Artisan – #8 Weekly: Oct 24 – 30

Tokenomics study, Monetary policy in crypto, Real-world assets, in-depth research memo on GMX, Sei whitepaper, USN winding down, liquid mining for $HOP, Azuki’s proof of stake, NFTs confirmed as a property in Singapore, Reddit’s NFT success…

🤔 Analysis & Thoughts

A framework for studying tokenomics and net-new markets (Read more)

• Skeuomorphic behavior is user activity that resembles existing consumer behavior, changing the consumption format or perception. Emergent behavior is the closest to net new consumer actions, combining both new formats and perceptions
• Tokens provide a mechanism to shape how users behave in a network, providing exciting ways to potentially predict and engineer new consumer behaviors. Entrepreneurs, developers, and creators will leverage tokens to expand upon existing behavior and purposefully – or inadvertently – create new consumer norms.
• Blockchain use cases like NFTs or Ethereum facilitated both a shift in consumption format as well as a shift in consumer perception.

The need for autonomous monetary policy in crypto (Read more)

• High demand for staking -> more ETH leveraged -> high demand for ETH -> more speculative activity, so on and so forth. Unfortunately, speculation has an expiry date, market cycles & speculation is inevitable, and the whole flywheel must unwind in reverse with high volatility.
• To make ETH better money, we must dampen this volatility. Instead of incentivizing staking ETH while priority fees, burns and MEV are high, we need mechanisms that disincentivize staking ETH, and making leveraging ETH expensive.
• Like central banks use interest rates, the lever the Ethereum protocol can use is staking rewards. Currently, validators are rewarded ~4%. This can dynamically respond to market conditions – deflation, priority fees, MEV (post-PBS) etc. I believe it can be largely autonomous.

Real World Assets: Finance’s Bridge to Crypto (Read more)

• RWAs are tokens (fungible or non-fungible) that can be traded on-chain, and represent actual assets. RWA examples include real estate (homes & rental streams), loans, contracts and guarantees, as well as any item of a high value that will be utilized in a transaction.
• Building a link between crypto and the real world must be DeFi’s main goal if it is to be successful. Despite the fact that the market for digital assets is still quite small ($1T), the market for actual assets is enormous (>$600T). Crypto must address this sea of value if it is to have an impact on how business is conducted. 
• In light of the proliferation of digital assets and the influx of new institutions, the significance of solid institutional custody for digital assets cannot be overstated.

GMX: The perps DEX of the future (Read more)

• GMX is a decentralized perps exchange supporting both spot and margin trading. GMX is riding into a tailwind of capturing a share of the growing demand for decentralized derivatives.
• GMX traders enjoy: a) close to zero slippage; b) 0.1% trading fees and low swapping fees; c) up to 30x leverage (a lot for a DEX!)
• GMX staking rewards: a) 30% of trading fees paid in either ETH or AVAX; b) esGMX which can be re-staked or converted to GMX tokens over 12 months; c) Boosted fee rewards
• Competitive advantages: a) Chain-agnostic vision, b) Trading at below-market valuations, c) Better incentive model with fee accruals, and d) High staking ratio of 80%+!

Pantera: It’s likely that blockchain can decouple and trade independently like gold (Read more)

• Most of the normal asset classes are connected to interest rates. Bonds are mathematically connected to interest rates, stocks are discounted cash flows, real estate is connected to mortgage rates
• Bitcoin is like digital gold. There’s no interest rate component to it. It should be able to trade independently.

Do DeFi protocols need a token to work? (Read more)

• The majority of projects launch a token out of financial necessity. Token sale is a preferred and the easiest way to raise fund. Without a necessary funding there wouldn’t be that many projects in the first place.
• Token serves a role for bootstrapping liquidity. Without liquidity mining, Sushiswap wouldn’t have been able to attract any TVL/users since it didn’t add any additional value to Uniswap’s V2.
• Token is also used as a community building tool. But building a community around the token and NOT around the protocol itself is a short-term strategy. Your community will abandon you when the price plummets.
• Token for (some) of these protocols is a risk management tool! $MKR is a backstop for insolvency: holders take risk of dilution to cover undercapitalized debt. Perpetual DEXes use the token to build up insurance fund in case of failed liquidations.

🌍 Layer-1 / Layer-2

State of Solana Q3 2022 (Read more)

• Solana’s position in the NFT sector remained the second largest by secondary sales volume, behind Ethereum, and narrowed the gap.
• Strategies to boost GameFi are underway, and unique use cases like Helium are coming to the Solana network.
• Efforts to improve decentralization through greater geographic, hosting, and ownership distribution continue.
• The Slope mobile wallet hack and network outage were separate and isolated events that were not recurring.

Sei Whitepaper just got released (Read more)

• Sei is the first sector-specific layer 1. At a protocol level, Sei utilizes Twin-Turbo consensus and multiple degrees of parallelization to improve performance.
• Sei also has a native order-matching engine that gives exchanges an unfair advantage.
• Sei makes significant protocol improvements to push Tendermint Core to the limit for speed.

💰 DeFi / CeFi

Struggling Bitcoin Miners Are Flocking to Maple Finance’s $300M Lending Pool (Read more)

• Bitcoin miners are queuing up to borrow from a special purpose decentralized finance (DeFi) lending pool created by Maple Finance, as a stressed out crypto industry explores creative ways to get through the bear market.
• A pipeline of 10 mining firms will make up the first cohort of borrowers, with some 25 on the waitlist.

USN is winding down (Read more)

• USN has faced many headwinds over the last few months with increased regulatory focus, and changes in market perception from recent high profile incidents. As a result of these issues, the project has taken the difficult decision to wind down the USN project in a controlled and responsible manner in a way that ensures USN holders are protected.
• To ensure that the USN Protection Programme begins, minting of new USN has been permanently stopped. They have also removed liquidity managed by DCB from pool #3020 on Ref.finance, destroying over 40M USN as well.

Hong Kong Fintech Startup Reap Raises $40 Million For Web3 Payments （Read more)

• Reap, a digital payment company based in Hong Kong, has netted $40 million in a funding round aimed at developing infrastructure to help facilitate payments between Web3 projects and traditional businesses.
• The financing is led by Silicon Valley-based Acorn Pacific Ventures, U.S. financial services firm Arcadia Funds and Hong Kong digital asset manager HashKey Capital, Reap said in a statement on Thursday. 

Hop protocol’s first liquidity mining program is LIVE (Read more)

• Liquidity providers in the bridge AMM’s can now stake their LP tokens to earn $HOP rewards in addition to the trading fees they were earning previously.
• In total, 2m $HOP will be distributed to LPs per month. Since $HOP is now a multichain token, the rewards can be claimed directly on each network you are on.

Kollider Raises $2.4M to Build ‘Lightning-Native’ Financial Products (Read more)

• Bitcoin derivatives exchange Kollider has closed a $2.35 million seed funding round that was led by Lemniscap, with participation from Castle Island Ventures, Polychain Capital, Alameda Ventures, Pfeffer Capital, Okex and other investors.
• The firm intends to use the funds to expand its exchange business and add more Lightning-native financial tools to its existing product lineup. Lightning is a network built on top of the Bitcoin blockchain that helps make bitcoin transactions faster and cheaper.

🖼️ NFT / 🎮 Gaming / 🎭 Metaverse

Azuki ‘Proof of Skate’ Auction Draws $2.5 Million for NFT-Backed Skateboards (Read more)

• NFTs are often thought of as flat images, but a bidding war broke out on Friday over physical skateboards authenticated by an embedded chip.
• The auction—hosted by Chiru Labs, creators of the Azuki brand—allowed people to place bids in Ethereum to secure one of eight skateboards, and amassed $2.5 million in ETH. Each of the skateboards is plated in 24 karat gold and weighs 45 pounds, according to Chiru Labs, which recommends that owners not try to ride them.

Singapore High Court affirms NFTs as a form of ‘property’ (Read more)

• The High Court issued the grounds for its judgement on the barring of sale and transfer of an NFT on Friday (Oct 21).
• The injunction was issued by the Singapore High Court on May 13 and is said to be the first in Asia to protect an NFT called the Bored Ape NFT.
• It is the first court case here which dealt with whether NFTs were counted as assets.

Apple restricts using NFTs to unlock content and features in Apps (Read more)

• Apple has formalized its controversial stance on NFTs. NFTs are allowed to exist within apps on the App Store—but they can’t unlock additional features or content.

How Reddit took the successful first step into Web3 (Read more)

• Reddit is a popular networking site that allows users to discuss, vote on and share content. It has more than 1.5 billion registered users, 430 million monthly active users, and 52 million daily active users.
• Reddit issued collectible avatars (NFTs) to give artists within its community a way to profit from their work. Reddit keeps only 5% of the sales revenue to support the creator program while the rest goes to artists.
• Reddit partnered with ~30 artists to release 2nd generation of 40,000 collectible avatars. Released on October 21, 2022, they were sold out in 24 hrs, a big improvement from its 1st gen released in July 2022 which took weeks to sell out.

The Sandbox will distribute 2.6M $SAND to LAND Owners on the Polygon network (Read more)

• The rewards distribution takes into account the ownership, the holding time and if the LAND is bridged on Polygon at the time of the snapshot.
• You can claim your SAND as of the time of publishing (October 25th, 2022).

Crypto Game Axie’s AXS Tokens Get Unlocked, Recipients Send $5.7M Worth to Exchanges (Read more)

• Axie Infinity released the first batch of 10 million previously restricted tokens to early investors and insiders, blockchain data shows.
• Crypto asset management firm Arca already deposited freshly-claimed AXS tokens to the FTX exchange – a move that sometimes indicates an inclination to dump.

LooksRare offers zero royalty trading, shares protocol fees with creators instead (read more)

• LooksRare will no longer support creator royalties by default, and instead share 25% of the LooksRare Protocol fee with creators/collection owners.
• The Trading Rewards distribution ratio has also been updated to favor sellers, with the aim to achieve 0% seller fees through what is basically a rebate on protocol fees paid.

🏢 Institutional Adoption / DAO

Google Cloud introduces its own blockchain node engine (Read more)

• Google Cloud looks forward to supporting organizations with a reliable, easy-to-use blockchain node hosting service so they can focus their time on innovating and scaling their Web3 applications.
• While self-managed nodes are difficult to deploy and require constant management, Blockchain Node Engine is a fully managed node-hosting service that can minimize the need for node operations.

JPMorgan Jumps on the Web3 Identity Train With Onyx (Read more)

• The US investment banking giant is expanding its web3 strategy with blockchain-based identities.
• The new product will be developed via the company’s blockchain subsidiary Onyx.
• JPMorgan wants to enable people to store, share and view all their digital assets in one place.

🔨 Infrastructure

Filecoin launches Web3 data-storage solution for carbon offsets (Read more)

• This free storage utility aims to address the shortcomings of traditional storage solutions for all types of digital environmental assets, said the company.
• Filecoin Green, a Protocol Labs initiative designed to reduce the environmental impact of FIlecoin and make it verifiably sustainable, has spearheaded an initiative to power Web3 technology with verifiably clean energy. 

🧑🏻‍⚖️ Regulations

Crypto retail investors to take risk test, barred from borrowing under proposed rules by MAS (Read more)

• Singapore plans to rein in cryptocurrency speculation by retail investors by making it harder for them to start trading digital assets. Industry players will also have to ensure that the investments of retail investors are ring-fenced.

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The Artisan Narrative is an educational resource intended for informational purposes only. It covers all things Web3 and may discuss assets that the Artisan Collective, ArtisanDAO or writers have financial exposure to. Views are on ours own. None of Artisan Collective, ArtisanDAO, its registered entity or any of its affiliated personnel are licensed to provide any type of financial advice, and nothing on newsletter, website and social media should be construed as financial advice. Artisan Collective, ArtisanDAO, writers might also receives compensation from its sponsor; sponsorship messages do not constitute financial advice or endorsement.