Artisan – #10 Weekly: Nov 7 – Nov 13

FTX Saga, #Decentralization, $ATOM 2.0 proposal, #Solana proposal, #DeFi on $BTC, Google Cloud & Solana partnership, NFT Allowlist Platform, New York Fed collaborates with Singapore MAS to explore CBDCs

🤔 Analysis & Thoughts

How to survive a dark time by Tascha (Read more)

• Treat it like a project Picking yourself up from the floor is a serious endeavor. Treat it like one & commit your best.
• Add structure to your day When we experience psychological shock, our body is often in fight or flight & immune system goes out of whack.
• Take long, deliberate walks in sunlight Commit to getting at least 1 hr of sun / outdoor air exposure daily. It’ll do wonders to correct any neuro-chemical imbalance triggered by external shock & help you rebound.
• Do the useful kind of meditation Contrary to popular belief, “mindfulness meditation” is not helpful at emergency time.
• Reconnect w/ the purpose bigger than you Like everyone else I’m incredibly frustrated w/ what’s going on in crypto right now. But I always come back to asking myself, “Why am I here in this space? What’s the point?”
• Quit the la-la-la investment style and establish systematic investment: 1) screening criteria 2) entry/exit criteria 3) investment horizon 4) allocation / risk control criteria

Personal post-mortem of how I dealt with the event as an investor by Jason Choi (Read more)

• The mistakes: – Placing too much trust in primary sources despite vested interests – Miscalculating the opportunity cost of missing out on trades vs. losing a chunk of portfolio – Not reacting decisively enough
• The result: – While I personally incurred a -10% drawdown on my portfolio – one of my largest 1-day drawdown, the total damage to @tangent_xyz is negligible.
• The response: – Need a framework to deal with emerging information regarding a counter-party and tail risks: i.e. if cost to hedge is negligible vs. potential damage, move first, investigate later. If potential damage >5%, drop everything and move.

Due diligence and red flag from a hindsight (Read more)

• FTX did not have a board of directors.
• FTX donated $40MM to the Democrats.
• FTX Chief Lobbyist has deleted his Twitter account.
• FTX worked with auditing firm Prager Metis that has an office in the Metaverse.
• SBF closed a founding round while playing League of Legends.
• FTX org chart very complex.
• FTX new CEO was former Enron bankruptcy lawyer.
• FTX is a World Economic Forum “partner”
• FTX purchased $300MM in real estate including in the “playground of the rich” Albany, Bahamas

This Is the Easiest Way to Time the Crypto Market (Read more)

• “Don’t time the market” is bad advice from people who didn’t get the memo. Understanding market timing = making money. Period. And it doesn’t have to be hard.
• They’re based on the concept of ‘market breadth’— possibly most under-rated investing concept on earth. Market breadth: How many listings in a market are participating in a particular market move.
• If a mkt move is broad-based, it signals strong money inflow/demand in mkt followed by strong rotation. Both lead to more persistent up trend.
• On other hand, after a strong mkt move, 2 things happen: 1) strong demand attracts new listings into mkt (increasing supply), and 2) all tokens that can be bought have already risen a lot— mkt running out of new narratives. These lead to eventual mkt drawdown.
• Mkt breadth tells you abt the macro climate of crypto mkt w/o resorting to complicated economic analysis & they’re easy to measure.

Maintaining decentralization: Are custody services a threat to DeFi protocols? (Read more)

• Through its accidental token delegation, Binance could propose governance votes as it had 1.3% of the total supply of UNI, far exceeding the 0.25% threshold. Its influence — if the exchange chose to use it — would have nevertheless been significant.
• Potentially centralized control from custody service providers is a “serious issue with decentralized governance,” adding that the “promise of decentralization” is “totally unrealized with a single token governance model.”
• “In face of all of these administrative tasks, the user decides to hand it over to third-party centralized platforms to handle the voting process so that they can obtain some yield ex-fees charged.”
• “veTokenomics does seem to protect against centralized custodian governance attacks, whereby token holders are able to ‘lock’ their token in the protocol to participate in governance. For example, if a user locks up a token for 4 years, they receive 4x the voting power.”

Notes for the Decentralization 101 panel discussion organized by HKUST Web3 Lab (Read more)

• Decentralization on everything is just a MYTH With infrastructure such as blockchain, we can enable decentralization, transparency, interoperability and more. However, it is not a panacea for everything such as governance (similar to democracy). There is no best solution.
• “Learn the rules like a pro, so you can break them like an artist.” You need to first understand the domain knowledge then to understand the model in web3. For instance, you need to understand finance before you understand decentralized finance #DeFi
• “Rome is not built in one day.” After the dot-com bubble, it takes decades for recovery as well as those proven sustainable business model continue to grow. It is never easy to push a paradigm shift and disrupt the incumbents. Be patient and continue to #buidl.
• Education is the cornerstone for mass adoption. For instance, DeFi is required some knowledge of finance, technology and cybersecurity. Without anyone of these, users can easily fall prey to finanicial loss easily.
• Build better product with a sustainable business model, content backed by thesis and organic supportive community.

🌍 Layer-1 / Layer-2

Solana community is unstoppable and working together amid difficult time (Read more)

• The serum program update key was not controlled by the SRM DAO, but by a private key connected to FTX. At this moment no one can confirm, who controls this key and hence has the power to update the serum program, possibly deploying malicious code.
• Most professional liquidity providers immediately stopped trading. Jupiter, the most popular dex aggregator on Solana did so as well.
• The core vision behind DeFi to bring transparency and open access to finance is today more relevant than ever and I’m happy to be part of such a strong community that does not stop to fight for it, even in tough weeks like this one.
• A few community projects have announced that they are working to integrate with this fork: @solapefinance, @openserum, @JupiterExchange, @switchboardxyz & @mangomarkets

Doubts on Atom 2.0 Proposal (Read more)

• Why validator have so much power ? This power don’t serve decentralization at all it serve fractionalization of the hub and the people
• Why our dear friends from the hub don’t gathering around a same idea or a same goal.
• Why create a multisig manage by a little team when we have everything on chain to manage these funds easily.

💰 DeFi / CeFi

Announcing DFlow Chain (Read more)

• On DFlow, crypto-native brokerages sell and route order flow to market makers in a transparent, safe, and competitive way. This prevents blockchain centralization risk from private order flow
• DFlow order flow auctions exist at the application-layer, rather than validator-layer.
• Better for traders: Zero-fee trading, No front-running Guaranteed best-execution
• Better for wallets: Monetize order flow seamlessly in one interface, Tranched order flow –> maximum order flow revenue, Permissionless auctions –> transparent and live order flow prices
• Better for market makers: Stronger guarantees on non-toxicity of flow, Run PFOF strategies without hiring a big sales team

Research Paper: DeFi on Bitcoin (Read more)

• Through the integration of Taproot, Bitcoin can partially make up for the “lack” of not being Turing complete.
• Besides security and privacy enhancements, Taproot enables space savings for the Bitcoin base layer.
• Taro stands for Taproot Asset Representation Overlay and is a Taproot-enabled protocol. Through Taro digital assets of all sorts can be issued using the Bitcoin blockchain and transacted on the Lightning Network.
• Through a connection to the Bitcoin base layer, Taro taps into the security and stability of the Bitcoin blockchain. This is because the Taro protocol relies on Bitcoin’s Proof-of-Work security mechanisms to ensure a correct ordering of transactions and discourage double-spending.

Alameda promised ‘high returns with no risk’ in 2018 pitch (Read more)

• Alameda’s 2018 slide deck had some major red flags, according to a legal expert.
• The firm said it was offering loans with “no downside” and high returns with “no risk.”

🖼️ NFT / 🎮 Gaming / 🎭 Metaverse

Spearmint, the Free and Automated Allowlist Platform (Read more)

• Free, of course, means that Spearmint will be available to all creators and collectors at no cost.
• At Alchemy, we have long been dedicated to making it more accessible to build amazing things in web3. Making Spearmint free is our latest re-commitment to that value.
• Automated means that Spearmint solves everything needed to manage access to mints completely out of the box.
• One of the main things that has held NFT projects back from using allowlists has been the significant work involved in doing so.
• Creating your own rudimentary allowlist would take weeks to months of dedicated eng work, distract from your real goal (launching a great collection) and potentially push back timelines and disappoint the community you’re trying to excite.

Axie Origins Economy Deep Dive (Read more)

• One core problem with Axie Classic’s economy was that the ownership of 3 Axies would grant a player the ability to earn SLP infinitely
• Limiting NFT utility to a specific timeline or season is crucial to balance the economic inflows & outflows.
• Runes and Charms play a similar economic balancing role in Axie Origins. They are temporary Axie power-ups that expire at the end of each season.
• Crafting R&C results in recurring inflows to the economy from Axie owners rather than one-off upfront Axie purchasing/breeding inflows.

🏢 Institutional Adoption / DAO

FTX’s blowup is a turning point for Wall Street’s crypto adoption journey (Read more)

• “Just wait until the institutional money comes in.” For a while, it seemed as if the only thing people in crypto liked talking about more than their eye-popping returns was how much bigger they’d be once traditional finance finally woke up and got into the market.
• In actuality, the concept was a bit of a misnomer, especially on the trading side. Traditional market makers entered the crypto market long ago and have done extremely well.
• Big money managers, however, were resistant. But that all started to change in 2022, most notably at BlackRock, the world’s largest asset manager, where real progressed was being made.

Google Cloud collaborates with Solana Labs (Read more)

• Google Cloud is working with Solana to bring Blockchain Node Engine to the Solana chain next year
• Google Cloud is indexing Solana data and bringing it to #BigQuery next year
• Google Cloud will soon begin accepting crypto payments via @CommerceCB

Notes from Google Cloud/Solana Talk (Read more)

🧑🏻‍⚖️ Regulations

FTX Debacle Shows Need for Crypto Regulation, Yellen Says (Read more)

• US Treasury Secretary Janet Yellen said the implosion of Sam Bankman-Fried’s FTX crypto empire reinforced her view that the market for digital assets required “very careful regulation.”
• “In other regulated exchanges, you would have segregation of customer assets,” Yellen said.
• “When I was at the Fed, I thought it was important that the risk-based requirement be what binds at the margin, and arguably now the SLR, for some of these important banks, is what’s binding,” said Yellen, a former chair of the central bank.

Hong Kong’s time to step up as fallout from crash of crypto exchange FTX rattles digital currency market, Animoca’s Yat Siu says (Read more)

• The Animoca chairman expects the FTX crash to strengthen Hong Kong’s resolve to build a regulatory infrastructure for its digital-assets industry
• His comments come after the spectacular collapse of crypto exchange FTX, which has filed for bankruptcy protection in the US

Op-ed: Crypto markets need regulation to avoid more washouts like FTX, says Coinbase CEO Brian Armstrong (Read more)

• Crypto regulation in the U.S. has been hard to navigate, and regulators have so far failed to provide a workable framework for how these services can be offered in a safe, transparent way, argues Coinbase CEO Brian Armstrong.
• This spurs crypto operations to set up shop outside the U.S., where regulation and enforcement are often weaker.

New York Fed collaborates with Singapore MAS to explore CBDCs (Read more)

• A joint effort is aimed at assessing the possible use of wholesale central bank digital currencies in cross-border transactions.
• “The project takes a practical approach and designs for any future wholesale CBDC to be interoperable across networks, while maintaining each network’s autonomy.”

White House Monitoring FTX Collapse, Calls for Crypto Regulation (Read more)

• The White House said Friday it was closely monitoring the collapse of digital-asset empire FTX, citing its bankruptcy filing as proof the cryptocurrency industry required strong regulation.
• The White House and other agencies were monitoring the situation, an administration official said, adding that Americans risked getting harmed without proper oversight of cryptocurrencies.

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