This week in The Context: all about ETF, Vitalik does the robot, and do you know what your DAO is doing?
[ET Fone Home 🏠]
It’s been three weeks since the first spot Bitcoin exchange-traded funds (ETFs) began trading in the U.S., allowing retail investors to buy and sell BTC through an investment management firm as they might a stock. There are three main things to keep track of:
What Journalists Said 🧑💻:
Grayscale converted its trust to an ETF, then watched as early traders cashed out in droves. That’s been slowing, said Sebastian Sinclair (DL News), which could mean less sell pressure on Bitcoin. Meanwhile, other ETFs, particularly BlackRock and Fidelity, have seen $1.8 billion in inflows. But the question, according to one analyst, is whether inflows “represent fresh capital entering the market or merely a shift between investment products.”
Bitcoin might not only be on Wall Street—it may also soon be more visible online. Last year, Google revised its policies to allow advertisements for “cryptocurrency coin trusts,” wrote Ciaran Lyons (Cointelegraph). Bitcoin ETFs “appear likely to meet the criteria.”
Asia-Pacific countries are taking note, reported Amitoj Singh (CoinDesk). Most of the 12+ analysts and industry insiders CoinDesk spoke with (which includes one YAP client) “said that Australia would likely be the next country” with a spot Bitcoin ETF. Hong Kong is also keen for ETF approval. All in all, “the U.S. approval could move things along faster for almost all the jurisdictions in the area.” 🌏
Why It Matters ⁉️:
The debut of a U.S. Bitcoin ETF signifies a global shift, elevating Bitcoin's stature as a mainstream asset. This move, magnified by Google's advertising openness and Asia-Pacific’s keen interest, hints at a rapidly integrating global Bitcoin market. These developments are not mere financial tweaks but strides towards a future where crypto is universally embraced.
[AI, AI, Captain 🚢]
Ethereum co-founder Vitalik Buterin released a new blog post exploring the “promise and challenges of crypto + AI applications.”
What People Said 🧑💻:
We can plug the intersection of crypto and artificial intelligence into four categories, wrote Buterin. The ”most viable” is AIs participating in a system, such as a token-based prediction market, alongside humans. Another category leverages AI to help crypto users understand transactions and identify scams. AIs can also act as judges—but therein lies a cryptographic challenge: how to “hide the inner workings of the model so that attackers can't optimize attacks, but at the same time prove that the model is being executed correctly, and was constructed using a reasonable training process on a reasonable set of underlying data!”
Buterin seems particularly worried about that final point, suggested Andrew Throuvalas (Decrypt). In an open-source system such as crypto, “an attacker would be free to design optimized attacks to trick the model into believing that up was down, or that cats were dogs. 🐈🐶 While using zero-knowledge proofs could help with the process,” it could “add to AI’s already heavy computational intensity, and potentially make it easier for whoever trains the model to corrupt it with poisoning attacks.”
Why It Matters ⁉️:
From the minute ChatGPT4 launched in March 2023, AI seemed primed to beat out crypto as the “next big thing in tech.” Now that the prince of Ethereum, Vitalik, has argued that AI and crypto could be better together than apart, we look forward to the benefits of this potential pairing. Still, the roadblocks he mentions must be overcome first.
[Don’t DAO It? ✋]
Decentralized autonomous organizations (DAOs), used to coordinate governance of a protocol or group via token ownership, are in the news after a Wired opinion piece called them “a dangerous new home for online extremism.”
What People Said🧑💻:
Decentralization is dangerous, wrote the Institute for Strategic Dialogue’s Julia Ebner for Wired. “With no regulations in place to hold DAOs accountable for extremist or criminal activities, the big question for 2024 will be: How can we ensure the metaverse doesn’t give rise to digital white ethnostates or cyber caliphates?”
Ummm, you must think DAOs “are way more powerful than they are,” opined CoinCenter’s Neeraj Agrawal. Besides, “every concern [you] have about DAOs applies equally to encrypted messaging.”
The Wired piece “misunderstands” the reality of DAOs, agreed lawyer Preston J. Byrne, writing for CoinDesk. Real extremist groups go underground instead of paying fees to put things onchain or posting their conversations on DAO-friendly Discord, where they’re easily monitored by law enforcement. ⚖️ A DAO is “the wrong tool for spreading propaganda. It’s the right tool for reaching consensus on whether to move a smart contract interest rate 50 bps.”
PR Perspective 🔎 :
As one YAPPER put it: “DAOs can't decide on a logo upgrade. I don’t know how the [Wired] writer thinks they can plan terrorist attacks.” Still, when people within the industry talk uncritically about the transformative power of decentralization, it invites equally vague fears about the dangers web3 will unleash.
[Tweet Of The Week]
Credit: @dollarmonkey_
[TradFi Translations]
A segment exploring one particular aspect of TradFi.
This week: ‘’Purpose Bound Money” by Jonathan Yap.
Purpose Bound Money (PBM) is a financial concept that focuses on creating a digital currency that is earmarked for specific purposes. At its core, the idea is to use smart contracts, known as PBM Wrappers, to set rules for how the money can be spent, including where and when it can be used and what it can be used for.
The beauty of PBM lies in its flexibility and interoperability. It can operate across different types of ledger technologies and different forms of digital currencies, from CBDCs to tokenized bank liabilities. Because of this, PBM fits with many different uses, like government disbursements with specific spending guidelines and vouchers that only work with certain merchants or expire after a set date. It offers a controlled approach to digital currencies that is tied to specific requirements.
As such, PBM is an advancement in the digital finance landscape, merging the reliability and security of traditional currencies with digital innovation, making transactions easier, smarter, and more transparent.
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.