Plus: De(fi)congestion and Mango Madness 🤧
This week in The Context, we look at more SEC mania, Solana’s need for a decongestant, and the U.S. government’s allergy to crypto market manipulation.
[Wells, Wells, Wells… 🦄]
According to Uniswap Labs founder Hayden Adams, the U.S. Securities and Exchange Commission has sent the company a Wells Notice, a standard precursor to a lawsuit.
What Journalists Said 🧑💻:
“The SEC has been investigating the leading Ethereum DEX for years,” wrote Andrew Hayward (Decrypt). Adams and Uniswap Labs Chief Legal Officer Marvin Ammori both suggested they weren’t surprised by the notice, just “disappointed.” 😠
“Industry observers have long wondered how the SEC and other market regulators would approach so-called DeFi protocols,” wrote Chris Matthews (MarketWatch). “Financial regulations are typically imposed on intermediaries like banks, brokers and exchanges, but DeFi protocols can theoretically run independently of any management by entrepreneurs or engineers.” 👨💻
Uniswap Labs has successfully argued that its protocols are independent before, said Jeff John Roberts (Fortune). In a class action last year, it convinced a judge the code Adams created “was neutral—and that whether individuals used it for bad or for good was beyond its control.”
PR Perspective 🔎:
Uniswap Labs’ eponymous exchange is the biggest of its kind. A successful lawsuit against it casts a pall on DeFi, adding to its existing uncertainties. Looking the other direction at the SEC, it’s a huge call that marks yet another chapter in their crackdown on Web3. A defeat would further cement them as enemies of the industry and raise more eyebrows over their commitment to impartiality.
[SLOana 🐌]
Solana developers are trying to ship a fix for congestion on the blockchain by mid-April as a majority of transactions last week failed to go through.
What Journalists Said 🧑💻:
Blame spam and the activity surrounding new Solana memecoins, wrote Vishal Chawla (The Block). The uptick in activity shows users are “attracted by the network’s affordable transaction fees.” That also makes it easy to spam. 📈
Solana’s value proposition is that ”it outperforms Ethereum's own mainnet by being faster and cheaper,” wrote Mat Di Salvo (Decrypt), “but recent congestion issues are diminishing that advantage.” 💨
Relax, everyone. ♨️ This isn’t a design flaw, but an “implementation issue,” according to Solana devs. It needs to address “deficiencies and bugs” rather than start from scratch—kind of like changing a tire instead of building a new car, wrote Brayden Lindrea (Cointelegraph). 🏎️
PR Perspective 🔎:
Solana continues to battle network issues, first with unscheduled downtime and now with congestion. Its PR strategy is a good one—be upfront about the issue on social media, communicate through external media, and be calm and solution-oriented without downplaying user frustrations.
[Number Mango Up 🥭]
Crypto trader Avi Eisenberg, who made $110 million via a trade on DeFi exchange Mango Markets, went on trial for fraud and market manipulation this week.
What Journalists Said🧑💻:
Eisenberg started by longing the MNGO token and buying a lot of them, inflating the value of the token and his long position, explained Brady Dale (Axios). He then had enough collateral to borrow $100M+ in crypto from the exchange and cash out. When his loan defaulted, he lost the collateral, but the value of MNGO at that point had come “back down to earth.”
While Eisenberg argues this was merely a complex trading strategy done well, the government sees it as “simple fraud,” said Danny Nelson (CoinDesk). “The trial represents an evolution in the government's attempts to police alleged crimes in decentralized finance (DeFi),” now that its prosecuted FTX’s Sam Bankman-Fried and indicted Terra’s Do Kwon.
This tests crypto’s “code is law” ethos, wrote David Voreacos and Chris Dolmetsch (Bloomberg). If the code is written in such a way as to allow a trade to happen, is it okay? Or is it stealing? We’ll soon find out what a jury thinks. 🧑⚖️
Why It Matters ⁉️:
Don’t hate the player, hate the game? This case will help establish a line between market manipulation and just making a really good trade. In any case, it’s a pivotal question that demands clarity, otherwise, we could see stories like this one surfacing in the future.
[Tweet Of The Week]
Credit: @ycsm1n
[DeFi Definitions]
A segment exploring one particular aspect of DeFi. View previous entries here.
This week: ‘’Sovereign Blockchain” by Lauren Platt.
Sovereign blockchains are the independent thinkers of the decentralized world. With a focus on self-control and adaptability, these blockchains are designed to be able to easily handle hacks and updates. What sets them apart is their immunity to shared vulnerabilities and the presence of personalized security measures. This ensures that they remain resilient against threats.
But it's not just about security. Sovereign blockchains are changing the game for decentralized technology. By providing a tailored approach to blockchain applications, they empower protocols with complete control over their dedicated blockchains. This means bespoke functionalities, unique consensus mechanisms, and governance structures that suit the specific needs of each application.
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.