This week in The Context, we’re capturing the biggest crypto stories as we head into the biggest Ethereum event of the year. Nigeria puts blockchain on the chopping block, EigenLayer dips into VC funding, and crypto PACs up.
[Nighty Night in Nigeria 🇳🇬]
The Nigerian Communications Commission asked telecommunications companies to begin blocking crypto exchanges such as Coinbase and Kraken from being accessed within the country.
What Journalists Said 🧑💻
Government officials are worried that “currency speculators and money launderers were using [Binance and other exchanges] to execute criminal activities,” wrote Oladeinde Olawoyin (Premium Times). The Nigerian naira has never been worth less in dollars, and the government thinks crypto platforms are to blame.
The governor of Nigeria’s central bank, Yemi Cardoso, claimed “$26 billion passed through Binance Nigeria from unknown sources” in the past 12 months, said Adekunle Agbetiloye (Business Insider Africa). Binance said it’s working with government officials to guard against market manipulation.
For the moment, we’re still running, responded Coinbase. However, Binance and Kraken have yet to weigh in, reported Sandali Handagama (CoinDesk).
Why It Matters ⁉️
Nigeria ranks second on Chainalysis’ Global Crypto Adoption Index, likely because citizens of Africa’s top economy want to protect their naira-based earnings from inflation. Cutting off one of citizens’ biggest avenues to crypto exchanges would force people to use VPNs and other legally dubious workarounds. But it’s unclear whether it would do much to eliminate the country’s foreign exchange problem.
[100 EigenLayer Dip 🥘]
Eigen Labs, the company that created Ethereum restaking protocol EigenLayer, pulled in $100 million in Series B funding from a16z.
What Journalists Said 🧑💻
This project just got off the ground last year and is already the fourth-largest DeFi protocol, said Aleks Gilbert (DL News). People are excited about what EigenLayer has done for restaking, “which makes it possible to use the same capital to simultaneously secure Ethereum and a variety of other protocols.”
Protocols looking to utilize EigenLayer are getting checks, too, said Jack Kubinec (Blockworks). AltLayer, Renzo, Reboot World, Polymer Labs, and Puffer all received recent funding, “as EigenLayer’s rising tide appears to be lifting several boats.”
This is a big bet on restaking, wrote Niamh Rowe (Fortune). Moreover, it could signify that venture funding for crypto, which dried up in 2022 and 2023, is set for a rebound in 2024.
Why It Matters ⁉️
EigenLayer-style restaking is exciting, but it could also be dangerous. Vitalik Buterin warned last year: “We should be wary of application-layer projects taking actions that risk increasing the ‘scope’ of blockchain consensus to anything other than verifying the core Ethereum protocol rules.” But at the start of a new bull cycle that’s seen Bitcoin and Ethereum surge, people may not be thinking about risks.
[Leaders of the PAC 👑]
Fairshake, a pro-crypto political action committee has $73 million to spend toward influencing the upcoming U.S. elections. It counts among its donors a16z’s Marc Andreessen and Ben Horowitz, Gemini co-founders Cameron and Tyler Winklevoss, Coinbase, and Ripple. Two other pro-crypto PACs, Protect Progress and Defend American Jobs, bring another $8 million in cash.
What Journalists Said🧑💻
Fairshake “is seeking to influence regulation by supporting pro-crypto candidates from both parties in Congress,” wrote Bill Allison (Bloomberg). But it’s also spent $3.6 billion to oppose Democrat Katie Porter from winning a U.S. Senate seat. “While the group isn’t opposed to rules that would foster transparency and prevent fraud, it opposes more extreme measures that would curb trade in cryptocurrencies.”
Don’t expect crypto policy to “swing any election,” said Jasper Goodman (Politico), but “crypto money could potentially make a marginal difference in control of Washington.” Democratic Senators Sherrod Brown and Elizabeth Warren could be targets; both are running against pro-crypto Republicans.
Indeed, Fairshake’s first attack ad doesn’t dwell on digital assets. Instead, it claims she took money from “Big Pharma, Big Oil and the Big Bank executives” despite publicly opposing corporate money in politics. It’s also pretty much FUD, reported Andrew Sheeler (The Sacramento Bee). None of the companies qualify as “big.” One firm delivers petrol in the state, and a listed bank is a community development financial institution.
Why It Matters ⁉️ :
Almost every industry has a PAC. Last election cycle, crypto had Sam Bankman-Fried, who showered money on candidates across the country. Fairshake and other pro-crypto political action committees represent a shift to an industry-wide effort to influence policy.
[Tweet Of The Week]
Credit: @AnnikaSays
[DeFi Definitions]
A segment exploring one particular aspect of DeFi. View previous entries here
This week: ‘’The Flippening” by Andrew Wickerson.
The Flippening refers to the hypothetical moment when Ethereum's total market capitalisation surpasses Bitcoin’s. The term originates from the 2017 bull market when Ethereum set a then-record high of $881.94 and symbolises confidence in Ethereum's strengths, from the foundations it created for developers to the more recent layer 2s built atop it. In this sense, one could argue that Ethereum has embraced modularity, while Bitcoin has embraced a monolithic design.
But while Ethereum has surpassed Bitcoin in metrics like transaction count and fees generated, it has yet to overtake Bitcoin in key areas such as trading volume, Google search interest, active addresses, and overall market capitalisation. The likelihood of the Flippening hinges on factors such as Ethereum's total supply, its use cases relative to Bitcoin's, and shifts in market dynamics.
Currently, no other layer 1 blockchain comes close to competing with the usability that Ethereum offers. Therefore, it offers the most realistic chance of replacing Bitcoin’s dominance. That said, although some experts foresee the Flippening occurring, many do not.
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.