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

There will come a time when it’s no longer necessary to discuss FTX and the massive, alleged fraud perpetrated by Sam Bankman-Fried. Alas, this is not the week. Of the many ridiculous and ill-advised public appearances and interviews SBF has given, the one to George Stephanopolous that aired on Good Morning  America galled me the most.

To his credit, Stephanopolous did a good job of pressing SBF on whether FTX borrowed customer funds to pay off loans taken out by its sister-organization Alameda Research, specifically by reading him the exchange’s terms of service that say customer deposits are never the property of FTX. In a pathetic moment, SBF quietly repeats to himself “can’t be loaned out…” as he’s trying to answer the simple question of where his customer’s money has gone.  

Watching this I recalled two former CEOs who improperly used customer deposits to try to bail their companies out from disaster but ended up going down in flames anyway -- Jon Corzine of MF Global and Russell Wasendorf of Peregrine Financial Group. Readers are likely familiar with Corzine, who parlayed a career at Goldman Sachs (where, fun fact, he was Gary Gensler’s boss) into a political run where he served as the Governor of New Jersey and then as its Senator. Corzine bankrupted MF Global after bad trades on European sovereign debt led to enormous margin calls that the company illegally covered with customer money. Well-connected in Washington, Corzine didn’t face any jail time, the Justice Department declined to criminally prosecute him, and he paid a $5 million fine and agreed to never work in the futures industry again.

Wasendorf is a name you might not remember, but I do (sometimes it’s good being an old). The head of Peregrine, an Iowa-based futures brokerage, Wasendorf stole $215 million of customer money over two decades to support a lavish lifestyle. Without friends in Washington, Wasendorf, who tried to commit suicide shortly after his fraud was uncovered, was sentenced to 50 years in prison in 2013 and ordered to pay back the $215 million he’d stolen.

Caroline Ellison, the former CEO of Alameda, has reportedly said SBF knew of customer funds being used to pay off Alameda loans. The pattern is clear, if this is true, and SBF should face criminal prosecution and a lengthy jail sentence if found guilty. The question of U.S. jurisdiction remains as FTX was based in the Bahamas, but FTX U.S. was also dissolved in the bankruptcy. In the past, prosecutors have found ways of proving U.S. citizens were affected by offshore scams, giving them the ability to go after the parent company.

The other enormous question is what SBF’s huge donations to U.S. politicians and his reported family connections to powerful people in Washington will get him. The different treatment afforded to Corzine and Wasendorf isn’t encouraging in this regard.

Towards the end of the Stephanopolous interview, SBF meekly says he “wasn’t even trying” to manage risk at FTX. “I don’t know what to say,” he says, “what happened, happened.” For the sake of the integrity of the crypto market, I’d like to see him under oath and then fitted for an orange jump suit. Let’s see what happens then, hey SBF? — Matthew Leising, Editor in Chief, DeCential Media

Market watch dept.

FTX and Alameda, by default, had deep ties to a variety of protocols and blockchains that have suffered in the wake of FTX’s implosion. Ethereum and Solana, two of the most popular blockchains for NFTs, were both affected by FTX’s collapse. In the days following FTX’s implosion, Forbes noted that Bored Ape Yacht Club, Crypto Punks and MoonBirds saw floor prices for their Ethereum-based NFTs drop 43, 37, and 51 percent, respectively. Similarly, Magic Eden, OpenSea, and Solanart, NFT markets based on the Solana blockchain, saw trading volumes more than triple, indicating there was a rush to dump Solana NFTs in particular as holders were looking to minimize their losses, per Forbes reporting. Forbes also quotes Gökçe Güven, an ex-OpenSea product designer turned Founder and CEO of Kalder, as having said, “The NFT and crypto industry must regain the trust of the world again…through the continued development of NFTs with real-world utility that can solve problems.”

With FTX’s contagion yet to be stemmed, it is no surprise that the NFT sector is still finding itself impacted. OpenSea, Magic Eden, X2Y2, LooksRare, and Solanart are all feeling the FTX blues as NFT markets saw a drop in total sales volume from October to November in excess of $100 million to $394.02 million, per Balthazar DAO’s November NFT Market Report.

In terms of overall market share, the landscape is certainly changing as incumbents reshuffle and up-and-coming markets seize larger pieces of the pie. As of November, OpenSea and Magic Eden have retained their place as the top two marketplaces by sales volume at 44.3 percent and 24.0 percent respectively. Magic Eden was the only major marketplace to see gains in month-to-month sales with an increase to $94.40 million from $35.74 million (source: Balthazar, DappRadar).

When commenting on the overall NFT market, Balthazar DAO’s Co-Founder and CEO, John Stefanidis, notes that the overall decrease in the market is, “due to macroeconomic pressures as well as the three cataclysms of 2022: Terra Luna, Three Arrows Capital, and FTX. We’ve [also] seen interest rates rise and disposable incomes tighten, volatility in stock markets. People have lost trust and are being more cautious.”

Stefanidis does, however, believe that this next year will yield new NFT use cases as investors and consumers push away from art-based applications and into utility-based ones.

This data indicates that despite increased NFT sales volumes immediately following the initial news of FTX’s implosion, the general market sentiment has waned as investors and traders have yet to regain trust and see a way forward for this segment of the industry. —Parker Dresdow, DeCential Media

Quick Bits

Despite endless media appearances, SBF unlikely to testify on Dec. 13

• After making his first of several public live-streamed appearances last week, SBF is perpetuating the idea that he was oblivious to the spending and “accounting error[s].”

• While speculation around SBF’s intentions to partake in these interviews is plentiful, one prominent theory is that he is more comfortable with lying in these interviews as opposed to perjuring himself before Congress, but we’ll have to wait till the 13th to know for sure. Cointelegraph notes that several prominent members of the crypto community, including Elon Musk, are ready for SBF’s chapter in crypto to be closed.

Crypto lender Genesis allegedly owes $900M to Gemini’s clients: Report

• As the contagion spreads, the industry is getting a better look under the hood at how the promise of high interest is actually achieved. And as it turns out, DCG and Genesis owe Gemini users some $900 million in unpaid interest.

• Through a partnership with Genesis, Gemini promised users 8 percent interest to lend their crypto. Everything looked like your average lending program until FTX collapsed with $175 million of lent funds stuck on the platform. Cointelegraph reports that Gemini is gearing up to recover the lost funds.

Reddit Collectible Avatar minting hits all-time high

• Following September’s earlier announcement to launch a $200 million fund with Polygon, Reddit has continued to see massive growth for its on-platform Polygon-based NFTs. The NFTs are termed “collectible avatars,” and per Dune Analytics, there are around 4.4 million in circulation.

• The Block also notes that each collectible avatar release is the result of partnerships with artists. According to The Block, “to date, there's only been about 40,000 recorded sales despite the millions of collectibles minted. More than 3.4 million holders have just one collectible in their wallets.”

CME Plots More DeFi Products Despite Broader Crypto Carnage

• CME Group and CF Benchmarks are gearing up to launch DeFi-focused “reference rate and real-time indexes - for Aave, Curve and Synthetix. Bitstamp, Coinbase, Gemini, itBit, Kraken and LMAX Digital would initially supply corresponding pricing data,” per Blockworks reporting.

• According to CME’s global head of crypto products, Giovanni Vicioso, the goal of these new products is to provide TradFi investors and institutions insights into sector-specific data that will help them “confidently and more accurately value” portfolios and other protocols.

Latest Podcast

Lights Camera Crypto With Stoner Cats Co-Creator Sarah Cole

On the debut episode of Lights Camera Crypto, Sarah Cole, co-creator of the NFT adult animated short series Stoner Cats, discusses her background in editing for some of the biggest studios in Hollywood and working on some of their most well-known franchises--such as the Spider-Verse--culminating with her co-creation of the popular weed-smoking cat NFTs. She also discusses how her real-life experience with her mother's Alzheimer's was able to influence the creative direction of Stoner Cats, and how the entire system of decentralization is allowing a new form of collaborative storytelling to take shape in real-time.

You can download and subscribe to Lights Camera Crypto here on Apple podcasts or Spotify

Good Podcasts Outside DeCential

And last but not least

How did the FTX collapse impact the Web3 gaming industry?

Another chapter was added to the debate on DeFi versus CeFi when Tegro Earn, along with Earn Alliance and KCC Games Guild, chatted about the impact of FTX’s fall on a recent Twitter Spaces. The conversation focused on the impact on the GameFi segment of the industry.

The general consensus was that while the GameFi sector as a whole had remained relatively stalwart amidst the current crypto winter, fresh funding and interest may start to cool as FTX’s fall reverberates. While there was a positive outlook with regard to DeFi, it was noted that the trust of centralized organizations was dwindling. At the same time, scrutiny of new projects and ones that are struggling to take off will likely increase. — 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.