Artisan – #21 Weekly: Feb 27 – Mar 5

How large and valuable EigenLayer/re-staking can become, Summary of the February crypto market, Simlating token economics, A data-driven deep dive on a16z investments, Jump executes counter exploit against Wormhole Exploiter, Market makers in NFT space, Growing list of crypto companies cutting Silvergate ties…

🤔 Analysis & Thoughts

GLP models are oversaturated now (Read more)

• GLP model is characterized by a vault that lenders stake assets in for yield, users borrow money from this vault and make trades, and protocols take fees from trade and give lenders yield.
• There are some issues with this model: liquidity fragmentation, market risk, eventual credit crunch.
• If there are multiple “glp models”, GMX or some other protocol should take lead to figure out a way for other protocols to tap into their lending pool, balance out the risks of the portfolio and create a “source of liquidity”.

How large and valuable EigenLayer/re-staking can become (Read more)

• In Q4 of 2022, the annualized staking revenue paid out by the top 25 proof of stake networks (excluding Ethereum) was around $3b. This has grown from just over $200m in Q1 2020. The average CAGR for the past 3 years is 37%.
• Staking is still quite early, and that with the coming proliferation of rollups and other modular blockchains will come a need for even more staking. Thus, EigenLayer AVSs are likely to comprise a meaningful portion of future staking revenue.
• Outside of L1s, it’s rare to see the potential for the amount of value which may end up flowing through EigenLayer.

Summary of the February crypto market (Read more)

• Total adjusted on-chain volume decreased by 0.7% to $164B (BTC: -4.3%, ETH +4.2%). Adjusted on-chain volume of stablecoins decreased by 17.6% to $558.1B; Issued supply further contracted by 3.2% to $128.4B.
• A total of 84,885 ETH, equivalent to $138.1M, was burned in February. Since the implementation of EIP-1559, a total of 2.95M ETH, equivalent to $9.02B, has been burned.
• Monthly NFT marketplace volume on Ethereum increased, by 103.2%, to $1.86B. Blur managed to displace OpenSea for the first time.
• Legitimate CEX spot volume increased by 11.4% to $665.8B. Notable market share: Binance at 81.9%, Coinbase at 6%, BTSE at 3.1%, Kraken at 2.9%, and Binance US at 1.7%.

Simulating Token Economies: Motivations and Insights (Read more)

• 6MV introduces their methodology and shares four early findings
• Although the strongest factor in token price performance are macro changes, they show that token design decisions can help mitigate downward price pressure during bear markets.
• All things being equal, incentivizing the supply side (providers) is more efficient than incentivizing demand (users). The effect of adding Providers to the network both increases stability and the overall token price.
• In their models, adjusting token emission rates (eg deflation) did not meaningfully affect a protocol’s performance. Instead of using deflation to drive token price, they recommend protocols to prioritize value drivers.

EigenLayer accelerates the Dapps’ innovation capped by infra’s rate of innovation (Read more)

• Rate of innovation at the core layer is lower than that at the application layer since core layer upgrades are only permissioned.
• EigenLayer can leverage the existing trust network to do other things than transaction ordering & execution via restaking. This lowers the threshold of bringing in innovations, transforming dynamics of creating new distributed systems.
• There will also be a flywheel for ETH since higher yields of ETH via restaking leads to more demand leads to less circulating supply and higher ETH prices, which will lead to higher yields of ETH.

A data-driven deep dive on a16z investments (Read more)

• For the number of investments, there is a good uptrend in the number of investments over time and a16z invested a record number of investments in2021.
• In 2022, for the first time, the amount invested as lead investor exceeded the investments as non-lead. The amount invested in 2022 was much higher than 2020, showing a16z’s high conviction to crypto.
• They invested less and less Cefi investments, lots of gaming projects in 2021 and L1 investments from 2018 to 2021. They started to invest in L2 and zk projects in 2022 and regularly invest in infrastructure projects.

🌍 Layer 1/2s

MetisDAO introduces Hybrid Rollups (Read more)

• Metis is building the first-ever Hybrid Rollup, combining the transcendent scalability of Optimistic Rollups with the security and fast finality of Zero-Knowledge Rollups.
• By combining these 2 architectures, Metis will provide a secure, developer-friendly Layer 2 for Ethereum developers to deploy all types of decentralized applications.

Ethereum Developers target March 14 Date for Shanghai upgrade on Goerli Testnet (Read more)

• Ethereum developers are targeting March 14 for the Goerli test network (testnet) to run through the Shanghai upgrade, the much-anticipated move to enable withdrawals of staked ether (ETH) from the blockchain.
• The developers agreed on the targeted date Thursday during their biweekly call.

💰 DeFi / CeFi / NFTFi

Noble ditches Cosmos ‘Interchain Security’ to avoid slashing attacks (Read more)

• Noble XYZ, a Cosmos-based general asset issuance chain, has paused integration with Interchain Security due to slashing concerns.
• Due to concerns that a bad actor could potentially rally support to slash a validator through governance even without participating in dishonest behaviors, Noble XYZ has chosen to launch as a “proof of authority” chain with a trusted validator set.

Spool v1 is live on Arbitrum (Read more)

• The protocol aims to bridge the gap between DeFi and the institutional market, enabling investors to create automated yield-bearing strategies in the form of smart vaults.
• Upcoming v2 will open Spool up to more volatile options, including LSDs, LP, and perp DEX-based strategies.

Non-custodial liquid staking platform Ether.Fi raises $5.3M in funding round (Read more)

• Compared to its competitors, Ether.Fi allows users to maintain control of their keys while delegating validator operations to a node operator.
• The round was co-led by North Island Ventures, Chapter One, and Node Capital, including participation from BitMex founder Arthur Hayes.

Hyperdrive to help Rocket Pool improve its capital efficiency, scalability, and validator distribution (Read more)

• The main goals of Hyperdrive are to help Rocket Pool improve its capital efficiency, scalability, and validator distribution without compromising on the base security model.
• The main advantage of Hyperdrive is to create a secondary system which can eliminate the bond requirement by distributing deposits to NOs in a fully non-custodial manner.

Jump executes counter exploit against Wormhole Exploiter (Read more)

• Jump Crypto has seemingly recovered 120.69k wstETH and 3.21k rETH ($225M of assets) from the infamous Wormhole Exploit that occurred one year ago.
• A recovery group, what appears to be Jump Crypto and Oasis, “counter exploited” an upgradable proxy contract on the Oasis protocol, securing the stolen funds and transferring them to a fresh wallet.

🖼 NFT / 🎮 Gaming / 🎭 Metaverse

Emmy award-winning, Disney-backed Baobab Studios launches ‘Momoguro’ Ethereum NFTs (Read more)

• Momoguro is a colorful fantasy world where creatures called “Momos” can fuse together to form hybrid characters.
• Momoguro is releasing NFTs as well as a NFT roleplay game (RPG) where players can go on “quests” across a world called the Uno Plane to combine Momos.

Treasure DAO launched a new game studio Darkbright Studios (Read more)

• This studio will power Smolverse’s first game title, Smolville from the ground up.

Illuvium will launch new game “Beyond” on March 7th (Read more)

• Illuvium-Beyond is a customizable NFT adventure game that allows players to collect the most powerful Illuvitar NFTs based on the game’s characters, the “Illuvials”.

Market makers in NFT space (Read more)

• MMs are not wash traders. They provide liquidity and make a profit on the spread around the true price of an asset. Every trade they make comes at a cost in the form of royalties paid to creators.
• Their entrance allows more players to come into the space. The liquidity they provide makes it safer to buy into new collections, which leads to more volume, and more revenue for creators.
• Before Blur there were very few MMs in NFTs. As the space matures, we will see more MMs come into the space.

🏢 Institutional Adoption / DAO / RWA

Growing list of crypto companies cutting Silvergate ties (Read more)

• Companies throughout the digital assets industry distanced themselves from Silvergate Thursday after the crypto-friendly bank delayed the filing of its annual 10-K report with the Securities and Exchange Commission (SEC).
• Coinbase, Crypto.com, Bitstmap, Gemini, Circle and other companies have paused correlations.

HSBC and Nationwide ramp up crypto limits (Read more)

• Nationwide Building Society and HSBC Holdings Plc toughened limits on retail customers’ access to cryptoassets in the last week, becoming the latest UK banks to impose curbs after industry scandals and regulatory warnings.
• Nationwide is applying daily limits of £5,000 ($5,965) on debit-card purchases of cryptoassets, the building society informed customers on Wednesday, while its credit cards can no longer be used to buy crypto.

Robinhood’s self-custody wallet launches on iOS (Read more)

• Robinhood Wallet has officially rolled out to all iOS users on the waitlist of more than 1 million and it is now available globally* via the Apple App store where it has already been downloaded in more than 130 countries.

Visa’s crypto strategy remains intact despite crypto winter (Read more)

• The U.S. payment giant denies a Reuters report it is looking to slow down partnerships with crypto companies.

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