Artisan – #18 Weekly: Feb 6 – 12

Kraken’s SEC settlement for retail staking, Cardano on-chain data, Stablecoins are crypto killers, Ethereum’s Shanghai fork on liquid staking derivatives, Stablecoin issuer Paxos being investigated by New York regulator…

🤔 Analysis & Thoughts

What does Kraken’s SEC settlement mean for crypto staking? (Read more)

• Proof-of-stake is a consensus mechanism wherein nodes are supported by people locking up, or “staking,” their crypto. It differs from proof-of-work consensus mechanisms in that rather than putting energy and computing power into securing the blockchain, you’re putting your “money.”
• Some of the big questions bouncing around after the Kraken announcement (and, to be quite frank, Armstrong’s tweet) include whether the SEC is going after all staking in the U.S., how crypto companies can actually offer staking services and whether the SEC would offer any guidance for companies hoping to offer services without drawing the agency’s ire.
• An SEC official, speaking at a media briefing after the settlement’s announcement, told reporters that the agency basically looks at the offering of a staking service as being similar to offering any other type of security.

Make Better Decisions Staking Cardano (ADA): Lessons from On-Chain Data (Read more)

• Look out for abrupt staking inflows when the price declines from a recent local top. The behavior occurred three times during significant price movements in the last two quarters. ADA investors should be patient when abrupt inflows occur as local high prices decline.
• ADA reward and inflation rates are nearly identical, 3.60% and 3.40%, respectively. Commission rates taken by validators on rewards have also increased from 6.3% to 7.05% on all rewards. On average, current ADA real rate returns are slightly negative at -0.17%.  Learn more about the ADA rewards system and calculate staking scenarios with the Cardano staking calculator.

Stablecoins are crypto’s killer use case and going to mainstream faster than other applications (Read more)

• Total value settled with stablecoins is rising in the bear market, reaching over $7 trillion in 2022. For comparison, Mastercard processed $2.2 trillion in value in 2022.
• The relative share of stablecoins market cap in Ethereum is growing significantly, and the absolute stablecoin market cap only fell by 5.7, un correlated to DeFi TVL.
• DeFi & Payment stablecoins can bring down fx costs (a $7T daily volume market) by up to 80%, saving unbanked and underbanked individuals $30 billion per year.

Shanghai: effects on liquid staking derivatives (read more here)

• The delta between primary and secondary LSD markets is a transitory phenomenon that is expected to converge towards zero after the implementation of the Shanghai Upgrade.
• Enabling withdrawals will impact LSD providers in vastly different ways. Of all the major players, only Rocket Pool allows for permissionless onboarding of node operators and will be poised to significantly benefit from the migration of solo node operators.
• The Lido DAO provides staking services across multiple blockchain networks, but the liquidity incentives on these networks are not as substantial as they are on Ethereum. This dilution of LDO’s ability to attract more stEth raises questions about its long-term incentives.
• As the market has developed and the amount of staked Eth has increased, there have been growing concerns over the health and decentralization of LSDs and the network.

Pantera: The seventh bull cycle of Bitcoin (Read more)

• The decline from November 2021 to November 2022 was the median of the typical cycle.
• The median downdraft has been 307 days and the previous bear market was 376.  The median drawdown has been a -73% downdraft and the latest bear market ended at -77%.
• We’re done with that and beginning to grind higher, blockchain assets have seen the lows and that we’re in the next bull market cycle.

🌍 Layer 1/2s

Ethereum testnet processes first ETH staking withdrawals (Read more)

• The testnet, known as Zhejiang, facilitated the withdrawal simulations early Tuesday after going live last week, according to an explorer website set up to track transactions on the system.
• The test network is designed to provide developers with a dress rehearsal of the withdrawals similar to those that will happen on the main Ethereum blockchain following its long-awaited Shanghai upgrade, expected next month.

Lightning Network reaches all-time high in bitcoin capacity (Read more)

• Bitcoin payments network Lightning Network has reached an all-time high in terms of capacity or the amount of bitcoin locked in payment channels.
• The network has over 5,490 BTC in capacity, up from 3,350 BTC since the beginning of 2022.

Elementus raises $10M in funding to continue building infrastructure needed to make blockchain more accessible (Read more)

• Elementus announced a $10M Series A-2 funding round led by ParaFi Capital, Increasing its valuation 208%, from $52M to $160M.
• Elementus is a web3 company whose blockchain data intelligence platform helps forward-thinking, data-driven organizations of all sizes to leverage the power of blockchain.

Chorus One releasing prototype to capture MEV on Solana (Read more)

• Blockchain infrastructure company Chorus One has released a white paper and an open-source prototype that can enable validators to capture maximum extractable value (MEV) on the Solana network.
• The proposed solution by Chorus One, dubbed “the decentralized extraction by validators,” will introduce a modified Solana client that will handle MEV opportunities in the banking stage of the validator, Thalita Franklin, a research analyst at Chorus One, told Blockworks.

💰 DeFi / CeFi

A16z votes against proposal to deploy latest Uniswap iteration on BNB Chain (Read more)

• A16z used all 15 million of their UNI to vote against the proposal. The proposal would use the Wormhole bridge for the Uniswap V3 deployment.
• Partners at the firm previously noted intentions to vote for LayerZero in last week’s temperature check on which bridge to use for the deployment.

DCG and Genesis branches agree on a restructuring plan (Read more)

• Digital Currency Group and Genesis subsidiaries reached an agreement with a group of the firm’s main creditors.
• As part of the plan, DCG will contribute its equity interest in Genesis Global Trading to Genesis Global Holdco, bringing all Genesis entities under the same holding company, according to a statement released on Monday.

Binance Tax launched to prepare crypto users for the tax season (Read more)

• On Feb. 6,  crypto exchange Binance announced it is launching a tax reporting tool to help users stay on track of their crypto transactions for tax reporting purposes.
• According to the announcement, Binance Tax lets its users download a tax summary report which includes any gains or losses which have occurred throughout the year in their Binance account. This includes spot trades, crypto donations and blockchain-based fork rewards.

Trader Joe Integrates LayerZero: JOE evolves into an Omnichain Token (Read more)

• Trader Joe announces integration with LayerZero, launching JOE as an omnichain token and unlocking seamless connectivity for the JOE token across all chains supported by the Trader Joe DEX.

Blockchain-based Render Network token rising after community vote for new burn-and-mint model (Read more)

• The utility token of the blockchain-based distributed rendering service Render Network has surged over 80% in value over the past week, following the network’s vote passing a new tokenomics model.
• With the burnt-and-mint equilibrium (BME) model, Render aims to make RNDR a commodity and deflationary asset.

Lido introduces Lido V2, a step change on the road toward further decentralization (Read more)

• The two major focal points of this upgrade are Staking Router and Withdrawals.
• The Staking Router will act as the nucleus of the Lido vision: a platform where stakers, developers, and node operators can collaborate without friction and drive the future of a decentralized Ethereum together.
• The Withdrawals function will allow stETH holders to withdraw from Lido at a 1:1 ratio, realizing a key milestone of a truly open on / off ramping into the Ethereum staking ecosystem.

Three Arrows Capital founders launch exchange where you can trade 3AC bankruptcy claims (Read more)

• Named Open Exchange, the platform aims to be a home for trading what it says is a $20 billion market of claims against bankrupt crypto firms, including those of 3AC.

MakerDAO integrates Chainlink for DAI Stablecoin (Read more)

• Chainlink Automation will run specific tasks, including price updates and liquidity balancing, to help maintain the stability of Maker’s $5 billion DAI stablecoin.

🖼 NFT / 🎮 Gaming / 🎭 Metaverse

Saudi Arabia, The Sandbox agree to collaborate on metaverse projects (Read more)

• The Sandbox and Saudi Arabia signed a memorandum of understanding but without revealing details explaining the scope of the agreement.
• Like the United Arab Emirates, Saudi Arabia has shown significant interest in crypto and web3.

Blur NFT volume beats OpenSea again, with 30% of the traders (Read more)

• An airdrop scheme and impending token launch are likely fueling NFT activity on Blur, putting OpenSea in second place once more.
• Blur has topped daily trade volume across the NFT sector every day throughout February so far, averaging roughly $14.3 million compared to OpenSea’s $11.3 million, per a Dune Analytics dashboard.

Introducing OpenSea’s 3hr Hold Period (Read more)

• To mitigate theft-related risk, sellers will be prevented from accepting offers on certain items for 3 hours after some transfers and sales.
• Delegate Cash is a decentralized registry that associates users’ trusted wallets. OpenSea will read from their on-chain registry so users can have a smooth buying and selling experience while staying protected.

🏢 Institutional Adoption / DAO / RWA

Microsoft, Google chatbot frenzy prompts rally in AI, big data tokens (Read more)

• Crypto tokens specializing in artificial intelligence (AI) and data are leading the recent crypto market rally.
• Microsoft and Google are betting bit on AI chatbots after ChatGPT trends.

Visa’s crypto strategy targets stablecoin settlements (Read more)

• Visa is seeking to build a “muscle memory” to settlements, aiming to allow customers to convert digital assets to fiat currencies on its platform, according to the company’s head of crypto division Cuy Sheffield at the StarkWare Sessions 2023.

Metaverse tokens show big gains in January with sector expected to reach $5 trillion value by 2030 (Read more)

• After spending a considerable portion of 2022 in the doldrums, a number of tokens in the metaverse sector have seen considerable gains over the last several weeks, with 18 of the top 20 tokens in the sector seeing gains of up +319%, over the last 30 days.
• The rise in their popularity recently may be due to several factors. A big one is the multi-billion dollar push from many in Big Tech to see the industry through a number of expensive VR and AR applications.

Aptos Labs backs web3 TikTok rival Chingari (Read more)

• Aptos Labs made an equity investment in popular Indian social media app Chingari.
• Chingari, a short video app with five million daily active users, will make Aptos its preferred Layer 1 blockchain.

Revolutionary Real-World Assets could be the next big thing in crypto (Read more)

• The main use case that current RWA protocols allow is the collateralization of these assets to obtain loans denominated in cryptocurrencies, normally stablecoins.
• RWA narrative may soon gain traction due to its similarity to the Real Yield narrative and its real-world use case.
• There are many RWA protocols that enable farmers to raise funds from DeFi in exchange for regular crop share payments, invest in estate from anywhere in the world, tokenized real-world assets (goods, mortgages, etc) and puts them on the blockchain, etc.

🧑🏻‍⚖️ Regulations

Stablecoin issuer Paxos is being investigated by New York regulator (Read more)

• The New York Department of Financial Services (NYDFS) is investigating stablecoin issuer Paxos, CoinDesk has learned.
• The full scope of the investigation is unclear. Paxos’ stablecoins include the Pax dollar (USDP) and Binance USD (BUSD), a Binance-branded stablecoin offered through a white-label service.

Kraken to shut US crypto-staking service, pay $30M fine in SEC settlement (Read more)

• Crypto exchange Kraken will “immediately” end its crypto staking-as-a-service platform for U.S. customers and pay $30 million to settle Securities and Exchange Commission (SEC) charges it offered unregistered securities, the U.S. agency announced Thursday.
• This applies to all staked assets except for staked ether (ETH), which will be unstaked after the Shanghai upgrade. U.S. clients will not be able to stake any additional assets, including ETH.

‘Crypto-assets’ on SEC’s 2023 to-do list (Read more)

• One of the SEC’s main divisions lists ‘crypto-assets’ among its major agenda items for 2023.
• “In a time of growing markets, evolving technologies, and new forms of risk, our Division of Examinations continues to protect investors,” SEC Chair Gary Gensler said in a statement.

ConsenSys backs lawsuit against IRS over taxing staked crypto (Read more)

• Crypto software giant ConsenSys will financially support an ongoing lawsuit challenging the IRS’ ability to tax staking rewards, the company announced Tuesday.

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