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

As a team with several members based in California, the concept of having an earthquake is one that comes with the zip code, and what you figure out pretty quickly is that earthquakes also have aftershocks. FTX’s collapse is definitely sending some aftershocks throughout the entire industry, given the exchange’s centralized nature and exposure to so much of the ecosystem. With Sam Bankman-Fried (SBF) seeming to fan the flames on Twitter via esoteric musings on the ecosystem and other revelations about what just happened, the chips are still in the process of falling.

What is clear is that leverage is not something to play around with. While this narrative seems to be understood by many, there are plenty —especially in the crypto space — who seem to think that their leveraged longs (or other positions) won’t fall by the wayside like so many before them. By his own admission, SBF was unaware of the total leverage facing him, claiming that, “I was wrong: leverage wasn't ~$5 billion, it was ~$13 billion.”

While several assets that were tied heavily to FTX, such as Solana, have taken massive price slashes, more withdrawals from exchanges are simultaneously taking place with over 1.1 million Ethereum alone being withdrawn from exchanges over the last few weeks, per Cointelegraph. In addition, Glassnode noted that “following the collapse of FTX, #Bitcoin investors have been withdrawing coins to self-custody at a historic rate of 106 thousand $BTC/month.” Needless to say, this shift shows that while many may have been hoping to wait out crypto winter on exchanges, recent developments have pushed them to self-custody. This is undeniably a good thing. On a similar note, the conversation around DeFi exchanges and protocols has looked more optimistic, as many of the problems that have been revealed with FTX are theoretically not present in a decentralized ecosystem.

As the regulators such as California’s DFPI wind up, the ongoing debate regarding regulation and its role in the space will doubtless persist. However, with SBF’s latest comments no one can doubt that there could be an epic showdown, as many regulators will likely want to take their pound of flesh in what could be a landmark crypto regulation case and narrative.

With more news to come, we will all be glued to the screens to see what happens when the dust settles. One thing to be sure of is that this collapse will be a game-changer for the industry, and more aftershocks in the form of insolvencies will continue to emerge. — Parker Dresdow, DeCential Media

Please make it stop dept.

In light of the FTX fiasco, it’s no surprise that talks of and expectations for increased regulation are spiking. Departments, organizations, and political figures from both sides of the aisle are calling for a closer eye and clearer guidelines on the industry as a whole moving forward.

Part of this push toward regulation is the investigation by the SEC and DOJ. FTX is reportedly preparing for these investigations, but to say the case is already looking sticky is an understatement. SBF’s constant stream of tweets is fueling an already massive flame. According to a former prosecutor, “It creates new bases for criminal or civil claims against him just based on those tweets… if he says that everything's fine, that their assets are real assets, and that's not true, then that can be securities fraud, and wire fraud, all sorts of other stuff…It is just disastrously reckless.” — PD

Quick Bits

SBF says he wants to ‘raise liquidity’ as puzzling tweets continue

• “Puzzling” is right - even with no leverage, a chapter 11 filing, and no position, SBF still seems to think he can create a solution to the massive problem that is FTX’s collapse. In a recent tweet, he wrote “So what can I try to do? Raise liquidity, make customers whole, and restart. Maybe I'll fail… But all I can do is to try. I've failed enough for the month.”

• How will he do this, you might ask? Great question, and it seems like one SBF himself doesn’t have the answer to, as he hasn’t responded to questions on how he intends to go about this. However, according to The Block and The Wall Street Journal, SBF is attempting to raise capital, so for now we must watch and wait.
  

Cryptoverse: So long, Solana? Ether rival clobbered by FTX crash

• Things are looking rough at the moment for the “Ethereum killer” Solana following the collapse of FTX this past week. In one of the final attempts to avoid calamity, FTX and sister firm Alameda Research seems to have sold a sizable amount of the coin, thereby dropping it by 53.8 percent. Industry voices are assuring that the moment of pain is better paid sooner than later.

• Contrary to Solana, one comfort from recent events, however, is in the unexpected stability from stablecoins, especially following the nightmares of Tether earlier this year.
  

Ethereum becomes most deflationary in history as activity spikes amid FTX collapse

• Speaking of Ethereum… this week, analysts noted the annual inflation rate of the coin has fallen -0.032/year, one of the lowest and most deflationary points in its history. This dip can be attributed to the recent Merge and current events.

• But, Cryptoslate notes that by comparison, ETH is on a potentially more promising trajectory than even Bitcoin was at its current stage, and “when the panic caused by the FTX fades, Ether’s tokenomics could outperform Bitcoin.”

FTX’s new CEO John Ray coldly addresses SBF’s erratic tweets

• SBF seems to be making sure that new FTX CEO John Ray doesn’t run out of things to put on his to-do list (if it were even possible for that to be the case in the first place). Ray, who was appointed CEO on Nov. 11, has been battling SBF’s broad claims via Twitter one by one, “reiterating [that SBF] ‘has no ongoing role at [FTX], FTX US, or Alameda Research Ltd. and does not speak on their behalf’.”

• This isn’t Ray’s first rodeo though. The newly appointed CEO is best known for his experience overseeing Enron’s bankruptcy, which was the largest corporate bankruptcy in U.S. history at the time. Yet even with that notch in his belt, Ray will still have to navigate one of the industry’s largest, if not the largest, quagmire to date.

Latest Podcast

The DeCent People Podcast With Avalanche Founder Emin Gün Sirer

In the latest DeCent People podcast, we talk to Emin Gün Sirer, the CEO and founder of the Avalanche blockchain which is the 16th biggest by market cap. He grew up in Istanbul among a large extended family and attended the prestigious American High School before coming to the U.S. for college. He was a professor of computer science for many years at Cornell University and was early to the game with both Bitcoin and Ethereum. We talk about family life in Istanbul, the strange TV show Musti and how cryptocurrency skepticism dates further back than 2008 and the release of the Bitcoin white paper.

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

Good Podcasts Outside DeCential

A Verified Mess: Turmoil from Twitter to FTX

This week’s New York Times’ Hard Fork Podcast goes inside Elon Musk’s “dire” warnings, FTX’s spectacular collapse, and Meta’s big layoffs. Has the tech industry lost its mind?

And last but not least

FTX Fallout Continues: Visa Dumps FTX, BlockFi Still Suspended, Crypto.com Skirts a Bank Run

No surprises here as the FTX carnage continues. Visa announced it would be ending its relationship with FTX following the collapse - outside of FTX, Visa is reportedly working with 65 other crypto firms who we imagine will not be watched like a hawk.  

On top of that BlockFi came forth noting it has “significant exposure to FTX” and will not be looking to recoup during the bankruptcy process. Meanwhile, the platform halted all withdrawals and deposits until further notice. 

Last but not least, Crypto.com is taking heat for an “erroneous transaction” that took place in late October but only recently surfaced through social media. The exchange “accidentally sent 320,000 ETH ($400 million) to a Gate.io wallet,” leading to $53 million in user withdrawals. The news coincided with the FTX fiasco, but CEO Kris Marszalek said the “‘company had recovered $990 million from FTX’… and now has just $10 million of exposure.” — 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.