Bessie Liu

Heavy-hitter DeFi protocols MakerDAO and dYdX are considering changing up their governance structures.



Blockchain protocols are commonly governed by decentralized autonomous organizations (DAOs), a collective of individuals who manage the groups’ treasury — with the goal of decentralizing decision-making. But, as a protocol begins to scale, and more money is at stake, DAOs, too, have been forced to incorporate bureaucracy.&nbsp;



In the case of MakerDAO and dYdX, both protocols have been actively flirting with the concept of subDAOs.&nbsp;



<h3>What is a SubDAO?</h3>



A subDAO is a new approach to addressing the operational challenge of delegating responsibility within a DAO — without sacrificing decentralization.



The setup is somewhat akin to a startup beginning to divide staffers into different divisions as the company scales.&nbsp;



SubDAOs have an independent foundation and ownership structure but are tied to the parent DAO in terms of mission.&nbsp;



David Gogel, head of growth and operations at dYdX, told Blockworks the purpose of moving into a subDAO structure is to “drive progressive decentralization over the protocol.”



“We envision independent groups really starting to own and run with different functional areas and aspects of the ecosystem,” Gogel said. “This way, community members can really orient around functional areas in the ecosystem and contribute in different ways.”



<h3>An example of a subDAO following the Guernsey purpose trust model&nbsp;</h3>



A subDAO is not new to dYdX.&nbsp;



Its first subDAO — the dYdX grants program (DPG) — was formed in March via a Guernsey non-charitable purpose trust — where an eight-person multi-signature committee was given $752,000 worth of DYDX tokens from the DAO’s treasury to oversee grant distribution.&nbsp;



Why the Guernsey model? It minimizes liability for the DAO and, especially, its committee, while giving the collective the go-ahead to engage in off-chain dealings. The arrangement also satisfies US payments tax and reporting requirements.



Gogel said company Reverie — which now oversees the DPG as the trust’s <a href="https://www.mourant.com/file-library/media---2022/mourant---guernsey-non-charitable-purpose-trusts.pdf" target="_blank" rel="noreferrer noopener">enforcer</a> — compiled the proposal for the subDAO.



<h3>How it all works</h3>



“Ultimately they&#8217;re all accountable to token holders who vote to allocate a percent of the community treasury to fund a grant program,” Gogel said. “Should they decide, [token holders] can make changes to the trustees or to the enforcers or decide not to give them additional funding.”



In a <a href="https://dydx.foundation/blog/a-take-on-the-dydx-daos-near-future" target="_blank" rel="noreferrer noopener">blog post</a>, the dYdX foundation proposed setting up several subDAOs — to position itself favorably ahead of its dYdX v4 mainnet launch.&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">So anon, you&#39;ve heard of <a href="https://twitter.com/MakerDAO?ref_src=twsrc%5Etfw">@MakerDAO</a> metaDAOs.. But whatchya know about <a href="https://twitter.com/dYdX?ref_src=twsrc%5Etfw">@dYdX</a> subDAOs? 🧵🧵🧵⬇️<a href="https://t.co/VfrkpixGiU">https://t.co/VfrkpixGiU</a>&mdash; Matt Fiebach 🟪 (@MattFiebach) <a href="https://twitter.com/MattFiebach/status/1588224148827799553?ref_src=twsrc%5Etfw">November 3, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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“The Guernsey trust structure is widely circulated in the crypto legal scene and I think is viewed as a positive contribution to try to be legally compliant while still maintaining the ethos of a DAO,” Gogel said.&nbsp;



<h3>MakerDAO’s endgame plan through metaDAOs</h3>



MakerDAO, meanwhile, as one of the largest DeFi protocols, has been navigating complicated governance restructures as it attempts to <a href="https://cms.blockworks.co/makerdao-votes-in-favor-of-rune-christensens-endgame-plan/" target="_blank" rel="noreferrer noopener">align incentives</a>.&nbsp;



In <a href="https://cms.blockworks.co/rune-christensen-wants-out-of-maker/" target="_blank" rel="noreferrer noopener">Rune Christensen</a>’s “endgame” plan, the MakerDAO founder has proposed to split the DAO into smaller teams, or metaDAOs — each with its own governance token.&nbsp;



As a DAO expands, things can get complicated quickly, and metaDAOs could ease these tensions, according to Asad Khan, a MakerDAO participant and DeFi politician at Centrifuge.&nbsp;



“The idea of having some sort of metaDAO or subDAO, where it has its own governance processes, its own community of interested experts and participants [who] are removed from the everyday, but [who are] still tied back through good economics…[can] unlock the scale that Rune and others would like to see achieved with something like real world assets,” Khan said.



Although Khan is unsure exactly what the tokenomics of the metaDAO tokens would look like, he said that an initial AirDrop to the existing Maker community may be possible.



“There would be some kind of initial distribution mechanism — not sold like an ICO or anything — then over time I suppose you could exchange the tokens with others to transfer your share,” he said. “It would look at it almost like a derivative token of Maker from a governance standpoint.”



But not everyone is as optimistic.&nbsp;



The pseudonymous Park Y, a MakerDAO delegate, tweeted, “MetaDAOs are financially and politically linked to Maker by way of ownership and incentives. In this way [it’s impossible] to truly [separate] them from the parent org, and the risks borne by these entities perpetuate through the entire ecosystem.”



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">We (<a href="https://twitter.com/lbsblockchain?ref_src=twsrc%5Etfw">@lbsblockchain</a>) voted NO to the controversial Endgame Plan proposed by <a href="https://twitter.com/RuneKek?ref_src=twsrc%5Etfw">@RuneKek</a> for <a href="https://twitter.com/MakerDAO?ref_src=twsrc%5Etfw">@MakerDAO</a>. <a href="https://t.co/pHM2B272wN">https://t.co/pHM2B272wN</a> The vote ultimately passed with 80% approval. As the minority position we wanted to explain our rationale: 👇&mdash; Park Y | 📍ETHLisbon (@park_eth) <a href="https://twitter.com/park_eth/status/1584840246176645120?ref_src=twsrc%5Etfw">October 25, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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<h3>The slow path to decentralization</h3>



Of course, the risks that come with innovation should not be surprising.&nbsp;



“DAOs, fundamentally, are still trying to figure out how to align together and determine priorities,” Centrifuge CEO Lucas Vogelsang told Blockworks.



“We definitely haven&#8217;t figured out all the problems yet — but one of the most exciting and most important parts of decentralization is that we can coordinate beyond just the code as communities about what we do,” Vogelsang said.&nbsp;



Decentralized protocols are still working on the DAO playbook as they build their products, Gogel said, and a one-size-fits-all solution is likely not in the cards.



“I think the whole industry is very much in the experimentation phase,” Gogel said. “We&#8217;re committed to progressive decentralization, being pragmatic and not doing things too quickly but rather, spending a lot of time thinking about sequence and how to make it fair and inclusive and transparent as much as possible.”



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What Is a SubDAO? A Way To Keep Governance Decentralized

John Gilbert

Global energy shortages, cycles of hoarding, closing business and declining purchasing power can be traced back to poor monetary policy. For decades now, we spent more than we had and promised more than we could deliver. And now it looks like Friedman was right – you can’t increase the money supply without increasing inflation. Individuals and nations are struggling to break out of this spiraling cycle &#8211; and even leveraging the threat of war to avoid it. This series will explore how we got here and what blockchain stablecoins need to provide a better reserve currency and a more stable world.



<h2>Part 1: What’s broken</h2>



<div class="wp-block-media-text alignwide is-stacked-on-mobile" style="grid-template-columns:30% auto"><figure class="wp-block-media-text__media"><a href="https://blockworks.co/news/how-broken-monetary-policy-fuels-instability"><img loading="lazy" width="1024" height="576" src="https://cms.blockworks.co/wp-content/uploads/2022/12/Untitled-design-5-1024x576.png" alt="How Broken monetary Policy Fuels Instability" class="wp-image-41102 size-full" srcset="https://cms.blockworks.co/wp-content/uploads/2022/12/Untitled-design-5-1024x576.png 1024w, https://cms.blockworks.co/wp-content/uploads/2022/12/Untitled-design-5-300x169.png 300w, https://cms.blockworks.co/wp-content/uploads/2022/12/Untitled-design-5-768x432.png 768w, https://cms.blockworks.co/wp-content/uploads/2022/12/Untitled-design-5-1536x864.png 1536w, https://cms.blockworks.co/wp-content/uploads/2022/12/Untitled-design-5-428x241.png 428w, https://cms.blockworks.co/wp-content/uploads/2022/12/Untitled-design-5-464x261.png 464w, https://cms.blockworks.co/wp-content/uploads/2022/12/Untitled-design-5-389x219.png 389w, https://cms.blockworks.co/wp-content/uploads/2022/12/Untitled-design-5-80x45.png 80w, https://cms.blockworks.co/wp-content/uploads/2022/12/Untitled-design-5-50x28.png 50w, https://cms.blockworks.co/wp-content/uploads/2022/12/Untitled-design-5.png 1600w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure><div class="wp-block-media-text__content">
<h3><a href="https://blockworks.co/news/how-broken-monetary-policy-fuels-instability">How Broken Monetary Policy Fuels Instability</a></h3>



Why unstable money isn’t safe for the world and how to understand monetary policy
</div></div>



<h2>Part 2: What are people doing today about it?</h2>



<div class="wp-block-media-text alignwide is-stacked-on-mobile" style="grid-template-columns:30% auto"><figure class="wp-block-media-text__media"><a href="https://blockworks.co/news/the-investors-guide-to-stablecoins/"><img loading="lazy" width="1024" height="576" src="https://cms.blockworks.co/wp-content/uploads/2022/12/Investor-Guide_Stablecoins_v01-1024x576.jpg" alt="Investor Guide to Stablecoins" class="wp-image-40777 size-full" srcset="https://cms.blockworks.co/wp-content/uploads/2022/12/Investor-Guide_Stablecoins_v01-1024x576.jpg 1024w, https://cms.blockworks.co/wp-content/uploads/2022/12/Investor-Guide_Stablecoins_v01-300x169.jpg 300w, https://cms.blockworks.co/wp-content/uploads/2022/12/Investor-Guide_Stablecoins_v01-768x432.jpg 768w, https://cms.blockworks.co/wp-content/uploads/2022/12/Investor-Guide_Stablecoins_v01-1536x864.jpg 1536w, https://cms.blockworks.co/wp-content/uploads/2022/12/Investor-Guide_Stablecoins_v01-428x241.jpg 428w, https://cms.blockworks.co/wp-content/uploads/2022/12/Investor-Guide_Stablecoins_v01-464x261.jpg 464w, https://cms.blockworks.co/wp-content/uploads/2022/12/Investor-Guide_Stablecoins_v01-389x219.jpg 389w, https://cms.blockworks.co/wp-content/uploads/2022/12/Investor-Guide_Stablecoins_v01-80x45.jpg 80w, https://cms.blockworks.co/wp-content/uploads/2022/12/Investor-Guide_Stablecoins_v01-50x28.jpg 50w, https://cms.blockworks.co/wp-content/uploads/2022/12/Investor-Guide_Stablecoins_v01.jpg 1600w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure><div class="wp-block-media-text__content">
<h3><a href="https://blockworks.co/news/the-investors-guide-to-stablecoins/">The Investor’s Guide to Stablecoins</a></h3>



A dive deep into the types of monetary policy alternatives that stablecoins offer
</div></div>



<h2>Part 3: What is the right way forward?</h2>



<div class="wp-block-media-text alignwide is-stacked-on-mobile" style="grid-template-columns:30% auto"><figure class="wp-block-media-text__media"><a href="https://blockworks.co/news/what-is-an-inflation-hedge-finding-stability-in-todays-market/"><img loading="lazy" width="1024" height="576" src="https://cms.blockworks.co/wp-content/uploads/2022/12/The-inflation-hedge-1024x576.png" alt="The inflation hedge" class="wp-image-41089 size-full" srcset="https://cms.blockworks.co/wp-content/uploads/2022/12/The-inflation-hedge-1024x576.png 1024w, https://cms.blockworks.co/wp-content/uploads/2022/12/The-inflation-hedge-300x169.png 300w, https://cms.blockworks.co/wp-content/uploads/2022/12/The-inflation-hedge-768x432.png 768w, https://cms.blockworks.co/wp-content/uploads/2022/12/The-inflation-hedge-1536x864.png 1536w, https://cms.blockworks.co/wp-content/uploads/2022/12/The-inflation-hedge-428x241.png 428w, https://cms.blockworks.co/wp-content/uploads/2022/12/The-inflation-hedge-464x261.png 464w, https://cms.blockworks.co/wp-content/uploads/2022/12/The-inflation-hedge-389x219.png 389w, https://cms.blockworks.co/wp-content/uploads/2022/12/The-inflation-hedge-80x45.png 80w, https://cms.blockworks.co/wp-content/uploads/2022/12/The-inflation-hedge-50x28.png 50w, https://cms.blockworks.co/wp-content/uploads/2022/12/The-inflation-hedge.png 1600w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure><div class="wp-block-media-text__content">
<h3><a href="https://blockworks.co/news/what-is-an-inflation-hedge-finding-stability-in-todays-market/">What Is an Inflation Hedge? Finding Stability in Today&#8217;s Market</a></h3>



Why unstable money isn’t safe for the world and how to understand monetary policy
</div></div>



<h2>Part 4: What will the future look like?</h2>



<div class="wp-block-media-text alignwide is-stacked-on-mobile" style="grid-template-columns:30% auto"><figure class="wp-block-media-text__media"><a href="https://blockworks.co/news/what-it-takes-to-tokenize-the-world/"><img loading="lazy" width="1024" height="576" src="https://cms.blockworks.co/wp-content/uploads/2022/12/What-it-takes-to-tokenize-the-world-1024x576.png" alt="What it takes to tokenize the world" class="wp-image-41090 size-full" srcset="https://cms.blockworks.co/wp-content/uploads/2022/12/What-it-takes-to-tokenize-the-world-1024x576.png 1024w, https://cms.blockworks.co/wp-content/uploads/2022/12/What-it-takes-to-tokenize-the-world-300x169.png 300w, https://cms.blockworks.co/wp-content/uploads/2022/12/What-it-takes-to-tokenize-the-world-768x432.png 768w, https://cms.blockworks.co/wp-content/uploads/2022/12/What-it-takes-to-tokenize-the-world-1536x864.png 1536w, https://cms.blockworks.co/wp-content/uploads/2022/12/What-it-takes-to-tokenize-the-world-428x241.png 428w, https://cms.blockworks.co/wp-content/uploads/2022/12/What-it-takes-to-tokenize-the-world-464x261.png 464w, https://cms.blockworks.co/wp-content/uploads/2022/12/What-it-takes-to-tokenize-the-world-389x219.png 389w, https://cms.blockworks.co/wp-content/uploads/2022/12/What-it-takes-to-tokenize-the-world-80x45.png 80w, https://cms.blockworks.co/wp-content/uploads/2022/12/What-it-takes-to-tokenize-the-world-50x28.png 50w, https://cms.blockworks.co/wp-content/uploads/2022/12/What-it-takes-to-tokenize-the-world.png 1600w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure><div class="wp-block-media-text__content">
<h3><a href="https://blockworks.co/news/what-it-takes-to-tokenize-the-world/">What it Takes to Tokenize the World</a></h3>



Why unstable money isn’t safe for the world and how to understand monetary policy
</div></div>



<h2>About Our Sponsor</h2>



<div class="wp-block-media-text alignwide is-stacked-on-mobile" style="grid-template-columns:30% auto"><figure class="wp-block-media-text__media"><a href="https://blockworks.co/news/about-our-sponsor-reserve/"><img loading="lazy" width="1024" height="576" src="https://cms.blockworks.co/wp-content/uploads/2022/12/Slide-16_9-24-1024x576.png" alt="About Reserve" class="wp-image-41042 size-full" srcset="https://cms.blockworks.co/wp-content/uploads/2022/12/Slide-16_9-24-1024x576.png 1024w, https://cms.blockworks.co/wp-content/uploads/2022/12/Slide-16_9-24-300x169.png 300w, https://cms.blockworks.co/wp-content/uploads/2022/12/Slide-16_9-24-768x432.png 768w, https://cms.blockworks.co/wp-content/uploads/2022/12/Slide-16_9-24-1536x864.png 1536w, https://cms.blockworks.co/wp-content/uploads/2022/12/Slide-16_9-24-428x241.png 428w, https://cms.blockworks.co/wp-content/uploads/2022/12/Slide-16_9-24-464x261.png 464w, https://cms.blockworks.co/wp-content/uploads/2022/12/Slide-16_9-24-389x219.png 389w, https://cms.blockworks.co/wp-content/uploads/2022/12/Slide-16_9-24-80x45.png 80w, https://cms.blockworks.co/wp-content/uploads/2022/12/Slide-16_9-24-50x28.png 50w, https://cms.blockworks.co/wp-content/uploads/2022/12/Slide-16_9-24.png 1600w" sizes="(max-width: 1024px) 100vw, 1024px" /></a></figure><div class="wp-block-media-text__content">
<h3><a href="https://blockworks.co/news/how-broken-monetary-policy-fuels-instability">Reserve</a></h3>



Reserve Protocol aims to protect consumers from the effects of high inflation and hopes to one day eradicate it.
</div></div>

Stabilize Money Stabilize The World

The Investor’s Guide to Stablecoins

When inflation runs rampant in an economy, it is difficult to find a lifeboat that can reliably protect you from volatility. A <a href="https://www.entrepreneur.com/business-news/are-stocks-your-best-hedge-against-runaway-inflation/391460">JPMorgan conference</a> recently conducted a survey and 47% of respondents listed commodities as the most effective inflation hedge. 27% listed equities, 10% listed securities and 17% listed other.



But this survey was conducted when many believed our current inflation to be transitory. Now, inflation appears to not only be persistent, but global. The landscape has changed. Russia’s invasion of Ukraine, the economic slowdown in China, and the rising US dollar have all driven volatility in the commodities market. Traditional inflation hedges have all seen similar effects.&nbsp;



In our previous two articles of this series, we learned that the world needs asset-backed currencies that can resist censorship and provide long-term purchasing power. But to better understand what type of assets are required, we need to understand how investors and everyday people hedge inflation.&nbsp;&nbsp;



<h3 id="series-table-of-contents"><a href="https://blockworks.co/news/stabilize-money-stabilize-the-world/">Stabilize Money Stabilize the World</a> </h3>



Part 1:&nbsp;<a href="https://blockworks.co/news/how-broken-monetary-policy-fuels-instability">What’s broken</a> Why unstable money isn’t safe for the world and how to understand monetary policy Part 2:&nbsp;<a href="https://blockworks.co/news/the-investors-guide-to-stablecoins">What are people doing today about it?</a> A dive deep into the types of monetary policy alternatives that stablecoins offer Part 3:&nbsp;<a href="https://blockworks.co/news/what-is-an-inflation-hedge-finding-stability-in-todays-market">What is the right way forward?</a> A guide to the various inflation hedging tactics and how they can be used in stablecoins Part 4:&nbsp;<a href="https://blockworks.co/news/what-it-takes-to-tokenize-the-world">What will the future look like?</a> A look at how tokenization will change the stablecoin ecosystem About our sponsor:&nbsp;<a href="https://blockworks.co/news/about-our-sponsor-reserve">Reserve</a> A video explaining the Reserve Protocol



<h2>What is an inflation hedge?</h2>



An inflation hedge is any investment intended to protect the investor from the effects of a currency&#8217;s increasing money supply and decreasing purchasing power. Popular hedging strategies typically include physical assets with limited supplies and are not only reserved for the investing class. Citizens of nations with hyperinflated currencies need inflation hedges to conduct business and survive the rising cost of living.



While it is natural to assume that harder assets are less resistant to inflation, not all provide the same degree of protection. Macroeconomic forces make it difficult to predict how these assets will perform compared to a declining currency.&nbsp;&nbsp;&nbsp;



So investors typically aim to create a diverse portfolio with various investments to hedge inflation effectively. At times, this may include advanced options and derivatives trading strategies. But for this article, we will compare the effectiveness of six asset classes: fiat, commodities, bonds, real estate, digital assets, and others.&nbsp;



<h2>Fiat</h2>



Fiat currencies <a href="https://www.bitstamp.net/learn/crypto-trading/inflationary-vs-deflationary-currencies/">are naturally inflationary</a>, so how can they be inflationary hedges? Citizens in nations with currencies facing much higher inflation rates can hedge their investments by buying another fiat currency inflating at a lower rate.&nbsp;



For example, a citizen of Argentina is unlikely to buy more of their national currency, the peso, to hedge against inflation. The peso is a notoriously weak fiat currency that constantly loses value through centralized, controlled monetary policies. Venezuelans swap their peso for the US dollar to hedge the peso’s inflation.



Even though the US dollar is also losing purchasing power, it&#8217;s declining at a much lower rate, meaning that by buying USD with bolivars, you&#8217;ll lose less money over time. This is, of course, assuming you have an easy and affordable way to exchange your local fiat for USD, something that the Reserve app is making possible.



In this environment, buying the currency with a lower inflation rate can keep more of your purchasing power than if you just kept your local currency.&nbsp;



<h2>Digital assets (cryptocurrencies)</h2>



Cryptocurrency advocates have long argued that digital assets are some of the best ways to hedge against inflation. Their fixed supplies or deflationary mechanics are inherently designed to make the currencies anti-inflationary.&nbsp;



However, not all digital assets are intended to replace fiat currencies. Some, like bitcoin, are considered digital stores of value — a digital equivalent to gold. Bitcoin evangelists argue that energy expended to produce bitcoin provides important security for a scarce asset. But because it represents a new asset class, the market for these standalone digital assets is highly volatile — resulting in significant price swings in short periods.&nbsp;



Secondly, some experts believe that <a href="https://www.forbes.com/sites/kenrapoza/2022/09/09/bitcoins-inflation-hedge-case-is-dead-crypto-leader-heading-to-12k/?sh=52c143bd4d8a">&#8220;Bitcoin is not immune to macroeconomic factors.&#8221;</a> Meaning that despite having a fixed supply, these forces influence demand in a similar way that they influence the stock market.&nbsp;&nbsp;



2022 is tracking at an 8.2% inflation rate, and BTC is down 59.46% YTD. That means that $100 from January this year is now worth $91.8, but $100 worth of bitcoin is worth $40.54.&nbsp;



Bitcoin holders will point to the asset&#8217;s long history of price appreciation to argue that it makes for a better inflationary hedge in the long run. But in times of great volatility, the asset provides poor purchasing power. Someone in Argentina is less inclined to use bitcoin to buy a bag of groceries when it is down 20% that day.&nbsp;



Read more: <a href="https://blockworks.co/news/how-broken-monetary-policy-fuels-instability">Why Unstable Money Isn’t Safe</a>



<h2>Commodities&nbsp;</h2>



Commodities have traditionally been a reliable inflation hedge. According to Vanguard, commodities rose by <a href="https://www.cmegroup.com/insights/economic-research/2022/commodities-as-an-inflation-hedge.html">7% to 9% for every 1% of unexpected inflation</a> over the last decade. The universal and persistent demand of this asset class makes it inherently valuable. But while they may be a great addition to an investment portfolio, they do not offer consumers a solution to their declining purchasing power.&nbsp;



For example, when inflation fears are high, supply constraints make physical gold more expensive than its spot price. If someone in a hyperinflationary environment wants to buy gold for the purpose of retaining purchasing power, they need to pay the premium and hope that the spot price continues to rise. This becomes a difficult gamble for families that simply want to put food on the table. Similar supply and storage constraints make commodities like oil even more difficult to use as a hedge in this environment.



<h2>Government Bonds</h2>



Government bonds, unlike stocks, are fixed-income debt instruments backed by the issuing government. Though the potential rate of return is generally lower than investing in stocks, bonds can provide a steady and predictable stream of income from the borrower.&nbsp;



Government bond yields have an inverse relationship with the market, so investors often use them to hedge against the risk of recession. The Federal Reserve has implied that economic growth needs to decline more to prevent runaway inflation. The Fed hopes to achieve this through raising interest rates and thereby increasing the cost to do business.&nbsp;



If the Fed succeeds, then bonds may offer a hedge against the declining economy, but if it fails, bonds can only offer an inflationary hedge if the interest rate outpaces inflation.&nbsp;



<h2>Real estate</h2>



Investing in real estate can be one of the best ways to hedge against inflation, but there are a couple of caveats. The first is timing. Investing in real estate during times of high inflation can be a poor decision because the interest rates on loans are likely to be quite high, making it an increasingly expensive debt to pay off.



The reality in this scenario is that real estate prices are lower during these times. Those with access to capital have a major advantage and are able to buy real estate outright.



Those that bought houses on mortgages leading up to the <a href="https://www.investopedia.com/terms/f/financial-crisis.asp">2008 Financial Crisis</a> likely didn&#8217;t do well, but those that bought during the crisis are likely reaping huge rewards today.



Timing is everything with real estate. It&#8217;s best to only add real estate when it can either generate income in the form of rentals or when you&#8217;re in a strong financial position, allowing you to buy at low prices and wait for a good time to sell.



<h2>Finding stability in a diverse portfolio of stable assets</h2>



Realistically, the best inflation hedge would be a portfolio full of stable assets that have steady value and can generate passive income for the investor. However, assembling a portfolio full of stable assets is easier said than done, with every asset sector facing fairly large price swings.



People have historically done this in a variety of different ways. One of the most popular arising in the last 20 years or so is the “60-40” portfolio of diversified equities and bonds. The theory is that if 60% of the portfolio is made up of growth stocks and real estate, then it will capture the gains of a growing economy. The latter 40% of government bonds help protect the portfolio from regional recessions.&nbsp;



The dragon portfolio is a new alternative to the 60-40 investing strategy. It was developed to account for two opposing economic environments. The first, represented by a serpent, is an era of great economic expansion — sustained by technological advancements and global trade. The second, represented by a hawk, is a prolonged era of deflationary change. As the serpent grows old and over-inflated with bad debt and poor monetary policy, the hawk makes its strike and the world undergoes a painful period of restructuring.&nbsp;



The dragon is a representation of both creatures and is designed to grow wealth throughout the entire cycle. It is still new and hasn’t been adequately tested. It comprises 24% equities, 19% gold, 18% commodities, and 18% fixed income.&nbsp;



But to properly assist people in retaining purchasing power, there needs to be a way to make inflation hedges portable.



This is why Reserve&#8217;s end goal is to facilitate digital currencies backed by baskets of stable-value assets, providing an alternative to the reliance on a fiat monetary system.



<h3>Reserve&#8217;s inflation hedge philosophy</h3>



Reserve hopes to empower people across the world to not only choose their own monetary policy, but make their own. They want to create a free market of asset-backed stablecoins that can offer a better alternative to the broken fiat system — one that is equally stable in the short run, and much more stable in the long run.&nbsp;



The assets that will back RTokens may vary by use cases, and could be a combination of digital assets such as ETH, BTC and other stable DeFi assets, as well as tokenized versions of real-world assets such as commodities and real estate.



<h2>Up Next</h2>



Read <a href="https://blockworks.co/news/what-it-takes-to-tokenize-the-world/">What It Takes To Tokenize the World</a> to learn how tokenization will change the stablecoin ecosystem.



This content is sponsored by <a href="https://reserve.org/en/">Reserve</a>

What is an Inflation Hedge? Finding Stability in Today’s Market

Hannah Finnerty

After centralized exchange FTX plunged into bankruptcy in November, investors have been cautiously evaluating their ventures into the cryptocurrency space.



Nevertheless, some large funding deals are still closing.



The largest is digital assets market maker Keyrock, which received a $72 million injection from investors including Ripple, SIX Fintech Ventures and Middlegame Ventures. 



Ripple’s director of institutional markets Maxime Fages says that this investment was made after observing Keyrock’s “global success” over the past three years.



“Under the leadership of Kevin, Jeremy and Juan, Keyrock has established themselves as a key player in the space by building scalable, enterprise grade solutions and taking a regulatory first approach,” Fages said.



This latest Series B round will be used to invest in infrastructure development for scalability and also work on licensing across Europe, US and Singapore, Keyrock said.



Another company which received a significant amount of money this past week is Web3 developer platform Fleek.



Fleek closed a $25 million Series A led by Polychain Capital with additional investments from Protocol Labs, Arweave, Coinbase Ventures and Digital Currency Group, just to name a few.



The latest funding will help launch Fleek Network, its latest Web3 content application, in 2023. 



“With Fleek Network, we will be empowering developers and organizations with an easy and seamless mechanism for Web3 hosting and content delivery that will help deliver on the promise of creating a truly decentralized internet,” Harrison Hines, co-founder and CEO of Fleek, said.



Cross-chain bridge protocol Across also raised a significant amount of money this week. The project, which focuses on bridging between rollup chains and Ethereum mainnet and is powered by UMA, secured $10 million from Hack VC, Placeholder and Blockchain Capital.



The latest funding will bring the protocol’s valuation up to an estimated $200 million.



Other notable funding rounds this week include:



<ul><li>Enterprise-grade staking technology provider Kiln secured 17 million euros in a financing round led by Illuminate Financial.</li><li>Software solution designer Daylight received a $3 million seed investment co-led by Framework Ventures and Chapter One.</li><li>Jupiter Exchange, an alternative asset exchange using fractional NFT technology, closed $5 million in seed funding led by White Hilt Capital.</li></ul>



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Funding Roundup: Wary Investors Still Cutting Checks for Crypto

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The world’s economic and societal structures aren’t very stable at the moment — or very safe. Supply chains aren’t working and the global energy shortage is growing — causing cycles of hoarding and unrest.



This economic and political instability, though, did not arise in a vacuum. It is rooted in the monetary system underpinning the post-industrial age. In short, it&#8217;s broken — and for many reasons. But fundamentally, instability is increasing across the world because the value of money is increasingly unstable. As people suffer from bank runs and hyperinflation, they turn against the authorities who failed to protect their wealth. It&#8217;s why people in Lebanon are <a href="https://www.aljazeera.com/news/2022/9/15/what-is-behind-lebanons-bank-robberies-explainer">robbing their own banks</a> and the Chinese government has redoubled efforts to <a href="https://www.reuters.com/world/china/china-bank-protest-stopped-by-health-codes-turning-red-depositors-say-2022-06-14/">squash bank protests with Covid restrictions</a>.&nbsp;&nbsp;



If we want to fix the world by fixing our money, we have to make it stable. This core problem is why governments, institutions, and innovators in DeFi are increasingly looking to stablecoins as a solution. And it is why Reserve is partnering with Blockworks in producing this series on stabilizing the world. They believe that stable money is asset-backed money.&nbsp;



In part one of this four part series, we will explain why money lost its backing and why we need a stable alternative.&nbsp;



<h3><a href="https://blockworks.co/news/stabilize-money-stabilize-the-world/">Stabilize Money Stabilize the World</a> </h3>



Part 1:&nbsp;<a href="https://blockworks.co/news/how-broken-monetary-policy-fuels-instability">What’s broken</a> Why unstable money isn’t safe for the world and how to understand monetary policy Part 2:&nbsp;<a href="https://blockworks.co/news/the-investors-guide-to-stablecoins">What are people doing today about it?</a> A dive deep into the types of monetary policy alternatives that stablecoins offer Part 3:&nbsp;<a href="https://blockworks.co/news/what-is-an-inflation-hedge-finding-stability-in-todays-market">What is the right way forward?</a> A guide to the various inflation hedging tactics and how they can be used in stablecoins Part 4:&nbsp;<a href="https://blockworks.co/news/what-it-takes-to-tokenize-the-world">What will the future look like?</a> A look at how tokenization will change the stablecoin ecosystem About our sponsor:&nbsp;<a href="https://blockworks.co/news/about-our-sponsor-reserve">Reserve</a> A video explaining the Reserve Protocol



<h2>Why money lost its backing</h2>



<h3>Bretton Woods Monetary System</h3>



The Bretton Woods system of monetary management was the last time any country issued a currency that was backed by an asset. It was called the gold standard. And from 1941 to 1971, other countries could redeem $35 for an ounce of gold.&nbsp;



The reason it ended was simple. The Vietnam War led the US to spend more than it had. And like depositors during the era of free banking, nations lost faith in the US government’s ability to honor withdrawals. But as requests to redeem US notes for gold started to increase, the Federal Reserve ended the policy to honor those redemptions. In principle, the decision is not very different from a centralized crypto exchange freezing withdrawals when it is on the brink of insolvency. It needed time to find a solution.



This decision combined with a decade of running unsustainable budget deficits for the war contributed to an economic recession and historic levels of inflation — peaking in 1976 at 12%. And while it was dialed back by the end of the decade, the damage to the US dollar was done. It has <a href="https://www.reuters.com/business/with-inflation-gold-notes-cards-find-their-way-into-americas-wallet-2022-04-27/">lost 86% of its purchasing power</a> since 1971.



<h3>The buying power of one dollar over time</h3>



<figure class="wp-block-image"><img src="https://lh6.googleusercontent.com/Z3T54EjxZ4KOkUpjtOPoGGZjAwq0Powlqfq2drhVXKJ21rVbLs96zSx6M_KNlj01nvbDoVeIiuBW70CntpJvhjQ0azbq2_bmtoLCx2tDjjEmaNQXCHsXQU6cr7RrwMri2RKUFN2q8_91f6tJqmGG2GCSue8WTO6Kc9eN4nnTJOA4mfNRYQ2Rp1M-XP9YjDKC" alt=""/></figure>



Source <a href="https://www.officialdata.org/us/inflation/">Officialdata.org</a>



<h3>Rise of the petro-dollar</h3>



In <a href="https://www.nytimes.com/1974/06/09/archives/milestone-pact-is-signed-by-us-and-saudi-arabia-acclaimed-by.html">June 1974</a>, shortly after removing the dollar from the gold standard, the US made a deal with Saudi Arabia to price oil in US dollars. This agreement created a de-facto oil peg for the US dollar. In return, the US agreed to a military alliance that promised weapons and military aid to the Saudis.&nbsp;



This trade agreement increased global demand for dollars, which set in motion a series of network effects that solidified it as the world&#8217;s reserve currency.&nbsp;



<h3>How the US exports inflation to other countries</h3>



Because the US has been able to keep its status as the world reserve currency, its inflationary monetary policy influenced economies around the world.



At a GDP of $20+ trillion, the US is estimated to have the largest economy. Many countries such as China and Turkey have built their economic growth on the US’ increasing demand for exports. The global demand for US dollars as a reserve currency combined with US consumer demand for lower prices pressures these export dependent&nbsp; economies to <a href="https://www.kansascityfed.org/research/economic-bulletin/price-pressures-for-us-exporters-and-a-strong-dollar-have-increased-inflation-in-foreign-countries/">devalue their currency</a> to compete for US imports. So if US inflation increases as it has over the past year, it becomes more difficult for these countries to keep the cost of their goods low. To stay competitive, they end up enacting new monetary policies that increase inflation at a higher rate than the US.&nbsp;



For example, Turkish annual inflation climbed to a new 24-year high of 85.51% in October 2022. This was in large part the result of rate hikes and a long history of monetary policy geared at keeping export prices low. Countries around the world have felt similar pressures as fears of insolvency have triggered violent bank runs in Lebanon, China, Venezuela and Argentina.&nbsp;&nbsp;



Each spike in inflation has a lasting effect on a currency&#8217;s purchasing power. Like with the US inflation in the 1970s, it is difficult to reverse course. With no promise of returning to a monetary policy of asset-backed currency, the fiat system will continue to erode the purchasing power and safety of money around the world.



<h3>How one central bank changed money&nbsp;</h3>



The root problem to this story is not simply that the dollar lost its backing, it is the mechanism that enables it. The erosion of purchasing power and safety across the world is directly linked to the unbridled ability for a centralized minority to enact monetary policy. It is ultimately the governance and enforcement of that policy that determines its fate and safety.&nbsp;



As with the US, the power of its enforcement lies with its military-backed trade alliances. It frees the US from the checks and balances other countries and institutions face, as there is no international regulatory authority that can chase down Fed policymakers for misappropriation of funds. And as a result, every decision they make impacts economies throughout the world.&nbsp;



<h2>What is a monetary policy and what makes it safe?&nbsp;</h2>



At the most basic level, a monetary policy is a set of rules or decisions that determines how a currency is created, destroyed, backed and managed. For example, the Fed creates and destroys money through its <a href="https://www.investopedia.com/articles/economics/10/understanding-the-fed-balance-sheet.asp">balance sheet</a>. And it manages the flow of money by setting interest rates.&nbsp;



Alternative systems, such as Bitcoin, embed its policy in the code. It can only be changed if a majority of network nodes agree to fork it. The code determines how many coins will ever be in existence and sets the conditions needed to issue and transfer coins.&nbsp;



Monetary policy safety is measured at two levels. On the first level, it is measured by the degree to which it protects its currency from losing value and accessibility. People need to be able to use their money without fear of a bank refusing access or a hacker stealing funds. And those same people need to trust that the value will stay consistent over time.



On the second level, it is measured by how the policy is governed. If policy is governed by a single entity, such as the Federal Reserve, versus a decentralized consensus, then there is greater risk of losing its backing to a commodity like gold or another currency.&nbsp;



Alternatively, if the governance mechanism is too rigid, it may not be able to meet the needs of a global economy.&nbsp; Critics of the bitcoin standard argue that once block rewards are gradually lowered, miner fees will not be enough to incentivize a diverse set of validators willing to secure the network of 21 million bitcoin. They argue that the protocol will ultimately need to change if it wants to gain widespread adoption.&nbsp;&nbsp;



<h2>The stablecoin solution</h2>



Every digital asset that is classified as a crypto currency represents an alternative monetary policy. But very few have ventured to provide greater price stability than the US dollar. Stablecoins are the only class of cryptocurrencies that attempt to provide a stable alternative to the fiat system — with some even offering greater purchasing power protection.&nbsp;



For example, in march of 2021, the Reserve Protocol launched its first stablecoin, the Reserve Dollar (RSV) and the Reserve app to help people in Latin America protect their livelihood from hyperinflation. When the local national currency is inflating 6% per week, inflation of 2% to 8% per year on a dollar stablecoin offers an easier, safer way to preserve purchasing power.



Currently 670,000 registered users access more than 25,000 merchants, transacting more than $300 million monthly with the RSV stablecoin — unlike most volume in crypto, which is speculation, this is all real commerce. The primary uses are payroll, p2p payments, remittances and merchant shopping. The Reserve app is available in Argentina, Venezuela, Panama, Peru and Colombia and will be launching soon in Mexico.&nbsp;



The community behind the Reserve Protocol believes that the need for an inflation and censorship resistant currency goes beyond the countries experiencing hyperinflation. Humanity collectively spends too much time, and often fails, to preserve their spending power over the long term. The world needs alternatives to fiat and centralized money systems, which is why Reserve updated their protocol so that anyone can launch a decentralized asset backed stablecoin. But to really evaluate the potential for any of these new or existing stablecoins to succeed, we need to examine the different types of existing stablecoins.



<h2>Up next&nbsp;</h2>



Read the <a href="https://blockworks.co/news/the-investors-guide-to-stablecoins/">The Investor’s Guide to Stablecoins</a> to learn how to measure the safety of a stablecoin issuer’s monetary policy.
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This content is sponsored by <a href="https://reserve.org/en/">Reserve</a>

How Broken Monetary Policy Fuels Instability

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In this <a href="https://blockworks.co/news/stabilize-money-stabilize-the-world/">Stabilize Money Stabilize the World</a> series, we have explained why we need a new monetary system and why it needs to be able to import the inflation resistance of hard assets into a useful, fungible stablecoin. But to achieve this grand objective, we need to tokenize real-world assets. Despite the challenges ahead, <a href="https://reserve.org/en/">Reserve</a>, the protocol for launching asset-backed stablecoins, believes this future is possible. 



<h3 id="series-table-of-contents"><a href="https://blockworks.co/news/stabilize-money-stabilize-the-world/">Stabilize Money Stabilize the World</a> </h3>



Part 1:&nbsp;<a href="https://blockworks.co/news/how-broken-monetary-policy-fuels-instability">What’s broken</a> Why unstable money isn’t safe for the world and how to understand monetary policy Part 2:&nbsp;<a href="https://blockworks.co/news/the-investors-guide-to-stablecoins">What are people doing today about it?</a> A dive deep into the types of monetary policy alternatives that stablecoins offer Part 3:&nbsp;<a href="https://blockworks.co/news/what-is-an-inflation-hedge-finding-stability-in-todays-market">What is the right way forward?</a> A guide to the various inflation hedging tactics and how they can be used in stablecoins Part 4:&nbsp;<a href="https://blockworks.co/news/what-it-takes-to-tokenize-the-world">What will the future look like?</a> A look at how tokenization will change the stablecoin ecosystem About our sponsor:&nbsp;<a href="https://blockworks.co/news/about-our-sponsor-reserve">Reserve</a> A video explaining the Reserve Protocol



Assets like <a href="https://www.flowcarbon.com/">carbon credits</a> and <a href="https://www.parcl.co/">real estate</a> are already moving on-chain. Even <a href="https://credix.finance/">car loans</a> now exist on the blockchain. As this ecosystem matures and finds some regulatory harmony, these tokens may provide the portability and stability needed in backing stablecoins that can retain greater purchasing power than fiat currency.&nbsp;&nbsp;&nbsp;



But this technology has central points of failure. Like fiat-based stablecoins, tokenized assets need a third-party intermediary to guarantee one-to-one backing and price equivalence. For example, the Venezualen government attempted to create an oil-backed currency called the Petro. But it failed to match the price of oil because the government had no redemption policy or market mechanism that would allow them to maintain a peg.&nbsp;



Despite these obstacles, the number of innovative solutions is endless — from using ChainLink price oracles to make synthetic assets, to tokenizing fractional ownership of real assets, and even issuing tokenized securities and treasuries. The number of potential approaches makes predicting the future of asset-backed stablecoins hard to predict.&nbsp;



The future can go one of two ways. In this article, we will explore the different approaches to tokenization and how they could fit into a monetary system of asset-backed stablecoins.&nbsp;



<h2>Tokenized property</h2>



The real estate market is an industry primed for tokenization. Historically, buying real estate is one of the best financial decisions anyone can make. The problem is that <a href="https://www.cnbc.com/2021/11/10/home-prices-are-now-rising-much-faster-than-incomes-studies-show.html">rising house prices have outpaced wages</a> and subsequently put buying a house out of reach for many people across age and demographic spectrums.



<a href="https://cointelegraph.com/nonfungible-tokens-for-beginners/what-is-tokenized-real-estate">Tokenized real estate</a> can allow people to own a share of a piece of real estate for as little as $1. As the price of that piece of real estate rises and falls, owners of the token are free to buy and sell as they please. A buyer may even, overtime and on their own schedule, purchase all the shares of a home and own it outright.



There is, however, a downside to this. It can further exacerbate the over-financialization of the real estate market by inviting more speculation from both retail and institutions. It is still in a nascent stage, so it could prove the opposite by providing greater price discovery.



How it works



Fractional ownership and synthetic assets are two popular approaches to real estate tokenization. In the first approach, companies like RealT fractionalize property entities into tokens on the Ethereum blockchain. Those tokens then entitle the owner to a share in revenue generated from that property. The fractionalization requires a formal legal process that employs a property manager to maintain properties on behalf of investors. They are responsible for finding tenants, collecting rent and paying the investors.&nbsp;



Synthetic assets, on the other hand, have no connection to the physical world. Platforms like Synthetix and Parcl combine decentralized price oracles like ChainLink with a system of overcollateralization to imitate the value of physical products on digital exchanges.&nbsp;



Pros and cons&nbsp;



Fractional ownership and synthetic assets have their advantages and disadvantages when it comes to their utility as stablecoin collateral. Fractionalized ownership requires more counterparty risk. And if a stablecoin commits to using these assets in a portion of the collateral basket, the stablecoin issuer needs to rely on companies like RealT to enforce contracts between multiple parties.&nbsp;



Synthetic assets have less counterparty risk; however, they are not backed by hard assets and have their own set of smart contract and platform incentive challenges. Synthetic assets use yield farming incentive mechanisms and gamification to provide stabilized value. These assets may work well in bull markets because there is less sell pressure on the crypto being used as collateral. In bear markets, liquidity providers face greater risk of liquidation and possibly impermanent loss. So if platforms become illiquid, their synthetic assets may lose value.&nbsp;



Another example of real estate assets might also include land in the metaverse. Similar to synthetic assets, and the 1990s explosion of dot-com real estate valuations, metaverse land value would be inherent to incentive mechanisms and network effects of the digital world they inhabit. A big unknown is the price stability of metaverse land in the future.



If price speculation is the fundamental force driving demand of a tokenized asset, then it will pose greater risk to stablecoins. Ideally, the issuer of an asset backed stablecoin would be able to collateralize tokens that have ample liquidity and direct utility in the real world. Tokenized energy may offer the best of both worlds.&nbsp;&nbsp;



<h2>Tokenized energy</h2>



Gas and energy has proven to be one of the greatest inflationary hedges post-pandemic lockdowns. As of <a href="https://www.tradingview.com/chart/Dvauw0KB/?symbol=AMEX%3ABNO">Nov. 18, 2022</a>, the United States Brent Oil Fund LP (BNO) is up 36% over one year. In comparison, the Nasdaq Index 100 (NDX), is down 29%.&nbsp;



This inverse relationship to the stock market could provide great stability to a basket of diverse assets. But as previous attempts such as Venezuela&#8217;s oil backed Petro has shown, tokenizing oil is very difficult. The market is more restricted than gold and real estate.&nbsp;



Tokenized energy could offer a more portable alternative that not only offers an inflationary hedge, but also incentivizes green energy. Powerledger.io is working on a way to tokenize green energy into granular <a href="https://cointelegraph.com/news/power-ledger-launches-renewable-energy-credit-marketplace-in-se-asia">credits that can be exchanged across the energy grid</a>. For example, someone with a private solar panel would earn these credits for contributing green energy to the power grid. In return, the owner could use the credits to pay for their own energy usage and then sell any excess tokens back to the grid or another exchange.&nbsp;



If the energy grid was properly decentralized across many public and private energy producers, this type of tokenization could offer the least counterparty risk to any of the alternatives. However, in a future where energy is monopolized, this type of tokenization could provide centralization risks.&nbsp;



For a stablecoin to capture the inflationary hedge of a diverse investment strategy like the dragon portfolio, it needs access to tokenized assets like securities, bonds and loans. All of these require centralized issuing mechanisms like fiat-backed stablecoins and tokenized commodities, but they vary in their degree of centralization and risk.



<h2>Tokenized securities and Treasurys</h2>



Tokenized securities, for example, are dependent on companies using them to raise funds. And unlike ICOs, they are done in a regulatory environment. A few popular security token platforms are <a href="https://www.inx.co/">INX</a> and <a href="https://www.oasispromarkets.com/">Oasis Pro Markets</a>. Companies can use these platforms to access liquidity and raise funds in a similar way to how they issue shares in a public offering.&nbsp;



The risks associated with the investment are similar to purchasing shares from a stock exchange.&nbsp;



In addition to tokenized securities, companies like <a href="https://backed.fi/">Backed Finance</a> have started tokenizing Treasurys. Their approach does add risk because they tokenize the Treasurys through purchasing them and promising to hold a one-to-one backing. The tokens are only sold to participants who pass full know-your-customer (KYC) and anti-money laundering (ALM) checks and will have the ability to mint and redeem token securities for the underlying asset. Backed’s method of tokenization enables an asset-backed stablecoin protocol to allocate a portion of its collateral to short-term bonds.&nbsp;



In addition, Frigg.eco is tokenizing green bonds. They also require KYC/AML for purchases and have created the ability to buy and sell tokens in a liquid secondary market. They are working with Norwegian-government-backed developer Malthe Winje to refinance the <a href="https://www.agatobwe.eco/">Agatobwe</a> hydroelectric plant in Rwanda, with debt on Ethereum.



<h2>Tokenized credit</h2>



Real-world credit can also be tokenized through lending platforms such as <a href="https://goldfinch.finance/">Goldfinch</a> and <a href="https://truefi.io/">TrueFi</a>. These platforms can offer access to yields from real companies that are vetted at rates meaningfully higher than in core DeFi. This could offer yields uncorrelated with the crypto industry and potentially offer the fixed income needed to make up a dragon portfolio.&nbsp;&nbsp;&nbsp;



Property, energy, Treasurys, securities and credit are a few of the possibilities that could complement core DeFi assets in diversified, asset-backed stablecoins.&nbsp;



While the <a href="https://twitter.com/jackchong_jc/status/1574745695654797312">tokenization of global assets is only beginning</a>, the potential to return safe asset backing to the global monetary system is promising.&nbsp;



In a future where stable currencies compete in the open market, participants will be able to choose their preferred monetary policy regime. The future could host lots of different stablecoins, pegged to dollars, euros or an index like the CPI or the S&amp;P, with unique features targeting different “jobs to be done” and maybe eventually a global reserve currency that retains its value indefinitely and isn’t too volatile.&nbsp;



The permissionless <a href="https://reserve.org/en/">Reserve Protocol</a> enables this asset-backed currency revolution, for idealists, heroes and capitalists.



This content is sponsored by <a href="https://reserve.org/en/">Reserve</a>
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What it Takes to Tokenize the World

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<h2>Introducing Reserve</h2>



<iframe loading="lazy" width="560" height="315" src="https://www.youtube.com/embed/JOy0wCVhnwM" title="YouTube video player" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen=""></iframe>



<h2>Series Table of Contents</h2>



Part 1:&nbsp;<a href="https://blockworks.co/news/how-broken-monetary-policy-fuels-instability">What’s broken</a> Why unstable money isn’t safe for the world and how to understand monetary policy Part 2:&nbsp;<a href="https://blockworks.co/news/the-investors-guide-to-stablecoins">What are people doing today about it?</a> A dive deep into the types of monetary policy alternatives that stablecoins offer Part 3:&nbsp;<a href="https://blockworks.co/news/what-is-an-inflation-hedge-finding-stability-in-todays-market">What is the right way forward?</a> A guide to the various inflation hedging tactics and how they can be used in stablecoins Part 4:&nbsp;<a href="https://blockworks.co/news/what-it-takes-to-tokenize-the-world">What will the future look like?</a> A look at how tokenization will change the stablecoin ecosystem About our sponsor:&nbsp;<a href="https://blockworks.co/news/about-our-sponsor-reserve">Reserve</a> A video explaining the Reserve Protocol



<h2>The protocol and services</h2>
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The <a href="https://reserve.org/">Reserve protocol</a> is a self-service, permissionless factory where anyone can build, deploy and govern their own asset-backed stablecoins (RTokens), which can be integrated within DeFi and real world commerce.



Their long-term goal is to create non-inflationary currencies that remains stable both month-to-month as well as century-to-century. In addition to their protocol, Reserve also launched a pay app called the <a href="https://reserve.org/en/app/about_app/">Reserve App</a>. It is a user-friendly way for ordinary people to buy RTokens with their local currencies and use them in locally. More than $300m a month is transacted on the platform, mainly real people and companies using Reserve to escape inflation.

About Our Sponsor: Reserve

Ben Strack

Bitget has been trying to reassure current and potential customers who are losing faith, fast, in digital assets. But the cryptocurrency exchange is taking a questionable route.



Bitget Managing Director Gracy Chen last week cited consumers’ trust reaching a nadir — spurred by “collapses of a few crypto giants this year” — as rationale for ramping up marketing and product efforts.



Consider what the company called its <a href="https://www.prnewswire.com/news-releases/bitget-launches-major-campaign-with-messi-to-reignite-confidence-in-the-crypto-market-301687422.html" target="_blank" rel="noreferrer noopener">Nov. 26 press release</a> breaking things down: “Bitget launches major campaign with Messi to reignite confidence in the crypto market.” As if a marketing campaign with the soccer star (the rest of the world calls it football, I know) would somehow make the exchange more trustworthy…?



Lionel Messi is among the world’s greatest athletes. He has scored two goals in the first three games of this year’s FIFA World Cup, helping Argentina advance past the group stage.



But how much does Messi know about crypto? This is a business deal for him, and his decision to endorse a crypto brand does not necessarily bestow confidence in a particular company or crypto more broadly.&nbsp;



In fact, Messi several years ago <a href="https://www.youtube.com/watch?v=ej8-yQM7pYo" target="_blank" rel="noreferrer noopener">endorsed Finney</a>, a blockchain-enabled smartphone by Sirin Labs — run by Moshe Hogeg, who was arrested in 2021 for <a href="https://www.timesofisrael.com/alleged-dirty-dealings-and-sex-offenses-moshe-hogegs-long-history-of-deceit/" target="_blank" rel="noreferrer noopener">alleged sex crimes and cryptocurrency fraud</a>. Hogeg has denied these allegations.



<h3>FTX built trust through celebrities&nbsp;&nbsp;&nbsp;</h3>



Bitget’s plan to boost trust in crypto, in part, by getting a celebrity to endorse Bitget, signals the exchange has not been paying attention to recent events — or, worse still, has chosen to ignore them.&nbsp;



Why are Bitget’s marketing efforts especially relevant? Well, something big recently happened in crypto land to a company who had some of the world’s biggest celebrities behind it.



FTX was the best when it came to making deals with the world’s largest sports stars and other celebrities to endorse its brand. Tom Brady, <a href="https://blockworks.co/news/ftx-names-stephen-curry-a-global-ambassador" target="_blank" rel="noreferrer noopener">Steph Curry</a> and <a href="https://blockworks.co/news/ftx-inks-deal-with-mlb-star-shohei-ohtani" target="_blank" rel="noreferrer noopener">Shohei Ohtani</a> were FTX brand ambassadors, as was fashion model Gisele Bündchen. The company landed Larry David for <a href="https://www.youtube.com/watch?v=kkUXzqD8xUY" target="_blank" rel="noreferrer noopener">its Super Bowl commercial</a> that aired in February.   



FTX <a href="https://blockworks.co/news/whats-next-for-ftx-and-its-customers-after-bankruptcy-filing" target="_blank" rel="noreferrer noopener">filed for bankruptcy</a> last month.



Perhaps celebrities do help persuade people to put their trust in crypto. Perhaps that was why FTX’s debacle stung so many.&nbsp;



<h3>Proper communications is important</h3>



I’m not naive enough to think companies, including crypto ones, will not utilize celebrities to endorse their brands going forward.&nbsp;



Binance, for example, unveiled an NFT collection with football star Christiano Ronaldo that became available Nov. 18. The company’s press release around the launch said the athlete’s collection was “aiming to give his fans an introduction to Web3 through the world of NFTs.”



But, for me, it truly was the title of Bitget’s press release — using a celebrity partnership to spur trust in the crypto space — that had me baffled.&nbsp;



Reading through the announcement, Messi does mention that “it’s reassuring to see Bitget taking this seriously with a series of protection initiatives.”



The last paragraph mentions Bitget’s launch of a $5 million “Builders&#8217; Fund” for users distressed by FTX’s crash. It also notes the company raising the size of <a href="https://blockworks.co/news/bitget-rolls-out-200m-protection-fund-to-safeguard-users-crypto" target="_blank" rel="noreferrer noopener">its Protection Fund</a> — designed to safeguard against hacks and theft — to $300 million last month.



But not mentioned are other measures Bitget is taking, such as its soon-to-be-shared <a href="https://www.bitget.com/academy/en/article-details/Transparency-as-a-priority-Bitget-shows-proof-of-reserves" target="_blank" rel="noreferrer noopener">Merkle Tree proof of reserves</a> in an effort “to promote complete transparency and comprehensive asset auditing.” Now, those could actually move the needle. That could be something worth trusting.



Learn more: <a href="https://blockworks.co/news/what-are-proof-of-reserves-and-can-they-build-back-trust" target="_blank" rel="noreferrer noopener">What Is Proof of Reserves and Can It Build Back Trust?</a>



Chen told Blockworks in a statement that the company is also working on hot and cold wallet separation, a multi-signature wallet, zero-trust security architecture, as well as other initiatives to protect user assets.



“We do all this to show the market that in the world of crypto, companies with real strength are immune to the rocky market, and when facing adversity, it is the best time to focus inwards and keep building,” she added.



So Bitget, like other crypto exchanges, appears to be taking legitimate steps to regain customer trust after FTX’s collapse.



So, don’t take this as a condemnation of Bitget as a company, but rather a reminder that words and marketing matter. Exchanges would be better off hammering home the details of their specific security and transparency efforts than touting celebrity partnerships.&nbsp;



As we would say in journalism, “Bitget buried the lede.”



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Bitget’s Celebrity Partnership Comes Across Tone Deaf

Macauley Peterson

Decentralized Web3 infrastructure provider Ankr sought to reassure its community Friday with an initial response to the <a href="https://blockworks.co/news/binance-chain-apps-5m-hack" target="_blank" rel="noreferrer noopener">theft of at least $5.5 million</a> from BNB Chain liquidity pools and money markets.&nbsp;



The team confirmed that Ankr’s other products — including validators, RPC nodes, and AppChain services — were not affected. That will come as a relief to holders of Ankr’s other larger staking derivatives, notably aETHc — Ankr staked ether — which carries a market cap of about $68 million.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Update on our aBNB Token Exploit: We are grateful to our community of DEXs, exchanges, and protocols that all helped us end the exploit quickly. We will use reserves to compensate liquidity providers for the aBNBc pools.<a href="https://t.co/B2yNWBAQdX">https://t.co/B2yNWBAQdX</a>&mdash; Ankr (@ankr) <a href="https://twitter.com/ankr/status/1598768146088742912?ref_src=twsrc%5Etfw">December 2, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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The attacker minted a total of 60 trillion aBNBc across 6 different transactions. The thief then used the minted, but unbacked tokens to drain liquidity from decentralized exchanges on the BNB Chain. After turning around and buying the depressed aBNBc the attacker was able to raid borrowing and lending protocol Helio by withdrawing $16 million in HAY, the protocol’s custom stablecoin and swapping it for $15.5 million BUSD, the Binance stablecoin issued by Paxos.



Prior to the exploit, Helio had $90 million in Total Value Locked, <a href="https://defillama.com/protocol/helio-protocol" target="_blank" rel="noreferrer noopener">according to DeFiLlama</a>.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">1/ The team at Helio Protocol is aware of the situation and we are closely working with <a href="https://twitter.com/ankr?ref_src=twsrc%5Etfw">@Ankr</a> to manage the situation and to support our community during this difficult time.&mdash; Helio Protocol ($HAY) 🔶 (@Helio_Money) <a href="https://twitter.com/Helio_Money/status/1598710451285598208?ref_src=twsrc%5Etfw">December 2, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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“Hacks and exploits from bad actors like this are an unfortunate possibility in Web3, even with every attention to detail in security processes — but we were well prepared,” Co-Founder &amp; CEO Chandler Song, said in <a href="https://www.ankr.com/blog/the-abnbc-token-report/" target="_blank" rel="noreferrer noopener">a statement</a>.



A recommended “action plan” explained how users of aBNBc can be compensated through a new ankrBNB token that will be minted and airdropped based on a pre-exploit snapshot of on-chain data.



While the attack apparently stems from malicious use of the private key for the aBNBc smart contract deployer, it&#8217;s unclear exactly how the key was compromised. Industry <a href="https://blog.openzeppelin.com/protect-your-users-with-smart-contract-timelocks/" target="_blank" rel="noreferrer noopener">best practices call for</a> multisignature wallets and timelocks on upgradeable smart contracts, to prevent this type of attack.



Representatives from Ankr did not respond to Blockworks request for comment.



Other providers of liquid staked BNB such as pSTAKE <a href="https://twitter.com/pSTAKE_stkBNB/status/1598540733044359168" target="_blank" rel="noreferrer noopener">use multisigs</a> to protect sensitive contracts, and restrict access to token minting functions, while fully decentralized dapps such as Uniswap on Ethereum are not upgradeable at all.



The full extent of the collateral damage is not yet clear, but the Ankr team <a href="https://twitter.com/ankr/status/1598803911443468289" target="_blank" rel="noreferrer noopener">expressed the intent</a> to resolve losses incurred by customers of related DeFi dapps.



For example, Ankr will cover bad debt incurred by Helio Protocol, pending the outcome of ongoing discussions, <a href="https://twitter.com/Helio_Money/status/1598710457711198208" target="_blank" rel="noreferrer noopener">according to</a> the latter’s official Twitter account.



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Ankr Exploit Causes Collateral Damage

Michael Bodley

As if a prolonged bankruptcy wasn’t enough, court documents show the story of defunct crypto lender Celsius has a new wrinkle: scammers impersonating lawyers involved in its Chapter 11 proceedings.



The attempted scams are the latest headache for Celsius, which halted withdrawals and related customer activities in July, <a href="https://celsiusnetwork.medium.com/a-memo-to-the-celsius-community-59532a06ecc6" target="_blank" rel="noreferrer noopener">citing</a> “extreme market conditions.”&nbsp;



“Our ultimate objective is stabilizing liquidity and restoring withdrawals, [swaps], and transfers between accounts as quickly as possible,” the company wrote in a blog post at the time. “There is a lot of work ahead as we consider various options, this process will take time, and there may be delays.”



In its latest setback, attorneys for Celsius said in court filings earlier this week that a number of unidentified would-be nefarious actors have been reaching out to its creditors, posing as Kirkland &amp; Ellis attorneys. The attempts, largely carried out over email, seem to have been intended to persuade customers — whose accounts have been frozen for months — to hand over sensitive information in a bid to gain access to their accounts.&nbsp;&nbsp;



The emails included links to shared spreadsheets, where recipients were told to share their personal information. The industry publication Law360 first <a href="https://www.law360.com/articles/1554186" target="_blank" rel="noreferrer noopener">reported</a> the news of the attempted scams. It’s not clear if any of those efforts were successful, at least in the eyes of the hackers.



<h3>Prime Trust settlement moves ahead — with a twist</h3>



But it’s not all doom and gloom for Celsius. A proposed settlement with Prime Trust — the crypto custodian that agreed to give back to the bankrupt company about $17 million of its assets — is moving along.&nbsp;



That was just a start, according to court records reviewed by Blockworks. An amended settlement proposal found that Prime Trust also owes Celsius 7.4 bitcoins, 1,145.5 CEL tokens, 248.5 ether and about $364,000 of the stablecoin USDC.



The assets, which should be incoming if both parties agree to the settlement along with the bankruptcy court, would not fill the role Celsius is in — hundreds of millions of dollars deep. But every bit moves the needle incrementally in terms of recouping funds for customers-turned-creditors — whom Celsius has always maintained are its top priority.&nbsp;



A spokesperson for Celsius did not return a request for comment, and a spokesperson for Prime Trust declined to comment, citing the unsettled litigation.



In the meantime, visitors to Celsius’ website receive a pop-up informing them of the pending bankruptcy — and pointing out the obvious: It’s no longer business as usual — with a link to another site set up specifically to disseminate information about the proceedings.&nbsp;



The defunct digital asset lenders’ <a href="https://celsius.network/careers" target="_blank" rel="noreferrer noopener">careers page</a>, however, still says Celsius has “open positions in every department” and is “growing rapidly.”



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Celsius Gets Cash Infusion From Prime Trust as Scammers Target Customers

Rocky crypto markets have not deterred Point72 Asset Management’s push into the sector.&nbsp;



The multi-strategy hedge and venture fund firm has added two senior professionals to its maturing crypto team, according to two sources familiar with the matter.



Michael Ashby, formerly chief operating officer of outsourced trading firm Meraki Advisors, joined Point72 this week. Ashby, based in New York, holds the title of head of digital assets strategic implementation. 



And Terence Schofield — who last spent time at digital asset-focused investment manager Pantera Capital as chief operating officer — started as Point72’s head of digital assets technology at the end of September.&nbsp;



Ashby, a longtime traditional finance pro, takes on a senior role that includes operations, especially working to build out the needed crypto trading infrastructure with input from a number of existing divisions.&nbsp;



Ashby reports directly to the firm’s chief financial officer, while Schofield reports directly to Point72’s chief technology officer — one indicator of the value Point72 has placed on its developing digital asset foray.



<h3>Pointing the way</h3>



Ashby’s post involves coordinating non-investment efforts, including between middle- and back-office teams that handle administrative and infrastructure functions for traders. He would also play a role in any hiring efforts. Part of his mandate is to tap into the existing rails that guide the multi-strategy fund operator’s existing processes.&nbsp;



The thinking is to avoid having to start entirely from scratch when it comes to digital assets and to conserve the capital costs of setting up a system for investing in cryptoassets — which is typically quite costly and time consuming.



For his part, Schofield has been tasked with overseeing the creation and development of the crypto division’s computer-driven models for digital assets, as well as playing a role in how trades are executed. It’s a position that additionally requires working with counterparties outside the firm, such as exchanges and related market-makers.



In addition to Pantera, Schofield’s resume includes stints at Cargill and Lake Hill Capital in c-suite technology roles. Like Ashby — who led the charge to build out the crypto dealings of his former employer, Meraki — Schofield’s longtime traditional finance expertise appears to have been attractive to his new firm.&nbsp;



Ashby, who also has experience in business development, has also worked for Thunderbird Partners and Ziff Brothers Investment.&nbsp;



The source categorized both hires as “not a stretch” or a gamble for the firm, but ones that seem to make strategic sense, adding that the operation could have turned to more crypto-native professionals — but didn’t.



<blockquote class="wp-block-quote">“Look at who they’re hiring,” the source said. “It adds up. This is a safe play. They know TradFi. And they know crypto.”</blockquote>



Point72, run by founder Steve Cohen, has so far traded only fairly vanilla crypto trust products, such as Grayscale’s GBTC, and related derivatives — its traders have yet to dabble in spot cryptocurrencies or more exotic products.&nbsp;



That said, <a href="https://blockworks.co/news/point72-asset-management-in-early-innings-of-big-crypto-push" target="_blank" rel="noreferrer noopener">Blockworks reported in July</a> that the firm was in the “early innings” of a “big crypto push,” according to a source familiar with the matter, including a search for two senior digital asset professionals — now revealed to be Ashby and Schofield.



Cohen has personally given input on his firm’s push into crypto, according to a second source, which started with Point72’s venture capital arm snapping up a series of stakes in startups in the sector. The hedge fund billionaire is also in the process of <a href="https://blockworks.co/news/steve-cohen-building-out-crypto-investment-firm" target="_blank" rel="noreferrer noopener">setting up</a> a separate entity — one not involving Ashby and Schofield — to exclusively trade digital assets.&nbsp;



The Point72 chief — who also maintains exposures to the asset class via his multibillion-dollar family office — tapped a reformed hacker with deep crypto ties, known as <a href="https://blockworks.co/news/steve-cohen-taps-hacker-acidphreak-as-first-trader-for-crypto-startup" target="_blank" rel="noreferrer noopener">Acidphreak</a>, as the new company’s first trader.



A spokesperson for Point72 and Cohen declined to comment.



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It’s a Bear Market, but Point72 Is Still Hiring Crypto Pros

Uniswap community governance is going to be voting on whether it will pilot a “fee switch” on select pools in its decentralized cryptocurrency exchange.



An <a href="https://blockworks.co/news/uniswaps-proposed-fee-switch-would-cut-into-liquidity-provider-payouts" target="_blank" rel="noreferrer noopener">initial proposal</a> was put forward in July this year, which wanted to begin collecting fees on a small set of Uniswap liquidity pools. Follow-up votes the DAO refers to as “temperature check” and “consensus check” were soon held and the proposal passed, but many Uniswap community members voiced a preference for more time to research and understand the proposal before the final vote. 



Now, almost six months after the idea was first introduced, the Uniswap community will <a href="https://gov.uniswap.org/t/fee-switch-pilot-update-vote/19514" target="_blank" rel="noreferrer noopener">finally hold a binding vote</a> on whether they move ahead with implementation of the fee switch.



The <a href="https://gov.uniswap.org/t/fee-switch-pilot-update-vote/19514" target="_blank" rel="noreferrer noopener">proposal</a> which community members will be voting on presents an opportunity for Uniswap to test the parameters in selected liquidity pools, this includes 0.05% of DAI-ETH, 0.3% of ETH-USDT and 1% of USDC-ETH.



A 10% fee would be applied to that percentage of the selected pools, the minimum value permitted by the code — Uniswap’s underlying smart contracts were immutable the moment they were deployed.



It is important to note that turning on the fee switch will not affect users using the protocol to swap directly, but rather will retain a small amount of what is currently being paid out to liquidity providers. It’s possible the modestly lower fees to those who supply liquidity will serve as a disincentive — precisely what the DAO aims to test.



The pilot will be considered a success if trading volume and market depth for the select pools are not diminished after the fee switch is executed.



Voting will go live in the next 14 day after technical due diligence of proposal is reviewed by its authors. UNI token holders <a href="https://boardroom.io/uniswap/overview" target="_blank" rel="noreferrer noopener">will then have 7 days</a> to cast their vote, followed — if passed — by a 2-day time lock before automatic execution.



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Uniswap ‘Fee Switch’ Finally Gets an On-chain Vote

Shalini Nagarajan

Sam Bankman-Fried, who turned from crypto billionaire to villain nearly overnight, sat for back-to-back interviews this week with appearances at the New York Times DealBook symposium and on Good Morning America.



Observers have drawn comparisons with Bernie Madoff, the Wall Street financier turned Ponzi scheme kingpin, who pleaded guilty to 11 federal crimes. And wewly-appointed FTX CEO John Ray III says FTX’s disintegration is <a href="https://blockworks.co/news/ftx-bankruptcy-like-enron">worse than Enron</a>, the energy company that went down as the largest accounting scandal in recent history. 



Crypto Twitter has dragged mainstream media for massaging Bankman-Fried&#8217;s image instead of asking truly tough questions, although Andrew Sorkin was widely thought to have given him a harder time than most. So, here’s a choice selection of Bankman-Fried corkers to get your blood boiling.



<ol><li>‘Got a little cocky’</li></ol>



Bankman-Fried has echoed several of his comments across interviews, but he was smug enough to admit that he may have been overconfident about the potential of his business.



“I think I got a little cocky — I mean, more than a little bit,” he told <a href="https://edition.cnn.com/2022/12/01/business/sbf-interview-gma/index.html">ABC’s George Stephanopoulous</a> on Good Morning America.



<ol start="2"><li>‘Close to nothing’</li></ol>



<a href="https://www.nytimes.com/2022/12/01/business/sam-bankman-fried-interview-sbf-ftx.html">Speaking virtually to Andrew Sorkin</a> of the New York Times, he claimed that he’s lost most of his money and that he didn’t stash away any of it.&nbsp;



He added that he’s disclosing everything he has, and that he has no hidden funds. He’s allegedly down to $100,000 “or something like that” and just has one working credit card.



<ol start="3"><li>Vacation home was not intended to be parents’ ‘long-term property’</li></ol>



The exchange spent millions on at least 19 properties worth $121 million in the Bahamas, according to <a href="https://www.reuters.com/technology/exclusive-bankman-frieds-ftx-parents-bought-bahamas-property-worth-121-mln-2022-11-22/">Reuters</a>. These included at least seven condominiums worth $72 million and a vacation property in which Bankman-Fried’s parents were listed as signatories.&nbsp;



“I think they may have stayed there while working, you know, with the company sometime over the last year. When you look at the rest of it, there were a lot of property purchases in the Bahamas,” Bankman-Fried told Sorkin.



<ol start="4"><li>Mixed messages</li></ol>



Bankman-Fried made some statements that appeared ill-thought-out when asked whether customer funds were used inappropriately. “I didn&#8217;t knowingly commingle funds,” he said. 



“I wasn’t trying to commingle funds,” he added later.



<ol start="5"><li>Ignorance of FTX/Alameda’s balance sheet</li></ol>



Bankman-Fried admitted to not knowing much about the finances of his companies, saying he was “frankly surprised” by how big Alameda’s position was in FTX’s native token FTT.&nbsp;



He also claimed he was not worried about customer losses or potential insolvency until Nov. 2, when CoinDesk published Alameda&#8217;s partial balance sheet.



<ol start="6"><li>Alleged dark money donations to Republicans</li></ol>



Bankman-Fried claimed he donated millions of “about the same amount” to both Democrats ahead of the 2022 midterm elections. Only his donations to Democrats were <a href="https://www.businessinsider.in/investment/news/ftx-founder-sam-bankman-fried-donated-40-million-to-political-campaigns-leading-into-the-midterms-leaving-some-concerned-about-cryptos-place-in-washington-report-says/articleshow/95646968.cms">publicly known</a> and well-documented, prior to his recent admission. But he kept the Republican donations quiet.&nbsp;



“All my Republican donations were dark,” he said. “The reason was not for regulatory reasons, it’s because reporters freak the f— out if you donate to Republicans. They’re all super liberal, and I didn’t want to have that fight.”



He has denied making any donations to politicians in the Bahamas.



<ol start="7"><li>Spot money and margin money are totally the same</li></ol>



During a Twitter Spaces appearance on Thursday, Bankman-Fried was asked whether funds for spot and margin accounts were commingled behind the scenes.



“Yes that’s right, in general, balances were generally treated as effectively fungible with each other.”



FTX International offered 20x leverage while FTX US offered 10x with a minimum required balance of $100,000.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Have your own favorite Sam Bankman-Fried media quote or tweet from over the years? Let us know in the thread below!



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">When asked if his lawyers thought his interviews were a good idea, Bankman-Fried said “They very much do not.” And reading this, you’ll see why… Add your own favorite SBF quotes below!<a href="https://t.co/WatJn8ylfY">https://t.co/WatJn8ylfY</a>&mdash; Blockworks (@Blockworks_) <a href="https://twitter.com/Blockworks_/status/1598770698679242753?ref_src=twsrc%5Etfw">December 2, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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7 Revealing Quotes From SBF’s Absurd Media Tour

Casey Wagner

Bitcoin has decoupled from Investo’s QQQ Trust, suggesting the cryptocurrency’s days of trading virtually in tandem with Big Tech stocks may be in the past — at least for now.&nbsp;



Bitcoin’s 30-day correlation coefficient to QQQ, the tech-heavy ETF known as the Qs, dipped below -0.77 to more three-year lows set on Thursday, per <a href="https://www.tradingview.com" target="_blank" rel="noreferrer noopener">TradingView</a> data. A correlation coefficient of -1 would mean the assets are moving in complete opposite directions. 



BTC’s 60-day coefficient is also negative but not as extreme, sitting at -0.2, its lowest point since last July. Blue-chip, growth technology stocks are expected to continue underperforming, according to Tom Essaye, founder of Sevens Report Research.&nbsp;



“Tech and growth stocks have recovered some ground on value recently, but we continue to believe that progress in the economic recovery and subsequently higher interest rates will be a headwind for tech, and a rotation from growth to value can be utilized to reduce tech overweights, but not abandon super-cap tech holdings altogether,” Essaye said.&nbsp;


<div class="wp-block-image">
<figure class="alignleft size-large"><img loading="lazy" width="1024" height="626" src="https://cms.blockworks.co/wp-content/uploads/2022/12/Screen-Shot-2022-12-02-at-19.27.53-1024x626.png" alt="" class="wp-image-40997" srcset="https://cms.blockworks.co/wp-content/uploads/2022/12/Screen-Shot-2022-12-02-at-19.27.53-1024x626.png 1024w, https://cms.blockworks.co/wp-content/uploads/2022/12/Screen-Shot-2022-12-02-at-19.27.53-300x183.png 300w, https://cms.blockworks.co/wp-content/uploads/2022/12/Screen-Shot-2022-12-02-at-19.27.53-768x470.png 768w, https://cms.blockworks.co/wp-content/uploads/2022/12/Screen-Shot-2022-12-02-at-19.27.53-1536x939.png 1536w, https://cms.blockworks.co/wp-content/uploads/2022/12/Screen-Shot-2022-12-02-at-19.27.53-2048x1252.png 2048w, https://cms.blockworks.co/wp-content/uploads/2022/12/Screen-Shot-2022-12-02-at-19.27.53-420x257.png 420w, https://cms.blockworks.co/wp-content/uploads/2022/12/Screen-Shot-2022-12-02-at-19.27.53-427x261.png 427w, https://cms.blockworks.co/wp-content/uploads/2022/12/Screen-Shot-2022-12-02-at-19.27.53-358x219.png 358w, https://cms.blockworks.co/wp-content/uploads/2022/12/Screen-Shot-2022-12-02-at-19.27.53-80x49.png 80w, https://cms.blockworks.co/wp-content/uploads/2022/12/Screen-Shot-2022-12-02-at-19.27.53-50x31.png 50w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>QQQ is up 90% over the past five years, double bitcoin&#8217;s returns | Chart by David Canellis</figcaption></figure></div>


The divergence comes as equities have dipped, following a stronger-than-anticipated jobs report, which showed nonfarm payrolls increasing by 263,000 in November. Analysts expected a 200,000 raise. Average hourly earnings also increased 0.6% between November and October and are up more than 5% year over year, suggesting the Fed’s efforts to curb inflation may not yet be sufficient.&nbsp;



The S&amp;P 500 and Nasdaq Composite indexes were each trading about 0.5% lower halfway through Friday’s session. Bitcoin was largely flat, while ether rallied 0.4%. QQQ lost close to 1%.



Still, risk-off sentiment is likely to persist in the long run, analysts say.&nbsp;



“Crypto traders need to remember that a key reason why crypto has fallen so much over the past year is that inflation was out of control and central banks were motivated to send rates higher which ultimately was bad news for all risky assets,” Edward Moya, senior market analyst at Oanda, said in a note Friday.



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Bitcoin, QQQ Correlation Dips to Lowest Level in More Than 3 Years

MoonPay is set to add Time executive Keith Grossman to lead its enterprise business, as he is set to join the crypto payments infrastructure company on Jan. 2.  



Grossman has spent the last three-plus years as president of publishing powerhouse Time. While there, <a href="https://time.com/6121132/time-and-galaxy-digital-partner-to-demystify-the-next-immersive-digital-frontier-the-metaverse-through-a-first-of-its-kind-partnership/" target="_blank" rel="noreferrer noopener">Time teamed up with Galaxy Digital</a> to offer metaverse education, and the publisher’s television and film production division <a href="https://time.com/6123080/time-studios-tap-nft-space-for-animated-franchises/" target="_blank" rel="noreferrer noopener">partnered with NFT creators</a> to develop animated franchises. 



“In 2020, I noticed a trend too big to ignore: a shift enabling the evolution from online ‘rentership’ to ‘ownership’ that also accommodated a much-needed shift in consumer privacy,” Grossman wrote in <a href="https://www.linkedin.com/pulse/after-35-years-time-i-wanted-inform-you-have-accepted-grossman/?trackingId=7LxA7hV0TM%2B8FfdraGylJA%3D%3D" target="_blank" rel="noreferrer noopener">a blog post</a>. “At that point, I knew it was only a matter of time before I ultimately needed to move from the comforts of being an ‘observer’ to that of a ‘participant’ in the adoption of web3.”



In addition to working at Time, Grossman has held leadership roles at Bloomberg and tech publisher Wired.



The upcoming addition of Grossman comes after MoonPay in July <a href="https://blockworks.co/news/latest-in-crypto-hiring-moonpay-adds-range-of-senior-execs" target="_blank" rel="noreferrer noopener">filled several executive roles</a>, including the addition of Jim Esposito as chief operating officer and Akash Garg as chief technology officer. 



MoonPay, which reports having 5 million customers and supports more than 80 assets, <a href="https://blockworks.co/news/moonpay-marshals-555m-in-series-a-funding-round" target="_blank" rel="noreferrer noopener">raised $555 million last year</a> in a Series A round that gave the company a $3.4 billion valuation. 



Blockchain Founders Fund promoted <a href="https://www.linkedin.com/in/tobias-man-bauer/details/experience/" target="_blank" rel="noreferrer noopener">Tobias Bauer</a> as a partner of the Web3 venture capital fund.     



Bauer has worked at the fund for the last three years, holding roles including head of partnerships and principal. He formerly was a venture partner at Republic, a financial technology company specializing in investment-related services in the private markets.



<a href="https://www.linkedin.com/in/suvratjoshi/" target="_blank" rel="noreferrer noopener">Suvrat Joshi</a> joined identity verification provider Veriff as a senior vice president of product. 



Joshi was most recently chief product officer at FarEye and previously worked in roles at Dropbox, Facebook, Microsoft and Amazon.&nbsp;



“Excited to share that I joined Veriff to bring the digital and physical worlds closer through the identity lens,” Joshi said in a LinkedIn post. “It&#8217;s early days, and Veriff is at the leading edge of this shift.”



Veriff, which <a href="https://www.veriff.com/case-studies/blockchain-veriff-making-crypto-safe-and-accessible" target="_blank" rel="noreferrer noopener">partnered with Blockchain.com</a> in 2018, offers various <a href="https://www.veriff.com/industry/crypto" target="_blank" rel="noreferrer noopener">verification and fraud prevention services for crypto users</a>. 



It is unclear how much Joshi will be working on Veriff’s crypto products in the new role. He did not immediately return a request for comment.



<h3>Firms hiring and firing</h3>



Kraken co-founder Jesse Powell said in <a href="https://blog.kraken.com/post/16442/business-update/" target="_blank" rel="noreferrer noopener">a blog post</a> Wednesday that about <a href="https://blockworks.co/news/kraken-layoffs-30-percent" target="_blank" rel="noreferrer noopener">30% of the company’s staff would be laid off</a> as a direct result of the ongoing crypto winter.



“This reduction takes our team size back to where it was only 12 months ago,” Powell said, describing the move as necessary because “negative influences on the financial markets have continued and we have exhausted preferable options for bringing costs in line with demand.”



The cuts amount to more than 1,000 people — roughly the same amount Coinbase laid off as part of <a href="https://blockworks.co/news/coinbase-cut-workforce-ceo-wary-of-potential-recession" target="_blank" rel="noreferrer noopener">cutbacks announced in June</a>. 



Not all crypto companies are downsizing.&nbsp;



Digital asset market maker Keyrock said Wednesday it is looking to double its headcount — currently more than 100 — in 2023, despite the bear market. The Brussels-based firm is seeking to expand to Switzerland and Singapore early next year.&nbsp;



Keyrock has already doubled the size of its workforce this year, the company said. The latest hiring plans come after it raised $72 million from investors including Ripple, SIX Fintech Ventures and Middlegame Ventures.



Lantern Ventures, a crypto-focused trading firm led by former Alameda Research co-founder  <a href="https://www.linkedin.com/in/tarajmacaulay/" target="_blank" rel="noreferrer noopener">Tara Mac Aulay</a>, is hiring an infrastructure lead. Mac Aulay started Alameda Research with Sam Bankman-Fried in 2017 and left the firm the following year.



The infrastructure engineer would be tasked with carving out a new infrastructure team as the company seeks to manage its virtual private network and developer productivity resources.



“We need to secure all these resources against both accidental loss and deliberate compromise, facing the unusually sharp threats and high stakes that are a systemic feature of crypto finance,” the job post states. 



Crypto exchange Bitget has reiterated its intention to increase its number of employees to 1,200 by the first quarter of 2023 — about a 50% increase from its current level.



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Latest in Crypto Hiring: MoonPay Recruits Time President for 2023

Ankr, a decentralized finance (DeFi) protocol on the BNB chain, has been hit with a $5 million exploit.



The hack occurred earlier Friday morning after the attacker took advantage of an <a href="https://twitter.com/peckshield/status/1598508401755144196" target="_blank" rel="noreferrer noopener">unlimited mint bug</a> in the aBNBc token smart contract, a bug that the attacker reportedly engineered.



A total of 10 trillion aBNBc was minted and later swapped by the attacker for 4,050,500 USDC and 5,000 BNB tokens. All USDC was then moved from the Binance Smart Chain onto Ethereum and funneled through <a href="https://blockworks.co/crypto-mixers-and-privacy-coins-can-they-resist-censorship/" target="_blank" rel="noreferrer noopener">crypto mixer Tornado Cash</a>.&nbsp;



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Ankr got hacked! 1.🧵 A short thread about what Ankr Exploiter did.&mdash; Lookonchain (@lookonchain) <a href="https://twitter.com/lookonchain/status/1598520872716804101?ref_src=twsrc%5Etfw">December 2, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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Binance CEO Changpeng Zhao said his exchange would be freezing withdrawals related to the recent hack.



&#8220;Initial analysis is developer private key was hacked, and the hacker updated the smart contract to a more malicious one,&#8221; Zhao <a href="https://twitter.com/cz_binance/status/1598575867311132673?cxt=HHwWgsC82YOSpK8sAAAA" target="_blank" rel="noreferrer noopener">tweeted</a>. &#8220;Binance paused withdrawals a few hours ago. Also froze about $3m that hackers move to our CEX.&#8221;



Liquidity pools of aBNBc on PancakeSwap and ApeSwap have almost been completely drained by the hack, and as a result, the price of aBNBc has dipped by <a href="https://www.coingecko.com/en/coins/ankr-reward-bearing-stake-bnb" target="_blank" rel="noreferrer noopener">99.5%</a> over the past 24 hours — the price of Ankr’s native cryptocurrency, ANKR, has also been affected, dropping by <a href="https://www.coingecko.com/en/coins/ankr-network" target="_blank" rel="noreferrer noopener">2.5%</a> in the past day.



Ankr’s team is actively looking at resolving its smart contract issues and will be reimbursing users affected by the hack.



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<blockquote class="twitter-tweet" data-width="550" data-dnt="true">The team at Ankr has assessed the damage and it is max 5M USD worth of BNB from the liquidity pools. We are currently working hard to resolve this issue efficiently and we would like to propose the following to address the current situation:&mdash; Ankr (@ankr) <a href="https://twitter.com/ankr/status/1598624443642703872?ref_src=twsrc%5Etfw">December 2, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
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“Ankr will purchase 5m worth of BNB and use this to compensate in totality the liquidity providers that have been affected by the exploit due to the drainage of the liquidity pool,” the company <a href="https://twitter.com/ankr/status/1598624447203770369" target="_blank" rel="noreferrer noopener">tweeted</a>.&nbsp;



Adding, “the ankrBNB token will continue to be redeemable, while aBNBc and aBNBb will no longer be redeemable.”



The Ankr team <a href="https://blockworks.co/news/ankr-exploit-causes-collateral-damage" target="_blank" rel="noreferrer noopener">put out a damage assessment</a> Friday afternoon ET, detailing the next steps for holders of the affected tokens.



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Hackers Stole More Than $5M From 2 Binance Chain Apps

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