Artisan – #11 Weekly: Nov 14 – 20

Collapse of Alameda and FTX, self-custody on MPC, crypto wallets from B2B to B2B2C, EIP-4844, Sui testnet wave 1, Genesis sought an emergency loan of $1 billion, Lemma Finance v2, Binance pushes for self-custody with Trust wallet, Adidas originals launches NFT wearables, Apple Pay now available on Circle

🤔 Analysis & Thoughts

Blockchain analysis: the collapse of Alameda and FTX (Read more)

• FTX created FTX Token (FTT), a token for their platform, involving Alameda since day one. The two of them shared the majority of the total FTT supply which did not really enter into circulation.
• The initial success of Alameda, FTX, and the meteoric rise of FTT most likely led to a rise in the value of Alameda’s balance sheet. This high balance sheet value of the FTT positions was likely used as collateral by Alameda to borrow against. If the borrowed funds were used to make illiquid investments, FTT would become a central weakness for Alameda.
• Evidence of the actual loan from FTX to Alameda is not directly visible on-chain, possibly due to the inherent nature of CEXs which may have obfuscated clear on-chain traces.

Seedless self-custody: on MPC and smart contract wallets (Read more)

• Following the revelations around FTX, we saw $800M+ of net inflow, Ledger experienced multiple all-time highs in sales in short succession, Trezor sales surged 300%, and ZenGo had triple-digit growth overnight and high ATHs in deposits, all in the same week.
• Individuals want seamless UX, low cost, and flexibility to interact with dapps; DAOs want transparent treasury management and ecosystem governance participation; Institutions want to outsource liability with chain-agnosticity, auditability, and institutional-grade security.
• There has been significant development in two categories of alternative key management solutions: smart contract wallets (including multi-signature wallets), and multi-party computation (MPC) protocols.

The ultimate guide to DeFi under-collateralized lending (Read more)

• While the collateralized lending primitives empower a trustless lending and borrowing experience that allows any DeFi user to borrow capital or leverage positions, they suck from a capital efficiency standpoint. Undercollateralized (or unsecured) lending solves this problem.
• Why CeFi lenders failed? 1) Failure to evaluate counterparty risk; 2) Illiquid collateral and poor liquidation mechanisms; 3) a lack of transparency for end users.
• Goldfinch, Maple Finance, and Gearbox currently dominate the undercollateralized lending space, composing 89% of the sector’s borrowing volume. The protocols examined in this guide have an aggregate outstanding loan balance of $419M, at the time of analysis.

Crypto wallets: the drivers of mass adoption (Read more)

• Since crypto wallets are the primary access point to web 3.0 economies, wallet providers will have the opportunity to gain bargaining power through increasing customer usage and on-ramp options (direct fiat trading volume, cross-chain swaps, etc…).
• Currently, crypto wallet providers’ most popular monetization models are either selling hardware devices, building a margin into crypto/fiat trading volume, or building a margin from integration of direct DEX swapping.
• As the traffic bottleneck for web3 economic activity, wallet providers have the opportunity to capitalize on cross-chain liquidity and traffic.

🌍 Layer-1 / Layer-2

EIP-4844: An optimistic bet on rollup scalability (Read more)

• EIP-4844 (protodanksharding) is a new transaction type that makes it easy to write cheap but ephemeral data on L1. The data, represented as blobs, relies on some nifty new cryptography to ensure that it is available long enough for L2 use.
• The EIP-4844 effort is the largest (other than The Merge) community-led effort.

Sui Testnet Wave 1 Goes Live (Read more)

• Testnet Wave 1 lets us understand interoperability among validators, while Devnet remains the appropriate network for builders.
• As an incentivized Testnet Wave, this network will be transitory, shutting down once the team achieves its goals. The team will stand up successive Testnet Waves as they proceed to Mainnet.

StarkNet token is deployed on Ethereum (Read more)

• It will take time for the Foundation to determine the mechanism for distributing its tokens.
• Tokens held by StarkWare shareholders, employees and by independent partner software developers are locked for a four-year period, with a gradual release starting after one year.
• The token will further StarkNet’s decentralization thanks to its use for voting, staking and paying fees.

Fuel Labs released Beta-2 (Read more)

• This second testnet brings cross-chain bridging to Fuel, paving the way for the next generation of Ethereum scalability.
• Developers participating in beta-2 can build and test cross-chain dApps, leading the charge for projects building on Fuel to tap into Ethereum’s massive liquidity and existing user base.

💰 DeFi / CeFi

Crypto Lender Genesis Had Sought Emergency Loan of $1 Billion (Read more)

• Cryptocurrency lender Genesis was seeking an emergency loan of $1 billion from investors before it told clients it was suspending redemptions this week, as the shockwaves from FTX’s collapse continue to reverberate through the crypto industry.
• A confidential fundraising document viewed by The Wall Street Journal states that Genesis needed access to the credit facility by 10 a.m. Monday, citing a “liquidity crunch due to certain illiquid assets on its balance sheet.” The firm didn’t get the money.

Genesis halts crypto lending, blames “FTX implosion” (Read more)

• The lending division of cryptoasset manager Genesis has put a halt to customer redemptions and new loan originations, a move that’s already disrupting crypto services across the ecosystem.

Gemini’s Earn program unable to meet customer redemptions within the service-level agreement (SLA) of 5 business days (Read more)

• Gemini is working with the Genesis team to help customers redeem their funds from the Earn program as quickly as possible. They will provide more information in the coming days.

Circle holds a little more than $10 million in FTX-related equity investments (Read more)

• Stablecoin issuer Circle holds about $10.6 million in equity investments related to the FTX Group.
• The disclosure puts a number on what CEO Jeremy Allaire had previously called a “tiny” amount of equity. 

Lemma Finance launches its v2 protocol, LemmaSwap (Read more)

• LemmaSwap is a completely new protocol for swapping spot assets using perpetual futures liquidity. Liquidity providers (LPs) deposit assets and get back highly composable ERC20s. They generate yield via spot trading fees and funding PnL, all without any impermanent loss.
• LPs facilitate spot swaps by acting as the counterparty to every trade and are always hedged via an opposite perpetual futures position.
• Perpetual futures liquidity is deeper than spot liquidity as perpetual futures markets are more risk-efficient for market makers to move in and out of, allowing them to give tighter quotes and post deeper orders.

OKX exchange plans $100mn market recovery fund (Read more)

• OKX, the world’s second-largest crypto-only exchange by trading volume, said it would support an industry struggling with the collapse of the rival FTX exchange with a $100 million market recovery fund.

Funds With FTX Exposure Have 7% to 12% of AUM Trapped (Read more)

• Between 25% and 40% of cryptocurrency-focused hedge funds had some level of direct exposure to FTX or the exchange’s native token, FTT, according to a new research note.

Binance CEO Zhao pushes for crypto self-custody; Trust wallet token soars 80% to record (Read more)

• The CEO of leading cryptocurrency exchange Binance, Changpeng “CZ” Zhao, called on members of the crypto community to take personal control of their digital assets using Trust Wallet, sending the app’s native token, TWT, to a record high.
• Zhao’s push for self-custody comes as investors rethink how to keep their assets safe in the wake of the cryptocurrency exchange FTX’s collapse and a subsequent hack that drained $600 million worth of coins from its wallets. Acquired by Binance in 2018, Trust Wallet is a decentralized hot wallet facilitating the storage of cryptocurrencies and non-fungible tokens.
• Trust Wallet Token (TWT) is the wallet’s official token, allowing holders to participate in decision-making related to app features and updates.

🖼️ NFT / 🎮 Gaming / 🎭 Metaverse

Metamask provides NFT Price Estimate function to its portfolio dApp (Read more)

• stimates are powered by NFTbank.ai – their unique algorithm can provide estimates with ~90% accuracy.
• The team will provide estimates for most major collections on Ethereum Mainnet and be expanding to more networks soon.

Adidas Originals launches inaugural NFT wearables collection (Read more)

• Adidas Originals unveils a limited collection of blockchain-based virtual wearables, released as non-fungible tokens (NFTs) on adidas.com/metaverse.
• Representing the brand’s first NFT collection of wearables, which is a new, interoperable product category adidas calls “Virtual Gear”, the launch accelerates Adidas Originals’ drive towards strengthening its community-based, member-first, open Metaverse strategy.

Cristiano Ronaldo Launches First NFT Collection with Binance (Read more)

• Cristiano Ronaldo’s first NFT collection will be available Friday, November 18, as part of an exclusive, multi-year partnership with Binance, the world’s leading blockchain ecosystem and cryptocurrency infrastructure provider.
• The launch is supported by a global marketing campaign featuring Ronaldo, aiming to give his fans an introduction to Web3 through the world of NFTs.

Binance integrates OpenSea NFTs on its platform (Read more)

Yuga Labs acquired Beeple’s 10KTF and WENEW Labs, making him an advisor (Read more)

🏢 Institutional Adoption / DAO

Apple Pay is now available on Circle (Read more)

• Eligible businesses who build with Circle can now help further boost their sales by accepting Apple Pay.
• This can be especially powerful for crypto-native businesses, since it can help them create stronger connections with customers who want to pay using more traditional methods and even enable them to buy crypto with Apple Pay on their preferred exchange.

Before the Blowup, Wall Street Heavyweights Went to Bat for FTX (Read more)

• Trading firms, think tanks, professors, even Fidelity: They all supported FTX’s plans to shake up the derivatives industry.

🧑🏻‍⚖️ Regulations

FTX Fallout Adds Urgency to South Korea’s Push for Crypto Regulations (Read more)

• Regulators stressed the need to have a regulatory framework in place during a meeting of South Korea’s National Assembly, given the failure of multi-billion dollar cryptocurrency exchange FTX, CoinDesk Korea reported on Monday.

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