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gm fam, fresh off the press:
▹ Week's Top Signal
▹ DeSci Movement by Esha Bora
▹ zkSync Road to Mainnet
▹ 3AC Founders on Bloomberg
▹ Minecraft NFTs Ban
▹ Tabula by Gnosis Safe
▹ ... much more
Plus: Market Pill, What else is Poppin'
Let’s get into it.
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"Our message with these charges is clear: fraud is fraud is fraud, whether it occurs on the blockchain or on Wall Street.”
That was the message from the SEC after arresting and charging a former Coinbase employee, and two others associated with the individual, with wire fraud. The arrest is in response to the former employee reportedly tipping off friends to purchase certain tokens that were soon-to-be listed on Coinbase’s exchange. They made between $1.1M and $1.5M off of this information over the course of a year.
While the SEC cracking down on “insider trading” in crypto is interesting enough, what’s more interesting is the contents of the SEC complaint.
In the complaint, the SEC listed 9 assets that they classify as securities: AMP, RLY, DDX, XYO, RGT, LCX, POWR, DFX, KROM. Prior to this complaint, there was no indication from the SEC of this classification. Coinbase’s Chief Legal Officer released a statement soon afterwards with a strong message: “Coinbase does not list securities. End of story.”
The saga raises some really important questions for the ecosystem. If the SEC can regulate by enforcement, with no clear guidance for projects on how to fall in or out of securities classification, innovation in the space will surely be stifled. At the same time, many of the reasons for the classification that the SEC gave in the complaint should be warning enough for projects, with lots of focus on “so-called governance tokens” and explicit centralization of powers.
TAKE NOTE
The crypto vs. SEC battle continues, and it will only become more real for projects as they continue to crack down. Definitely give the formal complaint a read, analyze the reasons given, and evaluate your project accordingly.
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The Decentralized Science Movement. This week for the Forefront Journal, FF contributor and Texas Blockchain student Esha Bora explored the potential of blockchain technology and tokenized communities in taking academic research to the next level. Covering everything from global, “open labs” like LabDAO to more democratic decision-making in science communities like VitaDAO with their VITA token, Esha provides an incredible overview of the progress being made in the decentralized science (DeSci) movement and the opportunity that lays ahead. The piece also highlights certain challenges that are attempting to be solved outside of web3 – peer-review for example – and how the potential solutions differ depending on the technology used. All in all, this is a great piece for anyone looking for an introduction to the DeSci ecosystem.
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Three Arrows Founders Break Silence Over Collapse of Crypto Hedge Fund. After five weeks in hiding, the seemingly vanished founders of Three Arrows Capital spoke out about the implosion of their hedge fund, saying their speculation unleashed cascading margin calls on loans that should never have been made. Creditors claim they’re owed over $2.8 billion by the fund. “People may call us stupid. They may call us stupid or delusional. And, I’ll accept that. Maybe,” Zhu said. “But they’re gonna, you know, say that I absconded funds during the last period, where I actually put more of my personal money back in. That’s not true.” However, the two declined to say where they currently were or get into details about how they would attempt to rectify the situation. “Given that we had planned to move the business to Dubai, we have to go there soon to assess whether we move there as originally planned or if the future holds something different for us,” Zhu added. “For now, things are very fluid and the main emphasis is on aiding the recovery process for creditors.”
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How Decentralization is Reshaping Technology and Governance. In this collaborative piece between the DAO Research Collective and The Defiant, David Kerr and Bruno Lulinski explore why people in the broader crypto community organize around the concept of decentralization. The duo dives into the different components of decentralization, the benefits of decentralized systems, examples of how different projects have approached the process of decentralizing, and good-faith critiques of decentralization. One of the more interesting distinctions made in the essay is between legal, economic, and technical decentralization. Kerr and Lulinski not only explain the difference, but also the implications of each in the real world with regards to various organizations and systems. The piece is the first in a series of collaborations between the two organizations.
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Why and How we SubDAO. This essay presents the conclusions of a research project between RnDAO and Sobol. The research sought out to define groups within DAOs, what they call DAO Units. They then explored the definitions used by members of a range of popular DAOs and identified a series of common challenges when setting up and operating different kinds of DAO Units. Broadly, they identified 4 types of DAO Units in the order of their frequency: Departments (aka guilds), Projects, Ventures, and Committees. These DAO Units are formed through proposals in the main DAOs, initiated by a small group in the DAO, or by the DAO founders/leaders. The research finds that across organizations, these “DAO Units” face many of the problems of traditional organizational hierarchy and are being organized in a very “top-down” fashion.
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zkSync 100days to mainnet. Last week, Ethereum’s long-awaited transition to proof-of-stake was announced with a September launch date. While many are still skeptical that the Merge can stay on-schedule, there was some other incredible scaling news coming out of EthCC: Polygon, Matter Labs, and Scroll all announced major progress on their own zkEVMs, a technology many once thought was still years away. Polygon’s, for example, now has a testnet live, with a mainnet launch slated in 2023. The announcements are absolutely huge for the Ethereum ecosystem, now with multiple competing L2 solutions, a (hopefully) successful upcoming Merge, and much more (the Surge?) on the roadmap to come in upcoming years.
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Circle & USDC: Building a Stable Platform. Packy McCormick is back with a deep-dive on (hopefully) the most interesting boring asset of all: USDC. He does a deep-dive on stablecoins and their different forms, highlighting what makes Circle’s fiat-backed stablecoin so… stable. While everything has risk, this is a very different write-up from the Terra/UST essay from a few months ago. USDC is boring, just like it should be. Packy also dives into Circle’s business model and explains how it even makes money minting fully-backed stablecoins. Finally, he explains why stablecoins are a valuable primitive. That is, why are stablecoins valuable if they are 1-1 related to their fiat equivalent? This is an excellent introduction to all things stablecoins, their business models, and to get more information on USDC specifically.
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No NFTs in Minecraft. Minecraft released a statement this week banning NFTs from their platform. The company claims that NFTs fail to create a “safe and inclusive” experience for users and that they encourage “speculation” that leads to exclusion of certain users. However, the company also failed to demonstrate an understanding of NFTs, saying that “an NFT is a unique, non-editable, digital token that is part of a blockchain and often purchased with cryptocurrencies like Bitcoin.” All in all, this is yet another example of why decentralized platforms are necessary – many developers were rugged with zero warning with no way to continue development of their Minecraft-related NFT projects. Additionally, opportunity to innovate in the space (see GFX Labs) is stifled.
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Market data on the last 7 days. Last updated July 25, 2022
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Updates from the DAO
— Cohort 2 of the W3CR kicked off this week! Make sure to stay up to date in the W3CR Discord channels, on Twitter, and on the FF blog/newsletter.
— Terminal by Forefront saw some updates this week to add new communities and metrics! Check it out at terminal.co.
— We published The DeSci Movement by Esha Bora, an incredible introduction to the bustling web3 science ecosystem. You can check it out here.
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Firelight
— The full synthesis of this week’s W3CR can be found here.
— The final members of the first W3CR cohort, Alex and Entes, finished out their residencies with a bang.
— In Cohort 2, Kabuki kicked off his residency with an event entitled “Rules and Rituals,” where he reframed rules through an artistic lens.
— Nico walked us through community design as game design.
— D3MO introduced us to his work and music, and walked us through his process in Blender.
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◎ Check out FF Signal for more headlines
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