The Web3 Rewind

A handful of the most interesting and current stories in the blockchain/web3 world not published on DeCential this past week in case you missed them

Hello and welcome back to the Web3 Rewind! Per usual with the industry, lots has happened this past week so without further adieu, let’s dive into this week’s news.

The Latest

Well, hello there. Are you still alive? Eyeballs still in their sockets? This was a week where crypto didn’t resemble the future so much as a WWE free for all. For mostly unknown reasons, the industry seems compelled to keep one-upping itself, to outdo the folding chair smash in the back, the wild flying helicopter flattening, the razor blade cutting bloody drama.

FTX is gone (see the gory details below). At first, Binance came in as a white knight, but then its horse puked and rushed back to the stables. All the while the digital asset market tanked on the uncertainty and inability of investors to get assets out of FTX.

But you know what? Big deal. I watched the financial crisis of 2008 in real time. The global economy was on the brink of a depression that would’ve made the 1930’s look kind. Investment bank giants Bear Stearns and Lehman Brothers blew up, next on the list were Goldman Sachs and Morgan Stanley until the Federal Reserve stepped in. Millions of people lost their jobs or their homes, or both. The automotive industry had to be rescued. The Fed was willing to pay 100 cents on the dollar for worthless collateral in its desperate attempt to keep the patient – the global economy – alive.

By way of contrast, in the past seven days Ether is down 23 percent, Bitcoin fell 20 percent. That’s not to dismiss that this was a tumultuous week in crypto and a lot of people lost money. But the context is important. The broader market is functioning well despite the localized trauma surrounding FTX, its investors and anyone with assets tied up there.

The true weakness exposed this week is how few people in crypto have this historical context to draw upon. It’s a sign of the bubble that surrounds much of the crypto ecosystem that while Sam Bankman-Fried’s implosion made the news it had no effect on the broader economy or financial markets. And it’s another indication of centralized entities in the space blowing up – Three Arrows Capital, Celsius, BlockFi, Voyager all came before FTX this year. My hope is that the mostly young and inexperienced crypto degens grow up a bit from going through this and realize the hair pulling and cries of imminent doom make them appear ridiculous and out of touch with what a true economic upheaval looks like.

In the meantime, the amount of self-inflicted abuse and punishment the crypto market can withstand continues to amaze. Yet it keeps on going, like Hulk Hogan getting up off the mat to lay down one last triumphant body slam. Let’s see what next week brings, shall we? — Matthew Leising, Editor in Chief, DeCential Media

WTF dept.

In what has been a rollercoaster week, FTX has gone from “fine” to stuck in a “liquidity crunch” to “bailed-out” to “out of options” and finally “bankrupt.” In order to make sense of this quagmire, it is helpful to look at the chronology of events. As of early Tuesday, (11/8) FTX was set to sell off its non-US-based operations to Binance. Despite claiming that the exchange was in a good place earlier this week, CEO Sam Bankman-Fried appears to have revealed in short form just how precarious of a position FTX is in, with relatively few being truly aware of the details.

According to The Block, Binance claimed that they had no intentions to crash FTT (FTX’s internal token), despite indicating that they would be offloading any remaining FTT on their books on Sunday (11/6). This could potentially be viewed as an attempt to drive the price down prior to swooping in and offering to bailout out FTX at a cheaper acquisition price by forcing a “liquidity crunch”.

Then, in another stroke of misfortune for FTX, Binance stated that they had no intention to move forward with any sort of acquisition because of FTX’s poor balance sheet. Today, FTX filed for bankruptcy and SBF resigned. The entire ecosystem from retail investors to venture capital firms has felt the shockwaves. Per additional reporting from The Block, Sequoia Capital has taken a roughly $213.5 M loss across several funds that invested in FTX, as the firm has moved to recognize their positions as worthless. On the retail side of things, many have lost life savings or seen their portfolio values get wiped out. Just like the elections, the long-term fallout of FTX is yet to be seen, and with mounting interest from regulators, investigations will yield better answers. — Parker Dresdow

Quick Bits

Midterm Elections 2022: Crypto Live Blog

• The US electorate voted this Tuesday (11/8) with the future of the nation in the balance. On a smaller scale, some voters wondered whether or not their vote would back a candidate that’s pro or anti-crypto. While votes are still being counted, it’s important to note that despite which party wins crypto advocates are on both sides of the aisle.

• Moreover, according to CoinDesk’s tracking, it appears that a number of candidates that won or had the lead were in fact advocates or proponents of some sort of crypto-friendly policies. While it seems prudent to wait and see how many of these candidates are still supportive and actually make efforts to advance the industry following the elections, it’s positive that so many are concerned, as it presents the possibility that crypto may be the one issue that representatives of both parties can agree on.

Polygon Defies Crypto Downturn, Token Up 40% Following Instagram Integration

• Thanks to a newly announced partnership with Instagram, Polygon’s MATIC seems to have found new life with a 40% boost, as Forbes reported. The partnership will widen the bridge to cryptocurrency, allowing users to service, mint and sell Polygon-powered NFTs on the platform.

• On top of the announcement, Polygon was also the center of “first cross-border transaction via decentralized finance on a public blockchain” by JPMorgan, a monumental occasion considering the firm’s and CEO Jamie Dimon’s past skepticism. However, this bump seems to be somewhat of an anomaly in the ever-persisting crypto winter as others such as Cardona, Solana, Loopring, and others continue to drop.

Meta Lays Off More Than 11,000 Employees

• Meta has laid off about 13% of its employees. This is a stark change for the company that had been hiring aggressively for the better part of a decade and seen its ranks swell to 87,314 at the end of September, according to the New York Times. Notably, developers and engineers involved on metaverse-related projects saw far fewer if any job cuts when compared to other employees within the same or other divisions.

• Zuckerberg has indicated that he views the way forward for Meta as more focused on key “high priority areas,” one of which will continue to be the metaverse with an emphasis on smaller teams. Despite this commitment, Meta’s internal metaverse group, Reality Labs, still has a lot to prove, with $3.67 billion in operating losses and more expected for next year, per NYT reporting.

OKX, Kucoin say proof of reserves will be ready in a month

• In the wake of FTX’s implosion, other exchanges are taking notice and being vocal about how they are positioning themselves to avoid ending up in a similar position. Cointelegraph noted that both OKX and Kucoin have taken measures to demonstrate “Proof of Reserves”, which is an indication that an exchange is holding enough in reserves to provide liquidity to meet withdrawals.

• This is effectively a form of insurance that is becoming more popular amidst regulator scrutiny and growing calls for greater transparency, which should be second nature for an industry that loves to use the word. Cointelegraph also notes that FTX was not employing PoR, which in turn can be seen as a contributor to the confusion around FTX’s health and the fact that over the course of a few days everything came crashing down.

Latest Podcast

DeCent People Podcast With Kosala Hemanchandra, Founder of MyEtherWallet

In the latest DeCent People podcast, Kosala Hemanchandra talks about his background growing up in Sri Lanka until he headed to Los Angeles at 17 to study computer science and engineering. A few years later he founded MyEtherWallet, the first digital wallet for the Ethereum blockchain. We speak about how his mother wanted him to be a doctor, lawyer, or engineer, his aversion to outdoor sports, and what he is looking forward to as Ethereum moves into its proof of stake era.

You can download and subscribe to the podcast here on Spotify, Apple Podcasts or Amazon Music and Audible.

Good Podcasts Outside DeCential

Last week’s The Defiant Podcast speaks with A.J. Warner, the Chief Strategy Officer at Offchain Labs, the builders of Arbitrum, one of the leading scaling solutions for Ethereum using Optimistic Rollups. Scaling is a hot topic on Ethereum and throughout the blockchain ecosystem, and according to L2Beat, Arbitrum has nearly $2.7 billion in total value locked. AJ goes on to explain the dapps and protocols building on Arbitrum and how they’ve managed to make Arbitrum the leading destination among Layer 2s.

And last but not least

US DOJ announces seizure of $3.36B in cryptocurrency

In an epic Sherlock Holmes-like finding, the US DOJ announced the seizure of $3.36 billion of Bitcoin by law enforcement on Monday, therefore solving a decade-long mystery and making it the largest seizure of cryptocurrency in the department’s history. About 50,000 bitcoin were confiscated “in an underground floor safe and on a single-board computer that was hidden under blankets in a popcorn tin placed in a bathroom closet.”

The funds were unlawfully obtained through Silk Road by James Zhong who “pleaded guilty on November 4 to committing wire fraud in September 2012.” Officials also found additional cash, Bitcoin, gold and silver bars in Zhong’s home. According to the charges, Zhong could face a maximum of 20 years in prison. What the DOJ will do with the funds is yet to be seen. In the past the government has auctioned off seized cryptocurrency, but it’s important to keep track of federal seizures as this is not the first time this has happened. In February, the DOJ seized $4B worth of Bitcoin from hackers. According to Fortune, in February of 2021, the DOJ seized another $3B from corrupt federal agents. The DOJ is effectively amassing a small war chest of Bitcoin, and with countless resources (and non-defined regulation) they have the ability to continue to do so. — PD

Out of the Ether: Special NFT Edition

Have you read the definitive history of Ethereum? No? Well then get your special edition of Out of the Ether while you can. There are only 1,000 that were printed and each copy is an NFT that can be registered on the Lukso blockchain’s Universal Profile protocol.