#46 Google: An Active Investor in Blockchain Companies. NFTs Reality Check.
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.
The Complexity of the Tornado Cash Sanction
Tornado Cash was [or is, as I’ll explain later on] a crypto tumbler service that got sanctioned by the US Treasury’s Office of Foreign Assets Control (OFAC). What’s a tumbler and why would it be useful? The linked Wiki page has more information, but essentially blockchain transactions are publicly traceable. For various reasons, people might want some privacy - maybe they are donating to some cause that they want to keep for themselves, maybe they are distributing some funds so their wealth is not public, or maybe they are flat out laundering illicit assets. A tumbler solves this issue as it pools together various transactions and makes it hard to trace what came from where. According to data mentioned by OFAC, Tornado Cash was used for “laundering more than 7 billion USD”, so they decided to sanction it.
This blew up in a lot of ways. An alleged developer was arrested. Kraken’s CEO said that this move is unconstitutional while others said banning Tornado is similar to banning email because bad actors are using it. A piece in CoinTelegraph is telling DeFi developers that they have to play ball with regulators. An article in CoinDesk warns that this move might not really stop bad actors but really set back progress in terms of privacy work. And many more.
I want to focus however on the unstoppable aspect of something running on the blockchain, something that is also covered in the CoinDesk article mentioned above. You see, OFAC essentially banned Tornado Cash, and if you Google it right now or try to go to the project’s website you won’t find anything. However, at its core, Tornado is a smart contract running on the Ethereum blockchain, and once deployed, it’s there. It can’t be taken down. If you know the contract’s address, you can use it. To that point, on the day of the sanctions, ~2 million USD went through it.
So at the moment, you are sanctioned if you use the Tornado smart contract. That sounds terrible if you are a random person wanting some privacy. However, if you are a hacker, doing bad stuff, and you still have the means to access Tornado (still running on-chain, as I explained) - what’s to stop you from still using it? It wouldn’t be the first illegal thing you’re doing, right?
It’s going to be interesting to see how bans and sanctions evolve in this new, immutable context of public blockchains.
Mihnea
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Brief unbundling of the Uniswap Foundation proposal
The Uniswap governance members are invited to exercise their rights regarding the proposal on establishing and funding with $74 million in UNI tokens of the Uniswap Foundation (UF). The proposal is currently in the final phase of Uniswap’s governance process and has passed the key threshold of 40 million UNI yes-votes.
Uniswap Foundation is intended to support the protocol’s decentralized growth, reinvigorate governance, and serve as a protocol advocate. The motivation behind the proposal included the frictions observed in the governance process, the difficulty to navigate the ecosystem as a whole, and the need to improve the current grants program architecture.
The proposal has a good, general structure however, it lacks a couple of key details that could better portray how they intend to deploy the grants - e.g., it lists the areas of focus for grants, but does not provide (high-level) OKRs sought from funded projects, especially as they state that the current grants system is not working. Some key points from the proposal:
Key activities and OKRs: breakdown of the 4 main objectives and key results measured by the funding granted.
Year 1 roadmap: breakdown of activities in the first 3 months (immediate and tangible effects) and thereafter - missing Year 2 and 3 (high-level) roadmap or guidelines.
Board: proposal was put forth by Uniswap Labs’ former chief of staff, Devin Walsh, and Uniswap grant program lead, Kenneth Ng. They are seeking a third board member to be installed in the first 3 months.
Hiring plans: 12-member team to be hired (specs included).
Budget breakdown: $60 million for the grants program over 3+ years and $14 million budget to build the team over the next 2 years.
Fund disbursements: 2-steps ($20m/$54m), the second disbursement would be subject to off-chain governance process.
Governance participation: UF to be granted 2.5 million UNI tokens to participate in governance. Tokens will be delegated through a new smart contract design (The Franchiser), which ensures the tokens are only used for delegation and allows the DAO to claw back the tokens.
Other items: A Delaware entity, UF will seek post-funding the appropriate legal entity structure that will allow it, inter alia, to enter into contracts, open a bank account, and hire employees.
The proposal has received mixed feedback from the community. Uniswap Labs CEO, Hayden Adams, has praised it, while Adam Cochran is expecting that UF will be more attentive and stringent towards how it distributes the grants and expects a community-backed monitoring committee and more checks on how the financing would be used.
Razvan
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NFTs Reality Check
The need for NFTs soared throughout the summer of 2021. The number of deals in the NFT market, however, has decreased after a year. Interest in NFTs has decreased along with the overall interest in the crypto sector due to the lowest transaction volumes in a year and the increase in NFT attacks.
Dune Analytics numbers from the community of crypto analysts show that OpenSea's transaction volume reached a height of more than $5.8 billion in January. Trade on the site, however, drastically decreased in the year's first two quarters, dropping to $3.1 billion in May, and that was only the beginning.
The biggest decline in transaction volume ever recorded by the exchange occurred in June when it dropped 74% to $826 million from the previous months. July stopped a bit above the $500 million mark, maintaining a declining trend and, at the current pace, august will not even go there.
The weekly volume from Nansen speak even more to us, showing the numbers from most of the big platforms, ETh wise NFTs.
After peaking on May 1, the floor pricing for the Bored Ape Yacht Club collection has dropped 69% to $128,722. Doodles' value decreased by 81% after peaking at $67,750 on May 6. According to information from NFT Price Floor and CoinGecko, Azuki fell 88% after reaching a high of $108,000 on April 3.
The Active wallets number has dropped as well, from 450,000 active wallets per week to less than 200,000, the active community was reduced by 57% between January and June.
The number of weekly sellers seems to be stabilizing at around 100,000 for 132,000 buyers. At the lowest, there is therefore a rate of 1.32 buyers for 1 seller.
Despite the sharp decline in activity, it should be remembered that there are still more buyers than sellers.
The biggest drop in the quarter was in collectibles, which went from a nearly 19% gain to less than 5%. Approximately 8.5 million Collectibles are still in use today.
In addition, we see that the launch of OtherDeed for OtherSide, with its 100,000 plots, has resulted in a nearly 25% rise in supply for the Metaverse segment.
Finally, utilities saw a dramatic gain in numbers, up more than 40% from the start of the quarter to the end.
Times are tough for the NFT world, but maybe this is just the filtration period when people start to ask for more utility in an NFT than community access. The extremes are always bad, but you need some extreme to better understand where the middle ground is.
One thing is for sure, the NFTs and Metaverse are here to stay, no doubt about this, but the market curation time has started.
Cosmin
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Google: An Active Investor in Blockchain Companies
A recent report conducted by Blockdata, a crypto research firm, shows that major tech players have been making significant investments into some blockchain companies. The report highlighted the most active investors in the crypto scene out of the top 100 public companies (by market capitalization) from September 2021 until June 2022.
Blockdata noted that Alphabet participated in funding rounds for companies including Fireblocks, Dapper Labs, Voltage, and Digital Currency Group, which ended up raising $1.5 billion in total. In an email statement, a Google spokesperson made it clear that: “As the report says, while the small number of Blockchain related companies we’ve invested in have raised $1.5b in total, we have only invested a small fraction of that ourselves.” Whilst the recent amounts invested are unclear, the group’s interest in blockchain technology is certain. Earlier this year, CEO Sundar Pichai told investors they were “definitely looking at blockchain, it’s such an interesting and powerful technology with broad applications.” The Google boss further said they plan to allow blockchain-based businesses to use cloud computing and want to incorporate NFTs and crypto payments into their various platforms.
Additionally, the report revealed that Samsung, South Korean tech giant has participated in funding rounds for 13 companies, including climate tech venture Flowcarbon, Bored Apes Yacht Club issuer Yuga Labs, blockchain gaming company Animoca Brands, and Axie Infinity owner Sky Mavis.The corporation is likely to have done most of its investing efforts through Samsung Next, a multifaceted innovation group within Samsung Electronics, investing in blockchain, artificial intelligence, and the Metaverse.The post, however, does not detail how much the tech corporation invested in each of the blockchain companies, noting only that the total size of funding rounds for the 13 companies aggregated to $979.26 million.
Evelyne
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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/
🧑🏽💻🤝tnx📊