In this week’s edition of The Context, SBF is headed back to prison, Hong Kong is headed toward Bitcoin ETFs, and OpenSea staffers are heading for the door. 🚪
[SBFelon 🦹]
Sam Bankman-Fried, founder of FTX and trading firm Alameda Research, was found guilty of all seven charges, including wire fraud, leaving FTX customers, Alamada lenders, and other investors out billions. Sentencing is scheduled for March 2024.
What Journalists Said 🧑💻:
Most trial observers have little sympathy for the former founder. “Bankman-Fried was a guy who long felt entitled to backdate his documents,” wrote Katie Baker (The Ringer). “He was arrogant enough to believe he had the power to manipulate time.” Then, the jury found him guilty in just four hours.
That’s about how long the OJ Simpson jury deliberated, wrote Cas Piancey (Protos). While both can be classified as trials of the decade, the difference is that SBF’s prosecutors made few mistakes, the judge and witnesses weren’t playing to the cameras, and “there was no all-star defense team.” 🧑⚖️
SBF isn’t the only loser, opined Daniel Kuhn (CoinDesk). His parents’ reputation is in shambles, his friends committed fraud, and the effective altruism movement is calculating the damages. The big winners, besides lawyers, reporters, and the justice system? TradFi institutions, which separate company money from customer deposits and have compliance departments: “It turns out that hardwon business practices exist for a reason.” 💼
Why It Matters ⁉️:
The general hope within crypto is that the industry gets back to basics: a better financial system built on trustlessness and responsible business practices. But people’s memories are short. This is significant as a lot of the industry’s commentators and news have been fixated on this story. Hopefully with SBF’s conviction we will begin to have more opportunities to divert our attention to more important matters crucial for the maturation of the industry as a whole. This new chapter will allow us to not only get back to basics but also provide builders, retail users and institutions alike to continue shaping the industry collectively in a way that will help add real value for all end users.
[OpenSea Sets Employees Adrift ⛵]
OpenSea, a leading NFT marketplace, has laid off around 50% of its workforce.
What Journalists Said 🧑💻:
OpenSea was at the forefront of the NFT boom in 2021 but was thrown off course as token prices declined, said Andrew Hayward (Decrypt), who had the scoop. 🍦 Blur and other “rival marketplaces began rejecting creator royalties” to spike profits while OpenSea took a wait-and-see approach. It still has the most traders, but it trails Blur in sales volume.
The company clearly is “adrift,” wrote Jeff John Roberts (Fortune), with its eventual decision to stop enforcing royalites alienating “both traders and artists.” 🌊 But NFT prices everywhere are in freefall even as the rest of the crypto market ticks up. 📉
Confirmation of the layoffs came buried in an X announcement by CEO Devin Finzer in which he announced “OpenSea 2.0, a big upgrade” to the platform that involved a leaner operation. Employees were told at an all-staff meeting that same day that they would receive an email detailing their fate, reported Ben Weiss (Fortune). Then OpenSea held a two-week retreat in Katy Perry’s former Hollywood mansion to focus on the future. 🏠
PR Perspective 🔎:
While OpenSea’s providing a generous severance package (including 4 months of pay), it unnecessarily tried to justify layoffs as part of its roadmap. And while the company is probably getting a better deal on the Perry Pad than it would by renting hotel rooms and a conference space, the story is bad optics. Make the layoff announcements sincerely without trying to spin it as a positive. You’ll have plenty of time to make exciting product updates later. Oh, and keep the retreat discreet.
[HK to Be HQ for BTC ETFs? 🇭🇰]
Hong Kong Securities and Futures Commission (SFC) CEO Julia Leung said she welcomes applications for crypto exchange-traded funds (ETFs), investment vehicles that trade just like stocks and would provide retail investors with easy access to crypto without actual custody.
What Journalists Said🧑💻:
Hong Kong unveiled its crypto regulatory framework in June to help “restore its luster as a cutting-edge financial center,” reported Kiuyan Wong (Bloomberg). ✂️ Now, the SFC is clearing the way for innovation, including tokenization of real-world assets for retail investors.
The SFC has been going back and forth on this, wrote Sam Reynolds (CoinDesk). In January, it restricted crypto spot ETFs to wealthier investors. The policy, said the SFC, was “updated in light of the latest market developments and enquiries from the industry seeking to further expand retail access.”
🇨🇳 vs. 🇺🇸: China seems aware that it’s competing with the US for a huge potential market. “As the prospect of a bitcoin-focused spot ETF in the U.S. generates ongoing enthusiasm,” wrote George Tung (TheStreet Crypto) “it appears that officials in China don’t want to be left behind.”
Why It Matters ⁉️:
Though Hong Kong is a semi-autonomous region, it’s still part of a Chinese state unencumbered by many of the governmental and legal burdens within the US. If the approval of Spot Bitcoin ETFs is successful in Kong Kong, we could expect to mainland China gearing towards the approval of a Spot Bitcoin ETF, opening up a huge market.
[Tweet Of The Week]
Credit: @BanklessHQ
[DeFi Definitions]
A segment exploring one particular aspect of DeFi.
This week: “Distributed Validator Technology” by Vasundhara Singh.
Distributed Validator Technology (DVT) refers to a system where the process of validating or confirming information is spread out across multiple computers or nodes, rather than being handled by a single central authority.
A validator’s private key is split across several node operators enabling the duties and responsibilities of a validator to be distributed and shared across a cluster of node operators, instead of a single node. Imagine you have a big puzzle to solve. Instead of one person trying to solve it alone, the task is divided among several people, each working on a different part of the puzzle. Once everyone completes their part, their solutions are combined to form the complete picture.
This approach has several benefits, including increased security, transparency, and resistance to tampering, because altering the information would require changing the majority of the copies stored across all these different nodes, which is extremely difficult.
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, Damian Alvarez, Andrew Wickerson, 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.