This week in The Context, EigenLayer plots its airdrop, Hong Kong ETFs experience an early flop, and Samourai gets a karate chop.
[EigenPayer? 💸]
EigenLayer, a protocol that allows people to restake their ETH so it can be used for multiple purposes simultaneously, announced it would be releasing its own token.
What Journalists Said 🧑💻:
EigenLayer’s quick rise to the #2 spot among DeFi protocols, $100 million in funding from a16z, and a points program “fueled speculation” that an airdrop was coming, explained Aleks Gilbert (DL News) — even though it declared up to the last moment “there is no token.”
Now “e-beggars” looking for free tokens are upset about the details, wrote Sage D. Young (Unchained). Some of the gripes: you can’t trade or transfer it yet, the airdrop favors whales, 🐳 the documents are confusing, and the March 15 date used to determine eligibility leaves some people out.
Don’t forget that U.S. and VPN users are blocked, likely over regulatory concerns, said Tim Copeland (The Block). ⛔ But the biggest issue is the lack of transferability, sparking a “backlash” reminiscent of the Starknet airdrop. In that instance, the token was ostensibly “silently churning through the investor vesting schedules even though [it] wasn't really live.”
PR Perspective 🔎:
The main thrust of the criticisms are that the “right” people aren’t getting fairly rewarded. Heaven help crypto firms, who are practically expected to send free tokens people’s way and then, when they do, get blasted for not doing it right. Rule #1 of airdrops: You can’t make everyone happy. Rule #2: Be ready with explanations, not apologies.
[Hong Kong Gone Wrong? 🇭🇰]
Hong Kong’s first spot bitcoin and ether exchange-traded funds registered HK$87.5 million ($11.2 million) in trading volume on their first day. [ETFs give retail investors exposure to an asset’s price and let them trade it like a stock without having to buy the actual asset.]
What Journalists Said🧑💻:
These are the first crypto ETFs in Asia, and Hong Kong is one of the few jurisdictions anywhere with an ether ETF, explained Shreyashi Sanyal (CNBC). But Japan, Singapore, and South Korea could be next. 🌏
While mainland China shuns crypto, 🇨🇳 semi-autonomous Hong Kong wants to be a crypto hub, wrote William Langley and Chan Ho-him (FT). The city-state is in a race with the US “to dominate the growing market” for crypto ETFs. 🏃♀️
So how was actual trading? “Dismal,” said Omkar Godbole (CoinDesk). The combined $11 million in trading volume Tuesday was “a fraction of the expected $100 million” — and way below the $655 million spot bitcoin ETFs logged in their January debut.
PR Perspective 🔎:
From the outside, it looks like a competition. But a win for Hong Kong would be a win for the entire industry. The opening of crypto ETFs — and, perhaps, their eventual popularity — signal that crypto is a mainstream investment worthy of mainstream attention. However, it's important to note that the lower-than-expected trading volumes may reflect initial skepticism or caution among investors, particularly in light of recent market volatility and regulatory uncertainties surrounding cryptocurrencies.
[All Mixed Up? 🎎]
The co-founders of Samourai Wallet, a Bitcoin mixing service, were arrested and charged by the U.S. with money laundering. 🧺 [These services essentially allow people to trade their bitcoin for BTC from a variety of sources; it’s a way of making blockchain transactions more private.]
What Journalists Said 🧑💻:
Anonymity was Samourai’s selling point. But prosecutors allege the co-founders “knew a large portion of the money Samourai processed were proceeds from criminal activity”—more than $100 million, wrote Mengqi Sun (WSJ).
First Tornado Cash, now this. The Department of Justice seems to be contending that crypto mixers are money transmitters that “allow (maybe even encourage) users from…sanctioned entities or regions to use their services” despite their ostensible decentralization, said Nikhilesh De (CoinDesk).
This is a “big deal,” argued Michael McSweeney (Blockworks). Crypto lovers may be too enamored with memecoins at the moment to realize “where things could go from here: self-censorship by developers afraid of legal drama, greater centralization of crypto services and the further abandonment of the US as a destination for technology innovation.” 🏚️
PR Perspective:
The crypto community rallied around Tornado Cash’s founders when they were similarly charged with money laundering last year. But privacy is a hard selling point — it doesn’t resonate with a lot of people outside crypto (and even many within). Meanwhile, the government can use the bully pulpit to conflate privacy with terrorism financing and a host of other illicit activity.
[Tweet Of The Week]
Credit: @Dogetoshi
[DeFi Definitions]
A segment exploring one particular aspect of DeFi. View previous entries here.
This week: ‘’Aggregation” by Andrew Wickerson.
In DeFi and tech platforms like GitHub and Gmail, aggregation refers to the process of consolidating and integrating diverse functionalities, protocols, or liquidity into a unified system or interface.
Aggregation holds promise for resolving crypto’s fragmentation. While monolithic platforms centralize liquidity to a single instance, they lack customization. Consequently, users fork them to make minor adjustments, leading to liquidity fragmentation. On the other hand, modular systems offer customization but lack a unified state or shared liquidity. Too many modular apps can fragment user experience (UX) and liquidity.
Aggregation pools resources or information into a central hub or shared state, enhancing efficiency, scalability, and UX. It allows customization through modular layers while promoting interoperability and network effects.
To address fragmentation, the solution lies in aggregating modularity on a shared immutable state, like the internet. This architecture combines the benefits of monolithic platforms and customization, fostering a cohesive ecosystem.
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 Jeff Benson, Sam O'Donohoe, Ewan Brewster, Andrew Wickerson, Delon Chan, Emma Murphy, and Lauren Platt. 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 brands through impactful storytelling. Find out more about us here.