This week in The Context, the biggest airdrop of 2024, 📦 AI captures more AI-balls, 🏀 and the Tory story on crypto regs. 🏛️
[Que Sera, Sora 🌐]
OpenAI released Sora, a tool that can create videos from text prompts. 📺
What Journalists Said 🧑💻:
OpenAI is only letting a few researchers and content creators use the tool for now, as it tests the tool’s “susceptibility to skirt OpenAI’s terms of service,” wrote Blake Montgomery (The Guardian). Thus far, however, the text-to-video tool stands out. 🧍♀️ “Other AI companies have debuted video generation tools, though those models have only been able to produce a few seconds of footage that often bears little relation to their prompts.”
Sora’s launch was positive news for Sam Altman’s other project, Worldcoin, which differentiates humans from bots and creates blockchain-based digital IDs for the former. 🤖Worldcoin has faced setbacks over data privacy and regulatory issues, explained Robert Hart (Forbes), but the price of the WLD token nearly tripled in just one week. 📈
It’s not just WLD getting a boost, said Shaurya Malwa (CoinDesk), but most AI-related tokens. But even though Ethereum creator Vitalik Buterin suggested AI could audit smart contracts, many developers aren’t sure yet how tokens and AI will ultimately go together since “commercial usage of AI, so far, is limited to virtual tools and chat software.”
Why It Matters ⁉️:
The surge in Worldcoin's value following the launch of Sora illustrates the direct influence of AI advancements on cryptocurrency markets, indicating a close link between technological breakthroughs and digital asset valuations. This connection highlights the importance for investors and industry players to stay informed about the constantly evolving tech sector.
[Regulators, Mount Up 🇬🇧]
A UK Treasury minister, Bim Afolami, said the government wants to introduce new regulations governing stablecoins and cryptocurrency staking “over the next six months.”
What Journalists Said 🧑💻:
These regulations would be just one part of the regulatory puzzle, wrote Emily Nicolle (Bloomberg). “Prime Minister Rishi Sunak first pledged to make the UK a global crypto hub in 2022,” but “relatively little regulatory progress has been made since.” Exchanges in particular have yet to fully dive in because they are stuck in “limbo.”
Coinbase hosted the event in London at which Afolami was speaking, noted Stacy Elliott (Decrypt). “The UK government plans to categorize staking…in a way that avoids collective investment classification. That's likely to be good news for Coinbase, which has faced pushback from regulators over its staking services for U.S. customers.”
The timeframe suggests this is a priority. The next general election will take place sometime before the end of January 2025. “With the Labour Party currently favored to win the upcoming election,” wrote Yousra Anwar Ahmed (CoinMarketCap), “the window for the Conservatives to establish their vision for crypto may be closing.”
Why It Matters ⁉️:
The sense of urgency is intriguing, particularly given the relatively low interest in crypto within the UK. However, with the country officially entering a recession, the economics-minded Tories may be looking for legal frameworks to bring in big crypto firms with high-paying jobs. But governments typically don’t move as fast as markets, so it might be a good time for investors and builders to check out Labour’s plans with regards to crypto.
[The Stark Reality ✨]
Starknet, a rollup aimed at partially alleviating Ethereum’s congestion issues, 🤧 began distributing 700 million STRK tokens to 1.3 million addresses, including stakers, developers, users, and even non-Web3 companies and individuals. STRK was trading at under $2 as of Wednesday. 2️⃣
What Journalists Said🧑💻:
People quickly started claiming tokens, and STRK’s fully diluted market cap (the theoretical value if all tokens were in supply) shot to $20 billion. But a Yearn Finance dev alleged that about half the addresses were “linked to repeat or renamed Github accounts controlled by airdrop squatters,” said Zhiyuan Sun (Cointelegraph).
“Not all ecosystem participants are happy with the community allocation,” wrote Macauley Peterson (Blockworks). One Github user received 1,800 tokens for fixing a typo, while a solo staker initially missed out because they were “confused for a centralized exchange.”
Starkware CEO Eli Ben-Sasson wants people to “look at intent, not execution” when it comes to the airdrop, relayed Liam Kelly (DL News). The exec, who was “brought into action to quell community discontent,” claimed that mistakes are a byproduct of an automated airdrop strategy.
Why It Matters ⁉️ :
Web3 users increasingly expect to eventually receive tokens for utilizing a protocol or network. But airdrops can create incentives for people to game the system—creating multiple addresses, for instance—without necessarily getting them to use the product over the long term. Crypto projects are still looking for equitable ways to reward users while also incentivizing sustainability.
[Tweet Of The Week]
Credit: @KyojiiBruder
[DeFi Definitions]
A segment exploring one particular aspect of DeFi. View previous entries here.
This week: ‘’Yield Farming” by Tiffany Mac Sherry.
Yield farming is an investment strategy that involves investors engaging in DeFi activities such as staking or lending. This allows investors to potentially earn above-average yields. In turn, these platforms use the deposited tokens to facilitate their own actions such as lending or trading. In return for providing liquidity cryptocurrencies to these platforms, users get rewarded with more tokens, typically in the form of the platform’s token.
Let’s take Uniswap for example, users deposit a value of crypto into the liquidity pool and are rewarded with liquidity provider (LP) tokens representing ownership stake in the pool. These LP tokens unlock further earning potential as they can be staked in Uniswap’s farming pools, allowing users to accrue additional rewards, often in the form of Uniswap’s native token (UNI).
By providing liquidity to a DeFi protocol, users not only facilitate decentralized trading but also earn rewards on top of the trading fees received as shares of the liquidity pool. It’s like being a part of a digital marketplace where you not only earn from trading but also from being a vital part of the 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, Tiffany Mac Sherry, Liam Quinn, 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 brands through impactful storytelling. Find out more about us here.