#26 Wall Street has entered the crypto space. Vee Friends Series 2.
Disclaimer: Everything we write in "The Crypto Insider Report" is an x-ray of the industry as we see it, through the lens of publicly available information. We are not financial advisors.
Please note that an audio version of this report is available on all streaming platforms including Spotify.
The Risks of Layer 2 - Ronin Network’s 600M Exploit
Layer 2 protocols are the frontrunner solution to Ethereum’s scaling problem. Their approach is to provide fast and cheap transactions on a separate, faster and less decentralized chain, while making use of Mainnet Ethereum’s robust security. Examples include Optimism, Arbitrum and zkSync.
To accommodate the large amount and throughput of in-game transactions, Axie Infinity developer Sky Mavis opted for a Layer 2 network, Ronin. Using a more centralized Proof of Authority model based on nine validators, Ronin Network ensures cheap, almost instantaneous transactions. Transactions are validated when five validators reach consensus. For reference, Ethereum’s beacon chain surpassed 300K validators. As long as the nodes are not compromised, Ronin Network is safe and really fast.
That is exactly what happened on March 23, when 5 nodes were compromised and 173,600 ETH as well as 25.5M USDC were stolen in what is probably the biggest Crypto hack so far. Attackers were able to use hacked private keys in order to forge transactions. The details are documented here. In the meantime, Sky Mavis halted the Ronin bridge (used to transfer funds between Layer 1 and Layer 2) as well as the Katana decentralized exchange while attempts to recover the stolen funds are underway.
Ronin’s exploit highlights the two main issues of centralized solutions:
They are less secure, making a 51% attack easier;
Having a majority gives full control over the system (Ronin’s decentralized exchange was halted).
Wall Street is gradually entering the crypto space
There have been some important recent announcements coming from Wall Street and their significance might have been overlooked. In a nutshell, banks are increasingly offering new products and services to interested investors in the crypto sector while also taking on more risk. This development seems driven by the heightened demand coming from their institutional clientele.
On March 21st, Galaxy Digital announced that it facilitated and executed the first OTC crypto transaction with Goldman Sachs. The instrument per se is not that important - a non-deliverable Bitcoin option or a derivative tied to Bitcoin’s price that is cash-settled, used by hedge funds or Bitcoin miners to hedge risks or boost yields. The fact that this gets added to the existing Goldman Sachs’ suite of crypto derivative products (non-deliverable forwards, exchange-listed options and futures) highlights the growing role the bank is willing to assume in the space. Having Goldman actively participate in the industry has a significant impact on market perception by regulators and government given that this is an institution that has been trusted for many years.
Large banks do not have a presence in the crypto spot market, being hampered by regulatory uncertainty and KYC rules. However, smaller, boutique banks have the advantage of being nimble and able to work with legal and compliance authorities in a faster way. On March 23rd, Cowen announced that it is starting its digital asset unit that will offer institutional clients access to cryptocurrencies trading. This represents the first push of a Wall Street bank into crypto spot trading. Cowen would provide principal trading (taking on risk during the transactions) in 16 cryptocurrencies, including BTC, ETH, SOL or AAVE. Interestingly, Cowen Digital had been trading crypto on behalf of clients for several months. Cowen also stated some ambitious future plans: derivatives and futures trading, lending and institutional access to DeFi and NFTs.
Other banks may be making moves in the shadows. From public releases, it is known that BofA and Morgan Stanley have their own crypto research arms, Citi opened its digital asset division, UBS’ fund-of-funds might be interested in gaining crypto exposure, or JPMorgan is taking tentative steps in crypto futures trading while also having its own infrastructure-focused crypto unit (Onyx).
Vee Friends Series 2
Vee Friends Series 2 is closing in upon us with a fresh look. If the first Series had a hand-drawn doodle style by Gary himself, this 2nd series comes with a new 'evolved' style. Only Series 1 holders will be able to mint this evolved version of the NFTs, and they will be able to do so for free, paying just for the gas.
Another advantage for accessing Season 2 one might have is when owning book games tokens because the most significant part of the total supply of the Season 2 will go to the Book Games NFT owners, as follows:
a) 10.255 will go to the Vee Friends Series 1 Holders
b) 3300 for 15 new Characters will go to the people burning Book Games.
Burning 5 Book Games series to be able to get One Season 2 NFT is one option, although the math didn't add up, to be honest. Why? Because Gary stated that One Season 2 NFT would cost less than 1000$ (close to 0.3 ETH), at the writing of this article, the floor price for the Book Games NFTs is 0.4 ETH. You can still buy Book Games NFTs from here.
c) So, a lot of people, even though burning 5 Book Games to make sure you get one Season 2 NFT, getting on the 15 New Characters list, tend to wait for the next phase, the 32000 Friends List Mint:
On April 5th, 2022, at 1 PM EST, 12.5 days before public minting, 32k BOOK GAMES tokens (out of 123k) will be randomly selected to enable their corresponding wallet addresses to mint Series 2 during the Friends List mint. Any owner of a Book Game NFT will have a 26% chance to get selected.
The Snapshot will happen at that specific time, and after the drawing, anyone can sell their book games. Being selected for a Season 2 minting won't mean you will have to hold on to your book game anymore, so expect some big sales after this. You can find all the details here.
We are still early on this, and more info is coming fast, but in a few days, the tweets will start shooting as the treasure hunt will come to an end.
Good luck to everybody!
Visa launches NFT program to support creators
Visa explained that they see NFTs as a new form of e-commerce and the program is an effort to bring small businesses into the digital economy. The one-year immersion program aims to attract a global mix of creators such as artists, musicians, filmmakers and fashion designers and support them in building their businesses in the web3 economy. Cuy Sheffield, head of crypto at Visa, told TechCrunch that there is no “hard cap” on the number of creators for the first cohort and all members will have access to Visa clients and a broader network of mentors.
This comes after VISA has focused on building its own crypto team that allowed them to launch a crypto advisory practice to help financial institutions develop their cryptocurrency businesses as demand for crypto products continues to grow. Back in December 2021, Visa’s head of crypto was declaring that every bank should have a crypto strategy. Visa’s crypto advisory team works alongside the company’s consulting and analytics group to advise banks on their crypto strategy and execution, as well as to help banks build crypto teams.
In a recent study conducted by Visa itself, 18% of global participants revealed they would be likely or very likely to switch their primary bank to one offering crypto-related products over the next year. In emerging markets, that figure rose to 24%. And for consumers who already own cryptocurrency, Visa’s study found that almost 40% of participants expressed a willingness to switch their banks to ones offering crypto products.
For more educational crypto content, check out the links below:
The Stakeborg DAO Talks on YouTube: https://www.youtube.com/playlist?list=PLOrFZZifNn4Nx4nSQL3WS52ALPXgrTSVG
Discord channel: https://discord.com/channels/901898461568442458/903006233584341052
StakeborgDAO Quarterly Reports: https://docs.stakeborgdao.com/reports/dao-quarterly-reports
Stakeborg Academy: https://academy.stakeborg.com/