by cooperating with the government.)
What the US Attorney’s Office Said 🧑💼: It goes beyond fraud. “Artificially inflating the price of CEL allowed Mashinsky, [Chief Revenue Officer] Roni Cohen-Pavon, and other Celsius executives to sell their own CEL holdings for a substantial profit,” stated a press release from the US Attorney’s Office, Southern District of New York. “Mashinsky personally reaped approximately $42 million in proceeds from his sales of CEL.”
What Mashinsky Said ❕: In a statement, a lawyer for Mashinsky said, “He looks forward to vigorously defending himself in court against these baseless charges.”
What Celsius Said ❗: “We are pleased to have reached resolutions with the Department of Justice, the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Federal Trade Commission as we continue to pursue a successful Chapter 11 Plan,” Celsius tweeted, exactly one year after it filed for bankruptcy.
What Journalists Said 🔎: Bloomberg’s Ava Benny-Morrison and Allyson Versprille set the scene: “Celsius was one of several high-profile crypto firms that imploded last year. The company gained popularity by paying high-interest rates on digital-asset deposits. But following the collapse of the TerraUSD stablecoin and a downturn in the digital-asset markets the company was unable to meet an influx of customer withdrawals.”
The indictment and the SEC, CFTC, and FTC filings all “present the same basic facts,” noted independent journalists Amy Castor and David Gerard: “If the DOJ and the agencies can’t get Mashinsky for crimes of fraud, they’ll get him for commodities law violations, securities law violations, or consumer deception.”
Castor and Gerard accused Mashinsky of running a Ponzi scheme. Bloomberg columnist Matt Levine agreed: “If you raise money from customers promising them 17% returns, and then you don’t make enough money to pay those returns, and then you raise more money from new customers and use some of their money to pay the returns, that’s a Ponzi scheme.”
Celsius “was basically a reckless investment firm…from the start,” alleged CoinDesk’s Daniel Kuhn — gambling with customer deposits and losing. All the while, “Celsius portrayed itself as a zero-risk lending platform where people could store their wealth.”
Why It Matters ⁉️: Many in crypto are just as eager to be done with Celsius as regulators and prosecutors are. But with the SBF case also going to trial, the public will have more glimpses of the industry’s dark side.
[UniswapX Marks the Spot 🎯]
Hayden Adams, the founder of the decentralized exchange Uniswap, announced the launch of UniswapX at the EthCC conference in Paris this week. UniswapX is a new routing protocol “for trading across [automated market makers] and other liquidity sources.”
What Uniswap Said 🐴: In a blog post, Uniswap Labs promised UniswapX would result in better trading, giving users “better prices by aggregating liquidity sources,” eliminating the cost of failed transactions, and protecting users against MEV (The Context Edition #65, by Saad Qureshi), or maximum extractable value. That’s when those who produce the blocks change transaction orders to get more in fees.
What Journalists Said 🔎: A major aim of UniswapX is to increase liquidity, explained CoinDesk’s Sam Reynolds. When DEX liquidity pools “dry up,” users can’t trade efficiently. So, UniswapX brings in third parties to fill the orders or re-route customers. “These third-party fillers would have to compete with Uniswap itself, thus driving down prices for traders.“
Notably, there’s a need for this, said Owen Fernau of The Defiant: “The firm’s move to develop a protocol to aggregate trade requests speaks to the increasing fragmentation of liquidity across DeFi.”
Why It Matters 🌈: In today’s DEX trading world, dominated by front-running and MEV, you typically get the worst order you’re willing to receive. With UniswapX, you’re supposed to get the best rate available.
[BlackRock On 🤘]
The Securities and Exchange Commission agreed to review BlackRock’s application for a spot Bitcoin exchange-traded fund. The agency has never approved a spot Bitcoin ETF (only a futures Bitcoin ETF), which would allow retail investors an easily accessible way to get financial exposure to BTC without buying it.
What BlackRock Said 💬: “We believe we have a responsibility to democratize investing,” CEO Larry Fink told CNBC. “We’ve done a great job, and the role of ETFs in the world is transforming investing. And we’re only at the beginning of that.”
What Journalists Said 🧑💻: This is just a “procedural move” but it nonetheless “suggests that the federal agency will give the closely-watched application a serious look,” wrote Decrypt’s Ryan Ozawa.
When BlackRock threw its hat into the ring last month, a handful of other firms followed suit. However, “don’t expect a flood of spot-Bitcoin ETFs,” wrote CoinDesk’s Amitoj Singh, after talking to investment experts. Several “poured cold water on the idea of an immediate spot bitcoin ETF approval.” It has been 10 years since the first spot Bitcoin ETF application was submitted, after all.
Why It Matters 🤷♂️: An ETF approval would represent Bitcoin’s ascension to an institutional asset, theoretically expanding its reach.
[Tweet of the week]
[Events]
AIBC ASIA | 19 - 22 July | Manila, Philippines
Blockchain Oracle Summit | 21 - 22 July | Berlin, Germany
ETHGlobal Paris | 21 - 23 July | Paris, France
Nebular Summit | 24 - 25 July | Paris, France
[EthCC Highlights 🇫🇷🥐]
EthCC, the largest annual European Ethereum conference created by and for the community, produced several highlights:
Vitalik Buterin, Co-founder of Ethereum, discussed the history of account abstraction and how different EIPs and ERC standards have affected how accounts on Ethereum could engage with the ecosystem.
🥳 “The big challenge with account abstraction is miner strategy… One simple approach, whitelist a set of co-hashes.” 🌺
Sriram Krishnan, GP at a16z talked about how now is the perfect time to build consumer social media or marketplace applications.
🧐 “My theory is that the things which wind up succeeding are things which really focus on community, interesting content and interesting experiences; and the financial side of things is actually a minor to a non-existent mechanism.” 🏦
Friederike Ernst, Co-Founder of Gnosis and Co-Host of Epicenter, spoke about the nuances between different L2s and contrasted this with horizontal scaling, to demonstrate how they are not that different.
⚖️ “Ethereum today has about 1.25 million transactions per day, it varies because transactions have varying amounts of gas, but there is nothing to substantially change that on the road map for the next three years. So this is what we have to live with.” 💯
[DeFi Definitions]
A segment exploring one particular aspect of DeFi.
This week: “White Hat Hack” by Andrew
White hat hacking, also known as ethical hacking, is a practice where skilled and knowledgeable individuals, referred to as white hat hackers, legally and ethically assess and evaluate the security of computer systems, networks, and software applications. White hat hackers employ their expertise to identify vulnerabilities, weaknesses, and potential threats that could be exploited by malicious attackers.
White hat hacking involves a systematic and controlled approach to testing the security defenses of a target system. It typically includes various methodologies, tools, and techniques aimed at uncovering weaknesses in the system's infrastructure, configurations, applications, or protocols. These activities may involve scanning networks, analyzing code, simulating attacks, exploiting vulnerabilities, and attempting to gain unauthorized access to the target system.
The main objectives of white hat hacking are to:
Identify vulnerabilities:
Evaluate security controls:
Verify compliance:
Enhance security posture:
Foster a proactive security culture:
It is crucial to note that white hat hackers adhere to strict ethical guidelines, ensuring that their activities do not cause harm, compromise data integrity, or violate any laws or regulations.
Overall, white hat hacking serves as a valuable practice to identify and mitigate security risks, protect sensitive information, and enhance the resilience of computer systems and networks against potential attacks.
The team: founder Samantha Yap and consulting editor Jeff Benson, Sam O'Donohoe, Andrew Wickerson, Damian Alvarez, Ewan Brewster, 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.